Customer Dependence and Revenue - The company serves over 300 customers, with one customer representing 15% of total revenues in 2024 and 10% in 2023[47]. - The company is dependent on a relatively small number of customers in the oil and natural gas E&P business, which could adversely affect its financial condition if an important customer is lost[87]. Manufacturing and Operations - The manufacturing facility in Bossier City, Louisiana, is designed for rapid turnaround of made-to-order equipment, while the Suzhou facility in China is optimized for higher-volume orders[42]. - The company has advanced manufacturing capabilities in Baytown, Texas, producing pipe products in accordance with industry standards and utilizing advanced CNC machines[43]. - The company operates through service centers and pipe yards located in the United States, Canada, Australia, and provides services in the Middle East and other international markets[260]. Industry Dependency and Market Conditions - The company is substantially dependent on the oil and gas industry, with exploration and production activity directly affected by oil and natural gas prices, which have historically been volatile[45]. - The company’s business is heavily influenced by trends in the demand for and price of crude oil and natural gas, which have historically been volatile[81]. - The oilfield services industry is highly competitive, and increased competition could lead to lower prices and utilization rates for the company's services[89]. - The introduction of new technologies in the oilfield services industry may cause the company to lose market share if it cannot keep up with competitors[90]. - Ongoing global conflicts, particularly in Ukraine and the Middle East, have resulted in volatility in oil and natural gas prices, potentially dampening demand for the company's products[109]. Environmental and Regulatory Compliance - The company has established proactive environmental and worker safety policies to manage compliance with stringent governmental laws and regulations[52]. - The company is subject to various environmental laws and regulations, and failure to comply could result in significant penalties and increased costs[100]. - Changes in regulations related to greenhouse gas emissions could negatively impact demand for the company's products and services[103]. - Increased regulation on hydraulic fracturing in Texas has led to suspensions of deep wastewater disposal wells in certain areas, potentially increasing costs for oil and gas production companies[104]. Financial Performance and Metrics - Total revenues for 2024 reached $1,129,814, an increase of 3% from $1,096,960 in 2023 and a significant rise of 64% compared to $688,369 in 2022[249]. - Net income attributable to Cactus Inc. for 2024 was $185,407, representing an increase of 10% from $169,171 in 2023 and a substantial increase of 68% from $110,174 in 2022[249]. - The total stockholders' equity attributable to Cactus Inc. rose to $1,071.1 million in 2024, up from $865.5 million in 2023, reflecting an increase of about 23.8%[247]. - The company reported a foreign currency translation adjustment loss of $1,974 in 2024, compared to a gain of $239 in 2023[252]. - The company completed the acquisition of the FlexSteel business on February 28, 2023, which has been reflected in the financial statements from the closing date of the acquisition[262]. Employee and Workforce Management - The company employed approximately 1,600 people worldwide as of December 31, 2024, with over 100 employees located outside the United States, primarily in Australia and China[61]. - The company has developed targeted strategies for recruitment and retention to maintain high retention rates among key managers and associates[62]. - The company is committed to fostering a diverse workforce, with approximately 10% women and 46% of the workforce representing a minority population[67]. Risk Management and Insurance - The company relies on customer indemnifications and third-party insurance for risk mitigation, but limitations on these could expose it to substantial liabilities[93]. - The company’s insurance includes coverage for various liabilities, including pollution liability and cyber insurance, but may not cover all losses[59]. - The company relies on information technology systems, and any failure or cyberattack could disrupt operations and adversely affect financial performance[132]. Tax and Financial Obligations - Payments under the Tax Receivable Agreement (TRA) could be substantial, as Cactus Inc. is obligated to pay 85% of net cash savings from tax benefits realized[120]. - The liability related to the Tax Receivable Agreement (TRA) was reported at $278.7 million as of December 31, 2024, indicating a significant financial obligation[242]. - The effective tax rate for 2024 was 22.2%, compared to 18.1% in 2023 and 17.8% in 2022[318]. Capital and Investment Activities - The company reported a net cash used in investing activities of $35,388,000 for 2024, a significant decrease from $654,793,000 in 2023[258]. - Capital expenditures for 2024 were $39,176,000, a decrease from $43,977,000 in 2023[258]. - The company had no outstanding debt as of December 31, 2024, and maintained compliance with all covenants under the Amended ABL Credit Facility[308]. Audit and Internal Controls - The independent auditor, PricewaterhouseCoopers, LLP, confirmed the effectiveness of the internal control over financial reporting as of December 31, 2024[230]. - The company maintained effective internal control over financial reporting based on the COSO framework, as stated in the management's assessment[229]. - The audit report highlighted a critical audit matter related to the TRA liability, emphasizing the complexity and subjectivity involved in its calculation[241].

Core Viewpoint - Cactus, Inc. reported quarterly earnings of $0.71 per share, missing the Zacks Consensus Estimate of $0.73 per share, and showing a decline from $0.81 per share a year ago, indicating a -2.74% earnings surprise [1][2] Financial Performance - The company posted revenues of $272.12 million for the quarter ended December 2024, which was 1.37% below the Zacks Consensus Estimate and a decrease from $274.87 million year-over-year [2] - Over the last four quarters, Cactus has surpassed consensus EPS estimates three times and has topped consensus revenue estimates three times as well [2] Stock Performance - Cactus shares have declined approximately 1.5% since the beginning of the year, contrasting with the S&P 500's gain of 1.3% [3] - The current consensus EPS estimate for the upcoming quarter is $0.78, with expected revenues of $283.66 million, and for the current fiscal year, the estimate is $3.22 on revenues of $1.17 billion [7] Industry Outlook - The Oil and Gas - Integrated - United States industry, to which Cactus belongs, is currently ranked in the top 16% of over 250 Zacks industries, suggesting a favorable outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Cactus's stock performance [5][6]

Financial Performance - Fourth quarter 2024 revenues were $272.1 million, a decrease of 1.0% from $274.9 million in the previous quarter[3]. - Operating income for the fourth quarter was $70.5 million, down 10.0% sequentially from $78.6 million[3]. - Net income for the fourth quarter was $57.4 million, resulting in a net income margin of 21.1%[3]. - Adjusted EBITDA for the fourth quarter was $92.7 million, with an adjusted EBITDA margin of 34.1%[3]. - For the twelve months ended December 31, 2024, net income increased to $232.8 million from $214.8 million in 2023, representing an 8.8% growth[34]. - Revenue for the twelve months ended December 31, 2024, was $1.13 billion, compared to $1.10 billion in 2023, reflecting a 3.1% increase[34]. - Adjusted net income for the twelve months ended December 31, 2024, was $245.1 million, slightly down from $253.1 million in 2023, a decrease of 3.2%[34]. - Diluted earnings per share, as adjusted, decreased to $3.07 for the twelve months ended December 31, 2024, from $3.19 in 2023, a decline of 3.8%[34]. - The net income margin for the three months ended December 31, 2024, was 21.1%, slightly lower than 21.3% in the previous quarter[39]. - Total operating income for the twelve months ended December 31, 2024, was $289,613,000, an increase from $264,366,000 in the previous year[45]. Segment Performance - Pressure Control segment revenue decreased by $8.4 million, or 4.5%, sequentially, while Spoolable Technologies revenue decreased by $12.1 million, or 11.2%[10][11]. - Pressure Control segment revenue for the three months ended December 31, 2024, was $176,719,000, down from $185,099,000 in the previous quarter[45]. - Spoolable Technologies segment revenue increased to $96,072,000 for the three months ended December 31, 2024, compared to $94,412,000 in the same period last year, representing a growth of approximately 1.8%[45]. - Adjusted Segment EBITDA margin for the Pressure Control segment was 34.8% for the three months ended December 31, 2024, compared to 33.5% in the previous quarter[45]. Cash Flow and Assets - Cash flow from operations for the fourth quarter was $66.6 million, with cash and cash equivalents totaling $342.8 million and no bank debt outstanding[7][13]. - Total assets as of December 31, 2024, reached $1.74 billion, up from $1.52 billion in 2023, indicating a 14.3% increase[30]. - Cash and cash equivalents significantly rose to $342.8 million in 2024, compared to $133.8 million in 2023, marking a 156.5% increase[31]. - The net cash provided by operating activities for the twelve months ended December 31, 2024, was $316.1 million, down from $340.3 million in 2023, a decrease of 7.1%[31]. - Total current liabilities increased to $178.8 million in 2024 from $175.7 million in 2023, a rise of 1.2%[30]. Future Outlook - The company expects net capital expenditures for 2025 to be in the range of $45 million to $55 million, focusing on supply chain diversification and efficiency improvements[14]. - The company anticipates U.S. land activity levels to remain unchanged in the first quarter of 2025, with expectations for Spoolable Technologies revenues to increase in the seasonally stronger second quarter[8]. - Cactus is implementing initiatives to grow its customer base and mitigate potential tariff impacts, including international sales growth and new product introductions[8]. Dividends and Expenses - In January 2025, the Board declared a quarterly cash dividend of $0.13 per Class A share[7][16]. - The company incurred transaction-related expenses of $2,793,000 in the three months ended December 31, 2024, related to growth initiatives including the FlexSteel acquisition[40].

Core Insights - Analysts expect Cactus, Inc. (WHD) to report quarterly earnings of $0.73 per share, reflecting a year-over-year decline of 9.9% [1] - Revenue projections stand at $275.89 million, indicating a slight increase of 0.4% from the previous year [1] - The consensus EPS estimate has been revised down by 1.5% over the last 30 days, showing a collective reevaluation by analysts [1][2] Revenue Projections - Revenue from Spoolable Technologies is projected to reach $100.73 million, representing a year-over-year increase of 6.7% [4] - Revenue from Pressure Control is estimated at $175.18 million, indicating a decline of 2.9% from the prior year [4] Operating Income Estimates - The consensus estimate for Operating Income from Spoolable Technologies is $27.35 million, down from $28.17 million in the previous year [4] - Analysts expect Operating Income from Pressure Control to be $50.62 million, compared to $56.05 million a year ago [5] Stock Performance - Cactus shares have decreased by 7.9% over the past month, contrasting with a minor decline of 0.5% in the Zacks S&P 500 composite [5] - Cactus holds a Zacks Rank 3 (Hold), suggesting it is expected to perform in line with the overall market in the near term [5]

Core Insights - The Lead-Lag Report aims to assist investors in outperforming in various market conditions through a tactical, data-driven investment approach [1] - The report emphasizes the importance of understanding risk-on/risk-off signals and identifying high-yield opportunities amidst increasing market volatility [1] Group 1 - The Lead-Lag Report is managed by Lead-Lag Publishing, LLC, and reflects the judgments of its authors as of the writing date, subject to change [2] - The report's trading signals are independent and may differ from other services provided by Lead-Lag Publishing, LLC [2] - The information provided is not intended as a primary basis for investment decisions and does not constitute personalized investment advice [2] Group 2 - The report highlights the necessity for investors to leverage award-winning research to maximize returns in uncertain market conditions [1] - The author, Michael A. Gayed, has a strong academic background and experience in market anomalies and investing [1] - The report does not guarantee future performance and emphasizes that past performance may not be indicative of future results [3]

Industry Overview - The Zacks Oil & Gas US Integrated industry includes companies involved in upstream and midstream energy businesses, focusing on oil and natural gas exploration and production, as well as transportation and storage [3] - The upstream business is positively correlated to oil and gas prices, while midstream operations generate stable fee-based revenues from long-term contracts [3] Current Market Conditions - Upstream companies are benefiting from favorable oil prices, with West Texas Intermediate (WTI) crude prices around $80 per barrel, which is advantageous for exploration and production activities [4] - The U.S. Energy Information Administration projects WTI and Brent average prices to be $70.31 and $74.31 per barrel, respectively, in 2025, indicating a continued favorable environment for integrated players [4] Revenue Stability - Integrated companies' midstream segments are less exposed to commodity price volatility due to long-term contracts securing stable fee-based revenues [5] Environmental Focus - Companies in the industry are increasingly focused on reducing greenhouse gas emissions and flaring rates, recognizing climate change as a significant risk [6] Industry Performance - The Zacks Oil & Gas US Integrated industry has a Zacks Industry Rank of 57, placing it in the top 23% of over 250 Zacks industries, indicating a bullish outlook [7][8] - However, the industry has underperformed compared to the broader Zacks Oil - Energy sector and the S&P 500, gaining only 1.2% over the past year compared to 16.8% and 25.4% for the sector and S&P 500, respectively [9] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 4.91X, lower than the S&P 500's 18.23X but higher than the sector's 3.86X [12] - Over the past five years, the industry's EV/EBITDA has ranged from 3.33X to 14.35X, with a median of 5.02X [12] Key Players - ConocoPhillips (COP) has a strong production outlook and lower debt exposure, positioning it well for adverse business scenarios [14] - Occidental Petroleum (OXY) is addressing its debt burden, reducing it from $47.6 billion in 2019 to $25.5 billion by 2024 [17] - Berry Corporation (BRY) operates in low-decline, long-lived reserves and has a strong balance sheet to navigate volatility [19] - Cactus Inc (WHD) benefits from high crude prices and is focused on minimizing environmental impact [21]

Financial Data and Key Metrics Changes - Total company revenue for Q3 2024 was $293 million, up 1% sequentially [11] - Adjusted EBITDA for Q3 2024 was $100 million, down 3% sequentially, with an adjusted EBITDA margin of 34.2% compared to 35.7% in Q2 2024 [9][16] - GAAP net income was $62 million in Q3 2024, slightly down from $63 million in Q2 2024 [18] - Cash balance increased to $303 million, up $57 million during the quarter [21] Business Segment Data and Key Metrics Changes - Pressure Control segment revenues were $185 million, down 1.1% sequentially, with operating income decreasing by $3.1 million or 5.6% [11][12] - Adjusted segment EBITDA for Pressure Control decreased by $3.3 million or 5.1% sequentially [13] - Spoolable Technology segment revenues increased by 4.3% sequentially, with adjusted segment EBITDA remaining flat at $42.5 million [13][15] Market Data and Key Metrics Changes - The U.S. land rig activity continued to decline, impacting the Pressure Control segment [7] - International revenue in spoolable Technologies for 2024 has already doubled compared to the full year performance of 2023 [30] Company Strategy and Development Direction - The company remains focused on international expansion, particularly in the Mideast, while also evaluating strategic opportunities [30] - The primary objective for the next year includes contributions from a new manufacturing facility to enhance the supply chain [33] - The company is optimistic about its market positioning and the introduction of new products and services [31] Management's Comments on Operating Environment and Future Outlook - Management noted that while the U.S. market is challenging, they are pleased with the positioning of the company and its high-margin products [31] - There is an expectation of a mid-single digit dip in Pressure Control revenue for Q4 due to lower drilling activity and seasonal factors [24] - Management anticipates adjusted EBITDA margins in the Pressure Control segment to be between 33% to 35% for Q4 [26] Other Important Information - The company paid a dividend of $0.13 per share, resulting in a cash outflow of approximately $11 million [20] - Capital expenditures for the full year 2024 have been reduced to a range of $32 million to $37 million [22] Q&A Session Summary Question: Thoughts on overall portfolio and strategic growth opportunities - Management indicated that the primary objective is international expansion, but they remain open to acquisition opportunities similar to Flexsteel [35] Question: General thoughts on tariffs and risk mitigation - Management believes they are in a strong position compared to competitors due to their manufacturing base and ongoing expansion efforts [37][38] Question: Cash balance and potential return to shareholders - Management acknowledged having excess cash and indicated that if no acquisitions occur, they would consider returning cash to shareholders by the end of the coming year [41] Question: Update on wellhead system qualification in the Middle East - Management confirmed ongoing testing and a cautious approach to decision-making regarding the facility [43] Question: Changes in customer dynamics and pricing - Management noted a shift towards technical buying among major operators, which could benefit the company [47] Question: Revenue per rig dynamics and customer caution - Management explained that revenue per rig is primarily impacted by production tree call-offs, which are difficult to predict [53] Question: International revenue contribution and future growth - Management stated that international revenue in spoolable Technologies is currently in the high single digits as a percentage and is expected to grow significantly [61][62]

Revenue Performance - For the nine months ended September 30, 2024, Cactus derived 76% of total revenues from product sales, 9% from rentals, and 15% from field services, compared to 74%, 10%, and 16% respectively for the same period in 2023[85]. - Total revenues for the third quarter of 2024 were $293.2 million, a 1.0% increase from $290.4 million in the second quarter of 2024[98]. - Total revenues for the first nine months of 2024 were $857.7 million, an increase of $35.6 million, or 4.3%, compared to $822.1 million in the same period of 2023[105]. Segment Performance - Pressure Control segment revenue for Q3 2024 was $185.1 million, a decrease of 1.1% from Q2 2024, while Spoolable Technologies revenue increased by 4.3% to $108.2 million[99][100]. - Pressure Control segment revenue decreased by $29.0 million, or 5.0%, to $547.3 million due to lower drilling and completion activity[105]. - Spoolable Technologies segment revenue increased by $65.1 million, or 26.5%, to $311.0 million, benefiting from the FlexSteel acquisition[106]. Operating Income - Operating income for the Pressure Control segment decreased by 5.6% to $52.5 million in Q3 2024, primarily due to miscellaneous charges[99]. - Spoolable Technologies operating income increased by 9.5% to $32.9 million in Q3 2024, attributed to decreased expenses related to the FlexSteel acquisition[100]. - Total operating income for the first nine months of 2024 was $219.2 million, an increase of $33.3 million, or 17.9%, compared to $185.8 million in 2023[105]. Net Income and Cash Flow - Net income attributable to Cactus Inc. was $138.7 million, an increase of $18.5 million, or 15.4%, from $120.2 million in the prior year[105]. - Cash provided by operating activities was $249.5 million, slightly up from $248.6 million in the same period last year[119]. Investment and Financing Activities - Net cash used in investing activities decreased significantly to $24.1 million from $645.2 million, primarily due to the non-recurrence of the FlexSteel acquisition[120]. - Net cash used in financing activities was $56.4 million, a decrease from net cash provided of $116.7 million in the prior year, mainly due to financing activities related to the FlexSteel acquisition[121]. Market Conditions - Average WTI oil price for Q3 2024 was $76.43 per barrel, while natural gas price was $2.11 per MMBtu, reflecting market volatility and geopolitical risks[92][93]. - U.S. land drilling rig count decreased to 565 in Q3 2024, down approximately 15% from the 2023 full year average, indicating a decline in industry activity levels[93]. Capital Expenditures - Estimated net capital expenditures for the year ending December 31, 2024, are projected to range from $32 million to $37 million, focusing on rental fleet investments and manufacturing enhancements[116]. Acquisition - Cactus completed the acquisition of FlexSteel on February 28, 2023, enhancing its position in the E&P industry and expanding its product offerings[82][91]. Cash Position - As of September 30, 2024, the company had $303.4 million in cash and cash equivalents and $220.7 million of available borrowing capacity under its Amended ABL Credit Facility[112].

Core Insights - Cactus, Inc. (WHD) reported third-quarter 2024 adjusted earnings of 79 cents per share, exceeding the Zacks Consensus Estimate of 74 cents, but down from 80 cents in the same quarter last year [1] - Total revenues for the quarter were $293.2 million, surpassing the Zacks Consensus Estimate of $283 million and increasing from $288 million year-over-year [1] Revenue Performance - The improved quarterly results were driven by increased revenues from both Pressure Control and Spoolable Technologies segments, although lower customer drilling activity in the Pressure Control segment partially offset this growth [2] - Pressure Control segment revenues reached $185.1 million, up from $182.5 million in the prior year, and exceeded the estimate of $178 million [3] - Spoolable Technologies segment revenues were $108.2 million, an increase from $103.7 million year-over-year, also above the estimate of $100.6 million [4] Segment EBITDA - Adjusted Segment EBITDA for Pressure Control was $61.9 million, down from $65.3 million in the prior year but above the estimate of $61.2 million [4] - Adjusted Segment EBITDA for Spoolable Technologies remained flat year-over-year at $42.5 million, exceeding the estimate of $40 million [5] Capital Expenditure and Cash Flow - Cactus' capital expenditure for the quarter totaled $10 million, while operating cash flow was reported at $85.3 million [6] Balance Sheet - At the end of Q3 2024, Cactus had cash and cash equivalents of $303.4 million and no outstanding bank debt [7] Outlook - The company anticipates subdued U.S. land drilling activity levels, with the U.S. land rig count expected to remain stable but may face reductions due to seasonal factors and budget constraints [8] - Cactus expects net capital expenditures for the full year 2024 to be in the range of $32-$37 million, down from the previous guidance of $35-$45 million [9]

Cactus, Inc. (WHD) came out with quarterly earnings of $0.79 per share, beating the Zacks Consensus Estimate of $0.74 per share. This compares to earnings of $0.80 per share a year ago. These figures are adjusted for nonrecurring items. This quarterly report represents an earnings surprise of 6.76%. A quarter ago, it was expected that this company would post earnings of $0.70 per share when it actually produced earnings of $0.81, delivering a surprise of 15.71%. Over the last four quarters, the company has ...