Cactus Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2026

Key Takeaways

  • Positive Sentiment: Management raised the expected annualized synergies from the Cactus International acquisition to $15 million (from $10 million) and says the organizational cost actions to realize those savings are complete, with supply‑chain savings targeted to materialize in the second half of 2027.
  • Negative Sentiment: The conflict in the Middle East has delayed shipments, reduced backlog in the region and is expected to keep pressure control revenues roughly flat in Q2 with segment adjusted EBITDA margins of ~22%–24%, while logistics costs and lower manufacturing absorption weigh on near‑term results.
  • Positive Sentiment: Spoolable Technologies outperformed in Q1 with record non‑U.S. revenues and management expects mid‑single digit revenue growth in Q2 and adjusted EBITDA margins of ~36%–38%, driven by improving international bookings and stronger North American activity.
  • Neutral Sentiment: Q1 highlights: total revenue $388 million, adjusted EBITDA $100 million (25.8% margin), adjusted EPS $0.70, and cash of $292 million — which includes $98 million earmarked for legal entity restructurings with Baker Hughes and reflected as a related payable.
  • Negative Sentiment: Tariff exposure remains a meaningful headwind (currently paying a 75% tariff on most China imports); a tentative API approval for the Vietnam facility should lower tariffs on some imports to 50%, but any tariff refunds are uncertain and timing/amounts remain unclear.
AI Generated. May Contain Errors.
Earnings Conference Call
Cactus Q1 2026
00:00 / 00:00

Transcript Sections

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Operator

Day, and thank you for standing by. Welcome to the Cactus Q1 2026 Earnings Call. At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Alan Boyd, Treasurer, Director of Corporate Development and Investor Relations. Please go ahead.

Alan Boyd
Alan Boyd
Treasurer and Director of Corporate Development and Investor Relations at Cactus

Thank you. Good morning. We appreciate you joining us on today's call. Our speakers will be Scott Bender, our Chairman and Chief Executive Officer, and Jay Nutt, our Chief Financial Officer. Also joining us today are Joel Bender, President, Steven Bender, Chief Operating Officer, and William Marsh, our General Counsel. 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.

Alan Boyd
Alan Boyd
Treasurer and Director of Corporate Development and Investor Relations at Cactus

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.

Scott Bender
Chairman and CEO at Cactus

Thanks, Alan. Good morning to everyone. I'm very proud of our team's achievements in the Q1 and the current momentum in the business, which reflects our focus on delivering premium, highly engineered products and services to our customers. Pressure Controls revenues remained resilient despite the impacts of the conflict in the Mideast, and our Spoolable Technologies business outperformed in what is usually a seasonally slow quarter on continued international shipment strength.

Scott Bender
Chairman and CEO at Cactus

I'd like to extend a thanks to our team, particularly those in the Mideast, for sustaining a high level of performance during this challenging period. Some Q1 total company financial highlights include revenue of $388 million, Adjusted EBITDA of $100 million, Adjusted EBITDA margin of 25.8%. We paid a quarterly dividend of $0.14 per share, and we closed the quarter with a cash balance of $292 million. I'll now turn the call over to Jay Nutt, our CFO, who will review our financial results. Following his remarks, I'll provide some thoughts on our outlook for the near term before opening the lines for Q&A. Jay?

Jay Nutt
Jay Nutt
EVP, CFO, and Treasurer at Cactus

Thank you, Scott. As Scott mentioned, total Q1 revenues were $388 million, and total Adjusted EBITDA was $100 million, both sequentially much higher than the Q4, largely due to the contribution of Cactus International for our Q1 of ownership. For our Pressure Control segment, revenues of $300 million were up nearly 70% from the Q4 due to the acquisition. Revenues and operating income in the Middle East were modestly impacted by the outbreak of the conflict in Iran, but impacts of delayed shipments were offset by strength in the US market. Operating income decreased $10 million or 20.7% sequentially, with operating margins decreasing approximately 14%.

Jay Nutt
Jay Nutt
EVP, CFO, and Treasurer at Cactus

Operating income improved sequentially due to the inclusion of Cactus International, of course, as reported, it was reduced by approximately $19 million due to purchase price accounting adjustments. These non-cash charges are added back to our adjusted operating results. Accordingly, Adjusted segment EBITDA was $12.7 million, higher sequentially, with margins decreasing by 930 basis points. The margin decrease was primarily due to the inclusion of Cactus International operating results. For our Spoolable Technology segment, revenues of $90 million were up 6.8% sequentially, reflecting higher customer activity supported by increased sales across domestic and international markets. Operating income increased $2.6 million or 12.6% sequentially, with operating margins increasing 130 basis points due to improved operating leverage and lower stock-based compensation expense.

Jay Nutt
Jay Nutt
EVP, CFO, and Treasurer at Cactus

Adjusted segment EBITDA increased $1.8 million or 5.9% sequentially, while margins decreased by 30 basis points as the improved operating leverage was offset by increased input cost. Corporate and other expenses increased by $2.9 million to $12.7 million in Q1, including $5.8 million of transaction and integration costs. Adjusted corporate EBITDA moved favorably to $4.7 million of expense. On a total company basis, Q1 Adjusted EBITDA was $100 million, up $14.6 million from Q4. Adjusted EBITDA margin for the Q1 was 25.8% compared to 32.7% in the Q4.

Jay Nutt
Jay Nutt
EVP, CFO, and Treasurer at Cactus

Adjustments to total company EBITDA during the Q1 included non-cash charges of $7 million in stock-based compensation, $10.4 million of inventory step-up amortization due to purchase price accounting, $5.8 million for transaction-related professional fees, and $900,000 of severance primarily incurred in initial actions to rightsize the Cactus International organization. Total company remaining performance obligations or backlog ended the quarter at $537 million. Backlog reflects remaining performance obligations for our global Pressure Control and Spoolable Technologies businesses, but a significant majority of these obligations are associated with our international Pressure Control business. As a reminder, our Pressure Control and Spoolable Technologies operations are predominantly short cycle businesses, where backlog levels at any time may not be indicative of future revenues beyond the near term.

Jay Nutt
Jay Nutt
EVP, CFO, and Treasurer at Cactus

Pressure Control operations in the U.S. do not contribute meaningfully to our backlog as the business is driven by call out orders. Backlog in the Cactus International business decreased from year-end as multiyear contract negotiations continued with one large Middle East customer, resulting in lower than normal order activity. Orders were partially impacted late in the quarter due to the outbreak of the conflict in Iran. Backlog could continue to decrease in the Q2 considering the conflict in the Middle East and the impact of contract renegotiation timing. Depreciation and amortization expense for the quarter was $36.8 million, which includes $12.5 million of amortization expense related to intangible assets and $10.5 million of amortization of the step-up of inventory values resulting from the Cactus International and FlexSteel acquisitions.

Jay Nutt
Jay Nutt
EVP, CFO, and Treasurer at Cactus

During the Q1, the public or Class A ownership of the company averaged 86% and ended the period at 87%. GAAP net income was $40 million in the Q1 versus $48 million during the Q4. The decrease was largely driven by purchase price accounting. Book tax expense during the Q1 was $10 million, resulting in an effective tax rate of 19%. Adjusted net income and earnings per share were $56 million and $0.70 per share, respectively, during the Q1, compared to $52 million and $0.65 per share in the Q4.

Jay Nutt
Jay Nutt
EVP, CFO, and Treasurer at Cactus

Adjusted net income for the Q1 was net of a 22% tax rate applied to our adjusted pre-tax income, and now also includes deductions for non-controlling interests related to Baker Hughes ownership in the Cactus International joint venture, combined with a non-controlling partner's ownership in our business in Saudi Arabia. During the quarter, we paid a quarterly dividend of $0.14 per share, resulting in a cash outflow of approximately $12 million, including related distributions to members. We ended the quarter with a cash balance of $292 million. This amount includes $98 million of cash held to finalize Cactus International legal entity restructuring transactions with Baker Hughes in certain jurisdictions. We expect those restructurings to be completed by Baker Hughes in the coming months. The offset to this cash is currently reflected in our accounts payable balances.

Jay Nutt
Jay Nutt
EVP, CFO, and Treasurer at Cactus

These balances and other legal restructuring related items impacted our cash from operations in the quarter. Cash decreased from year-end due to the acquisition outflow. Net CapEx was approximately $9 million during the Q1 of 2026. In a moment, Scott will give you our Q2 operational outlook. Some additional financial considerations when looking ahead to the Q2 include an effective tax rate of 19% and an estimated tax rate for adjusted EPS of approximately 22%. Total depreciation and amortization expense during the Q2 is expected to be approximately $37 million.

Jay Nutt
Jay Nutt
EVP, CFO, and Treasurer at Cactus

$28 million of this expense is associated with our Pressure Control segment, including approximately $10 million of expected amortization of the step-up of inventory and $8 million of intangible amortization because of purchase price accounting. Finally, $9 million of this expense is within Spoolable Technologies. Our full year 2026 CapEx outlook remains in the range of $40 million-$50 million. Finally, the board has approved a quarterly dividend of $0.14 per share, which will be paid in June. That covers the financial review. I'll turn the call back over to Scott.

Scott Bender
Chairman and CEO at Cactus

Thanks, Jay. I'll now touch on our expectations for the Q2, our reporting segment, starting with our Pressure Control business. During the Q2, we expect total Pressure Control revenue to be approximately flat from the Q1, reflecting increased customer optimism in the domestic market, offset by a full quarter impact of the conflict in Iran on our Cactus International JV's results. We assume that the status quo will continue throughout the full Q2, even considering an opening of the Strait of Hormuz, which is impacting our customer activity and presenting numerous logistic challenges to our Mid East manufacturing operations. I'm extremely thankful that our personnel in the region have remained safe, and we'll continue to prioritize their safety as the situation changes.

Scott Bender
Chairman and CEO at Cactus

Our team has done an incredible job mitigating the impacts of logistics challenges and minimizing the impact on revenues so far in the Q2 by utilizing alternative shipping methods whenever possible, while also personally navigating an extremely trying time for them and their families. We remain hopeful for an expeditious and non-kinetic resolution to the conflict soon. Adjusted EBITDA margins in our Pressure Control segment are expected to be in the 22%-24% range in the Q2. This guidance excludes approximately $5 million of stock-based comp expense within the segment and the amortization of the write-up of Cactus International inventory due to purchase price accounting.

Scott Bender
Chairman and CEO at Cactus

We expect this will be the last quarter for this inventory amortization expense. Margins are expected to decrease slightly as resilience in the US market and increased imports of lower cost goods from Vietnam are more than offset by elevated logistics expenses and lower manufacturing absorption in our Cactus International business due to the conflict. I'm also pleased to announce we're increasing the expected synergies targets for our Cactus International acquisition by 50% from an annualized amount of $10 million-$15 million. The increase follows our work to further flatten and rightsize the organization to match our operating model. The actions necessary to lock in these savings have already been completed, which are expected to support higher profitability leading into next year. Additionally, we are increasingly confident in supply chain related synergies. However, we have much work to do to crystallize the amount and timing of these savings.

Scott Bender
Chairman and CEO at Cactus

In any event, this is a project-driven business. At any rate, as this is a project-driven business, most material was ordered when the orders were received for delivery approximately nine to 15 months from placement. As a result, we do not expect to see meaningful supply chain related savings before the second half of 2027. More to come as we continue to work on this topic. I'd also like to provide a brief update on the tariff situation in the U.S. as it applies to our imports, which remain highly fluid. We still pay a 75% total tariff on the import of most of our goods from China, which consists of 25% Section 301 and 50% Section 232.

Scott Bender
Chairman and CEO at Cactus

There were no meaningful changes to the basis of calculations of our rates as a result of the recent U.S. Supreme Court rulings regarding the IEEPA tariffs or changes to the more impactful Section 232 tariffs announced in early April. We are also now paying a 10% tariff implemented under Section 122, which impacts certain goods we import, but not those captured under Section 232. While we've not gained much from tariff relief on China source product, I'm pleased to share that our Vietnam facility is now tentatively API approved, and we're proceeding to increase shipments from this facility, which will attract a lower 50% import tariff under Section 232 only. Finally, the recent Supreme Court ruling provided that certain tariff payers may claim refunds for IEEPA and other tariffs previously remitted that were ruled unconstitutional.

Scott Bender
Chairman and CEO at Cactus

We filed for a refund of such payments, the amount is relatively small compared to the overall tariff burden that we incurred as a result of Section 232 and Section 301, both of which remain in place. There is no certainty as to the amount or timing of the tariff refunds. Shifting to our Spoolable Technology segment, I'm extremely pleased with the performance in the quarter. We achieved a record quarter of non-U.S. revenues, buoyed by strength in the Middle East and Latin America. International order momentum is increasing due to our multi-year effort to further develop our global footprint and customer relationships. Domestic activity in the Q1 was also higher than expected in what is typically a seasonally slow quarter. Continued growth with midstream customers who demand our larger diameter, high specification products was an additional source of domestic strength.

Scott Bender
Chairman and CEO at Cactus

This momentum is continuing into the Q2 as we expect revenues to increase mid-single digits percentage-wise, primarily driven by an increase in North American activity. Recent commodity price strength has increased customer optimism and adoption. We're excited about the trajectory of the segment, where bookings have improved sequentially in every month this year. Internationally, we've seen a step change in inbound interest since quarter end, particularly from Latin America, where we were recently awarded several incremental orders totaling approximately $30 million for delivery this year. Further, we shipped our 1st sour service equipment order to the Middle East in April, as previously shared. We expect Spoolable Technologies Adjusted EBITDA margins to be approximately 36%-38% in the Q2, which excludes $1 billion of stock-based comp expense and is increasing modestly on improved operating leverage.

Scott Bender
Chairman and CEO at Cactus

With regards to our Spoolable Technology supply chain, the Middle East conflict has led to improved commodity prices for our customers, but also to a recent material increase in the price of polyethylene, one of our primary input costs. I'm confident in our team's ability to proactively address these inflationary pressures through cost mitigation and recovery efforts. Adjusted corporate EBITDA is expected to be a charge of approximately $5 million in the Q2, which excludes $2 million of stock-based comp. In conclusion, the outlook of the oil and gas market has fundamentally changed in the last two months, from one of supply abundance and customer unease to supply concerns and guarded optimism. We are extremely well-positioned to capitalize on this momentum shift with our premium global customers once the conflict abates.

Scott Bender
Chairman and CEO at Cactus

Although not seen in domestic activity levels as of yet, our customers have increased the pace of their activity and urgency, with which they are bringing production online into a highly supportive commodity prices. As our SafeDrill and FlexSteel products are both specifically engineered to allow our customers to drill wells and bring production online faster, we are receiving increasing inquiries for new activity. Although we remain in the early stages of the transformation necessary for our Cactus International business to improve the margins and returns consistent with our long-term expectations, we are very pleased to have the broader geographic footprint and participate fully in the expected upcoming investments required to reestablish supply after the disruption in the Middle East. With that, I'd like to turn it back over to the operator, and we can begin Q&A. Operator?

Operator

Thank you. At this time, we will conduct the question-and-answer session. We will conduct the Q&A question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. Please stand by while we compile the Q&A roster. Our first question comes from Arun Jayaram from JPMorgan Securities. Your line is now open.

Arun Jayaram
Analyst at JPMorgan Securities

Good morning, gentlemen.

Scott Bender
Chairman and CEO at Cactus

Morning, Arun.

Arun Jayaram
Analyst at JPMorgan Securities

I'm doing well. Doing well. Team, I wanted to get your thoughts. you know, you've had your hands around the Cactus International, you know, assets for four months or so, obviously, a very volatile time since the late February. I was wondering if you could frame some of the self-help opportunities you see with that business as we, you know, as we think about, you know, 2027 and beyond.

Scott Bender
Chairman and CEO at Cactus

Are you really referring to what we see in terms of synergy opportunities?

Arun Jayaram
Analyst at JPMorgan Securities

Exactly. Exactly. As you think about things such as optimizing the supply chain and things like that.

Scott Bender
Chairman and CEO at Cactus

Well, you know, as we discussed, that's the $15 million in synergies relates primarily to making the organization far more efficient. I think there was some bloat in the way it was organized, and we're trying to reduce that to be more like Cactus. Potentially the larger prize here is gonna be supply chain. Our early indications are that there's quite a bit of room there for improvement. I would really tell you that it's primarily based upon improving the processes in the business to require fewer headcount and then the supply chain aspect of the business. Our supply chain is considerably lower cost.

Arun Jayaram
Analyst at JPMorgan Securities

Got it. Got it. How much time do you think it will take to kinda get the Cactus cost, you know, optimal supply chain kinda embedded in those in that business?

Scott Bender
Chairman and CEO at Cactus

You know, it won't take us that long. However, it will take a while to get rid of the inventory that has already been ordered in fulfillment of the current backlog. You know, our best estimate will be sometime by the end of the Q2 leading into the Q3 as we begin to replenish this inventory with lower cost product.

Arun Jayaram
Analyst at JPMorgan Securities

Got it. Got it. Maybe one for Jay, 'cause I did get some questions this morning. You highlighted, and you mentioned this in your script, that the $98 million of cash held for the legal restructuring transactions with Baker. Can you provide a little bit more color? I know that Cactus spent around $355 million for the 65% stake in the JV, and you put $70 million in cash, you know, operating cash in the JV as part of your piece. How does this $98 million compare to that, and maybe just some color around that?

Jay Nutt
Jay Nutt
EVP, CFO, and Treasurer at Cactus

Yeah. Arun, this $98 million is for a couple of legal entities where the restructuring has not been completed, and that's Baker Hughes responsibility to complete that. This will be cash that's necessary to execute those transactions and restructurings. We're not calling it restricted cash 'cause it's sitting in our bank accounts. That cash is designated to complete those legal entity restructurings, and we believe it's gonna take several more months to complete that.

Arun Jayaram
Analyst at JPMorgan Securities

Okay. That is being paid for kind of from the Baker standpoint.

Jay Nutt
Jay Nutt
EVP, CFO, and Treasurer at Cactus

Yeah. The cash is sitting with us, and as I point out, we really show that as a payable on our balance sheet back to Baker because that cash is designated for those restructuring activities.

Arun Jayaram
Analyst at JPMorgan Securities

All right. Thanks for clarifying that. Appreciate it.

Operator

Thank you. Our next question comes from Stephen Gengaro from Stifel. Your line is now open.

Stephen Gengaro
Stephen Gengaro
Managing Director at Stifel

That's only slightly easier than Arun's last name, I think.

Scott Bender
Chairman and CEO at Cactus

Morning, Stephen.

Stephen Gengaro
Stephen Gengaro
Managing Director at Stifel

Good morning, everybody. I think two things from me. The first, when you think about the U.S. land market and, you know, kind of the potential for improvement, I'm thinking at least we're hearing completions probably lead and then maybe drilling activity picks up a bit. Are you seeing in what you've seen in your activity, is that playing out in that manner? How do you think drilling activity evolves as we go through the year based on what you see right now?

Scott Bender
Chairman and CEO at Cactus

Okay. Well, let me tell you that although customers are eager, I mean, I think you've read to reduce their DUCs right now and take advantage. We haven't really seen any meaningful or significant evidence of that, although it's expected. What we have seen is far more optimism on the part of our customers, larger customers in addition to our privates. If you recall last quarter, I was probably the outlier when I forecasted a U.S. onshore count of 490 and, of course, the world has changed since then. We're now thinking we're gonna be in the 525 range, 525. I personally believe that we'll get our more than our share of that. I think that, from what we see in terms of activity increases, many of them are within our customer base. I feel much better about it. That's the short answer, Stephen.

Stephen Gengaro
Stephen Gengaro
Managing Director at Stifel

Great. Okay. No, thank you. The other question I had, it pertains to the selling the SafeDrill product internationally and how the JV with Baker will potentially help sales of your SafeDrill product to some of the non-conventional markets, either in the Middle East or in other areas. Can you just talk a little bit about that and how you see that evolving?

Scott Bender
Chairman and CEO at Cactus

Yeah. I think that, let me tell you that our first shipment of SafeDrill will be to a historic Cactus customer, and will be that shipment and the resulting contribution margin will be the property of your old Cactus and not the JV. In terms of the JV's ability to leverage our unconventional, you know, they're very active in areas that you know are gonna be active in unconventional, such as Saudi, the rest of Abu Dhabi that's managed by ADNOC, Kuwait, Algeria, those areas are where we expect to see the greatest benefit from the JV. They're there, they're approved, we have the products.

Stephen Gengaro
Stephen Gengaro
Managing Director at Stifel

Okay, great. Thank you for the details.

Operator

Thank you. Our next question comes from Derek Podhaizer from Piper Sandler. Your line is now open.

Derek Podhaizer
Derek Podhaizer
Director and Senior Research Analyst at Piper Sandler

Good morning, everyone. Maybe just sticking on Cactus International. Appreciate all the comments around optimizing the supply chain, driving the efficiencies. You just upped the target there. Maybe some comments or your thoughts around what a activity recovery could look like in the Middle East in a post-war environment. I'm assuming that there's been a bit of a destocking in Saudi and UAE, but when we think about restocking going back into the region, how should that impact Cactus International? Where do you see some upside from that?

Scott Bender
Chairman and CEO at Cactus

Yeah. I would say because of the deliveries, the extended deliveries and the destocking, I'm thinking, we're all thinking, Q2, Q3 of 2027. I think we're gonna see a pretty good increase in what has historically been demand from that area. You know, I'm a little concerned about Qatar, frankly, because having lost their, most of their ability to export, and Qatar's been a really good market for us, I'm not sure how much more gas, you know, and believe me, this is only my opinion, how much more gas Qatar is interested in producing right now with limited avenues for export. For the rest of the Middle East, particularly, we're gonna see a lot more.

Derek Podhaizer
Derek Podhaizer
Director and Senior Research Analyst at Piper Sandler

Got it. Got it. Okay. That, that's great. Middle of next year, along with all the efficiencies on the cost side of things, so setting up for some good upside, it appears. I guess, maybe switching over to the free cash flow, you know, obviously a pretty big quarter. Obviously, a lot of impact from working capital where that ties back to the $98 million payable with Baker Hughes. I think when you guys closed the deal on SPC, Cactus International, there's a pretty high working capital balance, particularly around AR, and I think you can benefit from harvesting that cash. Maybe just some thoughts around that and when we can really see that showing up in force as we work through this year and into next year. Just some color around the free cash flow generation.

Jay Nutt
Jay Nutt
EVP, CFO, and Treasurer at Cactus

Yeah, Derek, you're correct. There was a high level of unbilled AR at the end of year-end. We made some progress in Q1, we continue to have an elevated level of unbilled AR. We're gonna work on some processes about improving and accelerating the timing of being able to get that bill to our customers so that we can start increasing the velocity of cash flow. It's gonna take a couple quarters to make that happen because we have to work closely with our customers to get them to take invoicing a little more rapidly than what they're used to right now.

Derek Podhaizer
Derek Podhaizer
Director and Senior Research Analyst at Piper Sandler

Got it. Okay, great. Encouraging. Thank you very much. I'll turn it back.

Operator

Our next question comes from Keith Beckmann from Pickering Energy Partners. Your line is now open.

Keith Beckmann
Keith Beckmann
VP at Pickering Energy Partners

Hey, good morning. Thanks for taking my question.

Scott Bender
Chairman and CEO at Cactus

Good morning.

Keith Beckmann
Keith Beckmann
VP at Pickering Energy Partners

I wanted to ask around, you know, you guys have been pretty clear, I think, that Q2, Q3, 2027 is whenever we could see potentially a little bit of margin inflection due to getting your supply chain. I think, you know, maybe right now it's not I think you mentioned nine to 15 months is kinda like the order placement. Whenever you get your own supply chain into place, do you, do you expect that lead time to go down on orders potentially at all? Or do you think that that's still the right way to think about it, that nine to 15 months whenever you get your own supply chain into place?

Scott Bender
Chairman and CEO at Cactus

No, our lead times are much lower than that. Our delivery times right now.

Joel Bender
President and Director at Cactus

Eight, four to six months, depending upon the product.

Scott Bender
Chairman and CEO at Cactus

There you go.

Keith Beckmann
Keith Beckmann
VP at Pickering Energy Partners

Okay, perfect. No, that makes a lot of sense, and that's really helpful. The second question I wanted to ask around is maybe could you speak more specifically, maybe, you know, you touched on your prepared remarks, just what the particular, some of the logistics disruptions you're dealing with right now, as it pertains to the Middle East, or potentially, you know, anything on the tariff side of things. I think you highlighted that as well. Maybe the potential size of refunds that you think you could see and maybe what goes to the customer versus what you guys could potentially harvest from that.

Scott Bender
Chairman and CEO at Cactus

Let me tell you, You know, I don't wanna comment on the magnitude of the potential tariff refund, just because there's a lot of confusion about the applicability of non-liquidated versus liquidated tariffs. I, you know, I can let Joel go into detail about that. It's not an insignificant amount of money, but it is modest in comparison to how much we actually spend on tariffs because it does not impact the majority, which are 232 and 301. It's more related to, you know.

Joel Bender
President and Director at Cactus

It's, it's really just they refer to them as these emergencies, but it's really what you think of as reciprocal tariffs and fentanyl. That's all that this addressed. As Scott mentioned, the 50% steel tariff, it remains in place. The way the process works right now is you're in phase 1 of what they refer to as the tariff refunds, and it would be on entries that have not been liquidated, which essentially means that have not been processed by CBP, and then any that were liquidated in the last 80 days.

Joel Bender
President and Director at Cactus

You submit the list, it's a ACE declaration. You get a confirmation that it was accepted, and then you wait for your claim number. They, you know, they tell us you can expect something maybe in 90+ days, but there was no confidence in that particular date because, again, this is just phase I. They expect that there will be at least a second, possibly third phase in which they address liquidated entries, but that has not been confirmed. Again, it's still very unclear as to what the outcome of this is gonna be.

Keith Beckmann
Keith Beckmann
VP at Pickering Energy Partners

Okay, perfect. I really appreciate it. I'll turn it back, guys.

Operator

Thank you. Our next question comes from Jeff LeBlanc from TPH&Co. Your line is now open.

Scott Bender
Chairman and CEO at Cactus

Hey, Jeff.

Jeffrey LeBlanc
Director at TPH&Co.

Good morning, Scott. Hey, how are you? Good morning, Scott and team. Thank you for taking my question.

Scott Bender
Chairman and CEO at Cactus

How come none of you asked about FlexSteel?

Jeffrey LeBlanc
Director at TPH&Co.

Ironically, it's gonna be about, the alternative shipping methods you're using in the Middle East. Additionally, how quickly do you think shipping can return to normal means once the Strait reopens?

Scott Bender
Chairman and CEO at Cactus

Yeah. You know, I right now we're having to take a very circuitous route around the Arabian Peninsula and trying to get some stuff in by land. It's incredibly problematic. I don't know how much it's I don't know. You know, I don't wanna tell you something that's not true, but it's gotta be a good 30 days more longer than it had before. When is it gonna return? You know, you got a huge backlog of vessels, like almost 1,600 vessels that have to be cleared.

Scott Bender
Chairman and CEO at Cactus

I think the priority is gonna be to try to get oil out of the region and of course, get food into the region. You know, it's gonna take months and months. I think during its peak, what did we clear? 100+ ships a day, 120 or so. You got almost 1,600 that have to be cleared. On top of that, you're gonna have food that's coming in. You know, I just Jeff, I don't know. It's gonna be a good while.

Jeffrey LeBlanc
Director at TPH&Co.

Okay. Thank you very much. I'll hand the call back to the operator.

Operator

Thank you. Our next call is coming from Don Crist from Johnson Rice. Your line is now open.

Scott Bender
Chairman and CEO at Cactus

Good morning.

Don Crist
Don Crist
Analyst at Johnson Rice

Morning, Scott. I wanted to ask a more macro question because I know you like to pontificate on such things. Just in your conversations with your customers, we're hearing more and more dislocation between the financial oil markets and paper oil markets and the back end of the strip coming up. Is that what you're hearing from your larger customers out there and as that relates to activity in 2027?

Scott Bender
Chairman and CEO at Cactus

Well, I mean, obviously they're looking at the forward market much more than the spot market, although their balance sheets right now are blowing up with spot market sales. You know that. In terms of drilling, they're looking at the market next year. You know, I think the best way to characterize this is that whatever they were assuming, they're now assuming probably in the neighborhood of at least $15 higher in the futures market. You know, they're always very reluctant to share that with us for fear that we're gonna see that as an opportunity to raise prices, frankly.

Scott Bender
Chairman and CEO at Cactus

They, you know, they plead they're not pleading poverty as they were before, they're not highlighting how much cash they're building on their balance sheets. They're unlikely to share that. Look, I can tell you from talking to maybe six or seven or eight already, they're feeling a heck of a lot better about 27 than they were prior to this conflict. How that translates, I think it really depends upon people like you. If you're not supportive of these increases, then they won't proceed. It really takes one of the big ones to open up, and I think the rest will follow. There's no question in my mind they'd all love to drill more wells right now.

Don Crist
Don Crist
Analyst at Johnson Rice

I tend to agree with you. Just one on Vietnam. It sounds like you got tentative approval of API. Any parameters around how much that could improve margins once you shift fully out of China, come into the U.S., or shift more out of China, come into the U.S. and more from Vietnam?

Scott Bender
Chairman and CEO at Cactus

Well, we're hoping that Vietnam, by the end of the year, will be, what, about 40%?

Joel Bender
President and Director at Cactus

That's it.

Scott Bender
Chairman and CEO at Cactus

We haven't really You know, all we know is it's 40% of it's gonna be at a tariff rate that's goes from 75% down to 50%. To tell you that we've quantified that, I don't think we've actually quantified it because what difference is it gonna make? We're gonna do it and it's gonna benefit us. You know, before the next call, Alan, can we quantify that?

Alan Boyd
Alan Boyd
Treasurer and Director of Corporate Development and Investor Relations at Cactus

Yeah. Yeah, we'll quantify that for you.

Don Crist
Don Crist
Analyst at Johnson Rice

I appreciate the color. Thanks, guys. Good quarter.

Scott Bender
Chairman and CEO at Cactus

Thank you.

Operator

Thank you. This concludes the question and answer session. I would now like to turn it back to Scott Bender, CEO, for closing remarks.

Scott Bender
Chairman and CEO at Cactus

I wanna thank everybody for their continued support and interest in the company. I think we have a very exciting remainder of the year and, although I didn't receive any questions, I'm particularly excited about our spoolable product. I think that it's, we've had a transformation in that particular area. Anyway, I hope to report more on that next quarter. Everybody have a good day. Thanks.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Executives
    • Alan Boyd
      Alan Boyd
      Treasurer and Director of Corporate Development and Investor Relations
    • Jay Nutt
      Jay Nutt
      EVP, CFO, and Treasurer
Analysts
    • Arun Jayaram
      Analyst at JPMorgan Securities
    • Derek Podhaizer
      Director and Senior Research Analyst at Piper Sandler
    • Don Crist
      Analyst at Johnson Rice
    • Jeffrey LeBlanc
      Director at TPH&Co.
    • Joel Bender
      President and Director at Cactus
    • Keith Beckmann
      VP at Pickering Energy Partners
    • Scott Bender
      Chairman and CEO at Cactus
    • Stephen Gengaro
      Managing Director at Stifel
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