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Cactus Announces Third Quarter 2023 Results

Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced financial and operating results for the third quarter of 2023.

Third Quarter Highlights

  • Revenue of $287.9 million and operating income of $87.6 million;
  • Net income of $68.0 million and diluted earnings per Class A share of $0.80;
  • Adjusted net income(1) of $63.8 million and diluted earnings per share, as adjusted(1) of $0.80;
  • Net income margin of 23.6% and adjusted net income margin(1) of 22.2%;
  • Adjusted EBITDA(2) and Adjusted EBITDA margin(2) of $103.1 million and 35.8%, respectively;
  • Cash flow from operations of $80.1 million;
  • Cash and cash equivalents balance of $63.7 million with no bank debt outstanding as of September 30, 2023; and
  • In November 2023, the Board of Directors declared a quarterly cash dividend of $0.12 per Class A share.

Financial Summary

Three Months Ended

September 30,

 

June 30,

 

September 30,

 

2023

 

2023

 

2022

 

(in thousands)

Revenues

$

287,870

 

 

$

305,819

 

 

$

184,481

 

Operating income(3)

$

87,603

 

 

$

48,522

 

 

$

51,296

 

Operating income margin

 

30.4

%

 

 

15.9

%

 

 

27.8

%

Net income

$

68,019

 

 

$

32,459

 

 

$

41,520

 

Net income margin

 

23.6

%

 

 

10.6

%

 

 

22.5

%

Adjusted net income(1)

$

63,804

 

 

$

67,279

 

 

$

39,327

 

Adjusted net income margin(1)

 

22.2

%

 

 

22.0

%

 

 

21.3

%

Adjusted EBITDA(2)

$

103,114

 

 

$

115,419

 

 

$

62,713

 

Adjusted EBITDA margin(2)

 

35.8

%

 

 

37.7

%

 

 

34.0

%

 

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

(2) Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. See definition of these measures and the reconciliation of GAAP to non-GAAP financial measures in the Supplemental Information tables.

(3) Operating income for the third quarter of 2023 includes a $5.1 million gain related to the remeasurement of the earn-out liability associated with the FlexSteel acquisition and $4.0 million of intangible amortization expense related to purchase price accounting. Operating income for the second quarter of 2023 includes $18.1 million of expense related to the remeasurement of the earn-out liability associated with the FlexSteel acquisition, $19.3 million of inventory costs associated with the step-up in value of inventory on hand at acquisition, and $8.7 million of intangible amortization expense related to purchase price accounting.

Scott Bender, CEO and Chairman of the Board of Cactus, commented, “I am pleased with our team's focus on execution in the third quarter. Revenues continue to outperform the year-to-date reduction in U.S. land rig count levels. We have received strong positive feedback on FlexSteel products and customers continue to recognize its many benefits relative to traditional line pipe and competitors' spoolable offerings.”

“In the fourth quarter, we anticipate a stabilization of U.S. land activity levels followed by recovery in the first quarter of 2024. Although we expect Pressure Control margins to be impacted by reduced activity levels, we believe supply chain initiatives will begin to flow through inventory values in early 2024. In addition, we plan to introduce several new product enhancements which should further serve to enhance operating results. We also expect a moderation of activity in Spoolable Technologies as the year-to-date U.S. land activity reduction in conjunction with seasonal slowdowns impact the business.”

Mr. Bender concluded, “We were excited to announce that Steve Tadlock has taken over as the CEO of the FlexSteel business and will lead us into our next phase of ownership. I'd like to take this opportunity to thank our FlexSteel team members for their support during the integration this year, which has been proceeding smoothly. I have had the opportunity to meet many of our FlexSteel associates, and it is clear that like Cactus, FlexSteel enjoys an excellent reputation due to the quality of its people, responsiveness to customer needs, and technical superiority of its products.”

Segment Performance

Upon completion of the FlexSteel acquisition, we re-evaluated our reportable segments and now report two business segments, Pressure Control (legacy Cactus) and Spoolable Technologies (FlexSteel). All corporate and other costs not directly attributable to either segment have been included in Pressure Control results.

 

Pressure Control

 

 

Three Months Ended

 

September 30,

 

June 30,

 

September 30,

 

2023

 

2023

 

2022

 

(in thousands)

Pressure Control

 

 

 

 

 

Revenue

$

182,484

 

 

$

199,134

 

 

$

184,481

 

 

 

 

 

 

 

Operating income

$

47,830

 

 

$

54,540

 

 

$

51,296

 

Revaluation gain on TRA liability(1)

 

266

 

 

 

 

 

 

1,125

 

Depreciation and amortization expense

 

6,868

 

 

 

9,127

 

 

 

8,399

 

Segment EBITDA(2)

 

54,964

 

 

 

63,667

 

 

 

60,820

 

Stock-based compensation

 

3,646

 

 

 

4,086

 

 

 

3,018

 

Revaluation gain on TRA liability(1)

 

(266

)

 

 

 

 

 

(1,125

)

Transaction related expenses(3)

 

1,084

 

 

 

2,191

 

 

 

 

Adjusted Segment EBITDA(2)

$

59,428

 

 

$

69,944

 

 

$

62,713

 

 

 

 

 

 

 

Operating income margin

 

26.2

%

 

 

27.4

%

 

 

27.8

%

Adjusted Segment EBITDA margin(2)

 

32.6

%

 

 

35.1

%

 

 

34.0

%

 

(1) Represents non-cash adjustments for the revaluation of the liability related to the TRA.

(2) Segment EBITDA, Adjusted Segment EBITDA and Adjusted Segment EBITDA margin are non-GAAP financial measures. See definition of these measures and the reconciliation of GAAP to non-GAAP financial measures in the Supplemental Information tables.

(3) Reflects fees and expenses recorded in connection with the FlexSteel Acquisition and related financing.

Third quarter 2023 Pressure Control revenue decreased $16.7 million, or 8.4%, sequentially, as sales of wellhead and production related equipment decreased primarily due to lower customer activity. Operating income decreased $6.7 million, or 12.3%, sequentially, with margins decreasing 120 basis points primarily due to lower operating leverage. Adjusted Segment EBITDA decreased $10.5 million, or 15.0%, sequentially, with Adjusted Segment EBITDA margins decreasing 250 basis points.

 

Spoolable Technologies

 

 

Three Months Ended

 

September 30,

 

June 30,

 

September 30,

 

2023

 

2023

 

2022

 

(in thousands)

Spoolable Technologies

 

 

 

 

 

Revenue

$

105,386

 

 

$

106,685

 

 

$

 

 

 

 

 

 

Operating income (loss)

$

39,773

 

 

$

(6,018

)

 

$

 

Depreciation and amortization expense

 

8,288

 

 

 

12,787

 

 

 

 

Segment EBITDA(1)

 

48,061

 

 

 

6,769

 

 

 

 

Stock-based compensation

 

716

 

 

 

1,237

 

 

 

 

Remeasurement (gain) loss on earn-out liability(2)

 

(5,091

)

 

 

18,144

 

 

 

 

Inventory step-up expense(3)

 

 

 

 

19,325

 

 

 

 

Adjusted Segment EBITDA(1)

$

43,686

 

 

$

45,475

 

 

$

 

 

 

 

 

 

 

Operating income (loss) margin

 

37.7

%

 

 

(5.6

)%

 

 

n/a

 

Adjusted Segment EBITDA margin(1)

 

41.5

%

 

 

42.6

%

 

 

n/a

 

 

(1) Segment EBITDA, Adjusted Segment EBITDA and Adjusted Segment EBITDA margin are non-GAAP financial measures. See definition of these measures and the reconciliation of GAAP to non-GAAP financial measures in the Supplemental Information tables.

(2) Represents non-cash adjustments for the remeasurement of the earn-out liability associated with the FlexSteel Acquisition.

(3) Represents amortization of the FlexSteel inventory step-up adjustment due to purchase price accounting.

Third quarter 2023 Spoolable Technologies revenues decreased $1.3 million, or 1.2% sequentially due to product mix. Operating income increased $45.8 million due to the quarter over quarter change in the remeasurement of the earn-out liability associated with the FlexSteel acquisition and a reduction in inventory step-up expense. Third quarter operating income was inclusive of $4.0 million of intangible amortization expense and a $5.1 million gain related to the remeasurement of the earn-out liability associated with the FlexSteel acquisition. Adjusted Segment EBITDA decreased $1.8 million, or 3.9%, sequentially, with Adjusted Segment EBITDA margins decreasing 110 basis points due to a modest, transient increase in material costs.

Liquidity, Capital Expenditures and Other

As of September 30, 2023, the Company had $63.7 million of cash and cash equivalents, no bank debt outstanding, and $222.9 million availability on our revolving credit facility. Operating cash flow was $80.1 million for the third quarter of 2023. During the third quarter, the Company made dividend payments and associated distributions of $9.5 million. The Company also made TRA payments and associated distributions of $32.7 million related to 2022 tax savings provided by the TRA.

Net capital expenditures represented $8.4 million during the third quarter of 2023. For the full year 2023, the Company now expects net capital expenditures to be in the range of $35 million to $40 million.

As of September 30, 2023, Cactus had 65,323,129 shares of Class A common stock outstanding (representing 82.2% of the total voting power) and 14,106,469 shares of Class B common stock outstanding (representing 17.8% of the total voting power).

Quarterly Dividend

In November 2023, the Board approved a quarterly cash dividend of $0.12 per share of Class A common stock with payment to occur on December 14, 2023 to holders of record of Class A common stock at the close of business on November 27, 2023. A corresponding distribution of up to $0.12 per CC Unit has also been approved for holders of CC Units of Cactus Companies, LLC.

Conference Call Details

The Company will host a conference call to discuss financial and operational results tomorrow, Thursday November 9, 2023 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. Please access the webcast for the call at least 10 minutes ahead of the start time to ensure a proper connection. Analysts and institutional investors may click here to pre-register for the conference call and obtain a dial-in number and passcode.

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 or rents a range of highly engineered pressure control and spoolable pipe technologies. 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 its products and rental items to assist with the installation, maintenance and handling of the equipment. Cactus operates service centers throughout North America and Australia, while also providing equipment and services in select international markets.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this press release and oral statements made regarding the matters addressed in this 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,” “plan,” “should,” “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 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 disclaims any duty to update and does not intend to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release.

 

Cactus, Inc.

Condensed Consolidated Statements of Income

(unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2023

 

2022

 

2023

 

2022

 

(in thousands, except per share data)

Revenues

 

 

 

 

 

 

 

Pressure Control

$

182,484

 

 

$

184,481

 

$

576,273

 

 

$

500,595

Spoolable Technologies

 

105,386

 

 

 

 

 

245,821

 

 

 

 

Total revenues

 

287,870

 

 

 

184,481

 

 

822,094

 

 

 

500,595

 

 

 

 

 

 

 

 

 

Operating income

 

 

 

 

 

 

 

Pressure Control

 

47,830

 

 

 

51,296

 

 

151,809

 

 

 

126,527

 

Spoolable Technologies

 

39,773

 

 

 

 

 

34,004

 

 

 

 

Total operating income

 

87,603

 

 

 

51,296

 

 

185,813

 

 

 

126,527

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

(1,372

)

 

 

1,140

 

 

(6,298

)

 

 

1,344

 

Other income, net

 

266

 

 

 

1,125

 

 

3,804

 

 

 

10

 

Income before income taxes

 

86,497

 

 

 

53,561

 

 

183,319

 

 

 

127,881

 

Income tax expense

 

18,478

 

 

 

12,041

 

 

30,553

 

 

 

23,498

 

Net income

$

68,019

 

 

$

41,520

 

$

152,766

 

 

$

104,383

 

Less: net income attributable to non-controlling interest

 

15,439

 

 

 

10,095

 

 

32,542

 

 

 

25,198

 

Net income attributable to Cactus, Inc.

$

52,580

 

 

$

31,425

 

$

120,224

 

 

$

79,185

 

 

 

 

 

Earnings per Class A share - basic

$

0.81

 

 

$

0.52

 

$

1.87

 

 

$

1.32

 

Earnings per Class A share - diluted(1)

$

0.80

 

 

$

0.51

 

$

1.82

 

 

$

1.30

 

 

 

 

 

Weighted average shares outstanding - basic

 

64,879

 

 

 

60,665

 

 

64,399

 

 

 

60,164

 

Weighted average shares outstanding - diluted(1)

 

65,486

 

 

 

61,106

 

 

79,632

 

 

 

76,296

 

 

(1) Dilution for the three months ended September 30, 2023 excludes 14.6 million weighted average shares of Class B common stock as the effect would be anti dilutive. Dilution for the nine months ended September 30, 2023 includes $33.6 million of additional pre-tax income attributable to non-controlling interest adjusted for a corporate effective tax rate of 26.0% and 14.8 million weighted average shares of Class B common stock outstanding plus the effect of dilutive securities. Dilution for the three months ended September 30, 2022 excludes 15.2 million shares of Class B common stock as the effect would be anti dilutive. Dilution for the nine months ended September 30, 2022 includes $26.2 million of additional pre-tax income attributable to non controlling interest adjusted for a corporate effective tax rate of 25.0% and 15.7 million weighted average shares of Class B common stock outstanding, plus the effect of dilutive securities.

 

Cactus, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 

 

September 30,

 

December 31,

 

2023

 

2022

 

(in thousands)

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

63,738

 

$

344,527

Accounts receivable, net

 

206,251

 

 

138,268

 

Inventories

 

203,517

 

 

161,283

 

Prepaid expenses and other current assets

 

19,442

 

 

10,564

 

Total current assets

 

492,948

 

 

654,642

 

 

 

 

 

Property and equipment, net

 

345,222

 

 

129,998

 

Operating lease right-of-use assets, net

 

19,969

 

 

23,183

 

Intangible assets, net

 

183,974

 

 

 

Goodwill

 

200,723

 

 

7,824

 

Deferred tax asset, net

 

211,535

 

 

301,644

 

Other noncurrent assets

 

9,779

 

 

1,605

 

Total assets

$

1,464,150

 

$

1,118,896

 

 

 

 

 

Liabilities and Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

$

65,217

 

$

47,776

 

Accrued expenses and other current liabilities

 

60,713

 

 

30,619

 

Earn-out liability

 

18,892

 

 

 

Current portion of liability related to tax receivable agreement

 

20,855

 

 

27,544

 

Finance lease obligations, current portion

 

7,543

 

 

5,933

 

Operating lease liabilities, current portion

 

4,147

 

 

4,777

 

Total current liabilities

 

177,367

 

 

116,649

 

 

 

 

 

Deferred tax liability, net

 

1,469

 

 

1,966

 

Liability related to tax receivable agreement, net of current portion

 

250,256

 

 

265,025

 

Finance lease obligations, net of current portion

 

9,239

 

 

6,436

 

Operating lease liabilities, net of current portion

 

15,748

 

 

18,375

 

Total liabilities

 

454,079

 

 

408,451

 

 

 

 

 

Equity

 

1,010,071

 

 

710,445

 

Total liabilities and equity

$

1,464,150

 

$

1,118,896

 

 

Cactus, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

Nine Months Ended

September 30,

 

2023

 

2022

 

(in thousands)

Cash flows from operating activities

 

 

 

Net income

$

152,766

 

 

$

104,383

 

Reconciliation of net income to net cash provided by operating activities

 

 

 

Depreciation and amortization

 

50,180

 

 

 

25,991

 

Deferred financing cost amortization

 

4,187

 

 

 

133

 

Stock-based compensation

 

13,526

 

 

 

8,034

 

Provision for expected credit losses

 

2,153

 

 

 

224

 

Inventory obsolescence

 

3,569

 

 

 

1,642

 

Gain on disposal of assets

 

(1,999

)

 

 

(470

)

Deferred income taxes

 

10,723

 

 

 

19,230

 

Change in fair value of earn-out liability

 

12,932

 

 

 

 

Gain from revaluation of liability related to tax receivable agreement

 

(3,683

)

 

 

(10

)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(12,637

)

 

 

(42,906

)

Inventories

 

45,377

 

 

 

(45,545

)

Prepaid expenses and other assets

 

(7,321

)

 

 

(4,265

)

Accounts payable

 

2,733

 

 

 

20,537

 

Accrued expenses and other liabilities

 

2,986

 

 

 

3,293

 

Payments pursuant to tax receivable agreement

 

(26,890

)

 

 

(11,666

)

Net cash provided by operating activities

 

248,602

 

 

 

78,605

 

 

 

 

 

Cash flows from investing activities

 

 

 

Acquisition of a business, net of cash and cash equivalents acquired

 

(616,189

)

 

 

 

Capital expenditures and other

 

(33,400

)

 

 

(21,197

)

Proceeds from sales of assets

 

4,347

 

 

 

1,701

 

Net cash used in investing activities

 

(645,242

)

 

 

(19,496

)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from the issuance of long-term debt

 

155,000

 

 

 

 

Repayments of borrowings of long-term debt

 

(155,000

)

 

 

 

Net proceeds from the issuance of Class A common stock

 

169,878

 

 

 

 

Payments of deferred financing costs

 

(6,857

)

 

 

(165

)

Payments on finance leases

 

(5,579

)

 

 

(4,505

)

Dividends paid to Class A common stock shareholders

 

(22,266

)

 

 

(20,015

)

Distributions to members

 

(13,926

)

 

 

(8,007

)

Repurchases of shares

 

(4,599

)

 

 

(4,495

)

Net cash provided by (used in) financing activities

 

116,651

 

 

 

(37,187

)

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(800

)

 

 

(2,968

)

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(280,789

)

 

 

18,954

 

 

 

 

 

Cash and cash equivalents

 

 

 

Beginning of period

 

344,527

 

 

 

301,669

 

End of period

$

63,738

 

 

$

320,623

 

 

Cactus, Inc. – Supplemental Information

Reconciliation of GAAP to non-GAAP Financial Measures

Adjusted net income, diluted earnings per share, as adjusted and adjusted net income margin

(unaudited)

 

Adjusted net income, diluted earnings per share, as adjusted and adjusted net income margin are not measures of net income as determined by GAAP but they are supplemental non-GAAP financial measures that are used by management and external users of the Company’s consolidated financial statements. Cactus defines adjusted net income as net income assuming Cactus, Inc. held all units in 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. Adjusted net income also includes certain other adjustments described below. Cactus defines diluted earnings per share, as adjusted as Adjusted net income divided by weighted average shares outstanding, as adjusted. Cactus defines Adjusted net income margin as Adjusted net income divided by total revenue. The Company believes this supplemental information is useful for evaluating performance period over period.

 

Three Months Ended

 

September 30,

 

June 30,

 

September 30,

 

2023

 

2023

 

2022

 

(in thousands, except per share data)

Net income

$

68,019

 

 

$

32,459

 

 

$

41,520

 

Adjustments:

 

 

 

 

 

Revaluation gain on TRA liability(1)

 

(266

)

 

 

 

 

 

(1,125

)

Transaction related expenses, pre-tax(2)

 

1,084

 

 

 

2,191

 

 

 

 

Intangible amortization expense(3)

 

3,997

 

 

 

8,663

 

 

 

 

Remeasurement (gain) loss on earn-out liability(4)

 

(5,091

)

 

 

18,144

 

 

 

 

Inventory step-up expense(5)

 

 

 

 

19,325

 

 

 

 

Income tax expense differential(6)

 

(3,939

)

 

 

(13,503

)

 

 

(1,068

)

Adjusted net income

$

63,804

 

 

$

67,279

 

 

$

39,327

 

 

 

 

 

 

 

Diluted earnings per share, as adjusted

$

0.80

 

 

$

0.84

 

 

$

0.52

 

 

 

 

 

 

 

Weighted average shares outstanding, as adjusted(7)

 

80,037

 

 

 

79,866

 

 

 

76,319

 

 

 

 

 

 

 

Revenue

$

287,870

 

 

$

305,819

 

 

$

184,481

 

Net income margin

 

23.6

%

 

 

10.6

%

 

 

22.5

%

Adjusted net income margin

 

22.2

%

 

 

22.0

%

 

 

21.3

%

(1) Represents non-cash adjustments for the revaluation of the liability related to the TRA.

(2) Reflects fees and expenses recorded in connection with the FlexSteel Acquisition and related financing.

(3) Reflects amortization expense associated with the step-up in intangible value due to purchase price accounting.

(4) Represents non-cash adjustments for the remeasurement of the earn-out liability associated with the FlexSteel Acquisition.

(5) Represents amortization of the FlexSteel inventory step-up adjustment due to purchase price accounting.

(6) Represents the increase or decrease in tax expense as though Cactus, Inc. owned 100% of its operating subsidiary 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 September 30, 2023 and June 30, 2023, and 25.0% for the three months ended September 30, 2022.

(7) Reflects 64.9, 64.6, and 60.7 million weighted average shares of basic Class A common stock outstanding and 14.6, 14.9 and 15.2 million of additional shares for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively, as if the weighted average shares of Class B common stock were exchanged and cancelled 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, Adjusted EBITDA and Adjusted EBITDA margin

(unaudited)

 

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not measures of net income as determined by GAAP but 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 defines Adjusted EBITDA margin as Adjusted EBITDA divided by total revenue. Cactus presents this supplemental information because it believes it provides 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,

 

2023

 

2023

 

2022

 

2023

 

2022

 

(in thousands)

 

(in thousands)

Net income

$

68,019

 

 

$

32,459

 

 

$

41,520

 

 

$

152,766

 

 

$

104,383

 

Interest (income) expense, net

 

1,372

 

 

 

5,928

 

 

 

(1,140

)

 

 

6,298

 

 

 

(1,344

)

Income tax expense

 

18,478

 

 

 

10,135

 

 

 

12,041

 

 

 

30,553

 

 

 

23,498

 

Depreciation and amortization

 

15,156

 

 

 

21,914

 

 

 

8,399

 

 

 

50,180

 

 

 

25,991

 

EBITDA

 

103,025

 

 

 

70,436

 

 

 

60,820

 

 

 

239,797

 

 

 

152,528

 

Revaluation gain on TRA liability(1)

 

(266

)

 

 

 

 

 

(1,125

)

 

 

(3,683

)

 

 

(10

)

Transaction related expenses(2)

 

1,084

 

 

 

2,191

 

 

 

 

 

 

11,856

 

 

 

 

Remeasurement (gain) loss on earn-out liability(3)

 

(5,091

)

 

 

18,144

 

 

 

 

 

 

12,932

 

 

 

 

Inventory step-up expense(4)

 

 

 

 

19,325

 

 

 

 

 

 

23,516

 

 

 

 

Stock-based compensation

 

4,362

 

 

 

5,323

 

 

 

3,018

 

 

 

13,526

 

 

 

8,034

 

Adjusted EBITDA

$

103,114

 

 

$

115,419

 

 

$

62,713

 

 

$

297,944

 

 

$

160,552

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

287,870

 

 

$

305,819

 

 

$

184,481

 

 

$

822,094

 

 

$

500,595

 

Net income margin

 

23.6

%

 

 

10.6

%

 

 

22.5

%

 

 

18.6

%

 

 

20.9

%

Adjusted EBITDA margin

 

35.8

%

 

 

37.7

%

 

 

34.0

%

 

 

36.2

%

 

 

32.1

%

 

(1) Represents non-cash adjustments for the revaluation of the liability related to the TRA.

(2) Reflects fees and expenses recorded in connection with the FlexSteel Acquisition and related financing.

(3) Represents non-cash adjustments for the remeasurement of the earn-out liability associated with the FlexSteel Acquisition.

(4) Represents amortization of the FlexSteel inventory step-up adjustment due to purchase price accounting.

 

Cactus, Inc. – Supplemental Information

Reconciliation of GAAP to non-GAAP Financial Measures

Segment EBITDA, Adjusted Segment EBITDA and Adjusted Segment EBITDA margin

(unaudited)

 

Segment EBITDA, Adjusted Segment EBITDA and Adjusted Segment EBITDA margin are not measures of net income as determined by GAAP but 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 Segment EBITDA as segment operating income including other non-operating income and excluding depreciation and amortization, in each case, attributable to the segment. Cactus defines Adjusted Segment EBITDA as Segment EBITDA excluding the other items outlined below that are attributable to the segment.

 

Cactus management believes Segment EBITDA and Adjusted Segment EBITDA are useful because they allow management to more effectively evaluate the Company’s segment operating performance and compare the results of its segment 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. Segment EBITDA and Adjusted Segment 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 Segment EBITDA and Adjusted Segment EBITDA may not be comparable to other similarly titled measures of other companies. Cactus defines Adjusted Segment EBITDA margin as Adjusted Segment EBITDA divided by total segment revenue. Cactus presents this supplemental information because it believes it provides 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,

 

2023

 

2023

 

2022

 

2023

 

2022

 

(in thousands)

 

(in thousands)

Pressure Control

 

 

 

 

 

 

 

 

 

Revenue

$

182,484

 

 

$

199,134

 

 

$

184,481

 

 

$

576,273

 

 

$

500,595

 

 

 

 

 

 

 

 

 

 

 

Operating income

$

47,830

 

 

$

54,540

 

 

$

51,296

 

 

$

151,809

 

 

$

126,527

 

Revaluation gain on TRA liability(1)

 

266

 

 

 

 

 

 

1,125

 

 

 

3,683

 

 

 

10

 

Depreciation and amortization expense

 

6,868

 

 

 

9,127

 

 

 

8,399

 

 

 

23,987

 

 

 

25,991

 

Segment EBITDA

 

54,964

 

 

 

63,667

 

 

 

60,820

 

 

 

179,479

 

 

 

152,528

 

Stock-based compensation

 

3,646

 

 

 

4,086

 

 

 

3,018

 

 

 

10,823

 

 

 

8,034

 

Revaluation gain on TRA liability(1)

 

(266

)

 

 

 

 

 

(1,125

)

 

 

(3,683

)

 

 

(10

)

Transaction related expenses(2)

 

1,084

 

 

 

2,191

 

 

 

 

 

 

11,856

 

 

 

 

Adjusted Segment EBITDA

$

59,428

 

 

$

69,944

 

 

$

62,713

 

 

$

198,475

 

 

$

160,552

 

 

 

 

 

 

 

 

 

 

 

Operating income margin

 

26.2

%

 

 

27.4

%

 

 

27.8

%

 

 

26.3

%

 

 

25.3

%

Adjusted Segment EBITDA margin

 

32.6

%

 

 

35.1

%

 

 

34.0

%

 

 

34.4

%

 

 

32.1

%

 

(1) Represents non-cash adjustments for the revaluation of the liability related to the TRA.

(2) Reflects fees and expenses recorded in connection with the FlexSteel Acquisition and related financing.

 

Cactus, Inc. – Supplemental Information

Reconciliation of GAAP to non-GAAP Financial Measures

Segment EBITDA, Adjusted Segment EBITDA and Adjusted Segment EBITDA margin (continued)

(unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

2023

 

2023

 

2022

 

2023

 

2022

 

(in thousands)

 

(in thousands)

Spoolable Technologies

 

 

 

 

 

 

 

 

 

Revenue

$

105,386

 

 

$

106,685

 

 

$

 

$

245,821

 

 

$

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

$

39,773

 

 

$

(6,018

)

 

$

 

$

34,004

 

 

$

 

Other non-operating income

 

 

 

 

 

 

 

 

 

121

 

 

 

 

Depreciation and amortization expense

 

8,288

 

 

 

12,787

 

 

 

 

 

26,193

 

 

 

 

Segment EBITDA

 

48,061

 

 

 

6,769

 

 

 

 

 

60,318

 

 

 

 

Stock-based compensation

 

716

 

 

 

1,237

 

 

 

 

 

2,703

 

 

 

 

Remeasurement (gain) loss on earn-out liability(1)

 

(5,091

)

 

 

18,144

 

 

 

 

 

12,932

 

 

 

 

Inventory step-up expense(2)

 

 

 

 

19,325

 

 

 

 

 

23,516

 

 

 

 

Adjusted Segment EBITDA

$

43,686

 

 

$

45,475

 

 

$

 

$

99,469

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss) margin

 

37.7

%

 

 

(5.6

)%

 

 

n/a

 

 

13.8

%

 

 

n/a

 

Adjusted Segment EBITDA margin

 

41.5

%

 

 

42.6

%

 

 

n/a

 

 

40.5

%

 

 

n/a

 

 

(1) Represents non-cash adjustments for the revaluation of the earn-out liability associated with the FlexSteel Acquisition.

(2) Represents amortization of the FlexSteel inventory step-up adjustment due to purchase price accounting.

 

A reconciliation of segment operating income to net income is shown below.

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

2023

 

2023

 

2022

 

2023

 

2022

 

(in thousands)

 

(in thousands)

Consolidated operating income (loss)

 

 

 

 

 

 

 

 

 

Pressure Control

$

47,830

 

 

$

54,540

 

 

$

51,296

 

$

151,809

 

 

$

126,527

Spoolable Technologies

 

39,773

 

 

 

(6,018

)

 

 

 

 

34,004

 

 

 

 

Total operating income

 

87,603

 

 

 

48,522

 

 

 

51,296

 

 

185,813

 

 

 

126,527

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

(1,372

)

 

 

(5,928

)

 

 

1,140

 

 

(6,298

)

 

 

1,344

 

Other income, net

 

266

 

 

 

 

 

 

1,125

 

 

3,804

 

 

 

10

 

Income before income taxes

 

86,497

 

 

 

42,594

 

 

 

53,561

 

 

183,319

 

 

 

127,881

 

Income tax expense

 

18,478

 

 

 

10,135

 

 

 

12,041

 

 

30,553

 

 

 

23,498

 

Net income

$

68,019

 

 

$

32,459

 

 

$

41,520

 

$

152,766

 

 

$

104,383

 

 

Contacts

Cactus, Inc.

Alan Boyd, 713-904-4669

Director of Corporate Development and Investor Relations

IR@CactusWHD.com

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