Cactus(US:WHD)2019-03-15 00:40Financial Performance - Total revenues for Cactus Inc. in 2018 were $544.1 million, a 59.5% increase from $341.2 million in 2017[164]. - Net income attributable to Cactus Inc. for 2018 was $51.7 million, compared to a net loss of $8.2 million in 2016[164]. - Net income for 2018 was $150.3 million, a rise of $83.7 million, or 125.8%, compared to $66.5 million in 2017[180]. - Comprehensive income attributable to Cactus Inc. was $51.2 million in 2018, compared to $0 in 2016[275]. - Earnings per Class A share - diluted was $1.58 for 2018, with a weighted average of 32,695 shares outstanding[273]. Revenue Breakdown - Product revenue increased to $290.5 million, up $101.4 million, or 53.6%, primarily due to increased U.S. onshore activity and a 29% rise in average monthly rigs to 272[181]. - Rental revenue reached $133.4 million, an increase of $55.9 million, or 72%, driven by investments in the rental fleet[182]. - Field service and other revenue grew to $120.2 million, up $45.6 million, or 61%, due to higher demand correlated with increased product and rental revenue[183]. Cash and Debt Management - Cactus Inc. had cash and cash equivalents of $70.8 million at the end of 2018, a substantial increase from $7.6 million at the end of 2017[164]. - Long-term debt was reduced to zero in 2018 from $241.4 million in 2017, reflecting the repayment of borrowings using IPO proceeds[166]. - Total debt, excluding capital leases, was $0.0 million at December 31, 2018, down from $248.5 million in 2017[207]. - Interest expense decreased significantly to $3.6 million, down $17.2 million, or 82.7%, due to the repayment of the term loan[189]. Tax and Compliance - Cactus Inc. is subject to a U.S. federal income tax rate of 21% on its share of income from Cactus LLC following its IPO[179]. - Income tax expense for 2018 was $19.5 million, reflecting an effective tax rate of 11.5%, compared to $1.5 million (2.3% effective tax rate) in 2017[191]. - The company intends to make pro rata distributions to unitholders to cover tax obligations and payments under the Tax Receivable Agreement[229]. - The company was in compliance with all covenants under the ABL Credit Facility as of December 31, 2018[228]. Operational Insights - The average U.S. onshore rig count for 2018 was 1,011 rigs, up 18.5% from 853 rigs in 2017 and significantly higher than 483 rigs in 2016[169]. - The rental revenues are primarily dependent on the number of wells completed, with a focus on the number of drilled but uncompleted wells (DUCs) providing additional opportunities[171]. - Cactus Inc. anticipates that market factors such as oil and gas prices will continue to influence demand for its products and services[168]. Capital Expenditures and Investments - The company expects capital expenditures for 2019 to range from $60 million to $65 million, primarily for rental fleet investments[209]. - The company reported capital expenditures of $70.1 million for the year, up from $32.1 million in 2017[279]. Inventory and Accounts Receivable - The allowance for doubtful accounts was $0.6 million as of December 31, 2018, representing approximately 1.0% of consolidated gross accounts receivable[237]. - The inventory obsolescence reserve was $7.3 million as of December 31, 2018, representing approximately 6.8% of consolidated gross inventories, an increase from $5.9 million (8.4%) in 2017[239]. - The company reported a significant increase in accounts receivable, net of allowance, which rose to $92.3 million from $84.2 million in 2017[271]. IPO and Follow-on Offering - Cactus Inc. completed an IPO on February 12, 2018, raising net proceeds of $408.0 million from the sale of 23 million shares at $19.00 per share[283]. - A follow-on offering on July 16, 2018, raised $359.3 million from the sale of 11.2 million shares at $33.25 per share[288]. Market Risks and Economic Factors - The company is exposed to market risks from changes in foreign currency rates and interest rates, particularly due to operations in China and Australia[256][257]. - Inflation has been relatively low in recent years and did not materially impact the company's operations for the years ended December 31, 2018, 2017, and 2016[254]. Tax Receivable Agreement (TRA) - The total liability from the Tax Receivable Agreement (TRA) recorded as of December 31, 2018, is $147.6 million, which includes both current and long-term portions[306]. - The TRA payments are expected to commence in 2019 and continue for 16 years after the last redemption of CW Units, potentially extending over 25 years[314]. - The TRA generally provides for the payment of 85% of net cash savings in taxes realized by the company, with the remaining 15% retained by the company[305].