ROHSTOFF INTERNATIONAL

23:09 | 08.03.2018
Cactus Announces Full Year and Fourth Quarter 2017 Results

Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced
financial and operating results for the full year and fourth quarter of
2017. On February 12, 2018, Cactus closed its initial public offering
(“IPO”) of Class A common stock. The financial results for 2017 and 2016
represent periods during which Cactus’ operating subsidiary was
privately-owned.
Key 2017 Operational Highlights
Grew estimated U.S. onshore market share(1) in wellhead
product line from 21.2% for fourth quarter 2016 to 26.0% for fourth
quarter 2017;

Developed and commercialized further innovations in frac rental
offerings to reduce repair time and enhance reliability;

Initiated expansion of its rental fleet to capitalize on higher
intensity fracs and larger pad sizes; and

Expanded Suzhou, China facility to improve product and rental margins.
Full Year 2017 Financial Highlights
Increased revenues 120.1% to $341.2 million from $155.0 million in
2016;

Grew income from operations to $88.9 million from $10.6 million in
2016;

Grew net income to $66.5 million from a net loss of $8.2 million in
2016; and

Increased Adjusted EBITDA(2) and related margin(3)
to $112.1 million and 32.9%, respectively, from $32.2 million and
20.8%, respectively, in 2016.
Fourth Quarter 2017 Financial Highlights and Recent Events
Reported financial results that were in-line with preliminary
estimates from the Company’s prospectus filed with the SEC;

Increased revenues 9.1% to $104.8 million from $96.0 million in the
preceding quarter;

Generated income from operations and net income of $28.7 million and
$22.8 million, respectively;

Increased Adjusted EBITDA(2) to $35.0 million from $34.1
million in the preceding quarter; and

Completed an upsized IPO(4) in February that allowed the
Company to repay its term loan in full.
Financial Summary

 
Three Months Ended
 
Year Ended

December 31,2017
 
September 30,2017
 
December 31,2016
December 31,2017
 
December 31,2016

(in thousands)
(in thousands)

 

 

 

Revenues

$

104,784

$

96,027

$

49,547

$

341,191

$

155,048

Income from operations

$

28,737

$

28,059

$

6,162

$

88,863

$

10,615

Operating income margin

27.4

%

29.2

%

12.4

%

26.0

%

6.8

%

Net income (loss)

$

22,814

$

22,301

$

1,346

$

66,547

$

(8,176

)

Adjusted EBITDA (2)

$

35,032

$

34,133

$

11,461

$

112,134

$

32,217

Adjusted EBITDA margin (3)

33.4

%

35.5

%

23.1

%

32.9

%

20.8

%

 

 

 

 

 

(1)

See definition and calculation of market share in the Supplemental
Information tables.

(2)

Adjusted EBITDA is a non-GAAP financial measure. See definition of
Adjusted EBITDA and the reconciliation of GAAP to Non-GAAP financial
measures in the Supplemental Information tables.

(3)

The percentage of Adjusted EBITDA to Revenues.

(4)

See Recent Events section for additional information.

 

Scott Bender, President and CEO of Cactus, commented, “Supported by our
talented team, Cactus entered 2017 well positioned to take advantage of
the expected improvements in the U.S. onshore unconventional oil and gas
market. As evidenced by our outstanding year-over-year financial
results, the benefits of our product and service offerings continued to
attract a growing customer base. This resulted in further market share
increases, including during the second half of 2017.

“Benefiting from the increasing onshore rig count and the number and
complexity of wells that are forecast in 2018, we expect another strong
year for the Company in 2018 and remain focused on generating superior
results and industry leading returns,” added Mr. Bender. “Working
closely with our customers, we look forward to providing additional
safety and efficiency enhancements to our products and services. In
addition, through our recent very successful IPO, we are now well
positioned to further grow the business through execution of strategic
initiatives that are well aligned with our core competencies while
maintaining our focus on return on capital,” concluded Mr. Bender.
Revenue CategoriesProduct

 
Three Months Ended
 
Year Ended

December 31,2017
 
September 30,2017
 
December 31,2016
December 31,2017
 
December 31,2016

(in thousands)
(in thousands)

 

 

 

Product revenue

$

57,128

$

53,680

$

25,929

$

189,091

$

77,739

Gross profit

$

19,662

$

19,807

$

5,962

$

65,061

$

14,973

Gross margin

34.4

%

36.9

%

23.0

%

34.4

%

19.3

%

 

Fourth quarter 2017 product revenue was up $3.4 million, or 6.4%,
sequentially and $31.2 million, or 120.3%, year-over-year. The
sequential increase was driven primarily by greater sales volume of
production valves and wellhead equipment during the fourth quarter. As
expected, gross profit decreased $0.1 million sequentially with margins
declining 250 basis points due to a combination of seasonal impacts,
higher volume of lower margin commoditized production valves, and
greater reliance on the Company’s relatively higher cost U.S. facility
related to specific customer orders in excess of expectations. Cactus’
estimated market share was 26.0% for the fourth quarter 2017 compared to
25.6% for the third quarter 2017, while the U.S. onshore quarterly rig
count averaged 900 rigs in the fourth quarter 2017 down from 924 rigs in
the third quarter 2017.
Rental

 
Three Months Ended
 
Year Ended

December 31,2017
 
September 30,2017
 
December 31,2016
December 31,2017
 
December 31,2016

(in thousands)
(in thousands)

 

 

 

Rental revenue

$

24,490

$

21,199

$

13,171

$

77,469

$

44,372

Gross profit

$

12,144

$

10,513

$

5,119

$

36,950

$

10,382

Gross margin

49.6

%

49.6

%

38.9

%

47.7

%

23.4

%

 

Fourth quarter 2017 rental revenue was up $3.3 million, or 15.5%,
sequentially and $11.3 million, or 85.9%, year-over-year. The sequential
increase was due to higher demand for frac valves, reflecting greater
completions activity across the major U.S. basins in which the Company
participates, as well as an increase in Cactus’ rental asset fleet from
the capital investments made throughout 2017. Gross profit increased
$1.6 million sequentially with margins flat due to higher repair costs
in the fourth quarter related to the redeployment of previously
underutilized rental assets into basins where activity continues to
increase.
Field Service and Other

 
Three Months Ended
 
Year Ended

December 31,2017
 
September 30,2017
 
December 31,2016
December 31,2017
 
December 31,2016

(in thousands)
(in thousands)

 

 

 

Field service and other revenue

$

23,166

$

21,148

$

10,447

$

74,631

$

32,937

Gross profit

$

3,575

$

4,835

$

680

$

14,029

$

4,467

Gross margin

15.4

%

22.9

%

6.5

%

18.8

%

13.6

%

 

Fourth quarter 2017 field service and other revenue was up $2.0 million,
or 9.5%, sequentially and $12.7 million, or 121.7%, year-over-year. The
sequential increase was due to increased billable hours related to
installations. Gross profit declined $1.3 million sequentially with
margins decreasing 750 basis points due to seasonal impacts during the
fourth quarter. In addition, the Company experienced higher nonbillable
and training time related to the strategic ramp up in field service
headcount in preparation for an expected increase in U.S. onshore market
activity during 2018.
Selling, General and Administrative Expenses (“SG&A”)
SG&A for the fourth quarter 2017 was $6.6 million (6.3% of revenue),
compared to $7.1 million (7.4% of revenue) for the third quarter 2017
and $5.6 million (11.3% of revenue) for the fourth quarter 2016. The
sequential decline is primarily due to $0.3 million lower legal and
professional fees, $0.3 million lower costs incurred during the fourth
quarter 2017 associated with preparing to be a public company, and a
$0.1 million recovery of bad debt, offset by a $0.2 million increase in
costs associated with higher headcount. The fourth quarter
year-over-year increase relates to higher headcount associated with
significant growth in the business during 2017 and expectations for 2018.
Liquidity and Capital Expenditures
As of December 31, 2017, the Company had $248.5 million outstanding
under its term loan and cash on hand of $7.6 million. The Company’s
revolving credit facility was undrawn and total availability as of
December 31, 2017 was $50.0 million. In conjunction with the Company’s
IPO, the outstanding term loan was repaid in full.

Net capital expenditures for the fourth quarter 2017 were $9.3 million
and $30.7 million for the full year 2017. The majority of the spend
related to the addition of rental equipment, particularly frac valves
and drilling tools.
Recent Events
On February 12, 2018, Cactus closed its IPO of Class A common shares.
Including the exercise in full of the underwriters’ option to purchase
an additional 15% of common shares, the Company issued a total of
26,450,000 shares of Class A common stock in the IPO at $19.00 per
share, resulting in net proceeds of $467.4 million after deducting
underwriting discounts and commissions and offering expenses. Cactus
contributed all of the net proceeds of the IPO to its limited liability
company operating subsidiary in exchange for units.

The Company caused its operating subsidiary to use the net proceeds to
(i) fully repay the outstanding term loan facility, plus accrued
interest, of the operating subsidiary of $251.0 million and (ii)
distribute $216.4 million pari passu to the legacy owners of the
operating subsidiary as part of the corporate reorganization undertaken
in connection with the IPO. In conjunction with the IPO, there are
48,439,772 Class B common shares issued and outstanding, representing
the remaining units held by the legacy owners of the operating
subsidiary.

Further information on the IPO can be found in the prospectus filed with
the Securities and Exchange Commission (“SEC”).

In January 2018, Cactus made a $26.0 million tax distribution payment to
legacy owners related to the tax liabilities incurred prior to the IPO.
The payment was funded through the borrowing of $26.0 million under the
Company’s revolving credit facility.

As of March 7, 2018, Cactus had $8.0 million drawn under the revolving
credit facility and $14.0 million cash on hand.
Conference Call Details
Cactus will host a conference call to discuss financial and operational
results on Friday, March 9, 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 (800)
263-0877. International parties may dial (323) 794-2094. The access code
is 8902876. 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 wellheads 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 14 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 StatementsCertain 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 noted below and other cautionary statements in this
news release. The risk factors and other factors noted throughout in
this news release could cause actual results to differ materially from
those contained in any forward-looking statement. Known material factors
that could cause the Company’s actual results to differ materially from
the results contemplated by such forward-looking statements are
described in the Company’s filings with the Securities and Exchange
Commission, and include:changes in general economic conditions and changes in economic
conditions of the crude oil and natural gas industry specifically;competitive conditions in the industry;changes in the long-term supply of and demand for crude oil and
natural gas;the ability to realize the anticipated benefits of the Company’s
business growth plans;actions taken by the Company’s customers, competitors, vendors and
suppliers;the financial condition of the Company’s customers;changes in the availability and cost of capital;operating hazards, natural disasters, weather-related delays,
casualty losses and other matters beyond the Company’s control;the effects of existing and future laws and governmental
regulations;the effects of future litigation; andother factors discussed in the Company’s filings with the
Securities and Exchange Commission.Any forward-looking statement speaks only as of the date on which it
is made, and, except as required by law, Cactus does not undertake any
obligation to update or revise any forward-looking statement, whether as
a result of new information, future events or otherwise. New factors
emerge from time to time, and it is not possible for Cactus to predict
all such factors. When considering these forward-looking statements, you
should keep in mind the risk factors and other cautionary statements in
the prospectus filed with the SEC in connection with Cactus’ IPO. The
risk factors and other factors noted in Cactus’ prospectus could cause
its actual results to differ materially from those contained in any
forward-looking statement.CactusCondensed Consolidated Statements of Income
(unaudited)

 

 

 

 

 

 

Three Months Ended December 31,
Year Ended December 31,

 
2017
 

 

 
2016
 

 
2017
 

 

 
2016
 

(in thousands)Revenues

 

 

Product revenue

$

57,128

$

25,929

$

189,091

$

77,739

Rental revenue

24,490

13,171

77,469

44,372

Field service and other revenue

 

23,166

 

 

 

10,447

 

 

74,631

 

 

 

32,937

 

Total revenues

 

104,784

 

 

 

49,547

 

 

341,191

 

 

 

155,048

 

 
Costs and expenses

Cost of product revenue

37,466

19,967

124,030

62,766

Cost of rental revenue

12,346

8,052

40,519

33,990

Cost of field service and other revenue

19,591

9,767

60,602

28,470

Selling, general and administrative expenses

 

6,644

 

 

 

5,599

 

 

27,177

 

 

 

19,207

 

Total costs and expenses

 

76,047

 

 

 

43,385

 

 

252,328

 

 

 

144,433

 

Income from operations

 

28,737

 

 

 

6,162

 

 

88,863

 

 

 

10,615

 

 

Interest expense, net

(5,316

)

(4,964

)

(20,767

)

(20,233

)

Other income (expense), net

 

 

 

 

 

 

 

 

 

2,251

 

Income (loss) before income taxes

23,421

1,198

68,096

(7,367

)

Income tax expense (a)

 

607

 

 

 

(148

)

 

1,549

 

 

 

809

 

Net income (loss)

$

22,814

 

 

$

1,346

 

$

66,547

 

 

$

(8,176

)

 

(a) Cactus has historically not been subject to U.S. federal income tax
at an entity level.

 
CactusCondensed Consolidated Balance Sheets
(unaudited)

 

 

 

 

 

 

December 31,
December 31,

 
2017
 

 

 
2016
 

(in thousands)Assets

Current assets

Cash and cash equivalents

$

7,574

$

8,688

Accounts receivable, net

84,173

32,289

Inventories

64,450

37,900

Prepaid expenses and other current assets

 

7,732

 

 

 

3,713

 

Total current assets

 

163,929

 

 

 

82,590

 

 

Property and equipment, net

94,654

74,870

Goodwill

7,824

7,824

Other noncurrent assets

 

49

 

 

 

44

 

Total assets

$

266,456

 

 

$

165,328

 

 
Liabilities and Members’ Equity

Current liabilities

Accounts payable

$

35,080

$

14,002

Accrued expenses and other

10,559

6,430

Capital lease obligations, current portion

4,667

1,134

Current maturities of long-term debt

 

2,568

 

 

 

2,568

 

Total current liabilities

 

52,874

 

 

 

24,134

 

 

Capital lease obligations, net of current portion

7,946

2,065

Deferred tax liability, net

416

196

Long-term debt, net

 

241,437

 

 

 

242,254

 

Total liabilities

 

302,673

 

 

 

268,649

 

 

Members’ equity (deficit)

 

(36,217

)

 

 

(103,321

)

Total liabilities and members’ equity (deficit)

$

266,456

 

 

$

165,328

 

 
CactusCondensed Consolidated Statements of Cash Flows
(unaudited)

 

 

 

 

 

 

 

Year Ended December 31,

 
2017
 

 

 
2016
 

(in thousands)Cash flows from operating activities

 

Net income (loss)

$

66,547

$

(8,176

)

Reconciliation of net income (loss) to net cash provided by
operating activities

Depreciation and amortization

23,271

21,241

Debt discount and deferred loan cost amortization

1,752

1,777

Stock-based compensation

361

Provision for (recovery of) bad debts

(100

)

(357

)

Inventory obsolescence

1,259

1,851

Loss on disposal of assets

534

950

Deferred income taxes

220

132

Gain on debt extinguishment

(2,251

)

Changes in operating assets and liabilities

Accounts receivable-trade

(50,094

)

509

Inventories

(28,279

)

4,126

Prepaid expenses and other assets

(4,012

)

1,080

Accounts payable-trade

19,505

5,014

Accrued expenses and other liabilities

 

4,104

 

 

 

(2,282

)

Net cash provided by operating activities

 

34,707

 

 

 

23,975

 

 
Cash flows from investing activities

Capital expenditures

(32,074

)

(21,677

)

Patent expenditures

(8

)

(44

)

Proceeds from sale of assets

 

1,404

 

 

 

4,363

 

Net cash used in investing activities

 

(30,678

)

 

 

(17,358

)

 
Cash flows from financing activities

Principal payments on long-term debt

(2,569

)

(7,908

)

Payments on capital leases

(2,744

)

(208

)

Distributions to members

 

 

 

 

(2,055

)

Net cash used in financing activities

 

(5,313

)

 

 

(10,171

)

 

Effect of exchange rate changes on cash and cash equivalents

 

170

 

 

 

(284

)

 

Net increase (decrease) in cash and cash equivalents

(1,114

)

(3,838

)

 
Cash and cash equivalents

Beginning of period

 

8,688

 

 

 

12,526

 

End of period

$

7,574

 

 

$

8,688

 

 
Cactus – Supplemental InformationMarket Share(1)
(unaudited)

 

 
Three Months Ended

December 31,2017
 
September 30,2017
 
December 31,2016

 

Cactus rigs followed

234

237

120

Baker Hughes U.S. onshore rig count quarterly average

900

924

565

Market share (1)

26.0%

25.6%

21.2%

 

(1)

 

Market share represents the average number of active U.S. onshore
rigs Cactus followed (which Cactus defines as the number of active
U.S. onshore drilling rigs to which it was the primary provider of
wellhead products and corresponding services during drilling) as
of mid-month for each of the three months in the applicable
quarter divided by the Baker Hughes U.S. onshore rig count
quarterly average. Cactus believes that comparing the total number
of active U.S. onshore rigs to which it was providing its products
and services at a given time to the number of active U.S. onshore
rigs during the same period provides Cactus with a reasonable
approximation of its market share with respect to wellhead
products sold and the corresponding services it provides.

 
Cactus – Supplemental InformationReconciliation of GAAP to Non-GAAP Financial MeasuresEBITDA and Adjusted EBITDA(2)
(unaudited)

 

 

Three Months Ended
Year Ended

December 31,2017
 
September 30,2017
 
December 31,2016
December 31,2017
 
December 31,2016

(in thousands)
Net income (loss)

$

22,814

$

22,301

$

1,346

$

66,547

$

(8,176

)

Interest expense, net

5,316

5,279

4,964

20,767

20,233

Income tax expense

607

479

(148

)

1,549

809

Depreciation and amortization

 

6,295

 

6,074

 

5,299

 

 

23,271

 

21,241

 

EBITDA (2)

35,032

34,133

11,461

112,134

34,107

(Gain) loss on debt extinguishment

(2,251

)

Stock-based compensation

 

 

 

 

 

 

361

 

Adjusted EBITDA (2)

$

35,032

$

34,133

$

11,461

 

$

112,134

$

32,217

 

 

(2)

 

EBITDA and Adjusted EBITDA are not measures of net income as
determined by GAAP. EBITDA and Adjusted EBITDA are supplemental
non-GAAP financial measures that are used by management and external
users of the Company’s consolidated financial statements, such as
industry analysts, investors, lenders and rating agencies. Cactus
defines EBITDA as net income before net interest expense, income tax
and depreciation and amortization. Cactus defines Adjusted EBITDA as
EBITDA excluding (gain) loss on debt extinguishment and stock-based
compensation.

 

Cactus management believes EBITDA and Adjusted EBITDA are useful
because they allow management to more effectively evaluate the
Company’s operating performance and compare the results of its
operations from period to period without regard to financing methods
or capital structure, or other items that impact comparability of
financial results from period to period. EBITDA and Adjusted EBITDA
should not be considered as alternatives to, or more meaningful
than, net income or any other measure as determined in accordance
with GAAP. The Company’s computations of EBITDA and Adjusted EBITDA
may not be comparable to other similarly titled measures of other
companies. Cactus presents EBITDA and Adjusted EBITDA because it
believes they provide useful information regarding the factors and
trends affecting the Company’s business.

 
Cactus – Supplemental InformationDepreciation and Amortization by Category
(unaudited)

 

 

Three Months Ended
Year Ended

December 31,2017
 
September 30,2017
 
December 31,2016
December 31,2017
 
December 31,2016

(in thousands)
Cost of product revenue

$

812

$

796

$

759

$

3,169

$

2,869

Cost of rental revenue

3,909

3,814

3,693

14,912

15,121

Cost of field service and other revenue

1,479

1,365

732

4,786

2,659

Selling, general and administrative expenses

 

95

 

99

 

115

 

404

 

592

Total depreciation and amortization

$

6,295

$

6,074

$

5,299

$

23,271

$

21,241

View source version on businesswire.com: http://www.businesswire.com/news/home/20180308006380/en/


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