whd-20230630

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 June 30, 2023


☐			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 August 3, 2023, the registrant had 64,609,498 shares of Class A common stock, $0.01 par value per share, and 14,820,100 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	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	27

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 5.	Other Information.	28
Item 6.	Exhibits	29
	Signatures	30

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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. We caution you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. 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, 2022 (our “2022 Annual Report”), the Risk Factors described in “Part II, Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and other cautionary statements contained herein and in our Exchange Act filings. Forward‑looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. Should one or more of the risks or uncertainties described in our 2022 Annual Report or other Exchange Act filings 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)


(in thousands, except per share data)	June 30, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	63,910	$	344,527
Accounts receivable, net of allowance of $2,550 and $1,060, respectively	214,590		138,268
Inventories	209,387		161,283
Prepaid expenses and other current assets	11,182		10,564
Total current assets	499,069		654,642
Property and equipment, net	345,956		129,998
Operating lease right-of-use assets, net	20,998		23,183
Intangible assets, net	187,971		—
Goodwill	202,806		7,824
Deferred tax asset, net	209,721		301,644
Other noncurrent assets	9,876		1,605
Total assets	$	1,476,397	$	1,118,896
Liabilities and Equity
Current liabilities
Accounts payable	$	63,585	$	47,776
Accrued expenses and other current liabilities	53,216		30,619
Current portion of liability related to tax receivable agreement	27,544		27,544
Finance lease obligations, current portion	7,299		5,933
Operating lease liabilities, current portion	4,446		4,777
Long-term debt, current portion	24,641		—
Total current liabilities	180,731		116,649
Deferred tax liability, net	1,049		1,966
Liability related to tax receivable agreement, net of current portion	262,882		265,025
Finance lease obligations, net of current portion	8,614		6,436
Operating lease liabilities, net of current portion	16,364		18,375
Long-term debt, net of current portion	30,000		—
Other noncurrent liabilities	23,983		—
Total liabilities	523,623		408,451
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, 64,609 and 60,903 shares issued and outstanding	647		609
Class B common stock, $0.01 par value, 215,000 shares authorized, 14,820 and 14,978 shares issued and outstanding	—		—
Additional paid-in capital	446,206		310,528
Retained earnings	315,049		261,764
Accumulated other comprehensive loss	(1,096)		(984)
Total stockholders’ equity attributable to Cactus Inc.	760,806		571,917
Non-controlling interest	191,968		138,528
Total stockholders’ equity	952,774		710,445
Total liabilities and equity	$	1,476,397	$	1,118,896

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 June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2023		2022		2023		2022
Revenues
Product revenue	$	231,893	$	112,232	$	391,403	$	206,272
Rental revenue	28,220		23,695		56,037		46,038
Field service and other revenue	45,706		34,288		86,784		63,804
Total revenues	305,819		170,215		534,224		316,114
Costs and expenses
Cost of product revenue	149,217		69,172		250,032		130,092
Cost of rental revenue	16,896		15,328		32,980		30,417
Cost of field service and other revenue	34,971		26,734		66,888		51,540
Selling, general and administrative expenses	38,069		14,740		67,970		28,834
Change in fair value of earn-out liability	18,144		—		18,144		—
Total costs and expenses	257,297		125,974		436,014		240,883
Operating income	48,522		44,241		98,210		75,231

Interest income (expense), net	(5,928)		304		(4,926)		204
Other income (expense), net	—		—		3,538		(1,115)
Income before income taxes	42,594		44,545		96,822		74,320
Income tax expense	10,135		8,765		12,075		11,457
Net income	$	32,459	$	35,780	$	84,747	$	62,863
Less: net income attributable to non-controlling interest	7,709		8,636		17,103		15,103
Net income attributable to Cactus Inc.	$	24,750	$	27,144	$	67,644	$	47,760

Earnings per Class A share - basic	$	0.38	$	0.45	$	1.05	$	0.80
Earnings per Class A share - diluted	$	0.38	$	0.44	$	1.02	$	0.78

Weighted average Class A shares outstanding - basic	64,566		60,523		64,155		59,909
Weighted average Class A shares outstanding - diluted	65,003		76,322		79,512		76,262

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 June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Net income	$	32,459	$	35,780	$	84,747	$	62,863
Foreign currency translation adjustments	(445)		(1,367)		(142)		(931)
Comprehensive income	$	32,014	$	34,413	$	84,605	$	61,932
Less: comprehensive income attributable to non-controlling interest	7,596		8,302		17,073		14,878
Comprehensive income attributable to Cactus Inc.	$	24,418	$	26,111	$	67,532	$	47,054

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 March 31, 2023	64,448	$	645	14,978	$	—	$	439,844	$	297,528	$	(764)	$	188,583	$	925,836

Member distributions	—	—		—	—		—		—		—		(3,068)		(3,068)
Effect of CC Unit redemptions	158	2		(158)	—		2,020		—		—		(2,022)		—
Tax impact of equity transactions	—	—		—	—		428		—		—		—		428
Equity award vestings	7	—		—	—		(62)		—		—		(35)		(97)
Other comprehensive loss	—	—		—	—		—		—		(332)		(113)		(445)
Share repurchases	(4)	—		—	—		(137)		—		—		(22)		(159)
Stock-based compensation	—	—		—	—		4,113		—		—		936		5,049
Cash dividends declared ($0.11 per share)	—	—		—	—		—		(7,229)		—		—		(7,229)
Net income	—	—		—	—		—		24,750		—		7,709		32,459
Balance at June 30, 2023	64,609	$	647	14,820	$	—	$	446,206	$	315,049	$	(1,096)	$	191,968	$	952,774

Balance at March 31, 2022	60,197	$	602	15,674	$	—	$	298,893	$	192,493	$	335	$	122,779	$	615,102
Member distributions	—	—		—	—		—		—		—		(1,694)		(1,694)
Effect of CW Unit redemptions	411	4		(411)	—		3,267		—		—		(3,271)		—
Tax impact of equity transactions	—	—		—	—		433		—		—		—		433
Equity award vestings	5	—		—	—		(51)		—		—

SEC Form 10-Q filed by Cactus Inc.