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01/10 17:10
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals several negative factors: declining revenue and margins in the Pressure Control segment, higher costs due to tariffs, and legal uncertainties with Cameron. Although the Spoolable Technologies segment shows some growth, overall financial performance is weak with declining net income and EPS. The Q&A section highlights concerns about tariffs, legal costs, and a lack of specific guidance on strategic initiatives. These issues, combined with a reduced CapEx outlook and market uncertainties, suggest a negative sentiment that could lead to a stock price decline.
Revenue $274 million, a sequential 2.4% decline. The decline was attributed to lower revenue in the rental business and a less favorable product mix.
Adjusted EBITDA $87 million, down 7.6% sequentially. The decrease was due to lower operating leverage, higher product costs from tariffs, and reduced revenue from higher-margin rental business.
Adjusted EBITDA Margins 31.7%, compared to 33.5% in the first quarter. The decline was due to the same factors affecting Adjusted EBITDA.
Pressure Control Segment Revenue $180 million, down 5.5% sequentially. The decline was driven by lower rental business revenue and a less favorable product mix.
Pressure Control Segment Operating Income Declined $12 million or 22.1% sequentially. Operating margins compressed by 510 basis points due to lower operating leverage, higher product costs from tariffs, and reduced rental business revenue.
Pressure Control Segment Adjusted EBITDA $11.7 million, 18% lower sequentially. Margins decreased by 450 basis points due to the same factors affecting operating income.
Spoolable Technologies Segment Revenue $96 million, up 3.9% sequentially. The increase was driven by higher domestic customer activity in the seasonally stronger second quarter.
Spoolable Technologies Segment Operating Income Increased $4.2 million or 17.5% sequentially. Operating margins expanded by 340 basis points due to improved operating leverage and increased manufacturing efficiencies.
Spoolable Technologies Segment Adjusted EBITDA Increased $4.4 million or 13.2% sequentially. Margins expanded by 320 basis points due to the same factors affecting operating income.
Corporate and Other Expenses Flat sequentially at $9.6 million in Q2, including $3.5 million of professional fees related to the acquisition of Baker Hughes’ Surface Pressure Control business.
GAAP Income $49 million, down from $54 million in the first quarter. The decrease was largely driven by lower operating income.
Adjusted Net Income $53 million, down from $59 million in the first quarter. Adjusted EPS was $0.66, down from $0.73 in the first quarter.
Free Cash Flow Increased significantly due to positive movements in inventory and accounts payable, combined with lower net CapEx.
Cash Balance $405 million, a sequential increase of approximately $58 million.
Net CapEx $11.1 million during the second quarter of 2025.
Spoolable Technologies: Outperformed profit expectations in Q2 2025 with revenues of $96 million, up 3.9% sequentially. Operating income increased by 17.5% sequentially due to improved operating leverage and manufacturing efficiencies.
Pressure Control Products: Sales remained strong despite declining activity levels. Revenue was $180 million, down 5.5% sequentially, with a less favorable product mix and lower rental business revenue.
Acquisition of Baker Hughes’ Surface Pressure Control business: Announced acquisition of a controlling interest in this business, which is expected to diversify the company's geographic footprint and customer base, focusing on the Middle East.
Tariff Impact: Section 232 tariff rate on steel and derivatives doubled from 25% to 50%, increasing costs. Broadened supply chain to higher-cost jurisdictions to ensure delivery certainty.
Cost Management: Implemented severance actions and reduced full-year 2025 CapEx outlook to $40-$45 million. Focused on Vietnam production growth and manufacturing efficiencies in Baytown.
Dividend Increase: Board approved an 8% increase in quarterly dividend to $0.14 per share, reflecting confidence in cash flow durability.
Geographic Diversification: Strategic focus on diversifying operations with the acquisition of Baker Hughes’ Surface Pressure Control business, emphasizing the Middle East market.
Tariff Increases: The Section 232 tariff rate on steel and certain steel derivatives was unexpectedly doubled from 25% to 50%, significantly increasing costs for goods imported from the company's Chinese manufacturing facility. This has led to higher material costs and depressed margins.
Supply Chain Challenges: The company has had to broaden its supply chain to higher-cost jurisdictions, including the U.S., to ensure delivery certainty for customers. This has resulted in increased costs and operational inefficiencies.
Declining Pressure Control Revenue: Pressure Control segment revenue declined 5.5% sequentially, driven by lower rental business revenue and a less favorable product mix. This has led to reduced operating income and compressed margins.
Litigation Costs: The company recorded $5.1 million in legal expenses and reserves related to litigation claims, representing an increase of approximately $2 million from the previous quarter.
Decreasing Domestic Activity Levels: The average U.S. land rig count has declined, and further softening is anticipated, impacting customer spending and revenue in the Pressure Control and Spoolable Technologies segments.
Higher Product Costs: Higher product costs due to tariffs and increased reliance on higher-cost materials have negatively impacted margins, particularly in the Pressure Control segment.
Economic Uncertainty: The company faces economic uncertainties, including fluctuating commodity prices and potential further declines in industry activity levels, which could impact revenue and profitability.
Integration Risks: The acquisition of a majority interest in Baker Hughes’ Surface Pressure Control business involves integration planning and administrative filings in global jurisdictions, which could pose operational and strategic challenges.
Capital Expenditures: The company is reducing its full-year 2025 CapEx outlook to a range of $40 million to $45 million, including a $6 million equity investment made into Vietnam in the first quarter. The company is evaluating its capital spending program to align with domestic activity trends while maintaining investments to support Vietnam production growth and strengthen manufacturing efficiencies in Baytown.
Pressure Control Revenue: Pressure Control revenue is expected to decline mid-to-high single digits in Q3 2025 compared to Q2 2025, primarily due to a decrease in the average rig count and further deterioration in the frac rental business. Adjusted EBITDA margins for this segment are expected to remain stable at 28% to 30%.
Spoolable Technologies Revenue: Revenue for the Spoolable Technologies segment is expected to decline high-single-digits in Q3 2025 compared to Q2 2025 due to lower domestic activity levels. Adjusted EBITDA margins are projected to be approximately 35% to 37%.
Tariff Impact: The company anticipates continued tariff-related challenges, with increased costs due to higher Section 232 tariffs on steel and steel derivatives. Despite these challenges, the company plans to heavily utilize Vietnam for U.S. imports to mitigate costs.
Acquisition of Baker Hughes’ Surface Pressure Control Business: The acquisition is expected to close in late 2025 or early 2026, diversifying the company's footprint with a focus on the Middle East. Integration planning is progressing well, and the company expects the acquisition to enhance its geographic footprint and customer base.
Dividend Increase: The Board has approved an 8% increase in the quarterly dividend to $0.14 per share, reflecting confidence in the company's cash flow durability.
Quarterly Dividend Increase: The Board approved an 8% increase in the quarterly dividend to $0.14 per share, which will be paid in September 2025.
Dividend Payment in Q2 2025: A quarterly dividend of $0.13 per share was paid during Q2 2025, resulting in a cash outflow of approximately $10 million, including related distributions to members.
Dividend Growth History: The company has consistently increased its dividend over the past several years, reflecting confidence in the durability of cash flows.
The earnings call presents mixed signals: strong financial performance with increased net income and cash balance, but declining revenues in key segments and uncertainties in market strategy. The dividend increase is a positive sign, yet the Q&A reveals management's vague responses to critical questions, especially regarding market share and future earnings. The market cap suggests moderate volatility, leading to a neutral sentiment as these factors balance each other out.
The earnings call reveals several negative factors: declining revenue and margins in the Pressure Control segment, higher costs due to tariffs, and legal uncertainties with Cameron. Although the Spoolable Technologies segment shows some growth, overall financial performance is weak with declining net income and EPS. The Q&A section highlights concerns about tariffs, legal costs, and a lack of specific guidance on strategic initiatives. These issues, combined with a reduced CapEx outlook and market uncertainties, suggest a negative sentiment that could lead to a stock price decline.
The earnings call presents mixed signals. Financial performance shows slight improvements in revenue and adjusted EBITDA, but there's a decline in operating margins and GAAP net income. The international expansion plan and new production facility in Vietnam are positive, but risks and cost concerns persist. The Q&A reveals management's evasiveness on tariffs and Vietnam integration, raising uncertainty. The dividend remains steady, but no share repurchase program is announced. Given the company's mid-cap size, the overall sentiment is neutral, expecting minor fluctuations within -2% to 2% over the next two weeks.
The earnings call presents a mixed outlook. Financial performance shows modest growth, but guidance is weak, with potential margin compression and economic uncertainties. The international expansion and supply chain diversification are positive, but risks remain. The Q&A reveals concerns over tariffs and customer behavior, while management's evasiveness on certain topics adds uncertainty. The $0.13 dividend is maintained, but no share repurchase plan is announced. Given the company's market cap and mixed signals, the stock is likely to remain stable, with a neutral outlook for the next two weeks.
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