8-K: Cactus Inc. Investor Presentation Highlights Growth Strategy and Financial Performance

Cactus Inc. presents its investment highlights, focusing on its strong margins, free cash flow generation, and growth opportunities in spoolable technologies and international markets.

Summary

• Cactus, Inc. management presented to investors on March 17, 2025.
• The presentation highlighted Cactus's strategy, future operations, financial position, expected revenue, Adjusted EBITDA, and Adjusted EBITDA margin.
• Cactus designs, manufactures, sells, and rents highly engineered products for drilling, completion, and production efficiencies.
• The company's revenue for 2024 was $1.13 billion.
• Adjusted EBITDA for 2024 was $392 million.
• The company has a strong balance sheet with approximately $343 million in cash at year-end 2024.
• Net capital expenditure guidance for 2025 is $45 to $55 million.
• The company is focused on growth in core production products, expansion in the midstream segment, carbon capture and underground storage (CCUS), and international markets.
• Cactus acquired FlexSteel on February 28, 2023, and is expanding its spoolable technologies business.
• The company has a dynamic manufacturing advantage with facilities in the U.S., China, and Vietnam.
• Cactus is committed to ESG initiatives, including reducing its environmental impact and improving employee and community lives.
• The company's ownership profile consists of 85% public and 15% management, board, and select employees.

Sentiment

Score: 7

Explanation: The presentation is generally positive, highlighting strong financial performance, growth opportunities, and a commitment to ESG. However, there are some concerns about near-term profitability impacts from tariffs and a slight dip in Spoolable Technologies revenue.

Positives

• Cactus has a strong balance sheet with approximately $343 million in cash at year-end 2024.
• The company has a proven track record of cash flow generation.
• Cactus has a dynamic manufacturing advantage with facilities in the U.S., China, and Vietnam.
• The company is committed to ESG initiatives, including reducing its environmental impact and improving employee and community lives.
• Management is well incentivized as it owns approximately 15% of the business.
• Cactus has increased shareholder returns in every year since going public and announced its inaugural share repurchase program in June 2023.
• The company has a differentiated margin profile through the cycle compared to its peers.
• Cactus has a strong global operating footprint with established and emerging markets for wellhead and spoolable products.

Negatives

• Spoolable Technologies Q1 2025 revenue is expected to be down mid-to-high single digits versus Q4 2024.
• The company expects a Corporate and Other Adjusted EBITDA loss of approximately $4.5 million for Q1 2025.
• Near-term profitability impacts of recently introduced tariffs are being determined.

Risks

• Unanticipated challenges relating to the FlexSteel business could affect forward-looking statements.
• The company's future dividend policy is within the discretion of the board of directors and will depend upon then-existing conditions.
• The company's computations of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.
• The market transition from traditional stick steel line pipe to spoolable products is still in early stages.

Future Outlook

Pressure Control Q1 2025 revenue is expected to be flat to up versus Q4 2024 with an Adjusted EBITDA margin of 33-35%. Spoolable Technologies Q1 2025 revenue is expected to be down mid-to-high single digits versus Q4 2024 with an Adjusted EBITDA margin of 35-37%. The company expects a Corporate and Other Adjusted EBITDA loss of approximately $4.5 million for Q1 2025. Near-term profitability impacts of recently introduced tariffs are being determined.

Management Comments

• Management believes EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are useful, because they allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to financing methods or capital structure, or other items that impact comparability of financial results from period to period.

Industry Context

Cactus operates in the oil and gas equipment and services sector, competing with companies like ChampionX, Core Laboratories, National Oilwell Varco, Oil States International, and TechnipFMC. The company's focus on spoolable technologies and international expansion aligns with industry trends towards efficiency and diversification.

Comparison to Industry Standards

• Cactus's Adjusted EBITDA margin has outperformed peers through the cycle (2014-2024).
• Peers include ChampionX, Core Laboratories, National Oilwell Varco, Oil States International and TechnipFMC.
• Cactus's ROCE (Return on Capital Employed) has also outperformed peers from 2017-2024.

Corporate Governance

Stakeholder Impact

• Shareholders benefit from increased returns through dividends and share repurchases.
• Employees benefit from the company's commitment to improving lives and providing a safe work environment.
• Customers benefit from the company's innovative and differentiated products and services.
• Communities benefit from the company's commitment to ESG initiatives and reducing its environmental impact.

Next Steps

• The company plans to continue paying the quarterly dividend at the current levels.
• Cactus will continue to strive to improve its products over time and to initiate more projects and activities that will further reduce its and its industrys impact on the environment.
• The company plans to continue to expand in the Midstream Segment.
• The company plans to continue to expand internationally.

Key Dates