Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced
financial and operating results for the second quarter of 2018.
Second Quarter 2018 Highlights
Financial Summary
Scott Bender, President and CEO of Cactus, commented, “The second
quarter was strong, resulting in double digit sequential revenue growth
across all of our business lines and regions. The improvement in margins
reflects our operating leverage and differentiated supply chain
capabilities.
“We expect operating results in the third quarter of 2018 to continue to
validate the strength of our business model with new and existing
customers. Our 15 locations throughout the U.S. provide us flexibility
to manage changes in activity across various basins. In addition, we
believe the breadth and profile of our customer base better positions us
to deal with potential Permian takeaway issues.”
Mr. Bender continued, “Looking to the fourth quarter and early 2019, we
expect to commence commercialization of new completions innovations that
we have been developing in concert with key customers.”
Revenue Categories
Product
Second quarter 2018 product revenue increased $14.4 million, or 24.4%,
sequentially, driven primarily by greater sales volume of wellhead and
production equipment. Gross profit increased $6.4 million sequentially
with margins improving 150 basis points due to more favorable supply
chain execution. Cactus’ estimated market share(3) was 26.0%
for second quarter 2018 compared to 26.4% for first quarter 2018, while
the U.S. onshore quarterly rig count averaged 1,017 rigs in second
quarter 2018 compared to 948 rigs in first quarter 2018.
Rental
Second quarter 2018 rental revenue increased $5.8 million, or 19.9%,
sequentially, due to the Company’s enhanced ability to respond to the
increased demand across nearly all the major U.S. basins in which the
Company operates. Gross profit increased $4.0 million sequentially with
margins improving 190 basis points, resulting from a combination of
volume, improved operating efficiencies and pricing.
Field Service and Other
Second quarter 2018 field service and other revenue increased $3.3
million, or 12.1%, sequentially, due to an increase in billable hours
and ancillary services associated with greater volume of product sales
and rental activity. Gross profit increased $1.6 million sequentially
with margins increasing 310 basis points due to higher average pricing
for billable services compared to first quarter 2018.
Selling, General and Administrative Expenses (“SG&A”)
SG&A for second quarter 2018 was $9.9 million (7.1% of revenues),
compared to $9.1 million (7.9% of revenues) for first quarter 2018 and
$7.3 million (9.0% of revenues) for second quarter 2017. The sequential
increase is primarily related to $0.4 million higher non-cash
stock-based compensation expense, as well as increased public company
costs.
Supplemental Information
Assuming Cactus, Inc. held all units in Cactus Wellhead, LLC (“Cactus
LLC”), its operating company subsidiary, at the beginning of the period,
with the resulting additional income tax expense related to the
incremental income attributable to Cactus, Inc., the Company’s diluted
earnings per share would have been $0.46 for second quarter 2018. The
Company believes this supplemental information is useful for evaluating
performance period over period. The table below sets forth additional
detail regarding the adjusted amounts.
(in thousands, except per share data)
75,219
Liquidity and Capital Expenditures
As of June 30, 2018, the Company had $28.4 million of cash on hand, no
bank debt outstanding and the full $50.0 million of capacity available
under the Company’s revolving credit facility. Operating cash flow was
$42.1 million for second quarter 2018 and $80.7 million for the first
six months of 2018, reflecting strong operating results.
Net capital expenditures were $15.7 million for second quarter 2018 and
$31.3 million for the first six months of 2018. The majority of the
spend related to investments in rental equipment, particularly frac
valves, to meet strong customer demand for the Company’s differentiated
frac rental equipment.
Other Events
On July 16, 2018, Cactus closed a public offering of 11,196,562 shares
of its Class A common stock at $33.25 per share and received $359.3
million of net proceeds after deducting underwriting discounts. Cactus
contributed the net proceeds to its operating company subsidiary, Cactus
LLC, in exchange for common units representing limited liability company
interests in Cactus LLC (“CW Units”). Cactus LLC then used the net
proceeds to redeem 11,196,562 CW Units from certain of the other owners
of Cactus LLC and a corresponding number of shares of Class B common
stock were canceled.
After these transactions, Cactus has outstanding 37,646,562 shares of
Class A common stock (representing 50.3% of the total voting power) and
37,243,210 shares of Class B common stock (representing 49.7% of the
total voting power). There was no change in the total aggregate number
of shares of Class A common stock and Class B common stock outstanding
of 74,889,772 following the completion of the offering.
Conference Call Details
Cactus will host a conference call to discuss financial and operational
results tomorrow, Thursday, August 2, 2018 at 9:00 AM Central Time
(10:00 AM Eastern Time).
The call will be webcast on Cactus’ website at www.CactusWHD.com.
Institutional investors and analysts may participate by dialing (888)
220-8474. International parties may dial (323) 794-2591. The access code
is 8571623. Please access the webcast or dial in for the call at least
10 minutes ahead of start time to ensure a proper connection.
An archived webcast of the conference call will be available on the
Company’s website shortly after the end of the call.
About Cactus
Cactus designs, manufactures, sells and rents a range of highly
engineered wellhead and pressure control equipment. Its products are
sold and rented principally for onshore unconventional oil and gas wells
and are utilized during the drilling, completion (including fracturing)
and production phases of its customers’ wells. In addition, it provides
field services for all its products and rental items to assist with the
installation, maintenance and handling of the wellhead and pressure
control equipment. Cactus operates 15 service centers in the United
States, which are strategically located in the key oil and gas producing
regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle
Ford and Bakken, among other areas, and one service center in Eastern
Australia.
Cautionary Statement Concerning Forward-Looking Statements
Certain statements contained in this press release constitute
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to risks, uncertainties and other factors, many
of which are outside of Cactus’ control, that could cause actual results
to differ materially from the results discussed in the forward-looking
statements.
Forward-looking statements can be identified by the use of
forward-looking terminology including “may,” “believe,” “expect,”
“intend,” “anticipate,” “estimate,” “continue,” or other similar words
and include the Company’s expectation of future performance contained
herein. These statements discuss future expectations, contain
projections of results of operations or of financial condition, or state
other “forward-looking” information. You are cautioned not to
place undue reliance on any forward-looking statements, which can be
affected by assumptions used or by known risks or uncertainties.
Consequently, no forward-looking statements can be guaranteed. When
considering these forward-looking statements, you should keep in mind
the risk factors and other factors noted in the Company’s Annual Report
on Form 10-K and any Quarterly Reports on Form 10-Q. The risk factors
and other factors noted therein could cause actual results to differ
materially from those contained in any forward-looking statement.
Cactus, Inc.
Condensed Consolidated Statements of Income
(unaudited)
June 30,
June 30,
Components of post-IPO net income:
Cactus, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
Cactus, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Cactus, Inc. – Supplemental Information
Reconciliation of GAAP to Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA(1)
(unaudited)
Cactus, Inc. – Supplemental Information
Depreciation and Amortization by Category
(unaudited)
Cactus, Inc. – Supplemental Information
Estimated Market Share(3)
(unaudited)
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