Cactus, Inc. (NYSE:WHD) is a leading provider of highly engineered equipment and services to the global oil and gas industry. Founded in 2011, the company has rapidly grown to become a premier manufacturer and supplier of wellhead and pressure control equipment, as well as spoolable pipe technologies, primarily serving the onshore exploration and production (E&P) market.

Financials

In 2023, Cactus reported annual revenue of $1,096,960,000, a 20% increase from the prior year. Net income for the year reached $169,171,000, while operating cash flow and free cash flow stood at $340,280,000 and $296,303,000, respectively. These strong financial results demonstrate the company's ability to capitalize on the robust demand for its specialized products and services.

Business Overview

Cactus operates in two primary business segments:

Pressure Control:

This segment designs, manufactures, sells, and rents a range of wellhead and pressure control equipment, primarily for onshore unconventional oil and gas wells. This segment generated $700,212,000 in revenue during 2023, accounting for 64% of the company's total revenue.

Spoolable Technologies:

Acquired in 2023 through the acquisition of FlexSteel, this segment designs, manufactures, and sells spoolable pipe and associated end fittings, primarily used as production, gathering, and takeaway pipelines to transport oil, gas, or other liquids. This segment contributed $396,748,000 in revenue, or 36% of the company's total revenue.

Recent Developments

In the first quarter of 2024, Cactus reported total revenue of $274,123,000, a 20% increase compared to the same period in the prior year. The Pressure Control segment generated $175,028,000 in revenue, while the Spoolable Technologies segment contributed $99,095,000. The company's net income for the quarter was $49,815,000, with operating cash flow and free cash flow of $86,263,000 and $78,355,000, respectively.

Outlook

Cactus provided the following guidance for the second quarter of 2024:

Pressure Control Segment:

- Revenue expected to be relatively flat compared to the first quarter - Adjusted EBITDA margins expected to be 33% to 35%, excluding approximately $3 million in stock-based compensation expense

Spoolable Technologies Segment:

- Revenue expected to be slightly up from the first quarter - Adjusted EBITDA margins expected to be 36% to 38%, excluding approximately $1 million in stock-based compensation expense

Corporate:

- Adjusted EBITDA expected to be a loss of approximately $4 million, excluding approximately $1.5 million in stock-based compensation expense

The company also highlighted several key initiatives it is pursuing to drive future growth, including the introduction of its latest generation wellhead, enhanced frac innovations, and continued expansion into international markets, particularly the Middle East. Cactus believes these initiatives, combined with the benefits of the FlexSteel acquisition, will position the company for above-market growth in the coming years.

Geographically, Cactus has predominantly domestic operations, with a small portion of sales in international markets such as Australia, Canada, and the Middle East. The company's focus on the onshore E&P market in the United States has been a key driver of its success, as the country's shale revolution has fueled robust demand for Cactus' specialized equipment and services.

Liquidity

Cactus ended the first quarter of 2024 with a strong cash position of $194,257,000 and available borrowing capacity of $216,700,000 under its Amended ABL Credit Facility, with no outstanding borrowings. The company's healthy balance sheet and cash flow generation provide it with the financial flexibility to invest in growth initiatives, pursue strategic acquisitions, and return capital to shareholders through its quarterly dividend and share repurchase program.

Conclusion

Cactus' diversified product portfolio, strong market position, and focus on innovation and international expansion position the company well to capitalize on the ongoing recovery in the global oil and gas industry. With a proven track record of financial performance, a robust liquidity position, and a clear strategic vision, Cactus appears poised to deliver continued growth and value creation for its shareholders.

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