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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).

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.

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.

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.

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.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20181114006002/en/

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, 3^rd 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.

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.

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–(BUSINESS WIRE)–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.