Exhibit 99.1
 | |||||
Cactus Announces First Quarter 2023 Results
HOUSTON – May 9, 2023 – Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced financial and operating results for the first quarter of 2023.
First Quarter Highlights
•Closed the acquisition of HighRidge Resources, Inc. (“FlexSteel”) on February 28, 2023(1);
•Revenue of $228.4 million and operating income of $49.7 million;
•Net income of $52.3 million and diluted earnings per Class A share of $0.63;
•Adjusted net income(2) of $50.7 million and diluted earnings per share, as adjusted(2) of $0.64;
•Net income margin of 22.9% and adjusted net income margin(2) of 22.2%;
•Adjusted EBITDA(3) and Adjusted EBITDA margin(3) of $79.4 million and 34.8%, respectively;
•Cash flow from operations of $60.5 million;
•In January 2023, Cactus closed an underwritten offering of Class A common stock for net proceeds of $165.6 million; and
•Subsequent to the end of the first quarter, the Company paid down the Term Loan debt balance by $60 million.
Financial Summary
| Three Months Ended | |||||||||||||||||
| March 31, | December 31, | March 31, | |||||||||||||||
2023(1) | 2022 | 2022 | |||||||||||||||
| ($ in thousands) | |||||||||||||||||
| Revenues | $ | 228,405 | $ | 187,774 | $ | 145,899 | |||||||||||
| Operating income | $ | 49,688 | $ | 48,221 | $ | 30,990 | |||||||||||
| Operating income margin | 21.8 | % | 25.7 | % | 21.2 | % | |||||||||||
| Net income | $ | 52,288 | $ | 40,739 | $ | 27,083 | |||||||||||
| Net income margin | 22.9 | % | 21.7 | % | 18.6 | % | |||||||||||
Adjusted net income(2) | $ | 50,682 | $ | 43,525 | $ | 22,859 | |||||||||||
Adjusted net income margin(2) | 22.2 | % | 23.2 | % | 15.7 | % | |||||||||||
Adjusted EBITDA(3) | $ | 79,411 | $ | 66,393 | $ | 42,333 | |||||||||||
Adjusted EBITDA margin(3) | 34.8 | % | 35.4 | % | 29.0 | % | |||||||||||
(1)First quarter 2023 results throughout include one month of FlexSteel operating results.
(2)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.
(3)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.
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Scott Bender, President and CEO of Cactus, commented, “I am very pleased with our performance in the first quarter. The strength of our customer base and our continued focus on execution allowed us to achieve record Cactus Product market share(1) of over 43% during the period. Cactus’ rigs followed increased by approximately 6% despite the average U.S. land rig count declining by approximately 2%. Additionally, we are pleased to include one month of FlexSteel results in our first quarter following the close of the acquisition on February 28, 2023. FlexSteel revenue exceeded expectations due to increased shipments of its equipment.
“Looking ahead to the second quarter, we anticipate revenue to be up over 25% sequentially due to a full quarter's contribution from FlexSteel. While the recent movement in commodity prices is likely to pressure U.S. land activity, Cactus remains well-positioned to outpace the market given our unique product portfolio and customer relationships.”
Mr. Bender concluded, “We have been pleased with early efforts to integrate the FlexSteel business, and the opportunities between the two businesses are even more apparent post-closing. Both businesses manufacture highly differentiated products, have modest capital requirements, and have attractive growth potential. We expect that free cash flow over the coming quarters should enable Cactus to meaningfully reduce leverage following the acquisition. As always, management intends to operate with a focus on margins, returns and generating value for shareholders.”
(1)Additional information regarding market share and rigs followed is located in the Supplemental Information tables.
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). For the first quarter of 2023, we have included our Pressure Control results in historical detail as supplemental information in this release. Starting with the second quarter of 2023, we intend to only report our Pressure Control results and Spoolable Technologies results as presented below. For the first quarter of 2023, all corporate and other costs not directly attributable to either segment have been included in Pressure Control results.
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Pressure Control
| Three Months Ended | |||||||||||||||||
| March 31, | December 31, | March 31, | |||||||||||||||
| 2023 | 2022 | 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Pressure Control | |||||||||||||||||
| Revenue | $ | 194,655 | $ | 187,774 | $ | 145,899 | |||||||||||
| Operating income | $ | 49,439 | $ | 48,221 | $ | 30,990 | |||||||||||
Other non-operating income (expense)(1) | 3,417 | (1,920) | (1,115) | ||||||||||||||
| Depreciation and amortization expense | 7,992 | 8,133 | 8,677 | ||||||||||||||
Segment EBITDA(2) | 60,848 | 54,434 | 38,552 | ||||||||||||||
| Stock-based compensation | 3,091 | 2,597 | 2,666 | ||||||||||||||
Other non-operating (income) expense(1) | (3,417) | 1,920 | 1,115 | ||||||||||||||
Transaction related expenses(3) | 8,581 | 7,442 | — | ||||||||||||||
Adjusted Segment EBITDA(2) | $ | 69,103 | $ | 66,393 | $ | 42,333 | |||||||||||
| Operating income margin | 25.4 | % | 25.7 | % | 21.2 | % | |||||||||||
Adjusted Segment EBITDA margin(2) | 35.5 | % | 35.4 | % | 29.0 | % | |||||||||||
(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.
First quarter 2023 Pressure Control revenue increased $6.9 million, or 3.7%, sequentially, as sales of wellhead and production related equipment along with associated services improved primarily due to higher customer drilling activity. Operating income increased $1.2 million, or 2.5%, sequentially, with margins decreasing 30 basis points due to higher transaction expenses and rental equipment redeployment costs. Adjusted Segment EBITDA increased $2.7 million, or 4.1%, sequentially, with Adjusted Segment EBITDA margins increasing 10 basis points due to higher operating leverage.
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Spoolable Technologies
| Three Months Ended | |||||||||||||||||
| March 31, | December 31, | March 31, | |||||||||||||||
| 2023 | 2022 | 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Spoolable Technologies | |||||||||||||||||
| Revenue | $ | 33,750 | $ | — | $ | — | |||||||||||
| Operating income | 249 | — | — | ||||||||||||||
Other non-operating income (expense)(1) | 121 | — | — | ||||||||||||||
| Depreciation and amortization expense | 5,118 | — | — | ||||||||||||||
Segment EBITDA(2) | 5,488 | — | — | ||||||||||||||
| Stock-based compensation | 750 | — | — | ||||||||||||||
Other non-operating (income) expense(1) | (121) | — | — | ||||||||||||||
Inventory step-up expense(3) | 4,191 | — | — | ||||||||||||||
Adjusted Segment EBITDA(2) | $ | 10,308 | $ | — | $ | — | |||||||||||
| Operating income margin | 0.7 | % | n/a | n/a | |||||||||||||
Adjusted Segment EBITDA margin(2) | 30.5 | % | n/a | n/a | |||||||||||||
(1)Represents a $0.1 million gain for the revaluation of the earn-out liability associated with the FlexSteel Acquisition.
(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)Represents amortization of the FlexSteel inventory step-up adjustment due to purchase price accounting.
In the last month of the first quarter of 2023 (acquisition date through March 31, 2023), Spoolable Technologies generated revenue of $33.8 million and segment operating income of $0.2 million. Segment operating margin was 0.7%. Operating income was inclusive of $4.2 million of inventory step-up costs associated with the step-up in value of inventory on hand at acquisition and $3.7 million of intangible amortization expense.
Liquidity, Capital Expenditures and Other
As of March 31, 2023, the Company had $155.0 million gross bank debt, $75.4 million of cash, and $193.3 million availability on our revolving credit facility. Operating cash flow was $60.5 million for the first quarter of 2023. During the first quarter, the Company made dividend payments and associated distributions of $9.0 million.
Net cash used in investing activities represented $633.2 million during the first quarter of 2023 due primarily to the FlexSteel acquisition. Net capital expenditures were $14.3 million, inclusive of the $7.0 million purchase of a previously leased facility. For the full year 2023, the Company expects net capital expenditures to be in the range of $45 million to $55 million, inclusive of capital directed toward planned international expansion and the FlexSteel business.
On January 13, 2023, Cactus closed an underwritten offering of 3,224,300 shares of its Class A common stock for total net proceeds of approximately $165.6 million, net of underwriting discounts and selling commissions. The net proceeds from the sale of the Class A common stock in the offering were utilized to fund a portion of the initial closing price for the FlexSteel Acquisition.
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As of March 31, 2023, Cactus had 64,448,377 shares of Class A common stock outstanding (representing 81.1% of the total voting power) and 14,978,225 shares of Class B common stock outstanding (representing 18.9% of the total voting power).
Quarterly Dividend
In May 2023 the Board approved a quarterly cash dividend of $0.11 per share of Class A common stock with payment to occur on June 15, 2023 to holders of record of Class A common stock at the close of business on May 30, 2023. A corresponding distribution of up to $0.11 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 today, Tuesday, May 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 wellhead, 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
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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.
Alan Boyd, 713-904-4669
Director of Corporate Development and Investor Relations
IR@CactusWHD.com
Source: Cactus, Inc.
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Cactus, Inc.
Condensed Consolidated Statements of Income
(unaudited)
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| (in thousands, except per share data) | |||||||||||
| Revenues | |||||||||||
| Pressure Control revenue | $ | 194,655 | $ | 145,899 | |||||||
| Spoolable Technologies revenue | 33,750 | — | |||||||||
| Total revenues | 228,405 | 145,899 | |||||||||
| Operating income | |||||||||||
| Pressure Control operating income | 49,439 | 30,990 | |||||||||
| Spoolable Technologies operating income | 249 | — | |||||||||
| Total operating income | 49,688 | 30,990 | |||||||||
| Interest income (expense), net | 1,002 | (100) | |||||||||
| Other income (expense), net | 3,538 | (1,115) | |||||||||
| Income before income taxes | 54,228 | 29,775 | |||||||||
| Income tax expense | 1,940 | 2,692 | |||||||||
| Net income | $ | 52,288 | $ | 27,083 | |||||||
| Less: net income attributable to non-controlling interest | 9,394 | 6,467 | |||||||||
| Net income attributable to Cactus, Inc. | $ | 42,894 | $ | 20,616 | |||||||
| Earnings per Class A share - basic | $ | 0.67 | $ | 0.35 | |||||||
| Earnings per Class A share - diluted (a) | $ | 0.63 | $ | 0.34 | |||||||
| Weighted average shares outstanding - basic | 63,740 | 59,288 | |||||||||
| Weighted average shares outstanding - diluted (a) | 79,155 | 76,162 | |||||||||
(a)Dilution for the three months ended March 31, 2023 includes $9.7 million of additional pre-tax income attributable to non-controlling interest adjusted for a corporate effective tax rate of 24.5% and 15.0 million weighted average shares of Class B common stock outstanding plus the effect of dilutive securities. Dilution for the three months ended March 31, 2022 includes $6.7 million of additional pre-tax income attributable to non-controlling interest adjusted for a corporate effective tax rate of 26.0% and 16.5 million weighted average shares of Class B common stock outstanding plus the effect of dilutive securities.
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Cactus, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
| March 31, | December 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| (in thousands) | |||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 75,422 | $ | 344,527 | |||||||
| Accounts receivable, net | 209,442 | 138,268 | |||||||||
| Inventories | 232,598 | 161,283 | |||||||||
| Prepaid expenses and other current assets | 9,993 | 10,564 | |||||||||
| Total current assets | 527,455 | 654,642 | |||||||||
| Property and equipment, net | 351,302 | 129,998 | |||||||||
| Operating lease right-of-use assets, net | 22,028 | 23,183 | |||||||||
| Intangible assets, net | 196,634 | — | |||||||||
| Goodwill | 201,302 | 7,824 | |||||||||
| Deferred tax asset, net | 211,460 | 301,644 | |||||||||
| Other noncurrent assets | 10,086 | 1,605 | |||||||||
| Total assets | $ | 1,520,267 | $ | 1,118,896 | |||||||
| Liabilities and Equity | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | 56,743 | $ | 47,776 | |||||||
| Accrued expenses and other current liabilities | 50,766 | 30,619 | |||||||||
| Current portion of liability related to tax receivable agreement | 27,544 | 27,544 | |||||||||
| Finance lease obligations, current portion | 7,242 | 5,933 | |||||||||
| Operating lease liabilities, current portion | 4,521 | 4,777 | |||||||||
| Long-term debt, current portion | 39,750 | — | |||||||||
| Total current liabilities | 186,566 | 116,649 | |||||||||
| Deferred tax liability, net | 2,123 | 1,966 | |||||||||
| Liability related to tax receivable agreement, net of current portion | 261,607 | 265,025 | |||||||||
| Finance lease obligations, net of current portion | 8,900 | 6,436 | |||||||||
| Operating lease liabilities, net of current portion | 17,429 | 18,375 | |||||||||
| Long-term debt, net of current portion | 111,967 | — | |||||||||
| Other noncurrent liabilities | 5,839 | — | |||||||||
| Total liabilities | 594,431 | 408,451 | |||||||||
| Equity | 925,836 | 710,445 | |||||||||
| Total liabilities and equity | $ | 1,520,267 | $ | 1,118,896 | |||||||
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Cactus, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| (in thousands) | |||||||||||
| Cash flows from operating activities | |||||||||||
| Net income | $ | 52,288 | $ | 27,083 | |||||||
| Reconciliation of net income to net cash provided by operating activities | |||||||||||
| Depreciation and amortization | 13,110 | 8,677 | |||||||||
| Deferred financing cost amortization | 291 | 42 | |||||||||
| Stock-based compensation | 3,841 | 2,666 | |||||||||
| Provision for expected credit losses | (376) | (110) | |||||||||
| Inventory obsolescence | 576 | 480 | |||||||||
| Gain on disposal of assets | (1,033) | (293) | |||||||||
| Deferred income taxes | (1,406) | 1,919 | |||||||||
| Change in fair value of earn-out liability | (121) | — | |||||||||
| (Gain) loss from revaluation of liability related to tax receivable agreement | (3,417) | 1,115 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (12,883) | (14,681) | |||||||||
| Inventories | 20,565 | (16,648) | |||||||||
| Prepaid expenses and other assets | 2,151 | (463) | |||||||||
| Accounts payable | (6,282) | 6,934 | |||||||||
| Accrued expenses and other liabilities | (6,842) | 488 | |||||||||
| Net cash provided by operating activities | 60,462 | 17,209 | |||||||||
| Cash flows from investing activities | |||||||||||
| Acquisition of a business, net of cash and cash equivalents acquired | (618,857) | — | |||||||||
| Capital expenditures and other | (15,928) | (7,652) | |||||||||
| Proceeds from sales of assets | 1,633 | 358 | |||||||||
| Net cash used in investing activities | (633,152) | (7,294) | |||||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from issuance of long-term debt | 155,000 | — | |||||||||
| Net proceeds from the issuance of Class A common stock | 169,878 | — | |||||||||
| Payments of deferred financing costs | (6,665) | — | |||||||||
| Payments on finance leases | (1,709) | (1,438) | |||||||||
| Dividends paid to Class A common stock shareholders | (7,353) | (6,664) | |||||||||
| Distributions to members | (1,645) | (1,654) | |||||||||
| Repurchase of shares | (4,343) | (4,424) | |||||||||
| Net cash provided by (used in) financing activities | 303,163 | (14,180) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 422 | 337 | |||||||||
| Net decrease in cash and cash equivalents | (269,105) | (3,928) | |||||||||
| Cash and cash equivalents | |||||||||||
| Beginning of period | 344,527 | 301,669 | |||||||||
| End of period | $ | 75,422 | $ | 297,741 | |||||||
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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 | |||||||||||||||||
| March 31, | December 31, | March 31, | |||||||||||||||
| 2023 | 2022 | 2022 | |||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||
| Net income | $ | 52,288 | $ | 40,739 | $ | 27,083 | |||||||||||
| Adjustments: | |||||||||||||||||
Other non-operating (income) expense, pre-tax(1) | (3,538) | 1,920 | 1,115 | ||||||||||||||
Transaction related expenses, pre-tax(2) | 8,581 | 7,442 | — | ||||||||||||||
Intangible amortization expense(3) | 3,666 | — | — | ||||||||||||||
Inventory step-up expense(4) | 4,191 | — | — | ||||||||||||||
Income tax expense differential(5) | (14,506) | (6,576) | (5,339) | ||||||||||||||
| Adjusted net income | $ | 50,682 | $ | 43,525 | $ | 22,859 | |||||||||||
| Diluted earnings per share, as adjusted | $ | 0.64 | $ | 0.57 | $ | 0.30 | |||||||||||
Weighted average shares outstanding, as adjusted(6) | 79,155 | 76,410 | 76,162 | ||||||||||||||
| Revenue | $ | 228,405 | $ | 187,774 | $ | 145,899 | |||||||||||
| Net income margin | 22.9 | % | 21.7 | % | 18.6 | % | |||||||||||
| Adjusted net income margin | 22.2 | % | 23.2 | % | 15.7 | % | |||||||||||
(1)Primarily 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 amortization of the FlexSteel inventory step-up adjustment due to purchase price accounting.
(5)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 24.5% on income before income taxes for the three months ended March 31, 2023, 25.0% for the three months ended December 31, 2022 and 26.0% for the three months ended March 31, 2022.
(6)Reflects 63.7, 60.8, and 59.3 million weighted average shares of basic Class A common stock outstanding and 15.0, 15.1 and 16.5 million of additional shares for the three months ended March 31, 2023, December 31, 2022 and March 31, 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.
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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 | |||||||||||||||||
| March 31, | December 31, | March 31, | |||||||||||||||
| 2023 | 2022 | 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Net income | $ | 52,288 | $ | 40,739 | $ | 27,083 | |||||||||||
| Interest (income) expense, net | (1,002) | (2,370) | 100 | ||||||||||||||
| Income tax expense (benefit) | 1,940 | 7,932 | 2,692 | ||||||||||||||
| Depreciation and amortization | 13,110 | 8,133 | 8,677 | ||||||||||||||
| EBITDA | 66,336 | 54,434 | 38,552 | ||||||||||||||
Other non-operating (income) expense(1) | (3,538) | 1,920 | 1,115 | ||||||||||||||
Transaction related expenses(2) | 8,581 | 7,442 | — | ||||||||||||||
Inventory step-up expense(3) | 4,191 | — | — | ||||||||||||||
| Stock-based compensation | 3,841 | 2,597 | 2,666 | ||||||||||||||
| Adjusted EBITDA | $ | 79,411 | $ | 66,393 | $ | 42,333 | |||||||||||
| Revenue | $ | 228,405 | $ | 187,774 | $ | 145,899 | |||||||||||
| Net income margin | 22.9 | % | 21.7 | % | 18.6 | % | |||||||||||
| Adjusted EBITDA margin | 34.8 | % | 35.4 | % | 29.0 | % | |||||||||||
(1)Primarily 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 amortization of the FlexSteel inventory step-up adjustment due to purchase price accounting.
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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 operating income including other non-operating income and excluding depreciation and amortization. Cactus defines Adjusted Segment EBITDA as Segment EBITDA excluding the other items outlined below.
Cactus management believes Segment EBITDA and Adjusted Segment 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. 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 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 | |||||||||||||||||
| March 31, | December 31, | March 31, | |||||||||||||||
| 2023 | 2022 | 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Pressure Control | |||||||||||||||||
| Revenue | $ | 194,655 | $ | 187,774 | $ | 145,899 | |||||||||||
| Operating income | $ | 49,439 | $ | 48,221 | $ | 30,990 | |||||||||||
Other non-operating income (expense)(1) | 3,417 | (1,920) | (1,115) | ||||||||||||||
| Depreciation and amortization expense | 7,992 | 8,133 | 8,677 | ||||||||||||||
| Segment EBITDA | 60,848 | 54,434 | 38,552 | ||||||||||||||
| Stock-based compensation | 3,091 | 2,597 | 2,666 | ||||||||||||||
Other non-operating (income) expense(1) | (3,417) | 1,920 | 1,115 | ||||||||||||||
Transaction related expenses(2) | 8,581 | 7,442 | — | ||||||||||||||
| Adjusted Segment EBITDA | $ | 69,103 | $ | 66,393 | $ | 42,333 | |||||||||||
| Operating income margin | 25.4 | % | 25.7 | % | 21.2 | % | |||||||||||
| Adjusted Segment EBITDA margin | 35.5 | % | 35.4 | % | 29.0 | % | |||||||||||
(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.
12
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 | |||||||||||||||||
| March 31, | December 31, | March 31, | |||||||||||||||
| 2023 | 2022 | 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Spoolable Technologies | |||||||||||||||||
| Revenue | $ | 33,750 | $ | — | $ | — | |||||||||||
| Operating income | 249 | — | — | ||||||||||||||
Other non-operating income (expense)(1) | 121 | — | — | ||||||||||||||
| Depreciation and amortization expense | 5,118 | — | — | ||||||||||||||
| Segment EBITDA | 5,488 | — | — | ||||||||||||||
| Stock-based compensation | 750 | — | — | ||||||||||||||
Other non-operating (income) expense(1) | (121) | — | — | ||||||||||||||
Inventory step-up expense(2) | 4,191 | — | — | ||||||||||||||
| Adjusted Segment EBITDA | $ | 10,308 | $ | — | $ | — | |||||||||||
| Operating income margin | 0.7 | % | n/a | n/a | |||||||||||||
| Adjusted Segment EBITDA margin | 30.5 | % | n/a | n/a | |||||||||||||
(1)Represents a $0.1 million gain 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 | |||||||||||||||||
| March 31, | December 31, | March 31, | |||||||||||||||
| 2023 | 2022 | 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Consolidated | |||||||||||||||||
| Pressure Control operating income | $ | 49,439 | $ | 48,221 | $ | 30,990 | |||||||||||
| Spoolable Technologies operating income | 249 | — | — | ||||||||||||||
| Total operating income | 49,688 | 48,221 | 30,990 | ||||||||||||||
| Interest income (expense), net | 1,002 | 2,370 | (100) | ||||||||||||||
| Other income (expense), net | 3,538 | (1,920) | (1,115) | ||||||||||||||
| Income before income taxes | 54,228 | 48,671 | 29,775 | ||||||||||||||
| Income tax expense | 1,940 | 7,932 | 2,692 | ||||||||||||||
| Net income | $ | 52,288 | $ | 40,739 | $ | 27,083 | |||||||||||
13
Cactus, Inc. – Supplemental Information
Pressure Control Results
Historical Presentation
(unaudited)
Three Months Ended | |||||||||||||||||
| March 31, | December 31, | March 31, | |||||||||||||||
| 2023 | 2022 | 2022 | |||||||||||||||
(in thousands) | |||||||||||||||||
Revenues | |||||||||||||||||
| Product | $ | 129,779 | $ | 124,561 | $ | 94,040 | |||||||||||
| Rental | 26,709 | 27,310 | 22,343 | ||||||||||||||
| Field service and other | 38,167 | 35,903 | 29,516 | ||||||||||||||
| Total revenues | 194,655 | 187,774 | 145,899 | ||||||||||||||
Gross profit | |||||||||||||||||
| Product | $ | 52,109 | $ | 50,529 | $ | 33,120 | |||||||||||
| Rental | 11,207 | 12,013 | 7,254 | ||||||||||||||
| Field service and other | 8,813 | 8,575 | 4,710 | ||||||||||||||
| Total gross profit | 72,129 | 71,117 | 45,084 | ||||||||||||||
Gross margin | |||||||||||||||||
| Product | 40.2 | % | 40.6 | % | 35.2 | % | |||||||||||
| Rental | 42.0 | % | 44.0 | % | 32.5 | % | |||||||||||
| Field service and other | 23.1 | % | 23.9 | % | 16.0 | % | |||||||||||
| Total gross margin | 37.1 | % | 37.9 | % | 30.9 | % | |||||||||||
Operating income | $ | 49,439 | $ | 48,221 | $ | 30,990 | |||||||||||
Operating margin | 25.4 | % | 25.7 | % | 21.2 | % | |||||||||||
| Depreciation and amortization | |||||||||||||||||
| Cost of product revenue | $ | 839 | $ | 783 | $ | 748 | |||||||||||
| Cost of rental revenue | 5,109 | 5,442 | 6,167 | ||||||||||||||
| Cost of field service and other revenue | 1,902 | 1,773 | 1,673 | ||||||||||||||
| Selling, general and administrative expenses | 142 | 135 | 89 | ||||||||||||||
| Total depreciation and amortization | 7,992 | 8,133 | 8,677 | ||||||||||||||
14
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, | |||||||||||||||
| 2023 | 2022 | 2022 | |||||||||||||||
| Cactus U.S. onshore rigs followed | 321 | 304 | 254 | ||||||||||||||
| Baker Hughes U.S. onshore rig count quarterly average | 742 | 757 | 616 | ||||||||||||||
| Market share | 43.3 | % | 40.2 | % | 41.2 | % | |||||||||||
15