HOUSTON--(BUSINESS WIRE)--Cactus, Inc. (NYSE: WHD) ("Cactus" or the "Company") today announced financial and operating results for the second quarter of 2023.
Second Quarter Highlights
- Revenue of $305.8 million and operating income of $48.5 million;
- Net income of $32.5 million and diluted earnings per Class A share of $0.38;
- Adjusted net income(1) of $67.3 million and diluted earnings per share, as adjusted(1) of $0.84;
- Net income margin of 10.6% and adjusted net income margin(1) of 22.0%;
- Adjusted EBITDA(2) and Adjusted EBITDA margin(2) of $115.4 million and 37.7%, respectively;
- Cash flow from operations of $108.1 million;
- On June 7, 2023, announced approval of a $150 million share repurchase authorization;
- On August 1, 2023, the Board of Directors approved a 9% increase to the dividend to $0.12 per quarter;
- Cash and cash equivalents balance of $63.9 million and gross bank debt outstanding of $55 million as of June 30, 2023; and
- As of July 31, 2023, the full balance of the $155 million of bank debt raised to finance the FlexSteel acquisition had been paid off.
Financial Summary | |||||||||||
Three Months Ended | |||||||||||
June 30, | March 31, | June 30, | |||||||||
2023 | 2023(3) | 2022 | |||||||||
(in thousands) | |||||||||||
Revenues | $ | 305,819 | $ | 228,405 | $ | 170,215 | |||||
Operating income(4) | $ | 48,522 | $ | 49,688 | $ | 44,241 | |||||
Operating income margin | 15.9 | % | 21.8 | % | 26.0 | % | |||||
Net income | $ | 32,459 | $ | 52,288 | $ | 35,780 | |||||
Net income margin | 10.6 | % | 22.9 | % | 21.0 | % | |||||
Adjusted net income(1) | $ | 67,279 | $ | 50,682 | $ | 33,409 | |||||
Adjusted net income margin(1) | 22.0 | % | 22.2 | % | 19.6 | % | |||||
Adjusted EBITDA(2) | $ | 115,419 | $ | 79,411 | $ | 55,506 | |||||
Adjusted EBITDA margin(2) | 37.7 | % | 34.8 | % | 32.6 | % | |||||
(1) | 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 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. | |
(2) | 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. | |
(3) | First quarter 2023 results throughout include only one month of FlexSteel results from the close of the acquisition on February 28th, 2023. | |
(4) | Operating income for the second quarter of 2023 includes $18.1 million of expense related to the remeasurement of the earn-out liability associated with the FlexSteel acquisition, $19.3 million of inventory costs associated with the step-up in value of inventory on hand at acquisition, and $8.7 million of intangible amortization expense related to purchase price accounting. Operating income for the first quarter of 2023 includes $4.2 million of inventory costs associated with the step-up in value of inventory on hand at acquisition and $3.7 million of intangible amortization expense related to purchase price accounting. |
Scott Bender, CEO and Chairman of the Board of Cactus, commented, "The second quarter once again showcased our ability to outperform a declining U.S. rig count due to our differentiated products and focus on execution. Revenues increased sequentially in both segments despite lower U.S. activity levels as the quarter progressed. Additionally, our substantial free cash flow generation enabled us to repay all of the $155 million of debt raised for the FlexSteel acquisition within five months of closing, well ahead of plan, leaving us once again free of bank debt."
"Looking ahead to the third quarter, we anticipate revenue to be down sequentially due to lower U.S. land activity levels, although we expect impacts to the FlexSteel business will lag the activity decline. We also expect margins to remain robust in both segments. We believe the majority of the rig count declines are behind us and are optimistic that drilling activity levels in the fourth quarter will be flat to up."
Mr. Bender concluded, "The integration of the FlexSteel business has been proceeding smoothly, and we are very pleased to report the first full quarter of results since the acquisition closed. Revenue, margins and cash flow generation all exceeded our expectations, and we continue to be excited about the growth potential of the business under our ownership. Additionally, we are pleased to have our new share repurchase authorization in place to allow us to invest in Cactus stock during what we perceive to be market price dislocations."
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). All corporate and other costs not directly attributable to either segment have been included in Pressure Control results.
Pressure Control
Three Months Ended | |||||||||||
June 30, | March 31, | June 30, | |||||||||
2023 | 2023 | 2022 | |||||||||
(in thousands) | |||||||||||
Pressure Control | |||||||||||
Revenue | $ | 199,134 | $ | 194,655 | $ | 170,215 | |||||
Operating income | $ | 54,540 | $ | 49,439 | $ | 44,241 | |||||
Revaluation gain on TRA liability(1) | - | 3,417 | - | ||||||||
Depreciation and amortization expense | 9,127 | 7,992 | 8,915 | ||||||||
Segment EBITDA(2) | 63,667 | 60,848 | 53,156 | ||||||||
Stock-based compensation | 4,086 | 3,091 | 2,350 | ||||||||
Revaluation gain on TRA liability(1) | - | (3,417 | ) | - | |||||||
Transaction related expenses(3) | 2,191 | 8,581 | - | ||||||||
Adjusted Segment EBITDA(2) | $ | 69,944 | $ | 69,103 | $ | 55,506 | |||||
Operating income margin | 27.4 | % | 25.4 | % | 26.0 | % | |||||
Adjusted Segment EBITDA margin(2) | 35.1 | % | 35.5 | % | 32.6 | % | |||||
(1) | Represents non-cash adjustments for the revaluation of the liability related to the TRA. | |
(2) | Segment EBITDA, Adjusted Segment EBITDA and Adjusted Segment 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. | |
(3) | Reflects fees and expenses recorded in connection with the FlexSteel Acquisition and related financing. |
Second quarter 2023 Pressure Control revenue increased $4.5 million, or 2.3%, sequentially, as sales of wellhead and production related equipment improved primarily due to higher customer activity relative to the declining rig count. Operating income increased $5.1 million, or 10.3%, sequentially, with margins increasing 200 basis points primarily due to lower transaction expenses offset partially by an increase in the allowance for doubtful accounts. Adjusted Segment EBITDA increased $0.8 million, or 1.2%, sequentially, with Adjusted Segment EBITDA margins decreasing 40 basis points.
Spoolable Technologies
Three Months Ended | ||||||||||
June 30, | March 31, | June 30, | ||||||||
2023 | 2023 | 2022 | ||||||||
(in thousands) | ||||||||||
Spoolable Technologies | ||||||||||
Revenue | $ | 106,685 | $ | 33,750 | $ | - | ||||
Operating income (loss) | $ | (6,018 | ) | $ | 249 | $ | - | |||
Other non-operating income | - | 121 | - | |||||||
Depreciation and amortization expense | 12,787 | 5,118 | - | |||||||
Segment EBITDA(1) | 6,769 | 5,488 | - | |||||||
Stock-based compensation | 1,237 | 750 | - | |||||||
Remeasurement (gain) loss on earn-out liability(2) | 18,144 | (121 | ) | - | ||||||
Inventory step-up expense(3) | 19,325 | 4,191 | - | |||||||
Adjusted Segment EBITDA(1) | $ | 45,475 | $ | 10,308 | $ | - | ||||
Operating income (loss) margin | (5.6 | )% | 0.7 | % | n/a | |||||
Adjusted Segment EBITDA margin(1) | 42.6 | % | 30.5 | % | n/a | |||||
(1) | Segment EBITDA, Adjusted Segment EBITDA and Adjusted Segment 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. | |
(2) | Represents non-cash adjustments for the remeasurement of the earn-out liability associated with the FlexSteel Acquisition. | |
(3) | Represents amortization of the FlexSteel inventory step-up adjustment due to purchase price accounting. |
In the second quarter of 2023, Spoolable Technologies generated revenue of $106.7 million and segment operating loss of $6.0 million. Operating loss was inclusive of $19.3 million of inventory costs associated with the step-up in value of inventory on hand at acquisition, $8.7 million of intangible amortization expense, and $18.1 million of expense related to the remeasurement of the earn-out liability associated with the FlexSteel acquisition. Adjusted Segment EBITDA margins increased 1,210 basis points due to the depletion of higher cost material in the prior quarter and improved operating leverage.
Liquidity, Capital Expenditures and Other
As of June 30, 2023, the Company had $55.0 million gross bank debt, $63.9 million of cash and cash equivalents, and $193.3 million availability on our revolving credit facility. Operating cash flow was $108.1 million for the second quarter of 2023. During the second quarter, the Company made dividend payments and associated distributions of $8.7 million.
Net cash used in investing activities represented $6.4 million during the second quarter of 2023. For the full year 2023, the Company now expects net capital expenditures to be in the range of $35 million to $45 million on lower expectations for near-term growth spending given moderating activity levels.
As of June 30, 2023, Cactus had 64,609,498 shares of Class A common stock outstanding (representing 81.3% of the total voting power) and 14,820,100 shares of Class B common stock outstanding (representing 18.7% of the total voting power).
Quarterly Dividend
In August 2023, the Board approved a quarterly cash dividend of $0.12 per share of Class A common stock with payment to occur on September 14, 2023 to holders of record of Class A common stock at the close of business on August 28, 2023. A corresponding distribution of up to $0.12 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 tomorrow, Tuesday August 8, 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 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. | ||||||||||||||
Condensed Consolidated Statements of Income | ||||||||||||||
(unaudited) | ||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
(in thousands, except per share data) | ||||||||||||||
Revenues | ||||||||||||||
Pressure Control | $ | 199,134 | $ | 170,215 | $ | 393,789 | $ | 316,114 | ||||||
Spoolable Technologies | 106,685 | - | 140,435 | - | ||||||||||
Total revenues | 305,819 | 170,215 | 534,224 | 316,114 | ||||||||||
Operating income (loss) | ||||||||||||||
Pressure Control | 54,540 | 44,241 | 103,979 | 75,231 | ||||||||||
Spoolable Technologies | (6,018 | ) | - | (5,769 | ) | - | ||||||||
Total 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(1) | $ | 0.38 | $ | 0.44 | $ | 1.02 | $ | 0.78 | ||||||
? | ? | |||||||||||||
Weighted average shares outstanding - basic | 64,566 | 60,523 | 64,155 | 59,909 | ||||||||||
Weighted average shares outstanding - diluted(1) | 65,003 | 76,322 | 79,512 | 76,262 | ||||||||||
(1) | Dilution for the three months ended June 30, 2023 excludes 14.9 million shares of Class B common stock as the effect would be anti-dilutive. Dilution for the six months ended June 30, 2023 includes $17.7 million of additional pre-tax income attributable to non-controlling interest adjusted for a corporate effective tax rate of 26.0% and 14.9 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, 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, respectively, plus the effect of dilutive securities. |
Cactus, Inc. | |||||
Condensed Consolidated Balance Sheets | |||||
(unaudited) | |||||
June 30, | December 31, | ||||
2023 | 2022 | ||||
(in thousands) | |||||
Assets | |||||
Current assets | |||||
Cash and cash equivalents | $ | 63,910 | $ | 344,527 | |
Accounts receivable, net | 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 | |||
Equity | 952,774 | 710,445 | |||
Total liabilities and equity | $ | 1,476,397 | $ | 1,118,896 | |
Cactus, Inc. | |||||||
Condensed Consolidated Statements of Cash Flows | |||||||
(unaudited) | |||||||
Six Months Ended June 30, | |||||||
2023 | 2022 | ||||||
(in thousands) | |||||||
Cash flows from operating activities | |||||||
Net income | $ | 84,747 | $ | 62,863 | |||
Reconciliation of net income to net cash provided by operating activities | |||||||
Depreciation and amortization | 35,024 | 17,592 | |||||
Deferred financing cost amortization | 3,545 | 84 | |||||
Stock-based compensation | 9,164 | 5,016 | |||||
Provision for expected credit losses | 1,515 | 240 | |||||
Inventory obsolescence | 1,980 | 959 | |||||
Gain on disposal of assets | (1,632 | ) | (518 | ) | |||
Deferred income taxes | 1,079 | 8,504 | |||||
Change in fair value of earn-out liability | 18,023 | - | |||||
(Gain) loss from revaluation of liability related to tax receivable agreement | (3,417 | ) | 1,115 | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (20,107 | ) | (36,484 | ) | |||
Inventories | 41,185 | (30,670 | ) | ||||
Prepaid expenses and other assets | 965 | (210 | ) | ||||
Accounts payable | 1,236 | 14,238 | |||||
Accrued expenses and other liabilities | (4,789 | ) | 5,494 | ||||
Net cash provided by operating activities | 168,518 | 48,223 | |||||
Cash flows from investing activities | |||||||
Acquisition of a business, net of cash and cash equivalents acquired | (618,857 | ) | - | ||||
Capital expenditures and other | (23,700 | ) | (13,752 | ) | |||
Proceeds from sales of assets | 3,038 | 876 | |||||
Net cash used in investing activities | (639,519 | ) | (12,876 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from issuance of long-term debt | 155,000 | - | |||||
Repayments of borrowings of long-term debt | (100,000 | ) | - | ||||
Net proceeds from the issuance of Class A common stock | 169,878 | - | |||||
Payments of deferred financing costs | (6,817 | ) | - | ||||
Payments on finance leases | (3,594 | ) | (2,987 | ) | |||
Dividends paid to Class A common stock shareholders | (14,469 | ) | (13,335 | ) | |||
Distributions to members | (4,712 | ) | (3,348 | ) | |||
Repurchase of shares | (4,599 | ) | (4,495 | ) | |||
Net cash provided by (used in) financing activities | 190,687 | (24,165 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (303 | ) | (1,167 | ) | |||
Net increase (decrease) in cash and cash equivalents | (280,617 | ) | 10,015 | ||||
Cash and cash equivalents | |||||||
Beginning of period | 344,527 | 301,669 | |||||
End of period | $ | 63,910 | $ | 311,684 | |||
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.
Three Months Ended | |||||||||||
June 30, | March 31, | June 30, | |||||||||
2023 | 2023 | 2022 | |||||||||
(in thousands, except per share data) | |||||||||||
Net income | $ | 32,459 | $ | 52,288 | $ | 35,780 | |||||
Adjustments: | |||||||||||
Revaluation gain on TRA liability(1) | - | (3,417 | ) | - | |||||||
Transaction related expenses, pre-tax(2) | 2,191 | 8,581 | - | ||||||||
Intangible amortization expense(3) | 8,663 | 3,666 | - | ||||||||
Remeasurement (gain) loss on earn-out liability(4) | 18,144 | (121 | ) | - | |||||||
Inventory step-up expense(5) | 19,325 | 4,191 | - | ||||||||
Income tax expense differential(6) | (13,503 | ) | (14,506 | ) | (2,371 | ) | |||||
Adjusted net income | $ | 67,279 | $ | 50,682 | $ | 33,409 | |||||
Diluted earnings per share, as adjusted | $ | 0.84 | $ | 0.64 | $ | 0.44 | |||||
Weighted average shares outstanding, as adjusted(7) | 79,866 | 79,155 | 76,322 | ||||||||
Revenue | $ | 305,819 | $ | 228,405 | $ | 170,215 | |||||
Net income margin | 10.6 | % | 22.9 | % | 21.0 | % | |||||
Adjusted net income margin | 22.0 | % | 22.2 | % | 19.6 | % | |||||
(1) | Represents non-cash adjustments for the revaluation of the liability related to the TRA. | |
(2) | Reflects fees and expenses recorded in connection with the FlexSteel Acquisition and related financing. | |
(3) | Reflects amortization expense associated with the step-up in intangible value due to purchase price accounting. | |
(4) | Represents non-cash adjustments for the remeasurement of the earn-out liability associated with the FlexSteel Acquisition. | |
(5) | Represents amortization of the FlexSteel inventory step-up adjustment due to purchase price accounting. | |
(6) | Represents the increase or decrease in tax expense as though Cactus, Inc. owned 100% of its operating subsidiary 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 26.0% on income before income taxes for the three months ended June 30, 2023, 24.5% for the three months ended March 31, 2023, and 25.0% for the three months ended June 30, 2022. | |
(7) | Reflects 64.6, 63.7, and 60.5 million weighted average shares of basic Class A common stock outstanding and 14.9, 15.0 and 15.4 million of additional shares for the three months ended June 30, 2023, March 31, 2023 and June 30, 2022, 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. |
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 Ended | Six Months Ended | ||||||||||||||||||
June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||
Net income | $ | 32,459 | $ | 52,288 | $ | 35,780 | $ | 84,747 | $ | 62,863 | |||||||||
Interest (income) expense, net | 5,928 | (1,002 | ) | (304 | ) | 4,926 | (204 | ) | |||||||||||
Income tax expense | 10,135 | 1,940 | 8,765 | 12,075 | 11,457 | ||||||||||||||
Depreciation and amortization | 21,914 | 13,110 | 8,915 | 35,024 | 17,592 | ||||||||||||||
EBITDA | 70,436 | 66,336 | 53,156 | 136,772 | 91,708 | ||||||||||||||
Revaluation (gain) loss on TRA liability(1) | - | (3,417 | ) | - | (3,417 | ) | 1,115 | ||||||||||||
Transaction related expenses(2) | 2,191 | 8,581 | - | 10,772 | - | ||||||||||||||
Remeasurement (gain) loss on earn-out liability(3) | 18,144 | (121 | ) | - | 18,023 | - | |||||||||||||
Inventory step-up expense(4) | 19,325 | 4,191 | - | 23,516 | - | ||||||||||||||
Stock-based compensation | 5,323 | 3,841 | 2,350 | 9,164 | 5,016 | ||||||||||||||
Adjusted EBITDA | $ | 115,419 | $ | 79,411 | $ | 55,506 | $ | 194,830 | $ | 97,839 | |||||||||
Revenue | $ | 305,819 | $ | 228,405 | $ | 170,215 | $ | 534,224 | $ | 316,114 | |||||||||
Net income margin | 10.6 | % | 22.9 | % | 21.0 | % | 15.9 | % | 19.9 | % | |||||||||
Adjusted EBITDA margin | 37.7 | % | 34.8 | % | 32.6 | % | 36.5 | % | 31.0 | % | |||||||||
(1) | Represents non-cash adjustments for the revaluation of the liability related to the TRA. | |
(2) | Reflects fees and expenses recorded in connection with the FlexSteel Acquisition and related financing. | |
(3) | Represents non-cash adjustments for the remeasurement of the earn-out liability associated with the FlexSteel Acquisition. | |
(4) | Represents amortization of the FlexSteel inventory step-up adjustment due to purchase price accounting. |
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 segment operating income including other non-operating income and excluding depreciation and amortization, in each case, attributable to the segment. Cactus defines Adjusted Segment EBITDA as Segment EBITDA excluding the other items outlined below that are attributable to the segment.
Cactus management believes Segment EBITDA and Adjusted Segment EBITDA are useful because they allow management to more effectively evaluate the Company's segment operating performance and compare the results of its segment 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 segment 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 Ended | Six Months Ended | ||||||||||||||||||
June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||
Pressure Control | |||||||||||||||||||
Revenue | $ | 199,134 | $ | 194,655 | $ | 170,215 | $ | 393,789 | $ | 316,114 | |||||||||
Operating income | $ | 54,540 | $ | 49,439 | $ | 44,241 | $ | 103,979 | $ | 75,231 | |||||||||
Revaluation gain (loss) on TRA liability(1) | - | 3,417 | - | 3,417 | (1,115 | ) | |||||||||||||
Depreciation and amortization expense | 9,127 | 7,992 | 8,915 | 17,119 | 17,592 | ||||||||||||||
Segment EBITDA | 63,667 | 60,848 | 53,156 | 124,515 | 91,708 | ||||||||||||||
Stock-based compensation | 4,086 | 3,091 | 2,350 | 7,177 | 5,016 | ||||||||||||||
Revaluation (gain) loss on TRA liability(1) | - | (3,417 | ) | - | (3,417 | ) | 1,115 | ||||||||||||
Transaction related expenses(2) | 2,191 | 8,581 | - | 10,772 | - | ||||||||||||||
Adjusted Segment EBITDA | $ | 69,944 | $ | 69,103 | $ | 55,506 | $ | 139,047 | $ | 97,839 | |||||||||
Operating income margin | 27.4 | % | 25.4 | % | 26.0 | % | 26.4 | % | 23.8 | % | |||||||||
Adjusted Segment EBITDA margin | 35.1 | % | 35.5 | % | 32.6 | % | 35.3 | % | 31.0 | % | |||||||||
(1) | Represents non-cash adjustments for the revaluation of the liability related to the TRA. | |
(2) | Reflects fees and expenses recorded in connection with the FlexSteel Acquisition and related financing. |
Cactus, Inc. - Supplemental Information | |||||||||||||||||
Reconciliation of GAAP to non-GAAP Financial Measures | |||||||||||||||||
Segment EBITDA, Adjusted Segment EBITDA and Adjusted Segment EBITDA margin (continued) | |||||||||||||||||
(unaudited) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | March 31, | June 30, | June 30, | ||||||||||||||
2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||
Spoolable Technologies | |||||||||||||||||
Revenue | $ | 106,685 | $ | 33,750 | $ | - | $ | 140,435 | $ | - | |||||||
Operating income (loss) | $ | (6,018 | ) | $ | 249 | $ | - | $ | (5,769 | ) | $ | - | |||||
Other non-operating income | - | 121 | - | 121 | - | ||||||||||||
Depreciation and amortization expense | 12,787 | 5,118 | - | 17,905 | - | ||||||||||||
Segment EBITDA | 6,769 | 5,488 | - | 12,257 | - | ||||||||||||
Stock-based compensation | 1,237 | 750 | - | 1,987 | - | ||||||||||||
Remeasurement (gain) loss on earn-out liability(1) | 18,144 | (121 | ) | - | 18,023 | - | |||||||||||
Inventory step-up expense(2) | 19,325 | 4,191 | - | 23,516 | - | ||||||||||||
Adjusted Segment EBITDA | $ | 45,475 | $ | 10,308 | $ | - | $ | 55,783 | $ | - | |||||||
Operating income (loss) margin | (5.6 | )% | 0.7 | % | n/a | (4.1 | )% | n/a | |||||||||
Adjusted Segment EBITDA margin | 42.6 | % | 30.5 | % | n/a | 39.7 | % | n/a | |||||||||
(1) | Represents non-cash adjustments for the revaluation of the earn-out liability associated with the FlexSteel Acquisition. | |
(2) | Represents amortization of the FlexSteel inventory step-up adjustment due to purchase price accounting. |
A reconciliation of segment operating income to net income is shown below.
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | March 31, | June 30, | June 30, | ||||||||||||||
2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||
Consolidated operating income (loss) | |||||||||||||||||
Pressure Control | $ | 54,540 | $ | 49,439 | $ | 44,241 | $ | 103,979 | $ | 75,231 | |||||||
Spoolable Technologies | (6,018 | ) | 249 | - | (5,769 | ) | - | ||||||||||
Total operating income | 48,522 | 49,688 | 44,241 | 98,210 | 75,231 | ||||||||||||
Interest income (expense), net | (5,928 | ) | 1,002 | 304 | (4,926 | ) | 204 | ||||||||||
Other income (expense), net | - | 3,538 | - | 3,538 | (1,115 | ) | |||||||||||
Income before income taxes | 42,594 | 54,228 | 44,545 | 96,822 | 74,320 | ||||||||||||
Income tax expense | 10,135 | 1,940 | 8,765 | 12,075 | 11,457 | ||||||||||||
Net income | $ | 32,459 | $ | 52,288 | $ | 35,780 | $ | 84,747 | $ | 62,863 | |||||||
Contacts
Cactus, Inc.
Alan Boyd, 713-904-4669
Director of Corporate Development and Investor Relations
IR@CactusWHD.com
