Cactus (WHD) Q4 2025 Earnings Call Transcript

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DATE

Thursday, February 26, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Scott J. Bender
• Chief Financial Officer — Jay A. Nutt
• President — Joel Bender
• Chief Operating Officer — Stephen Bender
• Chief Executive Officer, Cactus International — Stephen Tadlock
• General Counsel — William D. Marsh

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TAKEAWAYS

• Total Revenue -- $261 million, down 1% sequentially, reflecting segment divergence between Pressure Control and Spoolable Technologies.
• Adjusted EBITDA -- $85 million, down 1.7% sequentially, with a margin of 32.7% compared to 32.9% in the prior quarter.
• Pressure Control Segment Revenue -- $178 million, up 5.8% sequentially, driven by higher products sold per rig and increased rental revenues.
• Pressure Control Segment Operating Income -- Increased $4.1 million, or 9.3% sequentially, with operating margins increasing by 90 basis points.
• Pressure Control Segment Adjusted EBITDA -- Up $4 million, or 7.2% sequentially, with margin expansion of 50 basis points due to cost reduction benefits.
• Spoolable Technologies Segment Revenue -- $84 million, declined 11.6% sequentially due to seasonally lower U.S. customer activity.
• Spoolable Technologies Segment Operating Income -- Decreased $4.9 million, or 18.9% sequentially, and operating margins compressed by 220 basis points.
• Adjusted Net Income -- $52 million, or $0.65 per share, versus $54 million, or $0.67 per share, in the previous quarter, applying a 25% tax rate to adjusted pretax income.
• Quarterly Dividend -- Paid $0.14 per share, with total cash outflow of approximately $11 million including related distributions to members.
• Cash Balance -- Closed the quarter at $495 million, including $371 million held in escrow for the Cactus International acquisition.
• Cactus International Acquisition -- Closed January 1; full results to be reported in the Pressure Control segment starting in the next quarter.
• Q1 2026 Pressure Control Revenue Guidance -- Projected at $295 million to $305 million, with international contributing $130 million to $140 million.
• Q1 2026 Pressure Control Adjusted EBITDA Margin Guidance -- 23% to 25%, with margin decline driven "almost entirely to the inclusion of Cactus International."
• 2026 CapEx Guidance -- Expected at $40 million to $50 million, with continued manufacturing and facility investments, and similar to 2025 spend despite the Cactus International addition.
• Tariff Environment -- U.S. tariffs under Sections 301 and 232 are currently 75% for most China imports; Vietnam facility faces a 50% Section 232 tariff, expected to decline upon API certification planned for early in the second quarter.
• Backlog for Cactus International -- Ended 2025 at approximately $550 million following order slowdown, with expectations of increased order activity in 2026 and 2027.
• Annualized Synergy Target -- $10 million within one year of Cactus International acquisition close; additional supply chain savings anticipated in 2027, not in the current budget.
• Spoolable Technologies Q1 2026 Outlook -- Revenue expected to be down mid-single digits sequentially, with EBITDA margins guided to 33% to 35% and margins pressured by lower operating leverage and increased input costs.
• Product Innovation -- Introduction of new SKUs in Spoolable Technologies, with pilot programs in the Middle East planned for 2026 and expected future impact on 2027 revenues.
• Leadership Appointment -- Stephen Tadlock named CEO of Cactus International.

SUMMARY

Cactus, Inc. (NYSE:WHD) reported sequentially lower consolidated revenue and adjusted EBITDA, with improved performance in the Pressure Control segment offset by expected seasonal declines in Spoolable Technologies. The company completed the acquisition of Cactus International at the start of 2026, integrating it into the Pressure Control segment and initiating efforts to capture supply chain synergies and margin improvements, with management expecting material benefits beginning in 2027. Outlooks for 2026 indicate a return to revenue and adjusted EBITDA levels in line with 2024, with management forecasting increased order activity and market penetration internationally, especially in the Middle East, Sub-Saharan Africa, and the Far East. Spoolable Technologies will see market share initiatives through new product lines and is set to pilot innovations with major Middle East customers in 2026. The tariff differential from shifting sourcing from China to Vietnam is anticipated to enhance margins starting in late 2026, depending on the pace of API certification.

• Management explicitly communicated that the Cactus International segment currently lags its largest Middle East competitors in technology and customer execution, but intends to close this gap by leveraging its U.S. operating model and sales force expansion.
• Jay A. Nutt detailed that purchase price accounting adjustments associated with the Cactus International acquisition will impact near-term reported tax rates and increase quarterly depreciation and amortization expense by approximately $21 million in Q1 2026.
• Capital allocation plans for 2026 include both routine and expansionary projects, such as completing enhancements to the Saudi Arabia wellhead facility and ramping up the Vietnam plant for U.S. supply chain realignment.
• Chairman Scott J. Bender emphasized that, while near-term domestic and international market outlooks remain soft, the company is focused on sustaining margins and increasing exposure to higher-margin aftermarket service opportunities leveraging the legacy Vetco Gray installed base.
• The company acknowledged that supply and demand trends in the U.S. could result in a onshore rig count decline to the high 400s by year-end 2026, with limited forward oil price visibility creating market uncertainty.

INDUSTRY GLOSSARY

• TRA: Tax Receivable Agreement, an arrangement under which a company agrees to share certain realized tax benefits with pre-IPO owners or affiliates.
• API Certification: Accreditation granted by the American Petroleum Institute that validates manufacturing facilities’ processes and products according to industry standards, often required for product acceptance in regulated markets.
• SKU: Stock Keeping Unit, a unique product or item identifier used for inventory and sales tracking, particularly relevant for new product lines or technological introductions.

Full Conference Call Transcript

Scott J. Bender, our Chairman and Chief Executive Officer, and Jay A. Nutt, our Chief Financial Officer. Also joining us today are Joel Bender, President; Stephen Bender, Chief Operating Officer; Stephen Tadlock, CEO of Cactus International; and William D. Marsh, our General Counsel. Please note that any comments we make on today's call regarding our 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; we undertake no obligation to publicly update or revise 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 will turn the call over to Scott.

Scott J. Bender: Thanks, Alan. Good morning to everyone. We finished 2025 with strong performance in both segments. Pressure Control revenues and margins exceeded expectations on a strong mix of product sales and a more resilient rig count than anticipated, while Spoolable Technologies declined seasonally as expected but maintained strong profitability. Thanks to all of our associates for remaining customer-focused and for delivering excellent performance to close a year that was challenging from a macro perspective and transformational for the company. Some fourth quarter total company highlights include revenue of $261 million, adjusted EBITDA of $85 million, adjusted EBITDA margins of 32.7%.

We paid a quarterly dividend of $0.14 per share, increased our total cash balance to $495 million, and on January 1, we closed on the acquisition of the majority interest of Baker Hughes Surface Pressure Control business, which we will refer to as Cactus International. I will now turn the call over to Jay A. Nutt, our CFO, who will review our financial results. Following his remarks, I will provide some thoughts on our outlook for the near term, including the Cactus International business, before opening up the lines for Q&A. So Jay?

Jay A. Nutt: Thank you, Scott. As Scott mentioned, total Q4 revenues were $261 million, which were 1% lower sequentially. Total adjusted EBITDA of $85 million was down 1.7% sequentially. For our Pressure Control segment, revenues of $178 million were up 5.8% sequentially, driven primarily by higher levels of products sold per rig and improved rental revenues on increased customer activity. Operating income increased $4.1 million, or 9.3% sequentially, with operating margins expanding 90 basis points. Adjusted segment EBITDA was up $4 million, or 7.2% sequentially, with margins improving by 50 basis points. The margin increase was due to a fuller benefit of cost reduction as compared to the third quarter. We believe our U.S.

Pressure Control business is performing at its highest level since the inception of the company. For our Spoolable Technology segment, revenues of $84 million declined 11.6% sequentially, as anticipated, due to lower U.S. customer activity levels in the seasonally slow quarter. Operating income decreased $4.9 million, or 18.9% sequentially, with operating margins compressing 220 basis points due to reduced operating leverage. Adjusted segment EBITDA decreased $4.9 million, or 13.6% sequentially, while margins declined by 90 basis points. As a reminder, Q2 and Q3 are usually our strongest periods. Corporate and other expenses were $9.7 million in Q4 due to increased transaction and integration costs. Adjusted corporate EBITDA moved unfavorably in Q4 by $0.5 million to $4.7 million of expense.

On a total company basis, fourth quarter adjusted EBITDA was $85 million, down 1.7% from $87 million during the third quarter. Adjusted EBITDA margins for the quarter were 32.7% compared to 32.9% for the third quarter. Adjustments to total company EBITDA during the fourth quarter included a non-cash charge of $6 million in stock-based compensation, $3.3 million for transaction-related professional fees and expenses, $164,000 for additional restructuring actions to right-size the organization in response to the lower activity levels, and a $1 million loss related to the revaluation of the TRA liability. Depreciation and amortization expense for the fourth quarter was $16 million, including $4 million of amortization expense related to the intangible assets resulting from the FlexSteel acquisition.

During the fourth quarter, the public, or Class A, ownership of the company averaged and ended the quarter at 86%. GAAP net income was $48 million in the fourth quarter versus $50 million during the third quarter. The decrease was largely driven by lower operating income and the loss booked for the revaluation of the TRA. Book income tax expense during the fourth quarter was $14 million, resulting in an effective tax rate of 22%. Adjusted net income and earnings per share were $52 million and $0.65 per share, respectively, during the fourth quarter versus $54 million and $0.67 in the third quarter.

Adjusted net income for the fourth quarter and the full year 2025 were net of a 25% tax rate applied to our adjusted pretax income. During the fourth quarter, we paid a quarterly dividend of $0.14 per share, resulting in a cash outflow of approximately $11 million, including related distributions to members. We also made a cash TRA payment of $23 million following completion of the 2024 tax filings during the fourth quarter. We ended the quarter with a cash balance of $495 million, including $371 million of cash held in escrow to facilitate the closure of the Baker SPC acquisition on January 1.

The cash balance represented a sequential increase of $49 million despite the TRA payment and transaction-related disbursements associated with the acquisition. Net CapEx was approximately $4 million during the fourth quarter, and net CapEx for the full year 2025 was $39 million, just under the range guided to in October. In a moment, Scott will give you our first quarter operational outlook. Some additional financial considerations when looking ahead to the first quarter include an effective tax rate of approximately 20%, and an estimated tax rate for adjusted EPS of approximately 24%. Our tax rates will be impacted by the ongoing purchase price allocation exercise that will affect reported earnings.

I would also like to further explain our reporting following the Cactus International acquisition. Full results of Cactus International on a 100% basis will be included in our Pressure Control segment going forward. Additionally, a pro forma illustrated balance sheet and income statement as of September 30, 2025, will be filed before the end of the first quarter, including the initial purchase price accounting-related adjustments and details. Total depreciation and amortization expense during the first quarter is expected to be $21 million, with $12 million of which associated with our Pressure Control segment, including Cactus International, and $9 million in Spoolable Technologies.

The Pressure Control D&A guide includes our preliminary estimates regarding purchase price accounting write-ups to fixed assets and intangible assets. Our full-year 2026 net CapEx expectations are in the range of $40 million to $50 million, including our investments in Cactus International. Continued manufacturing efficiency investments in FlexSteel, routine U.S. branch facility upgrades, and the completion of our Saudi Arabia wellhead facility enhancements initiated in 2025 are the primary drivers of the planned spend. 2026 anticipated CapEx is largely in line with 2025 spend, despite the addition of Cactus International. Finally, as previously announced, the Board approved a quarterly dividend of $0.14 per share, which we paid in March. That covers the financial review.

I will now turn the call back over to Scott.

Scott J. Bender: Thank you, Jay. I will now touch on our expectations for the first quarter by individual reporting segment and provide some introduction to historical and future trends in our Cactus International business. During the first quarter, we expect total Pressure Control revenue to be approximately $295 million to $305 million. In North America, we see stable drilling and completion activity, and we expect modestly softer sales on lower levels of products sold per rig following the high rates achieved in the fourth quarter of last year. International sales are expected to contribute approximately $130 million to $140 million to Pressure Control in the first quarter. Adjusted EBITDA margins are 23% to 25% for the first quarter.

This adjusted EBITDA guidance excludes approximately $4 million of stock-based compensation expense within the segment and the expected amortization of the write-up of Cactus International inventory due to purchase price accounting. Margins are expected to decline from those achieved in the fourth quarter due almost entirely to the inclusion of Cactus International. The tariff environment as it applies to our imports to the U.S. had stabilized over the last several months, while future costs now appear to be trending down slightly but remain far from certain. To be clear, tariffs implemented under Sections 301 and 232 still total 75% on the majority of goods imported from China.

Our Vietnam facility, where Section 232 tariffs remain at 50%, is ramping up in Q1 with API certification now expected early in the second quarter. This should allow us to progress the displacement of shipments into the U.S. from China later this year as planned. I would also like to take this opportunity to explain trends in the Cactus International business over the course of 2025 and through early 2026. As previously disclosed, the company closed 2024 with over $600 million in backlog. In 2025, the company recorded $627 million of revenue, including a substantial amount associated with unbilled revenue, and the backlog ended 2025 at approximately $550 million.

Considering this order slowdown, we see the full year 2026 as being more in line with previously announced 2024 results from both the revenue and adjusted EBITDA perspective. We are anticipating increased order activity through 2026 and into 2027. Having owned Cactus International for nearly two months at this point, we remain very pleased with our decision to pursue this transformational acquisition. As we shared since announcing the agreement in June, we believe there are even more opportunities to improve the business, which currently lags its largest competitors in the Middle East from a technology and customer execution standpoint.

We believe that our U.S. conventional expertise and execution focus benefit clients throughout the Middle East and are encouraged by early customer responses in the region. More on this next quarter. You may recall we announced a target for $10 million of annualized synergies within one year of transaction close, and we now have far better visibility into meaningful supply chain savings in 2027 not incorporated into our original budget, as we leverage our U.S. model. Such actions will take more time to achieve due to the timing of order placements in this long-cycle business. We intend to share more on this topic over the next two quarters.

Switching over to Spoolable Technologies, we are proud of how we finished 2025 with another strong quarter of international shipments, which led to a record level of international products sold in 2025. Despite accelerating strength in international orders, we expect first quarter revenue to be down mid-single digits relative to the fourth quarter, with continued North American seasonality similar to what we saw in 2025, as our customers have been slow to increase activity through January and early February. We expect adjusted EBITDA margins to be approximately 33% to 35% in Q1, which excludes $1 million of stock-based comp in the segment.

Lower operating leverage and somewhat higher input costs are the primary contributors to the expected step down in margin. In addition, we are introducing several new SKUs, which we expect will enhance our market share and improve the moat around our technology in the future. We expect to pilot several of these new SKUs with a large Middle East customer in 2026, which should impact 2027 revenues. Adjusted corporate EBITDA is expected to be a charge of approximately $5 million in Q1, which excludes approximately $2 million of stock-based comp.

In closing, our team and I are energized by the formation of the Cactus International joint venture, and we are pleased to have a strong footprint in the most important oil and gas service markets in the world, North America and the Middle East. The near-term outlook for domestic and international markets remains soft, which presents short-term challenges to our business. However, we will continue to deliver industry-leading margins and returns, with a focus on the fundamentals of our business and introducing our responsive, agile, customer-focused culture into the Cactus International operation. With that goal in mind, I am pleased to confirm that Stephen Tadlock has been appointed CEO of Cactus International.

Stephen has been highly successful in leading our FlexSteel segment and integrating it into Cactus these past several years, which gives me the utmost confidence in its continued success in leading the joint venture through similar culture shifts. With that, I will turn it back over to the operator. We will now open for questions. Operator?

Operator: Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please standby while we compile the Q&A roster. Our first question comes from the line of Stephen David Gengaro of Stifel. Your line is now open.

Stephen David Gengaro: Thanks. Good morning, everybody.

Scott J. Bender: Good morning, Stephen. How are you?

Stephen David Gengaro: I am good. Thank you. Hope you are well. I have two things for me. The first on the Cactus International side, you talked a little bit about the synergies. When you think about sort of applying the Cactus Way to that business, any guidance on how we should think about margin progression in that business over the next three, four, five quarters?

Scott J. Bender: Well, I think you will see—let me start again. And Baker is not listening. How do you know that? I am joking. I think you are doing the transcript. I think that we are going to see very, very meaningful supply chain savings as we begin to use our own supply chain. The problem with that, Stephen, is that most of the orders have been placed for 2026, so we will not begin to see that margin enhancement until 2027, at which time I think it will be fairly substantial. In terms of flattening the organization, we can discuss that more perhaps in the next call.

But you have to understand that after only two months, we are still feeling our way through that. I can tell you that, although my teammate kicked me under the table, I am very optimistic that we will exceed projected synergies even for 2026.

Stephen David Gengaro: Okay. That is helpful. Thank you. And then the other quick question was on the U.S. wellhead side. When you think about just kind of the rig count progressions that we have seen, can you just give us kind of your view of how you see the U.S. activity evolving? You generally have very good insights into activity in the U.S., so I am curious what you are thinking.

Scott J. Bender: You mean my unpopular insight into the progression of it? I think that most analysts are around 510 exiting 2026 from 530—this is onshore only. So we are at 530 now. Most of them have an exit rate of 500 to 510. I think the outlier would be TPH at 475. My personal opinion is we are going to be in the range of probably 490 because we have yet to see the full impact of consolidation, and I am always very, very concerned when prices are supported largely by geopolitical factors because they can change so rapidly.

I do not know what premium our current oil price places on Iran and Russia, but they are having talks today, and I really cannot predict the outcome of that. But that lack of perhaps clarity on that subject makes me nervous. We all prefer to rely upon supply and demand. So call it high 400s.

Stephen David Gengaro: Great. Thanks for all the details.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Scott Andrew Gruber of Citigroup. Your line is now open.

Scott Andrew Gruber: Yes. Good morning. How are you doing?

Scott J. Bender: Good morning. Doing well.

Scott Andrew Gruber: I wanted to ask about the international segment. Congrats on the close. Scott, you mentioned orders likely picking up later this year. I would assume that likely reflects an increased activity in Saudi, but we are also hearing about additional tenders outstanding across the region. So just how do you think about the growth prospects for the international segment over the next, call it, three years or so?

Scott J. Bender: Yeah. Well, Scott, everything is relative. I think that you are going to see far greater growth prospects, particularly in the Middle East—than we are going to see in the U.S. We are in a period now, particularly in Saudi, with some destocking. The Saudis order far in advance, and they are on a program right now to increase their cash flow. So you can be sure they are going to be using what they have in stock and moderating—we are already seeing some evidence of that—moderating their forward purchases. But they are adding 70 rigs, and that is why I am so optimistic that 2027 is going to be considerably better than 2026.

In Abu Dhabi, it looks to be very stable. I think that Qatar has prospects of improving. I think Kuwait has prospects of improving. I think that as we begin to expand our sales team at International, you are going to see some additional revenue coming out of Sub-Saharan Africa. These are areas that were—would not say ignored, but they were sidelined by our predecessor. So look to see some improvement from the Far East and from Sub-Saharan Africa. In general, I feel much better about it.

Scott Andrew Gruber: Good. And then you were starting to answer my second question, but I wanted to just hear your thoughts around share capture in the Middle East. Obviously, in the U.S., you guys are on a pretty steady trajectory for a decade, and you guys operated in the Middle East in the past life. So just some thoughts around the puts and takes of picking up share in the region, and kind of the strategy to go about doing so. I know you do not want to reveal too much, but just some thoughts about it.

Scott J. Bender: I think that we see a huge opportunity in Saudi because our market share there is well below what it should be at roughly a third. And there are a lot of reasons for that, all of which we have identified and are addressing right now. So look to Saudi to be a large market share gain for us going forward. In Abu Dhabi, we share that contract 50/50 with FMC. But throughout the Middle East, we have quite a few new opportunities. Frankly, these were opportunities that just were not prioritized by the previous management. We have always been really great salespeople at Cactus, and we intend to pursue that strategy in the Middle East as well.

Scott Andrew Gruber: Great. Look forward to seeing the results. Thanks, Scott.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Derek Potteguiser of Piper Sandler. Your line is now open.

Derek Potteguiser: Good morning.

Scott J. Bender: Good morning.

Derek Potteguiser: Hey. Good morning. I guess sticking with Cactus International, maybe some comments around the aftermarket services piece of Cactus International SPC. I believe in the North Sea you have a pretty good footprint there. Just to hear some color on how impactful this is to the business as your installed base grows. I would imagine it is margin accretive. Just maybe some more thoughts and outlooks around the aftermarket piece of the business.

Scott J. Bender: That is an excellent question and one we are intensely focused upon. That legacy Vetco Gray has a huge installed base. So let us forget about increased market penetration, and let us think about installed base. Right now, we are undergoing an extensive exercise into identifying where Vetco Gray had the largest installed base. That particular area has not been a focus of Baker. They talk about it—it is the highest margin part of the business—but we see very substantial opportunities, particularly in West Africa and in the Far East, where Vetco Gray had dominant positions. So we are going to be focusing our attention on that. It has honestly been ignored.

Derek Potteguiser: Got it. That is helpful. And then maybe just—I know you have already provided some color and comments around the forward outlook. But just to clarify, 2026 should look more like 2024. Are you hoping 2027 then looks like what we heard from Baker on their previous call around the 2025 financials? Just trying to think about how we ramp back to the 2025 levels and when that could come.

Scott J. Bender: Yeah. So let me just qualify my statement by telling you that although Baker provided their financial reporting in accordance with GAAP, we differ in how we report our financials. So if you look at their full year 2025, we underwrote a number substantially below that amount to account for the way we approach our financials. So you have to temper your expectations a bit. To answer your question, I think that 2027 will probably be north of the midpoint between 2025 and 2026. The substantial improvement in EBITDA will come from supply chain initiatives. This is a big number for us.

Derek Potteguiser: Got it. Very helpful. Thank you, Scott.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Jeff LeBlanc of TPH. Your line is now open.

Jeff LeBlanc: Good morning. How are you? Are you there? Good morning. Just—good morning. Excuse me. Sorry. Thanks. I just wanted to see if you could talk about how you are thinking about U.S. drilling efficiencies. It seems like every year operators continue to find ways to improve cycle times, and what inning you think we are in. Though for you all, it is somewhat agnostic given that you are well-count levered, but just kind of curious your thoughts on continued drilling efficiencies in the guidance.

Scott J. Bender: I get asked this question, it seems like, every year, and we all think that increased drilling efficiencies are behind us, and we are always very surprised. So we are seeing greater efficiencies. We certainly saw them in 2025, which translates, frankly, into more wells per rig. The best proxy for our business is really wells drilled, not rig count. When we do our budget, we think about wells drilled. It is just that it is so much easier to use rig count as a proxy. Where we go from here, I do not know.

But I think that some of our very large customers have deployed some very interesting technology, and I think that you will see over time that some of the smaller operators will mimic that. So I am actually pretty bullish on increased efficiencies.

Jeff LeBlanc: Thank you very much. I will hand the call back to the operator.

Scott J. Bender: Thanks.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Donald Crist of Johnson Rice. Your line is now open.

Donald Crist: I wanted to ask about Vietnam and API certification. I know it has been a quarter or two since you talked about that and what kind of margin impact that could have as you are importing those pieces and parts to the U.S. today that have to go through a different step before they are actually sold. Can you talk about that some?

Scott J. Bender: Keep in mind that in the ever-changing landscape of tariffs, Vietnam is going to be—we expect—about 25 percentage points lower than the tariffs out of China. If you consider the volumes that we were bringing in from China, as we displace that from Vietnam, I think it is going to be pretty substantial, particularly in 2027. In terms of API certification, we have already begun to move product from Vietnam into the U.S., and then we are applying the necessary value added in Bossier City to apply the Bossier City monogram. We have already gotten through the first stage of our API certification in Vietnam, and, Joel, now we expect the second part of the audit to occur when?

Joel Bender: It is in process as we speak. It is supposed to finish this week, and then we will get reports back from API. So I would say, pending the results, another 30–60 days before we actually have the monogram.

Scott J. Bender: Okay. So we are still operating as quickly as we can, but we are constrained by not having that monogram in place.

Joel Bender: Right. It cannot boost margins.

Scott J. Bender: Absolutely. So Vietnam is inherently lower cost than China. Then you apply the tariff differential, and that boosts the effective margin even higher.

Donald Crist: Right. Okay. That is what I thought. Good to hear. And one quick one on North Africa. I know you talked about Sub-Saharan Africa, but we are hearing a lot of operators start to talk about Algeria and Egypt and other places, Turkey, etc., in that area. Do you have an installed base that you got with the international acquisition that could grow that meaningfully over the next couple of years?

Scott J. Bender: Yes. Indeed. I appreciate the color. Thank you.

Operator: Thank you. I am showing no further questions at this time. I will now turn it back to Scott J. Bender, Chairman and CEO, for closing remarks.

Scott J. Bender: Okay, everybody, I want to thank you very much for your attention, and we look forward, in the coming quarters, to giving you more visibility into what we expect on a go-forward basis with Cactus International.

Operator: Thanks a lot.

Scott J. Bender: Have a good day.

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

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