Earnings call transcript: RPC Inc Q2 2025 misses EPS forecast, stock dips

RPC Inc reported its second-quarter 2025 earnings, revealing a slight miss on earnings per share (EPS) forecasts. The company reported an EPS of $0.08, falling short of the expected $0.09, marking an 11.11% negative surprise. Despite meeting revenue forecasts of $420.8 million, the company’s stock price dipped 5% in pre-market trading, reflecting investor concerns over the earnings miss. According to InvestingPro data, the company maintains a "GOOD" financial health score, and three analysts have recently revised their earnings estimates upward for the upcoming period, suggesting potential resilience despite the current setback.

Key Takeaways

• RPC Inc’s Q2 2025 EPS fell short of forecasts, impacting investor sentiment.
• Revenues increased by 26% sequentially, reaching $421 million.
• The stock price dropped 5% in pre-market trading following the earnings release.
• The company highlights operational expansions and strategic acquisitions.

Company Performance

RPC Inc demonstrated solid revenue growth in Q2 2025, with a 26% sequential increase to $421 million. This growth was bolstered by the recent Pentail acquisition, which contributed significantly to the company’s revenues. The company’s strong financial position is evident in its impressive current ratio of 4.95x and minimal debt-to-equity ratio of 0.03, as reported by InvestingPro. While the EPS miss and challenging conditions in the pressure pumping segment tempered overall performance, the company’s robust balance sheet provides a solid foundation for future growth.

Financial Highlights

• Revenue: $421 million, up 26% sequentially
• Earnings per share: $0.08, down from the forecast of $0.09
• Adjusted EBITDA: $65.6 million, with a margin increase to 15.6%
• Operating cash flow: $92.9 million
• Free cash flow: $17.6 million

Earnings vs. Forecast

RPC Inc’s EPS of $0.08 missed the forecast of $0.09, resulting in an 11.11% negative surprise. This miss marks a deviation from previous quarters where the company met or exceeded expectations, raising questions about its ability to manage costs effectively amidst challenging market conditions.

Market Reaction

Following the earnings announcement, RPC Inc’s stock declined by 5% in pre-market trading, with the price settling at $4.71. This movement is significant, as it positions the stock closer to its 52-week low of $4.10. Based on InvestingPro’s comprehensive Fair Value analysis, the stock appears to be undervalued at current levels, trading at an attractive EV/EBITDA multiple of 3.44x and a P/E ratio of 13.18x. For more insights on undervalued opportunities, visit our Most Undervalued Stocks list.

Outlook & Guidance

Looking forward, RPC Inc maintains a cautious outlook for the second half of 2025. The company plans to focus on prudent capital investments and explore potential mergers and acquisitions within existing service lines. The full-year tax rate is expected to be in the mid-30s, and the Pentail acquisition is anticipated to be accretive in 2025.

Executive Commentary

CEO Ben Palmer highlighted the challenging operating environment, stating, "Uncertainty around the economy, tariffs, and commodity markets have created a challenging operating environment." He emphasized the company’s strategy, saying, "We will continue to manage our business by focusing on prudent capital investments and capital allocation decisions."

Risks and Challenges

• Geopolitical and macroeconomic uncertainties could impact operations.
• Pricing pressure in the wireline segment poses a competitive threat.
• Oil prices are unlikely to drive significant industry activity, affecting growth prospects.
• The integration of the Pentail acquisition presents potential operational risks.

RPC Inc’s Q2 2025 earnings call underscores the company’s revenue growth and strategic initiatives amidst a challenging market landscape. However, the EPS miss and subsequent stock price decline highlight investor concerns and the need for careful navigation of industry pressures.

Full transcript - RPC Inc. (RES) Q2 2025:

Conference Call Operator, RPC, Inc.: Good morning, and thank you for joining us for RPC, Inc. Second Quarter twenty twenty five 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 the time for you to queue up for questions. I would like to advise everyone that this conference call is being recorded. I will now turn the call over to Mr. Schmidt.

Mike Schmidt, Chief Financial Officer, RPC, Inc.: 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 twenty twenty four ten ks 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, RPC, Inc.: Thanks Mike and thank you for joining our call this morning. Today we will talk about our second quarter results which incorporate a full quarter of the recent Pentail acquisition. In addition, we will share our views about the impacts we are seeing from increasing macro and geopolitical uncertainties which were prevalent during the quarter. Second quarter results reflect a sequential improvement due to the full quarter impact of our Pentel acquisition. While many of our legacy service lines saw modest revenue increases, pressure pumping continued to experience a challenging environment.

Pressure pumping was negatively impacted by lower industry activity overall, but also by weather, third party nonproductive time and customer calendar delays. We saw more than a 200% increase in third party nonproductive time, which was most pronounced in June. This combined with customer delays resulted in operational inefficiencies. Pressure pumping is now primarily deployed with dedicated customers. This customer shift has increased our mix of semifrack and twin frac operations, which generally requires additional equipment and less cut spot materials.

The market overall remains very competitive and we are cautious regarding the second half of the year given the reduction in rig activity over the last several weeks. Our 2025 plans include the testing of 100% natural gas pressure pumping units as part of our strategy to evaluate alternative technologies. Our first unit is expected to be deployed in the third quarter. Non pressure pumping service lines represented 74% of total revenues during the second quarter. Revenues without the contribution of Tintail were up 7%.

We saw revenue growth in Downhole Tools, Foil Tubing, Rental Tools and our Tubular Services. Downhole tools revenues were up 6% sequentially. We saw particular strength in our Northeast and Rocky Mountain regions, which is a testament to Thru Tubing Solutions’ broad geographic exposure. Thru Tubing Solutions’ A10 motor and unplugged products continue to gain early traction in the market. We believe the new A10 motor has resulted in incremental share gains through our already robust market position.

The A10 motor is gaining a lot of traction and has been utilized by more than 50 customers to date. The product really demonstrates its value on longer laterals and wells that need higher flow rates. Turning to our unplugged technology, had multiple demonstrations during the quarter with customer use expanding. We are still very much in the early adopter and testing phase of this product’s lifecycle, but we are pleased with this performance and feedback we’ve received thus far. Recall, this product reduces the need for bridge plugs and drill out time in a well and achieves highly effective stage isolation.

Coiled tubing was up 12% sequentially. And in late June, we took delivery of the largest coiled tubing unit in The U. S, which began promptly working in July. The two seveneight unit is uniquely suited for large pad customers who drill long laterals and has had multiple customers expressing a strong interest. Over the last couple of years, we’ve made investments in cut pressure control that provide additional opportunities for coiled tubing and snubbing in late twenty twenty five and into 2026.

Cut Pressure Control has been able to partner with other RPC service lines with new applications to generate additional revenue. Committing revenues were roughly flat sequentially, and we saw rental tool revenues increase 17% versus the prior quarterly I’m sorry, the prior quarter, partly due to weather impacts from last quarter. Wireline, including our much smaller legacy business, increased substantially quarter over quarter due to the Pentel acquisition. Pentel is the largest wireline provider in the Permian Basin, an operational leader with a well regarded management team and a blue chip customer base. The acquisition further diversifies our portfolio, increases our scale through M and A, improves our cash flow profile and strengthens our customer mix.

Our portfolio of various services and products with strong brands and operational leadership has provided resiliency throughout the years. Pentel revenues contributed approximately $99,000,000 in the second quarter or 23% of total revenues. Given Pentel’s share position, we expect revenues to trend with the overall market and have historically experienced limited seasonality due to its focus on dedicated 20 fourseven customers. In our SEC filings following the transaction, additional financial data was provided. The wireline market too remains challenging with pricing pressure intensifying during the quarter as smaller competitors and less consistent work with less consistent work attempted to increase their utilization.

We saw relatively consistent gun usage during the quarter however competitive pricing leads us to expect slightly lower EBITDA margins than previously communicated but still strong operating cash flow. From a strategic standpoint, we believe bolstering these less capital intensive service lines with organic investments and selective acquisitions will help drive growth, improve our customer mix and reduce volatility in our financial results. We believe our balance sheet provides us optionality including executing selective acquisitions. Spinnaker and Tintail were well positioned as these companies participated in markets we had familiarity with but provided us a leading brand and leadership to significantly scale up in the respective service lines. While relatively small, we also have been able to deploy cash to purchase assets in the existing service lines to enhance and expand our offerings.

With that, Mike will now discuss the quarter’s financial results as well as some notes on the Pentel transaction.

Mike Schmidt, Chief Financial Officer, RPC, Inc.: Thanks, Ben. Our second quarter financial results with sequential comparisons to the 2025 are as follows: Revenues increased 26% to $421,000,000 Excluding Pintail revenues, revenues were down 3%. Breaking down our operating segments, technical services which represented 94% of our total second quarter revenues was up 27%. Support services which represented 6% of our total second quarter revenues, was up 14%. The following is a breakdown of the second quarter revenues for our largest service lines.

Pressure pumping was 25.9%. Wireline was 24.7%. Downhole tools was 23.7%. Coiled tubing was 8.5%. Cementing was 6.6%, and rental tools was 4.3%.

Together, these service lines accounted for 94% of our total revenues. Cost of revenues excluding depreciation and amortization was $318,000,000 compared to $245,000,000 in the previous quarter. This increase was primarily due to the addition of Pintail as our cost of revenues excluding Pintail declined 3% sequentially. The lower cost of revenues from our legacy businesses was primarily attributable to lower materials and supplies, which saw declines in pressure pumping due to lower activity and job mix changes during the quarter. We also saw modest declines in employment related costs.

SG and A expenses were $40,800,000 down from $42,500,000 As a percentage of revenue, these expenses decreased three ten basis points to 9.7%, reflecting minimal additional SG and A from the Pintail acquisition, leveraging our SG and A costs over higher revenues, as well as the capitalization of some costs associated with our IT system upgrades and ERP implementation. Our second quarter’s effective tax rate was 41.3%, which was significantly higher than our previous quarter’s effective tax rate. The effective tax rate was unusually high this quarter primarily due to the acquisition related employment costs associated with the Pintail acquisition, which contributed to lower pretax net income and which sorry, lower pretax income and which are largely nondeductible for tax purposes. We expect our effective tax rate to be negatively impacted through the life of the acquisition related employment costs due to their accounting treatment, which differs from their tax treatment. We expect our full year 2025 effective tax rate percentage to be in the mid-30s.

Adjusted diluted EPS was $08 in the quarter. Adjustments totaling $03 were entirely related to the acquisitions related employment costs. Adjusted EBITDA was $65,600,000 up from $48,900,000 with the margin increasing 90 basis points sequentially to 15.6%. Operating cash flow was $92,900,000 and after CapEx of $75,300,000 free cash flow was $17,600,000 Free cash flow year to date reflected a negative working capital impact related to a large customer prepayment received in the fourth quarter of twenty twenty four. At quarter end, we had $162,000,000 in cash, a $50,000,000 seller financed note payable and nothing outstanding on our $100,000,000 revolving credit facility.

During the quarter, we paid $8,800,000 in dividends. 2025 capital spending is expected to be between $165,000,000 and two fifteen million dollars inclusive of Penthale for nine months, mostly related to maintenance and opportunistic asset purchases as well as our IT system upgrades and ERP implementation. I’ll now give a few comments on our recent acquisition of Pintail Completions. As previously stated, we expect the acquisition to be accretive in 2025. The acquisition related employment costs are non cash for the quarter and are expected to continue at a similar quarterly amount over three years.

Our second quarter results reflect the additional shares issued in conjunction with the transaction. These results also reflect lower interest income from the lower cash balance and higher interest expense due to the seller note when comparing results to last year. The preliminary purchase price allocation details can be found in our second quarter ten Q. Going forward, we will not be providing specific guidance on Pintail. I’ll now turn it back over to Ben for some closing remarks.

Thank you, Mike.

Ben Palmer, President and CEO, RPC, Inc.: Uncertainty around the economy, tariffs and commodity markets have created a challenging operating environment. We’ve begun seeing tariff impacts and are taking steps to either mitigate or factor these cost increases into our pricing. Lastly, the current oil prices are unlikely to stimulate significant activity increases in the near term within the overall industry. RPC is no stranger to business cycles in uncertain demand environments. We will continue to manage our business by focusing on prudent capital investments and capital allocation decisions, control costs and utilize our balance sheet and liquidity to take advantage of opportunities as they arise.

Our mix of service lines, customers and basin exposures provide beneficial diversification. I want to thank all our employees who work tirelessly to deliver high levels of service and value to our customers. Thanks for joining us this morning. And at this time, we’d be happy to address any questions you might have.

Conference Call Operator, RPC, Inc.: And your first question comes from John Daniel with Daniel Energy Partners. Please go ahead.

John Daniel, Analyst, Daniel Energy Partners: Hey guys, thanks for having me. Ben, you still have an enviable cash position and balance sheet, and I’m just curious if you could elaborate a bit on the go forward acquisition strategy. And to help frame what I’m looking for is really your preference for consolidation opportunities to drive more scale in a particular service or region or whether you think the best opportunity is to try to expand into other services and or other geographic markets. That’s part one. I’ll let you touch on that.

Ben Palmer, President and CEO, RPC, Inc.: Okay. Thank you, John. Yes. That’s still our strategy. You know, over time, obviously, with, you know, in the last couple of quarters with some of the volatility and uncertainty around future activity levels, it makes the valuation of current oilfield, domestic oilfield opportunities a little bit more difficult analyze and price and that kind of thing.

But we’re certainly looking. I think scale for us in some of our existing service lines is certainly a possibility. But we’re going to be

Chuck Minervino, Analyst, Susquehanna: in the current

Ben Palmer, President and CEO, RPC, Inc.: environment we’ll be selective and we’ll be again mindful of the difficulty in trying to determine appropriate valuations. But with respect to I think as historically we’ve done, we’re much more opportunistic. There are certainly on the lookout on some of our existing opportunities around some of our existing service lines and the ability to diversify outside the oilfield is something that we look at as well. But not necessarily focused on particular regions. But as I indicated in Mark’s remarks, we like we feel like we’ve benefited historically from the diversification through Tubing Solutions in particular has a strong position in several basins around throughout The U.

S. So if and when natural gas activity picks up, we’re very well positioned to take advantage of that.

John Daniel, Analyst, Daniel Energy Partners: Okay. Well, thank you. A follow-up if I may on the M and A strategy, but at least within a couple of the service lines, and

Ben Palmer, President and CEO, RPC, Inc.: you touched on

John Daniel, Analyst, Daniel Energy Partners: a little bit, there’s a bit of a continued pricing pressures, predatory pricing, if you will. And then you have the backdrop, presumably of a Q4 slowdown just if we if the trend is consistent with prior years, I’m curious if it would seem that for some of your peers, it’s about to get worse. And so how does that play into just hitting the pause on M and A and maybe there’s better opportunities surface call it first half of next year? I’ll let

Ben Palmer, President and CEO, RPC, Inc.: you answer Yeah, yeah, yeah. I kind of touched on that. Think we we’d say we’d put a pause on, but but certainly, we’re not not leaning into the wind quite as much as as we as we have been.

John Daniel, Analyst, Daniel Energy Partners: Okay.

Ben Palmer, President and CEO, RPC, Inc.: And it very well could be. You’re right. I think, you know, if and when things are checking out, that could create some different type of opportunities and and situations that will be ready to take advantage of.

John Daniel, Analyst, Daniel Energy Partners: Okay. And I I I got an easier one for you now. The the addition of that two and seven ace is obviously an impressive unit. I’m curious, and you’ve only had a few weeks, but you you mentioned good customer interest so far. I’m I’m curious if you’ve if you have any field results from it yet that you can speak to and whether or not you believe that this stage there’s enough interest to warrant a possible second unit.

If could just provide some color, it would be helpful.

Ben Palmer, President and CEO, RPC, Inc.: Yeah. The results so far have been very good, very impressive. We’re we’re really pleased with that, and it and it’s staying very, very busy thus far. And in terms of the second unit, we we haven’t entertained that yet. Okay.

I I I think that, you we certainly haven’t placed any additional orders at this point in time. So it’s more of a wait and see. We’re trying to be very selective with our investments. You can see that our CapEx is down versus the prior year despite some of these additions that we’ve been able to make. We’re being very careful about that.

John Daniel, Analyst, Daniel Energy Partners: Your

Conference Call Operator, RPC, Inc.: next question comes from the line of Chuck Minervino with Susquehanna. Please go ahead.

Chuck Minervino, Analyst, Susquehanna: Hi, good morning.

Mike Schmidt, Chief Financial Officer, RPC, Inc.: Good morning,

Chuck Minervino, Analyst, Susquehanna: Chuck. Was wondering if you could touch on the segment outlook a little bit in the second half of the year here. I think your comments about the frac market, I think cautious in the second half of the year. I know it was down quite a bit in 2Q. I don’t know if now the market has kind of settled there or if you kind of anticipate a little bit of another leg down in the pressure pumping piece as you kind of work into 3Q here.

I guess that’s my first one, you can address that.

Ben Palmer, President and CEO, RPC, Inc.: Well, fresh pumping in particular, you know, those of you who are familiar with our historical results, fresh pumping has had kind of a challenging quarter in each of the last two years, and that was the third quarter of the last two years. This year it’s the second quarter. We are seeing as I indicated we are much more aligned with more highly dedicated customers that began during the second quarter and continues into the third quarter. But we see a lot more activity and a lot more certainty around our calendar heading into the third quarter and hopefully into the fourth quarter with some of these dedicated customers who typically don’t have as much of a seasonal slowdown. We expect hope and expect that that’s going to minimize the otherwise normal seasonality that occasionally gets the fourth quarter.

The fourth quarter of the last two years have been actually better than the third quarter of the last two years for the reason I indicated just there’s been unexpected white space and excessive non productive time and things like that. So we’re hopeful again with the customer lineup for pressure pumping that we have at this point in time that we’ll actually see a sequential an opportunity to have some improvement. The mix as we indicated too, the mix of the work has less materials and supplies. So the revenue change may be a little bit different, right? Obviously, more materials and supplies increases your revenues.

So we may have revenues that are lower than they would otherwise be, but we expect we’ll be staying a lot more busy.

Chuck Minervino, Analyst, Susquehanna: And then I was wondering if you could just touch a little bit on free cash flow outlook for the second half of the year.

Ben Palmer, President and CEO, RPC, Inc.: I would first say we noted in our comments about the first half free cash flow was impacted by was actually around $45,000,000 prepayment we received in the fourth quarter last year that negatively impacted free cash flow. So on a adjusted basis, we’ve been closer to 63,000,000 or so. So the back half of the year is going to be certainly better than the first half for the following reason. We don’t know whether we’ll receive another prepayment or not, but we’re not counting on that with respect to planning for and analyzing our expectations around free cash flow. But with the level of CapEx we have that we signaled, we think we’ll have decent free cash flow for the second half.

Chuck Minervino, Analyst, Susquehanna: Okay. And then just one more for me. I think you mentioned pricing in wireline getting a little bit more aggressive. Just wondering how that how you think that plays out a little bit in kind of the the results in 3Q and 4Q. Does that is that kind of tied to Pintail a little bit?

And and is that how we should be thinking about it?

Mike Schmidt, Chief Financial Officer, RPC, Inc.: Sure. Yeah. Definitely, PinTel. One other thought on free cash flow, we only had PinTel for one quarter in the first half of year, we’ll have them for both quarters in the second half of the year. So that should help us because, as we said, we expect them to be accretive for the year.

But, yeah, I mean, our our existing wireline business was very small. So you can think think about that. It is pretty much pent up there. But they’re also, heavily in the Permian, which has had, you know, some of the biggest struggle in the last in the most recent quarter. So that impacts Pintail as well as our pressure pumping business more than our other businesses, and you can kinda see that, you know, in the revenue increases and results.

So that that would have an impact there. But, you know, as as we’ve said, it’s it’s still accretive. You know, the numbers are available in the eight k that we had a couple about a month back that were, you know, extremely good in recent previous years, and they’re just impacted like everyone in the Permian. But as Ben indicated, we have a really strong position with Pintail. You know, they’re as busy or more busy than anyone else in the Permian and have great customer relationships and all the reasons we bought them.

So we’re not we’re still cautiously optimistic.

Ben Palmer, President and CEO, RPC, Inc.: Yeah. And we think, you know, the management team is working really hard on, you know, costs where they can in response to the to the more challenging environment. Certainly, uncertainty around that came about because of Liberation Day and the impact again on the overall market and customers’ appetite for increasing activity levels, obviously, and decreasing some of their activity levels. But Pentel is still well positioned, and they’ll be a nice contributor.

Chuck Minervino, Analyst, Susquehanna: You.

Conference Call Operator, RPC, Inc.: You. There are no further questions at this time. I will now turn the call back over to Mr. Ben Palmer for closing remarks.

Ben Palmer, President and CEO, RPC, Inc.: All right. Well, thank you, everybody. Appreciate you listening in, and look forward to catching up later, and hope you have a good rest of the day.

Conference Call Operator, RPC, Inc.: This concludes today’s call. A replay of today’s events will be available at www.rpc.net within two hours following the completion of the call. Thank you all for joining. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.