Cactus, Inc.

Previous wording

Except as otherwise indicated or required by the context, all references in this Quarterly Report to the “Company,” “Cactus,” “we,” “us” and “our” refer to Cactus, Inc. (“Cactus Inc.”) and its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes. The following discussion contains “forward-looking statements” that reflect our plans, estimates, beliefs and expected performance. Our actual results may differ materially from those anticipated as discussed in these forward-looking statements as a result of a variety of risks and uncertainties, which are difficult to predict, including those described above in “Cautionary Note Regarding Forward-Looking Statements,” and in the risk factors included in “Part I, Item 1A. Risk Factors” in our 2023 Annual Report. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We assume no obligation to update any of these forward-looking statements except as otherwise required by law.

Current wording

Except as otherwise indicated or required by the context, all references in this Quarterly Report to the “Company,” “Cactus,” “we,” “us” and “our” refer to Cactus, Inc. (“Cactus Inc.”) and its consolidated subsidiaries, unless we state otherwise or the context otherwise requires. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes. The following discussion contains “forward-looking statements” that reflect our plans, estimates, beliefs and expected performance. Our actual results may differ materially from those anticipated as discussed in these forward-looking statements as a result of a variety of risks and uncertainties, which are difficult to predict, including those described above in “Cautionary Note Regarding Forward-Looking Statements,” and in the risk factors included in “Part I, Item 1A. Risk Factors” in our 2024 Annual Report and "Part II, Item 1A. Risk Factors" in this Quarterly Report. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We assume no obligation to update any of these forward-looking statements except as otherwise required by law.

Previous wording

During the nine months ended September 30, 2024, we derived 76% of total revenues from the sale of our products, 9% of total revenues from rental and 15% of total revenues from field service and other. During the nine months ended September 30, 2023, we derived 74% of total revenues from the sale of our products, 10% of total revenues from rental and 16% of total revenues from field service and other. We have predominantly domestic operations, with more limited operations in Australia, Canada, and the Middle East, as well as sales in other international markets.

Current wording

During the three months ended March 31, 2025, we derived 74% of total revenues from the sale of our products, 10% of total revenues from rental and 16% of total revenues from field service and other. During the three months ended March 31, 2024, we derived 76% of total revenues from the sale of our products, 8% of total revenues from rental and 16% of total revenues from field service and other. We have predominantly domestic operations, with more limited operations in Australia, Canada, and the Middle East, as well as sales in other international markets.

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 Australia. These service centers support our field services and provide equipment assembly and repair services. We also provide rental and service operations in the Kingdom of Saudi Arabia. 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 Australia. These service centers support our field services and provide equipment assembly and repair services. We also provide rental and service operations in the Kingdom of Saudi Arabia. Pressure Control manufacturing and production facilities are located in Bossier City, Louisiana, Suzhou, China, and Vietnam.

Previous wording

(1)EIA Cushing, OK WTI (“West Texas Intermediate”) spot price.

Current wording

(1)EIA Cushing, OK West Texas Intermediate ("WTI") spot price.

Previous wording

The Organization for Economic Cooperation and Development (“OECD”) enacted rules (“Pillar Two”) for a new, global minimum tax of at least 15% on income arising in low-tax jurisdictions. We are currently evaluating the potential impact this new legislation will have on our consolidated financial statements; however, based on current enacted legislation, management anticipates the impact of Pillar Two to be immaterial to the Company for 2024.

Current wording

The Organization for Economic Cooperation and Development (“OECD”) enacted rules (“Pillar Two”) for a new, global minimum tax of at least 15% on income arising in low-tax jurisdictions. Based on current enacted legislation, management anticipates the impact of Pillar Two to be immaterial to the Company for 2025.

Previous wording

We have two operating segments consisting of the Pressure Control segment and the Spoolable Technologies segment. Our results of operations are evaluated by the Chief Executive Officer on a consolidated basis as well as at the segment level. The performance of our operating segments is primarily evaluated based on segment operating income (in addition to other measures), which is defined as income before taxes and before interest income (expense), net, other income (expense), net and corporate and other expenses not allocated to the operating segments. Prior to January 1, 2024, Corporate and other expenses were included in our Pressure Control segment. The Company has recast the information for the nine months ended September 30, 2023 to align with the presentation for the nine months ended September 30, 2024.

Current wording

We have two operating segments consisting of the Pressure Control segment and the Spoolable Technologies segment. Our results of operations are evaluated by the Chief Executive Officer on a consolidated basis as well as at the segment level. The performance of our operating segments is primarily evaluated based on segment operating income (in addition to other measures), which is defined as income before taxes and before interest income (expense), net, other income (expense), net and corporate and other expenses not allocated to the operating segments.

Previous wording

Pressure Control. Pressure Control revenue for the third quarter of 2024 was $185.1 million, a decrease of $2.1 million, or 1.1%, from the second quarter of 2024 primarily due to decreased sales of wellhead and production related equipment, offset by an increase in rental activity and field service activity. Pressure Control operating income of $52.5 million for the third quarter of 2024 decreased $3.1 million, or 5.6% from the second quarter of 2024 primarily due to miscellaneous charges incurred during the quarter, including reserves taken in connection with customer bankruptcies and other litigation claims.

Current wording

Pressure Control. Pressure Control revenue for the first quarter of 2025 was $190.3 million, an increase of $13.6 million, or 7.7%, from the fourth quarter of 2024 primarily due to increased sales of wellhead and production related equipment resulting from increased customer drilling efficiencies. Pressure Control operating income of $54.3 million for the first quarter of 2025 increased $3.5 million, or 6.9% from the fourth quarter of 2024 primarily due to the higher volume, with margins decreasing 20 basis points due to reserves taken in connection with litigation claims.

Previous wording

Spoolable Technologies. Spoolable Technologies revenue for the third quarter of 2024 was $108.2 million, an increase of $4.4 million, or 4.3% from the second quarter of 2024 primarily due to increased customer activity levels. Total operating income for Spoolable Technologies for the third quarter of 2024 was $32.9 million, compared to operating income of $30.0 million for the second quarter of 2024. The increase in operating income was primarily due to a decrease in expense related to the change in fair value of the earn-out payment for the FlexSteel acquisition, partly offset by higher manufacturing input costs.

Current wording

Spoolable Technologies. Spoolable Technologies revenue for the first quarter of 2025 was $92.6 million, a decrease of $3.5 million, or 3.6% from the fourth quarter of 2024 primarily due to reduced customer activity levels in the seasonally slow first quarter. Total operating income for Spoolable Technologies for the first quarter of 2025 was $23.9 million, compared to operating income of $25.5 million for the fourth quarter of 2024. The decrease in operating income was primarily due to lower revenue realized and the corresponding reduced operating leverage.

Previous wording

Corporate and other. Corporate and other revenue represents the elimination of inter-segment sales from our Pressure Control segment to our Spoolable technologies segment. Corporate and other expenses include costs associated with executive management and other administrative functions not directly attributable to our reporting segment. Corporate and other expenses for the third quarter of 2024 were $8.7 million, an increase of $2.8 million, or 46.9% from $5.9 million for the second quarter of 2024. The increase was primarily due to professional fees associated with the evaluation of an inorganic growth opportunity.

Current wording

Corporate and other. Corporate and other revenue represents the elimination of inter-segment sales from our Pressure Control segment to our Spoolable Technologies segment. Corporate and other expenses include costs associated with executive management and other administrative functions not directly attributable to our reporting segment. Corporate and other expenses for the first quarter of 2025 were $9.6 million, an increase of $3.7 million, or 62.7% from $5.9 million for the fourth quarter of 2024. The increase was primarily due to professional fees associated with growth initiatives.

Previous wording

Interest income, net. Interest income, net was $2.1 million for the third quarter of 2024, an increase of $0.7 million from the second quarter of 2024. The increase in interest income, net was primarily due to interest income earned on a higher invested cash balance.

Current wording

Interest income, net. Interest income, net was $2.3 million for the first quarter of 2025 and the fourth quarter of 2024. The interest income, net is primarily comprised of interest income earned on the invested cash balance.

Previous wording

Other income, net. Other income, net for 2023 related to non-cash adjustments for the revaluation of the liability related to the tax receivable agreement as a result of changes to the state tax rate.

Current wording

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

Previous wording

Income tax expense. Income tax expense for the third quarter of 2024 was $16.4 million compared to $18.2 million for the second quarter of 2024. The decrease in income tax expense from the second quarter was due to a decrease in operating income quarter-over-quarter, in addition to an overall tax rate reduction due to decreases in permanent items. 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 the first quarter of 2025 was $16.8 million compared to $18.5 million for the fourth quarter of 2024. The decrease in income tax expense from the first quarter was due to a decrease in operating income quarter-over-quarter, in addition to an overall tax rate reduction due to decreases in permanent items. 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

Pressure Control. Pressure Control revenue was $547.3 million for the first nine months of 2024, a decrease of $29.0 million, or 5.0%, from the first nine months of 2023. The lower revenue was primarily due to decreased sales of wellhead and production related equipment resulting from lower drilling and completion activity by our customers. In addition, rental of drilling and completion equipment and field service associated with product and rental revenues decreased as a result of the decline in customer activity. Operating income of $159.9 million in the first nine months of 2024 decreased $21.0 million, or 11.6%, from the first nine months of 2023. The decrease was primarily attributable to lower gross margins during the period due to the decreased customer activity levels and higher selling, general and administrative ("SG&A") expenses. The increase in SG&A expenses primarily related to higher personnel costs, stock-based compensation expense and other reserves, partially offset by a decrease in bad debt expense.

Current wording

Pressure Control. Pressure Control revenue was $190.3 million for the first three months of 2025, an increase of $15.2 million, or 8.7%, from the first three months of 2024. The increased revenue was primarily due to increased sales of wellhead and production related equipment resulting from increased customer drilling efficiencies. Operating income of $54.3 million in the first three months of 2025 increased $2.7 million, or 5.1%, from the first three months of 2024. The increase was primarily attributable to higher gross margins during the period due to the higher customer activity levels, partially offset by an increase in selling, general and administrative ("SG&A") expenses related to higher personnel costs, stock-based compensation expense and other reserves.

Previous wording

Corporate and other. Corporate and other revenue represents the elimination of inter-segment sales from our Pressure Control segment to our Spoolable technologies segment. Corporate and other expenses include costs associated with executive management and other administrative functions not directly attributable to our reporting segment. Corporate and other expenses for the first nine months of 2024 was $20.1 million, a decrease of $9.0 million, or 31.0% from the first nine months of 2023. The decrease was largely attributable to professional fees related to transaction costs associated with the closing of and accounting for the FlexSteel acquisition.

Current wording

Corporate and other. Corporate and other revenue represents the elimination of inter-segment sales from our Pressure Control segment to our Spoolable Technologies segment. Corporate and other expenses include costs associated with executive management and other administrative functions not directly attributable to our reporting segment. Corporate and other expenses for the first three months of 2025 was $9.6 million, an increase of $4.1 million, or 73.9% from the first three months of 2024. The increase was largely attributable to professional fees associated with growth initiatives.

Previous wording

Interest income (expense), net. Interest income, net for the first nine months of 2024 was $4.2 million, compared to interest expense, net of $6.3 million for the first nine months of 2023. The increase was 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.

Current wording

Interest income, net. Interest income, net for the first three months of 2025 was $2.3 million, compared to $0.7 million for the first three months of 2024. The increase was due to an increase in interest income earned on cash invested during period.

Previous wording

Income tax expense. Income tax expense for the first nine months of 2024 was $48.0 million compared to $30.6 million for the first nine months of 2023. The increase in income tax expense from the first nine months of 2023 was primarily due to an increase in operating income during the first nine months of 2024, and fewer reductions in income tax expense for items specific to the comparable period of 2023. Income tax expense for the first nine months of 2023 included approximately $38.3 million of expense associated with 2023 income, offset by a $12.1 million benefit associated with the release of our valuation allowance previously provided for our investment in Cactus Companies. The valuation allowance was 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 $4.3 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, and a $0.4 million benefit associated with permanent differences related to equity compensation.

Current wording

Income tax expense. Income tax expense for the first three months of 2025 was $16.8 million compared to $13.4 million for the first three months of 2024. The increase in income tax expense from the first three months of 2024 was primarily due to an increase in operating income during the first three months of 2025, in conjunction with an additional $1.2 million of expense related to the revaluation of our deferred tax asset as a result of a change in our forecasted state rate.

Previous wording

At September 30, 2024, we had $303.4 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 borrowings under our Amended ABL Credit Facility (as defined in Note 7 in the notes to the unaudited condensed 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 September 30, 2024, we had $220.7 million of available borrowing capacity under our Amended ABL Credit Facility with no outstanding borrowings, and $2.5 million in letters of credit outstanding. We were in compliance with the covenants of the Amended ABL Credit Facility as of September 30, 2024.

Current wording

At March 31, 2025, we had $347.7 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 borrowings under our Amended ABL Credit Facility (as defined in Note 6 in the notes to the unaudited condensed 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 March 31, 2025, we had $222.6 million of available borrowing capacity under our Amended ABL Credit Facility with no outstanding borrowings, and $2.4 million in letters of credit outstanding. We were in compliance with the covenants of the Amended ABL Credit Facility as of March 31, 2025.

Previous wording

We currently estimate our net capital expenditures for the year ending December 31, 2024 will range from $32 million to $37 million. In the Pressure Control segment, capital expenditures are primarily related to rental fleet investments, international expansion and diversification of our low cost supply chain. In the Spoolable Technologies segment, capital expenditures are primarily related to manufacturing plant enhancements and additional deployment equipment used for product installation.

Current wording

We currently estimate our net capital expenditures for the year ending December 31, 2025 will range from $40 to $50 million. In the Pressure Control segment, capital expenditures are primarily related to rental fleet investments, international expansion and diversification of our low cost supply chain. In the Spoolable Technologies segment, capital expenditures are primarily related to manufacturing plant enhancements and additional deployment equipment used for product installation.