RPC's third quarter shows resilience with 6% revenue increase, despite ongoing geopolitical uncertainties and oil price volatility impacting outlook.

OPERATOR - (00:00:00)

Good morning and thank you for joining us for RPC Inc's third 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 everyone the conference call is being recorded. I will now turn the call over to Mr. Schmidt.

Mike Schmidt - Chief Financial Officer - (00:01:16)

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.

Ben Palmer - President and CEO - (00:02:20)

Thanks Mike and thank you for joining our call this morning. Today we'll talk about our third 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 in 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 wireline and tubing solutions. Downhole tools revenues increased 5% sequentially. We saw particular strength in our Rocky Mountain and Southeast regions which is a testament to the company's broad geographic exposure. Retubing 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 to market share gain as alternative options are enabled.

UNKNOWN - (00:03:43)

A new metal-on-metal motor component called Metalmax. Metalmax has completed more than 100 runs with major hopper. The product allows for a smaller motor design, higher torque output, reduced size, improved performance, demanding pressure and making it extremely versatile. We continue to add units to support. Retubing Solutions to actively market and develop its unplugged technology. Recall this is an innovative product that reduces and can sometimes eliminate the need for bridge plugs and delivers faster drill out times while achieving highly effective stability and isolation. We're excited about these new products, the. Potential to further our industry leadership. And. The addition of a new unit during. The. Units position customers with unilateral demand and generational interest. Cut Pressure Control expects to proceed in early 2026. The big water control unit specifically designed for cast storage work. You know this after discussions with about. Its storage well maintenance schedule over the next several years. This work is regulatory driven and is part of our effort to continue diversifying our business. Recently, Cut Pressure Control collaborated with a leading industrial contract contractor to drill a Geo Exchange well at Metro University. That's a year after the company car. This is one example of how we can utilize our tools our much smaller legacy business increased revenues 1% from the quarter the majority of revenue comes from. Petra State 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 quarter. Third quarter benefited from some customer completion accelerations and shifts to simulfact operations. HUD Energy's pressure pumping business saw an improvement in overall activity during the third quarter bolstered by a reduction in third party non productive time and reduced white space. Despite the revenue improvements, we elected 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 completions 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. Pet Energy Services has received and is pulling 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 in challenging market conditions. With that, Mike will now discuss the quarter's financial results.

Mike Schmidt - Chief Financial Officer - (00:07:02)

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 third quarter revenues for our top service lines. Pressure pumping was 27.9%, wireline 23.5%, downhole tools also 23.5%, coil 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 rate 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 EBITDA 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 revolving credit facility. Payment of dividends totaled $26.3 million year to date and through the third quarter. During the quarter we paid $8.8 million in dividends full year 2025 capital spending is expected to be between one hundred and seventy 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 fourth 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'll now turn it back over to Ben for some closing remarks.

Ben Palmer - President and CEO - (00:11:26)

Thank you, Mike. Current oil prices and market uncertainty have contributed to additional near term risks. 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 improve. I want to thank all of our employees who work tirelessly to deliver high levels of service and value to our customers. Thank you for joining us this morning. At this time we're happy to address any questions.

OPERATOR - (00:12:07)

At this time. In order to ask a question, press Star, then the number one on your telephone keypad. We will pause for a moment to compile the Q and A roster. Your first question comes from the line of Don Crist with John Rice. Please go ahead.

Don Crist - (00:12:29)

Good morning guys. How are you all today?

UNKNOWN - (00:12:32)

Great. Good.

Don Crist - (00:12:35)

I wanted to start with kind of fourth quarter outlook. You know, obviously there's a lot of uncertainty as we kind of move into December. Just kind of what are you thinking there? And, and do you think that activity could kind of snap back in, in the first part of the year? Whether it be from budget exhaustion late in the fourth quarter or whatnot, kind of what you're seeing from a kind of activity levels over the next, you know, three months, four months or so?

Ben Palmer - President and CEO - (00:13:03)

Don, this has been reasonable question, something that we've all come to realize is a, is a possibility in the fourth quarter. To be honest, at this very moment we're comfortable with where things are for the fourth quarter, but certainly will not be surprised if customers announced some slowdowns for the holidays. So we're bracing for that and how that impacts based on experience, the impacts coming out of that into the first quarter just depends on how severe the slowdowns are in the fourth quarter. So it's kind of a non answer. We're not certain but we're trying to remain flexible and, 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 moment we're feeling, I think as good as possible about the fourth quarter and therefore how things will hopefully then proceed fairly well and not have too much of a slow start to early next year.

Don Crist - (00:14:20)

I appreciate that color and I, I get that it's, it's difficult to, to Predict. So I want. 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, you know, pressure pumping has, has become a very big boy game, for lack of a better term, with, you know, the top three or four companies having 30 plus 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 pivot to away from pressure pumping and just focus on the other business lines to kind of boost productivity?

Ben Palmer - President and CEO - (00:15:06)

Don, it's Ben, I think, you know, we've been talking about the fact that that's what we been doing. Pressure pumping is, you know, a lower percentage, about 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, you know, we're looking at a. And look and will 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 pressure pumping does continue to be capital intensive, but we want to be, we're going to be prudent about, you know, how much and when we make significant investments there.

Don Crist - (00:16:02)

Okay, and just one last one for me. This a 10 downhole motor that you all talked about. Can you just give us a little bit more detail of how it's differentiated and, you know, why the customers are kind of migrating towards it.

Ben Palmer - President and CEO - (00:16:19)

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 Retubing, has a unbelievable R and 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 is beneficial to the customer as well.

Don Crist - (00:17:10)

I appreciate the color. I look forward to seeing you all in person in a couple weeks. Talk to you all soon.

Ben Palmer - President and CEO - (00:17:16)

Thanks, Don.

OPERATOR - (00:17:19)

Again, if you would like to ask a question, press Star 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.

Ben Palmer - President and CEO - (00:17:34)

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

OPERATOR - (00:17:40)

Appreciate it. Today's call will be available for replay on www.rpc.net within two hours following the completion of the call. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. .