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

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.”

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

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

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. – 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.

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.

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.

Cactus, Inc. – Supplemental Information

Reconciliation of GAAP to non-GAAP Financial Measures

Segment EBITDA, Adjusted Segment EBITDA and Adjusted Segment EBITDA margin (continued)

(unaudited)

A reconciliation of segment operating income to net income is shown below.

Cactus, Inc. – Supplemental Information

Pressure Control Results

Historical Presentation

(unaudited)

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.

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