Cactus Announces Third Quarter 2019 Results and Initiates Quarterly Cash Dividend

Cactus, Inc. (NYSE: WHD) ("Cactus” or the "Company”) today announced financial and operating results for the third quarter of 2019 and the initiation of a quarterly cash dividend.

Third Quarter 2019 Highlights

• Reported revenue of $160.8 million;
• Generated income from operations of $47.1 million;
• Reported net income of $35.8 million⁽¹⁾ and diluted earnings per Class A share of $0.41⁽¹⁾
• Generated net income, as adjusted⁽²⁾ of $36.1 million and diluted earnings per share, as adjusted⁽²⁾ of $0.48;
• Reported Adjusted EBITDA⁽³⁾ and related margin⁽⁴⁾ of $58.8 million and 36.6%, respectively;
• Generated cash flow from operations during the third quarter of 2019 of $49.9 million; and
• The Board of Directors declared a regular quarterly cash dividend of $0.09 per share.

Financial Summary

Scott Bender, President and CEO of Cactus, commented, "I am pleased with our results for the third quarter, as the company exhibited resiliency in the face of declining activity with revenues outperforming the trajectory of the U.S. rig count. We continued to demonstrate the differentiated nature of our products and service execution, which has enabled us to maintain our attractive margin profile. Despite softness in overall completion activity, we are pleased with customer acceptance of our recent rental innovations. Once again, the quarter highlighted the Company’s ability to generate significant free cash flow, with cash growing by over $36 million during the period.

"Looking to the fourth quarter, lower drilling and completion activity is expected to reduce company revenues, though the impact will be mitigated somewhat as our October Product market share has improved from third quarter levels. While the impact of Section 301 tariffs and the typical seasonality in Field Service present potential margin headwinds, we will continue to operate with a focus on reducing costs and believe the impact of the tariffs will be less severe than previously anticipated.”

Mr. Bender concluded, "As always, we will maintain our focus on generating free cash flow and attractive returns on capital employed. A lower activity environment should highlight our ability to responsibly manage spending and expenses while generating substantial free cash flow. With this and our strong balance sheet in mind, I am pleased to announce that our board has authorized the introduction of a regular quarterly cash dividend of $0.09 per share, which highlights our ability to return cash to shareholders.”

Revenue Categories

Product

Third quarter 2019 product revenue decreased $1.9 million, or 2.0%, sequentially, as sales of wellhead equipment and production related equipment decreased due to reduced drilling and completion activity from our customers. Gross profit decreased $2.2 million, or 5.8%, sequentially, with margins declining 150 basis points primarily due to the impact of additional Section 301 tariffs. Cactus’ estimated market share⁽¹⁾ was 28.6% in the third quarter of 2019 compared to 29.4% during the second quarter of 2019.

Rental

Third quarter 2019 rental revenue decreased $4.0 million, or 10.2%, sequentially, following a decrease in completion activity from the Company’s customers. Gross profit decreased $1.8 million sequentially due to lower revenue and an increase in depreciation expense. Margins increased 70 basis points, primarily due to a reduction in costs associated with the utilization of assets, which more than offset increased depreciation expense.

Field Service and Other

Third quarter 2019 field service and other revenue decreased $1.7 million, or 5.0%, sequentially, as lower customer activity drove a decline in associated billable hours and ancillary services. Gross profit decreased $0.3 million, or 3.6%, sequentially.

Selling, General and Administrative Expenses ("SG&A”)

SG&A for the third quarter of 2019 was $13.3 million (8.3% of revenues), compared to $13.3 million (7.9% of revenues) for the second quarter of 2019 and $11.1 million (7.3% of revenues) for the third quarter of 2018.

Liquidity and Capital Expenditures

As of September 30, 2019, the Company had $167.5 million of cash, no bank debt outstanding and the full $75.0 million of capacity available under its revolving credit facility. Operating cash flow was $49.9 million for the third quarter of 2019, attributable to strong operating results and working capital metrics.

Net capital expenditures for the third quarter of 2019 were $9.0 million, driven largely by additions to the Company’s fleet of rental equipment, including recent innovations. For the full year 2019, the Company expects net capital expenditures to be in the range of $50 to $55 million.

Quarterly Dividend

Cactus today announced that its Board of Directors (the "Board”) has approved the initiation of a regular quarterly cash dividend. On October 29, 2019, the Board declared a cash dividend of $0.09 per share of Class A common stock to be paid on December 19, 2019 to holders of record of Class A common stock at the close of business on December 2, 2019. A corresponding distribution of $0.09 per CW Unit has been approved for holders of CW Units of Cactus Wellhead, LLC, which will have the same record and payment dates as applicable to the dividend declared with respect to the Company’s Class A common stock.

Mr. Bender added, "Cactus’ variable cost business model has demonstrated its ability to generate free cash flow through the cycle. Given our strong balance sheet and continued cash generation, we are well positioned to return cash to shareholders. The implementation of a quarterly dividend, which we hope to grow over time, reflects the confidence we have in our business.”

Conference Call Details

The Company will host a conference call to discuss financial and operational results tomorrow, Thursday, October 31, 2019 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time).

The call will be webcast on Cactus’ website at www.CactusWHD.com. Institutional investors and analysts may participate by dialing (866) 670-2203. International parties may dial (630) 489-9861. The access code is 9897427. Please access the webcast or dial in for the call at least 10 minutes ahead of start time to ensure a proper connection.

An archived webcast of the conference call will be available on the Company’s website shortly after the end of the call.

About Cactus, Inc.

Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of its customers' wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford and Bakken, among other areas, and in Eastern Australia.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this press release constitute "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Cactus’ control, that could cause actual results to differ materially from the results discussed in the forward-looking statements.

Forward-looking statements can be identified by the use of forward-looking terminology including "may,” "believe,” "expect,” "intend,” "anticipate,” "estimate,” "continue,” "potential,” "will,” "hope” or other similar words and include the Company’s expectation of future performance contained herein. These statements discuss future expectations, contain projections of results of operations or of financial condition, or state other "forward-looking” information. You are cautioned not to place undue reliance on any forward-looking statements, which can be affected by assumptions used or by known risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. When considering these forward-looking statements, you should keep in mind the risk factors and other factors noted in the Company’s Annual Report on Form 10-K and any Quarterly Reports on Form 10-Q. The risk factors and other factors noted therein could cause actual results to differ materially from those contained in any forward-looking statement.

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