2020 Archives | Cactus Wellhead

Cactus Announces Third Quarter 2020 Results

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced financial and operating results for the third quarter of 2020.

Third Quarter Highlights

Revenue of $59.8 million;
Income from operations of $12.6 million;
Net income of $10.9 million⁽¹⁾ and diluted earnings per Class A share of $0.13⁽¹⁾;
Net income, as adjusted⁽²⁾ of $9.5 million and diluted earnings per share, as adjusted⁽²⁾ of $0.13;
Adjusted EBITDA⁽³⁾ and related margin⁽⁴⁾ of $24.6 million and 41.1%, respectively;
Cash flow from operations of $18.9 million;
Reduced 2020 net capital expenditure guidance to between $17.5 and $22.5 million;
Cash balance of $273.9 million and no bank debt outstanding as of September 30, 2020; and
The Board of Directors declared a quarterly cash dividend of $0.09 per share.

Financial Summary

	Three Months Ended
	September 30,			June 30,			September 30,
	2020			2020			2019
	(in thousands)
Revenues	$	59,789		$	66,548		$	160,808
Income from operations	$	12,556		$	8,875		$	47,123
Operating income margin	21.0		%	13.3		%	29.3		%
Net income⁽¹⁾	$	10,886		$	9,095		$	35,833
Net income, as adjusted⁽²⁾	$	9,517		$	7,367		$	36,097
Adjusted EBITDA⁽³⁾	$	24,550		$	22,483		$	58,819
Adjusted EBITDA margin⁽⁴⁾	41.1		%	33.8		%	36.6		%

(1)	Net income during the third quarter of 2020 is inclusive of $1.9 million in expense related to the revaluation of the tax receivable agreement liability. Net income during the second quarter of 2020 is inclusive of $0.9 million in non-routine charges related to severance and $1.3 million in additional income related to the revaluation of the tax receivable agreement liability. 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.

Scott Bender, President and CEO of Cactus, commented, “The third quarter once again showcased our ability to outperform the U.S. rig count while maintaining strong margins during what we believe was the bottom of the current U.S. industry cycle. Cactus achieved record Product market share⁽¹⁾ of approximately 38% during the third quarter, highlighting the resiliency of our customer base and our track record of winning new customers. I am also pleased to report that Cactus has now generated positive free cash flow in all eleven quarters since going public in early 2018.

“Looking to the fourth quarter, we expect further gains in rigs followed and associated market share will benefit our Product business. While the near-term focus for our Rental business will continue to be on returns and margins, we are encouraged by the recent improvement in industry completion activity. We believe that total Company quarterly revenues have bottomed and expect an improvement going forward.”

Mr. Bender concluded, “Cactus has proven its ability to generate significant free cash flow and income through the downcycle. In the same vein, management has also further reduced its full year 2020 net capital expenditure budget. We believe the industry’s most pronounced activity decline in decades is behind us and we are now turning our attention to the recovery. This team is excited to see the potential benefits that greater operating leverage provides our business as activity levels increase, both in the U.S. and internationally.”

(1)	Additional information regarding market share and rigs followed is located in the Supplemental Information tables.

Revenue Categories

*Product*
	Three Months Ended
	September 30,			June 30,			September 30,
	2020			2020			2019
	(in thousands)
Product revenue	$	35,857		$	40,893		$	92,582
Gross profit	$	15,978		$	14,931		$	34,814
Gross margin	44.6		%	36.5		%	37.6		%

Third quarter 2020 product revenue decreased $5.0 million, or 12.3%, sequentially, as sales of wellhead and production related equipment decreased primarily due to lower drilling activity in the U.S., which was partially offset by market share gains. Gross profit increased $1.0 million, or 7.0%, sequentially, with margins increasing 810 basis points driven largely by $5.4 million in credits related to tariff refunds, up from $3.1 million during the second quarter of 2020.

*Rental*
	Three Months Ended
	September 30,			June 30,			September 30,
	2020			2020			2019
	(in thousands)
Rental revenue	$	9,881		$	11,535		$	35,528
Gross profit	$	234		$	860		$	18,334
Gross margin	2.4		%	7.5		%	51.6		%

Third quarter 2020 rental revenue decreased $1.7 million, or 14.3%, sequentially, as our customers’ level of completion activity was lower during the quarter. Gross profit decreased $0.6 million sequentially and margins decreased 510 basis points due largely to depreciation expense representing a higher percentage of revenue during the period.

*Field Service and Other*	Three Months Ended
	September 30,			June 30,			September 30,
	2020			2020			2019
	(in thousands)
Field service and other revenue	$	14,051		$	14,120		$	32,698
Gross profit	$	4,728		$	2,634		$	7,323
Gross margin	33.6		%	18.7		%	22.4		%

Third quarter 2020 field service and other revenue decreased $0.1 million, or 0.5%, sequentially, as lower customer activity drove a slight decrease in associated billable hours and ancillary services. Gross profit increased $2.1 million, or 79.5%, sequentially, with margins increasing by 1,490 basis points sequentially due to lower depreciation, tooling and payroll-related expenses, improved labor and equipment utilization and the rationalization of the Company’s field service vehicle fleet.

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

SG&A for the third quarter of 2020 was $8.4 million (14.0% of revenues), compared to $8.7 million (13.1% of revenues) for the second quarter of 2020 and $13.3 million (8.3% of revenues) for the third quarter of 2019. The sequential decrease was primarily due to lower payroll expenses.

Liquidity, Capital Expenditures and Other

As of September 30, 2020, the Company had $273.9 million of cash and no bank debt outstanding. Operating cash flow was $18.9 million for the third quarter of 2020. During the third quarter, the Company made dividend payments and associated distributions of $6.8 million. The Company also made tax receivable agreement payments and associated distributions of $22.6 million during the third quarter stemming from 2019 imputed tax liabilities.

Net cash used in investing activities represented a cash inflow of $0.1 million during the third quarter of 2020 as capital expenditures were more than offset by proceeds from the sale of assets. The Company reduced its full year 2020 net capital expenditure guidance to between $17.5 and $22.5 million.

During the third quarter, Cactus recognized $6.0 million in refunds pursuant to tariff exclusions granted by the U.S. Trade Representative. The refunds reduced cost of revenue during the period. As previously disclosed, a majority of the Company’s tariff exclusions were not extended past August 2020.

Quarterly Dividend

The Board of Directors (the “Board”) has approved the payment of a cash dividend of $0.09 per share of Class A common stock to be paid on December 17, 2020 to holders of record of Class A common stock at the close of business on November 30, 2020. A corresponding distribution of up to $0.09 per CW Unit has also been approved for holders of CW Units of Cactus Wellhead, LLC.

Conference Call Details

The Company will host a conference call to discuss financial and operational results tomorrow, Thursday, November 5, 2020 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 9195227. 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, Haynesville, 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, any Quarterly Reports on Form 10-Q and the other documents that the Company files with the Securities and Exchange Commission. 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,
	2020			2019		2020			2019
	(in thousands, except per share data)
Revenues
Product revenue	$	35,857		$	92,582	$	163,781		$	273,716
Rental revenue		9,881			35,528		57,579			113,601
Field service and other revenue		14,051			32,698		59,116			100,859
Total revenues		59,789			160,808		280,476			488,176

Costs and expenses
Cost of product revenue		19,879			57,768		101,976			168,303
Cost of rental revenue		9,647			17,194		39,661			54,435
Cost of field service and other revenue		9,323			25,375		44,620			79,105
Selling, general and administrative expenses		8,384			13,348		30,739			39,268
Severance expenses		—			—		1,864			—
Total costs and expenses		47,233			113,685		218,860			341,111
Income from operations		12,556			47,123		61,616			147,065

Interest income, net		218			373		851			489
Other income (expense), net		(1,865	)		558		(555	)		(484	)
Income before income taxes		10,909			48,054		61,912			147,070
Income tax expense		23			12,221		8,833			22,041
Net income	$	10,886		$	35,833	$	53,079		$	125,029
Less: net income attributable to non-controlling interest		4,653			16,494		21,835			57,475
Net income attributable to Cactus, Inc.	$	6,233		$	19,339	$	31,244		$	67,554

Earnings per Class A share – basic	$	0.13		$	0.41	$	0.66		$	1.53
Earnings per Class A share – diluted (a)	$	0.13		$	0.41	$	0.64		$	1.50

Weighted average shares outstanding – basic		47,510			47,095		47,406			44,260
Weighted average shares outstanding – diluted (a)		75,622			47,322		75,427			75,337

(a)

Dilution for the three and nine months ended September 30, 2020 includes $4.7 million and $23.2 million, respectively, of additional pre-tax income attributable to non-controlling interest adjusted for a corporate effective tax rate of 25.5%, and 27.9 million weighted average shares of Class B common stock plus the dilutive effect of restricted stock unit awards. Dilution for the three months ended September 30, 2019 excludes 28.0 million 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 dilutive effect of restricted stock unit awards.

Cactus, Inc. Condensed Consolidated Balance Sheets (unaudited)

	September 30,		December 31,
	2020		2019
	(in thousands)
Assets
Current assets
Cash and cash equivalents	$	273,941	$	202,603
Accounts receivable, net	40,290		87,865
Inventories	87,702		113,371
Prepaid expenses and other current assets	9,961		11,044
Total current assets	411,894		414,883

Property and equipment, net	148,696		161,748
Operating lease right-of-use assets, net	24,167		26,561
Goodwill	7,824		7,824
Deferred tax asset, net	217,659		222,545
Other noncurrent assets	1,248		1,403
Total assets	$	811,488	$	834,964

Liabilities and Equity
Current liabilities
Accounts payable	$	15,573	$	40,957
Accrued expenses and other current liabilities	14,565		22,067
Current portion of liability related to tax receivable agreement	8,902		14,630
Finance lease obligations, current portion	4,009		6,735
Operating lease liabilities, current portion	4,948		6,737
Total current liabilities	47,997		91,126

Deferred tax liability, net	792		1,348
Liability related to tax receivable agreement, net of current portion	194,616		201,902
Finance lease obligations, net of current portion	2,286		3,910
Operating lease liabilities, net of current portion	19,237		20,283
Total liabilities	264,928		318,569

Equity	546,560		516,395
Total liabilities and equity	$	811,488	$	834,964

Cactus, Inc. Condensed Consolidated Statements of Cash Flows (unaudited)

	Nine Months Ended September 30,
	2020			2019
	(in thousands)
Cash flows from operating activities
Net income	$	53,079		$	125,029
Reconciliation of net income to net cash provided by operating activities
Depreciation and amortization		31,262			28,264
Deferred financing cost amortization		126			126
Stock-based compensation		6,436			5,257
Provision for expected credit losses		341			255
Inventory obsolescence		3,376			1,708
(Gain) loss on disposal of assets		(1,810	)		820
Deferred income taxes		5,182			15,072
(Gain) loss from revaluation of liability related to tax receivable agreement		555			(558	)
Changes in operating assets and liabilities:
Accounts receivable		48,190			(8,326	)
Inventories		19,188			(14,513	)
Prepaid expenses and other assets		1,127			4,032
Accounts payable		(23,753	)		(4,334	)
Accrued expenses and other liabilities		(7,607	)		4,694
Payments pursuant to tax receivable agreement		(14,207	)		(9,335	)
Net cash provided by operating activities		121,485			148,191

Cash flows from investing activities
Capital expenditures and other		(21,908	)		(40,526	)
Proceeds from sale of assets		5,414			2,811
Net cash used in investing activities		(16,494	)		(37,715	)

Cash flows from financing activities
Payments on finance leases		(4,298	)		(5,660	)
Dividends paid to Class A common stock shareholders		(12,847	)		—
Distributions to members		(15,560	)		(5,853	)
Repurchase of shares		(1,385	)		(1,529	)
Net cash used in financing activities		(34,090	)		(13,042	)

Effect of exchange rate changes on cash and cash equivalents		437			(730	)

Net increase in cash and cash equivalents		71,338			96,704

Cash and cash equivalents
Beginning of period		202,603			70,841
End of period	$	273,941		$	167,545

Cactus, Inc. – Supplemental Information Reconciliation of GAAP to non-GAAP Financial Measures Net income, as adjusted and diluted earnings per share, as adjusted (unaudited)

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.

	Three Months Ended
	September 30,			June 30,			September 30,
	2020			2020			2019
	(in thousands, except per share data)
Net income	$	10,886		$	9,095		$	35,833
Adjustments:
Severance expenses, pre-tax ⁽¹⁾		—			857			—
Other non-operating (income) expense, pre-tax ⁽²⁾		1,865			(1,310	)		(558	)
Income tax expense differential ⁽³⁾		(3,234	)		(1,275	)		822
Net income, as adjusted	$	9,517		$	7,367		$	36,097

Diluted earnings per share, as adjusted	$	0.13		$	0.10		$	0.48

Weighted average shares outstanding, as adjusted ⁽⁴⁾		75,622			75,367			75,340

(1)	Represents non-routine charges related to severance benefits.
(2)	Represents non-cash adjustments 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 pre-tax items listed above, based on a corporate effective tax rate of 25.5% on income before income taxes for the three months ended September 30, 2020, 26.0% for the three months ended June 30, 2020 and 24.0% for the three months ended September 30, 2019.
(4)	Reflects 47.5, 47.4, and 47.1 million weighted average shares of basic Class A common stock and 27.9, 27.9 and 28.0 million of additional shares for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, 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 (unaudited)

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 below. 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.

	Three Months Ended									Nine Months Ended
	September 30,			June 30,			September 30,			September 30,
	2020			2020			2019			2020			2019
	(in thousands)									(in thousands)
Net income	$	10,886		$	9,095		$	35,833		$	53,079		$	125,029
Interest income, net		(218	)		(223	)		(373	)		(851	)		(489	)
Income tax expense		23			1,313			12,221			8,833			22,041
Depreciation and amortization		9,762			10,520			10,007			31,262			28,264
EBITDA		20,453			20,705			57,688			92,323			174,845
Severance expenses ⁽¹⁾		—			857			—			1,864			—
Other non-operating (income) expense ⁽²⁾		1,865			(1,310	)		(558	)		555			(558	)
Secondary offering related expenses		—			—			—			—			1,042
Stock-based compensation		2,232			2,231			1,689			6,436			5,257
Adjusted EBITDA	$	24,550		$	22,483		$	58,819		$	101,178		$	180,586

(1)	Represents non-routine charges related to severance benefits.
(2)	Represents non-cash adjustments 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						Nine Months Ended
	September 30,		June 30,		September 30,		September 30,
	2020		2020		2019		2020		2019
	(in thousands)						(in thousands)
Cost of product revenue	$	802	$	863	$	884	$	2,693	$	2,411
Cost of rental revenue	6,936		7,121		6,384		21,399		17,867
Cost of field service and other revenue	1,803		2,286		2,558		6,474		7,486
Selling, general and administrative expenses	221		250		181		696		500
Total depreciation and amortization	$	9,762	$	10,520	$	10,007	$	31,262	$	28,264

Cactus, Inc. – Supplemental Information Estimated Market Share (unaudited)

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.

	Three Months Ended
	September 30,		June 30,		September 30,
	2020		2020		2019
Cactus U.S. onshore rigs followed	91		112		256
Baker Hughes U.S. onshore rig count quarterly average	240		378		894
Market share	37.9	%	29.6	%	28.6	%

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced that it will issue its third quarter 2020 earnings release after market close on Wednesday, November 4, 2020. The Company will host a conference call to discuss financial and operational results on Thursday, November 5, 2020 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.

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

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced financial and operating results for the second quarter of 2020.

Second Quarter Highlights

Revenue of $66.5 million;
Income from operations of $8.9 million;
Net income of $9.1 million⁽¹⁾ and diluted earnings per Class A share of $0.11⁽¹⁾;
Net income, as adjusted⁽²⁾ of $7.4 million and diluted earnings per share, as adjusted⁽²⁾ of $0.10;
Adjusted EBITDA⁽³⁾ and related margin⁽⁴⁾ of $22.5 million and 33.8%, respectively;
Cash flow from operations of $57.4 million;
Cash balance of $270.7 million and no debt outstanding as of June 30, 2020; and
The Board of Directors declared a quarterly cash dividend of $0.09 per share.

Financial Summary

	Three Months Ended
	June 30,			March 31,			June 30,
	2020			2020			2019
	(in thousands)
Revenues	$	66,548		$	154,139		$	168,493
Income from operations	$	8,875		$	40,185		$	51,450
Operating income margin	13.3		%	26.1		%	30.5		%
Net income⁽¹⁾	$	9,095		$	33,098		$	40,750
Net income, as adjusted⁽²⁾	$	7,367		$	30,785		$	39,173
Adjusted EBITDA⁽³⁾	$	22,483		$	54,145		$	62,718
Adjusted EBITDA margin⁽⁴⁾	33.8		%	35.1		%	37.2		%

(1)	Net income during the second quarter of 2020 is inclusive of $0.9 million in non-routine charges related to severance and $1.3 million in additional income related to the revaluation of the tax receivable agreement liability. Net income during the first quarter of 2020 is inclusive of $1.0 million in non-routine charges related to severance. Net income during the second quarter of 2019 is inclusive of $4.0 million of additional tax expense related to a valuation allowance accrual.
(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.

Scott Bender, President and CEO of Cactus, commented, “Given the unprecedented decline in oilfield activity, I am pleased with our results for the second quarter. The quarter highlighted the variable cost nature of the Company, which has now effected total payroll-related savings of an estimated $85 million on an annualized basis. Importantly, the second quarter highlighted the Company’s ability to generate significant free cash flow, with cash growing by over $40 million during the period, net of nearly $7 million in dividends and associated distributions. Although market share⁽¹⁾ was volatile during the period, we recorded approximately 33% share as of June with a further expansion achieved by mid-July.

“While the overall U.S. rig count may trend lower in the near term, we believe that Cactus’ rigs followed bottomed around mid-year assuming commodity prices hold near current levels. I am encouraged by the swift rebound in oil prices from April lows, which provides optimism for a potential improvement in completion activity versus late second quarter levels. Nonetheless, as total Company revenues for the third quarter are likely to be down sequentially, we will continue to manage our costs as appropriate.”

Mr. Bender concluded, “Our cost structure is highly variable, our capital requirements are modest, and our management team is well aligned with our shareholders. Accordingly, returns and free cash flow remain our top priorities. This downturn provides us with the opportunity to further streamline our cost structure and emerge as a stronger company in a more favorable competitive environment.”

(1)	Additional information regarding market share and rigs followed is located in the Supplemental Information tables.

Revenue Categories

Product

	Three Months Ended
	June 30,			March 31,			June 30,
	2020			2020			2019
	(in thousands)
Product revenue	$	40,893		$	87,031		$	94,494
Gross profit	$	14,931		$	30,896		$	36,977
Gross margin	36.5		%	35.5		%	39.1		%

Second quarter 2020 product revenue decreased $46.1 million, or 53.0%, sequentially, as sales of wellhead and production related equipment decreased primarily due to lower drilling and completion activity from customers. Gross profit decreased $16.0 million, or 51.7%, sequentially, with margins increasing 100 basis points. The second quarter of 2020 included approximately $3.1 million in credits related to tariff refunds.

Rental

	Three Months Ended
	June 30,			March 31,			June 30,
	2020			2020			2019
	(in thousands)
Rental revenue	$	11,535		$	36,163		$	39,576
Gross profit	$	860		$	16,824		$	20,126
Gross margin	7.5		%	46.5		%	50.9		%

Second quarter 2020 rental revenue decreased $24.6 million, or 68.1%, sequentially, as our customers significantly reduced completion activity during the quarter. Gross profit decreased $16.0 million, or 94.9%, sequentially and margins decreased 3,900 basis points due to depreciation expense representing a higher percentage of revenue during the period.

Field Service and Other

	Three Months Ended
	June 30,			March 31,			June 30,
	2020			2020			2019
	(in thousands)
Field service and other revenue	$	14,120		$	30,945		$	34,423
Gross profit	$	2,634		$	7,134		$	7,599
Gross margin	18.7		%	23.1		%	22.1		%

Second quarter 2020 field service and other revenue decreased $16.8 million, or 54.4%, sequentially, as lower customer activity drove a significant decrease in associated billable hours and ancillary services. Gross profit decreased $4.5 million, or 63.1%, sequentially, with margins declining by 440 basis points sequentially as higher depreciation expense as a percent of revenue was partially offset by lower payroll-related expenses, improved labor utilization and rationalization of the field service vehicle fleet.

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

SG&A for the second quarter of 2020 was $8.7 million (13.1% of revenues), compared to $13.7 million (8.9% of revenues) for the first quarter of 2020 and $13.3 million (7.9% of revenues) for the second quarter of 2019. The sequential decrease was primarily due to lower payroll expenses, which was partially offset by higher non-cash stock-based compensation. Separately, we recorded severance expenses of $0.9 million during the quarter associated with headcount reductions.

Liquidity, Capital Expenditures and Other

As of June 30, 2020, the Company had $270.7 million of cash and no bank debt outstanding. Operating cash flow was $57.4 million for the second quarter of 2020. During the second quarter, the Company made dividend payments and associated distributions of $6.8 million.

Net capital expenditures for the second quarter of 2020 were $8.2 million, driven largely by additions to the Company’s fleet of rental equipment ordered early in the year. The Company has lowered its full year 2020 net capital expenditures guidance to be in the range of $20 to $25 million.

During the second quarter, Cactus recognized $7.5 million in refunds pursuant to tariff exclusions granted by the U.S. Trade Representative. The refunds reduced inventory values by $4.0 million and cost of revenue by $3.5 million during the second quarter. Cactus has filed for additional tariff refunds related to these exclusions.

Quarterly Dividend

The Board of Directors (the “Board”) has approved the payment of a cash dividend of $0.09 per share of Class A common stock to be paid on September 17, 2020 to holders of record of Class A common stock at the close of business on August 31, 2020. A corresponding distribution of up to $0.09 per CW Unit has also 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.

Conference Call Details

The Company will host a conference call to discuss financial and operational results tomorrow, Thursday, July 30, 2020 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 5634259. 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

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands, except per share data)
Revenues
Product revenue	$	40,893	$	94,494	$	127,924	$	181,134
Rental revenue	11,535		39,576		47,698		78,073
Field service and other revenue	14,120		34,423		45,065		68,161
Total revenues	66,548		168,493		220,687		327,368

Costs and expenses
Cost of product revenue	25,962		57,517		82,097		110,535
Cost of rental revenue	10,675		19,450		30,014		37,241
Cost of field service and other revenue	11,486		26,824		35,297		53,730
Selling, general and administrative expenses	8,693		13,252		22,355		25,920
Severance expenses	857		—		1,864		—
Total costs and expenses	57,673		117,043		171,627		227,426
Income from operations	8,875		51,450		49,060		99,942

Interest income, net	223		93		633		116
Other income (expense), net	1,310		—		1,310		(1,042		)
Income before income taxes	10,408		51,543		51,003		99,016
Income tax expense	1,313		10,793		8,810		9,820
Net income	$	9,095	$	40,750	$	42,193	$	89,196
Less: net income attributable to non-controlling interest	3,067		19,342		17,182		40,981
Net income attributable to Cactus, Inc.	$	6,028	$	21,408	$	25,011	$	48,215

Earnings per Class A share – basic	$	0.13	$	0.46	$	0.53	$	1.13
Earnings per Class A share – diluted (a)	$	0.11	$	0.45	$	0.51	$	1.07

Weighted average shares outstanding – basic	47,436		46,881		47,353		42,819
Weighted average shares outstanding – diluted (a)	75,367		47,145		75,347		75,326

(a)

Dilution for the three and six months ended June 30, 2020 includes $3.4 million and $18.5 million, respectively, of additional pre-tax income attributable to non-controlling interest adjusted for a corporate effective tax rate of 26%, and 27.9 million weighted average shares of Class B common stock plus the dilutive effect of restricted stock unit awards. 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 32.2 million weighted average shares of Class B common stock plus the dilutive effect of restricted stock unit awards.

Cactus, Inc. Condensed Consolidated Balance Sheets (unaudited)

	June 30,		December 31,
	2020		2019
	(in thousands)
Assets
Current assets
Cash and cash equivalents	$	270,673	$	202,603
Accounts receivable, net	46,824		87,865
Inventories	90,719		113,371
Prepaid expenses and other current assets	8,450		11,044
Total current assets	416,666		414,883

Property and equipment, net	157,145		161,748
Operating lease right-of-use assets, net	22,500		26,561
Goodwill	7,824		7,824
Deferred tax asset, net	216,732		222,545
Other noncurrent assets	1,285		1,403
Total assets	$	822,152	$	834,964

Liabilities and Equity
Current liabilities
Accounts payable	$	13,288	$	40,957
Accrued expenses and other current liabilities	13,925		22,067
Current portion of liability related to tax receivable agreement	21,402		14,630
Finance lease obligations, current portion	5,398		6,735
Operating lease liabilities, current portion	4,765		6,737
Total current liabilities	58,778		91,126

Deferred tax liability, net	718		1,348
Liability related to tax receivable agreement, net of current portion	194,101		201,902
Finance lease obligations, net of current portion	2,977		3,910
Operating lease liabilities, net of current portion	17,671		20,283
Total liabilities	274,245		318,569

Equity	547,907		516,395
Total liabilities and equity	$	822,152	$	834,964

Cactus, Inc. Condensed Consolidated Statements of Cash Flows (unaudited)

	Six Months Ended June 30,
	2020			2019
	(in thousands)
Cash flows from operating activities
Net income	$	42,193		$	89,196
Reconciliation of net income to net cash provided by operating activities
Depreciation and amortization	21,500			18,257
Deferred financing cost amortization	84			84
Stock-based compensation	4,204			3,568
Provision for expected credit losses	574			—
Inventory obsolescence	2,322			1,188
(Gain) loss on disposal of assets	(438		)	1,403
Deferred income taxes	5,565			7,060
Gain from revaluation of liability related to tax receivable agreement	(1,310		)	—
Changes in operating assets and liabilities:
Accounts receivable	42,039			(20,696		)
Inventories	17,076			(12,010		)
Prepaid expenses and other assets	2,619			1,261
Accounts payable	(25,686		)	1,691
Accrued expenses and other liabilities	(8,193		)	7,316
Net cash provided by operating activities	102,549			98,318

Cash flows from investing activities
Capital expenditures and other	(18,902		)	(29,924		)
Proceeds from sale of assets	2,352			1,175
Net cash used in investing activities	(16,550		)	(28,749		)

Cash flows from financing activities
Payments on finance leases	(3,265		)	(3,723		)
Dividends paid to Class A common stock shareholders	(8,568		)	—
Distributions to members	(4,712		)	(3,848		)
Repurchase of shares	(1,385		)	(1,516		)
Net cash used in financing activities	(17,930		)	(9,087		)

Effect of exchange rate changes on cash and cash equivalents	1			(174		)

Net increase in cash and cash equivalents	68,070			60,308

Cash and cash equivalents
Beginning of period	202,603			70,841
End of period	$	270,673		$	131,149

Cactus, Inc. – Supplemental Information Reconciliation of GAAP to non-GAAP Financial Measures Net income, as adjusted and diluted earnings per share, as adjusted (unaudited)

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.

	Three Months Ended
	June 30,			March 31,			June 30,
	2020			2020			2019
	(in thousands, except per share data)
Net income	$	9,095		$	33,098		$	40,750
Adjustments:
Severance expenses, pre-tax ⁽¹⁾	857			1,007			—
Other non-operating income, pre-tax ⁽²⁾	(1,310		)	—			—
Income tax expense differential ⁽³⁾	(1,275		)	(3,320		)	(1,577		)
Net income, as adjusted	$	7,367		$	30,785		$	39,173

Diluted earnings per share, as adjusted	$	0.10		$	0.41		$	0.52

Weighted average shares outstanding, as adjusted ⁽⁴⁾	75,367			75,395			75,375

(1)	Represents non-routine charges related to severance benefits.
(2)	Represents non-cash adjustments for the revaluation of the liability related to the tax receivable agreement.
(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 pre-tax items listed above, based on a corporate effective tax rate of 26.0% on income before income taxes for the three months ended June 30, 2020 and March 31, 2020, and 24.0% for the three months ended June 30, 2019.
(4)	Reflects 47.4, 47.3, and 46.9 million weighted average shares of basic Class A common stock and 27.9, 28.0 and 28.2 million of additional shares for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019, 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 (unaudited)

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 below.

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.

	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,
	2020			2020			2019			2020			2019
	(in thousands)									(in thousands)
Net income	$	9,095		$	33,098		$	40,750		$	42,193		$	89,196
Interest income, net	(223		)	(410		)	(93		)	(633		)	(116		)
Income tax expense	1,313			7,497			10,793			8,810			9,820
Depreciation and amortization	10,520			10,980			9,376			21,500			18,257
EBITDA	20,705			51,165			60,826			71,870			117,157
Severance expenses ⁽¹⁾	857			1,007			—			1,864			—
Other non-operating income ⁽²⁾	(1,310		)	—			—			(1,310		)	—
Secondary offering related expenses	—			—			—			—			1,042
Stock-based compensation	2,231			1,973			1,892			4,204			3,568
Adjusted EBITDA	$	22,483		$	54,145		$	62,718		$	76,628		$	121,767

(1)	Represents non-routine charges related to severance benefits.
(2)	Represents non-cash adjustments 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						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
	2020		2020		2019		2020		2019
	(in thousands)						(in thousands)
Cost of product revenue	$	863	$	1,028	$	762	$	1,891	$	1,527
Cost of rental revenue	7,121		7,342		5,966		14,463		11,483
Cost of field service and other revenue	2,286		2,385		2,478		4,671		4,928
Selling, general and administrative expenses	250		225		170		475		319
Total depreciation and amortization	$	10,520	$	10,980	$	9,376	$	21,500	$	18,257

Cactus, Inc. – Supplemental Information Estimated Market Share (unaudited)

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.

	Three Months Ended
	June 30,		March 31,		June 30,
	2020		2020		2019
Cactus U.S. onshore rigs followed	112		251		283
Baker Hughes U.S. onshore rig count quarterly average	378		763		963
Market share	29.6	%	32.9	%	29.4	%

CACTUS ANNOUNCES TIMING OF SECOND QUARTER 2020 EARNINGS RELEASE AND CONFERENCE CALL

HOUSTON – July 16, 2020 – Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced that it will issue its second quarter 2020 earnings release after market close on Wednesday, July 29, 2020. The Company will host a conference call to discuss financial and operational results on Thursday, July 30, 2020 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 5634259. 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.

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” or the “Company”) today announced financial and operating results for the first quarter of 2020.

Highlights

Increased revenues 9.9% from fourth quarter 2019 to $154.1 million, with growth across all business lines;
Grew income from operations 11.4% sequentially to $40.2 million;
Reported net income of $33.1 million⁽¹⁾ and diluted earnings per Class A share of $0.40⁽¹⁾;
Generated net income, as adjusted⁽²⁾ of $30.8 million and diluted earnings per share, as adjusted⁽²⁾ of $0.41;
Reported Adjusted EBITDA⁽³⁾ and related margin⁽⁴⁾ of $54.1 million and 35.1%, respectively;
Generated cash flow from operations during the first quarter of 2020 of $45.2 million;
Reported cash balance of $230 million and no debt outstanding as of March 31, 2020;
Reported record U.S. land market share of 32.9%, up from 30.9% during the fourth quarter of 2019;
Announced measures expected to increase total annualized operating cost savings to approximately $60 million from the $35 million previously announced; and
The Board of Directors declared a quarterly cash dividend of $0.09 per share.

Financial Summary


	Three Months Ended
		March 31,			December 31,			March 31,
		2020			2019			2019
	(in thousands)
Revenues	$	154,139		$	140,238		$	158,875
Income from operations	$	40,185		$	36,085		$	48,492
Operating income margin		26.1	%		25.7	%		30.5	%
Net income ⁽¹⁾	$	33,098		$	31,274		$	48,446
Net income, as adjusted ⁽²⁾	$	30,785		$	27,721		$	36,871
Adjusted EBITDA ⁽³⁾	$	54,145		$	48,413		$	59,049
Adjusted EBITDA margin ⁽⁴⁾		35.1	%		34.5	%		37.2	%

(1)		Net income during the first quarter of 2020 is inclusive of $1.0 million in non-routine charges related to severance incurred in connection with workforce reduction initiatives undertaken during the first quarter. Net income during the fourth quarter of 2019 is inclusive of $4.8 million in additional income related to the revaluation of the tax receivable agreement liability and $2.7 million of net additional tax expenses associated with various non-routine items. 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 and $1.0 million in secondary offering related expenses.
(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.

Scott Bender, President and CEO of Cactus, commented, “Our outperformance versus broader oilfield activity levels during the first quarter was encouraging, and Cactus posted revenue growth across all business lines, even as U.S. rig activity declined on a sequential basis. Despite the noticeable drop in activity toward the end of the quarter, our results were generally consistent with our expectations. In late March, Cactus demonstrated its strategy of quickly responding to the macroeconomic environment, by reducing its cost structure and capital expenditures. The quarter also highlighted the Company’s ability to generate significant free cash flow, with cash growing by approximately $28 million during the period, net of over $6 million in dividends and associated distributions.

“Given the magnitude of the activity change, we are expecting lower revenues and margins across all of our business lines in the second quarter. With crude storage nearing full capacity and predictions for the U.S. rig count to continue falling at a historic rate, Cactus has instituted a second round of cost savings, which will reduce U.S. headcount by an additional 28 percent and increase total annualized payroll related costs savings to approximately $60 million, $25 million above the amount announced in early April. With customer drilling and completion activity currently in sharp decline, we expect subsequent quarters to highlight Cactus’ variable cost structure and ability to offset a meaningful portion of the expected reduction in revenue.”

Mr. Bender concluded, “Cactus demonstrated its ability to deliver positive margins and free cash flow during the last industry downturn. Going forward, we believe the capital-light nature of the business and strong balance sheet will enable the company to successfully navigate through this cycle. We believe the anticipated industry changes will provide the opportunity to gain market share and emerge as a stronger company in a more favorable competitive environment. As always, our first priority will be the health and safety of our Associates, and we will continue to operate the business with a focus on improving our operational processes while maximizing returns and free cash flow.”

Revenue Categories

Product


	Three Months Ended
		March 31,			December 31,			March 31,
		2020			2019			2019
	(in thousands)
Product revenue	$	87,031		$	83,371		$	86,640
Gross profit	$	30,896		$	31,059		$	33,622
Gross margin		35.5	%		37.3	%		38.8	%

First quarter 2020 product revenue increased $3.7 million, or 4.4%, sequentially, as sales of wellhead equipment and production related equipment increased largely due to higher market share. Gross profit decreased $0.2 million, or 0.5%, sequentially, with margins declining 180 basis points. The first quarter of 2020 included approximately $1.4 million in non-cash charges related to inventory obsolescence reserves. Cactus’ estimated market share⁽¹⁾ increased to 32.9% in the first quarter of 2020 versus 30.9% during the fourth quarter of 2019 and 29.1% during the first quarter of 2019.

(1) Additional information regarding market share and rigs followed is located in the Supplemental Information tables.

Rental


	Three Months Ended
		March 31,			December 31,			March 31,
		2020			2019			2019
	(in thousands)
Rental revenue	$	36,163		$	28,215		$	38,497
Gross profit	$	16,824		$	12,821		$	20,706
Gross margin		46.5	%		45.4	%		53.8	%

First quarter 2020 rental revenue increased $7.9 million, or 28.2%, sequentially, as customers increased completion activity and the Company witnessed greater adoption of its recent innovations. Gross profit increased $4.0 million, or 31.2%, sequentially and margins increased 110 basis points largely due to depreciation expense representing a lower percentage of revenue during the period.

Field Service and Other


	Three Months Ended
		March 31,			December 31,			March 31,
		2020			2019			2019
	(in thousands)
Field service and other revenue	$	30,945		$	28,652		$	33,738
Gross profit	$	7,134		$	4,594		$	6,832
Gross margin		23.1	%		16.0	%		20.3	%

First quarter 2020 field service and other revenue increased $2.3 million, or 8.0%, sequentially, as higher customer activity drove an increase in associated billable hours and ancillary services. Gross profit increased $2.5 million, or 55.3%, sequentially, with margins improving by 710 basis points sequentially due to higher labor utilization during the quarter, largely due to the impacts of fewer holidays and greater customer activity.

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

SG&A for the first quarter of 2020 was $13.7 million (8.9% of revenues), compared to $12.4 million (8.8% of revenues) for the fourth quarter of 2019 and $12.7 million (8.0% of revenues) for the first quarter of 2019. The first quarter of 2020 includes a $0.6 million non-cash charge associated with a provision for expected credit losses on accounts receivable. Apart from this charge, the sequential increase was due to higher foreign exchange losses and stock-based compensation, which offset lower incentive compensation expense accruals. Separately, we recorded severance expenses of $1.0 million during the first quarter of 2020 associated with headcount reductions.

Liquidity and Capital Expenditures

As of March 31, 2020, the Company had $230.2 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 $45.2 million for the first quarter of 2020, attributable to strong operating results, which offset an increase in working capital. During the first quarter, the Company made dividend payments and associated distributions of $6.5 million.

Net capital expenditures for the first quarter of 2020 were $8.3 million, driven largely by additions to the Company’s fleet of rental equipment, including recent innovations. As previously disclosed, the Company expects full year 2020 net capital expenditures to be in the range of $20 to $30 million, with the majority weighted toward the first six months of the year.

Quarterly Dividend

The Board of Directors (the “Board”) has approved the payment of a cash dividend of $0.09 per share of Class A common stock to be paid on June 18, 2020 to holders of record of Class A common stock at the close of business on June 1, 2020. A corresponding distribution of $0.09 per CW Unit has also 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.

Conference Call Details

The Company will host a conference call to discuss financial and operational results tomorrow, Thursday, April 30, 2020 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 1375824. 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

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

	Three Months Ended March 31,
		2020		2019
		(in thousands, except per share data)
Revenues
Product revenue	$	87,031	$	86,640
Rental revenue		36,163		38,497
Field service and other revenue		30,945		33,738
Total revenues		154,139		158,875

Costs and expenses
Cost of product revenue		56,135		53,018
Cost of rental revenue		19,339		17,791
Cost of field service and other revenue		23,811		26,906
Selling, general and administrative expenses		13,662		12,668
Severance expenses		1,007		–
Total costs and expenses		113,954		110,383
Income from operations		40,185		48,492

Interest income, net		410		23
Other expense, net		–		(1,042)
Income before income taxes		40,595		47,473
Income tax expense (benefit)		7,497		(973)
Net income	$	33,098	$	48,446
Less: net income attributable to non-controlling interest		14,115		21,639
Net income attributable to Cactus Inc.	$	18,983	$	26,807

Earnings per Class A share – basic	$	0.40	$	0.69
Earnings per Class A share – diluted (a)	$	0.40	$	0.59

Weighted average shares outstanding – basic		47,270		38,719
Weighted average shares outstanding – diluted (a)		75,395		75,246

(a)

Dilution for the three months ended March 31, 2020 and March 31, 2019 includes $15.1 million and $23.0 million of additional pre-tax income attributable to non-controlling interest adjusted for a corporate effective tax rate of 26% and 24%, respectively, and 28.0 million and 36.3 million weighted average shares of Class B common stock plus the effect of dilutive securities.

Cactus, Inc.
Condensed Consolidated Balance Sheets
(unaudited)

		March 31,		December 31,
		2020		2019
	(in thousands)
Assets
Current assets
Cash and cash equivalents	$	230,202	$	202,603
Accounts receivable, net		95,236		87,865
Inventories		100,301		113,371
Prepaid expenses and other current assets		9,535		11,044
Total current assets		435,274		414,883

Property and equipment, net		162,871		161,748
Operating lease right-of-use assets, net		24,872		26,561
Goodwill		7,824		7,824
Deferred tax asset, net		217,916		222,545
Other noncurrent assets		1,338		1,403
Total assets	$	850,095	$	834,964

Liabilities and Equity
Current liabilities
Accounts payable	$	34,476	$	40,957
Accrued expenses and other current liabilities		19,275		22,067
Current portion of liability related to tax receivable agreement		14,630		14,630
Finance lease obligations, current portion		6,498		6,735
Operating lease liabilities, current portion		6,535		6,737
Total current liabilities		81,414		91,126

Deferred tax liability, net		1,511		1,348
Liability related to tax receivable agreement, net of current portion		201,902		201,902
Finance lease obligations, net of current portion		4,033		3,910
Operating lease liabilities, net of current portion		18,809		20,283
Total liabilities		307,669		318,569

Equity		542,426		516,395
Total liabilities and equity	$	850,095	$	834,964

Cactus, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)

		Three Months Ended March 31,
		2020		2019
	(in thousands)
Cash flows from operating activities
Net income	$	33,098	$	48,446
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization		10,980		8,881
Deferred financing cost amortization		42		42
Stock-based compensation		1,973		1,676
Provision for expected credit losses		625		–
Inventory obsolescence		1,353		224
Loss on disposal of assets		961		863
Deferred income taxes		4,848		(2,796)
Changes in operating assets and liabilities:
Accounts receivable		(8,244)		(15,597)
Inventories		8,306		(8,875)
Prepaid expenses and other assets		1,497		2,156
Accounts payable		(8,142)		192
Accrued expenses and other liabilities		(2,136)		(973)
Net cash provided by operating activities		45,161		34,239

Cash flows from investing activities
Capital expenditures and other		(9,441)		(14,655)
Proceeds from sale of assets		1,103		808
Net cash used in investing activities		(8,338)		(13,847)

Cash flows from financing activities
Payments on finance leases		(1,764)		(1,846)
Dividends paid to Class A common stock shareholders		(4,281)		–
Distributions to members		(2,203)		(235)
Repurchase of shares		(1,356)		(1,474)
Net cash used in financing activities		(9,604)		(3,555)

Effect of exchange rate changes on cash and cash equivalents		380		438

Net increase in cash and cash equivalents		27,599		17,275

Cash and cash equivalents
Beginning of period		202,603		70,841
End of period	$	230,202	$	88,116

Cactus, Inc. – Supplemental Information
Reconciliation of GAAP to non-GAAP Financial Measures
Net income, as adjusted and diluted earnings per share, as adjusted
(unaudited)

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.


		Three Months Ended
		March 31,			December 31,			March 31,
		2020			2019			2019
	(in thousands, except per share data)
Net income	$	33,098		$	31,274		$	48,446
Adjustments:
Severance expenses, pre-tax ⁽¹⁾		1,007			–			–
Other non-operating income, pre-tax ⁽²⁾		–			(4,778	)		–
Secondary offering related expenses, pre-tax ⁽³⁾		–			–			1,042
Income tax expense differential ⁽⁴⁾		(3,320	)		1,225			(12,617	)
Net income, as adjusted	$	30,785		$	27,721		$	36,871

Diluted earnings per share, as adjusted	$	0.41		$	0.37		$	0.49

Weighted average shares outstanding, as adjusted ⁽⁵⁾		75,395			75,405			75,246

(1)		Represents non-routine charges related to severance benefits.
(2)		Represents non-cash adjustments for the revaluation of the liability related to the tax receivable agreement.
(3)		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.
(4)		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 pre-tax items listed above, based on a corporate effective tax rate of 26.0% on income before income taxes for the three months ended March 31, 2020, and 24.0% for the three months ended December 31, 2019 and March 31, 2019.
(5)		Reflects 47.3, 47.1, and 38.7 million weighted average shares of basic Class A common stock and 28.0, 28.0 and 36.3 million of additional shares for the three months ended March 31, 2020, December 31, 2019, and March 31, 2019, 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
(unaudited)

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 below.

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.


		Three Months Ended
		March 31,			December 31,			March 31,
		2020			2019			2019
	(in thousands)
Net income	$	33,098		$	31,274		$	48,446
Interest income, net		(410	)		(390	)		(23	)
Income tax expense (benefit)		7,497			9,979			(973	)
Depreciation and amortization		10,980			10,590			8,881
EBITDA		51,165			51,453			56,331
Severance expenses ⁽¹⁾		1,007			–			–
Other non-operating income ⁽²⁾		–			(4,778	)		–
Secondary offering related expenses ⁽³⁾		–			–			1,042
Stock-based compensation		1,973			1,738			1,676
Adjusted EBITDA	$	54,145		$	48,413		$	59,049

(1)		Represents non-routine charges related to severance benefits.
(2)		Represents non-cash adjustments for the revaluation of the liability related to the tax receivable agreement.
(3)		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.

Cactus, Inc. – Supplemental Information
Depreciation and Amortization by Category
(unaudited)


		Three Months Ended
		March 31,		December 31,		March 31,
		2020		2019		2019
	(in thousands)
Cost of product revenue	$	1,028	$	893	$	765
Cost of rental revenue		7,342		7,014		5,517
Cost of field service and other revenue		2,385		2,500		2,450
Selling, general and administrative expenses		225		183		149
Total depreciation and amortization	$	10,980	$	10,590	$	8,881

Cactus, Inc. – Supplemental Information
Estimated Market Share
(unaudited)

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.


	Three Months Ended
	March 31,		December 31,		March 31,
	2020		2019		2019
Cactus U.S. onshore rigs followed	251		246		297
Baker Hughes U.S. onshore rig count quarterly average	763		796		1,021
Market share	32.9	%	30.9	%	29.1	%

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced that it will issue its first quarter 2020 earnings release after market close on Wednesday, April 29, 2020. The Company will host a conference call to discuss financial and operational results on Thursday, April 30, 2020 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 1375824. 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.

Cactus Announces Business Update

HOUSTON – April 3, 2020 – Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced that as part of the Company’s comprehensive response to the weakened macroeconomic environment, Cactus reduced its total U.S. associate headcount by approximately 30% effective April 1st in anticipation of the activity declines expected by early in the second quarter. Cactus also implemented large-scale salary reductions for its workforce beginning in March, inclusive of a 50% reduction to the CEO’s base salary, and salary reductions ranging from 25% to 50% for its other named executive officers. Board Member remuneration has also been reduced by 25%.

As a result of the above mentioned cost rationalization efforts, Cactus will record approximately $1 million in non-routine charges primarily related to severance benefits as of March 31st. These salary and headcount reductions are estimated to result in approximately $35 million of annualized cost savings, $5 million of which are associated with selling, general and administrative expenses. These cost savings estimates include items such as overtime reductions, benefits and payroll taxes. These estimates are, however, exclusive of additional or alternative potential cost saving measures that will be taken by the Company, such as a reduction in discretionary payments to associates related to annual incentive bonuses associated with the Company’s financial performance, which totaled approximately $8 million in 2019, $4 million of which was categorized as selling, general and administrative expenses.

In light of the recent macroeconomic events, Cactus has also withdrawn its full year net capital expenditure guidance for 2020. Net capital expenditures are now expected to be in the range of $20 million to $30 million in 2020, representing a reduction of more than 50% from 2019’s level. A majority of this spend will be allocated to the first half of the year. The Company’s cash balance rose to approximately $230 million as of March 31st, and its $75 million revolver remains fully available. Going forward, Cactus will continue to respond quickly to deteriorating conditions while protecting its reputation for operational excellence.

About Cactus, Inc.

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

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

Source: Cactus, Inc.

Cactus Announces Fourth Quarter and Full Year 2019 Results

HOUSTON–(BUSINESS WIRE)–Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced that it will issue its fourth quarter and full year 2019 earnings release after market close on Wednesday, February 26, 2020. The Company will host a conference call to discuss financial and operational results on Thursday, February 27, 2020 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 2489677. 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.

CACTUS ANNOUNCES QUARTERLY CASH

DIVIDEND

HOUSTON–(BUSINESS WIRE)– Cactus, Inc. (NYSE: WHD) (“Cactus”) today announced that its Board of Directors has declared a quarterly cash dividend of $0.09 per share of Class A common stock payable on March 19, 2020 to holders of record of Class A common stock at the close of business on March 2, 2020. A corresponding distribution of $0.09 per CW Unit has been approved for holders of CW Units of Cactus Wellhead, LLC.

Declarations of any dividends in the future, and the amount of any such dividends, are subject to approval by Cactus’ Board of Directors.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200130005871/en/

Cactus, Inc.

John Fitzgerald, 713-904-4655

Director of Corporate Development and Investor Relations

IR@CactusWHD.com Source: Cactus, Inc.

Jan 30, 2020

Cactus Q2 2024 Earnings Release Webcast: Click Here

August 1, 2024, 9AM Central

Cactus Announces Third Quarter 2020 Results

CACTUS ANNOUNCES TIMING OF SECOND QUARTER 2020 EARNINGS RELEASE AND CONFERENCE CALL