WHD Cactus Inc

Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced financial and operating results for the second quarter of 2024.

Second Quarter Highlights

• Revenue of $290.4 million and operating income of $79.8 million;
• Net income of $63.1 million and diluted earnings per Class A share of $0.75;
• Adjusted net income(1) of $65.2 million and diluted earnings per share, as adjusted(1) of $0.81;
• Net income margin of 21.7% and adjusted net income margin(1) of 22.4%;
• Adjusted EBITDA(2) and Adjusted EBITDA margin(2) of $103.6 million and 35.7%, respectively;
• Cash flow from operations of $78.0 million;
• Cash and cash equivalents of $246.5 million with no bank debt outstanding as of June 30, 2024;
• Final earn-out payment amount payable to the sellers of FlexSteel of $37.0 million expected to be settled and paid in the third quarter of 2024; and
• In July 2024, the Board of Directors approved an 8% increase in the dividend to $0.13 per quarter.

Financial Summary

 

Three Months Ended

 

June 30,

 

March 31,

 

June 30,

 

 

2024

 

 

 

2024

 

 

 

2023

 

 

(in thousands)

Revenues

$

290,389

 

 

$

274,123

 

 

$

305,819

 

Operating income(3)

$

79,819

 

 

$

62,550

 

 

$

48,522

 

Operating income margin

 

27.5

%

 

 

22.8

%

 

 

15.9

%

Net income

$

63,059

 

 

$

49,815

 

 

$

32,459

 

Net income margin

 

21.7

%

 

 

18.2

%

 

 

10.6

%

Adjusted net income(1)

$

65,192

 

 

$

59,600

 

 

$

67,279

 

Adjusted net income margin(1)

 

22.4

%

 

 

21.7

%

 

 

22.0

%

Adjusted EBITDA(2)

$

103,637

 

 

$

95,332

 

 

$

115,419

 

Adjusted EBITDA margin(2)

 

35.7

%

 

 

34.8

%

 

 

37.7

%

(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 reflects certain expenses related to the FlexSteel acquisition, including expenses related to the remeasurement of the earn-out liability associated with the FlexSteel acquisition and intangible amortization expenses related to purchase price accounting. See the reconciliation of GAAP to non-GAAP financial measures in the Supplemental Information tables for further details.

Scott Bender, CEO and Chairman of the Board of Cactus, commented, “I am very proud of our Company's performance in the second quarter. Pressure Control revenues rose as customer drilling efficiency increased, and we shipped significant production equipment to a large customer who had not previously used Cactus. These events more than offset the impact of the softer U.S. land rig count through the quarter. Our Spoolable Technologies segment reported solid revenues with margins exceeding expectations. International momentum continued in the quarter, combined with increased operating leverage through lower material input costs, which led to strong margin contribution.”

“Looking ahead to the third quarter of 2024, we anticipate that our U.S. land activity levels will remain relatively stable from today's levels. In Pressure Control, we expect revenue to moderate in the third quarter following the lower average drilling activity levels this year and less visibility into production equipment awards. In Spoolable Technologies, we anticipate revenues to be flat to slightly down from the second quarter reflecting the timing of international shipments.”

Mr. Bender concluded, “We believe most of the significant decline in U.S. activity is behind us for the year, although the effects of customer consolidation represent a potential downside to current activity levels. I remain very pleased with both segments' performance in this relatively soft macro environment and have confidence in our teams' ability to optimize free cash flow from our two highly differentiated segments. This confidence is reflected in the Board's recent approval to raise the dividend by 8%. As always, we will continue to responsibly allocate capital to the highest-return opportunities, with a focus on safety, costs, returns, and increasing long-term value for shareholders.”

Segment Performance

We report two business segments, Pressure Control and Spoolable Technologies, and starting with the fourth quarter of 2023, corporate and other expenses not directly attributable to either segment are presented separately as Corporate and Other Expenses. These expenses were previously included within the Pressure Control segment. Prior periods presented have been recast to conform to the new presentation.

Pressure Control

Second quarter 2024 Pressure Control revenue increased $12.2 million, or 6.9%, sequentially, as sales of wellhead and production related equipment rose as a result of increased customer drilling efficiencies and production equipment shipments to a large customer, which more than offset the impacts of lower industry activity. Operating income increased $4.0 million, or 7.7%, sequentially, with margins increasing 20 basis points. Adjusted Segment EBITDA increased $4.7 million, or 7.7%, sequentially, with Adjusted Segment EBITDA margins increasing 30 basis points. The margin improvements were due to higher operating leverage.

Spoolable Technologies

Second quarter 2024 Spoolable Technologies revenues increased $4.6 million, or 4.7%, sequentially, due to increased customer activity levels. Operating income increased $13.6 million, or 83.3%, sequentially, primarily due to a lower expense booked as a result of the remeasurement of the earn-out liability associated with the FlexSteel acquisition, which was $2.9 million in the second quarter compared to $13.3 million in the first quarter. Adjusted Segment EBITDA increased $3.7 million, or 9.4%, sequentially, with Adjusted Segment EBITDA margins increasing 170 basis points due to lower input costs and increased operating leverage.

Corporate and Other Expenses

Second quarter 2024 Corporate and Other expenses increased $0.4 million, or 6.8%, sequentially, primarily due to higher stock-based compensation expenses.

Liquidity, Capital Expenditures and Other

As of June 30, 2024, the Company had $246.5 million of cash and cash equivalents, no bank debt outstanding, and $220.1 million of availability on our revolving credit facility. Operating cash flow was $78.0 million for the second quarter of 2024. During the second quarter, the Company made dividend payments and associated distributions of $9.6 million. The Company also made TRA payments and associated distributions of $18.2 million related to 2023 tax savings provided by the TRA to minimize interest expense, which reduced the current liability related to the TRA by $15.3 million.

Net capital expenditures were $7.2 million during the second quarter of 2024. For the full year 2024, the Company now expects net capital expenditures to be in the range of $35 million to $45 million due to timing of planned investments.

As of June 30, 2024, Cactus had 66,479,914 shares of Class A common stock outstanding (representing 83.6% of the total voting power) and 13,081,859 shares of Class B common stock outstanding (representing 16.4% of the total voting power).

Quarterly Dividend

The Board of Directors approved a quarterly cash dividend of $0.13 per share of Class A common stock with payment to occur on September 12, 2024 to holders of record of Class A common stock at the close of business on August 26, 2024. A corresponding distribution of up to $0.13 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 August 1, 2024 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,” “opportunity,” 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 June 30,

 

Six Months Ended June 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

(in thousands, except per share data)

Revenues

 

 

 

 

 

 

 

Pressure Control

$

187,192

 

 

$

199,134

 

 

$

362,220

 

 

$

393,789

 

Spoolable Technologies

 

103,716

 

 

 

106,685

 

 

 

202,811

 

 

 

140,435

 

Corporate and other(1)

 

(519

)

 

 

—

 

 

 

(519

)

 

 

—

 

Total revenues

 

290,389

 

 

 

305,819

 

 

 

564,512

 

 

 

534,224

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

Pressure Control

 

55,669

 

 

 

62,888

 

 

 

107,344

 

 

 

126,059

 

Spoolable Technologies

 

30,041

 

 

 

(6,018

)

 

 

46,434

 

 

 

(5,769

)

Total segment operating income

 

85,710

 

 

 

56,870

 

 

 

153,778

 

 

 

120,290

 

Corporate and other expenses

 

(5,891

)

 

 

(8,348

)

 

 

(11,409

)

 

 

(22,080

)

Total operating income

 

79,819

 

 

 

48,522

 

 

 

142,369

 

 

 

98,210

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

1,405

 

 

 

(5,928

)

 

 

2,094

 

 

 

(4,926

)

Other income, net

 

—

 

 

 

—

 

 

 

—

 

 

 

3,538

 

Income before income taxes

 

81,224

 

 

 

42,594

 

 

 

144,463

 

 

 

96,822

 

Income tax expense

 

18,165

 

 

 

10,135

 

 

 

31,589

 

 

 

12,075

 

Net income

$

63,059

 

 

$

32,459

 

 

$

112,874

 

 

$

84,747

 

Less: net income attributable to non-controlling interest

 

13,231

 

 

 

7,709

 

 

 

24,081

 

 

 

17,103

 

Net income attributable to Cactus, Inc.

$

49,828

 

 

$

24,750

 

 

$

88,793

 

 

$

67,644

 

 

​

 

​

 

​

 

​

Earnings per Class A share - basic

$

0.75

 

 

$

0.38

 

 

$

1.35

 

 

$

1.05

 

Earnings per Class A share - diluted(2)

$

0.75

 

 

$

0.38

 

 

$

1.35

 

 

$

1.02

 

 

​

 

​

 

​

 

​

Weighted average shares outstanding - basic

 

66,142

 

 

 

64,566

 

 

 

65,760

 

 

 

64,155

 

Weighted average shares outstanding - diluted(2)

 

66,579

 

 

 

65,003

 

 

 

79,686

 

 

 

79,512

 

(1)

Represents the elimination of inter-segment revenue for sales from our Pressure Control segment to our Spoolable Technologies segment.

(2)

Dilution for the three months ended June 30, 2024 and June 30, 2023 excludes 13.4 million and 14.9 million shares of Class B common stock, respectively, as the effect would be antidilutive. Dilution for the six months ended June 30, 2024 and June 30, 2023 includes an additional $24.9 million and $17.7 million, respectively, of pre-tax income attributable to non-controlling interest adjusted for a corporate effective tax rate of 26.0% and 13.7 million and 14.9 million weighted average shares of Class B common stock outstanding, respectively, plus the effect of dilutive securities. 

Cactus, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 

 

June 30,

 

December 31,

 

2024

 

2023

 

(in thousands)

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

246,503

 

$

133,792

Accounts receivable, net

 

205,024

 

 

205,381

Inventories

 

206,730

 

 

205,625

Prepaid expenses and other current assets

 

10,764

 

 

11,380

Total current assets

 

669,021

 

 

556,178

 

 

 

 

Property and equipment, net

 

343,525

 

 

345,502

Operating lease right-of-use assets, net

 

23,239

 

 

23,496

Intangible assets, net

 

171,984

 

 

179,978

Goodwill

 

203,028

 

 

203,028

Deferred tax asset, net

 

206,409

 

 

204,852

Other noncurrent assets

 

9,187

 

 

9,527

Total assets

$

1,626,393

 

$

1,522,561

 

 

 

 

Liabilities and Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

$

63,760

 

$

71,841

Accrued expenses and other current liabilities

 

61,022

 

 

50,654

Earn-out liability

 

36,990

 

 

20,810

Current portion of liability related to tax receivable agreement

 

5,578

 

 

20,855

Finance lease obligations, current portion

 

7,087

 

 

7,280

Operating lease liabilities, current portion

 

4,186

 

 

4,220

Total current liabilities

 

178,623

 

 

175,660

 

 

 

 

Deferred tax liability, net

 

2,887

 

 

3,589

Liability related to tax receivable agreement, net of current portion

 

259,550

 

 

250,069

Finance lease obligations, net of current portion

 

9,372

 

 

9,352

Operating lease liabilities, net of current portion

 

18,953

 

 

19,121

Other noncurrent liabilities

 

2,212

 

 

—

Total liabilities

 

471,597

 

 

457,791

 

 

 

 

Equity

 

1,154,796

 

 

1,064,770

Total liabilities and equity

$

1,626,393

 

$

1,522,561

Cactus, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

Six Months Ended June 30,

 

 

2024

 

 

 

2023

 

 

(in thousands)

Cash flows from operating activities

 

 

 

Net income

$

112,874

 

 

$

84,747

 

Reconciliation of net income to net cash provided by operating activities

 

 

 

Depreciation and amortization

 

30,047

 

 

 

35,024

 

Deferred financing cost amortization

 

560

 

 

 

3,545

 

Stock-based compensation

 

10,373

 

 

 

9,164

 

Provision for expected credit losses

 

589

 

 

 

1,515

 

Inventory obsolescence

 

3,035

 

 

 

1,980

 

Gain on disposal of assets

 

(1,674

)

 

 

(1,632

)

Deferred income taxes

 

7,915

 

 

 

1,079

 

Change in fair value of earn-out liability

 

16,180

 

 

 

18,023

 

Gain from revaluation of liability related to tax receivable agreement

 

—

 

 

 

(3,417

)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(358

)

 

 

(20,107

)

Inventories

 

(4,340

)

 

 

41,185

 

Prepaid expenses and other assets

 

429

 

 

 

965

 

Accounts payable

 

(8,577

)

 

 

1,236

 

Accrued expenses and other liabilities

 

12,442

 

 

 

(4,789

)

Payments pursuant to tax receivable agreement

 

(15,277

)

 

 

—

 

Net cash provided by operating activities

 

164,218

 

 

 

168,518

 

 

 

 

 

Cash flows from investing activities

 

 

 

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

 

—

 

 

 

(618,857

)

Capital expenditures and other

 

(17,371

)

 

 

(23,700

)

Proceeds from sales of assets

 

3,317

 

 

 

3,038

 

Net cash used in investing activities

 

(14,054

)

 

 

(639,519

)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from the issuance of long-term debt

 

—

 

 

 

155,000

 

Repayments of borrowings of long-term debt

 

—

 

 

 

(100,000

)

Net proceeds from the issuance of Class A common stock

 

—

 

 

 

169,878

 

Payments of deferred financing costs

 

—

 

 

 

(6,817

)

Payments on finance leases

 

(3,954

)

 

 

(3,594

)

Dividends paid to Class A common stock shareholders

 

(16,135

)

 

 

(14,469

)

Distributions to members

 

(8,617

)

 

 

(4,712

)

Repurchases of shares

 

(8,489

)

 

 

(4,599

)

Net cash (used in) provided by financing activities

 

(37,195

)

 

 

190,687

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(258

)

 

 

(303

)

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

112,711

 

 

 

(280,617

)

 

 

 

 

Cash and cash equivalents

 

 

 

Beginning of period

 

133,792

 

 

 

344,527

 

End of period

$

246,503

 

 

$

63,910

 

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

 

June 30,

 

March 31,

 

June 30,

 

 

2024

 

 

 

2024

 

 

 

2023

 

 

(in thousands, except per share data)

Net income

$

63,059

 

 

$

49,815

 

 

$

32,459

 

Adjustments:

 

 

 

 

 

Transaction related expenses(1)

 

—

 

 

 

—

 

 

 

2,191

 

Intangible amortization expense(2)

 

3,997

 

 

 

3,997

 

 

 

8,663

 

Remeasurement loss on earn-out liability(3)

 

2,876

 

 

 

13,304

 

 

 

18,144

 

Inventory step-up expense(4)

 

—

 

 

 

—

 

 

 

19,325

 

Income tax expense differential(5)

 

(4,740

)

 

 

(7,516

)

 

 

(13,503

)

Adjusted net income

$

65,192

 

 

$

59,600

 

 

$

67,279

 

 

 

 

 

 

 

Diluted earnings per share, as adjusted

$

0.81

 

 

$

0.75

 

 

$

0.84

 

 

 

 

 

 

 

Weighted average shares outstanding, as adjusted(6)

 

79,994

 

 

 

79,556

 

 

 

79,866

 

 

 

 

 

 

 

Revenue

$

290,389

 

 

$

274,123

 

 

$

305,819

 

Net income margin

 

21.7

%

 

 

18.2

%

 

 

10.6

%

Adjusted net income margin

 

22.4

%

 

 

21.7

%

 

 

22.0

%

(1)

Reflects fees and expenses recorded in connection with the FlexSteel acquisition and related financing.

(2)

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

(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.

(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 26.0% on income before income taxes.

(6)

Reflects 66.1, 65.4, and 64.6 million weighted average shares of basic Class A common stock outstanding and 13.4, 14.0 and 14.9 million additional shares for the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, 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

 

Six Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

 

2024

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

(in thousands)

Net income

$

63,059

 

 

$

49,815

 

 

$

32,459

 

 

$

112,874

 

 

$

84,747

 

Interest (income) expense, net

 

(1,405

)

 

 

(689

)

 

 

5,928

 

 

 

(2,094

)

 

 

4,926

 

Income tax expense

 

18,165

 

 

 

13,424

 

 

 

10,135

 

 

 

31,589

 

 

 

12,075

 

Depreciation and amortization

 

15,001

 

 

 

15,046

 

 

 

21,914

 

 

 

30,047

 

 

 

35,024

 

EBITDA

 

94,820

 

 

 

77,596

 

 

 

70,436

 

 

 

172,416

 

 

 

136,772

 

Revaluation gain on TRA liability(1)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,417

)

Transaction related expenses(2)

 

—

 

 

 

—

 

 

 

2,191

 

 

 

—

 

 

 

10,772

 

Remeasurement loss on earn-out liability(3)

 

2,876

 

 

 

13,304

 

 

 

18,144

 

 

 

16,180

 

 

 

18,023

 

Inventory step-up expense(4)

 

—

 

 

 

—

 

 

 

19,325

 

 

 

—

 

 

 

23,516

 

Stock-based compensation

 

5,941

 

 

 

4,432

 

 

 

5,323

 

 

 

10,373

 

 

 

9,164

 

Adjusted EBITDA

$

103,637

 

 

$

95,332

 

 

$

115,419

 

 

$

198,969

 

 

$

194,830

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

290,389

 

 

$

274,123

 

 

$

305,819

 

 

$

564,512

 

 

$

534,224

 

Net income margin

 

21.7

%

 

 

18.2

%

 

 

10.6

%

 

 

20.0

%

 

 

15.9

%

Adjusted EBITDA margin

 

35.7

%

 

 

34.8

%

 

 

37.7

%

 

 

35.2

%

 

 

36.5

%

(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 Adjusted Segment EBITDA and Adjusted Segment EBITDA margin (unaudited)

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 Adjusted Segment EBITDA as segment operating income excluding depreciation and amortization and the other items outlined below, in each case, that are attributable to the segment.

Cactus management believes Adjusted Segment EBITDA is useful because it allows 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. Adjusted Segment EBITDA should not be considered as an alternative to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. The Company’s computations of 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

 

Six Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

 

2024

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

(in thousands)

Pressure Control

 

 

 

 

 

 

 

 

 

Revenue

$

187,192

 

 

$

175,028

 

 

$

199,134

 

 

$

362,220

 

 

$

393,789

 

Operating income

 

55,669

 

 

 

51,675

 

 

 

62,888

 

 

 

107,344

 

 

 

126,059

 

Depreciation and amortization expense

 

6,662

 

 

 

6,811

 

 

 

9,127

 

 

 

13,473

 

 

 

17,119

 

Stock-based compensation

 

2,978

 

 

 

2,148

 

 

 

2,074

 

 

 

5,126

 

 

 

3,694

 

Adjusted Segment EBITDA

$

65,309

 

 

$

60,634

 

 

$

74,089

 

 

$

125,943

 

 

$

146,872

 

Operating income margin

 

29.7

%

 

 

29.5

%

 

 

31.6

%

 

 

29.6

%

 

 

32.0

%

Adjusted Segment EBITDA margin

 

34.9

%

 

 

34.6

%

 

 

37.2

%

 

 

34.8

%

 

 

37.3

%

 

 

 

 

 

 

 

 

 

 

Spoolable Technologies

 

 

 

 

 

 

 

 

 

Revenue

$

103,716

 

 

$

99,095

 

 

$

106,685

 

$

202,811

 

 

$

140,435

 

Operating income (loss)

 

30,041

 

 

 

16,393

 

 

 

(6,018

)

 

 

46,434

 

 

 

(5,769

)

Depreciation and amortization expense

 

8,339

 

 

 

8,235

 

 

 

12,787

 

 

 

16,574

 

 

 

17,905

 

Stock-based compensation

 

1,200

 

 

 

874

 

 

 

1,237

 

 

 

2,074

 

 

 

1,987

 

Remeasurement loss on earn-out liability(1)

 

2,876

 

 

 

13,304

 

 

 

18,144

 

 

 

16,180

 

 

 

18,144

 

Inventory step-up expense(2)

 

—

 

 

 

—

 

 

 

19,325

 

 

 

—

 

 

 

23,516

 

Adjusted Segment EBITDA

$

42,456

 

 

$

38,806

 

 

$

45,475

 

 

$

81,262

 

 

$

55,783

 

Operating income (loss) margin

 

29.0

%

 

 

16.5

%

 

 

(5.6

)%

 

 

22.9

%

 

 

(4.1

)%

Adjusted Segment EBITDA margin

 

40.9

%

 

 

39.2

%

 

 

42.6

%

 

 

40.1

%

 

 

39.7

%

 

 

 

 

 

 

 

 

 

 

Corporate and Other

 

 

 

 

 

 

 

 

 

Revenue(3)

$

(519

)

 

$

—

 

 

$

—

 

 

$

(519

)

 

$

—

 

Corporate and other expenses

 

(5,891

)

 

 

(5,518

)

 

 

(8,348

)

 

 

(11,409

)

 

 

(22,080

)

Stock-based compensation

 

1,763

 

 

 

1,410

 

 

 

2,012

 

 

 

3,173

 

 

 

3,483

 

Transaction related expenses(4)

 

—

 

 

 

—

 

 

 

2,191

 

 

 

—

 

 

 

10,772

 

Adjusted Corporate EBITDA

$

(4,128

)

 

$

(4,108

)

 

$

(4,145

)

 

$

(8,236

)

 

$

(7,825

)

 

 

 

 

 

 

 

 

 

 

Total revenue

$

290,389

 

 

$

274,123

 

 

$

305,819

 

 

$

564,512

 

 

$

534,224

 

Total operating income

$

79,819

 

 

$

62,550

 

 

$

48,522

 

 

$

142,369

 

 

$

98,210

 

Total operating income margin

 

27.5

%

 

 

22.8

%

 

 

15.9

%

 

 

25.2

%

 

 

18.4

%

Total Adjusted EBITDA

$

103,637

 

 

$

95,332

 

 

$

115,419

 

 

$

198,969

 

 

$

194,830

 

Total Adjusted EBITDA margin

 

35.7

%

 

 

34.8

%

 

 

37.7

%

 

 

35.2

%

 

 

36.5

%

(1)

Represents non-cash adjustments for the remeasurement 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.

(3)

Represents the elimination of inter-segment revenue for sales from our Pressure Control segment to our Spoolable Technologies segment.

(4)

Reflects fees and expenses recorded in connection with the FlexSteel acquisition and related financing.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240730109624/en/

Cactus, Inc. Alan Boyd, 713-904-4669 Director of Corporate Development and Investor Relations IR@CactusWHD.com