Cactus, Inc.

Previous wording

See “Item 1. Business” for information on our products and business. Demand for our products and services depends primarily upon oil and gas industry activity levels, including the number of active drilling rigs, the number of wells being drilled, the number of wells being completed and the volume of newly producing wells, among other factors. Oil and gas exploration and production activity is in turn heavily influenced by, among other factors, investor sentiment, availability of capital and oil and gas prices locally and worldwide, which have historically been volatile.

Current wording

See “Item 1. Business” for information on our products and business. Demand for our products and services depends primarily upon oil and gas industry activity levels, including the number of active drilling rigs, the number of wells being drilled, the number of wells being completed and the volume of newly producing wells, among other factors. Oil and gas E&P activity is in turn heavily influenced by, among other factors, investor sentiment, availability of capital and oil and gas prices locally and worldwide, which have historically been volatile.

Previous wording

We operate through service centers in the United States, which are strategically located in the key oil and gas producing regions, and in Eastern Australia. These service centers support our field services and provide equipment assembly and repair services. We also provide rental and service operations in the Middle East. Pressure Control manufacturing and production facilities are located in Bossier City, Louisiana and Suzhou, China.

Current wording

We operate through service centers in the United States, which are strategically located in the key oil and gas producing regions, and in Eastern Australia. These service centers support our field services and provide equipment assembly and repair services. We also provide rental and service operations in the Middle East. Pressure Control manufacturing and production facilities are located in Bossier City, Louisiana, Suzhou, China and Hai Duong, Vietnam.

Previous wording

Demand for our product sales in the Pressure Control segment are driven primarily by the number of new wells drilled, as each new well requires a wellhead and, after the completion phase, a production tree. Demand for our rental items is driven primarily by the number of well completions as we rent frac trees to oil and gas operators to assist in hydraulic fracturing. Rental demand is also driven to a lesser extent by drilling activity as we rent tools used in the installation of wellheads. Field service and other revenues are closely correlated with revenues from product sales and rentals, as items sold or rented almost always have an associated service component.

Current wording

Demand for our product sales in the Pressure Control segment are driven primarily by the number of new wells drilled, as each new well requires a wellhead and, after the completion phase, a production tree. Demand for our rental items is driven primarily by the number of well completions as we rent frac trees to oil and gas operators to assist in hydraulic fracturing. Rental demand is also driven by drilling activity as we rent tools used in the installation of wellheads. Field service and other revenues are closely correlated with revenues from product sales and rentals, as items sold or rented almost always have an associated service component.

Previous wording

Our business experiences some seasonality during the fourth quarter due to holidays and customers managing their budgets as the year closes out. This can lead to lower activity in our three revenue categories as well as lower margins, particularly in field services due to lower labor utilization.

Current wording

Our business experiences some seasonality during the fourth quarter due to holidays and customers managing their cash balances as the year closes out. These activities can lead to lower demand in our three revenue categories as well as lower margins, particularly in field services due to lower labor utilization.

Previous wording

Other income (expense), net. Other income (expense), net represents non-cash adjustments for the revaluation of the liability related to the tax receivable agreement as a result of changes to the forecasted state tax rate.

Current wording

Other (expense) income, net. Other expense, net of $0.8 million in 2025, represented a decrease of $4.0 million, compared to other income, net of $3.2 million. The decrease primarily related to the revaluation of the liability related to the tax receivable agreement as a result of changes to the forecasted state tax rate.

Previous wording

Income tax expense. Income tax expense for 2023 was $47.5 million (18.1% effective tax rate) compared to $31.4 million (17.8% effective tax rate) for 2022. Income tax expense for 2023 includes approximately $56.6 million of expense associated with current income offset by a $12.1 million benefit associated with the release of our valuation allowance previously provided for our investment in Cactus Companies based on the determination that the deferred tax asset was realizable due to our ability to generate sufficient taxable income of the appropriate type. Additionally, we recognized $4.9 million of expense associated with the revaluation of our deferred tax asset as a result of a change in our forecasted state tax rate, $0.5 million of expense related to the finalization of our 2022 tax returns, a $1.2 million benefit associated with permanent differences related to equity compensation and a $1.2 million benefit associated with other adjustments. Income tax expense for 2022 primarily included approximately $36.4 million of expense associated with current income offset by a $1.7 million benefit associated with permanent differences related to equity compensation, a $1.7 million benefit resulting from a change in our forecasted state rate and a $1.4 million tax benefit associated with the partial valuation allowance release in conjunction with CW Unit redemptions during 2022. Partial valuation releases occur in conjunction with redemptions of CW Units (or CC Units, in the case of redemptions after the CC Reorganization) as a portion of Cactus Inc.’s deferred tax assets from its investment in Cactus LLC (or, after the CC Reorganization, its investment in Cactus Companies) becomes realizable. Cactus Inc. is only subject to federal and state income tax on its share of income from Cactus Companies. Income allocated to the non-controlling interest is only taxable to the non-controlling interest.

Current wording

Income tax expense. Income tax expense for 2025 was $59.0 million (22.6% effective tax rate) compared to $66.5 million (22.2% effective tax rate) for 2024. Income tax expense for 2025 includes $57.3 million of expense associated with current income, approximately $0.3 million of expense associated with permanent differences related to equity compensation, and approximately $1.4 million of expense associated with other adjustments. Income tax expense for 2024 includes approximately $66.5 million of expense associated with current income. Additionally, in 2024 we recognized $2.1 million of expense associated with the revaluation of our deferred tax asset as a result of a change in our forecasted state tax rate, a $2.1 million benefit related to the finalization of our 2023 tax returns, a $0.7 million benefit associated with permanent differences related to equity compensation and $0.7 million of expense associated with other adjustments. Partial valuation releases occur in conjunction with redemptions of CC Units as a portion of Cactus Inc.’s deferred tax assets from its investment in Cactus Companies becomes realizable. Cactus Inc. is only subject to federal and state income tax on its share of income from Cactus Companies. Income allocated to the non-controlling interest is only taxable to the non-controlling interest.

Previous wording

Interest income (expense), net. Interest income, net was $6.5 million in 2024 compared to interest expense, net of $6.5 million in 2023. The increase in interest income, net of $12.9 million was primarily due to an increase in interest income earned on cash invested during the 2024 period. Interest expense in 2023 was primarily related to borrowings outstanding through July 2023 under the Amended ABL Credit Facility (as defined in Note 6 in the notes to the Consolidated Financial Statements) which were required to finance the FlexSteel acquisition.

Current wording

Interest income (expense), net. Interest income, net was $6.5 million in 2024 compared to interest expense, net of $6.5 million in 2023. The increase in interest income, net of $12.9 million was primarily due to an increase in interest income earned on cash invested during the 2024 period. Interest expense in 2023 was primarily related to borrowings outstanding through July 2023 under the Amended ABL Credit Facility (the "Second Amended ABL Credit Facility") which were required to finance the FlexSteel acquisition.

Previous wording

At December 31, 2024, we had $342.8 million of cash and cash equivalents. Our primary sources of liquidity and capital resources are cash on hand, cash flows generated by operating activities and, if necessary, borrowings under our Amended ABL Credit Facility. Depending upon market conditions and other factors, we may also have the ability to issue additional equity and debt if needed. As of December 31, 2024, we had no borrowings outstanding under our Amended ABL Credit Facility and $222.6 million of available borrowing capacity. We had $2.4 million in letters of credit outstanding at December 31, 2024 which reduced our available borrowing capacity. We were in compliance with the covenants of the Amended ABL Credit Facility as of December 31, 2024.

Current wording

Our primary sources of liquidity and capital resources are cash on hand, cash flows generated by operating activities and, if necessary, borrowings under our Amended ABL Credit Facility (as defined in Note 6 in the notes to the Consolidated Financial Statements). Depending upon market conditions and other factors, we may also have the ability to issue additional equity and debt if needed. As of December 31, 2025, we had no borrowings outstanding under our Amended ABL Credit

Previous wording

We expect that our existing cash on hand, cash generated from operations and available borrowings under our Amended ABL Credit Facility will be sufficient for the next 12 months to meet our material cash requirements, including working capital requirements, debt service obligations, anticipated capital expenditures, lease obligations, repurchases of shares of our Class A common stock, expected TRA liability payments, anticipated tax liabilities and dividends to holders of our Class A common stock as well as pro rata cash distributions to holders of CC Units other than Cactus Inc.

Current wording

We expect that our existing cash on hand, cash generated from operations and available borrowings under our Amended ABL Credit Facility and Term Loan Facility will be sufficient for the next 12 months to meet our material cash requirements, including working capital requirements, debt service obligations, anticipated capital expenditures, lease obligations, repurchases of shares of our Class A common stock, expected TRA liability payments, anticipated tax liabilities and dividends to holders of our Class A common stock as well as pro rata cash distributions to holders of CC Units other than Cactus Inc.

Previous wording

We currently estimate our net capital expenditures for the year ending December 31, 2025 will range from $45 million to $55 million, mostly related to rental fleet investments including drilling tools, international expansion, diversification of our low cost supply chain, enhancements for our Baytown, TX manufacturing plant and additional deployment of equipment to facilitate installation of recent product introductions. We continuously evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including, among other things, demand for rental assets, available capacity in existing locations, prevailing economic conditions, market conditions in the E&P industry, customers’ forecasts, crude oil and natural gas price volatility and company initiatives.

Current wording

We currently estimate our net capital expenditures for the year ending December 31, 2026 will range from $40 million to $50 million, including investments in international expansion such as investments in the Joint Venture, further diversification of our low cost supply chain, enhancements for our Baytown, TX manufacturing plant and Hobbs, NM service center and additional deployment of equipment to facilitate installation of recent product introductions. We continuously evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including, among other things, demand for rental assets, available capacity in existing locations, prevailing economic conditions, market conditions in the E&P industry, customers’ forecasts, crude oil and natural gas price volatility and company initiatives.

Previous wording

Assuming no material changes in the relevant tax law, we expect that if the TRA were terminated as of December 31, 2024, the estimated termination payments, based on the assumptions discussed in Note 11 of the notes to the Consolidated Financial Statements, would be approximately $273.7 million, calculated using a discount rate equal to the 12-month term SOFR published by CME Group Benchmark Administration Limited, plus 71.513 basis points, applied against an undiscounted liability of $406.5 million. A 10% increase in the price of our Class A common stock at December 31, 2024 would have increased the discounted liability by $9.6 million to $283.3 million (an undiscounted increase of $15.8 million to $422.3 million), and likewise, a 10% decrease in the price of our Class A common stock at December 31, 2024 would have decreased the discounted liability by $9.6 million to $264.1 million (an undiscounted decrease of $15.8 million to $390.8 million).

Current wording

Assuming no material changes in the relevant tax law, we expect that if the TRA were terminated as of December 31, 2025, the estimated termination payments, based on the assumptions discussed in Note 11 of the notes to the Consolidated Financial Statements, would be approximately $251.2 million, calculated using a discount rate equal to the 12-month term SOFR published by CME Group Benchmark Administration Limited, plus 221.5 basis points, applied against an undiscounted liability of $348.4 million. A 10% increase in the price of our Class A common stock at December 31, 2025 would have increased the discounted liability by $7.6 million to $258.8 million (an undiscounted increase of $11.9 million to $360.3 million), and likewise, a 10% decrease in the price of our Class A common stock at December 31, 2025 would have decreased the discounted liability by $7.6 million to $243.6 million (an undiscounted decrease of $11.9 million to $336.6 million).

Previous wording

Net cash provided by operating activities was $340.3 million in 2023 compared to $117.9 million in 2022. Operating cash flows increased primarily due to higher income and a decrease in cash outflows associated with working capital, largely related to decreased purchases of inventory as well as higher collections on receivable balances. These increases in operating cash flows were slightly offset by $20.5 million of additional income tax payments, higher TRA payments of $15.2 million and $4.6 million of additional interest paid in 2023 compared to 2022.

Current wording

Net cash provided by operating activities was $258.4 million in 2025 compared to $316.1 million in 2024. Operating cash flows decreased primarily due to lower earnings as well as an increase in cash outflows associated with working capital, largely related to purchases of inventory of $26.8 million, reflecting escalated values due to tariffs. These decreases in operating cash flows were partially offset by an increase in customer collections of $13.4 million.

Previous wording

Estimating the amount and timing of the tax benefit is by its nature imprecise and the assumptions used in the estimates can change. The tax benefit is dependent upon future events and assumptions, the amount of the redeeming unit holders’ tax basis in its CC Units (formerly CW Units) at the time of the relevant redemption, the depreciation and amortization periods that apply to the increase in tax basis, the amount and timing of taxable income we generate in the future and the U.S. federal, state and local income tax rate then applicable, and the portion of Cactus Inc.’s payments under the TRA that constitute imputed interest or give rise to depreciable or amortizable tax basis. The most critical estimate included in calculating the TRA liability to record is the combined U.S. federal income tax rate and an assumed combined state and local income tax rate, to determine the future benefit we will realize. A 100 basis point decrease/increase in the blended tax rate used would decrease/increase the TRA liability recorded at December 31, 2024 by approximately $15.3 million.

Current wording

Estimating the amount and timing of the tax benefit is by its nature imprecise and the assumptions used in the estimates can change. The tax benefit is dependent upon future events and assumptions, the amount of the redeeming unit holders’ tax basis in its CC Units (formerly CW Units) at the time of the relevant redemption, the depreciation and amortization periods that apply to the increase in tax basis, the amount and timing of taxable income we generate in the future and the U.S. federal, state and local income tax rate then applicable, and the portion of Cactus Inc.’s payments under the TRA that constitute imputed interest or give rise to depreciable or amortizable tax basis. The most critical estimate included in calculating the TRA liability to record is the combined U.S. federal income tax rate and an assumed combined state and local income tax rate, to determine the future benefit we will realize. A 100 basis point decrease/increase in the blended tax rate used would decrease/increase the TRA liability recorded at December 31, 2025 by approximately $14.4 million.