總現金股息為 $0.37 和 $0.34 截至二零二四年九月三十日及二零二三年九月三十日止九個月內，每股 A 類普通股宣布總額為 $24.9 百萬和美元22.3 分別是百萬。截至二零二四年九月三十日及二零二三年九月三十日止九個月內支付現金股息總額為24.8 百萬和美元22.3 分別是百萬。股息將於記錄日期從未獲得股票基礎的獎勵累積，並在獲得權益時支付。股息不會向我們的 b 類普通股東發放；然而，對我們 A 類普通股的任何股息申報的任何股息，將向 Cactus Inc. 以外的 CC Units 擁有人支付每股的相應分配，每股與我們 A 類普通股東相同的分派。請參閱下面的「會員分配」下有關分配的進一步討論。
As previously discussed, we completed the acquisition of FlexSteel on February 28, 2023. The results of operations of FlexSteel have been reflected in our accompanying condensed consolidated financial statements from the closing date of the acquisition. See Note 2 to the unaudited condensed consolidated financial statements for additional information related to the acquisition.
Oil and Natural Gas Prices
The following table summarizes average oil and natural gas prices in North America over the indicated periods, as well as industry activity levels as reflected by the average number of active onshore drilling rigs during the same periods.
Three Months Ended
Nine Months Ended
September 30, 2024
June 30, 2024
September 30, 2024
September 30, 2023
WTI Oil Price ($/bbl) (1)
$
76.43
$
81.81
$
78.58
$
77.27
Natural Gas Price ($/MMBtu) (2)
$
2.11
$
2.06
$
2.05
$
2.46
U.S. Land Drilling Rigs (3)
565
583
583
689
(1) EIA Cushing, OK WTI (“West Texas Intermediate”) spot price.
(2) EIA Henry Hub Natural Gas spot price per million British Thermal Unit (“MMBtu”).
(3) Baker Hughes.
In the third quarter of 2024, U.S. land drilling and completion activity levels were down approximately 3% from the second quarter of 2024 and down approximately 15% from the 2023 full year average. Average oil prices decreased in the third quarter of 2024 compared to the second quarter of 2024 as global oil demand concerns grew in parallel with risks of increased supply from OPEC+ and non-OPEC+ countries. Accordingly, we anticipate activity in the Middle East may decline. Prices remain volatile due to ongoing geopolitical risk concerns. Natural gas prices increased 2% in the third quarter of 2024 from the second quarter of 2024, as higher power generation demand through the summer led to less supply surplus than the market anticipated. U.S. gas storage approached five-year average levels in the third quarter, after remaining above the 5-year maximum range for most of the first half of 2024. The ongoing conflicts in Ukraine and the Middle East have led to heightened commodity price uncertainty and increased risk to the global supply chain.
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Pillar Two Framework
The Organization for Economic Cooperation and Development (“OECD”) enacted rules (“Pillar Two”) for a new, global minimum tax of at least 15% on income arising in low-tax jurisdictions. We are currently evaluating the potential impact this new legislation will have on our consolidated financial statements; however, based on current enacted legislation, management anticipates the impact of Pillar Two to be immaterial to the Company for 2024.
Critical Accounting Policies and Estimates
A discussion of our critical accounting policies and estimates is contained in our 2023 Annual Report on Form 10-K. There have not been any changes in our critical accounting policies since December 31, 2023.
Consolidated Results of Operations
The following discussions relating to significant line items from our condensed consolidated statements of income are based on available information and represent our analysis of significant changes or events that impact the comparability of reported amounts. Where appropriate, we have identified specific events and changes that affect comparability or trends and, where reasonably practicable, have quantified the impact of such items.
We have two operating segments consisting of the Pressure Control segment and the Spoolable Technologies segment. Our results of operations are evaluated by the Chief Executive Officer on a consolidated basis as well as at the segment level. The performance of our operating segments is primarily evaluated based on segment operating income (in addition to other measures), which is defined as income before taxes and before interest income (expense), net, other income (expense), net and corporate and other expenses not allocated to the operating segments. Prior to January 1, 2024, Corporate and other expenses were included in our Pressure Control segment. The Company has recast the information for the nine months ended September 30, 2023 to align with the presentation for the nine months ended September 30, 2024.
Three Months Ended September 30, 2024 Compared to Three Months Ended June 30, 2024
The following table presents a summary of the segment consolidated operating results for the periods indicated:
Three Months Ended
September 30, 2024
June 30, 2024
$ Change
% Change
(in thousands)
Revenues
Pressure Control
$
185,099
$
187,192
$
(2,093)
(1.1)
%
Spoolable Technologies
108,155
103,716
4,439
4.3
Corporate and other
(73)
(519)
446
(85.9)
Total revenues
293,181
290,389
2,792
1.0
Operating income
Pressure Control
52,537
55,669
(3,132)
(5.6)
Spoolable Technologies
32,907
30,041
2,866
9.5
Total segment operating income
85,444
85,710
(266)
(0.3)
Corporate and other expenses
(8,652)
(5,891)
(2,761)
46.9
Total operating income
76,792
79,819
(3,027)
(3.8)
Interest income, net
2,062
1,405
657
46.8
Income before income taxes
78,854
81,224
(2,370)
(2.9)
Income tax expense
16,417
18,165
(1,748)
(9.6)
Net income
62,437
63,059
(622)
(1.0)
Less: net income attributable to non-controlling interest
12,510
13,231
(721)
(5.4)
Net income attributable to Cactus Inc.
$
49,927
$
49,828
$
99
0.2
%
21
Pressure Control. Pressure Control revenue for the third quarter of 2024 was $185.1 million, a decrease of $2.1 million, or 1.1%, from the second quarter of 2024 primarily due to decreased sales of wellhead and production related equipment, offset by an increase in rental activity and field service activity. Pressure Control operating income of $52.5 million for the third quarter of 2024 decreased $3.1 million, or 5.6% from the second quarter of 2024 primarily due to miscellaneous charges incurred during the quarter, including reserves taken in connection with customer bankruptcies and other litigation claims.
Spoolable Technologies. Spoolable Technologies revenue for the third quarter of 2024 was $108.2 million, an increase of $4.4 million, or 4.3% from the second quarter of 2024 primarily due to increased customer activity levels. Total operating income for Spoolable Technologies for the third quarter of 2024 was $32.9 million, compared to operating income of $30.0 million for the second quarter of 2024. The increase in operating income was primarily due to a decrease in expense related to the change in fair value of the earn-out payment for the FlexSteel acquisition, partly offset by higher manufacturing input costs.
Corporate and other. Corporate and other revenue represents the elimination of inter-segment sales from our Pressure Control segment to our Spoolable technologies segment. Corporate and other expenses include costs associated with executive management and other administrative functions not directly attributable to our reporting segment. Corporate and other expenses for the third quarter of 2024 were $8.7 million, an increase of $2.8 million, or 46.9% from $5.9 million for the second quarter of 2024. The increase was primarily due to professional fees associated with the evaluation of an inorganic growth opportunity.
Interest income, net. Interest income, net was $2.1 million for the third quarter of 2024, an increase of $0.7 million from the second quarter of 2024. The increase in interest income, net was primarily due to interest income earned on a higher invested cash balance.
Income tax expense. Income tax expense for the third quarter of 2024 was $16.4 million compared to $18.2 million for the second quarter of 2024. The decrease in income tax expense from the second quarter was due to a decrease in operating income quarter-over-quarter, in addition to an overall tax rate reduction due to decreases in permanent items. Cactus Inc. is only subject to federal and state income tax on its share of income from Cactus Companies. Income allocated to the non-controlling interest is only taxable to the non-controlling interest.
22
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
The following table presents a summary of the segment consolidated operating results for the periods indicated:
Nine Months Ended September 30,
2024
2023
$ Change
% Change
(in thousands)
Revenues
Pressure Control
$
547,319
$
576,273
$
(28,954)
(5.0)
%
Spoolable Technologies
310,966
245,821
65,145
26.5
Corporate and other
(592)
—
(592)
nm
Total revenues
857,693
822,094
35,599
4.3
Operating income
Pressure Control
159,881
180,881
(21,000)
(11.6)
Spoolable Technologies
79,341
34,004
45,337
nm
Total segment operating income
239,222
214,885
24,337
11.3
Corporate and other expenses
(20,061)
(29,072)
9,011
(31.0)
Total operating income
219,161
185,813
33,348
17.9
Interest income (expense), net
4,156
(6,298)
10,454
nm
Other income, net
—
3,804
(3,804)
nm
Income before income taxes
223,317
183,319
39,998
21.8
Income tax expense
48,006
30,553
17,453
57.1
Net income
175,311
152,766
22,545
14.8
Less: net income attributable to non-controlling interest
36,591
32,542
4,049
12.4
Net income attributable to Cactus Inc.
$
138,720
$
120,224
$
18,496
15.4
%
nm = not meaningful
Pressure Control. Pressure Control revenue was $547.3 million for the first nine months of 2024, a decrease of $29.0 million, or 5.0%, from the first nine months of 2023. The lower revenue was primarily due to decreased sales of wellhead and production related equipment resulting from lower drilling and completion activity by our customers. In addition, rental of drilling and completion equipment and field service associated with product and rental revenues decreased as a result of the decline in customer activity. Operating income of $159.9 million in the first nine months of 2024 decreased $21.0 million, or 11.6%, from the first nine months of 2023. The decrease was primarily attributable to lower gross margins during the period due to the decreased customer activity levels and higher selling, general and administrative ("SG&A") expenses. The increase in SG&A expenses primarily related to higher personnel costs, stock-based compensation expense and other reserves, partially offset by a decrease in bad debt expense.
Spoolable Technologies. Spoolable Technologies revenue for the first nine months of 2024 was $311.0 million, an increase of $65.1 million, or 26.5%, from the first nine months of 2023, as results for the first nine months of 2023 only included seven months of revenues from the FlexSteel acquisition, which closed on February 28, 2023. Total operating income was $79.3 million in the first nine months of 2024, an increase of $45.3 million, compared to operating income of $34.0 million in the first nine months of 2023, which included only seven months of income. Operating income for the first nine months of 2024 included $16.3 million of expense related to the change in fair value of the earn-out liability for the FlexSteel acquisition and $12.0 million of intangible amortization. Operating income for the first nine months of 2023 included approximately $13.1 million of expense related to the change in fair value of the estimated earn-out liability, $23.5 million of inventory step-up expense and $16.3 million of intangible amortization expense, as well as depreciation expense of $9.9 million primarily associated with the step-up of fixed assets in connection with accounting for the purchased assets at fair value in conjunction with purchase accounting.
Corporate and other. Corporate and other revenue represents the elimination of inter-segment sales from our Pressure Control segment to our Spoolable technologies segment. Corporate and other expenses include costs associated with executive management and other administrative functions not directly attributable to our reporting segment. Corporate and other expenses for the first nine months of 2024 was $20.1 million, a decrease of $9.0 million, or 31.0% from the first nine months of 2023. The
23
decrease was largely attributable to professional fees related to transaction costs associated with the closing of and accounting for the FlexSteel acquisition.
Interest income (expense), net. Interest income, net for the first nine months of 2024 was $4.2 million, compared to interest expense, net of $6.3 million for the first nine months of 2023. The increase was due to an increase in interest income earned on cash invested during the 2024 period. Interest expense in 2023 was primarily related to borrowings outstanding through July 2023 under the Amended ABL Credit Facility.
Other income, net. Other income, net for 2023 related to non-cash adjustments for the revaluation of the liability related to the tax receivable agreement as a result of changes to the state tax rate.
Income tax expense. Income tax expense for the first nine months of 2024 was $48.0 million compared to $30.6 million for the first nine months of 2023. The increase in income tax expense from the first nine months of 2023 was primarily due to an increase in operating income during the first nine months of 2024, and fewer reductions in income tax expense for items specific to the comparable period of 2023. Income tax expense for the first nine months of 2023 included approximately $38.3 million of expense associated with 2023 income, offset by a $12.1 million benefit associated with the release of our valuation allowance previously provided for our investment in Cactus Companies. The valuation allowance was based on the determination that the deferred tax asset was realizable due to our ability to generate sufficient taxable income of the appropriate type. Additionally, we recognized $4.3 million of expense associated with the revaluation of our deferred tax asset as a result of a change in our forecasted state tax rate, $0.5 million of expense related to the finalization of our 2022 tax returns, and a $0.4 million benefit associated with permanent differences related to equity compensation.
Liquidity and Capital Resources
At September 30, 2024, we had $303.4 million of cash and cash equivalents. Our primary sources of liquidity and capital resources are cash on hand, cash flows generated by operating activities, and borrowings under our Amended ABL Credit Facility (as defined in Note 7 in the notes to the unaudited condensed consolidated financial statements). Depending upon market conditions and other factors, we may also have the ability to issue additional equity and debt if needed. As of September 30, 2024, we had $220.7 million of available borrowing capacity under our Amended ABL Credit Facility with no outstanding borrowings, and $2.5 million in letters of credit outstanding. We were in compliance with the covenants of the Amended ABL Credit Facility as of September 30, 2024.
The contingent consideration earn-out period related to the FlexSteel acquisition ended on June 30, 2024 and resulted in an earn-out liability of $37.0 million, which was paid in September 2024.
In June 2023, our board of directors authorized the Company to repurchase shares of its Class A common stock for an aggregate purchase price of up to $150 million. Under our share repurchase program, shares may be repurchased from time to time in open market transactions or block trades, in privately negotiated transactions, or any other method permitted under U.S. securities laws, rules and regulations. The repurchase program does not obligate the Company to purchase any particular amount of shares, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. As of September 30, 2024, $146.3 million remained authorized for future repurchases of Class A common stock under the program.
We believe that our existing cash on hand, cash generated from operations and available borrowings under our Amended ABL Credit Facility will be sufficient for at least the next 12 months to meet working capital requirements, debt service obligations, anticipated capital expenditures, repurchases of shares of our Class A common stock, expected TRA liability payments, anticipated tax liabilities, and dividends to holders of our Class A common stock as well as pro rata cash distributions to holders of CC Units other than Cactus Inc.
We currently estimate our net capital expenditures for the year ending December 31, 2024 will range from $32 million to $37 million. In the Pressure Control segment, capital expenditures are primarily related to rental fleet investments, international expansion and diversification of our low cost supply chain. In the Spoolable Technologies segment, capital expenditures are primarily related to manufacturing plant enhancements and additional deployment equipment used for product installation.
24
Our ability to satisfy our long-term liquidity requirements, including cash requirements to fund income tax liabilities and the TRA liability at Cactus Inc., along with associated distributions to holders of CC Units relating to their ownership of Cactus Companies, depends on our future operating performance, which is affected by, and subject to, prevailing economic conditions, market conditions in the E&P industry, availability and cost of raw materials, and financial, business and other factors, many of which are beyond our control. We will not be able to predict or control many of these factors, such as economic conditions in the markets where we operate, and competitive pressures. If necessary, we would likely choose to further reduce our spending on capital expenditures and operating expenses to ensure we operate within the cash flow generated from our operations.
Cash Flows
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
The following table summarizes our cash flows for the periods indicated:
Nine Months Ended September 30,
2024
2023
(in thousands)
Net cash provided by operating activities
$
249,518
$
248,602
Net cash used in investing activities
(24,051)
(645,242)
Net cash (used in) provided by financing activities
(56,427)
116,651
Net cash provided by operating activities was $249.5 million and $248.6 million for the nine months ended September 30, 2024 and 2023, respectively. Operating cash flows for 2024 increased primarily due to an increase in operating income and stronger customer collections, partially offset by an increase in cash outflows associated with increased purchases of inventory, in addition to the payment of the earn-out liability.
Net cash used in investing activities was $24.1 million and $645.2 million for the nine months ended September 30, 2024 and 2023, respectively. The current year decrease was primarily due to the non-recurrence of cash paid to acquire FlexSteel for $621.5 million, less $5.3 million in cash acquired during the first quarter of 2023. Additionally, our capital expenditures decreased approximately $6.4 million primarily due to the $7.0 million purchase of a previously leased facility during the first half of 2023.
Net cash used in financing activities was $56.4 million for the nine months ended September 30, 2024 as compared to net cash provided by financing activities of $116.7 million for the nine months ended September 30, 2023. The decrease in net cash provided by financing activities was primarily related to certain financing activities in 2023 associated with the FlexSteel acquisition. We received approximately $169.9 million of proceeds, net of issuance costs, from issuing shares of our Class A common stock during 2023. The first nine months of 2023 also included payments of approximately $6.9 million of debt issuance costs. The first nine months of 2024 includes a $4.7 million increase in share repurchases, primarily associated with the Company's share repurchase program, higher dividend payments of approximately $2.6 million and $6.0 million payment related to the contingent consideration established as of the FlexSteel acquisition date. These increases are partially offset by a $3.5 million decrease in member distributions.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
For quantitative and qualitative disclosures about market risk, see Part II, Item 7A., “Quantitative and Qualitative Disclosures about Market Risk,” in our 2023 Annual Report. Our exposure to market risk has not changed materially since December 31, 2023.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
In accordance with Exchange Act Rules 13a-15 and 15d-15, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as
25
appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission ("SEC"). Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2024 at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the third quarter of 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are party to lawsuits arising in the ordinary course of our business. We cannot predict the outcome of any such lawsuits with certainty, but management believes it is unlikely that pending or threatened legal matters will have a material adverse impact on our financial condition.
Due to the nature of our business, we are, from time to time, involved in other routine litigation or subject to disputes or claims related to our business activities, including workers’ compensation claims and employment related disputes. In the opinion of our management, none of these, whether pending litigation, disputes or claims against us, if decided adversely, will have a material adverse effect on our results of operations, financial condition or cash flows.
Item 1A. Risk Factors.
In addition to the information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in our 2023 Annual Report and the risk factors and other cautionary statements contained in our other filings with the SEC, which could materially affect our business, results of operations, financial condition or cash flows. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, results of operations, financial condition or cash flows. There have been no material changes in our risk factors from those described in our 2023 Annual Report or our other SEC filings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
The following sets forth information with respect to our repurchases of Class A common stock during the three months ended September 30, 2024 (in whole shares).
Period
Total number of shares purchased (1)
Weighted-average price paid per share(2)
Total number of shares purchased as part of publicly announced plans or programs (3)
Maximum dollar value of shares that may yet be purchased under the plans or program (3)
July 1-31, 2024
—
$
—
—
$
—
August 1-31, 2024
13,945
$
59.67
—
$
—
September 1-30, 2024
—
$
—
—
$
—
Total
13,945
$
59.67
—
$
146,302,153
(1)Consists of shares of Class A common stock repurchased from employees to satisfy tax withholding obligations related to restricted stock units that vested during the period.
(2)Average price paid for Class A common stock purchased from employees to satisfy tax withholding obligations related to restricted stock units that vested during the period.
(3)In June 2023, our board of directors authorized the Company to repurchase shares of its Class A common stock for an aggregate purchase price of up to $150 million. Purchases made are intended to comply with Rule 10b-18 and qualify under Rule 10b5-1.
26
Item 5. Other Information.
During the three months ended September 30, 2024, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) of Cactus, Inc. adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits.
The following exhibits arerequired by Item 601 of Regulation S-K and are filed as part of this report.
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Filed herewith.
** Furnished herewith.
27
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, thereunto duly authorized.
Cactus, Inc.
October 31, 2024
By:
/s/ Scott Bender
Date
Scott Bender
Chief Executive Officer, Chairman of the Board and Director
(Principal Executive Officer)
October 31, 2024
By:
/s/ Jay A. Nutt
Date
Jay A. Nutt
Executive Vice President, Chief Financial Officer and Treasurer