Welcome to the Cactus first quarter 2022 earnings conference call. My name is Vanessa, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press zero then one on your touch-tone phone. I will now turn the call over to John Fitzgerald, Director of Corporate Development and IR. Thank you and good morning. We appreciate your attendance on today's call. Our speakers will be Scott Bender, our Chief Executive Officer, and Steve Tadlock, our Chief Financial Officer. Also joining us today are Joel Bender, Senior Vice President and Chief Operating Officer, Steven Bender, Vice President of Operations, and David Isaac, our General Counsel and Vice President of Administration. Please note that any comments we make on today's call regarding projections or expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC. Any forward-looking statements we make today are only as of today's date, and we undertake no obligation to publicly update or review any forward-looking statements. In addition, during today's call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. With that, I'll turn the call over to Scott. Thanks, John. Good morning to everyone. I'm pleased to report that Cactus posted its fifth consecutive quarter of adjusted EBITDA growth of greater than 10% by capitalizing on continued increases in customer drilling and completion activity. Our results highlighted the consistency and predictability of this business. Some first quarter highlights include revenue increased 12% sequentially, adjusted EBITDA improved by 16% sequentially, adjusted EBITDA margins were 29%, up 80 basis points versus the fourth quarter. We paid a quarterly dividend of $0.11 per share and ended the quarter with $298 million in cash and no debt. I'll now turn the call over to Stephen Tadlock, our CFO, who will review our financial results, and following his remarks, I'll provide some thoughts on our outlook for the near term before opening the lines for Q&A. Steve? Thank you. As Scott mentioned, Q1 revenues of $146 million were 12% higher than the prior quarter. Product revenues of $94 million were up 12% sequentially, driven primarily by an increase in rigs followed. Product gross margins at 35% rose 60 basis points sequentially due to leverage of our fixed cost base and continued cost recovery efforts. Rental revenues were $22 million for the quarter, up 16% versus the fourth quarter of 2021, driving an increase in gross margins of 820 basis points sequentially, due primarily to lower depreciation as a percentage of revenues. Field service and other revenues in Q1 were approximately $30 million, up 10% versus the fourth quarter of 2021. This represented 25% of combined product and rental related revenues during the quarter. Gross margins were 16%, down 210 basis points sequentially, with the reduction largely attributable to labor inflation, higher fuel costs, and increased third-party service expenses, all of which are being addressed in the second quarter. SG&A expenses were $14.1 million during the quarter, up $1.2 million versus the fourth quarter of 2021. The sequential increase was primarily attributable to higher payroll related costs driven by higher stock-based compensation expense. During the first quarter, we also incurred approximately $600,000 of SG&A expense evaluating growth opportunities. We expect fees and expenses related to growth opportunities to be a more regular part of our focus this year. Despite these non-operational expenses, SG&A declined to 9.7% of revenue, down from 9.9% during the fourth quarter of 2021. We expect SG&A to be $14 million in Q2 2022, inclusive of stock-based comp expense of approximately $2.3 million. Q1 2022 adjusted EBITDA was approximately $42 million, up 16% from $37 million during the fourth quarter of last year. Adjusted EBITDA for the quarter represented 29% of revenues, compared to 28% for the fourth quarter of 2021. Adjustments to EBITDA during the first quarter of 2022 included approximately $2.7 million in stock-based compensation and $1.1 million related to the revaluation of the TRA liability. We did not add back any of the aforementioned fees related to the evaluation of growth opportunities during the period. Depreciation expense for the first quarter was $8.7 million, and a similar amount is expected in the second quarter. We reported income tax expense of $2.7 million during the first quarter, which was inclusive of a $1 million tax benefit related to the revaluation of our deferred tax asset and a $1.7 million tax benefit related to equity compensation. During the quarter, the public or Class A ownership of the company averaged 78% and ended the quarter at 79%. Barring further changes in our public ownership percentage, we expect an effective tax rate of approximately 21% for Q2 2022. GAAP net income was $27 million in Q1 2022 versus $20 million during the fourth quarter of 2021, with the increase driven by higher operating income and a lower income tax expense. We prefer to look at adjusted net income and earnings per share, which were $22.9 million and $0.30 per share respectively during the first quarter versus $18.7 million and $0.25 per share in Q4 2021. Adjusted net income for the first quarter excluded $1.1 million in other income and applied a 26% tax rate to our adjusted pre-tax income generated during the quarter. We estimate that the tax rate for adjusted EPS will be 26% during the second quarter. During the first quarter, we paid a quarterly dividend of $0.11 per share, resulting in a cash outflow of over $8 million, including related distributions to members. The board has approved a dividend of $0.11 per share to be paid in June. We ended the quarter with a cash balance of $298 million. Operating cash flow was approximately $17 million, and our net CapEx was $7 million. Inventory rose by approximately $16 million sequentially due to further increases in inventory in transit, higher cost of goods, and the previously mentioned decision to increase product safety stocks to ensure timely delivery. Given the uncertainty regarding the global supply chain, our decision to manufacture additional inventory was taken with a view to alleviating customers' increasing concerns regarding certainty of supply. Working capital outflows are expected to moderate in Q2, which should benefit cash flow relative to the first quarter. Capital requirements for our business remain modest and will continue to exercise discipline with regards to growth expenditures. The first quarter included additional rental assets and expansion to our Bossier facility as we opportunistically purchased an adjacent parcel of land for nearly $3 million. Our net CapEx guidance for 2022 remains at $20 million-$30 million. That covers the financial review, and I'll now turn the call over to Scott. Thanks, Steve. As previously mentioned, we reported strong revenue growth across all of our business lines during the quarter, and adjusted EBITDA margins reached their highest levels since 2020. U.S. product market share remained strong at 41% during the period, as rig count increased by over 11%. Despite lower rig efficiencies from our customers during the period associated with service industry constraints, product revenue per U.S. land rig count increased due to cost recovery efforts, outperforming our prior expectations. Product EBITDA margins improved by 50 basis points in the first quarter, while incremental product EBITDA margins were a robust 40% during the period. Looking at the second quarter of 2022, we anticipate Cactus's rig count from our existing customer base to increase in the high single digits%. Product revenue is expected to increase 10% in Q2, despite expectations for further reductions in drilling efficiencies during the period. We anticipate product EBITDA margins to be in the low 36% range during the second quarter. Additionally, we've recently commenced a trial with one of the larger independent operators in the U.S. While geopolitical tensions and lockdowns in China have led to further cost headwind, Cactus remains confident that the compensation it receives will reflect the differentiated equipment and service we provide together with our elevated inventory levels. Cost recovery efforts commenced in the middle of last year. Since then, the company has continuously maintained an active dialogue with its customers as supply chain challenges persist. Internationally, our first South American product order of a high-dollar wellhead system is currently in the process of being delivered from Bossier City. We also expect to book our first product order in the Middle East around mid-year, although our focus to date has remained on honoring our U.S. commitments rather than pursuing high-volume international opportunities. From a supply chain perspective, we've had no major shutdowns at our facility in the Far East. However, transit times continue to increase given disruptions related to loading vessels and ocean freight. As mentioned previously, Cactus stocked up on inventory during the preceding months. Additionally, while many of our competitors rely solely on international locations to source equipment, we continue to have the benefit our Bossier City facility, which further distinguishes us relative to our peers. We expect our rig count to increase with both public and private operators going forward, and we continue to win business with new private customers as we demonstrate market focus and differentiated equipment and our ability to execute. Additionally, certain public operators have, for the first time in recent memory, announced increased CapEx budgets. On the rental side of the business, revenues increased by over 16% during the first quarter and are up nearly 80% year-over-year. For the second quarter, rental revenues are expected to increase by additional 10%, and EBITDA margins are anticipated to be up modestly during the period. In field service, revenues continue to be driven by both our product and rental activity. Revenue as a percentage of product and rental revenue is expected to be approximately 25% during the second quarter. Labor rate inflation as well as higher fuel related costs are expected to represent continued headwinds to margins. However, we currently forecast field service EBITDA margins to increase into the low-to-mid 20% range during the second quarter as we implement cost recovery initiatives. Regarding our outlook on M&A, the number and quality of opportunities in the market has increased in recent months. This management team continues to believe that M&A can be a useful tool to expand geographically or enhance our competitive positioning. However, we will continue to evaluate opportunities with a focus on returns to our shareholders. The ability to return cash to our shareholders remains an attractive avenue that we'll continue to carefully assess. Lastly, we announced during the quarter that David Isaac, our General Counsel and Vice President of Administration, is retiring. I wanna thank David for his outstanding service over the last few years and wish him well in his retirement. We're also proud to announce that Will Marsh will be joining the team to fill this role. Will comes to us from Bracewell, and previously spent over 20 years with Baker Hughes as their Chief Legal Officer and General Counsel. Will's unique industry experience and knowledge of international operations, capital markets, and M&A will be a great asset to this team. In summary, Cactus remains well-positioned to assuage any customer concerns regarding certainty of supply and quality of service. With that, I'll turn it back over to the operator, and we may begin Q&A. Operator? Thank you. We will now begin our question-and-answer session. If you have a question, please press zero, then one on your touch tone phone. If you wish to be removed from the queue, please press zero then two. If you're using a speakerphone, please pick up the handset first before pressing the numbers. We have our first question from David Anderson with Barclays. Hey, good morning, Scott. Good morning, David. How are you? I'm doing great. Your business continues to perform well on both products and rentals. You're constructive on the near term. Oil fundamentals are really supportive. Growth is, of course, never in a straight line. I just want to get some of your thoughts on some of the risks out there. You know, aside from global demand, what's most concerning to you over the next 12 months? Is it the privates kind of potentially running out of inventory and large cap stock spending? Is it industry-wide kind of lack of equipment that could level off growth? Is it customers experiencing some pricing sticker shock? Just how are you kind of sort of thinking about some of those risks out there? Yeah, David, I think that my near-term concern has to do with ancillary supply issues. You know, we're hearing a lot of comments about pipe availability, you know this, rig availability, sand availability, even cement availability. So I think that there's a desire probably to increase activity beyond the industry's capacity to support that. I, you know, I've mentioned that in previous calls that was my greatest concern. It's probably even more a concern today. Unless you're a very large publicly traded E&P and you've secured supply, I think you're gonna see some of these privates come under pressure to add rigs as a result of that. I think longer term, there's no question that the quality and availability of drilling prospects, particularly in West Texas, is diminishing. I also think that the larger public, publicly traded E&Ps probably have a more secure inventory of prospects than some of the independents. Near term, it's really supply constraints. It's not sticker shock. Um- over price increases. Yeah. It sounds like you're able to push through pricing, at least in your products, pretty effectively. Now, Scott, you're a man that's seen some cycles before. This one to me feels like. David, are you saying I'm old? Scott, we're in the same category, my friend. I am too. This one to me at least feels like 2004 again, you know, when activity ramped up and equipment was tight. We've heard from some of the larger service companies in the past couple weeks saying they view this being a margin cycle and not a build cycle. Can you comment on that? Do you agree with that? I mean, 2004 again, but this time, you know, we're seeing capitalistic cries everywhere, driving pricing and returns. Your returns on my numbers are already in the low teens, could be in the low teens this year, which is pretty remarkable. Maybe just kind of comment on how you think this could play from that perspective. Yeah. I think that it's probably fair to say that we're entering into a period of potential meaningful margin expansion. I think that volume expansion in terms of shipments is gonna be constrained. I, unlike I think some of our peers, we have the capacity to manage increased volumes. We could potentially benefit from. I think we will, frankly. I think we have two opportunities. I think we have margin expansion opportunities, and we have volume expansion opportunities. That is gonna come, quite frankly, with increasing our market share. I think even though no one's asked me that question, I'm anticipating I'll get asked that question since I always do. I think the fact that we have inventory on hand bodes probably well for market share gains at a price that we deem to be acceptable. You know, I've said before, we're not gonna chase market share for the sake of market share. I think That makes sense. you know, probably primarily margin expansion. Okay. Thanks, Scott. Appreciate it. Thank you. We have our next question from Stephen Gengaro with Stifel. Thanks. Good morning, everybody. Good morning to you. Well, you brought up market share, so maybe I'll just start with, you know, when we think about, and you mentioned some trials that you were doing with a large independent, and I think you also mentioned this expectation maybe that share gains a bit. Can you speak a little bit to kind of what you've seen as far as the dynamics you've had with the privates over the last year? I mean, it seems like you have gained some traction with the privates. Just kind of curious if you could add some color around that. Yeah. You know, as you know, privates have never been the core of our business. The fact that we've been able to maintain a market share north of 40%, given that privates account for well over 60% of the active rigs is, I think, supportive of our claim that we've done much better with privates today than we ever have before. You know, having said that, this business was not built on privates. We're built on the publicly traded, the larger operators, be they IOCs or be they independents. I think that our penetration of privates is, I think it's undeniable it's gonna increase this year because I think the privates are becoming much more sophisticated. They're consolidating. As they become more sophisticated and larger, then our product becomes far more attractive to them. They're not, as you know, they're not nearly as restrained from a capital perspective, and and we're doing our level best to to call on those customers for with whom it makes economic sense for us to pursue that business. I feel pretty good about the privates. I would feel a whole lot better though if some of our of our public companies actually do increase their activity level. We're seeing some of that right now, I'm optimistic that that combination could push our market share higher. Great. Thank you. Can you talk about a little bit more about sort of the interplay between, we'll call it cost recovery efforts and rig efficiency/the timing of rigs getting added, and how you think that kind of unfolds over the next few quarters? I imagine some of that's gonna be just pace of rig additions. Any color you could add around that sort of revenue per rig number, which was awfully healthy in the quarter given some of the headwinds. Yeah. I think the rig efficiencies I mentioned are gonna continue to suffer. It's really a function of several factors. One is that in general, the privates, you know, are less efficient than the publics. To the extent that the privates make up a higher percentage of the total rig count, you're gonna see rig efficiencies overall decline. I think that there have been episodic supply chain disruptions with our customers, where we've been on location waiting for another service company to arrive or complete a job, and that's becoming, unfortunately, more frequent. I think that you're seeing a lot of marginal equipment being deployed, and you're gonna see a lot more marginal equipment being deployed as we pass through the 700 level in the U.S. rig count on the way to maybe just under 800 by year-end. Rig efficiencies are not our friend, and we do measure those. They vary by basin, but overall, they have absolutely declined. We're also seeing a few customers drilling longer laterals. That's not necessarily a reflection of their efficiencies. I believe, I think this team believes that we'll be able to sustain our $ per rig by our cost recovery efforts. You know, it's more to an earlier question, it's really about margin expansion, I think, for the rest of this year, perhaps than huge activity gains. Great. Thank you for the color. We have our next question from Cameron Lochridge with Stephens. Hey, good morning. Thanks for taking my question. Morning, Cameron. I wanted to start just on the supply chain, a couple of questions there. One, just if you could talk a little bit about where you're seeing some of the biggest bottlenecks today, and what kinda, you know, what kinda gives you the confidence and the visibility to those potentially improving going forward. Just related, as it relates to South America, Middle East, how challenging is it to get equipment into those geographies? What are some of the levers you can pull to potentially offset some of that? Well, Joel's in the room today. He can talk about what's happening in China. Joel. Yeah. I mean, the biggest challenges from China for us right now are just the, you know, vessel loadings and the vessel sailings right now. That situation, we understand, is gonna improve mid-May. We have a lot of containers staged right now at our forwarders facility at the port ready to be loaded. We've been able to pick up a few spot vessels here and there, but we've been moving product mainly through charters, which has helped us move anywhere from 50 to 100+ containers on a vessel. So we feel like that's gonna improve, but we did make a choice last year to elevate our inventory and raise the levels that we talked about so that we'd have stock available for customers. I feel like, you know, the issue of sailings is gonna be challenging, you know, for the remainder of the year. If we have these COVID spikes over there, certainly that's gonna cause us a couple of extra weeks in terms of delivery of product to the U.S. In terms of product moving to other areas like the Middle East, South America, we haven't seen any challenges in terms of that. Those kind of shipments are available and the product is moving, again, depending upon where the product's coming from. South America typically comes from Bossier City, so we're able to move that. Any product that's gonna come out of the Far East has its issues, and again, it's the issues you're seeing today, and I think that'll sort of be episodic as well. Got it. No, that's helpful. Thank you, Joel. Just maybe as a follow-up, going back to the discussion on cost recovery. I mean, I think it's safe to assume all of your competitors are experiencing similar pressures, you know, just across their portfolios. I guess I was just wondering, just anecdotally, if there's anything you could share on what some of your competitors. I know you don't like talking about competitors, but I'm gonna try anyway. What some of your competitors may be doing, relative to price recovery or cost recovery, and how you see them, you know, potentially either working to move things in the same direction as you are or holding things back for the sake of share. What are you seeing there? Wow, Cameron, I wish you wouldn't ask a question like that. You know that- I'm sorry. First of all, you know that there'll never be a customer that comes up that says, "Cactus, you know, you can raise your price by X% because your competitors just came in here and demanded a price increase of Y." So they don't really share that with us. I think that in general, our larger competitors are being more responsible in terms of cost recovery. I think that some of the smaller players are being probably less responsive to their increase in costs. However, having said that, I expect that will change over the course of this year simply because many of our smaller competitors don't have access to working capital lines, and if they don't raise their prices or implement some sort of cost recovery, I think they could find themselves squeezed out of this market. You know, there are not a whole lot of lenders, as you know, that are willing to extend credit to smaller oil field service companies still. In general, yes, our larger competitors are being, I think, more responsible. Got it. Thank you, Scott. Sorry to put you on the spot there, but just- It's all right. wanted to, make that clear. Well, okay, thank you. I'll turn it back. Thank you. Our next question is from Ian Macpherson with Piper Sandler. Thanks. Good morning. Morning, Ian. How are you? This one hasn't come up yet. Scott, we always appreciate your peek into the crystal ball on rig count limits over the next few quarters. We're looking towards exiting this year around 700 lower 48 rigs. Do you think that will be challenged to be attained based on rig constraints or lead times, or do you think we get there? After that, I had a follow question on rig count beyond that threshold. Now, Ian, are you talking about horizontal rig count? Because I think the U.S. rig count is gonna exit the year, just closer to 800, frankly. Really? The total U.S. rig, yes. I don't know where you got the 700 from. You know, we're already very close to 700, and you're seeing. Okay You're seeing a couple, two, three rigs being added every week. Yeah. The drilling contractor guidance for this calendar quarter was definitely, you know, slowing down in aggregate, but certainly not saying it's. Uh, uh- Yeah. No, I think no question that the rate of increase. You know, we had some weeks, you'll recall, with double-digit rig count increases. I think those are probably, well, not impossible. I think that, you know, we're gonna settle into that 2-3. We've got a long way to go before the end of the year, so I think there's room for us. Yeah ... to approach the 800. I think that next year, 2023, if I think about that, I think that our average rig count for 2023 will be more in line with the exit of 2022, so maybe just below or around 800 rigs, which would represent about a 12% average increase, 2023 versus 2022. I think that yes, there is there are a lack of high spec rigs, but you know, this is the beauty of capitalism. If there's demand out there and the price is right, maybe $35,000 a day, I think you'll see some rigs come on the market. I Okay. I know when we plan our business, right now we're thinking in terms, particularly in terms of supply chain, about supporting an average count next year of about 800. Okay. I guess where I wanted to go with the question is, when we go from 700 rigs to 800 rigs, I think there's gotta be a mix with the last 100 rigs that are gonna be just definitionally maybe less efficient, less walking rigs, less total super spec. Then how, maybe if you agree with that or don't agree with it, but then how your value prop as an, you know, an efficiency enabler compounds in that scenario. Yeah. I absolutely agree with you there, Ian, that the next 100 or so rigs will exhibit far less efficiencies than the rigs that are currently running. The way we plan our business is that we look at each customer, we look at their projected rig count, and then we do a calculation that we refine on a rolling basis, their average wells drilled per month. Each customer has its own profile, and I think that maybe for the first time, we may have to adjust that depending if we may have a customer that has eight super spec rigs and maybe two lower tier rigs. We may have to sort of adjust that approach, but we have the capability to do that, and we'll do so. Super. Thank you for that perspective. Appreciate it. Okay, Ian. Have a good day. We have our next question from Don Crist with Johnson Rice. Morning, gentlemen. How are y'all today? Hey, Don. How are you? Pretty good. You called out field service costs in the press release and some mitigation efforts that you're doing there. Can you quantify what you're doing on either the labor or the fuel side to bring down those costs some? Well, there's nothing I can do on the fuel side, you know, we tried to buy some hybrid vehicles, but none of them were available. That's just the truth. It is what it is. Really, in terms of cost mitigation, there is not a whole lot that we can do in terms of labor and fuel. What we're really talking about is cost recovery initiatives that we implemented beginning of the second quarter. There was just no other way. Supply chain is one thing, but when it comes to diesel and people, there's just nowhere to go. We already operate at a very, very high utilization rate for our service techs, so pretty impossible for us to operate any higher. I think that an area that has been a burden is third-party contractors. We're raising the price, quite frankly, of deploying third-party contractors because they're raising the price to us. Now we don't deploy them widely, but you can imagine we use a lot of outside crane services, mobilization services on frack jobs, demob services on frack jobs. Much of that work is provided by third-party contractors, and they've not been bashful because there's no capacity there. We were probably, frankly, slower than we should have been in passing that on to our customers. Okay. I'm gonna ask a question that gets asked every quarter. With the hoard of cash that you have on the balance sheet, which frankly is a great thing to have, are there any new initiatives or, you know, sharing money back to shareholders, et cetera, that y'all are looking at specifically? Or do you think you just keep that cash on the balance sheet for now? Let me answer that. Really, it's. I have two answers. The first is, as you could tell by our SG&A for the first quarter, we are really the most active we've ever been in looking at M&A opportunities. They're better, and there are more of them. I know that our investors have a limited amount of patience for that. You know, I've said before, the management team owns 20% of this business. This is our money. We're gonna be very careful about how we deploy it, and we're gonna make sure that wherever we deploy it, we have a clear sight line of sight to a 30% return on our capital employed. That's not immediate, but that's a clear line of sight. It's taken us a while 'cause we're being very careful, but we're looking at more deals than ever. I really feel like that cash will be used in that endeavor. We also are committed to sustaining our dividend with a view to being able to periodically increase the dividend. They're not mutually exclusive. I think we wanna do both. Until we feel like the opportunities are no longer viable, I think we're gonna probably sit on most of this cash. I appreciate the color on that and the candid response. Can we assume that if you're looking at some M&A opportunities, that it would be something that you possibly did in either a previous company or have experience in? Or do you think you'd step out into something that is new and you'd have to bring, you know, new managers, et cetera, in to run that for you? Yeah. I think, you know, I've said this many times. Our preference is consolidation within the industry. It's what we know. We do it well. For us, it's the lowest risk avenue for deployment of our cash. That's our number one priority. There are other businesses out there, Don, that we're seeing right now that share the same customer base, that are manufacturing oriented, that are differentiated in terms of their technology and could potentially use our extensive service network. We would step out if it made sense, but obviously, I think you can appreciate this, the rewards would have to be deemed to be better than, or rather the risk-reward ratio would be different from if we were to acquire somebody who's a competitor, just because it would be a slightly riskier proposition for us. Does that make sense? I appreciate. Yeah, absolutely. Okay. Absolutely. I appreciate the color, and I'll turn it back. Thank you. We have no further questions. I will now turn the call over to John Fitzgerald for closing remarks. Thanks, everyone, for your participation. We look forward to following up with you on the next call. Thanks, everybody. Have a good day. Thank you. Ladies and gentlemen, this concludes today's conference. We thank you for participating. You may now disconnect.