On November 8, 2023, Cactus Inc (WHD, Financial) released its financial results for the third quarter of 2023, showcasing a robust financial performance despite a slight sequential dip in revenue. The company reported a total revenue of $287.9 million for the quarter, a decrease from the $305.8 million reported in the second quarter of 2023 but a significant increase from the $184.5 million reported in the same quarter of the previous year.
Financial Highlights and Segment Performance
Cactus Inc (WHD, Financial) achieved an operating income of $87.6 million, which includes a $5.1 million gain related to the remeasurement of the earn-out liability associated with the FlexSteel acquisition. The company's net income margin stood at 23.6%, with an adjusted net income margin of 22.2%. Adjusted EBITDA was reported at $103.1 million, resulting in an adjusted EBITDA margin of 35.8%.
The Pressure Control segment, which represents legacy Cactus operations, saw a revenue of $182.5 million, while the Spoolable Technologies segment, encompassing the FlexSteel business, reported revenue of $105.4 million. The latter segment's operating income showed a remarkable increase due to changes in the remeasurement of the earn-out liability and a reduction in inventory step-up expense.
Liquidity and Capital Expenditures
Cactus Inc (WHD, Financial) ended the quarter with a strong liquidity position, holding $63.7 million in cash and cash equivalents and no outstanding bank debt. The company also reported a healthy operating cash flow of $80.1 million for the quarter. Net capital expenditures for the quarter were $8.4 million, with full-year expectations adjusted to $35 million to $40 million.
Dividends and Share Structure
In November 2023, the Board of Directors declared a quarterly cash dividend of $0.12 per Class A share, underscoring the company's commitment to returning value to shareholders. As of September 30, 2023, Cactus had 65.3 million shares of Class A common stock and 14.1 million shares of Class B common stock outstanding.
Management Commentary
Scott Bender, CEO and Chairman of the Board, expressed satisfaction with the team's execution in the third quarter, noting that revenues have outperformed the year-to-date reduction in U.S. land rig count levels. Bender anticipates a stabilization of U.S. land activity levels in the fourth quarter, followed by a recovery in early 2024. He also highlighted the successful integration of the FlexSteel business and the appointment of Steve Tadlock as its CEO.
"I am pleased with our team's focus on execution in the third quarter. Revenues continue to outperform the year-to-date reduction in U.S. land rig count levels. We have received strong positive feedback on FlexSteel products and customers continue to recognize its many benefits relative to traditional line pipe and competitors' spoolable offerings."
Outlook and Conference Call
Cactus Inc (WHD, Financial) will host a conference call to discuss the financial and operational results, providing an opportunity for analysts and investors to engage with the management team. The call will be webcast on the company's website, and an archived version will be available shortly after the call's conclusion.
Overall, Cactus Inc (WHD, Financial)'s third-quarter earnings report reflects a company that continues to perform well financially, with a strong net income increase and a solid cash position. The company's strategic focus on its Pressure Control and Spoolable Technologies segments, coupled with its prudent financial management, positions it favorably for the future.
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Explore the complete 8-K earnings release (here) from Cactus Inc for further details.
