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Cactus, Inc.

Cactus, Inc.WHDEarnings & Financial Report

NYSE · Industrials · Oil & Gas Field Machinery & Equipment

Cactus Club Cafe is a Canadian-owned chain of premium casual restaurants that originated in North Vancouver, British Columbia. The chain has since expanded to 34 locations throughout Canada, with other locations throughout British Columbia, Alberta, Saskatchewan, Ontario and the United States

What changed in Cactus, Inc.'s 10-K — 2023 vs 2024

Top changes in Cactus, Inc.'s 2024 10-K

220 paragraphs added · 208 removed · 170 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

46 edited+17 added−14 removed69 unchanged
There can be no assurance, however, that others will not independently obtain similar information or otherwise gain access to our trade secrets. 4 Table of Contents Cyclicality We are substantially dependent on conditions in the oil and gas industry, including the level of exploration, development and production activity of, and the corresponding capital spending by, oil and natural gas companies.
There can be no assurance, however, that others will not independently obtain similar information or otherwise gain access to our trade secrets. 4 Table of Contents Cyclicality We are substantially dependent on conditions in the oil and gas industry, including the level of exploration, development and production activity of, and the corresponding capital spending by oil and natural gas exploration and production companies.
We believe the rental market for frac stacks and related flow control equipment is more fragmented than the wellhead product market and do not believe any individual company represents more than 20% of the U.S. market.
We believe the rental market for frac stacks and related flow control equipment is more fragmented than the wellhead product market, and we do not believe any individual company represents more than 20% of the U.S. market.
These laws and regulations include, among others: • the Federal Water Pollution Control Act (the “Clean Water Act”); • the Clean Air Act; • the Comprehensive Environmental Response, Compensation and Liability Act; • the Resource Conservation and Recovery Act; • the Occupational Safety and Health Act; and • national and local environmental protection laws in Australia, China, Canada and the Middle East. 5 Table of Contents New, modified or stricter enforcement of environmental laws and regulations could be adopted or implemented that significantly increase our compliance costs, pollution mitigation costs, or the cost of any remediation of environmental contamination that may become necessary, and these costs could be material.
These laws and regulations include, among others: • the Federal Water Pollution Control Act (the “Clean Water Act”); • the Clean Air Act; • the Comprehensive Environmental Response, Compensation and Liability Act; • the Resource Conservation and Recovery Act; • the Occupational Safety and Health Act; and • national and local environmental protection laws in Australia, China, Canada and the Middle East. 5 Table of Contents New, modified or stricter enforcement of environmental laws and regulations could be adopted or implemented that may significantly increase our compliance costs, pollution mitigation costs, or the cost of any remediation of environmental contamination that may become necessary, and these costs could be material.
Likewise, such restrictions may result in additional compliance obligations that could have a material adverse effect on our business, consolidated results of operations and consolidated financial position. In addition, our business could be impacted by initiatives to address greenhouse gases and climate change and incentives to conserve energy or use alternative energy sources.
Likewise, such restrictions may result in additional compliance obligations that could have a material adverse effect on our business, consolidated results of operations and consolidated financial position. In addition, our business could be negatively impacted by initiatives to address greenhouse gases and climate change and incentives to conserve energy or use alternative energy sources.
State, national and foreign governments and agencies continue to evaluate, and in some instances adopt, climate-related legislation and other regulatory initiatives that would restrict emissions of greenhouse gases. Changes in environmental requirements related to greenhouse gases, climate change and alternative energy sources may negatively impact demand for our services.
Local, state, national and foreign governments and agencies continue to evaluate, and in some instances adopt, climate-related legislation and other regulatory initiatives that would restrict emissions of greenhouse gases. Changes in environmental requirements related to greenhouse gases, climate change and alternative energy sources may negatively impact demand for our services.
Most of our sales are made on a call out basis pursuant to agreements, wherein our clients provide delivery instructions for goods and/or services as their operations require. Such goods and services are most often priced in accordance with a preapproved price list.
Most of our sales are made on a call out basis pursuant to customer agreements, wherein our clients provide delivery instructions for goods and/or services as their operations require. Such goods and services are most often priced in accordance with a preapproved price list.
Suppliers and Raw Materials Forgings, castings, tube and bar stock represent the principal raw materials used in the manufacture of our Pressure Control products and rental equipment. In addition, we require accessory items (such as elastomers, ring gaskets, studs and nuts) and machined components.
Suppliers and Raw Materials Forgings, tube and bar stock represent the principal raw materials used in the manufacture of our Pressure Control products and rental equipment. In addition, we require accessory items (such as elastomers, ring gaskets, studs and nuts) and machined components.
Our customers use these products primarily as production, gathering and takeaway pipelines to transport oil, gas or other liquids. In addition, we also provide field services and rental items to assist our customers with the installation of these products.
Our customers use these products primarily as production, gathering and takeaway pipelines to transport oil, gas or other liquids. In addition, we provide field services and rental items to assist our customers with the installation of these products.
In the Spoolable Technologies segment, we compete with companies who offer spoolable products, including Baker Hughes, Mattr, NOV and select other companies, and also companies who offer traditional steel line pipe, including Tenaris, Vallourec, and a large number of other line pipe manufacturers and distributors.
In the Spoolable Technologies segment, we compete with companies who offer spoolable products, including Baker Hughes, Mattr, NOV and select other companies, and companies who offer traditional steel line pipe, including Tenaris, Vallourec, and a large number of other line pipe manufacturers and distributors.
Our insurance includes coverage for commercial general liability, damage to our real and personal property, damage to our mobile equipment, pollution liability, workers’ compensation and employer’s liability, auto liability, foreign package policy, commercial crime, fiduciary liability employment practices, cargo, excess liability, and directors and officers’ insurance.
Our insurance includes coverage for commercial general liability, damage to our real and personal property, damage to our mobile equipment, pollution liability, workers’ compensation and employer’s liability, auto liability, foreign package policy, commercial crime, fiduciary liability employment practices, cargo, excess liability, directors and officers’ and cyber insurance.
Our manufacturing facility in Bossier City, Louisiana, our production facility in Suzhou, China and our service center in Brendale, Australia are currently licensed by the API to monogram manufactured products in accordance with API 6A, 21st Edition product specification for both wellheads and valves while the quality management system is certified to API Q1, 9th Edition and ISO 9001:2015.
Our manufacturing facility in Bossier City, Louisiana, our production facility in Suzhou, China and our service center in Brendale, Australia are currently licensed by the API to monogram manufactured products in accordance with API 6A, 21st Edition product specification for both wellheads and valves while the quality management system is certified to API Q1, 10th Edition and ISO 9001:2015.
Our manufacturing facility in Baytown, Texas also holds API licenses, allowing us to monogram our FlexSteel products in strict accordance with industry-leading standards. Specifically, we adhere to the API 15S 3rd Edition product specification for spoolable reinforced plastic line pipe and the API 17J 4th Edition product specification for unbonded flexible pipe.
Our manufacturing facility in Baytown, Texas also holds API licenses, allowing us to monogram our FlexSteel products in strict accordance with industry-leading standards. Specifically, we adhere to the API 15S 3rd Edition product specification for spoolable reinforced plastic line pipe and the API 17J 5th Edition product specification for unbonded flexible pipe.
(along with their permitted transferees), as “CC Unit Holders.” From the completion of our IPO until the CC Reorganization, CW Unit Holders owned one share of our Class B common stock, par value $0.01 per share (“Class B common stock”) for each CW Unit such CW Unit Holder owned and, upon the completion of the CC Reorganization, such CW Unit Holders ceased to be holders of CW Units and, instead, became holders of a number of CC Units equal to the number of CW Units such CW Unit Holders held immediately prior to the completion of the CC Reorganization.
(along with their permitted transferees), as “CC Unit Holders.” From the completion of our IPO until the CC Reorganization, CW Unit Holders owned one share of our 1 Table of Contents Class B common stock, par value $0.01 per share (“Class B common stock”) for each CW Unit such CW Unit Holder owned and, upon the completion of the CC Reorganization, such CW Unit Holders ceased to be holders of CW Units and, instead, became holders of a number of CC Units equal to the number of CW Units such CW Unit Holders held immediately prior to the completion of the CC Reorganization.
We also provide rental and service operations in the Middle East and other select international markets. We also have manufacturing and production facilities in Bossier City, Louisiana, Baytown, Texas and Suzhou, China. Our corporate headquarters are located in Houston, Texas.
We also provide rental and service operations in the Middle East and other select international markets. Our primary manufacturing and production facilities are in Bossier City, Louisiana, Baytown, Texas and Suzhou, China. Our corporate headquarters are located in Houston, Texas.
For example, oil and natural gas exploration and production may decline as a result of environmental requirements, including land use policies responsive to environmental concerns.
Oil and natural gas exploration and production may decline as a result of environmental requirements, including land use policies responsive to environmental concerns.
Joel Bender President and Director of Cactus, Inc. Melissa Law President of Global Operations for Tate & Lyle Michael McGovern Executive Chairman of the board of directors of Superior Energy Services, Inc. John (Andy) O’Donnell Former Vice President and executive officer of Baker Hughes Incorporated Gary Rosenthal Partner, The Sterling Group, L.P.
Melissa Law President of Global Operations for Tate & Lyle Michael McGovern Former Executive Chairman of the board of directors of Superior Energy Services, Inc. John (Andy) O’Donnell Former Vice President and executive officer of Baker Hughes Incorporated Gary Rosenthal Partner, The Sterling Group, L.P.
The following diagram indicates our simplified ownership structure as of December 31, 2023: 2 Table of Contents Our Products and Services Following the acquisition of FlexSteel, we have two operating segments consisting of Pressure Control and Spoolable Technologies. See discussion below of each operating segment.
The following diagram indicates our simplified ownership structure as of December 31, 2024: 2 Table of Contents Our Products and Services We have two operating segments consisting of Pressure Control and Spoolable Technologies. See discussion below of each operating segment.
Information on our website or any other website is not incorporated by reference into this Annual Report and does not constitute a part of this Annual Report.
Information on our website or any other website is not incorporated by reference into this Annual Report and does not constitute a part of this Annual Report. 9 Table of Contents
Since our IPO, 46.5 million CC Units (including CW Units prior to the CC Reorganization) and a corresponding number of shares of Class B common stock have been redeemed in exchange for shares of Class A common stock.
Since our IPO, 49.1 million CC Units (including CW Units prior to the CC Reorganization) and a corresponding number of shares of Class B common stock have been redeemed in exchange for shares of Class A common stock.
Bruce Rothstein Former Member and co-founder of Cadent Energy Partners LLC Alan Semple Director of Teekay Corporation Tym Tombar Managing Director and Co-Founder of Arcadius Capital Partners Available Information Our principal executive offices are located at 920 Memorial City Way, Suite 300, Houston, TX 77024, and our telephone number at that address is (713) 626‑8800. Our website address is www.CactusWHD.com.
Bruce Rothstein Former Member and co-founder of Cadent Energy Partners LLC Alan Semple Director of Teekay Tankers Ltd Tym Tombar Managing Director and Co-Founder of Arcadius Capital Partners Available Information Our principal executive offices are located at 920 Memorial City Way, Suite 300, Houston, TX 77024, and our telephone number at that address is (713) 626‑8800.
This can lead to lower activity in our three revenue categories as well as lower margins, particularly in field services due to reduced labor utilization.
These factors can lead to lower activity in our three revenue categories as well as lower margins, particularly in field services due to reduced labor utilization.
Once registered, our trademarks can be renewed every 10 years as long as we are using them in commerce. We also seek to protect our technology through the use of patents, which affords us 20 years of protection of our proprietary inventions and technology, although we do not deem patents to be critical to our success.
Once registered, our trademarks can be renewed every 10 years as long as we are using them in commerce. We also seek to protect our technology through the use of patents, which affords us 20 years of protection of our proprietary inventions and technology.
In 2021, we derived 64% of our total revenues from the sale of our products, 14% from rentals and 22% from field service and other. We have predominantly domestic operations and sales but also generate revenues in Australia, Canada and other select international markets.
In 2022, we derived 66% of our total revenues from the sale of our products, 14% from rentals and 20% from field service and other. We have predominantly domestic operations and sales, but also generate revenues in Australia, Canada and other select international markets.
The Inflation Reduction Act amends the federal Clean Air Act to impose a fee on the emission of methane from sources required to report their GHG emissions to the EPA, including those sources in the onshore petroleum and natural gas production categories.
The Inflation Reduction Act amends the federal Clean Air Act to impose a fee on the emission of methane from sources required to report their GHG emissions to the EPA, including those sources in the onshore petroleum and natural gas production categories. The final rule implementing the waste emissions charge was published in November 2024.
Human Capital Management As of December 31, 2023, we employed almost 1,600 people worldwide, of which over 100 were employed outside of the United States, mainly in Australia and China. We are not a party to any collective bargaining agreements and have not experienced any strikes or work stoppages. We consider our relations with our workforce to be good.
Human Capital Management As of December 31, 2024, we employed approximately 1,600 people worldwide, of which over 100 were employed outside of the United States, mainly in Australia and China. We are not a party to any collective bargaining agreements and have not experienced any strikes or work stoppages.
For the year ended December 31, 2023, we derived 74% of our total revenues from the sale of our products, 10% from rentals and 16% from field service and other. In 2022, we derived 66% of our total revenues from the sale of our products, 14% from rentals and 20% from field service and other.
For the year ended December 31, 2024, we derived 75% of our total revenues from the sale of our products, 9% from rentals and 16% from field service and other. In 2023, we derived 74% of our total revenues from the sale of our products, 10% from rentals and 16% from field service and other.
We completed the acquisition on a cash-free, debt-free basis and paid total cash consideration of $621.5 million which included final adjustments for closing working capital, cash on hand and indebtedness adjustments as set forth in the related merger agreement (the “Merger Agreement”).
We completed the acquisition on a cash-free, debt-free basis and paid total cash consideration of $658.6 million which included the initial purchase consideration, final adjustments for closing working capital, cash on hand and indebtedness adjustments, and earn-out payments made in 2024 as set forth in the related merger agreement (the “Merger Agreement”).
Cactus Inc. was responsible for all operational, management and administrative decisions relating to Cactus LLC’s business for the period from completion of our IPO until the CC Reorganization and for the Cactus Companies’ business for periods after the CC Reorganization. 1 Table of Contents From the completion of our IPO until the CC Reorganization, pursuant to the Cactus Wellhead LLC Agreement, owners of CW Units were entitled to redeem their CW Units for shares of Cactus Inc.’s Class A common stock, par value $0.01 per share (“Class A common stock”) on a one-for-one basis, which would have resulted in a corresponding increase in Cactus Inc.’s membership interest in Cactus LLC and an increase in the number of shares of Class A common stock outstanding.
From the completion of our IPO until the CC Reorganization, pursuant to the Cactus Wellhead LLC Agreement, owners of CW Units were entitled to redeem their CW Units for shares of Cactus Inc.’s Class A common stock, par value $0.01 per share (“Class A common stock”) on a one-for-one basis, which would have resulted in a corresponding increase in Cactus Inc.’s membership interest in Cactus LLC and an increase in the number of shares of Class A common stock outstanding.
Customers We serve over 300 customers representing private operators, publicly-traded independents, majors and other companies with operations in the key U.S. oil and gas producing basins as well as in Australia, Canada, the Middle East and other international locations. One customer represented approximately 10% of total revenues during the year ended December 31, 2023.
Customers We serve over 300 customers representing private operators, publicly-traded independents, majors and other companies with operations in the key U.S. oil and gas producing basins as well as in Australia, Canada, the Middle East and other international locations.
These developments could further accelerate the transition of the U.S. economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which could reduce demand for our products and services and negatively impact our business. Insurance and Risk Management We rely on customer indemnifications and third‑party insurance as part of our risk mitigation strategy.
These developments could further accelerate the transition of the U.S. economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which could reduce demand for our products and services and negatively impact our business.
As of December 31, 2023, Cactus Inc. owned 82.3% and CC Unit Holders owned 17.7% of Cactus Companies, which was based on 65.4 million shares of Class A common stock issued and outstanding and 14.0 million shares of Class B common stock issued and outstanding. Cactus WH Enterprises held approximately 15.8% of our voting power as of December 31, 2023.
As of December 31, 2024, Cactus Inc. owned 85.6% and CC Unit Holders owned 14.4% of Cactus Companies, which was based on 68.2 million shares of Class A common stock issued and outstanding and 11.4 million shares of Class B common stock issued and outstanding. Cactus WH Enterprises held approximately 12.8% of our voting power as of December 31, 2024.
The principal raw materials used by our Spoolable Technologies segment include tube, bar stock, steel strip and high density polyethylene. We purchase a majority of our raw materials from vendors primarily located in the United States, China, India, Australia and the United Kingdom.
The principal raw materials used by our Spoolable Technologies segment include tube, bar stock, steel strip and high-density polyethylene. We purchase a majority of our raw materials from vendors primarily located in the United States, China, India, Australia and Vietnam. We do not believe that we are overly dependent on any individual vendor to supply our required materials or services.
Our health and safety programs are designed around global standards with appropriate variations addressing the multiple jurisdictions and regulations, specific hazards and unique working environments of our manufacturing and production facilities, service centers and headquarters. We require each location to conduct regular safety evaluations to verify that expectations for safety program procedures and training are being met.
Our health and safety programs are designed around global standards with appropriate variations addressing the multiple jurisdictions and regulations, specific hazards and unique working environments of our manufacturing 8 Table of Contents and production facilities, service centers and headquarters.
However, our customers may be unable to satisfy indemnification claims against them. In addition, we indemnify our customers against certain claims and liabilities resulting or arising from our provision of goods or services to them. Our insurance may not be sufficient to cover any particular loss or may not cover all losses.
Insurance and Risk Management We rely on customer indemnifications and third‑party insurance as part of our risk mitigation strategy. However, our customers may be unable to satisfy indemnification claims against them. In addition, we indemnify our customers against certain claims and liabilities resulting or arising from our provision of goods or services to them.
We provide our employees and their families access to various flexible and convenient health and wellness programs. These programs include benefits that offer protection and security to have peace of mind concerning events that may require time away from work or impact their financial well-being.
These programs include benefits that offer protection and security to have peace of mind concerning events that may require time away from work or impact their financial well-being. These tools also support their physical and mental health by providing resources to improve or maintain their health status.
We carry a variety of insurance coverages for our operations, and we are partially self‑insured for certain claims, in amounts that we believe to be customary and reasonable. Historically, insurance rates have been subject to various market fluctuations that may result in less coverage, increased premium costs, or higher deductibles or self‑insured retentions.
Historically, insurance rates have been subject to various market fluctuations that may result in less coverage, increased premium costs, or higher deductibles or self‑insured retentions.
Our Spoolable Technologies segment reported a TRIR of 0.98 for fiscal year 2023 with no work-related fatalities. Based on the most recent statistics available from the International Association of Drilling Contractors, our TRIR statistics are in line with the industry average. We are committed to the health, safety and wellness of our employees.
Based on the most recent statistics available from the International Association of Drilling Contractors, our TRIR statistics are in line with the industry average. We are committed to the health, safety and wellness of our employees. We provide our employees and their families access to various flexible and convenient health and wellness programs.
No customer represented 10% or more of our total revenues during the year ended December 31, 2022, whereas one customer represented 12% of total revenues during the year ended December 31, 2021. Competition The markets in which we operate are highly competitive.
For the years ended December 31, 2024 and 2023, one customer represented 15% and 10%, respectively, of total Company revenues, with both operating segments reporting revenues with this customer. No customer represented more than 10% of total Company revenues for the year ended December 31, 2022. Competition The markets in which we operate are highly competitive.
Our career development plans are designed to enable individuals to acquire the necessary technical knowledge to perform their jobs with utmost safety and precision. External training courses are attended by employees with specialized skills, knowledge or certifications as needed for their ongoing success and professional development.
To support career advancement, our development plans equip individuals with the technical expertise needed to perform their roles with the highest levels of safety and precision. For employees requiring specialized skills, knowledge, or certifications, we provide access to external training opportunities tailored to their professional growth.
These tools also support their physical and mental health by providing resources to improve or maintain their health status. 8 Table of Contents Executive Officers and Directors The following tables set forth certain information regarding our Executive Officers and Directors as of February 27, 2024: Information About Our Executive Officers Name Position Scott Bender Chief Executive Officer, Chairman of the Board and Director Joel Bender President and Director Steven Bender Chief Operating Officer Stephen Tadlock Executive Vice President, Chief Executive Officer of the Spoolable Technologies segment and Treasurer Alan Keifer Interim Chief Financial Officer William Marsh Executive Vice President, General Counsel and Corporate Secretary Donna Anderson Vice President and Chief Accounting Officer Information About Our Board of Directors Name Position Scott Bender Chief Executive Officer, Chairman of the Board and Director of Cactus, Inc.
Executive Officers and Directors The following tables set forth certain information regarding our Executive Officers and Directors as of February 25, 2025: Information About Our Executive Officers Name Position Scott Bender Chief Executive Officer, Chairman of the Board and Director Joel Bender President and Director Steven Bender Chief Operating Officer Stephen Tadlock Executive Vice President, Chief Executive Officer of the Spoolable Technologies segment Jay A.
We also engage in third-party conformity assessments of our HSE processes to determine adherence to our HSE management system and to global health and safety standards. We monitor our Occupational Safety and Health Administration Total Recordable Incident Rate (“TRIR”) to assess our operation’s health and safety performance.
We require each location to conduct regular safety evaluations to verify that expectations for safety program procedures and training are being met. We also engage in third-party conformity assessments of our HSE processes to determine adherence to our HSE management system and to global health and safety standards.
We are dedicated to our employees’ training and development, especially those in field, plant and branch operations. We offer extensive internal training programs that prioritize and monitor their technical and safety skills. Our internal training focuses on safety, corporate and personal responsibility, product knowledge, behavioral development and ethical conduct.
Our comprehensive internal training programs are designed to enhance and monitor technical and safety skills while fostering growth in key areas such as safety practices, corporate and personal responsibility, product knowledge, behavioral development, and ethical conduct.
TRIR is defined as the number of incidents per 100 full-time employees that have resulted in a recordable injury or illness in the pertinent period. During fiscal year 2023, our Pressure Control segment reported a TRIR of 1.19, which compares to 1.35 in 2022, with no work-related fatalities in either year.
During fiscal year 2024, our Pressure Control segment reported a TRIR of 0.81, which compares to 1.19 in 2023, with no work-related fatalities in either year. Our Spoolable Technologies segment reported a TRIR of 1.26 for fiscal year 2024, compared to 0.98 in 2023, with no work-related fatalities.
We offer comprehensive compensation and benefits programs designed to address the needs of our employees and their families.
We provide comprehensive compensation and benefits programs thoughtfully designed to address the diverse needs of our employees and their families. Our approach goes beyond offering competitive salaries and wages, incorporating a wide range of benefits to promote financial security, health, wellness, and professional growth.
We believe our continued focus on training and development translates into a safer work environment, opportunities to promote within the organization, improved employee morale and increased employee retention. Diversity and Inclusion. We believe that diversity and inclusion are integral to our success and essential to fostering innovation and sustainable growth.
We believe that our unwavering focus on training and development not only fosters a safer work environment but also creates pathways for internal promotions, boosts employee morale, and strengthens retention across the organization. Workplace Culture. We believe our workplace culture is fundamental to our success, driving innovation, creativity, and sustainable growth.
This commitment extends across all aspects of our business, from hiring and promotion practices to employee development and supplier relationships. Our workforce comprises a diverse associate group, with approximately 14% women and approximately 46% of our workforce representing a minority population. Compensation and Benefits.
Our workforce comprises a diverse associate group, with approximately 10% women and approximately 46% of our workforce representing a minority population. By cultivating a diverse environment, we strengthen our organization, enrich our workplace culture, and ensure long-term success. Compensation and Benefits.
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In addition to the upfront consideration, there is a potential future earn-out payment of up to $75 million to be paid no later than the third quarter of 2024, if certain revenue growth targets are met by the FlexSteel business.
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Cactus Inc. was responsible for all operational, management and administrative decisions relating to Cactus LLC’s business for the period from completion of our IPO until the CC Reorganization and for the Cactus Companies’ business for periods after the CC Reorganization.
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We funded the upfront purchase price using a combination of $165.6 million of net proceeds received from a public offering of shares of our Class A common stock completed in January 2023, borrowings under the Amended ABL Credit Facility (as defined in Note 6 in the notes to the Consolidated Financial Statements) totaling $155.0 million and available cash on hand.
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For example, in January 2025, President Biden issued a Memorandum of Withdrawal that could have had the effect of preventing future leasing by the federal government (and therefore oil and gas exploration) of the lands underlying federal waters offshore the U.S.
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See Note 3 in the notes to the Consolidated Financial Statements for additional information related to the acquisition.
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East Coast, the eastern Gulf of Mexico, the Pacific Ocean off the coasts of Washington, Oregon, and California, and additional portions of the Northern Bering Sea in Alaska. The Trump Administration, however, overturned President Biden’s Memorandum of Withdrawal and issued a series of executive orders that signal a shift in the United States’ energy and climate change policies.
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We do not believe that we are overly dependent on any individual vendor to supply our required materials or services.
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Future administrations may, however, pursue executive orders similar to, or more restrictive than, those put in place by President Biden. The topic of oil and gas leasing on public land remains politically fraught.
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While the United States Department of the Interior (“DOI”) announced in April 2022 that it would resume oil and gas leasing on public lands, there was an 80% reduction in the number of acres offered and an increase in the royalties companies must pay.
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In January 2025, however, the United States submitted formal notification to the United Nations that it intends to withdraw from the Paris Agreement and the President Trump signed executive orders that, among other things, direct federal executive departments and agencies to initiate a regulatory freeze for certain rules that have not taken effect, pending review by the newly appointed agency head, call upon the EPA to submit a report on the continuing applicability of its endangerment finding for GHGs under the Clean Air Act and issue guidance on the “social cost of carbon” to consider whether such metric should be eliminated, and pause the disbursement of funds appropriated through the Inflation Reduction Act and the Infrastructure Investments and Jobs Act.
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In August 2023, the DOI proposed a scaled back offshore lease sale for certain areas in the Gulf of Mexico due to concerns related to an endangered whale population in the area. The exclusion of certain lease blocks from the sale was successfully challenged in court, and the DOI was ordered to hold the lease sale at its original scale.
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Our insurance may not be sufficient to cover any particular loss or may not cover all losses. We carry a variety of insurance coverages for our operations, and we are partially self‑insured for certain claims, in amounts that we believe to be customary and reasonable.
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This decision was upheld by the U.S. Court of Appeals for the Fifth Circuit on November 14, 2023, and the sale went forward as scheduled on December 20, 2023. The topic of oil and gas leasing on public land remains politically fraught.
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We consider our relations with our workforce to be strong. 7 Table of Contents Our success is intrinsically tied to our ability to attract, retain, and inspire a diverse and talented team across all levels of our organization. This includes our global workforce, executive leadership, and other key personnel.
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In addition, the Biden administration has indicated that it is delaying consideration of new natural gas export terminals in the United States and to the extent that these developments or other initiatives to reform federal leasing practices result in the development of additional restrictions on drilling, limitations on the availability of leases, or restrictions on the ability to obtain required permits, it could impact our customers’ opportunities and reduce demand for our products and services in the aforementioned areas.
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Operating in a highly competitive industry, we have developed and implemented targeted strategies, objectives, and metrics for recruitment and retention. These initiatives are integral to our overall business management approach, contributing to our ability to maintain high retention rates among key managers and associates while fostering a dynamic and motivated workforce. Recruiting .
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Our success is highly dependent on our ability to attract, retain and motivate a diverse population of talented employees at all levels of our organization, including the individuals who comprise our global workforce, executive officers and other key personnel. To thrive in a highly competitive industry, we have formulated essential strategies, objectives, and metrics for recruitment and retention.
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Our talent strategy focuses on attracting, recognizing, developing, and retaining top-performing individuals. To identify and secure exceptional talent, we actively encourage and reward employee referrals, leverage multiple social media platforms, and participate in regional job fairs. Additionally, we build strategic partnerships with educational institutions across the United States and collaborate with local workforce commissions.
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These factors play a significant role in our comprehensive business management approach and our high levels of retention of key managers and associates. 7 Table of Contents Recruiting. Our talent strategy prioritizes the attraction, recognition, development, and retention of high-performing individuals.
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These efforts ensure we maintain a diverse and highly skilled candidate pool in every region where we operate. Training and Development. We are deeply committed to the training and development of our employees, with a special emphasis on those in field, plant, and branch operations.
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To find qualified candidates, we encourage and reward employee referrals, utilize several social media platforms, participate in regional job fairs and establish partnerships with educational organizations throughout the United States. Furthermore, we collaborate with local workforce commissions to ensure that we attract a diverse and highly capable pool of candidates in all regions where we operate. Training and Development.
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Our commitment is to nurture a workplace culture that values every individual, and empowers everyone to contribute their unique perspectives. We are dedicated to fostering an environment where discrimination has no place. This commitment is reflected in every aspect of our business—from recruitment and promotion practices to employee development initiatives and supplier partnerships.
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We are dedicated to cultivating a workplace that embraces differences and ensures everyone feels valued, respected and empowered to contribute their unique perspectives. We are committed to creating and maintaining a workplace culture that is diverse, inclusive, and free from discrimination.
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Our financial benefits include annual bonuses and retirement plans, such as a 401(k), to help employees build long-term financial stability. We also utilize targeted equity-based grants with vesting conditions to support the retention of key personnel, aligning their success with the Company's growth.
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Along with competitive salaries and wages, our benefits programs (which may vary by country) include annual bonuses, retirement plans such as a 401(k) plan, healthcare and insurance benefits, health savings accounts partially funded by the Company, standard flexible spending accounts, personal legal services insurance, company-sponsored long and short term disability, accident and critical illness, paid time off, family leave, partially paid maternity and paternity leave, family care resources and employee assistance programs, among others.
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To promote health and wellness, we offer competitive healthcare and insurance options, including health savings accounts partially funded by the Company and standard flexible spending accounts. Employees also have access to company-sponsored long- and short-term disability coverage, accident and critical illness insurance, and resources to support overall well-being.
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We also offer tuition reimbursement in certain circumstances to support our employees’ continued growth and development. Additionally, we use targeted equity-based grants with vesting conditions to facilitate the retention of key personnel. Health and Safety.
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Recognizing the importance of work-life balance, we provide paid time off, family leave, and paid maternity and paternity leave. Our commitment to supporting families extends further with access to family care resources and personal legal services insurance. Additionally, employee assistance programs are available to help navigate personal and professional challenges.
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We also invest in our employees’ professional development by offering tuition reimbursement in certain circumstances, enabling continued growth and skill development. Through this holistic approach to compensation and benefits, we aim to create a supportive and empowering environment that fosters employee satisfaction, enhances retention, and ensures the long-term success of both our employees and the organization. Health and Safety.
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We monitor our Occupational Safety and Health Administration Total Recordable Incident Rate (“TRIR”) to assess our operation’s health and safety performance. TRIR is defined as the number of incidents per 100 full-time employees that have resulted in a recordable injury or illness in the pertinent period.
Added
Nutt Executive Vice President, Chief Financial Officer, and Treasurer William Marsh Executive Vice President, General Counsel and Corporate Secretary Information About Our Board of Directors Name Position Scott Bender Chief Executive Officer, Chairman of the Board and Director of Cactus, Inc. Joel Bender President and Director of Cactus, Inc.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

55 edited+8 added−6 removed135 unchanged
In addition to our U.S. operations, we have operations in, among other countries, China, Australia, Canada and the Middle East. Our operations outside of the United States require us to comply with numerous anti‑bribery and anti‑corruption regulations. The U.S. Foreign Corrupt Practices Act, among others, applies to us and our operations.
In addition to our U.S. operations, we have operations in, among other countries, China, Australia, Canada, Vietnam and the Middle East. Our operations outside of the United States require us to comply with numerous anti‑bribery and anti‑corruption regulations. The U.S. Foreign Corrupt Practices Act, among others, applies to us and our operations.
As we integrate FlexSteel into our operations, we may learn additional information about FlexSteel, such as unknown or contingent liabilities and issues relating to compliance with applicable laws, that could potentially have an adverse effect on our business, financial condition and results of operations.
As we continue to integrate FlexSteel into our operations, we may learn additional information about FlexSteel, such as unknown or contingent liabilities and issues relating to compliance with applicable laws, that could potentially have an adverse effect on our business, financial condition and results of operations.
The ongoing conflicts in Ukraine and the Middle East could have adverse effects on global macroeconomic conditions which could negatively impact our business and results of operations. The conflicts are highly unpredictable and have already resulted in volatility with oil and natural gas prices worldwide.
The ongoing conflicts in Ukraine and the Middle East could have adverse effects on global macroeconomic conditions which could negatively impact our business and results of operations. The conflicts are highly unpredictable and have resulted in volatility with oil and natural gas prices worldwide.
We also provide parts, repair services and field services associated with installation at all of our facilities and service centers in the United States and Australia, as well as at customer sites, including sites in the Middle East.
We also provide parts, repair services and field services associated with installation at all our facilities and service centers in the United States and Australia, as well as at customer sites, including sites in the Middle East.
In addition, the Texas Railroad Commission has overseen the development of well-operator-led response plans to reduce injection volumes in other portions of West Texas in order to reduce seismicity in these areas.
In addition, the Texas Railroad Commission has overseen the development of well-operator-led response plans to reduce injection volumes in other portions of West Texas to reduce seismicity in these areas.
For example, we intend to limit the number of unit holders of Cactus Companies, and the Cactus Companies LLC Agreement, which was entered into with Cactus LLC in connection with the closing of our IPO and amended as part of the CC Reorganization, provides for limitations on the ability of CC Unit Holders to transfer their CC Units and provides us, as managing member of Cactus Companies, with the right to impose restrictions (in addition to those already in place) on the ability of unit holders of 17 Table of Contents Cactus Companies to redeem their CC Units pursuant to the Redemption Right to the extent we believe it is necessary to ensure that Cactus Companies will continue to be treated as a partnership for U.S. federal income tax purposes.
For example, we intend to limit the number of unit holders of Cactus Companies, and the Cactus Companies LLC Agreement, which was entered into with Cactus LLC in connection with the closing of our IPO and amended as part of the CC Reorganization, provides for limitations on the ability of CC Unit Holders to transfer their CC Units and provides us, as managing member of Cactus Companies, with the right to impose restrictions (in addition to those already in place) on the ability of unit holders of Cactus Companies to redeem their CC Units pursuant to the Redemption Right to the extent we believe it is necessary to ensure that Cactus Companies will continue to be treated as a partnership for U.S. federal income tax purposes.
In addition, we import raw materials, semi‑finished goods, and finished products into, among other countries, the United States, China, Australia, Canada and the Middle East for use in such countries or for manufacturing and/or finishing for re‑export and import into another country for use or further integration into equipment or systems.
In addition, we import raw materials, semi‑finished goods, and finished products into, among other countries, the United States, China, Australia, Canada, Vietnam, India and the Middle East for use in such countries or for manufacturing and/or finishing for re‑export and import into another country for use or further integration into equipment or systems.
Risks inherent in our industry include the risks of equipment defects, installation errors, the presence of multiple contractors at the wellsite over which we have no control, vehicle accidents, fires, explosions, blowouts, surface cratering, uncontrollable flows of gas or well fluids, pipe or pipeline failures, abnormally pressured formations and various environmental hazards such as oil spills and releases of, and exposure to, hazardous substances.
Risks inherent in our industry include the risks of equipment defects, installation errors, the presence of multiple contractors at the wellsite over which we have no control, vehicle accidents, fires, explosions, blowouts, surface cratering, 12 Table of Contents uncontrollable flows of gas or well fluids, pipe or pipeline failures, abnormally pressured formations and various environmental hazards such as oil spills and releases of, and exposure to, hazardous substances.
If we are not able to employ and retain skilled workers, our ability to respond quickly to customer demands or strong market conditions may inhibit our growth, which could have a material adverse effect on our business, results of operations and cash flows. Our business is dependent on the continuing services of certain of our key managers and employees.
If we are not able to employ and retain skilled workers, our ability to respond quickly to customer demands or strong market conditions may inhibit our growth, which could have a material adverse effect on our business, results of operations and cash flows. 10 Table of Contents Our business is dependent on the continuing services of certain of our key managers and employees.
Most movement of raw materials, semi‑finished or finished products involves imports and exports. As a result, compliance with multiple trade sanctions, embargoes and import/export laws and regulations pose a constant challenge and risk to us since a portion of our business is conducted outside of the United States through our subsidiaries.
Most movement of raw materials, semi‑finished or finished products involves imports and exports. As a result, compliance with multiple trade sanctions, embargoes and import/export laws and regulations pose an ongoing challenge and risk to us since a portion of our business is conducted outside of the United States through our subsidiaries.
State or federal initiatives to incentivize a shift away from fossil fuels could also reduce demand for hydrocarbons. For example, the Inflation Reduction Act appropriates significant federal funding for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions.
State or federal initiatives to incentivize a shift away from fossil fuels could also reduce demand for hydrocarbons. For example, the Inflation Reduction Act appropriates significant federal 14 Table of Contents funding for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions.
Outbreaks of other pandemics or contagious diseases may in the future disrupt our operations, suppliers or facilities, result in increased costs for certain goods or otherwise impact us in a manner similar to the COVID-19 pandemic. 14 Table of Contents The ongoing conflicts in various parts of the world may adversely affect our business and results of operations.
Outbreaks of other pandemics or contagious diseases may in the future disrupt our operations, suppliers or facilities, result in increased costs for certain goods or otherwise impact us in a manner similar to the COVID-19 pandemic. The ongoing conflicts in various parts of the world may adversely affect our business and results of operations.
These laws and regulations, as well as the adoption of other new laws and regulations affecting our operations or the exploration and production and transportation of crude oil and natural gas by our customers, could adversely affect our business and operating results by increasing our costs of compliance, increasing the costs of compliance and costs of doing business for our customers, limiting the demand for our products and services or restricting our operations.
These laws and regulations, as well as the 13 Table of Contents adoption of other new laws and regulations affecting our operations or the exploration, production and transportation of crude oil and natural gas by our customers, could adversely affect our business and operating results by increasing our costs of compliance, increasing the costs of compliance and costs of doing business for our customers, limiting the demand for our products and services or restricting our operations.
Such oilfield anti-indemnity acts may restrict or void a party’s indemnification of us, which could have a material adverse effect on our business, results of operations and cash flows. 12 Table of Contents Our operations require us to comply with various domestic and international regulations, violations of which could have a material adverse effect on our results of operations, financial condition and cash flows.
Such oilfield anti-indemnity acts may restrict or void a party’s indemnification of us, which could have a material adverse effect on our business, results of operations and cash flows. Our operations require us to comply with various domestic and international regulations, violations of which could have a material adverse effect on our results of operations, financial condition and cash flows.
Any significant future increase in overall market capacity for the products, rental equipment or services that we offer could adversely affect our business, results of operations and cash flows. New technology may cause us to become less competitive.
Any significant future increase in overall market capacity for the products, rental equipment or services that we offer could adversely affect our business, results of operations and cash flows. 11 Table of Contents New technology may cause us to become less competitive.
Instability and unforeseen changes in any of the markets in which we conduct business could have an adverse effect on the demand for, or supply of, our business, results of operations and cash flows. 10 Table of Contents We are dependent on a relatively small number of customers in a single industry.
Instability and unforeseen changes in any of the markets in which we conduct business could have an adverse effect on the demand for, or supply of, our business, results of operations and cash flows. We are dependent on a relatively small number of customers in a single industry.
In addition, new laws and regulations governing data privacy, cybersecurity, and the unauthorized disclosure of confidential information pose increasingly complex compliance challenges and potentially elevate costs, and any failure to comply with these laws and regulations could result in significant penalties and legal liability.
In addition, new laws and 19 Table of Contents regulations governing data privacy, cybersecurity, and the unauthorized disclosure of confidential information pose increasingly complex compliance challenges and potentially elevate costs, and any failure to comply with these laws and regulations could result in significant penalties and legal liability.
Demand for our products and services depends primarily upon the general level of activity in the oil and gas industry, including the number of drilling rigs in operation, the number of oil and gas wells being drilled, the depth, lateral length and 9 Table of Contents drilling conditions of these wells, the volume of production, the number of well completions and the level of well remediation activity, the number of wells put into production and the corresponding capital spending by oil and gas companies.
Demand for our products and services depends primarily upon the general level of activity in the oil and gas industry, including the number of drilling rigs in operation, the number of oil and gas wells being drilled, the depth, lateral length and drilling conditions of these wells, the volume of production, the number of well completions and the level of well remediation activity, the number of wells put into production and the corresponding capital spending by oil and gas exploration and production companies.
Finally, increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that could have 13 Table of Contents significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events; if such effects were to occur, they could have an adverse impact on our operations.
Finally, increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that could have significant physical effects, such as increased frequency and severity of storms, droughts, floods, wildfires and other climatic events; if such effects were to occur, they could have an adverse impact on our operations.
Holders of Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law or our amended and restated certificate of incorporation. Cactus WH Enterprises owned approximately 16% of our voting power as of December 31, 2023.
Holders of Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law or our amended and restated certificate of incorporation. Cactus WH Enterprises owned approximately 13% of our voting power as of December 31, 2024.
Risks Related to the FlexSteel acquisition We may not realize the anticipated benefits from the FlexSteel acquisition, and it could adversely impact our business and our operating results.
Risks Related to the FlexSteel Business We may not realize the anticipated benefits from the FlexSteel acquisition, and failure to realize the anticipated benefits could adversely impact our business and our operating results.
For example, we or our products may be affected by such laws as the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Clean Water Act, the Clean Air Act and the Occupational Safety and Health Act of 1970.
For example, we may be affected by such laws as the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Clean Water Act, the Clean Air Act and the Occupational Safety and Health Act of 1970.
The COVID-19 pandemic negatively affected our revenues and operations. We experienced, and if another pandemic was to occur, we may experience in the future, slowdowns or temporary idling of certain of our manufacturing and service facilities due to a number of factors, including implementing additional safety measures, testing of our team members, team member absenteeism and governmental orders.
We experienced, and if another pandemic was to occur, we may experience in the future, slowdowns or temporary idling of certain of our manufacturing and service facilities due to a number of factors, including implementing additional safety measures, testing of our team members, team member absenteeism and governmental orders.
The success of the Merger will depend in part on our ability to realize the anticipated business opportunities from combining the operations of FlexSteel with our business in an efficient and effective manner.
The ongoing success of the Merger will depend in part on our ability to realize all of the anticipated business opportunities from combining the operations of FlexSteel with our Pressure Control business in an efficient and effective manner.
In addition, some provisions of our amended and restated certificate of incorporation and amended and restated 15 Table of Contents bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our shareholders, including: • limitations on the removal of directors, including a classified board whereby only one-third of the directors are elected each year; • limitations on the ability of our shareholders to call special meetings; • establishing advance notice provisions for shareholder proposals and nominations for elections to the board of directors to be acted upon at meetings of shareholders; • providing that the board of directors is expressly authorized to adopt, or to alter or repeal our bylaws; and • establishing advance notice and certain information requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by shareholders at shareholder meetings.
In addition, some provisions of our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our shareholders, including: • limitations on the removal of directors, including a classified board whereby only one-third of the directors are elected each year, which will be phased out between 2025 and 2027; • limitations on the ability of our shareholders to call special meetings; • providing that the board of directors is expressly authorized to adopt, or to alter or repeal our bylaws; and • establishing advance notice and certain information requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by shareholders at shareholder meetings.
If we fail to achieve some or all of the benefits expected to result from the acquisition, or if such benefits are delayed, our business could be harmed. FlexSteel’s operations are subject to many of the same risks as our historical operations.
If we fail to achieve some or all of the benefits expected to result from the acquisition, or if such benefits are delayed, our business could be impacted. FlexSteel’s operations are subject to many of the same risks as the Pressure Control operations.
To the extent that we are unable to make payments under the TRA for any reason, such payments will be deferred and will accrue interest until paid.
To the 15 Table of Contents extent that we are unable to make payments under the TRA for any reason, such payments will be deferred and will accrue interest until paid.
If we elect to terminate the TRA early or it is terminated early due to Cactus Inc.’s failure to honor a material obligation thereunder or due to certain mergers or other changes of control, our obligations under the TRA would accelerate and we would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by us under the TRA (determined by applying a discount rate equivalent to the former one-year LIBOR) and such payment is expected to be substantial.
If we elect to terminate the TRA early or it is terminated early due to Cactus Inc.’s failure to honor a material obligation thereunder or due to certain mergers or other changes of control, our obligations under the TRA would accelerate and we would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by us under the TRA (determined by applying a discount rate equivalent to the 30-day SOFR plus 0.715%) and such payment is expected to be substantial.
The CC Unit Holders own all outstanding shares of our Class B common stock, representing approximately 18% of our total outstanding common stock.
The CC Unit Holders own all outstanding shares of our Class B common stock, representing approximately 14.4% of our total outstanding common stock.
The results or costs of any such litigation may have an adverse effect on our business, results of operations and financial condition. Any litigation concerning intellectual property could be protracted and costly, is inherently unpredictable and could have an adverse effect on our business, regardless of its outcome. Item 1B. Unresolved Staff Comments None.
The results or costs of any such litigation may have an adverse effect on our business, results of operations and financial condition. Any litigation concerning intellectual property could be protracted and costly, is inherently unpredictable and could have an adverse effect on our business, regardless of its outcome.
The Inflation Reduction Act amends the federal Clean Air Act to impose a fee on the emission of methane from sources required to report their GHG emissions to the EPA, including those sources in the onshore petroleum and natural gas production categories.
The Inflation Reduction Act amends the federal Clean Air Act to impose a fee on the emission of methane from sources required to report their GHG emissions to the EPA, including those sources in the onshore petroleum and natural gas production categories, the rule for which was finalized in November 2024.
The DGCL allows a corporation to pay dividends only out of a surplus, as determined under Delaware law or, if there is no surplus, out of net profits for the fiscal year in which the dividend was declared and for the preceding fiscal year.
We are incorporated in Delaware and are governed by the Delaware General Corporation Law (“DGCL”). The DGCL allows a corporation to pay dividends only out of a surplus, as determined under Delaware law or, if there is no surplus, out of net profits for the fiscal year in which the dividend was declared and for the preceding fiscal year.
We may not be able to achieve the full potential strategic and financial benefits that we expect to achieve from the acquisition of the FlexSteel business, or such benefits may be delayed or not occur at all.
We may not be able to achieve the full potential strategic and financial benefits that were expected to be achieved at the time of the acquisition of the FlexSteel business, or such benefits may be delayed or not occur at all.
Permitting, authorization or renewal delays, the inability to obtain new permits or the revocation of current permits could impact our customers’ operations and cause a loss of revenue and potentially have a material adverse effect on our business, results of operations and cash flows. Competition within the oilfield services industry may adversely affect our ability to market our services.
Permitting, authorization or renewal delays, the inability to obtain new permits or the revocation of current permits could impact our customers’ operations and cause a loss of revenue and potentially have a material adverse effect on our business, results of operations and cash flows.
The integration process could take longer than anticipated and could result in the distraction of management, the loss of key employees from either company, the disruption of each company’s ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, employees or other third parties, or our ability to achieve the anticipated benefits of the FlexSteel acquisition, and could harm our financial performance.
The integration process could take longer than anticipated and could result in the distraction of management, the loss of key employees from either company, the disruption of each company’s ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, employees or other third parties, or our ability to achieve the anticipated benefits of the FlexSteel acquisition, and could harm our financial performance. 18 Table of Contents FlexSteel may have liabilities that are not known to us and the indemnities negotiated in the Merger Agreement may not offer adequate protection.
Among other things, the conflicts in Ukraine and 11 Table of Contents the Middle East may result in longer transit times, higher costs and reduced availability of raw materials and components used in our wide variety of products and systems.
Among other things, the conflicts in Ukraine and the Middle East may result in longer transit times, higher costs and reduced availability of raw materials and components used in our wide variety of products and systems. Further union port labor related disruptions could also result in increased transit times and costs.
To provide for coverage against certain breaches by the sellers of their representations and warranties and certain pre-closing taxes of FlexSteel, we have obtained a representation and warranty insurance policy.
To provide for coverage against certain breaches by the sellers of their representations and warranties and certain pre-closing taxes of FlexSteel, we obtained a representation and warranty insurance policy. The policy is subject to a retention amount, exclusions, policy limits and certain other customary terms and conditions.
These developments could further accelerate the transition of the U.S. economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which would reduce demand for our products and services and negatively impact our business. The global outbreak of COVID-19 had, and similar pandemics in the future may have, an adverse impact on our business and operations.
These developments could further accelerate the transition of the U.S. economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which would reduce demand for our products and services and negatively impact our business.
Many contracts are awarded on a bid basis, which may further increase competition based primarily on price. In addition, adverse market conditions lower demand for well servicing equipment, which results in excess equipment and lower utilization rates. If market conditions deteriorate or if adverse market conditions persist, the prices we are able to charge and utilization rates may decline.
In addition, adverse market conditions reduce demand for well servicing equipment, which results in excess equipment and lower utilization rates. If market conditions deteriorate or if adverse market conditions persist, the prices we are able to charge and utilization rates may decline.
The oilfield services industry is highly competitive and fragmented and includes numerous companies capable of competing effectively in our markets, including several large companies that possess substantially greater financial and other resources than we do. The amount of equipment available may exceed demand, which could result in active price competition.
Competition within the oilfield services industry may adversely affect our ability to market our services. The oilfield services industry is highly competitive and fragmented and includes numerous companies capable of competing effectively in our markets, including several large companies that possess substantially greater financial and other resources than we do.
Payments under the TRA commenced in 2019, and in the event that the TRA is not terminated, the payments under the TRA are anticipated to continue for approximately 20 years after the date of the last redemption of CC Units. 16 Table of Contents The payment obligations under the TRA are our obligations and not obligations of Cactus Companies, and we expect that the payments we will be required to make under the TRA will be substantial.
Payments under the TRA commenced in 2019, and in the event that the TRA is not terminated, the payments under the TRA are anticipated to continue for approximately 20 years after the date of the last redemption of CC Units.
We may also have not correctly assessed the significance of certain FlexSteel liabilities identified in the course of our due diligence. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.
Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.
The effects of these developments or other initiatives to reform the federal leasing process could result in additional restrictions or limitations on the issuance of federal leases and permits for drilling on public lands. In addition, the Biden administration has indicated it is delaying consideration of new natural gas export terminals in the United States.
The effects of these developments or other initiatives to reform the federal leasing process could result in additional restrictions or limitations on the issuance of federal leases and permits for drilling on public lands.
Increased regulation and attention given to the hydraulic fracturing process could lead to greater opposition to oil and gas production activities using hydraulic fracturing techniques. Since 2021, the Texas Railroad Commission, which regulates the state’s oil and gas industry, has suspended the use of deep wastewater disposal wells in certain areas of four oil-producing counties in West Texas.
Since 2021, the Texas Railroad Commission, which regulates the state’s oil and gas industry, has suspended the use of deep wastewater disposal wells in certain areas of four oil-producing counties in West Texas.
FlexSteel may have liabilities that are not known to us and the indemnities negotiated in the Merger Agreement may not offer adequate protection. As part of the Merger, we have assumed certain liabilities of FlexSteel. There may be liabilities that we failed or were unable to discover in the course of performing due diligence investigations into FlexSteel.
As part of the Merger, we assumed certain liabilities of FlexSteel. There may be liabilities that we failed to identify or we were unable to discover in the course of performing due diligence investigations into FlexSteel. We may also have not correctly assessed the significance of certain FlexSteel liabilities identified in the course of our due diligence.
Holders of our Class A common stock are entitled to receive only such dividends as our board of directors may declare out of funds legally available for such payments. We are incorporated in Delaware and are governed by the Delaware General Corporation Law (“DGCL”).
Holders of our Class A common stock may not receive dividends on their Class A common stock. Holders of our Class A common stock are entitled to receive only such dividends as our board of directors may declare out of funds legally available for such payments.
Sales of substantial amounts of our Class A common stock (including shares issued in connection with an acquisition) or secondary offerings, or the perception that such sales could occur, may adversely affect prevailing market prices of our Class A common stock.
We cannot predict the size of future issuances of our Class A common stock or securities convertible into Class A common stock or the effect, if any, that future issuances and sales of shares of our Class A common stock will have on the market price of our Class A common stock. 16 Table of Contents Sales of substantial amounts of our Class A common stock (including shares issued in connection with an acquisition) or secondary offerings, or the perception that such sales could occur, may adversely affect prevailing market prices of our Class A common stock.
These concerns have led to several regulatory and governmental initiatives in the United States to restrict the hydraulic fracturing process, which could have an adverse impact on our customers’ completions or production activities. Although we do not conduct hydraulic fracturing, our products are used in hydraulic fracturing.
Environmental concerns have been raised regarding the potential impact of hydraulic fracturing on underground water supplies and seismic activity. These concerns have led to several regulatory and governmental initiatives in the United States to restrict the hydraulic fracturing process, which could have an adverse impact on our customers’ completions or production activities.
The policy is subject to a retention amount, exclusions, policy limits and certain other customary terms and conditions. 18 Table of Contents General Risks A failure of our information technology infrastructure and cyberattacks could adversely impact us. We depend on our information technology (“IT”) systems for the efficient operation of our business.
General Risks A failure of our information technology infrastructure and cyberattacks could adversely impact us. We depend on our information technology (“IT”) systems for the efficient operation of our business.
Additionally, we may issue additional shares of Class A common stock or convertible securities in subsequent public offerings. We had 65,322,730 outstanding shares of Class A common stock and 14,033,979 outstanding shares of Class B common stock as of February 27, 2024.
Additionally, we may issue additional shares of Class A common stock or convertible securities in subsequent public offerings. We had 68,151,542 outstanding shares of Class A common stock and 11,432,545 outstanding shares of Class B common stock as of February 25, 2025.
There can be no assurance that we will be able to finance our obligations under the TRA. Payments under the TRA are based on the tax reporting positions that we will determine.
The foregoing number is merely an estimate and the actual payment could differ materially. There can be no assurance that we will be able to finance our obligations under the TRA. 17 Table of Contents Payments under the TRA are based on the tax reporting positions that we will determine.
Increased costs, or lack of availability, of raw materials and other components may result in increased operating expenses and adversely affect our results of operations and cash flows. Our ability to source and transport low cost raw materials and components, such as steel, tube and bar stock, forgings and machined components is critical to our ability to successfully compete.
Our ability to source and transport low-cost raw materials and components, such as steel, tube and bar stock, forgings and machined components is critical to our ability to successfully compete.
Estimating the amount and timing of payments that may become due under the TRA Agreement is by its nature imprecise.
The payment obligations under the TRA are our obligations and not obligations of Cactus Companies, and we expect that the payments we will be required to make under the TRA will be substantial. Estimating the amount and timing of payments that may become due under the TRA Agreement is by its nature imprecise.
As noted above, we are also subject to the possibility of cyber-attacks, which themselves may result in a violation of these laws.
As noted above, we are also subject to the possibility of cyber-attacks, which themselves may result in a violation of these laws. Finally, if we acquire a company that has violated or is not in compliance with applicable data protection laws, we may incur significant liabilities and penalties as a result.
If the TRA were terminated as of December 31, 2023, the estimated termination payments, based on the assumptions discussed above, would have been approximately $256.8 million (calculated using a discount rate equivalent to the former one-year LIBOR, applied against an undiscounted liability of approximately $397.0 million). The foregoing number is merely an estimate and the actual payment could differ materially.
If the TRA were terminated as of December 31, 2024, the estimated termination payments, based on the assumptions discussed above, would have been approximately $273.7 million (calculated using a discount rate equal to the 12-month term SOFR published by CME Group Benchmark Administration Limited, plus 71.513 basis points, applied against an undiscounted liability of approximately $406.5 million).
Removed
During the fourth quarter of 2023, our Chief Financial Officer (“CFO”) assumed responsibility for the Chief Executive Officer position in our Spoolable Technologies operating segment (the FlexSteel business) and was replaced with an interim CFO. While the Company intends to appoint a new CFO during 2024, the changes in executive leadership could cause disruption to our business operations.
Added
In January 2025, however, President Trump signed an executive order directing federal executive departments and agencies to initiate a regulatory freeze for certain rules that have not taken effect, pending review by the newly appointed agency head, identify and exercise emergency authorities to facilitate conventional energy production, transportation, and refining, and mandate a review of existing regulations that may burden domestic energy development.
Removed
Many of our customers utilize hydraulic fracturing in their operations. Environmental concerns have been raised regarding the potential impact of hydraulic fracturing on underground water supplies and seismic activity.
Added
Consolidation of our competitors and the entry of new competitors could result in a further increase in competition. The amount of equipment available may exceed demand, which could result in active price competition. Many contracts are awarded on a bid basis, which may further increase competition based primarily on price.
Removed
We cannot predict the size of future issuances of our Class A common stock or securities convertible into Class A common stock or the effect, if any, that future issuances and sales of shares of our Class A common stock will have on the market price of our Class A common stock.
Added
Increased costs, increased transit times, increased tariffs, or lack of availability, of raw materials and other components may result in increased operating expenses and adversely affect our results of operations and cash flows.
Removed
In addition, the recent transition to new leadership in the FlexSteel business could delay or hinder our ability to achieve the anticipated benefits of the acquisition.
Added
Transit times through and availability of the Panama Canal may be impacted by weather patterns and political tensions among the US, Panama and China. In the United States, the Trump administration has indicated that it may increase existing tariffs or implement new tariffs that may result in increased costs and inflation impacting the cost of other raw materials.
Removed
If we are unable to successfully or timely integrate the operations of FlexSteel with our business, we may incur unanticipated liabilities and be unable to realize the revenue growth and other anticipated benefits resulting from the acquisition, and our business, results of operations and financial condition could be materially and adversely affected.
Added
Although the Trump Administration has signaled a shift in federal climate policy, state and local climate and energy initiatives may continue, and future presidential administrations may pursue executive orders similar to, or more restrictive than, those put in place by President Biden. Many of our customers utilize hydraulic fracturing in their operations.
Removed
Finally, if we acquire a company that has violated or is not in compliance with applicable data protection laws, we may incur significant liabilities and penalties as a result. 19 Table of Contents Holders of our Class A common stock may not receive dividends on their Class A common stock.
Added
Although we do not conduct hydraulic fracturing, our products are used in hydraulic fracturing. Increased regulation and attention given to the hydraulic fracturing process could lead to greater opposition to oil and gas production activities using hydraulic fracturing techniques.
Added
In January 2025, however, President Trump signed executive orders that, among other things, direct federal executive departments and agencies to initiate a regulatory freeze for certain rules that have not taken effect, pending review by the newly appointed agency head, call upon the EPA to submit a report on the continuing applicability of its endangerment finding for GHGs under the Clean Air Act and issue guidance on the “social cost of carbon” to consider whether such metric should be eliminated, and pause the disbursement of funds appropriated through the IRA and the Infrastructure Investments and Jobs Act.
Added
However, future presidential administrations may pursue executive orders that increase the amount of regulation. The global outbreak of COVID-19 had, and similar pandemics in the future may have, an adverse impact on our business and operations. The COVID-19 pandemic negatively affected our revenues and operations.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Prior to joining the Company, he had over 20 years’ experience in oversight of Information Technology systems including ERP systems, infrastructure, and networking. Monitoring Cybersecurity Risks and Incidents Our Director of IT Infrastructure and Cybersecurity meets regularly with members of our executive team to discuss and review risks related to cybersecurity.
Prior to joining the Company, he had over 20 years’ experience in oversight of Information Technology systems including ERP systems, infrastructure, and networking. Monitoring Cybersecurity Risks and Incidents Our Director of IT Cybersecurity and Networking meets regularly with members of our executive team to discuss and review risks related to cybersecurity.
We depend on various controls, policies, procedures and programs (“Risk Controls”) to manage our risks, including risks associated with our information systems. Risks and Risk Controls are included as part of our annual enterprise risk management (“ERM”) program. Our risk controls include our administrative, physical, and technical controls (“Cyber Risk Controls”).
We depend on various controls, policies, procedures and programs (“Risk Controls”) to manage our risks, including risks associated with our information systems. Risks Assessment and Risk Controls are included as part of our annual enterprise risk management (“ERM”) program. Our risk controls include our administrative, physical, and technical controls (“Cyber Risk Controls”).
We also rely on third-party business associates, with whom we may share data and services, to defend their digital technologies and services against attack. Managing Material Risks & Integrated Overall Risk Management We attempt to integrate cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cyber risk awareness.
We also rely on third-party business associates, with whom we may share data and services, to defend their digital technologies and services against attack. Managing Material Risks & Integrated Overall Risk Management We have integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cyber risk awareness.
Risk Management Personnel Our Director of IT Infrastructure and Cybersecurity has direct responsibility for assessing, monitoring and managing risks related to cybersecurity threats in conjunction with the Vice President of Information Technology. Third party experts and/or consultants are retained to help identify, assess and monitor cybersecurity incidents and related risks.
Risk Management Personnel Our Director of Cybersecurity and Networking has direct responsibility for assessing, monitoring and managing risks related to cybersecurity threats in conjunction with the Vice President of Information Technology. Third party experts and/or consultants are retained to help identify, assess and monitor cybersecurity incidents and related risks.
Our Director of IT Infrastructure and Cybersecurity has been in that position with the Company since 2019 and, including prior experience, has over 12 years’ experience in managing IT infrastructure, architecture and security. Our Vice President of Information Technology has been with the Company in his current position and similar roles since its inception in 2011.
Our Director of Cybersecurity and Networking has been in that position with the Company since 2019 and, including prior experience, has over 13 years’ experience in managing IT infrastructure, architecture and security. Our Vice President of Information Technology has been with the Company in his current position and similar roles since its inception in 2011.
The reviews may include evaluations of risks and incidents identified by third-party providers retained to review our cyber risk as well as cybersecurity threat scenario planning. Identified risks related to cybersecurity threats may also be analyzed as part of our ERM process.
The reviews may include evaluations of risks and incidents identified by third-party providers retained to review our cyber risk as well as cybersecurity threat scenario planning.
Engaging Third Parties on Risk Management We collaborate with our clients, vendors and other third parties to develop information systems and protect against cybersecurity threats.
Engaging Third Parties on Risk Management We collaborate with our clients, vendors and other third parties to develop information systems and protect against cybersecurity threats. We engage third-party security experts for risk assessments and program enhancements.
Board of Director Oversight Our Audit Committee is responsible for oversight of our programs and procedures related to cybersecurity risk. Management provides periodic reports to the Audit Committee on cybersecurity risk. The Audit Committee reports significant findings from these reports to the full Board of Directors. 21 Table of Contents
Identified risks related to cybersecurity threats may also be analyzed as part of our ERM process. 21 Table of Contents Board of Director Oversight Our Audit Committee is responsible for oversight of our programs and procedures related to cybersecurity risk. Management provides periodic reports to the Audit Committee on cybersecurity risk.
We engage third-party security experts for risk assessments and program enhancements. 20 Table of Contents Managing Third Party Risk There are risks associated with the use of vendors, service providers and other third parties that provide information system services to us, process information on our behalf, or have access to our information.
Managing Third Party Risk There are risks associated with the use of vendors, service providers and other third parties that provide information system services to us, process information on our behalf, or have access to our information. We evaluate third-party service providers’ cybersecurity posture and seek to mitigate risk through contractual safeguards, monitoring, and incident response plans.
Removed
We evaluate third-party service providers’ cybersecurity posture and seek to mitigate risk through contractual safeguards, monitoring, and incident response plans.
Added
The Audit Committee reports significant findings from these reports to the full Board of Directors.

Item 2. Properties

Properties — owned and leased real estate

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Location Type Operating Segment Own/ Lease United States Baytown, TX Manufacturing Facility, Service Center and Land Spoolable Technologies Own Bossier City, LA (1) Manufacturing Facility and Service Center Pressure Control Lease Bossier City, LA (1) Manufacturing and Assembly Facilities, Warehouse and Land Pressure Control Own Donora, PA Service Center Pressure Control Lease DuBois, PA (2) Service Center Pressure Control Lease Hobbs, NM Service Center / Land Pressure Control Own Hobbs, NM Service Center Spoolable Technologies Lease Houston, TX Administrative Headquarters N/A (3) Lease New Waverly, TX Service Center / Land Pressure Control Own Odessa, TX Service Center / Land Pressure Control Own Oklahoma City, OK Service Center Pressure Control Lease Pleasanton, TX Service Center Spoolable Technologies Own Pleasanton, TX (2) Service Center Pressure Control Lease Williston, ND (2) Service Center Pressure Control Lease China and Australia Queensland, Australia Service Centers and Offices / Land Pressure Control Lease Suzhou, China Production Facility and Offices Pressure Control Lease (1) Consists of various facilities adjacent to each other constituting our manufacturing facility, test and assembly facility, warehouse and service center.
Location Type Operating Segment Own/ Lease United States Baytown, TX Manufacturing Facility, Service Center and Land Spoolable Technologies Own Bossier City, LA (1) Manufacturing Facility and Service Center Pressure Control Lease Bossier City, LA (1) Manufacturing and Assembly Facilities, Warehouse and Land Pressure Control Own Donora, PA Service Center Pressure Control Lease DuBois, PA (2) Service Center Pressure Control Lease Hobbs, NM Service Center / Land Pressure Control Own Hobbs, NM Service Center Spoolable Technologies Lease Houston, TX Administrative Headquarters N/A (3) Lease New Waverly, TX Service Center / Land Pressure Control Own Odessa, TX Service Center / Land Pressure Control Own Oklahoma City, OK Service Center Pressure Control Lease Pleasanton, TX Service Center Spoolable Technologies Own Pleasanton, TX (2) Service Center Pressure Control Lease Williston, ND (2) Service Center Pressure Control Lease International Queensland, Australia Service Centers and Offices / Land Pressure Control Lease Suzhou, China Production Facility and Offices Pressure Control Lease Hai Duong, Vietnam Production Facility and Offices Pressure Control Lease (1) Consists of various facilities adjacent to each other constituting our manufacturing facility, test and assembly facility, warehouse and service center.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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In the opinion of our management, there is no pending litigation, dispute or claim against us that, if decided adversely, will have a material adverse effect on our results of operations, financial condition or cash flows. Item 4. Mine Safety Disclosures Not applicable. PART II
In the opinion of our management, there is no pending litigation, dispute or claim against us that, if decided adversely, will have a material adverse effect on our results of operations, financial condition or cash flows. Item 4. Mine Safety Disclosures Not applicable. 22 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The following graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Cactus Inc. specifically incorporates it by reference into such filing. 23 Table of Contents Issuer Purchases of Equity Securities The following sets forth information with respect to our repurchase of Class A common stock during the three months ended December 31, 2023 (in whole shares).
The following graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Cactus Inc. specifically incorporates it by reference into such filing. 23 Table of Contents Issuer Purchases of Equity Securities The following sets forth information with respect to our repurchase of Class A common stock during the three months ended December 31, 2024 (in whole shares).
The total shareholder return assumes $100 was invested on December 31, 2018 in Cactus Inc., the S&P 500 Index, the S&P Oil and Gas Equipment Select Industry Index and the PHLX Oil Service Index. It also assumes reinvestment of all dividends.
The total shareholder return assumes $100 was invested on December 31, 2019 in Cactus Inc., the S&P 500 Index, the S&P Oil and Gas Equipment Select Industry Index and the PHLX Oil Service Index. It also assumes reinvestment of all dividends.
We have paid quarterly dividends uninterrupted since initiation of the cash dividend program and the approved dividend per share amount has increased from the initial amount of $0.09 per share to the current amount of $0.12 per share of Class A common stock.
We have paid quarterly dividends uninterrupted since initiation of the cash dividend program and the approved dividend per share amount has increased from the initial amount of $0.09 per share to the current amount of $0.13 per share of Class A common stock.
Federal excise tax on certain repurchases of stock by publicly traded U.S. corporations after December 31, 2022. Accordingly, this new excise tax applies to our share repurchase program. In 2023, issuances of shares exceeded share repurchases and, as such, there was no excise tax.
Federal excise tax on certain repurchases of stock by publicly traded U.S. corporations after December 31, 2022. Accordingly, this new excise tax applies to our share repurchase program. For the years ended December 31, 2024 and 2023, issuances of shares exceeded share repurchases and, as such, there was no excise tax.
In fiscal year 2023, the annual dividend rate for our Class A common stock was $0.46 per share compared to $0.44 per share in fiscal year 2022 and $0.38 per share in fiscal year 2021.
In fiscal year 2024, the annual dividend rate for our Class A common stock was $0.50 per share compared to $0.46 per share in fiscal year 2023 and $0.44 per share in fiscal year 2022.
Dividends We have paid a regular quarterly cash dividend on our Class A common stock as approved by our board of directors since December 2019.
As of December 31, 2024, there were five holders of record of our Class B common stock. Dividends We have paid a regular quarterly cash dividend on our Class A common stock as approved by our board of directors since December 2019.
(2) In June 2023, our board of directors authorized the Company to repurchase shares of its Class A common stock for an aggregate purchase price of up to $150 million. Purchases were made under terms intended to qualify for exemption under Rules 10b-18 and 10b5-1. Item 6. (Reserved)
(2) Average price paid for Class A common stock purchased from employees to satisfy tax withholding obligations related to restricted stock units that vested during the period. (3) In June 2023, our board of directors authorized the Company to repurchase shares of its Class A common stock for an aggregate purchase price of up to $150 million. Item 6.
Period Total number of shares purchased Weighted-average price paid per share (1) Total number of shares purchased as part of publicly announced plans or programs (2) Maximum dollar value of shares that may yet be purchased under the plans or programs (2) October 1-31, 2023 — $ — — $ — November 1-30, 2023 11,638 $ 41.30 — $ — December 1-31, 2023 4,225 $ 39.87 4,225 $ 149,672,535 Total 15,863 $ 40.92 4,225 $ 149,672,535 (1) The average price paid per share of $40.92 was calculated excluding commissions.
Period Total number of shares purchased (1) Weighted-average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs (3) Maximum dollar value of shares that may yet be purchased under the plans or programs (3) October 1-31, 2024 172 $ 60.07 — $ 146,302,153 November 1-30, 2024 — $ — — $ 146,302,153 December 1-31, 2024 — $ — — $ 146,302,153 Total 172 $ 60.07 — $ — (1) Consists of shares of Class A common stock repurchased from employees to satisfy tax withholding obligations related to restricted stock units that vested during the period.
Removed
As of December 31, 2023, there were two holders of record of our Class A common stock. This number excludes owners for whom Class A 22 Table of Contents common stock may be held in “street name.” As of December 31, 2023, there were five holders of record of our Class B common stock.
Added
As of December 31, 2024, there was one holder of record of our Class A common stock. The foregoing does not include the number of shareholders whose shares are nominally held by banks, brokerage houses or other institutions, but includes all such institutions as one record holder.
Removed
Included below are 4,225 shares purchased in the open market pursuant to a share repurchase program and 11,638 shares repurchased from employees to satisfy tax withholding obligations related to restricted stock units that vested during the period.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Cash Flows Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2023 2022 (in thousands) Net cash provided by operating activities $ 340,280 $ 117,884 Net cash used in investing activities (654,793) (25,536) Net cash provided by (used in) financing activities 103,275 (47,382) Net cash provided by operating activities was $340.3 million in 2023 compared to $117.9 million in 2022.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2023 2022 (in thousands) Net cash provided by operating activities $ 340,280 $ 117,884 Net cash used in investing activities (654,793) (25,536) Net cash provided by (used in) financing activities 103,275 (47,382) Net cash provided by operating activities was $340.3 million in 2023 compared to $117.9 million in 2022.
We support our field service operations through service centers and pipe yards located in oil and gas regions throughout the United States and Western Canada. Our manufacturing facility is located in Baytown, Texas.
We support our field service operations through service centers and pipe yards located in oil and gas producing regions throughout the United States and Western Canada. Our manufacturing facility is located in Baytown, Texas.
We currently estimate our net capital expenditures for the year ending December 31, 2024 will range from $45 million to $55 million, mostly related to rental fleet investments including drilling tools, international expansion, diversification of our low cost supply chain, enhancements for our Baytown, TX manufacturing plant and additional deployment equipment to facilitate installation of recent product introductions.
We currently estimate our net capital expenditures for the year ending December 31, 2025 will range from $45 million to $55 million, mostly related to rental fleet investments including drilling tools, international expansion, diversification of our low cost supply chain, enhancements for our Baytown, TX manufacturing plant and additional deployment of equipment to facilitate installation of recent product introductions.
Oil and gas activity is in turn heavily influenced by, among other factors, investor sentiment, availability of capital and oil and gas prices locally and worldwide, which have historically been volatile. Revenues generated by our Pressure Control and Spoolable Technologies operating segments are derived from three sources: products, rentals, and field service and other.
Oil and gas exploration and production activity is in turn heavily influenced by, among other factors, investor sentiment, availability of capital and oil and gas prices locally and worldwide, which have historically been volatile. Revenues generated by our Pressure Control and Spoolable Technologies operating segments are derived from three sources: products, rentals, and field service and other.
The tax benefit is dependent upon future events and assumptions, the amount of the redeeming unit holders’ tax basis in its CC Units (formerly CW Units) at the time of the relevant redemption, the depreciation and amortization periods that apply to the increase in tax basis, the amount and timing of taxable income we generate in the future and the U.S. federal, state and local income tax rate then applicable, and the portion of Cactus Inc.’s payments under the TRA that constitute imputed interest or give rise to depreciable or amortizable tax basis.
The tax benefit is dependent upon future events and assumptions, the amount of the redeeming unit holders’ tax basis in its CC Units (formerly CW Units) at the time of the relevant redemption, the depreciation and amortization 33 Table of Contents periods that apply to the increase in tax basis, the amount and timing of taxable income we generate in the future and the U.S. federal, state and local income tax rate then applicable, and the portion of Cactus Inc.’s payments under the TRA that constitute imputed interest or give rise to depreciable or amortizable tax basis.
Long‑lived assets assessed for impairment are grouped at the lowest level for which identifiable cash flows are available, and a provision made where the cash flow is less than the carrying value of the asset. The estimation of future cash flows and fair value is highly subjective and inherently imprecise.
Long‑lived assets assessed for impairment are grouped at the lowest level for which identifiable cash flows are available, and a provision would be made where the cash flow is less than the carrying value of the asset. The estimation of future cash flows and fair value is highly subjective and inherently imprecise.
Our actual results may differ materially from those anticipated as discussed in these forward-looking statements as a result of a variety of risks and 24 Table of Contents uncertainties, including those described in “Cautionary Statement Regarding Forward-Looking Statements” and “Item 1A. Risk Factors” included elsewhere in this Annual Report, all of which are difficult to predict.
Our actual results may differ materially from those anticipated as discussed in these forward-looking statements as a result of a variety of risks and uncertainties, including those described in “Cautionary Statement Regarding Forward-Looking Statements” and “Item 1A. Risk Factors” included elsewhere in this Annual Report, all of which are difficult to predict.
Estimates can change materially from period to period based on many factors. Accordingly, if conditions change in the future, we may record impairment losses, which could be material to any particular reporting period. Goodwill Goodwill represents the excess of purchase price paid over the fair value of the net assets of acquired businesses.
Estimates can change materially from period to period based on many factors. Accordingly, if conditions change in the future, we may record impairment losses, which could be material to any particular reporting period. 32 Table of Contents Goodwill Goodwill represents the excess of purchase price paid over the fair value of the net assets of acquired businesses.
These increases in operating cash flows were slightly offset by $20.5 million of additional income tax payments, higher TRA payments of $15.2 million and $4.6 million of additional interest paid in 2023 compared to 2022. 30 Table of Contents Net cash used in investing activities was $654.8 million and $25.5 million for 2023 and 2022, respectively.
These increases in operating cash flows were slightly offset by $20.5 million of additional income tax payments, higher TRA payments of $15.2 million and $4.6 million of additional interest paid in 2023 compared to 2022. Net cash used in investing activities was $654.8 million and $25.5 million for 2023 and 2022, respectively.
The Company has recast the information for fiscal year 2022 and 2021 to align with the presentation for the year ended December 31, 2023. 26 Table of Contents Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table presents summary consolidated operating results for the periods indicated: Year Ended December 31, 2023 2022 $ Change % Change (in thousands) Revenues Pressure Control $ 756,727 $ 688,369 $ 68,358 9.9 % Spoolable Technologies 340,233 — 340,233 nm Total revenues 1,096,960 688,369 408,591 59.4 Operating income Pressure Control 236,934 202,650 34,284 16.9 Spoolable Technologies 62,172 — 62,172 nm Total segment operating income 299,106 202,650 96,456 47.6 Corporate and other expenses (34,740) (27,902) (6,838) 24.5 Total operating income 264,366 174,748 89,618 51.3 Interest income (expense), net (6,480) 3,714 (10,194) nm Other income (expense), net 4,490 (1,910) 6,400 nm Income before income taxes 262,376 176,552 85,824 48.6 Income tax expense 47,536 31,430 16,106 51.2 Net income $ 214,840 $ 145,122 $ 69,718 48.0 % Less: net income attributable to non-controlling interest 45,669 34,948 10,721 30.7 Net income attributable to Cactus Inc. $ 169,171 $ 110,174 $ 58,997 53.5 % nm = not meaningful Pressure Control.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table presents summary consolidated operating results for the periods indicated: Year Ended December 31, 2023 2022 $ Change % Change (in thousands) Revenues Pressure Control $ 756,727 $ 688,369 $ 68,358 9.9% Spoolable Technologies 340,233 — 340,233 — Total revenues 1,096,960 688,369 408,591 59.4 Operating income Pressure Control 236,934 202,650 34,284 16.9 Spoolable Technologies 62,172 — 62,172 — Total segment operating income 299,106 202,650 96,456 47.6 Corporate and other expenses (34,740) (27,902) (6,838) 24.5 Total operating income 264,366 174,748 89,618 51.3 Interest income (expense), net (6,480) 3,714 (10,194) nm Other income (expense), net 4,490 (1,910) 6,400 nm Income before income taxes 262,376 176,552 85,824 48.6 Income tax expense 47,536 31,430 16,106 51.2 Net income $ 214,840 $ 145,122 $ 69,718 48.0 Less: net income attributable to non-controlling interest 45,669 34,948 10,721 30.7 Net income attributable to Cactus Inc. $ 169,171 $ 110,174 $ 58,997 53.5% 28 Table of Contents nm = not meaningful Pressure Control.
Other movements in our investing activities were related to the increase in proceeds from sales of assets of approximately $2.6 million from 2022. Net cash provided by financing activities was $103.3 million for 2023 compared to net cash used in financing activities of $47.4 million for 2022.
Other movements in our investing activities were related to the increase in proceeds from sales of assets of approximately $2.6 million from 2022. 31 Table of Contents Net cash provided by financing activities was $103.3 million for 2023 compared to net cash used in financing activities of $47.4 million for 2022.
In 2022, the United States experienced the highest inflation in decades primarily due to supply-chain issues, a shortage of labor and a build-up of demand for goods and services. The most noticeable adverse impact to our business was increased costs associated with freight, materials, vehicle-related costs and personnel expenses. Most of our costs moderated in 2023 except for wages.
In 2022, the United States experienced the highest inflation in decades primarily due to supply-chain issues, a shortage of labor and a build-up of demand for goods and services. The most noticeable adverse impact to our business was increased costs associated with freight, materials, vehicle-related costs and personnel expenses.
Oil and Natural Gas Prices The following table summarizes average oil and natural gas prices in North America over the indicated periods as well as industry activity levels as reflected by the average number of active onshore drilling rigs during the same periods.
Recent Developments and Trends Oil and Natural Gas Prices The following table summarizes average oil and natural gas prices in North America over the indicated periods as well as industry activity levels as reflected by the average number of active onshore drilling rigs during the same periods.
In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning 32 Table of Contents strategies and results of recent operations.
In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and results of recent operations.
Rental and field service and other revenues are closely correlated with revenues from product sales, as items sold usually have an associated rental and service component. Seasonality Our business experiences some seasonality during the fourth quarter due to holidays and customers managing their budgets as the year closes out.
Rental and field service and other revenues are closely correlated with revenues from product sales, as items sold usually have an associated rental and service component. 25 Table of Contents Seasonality Our business experiences some seasonality during the fourth quarter due to holidays and customers managing their budgets as the year closes out.
Such estimates could be modified, as impairment could arise as a result of changes in supply and demand fundamentals, technological developments, new competitors with cost advantages and the cyclical nature of the oil and gas industry.
Such estimates could be modified, as impairment could arise as a result of changes in supply and demand fundamentals, technological developments, new competitors with disruptive technologies or cost advantages and the cyclical nature of the oil and gas industry.
For information concerning our future lease payments as of December 31, 2023, see Note 10 to our consolidated financial statements.
For information concerning our future lease payments as of December 31, 2024, see Note 10 to our consolidated financial statements.
We expect that our existing cash on hand, cash generated from operations and available borrowings under our Amended ABL Credit Facility will be sufficient for the next 12 months to meet our material cash requirements, including working capital requirements, debt service obligations, anticipated capital expenditures, lease obligations, repurchases of shares of our Class A common stock, expected TRA liability payments, possible earn-out payment associated with the FlexSteel acquisition, anticipated tax liabilities and dividends to holders of our Class A common stock as well as pro rata cash distributions to holders of CC Units other than Cactus Inc.
We expect that our existing cash on hand, cash generated from operations and available borrowings under our Amended ABL Credit Facility will be sufficient for the next 12 months to meet our material cash requirements, including working capital requirements, debt service obligations, anticipated capital expenditures, lease obligations, repurchases of shares of our Class A common stock, expected TRA liability payments, anticipated tax liabilities and dividends to holders of our Class A common stock as well as pro rata cash distributions to holders of CC Units other than Cactus Inc.
Under our share repurchase program, shares may be repurchased from time to time in open market transactions or block trades, in privately negotiated transactions or any other method permitted under U.S. securities laws, rules and regulations.
Under our share repurchase program, shares may be repurchased from time to 29 Table of Contents time in open market transactions or block trades, in privately negotiated transactions or any other method permitted under U.S. securities laws, rules and regulations.
Where appropriate, we have identified specific events and changes that affect comparability or trends and, where reasonably practicable, have quantified the impact of such items. Following the acquisition of FlexSteel, we have two operating segments consisting of the Pressure Control segment (legacy Cactus) and the Spoolable Technologies segment (FlexSteel).
Where appropriate, we have identified specific events and changes that affect comparability or trends and, where reasonably practicable, have quantified the impact of such items. We have two operating segments consisting of the Pressure Control segment and the Spoolable Technologies segment.
The repurchase program does not obligate the Company to purchase any particular amount of shares, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. At December 31, 2023, $149.7 million of Class A common stock could be repurchased under our share repurchase program.
The repurchase program does not obligate the Company to purchase any particular amount of shares, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. At December 31, 2024, $146.3 million of Class A common stock could be repurchased under our share repurchase program.
A 100 basis point decrease/increase in the blended tax rate used would decrease/increase the TRA liability recorded at December 31, 2023 by approximately $14.7 million. Recent Accounting Pronouncements See Note 2 of the notes to the Consolidated Financial Statements for discussion of recent accounting pronouncements.
A 100 basis point decrease/increase in the blended tax rate used would decrease/increase the TRA liability recorded at December 31, 2024 by approximately $15.3 million. Recent Accounting Pronouncements See Note 2 of the notes to the Consolidated Financial Statements for discussion of recent accounting pronouncements.
The ongoing conflicts in the Middle East and Ukraine have had repercussions globally and in the United States by continuing to cause uncertainty, not only in the oil and natural gas markets, but also in the financial markets and global supply chain.
The ongoing conflict in Ukraine and prolonged conflict in the Middle East have had repercussions globally by continuing to cause uncertainty, not only in the oil and natural gas markets, but also in the financial markets and global supply chain.
Inflation While inflationary cost increases can affect our income from operations’ margin, we believe that inflation generally has not had, and is not expected to have, a material adverse effect on our results of operations.
Inflation While inflationary cost increases can affect our income from operations’ margin, we believe that inflation generally has not had a material adverse effect on our results of operations.
We continuously evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including, among other things, demand for rental assets, available capacity 29 Table of Contents in existing locations, prevailing economic conditions, market conditions in the E&P industry, customers’ forecasts, volatility and company initiatives.
We continuously evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including, among other things, demand for rental assets, available capacity in existing locations, prevailing economic conditions, market conditions in the E&P industry, customers’ forecasts, crude oil and natural gas price volatility and company initiatives.
Year Ended December 31, 2023 2022 2021 WTI Oil Price ($/bbl) (1) $ 77.58 $ 94.90 $ 68.14 Natural Gas Price ($/MMBtu) (2) $ 2.53 $ 6.45 $ 3.89 U.S. Land Drilling Rigs (3) 667 705 460 (1) U.S. Energy Information Administration (“EIA”) Cushing, OK WTI (“West Texas Intermediate”) spot price per barrel of crude oil.
Year Ended December 31, 2024 2023 2022 WTI Oil Price ($/bbl) (1) $ 76.63 $ 77.58 $ 94.90 Natural Gas Price ($/MMBtu) (2) $ 2.19 $ 2.53 $ 6.45 U.S. Land Drilling Rigs (3) 580 667 705 (1) U.S. Energy Information Administration (“EIA”) Cushing, OK WTI (“West Texas Intermediate”) spot price per barrel of crude oil.
Other income (expense), net represents non-cash adjustments for the revaluation of the liability related to the tax receivable agreement as a result of changes to the forecasted state tax rate. Income tax expense. Income tax expense for 2023 was $47.5 million (18.1% effective tax rate) compared to $31.4 million (17.8% effective tax rate) for 2022.
Other income, net represents non-cash adjustments for the revaluation of the liability related to the tax receivable agreement as a result of changes to the forecasted state tax rate. Income tax expense. Income tax expense for 2024 was $66.5 million (22.2% effective tax rate) compared to $47.5 million (18.1% effective tax rate) for 2023.
Such uncertainty could continue to result in stock price volatility and supply chain disruptions as well as higher oil and natural gas prices which could cause higher inflation worldwide, impact consumer spending and negatively impact demand for our goods and services. Additionally, militant attacks on ships in the Red Sea or elsewhere could negatively impact our ocean freight costs.
Such uncertainty could continue to result in stock price volatility and supply chain disruptions as well as higher oil and natural gas prices which could cause higher inflation worldwide, impact consumer spending and negatively impact demand for our goods and services.
Although lower natural gas prices could negatively impact the oil and gas industry, most of our customers are primarily oil-focused, thus moderating the impact to demand for our products and services.
The increased year-end 2024 natural gas prices could favorably impact oil and gas industry activity levels, although most of our customers are primarily oil-focused, thus moderating the potential impact to demand for our products and services.
We had $1.1 million in letters of credit outstanding at December 31, 2023 which reduced our available borrowing capacity. We were in compliance with the covenants of the Amended ABL Credit Facility as of December 31, 2023.
As of December 31, 2024, we had no borrowings outstanding under our Amended ABL Credit Facility and $222.6 million of available borrowing capacity. We had $2.4 million in letters of credit outstanding at December 31, 2024 which reduced our available borrowing capacity. We were in compliance with the covenants of the Amended ABL Credit Facility as of December 31, 2024.
Note 2 of the notes to the Consolidated Financial Statements includes a summary of the significant accounting policies used in the preparation of the accompanying consolidated financial statements.
Note 2 of the notes to the Consolidated Financial Statements includes a summary of the significant accounting policies used in the preparation of the accompanying consolidated financial statements. The following is a brief discussion of our most critical accounting policies and related estimates and assumptions.
Income tax expense for 2022 was $31.4 million (17.8% effective tax rate) compared to $7.7 million (10.2% effective tax rate) for 2021.
Income tax expense. Income tax expense for 2023 was $47.5 million (18.1% effective tax rate) compared to $31.4 million (17.8% effective tax rate) for 2022.
Cactus Inc. is only subject to federal and state income tax on its share of income from Cactus Companies. Income allocated to the non-controlling interest is only taxable to the non-controlling interest.
Cactus Inc. is only subject to federal and state income tax on its share of income from Cactus Companies. Income allocated to the non-controlling interest is only taxable to the non-controlling interest. Liquidity and Capital Resources At December 31, 2024, we had $342.8 million of cash and cash equivalents.
Assuming no material changes in the relevant tax law, we expect that if the TRA were terminated as of December 31, 2023, the estimated termination payments, based on the assumptions discussed in Note 11 of the notes to the Consolidated Financial Statements, would be approximately $256.8 million, calculated using a discount rate equivalent to the former one-year LIBOR, applied against an undiscounted liability of $397.0 million.
Assuming no material changes in the relevant tax law, we expect that if the TRA were terminated as of December 31, 2024, the estimated termination payments, based on the assumptions discussed in Note 11 of the notes to the Consolidated Financial Statements, would be approximately $273.7 million, calculated using a discount rate equal to the 12-month term SOFR published by CME Group Benchmark Administration Limited, plus 71.513 basis points, applied against an undiscounted liability of $406.5 million.
The following is a brief discussion of our most critical accounting policies and related estimates and assumptions. 31 Table of Contents Determination of Fair Value in Business Combinations Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets acquired and liabilities assumed at their respective fair values.
Determination of Fair Value in Business Combinations Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets acquired and liabilities assumed at their respective fair values. The determination of fair value requires the use of significant estimates and assumptions, and in making these determinations, management uses all available information.
It is highly unlikely that salaries and wages will decrease to the levels experienced in prior years.
Most of our costs associated with providing our products and services moderated in 2023 and 2024, except for salaries and wages. It is highly unlikely that salaries and wages will decrease to the levels experienced in prior years.
The increase in interest expense, net of $10.2 million was primarily related to borrowings under the Amended ABL Credit Facility related to the FlexSteel acquisition. 27 Table of Contents Other income (expense), net.
The increase in interest expense, net of $10.2 million was primarily related to borrowings under the Amended ABL Credit Facility related to financing the FlexSteel acquisition. Other income (expense), net. Other income (expense), net represents non-cash adjustments for the revaluation of the liability related to the tax receivable agreement as a result of changes to the forecasted state tax rate.
Our primary sources of liquidity and capital resources are cash on hand, cash flows generated by operating activities and, if necessary, borrowings under our Amended ABL Credit Facility (as defined in Note 6 in the notes to the Consolidated Financial Statements).
Our primary sources of liquidity and capital resources are cash on hand, cash flows generated by operating activities and, if necessary, borrowings under our Amended ABL Credit Facility. Depending upon market conditions and other factors, we may also have the ability to issue additional equity and debt if needed.
This can lead to lower activity in our three revenue categories as well as lower margins, particularly in field services due to lower labor utilization. 25 Table of Contents Recent Developments and Trends Acquisition of FlexSteel As previously discussed, we completed the acquisition of FlexSteel on February 28, 2023.
This can lead to lower activity in our three revenue categories as well as lower margins, particularly in field services due to lower labor utilization.
(2) EIA Henry Hub Natural Gas spot price per million British Thermal Unit (“MMBtu”). (3) Baker Hughes. After seeing a recovery in industry activity in 2022, onshore drilling and completion activity levels steadily declined throughout 2023.
(2) EIA Henry Hub Natural Gas spot price per million British Thermal Unit (“MMBtu”). (3) Baker Hughes. Onshore drilling and completion activity levels declined through the first half of 2024, resulting in the average number of U.S. land drilling rigs for 2024 to be 13% below 2023 levels.
The 28 Table of Contents increase was primarily attributable to higher gross margins during the period due to increased activity partially offset by higher SG&A expenses. The increase in SG&A expenses was largely attributable to increased personnel costs primarily related to higher salaries and wages and associated taxes and benefits, higher annual incentive bonus expense and increased stock-based compensation.
The decrease was primarily attributable to lower gross margins during the period due to decreased customer activity levels and higher selling, general and administrative ("SG&A") expenses. The increase in SG&A expenses primarily related to higher personnel costs, stock-based compensation expense and other reserves, partially offset by a decrease in bad debt expense. Spoolable Technologies.
Operating cash flows increased primarily due to an increase in income offset by an increase in working capital, largely related to the increase in inventory and increased accounts receivable associated with higher revenues, a $2.0 million increase in TRA payments and a $1.0 million increase in taxes paid, net of refunds.
Operating cash flows decreased primarily due to an increase in cash outflows associated with working capital, largely related to increased purchases of inventory of $67.6 million as well as payout of the earn-out liability of $31.2 million.
Oil prices declined throughout 2023 and continued to be relatively volatile, with WTI remaining above $66 per barrel all year. Natural gas prices declined approximately 60% in 2023 from 2022 primarily due to persistently high inventory levels with prices averaging $2.53 per MMBtu in 2023 compared to $6.45 per MMBtu in 2022.
Average oil prices were relatively stable in 2024 and were down 1% from 2023 average levels. Natural gas prices declined approximately 13% in 2024 from 2023 with prices averaging $2.19 per MMBtu in 2024 compared to $2.53 per MMBtu in 2023.
The increase in interest income, net of $4.5 million was primarily due to higher interest income earned on cash invested resulting from increased interest rates in 2022. Other income (expense), net. Other expense, net of $1.9 million in 2022 represented a non-cash adjustment for the revaluation of the liability related to the tax receivable agreement.
Interest income, net was $6.5 million in 2024 compared to interest expense, net of $6.5 million in 2023. The increase in interest income, net of $12.9 million was primarily due to an increase in interest income earned on cash invested during the 2024 period.
A 10% increase in the price of our Class A common stock at December 31, 2023 would have increased the discounted liability by $9.0 million to $265.8 million (an undiscounted increase of $15.2 million to $412.2 million), and likewise, a 10% decrease in the price of our Class A common stock at December 31, 2023 would have decreased the discounted liability by $9.0 million to $247.8 million (an undiscounted decrease of $15.2 million to $381.8 million).
A 10% increase in the price of our Class A common stock at December 31, 2024 would have increased the discounted liability by $9.6 million to $283.3 million (an undiscounted increase of $15.8 million to $422.3 million), and likewise, a 10% decrease in the price of our Class A common stock at December 31, 2024 would have decreased the discounted liability by $9.6 million to $264.1 million (an undiscounted decrease of $15.8 million to $390.8 million). 30 Table of Contents Cash Flows Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2024 2023 (in thousands) Net cash provided by operating activities $ 316,113 $ 340,280 Net cash used in investing activities (35,388) (654,793) Net cash provided by (used in) financing activities (70,144) 103,275 Net cash provided by operating activities was $316.1 million in 2024 compared to $340.3 million in 2023.
Income tax expense for 2022 primarily included approximately $36.4 million of expense associated with current income offset by a $1.7 million benefit associated with permanent differences related to equity compensation, a $1.7 million benefit resulting from a change in our forecasted state rate and a $1.4 million tax benefit associated with the partial valuation allowance release in conjunction with CW Unit redemptions during 2022.
Additionally in 2023, we recognized $4.9 million of expense associated with the revaluation of our deferred tax asset as a result of a change in our forecasted state tax rate, $0.5 million of expense related to the finalization of our 2022 tax returns, a $1.2 million benefit associated with permanent differences related to equity compensation and a $1.2 million benefit associated with other adjustments.
Additional increases in SG&A expenses from 2021 were attributable to higher information technology expenses. Corporate and other expenses. Corporate and other expenses for 2022 were $27.9 million, an increase of $11.8 million from $16.2 million for 2021. The increase was primarily due to approximately $8.4 million of transaction costs associated with the FlexSteel acquisition.
Corporate and other expenses for 2024 were $26.0 million, a decrease of $8.8 million from $34.7 million for 2023. The decrease was largely 27 Table of Contents attributable to lower professional fees related to transaction costs associated with growth initiatives, including the closing of and accounting for the FlexSteel acquisition in 2023. Interest income (expense), net.
Removed
The results of operations of the FlexSteel business have been reflected in our accompanying condensed consolidated financial statements from the closing date of the acquisition. See Note 3 in the notes to the Consolidated Financial Statements for additional information related to the acquisition.
Added
Natural gas prices were lower as inventory levels remained above five-year maximum levels through most of the first half of 2024. Spot prices averaged $3.01 per MMBtu in December 2024 and closed 2024 at $3.40 per MMBtu, as colder than forecasted weather impacted prices.
Removed
The average number of U.S. land drilling rigs for 2023 decreased by 5% from 2022, with the number of rigs as of the end of 2023 at 602 rigs compared to 762 as of the end of 2022 and 570 as of the end of 2021.
Added
Additionally, the U.S. presidential election outcome has introduced further uncertainty to global supply chains, as the new administration has signaled the potential to impose and increase tariffs, including on China, where we have a manufacturing facility.
Removed
The performance of our operating segments is primarily evaluated based on segment operating income (in addition to other measures), which is defined as income before taxes and before interest income (expense), net, other income (expense), net and corporate and other expenses not allocated to the operating segments. Corporate and other expenses were previously included in our Pressure Control segment.
Added
The performance of our operating segments is primarily evaluated based on segment operating income (in addition to other measures), which is defined as income before taxes and before interest income (expense), net, other income (expense), net and corporate and other expenses not allocated to the operating segments. 26 Table of Contents Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 The following table presents summary consolidated operating results for the periods indicated: Year Ended December 31, 2024 2023 $ Change % Change (in thousands) Revenues Pressure Control $ 724,038 $ 756,727 $ (32,689) (4.3)% Spoolable Technologies 407,038 340,233 66,805 19.6 Corporate and other (1,262) — (1,262) — Total revenues 1,129,814 1,096,960 32,854 3.0 Operating income Pressure Control 210,710 236,934 (26,224) (11.1) Spoolable Technologies 104,864 62,172 42,692 68.7 Total segment operating income 315,574 299,106 16,468 5.5 Corporate and other expenses (25,961) (34,740) 8,779 (25.3) Total operating income 289,613 264,366 25,247 9.6 Interest income (expense), net 6,459 (6,480) 12,939 nm Other income, net 3,204 4,490 (1,286) (28.6) Income before income taxes 299,276 262,376 36,900 14.1 Income tax expense 66,518 47,536 18,982 39.9 Net income $ 232,758 $ 214,840 $ 17,918 8.3 Less: net income attributable to non-controlling interest 47,351 45,669 1,682 3.7 Net income attributable to Cactus Inc. $ 185,407 $ 169,171 $ 16,236 9.6% nm = not meaningful Pressure Control.
Removed
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following table presents summary consolidated operating results for the periods indicated: Year Ended December 31, 2022 2021 $ Change % Change (in thousands) Revenues Pressure Control $ 688,369 $ 438,589 $ 249,780 57.0 % Spoolable Technologies — — — — Total revenues 688,369 438,589 249,780 57.0 Operating income Pressure Control 202,650 91,579 111,071 nm Spoolable Technologies — — — — Total segment operating income 202,650 91,579 111,071 nm Corporate and other expenses (27,902) (16,152) (11,750) 72.7 Total operating income 174,748 75,427 99,321 nm Interest income (expense), net 3,714 (774) 4,488 nm Other income (expense), net (1,910) 492 (2,402) nm Income before income taxes 176,552 75,145 101,407 nm Income tax expense 31,430 7,675 23,755 nm Net income $ 145,122 $ 67,470 $ 77,652 nm Less: net income attributable to non-controlling interest 34,948 17,877 17,071 95.5 % Net income attributable to Cactus Inc. $ 110,174 $ 49,593 $ 60,581 nm nm = not meaningful Pressure Control.
Added
Pressure Control revenue was $724.0 million for 2024, a decrease of $32.7 million, or 4.3%, from $756.7 million for 2023. The decrease in revenues was primarily due to decreased sales of wellhead and production related equipment resulting from lower drilling and completion activity by our customers.
Removed
Pressure Control revenue for 2022 was $688.4 million compared to $438.6 million for 2021. The increase of $249.8 million, representing a 57% increase from 2021 was primarily due to a $171.7 million increase in product revenues, a $38.8 million increase in rental revenues and a $39.2 million increase in field service and other revenue.
Added
In addition, rental of drilling and completion equipment decreased as a result of the decline in customer activity. Operating income of $210.7 million in 2024 resulted in a decrease of $26.2 million, or 11.1%, from $236.9 million in 2023.
Removed
These increases were the result of increased drilling and completion activity by our customers which translated into higher sales of pressure control equipment, tool and equipment rentals and related field and other ancillary services as well as certain cost recovery measures. Operating income of $202.7 million in 2022 increased $111.1 million from $91.6 million in 2021.
Added
Spoolable Technologies revenue of $407.0 million for 2024, represented an increase of $66.8 million, or 19.6%, from $340.2 million for 2023 as results for 2023 only included ten months of revenues from the FlexSteel acquisition, which closed on February 28, 2023.
Removed
Additional increases were largely attributable to increased personnel costs as well as increased travel and entertainment expenses. Interest income (expense), net. Interest income, net was $3.7 million in 2022 compared to interest expense, net of $0.8 million in 2021.
Added
Total operating income of $104.9 million for 2024, resulted in an increase of $42.7 million, or 68.7%, from $62.2 million for 2023 as results for 2023 only included ten months of revenues.
Removed
Other income, net of $0.5 million in 2021 related to a $0.9 million non-cash gain associated with the revaluation of the liability related to the TRA and $0.4 million for professional fees and other expenses associated with the 2021 Secondary Offering. Income tax expense.
Added
Operating income for the 2024 included $16.3 million of expense related to the change in fair value of the earn-out liability for the FlexSteel acquisition and $16.0 million of intangible amortization.
Removed
Income tax expense for 2021 was primarily related to approximately $16.3 million expense associated with our 2021 operations and $1.3 million expense resulting from a change in our forecasted state tax rate.
Added
Operating income for 2023 included approximately $14.9 million of expense related to the change in fair value of the estimated earn-out liability, $23.5 million of inventory step-up expense and $20.3 million of intangible amortization expense, as well as depreciation expense of $13.8 million primarily associated with the step-up of fixed assets in connection with accounting for the purchased assets at fair value.
Removed
This tax expense was partially offset by a $1.1 million benefit associated with permanent differences related to equity compensation and a $9.0 million tax benefit associated with the partial valuation allowance release in conjunction with 2021 redemptions of CW Units. Liquidity and Capital Resources At December 31, 2023, we had $133.8 million of cash and cash equivalents.
Added
Corporate and other. Corporate and other revenue represents the elimination of inter-segment sales from our Pressure Control segment to our Spoolable Technologies segment. Corporate and other expenses include costs associated with executive management and other administrative functions not directly attributable to our reporting segments.
Removed
Depending upon market conditions and other factors, we may also have the ability to issue additional equity and debt if needed. As of December 31, 2023, we had no borrowings outstanding under our Amended ABL Credit Facility and $216.0 million of available borrowing capacity.
Added
Interest expense in 2023 was primarily related to borrowings outstanding through July 2023 under the Amended ABL Credit Facility (as defined in Note 6 in the notes to the Consolidated Financial Statements) which were required to finance the FlexSteel acquisition. Other income, net.
Removed
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2022 2021 (in thousands) Net cash provided by operating activities $ 117,884 $ 63,759 Net cash used in investing activities (25,536) (11,633) Net cash used in financing activities (47,382) (39,388) Net cash provided by operating activities was $117.9 million in 2022 compared to $63.8 million in 2021.
Added
Income tax expense for 2024 includes approximately $66.5 million of expense associated with current income.
Removed
Net cash used in investing activities was $25.5 million and $11.6 million for 2022 and 2021, respectively. The increase was primarily due to increased investments associated with our rental fleet and additional investment in and expansion of our Bossier City location. Net cash used in financing activities was $47.4 million and $39.4 million for 2022 and 2021, respectively.
Added
Additionally, in 2024 we recognized $2.1 million of expense associated with the revaluation of our deferred tax asset as a result of a change in our forecasted state tax rate, a $2.1 million benefit related to the finalization of our 2023 tax returns, a $0.7 million benefit associated with permanent differences related to equity compensation and $0.7 million of expense associated with other adjustments.
Removed
The increase was primarily comprised of a $5.6 million increase in dividend payments, a $1.3 million increase in share repurchases from employees to satisfy tax withholding obligations related to restricted stock units that vested during the period, a $0.9 million increase in payments on finance leases and $0.4 million in deferred financing costs.
Added
Partial valuation releases occur in conjunction with redemptions of CC Units as a portion of Cactus Inc.’s deferred tax assets from its investment in Cactus Companies becomes realizable. Cactus Inc. is only subject to federal and state income tax on its share of income from Cactus Companies. Income allocated to the non-controlling interest is only taxable to the non-controlling interest.
Removed
The determination of fair value requires the use of significant estimates and assumptions, and in making these determinations, management uses all available information.
Added
Income tax expense for 2023 includes approximately $56.6 million of expense associated with current income offset by a $12.1 million benefit associated with the release of our valuation allowance previously provided for our investment in Cactus Companies based on the determination that the deferred tax asset was realizable due to our ability to generate sufficient taxable income of the appropriate type.
Added
These decreases in operating cash flows were offset by an increase in customer collections of $24.9 million as well as an increase in operating income of $17.9 million in 2024 compared to 2023. Net cash used in investing activities was $35.4 million and $654.8 million for 2024 and 2023, respectively.
Added
The decrease was primarily due to the non-recurrence of cash paid to acquire FlexSteel for $621.5 million, less $5.3 million in cash acquired during the first quarter of 2023. Additionally, our capital expenditures decreased approximately $4.8 million primarily due to the $7.0 million purchase of a previously leased facility during the first half of 2023.
Added
Net cash used in financing activities was $70.1 million for 2024 compared to net cash provided by in financing activities of $103.3 million for 2023. The decrease in net cash provided by financing activities was primarily related to certain financing activities in 2023 associated with the FlexSteel acquisition.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+2 added−0 removed3 unchanged
As of December 31, 2023, if the U.S. dollar strengthened or weakened 5%, the impact to the unrealized value of our forward contracts would be approximately $0.9 million. The gain or loss on the forward contracts would be largely offset by the gain or loss on the underlying transactions, and therefore, would have minimal impact on future earnings.
As of December 31, 2024, if the U.S. dollar strengthened or weakened 5%, the impact to the unrealized value of our forward contracts would be approximately $0.9 million. The gain or loss on the forward contracts would be largely offset by the gain or loss on the underlying transactions, and therefore, would have minimal impact on future earnings.
Quantitative and Qualitative Disclosures about Market Risk In the normal course of business, we are exposed to market risk from changes in foreign currency exchange rates and changes in interest rates. 33 Table of Contents Foreign Currency Exchange Rate Risk We have subsidiaries with operations in China, Australia and Canada who conduct business in their local currencies (functional currencies) and are therefore subject to foreign currency exchange rate risk on cash flows related to sales, expenses, financing and investing transactions in currencies other than the U.S. dollar.
Foreign Currency Exchange Rate Risk We have subsidiaries with operations in China, Australia and Canada who conduct business in their local currencies (functional currencies) and are therefore subject to foreign currency exchange rate risk on cash flows related to sales, expenses, financing and investing transactions in currencies other than the U.S. dollar.
Interest Rate Risk Our Amended ABL Credit Facility is variable rate debt. At December 31, 2023, there were no borrowings outstanding. Borrowings under our Amended ABL Credit Facility bear interest at Cactus Company’s option at either the Alternate Base Rate (as defined therein) or the Adjusted Term SOFR Rate (as defined therein), plus, in each case, an applicable margin.
Borrowings under our Amended ABL Credit Facility bear interest at Cactus Company’s option at either the Alternate Base Rate (as defined therein) or the Adjusted Term SOFR Rate (as defined therein), plus, in each case, an applicable margin. 34 Table of Contents
Added
Item 7A. Quantitative and Qualitative Disclosures about Market Risk In the normal course of business, we are exposed to market risk from changes in foreign currency exchange rates and changes in interest rates.
Added
Interest Rate Risk Our Amended ABL Credit Facility is variable rate debt. At December 31, 2024, there were no borrowings outstanding.

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