CAUTIONARY ~~STATEMENT~~NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form ~~10‑Q~~10-Q (the “Quarterly Report”) contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When used in this Quarterly Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify ~~forward‑looking~~forward-looking statements, although not all ~~forward‑looking~~forward-looking statements contain such identifying words. These ~~forward‑looking~~forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward‑looking statements, you should keep in mind the risk factors and other cautionary statements described under “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (our “2021 Annual Report”) and under “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and other cautionary statements contained herein. These forward‑looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.

~~Forward‑looking~~

Important factors that could cause actual results to differ materially from those contained in the forward-looking statements ~~may~~ include, ~~statements about:~~

~~demand for our products and services, which is affected by, among other things, changes in the price of, and demand for, crude oil and natural gas in domestic and international markets;~~

but are not limited to:

~~the level of growth in number of rigs and well count and lack of takeaway capacity in areas such as the Permian;~~

•demand for our products and services, which is affected by, among other things, changes in the price of crude oil and natural gas in domestic and international markets;

~~the level of fracturing activity and the availability of fracturing equipment and pressure pumping services;~~

•the number of active rigs, pad sizes, drilling and completion efficiencies, lateral lengths, well spacings and associated well counts and availability of takeaway and storage capacity;

~~the size and timing of orders;~~

•disparities in activity levels between private operators and large publicly-traded exploration and production (“E&P”) companies;

~~availability of raw materials;~~

•the number of active workover rigs;

~~expectations regarding raw materials, overhead and operating costs and margins;~~

•availability and cost of capital and capital spending discipline exercised by customers;

~~availability of skilled and qualified workers;~~

•customers’ use of free cash flow to increase dividends and/or share buybacks rather than to increase production;

~~potential liabilities arising out of the installation, use or misuse of our products;~~

•overall oilfield service cost inflation;

~~the possibility of cancellation of orders;~~

•our success in cost recovery efforts;

~~our business strategy;~~

•the financial health of our customers and our credit risk of customer non-payment;

~~our financial strategy, operating cash flows, liquidity and capital required for our business;~~

•changes in the number of drilled but uncompleted wells (DUCs) and the level of completion activity;

~~our future revenue, income and operating performance;~~

•the size and timing of orders;

~~the termination of relationships with major customers or suppliers;~~

•availability and cost of raw materials, components and imported items;

~~warranty and product liability claims;~~

•changes in inland and ocean shipping costs, the availability of containers and vessels from Asia as well as port congestion and domestic trucking capacity;

~~laws and regulations, including environmental regulations, that may increase our costs, limit the demand for our products and services or restrict our operations;~~

•transportation differentials associated with reduced capacity in and out of the storage hub in Cushing, Oklahoma;

~~disruptions in the political, regulatory, economic and social conditions domestically or internationally;~~

•expectations regarding overhead and operating costs and margins;

~~increased import tariffs assessed on products from China or imported raw materials used in the manufacture of our goods in the United States;~~

•the impact of inflation, rising interest rates and the threat of a recession;

~~a failure of our information technology infrastructure or any significant breach of security;~~

•availability and cost of skilled and qualified workers and our ability to hire and retain such workers;

~~potential uninsured claims and litigation against us;~~

•potential liabilities such as warranty and product liability claims arising out of the installation, use or misuse of our products;

•the possibility of cancelled or delayed orders;

•our business strategy;

•our financial strategy, operating cash flows, liquidity and capital required for our business;

•our future revenue, income and operating performance;

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~~our dependence on the continuing services of certain of our key managers and employees; and~~

•our ability to pay dividends and the amounts of any such dividends;

~~plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical.~~

•consolidation activity involving our customers;

•the addition or termination of relationships with major customers or suppliers;

•laws and regulations, including environmental regulations, that may increase our costs, limit the demand for our products and services or restrict our operations;

•disruptions in political, regulatory, economic and social conditions domestically or internationally, including, for instance, the armed conflict between Russia and Ukraine and associated economic sanctions on Russia;

•the severity and duration of the ongoing coronavirus (“COVID”) pandemic and the extent of its impact on our business, including employee absenteeism;

•outbreaks of other pandemic or contagious diseases that may disrupt our operations, suppliers or facilities or impact demand for oil and natural gas;

•the impact of actions taken by the Organization of Petroleum Exporting Countries (OPEC+) and other oil and gas producing countries affecting the supply of oil and gas;

•the impact of planned and possible future releases from the Strategic Petroleum Reserve;

•the impact of disruptions in Russian oil and gas deliveries resulting from the conflict in Ukraine;

•takeaway capacity, particularly in the Northeastern United States;

•the impact of the fire at the Freeport, TX liquified natural gas (“LNG”) facility on associated natural gas demand;

•changes in import tariffs or duties assessed on products and imported raw materials used in the production and assembly of our goods which could negatively impact margins and our working capital;

•the significance of future liabilities under the Tax Receivable Agreement (the “TRA”) we entered into with certain current or past direct and indirect owners of Cactus Wellhead, LLC (the “TRA Holders”) in connection with our initial public offering;

•the impact of shipping delays on our operations and level of working capital;

•a failure of our information technology infrastructure or any significant breach of security;

•potential uninsured claims and litigation against us;

•competition and overall capacity within the oilfield services industry;

•availability of pressure pumping fleets and oil country tubular goods (OCTG);

•our dependence on the continuing services of certain of our key managers and employees;

•currency exchange rate fluctuations associated with our international operations; and

•plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical.

We caution you that these ~~forward‑looking~~forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the operation of our business.

These risks include, but are not limited to, the risks described in our 2021 Annual Report under “Part I, Item 1A. Risk Factors,” and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 under “Part II, Item 1A. Risk Factors.” Should one or more of the risks or uncertainties described in this Quarterly Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any ~~forward‑looking~~forward-looking statements.

All ~~forward‑looking~~forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral ~~forward‑looking~~forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any ~~forward‑looking~~forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	March 31,		December 31,
	2018		2017			June 30, 2022		December 31, 2021
	(in thousands, except per share data)					(in thousands, except per share data)
Assets					Assets
Current assets					Current assets
Cash and cash equivalents	$	7,860	$	7,574	Cash and cash equivalents	$	311,684	$	301,669
Accounts receivable, net		84,800		84,173
Accounts receivable, net of allowance of $920 and $741, respectively					Accounts receivable, net of allowance of $920 and $741, respectively	125,821		89,205
Inventories		69,533		64,450	Inventories	149,037		119,817
Prepaid expenses and other current assets		5,563		7,732	Prepaid expenses and other current assets	7,985		7,794
Total current assets		167,756		163,929	Total current assets	594,527		518,485
Property and equipment, net		109,492		94,654	Property and equipment, net	130,376		129,117
Operating lease right-of-use assets, net					Operating lease right-of-use assets, net	20,910		22,538
Goodwill		7,824		7,824	Goodwill	7,824		7,824
Deferred tax asset, net		73,215		—	Deferred tax asset, net	315,495		303,074
Other noncurrent assets		48		49	Other noncurrent assets	992		1,040
Total assets	$	358,335	$	266,456	Total assets	$	1,070,124	$	982,078
Liabilities and Equity					Liabilities and Equity
Current liabilities					Current liabilities
Accounts payable	$	38,575	$	35,080	Accounts payable	$	57,366	$	42,818
Accrued expenses and other current liabilities		14,584		10,559	Accrued expenses and other current liabilities	33,620		28,240
Capital lease obligations, current portion		5,578		4,667
Current maturities of long-term debt		—		2,568
Current portion of liability related to tax receivable agreement					Current portion of liability related to tax receivable agreement	11,769		11,769
Finance lease obligations, current portion					Finance lease obligations, current portion	5,630		4,867
Operating lease liabilities, current portion					Operating lease liabilities, current portion	5,253		4,880
Total current liabilities		58,737		52,874	Total current liabilities	113,638		92,574
Capital lease obligations, net of current portion		8,809		7,946
Deferred tax liability, net		489		416	Deferred tax liability, net	1,247		1,172
Liability related to tax receivable agreement		62,989		—
Long-term debt, net		—		241,437
Liability related to tax receivable agreement, net of current portion					Liability related to tax receivable agreement, net of current portion	288,659		269,838
Finance lease obligations, net of current portion					Finance lease obligations, net of current portion	6,912		5,811
Operating lease liabilities, net of current portion					Operating lease liabilities, net of current portion	15,860		17,650
Total liabilities		131,024		302,673	Total liabilities	426,316		387,045
Commitments and contingencies					Commitments and contingencies			0
Stockholders' / Members' equity (deficit)
Members' equity (deficit)		—		(36,299)
Preferred stock, $0.01 par value, 10,000 shares authorized, none issued and outstanding as of March 31, 2018		—		—
Class A common stock, $0.01 par value, 300,000 shares authorized, 26,450 shares issued and outstanding as of March 31, 2018		265		—
Class B common stock, $0.01 par value, 215,000 shares authorized, 48,440 shares issued and outstanding as of March 31, 2018		—		—
0Stockholders’ equity					0Stockholders’ equity
Preferred stock, $0.01 par value, 10,000 shares authorized, none issued and outstanding					Preferred stock, $0.01 par value, 10,000 shares authorized, none issued and outstanding	—		—
Class A common stock, $0.01 par value, 300,000 shares authorized, 60,613 and 59,035 shares issued and outstanding					Class A common stock, $0.01 par value, 300,000 shares authorized, 60,613 and 59,035 shares issued and outstanding	606		590
Class B common stock, $0.01 par value, 215,000 shares authorized, 15,263 and 16,674 shares issued and outstanding					Class B common stock, $0.01 par value, 215,000 shares authorized, 15,263 and 16,674 shares issued and outstanding	—		—
Additional paid-in capital		83,145		—	Additional paid-in capital	304,418		289,600
Retained earnings		3,753		—	Retained earnings	212,913		178,446
Accumulated other comprehensive income		321		82
Total stockholders' equity attributable to Cactus Inc. and members' equity (deficit)		87,484		(36,217)
Accumulated other comprehensive income (loss)					Accumulated other comprehensive income (loss)	(698)		8
Total stockholders’ equity attributable to Cactus Inc.					Total stockholders’ equity attributable to Cactus Inc.	517,239		468,644
Non-controlling interest		139,827		—	Non-controlling interest	126,569		126,389
Total stockholders' and members' equity (deficit)		227,311		(36,217)
Total stockholders’ equity					Total stockholders’ equity	643,808		595,033
Total liabilities and equity	$	358,335	$	266,456	Total liabilities and equity	$	1,070,124	$	982,078

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017			2022		2021		2022		2021
	(in thousands, except per share data)					(in thousands, except per share data)
Revenues					Revenues
Product revenue	$	58,926	$	33,038	Product revenue	$	112,232	$	70,345	$	206,272	$	122,301
Rental revenue		29,145		12,975	Rental revenue	23,695		14,644		46,038		27,133
Field service and other revenue		27,039		12,490	Field service and other revenue	34,288		23,904		63,804		43,876
Total revenues		115,110		58,503	Total revenues	170,215		108,893		316,114		193,310

Costs and expenses					Costs and expenses
Cost of product revenue		37,066		23,195	Cost of product revenue	69,172		48,100		130,092		84,621
Cost of rental revenue		12,176		8,273	Cost of rental revenue	15,328		14,403		30,417		26,574
Cost of field service and other revenue		21,537		10,938	Cost of field service and other revenue	26,734		17,692		51,540		32,155
Selling, general and administrative expenses		9,114		6,103	Selling, general and administrative expenses	14,740		11,384		28,834		21,011
Total costs and expenses		79,893		48,509	Total costs and expenses	125,974		91,579		240,883		164,361
Income from operations		35,217		9,994	Income from operations	44,241		17,314		75,231		28,949

Interest expense, net		(2,852)		(4,986)
Other income (expense), net		(4,305)		—
Interest income (expense), net					Interest income (expense), net	304		(181)		204		(333)
Other expense, net					Other expense, net	—		(1,004)		(1,115)		(1,410)
Income before income taxes		28,060		5,008	Income before income taxes	44,545		16,129		74,320		27,206
Income tax expense		1,652		154
Income tax expense (benefit)					Income tax expense (benefit)	8,765		1,355		11,457		(2,704)
Net income	$	26,408	$	4,854	Net income	$	35,780	$	14,774	$	62,863	$	29,910
Less: Pre-IPO net income attributable to Cactus LLC		13,648		4,854
Less: net income attributable to non-controlling interest		9,007		—	Less: net income attributable to non-controlling interest	8,636		4,381		15,103		7,958
Net income attributable to Cactus Inc.	$	3,753	$	—	Net income attributable to Cactus Inc.	$	27,144	$	10,393	$	47,760	$	21,952

Earnings per Class A Share - basic	$	0.14	$	—
Earnings per Class A Share - diluted	$	0.14	$	—
Earnings per Class A share - basic					Earnings per Class A share - basic	$	0.45	$	0.19	$	0.80	$	0.42
Earnings per Class A share - diluted					Earnings per Class A share - diluted	$	0.44	$	0.18	$	0.78	$	0.37

Weighted average Class A Shares outstanding - basic		26,450		—
Weighted average Class A Shares outstanding - diluted		26,648		—
Weighted average Class A shares outstanding - basic					Weighted average Class A shares outstanding - basic	60,523		55,048		59,909		52,124
Weighted average Class A shares outstanding - diluted					Weighted average Class A shares outstanding - diluted	76,322		75,997		76,262		75,955

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017			2022		2021		2022		2021
	(in thousands)					(in thousands)
Net income	$	26,408	$	4,854	Net income	$	35,780	$	14,774	$	62,863	$	29,910
Foreign currency translation		239		177
Foreign currency translation adjustments					Foreign currency translation adjustments	(1,367)		(82)		(931)		(275)
Comprehensive income	$	26,647	$	5,031	Comprehensive income	$	34,413	$	14,692	$	61,932	$	29,635
Less: Pre-IPO comprehensive income attributable to Cactus LLC		13,928		5,031
Less: comprehensive income attributable to non-controlling interest		8,981		—	Less: comprehensive income attributable to non-controlling interest	8,302		4,337		14,878		7,796
Comprehensive income attributable to Cactus Inc.	$	3,738	$	—	Comprehensive income attributable to Cactus Inc.	$	26,111	$	10,355	$	47,054	$	21,839

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

Accumulated

Members'

Class A

Class B

Additional

Other

Non-

Total


Equity

Common Stock

Common Stock

Paid-In

Retained

Comprehensive

controlling

Equity
(in thousands)

(Deficit)

Shares

Amount

Shares

Amount

Capital

Earnings

Income

Interest

(Deficit)
Balance at December 31, 2017

$
(36,299)

—

$
—

—

$
—

$
—

$
—

$
82

$
—

$
(36,217)
Member distributions prior to IPO

(26,000)

—

—

—

—

—

—

—

—

(26,000)
Net income prior to IPO and reorganization

13,648

—

—

—

—

—

—

—

—

13,648
Effect of IPO and reorganization (Note 1)

48,651

26,450

265

48,440

—

71,195

—

—

130,861

250,972
Member distributions after IPO

—

—

—

—

—

—

—

—

(41)

(41)
Additional paid-in capital related to tax receivable agreement

—

—

—

—

—

11,116

—

—

—

11,116
Other comprehensive income

—

—

—

—

—

—

—

239

—

239
Stock-based compensation

—

—

—

—

—

834

—

—

—

834
Net income after IPO and reorganization

—

—

—

—

—

—

3,753

—

9,007

12,760
Balance at March 31, 2018

$
—

26,450

$
265

48,440

$
—

$
83,145

$
3,753

$
321

$
139,827

$
227,311


	Class A			Class B			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Equity
	Common Stock			Common Stock
(in thousands)	Shares	Amount		Shares	Amount
Balance at March 31, 2022	60,197	$	602	15,674	$	—	$	298,893	$	192,493	$	335	$	122,779	$	615,102
Member distributions	—	—		—	—		—		—		—		(1,694)		(1,694)
Effect of CW Unit redemptions	411	4		(411)	—		3,267		—		—		(3,271)		—
Tax impact of equity transactions	—	—		—	—		433		—		—		—		433
Equity award vestings	5	—		—	—		(51)		—		—		(21)		(72)
Other comprehensive loss	—	—		—	—		—		—		(1,033)		(334)		(1,367)
Stock-based compensation	—	—		—	—		1,876		—		—		474		2,350
Cash dividends declared ($0.11 per share)	—	—		—	—		—		(6,724)		—		—		(6,724)
Net income	—	—		—	—		—		27,144		—		8,636		35,780
Balance at June 30, 2022	60,613	$	606	15,263	$	—	$	304,418	$	212,913	$	(698)	$	126,569	$	643,808

Balance at March 31, 2021	54,317	$	543	21,383	$	—	$	247,875	$	157,286	$	255	$	153,091	$	559,050
Member distributions	—	—		—	—		—		—		—		(1,886)		(1,886)
Effect of CW Unit redemptions	3,718	37		(3,718)	—		26,912		—		—		(26,949)		—
Tax impact of equity transactions	—	—		—	—		1,931		—		—		—		1,931
Equity award vestings	3	—		—	—		(19)		—		—		(17)		(36)
Other comprehensive loss	—	—		—	—		—		—		(38)		(44)		(82)
Stock-based compensation	—	—		—	—		1,806		—		—		629		2,435
Cash dividends declared ($0.09 per share)	—	—		—	—		—		(5,011)		—		—		(5,011)
Net income	—	—		—	—		—		10,393		—		4,381		14,774
Balance at June 30, 2021	58,038	$	580	17,665	$	—	$	278,505	$	162,668	$	217	$	129,205	$	571,175

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~

STOCKHOLDERS’ EQUITY

(unaudited)

Three Months Ended March 31,

2018

2017

(in thousands)
Cash flows from operating activities

Net income

$
26,408

$
4,854
Reconciliation of net income to net cash provided by operating activities

Depreciation and amortization

6,621

5,313
Debt discount and deferred loan cost amortization

219

438
Stock-based compensation

834

—
Inventory obsolescence

451

—
Loss on disposal of assets

29

235
Deferred income taxes

963

29
Loss on debt extinguishment

4,305

—
Changes in operating assets and liabilities

Accounts receivable

(419)

(8,998)
Inventories

(5,594)

(7,648)
Prepaid expenses and other assets

(56)

(1,140)
Accounts payable

792

12,508
Accrued expenses and other liabilities

4,012

341
Net cash provided by operating activities

38,565

5,932

Cash flows from investing activities

Capital expenditures

(16,127)

(8,584)
Proceeds from sale of assets

440

83
Net cash used in investing activities

(15,687)

(8,501)

Cash flows from financing activities

Principal payments on long-term debt

(248,529)

(642)
Payments on capital leases

(1,266)

(319)
Net proceeds from IPO

469,621

—
Distributions to members

(26,041)

—
Redemptions of CW Units

(216,425)

—
Net cash used in financing activities

(22,640)

(961)

Effect of exchange rate changes on cash and cash equivalents

48

12

Net increase (decrease) in cash and cash equivalents

286

(3,518)

Cash and cash equivalents

Beginning of period

7,574

8,688
End of period

$
7,860

$
5,170


	Class A			Class B			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Equity
	Common Stock			Common Stock
(in thousands)	Shares	Amount		Shares	Amount
Balance at December 31, 2021	59,035	$	590	16,674	$	—	$	289,600	$	178,446	$	8	$	126,389	$	595,033
Member distributions	—	—		—	—		—		—		—		(3,348)		(3,348)
Effect of CW Unit redemptions	1,411	14		(1,411)	—		11,145		—		—		(11,159)		—
Tax impact of equity transactions	—	—		—	—		2,964		—		—		—		2,964
Equity award vestings	167	2		—	—		(3,263)		—		—		(1,235)		(4,496)
Other comprehensive loss	—	—		—	—		—		—		(706)		(225)		(931)
Stock-based compensation	—	—		—	—		3,972		—		—		1,044		5,016
Cash dividends declared ($0.22 per share)	—	—		—	—		—		(13,293)		—		—		(13,293)
Net income	—	—		—	—		—		47,760		—		15,103		62,863
Balance at June 30, 2022	60,613	$	606	15,263	$	—	$	304,418	$	212,913	$	(698)	$	126,569	$	643,808

Balance at December 31, 2020	47,713	$	477	27,655	$	—	$	202,077	$	150,086	$	330	$	197,800	$	550,770
Member distributions	—	—		—	—		—		—		—		(3,560)		(3,560)
Effect of CW Unit redemptions	9,990	100		(9,990)	—		71,911		—		—		(72,011)		—
Tax impact of equity transactions	—	—		—	—		2,436		—		—		—		2,436
Equity award vestings	335	3		—	—		(1,067)		—		—		(2,110)		(3,174)
Other comprehensive loss	—	—		—	—		—		—		(113)		(162)		(275)
Stock-based compensation	—	—		—	—		3,148		—		—		1,290		4,438
Cash dividends declared ($0.18 per share)	—	—		—	—		—		(9,370)		—		—		(9,370)
Net income	—	—		—	—		—		21,952		—		7,958		29,910
Balance at June 30, 2021	58,038	$	580	17,665	$	—	$	278,505	$	162,668	$	217	$	129,205	$	571,175

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Six Months Ended June 30,
	2022		2021
	(in thousands)
Cash flows from operating activities
Net income	$	62,863	$	29,910
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization	17,592		18,352
Deferred financing cost amortization	84		84
Stock-based compensation	5,016		4,438
Provision for expected credit losses	240		149
Inventory obsolescence	959		1,566
Gain on disposal of assets	(518)		(613)
Deferred income taxes	8,504		(4,506)
Loss from revaluation of liability related to tax receivable agreement	1,115		1,004
Changes in operating assets and liabilities:
Accounts receivable	(36,484)		(27,858)
Inventories	(30,670)		(2,569)
Prepaid expenses and other assets	(210)		499
Accounts payable	14,238		12,774
Accrued expenses and other liabilities	5,494		9,999

Net cash provided by operating activities	48,223		43,229

Cash flows from investing activities
Capital expenditures and other	(13,752)		(5,461)
Proceeds from sale of assets	876		1,108
Net cash used in investing activities	(12,876)		(4,353)

Cash flows from financing activities
Payments on finance leases	(2,987)		(2,479)
Dividends paid to Class A common stock shareholders	(13,335)		(9,426)
Distributions to members	(3,348)		(3,560)
Repurchases of shares	(4,495)		(3,174)
Net cash used in financing activities	(24,165)		(18,639)

Effect of exchange rate changes on cash and cash equivalents	(1,167)		186

Net increase in cash and cash equivalents	10,015		20,423

Cash and cash equivalents
Beginning of period	301,669		288,659
End of period	$	311,684	$	309,082

Supplemental disclosure of cash flow information
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new lease obligations	$	6,340	$	9,859
Property and equipment in accounts payable	$	1,729	$	694

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CACTUS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(in thousands, except ~~share and~~ per share data, or as otherwise indicated)

1. ~~Organization~~Preparation of Interim Financial Statements and ~~Nature~~Other Items

Basis of ~~Operations~~

~~Description~~Presentation

The financial statements presented in this report represent the consolidation of ~~Business~~

Cactus, Inc. (“Cactus ~~Inc”~~Inc.”) and its ~~consolidated~~ subsidiaries (the “Company”), including Cactus Wellhead, LLC (“Cactus LLC”) are primarily engaged in the design, manufacture and sale of wellhead and pressure control equipment. In addition, we maintain a fleet of frac valves and ancillary equipment for short-term rental, as well as offering repair and refurbishment services and the provision of service crews to assist in the installation and operations of pressure control systems. We operate through 14 U.S. service centers located in Texas, Oklahoma, New Mexico, Louisiana, Pennsylvania, North Dakota, Wyoming and Colorado, and one service center in Australia, with our corporate headquarters located in Houston, Texas.

. Cactus Inc. ~~was incorporated on February 17, 2017 as a Delaware corporation for the purpose of completing an initial public offering of equity and related transactions. Cactus LLC~~ is a ~~Delaware~~holding company whose only material asset is an equity interest consisting of units representing limited liability company and was formed on July 11, 2011. Except as otherwise indicated or required by the context, all references to “Cactus,” “we,” “us” and “our” refer to Cactus Inc. and its consolidated subsidiaries (including Cactus LLC) following the completion of our IPO and (ii) Cactus LLC and its consolidated subsidiaries prior to the completion of our IPO.

~~Initial Public Offering~~

On February 12, 2018, we completed the initial public offering of 23,000,000 shares of Class A common stock (our “IPO”), par value $0.01 per share, at a price to the public of $19.00 per share. We received net proceeds of $408.0 million after deducting underwriting discounts and commissions and $2.8 million in current offering expenses of our IPO. We also paid $2.2 million in offering expenses during 2017 that were recorded to prepaid expenses in the consolidated balance sheet as of December 31, 2017. On February 14, 2018 we completed the sale of an additional 3,450,000 shares of Class A common stock pursuant to the exercise in full by the underwriters of their option to purchase additional shares of Class A common stock (the “Option”), from which we received an additional $61.6 million of net proceeds after deducting underwriting discounts and commissions. We contributed all of the net proceeds of our IPO (including from the Option) to Cactus LLC in exchange for unitsinterests in Cactus LLC (“CW Units”). Cactus Inc. is ~~a holding company who is the sole managing member of Cactus LLC.~~

Cactus LLC used the total $469.6 million of net proceeds (including net proceeds from the Option) to (i) repay all of the borrowings outstanding under its term loan facility, including accrued interest, of $251.0 million and (ii) redeem $216.4 million of CW Units from certain direct and indirect owners of Cactus LLC. The remaining $2.2 million was held by Cactus LLC to cover previously paid offering expenses in 2017.

As the sole managing member of Cactus LLC ~~Cactus Inc.~~and operates and controls all of the business and affairs of Cactus LLC and conducts its business through Cactus LLC and its subsidiaries. As a result, Cactus Inc. consolidates the financial results of Cactus LLC and its subsidiaries and reports a non-controlling interest related to the portion of CW Units not owned by Cactus Inc., which reduces net income attributable to holders of Cactus Inc.’s Class A ~~stockholders. As of March 31, 2018, Cactus Inc. owned 35.3% of Cactus LLC.~~

~~Tax Receivable Agreement~~

In connection with our IPO, we entered into a tax receivable agreement (the “TRA”) with certain direct and indirect owners of CW Units (the “TRA Holders”). The TRA generally provides for the payment by Cactus Inc. to the TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax or franchise tax that Cactus Inc. actually realizes or is deemed to realize in certain circumstances. Cactus Inc. will retain the benefit of the remaining 15% of these net cash savings. See Note 2 for further details of the TRA.

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~~Reorganization~~

~~In connection with our IPO, we completed a series of reorganization transactions (the “Reorganization”), including the following:~~

~~(a)~~

~~all of the membership interests in Cactus LLC were converted into a single class of CW Units;~~

~~(b)~~

~~Cactus Inc. contributed the net proceeds of our IPO to Cactus LLC in exchange for 23,000,000 CW Units;~~

~~(c)~~

Cactus LLC used the net proceeds of our IPO that it received from Cactus Inc. to repay the borrowings outstanding, plus accrued interest, under its term loan facility and to redeem 8,667,841 CW Units from the owners thereof;

~~(d)~~

Cactus Inc. issued and contributed a total of 51,889,772 shares of its Class B common stock, par value $0.01 per share, equal to the number of outstanding CW Units held by the owners thereof following the redemption described in (c) above to Cactus LLC (the Class B common stock has no economic interest and does not share in cash dividends or liquidation rights, but entitles its holders to one vote on all matters to be voted on by Cactus’ shareholders generally);

~~(e)~~

Cactus LLC distributed to each of the owners that continued to own CW Units following our IPO one share of Class B common stock for each CW Unit such owner held following the redemption described in (c) above;

~~(f)~~

~~Cactus Inc. contributed the net proceeds from the exercise of the Option to Cactus LLC in return for 3,450,000 additional CW Units, and~~

~~(g)~~

~~Cactus LLC used the net proceeds from the Option to redeem 3,450,000 CW Units from the owners thereof, and Cactus Inc. canceled a corresponding number of shares of Class B common stock.~~

~~As of March 31, 2018, there were 26,450,000 shares of~~ common stock, par value $0.01 per share (“Class A common ~~stock~~stock”). Except as otherwise indicated or required by the context, all references to “Cactus,” “we,” “us” and ~~48,439,772 shares of Class B common stock issued~~“our” refer to Cactus Inc. and ~~outstanding.~~

~~Other IPO related items~~

~~In conjunction with our IPO, we also:~~

~~(a)wrote off $2.2 million of prepaid IPO costs incurred in 2017 as a reduction of additional paid-in capital;~~

~~(b)wrote off $4.3 million in unamortized debt discount and deferred loan costs related to the repayment of the term loan;~~

~~(c)issued 737,493 shares of restricted stock units and began recording stock-based compensation;~~

(d)recorded a deferred tax asset of $74.1 million related to the step-up in basis, a liability from the TRA of $63.0 million representing 85% of the expected net cash tax savings from the step-up in basis that will be paid to TRA Holders, and recorded $11.1 million as additional paid-in capital;

~~(e)reset the previous accumulated deficit in Cactus LLC to zero; and~~

~~(f)recorded $130.9 million of non-controlling interest representing the portion of CW Units not owned by Cactus Inc.~~

Prior to our IPO, on January 25, 2018, Cactus LLC paid a cash distribution of $26.0 million to pre-IPO owners. This distribution was funded by borrowing under the revolving credit facility. The purpose of the distribution was to provide funds to these owners to pay their federal and state tax liabilities associated with taxable income recognized by them for periods prior to the completion of our IPO as a result of their ownership interests in Cactus LLC. The borrowings under the revolving credit facility were repaid as of March 31, 2018.

2.~~Preparation of Interim Financial Statements and Other Items~~

~~Basis of Presentation~~

its consolidated subsidiaries.

The unaudited ~~and~~ condensed consolidated financial statements ~~(“consolidated financial statements”)~~ have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)~~. These consolidated financial statements include the accounts of Cactus Inc. and its wholly owned subsidiaries~~ for interim financial information. Accordingly, these consolidated financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read together with our Annual Report ~~for~~on Form ~~10‑K~~10-K for the year ended December 31, ~~2017. All significant intercompany transactions and balances have been eliminated upon consolidation.~~

2021.

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~~In our opinion, the~~The consolidated financial statements include all adjustments, which are of a normal recurring nature, unless otherwise disclosed, necessary for a fair statement of the consolidated financial statements for the interim periods. The results of operations for ~~the three months ended March 31, 2018~~any interim period are not necessarily indicative of the results to be expected for the full year.

~~As discussed in Note 1, as a result~~

Use of Estimates

In preparing our IPO and Reorganization, Cactus Inc. is the sole managing member of Cactus LLC and consolidates entities in which it has a controlling financial interest. The Reorganization was considered a transaction between entities under common control. As a result, the financial statements for periods prior to our IPO and the Reorganization have been adjusted to combine the previously separate entities for presentation purposes. However, Cactus Inc. had no operations or assets and liabilities prior to our IPO. As such, for periods prior to the completion of our IPO, the consolidated financial statements ~~represent~~in conformity with GAAP, we make numerous estimates and assumptions that affect the ~~historical financial position~~accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. We must make these estimates and assumptions because certain information that we use is dependent on future events, cannot be calculated with a high degree of precision from available data or is not otherwise capable of being readily calculated based on accepted methodologies. In some cases, these estimates are particularly difficult to determine, and we must exercise significant judgment. Actual results ~~of operations of Cactus LLC~~could differ materially from the estimates and ~~its subsidiaries. For periods after~~assumptions that we use in the ~~completion~~preparation of our ~~IPO, the~~consolidated financial ~~position and results of operations include those of Cactus and report the non-controlling interest related~~statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to the ~~portion of CW Units not owned by Cactus Inc.~~

~~Limitation of Members’ Liability~~

~~Under the terms of the First Amended~~current period presentation.

2.Concentrations, Risks and ~~Restated Limited Liability Company Operating Agreement, dated as of January 29, 2018 of Cactus LLC (the “LLC Agreement”), the members of Cactus LLC~~Uncertainties

Significant Customers

Our customers are ~~not obligated for debt, liabilities, contracts or~~primarily oil and natural gas E&P companies representing private operators, publicly-traded independents, majors and other ~~obligations of Cactus LLC. Profits and losses are allocated to members as defined~~companies with operations in the ~~LLC Agreement.~~

~~Policy for Interim Period Tax Allocation~~

~~For interim income tax reporting we estimate our annual effective tax rate~~key U.S. oil and apply it to our year-to-date ordinary income. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur. Our IPO closed on February 12, 2018, and the annual effective tax rate was determined considering the periods before and after our IPO. Accordingly, net income attributable to non-controlling interest includes its share of respective income tax expense, which is not subject to U.S. federal and state income tax expense, and net income attributable to Cactus Inc. includes its share of respective income tax expense, which does include U.S. federal and state income tax expense. As of March 31, 2018, Cactus Inc. owned 35.3% of Cactus LLC and non-controlling interest owned 64.7% of Cactus LLC.

~~Income Taxes~~

~~Cactus Inc. is a corporation and is subject to U.S. federal~~gas producing basins as well as ~~state income tax related to its ownership percentage in Cactus LLC.~~

Cactus LLC is a limited liability company treated as a partnership for U.S. federal income tax purposes and files a U.S. Return of Partnership Income, which includes both our U.S. and foreign operations. Consequently, the members of Cactus LLC are taxed individually on their share of earnings for U.S. federal and state income tax purposes. Additionally, our operations in both Australia and ~~China are subject to local country income taxes.~~

~~Table~~the Kingdom of ~~Contents~~

~~The provision for income tax for~~Saudi Arabia. For the ~~three~~six months ended ~~March 31, 2018 consisted of:~~

June 30, 2022 and 2021, one customer represented approximately 10% and 13%, respectively, of our consolidated revenues.

Three Months Ended March 31,

2018
Current:

Federal

$
211
State

240
Foreign

238
Total current income taxes

689
Deferred:

Federal

762
State

128
Foreign

73
Total deferred income taxes

963
Total provision for income taxes

$
1,652
Significant Vendors

The ~~effective income tax rate was different~~principal raw materials used in the manufacture of our products and rental equipment include forgings and plate, castings, tube and bar stock. In addition, we require accessory items (such as elastomers, ring gaskets, studs and nuts) and machined components and assemblies. We purchase these items from vendors primarily located in the ~~statutory U.S. federal income tax rate due to~~United States, China, India and Australia. For the ~~following:~~

Three Months Ended March 31,

2018
Income taxes at 21% statutory tax rate

$
5,893
Net difference resulting from:

Profit of Cactus LLC Pre-IPO not subject to U.S. federal tax

(2,808)
Profit of non-controlling interest not subject to U.S. federal tax

(1,926)
Foreign earnings subject to different tax rates

50
State income taxes

318
Foreign withholding taxes

73
Change in valuation allowance

(20)
Other

72
Total provision for income taxes

$
1,652

~~Stock-based Compensation~~

We measure the cost of equity-based awards based on the grant-date fair value and we allocate the compensation expense over the corresponding service period, which is usually the vesting period, using the straight-line method. All grant date fair value is expensed immediately for awards that are fully vested as of the grant date.

~~In conjunction with our IPO, we granted 737,493 restricted stock unit awards with a grant date fair value of $19.00. The majority of these awards vest over a three year period. During the three~~six months ended March 31, 2018, we recorded $0.8 million of stock-based compensation expense mostly included in selling, general and administrative expenses. As of March 31, 2018, there was $13.2 million of unrecognized compensation cost related to these unvested restricted stock unit awards, which is expected to be recognized over a weighted average period of 2.8 years.

~~Significant Customers~~

~~For the three months ended March 31, 2018, Cactus had one customer that represented 11% of consolidated revenues. No other customer~~June 30, 2022, no vendor represented 10% or more of consolidated revenues during this period. For the three months ended March 31, 2017, Cactus had two customers each representing 10% or more of consolidated revenues, whose combined revenues represented approximately 21% of consolidated revenues. There were no other customers representing 10% or more of consolidated revenues during this period.

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~~Significant Vendors~~

We purchase a significant portion of supplies, equipment and machined components from a single vendor. For the three months ended March 31, 2018 and 2017, purchases from this vendor totaled $10.4 million and $6.4 million, respectively. These figures represent approximately 21% and 20% for the respective periods, ofour total ~~third party~~third-party vendor purchases of raw materials, finished products, components, equipment, machining and other services. ~~Amounts~~For the six months ended

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June 30, 2021, one vendor represented approximately 10% of our total third-party vendor purchases of raw materials, finished products, components, equipment, machining and other services.

3.Accounts Receivable and Allowance for Credit Losses

We extend credit to customers in the normal course of business. Our customers are predominantly oil and gas E&P companies located in the U.S. Our receivables are short-term in nature and typically due in 30 to 45 days. We do not accrue interest on delinquent receivables. Accounts receivable includes amounts billed and currently due from customers and unbilled amounts for products delivered and services performed for which billings have not yet been submitted to the ~~vendor~~customers. Total unbilled revenue included in accounts ~~payable in the consolidated balance sheets~~receivable as of ~~March 31, 2018~~June 30, 2022 and December 31, ~~2017 totaled $7.2~~2021 was $28.3 million and ~~$7.4~~$24.1 million, respectively.

~~Use~~

We maintain an allowance for credit losses to provide for the amount of ~~Estimates~~

billed receivables we believe to be at risk of loss. In our determination of the allowance for credit losses, we pool receivables with similar risk characteristics based on customer size, credit ratings, payment history, bankruptcy status and other factors known to us and apply an expected credit loss percentage. The ~~preparation~~expected credit loss percentage is determined using historical loss data adjusted for current conditions and forecasts of ~~consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect~~future economic conditions. Accounts deemed uncollectible are applied against the ~~reported amounts~~allowance for credit losses. The following is a rollforward of ~~assets and liabilities and disclosure of contingent assets and liabilities~~our allowance for credit losses.


	Balance at Beginning of Period		Expense		Write off		Balance at End of Period
Six Months Ended June 30, 2022	$	741	$	240	$	(61)	$	920
Six Months Ended June 30, 2021	598		149		(117)		630

4.Inventories

Inventories are stated at the ~~date~~lower of ~~the consolidated financial statements~~cost or net realizable value. Cost is determined using standard cost (which approximates average cost) and ~~the reported amounts~~weighted average methods. Costs include an application of ~~revenues~~related material, direct labor, duties, tariffs, freight and ~~expenses during the reporting period. Such estimates include but are not limited to estimated losses on accounts receivables, estimated~~overhead costs. Net realizable value onis the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Reserves are made for excess and obsolete items based on a range of factors, including age, usage and technological or market changes that may impact demand for those products. Inventories consist of the following:


	June 30, 2022		December 31, 2021
Raw materials	$	2,695	$	1,870
Work-in-progress	6,159		4,288
Finished goods	140,183		113,659
	$	149,037	$	119,817

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5.Property and Equipment, net

Property and equipment are stated at cost. We manufacture or construct most of our rental assets. During the manufacture of these assets, they are reflected as construction in progress until complete. Property and equipment consists of the following:


	June 30, 2022		December 31, 2021
Land	$	5,590	$	3,203
Buildings and improvements	23,961		22,532
Machinery and equipment	57,468		56,937
Vehicles under finance lease	27,334		23,450
Rental equipment	187,464		180,704
Furniture and fixtures	1,750		1,755
Computers and software	3,605		3,495
Gross property and equipment	307,172		292,076
Less: Accumulated depreciation	(190,236)		(175,992)
Net property and equipment	116,936		116,084
Construction in progress	13,440		13,033
Total property and equipment, net	$	130,376	$	129,117

6.Debt

We had no debt outstanding as of June 30, 2022 and December 31, 2021.

On August 21, 2018, Cactus LLC entered into a five-year senior secured asset-based revolving credit facility with a syndicate of lenders and JPMorgan Chase Bank, N.A., as administrative agent for such lenders and as an issuing bank and swingline lender (the “ABL Credit Facility”). The ABL Credit Facility was amended in September 2020 and provides for up to $75.0 million in revolving commitments, up to $15.0 million of which is available for the issuance of letters of credit. The maximum amount that Cactus LLC may borrow under the ABL Credit Facility is subject to a borrowing base, which is based on a percentage of eligible accounts receivable and eligible inventory, ~~estimates~~subject to reserves and other adjustments. We were in compliance with all covenants under the ABL Credit Facility as of June 30, 2022.

On July 25, 2022, the ABL Credit Facility was amended to, among other things, increase the committed amount of the revolving credit facility to $80.0 million and extend the maturity date to July 25, 2027, or such earlier date that is 91 days prior to the maturity date of any indebtedness that has a principal balance exceeding $30.0 million.

7.Revenue

The majority of our revenues are derived from short-term contracts for fixed consideration or in the case of rentals, for a fixed charge per day while the equipment is in use by the customer. Product sales generally do not include right of return or other significant post-delivery obligations. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Revenues are recognized when we satisfy a performance obligation by transferring control of the promised goods or providing services to our customers at a point in time, in an amount specified in the contract with our customer and that reflects the consideration to which we expect to be entitled in exchange for those goods or services. The majority of our contracts with customers contain a single performance obligation to provide agreed upon products or services. For contracts with multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price. We do not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. We do not incur any material costs of obtaining contracts.

We do not adjust the amount of consideration per the contract for the effects of a significant financing component when we expect, at contract inception, that the period between the transfer of a promised good or service to a customer and when the customer pays for that good or service will be one year or less, which is in substantially all cases. Payment terms and conditions vary, although terms generally include a requirement of payment within 30 to 45 days. Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. We treat shipping and handling associated

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with outbound freight as a fulfillment cost instead of as a separate performance obligation. We recognize the cost for the associated shipping and handling when incurred as an expense in cost of sales.

We disaggregate revenue into three categories: product revenues, rental revenues and field service and other revenues. We have predominately domestic operations with a small amount of sales in Australia and the Kingdom of Saudi Arabia. The following table presents our revenues disaggregated by category:


	Three Months Ended June 30,								Six Months Ended June 30,
	2022				2021				2022					2021
Product revenue	$	112,232	66	%	$	70,345	65	%		$	206,272	65	%	$	122,301	63	%
Rental revenue	23,695		14	%	14,644		13	%		46,038		15	%	27,133		14	%
Field service and other revenue	34,288		20	%	23,904		22	%		63,804		20	%	43,876		23	%
Total revenues	$	170,215	100	%	$	108,893	100	%		$	316,114	100	%	$	193,310	100	%

At June 30, 2022, we had a deferred revenue balance of $1.4 million compared to the December 31, 2021 balance of $1.8 million. Deferred revenue represents our obligation to transfer products to or perform services for a customer for which we have received cash or billed in advance. The revenue that has been deferred will be recognized upon product delivery or as services are performed. As of June 30, 2022, we did not have any contracts with an original length of greater than a year from which revenue is expected to be recognized in the future related to fair value of reporting units for purposes of assessing goodwill and other indefinite-lived intangible assets for impairment and estimates of deferred tax assets related to the step-up in basis under the TRA and the associated liability under the TRA. Actual results could differ from those estimates.

performance obligations that are unsatisfied.

8.Tax Receivable Agreement

Pursuant to the LLC Agreement, each TRA Holder will, subject to certain limitations, have the right (the “Redemption Right”) to cause Cactus LLC to acquire all or at least a minimum portion of its CW Units for, at Cactus LLC’s election, (x) shares of our Class A common stock at a redemption ratio of one share of Class A common stock for each CW Unit redeemed, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions, or (y) an equivalent amount of cash. Alternatively, upon the exercise of the Redemption Right, Cactus Inc. (instead of Cactus LLC) will have the right (the “Call Right”) to acquire each tendered CW Unit directly from the exchanging TRA Holder for, at its election, (x) one share of Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions, or (y) an equivalent amount of cash. (TRA)

In connection with ~~any redemption of CW Units pursuant to~~our initial public offering (“IPO”) in February 2018, we entered into the ~~Redemption Right or our Call Right, the corresponding number of shares of Class B common stock will be canceled.~~

~~Cactus LLC has made~~TRA which generally provides for itself (and for each of its direct or indirect subsidiaries that is treated as a partnership for U.S. federal income tax purposes and that it controls) an election under Section 754 of the Internal Revenue Code (the “Code”) that will be effective for 2018 and each taxable year in which a redemption of CW Units pursuant to the Redemption Right or the Call Right occurs. Pursuant to the Section 754 election, redemptions of CW Units pursuant to the Redemption Right or the Call Right are expected to result in adjustments to the tax basis of the tangible and intangible assets of Cactus LLC. These adjustments will be allocated to Cactus Inc. Such adjustments to the tax basis of the tangible and intangible assets of Cactus LLC would not have been available to Cactus Inc. absent its acquisition or deemed acquisition of CW Units pursuant to the exercise of the Redemption Right or the Call Right. In addition, the repayment of borrowings outstanding under the Cactus LLC term loan facility resulted in adjustments to the tax basis of the tangible and intangible assets of Cactus LLC, a portion of which was allocated to Cactus Inc.

These basis adjustments are expected to increase (for tax purposes) Cactus Inc.’s depreciation, depletion and amortization deductions and may also decrease Cactus Inc.’s gains (or increase its losses) on future dispositions of certain assets to the extent tax basis is allocated to those assets. Such increased deductions and losses and reduced gains may reduce the amount of tax that Cactus Inc. would otherwise be required to pay in the future.

~~The TRA will generally provide for the~~ payment by Cactus Inc. to ~~each~~the TRA ~~Holder~~Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that Cactus Inc. actually realizes or is deemed to realize in certain ~~circumstances as a result of (i) certain increases in tax basis that occur as a result of~~circumstances. Cactus Inc.’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s CW Units in connection with our IPO or pursuant to the exercise of the Redemption Right or the Call Right, (ii) certain increases in tax basis resulting from the repayment of borrowings outstanding under Cactus LLC’s term loan facility and (iii) imputed interest deemed to be paid by Cactus Inc. as a result of, and additional tax basis arising from, any payments Cactus Inc. makes under the TRA. We will retain retains the benefit of the remaining 15% of ~~the~~these net cash savings.

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The ~~payment obligations under~~TRA liability is calculated by determining the tax basis subject to the TRA ~~are Cactus Inc.’s obligations~~(“tax basis”) and ~~not obligations~~applying a blended tax rate to the basis differences and calculating the resulting iterative impact. The blended tax rate consists of ~~Cactus LLC, and we expect that~~ the payments we will be required to make under the TRA will be substantial. We have determined that it is more likely than not that actual cash tax savings will be realized by Cactus Inc. from the tax benefits resulting from the Reorganization and our IPO. Accordingly, the TRA is expected to result in future payments, and we have recorded a liability from the TRA of $63.0 million included in the consolidated balance sheet as of March 31, 2018. Estimating the amount and timing of payments that may become due under the TRA is by its nature imprecise. For purposes of the TRA, net cash savings in tax generally will be calculated by comparing Cactus Inc.’s actual tax liability (determined by using the actual applicable U.S. federal income tax rate and an assumed combined state and local income tax ~~rate)~~rate driven by the apportionment factors applicable to each state. Subsequent changes to the ~~amount it would have been required to pay had it not been able to utilize any~~measurement of the ~~tax benefits subject to the TRA. The amounts payable, as well as the timing of any payments under the~~ TRA liability are dependent upon significant future events and assumptions, including the timing of the redemption of CW Units, the price of our Class A common stock at the time of each redemption, the extent to which such redemptions are taxable transactions, the amount of the redeeming unit holder’s tax basis in its 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 generaterecognized in the ~~future and the U.S. federal~~statements of 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 accounting under the TRA for any exchanges of CW Units subsequent to the Reorganization will follow the same procedures as described above.~~

A delay in the timing of redemptions of CW Units, holding other assumptions constant, would be expected to decrease the discounted value of the amounts payable under the TRA as the benefit of the depreciation and amortization deductions would be delayed and the estimated increase in tax basis could be reduced as a ~~result~~component of ~~allocations~~other expense, net. As of ~~Cactus LLC taxable income to~~June 30, 2022, the redeeming unit holder prior to the redemption. Stock price increases or decreases at the time of each redemption of CW Units would be expected to result in a corresponding increase or decrease in the undiscounted amounts payable under the TRA in an amount equal to 85% of the tax-effected change in price. The amounts payable under the TRA are dependent upon Cactus Inc. having sufficient future taxable income to utilize the tax benefits on which it is required to make payments under the TRA. If Cactus Inc.’s projected taxable income is significantly reduced, the expected payments would be reduced to the extent such tax benefits do not result in a reduction of Cactus Inc.’s future income tax liabilities.

~~It is possible that future transactions or events could increase or decrease the actual tax benefits realized and the corresponding~~total liability from the ~~TRA. Moreover, there may be a negative impact~~TRA was $300.4 million with $11.8 million reflected in current liabilities based on the expected timing of our liquidity if, as a result of timing discrepancies or otherwise, (i) the payments under the TRA exceed the actual benefits we realize in respect of the tax attributes subject to the TRA or (ii) distributions to Cactus Inc. by Cactus LLC are not sufficient to permit Cactus Inc. to make payments under the TRA after it has paid its taxes and other obligations.next payment. The payments under the TRA will not be conditional on a holder of rights under the TRA having a continued ownership interest in either Cactus LLC or Cactus Inc.

In addition, although we are not aware of any issue that would cause the Internal Revenue Service (“IRS”) or other relevant tax authorities to challenge potential tax basis increases or other tax benefits covered under the TRA, the TRA Holders will not reimburse us for any payments previously made under the TRA if such basis increases or other benefits are subsequently disallowed, except that excess payments made to any such holder will be netted against payments otherwise to be made, if any, to such holder after our determination of such excess. As a result, in such circumstances, Cactus Inc. could make payments that are greater than its actual cash tax savings, if any, and may not be able to recoup those payments.

We account for any amounts payable under the TRA in accordance with Accounting Standard Codification (“ASC”) Topic 450, Contingencies (“ASC 450”). We will recognize subsequent changes to the measurement of the liability from the TRA in the income statement as a component of income before taxes. In the case of any changes to any valuation allowance associated with the underlying tax asset, given the link between the tax savings generated and the recognition of the liability from the TRA (i.e., one is recorded based on 85% of the other), and the explicit guidance in ASC 740-20-45-11(g) which requires that subsequent changes in a valuation allowance established against deferred tax assets that arose due to change in tax basis as a result of a transaction among or with shareholders to be recorded in the income statement as opposed to equity, we believe recording of the corollary adjustment to the liability from the TRA in the income statement is appropriate.

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The term of the TRA commenced upon completion of our IPO and will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless we exercise our right to terminate the TRA. In the event that the TRA is not terminated, the payments under the TRA are anticipated to commence in 2019 and to continue for 16 years after the date of the last redemption of CW Units. Accordingly, it is expected that payments will continue to be made under the TRA for more than 25 years. If we elect to terminate the TRA early (or it is terminated early due to certain mergers, asset sales, other forms of business combinations 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 of one-year LIBOR plus 150 basis points)~~ and such payment is expected to be substantial. The calculation of anticipated future payments will be based upon certain assumptions and deemed events set forth in the TRA, including the assumptions that (i) we have sufficient taxable income to fully utilize the tax benefits covered by the TRA and (ii) any CW Units (other than those held by Cactus Inc.) outstanding on the termination date are deemed to be redeemed on the termination date. Any early termination payment may be made significantly in advance of the actual realization, if any, of the future tax benefits to which the termination payment relates. Assuming no material changes in the relevant tax law, we expect that if the TRA were terminated as of March 31, 2018, the estimated termination payments, based on the assumptions discussed above, would be approximately $304.6 million (calculated using a discount rate equal to one-year LIBOR plus 150 basis points, applied against an undiscounted liability of $430.1 million).

The TRA provides that in the event that we breach any of our material obligations under the TRA, whether as a result of (i) our failure to make any payment when due (including in cases where we elect to terminate the TRA early, the TRA is terminated early due to certain mergers, asset sales, or other forms of business combinations or changes of control or we have available cash but fail to make payments when due under circumstances where we do not have the right to elect to defer the payment, as described below), (ii) our failure to honor any other material obligation under it or (iii) by operation of law as a result of the rejection of the TRA in a case commenced under the U.S. Bankruptcy Code or otherwise, then the TRA Holders may elect to treat such breach as an early termination, which would cause all our payment and other obligations under the TRA to be accelerated and become due and payable applying the same assumptions described above.

As a result of either an early termination or a change of control, we could be required to make payments under the TRA that exceed our actual cash tax savings under the TRA. In these situations, our obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, or other forms of business combinations or changes of control.

Decisions we make in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments that are received by the TRA Holders under the TRA. For example, the earlier disposition of assets following a redemption of CW Units may accelerate payments under the TRA and increase the present value of such payments, and the disposition of assets before a redemption of CW Units may increase the TRA Holders’ tax liability without giving rise to any rights of the TRA Holders to receive payments under the TRA. Such effects may result in differences or conflicts of interest between the interests of the TRA Holders and other shareholders.

Payments generally are due under the TRA within five business days following the finalization of the schedule with respect to which the payment obligation is calculated. However, interest on such payments will begin to accrue from the due date (without extensions) of our U.S. federal income tax return for the period to which such payments relate until such payment due date at a rate equal to one-year LIBOR plus 150 basis points. Except in cases where we elect to terminate the TRA early or it is otherwise terminated as described above, generally we

We may elect to defer payments due under the TRA if we do not have available cash to satisfy our payment obligations under the TRA. Any such deferred payments under the TRA generally will accrue interest from the due date for such payment until the payment ~~date at a rate~~date.

9.Equity

As of one-year LIBOR plus 550 basis points. However, interest will accrue from the due date for such payment until the payment date at a rate of one-year LIBOR plus 150 basis points if we are unable to make such payment as a result of limitations imposed by our credit agreement. We have no present intention to defer payments under the TRA.

~~Because we are a holding company with no operations of our own, our ability to make payments under the TRA is dependent on the ability~~June 30, 2022, Cactus Inc. owned 79.9% of Cactus LLC as compared to ~~make distributions to us in an amount sufficient to cover our obligations under the TRA. This ability, in turn, may depend on the ability~~78.0% as of December 31, 2021. As of June 30, 2022, Cactus ~~LLC’s subsidiaries to make distributions to it. The ability~~Inc. had outstanding 60.6 million shares of Cactus LLC, its subsidiaries and other entities in which it directly or indirectly holds an equity interest to make such distributions will be subject to, among other things, the applicable provisions of Delaware law (or other applicable

~~Table of Contents~~

jurisdiction) that may limit the amount of funds available for distribution and restrictions in relevant debt instruments issued by Cactus LLC or its subsidiaries and other entities in which it directly or indirectly holds an equity interest. Additionally, distributions made by Cactus LLC generally require pro-rata distribution among all its members, which could be significant. 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.

~~Emerging Growth Company status~~

Cactus is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We will remain an emerging growth company until the earlier of (1) the last day of our fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which our total annual gross revenue is at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock ~~that is held by non-affiliates exceeds $700.0 million as~~(representing 79.9% of the ~~last business day~~total voting power) and 15.3 million shares of our most recently completed second fiscal quarter (following twelve months from our IPO), and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise generally applicable to public companies. We have irrevocably opted outClass B common stock (representing 20.1% of the ~~extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.~~

~~Recent Accounting Pronouncements~~

~~Standards Adopted~~

~~In August 2016, the FASB issued ASU No. 2016-15, Cash Flow Statement (Topic 250)~~total voting power). This new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice, including: debt prepayment or debt extinguishment costs, settlement of zero coupon debt instruments or other debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We adopted this ASU on January 1, 2018. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which supersedes the current revenue recognition guidance. The ASU is based on the principle that revenue is recognized to depict the transfer of goods and services to customers in the amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The new standard will be effective for public companies for the fiscal years beginning after December 31, 2017 using one of two retrospective application methods. We adopted this ASU on January 1, 2018 using the modified retrospective method. The adoption of this pronouncement did not have a material impact on our consolidated financial statements. See Note 5.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, in an effort to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this standard provide a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the integrated set of assets and activities is not a business. The new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is allowed for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance.

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~~Entities will be required to apply the guidance prospectively when adopted. We adopted this ASU on January 1, 2018. The adoption~~

Redemptions of ~~this pronouncement did not have a material impact on our consolidated financial statements.~~

~~Standards Not Yet Adopted~~

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Upon adoption of the new guidance, lessees are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The new guidance will be effective for fiscal years beginning after December 15, 2018. We are currently evaluating the impact this pronouncement will have on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other, which simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the new standard, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new guidance should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of this pronouncement to have a material impact on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this update allow a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. However, because the amendments only relateCW Units

Pursuant to the ~~reclassification~~First Amended and Restated Limited Liability Company Operating Agreement of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this update also require certain disclosures about stranded tax effects. The amendments in this update are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact this pronouncement will have on our consolidated financial statements.

~~3. Inventories~~

~~Inventories consists of the following:~~

March 31,

December 31,

2018

2017

Raw materials

$
1,378

$
1,532

Work-in-progress

4,012

3,590

Finished goods

64,143

59,328

$
69,533

$
64,450

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~~4. Long-term Debt~~

~~Long-term debt consists of the following:~~

March 31,

December 31,


2018

2017

Term Loan

$
—

$
248,529

Less:





Current portion

—

(2,568)

Unamortized debt discount and deferred loan costs

—

(4,524)

Long-term debt, net

$
—

$
241,437

~~On July 31, 2014,~~ Cactus Wellhead, LLC ~~entered into a credit agreement collateralized by substantially all of its assets~~ (the ~~“Credit~~“Cactus Wellhead LLC Agreement”), ~~consisting~~holders of a $275.0 million Tranche B term loan (the “Term Loan”) and $50.0 million revolving credit facility with a $10.0 million sublimit for letters of credit (the “Revolving Loans”). In conjunction with the completion ofCW Units are entitled to redeem their CW Units, which results in additional Class A common stock outstanding. Since our IPO in February 2018, ~~we repaid~~45.3 million CW Units and a corresponding number of shares of Class B common stock have been redeemed in exchange for shares of Class A common stock.

During the ~~Term Loan~~six months ended June 30, 2022, 1.4 million CW Units, together with a corresponding number of shares of Class B common stock, were redeemed in full. There was $248.5 million outstanding on the Term Loan as of December 31, 2017. As of March 31, 2018 and December 31, 2017, no amounts were outstanding on the Revolving Loans and no letters of credit were outstanding. We may borrow and repay the Revolving Loansexchange for Class A common stock in accordance with the ~~terms~~Cactus Wellhead LLC Agreement. There was no change in the combined number of Cactus Inc. voting shares outstanding as a result of the ~~Credit Agreement. A commitment fee is payable quarterly on the unused portion~~redemptions.

On June 17, 2021, Cadent Energy Partners II, L.P. (“Cadent”) transferred ownership of ~~the revolving credit facility. Interest on the Revolving Loans is payable in arrears for each draw fixed at an adjusted base rate plus an applicable margin,~~944,093 CW Units, together with a corresponding number of shares of Class B common stock, to various Cadent-affiliated entities. Cadent then redeemed its remaining 3.3 million CW Units, together with a corresponding number of shares of Class B common stock, as ~~defined~~provided in the ~~Credit~~Cactus Wellhead LLC Agreement. ~~At March 31, 2018~~The redeemed CW Units (and the corresponding shares of Class B common stock) were cancelled and Cactus Inc. issued 3.3 million new shares of Class A common stock to Cadent, which then distributed such shares to its limited partners. Cactus received no proceeds from these events, and there was no ~~accrued interest and December 31, 2017 included $0.2 million~~change in the combined number of ~~accrued interest within accrued expenses, on the consolidated balance sheets. The Revolving Loans portion~~voting shares of the Credit Agreement matures on July 31, 2019. Amounts outstanding under the Credit Agreement may be voluntarily prepaid, in whole or in part, without premium or penalty, in accordance with the terms of the Credit Agreement and subject to breakage and similar costs.

The Credit Agreement contains various restrictive covenants that may limit our ability to incur additional indebtedness and liens, make or declare dividends, or enter into certain transactions, and contains a total leverage financial covenant related onlyCactus Inc. outstanding. In addition to the ~~Revolving Loans once a total~~redemption by Cadent, 425,433 CW Units were redeemed in exchange for shares of $15.0 million or more has been drawn on the Revolving Loans. Based on this total leverage financial covenant, availability under the revolving credit facility can be limited to $15.0 million. At March 31, 2018, we had access to the full $50.0 million revolving credit facility capacity. At March 31, 2018 and December 31, 2017, we were in compliance with the covenants in the Credit Agreement.

At March 31, 2018, the applicable margin on our Revolving Loans was 2.75% with an adjusted base rate of one or three month LIBOR. At December 31, 2017, the weighted average interest rate for the borrowings under the Credit Agreement was 7.3%.

~~Loss on debt extinguishment~~

~~For~~Class A common stock during the three months ended ~~March 31, 2018,~~June 30, 2021. We recorded an increase in additional paid-in capital with a corresponding decrease in the non-controlling interest in equity of $26.9 million and an increase in the TRA liability of $33.1 million resulting from the redemption of CW Units during the second quarter of 2021. Additionally, we ~~recorded~~recognized a ~~$4.3~~$3.0 million ~~loss on early extinguishment of debt in conjunction with~~tax benefit for the ~~repayment of~~partial valuation release related to the ~~Term Loan with a~~realizable portion of the ~~net~~deferred tax assets.

On March 9, 2021, Cactus Inc. entered into an underwriting agreement with Cactus LLC, certain selling stockholders of Cactus (the “Selling Stockholders”) and the underwriters named therein, providing for the offer and sale by the Selling Stockholders (the “2021 Secondary Offering”) of up to 6,325,000 shares of Class A common stock at a price to the underwriters of $30.555 per share. On March 12, 2021, in connection with the 2021 Secondary Offering, certain of the Selling Stockholders exercised their right to redeem 6,272,500 CW Units, together with a corresponding number of shares of Class B common stock, as provided in the Cactus Wellhead LLC Agreement. Upon the closing of the 2021 Secondary Offering, Cactus Inc. acquired the redeemed CW Units and a corresponding number of shares of Class B common stock (which shares of Class B common stock were then cancelled) and issued 6,272,500 new shares of Class A common stock to the underwriters at the direction of the redeeming Selling Stockholders, as provided in the Cactus Wellhead LLC Agreement. In addition, certain other Selling Stockholders sold 52,500 shares of Class A common stock in the 2021 Secondary Offering, which shares were owned by them directly as of the time of the 2021 Secondary Offering. Cactus did not receive any of the proceeds from ~~our IPO. The loss consists~~the sale of common stock in the ~~write-off of the unamortized balance of debt discount~~2021 Secondary Offering and ~~deferred loan costs of $2.1~~incurred $0.4 million ~~and $2.2 million, respectively. The loss on debt extinguishment is included under~~in expenses which were recorded in other ~~income (expense),~~expense, net, in the consolidated statements of income.

~~5. Revenue~~

~~Accounting Policy~~

There was no change in the combined number of Cactus Inc. voting shares outstanding as a result of the 2021 Secondary Offering. We ~~account~~recorded an increase in additional paid-in capital with a corresponding decrease in the non-controlling interest in equity of approximately $45.0 million and an increase in the TRA liability of $46.7 million resulting from the redemption of CW Units pursuant to the 2021 Secondary Offering. Additionally, we recognized a $5.1 million tax benefit for ~~revenue in accordance with Topic 606, which we adopted~~a partial valuation allowance release related to the realizable portion of the deferred tax asset.

Dividends

Aggregate cash dividends of $0.22 per share of Class A common stock declared during the six months ended June 30, 2022 totaled $13.3 million compared to $0.18 per share of Class A common stock and $9.4 million during the six months ended June 30, 2021. Cash dividends paid during the six months ended June 30, 2022 and 2021 totaled $13.3 million and $9.4 million, respectively. Dividends accrue on ~~January 1, 2018, using the modified retrospective method. The adoption of Topic 606 did not have a material impact~~unvested equity-based awards on the ~~timing or amounts~~date of ~~revenue recognized in~~record and are paid upon vesting. Dividends are not paid to our ~~unaudited condensed consolidated financial statements and therefore did not have~~Class B common stockholders; however, a ~~material impact~~corresponding distribution up to the same amount per share as our Class A common stockholders is paid to the owners of CW Units other than Cactus Inc. for any dividends declared on our ~~financial position, results of operations, equity or cash flows as~~Class A common stock. See further discussion of the ~~adoption date or for~~distributions below under “Member Distributions.”

Member Distributions

Distributions made by Cactus LLC are generally required to be made pro rata among all its members. For the ~~three~~six months ended ~~March 31, 2018. Furthermore, we expect~~June 30, 2022, Cactus LLC distributed $13.1 million to Cactus Inc. to fund its dividend and estimated tax payments and made pro rata distributions to the ~~impact of~~other members totaling $3.3 million over the ~~adoption of~~same period. During the ~~new standard~~six months ended June 30, 2021, Cactus LLC distributed $9.2 million to ~~be immaterial~~Cactus Inc. to ~~our revenue~~fund its dividend payments and ~~gross profit on an ongoing basis. We did not recognize any cumulative-effect adjustment~~made pro rata distributions to ~~retained earnings upon adoption as~~ the ~~impact was immaterial. Also, the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.~~

other members totaling $3.6 million.

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~~Revenue Recognition~~

~~The majority~~Limitation of ~~our revenues~~Members’ Liability

Under the terms of the Cactus Wellhead LLC Agreement, the members of Cactus LLC are ~~derived from short term contracts. Product sales generally do~~ not ~~include right of return~~obligated for debt, liabilities, contracts or other significant post-delivery obligations. Revenues are recognized when we satisfy a performance obligation by transferring control of the promised goods or services to our customers at a point in time, in an amount specified in the contract with our customer and that reflects the consideration we expect to be entitled to in exchange for those goods or services. We also assess our customer’s ability and intention to pay, which is based on a variety of factors including our customer’s historical payment experience and financial condition. Payment terms and conditions vary, although terms generally include a requirement of payment within 30 days. Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. We elected to treat shipping and handling associated with outbound freight as a fulfillment cost instead of as a separate performance obligation. We recognize the cost for shipping and handling when incurred as an expense in cost of sales.

~~Performance Obligations~~

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer under Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts with customers contain a single performance obligation to provide agreed-upon products or services. For contracts with multiple performance obligations we allocate revenue to each performance obligation based on its relative standalone selling price. In accordance with Topic 606, we do not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer.

All of our contracts are less than one year in duration. We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

~~Disaggregation of Revenue~~

We disaggregate revenue from contracts with customers into three revenue categories: i) product revenues, ii) rental revenues and iii) field service and other revenues. Approximately 99% of our revenues are from the United States. For the three months ended March 31, 2018, we derived 51% of our total revenues from the sale of our products, 25% of our total revenues from rental and 24% of our total revenues from field service and other.

~~Contract Balances~~

We perform our obligations under contracts with our customers by transferring services and products in exchange for consideration. The timing of our performance often differs from the timing of invoicing and our customer’s payment, which results in the recording of unbilled revenue and deferred revenue. Amounts in the consolidated balance sheet as of March 31, 2018 representing unbilled revenue within accounts receivable, net, were $24.3 million and amounts representing deferred revenue within accrued expenses and other current liabilities were $1.1 million. This compares to an unbilled revenue balance of $24.7 million and a deferred revenue balance of $0.8 million as of December 31, 2017.

~~Contract Costs~~

~~We do not incur any material costs of obtaining contracts.~~

~~6. Related Party Transactions~~

Prior to our IPO, we were party to a management services agreement with two Cactus LLC members, whereby Cactus paid an annual management fee totaling approximately $0.3 million, payable in four installments, each to be paid quarterly in advance, prorated for any partial year. In conjunction with our IPO, the management services agreement terminated pursuant to its terms. Management fee expense totaled less than $0.1 million for each of the three months ended March 31, 2018 and 2017. There were no outstanding balances due as of March 31, 2018 or December 31, 2017 under the management services agreement.

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~~From time to time, we rent a plane under dry-lease from a company owned by a member~~ of Cactus LLC. ~~These transactions~~Profits and losses are under short-term rental arrangements. During the three months ended March 31, 2018 and 2017, expense recognized in connection with these rentals totaled less than $0.1 million, respectively. As of March 31, 2018, and December 31, 2017, we owed less than $0.1 million, respectively,allocated to ~~the related party which are included in accounts payable~~members as defined in the ~~consolidated balance sheets.~~

We are also party to a TRA with certain direct and indirect holders of CW Units, including certain of our officers, directors and employees. These TRA Holders have the right in the future to receive 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that Cactus ~~Inc. actually realizes or is deemed to realize.~~

7. Wellhead LLC Agreement.

10.Commitments and Contingencies

~~Operating Leases and Capital Leases~~

We lease certain facilities, vehicles, equipment, office and manufacturing space under noncancelable operating leases which expire at various dates through 2029. We are also party to a significant number of month-to-month leases that can be canceled at any time. Total rent expense related to operating leases for the three months ended March 31, 2018 and 2017 was approximately $1.8 million and $1.7 million, respectively.

We also lease vehicles under capital leases. These leases are typically three years in duration and have no guaranteed residual values. Amounts included within property and equipment under capital leases as of March 31, 2018 and December 31, 2017 are as follows:

March 31,

December 31,

2018

2017

Cost

$
18,591

$
15,557

Accumulated depreciation

(3,838)

(2,672)

Net

$
14,753

$
12,885

The following table presents our contractual obligations for the periods subsequent to March 31, 2018, including future minimum annual lease payments, including executory costs and interest, and the payments of the liability related to the TRA:

Operating
Leases

Capital
Leases

Liability related to TRA

Total
Remainder of 2018

$
4,376

$
4,732

$
—

$
9,108
2019

4,206

6,420

5,840

16,466
2020

3,782

4,461

3,168

11,411
2021

3,095

494

3,255

6,844
2022

2,043

—

3,331

5,374
Thereafter

4,960

—

47,395

52,355

$
22,462

$
16,107

$
62,989

$
101,558

~~Legal Contingencies~~

We are involved in various disputes arising in the ordinary course of business. Management does not believe the outcome of these disputes will have a material adverse effect on our consolidated financial position or consolidated results of operations.

~~8. Employee Benefit Plans~~

~~401K Plan~~

Our employees within the United States are eligible to participate in a 401(k) plan (the “Plan”) sponsored by us. These employees are eligible to participate upon employment hire date and obtaining the age of eighteen. All eligible employees may contribute a percentage of their compensation subject to a maximum imposed by the Internal Revenue

11.Earnings per Share

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Code. We match 100% of the first 3% of gross pay contributed by each employee and 50% of the next 4% of gross pay contributed by each employee. We may also make additional non-elective employer contributions at our discretion under the Plan. Similar benefit plans exist for employees of our foreign subsidiaries. For the three months ended March 31, 2018 and 2017, employer matching contributions totaled $0.8 million and $0.4 million, respectively. Historically, we have not made non-elective employer contributions under the Plan.

~~9. Supplemental Cash Flow Information~~

~~Non-cash investing and financing activities were as follows:~~

Three Months Ended March 31,

2018

2017
Property and equipment acquired under capital lease

$
3,092

$
2,046
Property and equipment in payables

4,512

579

In conjunction with our IPO, we issued and contributed shares of Class B common stock to owners of CW Units equal to the number of outstanding CW Units held by the owners thereof. The Class B common stock has no economic interest and does not share in cash dividends or liquidation rights.

~~10. Earnings Per Share~~

Basic earnings per share of Class A common stock is calculated by dividing the net income attributable to Cactus Inc. ~~for~~during the period ~~from February 12, 2018 through March 31, 2018, the period following the Reorganization and IPO,~~ by the ~~weighted-average~~weighted average number of shares of Class A common stock outstanding during the same period. Diluted earnings per share of Class A common stock is calculated by dividing the net income attributable to Cactus Inc. during that period by the weighted average number of common shares outstanding assuming all potentially dilutive shares were issued.

~~Dilution for~~

We use the ~~period includes~~if-converted method to determine the potential dilutive effect of outstanding CW Units (and corresponding shares of outstanding Class B common stock), the treasury stock method to determine the potential dilutive effect of unvested restricted stock units ~~under the treasury method~~ assuming that the proceeds will be used to purchase shares of Class A common ~~stock.~~

~~There were no shares~~stock and the contingently issuable share method to determine the potential dilutive effect of ~~Class A common~~unvested performance stock ~~or Class B common stock outstanding prior to February 12, 2018, therefore no earnings per share information has been presented for any period prior to that date.~~

units.

The following table summarizes the basic and diluted earnings per share calculations:

Three Months Ended March 31,

2018

2017
Numerator:




Net income attributable to Cactus Inc.
$
3,753

$
—
Denominator:




Weighted average Class A shares outstanding—basic

26,450

—
Effect of dilutive shares (1)

198

Weighted average Class A shares outstanding—diluted (1)

26,648

—

Earnings per Class A Share—basic
$
0.14

$
—
Earnings per Class A Share—diluted (1)
$
0.14

$
—

~~(1)~~

~~Diluted earnings per share for the periods presented excludes 48,439,772 shares of Class B common stock as the effect would be anti-dilutive.~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Numerator:
Net income attributable to Cactus Inc.—basic	$	27,144	$	10,393	$	47,760	$	21,952
Net income attributable to non-controlling interest (1)	6,759		3,332		11,779		6,091
Net income attributable to Cactus Inc.—diluted (1)	$	33,903	$	13,725	$	59,539	$	28,043
Denominator:
Weighted average Class A shares outstanding—basic	60,523		55,048		59,909		52,124
Effect of dilutive shares	15,799		20,949		16,353		23,831
Weighted average Class A shares outstanding—diluted	76,322		75,997		76,262		75,955

Earnings per Class A share—basic	$	0.45	$	0.19	$	0.80	$	0.42
Earnings per Class A share—diluted (1)	$	0.44	$	0.18	$	0.78	$	0.37

(1)The numerator is adjusted in the calculation of diluted earnings per share under the if-converted method to include net income attributable to the non-controlling interest calculated as its pre-tax income adjusted for a corporate effective tax rate of 25.0% for the three and six months ended June 30, 2022 and 28.0% for the three and six months ended June 30, 2021.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Except as otherwise indicated or required by the context, all references in this Quarterly Report to the “Company,” “Cactus,” “we,” “us” and “our” refer to ~~(i)~~ Cactus, Inc. (“Cactus Inc.”) and its consolidated subsidiaries, ~~(including Cactus LLC) following the completion of our initial public offering on February 12, 2018 (our “IPO”),~~ unless we state otherwise or the context otherwise ~~requires and (ii) Cactus Wellhead, LLC (“Cactus LLC”) and its consolidated subsidiaries prior to the completion of our IPO.~~requires. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes. The following discussion contains “forward-looking statements” that reflect our plans, estimates, beliefs and expected performance. 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 above in “Cautionary ~~Statement~~Note Regarding Forward-Looking Statements” and included elsewhere in this Quarterly Report, all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We assume no obligation to update any of these forward-looking statements except as otherwise required by law.

Executive Summary

We design, manufacture, sell and rent a range of highly engineered wellhead and pressure control equipment. Our products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion ~~(including fracturing)~~ and production phases of our customers’ wells. In addition, we provide field services for all of our products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment.

Our principal products include our Cactus SafeDrill™ wellhead systems, as well as frac stacks, zipper manifolds and production trees that we design and manufacture. Every oil and gas well requires a wellhead, which is installed at the onset of the drilling process and which remains with the well through its entire productive life. The Cactus SafeDrill™ wellhead systems employ technology which allows technicians to land and secure casing strings more safely from the rig floor reducing the need to descend into the cellar. We believe we are a market leader in the application of such technology, with thousands of our products sold and installed across the United States since 2011. During the completion phase of a well, we rent frac stacks, zipper manifolds and other high‑pressure equipment that are used for well control and for managing the transmission of frac fluids and proppants during the hydraulic fracturing process. These severe service applications require robust and reliable equipment. For the subsequent production phase of a well, we sell production trees that regulate hydrocarbon production, which are installed on the wellhead after the frac stack has been removed. In addition, we provide mission‑critical field services for all of our products and rental items, including 24‑hour service crews to assist with the installation, maintenance and safe handling of the wellhead and pressure control equipment. Finally, we provide repair services for all of the equipment that we sell or rent.

Our innovative wellhead products and pressure control equipment are developed internally. We believe our close relationship with our customers provides us with insight into the specific issues encountered in the drilling and completion processes, allowing us to provide them with highly tailored product and service solutions. We have achieved significant market share, as measured by the percentage of total active U.S. onshore rigs that we follow (which we define as the number of active U.S. onshore drilling rigs to which we are the primary provider of wellhead products and corresponding services during drilling), and brand name recognition with respect to our engineered products, which we believe is due to our focus on safety, reliability, cost effectiveness and time saving features. We optimize our products for pad drilling (i.e., the process of drilling multiple wellbores from a single surface location) to reduce rig time and provide operators with significant efficiencies that translate to cost savings at the wellsite.

Our manufacturing and production facilities are located in Bossier City, Louisiana and Suzhou, China. While both facilities can produce our full range of products, our Bossier City facility has advanced capabilities and is designed to support time‑sensitive and rapid turnaround orders, while our facility in China is optimized for longer lead time orders and outsources its machining requirements. Both our United States and China facilities are licensed to the latest API 6A specification for both wellheads and valves and API Q1 and ISO9001:2015 quality management systems.

We operate 14through 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, Haynesville, Eagle Ford, Bakken and SCOOP/STACK, among other active oil and gas

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regions in the United ~~States. We also have one service center~~States, and in Eastern Australia. These service centers support our field services and provide equipment assembly and repair services.

~~Market Factors~~ We also provide rental and ~~Trends~~

~~Demand for our products and services depends primarily upon the general level of activity~~service operations in the ~~oil~~Kingdom of Saudi Arabia. Our manufacturing and ~~gas industry, including the number of drilling rigs~~production facilities are located in ~~operation, the number of oil~~Bossier City, Louisiana and gas wells being drilled, the depth and drilling conditions of these wells, the volume of production, the number of well completions and the level of well remediation activity, and the corresponding capital spending by oil and natural gas companies. Oil and gas activity isSuzhou, China.

We operate in ~~turn heavily influenced by, among other factors, oil and gas prices worldwide, which have historically been volatile.~~

The total average U.S. onshore rig count for 2017 as reported by Baker Hughes was 852 rigs, a material increase relative to the 2016 average of 485 rigs. The December 2017, January 2018, February 2018 and March 2018 monthly averages were 909, 920, 959 and 974 rigs, respectively.

Oil and natural gas prices have historically been volatile. Ongoing compliance among OPEC producers on production cuts implemented in early 2017 and the extension of these production cuts through the end of 2018, combined with current geopolitical tension, have supported upward momentum for energy prices. We believe that recent increases in oil and natural gas prices, as well as moderate relief from the global oversupply of oil and domestic oversupply of natural gas, should increase demand for our products and services.

The key market factor of our product sales is the number of wells drilled, as each well requires an individual wellhead assembly, and after completion, the installation of an associated production tree. We measure our product sales activity levels versus our competitors’ by the number of rigs that we are supporting on a monthly basis as a proxy for wells drilled. Each active drilling rig produces different levels of revenue based on the customer’s drilling plan, which includes factors such as the number of wells drilled per pad, the time taken to drill each well, the number and size of casing strings, the working pressure, material selection and the complexity of the wellhead system chosen by the customer and the rate at which production trees are eventually deployed. All of these factors are influenced by the oil and gas region in which our customer is operating. While these factors may lead to differing revenues per rig, they allow us to forecast our product needs and anticipated revenue levels based on general trends in a given region and with a specific customer.

~~Our rental revenues are primarily dependent on the number of wells completed (i.e.~~, hydraulically fractured) and the number of fracture stages per well. Rental revenues and prices are more dependent on overall industry activity levels in the short‑term than product sales. This is due to the more competitive and price‑sensitive nature of the rental market with more participants having access to completions‑focused rental equipment. Pricing has also historically been impacted with the move from dayrate pricing to stage‑based pricing in the hydraulic fracturing market. This had a follow‑on effect to the rental pricing of completions‑focused pressure control equipment, as problems experienced with rental equipment did not have as significant a cost impact as they did prior to 2015 and 2016 to the E&P operator under dayrate pricing. We believe that as the market increases in activity levels and as capacity becomes more constrained due to cannibalization of both rental and hydraulic fracturing service equipment, the pricing of completions‑focused pressure control rental equipment will be less of a factor due to a renewed focus on availability, reliability and quality. Furthermore, we believe that the current number of drilled but uncompleted wells (“DUCs”) and any increases thereto could ultimately provide additional opportunities although we recognize that not all DUCs may be completed.

Service and other revenues are closely correlated to revenues from product sales and rentals, as items sold or rented often have an associated service component. Almost all service sales are offered in connection with a product sale or rental. Therefore, the market factors and trends of product sales and rental revenues similarly impact the associated levels of service and other revenues generated.

~~How We Generate Our Revenues~~

one business segment. Our revenues are derived from three sources: products, rentals, and field service and other. Product revenues are primarily derived from the sale of wellhead systems and production trees. Rental revenues are primarily derived from the rental ~~and associated repair~~ of equipment used ~~for well control~~ during the completion process, ~~as well as~~the repair of such equipment and the rental of tools used during drilling ~~tools.~~operations. Field service and other revenues are primarily earned when we provide installation and other field services for both product sales and equipment rental. Additionally, other revenues are derived from providing repair and

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reconditioning services to customers that have previously installed ~~our products on their wellsite.~~wellheads or production trees. Items sold or rented generally have an associated service component. As a result, there is ~~some level of~~a close correlation between field service and other revenues and revenues from product sales and rentals.

During the ~~three~~six months ended ~~March 31, 2018,~~June 30, 2022, we derived ~~51%~~65% of ~~our~~ total revenues from the sale of our products, ~~25%~~15% of ~~our~~ total revenues from rental and ~~24%~~20% of ~~our~~ total revenues from field service and other. InDuring the ~~three~~six months ended ~~March 31, 2017,~~June 30, 2021, we derived ~~57%~~63% of ~~our~~ total revenues from the sale of our products, ~~22%~~14% of ~~our~~ total revenues from rental and ~~21%~~23% of ~~our~~ total revenues from field service and other. We have predominantly domestic operations with ~~99%~~a small amount of activity in Australia and the Kingdom of Saudi Arabia.

Market Factors

Demand for our products and services depends primarily upon the general level of activity in the oil and gas industry, including the number of active drilling rigs, the number of wells being drilled, the depth and working pressure of these wells, the number of well completions, the level of well remediation activity, the volume of production and the corresponding capital spending by oil and natural gas companies. 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.

The key market factors impacting our product sales are the number of wells drilled and placed on production, as each well requires an individual wellhead assembly and, at some time after completion, the installation of an associated production tree. We measure our product sales activity levels against our competitors by the number of rigs that we are supporting on a monthly basis as it is correlated to wells drilled. Each active drilling rig produces different levels of revenue based on the customer’s drilling program and efficiencies, which includes factors such as the number of wells drilled per pad, the timing of rig moves, the time taken to drill each well, the number and size of casing strings, the working pressure, material selection, the complexity of the wellhead system chosen by the customer and the rate at which production trees are eventually deployed. All of these factors may be influenced by the oil and gas region in which our customers are operating. While these factors may lead to differing revenues per rig, we have generally been able to forecast our product needs and anticipated revenue levels based on historic trends in a

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given region and with a specific customer. An increase in the number of wells drilled per rig is a favorable trend that we believe enhances the demand for our products relative to the active rig count. However, such a favorable trend might be adversely affected by overall supply chain-related disruptions.

Our rental revenues are primarily dependent on the number of wells completed (i.e., hydraulically fractured), the number of wells on a well pad, the number of fracture stages per well and the number of fracture stages completed per day. Well completion activity generally follows the level of drilling activity over time but can be delayed or accelerated due to such factors as pressure pumping availability, takeaway capacity, storage capacity, spot prices, overall service cost inflation and budget considerations.

Field service and other revenues are closely correlated to revenues from product sales and rentals, as items sold or rented almost always have an associated service component. Therefore, the market factors and trends of product sales and rental revenues similarly impact the associated levels of field service and other revenues generated.

Recent Developments and Trends

Oil prices rose in early 2022 due to concerns over supply constraints with West Texas Intermediate (“WTI”) prices surpassing $90 per barrel in February. Since Russia invaded Ukraine on February 24, 2022, oil prices increased further and price volatility has been high, with WTI prices reaching almost $115 per barrel in March, dropping to approximately $94 per barrel in April, increasing to over $122 per barrel in June and decreasing to just over $90 per barrel in early August 2022. The volatility can mainly be attributed to the global response to the conflict in Ukraine, which includes import bans on Russian oil, but can also be attributed to inflation and looming concerns of a recession in the United States and possibly globally.

Prices for natural gas have also surged in 2022 in the U.S. due to higher demand for heating due to a colder winter, record-high LNG exports and a nationwide heat wave. Henry Hub natural gas spot prices increased from an average of $3.76 per one million British Thermal Units (“MMBtu”) in December 2021 to $8.14 per MMBtu in May 2022 and then down to $7.28 per MMBtu in July 2022. The U.S. was exporting record volumes of LNG to Europe until early June 2022, when an explosion at one of the largest export plants producing LNG in the United States in Freeport, TX occurred. The temporary closure of the plant, which is expected to restart only on a partial basis in October 2022, is predicted to add natural gas supplies in the U.S. by reducing how much natural gas can be exported, placing downward pressure on natural gas prices. This is forecasted to provide some pricing relief in the United States but represents a loss of supply for global markets, especially for certain European countries desiring to reduce their dependency on Russian natural gas exports. The shutdown of the Freeport plant is expected to reduce total ~~sales~~U.S. LNG export capacity by approximately 2 billion cubic feet per day (Bcf/d), or 17% of total U.S. LNG export capacity.

The ongoing conflict in Ukraine has had repercussions globally and in the U.S. by continuing to cause uncertainty, not only in the oil and natural gas markets, but also in the stock market. Such uncertainty already has and could continue to result in stock price volatility and supply chain disruptions as well as higher oil and natural gas prices which could result in higher inflation worldwide and negatively impact demand for our goods and services. Moreover, additional interest rate increases by the U.S. Federal Reserve to combat inflation could further increase the possibility of a recession.

The significant increase in commodity prices has also led to meaningful increases in the level of U.S. onshore drilling activity, particularly among private operators. During the three months ended June 30, 2022, the weekly average U.S. onshore rig count as reported by Baker Hughes was 697 rigs compared to 616 rigs for the three months ended March 31, ~~2018~~2022 and ~~2017, respectively, earned~~436 rigs for the three months ended June 30, 2021. Although these gains are encouraging, current rig activity is still significantly reduced from the levels in 2019 when the weekly average rig count for the three months ended March 31, 2019 was 1,021. However, notwithstanding the impact of longer laterals, improved rig efficiencies have partially offset the impact of this reduction. As of July 29, 2022, the U.S. ~~operations.~~

~~Substantially all~~onshore rig count was 746.

Private E&P companies have been responsible for the majority of the rig additions in the U.S. onshore market over the last year. We have significantly increased our ~~sales are made~~revenues and rigs followed since the low in activity in the third quarter of 2020 despite a greater portion of Cactus’ revenues having historically resulted from publicly traded E&P companies. During this time, Cactus has meaningfully increased its business with private E&P companies. Disproportionate changes in activity from private or publicly traded E&P companies present both risks and opportunities for Cactus, depending on a ~~call‑out basis, wherein our clients issue requests~~number of factors, such as which customers add or drop rigs and their relative efficiency in drilling wells. Increasing volatility in oil and natural gas prices could also impact activity among private operators.

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Inflation and Increased Costs

Inflation as reported by the U.S. Bureau of Labor Statistics has continued to increase in 2022, rising from 5.8% in December 2021 to 9.1% in June 2022, a high not seen since 1981. Supply chain disruptions, geopolitical issues and significantly increased demand for goods ~~and/or services as their operations require. Such goods and/or services are most often priced in accordance with a preapproved price list.~~

~~Generally, we attempt to raise prices as our costs increase or additional features are provided. However, the actual pricing of our products~~ and services ~~is impacted~~worldwide have resulted in substantial increases in fuel, raw materials, component parts, ocean freight charges as well as increased labor costs. Salaries and wages have increased significantly as a result of competitive labor markets, especially in certain key oil and gas producing areas, but also due to broader inflation trends and labor shortages. Due to heightened demand and a shortage of steel caused primarily by production disruptions during the pandemic and the conflict in Ukraine, steel and assembled component prices have been and remain elevated. Freight costs, specifically ocean freight costs, remain elevated due to a number of factors including, ~~competitive pricing pressure, the level~~but not limited to, a scarcity of ~~utilized~~shipping containers, congested seaports, a shortage of commercial drivers, capacity constraints on vessels and lockdowns in ~~the oil service sector, capital discipline within~~certain markets. In addition to dealing with these unprecedented cost increases, we continue to be impacted by global supply chain issues which have resulted in shipping delays and, in some cases, resulted in increased costs when we are required to use other more expensive modes of transportation or substitute more costly products in order to meet customer demand. These cost increases have already had, and could continue to have, a negative impact on our ~~client base, maintenance of market share and general market conditions.~~

~~Costs of Conducting Our Business~~

The principal elements of cost of sales for products are the direct and indirect costs to manufacture and supply the product, including labor, materials, machine time, lease expense related to our facilities and freight. The principal elements of cost of sales for rentals are the direct and indirect costs of supplying rental equipment, including depreciation, repairs specifically performed on such rental equipment and freight. The principal elements of cost of sales for field service and other are labor, equipment depreciation and repair, equipment lease expense, fuel and supplies.

Selling, general and administrative expense is comprised of costs such as sales and marketing, engineering expenses, general corporate overhead, business development expenses, compensation expense, IT expenses, safety and environmental expenses, legal and professional expenses and other related administrative functions.

Interest expense, net is comprised primarily of interest expense associated with our term loan facility, revolving credit facility and capital leases. A portion of the net proceeds of our IPO were used to repay the borrowings outstanding under our term loan facility in February 2018.

~~Factors Affecting the Comparability of Our Financial Condition and Results of Operations~~

~~Our historical financial condition~~margins and results of operations absent further successful cost recovery efforts.

We expect we will continue to experience supply chain constraints and inflationary pressures on our cost structure for the ~~periods presented may~~foreseeable future; however, tightness in overseas freight and transit times from China have started to moderate. Additionally, raw material and component costs are beginning to show signs of improvement. Nonetheless, we cannot be confident that transit times or input prices will return to the lower levels experienced in prior years.

Critical Accounting Policies and Estimates

A discussion of our critical accounting policies and estimates is contained in our 2021 Annual Report on Form 10-K. There have not ~~be comparable, either from period to period or going forward, for the following reasons:~~

~~Selling, General and Administrative Expenses.~~ We expect to incur additional selling, general and administrative expenses as a result of being a publicly traded company. These costs include expenses associated with our annual and quarterly reporting, tax return preparation expenses, Sarbanes‑Oxley compliance expenses, audit fees, legal fees, directors and officers insurance, investor relations expenses, TRA administration expenses and registrar and transfer agent fees. We also expect to incur greater stock-based compensation expense related to equity awards granted by Cactus Inc. These increases in selling, general and administrative expenses are not reflected in our historical financial statements prior to our IPO, other than a portion of these costs incurred in 2017 in preparation of becoming a public company and historical compensation expense related to equity awards granted as a private company.

been any changes in our critical accounting policies since December 31, 2021.

~~Corporate Reorganization.~~ The historical consolidated financial statements are based on the financial statements of our accounting predecessor, Cactus LLC and its subsidiaries, prior to our reorganization in connection with our IPO. As a result, the historical consolidated financial data may not provide an accurate indication of what our actual results would have been if such transactions had been completed at the beginning of the periods presented or of what our future results of operations are likely to be. In addition, we entered into a TRA with the TRA Holders. This agreement generally provides for the payment by us to the TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax or

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franchise tax that we actually realize or are deemed to realize in certain circumstances in periods after our IPO as a result of certain increases in tax basis and imputed interest. We will retain the benefit of the remaining 15% of such net cash savings. See Note 2 of the Notes to Consolidated Financial Statements

~~Income Taxes.~~ Cactus Inc. is a corporation under Internal Revenue Code (the “Code”) and is subject to U.S. federal income taxes (currently at a statutory rate of 21% of pretax earnings, as adjusted by the Code), as well as state, local and franchise income taxes, on its share of income of Cactus LLC. Consequently, we will report income tax expense or benefit attributable to U.S. federal income taxes for periods following our IPO. Our accounting predecessor is a limited liability company that is treated as a partnership for U.S. federal income tax purposes, and therefore is not subject to U.S. federal income taxes. Accordingly, no provision for U.S. federal income taxes has been provided for in our historical results of operations prior to our IPO because taxable income was passed through to Cactus LLC’s members.

~~Long‑Term Incentive Plan.~~ To incentivize individuals providing services to us or our affiliates, our board adopted a long‑term incentive plan prior to the completion of our IPO. The LTIP provides for the grant, from time to time, at the discretion of our board of directors or a committee thereof, of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, other stock‑based awards, cash awards, substitute awards and performance awards. Any individual who is our officer or employee or an officer or employee of any of our affiliates, and any other person who provides services to us or our affiliates, including members of our board of directors, will be eligible to receive awards under the LTIP at the discretion of our board of directors. In connection with our IPO, we issued 0.7 million restricted stock unit awards, which will vest over one to three years, to certain of our directors, officers and employees. We will recognize stock-based compensation expense, starting in 2018, over the one to three-year vesting term related to this issuance.

~~Non-controlling Interest~~. As a result of our IPO and Reorganization, Cactus Inc. is the sole managing member of Cactus LLC and consolidates entities in which it has a controlling financial interest. The Reorganization was considered a transaction between entities under common control. As a result, the financial statements for periods prior to our IPO and the Reorganization have been adjusted to combine the previously separate entities for presentation purposes. However, Cactus Inc. had no operations or assets and liabilities prior to our IPO. As such, for periods prior to the completion of our IPO, the consolidated financial statements represent the historical financial position and results of operations of Cactus LLC and its subsidiaries. For periods after the completion of our IPO, the financial position and results of operations include those of Cactus and report the non-controlling interest related to the portion of CW Units not owned by Cactus Inc. All Class B common stock is held by non-controlling interest owners.

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Consolidated Results of Operations

The following discussions relating to significant line items from our condensed consolidated statements of income are based on available information and represent our analysis of significant changes or events that impact the comparability of reported amounts. 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.

Three Months Ended ~~March 31, 2018~~June 30, 2022 Compared to Three Months Ended March 31, ~~2017~~

2022

The following table presents summary consolidated operating results for the periods indicated:


	Three Months Ended
	March 31,									Three Months Ended
	2018		2017		$ Change		% Change			June 30, 2022		March 31, 2022		$ Change		% Change
	(in thousands)									(in thousands)
Revenues									Revenues
Product revenue	$	58,926	$	33,038	$	25,888	78.4	%	Product revenue	$	112,232	$	94,040	$	18,192	19.3	%
Rental revenue		29,145		12,975		16,170	124.6		Rental revenue	23,695		22,343		1,352		6.1
Field service and other revenue		27,039		12,490		14,549	116.5		Field service and other revenue	34,288		29,516		4,772		16.2
Total revenues		115,110		58,503		56,607	96.8		Total revenues	170,215		145,899		24,316		16.7
Costs and expenses									Costs and expenses
Cost of product revenue		37,066		23,195		13,871	59.8		Cost of product revenue	69,172		60,920		8,252		13.5
Cost of rental revenue		12,176		8,273		3,903	47.2		Cost of rental revenue	15,328		15,089		239		1.6
Cost of field service and other revenue		21,537		10,938		10,599	96.9		Cost of field service and other revenue	26,734		24,806		1,928		7.8
Selling, general and administrative expenses		9,114		6,103		3,011	49.3		Selling, general and administrative expenses	14,740		14,094		646		4.6
Total costs and expenses		79,893		48,509		31,384	64.7		Total costs and expenses	125,974		114,909		11,065		9.6
Income from operations		35,217		9,994		25,223	252.4		Income from operations	44,241		30,990		13,251		42.8

Interest expense, net		(2,852)		(4,986)		(2,134)	(42.8)
Other income (expense), net		(4,305)		—		4,305	100.0
Interest income (expense), net									Interest income (expense), net	304		(100)		404		nm
Other expense, net									Other expense, net	—		(1,115)		1,115		nm
Income before income taxes		28,060		5,008		23,052	460.3		Income before income taxes	44,545		29,775		14,770		49.6
Income tax expense		1,652		154		1,498	972.7		Income tax expense	8,765		2,692		6,073		nm
Net income	$	26,408	$	4,854		21,554	444.0		Net income	35,780		27,083		8,697		32.1
Less: net income attributable to non-controlling interest									Less: net income attributable to non-controlling interest	8,636		6,467		2,169		33.5
Net income attributable to Cactus Inc.									Net income attributable to Cactus Inc.	$	27,144	$	20,616	$	6,528	31.7	%
nm = not meaningful									nm = not meaningful

Revenues

Product revenue was $112.2 million for the second quarter of 2022 compared to $94.0 million for the first quarter of 2022. The increase of $18.2 million, representing a 19% increase, was primarily due to increased sales of wellhead and production related equipment resulting from higher activity by our customers as well as increased cost recovery efforts.

Rental revenue for the ~~three months ended March 31, 2018~~second quarter of 2022 was ~~$58.9~~$23.7 million, an increase of ~~$25.9~~$1.4 million, or ~~78%~~6%, from ~~$33.0~~$22.3 million for the three months ended March 31, 2017. The increase was primarily attributable to a significant increase in U.S. onshore activity compared to the first quarter 2017. The quarterly average U.S. onshore rig count increased 32% to 948 rigs for the three months ended March 31, 2018 compared to 719 for the same period in 2017. Additionally, the number of rigs followed by Cactus increased 53% to 250 during the first quarter 2018 compared to 163 rigs for the first quarter ~~2017.~~of 2022. The term “rigs followed” represents the approximate number of active U.S. onshore drilling rigs to which we were the primary provider of wellhead products and corresponding services during drilling. Product revenue has historically tracked the rig count and has increased significantly due to the greater number of rigs and drilling activity conducted onshore in the U.S. We have also seen an increase ~~in the sale of production trees as more wells are put on production.~~

~~Rental revenue for the three months ended March 31, 2018~~ was ~~$29.1 million, an increase of $16.2 million, or 125%, from $13.0 million for the three months ended March 31, 2017. The change was primarily~~mainly attributable to higher ~~utilization related to increased demand placed on our rental fleet in which we have invested in during the preceding 12 months.~~

customer drilling and completion activity and associated repairs.

Field service and other revenue ~~for the three months ended March 31, 2018 was $27.0 million, an increase~~ of ~~$14.5 million, or 117%, from $12.5~~$34.3 million for the three months ended March 31, 2017. The increase was primarily attributable to higher demand for these services following the increase in our product and rental revenue, as field service is closely correlated with bothsecond quarter of ~~these activities.~~

~~Costs and expenses~~

~~Cost of product revenue for the three months ended March 31, 2018 was $37.1 million, an increase of $13.9~~2022 increased $4.8 million, or ~~60%~~16%, from ~~$23.2~~$29.5 million for the ~~three months ended March 31, 2017. The increase was largely attributable to an~~

~~Table~~first quarter of ~~Contents~~

~~increase in product sales volume as a result of higher demand for our products as well as higher pricing on more advanced wellheads.~~

~~Cost of rental revenue for the three months ended March 31, 2018 was $12.2 million, an increase of $3.9 million, or 47%, from $8.3 million for the three months ended March 31, 2017.~~2022. The increase was primarily due to higher ~~depreciation expense~~billable hours from increased customer activity and ~~repair~~cost recovery measures.

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Costs and expenses

Cost of product revenue for the second quarter of 2022 of $69.2 million increased $8.3 million, or 14%, from $60.9 million for the first quarter of 2022. The increase was primarily attributable to the increase in product sales as well as increased costs associated with ~~a larger, more active fleet,~~materials, freight and overhead.

Cost of rental revenue for the ~~three months ended March 31, 2018.~~

second quarter of 2022 was $15.3 million, an increase of $0.2 million, or 2%, from $15.1 million for the first quarter of 2022 mainly due to higher scrap expense and depreciation expense on our rental fleet, partially offset by lower equipment repair costs.

Cost of field service and other revenue was $26.7 million for the ~~three months ended March 31, 2018~~second quarter of 2022, an increase of $1.9 million, or 8%, from $24.8 million for the first quarter of 2022. The increase was ~~$21.5~~primarily related to increased personnel costs associated with an increase in the number of field personnel and higher wages. Additional increases were related to higher fuel and other costs associated with increased field service activity levels.

Selling, general and administrative expenses for the second quarter of 2022 were $14.7 million, an increase of ~~$10.6~~$0.6 million, or ~~97%~~5%, from ~~$10.9~~$14.1 million for the ~~three months ended March 31, 2017. The increase was primarily attributable to higher payroll costs due to additional field personnel and higher operating costs due to activity increases.~~

~~Selling, general and administrative expense for the three months ended March 31, 2018 was $9.1 million, an increase~~first quarter of ~~$3.0 million, or 49%, from $6.1 million for the three months ended March 31, 2017.~~2022. The increase was primarily due to ~~higher~~increased annual incentive bonus accruals, bad debt expense and travel costs offset by lower benefits, primarily payroll taxes, and ~~incentive compensation costs associated with the overall growth of Cactus, as well as higher~~ stock-based compensation expense.

Interest income (expense), net. Interest income, net for the second quarter of 2022 was $0.3 million compared to interest expense, ~~related~~net of $0.1 million for the first quarter of 2022. The increase in interest income, net of $0.4 million was primarily due to ~~equity awards issued in conjunction with our IPO.~~

~~Interest~~higher interest income earned on cash invested resulting from increased interest rates.

Other expense, net.~~Interest~~ Other expense, net for the ~~three months ended March 31, 2018 was $2.9~~first quarter of 2022 of $1.1 million represented a ~~decrease of $2.1 million, or 43%, from $5.0 million~~non-cash adjustment for the ~~three months ended March 31, 2017. The decrease is due to~~revaluation of the ~~repayment of our term loan in mid-February 2018 in connection with our IPO.~~

~~Other income (expense), net.~~ ~~Other income (expense), net for the three months ended March 31, 2018 relates to a $4.3 million loss on debt extinguishment~~liability related to the ~~write off~~tax receivable agreement as a result of changes to the ~~unamortized balance of debt discount and deferred loan costs in connection with the repayment of our term loan with a portion of the net proceeds of our IPO.~~

state tax rate.

Income tax expense.~~Cactus Inc. is subject to federal as well as state income tax on its share of income of Cactus LLC. Our operations prior to our IPO were not subject to U.S. federal income tax at an entity level.~~ Income tax expense for the ~~three months ended March 31, 2018~~second quarter of 2022 was ~~$1.7~~$8.8 million ~~(5.9% effective tax rate)~~ compared to ~~$0.2~~$2.7 million ~~(3.1% effective tax rate)~~ for the three months ended March 31, 2017. The change was primarily attributable to Cactus Inc. incurring U.S. federal income tax on its share of income of Cactus LLC during the period subsequent to our IPO in the first quarter of ~~2018. The effective~~2022. Income tax expense for the second quarter of 2022 included approximately $9.1 million expense associated with current income offset by a $0.3 million tax benefit associated with the partial valuation allowance release in conjunction with second quarter 2022 redemptions of CW Units. Partial valuation releases occur in conjunction with redemptions of CW Units as a portion of Cactus Inc.’s deferred tax assets from its investment in Cactus LLC becomes realizable. Income tax expense for the first quarter of 2022 included approximately $6.2 million expense associated with current income offset by a $1.7 million benefit associated with permanent differences related to equity compensation, a $1.0 million benefit associated with the revaluation of our deferred tax asset as a result of a change in our forecasted state tax rate ~~is lower than~~and a $0.8 million tax benefit associated with the ~~federal statutory rate~~partial valuation allowance release in conjunction with first quarter 2022 redemptions of ~~21% as~~ CW Units.

Cactus Inc. is only subject to federal and state income tax on its share of income offrom Cactus LLC. AsIncome allocated to the non-controlling interest is not subject to U.S. federal or state tax.

Table of ~~March 31, 2018, Cactus Inc. owned 35.3%~~Contents

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

The following table presents summary consolidated operating results for the periods indicated:


	Six Months Ended June 30,
	2022		2021		$ Change		% Change
	(in thousands)
Revenues
Product revenue	$	206,272	$	122,301	$	83,971	68.7	%
Rental revenue	46,038		27,133		18,905		69.7
Field service and other revenue	63,804		43,876		19,928		45.4
Total revenues	316,114		193,310		122,804		63.5
Costs and expenses
Cost of product revenue	130,092		84,621		45,471		53.7
Cost of rental revenue	30,417		26,574		3,843		14.5
Cost of field service and other revenue	51,540		32,155		19,385		60.3
Selling, general and administrative expenses	28,834		21,011		7,823		37.2
Total costs and expenses	240,883		164,361		76,522		46.6
Income from operations	75,231		28,949		46,282		nm

Interest income (expense), net	204		(333)		537		nm
Other expense, net	(1,115)		(1,410)		295		(20.9)
Income before income taxes	74,320		27,206		47,114		nm
Income tax expense (benefit)	11,457		(2,704)		14,161		nm
Net income	62,863		29,910		32,953		nm
Less: net income attributable to non-controlling interest	15,103		7,958		7,145		89.8	%
Net income attributable to Cactus Inc.	$	47,760	$	21,952	$	25,808	nm
nm = not meaningful

Revenues

Product revenue was $206.3 million for the six months ended June 30, 2022 compared to $122.3 million for the six months ended June 30, 2021. The increase of ~~Cactus LLC.~~

$84.0 million, representing a 69% increase from 2021, was primarily due to higher sales of wellhead and production related equipment resulting from higher activity by our customers as well as increased cost recovery efforts.

Rental revenue of $46.0 million for the first six months of 2022 increased $18.9 million, or 70%, from $27.1 million for the first six months of 2021. The increase was primarily attributable to higher drilling and completion activity by our customers and associated repairs.

Field service and other revenue for the six months ended June 30, 2022 was $63.8 million, an increase of $19.9 million, or 45%, from $43.9 million for the six months ended June 30, 2021. The increase was attributable to increased customer activity, resulting in higher billable hours and ancillary services as well as cost recovery measures.

Costs and expenses

Cost of product revenue for the six months ended June 30, 2022 was $130.1 million, an increase of $45.5 million, or 54%, from $84.6 million for the six months ended June 30, 2021. The increase was largely attributable to an increase in product sales and increased costs associated with materials, freight and overhead.

Cost of rental revenue of $30.4 million for the first six months of 2022 increased $3.8 million, or 14%, from $26.6 million for the first six months of 2021. The increase was primarily due to higher scrap expense, repair and equipment reactivation costs and increased personnel, ancillary costs and branch expenses, partially offset by lower depreciation expense on our rental fleet.

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Cost of field service and other revenue was $51.5 million for the six months ended June 30, 2022, an increase of $19.4 million, or 60%, from $32.2 million for the six months ended June 30, 2021. The increase was mainly related to higher personnel costs resulting from an increase in the number of field and branch personnel and higher wages as well as higher fuel and third-party service costs associated with increased field service activity levels.

Selling, general and administrative expenses for the six months ended June 30, 2022 were $28.8 million compared to $21.0 million for the six months ended June 30, 2021. The $7.8 million increase was largely attributable to increased personnel costs primarily related to higher salaries and wages, benefits and accruals for annual incentive bonuses. Additional increases related to higher stock-based compensation expense, professional fees, information technology expenses and travel costs.

Interest income (expense), net. Interest income, net for the first six months of 2022 was $0.2 million compared to interest expense, net of $0.3 million for the first six months of 2021. The increase in interest income, net of $0.5 million was primarily due to higher interest income earned on cash invested resulting from increased interest rates in 2022.

Other expense, net. Other expense, net for the six months ended June 30, 2022 of $1.1 million related to a non-cash adjustment for the revaluation of the liability related to the tax receivable agreement. Other expense, net for the six months ended June 30, 2021 of $1.4 million related to a $1.0 million non-cash adjustment for the revaluation of the liability related to the tax receivable agreement and $0.4 million for professional fees and other expenses associated with the 2021 Secondary Offering.

Income tax expense (benefit). Income tax expense for the six months ended June 30, 2022 was $11.5 million compared to an income tax benefit of $2.7 million for the six months ended June 30, 2021. Income tax expense for the first six months of 2022 included approximately $15.3 million expense associated with current income offset by a $1.7 million benefit associated with permanent differences related to equity compensation, a $1.0 million benefit associated with the revaluation of our deferred tax asset as a result of a change in our forecasted state tax rate and a $1.1 million tax benefit associated with the partial valuation allowance release in conjunction with CW Unit redemptions during the year. The income tax benefit for the first six months of 2021 included a $8.1 million benefit associated with a partial valuation allowance release associated with CW Unit redemptions during the year and a $1.1 million benefit associated with permanent differences related to equity compensation. These tax benefits were offset by an expense of $0.6 million related to a change in our foreign tax credit position and related valuation allowance.

Liquidity and Capital Resources

~~In February 2018,~~

At June 30, 2022, we completed our IPO. We received net proceeds of $469.6 million from the sale of 26,450,000 shares of Class A common stock in our IPO (including the sale of 3,450,000 additional shares of Class A common stock pursuant to the exercise in full by the underwriters of their option to purchase additional shares of Class A common stock (the “Option”)). We contributed all of the net proceeds of our IPO and the Option to Cactus LLC in exchange for CW Units. Cactus LLC used (i) $251.0had $311.7 million of ~~the net proceeds to repay all of the borrowings outstanding, plus accrued interest, under our term loan facility~~cash and ~~(ii) $216.4 million to redeem CW Units from certain direct and indirect owners of Cactus LLC. The remaining $2.2 million was held by Cactus LLC to cover previously paid offering expenses.~~

~~We expect that our~~cash equivalents. Our primary sources of liquidity and capital resources ~~will be~~are cash on hand, cash flows generated by operating activities and, if necessary, borrowings under our ~~revolving credit facility.~~ABL Credit Facility. Depending upon market conditions and other factors, we may also have the ability to issue additional equity and debt if needed.

~~Our ability~~ As of June 30, 2022, we had no borrowings outstanding under our ABL Credit Facility and $75.0 million of available borrowing capacity. Additionally, we were in compliance with the covenants of the ABL Credit Facility as of June 30, 2022. On July 25, 2022, the ABL Credit Facility was amended to, ~~satisfy~~among other things, increase the committed amount of the revolving credit facility from $75.0 million to $80.0 million and extend the maturity date to July 25, 2027, or such earlier date that is 91 days prior to the maturity date of any indebtedness that has a principal balance exceeding $30.0 million.

We believe that our ~~liquidity~~existing cash on hand, cash generated from operations and available borrowings under our ABL Credit Facility will be sufficient for at least the next 12 months to meet working capital requirements, ~~including~~anticipated capital expenditures, expected payments related to the TRA, anticipated tax liabilities and dividends to holders of our Class A common stock as well as pro rata cash distributions to the holders of CW Units other than Cactus Inc.

For the six months ended June 30, 2022, net capital expenditures totaled $12.9 million, which were primarily related to additions to the Company’s fleet of rental equipment, including drilling-related tools, and additional investment in and expansion of our Bossier City location. We currently estimate our net capital expenditures for the year ending December 31, 2022 will range from $20 million to $30 million. 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, volatility and company initiatives.

Our ability to satisfy our long-term liquidity requirements, including cash distributions to CW Unit Holders to fund their respective income tax liabilities relating to their share of ~~taxes~~the income of Cactus LLC and to fund liabilities related to the ~~partnership,~~TRA, depends on our future operating performance, which is affected by, and subject to, prevailing economic conditions, market conditions in the E&P industry, availability and cost of raw materials, and financial, business and other factors, many of which are beyond our control.

We ~~currently estimate that our capital expenditures for~~will not be able to predict or control many of these factors, such as economic conditions in the year ending December 31, 2018 will range from $50 million to $60 million, excluding acquisitions. We have begun accelerating and expanding our investments in frac equipment in response to increasing opportunities and client demands, and we expect to expand certain facilities. We continuously evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors,

markets

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~~including, among other things, demand for rental assets, prevailing economic conditions,~~where we operate and competitive pressures. If necessary, we could choose to further reduce our spending on capital projects and operating expenses to ensure we operate within the ~~condition of our existing assets, market conditions in the E&P industry, customers’ forecasts, demand volatility and company initiatives. We believe that our existing~~ cash ~~on hand, cash~~flow generated from ~~operations and available borrowings under~~ our revolving credit facility will be sufficient to meet working capital requirements, anticipated capital expenditures, expected cash distributions to the holders of CW Units and anticipated tax liabilities for at least the next 12 months.

At March 31, 2018 and December 31, 2017, we had approximately $7.9 million and $7.6 million, respectively, of cash and cash equivalents and $50.0 million and $50.0 million, respectively, of available borrowing capacity under our revolving credit facility. As of March 31, 2018, there were no borrowings outstanding under the revolving credit facility.

Prior to our IPO, on January 25, 2018, Cactus LLC paid a cash distribution of $26.0 million to its pre-IPO owners. This distribution was funded by borrowing under the revolving credit facility. The purpose of the distribution was to provide funds to these owners to pay their federal and state tax liabilities associated with taxable income recognized by them in the period prior to the completion of our IPO as a result of their ownership interests in Cactus LLC. The borrowings under the revolving credit facility were repaid as of March 31, 2018.

operations.

Cash Flows

~~Three~~

Six Months Ended ~~March 31, 2018~~June 30, 2022 Compared to ~~Three~~Six Months Ended ~~March 31, 2017~~

June 30, 2021

The following table summarizes our cash flows for the periods indicated:


	Three Months Ended March 31,					Six Months Ended June 30,
	2018		2017			2022		2021
	(in thousands)					(in thousands)
Net cash provided by operating activities	$	38,565	$	5,932	Net cash provided by operating activities	$	48,223	$	43,229
Net cash used in investing activities		(15,687)		(8,501)	Net cash used in investing activities	(12,876)		(4,353)
Net cash used in financing activities		(22,640)		(961)	Net cash used in financing activities	(24,165)		(18,639)

Net cash provided by operating activities was ~~$38.6~~$48.2 million and ~~$5.9~~$43.2 million for the ~~three~~six months ended ~~March 31, 2018~~June 30, 2022 and ~~2017,~~2021, respectively. ~~The primary reason~~Operating cash flows for ~~the change was a $21.6 million~~2022 increased primarily due to an increase in ~~net~~ income ~~and a $3.7 million period over period improvement~~offset by an increase in ~~net~~ working capital, ~~due to improved collections during the first quarter of 2018. We also had an increase of $7.4 million in non-cash items primarily~~largely related to the ~~$4.3 million loss on debt extinguishment recorded~~increase in ~~conjunction~~inventories exacerbated by extended in-transit volumes and increased accounts receivable associated with ~~the repayment of our term loan, $1.3 million of additional depreciation and $0.9 million difference in deferred income taxes.~~

higher revenues.

Net cash used in investing activities was ~~$15.7~~$12.9 million and ~~$8.5~~$4.4 million for the ~~three~~six months ended ~~March 31, 2018~~June 30, 2022 and ~~2017,~~2021, respectively. The ~~primary reason for the change~~increase was ~~higher capital expenditures during 2018 related~~primarily due to increased investments associated with our rental fleet ~~to meet the increased customer demand for~~and additional investment in and expansion of our ~~frac equipment.~~

Bossier City location.

Net cash used in financing activities was ~~$22.6~~$24.2 million and ~~$1.0~~$18.6 million for the ~~three~~six months ended ~~March 31, 2018~~June 30, 2022 and ~~2017,~~2021, respectively. The ~~primary reason for~~increase was comprised of a $3.9 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 ~~change was the receipt of $469.6~~period and a $0.5 million ~~of net proceeds from our IPO and the Option,~~increase in payments on finance leases. These increases were partially offset by ~~(i)~~ a ~~$248.5~~$0.2 million ~~repayment of the borrowings outstanding under our term loan and (ii) $216.4 million~~decrease in ~~redemptions of CW Units from certain direct and indirect owners of~~distributions to members other than Cactus LLC in connection with our IPO. Additionally, we made a $26.0 million distribution to owners prior to our IPO to provide funds to pay their federal and state liabilities associated with taxable income recognized by them in the period prior to the completion of our IPO as a result of their ownership in Cactus LLC.

~~Credit Agreement~~

On July 31, 2014, Cactus LLC entered into a credit agreement collateralized by substantially all of its assets, consisting of a $275.0 million Tranche B term loan and $50.0 million revolving credit facility with a $10.0 million sublimit for letters of credit. In conjunction with the completion of our IPO in February 2018, we repaid the term loan in full. There was $248.5 million outstanding on the term loan as of December 31, 2017. As of March 31, 2018 and December 31, 2017, no amounts were outstanding on the revolving loans and no letters of credit were outstanding. We may borrow and repay the revolving loans in accordance with the terms of the credit agreement. A commitment fee is payable quarterly on the unused portion of the revolving credit facility. Interest on the revolving loans is payable in

Inc.

~~Table of Contents~~

arrears for each draw fixed at an adjusted base rate plus an applicable margin, as defined in the credit agreement. The revolving loans portion of the credit agreement matures on July 31, 2019. Amounts outstanding under the credit agreement may be voluntarily prepaid, in whole or in part, without premium or penalty, in accordance with the terms of the credit agreement t and subject to breakage and similar costs.

The credit agreement contains various restrictive covenants that may limit our ability to incur additional indebtedness and liens, make or declare dividends, or enter into certain transactions, and contains a total leverage financial covenant related only to the revolving loans once a total of $15.0 million or more has been drawn on the revolving loans. Based on this total leverage financial covenant, availability under the revolving credit facility can be limited to $15.0 million. At March 31, 2018, we had access to the full $50 million revolving credit facility capacity. At March 31, 2018 and December 31, 2017, we were in compliance with the covenants in the credit agreement.

~~Contractual Obligations~~

~~A summary of our contractual obligations as of March 31, 2018 is provided in the following table.~~

Payments Due by Period For the Year Ending December 31,


2018

2019

2020

2021

2022

Thereafter

Total

(in thousands)
Operating lease obligations(1)

$
4,376

$
4,206

$
3,782

$
3,095

$
2,043

$
4,960

$
22,462
Capital lease obligations(2)

4,732

6,420

4,461

494

—

—

16,107
Liability related to TRA(3)

—

5,840

3,168

3,255

3,331

47,395

62,989
Total

$
9,108

$
16,466

$
11,411

$
6,844

$
5,374

$
52,355

$
101,558

~~(1)~~

~~Operating lease obligations relate to real estate, vehicles and equipment.~~

~~(2)~~

~~Capital lease obligations relate to vehicles used in our business.~~

~~(3)~~

~~Represents obligations by Cactus to make payments under the TRA. The amount and timing of payments is subject to change.~~

~~Off-Balance Sheet Arrangements~~

~~Currently, we do not have off-balance sheet arrangements.~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

For quantitative and qualitative disclosures about market risk, see Part II, Item 7A., “Quantitative and Qualitative Disclosures about Market Risk,” in our 2021 Annual ~~Report on Form 10-K for the year ended December 31, 2017 (our “2017 Annual Report”).~~Report. Our exposure to market risk has not changed materially since December 31, ~~2017.~~

2021.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

In accordance with Exchange Act Rules 13a-15 and 15d-15, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of ~~March 31, 2018~~June 30, 2022 at the reasonable assurance level.

~~Table of Contents~~

Changes in Internal Control over Financial Reporting

During the first quarter of 2018, we implemented new review and approval procedures over journal entry transactions recorded during the financial close process that enhance our internal control over financial reporting. Other than this change, there has been

There were no ~~change~~changes in our internal control over financial reporting that occurred during the second quarter ~~ended March 31, 2018~~of 2022 that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are party to lawsuits arising in the ordinary course of our business. We cannot predict the outcome of any such lawsuits with certainty, but management believes it is ~~remote~~unlikely that pending or threatened legal matters will have a material adverse impact on our financial condition.

Due to the nature of our business, we are, from time to time, involved in other routine litigation or subject to disputes or claims related to our business activities, including workers’ compensation claims and employment related disputes. In the opinion of our management, none of these, ~~other~~whether pending litigation, ~~matters,~~ disputes or claims against us, if decided adversely, will have a material adverse effect on our results of operations, financial condition or cash ~~flows or results of operations.~~

flows.

Item 1A. Risk Factors.

In addition to the ~~other~~ information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described below and under ~~the heading “Item~~“Part I, Item 1A. Risk Factors” included in our ~~2017~~2021 Annual Report, and under “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and the risk factors and other cautionary statements contained in our other filings with the Securities and Exchange Commission, which could materially affect our business, results of operations, financial condition or cash flows. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, results of operations, financial condition or cash flows. ~~There~~Except as previously disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, there have been no material changes in our risk factors from those described in our ~~2017~~2021 Annual Report or our other Securities and Exchange Commission ~~filings other than as set forth below:~~

~~The outcome of final actions under Section 301 of the Trade Act of 1974 may adversely affect our business.~~

On March 22, 2018 the President of the United States announced his decisions on the actions that the U.S. government will take based on the findings of an investigation under Section 301 of the Trade Act of 1974. These actions include a proposed 25 percent tariff on approximately $50 billion worth of imports from China, pursuit of dispute settlement in the World Trade Organization and restrictions on investment in the United States directed or facilitated by China. In response to the release by the U.S. government of the proposed list of Chinese products that could be subject to the additional 25 percent tariff under Section 301, the Chinese government issued a list of additional U.S. origin goods such as airplanes and automobiles equal to about $50 billion in exports to China that could be subject to a 25 percent tariff. The outcome of final actions under Section 301 and related developments is uncertain. To the extent these actions result in a decrease in demand for our products, our business may be adversely impacted. Given the uncertainty regarding the scope and duration of these trade actions by the U.S. or other countries, the impact of these trade actions on our operations or results remains uncertain.

filings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~Unregistered Sales~~

Issuer Purchases of Equity Securities

~~In connection~~

The following sets forth information with respect to our ~~IPO, Cactus Inc. and Cactus LLC effected a series~~repurchase of ~~restructuring transactions as a result of which (a) all of the previously outstanding membership interests (including outstanding~~ Class A ~~units, Class A-1 units and Class B units) in Cactus LLC held by its pre-IPO owners were converted into CW Units; (b) Cactus Inc. issued 23,000,000~~common stock during the three months ended June 30, 2022 (in whole shares).


Period	Total number of shares purchased (1)	Average price paid per share (2)
April 1-30, 2022	275	$	61.65
May 1-31, 2022	—	—
June 1-30, 2022	1,032	52.42
Total	1,307	$	54.36

(1)Consists of shares of Class A common stock ~~and contributed~~repurchased from employees to satisfy tax withholding obligations related to restricted stock units that vested during the ~~net proceeds of our IPO to Cactus LLC in exchange~~period.

(2)Average price paid for 23,000,000 CW Units; (c) Cactus LLC used the net proceeds of our IPO that it received from Cactus Inc. to repay the borrowings outstanding under its term loan facility and to redeem 8,667,841 CW Units from the existing owners; (d) Cactus Inc. issued and contributed 51,889,772 shares of its Class B common stock, equal to the number of outstanding CW Units held by the owners thereof following the redemption described in (c) above to Cactus LLC; and (e) Cactus LLC distributed to each of the owners that continued to own CW Units following our IPO one share of Class B common stock for each CW Unit such holder continued to hold following the redemption described in (c) above. With the exercise of the Option, Cactus Inc. issued an additional 3,450,000 shares of Class A common stock ~~and used~~purchased from employees to satisfy tax withholding obligations related to restricted stock units that vested during the net proceeds to redeem 3,450,000 CW Units from the owners thereof, and Cactus Inc. canceled a corresponding number of shares of Class B common stock. The IPO was registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an effective Registration Statement on Form S-1 (Reg. No. 333-222540), as supplemented by the registration statement supplement filed pursuant to Rule 462(b) under the Securities Act of 1933 (Reg. No. 333-222919).

period.

Table of Contents

~~Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC acted as joint book-running managers of the offering and as representatives of the underwriters.~~

~~Use of Proceeds~~

On February 12, 2018, we completed our IPO at a price to the public of $19.00 per share. We received net proceeds of $408.0 million after deducting underwriting discounts and commissions and $2.8 million in current offering expenses of our IPO. We also paid $2.2 million in offering expenses during 2017 that were recorded to prepaid expenses in the consolidated balance sheet as of December 31, 2017. On February 14, 2018 we completed the sale of an additional 3,450,000 shares of Class A common stock pursuant to the exercise in full by the underwriters of the Option from which we received an additional $61.6 million of net proceeds after deducting underwriting discounts and commissions. We contributed all of the net proceeds of our IPO (including from the Option) to Cactus LLC in exchange for CW Units. Cactus LLC used the $469.6 million of net proceeds to (i) repay all of the borrowings outstanding under its term loan facility, including accrued interest, of $251.0 million and (ii) redeem $216.4 million of CW Units from certain direct and indirect owners of Cactus LLC. The remaining $2.2 million was held by Cactus LLC to cover previously paid offering expenses.

Item 6. Exhibits.

The following exhibits arerequired by Item 601 of Regulation S-K and are filed as part of this report.

~~EXHIBIT INDEX~~

~~The following exhibits are required by Item 601 of Regulation S-K and are filed as part of this report:~~


Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation of Cactus, Inc., effective February 12, 2018 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form ~~8 K (File No. 001 38390)~~8-K filed with the Commission on February 12, 2018)
3.2
~~3.2~~	Amended and Restated Bylaws of Cactus, Inc., effective as of September 8, 2020 (incorporated by reference to Exhibit ~~3.2~~3.1 to the Registrant’s Form 8-K filed with the Commission on ~~February 12, 2018)~~September 9, 2020)
31.1*
~~4.1~~	~~Form of Class A Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 filed with the Commission on January 12, 2018)~~

~~4.2~~	~~Registration Rights Agreement (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~4.3~~	Stockholders’ Agreement, effective as of February 12, 2018., by and among Cactus, Inc., Cadent Energy Partners II, L.P. and Cactus WH Enterprises, LLC (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)

~~10.1~~	First Amended and Restated Limited Liability Company Operating Agreement of Cactus Wellhead, LLC, (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)

~~10.2†~~	Amended and Restated Employment Agreement with Scott Bender, dated as of February 12, 2018 (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)

~~10.3†~~	Amended and Restated Employment Agreement with Joel Bender, dated as of February 12, 2018 (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)

~~Table of Contents~~


~~Exhibit No.~~		~~Description~~
~~10.4†~~		Amended and Restated Noncompetition Agreement with Scott Bender, dated as of February 12, 2018 (incorporated by reference to Exhibit 10.5 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)

~~10.5†~~		Amended and Restated Noncompetition Agreement with Joel Bender, dated as of February 12, 2018 (incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)

~~10.6†~~		~~Indemnification Agreement (Scott Bender) (incorporated by reference to Exhibit 10.7 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.7†~~		~~Indemnification Agreement (Joel Bender) (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.8†~~		~~Indemnification Agreement (Bruce Rothstein) (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.9†~~		~~Indemnification Agreement (Brian Small) (incorporated by reference to Exhibit 10.10 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.10†~~		~~Indemnification Agreement (Steven Bender) (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.11†~~		~~Indemnification Agreement (Stephen Tadlock) (incorporated by reference to Exhibit 10.12 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.12†~~		~~Indemnification Agreement (John (Andy) O’Donnell) (incorporated by reference to Exhibit 10.13 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.13†~~		~~Indemnification Agreement (Michael McGovern) (incorporated by reference to Exhibit 10.14 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.14†~~		~~Indemnification Agreement (Alan Semple) (incorporated by reference to Exhibit 10.15 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.15†~~		~~Indemnification Agreement (Gary Rosenthal) (incorporated by reference to Exhibit 10.16 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.16†~~		~~Indemnification Agreement (Ike Smith) (incorporated by reference to Exhibit 10.17 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.17~~		~~Tax Receivable Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.18~~		Credit Agreement, dated July 31, 2014, among Cactus Wellhead, LLC, Credit Suisse AG, as administrative agent, collateral agent and issuing bank, and the lenders named therein as parties thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S 1 (File No. 333 222540) filed with the Commission on January 12, 2018)

~~10.19~~		~~Cactus, Inc. Long Term Incentive Plan (incorporated by reference to Exhibit 10.18 to the Registrant’s Form 8 K (File No. 001 38390) filed with the Commission on February 12, 2018)~~

~~10.20†~~		Form of Restricted Stock Agreement under the Cactus Inc. Long Term Incentive Plan (incorporated by reference to Exhibit 10.10 to the Registrant’s Form S 1 Registration Statement (File No. 333 222540) filed with the Commission on January 12, 2018)

~~Table of Contents~~


~~Exhibit No.~~	~~Description~~
~~10.21†~~	Form of Restricted Stock Unit Agreement under the Cactus Inc. Long Term Incentive Plan (incorporated by reference to Exhibit 10.11 to the Registrant’s Form S 1 Registration Statement (File No. 333 222540) filed with the Commission on January 12, 2018)

31.1*	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
31.2*	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
32.1*	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
32.2*	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document
101* 101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Calculation Linkbase Document
101.LAB*		Inline XBRL Taxonomy Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Presentation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Definition Document
104		Cover Page Interactive Data ~~Files~~ File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

~~† Management contract or compensatory plan or arrangement.~~

** Furnished herewith.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


						Cactus, Inc.

August 4, 2022
~~Date: May 11, 2018~~ By:
	~~By:~~	/s/ Scott Bender
Date						Scott Bender
		President, Chief Executive Officer and Director (Principal Executive Officer)

August 4, 2022					By:	/s/ Stephen Tadlock
Date			~~By:~~		~~/s/ Brian Small~~
				~~Brian Small~~
		Stephen Tadlock Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)


☐
	~~For the quarterly period ended March 31, 2018~~

	or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	~~Commission File Number: 001‑38390~~

~~Delaware~~	~~35‑2586106~~
Delaware			35-2586106
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

920 Memorial City Way, Suite 300			77024
Houston,		Texas	(Zip Code)
(Address of principal executive offices)			~~77024~~ ~~(Zip Code)~~


Large accelerated filer ☐		☑	Accelerated filer	☐
Non-accelerated filer ☑ (Do not check if a smaller reporting company)		☐	Smaller reporting company	☐
			Emerging growth company ☑
	☐


Cautionary ~~Statement~~Note Regarding Forward-Looking Statements		i

PART I - FINANCIAL INFORMATION		1

Item 1.	Financial ~~Statement~~Statementss	1
Item 2.	~~Management's~~Management ’s Discussion and Analysis of Financial Condition and Results of Operations	19 13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26 20
Item 4.	Controls and Procedures	26 20

PART II - OTHER INFORMATION		28

Item 11..	Legal Proceedings	28 21
Item lA1A.	Risk Factors	28 21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28 21
Item 6.	Exhibits	29 22
	Signatures	32 23



													Accumulated
	Members'		Class A			Class B			Additional				Other		Non-		Total
	Equity		Common Stock			Common Stock			Paid-In		Retained		Comprehensive		controlling		Equity
(in thousands)	(Deficit)		Shares	Amount		Shares	Amount		Capital		Earnings		Income		Interest		(Deficit)
Balance at December 31, 2017	$	(36,299)	—	$	—	—	$	—	$	—	$	—	$	82	$	—	$	(36,217)
Member distributions prior to IPO		(26,000)	—		—	—		—		—		—		—		—		(26,000)
Net income prior to IPO and reorganization		13,648	—		—	—		—		—		—		—		—		13,648
Effect of IPO and reorganization (Note 1)		48,651	26,450		265	48,440		—		71,195		—		—		130,861		250,972
Member distributions after IPO		—	—		—	—		—		—		—		—		(41)		(41)
Additional paid-in capital related to tax receivable agreement		—	—		—	—		—		11,116		—		—		—		11,116
Other comprehensive income		—	—		—	—		—		—		—		239		—		239
Stock-based compensation		—	—		—	—		—		834		—		—		—		834
Net income after IPO and reorganization		—	—		—	—		—		—		3,753		—		9,007		12,760
Balance at March 31, 2018	$	—	26,450	$	265	48,440	$	—	$	83,145	$	3,753	$	321	$	139,827	$	227,311


	Three Months Ended March 31,
	2018
Current:
Federal	$	211
State		240
Foreign		238
Total current income taxes		689
Deferred:
Federal		762
State		128
Foreign		73
Total deferred income taxes		963
Total provision for income taxes	$	1,652


	Three Months Ended March 31,
	2018
Income taxes at 21% statutory tax rate	$	5,893
Net difference resulting from:
Profit of Cactus LLC Pre-IPO not subject to U.S. federal tax		(2,808)
Profit of non-controlling interest not subject to U.S. federal tax		(1,926)
Foreign earnings subject to different tax rates		50
State income taxes		318
Foreign withholding taxes		73
Change in valuation allowance		(20)
Other		72
Total provision for income taxes	$	1,652


	Operating Leases		Capital Leases		Liability related to TRA		Total
Remainder of 2018	$	4,376	$	4,732	$	—	$	9,108
2019		4,206		6,420		5,840		16,466
2020		3,782		4,461		3,168		11,411
2021		3,095		494		3,255		6,844
2022		2,043		—		3,331		5,374
Thereafter		4,960		—		47,395		52,355
	$	22,462	$	16,107	$	62,989	$	101,558