FALSE000169913600016991362022-08-042022-08-04

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________
FORM 8-K
______________________________________________________________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 4, 2022
______________________________________________________________________________
Cactus, Inc.
(Exact name of registrant as specified in its charter)
______________________________________________________________________________

Delaware001-3839035-2586106
(State or other jurisdiction of incorporation)(Commission File Number)(I.R.S. Employer Identification No.)


920 Memorial City Way, Suite 300
Houston, Texas 77024
(Address of principal executive offices)
(Zip Code)

(713) 626-8800
(Registrant’s telephone number, including area code)
______________________________________________________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.01WHDNew York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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Item 2.02 Results of Operations and Financial Condition.

The following information is furnished pursuant to Item 2.02.

On August 4, 2022, Cactus, Inc. issued a press release announcing its results for the second quarter ended June 30, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The information being furnished pursuant to this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit
No.		Description
99.1
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Cactus, Inc.
August 4, 2022By:/s/ Stephen Tadlock
DateName:Stephen Tadlock
Title:Vice President, Chief Financial Officer and Treasurer

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Document

Exhibit 99.1
whd-20200429xex99d1g001.jpg

Cactus Announces Second Quarter 2022 Results

HOUSTON – August 4, 2022 – Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced financial and operating results for the second quarter of 2022.
Second Quarter Highlights
•Revenue of $170.2 million and income from operations of $44.2 million;
•Net income of $35.8 million(1) and diluted earnings per Class A share of $0.44(1);
•Adjusted net income(2) of $33.4 million and diluted earnings per share, as adjusted(2) of $0.44;
•Net income margin of 21.0% and adjusted net income margin(2) of 19.6%;
•Adjusted EBITDA(3) and Adjusted EBITDA margin(3) of $55.5 million and 32.6%, respectively;
•Cash flow from operations of $31.0 million; and
•Cash balance of $311.7 million and no bank debt outstanding as of June 30, 2022.
Financial Summary
Three Months Ended
June 30,March 31,June 30,
202220222021
(in thousands)
Revenues$170,215 $145,899 $108,893 
Income from operations$44,241 $30,990 $17,314 
Net income(1)
$35,780 $27,083 $14,774 
Net income margin21.0 %18.6 %13.6 %
Adjusted net income(2)
$33,409 $22,859 $12,336 
Adjusted net income margin(2)
19.6 %15.7 %11.3 %
Adjusted EBITDA(3)
$55,506 $42,333 $28,908 
Adjusted EBITDA margin(3)
32.6 %29.0 %26.5 %

(1)Net income during the first quarter of 2022 is inclusive of $1.1 million in other expense related to the revaluation of the tax receivable agreement (“TRA”) liability, a $1.0 million tax benefit related to the revaluation of our deferred tax asset and a $1.7 million tax benefit related to equity compensation. Net income during the second quarter of 2021 is inclusive of a $3.0 million income tax benefit associated with a partial release of a valuation allowance in connection with the redemption of units in Cactus Wellhead, LLC (“Cactus LLC”) by Cadent and other members during the period, $0.6 million of income tax expense related to changes in our foreign tax credit position and $1.0 million in other expense related to the revaluation of the TRA liability.
(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 Cactus LLC, its operating subsidiary, at the beginning of the period. Additional information regarding non-GAAP measures and the reconciliation of GAAP to non-GAAP financial measures are in the Supplemental Information tables.
(3)Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. See definition of these measures and the reconciliation of GAAP to non-GAAP financial measures in the Supplemental Information tables.
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Scott Bender, President and CEO of Cactus, commented, “We were pleased with our strong performance during the second quarter. Revenue growth during the period outpaced the change in the domestic rig count while margin improvement was robust across all business lines. Product revenue generated per U.S. land rig followed(1) was up over ten percent sequentially. In our Rental business line, revenue and margins continued their upward trajectory. In Field Service, steps taken during the second quarter to offset inflationary pressures impacting labor and transportation contributed to significant margin improvement.

“For the third quarter, we anticipate further revenue growth across our various business lines. Of note, the Company’s first Product sales into South America and the Middle East are expected to be recognized in the third quarter. We remain well positioned in our Rental business, as customers continue to recognize the value of our products and execution.”

Mr. Bender concluded, “Second quarter results demonstrated the emphasis we place on margins and returns. Management will continue to run the business with these values in mind. Additionally, we continue to focus on increasing the quality of our customer base in an industry where availability of resources, particularly labor, is tight. Looking forward, a continued focus on our supply chain leaves us well positioned to support additional activity gains. Finally, we are witnessing encouraging signs that the overall rate of cost inflation may be moderating.”

(1)Additional information regarding market share and rigs followed is located in the Supplemental Information tables.
Revenue Categories
Product
Three Months Ended
June 30,March 31,June 30,
202220222021
(in thousands)
Product revenue$112,232 $94,040 $70,345 
Gross profit$43,060 $33,120 $22,245 
Gross margin38.4 %35.2 %31.6 %

Second quarter 2022 product revenue increased $18.2 million, or 19.3%, sequentially, as sales of wellhead and production related equipment increased due to higher drilling activity and cost recovery efforts. Gross profit increased $9.9 million, or 30.0%, sequentially, with margins increasing 320 basis points due to operating leverage and cost recovery.

Rental
 Three Months Ended
 June 30,March 31,June 30,
 202220222021
 (in thousands)
Rental revenue$23,695 $22,343 $14,644 
Gross profit$8,367 $7,254 $241 
Gross margin35.3 %32.5 %1.6 %

Second quarter 2022 rental revenue increased $1.4 million, or 6.1%, sequentially, due to higher customer activity. Gross profit increased $1.1 million sequentially and margins increased 280 basis points due to
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depreciation expense representing a lower percentage of revenue and lower equipment repair costs during the period.

Field Service and Other
 Three Months Ended
 June 30,March 31,June 30,
 202220222021
 (in thousands)
Field service and other revenue$34,288 $29,516 $23,904 
Gross profit$7,554 $4,710 $6,212 
Gross margin22.0 %16.0 %26.0 %

Second quarter 2022 field service and other revenue increased $4.8 million, or 16.2%, sequentially, as higher customer activity drove an increase in associated billable hours. The Company also took measures to address inflation in fuel and labor costs experienced this year. Gross profit increased $2.8 million, or 60.4%, sequentially, with margins increasing by 600 basis points sequentially.
Selling, General and Administrative Expenses (“SG&A”)
SG&A expense for the second quarter of 2022 was $14.7 million (8.7% of revenues), compared to $14.1 million (9.7% of revenues) for the first quarter of 2022 and $11.4 million (10.5% of revenues) for the second quarter of 2021. The sequential increase was primarily due to increased bonus accruals due to stronger than expected financial performance.
Liquidity, Capital Expenditures and Other
As of June 30, 2022, the Company had $311.7 million of cash and no bank debt outstanding. Operating cash flow was $31.0 million for the second quarter of 2022. During the second quarter, the Company made dividend payments and associated distributions of $8.3 million.

Net cash used in investing activities was $5.6 million during the second quarter of 2022, driven largely by additions to the Company’s fleet of rental equipment. For the full year 2022, the Company expects net capital expenditures to be in the range of $20 million to $30 million.

As of June 30, 2022, Cactus had 60,612,784 shares of Class A common stock outstanding (representing 79.9% of the total voting power) and 15,262,826 shares of Class B common stock outstanding (representing 20.1% of the total voting power).
Quarterly Dividend
The Board of Directors has approved a quarterly cash dividend of $0.11 per share of Class A common stock with payment to occur on September 15, 2022 to holders of record of Class A common stock at the close of business on August 29, 2022. A corresponding distribution of up to $0.11 per CW Unit has also been approved for holders of CW Units of Cactus Wellhead, LLC.
Conference Call Details
The Company will host a conference call to discuss financial and operational results on August 4, 2022 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time).
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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 and rents a range of highly engineered wellhead and pressure control equipment. 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 all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Haynesville, Eagle Ford and Bakken, among other areas, and in Eastern Australia. Cactus also conducts rental and service operations in the Kingdom of Saudi Arabia.
Cautionary Statement Concerning Forward-Looking Statements
Certain statements contained in this press 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,” “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 known 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, Inc.
John Fitzgerald, 713-904-4655
Director of Corporate Development and Investor Relations
IR@CactusWHD.com
Source: Cactus, Inc.
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Cactus, Inc.
Condensed Consolidated Statements of Income
(unaudited)
 
Three Months Ended
June 30,		Six Months Ended
June 30,
2022202120222021
(in thousands, except per share data)
Revenues
Product revenue$112,232 $70,345 $206,272 $122,301 
Rental revenue23,695 14,644 46,038 27,133 
Field service and other revenue34,288 23,904 63,804 43,876 
Total revenues170,215 108,893 316,114 193,310 
Costs and expenses
Cost of product revenue69,172 48,100 130,092 84,621 
Cost of rental revenue15,328 14,403 30,417 26,574 
Cost of field service and other revenue26,734 17,692 51,540 32,155 
Selling, general and administrative expenses14,740 11,384 28,834 21,011 
Total costs and expenses125,974 91,579 240,883 164,361 
Income from operations44,241 17,314 75,231 28,949 
Interest income (expense), net304 (181)204 (333)
Other expense, net— (1,004)(1,115)(1,410)
Income before income taxes44,545 16,129 74,320 27,206 
Income tax expense (benefit)8,765 1,355 11,457 (2,704)
Net income$35,780 $14,774 $62,863 $29,910 
Less: net income attributable to non-controlling interest8,636 4,381 15,103 7,958 
Net income attributable to Cactus, Inc.$27,144 $10,393 $47,760 $21,952 
Earnings per Class A share - basic$0.45 $0.19 $0.80 $0.42 
Earnings per Class A share - diluted (a)$0.44 $0.18 $0.78 $0.37 
Weighted average shares outstanding - basic60,523 55,048 59,909 52,124 
Weighted average shares outstanding - diluted (a)76,322 75,997 76,262 75,955 

(a)Dilution for the three and six months ended June 30, 2022 includes $9.0 million and $15.7 million, respectively, of additional pre-tax income attributable to non-controlling interest adjusted for a corporate effective tax rate of 25.0% and 15.4 million and 15.9 million weighted average shares of Class B common stock outstanding, plus the effect of dilutive securities. Dilution for the three and six months ended June 30, 2021 includes $4.6 million and $8.5 million, respectively, of additional pre-tax income attributable to non-controlling interest adjusted for a corporate effective tax rate of 28% and 20.7 and 23.5 million weighted average shares of Class B common stock outstanding, respectively, plus the effect of dilutive securities.
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Cactus, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
June 30,December 31,
20222021
(in thousands)
Assets
Current assets
Cash and cash equivalents$311,684 $301,669 
Accounts receivable, net125,821 89,205 
Inventories149,037 119,817 
Prepaid expenses and other current assets7,985 7,794 
Total current assets594,527 518,485 
Property and equipment, net130,376 129,117 
Operating lease right-of-use assets, net20,910 22,538 
Goodwill7,824 7,824 
Deferred tax asset, net315,495 303,074 
Other noncurrent assets992 1,040 
Total assets$1,070,124 $982,078 
Liabilities and Equity
Current liabilities
Accounts payable$57,366 $42,818 
Accrued expenses and other current liabilities33,620 28,240 
Current portion of liability related to tax receivable agreement11,769 11,769 
Finance lease obligations, current portion5,630 4,867 
Operating lease liabilities, current portion5,253 4,880 
Total current liabilities113,638 92,574 
Deferred tax liability, net1,247 1,172 
Liability related to tax receivable agreement, net of current portion288,659 269,838 
Finance lease obligations, net of current portion6,912 5,811 
Operating lease liabilities, net of current portion15,860 17,650 
Total liabilities426,316 387,045 
Equity643,808 595,033 
Total liabilities and equity$1,070,124 $982,078 
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Cactus, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
Six Months Ended
June 30,
20222021
(in thousands)
Cash flows from operating activities
Net income$62,863 $29,910 
Reconciliation of net income to net cash provided by operating activities
Depreciation and amortization17,592 18,352 
Deferred financing cost amortization84 84 
Stock-based compensation5,016 4,438 
Provision for expected credit losses240 149 
Inventory obsolescence959 1,566 
Gain on disposal of assets(518)(613)
Deferred income taxes8,504 (4,506)
Loss from revaluation of liability related to tax receivable agreement1,115 1,004 
Changes in operating assets and liabilities:
Accounts receivable(36,484)(27,858)
Inventories(30,670)(2,569)
Prepaid expenses and other assets(210)499 
Accounts payable14,238 12,774 
Accrued expenses and other liabilities5,494 9,999 
Net cash provided by operating activities48,223 43,229 
Cash flows from investing activities
Capital expenditures and other(13,752)(5,461)
Proceeds from sale of assets876 1,108 
Net cash used in investing activities(12,876)(4,353)
Cash flows from financing activities
Payments on finance leases(2,987)(2,479)
Dividends paid to Class A common stock shareholders(13,335)(9,426)
Distributions to members(3,348)(3,560)
Repurchase of shares(4,495)(3,174)
Net cash used in financing activities(24,165)(18,639)
Effect of exchange rate changes on cash and cash equivalents(1,167)186 
Net increase in cash and cash equivalents10,015 20,423 
Cash and cash equivalents
Beginning of period301,669 288,659 
End of period$311,684 $309,082 
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Cactus, Inc. – Supplemental Information
Reconciliation of GAAP to non-GAAP Financial Measures
Adjusted net income, diluted earnings per share, as adjusted and adjusted net income margin
(unaudited)
 
Adjusted net income, diluted earnings per share, as adjusted and adjusted net income margin are not measures of net income as determined by GAAP but they are supplemental non-GAAP financial measures that are used by management and external users of the Company’s consolidated financial statements. Cactus defines adjusted net income as net income assuming Cactus, Inc. held all units in Cactus LLC, 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,
202220222021
(in thousands, except per share data)
Net income$35,780 $27,083 $14,774 
Adjustments:
Other non-operating expense, pre-tax(1)
— 1,115 1,004 
Income tax expense differential(2)
(2,371)(5,339)(3,442)
Adjusted net income $33,409 $22,859 $12,336 
Diluted earnings per share, as adjusted$0.44 $0.30 $0.16 
Weighted average shares outstanding, as adjusted(3)
76,322 76,162 75,997 
Revenue$170,215 $145,899 $108,893 
Net income margin(4)
21.0 %18.6 %13.6 %
Adjusted net income margin19.6 %15.7 %11.3 %

(1)Represents non-cash adjustments for the revaluation of the liability related to the TRA.
(2)Represents the increase or decrease in tax expense as though Cactus, Inc. owned 100% of Cactus LLC 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 25% on income before income taxes for the three months ended June 30, 2022, 26% for the three months ended March 31, 2022, and 28% for the three months ended June 30, 2021.
(3)Reflects 60.5, 59.3, and 55.0 million weighted average shares of basic Class A common stock outstanding and 15.4, 16.5 and 20.7 million of additional shares for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, 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.
(4)Net income margin represents net income divided by total revenue.
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Cactus, Inc. – Supplemental Information
Reconciliation of GAAP to non-GAAP Financial Measures
EBITDA, Adjusted EBITDA and Adjusted EBITDA margin
(unaudited)

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not measures of net income as determined by GAAP but are supplemental non-GAAP financial measures that are used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. Cactus defines EBITDA as net income excluding net interest, income tax and depreciation and amortization. Cactus defines Adjusted EBITDA as EBITDA excluding the other items outlined below.

Cactus management believes EBITDA and Adjusted EBITDA are useful because they allow management to more effectively evaluate the Company’s operating performance and compare the results of its operations from period to period without regard to financing methods or capital structure, or other items that impact comparability of financial results from period to period. EBITDA and Adjusted EBITDA should not be considered as alternatives to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. The Company’s computations of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Cactus defines Adjusted EBITDA margin as Adjusted EBITDA divided by total revenue. Cactus presents this supplemental information because it believes it provides useful information regarding the factors and trends affecting the Company’s business.

Three Months EndedSix Months Ended
June 30,March 31,June 30,June 30,
20222022202120222021
(in thousands)(in thousands)
Net income$35,780 $27,083 $14,774 $62,863 $29,910 
Interest (income) expense, net(304)100 181 (204)333 
Income tax expense (benefit)8,765 2,692 1,355 11,457 (2,704)
Depreciation and amortization8,915 8,677 9,159 17,592 18,352 
EBITDA53,156 38,552 25,469 91,708 45,891 
Other non-operating expense(1)
— 1,115 1,004 1,115 1,004 
Secondary offering related expenses(2)
— — — — 406 
Stock-based compensation2,350 2,666 2,435 5,016 4,438 
Adjusted EBITDA$55,506 $42,333 $28,908 $97,839 $51,739 
Revenue$170,215 $145,899 $108,893 $316,114 $193,310 
Net income margin(3)
21.0 %18.6 %13.6 %19.9 %15.5 %
Adjusted EBITDA margin32.6 %29.0 %26.5 %31.0 %26.8 %

(1)Represents non-cash adjustments for the revaluation of the liability related to the TRA.
(2)Reflects fees and expenses recorded in the first quarter of 2021 in connection with the offering of Class A common stock by certain selling stockholders, excluding underwriting discounts and selling commissions incurred by the selling stockholders.
(3)Net income margin represents net income divided by total revenue.

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Cactus, Inc. – Supplemental Information
Depreciation and Amortization by Category
(unaudited)

Three Months EndedSix Months Ended
June 30,March 31,June 30,June 30,
20222022202120222021
(in thousands)(in thousands)
Cost of product revenue$751 $748 $814 $1,499 $1,620 
Cost of rental revenue6,252 6,167 6,491 12,419 13,116 
Cost of field service and other revenue1,802 1,673 1,753 3,475 3,408 
Selling, general and administrative expenses110 89 101 199 208 
Total depreciation and amortization$8,915 $8,677 $9,159 $17,592 $18,352 


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
June 30,March 31,June 30,
202220222021
Cactus U.S. onshore rigs followed275 254 182 
Baker Hughes U.S. onshore rig count quarterly average697 616 436 
Market share39.5 %41.2 %41.7 %

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