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01/10 17:11
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Revenue $264 million, a sequential 3.5% decline. The decline was driven by lower domestic customer activity levels in Spoolable Technologies and lower frac rental revenues in Pressure Control.
Adjusted EBITDA $87 million, flat from the second quarter. Adjusted EBITDA margin increased to 32.9% from 31.7% in the second quarter due to cost reduction initiatives, tariff mitigation efforts, and reduced legal expenses.
Pressure Control Segment Revenue $169 million, down 6.2% sequentially. The decline was primarily due to lower frac rental revenues as the company focused on its consumable business.
Pressure Control Segment Operating Income Increased $2.2 million or 5.2% sequentially, with operating margins increasing 290 basis points. The increase was due to cost reduction initiatives, tariff mitigation efforts, and reduced legal expenses.
Spoolable Technologies Segment Revenue $95 million, down 1% sequentially. The decline was due to lower domestic customer activity levels, mostly offset by increased international sales.
Spoolable Technologies Segment Operating Income Decreased $2.2 million or 8% sequentially, with operating margins decreasing 210 basis points due to higher input costs.
GAAP Net Income $50 million, compared to $49 million in the second quarter. The increase was due to improved operating performance.
Adjusted Net Income $54 million, compared to $53 million in the second quarter. Adjusted earnings per share were $0.67, up from $0.66 in the second quarter.
Cash Balance $446 million, a sequential increase of approximately $40 million. The increase was driven by improved cash flow management despite inventory build challenges due to tariffs.
Net CapEx Approximately $8.2 million during the third quarter of 2025.
Spoolable Technologies: Achieved highest international revenue since acquisition, with significant orders from the Middle East and Africa. New product development is gaining customer interest.
International Expansion: Strong international sales in Spoolable Technologies, including first gas service order from a major Middle East NOC and a large order for a new customer in Africa. First sour service order in the Middle East for shipment in 2026.
Tariff Mitigation: Efforts to mitigate tariff impacts are progressing, with increased shipments from the Vietnam plant expected to displace Chinese shipments by mid-2026.
Cost Reduction: Implemented cost reduction initiatives and reduced legal expenses, leading to improved margins in Pressure Control.
Acquisition: Planned acquisition of a majority interest in Baker Hughes' Surface Pressure Control business, expected to close in early 2026.
Tariff Impact: The company faces significant tariff challenges, including a 70% incremental tariff on goods imported from China (totaling 95%) and a 50% tariff on goods from Vietnam. These tariffs have increased costs and impacted profitability, despite mitigation efforts.
Lower Domestic Customer Activity: The Spoolable Technologies segment experienced a decline in domestic customer activity levels, which negatively impacted revenues and operating margins.
Higher Input Costs: The Spoolable Technologies segment faced higher input costs, leading to a decrease in operating margins and adjusted segment EBITDA.
Seasonal Declines in Field Service Utilization: The Pressure Control segment is expected to experience typical seasonal declines in field service utilization, which could impact adjusted EBITDA margins.
Inventory Build and Tariff-Driven Costs: Inventory build has been a working capital headwind, with increased carrying value primarily due to tariffs rather than higher inventory quantities.
Delayed TRA Payment: The annual TRA payment and related member distribution were delayed, which could indicate potential cash flow management challenges.
Domestic Activity Levels: Domestic activity levels remain subdued, which could impact overall performance and growth.
Pressure Control revenue: Expected to be relatively flat versus the $169 million reported in the third quarter, aided by modestly increased activity in the frac rental business, which offsets normal holiday slowdowns.
U.S. land rig count: Expected to drift modestly lower through the year-end, with most industry activity declines for 2025 believed to be behind.
Adjusted EBITDA margins for Pressure Control segment: Expected to be in the 31% to 33% range for the fourth quarter, staying relatively stable from the third quarter and inclusive of typical seasonal declines in field service utilization.
Spoolable Technologies revenue: Expected to be down low double digits sequentially in the fourth quarter, consistent with the typical seasonal pattern in this business.
Adjusted EBITDA margins for Spoolable Technologies segment: Expected to be approximately 34% to 36% for Q4, moderating from third quarter levels on lower volume.
Adjusted corporate EBITDA: Expected to be a charge of approximately $4 million in Q4, excluding $2 million of stock-based compensation.
Planned acquisition of Baker Hughes Surface Pressure Control business: Integration planning and administrative legal filings are proceeding smoothly, with the transaction expected to close in early 2026.
Vietnam plant shipments: Expected to substantially displace Chinese shipments into the U.S. by mid-next year, pending finalization of API certification.
International business in Spoolable Technologies: Momentum expected to continue, with recent awards including a first gas service order from a major Middle East NOC, a large order for a new customer in Africa, and a first commercial order in another major Middle East market for shipment in the first half of 2026.
Quarterly Dividend: Paid a quarterly dividend of $0.14 per share during the third quarter, resulting in a cash outflow of approximately $11 million, including related distributions to members.
Future Dividend Plan: The Board has approved a quarterly dividend of $0.14 per share, which will be paid in December.
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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