RPC, Inc. (RES) Bundle
Understanding RPC, Inc. (RES) Revenue Streams
Understanding RPC, Inc.’s Revenue Streams
RPC, Inc. generates revenue primarily through its Technical Services and Support Services segments. The following breakdown details each segment's contribution to overall revenue:
| Segment | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) |
|---|---|---|---|---|
| Technical Services | $313,492 | $303,069 | $1,011,370 | $1,145,078 |
| Support Services | $24,160 | $27,348 | $68,268 | $77,865 |
| Total Revenues | $337,652 | $330,417 | $1,079,638 | $1,222,943 |
The year-over-year revenue growth rate shows a slight increase of 2.2% in the third quarter of 2024 compared to the same quarter in 2023. However, there was a decrease of 11.7% in total revenues for the nine months ended September 30, 2024, compared to the same period in 2023.
Revenue from the Technical Services segment has been the primary driver, accounting for approximately 93% of total revenues in the third quarter of 2024. This segment has experienced fluctuations primarily due to changes in pressure pumping activity levels.
In contrast, the Support Services segment has seen a decline of 11.7% year-over-year for the third quarter, attributed to reduced activity levels within rental tools. This trend indicates a competitive pricing environment and lower demand for certain support services.
RPC has also reported that international revenues represented 3.2% of total revenues in the third quarter of 2024, up from 2.2% in the same period of the prior year. Nonetheless, international revenues are expected to remain less than 10% of consolidated revenues in the foreseeable future.
The average domestic rig count for the nine months ended September 30, 2024, was 14.8% lower than the same period in 2023. This decline in rig activity has impacted overall revenue generation across service lines.
In summary, while RPC, Inc. has seen a modest increase in quarterly revenues, the overall trend for the year-to-date period indicates a significant decline due to competitive pressures and lower industry activity levels.
A Deep Dive into RPC, Inc. (RES) Profitability
Profitability Metrics
In analyzing the profitability metrics of the company, we look at gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the following financial figures were reported:
- Gross Profit: $90.2 million, calculated as total revenues of $337.7 million minus cost of revenues of $247.5 million.
- Operating Profit: $19.2 million, down from $22.7 million in the same quarter of 2023.
- Net Income: $18.8 million, resulting in a net profit margin of 5.6% for the quarter.
For the nine months ended September 30, 2024:
- Total Revenues: $1.08 billion.
- Gross Profit: $332.6 million.
- Operating Profit: $87.0 million, down from $195.7 million in the same period of 2023.
- Net Income: $78.7 million, resulting in a net profit margin of 7.3%.
Trends in Profitability Over Time
The trends in profitability metrics show a decrease in operating profit and net income compared to the previous year:
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Operating Profit | $19.2 million | $22.7 million | -15.4% |
| Net Income | $18.8 million | $18.3 million | +2.7% |
Comparison of Profitability Ratios with Industry Averages
The company's profitability ratios are compared with industry averages as follows:
| Ratio | Company | Industry Average |
|---|---|---|
| Gross Margin | 26.7% | 30.0% |
| Operating Margin | 5.7% | 10.0% |
| Net Profit Margin | 7.3% | 8.5% |
Analysis of Operational Efficiency
Operational efficiency can be analyzed through cost management and gross margin trends:
- Cost of Revenues: Increased by 3.5% to $247.5 million in Q3 2024 from $239.1 million in Q3 2023.
- SG&A Expenses: Decreased to $37.7 million in Q3 2024 from $42.0 million in Q3 2023.
- Depreciation and Amortization: Increased to $35.0 million in Q3 2024 from $28.4 million in Q3 2023.
The gross margin trend has shown a slight decline, indicating pressure on profitability due to rising costs and competitive pricing in the market.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Gross Margin | 26.7% | 27.3% | -2.2% |
| Operating Margin | 5.7% | 6.9% | -17.4% |
Debt vs. Equity: How RPC, Inc. (RES) Finances Its Growth
Debt vs. Equity: How RPC, Inc. Finances Its Growth
Overview of the Company's Debt Levels:
As of September 30, 2024, RPC, Inc. reported total debt of approximately $0 under its revolving credit facility, which has a total capacity of $100 million. The company had letters of credit outstanding totaling $16.5 million, leaving $83.5 million available in the facility. The company does not currently utilize its revolving credit facility for liquidity needs.
Debt-to-Equity Ratio:
The debt-to-equity ratio for RPC, Inc. is 0.0 as there are no outstanding borrowings against its credit facility. This is significantly below the industry average of around 1.0, indicating a conservative approach to leverage compared to its peers in the oilfield services sector.
Recent Debt Issuances and Credit Ratings:
RPC, Inc. has not engaged in any recent debt issuances, maintaining a solid credit profile with no outstanding debt as of September 30, 2024. The company is compliant with all covenants associated with its credit facility, which matures in June 2027. The absence of debt also contributes to a favorable credit rating environment for the company, enhancing its financial flexibility.
Balancing Debt Financing and Equity Funding:
RPC, Inc. balances its financing strategy by relying primarily on operational cash flows and maintaining a strong equity base. As of September 30, 2024, the company reported cash and cash equivalents of $276.9 million, up from $223.3 million at the end of 2023. The company’s net cash provided by operating activities was $255.2 million for the nine months ended September 30, 2024.
| Financial Metric | Value |
|---|---|
| Total Debt | $0 |
| Credit Facility Capacity | $100 million |
| Letters of Credit Outstanding | $16.5 million |
| Available Credit Facility | $83.5 million |
| Debt-to-Equity Ratio | 0.0 |
| Cash and Cash Equivalents | $276.9 million |
| Net Cash from Operating Activities (9M 2024) | $255.2 million |
Assessing RPC, Inc. (RES) Liquidity
Assessing RPC, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is approximately 3.09, calculated from current assets of $631.9 million and current liabilities of $204.2 million.
Quick Ratio: The quick ratio is approximately 2.36, indicating a strong liquidity position when excluding inventory from current assets.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, stands at $427.7 million, reflecting an increase from $395.5 million as of December 31, 2023. This increase is attributed to improved cash flow management and a decrease in accounts payable.
Cash Flow Statements Overview
Net Cash Provided by Operating Activities: For the nine months ended September 30, 2024, net cash provided by operating activities was $255.2 million, a decrease from $299.1 million for the same period in 2023.
Net Cash Used for Investing Activities: Cash used for investing activities was $(165.3 million) for the nine months ended September 30, 2024, compared to $(215.0 million) in 2023.
Net Cash Used for Financing Activities: Cash used for financing activities was $(36.3 million) in the nine months ended September 30, 2024, down from $(38.6 million) in 2023.
| Activity | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $255,215 | $299,142 |
| Net Cash Used for Investing Activities | $(165,333) | $(215,045) |
| Net Cash Used for Financing Activities | $(36,304) | $(38,647) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company holds $276.9 million in cash and cash equivalents, an increase of $53.6 million from December 31, 2023. The company has no outstanding borrowings under its $100 million revolving credit facility, which matures in June 2027. Letters of credit outstanding totaled $16.5 million, indicating strong liquidity without reliance on debt financing.
The company also reported compliance with all financial covenants associated with its credit facility, enhancing its liquidity profile.
Is RPC, Inc. (RES) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of the company can be assessed through various financial metrics and market performance indicators.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 8.5x, reflecting a decrease compared to the previous year's ratio of 11.0x. This suggests a potential undervaluation based on earnings performance.
Price-to-Book (P/B) Ratio
The P/B ratio is currently at 1.2x, down from 1.5x last year, indicating that the stock is trading at a lower multiple of its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 5.6x, which is below the industry average of 7.0x, suggesting that the company may be undervalued relative to its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $6.50 and a high of $10.20. The current stock price is approximately $7.80, indicating a 23.5% decline from its peak.
Dividend Yield and Payout Ratios
The current dividend yield is 2.1%, with a payout ratio of 32%. This reflects the company's commitment to returning value to shareholders while maintaining a healthy balance for reinvestment.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a rating of Hold, with 40% of analysts recommending buy, 50% hold, and 10% sell. The average target price among analysts is set at $8.50.
| Metric | Current Value | Previous Year Value |
|---|---|---|
| P/E Ratio | 8.5x | 11.0x |
| P/B Ratio | 1.2x | 1.5x |
| EV/EBITDA Ratio | 5.6x | N/A |
| 52-Week Low | $6.50 | N/A |
| 52-Week High | $10.20 | N/A |
| Current Stock Price | $7.80 | N/A |
| Dividend Yield | 2.1% | N/A |
| Payout Ratio | 32% | N/A |
| Analyst Consensus | Hold | N/A |
| Average Target Price | $8.50 | N/A |
Key Risks Facing RPC, Inc. (RES)
Key Risks Facing RPC, Inc. (RES)
Overview of Internal and External Risks
RPC, Inc. faces a range of internal and external risks that could impact its financial health. Key risks include:
- Industry Competition: The oilfield services market is highly competitive, with ongoing price pressures affecting profitability. The average price of oil was $76.57 per barrel in Q3 2024, which is 6.8% lower than the prior year. Similarly, the average natural gas price fell to $2.10 per thousand cubic feet, down 18.9% year-over-year.
- Regulatory Changes: Regulatory changes can affect operational costs and compliance requirements, adding uncertainty to financial forecasting.
- Market Conditions: The average domestic rig count decreased by 9.7% year-over-year, indicating a decline in drilling activity, which directly impacts RPC's service demand.
Operational, Financial, or Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Revenue Decline: Revenues for the nine months ended September 30, 2024, were $1.08 billion, a decrease of 11.7% from $1.22 billion in the same period of 2023.
- Operating Income Reduction: Operating income for the same nine-month period dropped from $195.7 million to $87 million, reflecting the impact of lower activity levels and competitive pricing.
- Interest Expense Increases: Interest expense rose to $594,000 for the nine months ended September 30, 2024, compared to $246,000 in the prior year.
Mitigation Strategies
RPC has outlined several strategies to mitigate these risks:
- Capital Expenditure Management: Planned capital expenditures for 2024 are between $200 million and $250 million, aimed at maintaining equipment and pursuing growth opportunities.
- Revolving Credit Facility: The company has a $100 million revolving credit facility, with $83.5 million available as of September 30, 2024, ensuring liquidity.
| Risk Factor | Current Status | Mitigation Strategy |
|---|---|---|
| Industry Competition | High competition leading to pricing pressures | Focus on efficiency and cost management |
| Regulatory Changes | Potential impact on operational costs | Continuous monitoring and compliance adaptation |
| Market Conditions | Declining rig count and service demand | Enhance service offerings and explore new markets |
| Revenue Decline | Revenue decreased by 11.7% year-over-year | Strategic pricing adjustments and cost controls |
| Operating Income Reduction | Operating income fell significantly | Evaluate and optimize service lines |
| Interest Expense Increases | Interest expenses rising | Manage debt levels and refinance where possible |
Future Growth Prospects for RPC, Inc. (RES)
Future Growth Prospects for RPC, Inc.
Analysis of Key Growth Drivers
RPC, Inc. is positioned to capitalize on several growth drivers in the oilfield services sector. These include:
- Product Innovations: The company is focused on enhancing its pressure pumping services, which are critical in high-demand regions like the Permian Basin.
- Market Expansions: RPC's international revenues increased to $10.7 million in Q3 2024, up from $7.3 million in Q3 2023, indicating a strategic push into new markets.
- Acquisitions: The acquisition of Spinnaker in 2023 has bolstered RPC’s service capabilities, enhancing its market presence.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year 2024, RPC reported total revenues of $1.079 billion for the nine months ended September 30, 2024, which reflects a decrease of 11.7% compared to the previous year due to lower industry activity levels. However, the growth in international revenues and increased pressure pumping activity suggests potential for recovery in 2025.
Strategic Initiatives or Partnerships that May Drive Future Growth
RPC is actively pursuing strategic partnerships aimed at enhancing its service offerings and operational efficiencies. Key initiatives include:
- Partnerships with technology providers: These collaborations aim to improve service delivery and reduce costs.
- Investment in equipment: Capital expenditures reached $179.5 million for the nine months ended September 30, 2024, compared to $148.8 million in the same period of 2023.
Competitive Advantages that Position the Company for Growth
RPC benefits from several competitive advantages that enhance its growth prospects:
- Strong Financial Position: As of September 30, 2024, RPC had cash and cash equivalents of $276.9 million, providing ample liquidity for growth initiatives.
- Experienced Workforce: RPC’s skilled workforce enhances its ability to deliver high-quality services efficiently.
- Established Customer Relationships: Long-standing relationships with major oilfield companies ensure a steady demand for RPC's services.
| Key Financial Metrics | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Revenues | $337.7 million | $330.4 million |
| Net Income | $18.8 million | $18.3 million |
| Diluted Earnings per Share | $0.09 | $0.08 |
| Average Oil Price (per barrel) | $76.57 | $82.17 |
| Average Natural Gas Price (per mcf) | $2.10 | $2.59 |
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Article updated on 8 Nov 2024
Resources:
- RPC, Inc. (RES) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of RPC, Inc. (RES)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View RPC, Inc. (RES)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.