10-Q 1 whd-20230930.htm 10-Q whd-20230930
000169913612-312023Q3false100016991362023-01-012023-09-300001699136us-gaap:CommonClassAMember2023-11-06xbrli:shares0001699136us-gaap:CommonClassBMember2023-11-0600016991362023-09-30iso4217:USD00016991362022-12-31iso4217:USDxbrli:shares0001699136us-gaap:CommonClassAMember2023-09-300001699136us-gaap:CommonClassAMember2022-12-310001699136us-gaap:CommonClassBMember2023-09-300001699136us-gaap:CommonClassBMember2022-12-310001699136us-gaap:ProductMember2023-07-012023-09-300001699136us-gaap:ProductMember2022-07-012022-09-300001699136us-gaap:ProductMember2023-01-012023-09-300001699136us-gaap:ProductMember2022-01-012022-09-300001699136whd:RentalRevenueMember2023-07-012023-09-300001699136whd:RentalRevenueMember2022-07-012022-09-300001699136whd:RentalRevenueMember2023-01-012023-09-300001699136whd:RentalRevenueMember2022-01-012022-09-300001699136us-gaap:ProductAndServiceOtherMember2023-07-012023-09-300001699136us-gaap:ProductAndServiceOtherMember2022-07-012022-09-300001699136us-gaap:ProductAndServiceOtherMember2023-01-012023-09-300001699136us-gaap:ProductAndServiceOtherMember2022-01-012022-09-3000016991362023-07-012023-09-3000016991362022-07-012022-09-3000016991362022-01-012022-09-300001699136us-gaap:CommonClassAMember2023-07-012023-09-300001699136us-gaap:CommonClassAMember2022-07-012022-09-300001699136us-gaap:CommonClassAMember2023-01-012023-09-300001699136us-gaap:CommonClassAMember2022-01-012022-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassAMember2023-06-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassBMember2023-06-300001699136us-gaap:AdditionalPaidInCapitalMember2023-06-300001699136us-gaap:RetainedEarningsMember2023-06-300001699136us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-300001699136us-gaap:NoncontrollingInterestMember2023-06-3000016991362023-06-300001699136us-gaap:NoncontrollingInterestMember2023-07-012023-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassAMember2023-07-012023-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassBMember2023-07-012023-09-300001699136us-gaap:AdditionalPaidInCapitalMember2023-07-012023-09-300001699136us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-300001699136us-gaap:RetainedEarningsMember2023-07-012023-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassAMember2023-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassBMember2023-09-300001699136us-gaap:AdditionalPaidInCapitalMember2023-09-300001699136us-gaap:RetainedEarningsMember2023-09-300001699136us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-300001699136us-gaap:NoncontrollingInterestMember2023-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-06-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassBMember2022-06-300001699136us-gaap:AdditionalPaidInCapitalMember2022-06-300001699136us-gaap:RetainedEarningsMember2022-06-300001699136us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001699136us-gaap:NoncontrollingInterestMember2022-06-3000016991362022-06-300001699136us-gaap:NoncontrollingInterestMember2022-07-012022-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-07-012022-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassBMember2022-07-012022-09-300001699136us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001699136us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300001699136us-gaap:RetainedEarningsMember2022-07-012022-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassBMember2022-09-300001699136us-gaap:AdditionalPaidInCapitalMember2022-09-300001699136us-gaap:RetainedEarningsMember2022-09-300001699136us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300001699136us-gaap:NoncontrollingInterestMember2022-09-3000016991362022-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-12-310001699136us-gaap:CommonStockMemberus-gaap:CommonClassBMember2022-12-310001699136us-gaap:AdditionalPaidInCapitalMember2022-12-310001699136us-gaap:RetainedEarningsMember2022-12-310001699136us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001699136us-gaap:NoncontrollingInterestMember2022-12-310001699136us-gaap:CommonStockMemberus-gaap:CommonClassAMember2023-01-012023-09-300001699136us-gaap:AdditionalPaidInCapitalMember2023-01-012023-09-300001699136us-gaap:NoncontrollingInterestMember2023-01-012023-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassBMember2023-01-012023-09-300001699136us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-09-300001699136us-gaap:RetainedEarningsMember2023-01-012023-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-12-310001699136us-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-12-310001699136us-gaap:AdditionalPaidInCapitalMember2021-12-310001699136us-gaap:RetainedEarningsMember2021-12-310001699136us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001699136us-gaap:NoncontrollingInterestMember2021-12-3100016991362021-12-310001699136us-gaap:NoncontrollingInterestMember2022-01-012022-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-01-012022-09-300001699136us-gaap:CommonStockMemberus-gaap:CommonClassBMember2022-01-012022-09-300001699136us-gaap:AdditionalPaidInCapitalMember2022-01-012022-09-300001699136us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-09-300001699136us-gaap:RetainedEarningsMember2022-01-012022-09-30whd:segment0001699136whd:FlexSteelMember2023-02-282023-02-280001699136whd:FlexSteelMember2023-02-2800016991362023-02-280001699136whd:FlexSteelMember2023-09-300001699136whd:FlexSteelMember2023-07-012023-09-300001699136whd:FlexSteelMember2023-01-012023-03-3100016991362023-01-012023-03-310001699136whd:FlexSteelMember2023-02-282023-09-300001699136whd:FlexSteelMember2022-07-012022-09-300001699136whd:FlexSteelMember2023-01-012023-09-300001699136whd:FlexSteelMember2022-01-012022-09-300001699136us-gaap:LandMember2023-09-300001699136us-gaap:LandMember2022-12-310001699136us-gaap:BuildingAndBuildingImprovementsMember2023-09-300001699136us-gaap:BuildingAndBuildingImprovementsMember2022-12-310001699136us-gaap:MachineryAndEquipmentMember2023-09-300001699136us-gaap:MachineryAndEquipmentMember2022-12-310001699136whd:ReelsAndSkidsMember2023-09-300001699136whd:ReelsAndSkidsMember2022-12-310001699136us-gaap:VehiclesMember2023-09-300001699136us-gaap:VehiclesMember2022-12-310001699136whd:RentalEquipmentMember2023-09-300001699136whd:RentalEquipmentMember2022-12-310001699136us-gaap:FurnitureAndFixturesMember2023-09-300001699136us-gaap:FurnitureAndFixturesMember2022-12-310001699136whd:ComputerAndSoftwareMember2023-09-300001699136whd:ComputerAndSoftwareMember2022-12-310001699136us-gaap:ConstructionInProgressMember2023-09-300001699136us-gaap:ConstructionInProgressMember2022-12-310001699136whd:PressureControlSegmentMember2022-12-310001699136whd:SpoolableTechnologiesMember2022-12-310001699136whd:PressureControlSegmentMember2023-01-012023-09-300001699136whd:SpoolableTechnologiesMember2023-01-012023-09-300001699136whd:PressureControlSegmentMember2023-09-300001699136whd:SpoolableTechnologiesMember2023-09-300001699136us-gaap:CustomerRelationshipsMember2023-09-300001699136us-gaap:TechnologyBasedIntangibleAssetsMember2023-09-300001699136us-gaap:TradeNamesMember2023-09-300001699136us-gaap:OrderOrProductionBacklogMember2023-09-300001699136whd:IdentifiableIntangibleAssetsAcquiredMember2023-09-300001699136whd:IdentifiableIntangibleAssetsAcquiredMember2023-07-012023-09-300001699136whd:IdentifiableIntangibleAssetsAcquiredMember2023-01-012023-09-300001699136us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberwhd:CactusWellheadLlcAndItsSubsidiariesMember2018-08-210001699136us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberwhd:CactusWellheadLlcAndItsSubsidiariesMember2022-07-250001699136us-gaap:LineOfCreditMemberwhd:CactusWellheadLlcAndItsSubsidiariesMember2022-07-250001699136whd:AmendedABLCreditFacilityMemberus-gaap:SecuredDebtMember2023-02-280001699136whd:AmendedABLCreditFacilityMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2023-02-280001699136whd:AmendedABLCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:LetterOfCreditMember2023-02-280001699136us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberwhd:CactusWellheadLlcAndItsSubsidiariesMember2023-02-280001699136whd:TheCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:SecuredDebtMember2023-02-280001699136whd:TheCreditFacilityMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2023-02-2800016991362023-02-282023-02-280001699136us-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMembersrt:SubsidiariesMember2023-01-012023-09-30xbrli:pure0001699136us-gaap:RevolvingCreditFacilityMemberwhd:SecuredOvernightFinancingRateMembersrt:SubsidiariesMember2023-01-012023-09-300001699136us-gaap:RevolvingCreditFacilityMembersrt:MinimumMemberus-gaap:BaseRateMembersrt:SubsidiariesMember2023-01-012023-09-300001699136srt:MaximumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMembersrt:SubsidiariesMember2023-01-012023-09-300001699136us-gaap:RevolvingCreditFacilityMembersrt:MinimumMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMembersrt:SubsidiariesMember2023-01-012023-09-300001699136srt:MaximumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMembersrt:SubsidiariesMember2023-01-012023-09-300001699136us-gaap:RevolvingCreditFacilityMembersrt:MinimumMembersrt:SubsidiariesMember2023-01-012023-09-300001699136us-gaap:RevolvingCreditFacilityMemberwhd:CreditAgreementMemberus-gaap:LineOfCreditMembersrt:SubsidiariesMember2023-09-300001699136us-gaap:RevolvingCreditFacilityMembersrt:SubsidiariesMember2023-01-012023-09-3000016991362018-02-012018-02-2800016991362022-01-012022-12-310001699136whd:CactusCompaniesMember2023-01-012023-09-300001699136whd:CactusLLCMember2022-01-012022-12-310001699136us-gaap:CommonClassAMemberwhd:AdditionalOfferingMember2023-01-012023-01-310001699136us-gaap:CommonClassAMemberwhd:AdditionalOfferingMember2023-01-310001699136us-gaap:AdditionalPaidInCapitalMember2023-01-012023-01-310001699136whd:KeyEmployeeMemberwhd:FlexSteelMember2023-01-012023-09-300001699136whd:KeyEmployeeMemberwhd:FlexSteelMember2023-09-300001699136us-gaap:CommonClassBMemberwhd:CactusCompaniesMember2023-09-300001699136us-gaap:CommonClassAMemberwhd:CCUnitsRedeemedForClassCommonStockMember2023-09-300001699136us-gaap:CommonClassAMemberwhd:CCUnitsRedeemedForClassCommonStockMember2018-02-122023-09-300001699136whd:March2021SecondaryOfferingMemberus-gaap:CommonClassAMember2023-01-012023-09-300001699136whd:March2021SecondaryOfferingMemberus-gaap:CommonClassAMember2022-01-012022-09-300001699136whd:ShareRepurchaseProgramMember2023-06-060001699136us-gaap:CommonStockMemberwhd:ShareRepurchaseProgramMember2023-01-012023-09-300001699136us-gaap:CommonStockMemberwhd:ShareRepurchaseProgramMember2023-09-300001699136whd:CactusIncMember2023-01-012023-09-300001699136whd:CCUnitHoldersOtherThanCactusIncMember2023-01-012023-09-300001699136whd:CactusIncMember2022-01-012022-09-300001699136whd:CCUnitHoldersOtherThanCactusIncMember2022-01-012022-09-300001699136us-gaap:FairValueMeasurementsRecurringMemberwhd:EarnOutLiabilityMemberus-gaap:FairValueInputsLevel1Member2023-09-300001699136us-gaap:FairValueMeasurementsRecurringMemberwhd:EarnOutLiabilityMemberus-gaap:FairValueInputsLevel2Member2023-09-300001699136us-gaap:FairValueMeasurementsRecurringMemberwhd:EarnOutLiabilityMemberus-gaap:FairValueInputsLevel3Member2023-09-300001699136us-gaap:FairValueMeasurementsRecurringMemberwhd:EarnOutLiabilityMember2023-09-300001699136us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberwhd:PutOptionLiabilityMember2023-09-300001699136us-gaap:FairValueMeasurementsRecurringMemberwhd:PutOptionLiabilityMemberus-gaap:FairValueInputsLevel2Member2023-09-300001699136us-gaap:FairValueMeasurementsRecurringMemberwhd:PutOptionLiabilityMemberus-gaap:FairValueInputsLevel3Member2023-09-300001699136us-gaap:FairValueMeasurementsRecurringMemberwhd:PutOptionLiabilityMember2023-09-300001699136whd:EarnOutLiabilityMemberus-gaap:MeasurementInputRiskFreeInterestRateMembersrt:MinimumMember2023-09-300001699136srt:MaximumMemberwhd:EarnOutLiabilityMemberus-gaap:MeasurementInputRiskFreeInterestRateMember2023-09-300001699136whd:EarnOutLiabilityMemberwhd:MeasurementInputExpectedRevenueVolatilityMember2023-09-300001699136whd:EarnOutLiabilityMembersrt:MinimumMemberus-gaap:MeasurementInputDiscountRateMember2023-09-300001699136srt:MaximumMemberwhd:EarnOutLiabilityMemberus-gaap:MeasurementInputDiscountRateMember2023-09-300001699136whd:EarnOutLiabilityMembersrt:MinimumMemberwhd:CreditDiscountRateMember2023-09-300001699136srt:MaximumMemberwhd:EarnOutLiabilityMemberwhd:CreditDiscountRateMember2023-09-300001699136us-gaap:MeasurementInputRiskFreeInterestRateMemberwhd:PutOptionLiabilityMember2023-09-300001699136us-gaap:MeasurementInputPriceVolatilityMemberwhd:PutOptionLiabilityMember2023-09-300001699136whd:PutOptionLiabilityMemberus-gaap:MeasurementInputExpectedDividendRateMember2023-09-300001699136whd:EarnOutLiabilityMemberus-gaap:FairValueInputsLevel3Member2022-12-310001699136whd:PutOptionLiabilityMemberus-gaap:FairValueInputsLevel3Member2022-12-310001699136whd:EarnOutLiabilityMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-09-300001699136whd:PutOptionLiabilityMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-09-300001699136whd:EarnOutLiabilityMemberus-gaap:FairValueInputsLevel3Member2023-09-300001699136whd:PutOptionLiabilityMemberus-gaap:FairValueInputsLevel3Member2023-09-300001699136whd:EarnOutLiabilityMemberwhd:FlexSteelMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-03-310001699136whd:PutOptionLiabilityMemberwhd:RemeasurementExpenseMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-09-300001699136us-gaap:FairValueInputsLevel2Member2023-09-3000016991362023-02-282023-09-300001699136whd:PressureControlSegmentMember2023-07-012023-09-300001699136whd:PressureControlSegmentMember2022-07-012022-09-300001699136whd:PressureControlSegmentMember2022-01-012022-09-300001699136whd:SpoolableTechnologiesMember2023-07-012023-09-300001699136whd:SpoolableTechnologiesMember2022-07-012022-09-300001699136whd:SpoolableTechnologiesMember2022-01-012022-09-3000016991362023-01-012023-02-270001699136us-gaap:CommonClassBMember2023-07-012023-09-300001699136us-gaap:CommonClassBMember2022-07-012022-09-30
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, 2023
or
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)
______________________________________________________________________________
Delaware35-2586106
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
920 Memorial City Way, Suite 30077024
Houston,Texas(Zip Code)
(Address of principal executive offices)
(713626-8800
(Registrant’s telephone number, including area code)
______________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.01WHDNew 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 filerAccelerated filer
Non-accelerated filerSmaller 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 6, 2023, the registrant had 65,323,129 shares of Class A common stock, $0.01 par value per share, and 14,106,469 shares of Class B common stock, $0.01 par value per share, outstanding.


TABLE OF CONTENTS


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, the Risk Factors described in “Part II, Item 1A. Risk Factors” of this Quarterly Report 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 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.
i

PART I - FINANCIAL INFORMATION
Item 1.   Financial Statements.
CACTUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share data)September 30,
2023
December 31,
2022
Assets
Current assets
Cash and cash equivalents
$63,738 $344,527 
Accounts receivable, net of allowance of $3,187 and $1,060, respectively
206,251 138,268 
Inventories
203,517 161,283 
Prepaid expenses and other current assets
19,442 10,564 
Total current assets
492,948 654,642 
Property and equipment, net
345,222 129,998 
Operating lease right-of-use assets, net
19,969 23,183 
Intangible assets, net183,974  
Goodwill
200,723 7,824 
Deferred tax asset, net
211,535 301,644 
Other noncurrent assets
9,779 1,605 
Total assets
$1,464,150 $1,118,896 
Liabilities and Equity
Current liabilities
Accounts payable
$65,217 $47,776 
Accrued expenses and other current liabilities
60,713 30,619 
Earn-out liability18,892  
Current portion of liability related to tax receivable agreement
20,855 27,544 
Finance lease obligations, current portion
7,543 5,933 
Operating lease liabilities, current portion
4,147 4,777 
Total current liabilities
177,367 116,649 
Deferred tax liability, net
1,469 1,966 
Liability related to tax receivable agreement, net of current portion
250,256 265,025 
Finance lease obligations, net of current portion
9,239 6,436 
Operating lease liabilities, net of current portion
15,748 18,375 
Total liabilities
454,079 408,451 
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, 65,323 and 60,903 shares issued and outstanding
654 609 
Class B common stock, $0.01 par value, 215,000 shares authorized, 14,106 and 14,978 shares issued and outstanding
  
Additional paid-in capital
462,302 310,528 
Retained earnings
359,699 261,764 
Accumulated other comprehensive loss(1,647)(984)
Total stockholders’ equity attributable to Cactus Inc.821,008 571,917 
Non-controlling interest
189,063 138,528 
Total stockholders’ equity1,010,071 710,445 
Total liabilities and equity
$1,464,150 $1,118,896 
The accompanying notes are an integral part of these condensed consolidated financial statements.
1

CACTUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands, except per share data)2023202220232022
Revenues
Product revenue
$214,295 $121,782 $605,698 $328,054 
Rental revenue
28,879 27,105 84,916 73,143 
Field service and other revenue
44,696 35,594 131,480 99,398 
Total revenues
287,870 184,481 822,094 500,595 
Costs and expenses
Cost of product revenue
123,278 73,747 373,310 203,839 
Cost of rental revenue
15,558 16,323 48,538 46,740 
Cost of field service and other revenue
36,973 27,145 103,861 78,685 
Selling, general and administrative expenses
29,549 15,970 97,519 44,804 
Change in fair value of earn-out liability(5,091) 13,053  
Total costs and expenses
200,267 133,185 636,281 374,068 
Operating income87,603 51,296 185,813 126,527 
Interest income (expense), net(1,372)1,140 (6,298)1,344 
Other income, net266 1,125 3,804 10 
Income before income taxes
86,497 53,561 183,319 127,881 
Income tax expense18,478 12,041 30,553 23,498 
Net income
$68,019 $41,520 $152,766 $104,383 
Less: net income attributable to non-controlling interest
15,439 10,095 32,542 25,198 
Net income attributable to Cactus Inc.
$52,580 $31,425 $120,224 $79,185 
Earnings per Class A share - basic
$0.81 $0.52 $1.87 $1.32 
Earnings per Class A share - diluted
$0.80 $0.51 $1.82 $1.30 
Weighted average Class A shares outstanding - basic
64,879 60,665 64,399 60,164 
Weighted average Class A shares outstanding - diluted
65,486 61,106 79,632 76,296 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2

CACTUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
Three Months Ended September 30,Nine Months Ended
September 30,
(in thousands)2023202220232022
Net income
$68,019 $41,520 $152,766 $104,383 
Foreign currency translation adjustments
(670)(1,219)(812)(2,150)
Comprehensive income
$67,349 $40,301 $151,954 $102,233 
Less: comprehensive income attributable to non-controlling interest
15,319 9,795 32,393 24,673 
Comprehensive income attributable to Cactus Inc.
$52,030 $30,506 $119,561 $77,560 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

CACTUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)

Class AClass BAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive Income (Loss)
Non-controlling
Interest
Total
Equity
Common StockCommon Stock
(in thousands)SharesAmountSharesAmount
Balance at June 30, 202364,609 $647 14,820 $ $446,206 $315,049 $(1,096)$191,968 $952,774 
Member distributions— — — — — — — (9,214)(9,214)
Effect of CC Unit redemptions714 7 (714)— 9,753 — — (9,760) 
Tax impact of equity transactions— — — — 2,574 — — (100)2,474 
Other comprehensive loss— — — — — — (551)(119)(670)
Stock-based compensation— — — — 3,769 — — 849 4,618 
Cash dividends declared ($0.12 per share)
— — — — — (7,930)— — (7,930)
Net income— — — — — 52,580 — 15,439 68,019 
Balance at September 30, 202365,323 $654 14,106 $ $462,302 $359,699 $(1,647)$189,063 $1,010,071 
Balance at June 30, 202260,613 $606 15,263 $ $304,418 $212,913 $(698)$126,569 $643,808 
Member distributions— — — — — — — (4,659)(4,659)
Effect of CW Unit redemptions104 1 (104)— 894 — — (895) 
Tax impact of equity transactions— — — — (33)— — — (33)
Equity award vestings2 — — — 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, 202260,719 $607 15,159 $ $307,698 $237,551 $(1,617)$131,411 $675,650 
The accompanying notes are an integral part of these condensed consolidated financial statements.
















4

CACTUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)

Class AClass BAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive Income (Loss)
Non-controlling
Interest
Total
Equity
Common StockCommon Stock
(in thousands)SharesAmountSharesAmount
Balance at December 31, 202260,903 $609 14,978 $ $310,528 $261,764 $(984)$138,528 $710,445 
Issuances of common stock3,352 34 — — 143,302 — — 26,033 169,369 
Member distributions— — — — — — — (13,926)(13,926)
Effect of CC Unit redemptions872 9 (872)— 11,773 — — (11,782) 
Tax impact of equity transactions— — — — (10,979)— — 16,726 5,747 
Equity award vestings200 2 — — (3,071)— — (1,371)(4,440)
Other comprehensive loss— — — — — — (663)(149)(812)
Share repurchases(4)— — — (137)— — (22)(159)
Stock-based compensation— — — — 10,886 — — 2,484 13,370 
Cash dividends declared ($0.34 per share)
— — — — — (22,289)— — (22,289)
Net income— — — — — 120,224 — 32,542 152,766 
Balance at September 30, 202365,323 $654 14,106 $ $462,302 $359,699 $(1,647)$189,063 $1,010,071 
Balance at December 31, 202159,035 $590 16,674 $ $289,600 $178,446 $8 $126,389 $595,033 
Member distributions— — — — — — — (8,007)(8,007)
Effect of CW Unit redemptions1,515 15 (1,515)— 12,039 — — (12,054) 
Tax impact of equity transactions— — — — 2,931 — — — 2,931 
Equity award vestings169 2 — — (3,258)— — (1,238)(4,494)
Other comprehensive loss— — — — — — (1,625)(525)(2,150)
Stock-based compensation— — — — 6,386 — — 1,648 8,034 
Cash dividends declared ($0.33 per share)
— — — — — (20,080)— — (20,080)
Net income— — — — — 79,185 — 25,198 104,383 
Balance at September 30, 202260,719 $607 15,159 $ $307,698 $237,551 $(1,617)$131,411 $675,650 
The accompanying notes are an integral part of these condensed consolidated financial statements.






5

CACTUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
(in thousands)20232022
Cash flows from operating activities
Net income
$152,766 $104,383 
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization
50,180 25,991 
Deferred financing cost amortization
4,187 133 
Stock-based compensation
13,526 8,034 
Provision for expected credit losses
2,153 224 
Inventory obsolescence
3,569 1,642 
Gain on disposal of assets(1,999)(470)
Deferred income taxes
10,723 19,230 
Change in fair value of earn-out liability12,932  
Gain from revaluation of liability related to tax receivable agreement(3,683)(10)
Changes in operating assets and liabilities:
Accounts receivable
(12,637)(42,906)
Inventories
45,377 (45,545)
Prepaid expenses and other assets
(7,321)(4,265)
Accounts payable
2,733 20,537 
Accrued expenses and other liabilities
2,986 3,293 
Payments pursuant to tax receivable agreement(26,890)(11,666)
Net cash provided by operating activities
248,602 78,605 
Cash flows from investing activities
Acquisition of a business, net of cash and cash equivalents acquired(616,189) 
Capital expenditures and other
(33,400)(21,197)
Proceeds from sales of assets4,347 1,701 
Net cash used in investing activities
(645,242)(19,496)
Cash flows from financing activities
Proceeds from the issuance of long-term debt155,000  
Repayments of borrowings of long-term debt(155,000) 
Net proceeds from the issuance of Class A common stock169,878  
Payments of deferred financing costs(6,857)(165)
Payments on finance leases
(5,579)(4,505)
Dividends paid to Class A common stock shareholders
(22,266)(20,015)
Distributions to members
(13,926)(8,007)
Repurchases of shares
(4,599)(4,495)
Net cash provided by (used in) financing activities116,651 (37,187)
Effect of exchange rate changes on cash and cash equivalents
(800)(2,968)
Net increase (decrease) in cash and cash equivalents(280,789)18,954 
Cash and cash equivalents, beginning of period344,527 301,669 
Cash and cash equivalents, end of period$63,738 $320,623 
Supplemental disclosure of cash flow information
Net cash paid for income taxes$19,464 $3,762 
Cash paid for interest$5,150 $801 
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new lease obligations$10,210 $10,707 
Property and equipment in accounts payable$1,758 $1,582 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

CACTUS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands, except per share data, or as otherwise indicated)
1.Preparation of Interim Financial Statements and Other Items
Basis of Presentation
The financial statements presented in this report represent the consolidation of Cactus, Inc. (“Cactus Inc.”) and its subsidiaries (the “Company”), including Cactus Companies, LLC (“Cactus Companies”). Cactus Inc. is a holding company whose only material asset is an equity interest consisting of units representing limited liability company interests in Cactus Companies (“CC Units”). Cactus Inc. is the sole managing member of Cactus Companies and operates and controls all of the business and affairs of Cactus Companies and conducts its business through Cactus Companies and its subsidiaries. As a result, Cactus Inc. consolidates the financial results of Cactus Companies and its subsidiaries and reports a non-controlling interest related to the portion of CC Units not owned by Cactus Inc., which reduces net income attributable to holders of Cactus Inc.’s Class A common stock, par value $0.01 per share (“Class A common stock”). Except as otherwise indicated or required by the context, all references to “Cactus,” “we,” “us” and “our” refer to Cactus Inc. and its consolidated subsidiaries.
On February 28, 2023, Cactus Inc. through one of its subsidiaries, completed the merger of the FlexSteel business (the “Merger”) through a merger with HighRidge Resources, Inc. and its subsidiaries (“HighRidge”). On February 27, 2023, in order to facilitate the Merger with HighRidge, an internal reorganization was completed in which Cactus Companies acquired all of the outstanding units representing ownership interests in Cactus Wellhead, LLC (“Cactus LLC”), the operating subsidiary of Cactus Inc. (the “CC Reorganization”). The purpose of the Merger was to effect the acquisition of the operations of FlexSteel Holdings, Inc. and its subsidiaries. FlexSteel Holdings, Inc. was a wholly-owned subsidiary of HighRidge prior to the Merger and was converted into a limited liability company, contributed from HighRidge to Cactus Companies as part of the CC Reorganization and is now named FlexSteel Holdings, LLC (“FlexSteel”). The results of operations of FlexSteel have been reflected in our accompanying condensed consolidated financial statements from the closing date of the acquisition through September 30, 2023. See Note 2 for additional information related to the acquisition.
Following the acquisition of FlexSteel, we now operate in two business segments: Pressure Control and Spoolable Technologies.
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these consolidated financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read together with our Annual Report on Form 10-K for the year ended December 31, 2022.
The consolidated financial statements include all adjustments, which are of a normal recurring nature, unless otherwise disclosed, necessary for a fair statement of the consolidated financial statements for the interim periods. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.
Use of Estimates
In preparing our consolidated financial statements in conformity with GAAP, we make numerous estimates and assumptions that affect the accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. We must make these estimates and assumptions because certain information that we use is dependent on future events, cannot be calculated with a high degree of precision from available data or is not otherwise capable of being readily calculated based on accepted methodologies. In some cases, these estimates are particularly difficult to determine, and we must exercise significant judgment. Actual results could differ materially from the estimates and assumptions that we use in the preparation of our consolidated financial statements.
2.FlexSteel Acquisition
On February 28, 2023 (the “acquisition date”), we completed the acquisition of FlexSteel in accordance with the terms and conditions of the merger agreement dated December 30, 2022. Including final adjustments for closing working capital, cash on hand and indebtedness adjustments as set forth in the merger agreement, we paid total cash consideration of $621.5 million. There is also a potential future earn-out payment of up to $75.0 million to be paid no later than the third quarter of 2024, if certain revenue growth targets are met by FlexSteel. We funded the upfront purchase price using a combination of $165.6 million of net
7

proceeds received from the public offering of shares of our Class A common stock completed in January 2023, borrowings under the Amended ABL Credit Facility (as defined in Note 7) totaling $155.0 million and available cash on hand at the time of closing.
We believe this acquisition enhances Cactus’ position as a premier manufacturer and provider of highly engineered equipment to the oil and gas exploration and production (“E&P”) industry and provides meaningful growth potential for Cactus. We also believe FlexSteel’s products are highly complementary to Cactus’ equipment as it expands our exposure to our customers’ operations from production trees to transportation of oil, gas and other liquids as well as to additional customers operating in the midstream area. The acquisition is being accounted for using the acquisition method of accounting, with Cactus being treated as the accounting acquirer. Under the acquisition method of accounting, the assets and liabilities are recorded at their respective fair values as of the acquisition date. The transaction was treated as a purchase of stock for United States federal income tax purposes. In connection with the acquisition, we incurred approximately $7.5 million of transaction costs for the nine months ended September 30, 2023 required to effect the transaction and incurred an additional $4.4 million in costs related to the reporting of and accounting for the transaction. These fees primarily related to legal, accounting and consulting fees and are included in selling, general and administrative (“SG&A”) expenses in the consolidated statements of income.
Purchase Price Consideration
The final purchase price consideration for the acquisition is $627.5 million and is summarized as follows:
Purchase Price Consideration
Cash consideration$621,505 
Add: Contingent consideration (1)
5,960 
Fair value of consideration transferred$627,465 
(1) Represents the estimated fair value as of the acquisition date of the earn-out payment of up to $75 million of additional cash consideration if certain revenue growth targets are met by FlexSteel. The estimated fair value of the earn-out payment was determined using a Monte Carlo simulation valuation methodology based on probability-weighted performance projections and other inputs, including a discount rate.
Changes in the fair value of the earn-out liability subsequent to the acquisition date are recognized in the consolidated statements of income. As of September 30, 2023, the estimated fair value of the earn-out payment increased to $18.9 million. The increase is based on the revised forecast for the period January 1, 2023 through June 30, 2024, reflecting improvements in FlexSteel’s revenues as compared to projections made at the time of the acquisition. See further discussion of the calculation of fair value of the earn-out liability in Note 12.
Preliminary Purchase Price Allocation
The following table provides the preliminary allocation of the purchase price as of the acquisition date. The goodwill reflected below decreased $0.6 million from the original preliminary purchase price allocation as a result of measurement period adjustments, primarily related to changes in cash consideration upon finalization of the closing net working capital and the
8

resulting updates to deferred tax liabilities, partially offset by valuation adjustments to inventories and property and equipment.
Cash and cash equivalents$5,316 
Receivables57,747 
Inventories91,746 
Prepaid expenses and other current assets1,283 
Property and equipment208,955 
Operating lease right-of-use assets1,021 
Identifiable intangible assets200,300 
Other noncurrent assets5,666 
Total assets acquired572,034 
Accounts payable(14,789)
Accrued expenses and other current liabilities(26,827)
Finance lease obligations(974)
Operating lease liabilities(906)
Deferred tax liabilities(93,972)
Total liabilities assumed(137,468)
Net assets acquired434,566 
Goodwill$192,899 
Assets acquired and liabilities assumed in connection with the acquisition were recorded at their estimated fair values. Estimated fair values were determined by management, based in part on an independent valuation performed by third-party valuation specialists. The valuation methods used to determine the estimated fair value of intangible assets included the excess earnings approach for customer relationships and backlog using customer inputs and contributory charges and the relief from royalty method for tradename and developed technology. Several significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. Cash flow forecasts were generally based on FlexSteel’s pre-acquisition forecasts. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives.
The fair values determined for accounts receivable, accounts payable and most other current assets and liabilities, other than inventory, were equivalent to the carrying value due to their short-term nature. Acquired inventories are comprised of raw materials, work-in-progress and finished goods. The preliminary fair value of finished goods was calculated as the estimated selling price, less costs of the selling effort and a reasonable profit allowance relating to the selling effort. The preliminary fair value of work-in-progress was calculated as the estimated selling price, less costs to complete, less costs of the selling effort and a reasonable profit allowance on completion and selling costs. The preliminary fair value of raw materials was determined based on replacement cost which approximates historical carrying value. The preliminary fair value of identifiable fixed assets was calculated using a combination of valuation approaches, but primarily consisted of the cost approach which adjusts estimates of replacement cost for the age, condition and utility of the associated assets.
Goodwill is calculated as the excess of the purchase price over the estimated fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the estimated fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, expansion opportunities and other benefits that we believe will result from combining the operations of FlexSteel with ours. Goodwill was further increased by the deferred tax liability associated with the fair market value in excess of the tax basis acquired. The goodwill associated with this transaction has been allocated to our Spoolable Technologies segment.
The purchase price allocation is preliminary and could be revised as a result of additional information obtained regarding assets acquired and liabilities assumed and revisions of preliminary estimates of fair values including, but not limited to, certain tangible assets acquired and liabilities assumed, contractual relationships, intangible assets, certain working capital items, deferred income taxes and residual goodwill. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date.
9

Tax-related impacts
As a result of the transaction, we acquired certain carryforward tax attributes. The Company’s current assessment is that some of these attributes should be accounted for as unrecognized tax benefits in the acquisition accounting. The unrecognized tax benefits have been offset by an indemnification asset from the seller of $5.7 million. The Company continues to evaluate the technical merits of the tax attributes, and the unrecognized tax benefit assessment is subject to change within the measurement period. Subsequent to completion of the acquisition, we determined that we expect to generate sufficient taxable income of the appropriate type to allow for the realization of the deferred tax asset associated with our investment in Cactus Companies and recognized a $12.1 million tax benefit in the first quarter of 2023 associated with the release of our valuation allowance previously provided. Additionally, we recognized $4.3 million of tax expense in the first quarter of 2023 associated with the revaluation of our deferred tax asset as a result of a change in our forecasted state rate primarily due to state impacts of the FlexSteel acquisition.
Pro forma financial information
From acquisition date through September 30, 2023, FlexSteel produced revenue of $245.8 million and net income of $34.1 million. The pro forma financial information below represents the combined results of operations for the nine months ended September 30, 2023 and for the three and nine months ended September 30, 2022, as if the acquisition had occurred as of January 1, 2022. The unaudited pro forma combined financial information includes, where applicable, adjustments for additional amortization expense related to the fair value step-up of intangible assets, additional inventory fair value step-up expense, additional depreciation expense associated with adjusting property and equipment to fair value, changes to align accounting policies, decreases in interest expense due to modification of borrowings in conjunction with the acquisition and associated tax-related impacts of adjustments. These pro forma adjustments are based on available information as of the date hereof and upon assumptions that we believe are reasonable to reflect the impact of the FlexSteel acquisition on our historical financial information on a supplemental pro forma basis. Adjustments do not include the elimination of transaction-related costs incurred or any costs related to integration activities, cost savings or synergies that have been or may be achieved by the combined business. The unaudited pro forma financial information is presented for informational purposes only and is neither indicative of the results of operations that would have occurred if the acquisition had taken place at the beginning of the period presented nor indicative of future operating results.
Three Months Ended
September 30,
Nine Months Ended
September 30,
202220232022
Revenues$274,855 $875,473 $765,847 
Net Income attributable to Cactus, Inc.33,885 132,026 83,224 
3.Accounts Receivable and Allowance for Credit Losses
We extend credit to customers in the normal course of business. Our customers are predominantly oil and gas E&P companies located in the U.S. Our receivables are short-term in nature and typically due in 30 to 60 days. We do not accrue interest on delinquent receivables. Accounts receivable includes amounts billed and currently due from customers and unbilled amounts for products delivered and services performed for which billings have not yet been submitted to the customers. Total unbilled revenue included in accounts receivable as of September 30, 2023 and December 31, 2022 was $36.6 million and $34.9 million, respectively.
We maintain an allowance for credit losses to provide for the amount of billed receivables we believe to be at risk of loss. In our determination of the allowance for credit losses, we pool receivables with similar risk characteristics based on customer size, credit ratings, payment history, bankruptcy status and other factors known to us and apply an expected credit loss percentage. The expected credit loss percentage is determined using historical loss data adjusted for current conditions and forecasts of future economic conditions. Accounts deemed uncollectible are applied against the allowance for credit losses. The following is a rollforward of our allowance for credit losses.
Balance at
Beginning of
Period
ExpenseWrite offTranslation AdjustmentsBalance at
End of
Period
Nine Months Ended September 30, 2023$1,060 $2,153 $(16)$(10)$3,187 
Nine Months Ended September 30, 2022741 224 (63)(1)901 
10

4.Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using standard cost (which approximates average cost). Costs include an application of related material, direct labor, duties, tariffs, freight and overhead costs. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Reserves are made for excess and obsolete items based on a range of factors, including age, usage and technological or market changes that may impact demand for those products. Inventories consist of the following:
September 30,
2023
December 31,
2022
Raw materials$23,144 $3,150 
Work-in-progress11,500 5,444 
Finished goods168,873 152,689 
$203,517 $161,283 
5.Property and Equipment, net
Property and equipment are stated at cost. We manufacture or construct most of our Pressure Control rental equipment assets. During the manufacture of these assets, they are reflected as construction in progress until complete. Property and equipment consists of the following:
September 30,
2023
December 31,
2022
Land
$16,442 $5,302 
Buildings and improvements
131,960 25,480 
Machinery and equipment
127,701 57,883 
Reels and skids18,028  
Vehicles35,319 29,045 
Rental equipment215,581 194,088 
Furniture and fixtures
1,905 1,759 
Computers and software
3,889 3,068 
Gross property and equipment
550,825 316,625 
Less: Accumulated depreciation
(222,998)(200,573)
Net property and equipment
327,827 116,052 
Construction in progress
17,395 13,946 
Total property and equipment, net
$345,222 $129,998 
6.Goodwill and Other Intangible Assets
Goodwill represents the excess of purchase price paid over the fair value of the net assets of acquired businesses. Goodwill is not amortized, but we evaluate at least annually whether it is impaired. Goodwill is considered impaired if the carrying amount of the reporting unit exceeds its estimated fair value. We conduct our annual assessment of the recoverability of goodwill as of December 31 of each year and more frequently if events and circumstances indicate that goodwill might be impaired. The change in carrying value of goodwill allocated to our reportable segments during the nine months ended September 30, 2023 was as follows:
Pressure ControlSpoolable TechnologiesTotal
Balance at December 31, 2022$7,824 $ $7,824 
FlexSteel acquisition 192,899 192,899 
Balance at September 30, 2023$7,824 $192,899 $200,723 
11

The following table presents the detail of acquired intangible assets other than goodwill as of September 30, 2023:
Gross CostAccumulated AmortizationNet Cost
Customer relationships$100,300 $(3,901)$96,399 
Developed technology77,000 (4,492)72,508 
Tradename16,000 (933)15,067 
Backlog7,000 (7,000) 
Total$200,300 $(16,326)$183,974 
All intangible assets are amortized over their estimated useful lives. The weighted average amortization period for identifiable intangible assets acquired is 12 years. Amortization expense recognized during the three and nine months ended September 30, 2023 was $4.0 million and $16.3 million, respectively, and was recorded in SG&A expenses in the consolidated statements of income. Estimated future amortization expense is as follows:
Remainder of 2023$3,997 
202415,987 
202515,987 
202615,987 
202715,987 
202815,987 
Thereafter100,042 
Total$183,974 
7.Debt
We had no debt outstanding as of September 30, 2023 and December 31, 2022. We had $1.5 million in letters of credit outstanding as of September 30, 2023.
In August 2018, Cactus LLC entered into a five-year senior secured asset-based revolving credit facility with a syndicate of lenders and JPMorgan Chase Bank, N.A., as administrative agent for such lenders and as an issuing bank and swingline lender (the “ABL Credit Facility”). The ABL Credit Facility was first amended in September 2020 and provided for up to $75.0 million in revolving commitments. On July 25, 2022, the ABL Credit Facility was amended again for up to $80.0 million in revolving commitments, up to $15.0 million of which was available for the issuance of letters of credit.
On February 28, 2023, in connection with the Merger, Cactus Companies assumed the rights and obligations of Cactus LLC as Borrower under the ABL Credit Facility, and the ABL Credit Facility was amended and restated in its entirety (the “Amended ABL Credit Facility”). The Amended ABL Credit Facility provides for a term loan of $125.0 million and up to $225.0 million in revolving commitments, of which $20.0 million is available for the issuance of letters of credit. Subject to certain terms and conditions set forth in the Amended ABL Credit Facility, Cactus Companies may request additional revolving commitments in an amount not to exceed $50.0 million, for a total of up to $275.0 million in revolving commitments. The term loan under the Amended ABL Credit Facility was set to mature on February 27, 2026 and any revolving loans under the Amended ABL Credit Facility mature on July 26, 2027. The maximum amount that Cactus Companies may borrow under the Amended ABL Credit Facility is subject to a borrowing base, which is based on a percentage of eligible accounts receivable and eligible inventory, subject to reserves and other adjustments.
We borrowed the full $125.0 million term loan amount and $30.0 million as a revolving loan at closing of the Amended ABL Credit Facility to fund a portion of the Merger. The term loan was required to be repaid in regular set amounts starting July 1, 2023 as set forth in the amortization schedule in the Amended ABL Credit Facility and could be prepaid without the payment of any prepayment premium (other than customary breakage costs for Term Benchmark (as defined below) borrowings). We began making discretionary prepayments on the term loan in April 2023 and continued to make payments until the entire $155.0 million we borrowed was repaid in July 2023.
Borrowings under the Amended ABL Credit Facility bear interest at Cactus Companies’ option at either (i) the Alternate Base Rate (as defined therein) (“ABR”), or (ii) the Adjusted Term SOFR Rate (as defined therein) (“Term Benchmark”), plus, in
12

each case, an applicable margin. Letters of credit issued under the Amended ABL Credit Facility accrue fees at a rate equal to the applicable margin for Term Benchmark borrowings. The applicable margin is 2.50% per annum for term loan ABR borrowings and 3.50% per annum for term loan Term Benchmark borrowings. The applicable margin for revolving loan borrowings ranges from 0.0% to 0.5% per annum for revolving loan ABR borrowings and 1.25% to 1.75% per annum for revolving loan Term Benchmark borrowings and, in each case, is based on the average quarterly availability of the revolving loan commitment under the Amended ABL Credit Facility for the immediately preceding fiscal quarter. The unused portion of revolving commitment under the Amended ABL Credit Facility is subject to a commitment fee of 0.25% per annum.
The Amended ABL Credit Facility contains various covenants and restrictive provisions that limit Cactus Companies’ and each of its subsidiaries’ ability to, among other things, incur additional indebtedness and create liens, make investments or loans, merge or consolidate with other companies, sell assets, make certain restricted payments and distributions, and engage in transactions with affiliates. The obligations under the Amended ABL Credit Facility are guaranteed by certain subsidiaries of Cactus Companies and secured by a security interest in accounts receivable, inventory, equipment and certain other real and personal property assets of Cactus Companies and the guarantors. Until the term loan was paid in full, the Amended ABL Credit Facility required Cactus Companies to maintain a leverage ratio no greater than 2.50 to 1.00 based on the ratio of Total Indebtedness (as defined therein) to EBITDA (as defined therein). The Amended ABL Credit Facility requires Cactus Companies to maintain a minimum fixed charge coverage ratio of 1.00 to 1.00 based on the ratio of EBITDA (as defined therein) minus Unfinanced Capital Expenditures (as defined therein) to Fixed Charges (as defined therein) during certain periods, including when availability under the Amended ABL Credit Facility is under certain levels. If Cactus Companies fails to perform its obligations under the Amended ABL Credit Facility, (i) the revolving commitments under the Amended ABL Credit Facility could be terminated, (ii) any outstanding borrowings under the Amended ABL Credit Facility may be declared immediately due and payable, and (iii) the lenders may commence foreclosure or other actions against the collateral. We were in compliance with all covenants under the Amended ABL Credit Facility as of September 30, 2023.
8.Revenue
The majority of our revenues are derived from short-term contracts for fixed consideration or in the case of rentals, for a fixed charge per day plus repairs while the equipment is in use by the customer. Product sales generally do not include right of return or other significant post-delivery obligations. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Revenues are recognized when we satisfy a performance obligation by transferring control of the promised goods or providing services to our customers at a point in time, in an amount specified in the contract with our customer and that reflects the consideration to which we expect to be entitled in exchange for those goods or services. The majority of our contracts with customers contain a single performance obligation to provide agreed upon products or services. For contracts with multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price. We do not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. We do not incur any material costs of obtaining contracts.
We do not adjust the amount of consideration per the contract for the effects of a significant financing component when we expect, at contract inception, that the period between the transfer of a promised good or service to a customer and when the customer pays for that good or service will be one year or less, which is in substantially all cases. Payment terms and conditions vary, although terms generally include a requirement of payment within 30 to 60 days of invoicing. Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. We treat shipping and handling associated with outbound freight as a fulfillment cost instead of as a separate performance obligation. We recognize the cost for the associated shipping and handling when incurred as an expense in cost of sales.
We disaggregate revenue into three categories: product revenues, rental revenues and field service and other revenues. We have predominately domestic operations with a small amount of sales in Australia, Canada, the Middle East and other international markets. The following table presents our revenues disaggregated by category:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Product revenue
$214,295 74 %$121,782 66 %$605,698 74 %$328,054 65 %
Rental revenue
28,879 10 %27,105 15 %84,916 10 %73,143 15 %
Field service and other revenue
44,696 16 %35,594 19 %131,480 16 %99,398 20 %
Total revenues$287,870 100 %$184,481 100 %$822,094 100 %$500,595 100 %
13

At September 30, 2023, we had a deferred revenue balance of $8.6 million compared to the December 31, 2022 balance of $1.5 million. Deferred revenue represents our obligation to transfer products to or perform services for a customer for which we have received cash or billed in advance. The revenue that has been deferred will be recognized upon product delivery or as services are performed. As of September 30, 2023, we did not have any contracts with an original length of greater than a year from which revenue is expected to be recognized in the future related to performance obligations that are unsatisfied.
9.Tax Receivable Agreement (TRA)
In connection with our initial public offering (“IPO”) in February 2018, we entered into the TRA which generally provides for payment by Cactus Inc. to certain direct and indirect owners of Cactus LLC (after the CC Reorganization, Cactus Companies) of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that Cactus Inc. actually realizes or is deemed to realize in certain circumstances. Cactus Inc. will retain the benefit of the remaining 15% of these net cash savings.
The TRA liability is calculated by determining the tax basis subject to the TRA (“tax basis”) and applying a blended tax rate to the basis differences and calculating the resulting iterative impact. The blended tax rate consists of the U.S. federal income tax rate and an assumed combined state and local income tax rate driven by the apportionment factors applicable to each state. Subsequent changes to the measurement of the TRA liability are recognized in the statements of income as a component of other expense, net. After finalizing its 2022 federal tax return in September 2023, Cactus Inc. made a $26.9 million TRA payment, which is equal to 85% of the $31.6 million 2022 tax benefit resulting from the exchange of CC Units for shares of Class A common stock. In September 2022, Cactus Inc. made an $11.7 million TRA payment based on its 2021 federal tax return. As of September 30, 2023, the total liability from the TRA was $271.1 million with $20.9 million reflected in current liabilities based on the expected timing of our next payment. The payments under the TRA will not be conditional on a holder of rights under the TRA having a continued ownership interest in either Cactus Companies or Cactus Inc.
The term of the TRA commenced upon completion of our IPO and will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless we exercise our right to terminate the TRA. If we elect to terminate the TRA early (or it is terminated early due to certain mergers, asset sales, other forms of business combinations or other changes of control), our obligations under the TRA would accelerate and we would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by us under the TRA and such payment is expected to be substantial. The calculation of anticipated future payments will be based upon certain assumptions and deemed events set forth in the TRA, including the assumptions that (i) we have sufficient taxable income to fully utilize the tax benefits covered by the TRA and (ii) any CC Units (other than those held by Cactus Inc.) outstanding on the termination date are deemed to be redeemed on the termination date. Any early termination payment may be made significantly in advance of the actual realization, if any, of the future tax benefits to which the termination payment relates.
We may elect to defer payments due under the TRA if we do not have available cash to satisfy our payment obligations under the TRA. Any such deferred payments under the TRA generally will accrue interest from the due date for such payment until the payment date.
10.Equity
As of September 30, 2023, Cactus Inc. owned 82.2% of Cactus Companies as compared to 80.3% of Cactus LLC (prior to the CC Reorganization) as of December 31, 2022. As of September 30, 2023, Cactus Inc. had outstanding 65.3 million shares of Class A common stock (representing 82.2% of the total voting power) and 14.1 million shares of Class B common stock (representing 17.8% of the total voting power).
Equity Offering
In January 2023, Cactus Inc. completed an underwritten offering of 3,224,300 shares of Class A common stock at a price to the underwriters of $51.36 per share for net proceeds of $165.6 million (net of $6.9 million of underwriting discounts and commissions). In addition to the underwriting discounts and commissions, approximately $2.2 million of costs directly associated with the stock issuance were recorded as a reduction to additional paid-in capital.
FlexSteel Acquisition
In conjunction with the FlexSteel acquisition, a restricted stock award of 128,150 shares of Class A common stock was issued under the Company’s long-term incentive plan to a key employee in exchange for cash consideration of $6.5 million. The shares
14

are restricted from sale or trading and are subject to vesting requirements for one year from grant date. If the fair market value of the restricted shares is below the purchase price upon vesting, Cactus will compensate the key employee for the difference in price plus a gross-up for taxes. We are accounting for this guaranteed payment as stock compensation with liability classification and remeasure the liability to fair value at each reporting period. Compensation cost is being recognized ratably over the one-year vesting period. The liability balance is $0.7 million as of September 30, 2023 and is included in accrued expenses and other current liabilities in the consolidated balance sheets. We recognized $0.2 million of compensation expense in SG&A in the consolidated statements of income during the nine months ended September 30, 2023.
CC Reorganization
As part of the CC Reorganization in connection with the acquisition of FlexSteel, Cactus Companies acquired all of the outstanding units representing limited liability company interests of Cactus LLC ( “CW Units”) in exchange for an equal number of CC Units issued to each of the previous owners of CW Units other than Cactus Inc. (the “CW Unit Holders”). Upon the completion of the CC Reorganization, CW Unit Holders ceased to be holders of CW Units and, instead, became holders of a number of CC Units equal to the number of CW Units such CW Unit Holders held immediately prior to the completion of the CC Reorganization. After the CC Reorganization, we refer to the owners of CC Units, other than Cactus Inc. (along with their permitted transferees), as “CC Unit Holders.” Following the completion of the CC Reorganization, CC Unit Holders own one share of our Class B Common Stock for each CC Unit such CC Unit Holder owns.
In connection with the CC Reorganization, Cactus Inc. and the owners of CC Units entered into the Amended and Restated Limited Liability Company Operating Agreement of Cactus Companies (the “Cactus Companies LLC Agreement”), which contains substantially the same terms and conditions as the Second Amended and Restated Limited Liability Company Operating Agreement of Cactus LLC (the “Cactus Wellhead LLC Agreement”), which was the limited liability company operating agreement of Cactus LLC prior to the CC Reorganization. Cactus Inc. was responsible for all operational, management and administrative decisions relating to Cactus LLC’s business for the period from completion of our IPO until the CC Reorganization and relating to Cactus Companies’ business for periods after the CC Reorganization. Pursuant to the Cactus Companies LLC Agreement, each holder of CC Units has, subject to certain limitations, the right to cause Cactus Companies to acquire all or at least a minimum portion of its CC Units for, at Cactus Companies’ election, (x) shares of our Class A common stock at a redemption ratio of one share of Class A common stock for each CC Unit redeemed, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions, or (y) an equivalent amount of cash. Alternatively, upon the exercise of such redemption right, Cactus Inc. (instead of Cactus Companies) has the right to acquire each tendered CC Unit directly from the exchanging CC Unit Holder for, at its election, (x) one share of Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions, or (y) an equivalent amount of cash. In connection with any redemption of CC Units pursuant to such redemption right or our alternative right to acquire each tendered CC Unit, the corresponding number of shares of Class B common stock would be canceled.
Redemptions of CC Units
Pursuant to the Cactus Companies LLC Agreement, holders of CC Units are entitled to redeem their CC Units, which results in additional Class A common stock outstanding. Since our IPO in February 2018, an aggregate of 46.5 million of CC Units (including CW Units prior to the CC Reorganization) and a corresponding number of shares of Class B common stock have been redeemed in exchange for shares of Class A common stock.
During the nine months ended September 30, 2023, 0.9 million CC Units, together with a corresponding number of shares of Class B common stock, were redeemed in exchange for Class A common stock in accordance with the Cactus Companies LLC Agreement. During the nine months ended September 30, 2022, 1.5 million CW Units, together with a corresponding number of shares of Class B common stock, were redeemed in exchange for Class A common stock in accordance with the Cactus Wellhead LLC Agreement. There was no change in the combined number of Cactus Inc. voting shares outstanding as a result of the redemptions.
Dividends
Aggregate cash dividends of $0.34 per share of Class A common stock declared during the nine months ended September 30, 2023 totaled $22.3 million compared to $0.33 per share of Class A common stock and $20.1 million during the nine months ended September 30, 2022. Cash dividends paid during the nine months ended September 30, 2023 and 2022 totaled $22.3 million and $20.0 million, respectively. Dividends accrue on unvested equity-based awards on the date of record and are paid upon vesting. Dividends are not paid to our Class B common stockholders; however, a corresponding distribution up to the same
15

amount per share as our Class A common stockholders is paid to the owners of CC Units other than Cactus Inc. for any dividends declared on our Class A common stock. See further discussion of the distributions below under “Member Distributions.”
Share Repurchase Program
On June 6, 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. During the nine months ended September 30, 2023, the Company purchased and retired 4,007 shares of Class A common stock for $0.2 million or $39.69 average price per share excluding commissions, under the share repurchase program. As of September 30, 2023, $149.8 million remained authorized for future repurchases of Class A common stock under the program.
Member Distributions
Distributions made by Cactus Companies are generally required to be made pro rata among all its members. For the nine months ended September 30, 2023, Cactus Companies distributed $63.1 million to Cactus Inc. to fund its dividend, TRA and estimated tax payments and made pro rata distributions to the other members totaling $13.9 million over the same period. During the nine months ended September 30, 2022, Cactus Companies distributed $31.7 million to Cactus Inc. to fund its dividend, TRA and estimated payments and made pro rata distributions to the other members totaling $8.0 million.
Limitation of Members’ Liability
Under the terms of the Cactus Companies LLC Agreement, the members of Cactus Companies are not obligated for debt, liabilities, contracts or other obligations of Cactus Companies. Profits and losses are allocated to members as defined in the Cactus Companies LLC Agreement.
11.Commitments and Contingencies
We are involved in various disputes arising in the ordinary course of business. Management does not believe the outcome of these disputes will have a material adverse effect on our consolidated financial position or consolidated results of operations.
12.Fair Value Measurements
Authoritative guidance on fair value measurements provides a framework for measuring fair value and establishes a fair value hierarchy that prioritizes the inputs used to measure fair value, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). The carrying value of cash and cash equivalents, receivables, accounts payable and accrued expenses approximates fair value based on the short-term nature of these accounts.
The following table sets forth our liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy:
Fair Value at September 30, 2023
Level 1Level 2Level 3Total
Liabilities:
Earn-out liability$ $ $18,892 $18,892 
Put option liability  777 777 
The earn-out liability related to the FlexSteel acquisition (see Note 2) is measured at fair value using Level 3 unobservable inputs at the end of each reporting period with changes in its estimated fair value recorded in earnings until the liability is settled. The fair value is determined based on the evaluation of the probability and amount of earn-out that may be achieved based on expected future performance of FlexSteel using a Monte Carlo simulation model. The Monte Carlo simulation model uses assumptions including revenue volatilities, risk free rates, credit discount rates and revenue discount rates. Significant changes in any of those assumptions could have a material effect on the estimated fair value of the earn-out payment. The following table
16

sets forth the range of inputs for the significant assumptions utilized to determine the fair value of the earn-out payment as of September 30, 2023:
September 30, 2023
Risk-free interest rate5.60%to5.63%
Expected revenue volatility25.20%
Revenue discount rate10.88%to10.92%
Credit discount rate10.90%to11.00%
The put option liability represents the guaranteed payment on restricted stock purchased in conjunction with the FlexSteel acquisition (see Note 10). This liability is measured at fair value at the end of each reporting period until the liability is settled with changes in fair value from grant date recognized ratably over the one-year vesting period. The fair value is determined using the Black-Scholes option pricing method that utilizes a selected volatility calculated based on weighting historical and implied volatility indications. As the selected volatility involves judgement and is a significant input to estimating the fair value of the put option, it is classified as a Level 3 input. Significant changes in the volatility could have a material effect on the estimated fair value of the put option liability. The following table sets forth the inputs for the significant assumptions utilized to determine the fair value of the put option liability as of September 30, 2023:
September 30, 2023
Risk-free interest rate5.46%
Expected volatility39.27%
Dividend yield0.95%
The following table presents a summary of the changes in fair value of our liabilities measured using Level 3 inputs:
Earn-outPut Option
Opening Balance$5,960 $510 
Changes in fair value (1)
12,932 267 
Balance at September 30, 2023$18,892 $777 
(1)We recognized $12.9 million of remeasurement expense associated with the change in the fair value of the earn-out liability during the nine months ended September 30, 2023. During the three months ended March 31, 2023, a $0.1 million gain was recognized in other income, net in the consolidated statements of operations. After the first quarter of 2023, the change in fair value of the earn-out liability is being presented separately as a component of operating income with $13.1 million of expense recognized during the six months ended September 30, 2023. For the put option liability, we recognized $0.2 million of expense associated with the change in fair value in SG&A in the consolidated statements of income during the nine months ended September 30, 2023.
The fair value of our foreign currency forwards was less than $0.1 million as of September 30, 2023 and was determined using market observable inputs including forward and spot prices (Level 2 inputs).
13.Segment Reporting
Prior to the acquisition of FlexSteel, we operated in a single segment which reflected how our business was managed and the nature of our products and services. Upon completion of the acquisition, we re-evaluated our reportable segments and now report two business segments. Our business segments offer different products and services and correspond to the manner in which our chief operating decision maker reviews and evaluates operating performance to make decisions about resources to be allocated to each segment.
Our reporting segments are:
Pressure Control – engaged in the design, manufacture, sale, installation and service of wellhead and pressure control equipment utilized during the drilling, completion and production phases of oil and gas wells.
Spoolable Technologies – engaged in the design, manufacture, sale, installation, service and associated rental of onshore spoolable pipe technologies utilized for production, gathering and takeaway transportation of oil, gas or other liquids.
17

Financial information by business segment for the three and nine months ended September 30, 2023 and 2022 is summarized below.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Revenue:
Pressure Control$182,484 $184,481 $576,273 $500,595 
Spoolable Technologies105,386  245,821  
Total revenues287,870 184,481 822,094 500,595 
Operating income:
Pressure Control (1)
47,830 51,296 151,809 126,527 
Spoolable Technologies39,773  34,004  
Total operating income87,603 51,296 185,813 126,527 
Interest income (expense), net(1,372)1,140 (6,298)1,344 
Other income, net266 1,125 3,804 10 
Income before income taxes$86,497 $53,561 $183,319 $127,881 
(1)Includes corporate and other costs not directly attributable to our reporting segments such as corporate executive management and other administrative functions.
14.Earnings per Share
Basic earnings per share of Class A common stock is calculated by dividing the net income attributable to Cactus Inc. during the period by the weighted average number of shares of Class A common stock outstanding during the same period. Diluted earnings per share of Class A common stock is calculated by dividing the net income attributable to Cactus Inc. during that period by the weighted average number of common shares outstanding assuming all potentially dilutive shares were issued.
We use the if-converted method to determine the potential dilutive effect of outstanding CC Units (and corresponding shares of outstanding Class B common stock), the treasury stock method to determine the potential dilutive effect of unvested restricted stock units assuming that the proceeds will be used to purchase shares of Class A common stock and the contingently issuable share method to determine the potential dilutive effect of unvested performance stock units.
The following table summarizes the basic and diluted earnings per share calculations:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Numerator:
Net income attributable to Cactus Inc.—basic
$52,580 $31,425 $120,224 $79,185 
Net income attributable to non-controlling interest (1)
  24,874 19,686 
Net income attributable to Cactus Inc.—diluted (1)
$52,580 $31,425 $145,098 $98,871 
Denominator:
Weighted average Class A shares outstanding—basic
64,879 60,665 64,399 60,164 
Effect of dilutive shares (2)
607 441 15,233 16,132 
Weighted average Class A shares outstanding—diluted (2)
65,486 61,106 79,632 76,296 
Earnings per Class A share—basic
$0.81 $0.52 $1.87 $1.32 
Earnings per Class A share—diluted (1)(2)
$0.80 $0.51 $1.82 $1.30 
(1)The numerator is adjusted in the calculation of diluted earnings per share under the if-converted method to include net income attributable to the non-controlling interest calculated as its pre-tax income adjusted for a corporate effective tax rate of 26.0% for the nine months ended September 30, 2023 and 25.0% for the nine months ended September 30, 2022.
(2)Diluted earnings per share for the three months ended September 30, 2023 and 2022 excludes 14.6 million and 15.2 million, respectively, of weighted average shares of Class B common stock as the effect would be anti-dilutive.
18

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Except as otherwise indicated or required by the context, all references in this Quarterly Report to the “Company,” “Cactus,” “we,” “us” and “our” refer to Cactus, Inc. (“Cactus Inc.”) and its consolidated subsidiaries, unless we state otherwise or the context otherwise requires. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes. The following discussion contains “forward-looking statements” that reflect our plans, estimates, beliefs and expected performance. Our actual results may differ materially from those anticipated as discussed in these forward-looking statements as a result of a variety of risks and uncertainties, which are difficult to predict, including those described above in “Cautionary Note Regarding Forward-Looking Statements,” and in the risk factors included in “Part I, Item 1A. Risk Factors” in our 2022 Annual Report, in “Part II, Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and in “Part II, Item 1A. Risk Factors” of this Quarterly Report. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We assume no obligation to update any of these forward-looking statements except as otherwise required by law.
Executive Summary
Cactus is an equipment solutions provider primarily for onshore oil and gas markets. Founded in 2011 by a management group that previously operated two of the largest wellhead providers at the time, Cactus has rapidly grown to be a leading provider of wellhead solutions to the U.S. onshore market. On February 28, 2023, Cactus acquired FlexSteel, which similarly grew from its founding in 2003 to its current status as a leading provider of spoolable pipe technologies primarily to the U.S. onshore market.
Including final adjustments for closing working capital, cash on hand and indebtedness as set forth in the merger agreement, we paid total cash consideration of approximately $621.5 million for the FlexSteel acquisition. Additionally, there is a potential future earn-out payment of up to $75 million to be paid no later than the third quarter of 2024 if certain revenue growth targets are met by FlexSteel. We believe this acquisition enhances our position as a premier manufacturer and provider of highly engineered equipment to the E&P industry and should provide meaningful growth potential. We further believe FlexSteel’s products are highly complementary to Cactus’ equipment as it expands our exposure to our customers’ operations from production trees to transportation of oil, gas and other liquids as well as to additional customers operating in the midstream area.
Demand for our products and services depends primarily upon oil and gas industry activity levels, including the number of active drilling rigs, the number of wells being drilled, the number of wells being completed, and the volume of newly producing wells, among other factors.
Revenues
Our revenues are derived from three sources: products, rentals, and field service and other. Product revenues are derived from the sale of wellhead systems, production trees and spoolable pipe and fittings. Rental revenues are primarily derived from the rental of equipment used during the completion process, the repair of such equipment and the rental of equipment or tools used to install wellhead equipment or spoolable pipe. Field service and other revenues are primarily earned when we provide installation and other field services for both product sales and equipment rental.
During the nine months ended September 30, 2023, we derived 74% of total revenues from the sale of our products, 10% of total revenues from rental and 16% of total revenues from field service and other. During the nine months ended September 30, 2022, we derived 65% of total revenues from the sale of our products, 15% of total revenues from rental and 20% of total revenues from field service and other. We have predominantly domestic operations with more limited operations in Australia, Canada, and the Middle East as well as sales in other international markets.
Following the acquisition of FlexSteel, we now operate in two business segments consisting of the Pressure Control segment and the Spoolable Technologies segment.
Pressure Control
The Pressure Control segment designs, manufactures, sells and rents a range of wellhead and pressure control equipment under the Cactus Wellhead brand. Products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of our customers’ wells. In addition, we provide field services for all of our products and rental items to assist with the installation, maintenance and handling of the equipment.
19

We operate through service centers in the United States, which are strategically located in the key oil and gas producing regions, and in Eastern Australia. These service centers support our field services and provide equipment assembly and repair services. We also provide rental and service operations in the Kingdom of Saudi Arabia. Pressure Control manufacturing and production facilities are located in Bossier City, Louisiana and Suzhou, China.
Demand for our product sales in the Pressure Control segment are driven primarily by the number of new wells drilled, as each new well requires a wellhead and, after the completion phase, a production tree. Demand for our rental items is driven primarily by the number of well completions as we rent frac trees to oil and gas operators to assist in hydraulic fracturing. Rental demand is also driven to a lesser extent by drilling activity as we rent tools used in the installation of wellheads. Field service and other revenues are closely correlated with revenues from product sales and rentals, as items sold or rented almost always have an associated service component.
Spoolable Technologies
The Spoolable Technologies segment designs, manufactures, and sells spoolable pipe and associated end fittings under the FlexSteel brand. Our customers use these products primarily as production, gathering and takeaway pipelines to transport oil, gas or other liquids. In addition, we also provide field services and rental items to assist our customers with the installation of these products. We support our field service operations through service centers and pipe yards located in oil and gas regions throughout the United States and Western Canada. Our manufacturing facility is located in Baytown, Texas.
Demand for our product sales in the Spoolable Technologies segment are driven primarily by the number of wells being placed into production after the completions phase as customers use our spoolable pipe and associated fittings to bring wells more rapidly onto production. Rental and field service and other revenues are closely correlated with revenues from product sales, as items sold usually have an associated rental and service component.
Recent Developments and Trends
FlexSteel Acquisition
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 through September 30, 2023. 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 EndedNine Months Ended
September 30, 2023June 30, 2023September 30, 2023September 30, 2022
WTI Oil Price ($/bbl) (1)
$82.25 $73.54 $77.27 $98.96 
Natural Gas Price ($/MMBtu) (2)
$2.59 $2.16 $2.46 $6.74 
U.S. Land Drilling Rigs (3)
627698689688
(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.
As expected, drilling and completion activity levels declined in the third quarter of 2023. The average number of U.S. land drilling rigs decreased by 17% from the fourth quarter of 2022 with most of the reductions occurring in the third quarter of 2023. Oil prices rose 12% in the third quarter compared to the second quarter of 2023 as global oil demand remained strong and concerns regarding tightening supply emerged due to continued OPEC+ production cuts. The recent conflict in the Middle East has resulted in some volatility in oil prices due to concerns regarding the potential impact on global oil supplies. Natural gas prices have also risen since the second quarter of 2023 primarily due to declining drilling activity and moderating storage surplus.
20

Barring any significant developments in the Middle East, we believe oil and natural gas activity levels in the fourth quarter of 2023 will display a modest recovery compared with the third quarter.
Critical Accounting Policies and Estimates
A discussion of our critical accounting policies and estimates is contained in our 2022 Annual Report on Form 10-K. There have not been any changes in our critical accounting policies since December 31, 2022 other than the following additional critical accounting estimate.
Determination of Fair Value in Business Combinations
Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets acquired and liabilities assumed at their respective fair values. The determination of fair value requires the use of significant estimates and assumptions, and in making these determinations, management uses all available information. If necessary, we have up to one year after the acquisition closing date to finalize these fair value determinations under the applicable GAAP. For tangible and identifiable intangible assets acquired in a business combination, the determination of fair value utilizes several valuation methodologies including discounted cash flows which has assumptions with respect to the timing and amount of future revenue and expenses associated with an asset. The assumptions made in performing these valuations include, but are not limited to, discount rates, future revenues and operating costs, projections of capital costs, and other assumptions believed to be consistent with those used by principal market participants. Due to the specialized nature of these calculations, we engage third-party specialists to assist management in evaluating our assumptions as well as appropriately measuring the fair value of assets acquired and liabilities assumed.
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.
Three Months Ended September 30, 2023 Compared to Three Months Ended June 30, 2023

The following table presents summary consolidated operating results for the periods indicated:
Three Months Ended
September 30, 2023June 30, 2023$ Change% Change
(in thousands)
Revenues
Pressure Control$182,484 $199,134 $(16,650)(8.4)%
Spoolable Technologies105,386 106,685 (1,299)(1.2)
Total revenues287,870 305,819 (17,949)(5.9)
Operating income
Pressure Control47,830 54,540 (6,710)(12.3)
Spoolable Technologies39,773 (6,018)45,791 nm
Total operating income87,603 48,522 39,081 80.5 
Interest expense, net(1,372)(5,928)4,556 (76.9)
Other income, net266 — 266 nm
Income before income taxes86,497 42,594 43,903 nm
Income tax expense18,478 10,135 8,343 82.3 %
Net income68,019 32,459 35,560 nm
Less: net income attributable to non-controlling interest15,439 7,709 7,730 nm
Net income attributable to Cactus Inc.$52,580 $24,750 $27,830 nm
nm = not meaningful
21

Pressure Control. Pressure Control revenue for the third quarter of 2023 was $182.5 million, a decrease of $16.7 million, or 8.4%, from $199.1 million for the second quarter of 2023 primarily due to decreased sales of wellhead and production related equipment and related field services resulting from reduced activity offset slightly by higher rental revenues. Pressure Control operating income of $47.8 million for the third quarter of 2023 decreased $6.7 million, or 12.3% from the second quarter of 2023. The decreased revenues and associated gross margins related to equipment sales and field services were offset by higher gross margins associated with rentals driven by higher revenue and lower depreciation expense on our rental fleet. Selling, general and administrative expenses (“SG&A”) decreased approximately $2.0 million from the second quarter primarily due to lower bad debt expense, professional fees, stock-based compensation expense and annual incentive bonus accruals.
Spoolable Technologies. Spoolable Technologies revenue for the third quarter of 2023 was $105.4 million, a decrease of $1.3 million from the second quarter of 2023. Total operating income for Spoolable Technologies for the third quarter of 2023 was $39.8 million compared to an operating loss of $6.0 million for the second quarter of 2023. The improvement in operating income was mainly due to recognition of a gain of $5.1 million for the change in fair value of the earn-out payment for the FlexSteel acquisition in the third quarter compared to an $18.1 million loss in the second quarter. Additional increases in operating income from the second quarter were due to a $19.3 million decrease in inventory step-up expense and a $4.7 million reduction in intangible amortization expense.
Interest expense, net. Interest expense, net was $1.4 million for the third quarter of 2023 compared to $5.9 million for the second quarter of 2023. The decrease in interest expense from the second quarter was the result of our repayment of $55.0 million under the Amended ABL Credit Facility in July 2023, reducing our total bank debt outstanding to zero.
Other income, net. Other income, net of $0.3 million for the third quarter of 2023 represented 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 third quarter of 2023 was $18.5 million compared to $10.1 million for the second quarter of 2023. The increase in income tax expense from the second quarter was primarily due to an increase in operating income quarter over quarter. 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.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

The following table presents summary consolidated operating results for the periods indicated:
Nine Months Ended
September 30,
20232022$ Change% Change
(in thousands)
Revenues
Pressure Control$576,273 $500,595 $75,678 15.1 %
Spoolable Technologies245,821 — 245,821 nm
Total revenues822,094 500,595 321,499 64.2 
Operating income
Pressure Control151,809 126,527 25,282 20.0 
Spoolable Technologies34,004 — 34,004 nm
Total operating income185,813 126,527 59,286 46.9 
Interest income (expense), net(6,298)1,344 (7,642)nm
Other income, net3,804 10 3,794 nm
Income before income taxes183,319 127,881 55,438 43.4 
Income tax expense30,553 23,498 7,055 30.0 
Net income152,766 104,383 48,383 46.4 
Less: net income attributable to non-controlling interest32,542 25,198 7,344 29.1 
Net income attribut