Cactus(WHD) - 2021 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements Presents Cactus, Inc.'s unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2021 Condensed Consolidated Balance Sheets Total assets increased to $963.9 million by September 30, 2021, with liabilities rising due to the TRA Condensed Consolidated Balance Sheets (in thousands USD) | | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $301,974 | $288,659 | | Accounts receivable, net | $79,401 | $44,068 | | Inventories | $101,137 | $87,480 | | Total current assets | $491,801 | $425,142 | | Total assets | $963,930 | $815,594 | | Liabilities and Equity | | | | Accounts payable | $43,405 | $20,163 | | Total current liabilities | $87,951 | $48,915 | | Liability related to tax receivable agreement, net | $272,017 | $195,061 | | Total liabilities | $384,230 | $264,824 | | Total stockholders' equity | $579,700 | $550,770 | | Total liabilities and equity | $963,930 | $815,594 | Condensed Consolidated Statements of Income Total revenues for Q3 2021 significantly increased to $115.4 million, with nine-month revenues growing 10.1% Financial Performance (in thousands USD, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $115,363 | $59,789 | $308,673 | $280,476 | | Income from operations | $20,766 | $12,556 | $49,715 | $61,616 | | Net income | $17,177 | $10,886 | $47,087 | $53,079 | | Net income attributable to Cactus Inc. | $12,617 | $6,233 | $34,569 | $31,244 | | Earnings per Class A share - diluted | $0.21 | $0.13 | $0.58 | $0.64 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income attributable to Cactus Inc. increased to $12.2 million in Q3 2021, driven by foreign currency translation adjustments Comprehensive Income (in thousands USD) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income | $17,177 | $10,886 | $47,087 | $53,079 | | Foreign currency translation adjustments | $(529) | $533 | $(804) | $329 | | Comprehensive income | $16,648 | $11,419 | $46,283 | $53,408 | | Comprehensive income attributable to Cactus Inc. | $12,235 | $6,536 | $34,074 | $31,430 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased to $579.7 million by September 30, 2021, due to net income and CW Unit redemptions - For the nine months ended September 30, 2021, the company declared cash dividends of $0.28 per share, totaling $15.3 million[25][56] - The effect of CW Unit redemptions resulted in a $78.7 million decrease in non-controlling interest and a corresponding increase in additional paid-in capital for the nine months ended September 30, 2021[25] Condensed Consolidated Statements of Cash Flows Net cash from operating activities decreased to $52.1 million for the nine months ended September 30, 2021, due to increased working capital Cash Flow Summary (in thousands USD) | Cash Flow Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $52,084 | $121,485 | | Net cash used in investing activities | $(8,417) | $(16,494) | | Net cash used in financing activities | $(30,354) | $(34,090) | | Net increase in cash and cash equivalents | $13,315 | $71,338 | | Cash and cash equivalents, end of period | $301,974 | $273,941 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, customer concentration, no outstanding debt, $283.0 million TRA liability, and increased Cactus LLC ownership - For the nine months ended September 30, 2021, one customer accounted for 13% of consolidated revenues[33] - The company had no debt outstanding as of September 30, 2021, but has access to a $75.0 million ABL Credit Facility[41][42] - As of September 30, 2021, the total liability from the Tax Receivable Agreement (TRA) was $283.0 million[47] - Cactus Inc.'s ownership of Cactus LLC increased to 77.9% as of September 30, 2021, up from 63.3% as of December 31, 2020, due to redemptions of CW Units[50] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, market factors, revenue growth, cost pressures, and strong liquidity with $302.0 million cash and no debt Executive Summary & Market Factors Cactus designs and sells wellhead and pressure control equipment for U.S. onshore oil and gas wells, with demand driven by industry activity - The company operates in one business segment, deriving revenue from products, rentals, and field services[67] - Demand for products and services is primarily dependent on the level of oil and gas industry activity, including drilling rig counts and capital spending by customers[69] Recent Developments and Trends Economic reopening and higher commodity prices boosted activity, leading to workforce expansion but also significant cost inflation in freight and raw materials - Higher commodity prices have resulted in increased drilling and completion activity, leading to improved demand for the company's products and services[75] - The company is experiencing substantial increases in ocean freight, salaries, wages, and raw material prices due to supply chain pressures and increased global demand[75] - International freight costs have surged from approximately $2,800 per container pre-pandemic to over $17,000, with prices expected to remain elevated until mid-to-late 2022[78] Results of Operations Q3 2021 revenue grew 5.9% sequentially, and nine-month revenue increased 10.1% year-over-year, driven by product revenue despite higher costs Q3 2021 vs Q2 2021 Performance (in thousands USD) | Metric | Q3 2021 | Q2 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $115,363 | $108,893 | $6,470 | 5.9% | | Income from operations | $20,766 | $17,314 | $3,452 | 19.9% | | Net income attributable to Cactus Inc. | $12,617 | $10,393 | $2,224 | 21.4% | Nine Months 2021 vs 2020 Performance (in thousands USD) | Metric | Nine Months 2021 | Nine Months 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $308,673 | $280,476 | $28,197 | 10.1% | | Product revenue | $197,136 | $163,781 | $33,355 | 20.4% | | Rental revenue | $42,404 | $57,579 | $(15,175) | (26.4)% | | Income from operations | $49,715 | $61,616 | $(11,901) | (19.3)% | | Net income attributable to Cactus Inc. | $34,569 | $31,244 | $3,325 | 10.6% | Liquidity and Capital Resources The company maintains strong liquidity with $302.0 million cash and no debt, with $52.1 million in operating cash flow for the first nine months - As of September 30, 2021, the company had $302.0 million in cash and cash equivalents and no borrowings outstanding under its $75.0 million ABL Credit Facility[107] - Net capital expenditures for the full year 2021 are estimated to range from $10 million to $15 million[110] - Net cash provided by operating activities decreased to $52.1 million for the first nine months of 2021 from $121.5 million in the prior year, mainly due to an increase in working capital[112] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk exposure since December 31, 2020 - There have been no material changes in the company's exposure to market risk since December 31, 2020[115] Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal controls - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[117] - No changes in internal control over financial reporting occurred during Q3 2021 that have materially affected, or are reasonably likely to materially affect, internal controls[118] PART II - OTHER INFORMATION Legal Proceedings Management believes ongoing legal proceedings are unlikely to have a material adverse effect on the company's financial condition - Management does not believe that pending or threatened legal matters will have a material adverse impact on the company's financial condition[120][121] Risk Factors The company reports no material changes in its risk factors from those described in its 2020 Annual Report - There have been no material changes in the company's risk factors from those described in the 2020 Annual Report[122] Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2021, the company repurchased 534 shares of Class A common stock at $33.37 per share for tax withholding Issuer Purchases of Equity Securities (Q3 2021) | Period | Total number of shares purchased | Average price paid per share | | :--- | :--- | :--- | | July 1-31, 2021 | — | $ — | | August 1-31, 2021 | — | $ — | | September 1-30, 2021 | 534 | $33.37 | | Total | 534 | $33.37 | Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including CEO/CFO certifications and XBRL - The report includes required exhibits, such as CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, and XBRL data files[126]