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Cactus Announces First Quarter 2023 Results

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.

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.

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.

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.

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 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

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.

 

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

 

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

 

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.

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.

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.

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

 

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

 

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

%

 

Contacts

Cactus, Inc.

Alan Boyd, 713-904-4669

Director of Corporate Development and Investor Relations

IR@CactusWHD.com

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