whd-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________________________

FORM 10-Q

______________________________________________________________________________

(MARK ONE)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-38390

______________________________________________________________________________

Cactus, Inc.

(Exact name of registrant as specified in its charter)

______________________________________________________________________________


Delaware		35-2586106
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

(713) 626-8800

(Registrant’s telephone number, including area code)

______________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01

WHD

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of November 3, 2022, the registrant had 60,718,869 shares of Class A common stock, $0.01 par value per share, and 15,159,253 shares of Class B common stock, $0.01 par value per share, outstanding.

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TABLE OF CONTENTS


Cautionary Note Regarding Forward-Looking Statements		i

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management ’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 6.	Exhibits	21
	Signatures	22

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When used in this Quarterly Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward‑looking statements, you should keep in mind the risk factors and other cautionary statements described under “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (our “2021 Annual Report”) and under “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and other cautionary statements contained herein. These forward‑looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.

Important factors that could cause actual results to differ materially from those contained in the forward-looking statements include, but are not limited to:

•demand for our products and services, which is affected by, among other things, changes in the price of crude oil and natural gas in domestic and international markets;

•the number of active rigs, pad sizes, drilling and completion efficiencies, lateral lengths, well spacings and associated well counts and availability of storage capacity;

•disparities in activity levels between private operators and large publicly-traded exploration and production (“E&P”) companies;

•the number of active workover rigs;

•availability and cost of capital and capital spending discipline exercised by customers;

•customers’ use of free cash flow to pay interest, increase dividends and/or share buybacks rather than to increase production;

•overall oilfield service cost inflation;

•our success in cost recovery efforts;

•the financial health of our customers and our credit risk of customer non-payment;

•changes in the number of drilled but uncompleted wells (DUCs) and the level of completion activity;

•the size and timing of orders;

•availability and cost of raw materials, components and imported items;

•changes in inland and ocean shipping costs, the availability of containers and vessels from Asia as well as port congestion and domestic trucking capacity;

•transportation differentials associated with reduced capacity in and out of the storage hub in Cushing, Oklahoma;

•expectations regarding overhead and operating costs and margins;

•the impact of inflation, rising interest rates and a recession;

•availability and cost of skilled and qualified workers and our ability to hire and retain such workers;

•potential liabilities such as warranty and product liability claims arising out of the installation, use or misuse of our products;

•the possibility of cancelled or delayed orders;

•our business strategy;

•our financial strategy, operating cash flows, liquidity and capital required for our business;

•our future revenue, income and operating performance;

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•our ability to pay dividends and the amounts of any such dividends;

•consolidation activity involving our customers;

•the addition or termination of relationships with major customers or suppliers;

•laws and regulations, including environmental regulations, that may increase our costs, limit the demand for our products and services or restrict our operations;

•disruptions in political, regulatory, economic and social conditions domestically or internationally, including, for instance, the armed conflict between Russia and Ukraine and associated economic sanctions on Russia;

•the impact of disruptions in Russian oil and gas deliveries resulting from the conflict in Ukraine;

•the severity and duration of the ongoing coronavirus (“COVID”) pandemic and the extent of its impact on our business, including employee absenteeism;

•outbreaks of other pandemic or contagious diseases that may disrupt our operations, suppliers or facilities or impact demand for oil and natural gas;

•the impact of actions taken by the Organization of Petroleum Exporting Countries (OPEC+) and other oil and gas producing countries affecting the supply of oil and gas;

•the impact of planned and possible future releases from and replenishments to the Strategic Petroleum Reserve;

•takeaway capacity, particularly in the Northeastern United States;

•the impact of the fire at the Freeport, TX liquified natural gas (“LNG”) facility on associated natural gas demand;

•the impact of LNG regasification and storage capacity on associated natural gas demand in Europe;

•changes in import tariffs or duties assessed on products and imported raw materials used in the production and assembly of our goods which could negatively impact margins and our working capital;

•the significance of future liabilities under the Tax Receivable Agreement (the “TRA”) we entered into with certain current or past direct and indirect owners of Cactus Wellhead, LLC (the “TRA Holders”) in connection with our initial public offering;

•the impact of ocean transit times on our operations and level of working capital;

•a failure of our information technology infrastructure or any significant breach of security;

•potential uninsured claims and litigation against us;

•competition and overall capacity within the oilfield services industry;

•availability of drilling rigs, pressure pumping fleets and oil country tubular goods (“OCTG”);

•our dependence on the continuing services of certain of our key managers and employees;

•currency exchange rate fluctuations associated with our international operations; and

•plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical.

We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the operation of our business. These risks include, but are not limited to, the risks described in our 2021 Annual Report under “Part I, Item 1A. Risk Factors,” and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 under “Part II, Item 1A. Risk Factors.” Should one or more of the risks or uncertainties described in this Quarterly Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty 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 Quarterly Report.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	September 30, 2022		December 31, 2021
	(in thousands, except per share data)
Assets
Current assets
Cash and cash equivalents	$	320,623	$	301,669
Accounts receivable, net of allowance of $901 and $741, respectively	131,748		89,205
Inventories	162,730		119,817
Prepaid expenses and other current assets	11,849		7,794
Total current assets	626,950		518,485
Property and equipment, net	130,099		129,117
Operating lease right-of-use assets, net	22,232		22,538
Goodwill	7,824		7,824
Deferred tax asset, net	306,789		303,074
Other noncurrent assets	1,307		1,040
Total assets	$	1,095,201	$	982,078
Liabilities and Equity
Current liabilities
Accounts payable	$	62,398	$	42,818
Accrued expenses and other current liabilities	31,659		28,240
Current portion of liability related to tax receivable agreement	27,696		11,769
Finance lease obligations, current portion	5,757		4,867
Operating lease liabilities, current portion	4,677		4,880
Total current liabilities	132,187		92,574
Deferred tax liability, net	2,099		1,172
Liability related to tax receivable agreement, net of current portion	260,844		269,838
Finance lease obligations, net of current portion	6,837		5,811
Operating lease liabilities, net of current portion	17,584		17,650
Total liabilities	419,551		387,045
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value, 10,000 shares authorized, none issued and outstanding	—		—
Class A common stock, $0.01 par value, 300,000 shares authorized, 60,719 and 59,035 shares issued and outstanding	607		590
Class B common stock, $0.01 par value, 215,000 shares authorized, 15,159 and 16,674 shares issued and outstanding	—		—
Additional paid-in capital	307,698		289,600
Retained earnings	237,551		178,446
Accumulated other comprehensive income (loss)	(1,617)		8
Total stockholders’ equity attributable to Cactus Inc.	544,239		468,644
Non-controlling interest	131,411		126,389
Total stockholders’ equity	675,650		595,033
Total liabilities and equity	$	1,095,201	$	982,078

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands, except per share data)
Revenues
Product revenue	$	121,782	$	74,835	$	328,054	$	197,136
Rental revenue	27,105		15,271		73,143		42,404
Field service and other revenue	35,594		25,257		99,398		69,133
Total revenues	184,481		115,363		500,595		308,673
Costs and expenses
Cost of product revenue	73,747		49,708		203,839		134,329
Cost of rental revenue	16,323		13,250		46,740		39,824
Cost of field service and other revenue	27,145		19,490		78,685		51,645
Selling, general and administrative expenses	15,970		12,149		44,804		33,160
Total costs and expenses	133,185		94,597		374,068		258,958
Income from operations	51,296		20,766		126,527		49,715

Interest income (expense), net	1,140		(299)		1,344		(632)
Other income (expense), net	1,125		—		10		(1,410)
Income before income taxes	53,561		20,467		127,881		47,673
Income tax expense	12,041		3,290		23,498		586
Net income	$	41,520	$	17,177	$	104,383	$	47,087
Less: net income attributable to non-controlling interest	10,095		4,560		25,198		12,518
Net income attributable to Cactus Inc.	$	31,425	$	12,617	$	79,185	$	34,569

Earnings per Class A share - basic	$	0.52	$	0.22	$	1.32	$	0.64
Earnings per Class A share - diluted	$	0.51	$	0.21	$	1.30	$	0.58

Weighted average Class A shares outstanding - basic	60,665		58,248		60,164		54,188
Weighted average Class A shares outstanding - diluted	61,106		76,082		76,296		76,045

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Net income	$	41,520	$	17,177	$	104,383	$	47,087
Foreign currency translation adjustments	(1,219)		(529)		(2,150)		(804)
Comprehensive income	$	40,301	$	16,648	$	102,233	$	46,283
Less: comprehensive income attributable to non-controlling interest	9,795		4,413		24,673		12,209
Comprehensive income attributable to Cactus Inc.	$	30,506	$	12,235	$	77,560	$	34,074

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)


	Class A			Class B			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Equity
	Common Stock			Common Stock
(in thousands)	Shares	Amount		Shares	Amount
Balance at June 30, 2022	60,613	$	606	15,263	$	—	$	304,418	$	212,913	$	(698)	$	126,569	$	643,808
Member distributions	—	—		—	—		—		—		—		(4,659)		(4,659)
Effect of CW Unit redemptions	104	1		(104)	—		894		—		—		(895)		—
Tax impact of equity transactions	—	—		—	—		(33)		—		—		—		(33)
Equity award vestings	2	—		—	—		5		—		—		(3)		2
Other comprehensive loss	—	—		—	—		—		—		(919)		(300)		(1,219)
Stock-based compensation	—	—		—	—		2,414		—		—		604		3,018
Cash dividends declared ($0.11 per share)	—	—		—	—		—		(6,787)		—		—		(6,787)
Net income	—	—		—	—		—		31,425		—		10,095		41,520
Balance at September 30, 2022	60,719	$	607

SEC Form 10-Q filed by Cactus Inc.