RPC Inc (RES) 2025 Q3 法說會逐字稿

Good morning and thank you for joining us for RPC Inc's 3rd quarter 2025 earnings conference call.

Today's call will be hosted by Ben Palmer, President and CEO, and Mike Schmidt, Chief Financial Officer. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to advise the conference call is being recorded. I will now turn the call over to Mr. Schmidt.

Thank you and good morning.

Before we begin, I want to remind you that some of the statements that will be made on this call could be forward-looking in nature and reflect a number of known and unknown risks.

Please refer to our press release issued today along with our 2024 10K and other public filings that outline those risks, all of which can be found on RPC's website at www.rpc.net.

In today's earnings release and conference call, we'll be referring to several non-GAAP measures of operating performance and liquidity.

We believe these non-GAAP measures allow us to compare performance consistently over various periods.

Our press release and our website contain reconciliations of these non-GAAP measures to the most directly comparable GAAP measures.

I'll now turn the call over to our President and CEO Ben Palmer.

Thanks, Mike, and thank you for joining our call this morning.

Today we'll talk about our 3rd quarter results. In addition, we will share our views about the impacts we are seeing from increasing macro and geopolitical uncertainties which were prevalent during and after the quarter.

Third quarter results reflect a sequential revenue improvement due to increases across the majority of our companies.

We saw the largest increases in pressure pumping, coil tubing, and downhole tools.

Service lines other than pressure pumping represented 72% of total revenues the third quarter and generated a 3% sequential increase.

In addition to revenue growth in downhole tools and coil tubing, we also saw growth in rental tools and wire line.

The tubing solutions downfold tools revenues increase 5% sequentially. We saw a particular strength in our Rocky Mountain and Southeast regions, which is a testament to the company's broad geographic exposure.

Tubing Solutions is a market leader in downhole technologies. The company continues to gain traction with its new A10 downhole motor.

The motor is proving highly effective, particularly longer laterals, which is translated as alternative.

Equations that that new metal on metal motor called metal max.

That completed more than 100s with.

Allows for a smaller amount of time work output and improve performance.

And pressure and making it extremely personal.

That or The solutions to actively market and develop its unplugged technology.

Recall, this is an innovative product that reduce that reduces and can sometimes eliminate the need for bridge blocks and delivers faster drill out times while achieving highly effective state isolation.

We're excited about these new products, the potential further our industry leadership.

The pressure in the addition of a sorry.

Unity position man and generational.

Practical effects received in early 2026 that they units on storage for.

You know with about its storage well maintenance schedule over the next several years. This work is a regulatory driven and is part of our effort to continue diversifying our business.

Recently cut press control collaborated with a leading industrial contract contractor to drill a geo exchange well at universe.

That's your This is one example of utilize tools Our smaller letters business revenues 1% from 4.

Of revenue comes from completions, which is the largest wireline provider in the Permian Basin.

While the Permian completion market remains challenged, we saw increased gun usage in the court. The 3rd quarter benefited from some customer completion accelerations and shifts to some fact operations.

That energy's pressure funding business saw an improvement in overall activity during the 3rd quarter bolstered by a reduction in third-party non-productive time and reduced white space.

Despite the revenue improvements, we would like to lay down a fleet.

In October and reduce staffing accordingly. We will continue to evaluate fleets from a return-based framework. Our deployed fleets are largely supporting customers that we expect will continue completion activity over the next several months.

With recent oil price volatility, we expect continued challenging conditions in the oilfield services market over the near term.

Energy Services has received and is deploying a new 100% gas frac pump for testing and alternative technology evaluation. We have an additional unit with a slightly different design on the way as well.

Our focus has always been on shareholder returns and managing through cycles. We continue to strategically grow our less capital intensive service lines, both organically and through acquisitions. We believe our balance sheet offers us optionality and challenging market conditions.

With that, Mike will now discuss the quarter's financial results.

Thanks, Ben.

Our third quarter financial results with sequential comparisons to the second quarter of 2025 are as follows.

Revenues increased 6% to $447.1 million compared to Q2.

Breaking down our operating segments, technical services, which represented 94% of our total third quarter revenues, was up 6%.

Support services, which represented 6% of our total third quarter revenues, was up 4% led by rental tools.

The following is a breakdown of our 3rd quarter revenues for our top service lines.

Pressure pumping was 27.9%. Wire line 23.5%. Downhole tools also 23.5%. Quil tubing, 9.5%. Cementing, 5.4%, and rental tools, 4.2%. Together these service lines accounted for 94% of our total revenues.

Cost of revenues excluding depreciation and amortization was $335 million compared to $318 million in the previous quarter. This increase was primarily due to expenses that vary with increased activity.

SG&A expenses were $44.6 million up from $40.8 million.

As a percentage of revenue, these expenses increased 30 basis points to 10%, primarily due to employment incentive accrual adjustments and other payroll costs.

Our third quarter's effective tax rate was 42.6%, which was slightly higher than our previous quarter's effective tax rate.

The effective tax rate was unusually high, primarily due to the non-deductible portion of acquisition-related employment costs and a provision to tax return adjustment in the quarter.

We expect our effective tax rates to be impacted through the life of the acquisition related employment costs due to differences between the accounting and tax treatments of these costs.

Adjusted diluted EPS was $0.09 in the quarter.

Adjustments totaled $0.03 and were entirely related to the acquisition related employment costs.

Adjusted EBITDA was $72.3 million up from $65.6 million due to the broad-based increases across the majority of our businesses.

Adjusted even the margins, increased 60 basis points sequentially to 16.2%. Operating cash flow year-to-date was $139.5 million and after CapEx of $117.8 million free cash flow was $21.7 million.

At the quarter end, we had over $163 million in cash, a $50 million seller finance note, and no outstanding debt on our $100 million dollar revolving credit facility.

Payment of dividends totaled $26.3 million year-to-date.

And through through the 3rd quarter.

During the quarter, we paid $8.8 million in dividends.

Full year 2025 capital spending is expected to be between 170 to $190 million primarily related to maintenance and inclusive of opportunistic asset purchases, as well as our ERP and other IT system upgrades.

In the 4th quarter, we are planning to liquidate our terminated supplemental executive retirement plan.

Related to this, we expect to receive a net cash distribution of approximately $8 million subject to market changes, and to incur a one-time discrete increase in our effective tax rate.

I now turn it back over to Ben for some closing remarks.

Thank you, Mike.

Current oil prices and market uncertainty have contributed to additional near term risks to the operating environment. Like we have in prior business cycles, we will manage the business prudently focusing on costs, returns, capital allocation, utilizing our balance sheet to take advantage of opportunities.

We believe our more diversified product offerings and geographic exposure offer opportunities to better position ourselves when fundamentals improved. I want to thank all of our employees who work tirelessly to deliver high levels of service and value to customers.

Thank you for joining us this morning. At this time we're happy to address any questions.

(Operator instruction)

Don Christ with John Rice.

Good morning guys. How are y'all today?

Great good.

I wanted to start with kind of 4th quarter outlook, obviously there's a lot of uncertainty as we kind of move into December.

Just kind of what are you thinking there? And do you think that activity could kind of snap back in the first part of the year, whether it be from budget exhaustion late in the 4th quarter or whatnot, kind of what you're seeing from a kind of activity levels over the next, 3 months, 4 months or so.

Don, it's been, a reasonable question, something that we've all come to realize is a is a possibility in the fourth quarter, to be H1st, at this very moment, we're.

Comfortable with where things are for the 4th quarter but certainly will not be surprised if customers announce some some slowdowns for the holidays, so we're we're bracing for that, and how that impacts, based on experience, the impacts coming out of that into the 1st quarter, just depends on how severe the slowdowns are in the 4th quarter, so. It's kind of a non-answer. We're not certain, but we're trying to remain, flexible and diligent and prepared to react, to whatever.

We see out there again reasonable questions, hard to say, but I would say right now at this at this moment we're feeling, I think as good as possible about the 4th quarter and therefore how things will hopefully then proceed fairly well and not have too much of a a slow start to early next year.

I appreciate that color and I get that it's difficult to predict. So I wanted to ask more of a kind of high level kind of business question, and you may want to defer this this answer as well, but pressure pumping has become a very big boy game, for lack of a better term, with, the TOP3 or 4 companies having 30+ fleets running, and y'all are kind of on the smaller end of that. Given the performance of your other business lines that seem to be kind of outperforming the general market, does it kind of make sense to to pivot to away from pressure pumping and just focus on the other business lines to kind of boost productivity?

Don, it's been, I think, we, we've been talking about the fact that that's what we've been doing, pressure pumping is, a lower percentage of our much lower percentage of our total revenues than it has been in recent years. We still think we have some opportunities there, but as we've talked before, we're not investing aggressively within pressure pumping, but we're keeping it going and, we're looking at a And look and we look are looking at a variety of different options there, but yes, I would say that you know high level that's what we're doing is focus on the less capital intensive service lines and fresh pumping does continue to be capital intensive, but we want to be, we're going to be prudent about how much and when we make significant investments there.

Okay, and just one last one for me, this A10 down hall motor that y'all talked about, can you just give us a little bit more detail of how it's differentiated and, why the customers are kind of migrating towards it?

It, it's from a performance standpoint, a drill out standpoint, it's, much more effective with the longer laterals, and so that's the performance. I mean it's just, it's a time and efficiency thing.

And I think it's through its design and its size. It's something that we focus on constantly. The tubing has an unbelievable R&D team, engineering team that is constantly making new innovations and improving the performance and this is yet, another example and it just gets the job done more reliably and quicker and that translates.

Hopefully and improved returns for us, additional work, but it also, it's beneficial to the customer as well.

I appreciate the color. I look forward to seeing y'all in person in a couple weeks.

Talk to you soon. Thanks.

Again, if you would like to ask a question, press one on your telephone keypad.

There are no further questions at this time. I will now turn the call back over to Ben Palmer for closing remarks.

Well, thank you for listening in this morning. We appreciate it very much and I hope you have a good rest of the day. Appreciate it.

Today's call will be available for replay on www.rpc.net within 2 hours following the completion of the call. Ladies and gentlemen, that concludes today's call.

Thank you all for joining. You may now disconnect.