Cactus Announces Third Quarter 2019 Results and Initiates Quarterly Cash Dividend

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced financial and operating results for the third quarter of 2019 and the initiation of a quarterly cash dividend.

Third Quarter 2019 Highlights

  • Reported revenue of $160.8 million;
  • Generated income from operations of $47.1 million;
  • Reported net income of $35.8 million(1) and diluted earnings per Class A share of $0.41(1)
  • Generated net income, as adjusted(2) of $36.1 million and diluted earnings per share, as adjusted(2) of $0.48;
  • Reported Adjusted EBITDA(3) and related margin(4) of $58.8 million and 36.6%, respectively;
  • Generated cash flow from operations during the third quarter of 2019 of $49.9 million; and
  • The Board of Directors declared a regular quarterly cash dividend of $0.09 per share.

Financial Summary

Three Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

(in thousands)

 

Revenues

$

160,808

$

168,493

$

150,658

Income from operations

$

47,123

$

51,450

$

52,133

Operating income margin

 

29.3%

 

30.5%

 

34.6%

Net income (1)(5)

$

35,833

$

40,750

$

43,648

Net income, as adjusted (2)

$

36,097

$

39,173

$

39,157

Adjusted EBITDA (3)

$

58,819

$

62,718

$

61,261

Adjusted EBITDA margin (4)

 

36.6%

 

37.2%

 

40.7%

(1)

Net income during the third quarter of 2019 is inclusive of $4.1 million in additional tax expenses related to the write-off of foreign tax credits and the reduction in expected future state tax benefits.

(2)

Net income, as adjusted and diluted earnings per share, as adjusted are non-GAAP financial measures. These figures assume Cactus, Inc. held all units in Cactus Wellhead, LLC (“Cactus LLC”), its operating subsidiary, at the beginning of the period. Additional information regarding net income, as adjusted and diluted earnings per share, as adjusted and the reconciliation of GAAP to non-GAAP financial measures are in the Supplemental Information tables.

(3)

Adjusted EBITDA is a non-GAAP financial measure. See definition of Adjusted EBITDA and the reconciliation of GAAP to non-GAAP financial measures in the Supplemental Information tables.

(4)

The percentage of Adjusted EBITDA to Revenues.

(5)

Net income for the second quarter of 2019 is inclusive of $4.0 million in additional tax expense related to a valuation allowance accrual.

Scott Bender, President and CEO of Cactus, commented, “I am pleased with our results for the third quarter, as the company exhibited resiliency in the face of declining activity with revenues outperforming the trajectory of the U.S. rig count. We continued to demonstrate the differentiated nature of our products and service execution, which has enabled us to maintain our attractive margin profile. Despite softness in overall completion activity, we are pleased with customer acceptance of our recent rental innovations. Once again, the quarter highlighted the Company’s ability to generate significant free cash flow, with cash growing by over $36 million during the period.

Looking to the fourth quarter, lower drilling and completion activity is expected to reduce company revenues, though the impact will be mitigated somewhat as our October Product market share has improved from third quarter levels. While the impact of Section 301 tariffs and the typical seasonality in Field Service present potential margin headwinds, we will continue to operate with a focus on reducing costs and believe the impact of the tariffs will be less severe than previously anticipated.”

Mr. Bender concluded, “As always, we will maintain our focus on generating free cash flow and attractive returns on capital employed. A lower activity environment should highlight our ability to responsibly manage spending and expenses while generating substantial free cash flow. With this and our strong balance sheet in mind, I am pleased to announce that our board has authorized the introduction of a regular quarterly cash dividend of $0.09 per share, which highlights our ability to return cash to shareholders.”

Revenue Categories

Product

 

Three Months Ended

 

September 30,
2019

June 30,
2019

September 30,
2018

 

(in thousands)

 

Product revenue

 

$

92,582

$

94,494

$

79,388

Gross profit

 

$

34,814

$

36,977

$

32,572

Gross margin

 

 

37.6%

 

39.1%

 

41.0%

Third quarter 2019 product revenue decreased $1.9 million, or 2.0%, sequentially, as sales of wellhead equipment and production related equipment decreased due to reduced drilling and completion activity from our customers. Gross profit decreased $2.2 million, or 5.8%, sequentially, with margins declining 150 basis points primarily due to the impact of additional Section 301 tariffs. Cactus’ estimated market share(1) was 28.6% in the third quarter of 2019 compared to 29.4% during the second quarter of 2019.

(1)

Additional information regarding market share is located in the Supplemental Information tables.

Rental

Three Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

(in thousands)

 

Rental revenue

$

35,528

$

39,576

$

38,135

Gross profit

$

18,334

$

20,126

$

22,786

Gross margin

 

51.6%

 

50.9%

 

59.8%

Third quarter 2019 rental revenue decreased $4.0 million, or 10.2%, sequentially, following a decrease in completion activity from the Company’s customers. Gross profit decreased $1.8 million sequentially due to lower revenue and an increase in depreciation expense. Margins increased 70 basis points, primarily due to a reduction in costs associated with the utilization of assets, which more than offset increased depreciation expense.

Field Service and Other

Three Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

(in thousands)

 

Field service and other revenue

$

32,698

$

34,423

$

33,135

Gross profit

$

7,323

$

7,599

$

7,826

Gross margin

 

22.4%

 

22.1%

 

23.6%

Third quarter 2019 field service and other revenue decreased $1.7 million, or 5.0%, sequentially, as lower customer activity drove a decline in associated billable hours and ancillary services. Gross profit decreased $0.3 million, or 3.6%, sequentially.

Selling, General and Administrative Expenses (“SG&A”)

SG&A for the third quarter of 2019 was $13.3 million (8.3% of revenues), compared to $13.3 million (7.9% of revenues) for the second quarter of 2019 and $11.1 million (7.3% of revenues) for the third quarter of 2018.

Liquidity and Capital Expenditures

As of September 30, 2019, the Company had $167.5 million of cash, no bank debt outstanding and the full $75.0 million of capacity available under its revolving credit facility. Operating cash flow was $49.9 million for the third quarter of 2019, attributable to strong operating results and working capital metrics.

Net capital expenditures for the third quarter of 2019 were $9.0 million, driven largely by additions to the Company’s fleet of rental equipment, including recent innovations. For the full year 2019, the Company expects net capital expenditures to be in the range of $50 to $55 million.

Quarterly Dividend

Cactus today announced that its Board of Directors (the “Board”) has approved the initiation of a regular quarterly cash dividend. On October 29, 2019, the Board declared a cash dividend of $0.09 per share of Class A common stock to be paid on December 19, 2019 to holders of record of Class A common stock at the close of business on December 2, 2019. A corresponding distribution of $0.09 per CW Unit has been approved for holders of CW Units of Cactus Wellhead, LLC, which will have the same record and payment dates as applicable to the dividend declared with respect to the Company’s Class A common stock.

Mr. Bender added, “Cactus’ variable cost business model has demonstrated its ability to generate free cash flow through the cycle. Given our strong balance sheet and continued cash generation, we are well positioned to return cash to shareholders. The implementation of a quarterly dividend, which we hope to grow over time, reflects the confidence we have in our business.”

Conference Call Details

The Company will host a conference call to discuss financial and operational results tomorrow, Thursday, October 31, 2019 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time).

The call will be webcast on Cactus’ website at www.CactusWHD.com. Institutional investors and analysts may participate by dialing (866) 670-2203. International parties may dial (630) 489-9861. The access code is 9897427. Please access the webcast or dial in for the call at least 10 minutes ahead of start time to ensure a proper connection.

An archived webcast of the conference call will be available on the Company’s website shortly after the end of the call.

About Cactus, Inc.

Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of its customers’ wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford and Bakken, among other areas, and in Eastern Australia.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Cactus’ control, that could cause actual results to differ materially from the results discussed in the forward-looking statements.

Forward-looking statements can be identified by the use of forward-looking terminology including “may,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “continue,” “potential,” “will,” “hope” or other similar words and include the Company’s expectation of future performance contained herein. These statements discuss future expectations, contain projections of results of operations or of financial condition, or state other “forward-looking” information. You are cautioned not to place undue reliance on any forward-looking statements, which can be affected by assumptions used or by known risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. When considering these forward-looking statements, you should keep in mind the risk factors and other factors noted in the Company’s Annual Report on Form 10-K and any Quarterly Reports on Form 10-Q. The risk factors and other factors noted therein could cause actual results to differ materially from those contained in any forward-looking statement.

Cactus, Inc.

Condensed Consolidated Statements of Income

(unaudited)

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2019

 

2018

 

 

 

2019

 

 

2018

 

 

 

(in thousands, except per share data)

Revenues

 

 

 

Product revenue

$

92,582

$

79,388

 

 

$

273,716

 

$

211,595

 

Rental revenue

 

35,528

 

38,135

 

 

 

113,601

 

 

102,224

 

Field service and other revenue

 

32,698

 

33,135

 

 

 

100,859

 

 

90,492

 

Total revenues

 

160,808

 

150,658

 

 

 

488,176

 

 

404,311

 

 

 

 

Costs and expenses

 

 

 

Cost of product revenue

 

57,768

 

46,816

 

 

 

168,303

 

 

128,897

 

Cost of rental revenue

 

17,194

 

15,349

 

 

 

54,435

 

 

41,477

 

Cost of field service and other revenue

 

25,375

 

25,309

 

 

 

79,105

 

 

70,084

 

Selling, general and administrative expenses

 

13,348

 

11,051

 

 

 

39,268

 

 

30,016

 

Total costs and expenses

 

113,685

 

98,525

 

 

 

341,111

 

 

270,474

 

Income from operations

 

47,123

 

52,133

 

 

 

147,065

 

 

133,837

 

 

 

 

Interest income (expense), net

 

373

 

(270

)

 

 

489

 

 

(3,370

)

Other income (expense), net

 

558

 

 

 

 

(484

)

 

(4,305

)

Income before income taxes

 

48,054

 

51,863

 

 

 

147,070

 

 

126,162

 

Income tax expense

 

12,221

 

8,215

 

 

 

22,041

 

 

14,564

 

Net income

$

35,833

$

43,648

 

 

$

125,029

 

$

111,598

 

Less: pre-IPO net income attributable to Cactus LLC

 

 

 

 

 

 

 

13,648

 

Less: net income attributable to non-controlling interest

 

16,494

 

24,976

 

 

 

57,475

 

 

63,191

 

Net income attributable to Cactus Inc.

$

19,339

$

18,672

 

 

$

67,554

 

$

34,759

 

 

 

 

 

 

 

Earnings per Class A share – basic

$

0.41

$

0.52

 

 

$

1.53

 

$

1.15

 

Earnings per Class A share – diluted (a)

$

0.41

$

0.52

 

 

$

1.50

 

$

1.14

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

47,095

 

35,821

 

 

 

44,260

 

 

30,182

 

Weighted average shares outstanding – diluted (a)

 

47,322

 

36,229

 

 

 

75,337

 

 

30,522

 

(a)

Dilution for the three months ended September 30, 2019 excludes 28.0 million weighted average shares of Class B common stock as the effect would be anti-dilutive. Dilution for the nine months ended September 30, 2019 includes an additional $60.1 million of pre-tax income attributable to non-controlling interest adjusted for a corporate effective tax rate of 24%, and 30.8 million weighted average shares of Class B common stock plus the effect of dilutive securities. Dilution for the three and nine months ended September 30, 2018 excludes 39.1 million and 44.7 million weighted average shares of Class B common stock, respectively, as the effect would be anti-dilutive.

Cactus, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

September 30,

December 31,

2019

2018

(in thousands)

Assets

Current assets

Cash and cash equivalents

$

167,545

$

70,841

Accounts receivable, net

 

100,305

 

92,269

Inventories

 

111,590

 

99,837

Prepaid expenses and other current assets

 

7,510

 

11,558

Total current assets

 

386,950

 

274,505

 

Property and equipment, net

 

157,124

 

142,054

Operating lease right-of-use assets, net

 

 

 

26,537

 

Goodwill

 

7,824

 

7,824

Deferred tax asset, net

 

 

 

231,224

 

159,053

Other noncurrent assets

 

1,478

 

1,308

Total assets

$

811,137

$

584,744

 

Liabilities and Equity

Current liabilities

Accounts payable

$

40,959

$

42,047

Accrued expenses and other current liabilities

 

19,706

 

15,650

Current portion of liability related to tax receivable agreement

 

 

 

14,815

 

9,574

Finance lease obligations, current portion

 

7,361

 

7,353

Operating lease liabilities, current portion

 

 

 

6,739

 

Total current liabilities

 

89,580

 

74,624

 

Deferred tax liability, net

 

822

 

1,036

Liability related to tax receivable agreement, net of current portion

 

 

 

206,105

 

138,015

Finance lease obligations, net of current portion

 

5,339

 

8,741

Operating lease liabilities, net of current portion

 

20,232

 

Total liabilities

 

322,078

 

222,416

 

Equity

 

489,059

 

362,328

Total liabilities and equity

$

811,137

$

584,744

Cactus, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

Nine Months Ended September 30,

2019

2018

(in thousands)

Cash flows from operating activities

Net income

$

125,029

 

$

111,598

 

Reconciliation of net income to net cash provided by operating activities

Depreciation and amortization

 

28,264

 

 

21,829

 

Debt discount and deferred loan cost amortization

 

126

 

 

229

 

Stock-based compensation

 

5,257

 

 

3,384

 

Provision for bad debts

 

 

255

 

 

 

Inventory obsolescence

 

1,708

 

 

932

 

Loss on disposal of assets

 

820

 

 

1,759

 

Deferred income taxes

 

15,072

 

 

11,762

 

Loss on debt extinguishment

 

 

 

4,305

 

Gain from revaluation of liability related to tax receivable agreement

 

(558

)

 

 

Changes in operating assets and liabilities:
Accounts receivable

 

(8,326

)

 

(21,761

)

Inventories

 

(14,513

)

 

(22,866

)

Prepaid expenses and other assets

 

4,032

 

 

(3,835

)

Accounts payable

 

(4,334

)

 

8,108

 

Accrued expenses and other liabilities

 

4,694

 

 

6,906

 

Payments pursuant to tax receivable agreement

 

 

(9,335

)

 

 

Net cash provided by operating activities

 

148,191

 

 

122,350

 

 

Cash flows from investing activities

Capital expenditures and other

 

(40,526

)

 

(55,720

)

Proceeds from sale of assets

 

2,811

 

 

1,313

 

Net cash used in investing activities

 

(37,715

)

 

(54,407

)

 

Cash flows from financing activities

Principal payments on long-term debt

 

 

 

(248,529

)

Payment of deferred financing costs

 

 

 

 

(576

)

Payments on finance leases

 

(5,660

)

 

(4,456

)

Net proceeds from equity offerings

 

 

 

 

828,168

 

Distributions to members

 

 

(5,853

)

 

(31,848

)

Redemption of CW Units

 

 

 

(575,681

)

Repurchase of shares

 

 

(1,529

)

 

 

Net cash used in financing activities

 

(13,042

)

 

(32,922

)

 

Effect of exchange rate changes on cash and cash equivalents

 

(730

)

 

(614

)

 
Net increase in cash and cash equivalents

 

96,704

 

 

34,407

 

 

Cash and cash equivalents

Beginning of period

 

70,841

 

 

7,574

 

End of period

$

167,545

 

$

41,981

 

Cactus, Inc. – Supplemental Information

Reconciliation of GAAP to non-GAAP Financial Measures

Net income, as adjusted and diluted earnings per share, as adjusted(1)

(unaudited)

 

Three Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

 

(in thousands, except per share data)

 

 

 

 

 

 

Net income

$

35,833

 

$

40,750

 

$

43,648

 

Adjustments:

 

 

 

 

 

Other non-operating (income) expense (2)

 

(558

)

 

 

 

 

 

 

Income tax expense differential (3)

 

822

 

 

(1,577

)

 

(4,491

)

Net income, as adjusted (1)

$

36,097

 

$

39,173

 

$

39,157

 

 

 

 

 

 

 

Diluted earnings per share, as adjusted (1)

$

0.48

 

$

0.52

 

 

$

0.52

 

 

 

 

 

 

 

Weighted average shares outstanding, as adjusted (4)

 

75,340

 

 

75,375

 

 

75,298

 

(1)

Net income, as adjusted and diluted earnings per share, as adjusted are not measures of net income as determined by GAAP. Net income, as adjusted and diluted earnings per share, as adjusted are supplemental non-GAAP financial measures that are used by management and external users of the Company’s consolidated financial statements. Cactus defines net income, as adjusted as net income assuming Cactus, Inc. held all units in Cactus LLC, its operating subsidiary, at the beginning of the period, with the resulting additional income tax expense related to the incremental income attributable to Cactus, Inc. Net income, as adjusted, also includes certain other adjustments described below. Cactus defines diluted earnings per share, as adjusted as net income, as adjusted divided by weighted average shares outstanding, as adjusted. The Company believes this supplemental information is useful for evaluating performance period over period.

(2)

Represents a non-cash adjustment for the revaluation of the liability related to the tax receivable agreement.

(3)

Represents the increase or decrease in tax expense as though Cactus, Inc. owned 100% of Cactus LLC at the beginning of the period, calculated as the difference in tax expense recorded during each period and what would have been recorded, adjusted for item (2) above, based on a corporate effective tax rate of 24.0% on income before income taxes for the three months ended September 30, 2019 and June 30, 2019 and 24.5% for the three months ended September 30, 2018.

(4)

Reflects 47,095, 46,881, and 35,821 weighted average shares of Class A common stock and 28,018, 28,230 and 39,069 of additional shares for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively, as if the weighted average shares of Class B common stock were exchanged and canceled for Class A common stock at the beginning of the period, plus the effect of dilutive securities.

Cactus, Inc. – Supplemental Information

Reconciliation of GAAP to non-GAAP Financial Measures

EBITDA and Adjusted EBITDA(1)

(unaudited)

Three Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

 

(in thousands)

Net income

$

35,833

 

$

40,750

 

$

43,648

Interest (income) expense, net

 

(373

)

 

(93

)

 

270

Income tax expense

 

12,221

 

 

10,793

 

 

8,215

Depreciation and amortization

 

10,007

 

 

9,376

 

 

7,841

EBITDA (1)

 

57,688

 

 

60,826

 

 

59,974

Other non-operating (income) expense (2)

 

(558

)

 

 

 

 

 

Stock-based compensation

 

1,689

 

 

1,892

 

 

1,287

Adjusted EBITDA (1)

$

58,819

 

$

62,718

 

$

61,261

 

Nine Months Ended

September 30,
2019

September 30,
2018

 

(in thousands)

Net income

$

125,029

 

 

$

111,598

Interest (income) expense, net

 

(489

)

 

 

3,370

Income tax expense

 

22,041

 

 

 

14,564

Depreciation and amortization

 

28,264

 

 

 

21,829

EBITDA (1)

 

174,845

 

 

 

 

151,361

Other non-operating (income) expense (2)

 

(558

)

 

 

 

 

Secondary offering related expenses

 

1,042

 

 

 

 

 

Loss on debt extinguishment

 

 

 

 

4,305

Stock-based compensation

 

5,257

 

 

 

3,384

Adjusted EBITDA (1)

$

180,586

 

 

$

159,050

 

(1)

EBITDA and Adjusted EBITDA are not measures of net income as determined by GAAP. EBITDA and Adjusted EBITDA are supplemental non‑GAAP financial measures that are used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. Cactus defines EBITDA as net income excluding net interest, income tax and depreciation and amortization. Cactus defines Adjusted EBITDA as EBITDA excluding the other items outlined above.

 

 

 

Cactus management believes EBITDA and Adjusted EBITDA are useful because they allow management to more effectively evaluate the Company’s operating performance and compare the results of its operations from period to period without regard to financing methods or capital structure, or other items that impact comparability of financial results from period to period. EBITDA and Adjusted EBITDA should not be considered as alternatives to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. The Company’s computations of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Cactus presents EBITDA and Adjusted EBITDA because it believes they provide useful information regarding the factors and trends affecting the Company’s business.

(2)

Represents a non-cash adjustment for the revaluation of the liability related to the tax receivable agreement.

Cactus, Inc. – Supplemental Information

Depreciation and Amortization by Category

(unaudited)

Three Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

 

(in thousands)

Cost of product revenue

$

884

$

762

$

792

Cost of rental revenue

 

6,384

 

5,966

 

4,671

Cost of field service and other revenue

 

2,558

 

2,478

 

2,269

Selling, general and administrative expenses

 

181

 

170

 

109

Total depreciation and amortization

$

10,007

$

9,376

$

7,841

 

Nine Months Ended

September 30,
2019

September 30,
2018

 

(in thousands)

Cost of product revenue

$

2,411

 

$

2,361

Cost of rental revenue

 

17,867

 

 

13,058

Cost of field service and other revenue

 

7,486

 

 

6,098

Selling, general and administrative expenses

 

500

 

 

312

Total depreciation and amortization

$

28,264

 

$

21,829

Cactus, Inc. – Supplemental Information

Estimated Market Share(1)

(unaudited)

Three Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

 

Cactus U.S. onshore rigs followed

256

283

282

Baker Hughes U.S. onshore rig count quarterly average

894

963

1,029

Market share (1)

28.6%

29.4%

27.4%

(1)

Market share represents the average number of active U.S. onshore rigs Cactus followed (which Cactus defines as the number of active U.S. onshore drilling rigs to which it was the primary provider of wellhead products and corresponding services during drilling) as of mid month for each of the three months in the applicable quarter divided by the Baker Hughes U.S. onshore rig count quarterly average. Cactus believes that comparing the total number of active U.S. onshore rigs to which it was providing its products and services at a given time to the number of active U.S. onshore rigs during the same period provides Cactus with a reasonable approximation of its market share with respect to wellhead products sold and the corresponding services it provides.

 

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced that it will issue its third quarter 2019 earnings release after market close on Wednesday, October 30, 2019. The Company will host a conference call to discuss financial and operational results on Thursday, October 31, 2019 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time).

The call will be webcast on Cactus’ website at www.CactusWHD.com. Institutional investors and analysts may participate by dialing (866) 670-2203. International parties may dial (630) 489-9861. The access code is 9897427. Please access the webcast or dial in for the call at least 10 minutes ahead of start time to ensure a proper connection.

An archived webcast of the conference call will be available on the Company’s website shortly after the end of the call.

About Cactus, Inc.

Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of its customers’ wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford and Bakken, among other areas, and in Eastern Australia.

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced financial and operating results for the second quarter of 2019.

Second Quarter 2019 Highlights

  • Increased revenues 6.1% from first quarter to a record $168.5 million, with growth across all business lines;
  • Grew income from operations 6.1% sequentially to $51.5 million;
  • Reported net income of $40.8 million and diluted earnings per Class A share of $0.45, inclusive of $4.0 million of additional tax expense related to a valuation allowance accrual;
  • Generated net income, as adjusted(1) of $39.2 million and diluted earnings per share, as adjusted(1) of $0.52;
  • Reported Adjusted EBITDA(2) and related margin(3) of $62.7 million and 37.2%, respectively; and
  • Generated cash flow from operations during the second quarter of 2019 of $64.1 million.

Financial Summary

Three Months Ended

 

June 30,
2019

March 31,
2019

June 30,
2018

 

(in thousands)

 

 

Revenues

$

168,493

$

158,875

$

138,543

 

Income from operations

$

51,450

$

48,492

$

46,487

 

Operating income margin

 

30.5%

 

30.5%

 

33.6%

 

Net income (4)

$

40,750

$

48,446

$

41,542

 

Net income, as adjusted (1)

$

39,173

$

36,871

$

34,910

 

Adjusted EBITDA (2)

$

62,718

$

59,049

$

55,117

 

Adjusted EBITDA margin (3)

 

37.2%

 

37.2%

 

39.8%

 

(1)

Net income, as adjusted and diluted earnings per share, as adjusted are non-GAAP financial measures. These figures assume Cactus, Inc. held all units in Cactus Wellhead, LLC (“Cactus LLC”), its operating subsidiary, at the beginning of the period. Additional information regarding net income, as adjusted and diluted earnings per share, as adjusted and the reconciliation of GAAP to non-GAAP financial measures are in the Supplemental Information tables.

(2)

Adjusted EBITDA is a non-GAAP financial measure. See definition of Adjusted EBITDA and the reconciliation of GAAP to non-GAAP financial measures in the Supplemental Information tables.

(3)

The percentage of Adjusted EBITDA to Revenues.

(4)

Net income during the second quarter of 2019 is inclusive of $4.0 million of additional tax expense related to a valuation allowance accrual, and net income for the first quarter of 2019 is inclusive of a deferred tax benefit of $8.2 million which resulted in a total income tax benefit of $1.0 million during the first quarter.

Scott Bender, President and CEO of Cactus, commented, “I am pleased with our results for the second quarter in the face of a declining rig count environment. We reported sequential revenue growth across all business lines and generated the highest quarterly revenue and Adjusted EBITDA in the Company’s history. Growth was driven by continued market share gains in our Product business and higher production tree demand. We also continued to see strong demand for our differentiated Rental offerings. The quarter highlighted the ability of the business to generate significant free cash flow, with cash growing by over $43 million during the period.

While the second quarter was strong, lower drilling and completion activity will likely impact our revenues during the third quarter. As previously stated, we also anticipate the impact of Section 301 tariffs to pressure Product margins during the second half of 2019.”

Mr. Bender concluded, “As always, we will continue to focus on generating free cash flow and attractive returns on capital employed. We now expect capital expenditures for 2019 to be in the $50 to $60 million range. A meaningful portion of this will continue to be related to our new frac innovations, which have been very well received in the field. A lower activity environment should highlight our ability to responsibly manage expenses and generate substantial free cash flow.”

Revenue Categories

Product

Three Months Ended

June 30,
2019

March 31,
2019

June 30,
2018

(in thousands)

 

Product revenue

$

94,494

$

86,640

$

73,281

Gross profit

$

36,977

$

33,622

$

28,266

Gross margin

 

39.1%

 

38.8%

 

38.6%

Second quarter 2019 product revenue increased $7.9 million, or 9.1%, sequentially, as sales of wellhead equipment and production related equipment increased due to greater market share and more wells turned in-line by the Company’s customers. Gross profit increased $3.4 million, or 10.0%, sequentially, with margins improving 30 basis points primarily due to product mix and leverage of the Company’s fixed cost base. Cactus’ estimated market share(1) was 29.4% in the second quarter of 2019 compared to 29.1% during the first quarter of 2019.

(1)

 

Additional information regarding market share is located in the Supplemental Information tables.

Rental

Three Months Ended

June 30,
2019

March 31,
2019

June 30,
2018

(in thousands)

 

Rental revenue

$

39,576

$

38,497

$

34,944

Gross profit

$

20,126

$

20,706

$

20,992

Gross margin

 

50.9%

 

53.8%

 

60.1%

Second quarter 2019 rental revenue increased $1.1 million, or 2.8%, sequentially, following continued strength in completion activity from the Company’s customers. Gross profit decreased $0.6 million sequentially with margins down 290 basis points, primarily due to increased costs associated with the redeployment of assets as well as increased depreciation expense.

Field Service and Other

Three Months Ended

June 30,
2019

March 31,
2019

June 30,
2018

(in thousands)

 

Field service and other revenue

$

34,423

$

33,738

$

30,318

Gross profit

$

7,599

$

6,832

$

7,080

Gross margin

 

22.1%

 

20.3%

 

23.4%

Second quarter 2019 field service and other revenue increased $0.7 million, or 2.0%, sequentially. Gross profit increased $0.8 million, or 11.2%, sequentially due to improved revenue mix during the quarter.

Selling, General and Administrative Expenses (“SG&A”)

SG&A for second quarter 2019 was $13.3 million (7.9% of revenues), compared to $12.7 million (8.0% of revenues) for first quarter 2019 and $9.9 million (7.1% of revenues) for the second quarter 2018. The sequential increase is primarily related to higher incentive compensation accruals associated with outperformance during the quarter.

Liquidity and Capital Expenditures

As of June 30, 2019, the Company had $131.1 million of cash, no bank debt outstanding and the full $75.0 million of capacity available under its revolving credit facility. Operating cash flow was $64.1 million for second quarter 2019, attributable to improved operating results and working capital metrics.

Net capital expenditures for second quarter 2019 were $14.9 million, driven largely by additions to the Company’s fleet of rental equipment, including new innovations. For the full year 2019, the Company expects capital expenditures to be in the range of $50 to $60 million.

Conference Call Details

The Company will host a conference call to discuss financial and operational results tomorrow, Thursday, August 1, 2019 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time).

The call will be webcast on Cactus’ website at www.CactusWHD.com. Institutional investors and analysts may participate by dialing (866) 670-2203. International parties may dial (630) 489-9861. The access code is 9795497. Please access the webcast or dial in for the call at least 10 minutes ahead of start time to ensure a proper connection.

An archived webcast of the conference call will be available on the Company’s website shortly after the end of the call.

About Cactus, Inc.

Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of its customers’ wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford and Bakken, among other areas, and in Eastern Australia.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Cactus’ control, that could cause actual results to differ materially from the results discussed in the forward-looking statements.

Forward-looking statements can be identified by the use of forward-looking terminology including “may,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “continue,” “potential,” “will,” or other similar words and include the Company’s expectation of future performance contained herein. These statements discuss future expectations, contain projections of results of operations or of financial condition, or state other “forward-looking” information. You are cautioned not to place undue reliance on any forward-looking statements, which can be affected by assumptions used or by known risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. When considering these forward-looking statements, you should keep in mind the risk factors and other factors noted in the Company’s Annual Report on Form 10-K and any Quarterly Reports on Form 10-Q. The risk factors and other factors noted therein could cause actual results to differ materially from those contained in any forward-looking statement.

Cactus, Inc.

Condensed Consolidated Statements of Income

(unaudited)

   

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

 

 

2019

 

 

2018

 

 

(in thousands, except per share data)

Revenues

 

 

 

Product revenue

$

94,494

$

73,281

 

 

$

181,134

 

$

132,207

 

Rental revenue

 

39,576

 

34,944

 

 

 

78,073

 

 

64,089

 

Field service and other revenue

 

34,423

 

30,318

 

 

 

68,161

 

 

57,357

 

Total revenues

 

168,493

 

138,543

 

 

 

327,368

 

 

253,653

 

 

 

 

Costs and expenses

 

 

 

Cost of product revenue

 

57,517

 

45,015

 

 

 

110,535

 

 

82,081

 

Cost of rental revenue

 

19,450

 

13,952

 

 

 

37,241

 

 

26,128

 

Cost of field service and other revenue

 

26,824

 

23,238

 

 

 

53,730

 

 

44,775

 

Selling, general and administrative expenses

 

13,252

 

9,851

 

 

 

25,920

 

 

18,965

 

Total costs and expenses

 

117,043

 

92,056

 

 

 

227,426

 

 

171,949

 

Income from operations

 

51,450

 

46,487

 

 

 

99,942

 

 

81,704

 

 

 

 

Interest income (expense), net

 

93

 

(248

)

 

 

116

 

 

(3,100

)

Other income (expense), net

 

 

 

 

 

(1,042

)

 

(4,305

)

Income before income taxes

 

51,543

 

46,239

 

 

 

99,016

 

 

74,299

 

Income tax expense

 

10,793

 

4,697

 

 

 

9,820

 

 

6,349

 

Net income

$

40,750

$

41,542

 

 

$

89,196

 

$

67,950

 

Less: pre-IPO net income attributable to Cactus LLC

 

 

 

 

 

 

 

13,648

 

Less: net income attributable to non-controlling interest

 

19,342

 

29,208

 

 

 

40,981

 

 

38,215

 

Net income attributable to Cactus Inc.

$

21,408

$

12,334

 

 

$

48,215

 

$

16,087

 

 

 

 

 

 

 

Earnings per Class A share – basic

$

0.46

$

0.47

 

 

$

1.13

 

$

0.61

 

Earnings per Class A share – diluted (a)

$

0.45

$

0.46

 

 

$

1.07

 

$

0.60

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

46,881

 

26,450

 

 

 

42,819

 

 

26,450

 

Weighted average shares outstanding – diluted (a)

 

47,145

 

26,779

 

 

 

75,326

 

 

26,734

 

(a)

Dilution for the three months ended June 30, 2019 excludes 28.2 million shares of Class B common stock as the effect would be anti-dilutive. Dilution for the six months ended June 30, 2019 includes an additional $42.4 million of pre-tax income attributable to non-controlling interest adjusted for a corporate effective tax rate of 24%, and the weighted average shares of Class B common stock of 32.2 million plus the dilutive effect of 265 shares of restricted stock unit awards, respectively. Dilution for both the three and six months ended June 30, 2018 excludes 48.4 million shares of Class B common stock as the effect would be anti-dilutive.

Cactus, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 

June 30,

December 31,

2019

2018

(in thousands)

Assets

Current assets

Cash and cash equivalents

$

131,149

$

70,841

Accounts receivable, net

 

112,963

 

92,269

Inventories

 

110,060

 

99,837

Prepaid expenses and other current assets

 

10,363

 

11,558

Total current assets

 

364,535

 

274,505

 

Property and equipment, net

 

155,988

 

142,054

Operating lease right-of-use assets, net

 

24,178

 

Goodwill

 

7,824

 

7,824

Deferred tax asset, net

 

239,754

 

159,053

Other noncurrent assets

 

1,486

 

1,308

Total assets

$

793,765

$

584,744

 

Liabilities and Equity

Current liabilities

Accounts payable

$

46,346

$

42,047

Accrued expenses and other current liabilities

 

22,534

 

15,650

Current portion of liability related to tax receivable agreement

 

9,574

 

9,574

Finance lease obligations, current portion

 

7,738

 

7,353

Operating lease liabilities, current portion

 

6,763

 

Total current liabilities

 

92,955

 

74,624

 

Deferred tax liability, net

 

865

 

1,036

Liability related to tax receivable agreement, net of current portion

 

221,043

 

138,015

Finance lease obligations, net of current portion

 

6,519

 

8,741

Operating lease liabilities, net of current portion

 

17,853

 

Total liabilities

 

339,235

 

222,416

 

Equity

 

454,530

 

362,328

Total liabilities and equity

$

793,765

$

584,744

Cactus, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

Six Months Ended June 30,

 

2019

 

 

2018

 

(in thousands)

Cash flows from operating activities

Net income

$

89,196

 

$

67,950

 

Reconciliation of net income to net cash provided by operating activities

Depreciation and amortization

 

18,257

 

 

13,988

 

Debt discount and deferred loan cost amortization

 

84

 

 

219

 

Stock-based compensation

 

3,568

 

 

2,097

 

Inventory obsolescence

 

1,188

 

 

830

 

Loss on disposal of assets

 

1,403

 

 

706

 

Deferred income taxes

 

7,060

 

 

4,094

 

Loss on debt extinguishment

 

 

 

4,305

 

Changes in operating assets and liabilities:

Accounts receivable

 

(20,696

)

 

(12,647

)

Inventories

 

(12,010

)

 

(14,943

)

Prepaid expenses and other assets

 

4,612

 

 

2,387

 

Accounts payable

 

1,691

 

 

7,302

 

Accrued expenses and other liabilities

 

7,316

 

 

4,417

 

Operating lease liabilities

 

(3,351

)

 

 

Net cash provided by operating activities

 

98,318

 

 

80,705

 

 

Cash flows from investing activities

Capital expenditures and other

 

(29,924

)

 

(32,128

)

Proceeds from sale of assets

 

1,175

 

 

780

 

Net cash used in investing activities

 

(28,749

)

 

(31,348

)

 

Cash flows from financing activities

Principal payments on long-term debt

 

 

 

(248,529

)

Payments on finance leases

 

(3,723

)

 

(2,788

)

Net proceeds from equity offerings

 

 

 

469,621

 

Distributions to members

 

(3,848

)

 

(30,275

)

Redemption of CW Units

 

 

 

(216,425

)

Repurchase of shares

 

(1,516

)

 

 

Net cash used in financing activities

 

(9,087

)

 

(28,396

)

 

Effect of exchange rate changes on cash and cash equivalents

 

(174

)

 

(132

)

 

Net increase in cash and cash equivalents

 

60,308

 

 

20,829

 

 

Cash and cash equivalents

Beginning of period

 

70,841

 

 

7,574

 

End of period

$

131,149

 

$

28,403

 

Cactus, Inc. – Supplemental Information

Reconciliation of GAAP to non-GAAP Financial Measures

Net income, as adjusted and diluted earnings per share, as adjusted(1)

(unaudited)

 

Three Months Ended

June 30,
2019

 

March 31,
2019

 

June 30,
2018

 

(in thousands, except per share data)

 

 

 

 

 

 

Net income

$

40,750

 

$

48,446

 

$

41,542

Adjustments:

 

 

 

 

 

Secondary offering related expenses, pre-tax (2)

 

 

 

1,042

 

 

Income tax expense differential (3)

 

(1,577)

 

 

(12,617)

 

 

(6,632)

Net income, as adjusted (1)

$

39,173

 

$

36,871

 

$

34,910

 

 

 

 

 

 

Diluted earnings per share, as adjusted (1)

$

0.52

 

$

0.49

 

$

0.46

 

 

 

 

 

 

Weighted average shares outstanding, as adjusted (4)

 

75,375

 

 

75,246

 

 

75,219

(1)

Net income, as adjusted and diluted earnings per share, as adjusted are not measures of net income as determined by GAAP. Net income, as adjusted and diluted earnings per share, as adjusted are supplemental non-GAAP financial measures that are used by management and external users of the Company’s consolidated financial statements. Cactus defines net income, as adjusted as net income assuming Cactus, Inc. held all units in Cactus LLC, its operating subsidiary, at the beginning of the period, with the resulting additional income tax expense related to the incremental income attributable to Cactus, Inc. Net income, as adjusted, also includes certain other adjustments described below. Cactus defines diluted earnings per share, as adjusted as net income, as adjusted divided by weighted average shares outstanding, as adjusted. The Company believes this supplemental information is useful for evaluating performance period over period.

(2)

Reflects fees and expenses recorded in first quarter 2019 in connection with the offering of Class A common stock by certain selling stockholders, excluding underwriting discounts and selling commissions incurred by the selling stockholders.

(3)

Represents the increase in tax expense as though Cactus, Inc. owned 100% of Cactus LLC at the beginning of the period, calculated as the difference in tax expense recorded during each period and what would have been recorded, adjusted for item (2) above, based on a corporate effective tax rate of 24.0% on income before income taxes for the three months ended June 30, 2019 and March 31, 2019 and 24.5% for the three months ended June 30, 2018.

(4)

Reflects 46,881, 46,293, and 26,450 shares of Class A common stock and 28,230, 28,718 and 48,440 of additional shares for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively, as if the Class B common stock was exchanged and canceled for Class A common stock at the beginning of the period, plus the dilutive effect of 264, 235, and 329 shares for restricted stock unit awards for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively.

Cactus, Inc. – Supplemental Information

Reconciliation of GAAP to non-GAAP Financial Measures

EBITDA and Adjusted EBITDA(1)

(unaudited)

 

Three Months Ended

June 30,
2019

March 31,
2019

June 30,
2018

 

(in thousands)

 

Net income

$

40,750

$

48,446

$

41,542

Interest (income) expense, net

 

(93)

 

(23)

 

248

Income tax expense (benefit)

 

10,793

 

(973)

 

4,697

Depreciation and amortization

 

9,376

 

8,881

 

7,367

EBITDA (1)

 

60,826

 

56,331

 

53,854

Secondary offering related expenses

 

 

 

1,042

 

 

 

Stock-based compensation

 

1,892

 

1,676

 

1,263

Adjusted EBITDA (1)

$

62,718

$

59,049

$

55,117

 

Six Months Ended

June 30,
2019

June 30,
2018

 

(in thousands)

 

Net income

$

89,196

 

$

67,950

Interest (income) expense, net

 

(116)

 

 

3,100

Income tax expense

 

9,820

 

 

6,349

Depreciation and amortization

 

18,257

 

 

13,988

EBITDA (1)

 

117,157

 

 

91,387

Secondary offering related expenses

 

1,042

 

 

 

 

 

Loss on debt extinguishment

 

 

 

4,305

Stock-based compensation

 

3,568

 

 

2,097

Adjusted EBITDA (1)

$

121,767

 

$

97,789

(1)

EBITDA and Adjusted EBITDA are not measures of net income as determined by GAAP. EBITDA and Adjusted EBITDA are supplemental non‑GAAP financial measures that are used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. Cactus defines EBITDA as net income excluding net interest, income tax and depreciation and amortization. Cactus defines Adjusted EBITDA as EBITDA excluding other items outlined above.

 
Cactus management believes EBITDA and Adjusted EBITDA are useful because they allow management to more effectively evaluate the Company’s operating performance and compare the results of its operations from period to period without regard to financing methods or capital structure, or other items that impact comparability of financial results from period to period. EBITDA and Adjusted EBITDA should not be considered as alternatives to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. The Company’s computations of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Cactus presents EBITDA and Adjusted EBITDA because it believes they provide useful information regarding the factors and trends affecting the Company’s business.

Cactus, Inc. – Supplemental Information

Depreciation and Amortization by Category

(unaudited)

 

Three Months Ended

June 30,
2019

March 31,
2019

June 30,
2018

 

(in thousands)

 

Cost of product revenue

$

762

$

765

$

793

Cost of rental revenue

 

5,966

 

5,517

 

4,433

Cost of field service and other revenue

 

2,478

 

2,450

 

2,039

Selling, general and administrative expenses

 

170

 

149

 

102

Total depreciation and amortization

$

9,376

$

8,881

$

7,367

 

Six Months Ended

June 30,
2019

June 30,
2018

 

(in thousands)

 

Cost of product revenue

$

1,527

 

$

1,569

Cost of rental revenue

 

11,483

 

 

8,387

Cost of field service and other revenue

 

4,928

 

 

3,829

Selling, general and administrative expenses

 

319

 

 

203

Total depreciation and amortization

$

18,257

 

$

13,988

Cactus, Inc. – Supplemental Information

Estimated Market Share(1)

(unaudited)

 

Three Months Ended

June 30,
2019

March 31,
2019

June 30,
2018

 

Cactus U.S. onshore rigs followed

283

297

264

Baker Hughes U.S. onshore rig count quarterly average

963

1,021

1,017

Market share (1)

29.4%

29.1%

26.0%

(1)

Market share represents the average number of active U.S. onshore rigs Cactus followed (which Cactus defines as the number of active U.S. onshore drilling rigs to which it was the primary provider of wellhead products and corresponding services during drilling) as of mid-month for each of the three months in the applicable quarter divided by the Baker Hughes U.S. onshore rig count quarterly average. Cactus believes that comparing the total number of active U.S. onshore rigs to which it was providing its products and services at a given time to the number of active U.S. onshore rigs during the same period provides Cactus with a reasonable approximation of its market share with respect to wellhead products sold and the corresponding services it provides.

 

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced that it will issue its second quarter 2019 earnings release after market close on Wednesday, July 31, 2019. The Company will host a conference call to discuss financial and operational results on Thursday, August 1, 2019 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time).

The call will be webcast on Cactus’ website at www.CactusWHD.com. Institutional investors and analysts may participate by dialing (866) 670-2203. International parties may dial (630) 489-9861. The access code is 9795497. Please access the webcast or dial in for the call at least 10 minutes ahead of start time to ensure a proper connection.

An archived webcast of the conference call will be available on the Company’s website shortly after the end of the call.

About Cactus, Inc.

Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of its customers’ wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford and Bakken, among other areas, and in Eastern Australia.

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced financial and operating results for the first quarter of 2019.

First Quarter 2019 Highlights

  • Increased revenues 13.6% from fourth quarter 2018 to $158.9 million, with growth across all business lines;
  • Grew income from operations 10.6% sequentially to $48.5 million;
  • Reported net income of $48.4 million and diluted earnings per Class A share of $0.59, inclusive of an $8.2 million deferred tax benefit;
  • Generated net income, as adjusted(1) of $36.9 million and diluted earnings per share, as adjusted(1) of $0.49;
  • Reported Adjusted EBITDA(2) and related margin(3) of $59.0 million and 37.2%, respectively; and
  • Generated cash flow from operations during the first quarter of 2019 of $34.2 million.

Financial Summary

    Three Months Ended
March 31,
2019
  December 31,
2018
  March 31,
2018
(in thousands)
   
Revenues $ 158,875 $ 139,824 $ 115,110
Income from operations $ 48,492 $ 43,864 $ 35,217
Operating income margin 30.5 % 31.4 % 30.6 %
Net income (4) $ 48,446 $ 38,683 $ 26,408
Net income, as adjusted (1) $ 36,871 $ 33,827 $ 25,845
Adjusted EBITDA (2) $ 59,049 $ 53,508 $ 42,672
Adjusted EBITDA margin (3) 37.2 % 38.3 % 37.1 %
 
(1)   Net income, as adjusted and diluted earnings per share, as adjusted are non-GAAP financial measures. These figures assume Cactus, Inc. held all units in Cactus Wellhead, LLC (“Cactus LLC”), its operating subsidiary, at the beginning of the period. Additional information regarding net income, as adjusted and diluted earnings per share, as adjusted and the reconciliation of GAAP to non-GAAP financial measures are in the Supplemental Information tables.
(2) Adjusted EBITDA is a non-GAAP financial measure. See definition of Adjusted EBITDA and the reconciliation of GAAP to non-GAAP financial measures in the Supplemental Information tables.
(3) The percentage of Adjusted EBITDA to Revenues.
(4) Net income during the first quarter of 2019 is inclusive of a deferred tax benefit of $8.2 million which resulted in a total income tax benefit of $1.0 million during the quarter.
 

Scott Bender, President and CEO of Cactus, commented, “The first quarter of 2019 was encouraging, with significant sequential revenue growth across all of our business lines generating our highest quarterly revenues to date. Growth was driven by continued market share gains in both Product and Rental, combined with a rebound in U.S. onshore completions activity. Despite cost headwinds driven largely by the impact of Section 301 tariffs and a strengthening yuan, we generated attractive margins, which highlights our differentiated product offerings and strength in execution. Additionally, we continue to generate industry leading returns and significant free cash flow.

While the U.S. onshore rig count has continued to move lower during the second quarter of 2019, an improved macro environment gives us optimism that drilling activity may recover to some extent in the second half of the year. Demand for our Rental offerings remains strong, as customers look for high-quality products that reduce non-productive time and increase efficiencies.”

Mr. Bender concluded, “Feedback regarding the performance of our new frac innovations continues to be positive, and we expect investments in these offerings to benefit our Rental business in the second half of 2019, assuming broader completions activity levels hold. As always, growth initiatives will be pursued at levels that support our attractive return on capital profile.”

Revenue Categories

Product

    Three Months Ended
March 31,
2019
  December 31,
2018
  March 31,
2018
(in thousands)
   
Product revenue $ 86,640 $ 78,901 $ 58,926
Gross profit $ 33,622 $ 33,123 $ 21,860
Gross margin 38.8 % 42.0 % 37.1 %
 

First quarter 2019 product revenue increased $7.7 million, or 9.8%, sequentially, as sales of wellhead equipment and production related equipment increased due to greater market share and more wells turned in-line by the Company’s customers. Gross profit increased $0.5 million sequentially, with margins declining 320 basis points reflecting the impact of Section 301 tariffs and changes in foreign currency exchange rates. Cactus’ estimated market share(4) was 29.1% in the first quarter of 2019 compared to 27.8% during the fourth quarter of 2018.

Rental

    Three Months Ended
March 31,
2019
  December 31,
2018
  March 31,
2018
(in thousands)
   
Rental revenue $ 38,497 $ 31,194 $ 29,145
Gross profit $ 20,706 $ 17,656 $ 16,969
Gross margin 53.8 % 56.6 % 58.2 %
 

First quarter 2019 rental revenue increased $7.3 million, or 23.4%, sequentially, following continued investment in the Company’s rental fleet and a rebound in activity. Gross profit increased $3.1 million sequentially with gross profit margins down 280 basis points, primarily due to costs incurred as a result of transitory issues in the field and the accelerated deployment and relocation of assets.

Field Service and Other

    Three Months Ended
March 31,
2019
  December 31,
2018
  March 31,
2018
(in thousands)
   
Field service and other revenue $ 33,738 $ 29,729 $ 27,039
Gross profit $ 6,832 $ 3,598 $ 5,502
Gross margin 20.3 % 12.1 % 20.3 %
 

First quarter 2019 field service and other revenue increased $4.0 million, or 13.5%, sequentially, as higher completions activity coupled with a seasonal recovery drove an increase in associated billable hours and ancillary services. Gross profit increased $3.2 million sequentially due to higher labor utilization during the quarter, with margins rebounding from the seasonally impacted levels of the fourth quarter.

Selling, General and Administrative Expenses (“SG&A”)

SG&A for first quarter 2019 was $12.7 million (8.0% of revenues), compared to $10.5 million (7.5% of revenues) for fourth quarter 2018 and $9.1 million (7.9% of revenues) for first quarter 2018. The sequential increase is primarily related to higher audit and tax professional fees, employment benefits and taxes, and stock-based compensation.

Liquidity and Capital Expenditures

As of March 31, 2019, the Company had $88.1 million of cash, no bank debt outstanding and the full $75.0 million of capacity available under its revolving credit facility. Operating cash flow was $34.2 million for first quarter 2019, attributable to improved operating results but impacted by a sharp increase in activity.

Net capital expenditures for first quarter 2019 were $13.8 million, driven largely by additions to the Company’s fleet of rental assets to meet customer demand for higher pressure valves.

For the full year 2019, the Company still expects capital expenditures to be in the range of $60 to $65 million.

Other Items

On March 21, 2019, Cactus closed an underwritten secondary offering of 8.5 million shares of its Class A common stock by certain selling stockholders. Cactus did not receive any proceeds from the sale of the common stock in the offering. Cactus incurred $1.0 million in costs associated with the offering, which were recorded as Other Expense.

As of March 31, 2019, Cactus had 46,390,804 shares of Class A common stock outstanding (representing 61.8% of the total voting power) and 28,718,409 shares of Class B common stock outstanding (representing 38.2% of the total voting power).

Conference Call Details

The Company will host a conference call to discuss financial and operational results tomorrow, Thursday, May 2, 2019 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time).

The call will be webcast on Cactus’ website at www.CactusWHD.com. Institutional investors and analysts may participate by dialing (866) 670-2203. International parties may dial (630) 489-9861. The access code is 2989706. Please access the webcast or dial in for the call at least 10 minutes ahead of start time to ensure a proper connection.

An archived webcast of the conference call will be available on the Company’s website shortly after the end of the call.

About Cactus, Inc.

Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of its customers’ wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford and Bakken, among other areas, and in Eastern Australia.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Cactus’ control, that could cause actual results to differ materially from the results discussed in the forward-looking statements.

Forward-looking statements can be identified by the use of forward-looking terminology including “may,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “continue,” “potential,” “will,” or other similar words and include the Company’s expectation of future performance contained herein. These statements discuss future expectations, contain projections of results of operations or of financial condition, or state other “forward-looking” information. You are cautioned not to place undue reliance on any forward-looking statements, which can be affected by assumptions used or by known risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. When considering these forward-looking statements, you should keep in mind the risk factors and other factors noted in the Company’s Annual Report on Form 10-K and any Quarterly Reports on Form 10-Q. The risk factors and other factors noted therein could cause actual results to differ materially from those contained in any forward-looking statement.

 

Cactus, Inc.

Condensed Consolidated Statements of Income

(unaudited)

 
    Three Months Ended

March 31,

2019   2018
(in thousands, except per share data)
Revenues  
Product revenue $ 86,640 $ 58,926
Rental revenue 38,497 29,145
Field service and other revenue   33,738       27,039  

Total revenues

  158,875       115,110  
 
Costs and expenses
Cost of product revenue 53,018 37,066
Cost of rental revenue 17,791 12,176
Cost of field service and other revenue 26,906 21,537
Selling, general and administrative expenses   12,668       9,114  
Total costs and expenses   110,383       79,893  
Income from operations   48,492       35,217  
 
Interest income (expense), net 23 (2,852 )
Other income (expense), net   (1,042 )     (4,305 )
Income before income taxes 47,473 28,060
Income tax expense (benefit)   (973 )     1,652  
Net income $ 48,446 $ 26,408
Less: pre-IPO net income attributable to Cactus LLC 13,648
Less: net income attributable to non-controlling interest   21,639       9,007  
Net income attributable to Cactus Inc. $ 26,807     $ 3,753  
 
Earnings per Class A share – basic $ 0.69     $ 0.14  
Earnings per Class A share – diluted (a) $ 0.59     $ 0.14  
 
Weighted average shares outstanding – basic 38,719 26,450
Weighted average shares outstanding – diluted (a) 75,246 26,648
 
 
(a) Dilution for the three months ended March 31, 2019 includes an additional $17,504 of income attributable to non-controlling interest adjusted for a corporate effective tax rate of 24%, and the weighted average shares of Class B common stock of 36,292 plus the dilutive effect of 235 shares of restricted stock unit awards. Dilution excludes 48.4 million shares of Class B common stock for the three months ended March 31, 2018 as the effect would be anti-dilutive.
 
 

Cactus, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 
    March 31,   December 31,
2019   2018
(in thousands)
Assets
Current assets
Cash and cash equivalents $ 88,116 $ 70,841
Accounts receivable, net 107,873 92,269
Inventories 108,182 99,837
Prepaid expenses and other current assets   11,028     11,558
Total current assets   315,199     274,505
 
Property and equipment, net 148,856 142,054
Operating lease right-of-use asset, net 25,110
Goodwill 7,824 7,824
Deferred tax asset, net 244,359 159,053
Other noncurrent assets   1,285     1,308
Total assets $ 742,633   $ 584,744
 
Liabilities and Equity
Current liabilities
Accounts payable $ 44,847 $ 42,047
Accrued expenses and other current liabilities 15,932 15,650
Current portion of liability related to tax receivable agreement 9,574 9,574
Finance lease obligations, current portion 6,956 7,353
Operating lease liabilities, current portion   6,772    
Total current liabilities   84,081     74,624
 
Deferred tax liability, net 1,244 1,036
Liability related to tax receivable agreement, net of current portion 214,968 138,015
Finance lease obligations, net of current portion 7,225 8,741
Operating lease liabilities, net of current portion   18,754    
Total liabilities   326,272     222,416
 
Equity   416,361     362,328
Total liabilities and equity $ 742,633   $ 584,744
 
 

Cactus, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 
    Three Months Ended March 31,
2019   2018
(in thousands)
Cash flows from operating activities  
Net income $ 48,446 $ 26,408
Reconciliation of net income to net cash provided by operating activities
Depreciation and amortization 8,881 6,621
Debt discount and deferred loan cost amortization 42 219
Stock-based compensation 1,676 834
Inventory obsolescence 224 451
Loss on disposal of assets 863 29
Deferred income taxes (2,796 ) 963
Loss on debt extinguishment 4,305
Changes in operating assets and liabilities:
Accounts receivable (15,597 ) (419 )
Inventories (8,875 ) (5,594 )
Prepaid expenses and other assets 2,156 (56 )
Accounts payable 192 792
Accrued expenses and other liabilities 737 4,012
Operating lease liabilities   (1,710 )      
Net cash provided by operating activities   34,239       38,565  
 
Cash flows from investing activities
Capital expenditures and other (14,655 ) (16,127 )
Proceeds from sale of assets   808       440  
Net cash used in investing activities   (13,847 )     (15,687 )
 
Cash flows from financing activities
Principal payments on long-term debt (248,529 )
Payments on capital leases (1,846 ) (1,266 )
Net proceeds from equity offerings 469,621
Distributions to members (235 ) (26,041 )
Redemption of CW Units (216,425 )
Repurchase of shares   (1,474 )      
Net cash used in financing activities   (3,555 )     (22,640 )
 
Effect of exchange rate changes on cash and cash equivalents   438       48  
 
Net increase in cash and cash equivalents 17,275 286
 
Cash and cash equivalents
Beginning of period   70,841       7,574  
End of period $ 88,116     $ 7,860  
 
 

Cactus, Inc. – Supplemental Information

Reconciliation of GAAP to non-GAAP Financial Measures

Net income, as adjusted and diluted earnings per share, as adjusted(1)

(unaudited)

 
    Three Months Ended
March 31,
2019
  December 31,
2018
  March 31,
2018
(in thousands, except per share data)
 
Net income $ 48,446 $ 38,683 $ 26,408
Adjustments:
Secondary offering related expenses, pre-tax (5) 1,042
Term loan interest, pre-tax (6) 2,284
Loss on debt extinguishment, pre-tax (7) 4,305
Stock-based compensation, pre-tax (8) (417 )
Income tax expense differential (9)   (12,617 )   (4,856 )   (6,735 )
Net income, as adjusted (1) $ 36,871   $ 33,827   $ 25,845  
     
Diluted earnings per share, as adjusted (1) $ 0.49   $ 0.45   $ 0.34  
 
Weighted average shares outstanding, as adjusted (10) 75,246 75,321 75,096
 
 
(1) Net income, as adjusted and diluted earnings per share, as adjusted are not measures of net income as determined by GAAP. Net income, as adjusted and diluted earnings per share, as adjusted are supplemental non-GAAP financial measures that are used by management and external users of the Company’s consolidated financial statements. Cactus defines net income, as adjusted as net income assuming Cactus, Inc. held all units in Cactus LLC, its operating subsidiary, at the beginning of the period, with the resulting additional income tax expense related to the incremental income attributable to Cactus, Inc. Net income, as adjusted, also includes certain other adjustments described below. Cactus defines diluted earnings per share, as adjusted as net income, as adjusted divided by weighted average shares outstanding, as adjusted. The Company believes this supplemental information is useful for evaluating performance period over period.
(5) Reflects fees and expenses recorded in first quarter 2019 in connection with the offering of Class A common stock by certain selling stockholders, excluding underwriting discounts and selling commissions incurred by the selling stockholders.
(6) Reflects the removal of the term loan interest expense recorded during first quarter 2018 as the term loan was repaid in full in conjunction with the IPO.
(7) Reflects the removal of the loss on debt extinguishment recorded in first quarter 2018 in conjunction with the IPO related to the write-off of the unamortized balance of deferred financing costs and original issue discount.
(8) Represents the additional stock-based compensation expense that would have been recorded during the first quarter of 2018 assuming the restricted stock unit awards were issued as of January 1, 2018.
(9) Represents the increase in tax expense as though Cactus, Inc. owned 100% of Cactus LLC at the beginning of the period, calculated as the difference in tax expense recorded during each period and what would have been recorded, adjusted for items in (5), (6), (7) and (8) above, based on a corporate effective tax rate of 24.0% on income before income taxes for the three months ended March 31, 2019, 22.5% for the three months ended December 31, 2018, and 24.5% for the three months ended March 31, 2018.
(10) Reflects 46,293, 37,654, and 26,450 shares of Class A common stock and 28,718, 37,236 and 48,440 of additional shares for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018, respectively, as if the Class B common stock was exchanged and canceled for Class A common stock at the beginning of the period, plus the dilutive effect of 235, 431, and 206 shares for restricted stock unit awards for the three month periods ended March 31, 2019, December 31, 2018 and March 31, 2018 respectively.
 
 

Cactus, Inc. – Supplemental Information

Reconciliation of GAAP to non-GAAP Financial Measures

EBITDA and Adjusted EBITDA(2)

(unaudited)

 
    Three Months Ended
March 31,
2019
  December 31,
2018
  March 31,
2018
(in thousands)
Net income $ 48,446 $ 38,683 $ 26,408
Interest (income) expense, net (23 ) 225 2,852
Income tax expense (benefit) (973 ) 4,956 1,652
Depreciation and amortization   8,881     8,324   6,621
EBITDA (2) 56,331 52,188 37,533
Secondary offering related expenses 1,042
Loss on debt extinguishment 4,305
Stock-based compensation   1,676     1,320   834
Adjusted EBITDA (2) $ 59,049   $ 53,508 $ 42,672
 
 
(2) EBITDA and Adjusted EBITDA are not measures of net income as determined by GAAP. EBITDA and Adjusted EBITDA are supplemental non-GAAP financial measures that are used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. Cactus defines EBITDA as net income excluding net interest, income tax and depreciation and amortization. Cactus defines Adjusted EBITDA as EBITDA excluding other items outlined above.
 
Cactus management believes EBITDA and Adjusted EBITDA are useful because they allow management to more effectively evaluate the Company’s operating performance and compare the results of its operations from period to period without regard to financing methods or capital structure, or other items that impact comparability of financial results from period to period. EBITDA and Adjusted EBITDA should not be considered as alternatives to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. The Company’s computations of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Cactus presents EBITDA and Adjusted EBITDA because it believes they provide useful information regarding the factors and trends affecting the Company’s business.
 
 

Cactus, Inc. – Supplemental Information

Depreciation and Amortization by Category

(unaudited)

 
    Three Months Ended
March 31,
2019
  December 31,
2018
  March 31,
2018
(in thousands)
Cost of product revenue $ 765 $ 901 $ 776
Cost of rental revenue 5,517 4,939 3,954
Cost of field service and other revenue 2,450 2,358 1,790
Selling, general and administrative expenses   149   126   101
Total depreciation and amortization $ 8,881 $ 8,324 $ 6,621
 
 

Cactus, Inc. – Supplemental Information

Estimated Market Share(4)

(unaudited)

 
    Three Months Ended
March 31,
2019
  December 31,
2018
  March 31,
2018
 
Cactus U.S. onshore rigs followed 297 291 250
Baker Hughes U.S. onshore rig count quarterly average 1,021 1,048 948
Market share (4) 29.1 % 27.8 % 26.4 %
 
 
(4) Market share represents the average number of active U.S. onshore rigs Cactus followed (which Cactus defines as the number of active U.S. onshore drilling rigs to which it was the primary provider of wellhead products and corresponding services during drilling) as of mid-month for each of the three months in the applicable quarter divided by the Baker Hughes U.S. onshore rig count quarterly average. Cactus believes that comparing the total number of active U.S. onshore rigs to which it was providing its products and services at a given time to the number of active U.S. onshore rigs during the same period provides Cactus with a reasonable approximation of its market share with respect to wellhead products sold and the corresponding services it provides.
 

HOUSTON–(BUSINESS WIRE)– Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced that it will issue its first quarter 2019 earnings release after market close on Wednesday, May 1, 2019. The Company will host a conference call to discuss financial and operational results on Thursday, May 2, 2019 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time).

The call will be webcast on Cactus’ website at www.CactusWHD.com. Institutional investors and analysts may participate by dialing (866) 670-2203. International parties may dial (630) 489-9861. The access code is 2989706. Please access the webcast or dial in for the call at least 10 minutes ahead of start time to ensure a proper connection.

An archived webcast of the conference call will be available on the Company’s website shortly after the end of the call.

About Cactus, Inc.

Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion (including fracturing) and production phases of its customers’ wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates 15 service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford and Bakken, among other areas, and one service center in Eastern Australia.

Cactus, Inc.
John Fitzgerald, 713-904-4655
Director of Corporate Development and Investor Relations
IR@CactusWHD.com

Source: Cactus, Inc.

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus”) announced today the pricing of an underwritten secondary offering (the “Offering”) of 8,500,000 shares of its Class A common stock (“common stock”) by certain selling stockholders (the “Selling Stockholders”) for total gross proceeds of $308.1 million. The Offering is expected to close on March 21, 2019, subject to customary closing conditions.

Cactus will not receive any of the proceeds from the sale of common stock in the Offering.

Citigroup and Credit Suisse are acting as joint book-running managers for the Offering.

The securities are being offered and will be sold pursuant to an automatic shelf registration statement (including a prospectus) that was previously filed with the Securities and Exchange Commission (the “SEC”) and became effective upon filing. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction. The Offering is being made only by means of a prospectus and related prospectus supplement.

Copies of the preliminary prospectus supplement and accompanying base prospectus and, when available, copies of the final prospectus supplement and accompanying base prospectus, related to the Offering may be obtained, free of charge, at the SEC’s website at www.sec.gov. Alternatively, copies of the preliminary prospectus supplement and accompanying base prospectus may be obtained from:

Citigroup Global Markets Inc.
Attention: Broadridge Financial Solutions
1155 Long Island Avenue
Edgewood, New York 11717
Telephone: (800) 831-9146

Credit Suisse Securities (USA) LLC
Attention: Prospectus Department
Eleven Madison Avenue, 3rd Floor
New York, New York 10010
Telephone: (800) 221-1037
usa.prospectus@credit-suisse.com

About Cactus, Inc.

Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of its customers’ wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates 15 service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford and Bakken, among other areas, and one service center in Eastern Australia.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements regarding the size, timing or results of the Offering, represent Cactus’ expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Cactus’ control, that could cause actual results to differ materially from the results discussed in the forward-looking statements.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, Cactus does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for Cactus to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the prospectus and related preliminary prospectus supplement filed with the SEC in connection with the Offering, Cactus’ Annual Report on Form 10-K for the year ended December 31, 2018 and its other filings with the SEC. These risk factors and other factors noted in Cactus’ SEC filings could cause its actual results to differ materially from those contained in any forward-looking statement.

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus”) announced today the commencement of an underwritten secondary offering (the “Offering”) of 8,500,000 shares of its Class A common stock (“common stock”) by certain selling stockholders (the “Selling Stockholders”). Cactus will not receive any of the proceeds from the sale of common stock in the Offering.

Citigroup and Credit Suisse are acting as joint book-running managers for the Offering.

The securities are being offered and will be sold pursuant to an automatic shelf registration statement (including a prospectus) that was previously filed with the Securities and Exchange Commission (the “SEC”) and became effective upon filing. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction. The Offering is being made only by means of a prospectus and related prospectus supplement.

Copies of the preliminary prospectus supplement and accompanying base prospectus related to the Offering may be obtained, free of charge, at the SEC’s website at www.sec.gov. Alternatively, copies of the preliminary prospectus supplement and accompanying base prospectus may be obtained from:

Citigroup Global Markets Inc.
Attention: Broadridge Financial Solutions
1155 Long Island Avenue
Edgewood, New York 11717
Telephone: (800) 831-9146

Credit Suisse Securities (USA) LLC
Attention: Prospectus Department
One Madison Avenue
New York, New York 10010
Telephone: (800) 221-1037
newyork.prospectus@credit-suisse.com

About Cactus, Inc.

Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of its customers’ wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates 15 service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford and Bakken, among other areas, and one service center in Eastern Australia.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements regarding the size, timing or results of the Offering, represent Cactus’ expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Cactus’ control, that could cause actual results to differ materially from the results discussed in the forward-looking statements.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, Cactus does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for Cactus to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the prospectus and related preliminary prospectus supplement filed with the SEC in connection with the Offering, Cactus’ Annual Report on Form 10-K for the year ended December 31, 2018 and its other filings with the SEC. These risk factors and other factors noted in Cactus’ SEC filings could cause its actual results to differ materially from those contained in any forward-looking statement.

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced financial and operating results for the fourth quarter and full year 2018.

Fourth Quarter 2018 Highlights

  • Reported revenues of $139.8 million;
  • Generated income from operations of $43.9 million;
  • Reported net income of $38.7 million and net income, as adjusted(1) of $33.8 million;
  • Reported diluted earnings per Class A share of $0.44 and diluted earnings per share, as adjusted(1) of $0.45;
  • Generated Adjusted EBITDA(2) and related margin(3) of $53.5 million and 38.3%, respectively; and
  • Generated cash flow from operations during the fourth quarter of 2018 of $44.8 million.

Financial Summary

            Three Months Ended    

Twelve Months Ended

December 31,
2018
  September 30,
2018
  December 31,
2017
December 31,
2018
  December 31,
2017

(in thousands)

(in thousands)

     
Revenues $ 139,824 $ 150,658 $ 104,784 $ 544,135 $ 341,191
Income from operations $ 43,864 $ 52,133 $ 28,737 $ 177,701 $ 88,863
Operating income margin 31.4 % 34.6 % 27.4 % 32.7 % 26.0 %
Net income $ 38,683 $ 43,648 $ 22,814 $ 150,281 $ 66,547
Net income, as adjusted (1) $ 33,827 $ 39,157 n/a $ 133,739 n/a
Adjusted EBITDA (2) $ 53,508 $ 61,261 $ 35,032 $ 212,558 $ 112,134
Adjusted EBITDA margin (3) 38.3 % 40.7 % 33.4 % 39.1 % 32.9 %
(1)   Net income, as adjusted and diluted earnings per share, as adjusted are non-GAAP financial measures. These figures assume Cactus, Inc. held all units in Cactus Wellhead, LLC (“Cactus LLC”), its operating subsidiary, at the beginning of the period, with the resulting additional income tax expense related to the incremental income attributable to Cactus, Inc. Additional information regarding net income, as adjusted and diluted earnings per share, as adjusted and the reconciliation of GAAP to non-GAAP financial measures are in the Supplemental Information tables.
(2) Adjusted EBITDA is a non-GAAP financial measure. See definition of Adjusted EBITDA and the reconciliation of GAAP to non-GAAP financial measures in the Supplemental Information tables.
(3) The percentage of Adjusted EBITDA to Revenues.
 

Full Year 2018 Highlights

  • Reported revenues of $544.1 million, up 59.5% year-over-year;
  • Generated income from operations of $177.7 million; up 100.0% year-over-year;
  • Reported net income of $150.3 million; and
  • Generated Adjusted EBITDA(2) and related margin(3) of $212.6 million and 39.1%, up 89.6% year-over-year and 620 basis points, respectively.

Scott Bender, President and CEO of Cactus, commented, “2018 was a tremendous year for Cactus. Our profitability during the fourth quarter was generally consistent with our expectations despite the dramatic decline in oil prices throughout the fourth quarter, and we were pleased with the resiliency demonstrated by our business. Drilling related activity showed a slight increase, while completions related revenue declined more than anticipated as customers deferred activity due to budget exhaustion. The overall margin profile of our business remained strong notwithstanding the more pronounced than usual seasonal slowdown in our Field Service and Other business.

Despite pulling forward both capital spending and additions to inventory prior to year-end due to concerns over tariffs, the fourth quarter and full year 2018 highlighted our ability to generate significant free cash flow and attractive returns on capital.

Although the market is anticipating a pullback in the U.S. rig count in 2019, we believe the strength of our customer base will moderate the impact of a potential decline in drilling related activity. For the first quarter of 2019, we currently anticipate that revenue across all our business lines will increase relative to the fourth quarter of 2018 based on the rebound in activity we have seen during the first two months of the year.

Mr. Bender concluded, “We continue to make progress toward the commercialization of our new frac innovations, many of which have been successfully trialed in the field with customers. Initial adoption has been encouraging, and we expect investments in these offerings will drive further growth in our Rental business in the second half of 2019. Such growth initiatives will be pursued at levels consistent with and supportive of our attractive return on capital profile.”

Revenue Categories

Product

            Three Months Ended
December 31,
2018
  September 30,
2018
  December 31,
2017
(in thousands)
   
Product revenue $ 78,901 $ 79,388 $ 57,128
Gross profit $ 33,123 $ 32,572 $ 19,662
Gross margin 42.0 % 41.0 % 34.4 %
 

Fourth quarter 2018 product revenue decreased $0.5 million, or 0.6%, sequentially, as lower sales of production related equipment more than offset an increase in sales of wellhead equipment. Gross profit increased $0.6 million sequentially with margins improving 100 basis points primarily due to product mix and more favorable supply chain execution. Cactus’ estimated market share(4) was 27.8% in the fourth quarter of 2018 compared to 27.4% during the third quarter of 2018.

Rental

            Three Months Ended
December 31,
2018
  September 30,
2018
  December 31,
2017
(in thousands)
   
Rental revenue $ 31,194 $ 38,135 $ 24,490
Gross profit $ 17,656 $ 22,786 $ 12,144
Gross margin 56.6 % 59.8 % 49.6 %
 

Fourth quarter 2018 rental revenue decreased $6.9 million, or 18.2%, sequentially, as budget exhaustion and the steep decline in oil prices during the quarter led to reduced customer completion activity. Gross profit decreased $5.1 million sequentially with gross profit margins down 320 basis points, primarily due to depreciation expense representing a higher proportion of revenue than during the previous quarter.

Field Service and Other

            Three Months Ended
December 31,
2018
  September 30,
2018
  December 31,
2017
(in thousands)
   
Field service and other revenue $ 29,729 $ 33,135 $ 23,166
Gross profit $ 3,598 $ 7,826 $ 3,575
Gross margin 12.1 % 23.6 % 15.4 %
 

Fourth quarter 2018 field service and other revenue decreased $3.4 million, or 10.3%, sequentially, as lower completion activity coupled with fourth quarter seasonality drove a decline in associated billable hours and ancillary services. Gross profit decreased $4.2 million sequentially due to lower labor utilization during the quarter.

Selling, General and Administrative Expenses (“SG&A”)

SG&A for fourth quarter 2018 was $10.5 million (7.5% of revenues), compared to $11.1 million (7.3% of revenues) for third quarter 2018 and $6.6 million (6.3% of revenues) for fourth quarter 2017. The sequential decrease is primarily related to lower professional and legal fees.

Liquidity and Capital Expenditures

As of December 31, 2018, the Company had $70.8 million of cash on hand, no bank debt outstanding and the full $75.0 million of capacity available under the Company’s revolving credit facility. Operating cash flow was $44.8 million for fourth quarter 2018 and $167.2 million for 2018, reflecting strong operating results.

Net capital expenditures for fourth quarter 2018 were $13.7 million, driven largely by additions to the Company’s fleet of rental assets. Net capital expenditures for 2018 were $68.2 million.

For the full year 2019, the Company expects capital expenditures to be in the range of $60 to $65 million.

Other Items

As of December 31, 2018, Cactus had 37,653,630 shares of Class A common stock outstanding (representing 50.3% of the total voting power) and 37,236,142 shares of Class B common stock outstanding (representing 49.7% of the total voting power).

Conference Call Details

The Company will host a conference call to discuss financial and operational results tomorrow, Thursday, March 7, 2019 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time).

The call will be webcast on Cactus’ website at www.CactusWHD.com. Institutional investors and analysts may participate by dialing (866) 670-2203. International parties may dial (630) 489-9861. The access code is 6693617. Please access the webcast or dial in for the call at least 10 minutes ahead of start time to ensure a proper connection.

An archived webcast of the conference call will be available on the Company’s website shortly after the end of the call.

About Cactus, Inc.

Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of its customers’ wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates 15 service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford and Bakken, among other areas, and one service center in Eastern Australia.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Cactus’ control, that could cause actual results to differ materially from the results discussed in the forward-looking statements.

Forward-looking statements can be identified by the use of forward-looking terminology including “may,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “continue,” “potential,” “will,” or other similar words and include the Company’s expectation of future performance contained herein. These statements discuss future expectations, contain projections of results of operations or of financial condition, or state other “forward-looking” information. You are cautioned not to place undue reliance on any forward-looking statements, which can be affected by assumptions used or by known risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. When considering these forward-looking statements, you should keep in mind the risk factors and other factors noted in the Company’s Annual Report on Form 10-K and any Quarterly Reports on Form 10-Q. The risk factors and other factors noted therein could cause actual results to differ materially from those contained in any forward-looking statement.

 
Cactus, Inc.
Condensed Consolidated Statements of Income
(unaudited)
             
Three Months Ended

December 31,

Twelve Months Ended

December 31,

  2018     2017     2018     2017  
  (in thousands, except per share data)
Revenues
Product revenue $ 78,901 $ 57,128 $ 290,496 $ 189,091
Rental revenue 31,194 24,490 133,418 77,469
Field service and other revenue   29,729     23,166     120,221     74,631  
Total revenues   139,824     104,784     544,135     341,191  
 
Costs and expenses
Cost of product revenue 45,778 37,466 174,675 124,030
Cost of rental revenue 13,538 12,346 55,015 40,519
Cost of field service and other revenue 26,131 19,591 96,215 60,602
Selling, general and administrative expenses   10,513     6,644     40,529     27,177  
Total costs and expenses   95,960     76,047     366,434     252,328  
Income from operations   43,864     28,737     177,701     88,863  
 
Interest expense, net (225 ) (5,316 ) (3,595 ) (20,767 )
Other income (expense), net           (4,305 )    
Income before income taxes 43,639 23,421 169,801 68,096
Income tax expense (a)   4,956     607     19,520     1,549  
Net income $ 38,683 $ 22,814 $ 150,281 $ 66,547
 
Pre-IPO net income $ $ 22,814 $ 13,648 $ 66,547
Post-IPO net income $ 38,683 $ $ 136,633 $
 
Components of post-IPO net income:
Net income attributable to non-controlling interest $ 21,759 n/a $ 84,950 n/a
Net income attributable to Cactus Inc. $ 16,924 n/a $ 51,683 n/a
 
Earnings per Class A share – basic $ 0.45     n/a   $ 1.60     n/a  
Earnings per Class A share – diluted (b) $ 0.44     n/a   $ 1.58     n/a  
 
Weighted average shares outstanding – basic 37,650 n/a 32,329 n/a
Weighted average shares outstanding – diluted (b) 38,081 n/a 32,695 n/a
(a)   Cactus has historically not been subject to U.S. federal income tax at an entity level. Subsequent to the IPO, which occurred on February 12, 2018, Cactus, Inc. incurs federal and state income tax on its share of income from Cactus LLC.
(b) Dilution excludes 37.2 million and 42.6 million shares of Class B common stock for the three and twelve months ended December 31, 2018, respectively, as the effect would be anti-dilutive.
 
 
Cactus, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
             
December 31, December 31,
2018   2017
(in thousands)
Assets
Current assets
Cash and cash equivalents $ 70,841 $ 7,574
Accounts receivable, net 92,269 84,173
Inventories 99,837 64,450
Prepaid expenses and other current assets 11,558   7,732
Total current assets 274,505   163,929
 
Property and equipment, net 142,054 94,654
Goodwill 7,824 7,824
Deferred tax asset, net 159,053
Other noncurrent assets 1,308   49
Total assets $ 584,744   $ 266,456
 
Liabilities and Equity
Current liabilities
Accounts payable $ 42,047 $ 35,080
Accrued expenses and other current liabilities 15,650 10,559
Current portion of liability related to tax receivable agreement 9,574
Capital lease obligations, current portion 7,353 4,667
Current maturities of long-term debt   2,568
Total current liabilities 74,624   52,874
 
Deferred tax liability, net 1,036 416
Liability related to tax receivable agreement, net of current portion 138,015
Capital lease obligations, net of current portion 8,741 7,946
Long-term debt, net   241,437
Total liabilities 222,416   302,673
 
Equity (deficit) 362,328   (36,217)
Total liabilities and equity $ 584,744   $ 266,456
 
 
Cactus, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
               
Twelve Months Ended December 31,
2018   2017
(in thousands)
Cash flows from operating activities  
Net income $ 150,281 $ 66,547
Reconciliation of net income to net cash provided by operating activities
Depreciation and amortization 30,153 23,271
Debt discount and deferred loan cost amortization 275 1,752
Stock-based compensation 4,704
Recovery of bad debts (100)
Inventory obsolescence 1,451 1,259
Loss on disposal of assets 886 534
Deferred income taxes 15,201 220
Loss on debt extinguishment 4,305
Changes in operating assets and liabilities:
Accounts receivable (8,105) (50,094)
Inventories (38,227) (28,279)
Prepaid expenses and other assets (6,509) (4,012)
Accounts payable 7,651 19,505
Accrued expenses and other liabilities 5,114   4,104
Net cash provided by operating activities 167,180   34,707
 
Cash flows from investing activities
Capital expenditures and other (70,053) (32,082)
Proceeds from sale of assets 1,899   1,404
Net cash used in investing activities (68,154)   (30,678)
 
Cash flows from financing activities
Principal payments on long-term debt (248,529) (2,569)
Payment of deferred financing costs (840)
Payments on capital leases (6,274) (2,744)
Net proceeds from IPO and Follow-on Offering 828,168
Distributions to members (31,848)
Redemption of CW Units (575,681)  
Net cash used in financing activities (35,004)   (5,313)
 
Effect of exchange rate changes on cash and cash equivalents (755)   170
 
Net increase (decrease) in cash and cash equivalents 63,267 (1,114)
 
Cash and cash equivalents
Beginning of period 7,574   8,688
End of period $ 70,841   $ 7,574
 
 
Cactus, Inc. – Supplemental Information
Reconciliation of GAAP to non-GAAP Financial Measures

Net income, as adjusted and diluted earnings per share, as adjusted(1)

(unaudited)
                 
Three Months Ended Twelve Months Ended
December 31,
2018
    September 30,
2018
December 31,
2018
(in thousands, except per share data)
 
Net income $ 38,683 $ 43,648 $ 150,281
Adjustments:
Term loan interest, pre-tax (5) 2,284
Loss on debt extinguishment, pre-tax (6) 4,305
Stock-based compensation, pre-tax (7) (417)
Income tax expense differential (8) (4,856) (4,491) (22,714)
Net income, as adjusted (1) $ 33,827 $ 39,157 $ 133,739
     
Diluted earnings per share, as adjusted (1) $ 0.45 $ 0.52 $ 1.78
 
Weighted average shares outstanding, as adjusted (9) 75,321 75,298 75,256
(1)   Net income, as adjusted and diluted earnings per share, as adjusted are not measures of net income as determined by GAAP. Net income, as adjusted and diluted earnings per share, as adjusted are supplemental non-GAAP financial measures that are used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. Cactus defines net income, as adjusted as net income assuming Cactus, Inc. held all units in Cactus LLC, its operating subsidiary, at the beginning of the period, with the resulting additional income tax expense related to the incremental income attributable to Cactus, Inc. The Company believes this supplemental information is useful for evaluating performance period over period.
(5) Reflects the removal of the term loan interest expense recorded during first quarter 2018 as the term loan was repaid in full in conjunction with the IPO.
(6) Reflects the removal of the loss on debt extinguishment recorded in first quarter 2018 in conjunction with the IPO related to the write-off of the unamortized balance of deferred financing costs and original issue discount.
(7) Represents the additional stock-based compensation expense that would have been recorded during the first quarter assuming the restricted stock unit awards were issued as of January 1, 2018.
(8)

Represents the increase in tax expense as though Cactus, Inc. owned 100% of Cactus LLC at the beginning of the period, calculated as the difference in tax expense recorded during each period and what would have been recorded based on a corporate effective tax rate of 24.0% on income before income taxes for the twelve months ended December 31, 2018, 22.5% for the three months ended December 31, 2018, and 24.5% for the three months ended September 30, 2018. The effective tax rate for the three months ended December 31, 2018 reflects the adjustment necessary to derive a 24.0% corporate effective tax rate for the full year.

(9) Reflects 37,654 and 37,647 shares of Class A common stock plus 37,236 and 37,243 additional shares for the three months ended December 31, 2018 and September 30, 2018, respectively, as if the Class B common stock was exchanged and canceled for Class A common stock at the beginning of the period, plus the dilutive effect of 431 and 408 shares for restricted stock unit awards for the three month periods ended December 31, 2018 and September 30, 2018 respectively. Reflects 37,654 shares of Class A common stock plus 37,236 additional shares for the twelve months ended December 31, 2018, as if the Class B common stock was exchanged and canceled for Class A common stock at the beginning of the period, plus the dilutive effect of 366 shares for restricted stock unit awards for the twelve months ended December 31, 2018.
 
          Three Months Ended
December 31,
2018
  September 30,
2018
  December 31,
2017
(in thousands)
Net income $ 38,683 $ 43,648 $ 22,814
Interest expense, net 225 270 5,316
Income tax expense 4,956 8,215 607
Depreciation and amortization 8,324 7,841 6,295
EBITDA (2) 52,188 59,974 35,032
Stock-based compensation 1,320 1,287
Adjusted EBITDA (2) $ 53,508 $ 61,261 $ 35,032
 
Twelve Months Ended
December 31,
2018
December 31,
2017
(in thousands)
Net income $ 150,281 $ 66,547
Interest expense, net 3,595 20,767
Income tax expense 19,520 1,549
Depreciation and amortization 30,153 23,271
EBITDA (2) 203,549 112,134
Loss on debt extinguishment 4,305
Stock-based compensation 4,704
Adjusted EBITDA (2) $ 212,558 $ 112,134
(2)   EBITDA and Adjusted EBITDA are not measures of net income as determined by GAAP. EBITDA and Adjusted EBITDA are supplemental non-GAAP financial measures that are used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. Cactus defines EBITDA as net income excluding net interest expense, income tax expense and depreciation and amortization. Cactus defines Adjusted EBITDA as EBITDA excluding (gain) loss on debt extinguishment and stock-based compensation.
 
Cactus management believes EBITDA and Adjusted EBITDA are useful because they allow management to more effectively evaluate the Company’s operating performance and compare the results of its operations from period to period without regard to financing methods or capital structure, or other items that impact comparability of financial results from period to period. EBITDA and Adjusted EBITDA should not be considered as alternatives to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. The Company’s computations of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Cactus presents EBITDA and Adjusted EBITDA because it believes they provide useful information regarding the factors and trends affecting the Company’s business.
 
             
Cactus, Inc. – Supplemental Information
Depreciation and Amortization by Category
(unaudited)
 
Three Months Ended
December 31,
2018
  September 30,
2018
  December 31,
2017
(in thousands)
Cost of product revenue $ 901 $ 792 $ 812
Cost of rental revenue 4,939 4,671 3,909
Cost of field service and other revenue 2,358 2,269 1,479
Selling, general and administrative expenses 126 109 95
Total depreciation and amortization $ 8,324 $ 7,841 $ 6,295
 
Twelve Months Ended
December 31,
2018
December 31,
2017
(in thousands)
Cost of product revenue $ 3,262 $ 3,169
Cost of rental revenue 17,997 14,912
Cost of field service and other revenue 8,456 4,786
Selling, general and administrative expenses 438 404
Total depreciation and amortization $ 30,153 $ 23,271
 
 
Cactus, Inc. – Supplemental Information

Estimated Market Share(4)

(unaudited)
             
Three Months Ended
December 31,
2018
  September 30,
2018
  December 31,
2017
 
Cactus U.S. onshore rigs followed 291 282 234
Baker Hughes U.S. onshore rig count quarterly average 1,048 1,029 900
Market share (4) 27.8% 27.4% 26.0%
(4)   Market share represents the average number of active U.S. onshore rigs Cactus followed (which Cactus defines as the number of active U.S. onshore drilling rigs to which it was the primary provider of wellhead products and corresponding services during drilling) as of mid-month for each of the three months in the applicable quarter divided by the Baker Hughes U.S. onshore rig count quarterly average. Cactus believes that comparing the total number of active U.S. onshore rigs to which it was providing its products and services at a given time to the number of active U.S. onshore rigs during the same period provides Cactus with a reasonable approximation of its market share with respect to wellhead products sold and the corresponding services it provides.

HOUSTON–()–Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced that it will issue its fourth quarter and full year 2018 earnings release after market close on Wednesday, March 6, 2019. The Company will host a conference call to discuss financial and operational results on Thursday, March 7, 2019 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time).

The call will be webcast on Cactus’ website at www.CactusWHD.com. Institutional investors and analysts may participate by dialing (866) 670-2203. International parties may dial (630) 489-9861. The access code is 6693617. Please access the webcast or dial in for the call at least 10 minutes ahead of start time to ensure a proper connection.

An archived webcast of the conference call will be available on the Company’s website shortly after the end of the call.

About Cactus, Inc.

Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion (including fracturing) and production phases of its customers’ wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates 15 service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford and Bakken, among other areas, and one service center in Eastern Australia.

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