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Financial report summary
?Risks
- Demand for our products and services depends on oil and gas industry activity and customer expenditure levels, which are directly affected by trends in the demand for and price of crude oil and natural gas and availability of capital.
- U.S. drilling and completion activity could be adversely affected by any significant constraints in equipment, labor or takeaway capacity in the regions in which we operate.
- We may be unable to employ a sufficient number of skilled and qualified workers to sustain or expand our current operations.
- Our business is dependent on the continuing services of certain of our key managers and employees.
- Political, regulatory, economic and social disruptions in the countries in which we conduct business and globally could adversely affect our business or results of operations.
- We are dependent on a relatively small number of customers in a single industry. The loss of an important customer could adversely affect our results of operations and financial condition.
- Delays in obtaining, or inability to obtain or renew, permits or authorizations by our customers for their operations could impair our business.
- Competition within the oilfield services industry may adversely affect our ability to market our services.
- New technology may cause us to become less competitive.
- Increased costs, or lack of availability, of raw materials and other components may result in increased operating expenses and adversely affect our results of operations and cash flows.
- Our operations are subject to hazards inherent in the oil and natural gas industry, which could expose us to substantial liability and cause us to lose customers and substantial revenue.
- Oilfield anti-indemnity provisions enacted by many states may restrict or prohibit a party’s indemnification of us.
- Our operations require us to comply with various domestic and international regulations, violations of which could have a material adverse effect on our results of operations, financial condition and cash flows.
- Compliance with environmental laws and regulations may adversely affect our business and results of operations.
- Existing or future laws and regulations related to greenhouse gases and climate change and related public and governmental initiatives and additional compliance obligations could have a material adverse effect on our business, results of operations, prospects, and financial condition.
- The global outbreak of COVID-19 had, and similar pandemics in the future may have, an adverse impact on our business and operations.
- The ongoing conflicts in various parts of the world may adversely affect our business and results of operations.
- We are a holding company whose only material asset is our equity interest in Cactus Companies, and accordingly, we are dependent upon distributions from Cactus Companies to pay taxes, make payments under the TRA and cover our corporate and other overhead expenses and pay dividends to holders of our Class A Common Stock.
- Cactus WH Enterprises LLC has the ability to direct the voting of a significant percentage of the voting power of our common stock, and its interests may conflict with those of our other shareholders.
- Our amended and restated certificate of incorporation and amended and restated bylaws, as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our Class A common stock.
- Future sales of our Class A common stock in the public market, or the perception that such sales may occur, could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.
- Cactus Inc. will be required to make payments under the TRA for certain tax benefits that we may claim, and the amounts of such payments could be significant.
- In certain cases, payments under the TRA may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the TRA.
- If Cactus Companies were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we and Cactus Companies might be subject to potentially significant tax inefficiencies, and we would not be able to recover payments previously made by us under the TRA even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.
- We may not realize the anticipated benefits from the FlexSteel acquisition, and it could adversely impact our business and our operating results.
- We may experience difficulties in integrating the operations of FlexSteel into our business and in realizing the expected benefits of the Merger.
- FlexSteel may have liabilities that are not known to us and the indemnities negotiated in the Merger Agreement may not offer adequate protection.
- We will not be able to enforce claims with respect to the representations and warranties that the sellers of FlexSteel provided under the Merger Agreement.
- A failure of our information technology infrastructure and cyberattacks could adversely impact us.
- We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could disrupt our business and adversely affect our results of operations.
- Our business is subject to complex and evolving laws and regulations regarding privacy and data protection (“data protection laws”).
- Holders of our Class A common stock may not receive dividends on their Class A common stock.
- If we are unable to fully protect our intellectual property rights or trade secrets or a third party attempts to enforce their intellectual property rights against us, we may suffer a loss in revenue or any competitive advantage or market share we hold, or we may incur costs in litigation defending intellectual property rights.
Management Discussion
- Pressure Control. Pressure Control revenue was $756.7 million for 2023, an increase of $68.4 million, or 10%, from $688.4 million for 2022. The increase in revenues was primarily due to higher sales of wellhead and production related equipment resulting from higher drilling and completion activity by our customers. In addition, increased rental of drilling and completion equipment and field service associated with product and rental revenues also increased as a result of higher customer activity. Operating income of $236.9 million in 2023 increased $34.3 million, or 17%, from $202.7 million in 2022. The increase was primarily attributable to higher gross margins during the period and increased volume partially offset by higher segment selling, general and administrative (“SG&A”) expenses. The increase in SG&A expenses primarily related to higher bad debt expense, travel and entertainment expenses, professional fees and hardware and software expenses.