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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________
FORM 10-Q
______________________________________________________________________________
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 001-38390
______________________________________________________________________________
Cactus, Inc.
(Exact name of registrant as specified in its charter)
______________________________________________________________________________
Delaware35-2586106
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
920 Memorial City Way, Suite 30077024
Houston,Texas(Zip Code)
(Address of principal executive offices)
(713626-8800
(Registrant’s telephone number, including area code)
______________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.01WHDNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 
As of August 2, 2022, the registrant had 60,615,296 shares of Class A common stock, $0.01 par value per share, and 15,262,826 shares of Class B common stock, $0.01 par value per share, outstanding.



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 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 statements, although not all forward-looking statements contain such identifying words. These 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.
Important factors that could cause actual results to differ materially from those contained in the forward-looking statements include, but are not limited to:
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 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;
disparities in activity levels between private operators and large publicly-traded exploration and production (“E&P”) companies;
the number of active workover rigs;
availability and cost of capital and capital spending discipline exercised by customers;
customers’ use of free cash flow to increase dividends and/or share buybacks rather than to increase production;
overall oilfield service cost inflation;
our success in cost recovery efforts;
the financial health of our customers and our credit risk of customer non-payment;
changes in the number of drilled but uncompleted wells (DUCs) and the level of completion activity;
the size and timing of orders;
availability and cost of raw materials, components and imported items;
changes in inland and ocean shipping costs, the availability of containers and vessels from Asia as well as port congestion and domestic trucking capacity;
transportation differentials associated with reduced capacity in and out of the storage hub in Cushing, Oklahoma;
expectations regarding overhead and operating costs and margins;
the impact of inflation, rising interest rates and the threat of a recession;
availability and cost of skilled and qualified workers and our ability to hire and retain such workers;
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 ability to pay dividends and the amounts of any such dividends;
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 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 statements.
All 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 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 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)
June 30,
2022
December 31,
2021
(in thousands, except per share data)
Assets
Current assets
Cash and cash equivalents
$311,684 $301,669 
Accounts receivable, net of allowance of $920 and $741, respectively
125,821 89,205 
Inventories
149,037 119,817 
Prepaid expenses and other current assets
7,985 7,794 
Total current assets
594,527 518,485 
Property and equipment, net
130,376 129,117 
Operating lease right-of-use assets, net
20,910 22,538 
Goodwill
7,824 7,824 
Deferred tax asset, net
315,495 303,074 
Other noncurrent assets
992 1,040 
Total assets
$1,070,124 $982,078 
Liabilities and Equity
Current liabilities
Accounts payable
$57,366 $42,818 
Accrued expenses and other current liabilities
33,620 28,240 
Current portion of liability related to tax receivable agreement
11,769 11,769 
Finance lease obligations, current portion
5,630 4,867 
Operating lease liabilities, current portion
5,253 4,880 
Total current liabilities
113,638 92,574 
Deferred tax liability, net
1,247 1,172 
Liability related to tax receivable agreement, net of current portion
288,659 269,838 
Finance lease obligations, net of current portion
6,912 5,811 
Operating lease liabilities, net of current portion
15,860 17,650 
Total liabilities
426,316 387,045 
Commitments and contingencies


Stockholders’ equity
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
606 590 
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
304,418 289,600 
Retained earnings
212,913 178,446 
Accumulated other comprehensive income (loss)(698)8 
Total stockholders’ equity attributable to Cactus Inc.517,239 468,644 
Non-controlling interest
126,569 126,389 
Total stockholders’ equity643,808 595,033 
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
June 30,
Six Months Ended
June 30,
2022202120222021
(in thousands, except per share data)
Revenues
Product revenue
$112,232 $70,345 $206,272 $122,301 
Rental revenue
23,695 14,644 46,038 27,133 
Field service and other revenue
34,288 23,904 63,804 43,876 
Total revenues
170,215 108,893 316,114 193,310 
Costs and expenses
Cost of product revenue
69,172 48,100 130,092 84,621 
Cost of rental revenue
15,328 14,403 30,417 26,574 
Cost of field service and other revenue
26,734 17,692 51,540 32,155 
Selling, general and administrative expenses
14,740 11,384 28,834 21,011 
Total costs and expenses
125,974 91,579 240,883 164,361 
Income from operations
44,241 17,314 75,231 28,949 
Interest income (expense), net304 (181)204 (333)
Other expense, net (1,004)(1,115)(1,410)
Income before income taxes
44,545 16,129 74,320 27,206 
Income tax expense (benefit)8,765 1,355 11,457 (2,704)
Net income
$35,780 $14,774 $62,863 $29,910 
Less: net income attributable to non-controlling interest
8,636 4,381 15,103 7,958 
Net income attributable to Cactus Inc.
$27,144 $10,393 $47,760 $21,952 
Earnings per Class A share - basic
$0.45 $0.19 $0.80 $0.42 
Earnings per Class A share - diluted
$0.44 $0.18 $0.78 $0.37 
Weighted average Class A shares outstanding - basic
60,523 55,048 59,909 52,124 
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 June 30,Six Months Ended
June 30,
2022202120222021
(in thousands)
Net income
$35,780 $14,774 $62,863 $29,910 
Foreign currency translation adjustments
(1,367)(82)(931)(275)
Comprehensive income
$34,413 $14,692 $61,932 $29,635 
Less: comprehensive income attributable to non-controlling interest
8,302 4,337 14,878 7,796 
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)

Class AClass BAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive Income (Loss)
Non-controlling
Interest
Total
Equity
Common StockCommon Stock
(in thousands)SharesAmountSharesAmount
Balance at March 31, 202260,197 $602 15,674 $ $298,893 $192,493 $335 $122,779 $615,102 
Member distributions— — — — — — — (1,694)(1,694)
Effect of CW Unit redemptions411 4 (411)— 3,267 — — (3,271) 
Tax impact of equity transactions— — — — 433 — — — 433 
Equity award vestings5  — — (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, 202260,613 $606 15,263 $ $304,418 $212,913 $(698)$126,569 $643,808 
Balance at March 31, 202154,317 $543 21,383 $ $247,875 $157,286 $255 $153,091 $559,050 
Member distributions— — — — — — — (1,886)(1,886)
Effect of CW Unit redemptions3,718 37 (3,718)— 26,912 — — (26,949) 
Tax impact of equity transactions— — — — 1,931 — — — 1,931 
Equity award vestings3  — — (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, 202158,038 $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 STOCKHOLDERS’ EQUITY
(unaudited)

Class AClass BAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive Income (Loss)
Non-controlling
Interest
Total
Equity
Common StockCommon Stock
(in thousands)SharesAmountSharesAmount
Balance at December 31, 202159,035 $590 16,674 $ $289,600 $178,446 $8 $126,389 $595,033 
Member distributions— — — — — — — (3,348)(3,348)
Effect of CW Unit redemptions1,411 14 (1,411)— 11,145 — — (11,159) 
Tax impact of equity transactions— — — — 2,964 — — — 2,964 
Equity award vestings167 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, 202260,613 $606 15,263 $ $304,418 $212,913 $(698)$126,569 $643,808 
Balance at December 31, 202047,713 $477 27,655 $ $202,077 $150,086 $330 $197,800 $550,770 
Member distributions— — — — — — — (3,560)(3,560)
Effect of CW Unit redemptions9,990 100 (9,990)— 71,911 — — (72,011) 
Tax impact of equity transactions— — — — 2,436 — — — 2,436 
Equity award vestings335 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, 202158,038 $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,
20222021
(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 agreement1,115 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 equivalents10,015 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 per share data, or as otherwise indicated)
1.Preparation of Interim Financial Statements and Other Items
Basis of Presentation
The financial statements presented in this report represent the consolidation of Cactus, Inc. (“Cactus Inc.”) and its subsidiaries (the “Company”), including Cactus Wellhead, LLC (“Cactus LLC”). Cactus Inc. is a holding company whose only material asset is an equity interest consisting of units representing limited liability company interests in Cactus LLC (“CW Units”). Cactus Inc. is the sole managing member of Cactus LLC 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 common stock, par value $0.01 per share (“Class A common stock”). 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.
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) 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 on Form 10-K for the year ended December 31, 2021.
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 any interim period are not necessarily indicative of the results to be expected for the full year.
Use of Estimates
In preparing our consolidated financial statements in conformity with GAAP, we make numerous estimates and assumptions that affect the 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 could differ materially from the estimates and assumptions that we use in the preparation of our consolidated financial statements.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation.
2.Concentrations, Risks and Uncertainties
Significant Customers
Our customers are primarily oil and natural gas E&P companies representing private operators, publicly-traded independents, majors and other companies with operations in the key U.S. oil and gas producing basins as well as Australia and the Kingdom of Saudi Arabia. For the six months ended June 30, 2022 and 2021, one customer represented approximately 10% and 13%, respectively, of our consolidated revenues.
Significant Vendors
The 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 United States, China, India and Australia. For the six months ended June 30, 2022, no vendor represented 10% or more of our total third-party vendor purchases of raw materials, finished products, components, equipment, machining and other services. 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 customers. Total unbilled revenue included in accounts receivable as of June 30, 2022 and December 31, 2021 was $28.3 million and $24.1 million, respectively.
We maintain an allowance for credit losses to provide for the amount of 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 expected credit loss percentage is determined using historical loss data adjusted for current conditions and forecasts of future economic conditions. Accounts deemed uncollectible are applied against the allowance for credit losses. The following is a rollforward of our allowance for credit losses.
Balance at
Beginning of
Period
ExpenseWrite offBalance at
End of
Period
Six Months Ended June 30, 2022$741 $240 $(61)$920 
Six Months Ended June 30, 2021598 149 (117)630 
4.Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using standard cost (which approximates average cost) and weighted average methods. Costs include an application of related material, direct labor, duties, tariffs, freight and overhead costs. Net realizable value is 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-progress6,159 4,288 
Finished goods140,183 113,659 
$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, 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,
2022202120222021
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 performance obligations that are unsatisfied.
8.Tax Receivable Agreement (TRA)
In connection with our initial public offering (“IPO”) in February 2018, we entered into the TRA which generally provides for 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 and franchise tax that Cactus Inc. actually realizes or is deemed to realize in certain circumstances. Cactus Inc. retains the benefit of the remaining 15% of these net cash savings.
The TRA liability is calculated by determining the tax basis subject to the TRA (“tax basis”) and applying a blended tax rate to the basis differences and calculating the resulting iterative impact. The blended tax rate consists of the U.S. federal income tax rate and an assumed combined state and local income tax rate driven by the apportionment factors applicable to each state. Subsequent changes to the measurement of the TRA liability are recognized in the statements of income as a component of other expense, net. As of June 30, 2022, the total liability from the TRA was $300.4 million with $11.8 million reflected in current liabilities based on the expected timing of our 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.
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. 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 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.
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.
9.Equity
As of June 30, 2022, Cactus Inc. owned 79.9% of Cactus LLC as compared to 78.0% as of December 31, 2021. As of June 30, 2022, Cactus Inc. had outstanding 60.6 million shares of Class A common stock (representing 79.9% of the total voting power) and 15.3 million shares of Class B common stock (representing 20.1% of the total voting power).
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Redemptions of CW Units
Pursuant to the First Amended and Restated Limited Liability Company Operating Agreement of Cactus Wellhead, LLC (the “Cactus Wellhead LLC Agreement”), holders of CW Units are entitled to redeem their CW Units, which results in additional Class A common stock outstanding. Since our IPO in February 2018, 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 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 exchange for Class A common stock in accordance with the Cactus Wellhead LLC Agreement. There was no change in the combined number of Cactus Inc. voting shares outstanding as a result of the redemptions.
On June 17, 2021, Cadent Energy Partners II, L.P. (“Cadent”) transferred ownership of 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 provided in the Cactus Wellhead LLC Agreement. 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 change in the combined number of voting shares of Cactus Inc. outstanding. In addition to the redemption by Cadent, 425,433 CW Units were redeemed in exchange for shares of Class A common stock during the three months ended 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 recognized a $3.0 million tax benefit for the partial valuation release related to the realizable portion of the 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 the sale of common stock in the 2021 Secondary Offering and incurred $0.4 million in expenses which were recorded in other expense, net, in the consolidated statements of income. There was no change in the combined number of Cactus Inc. voting shares outstanding as a result of the 2021 Secondary Offering. We 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 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 unvested equity-based awards on the date of record and are paid upon vesting. Dividends are not paid to our Class B common stockholders; however, a 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 Class A common stock. See further discussion of the 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 six months ended 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 other members totaling $3.3 million over the same period. During the six months ended June 30, 2021, Cactus LLC distributed $9.2 million to Cactus Inc. to fund its dividend payments and made pro rata distributions to the other members totaling $3.6 million.
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Limitation of Members’ Liability
Under the terms of the Cactus Wellhead LLC Agreement, the members of Cactus LLC are not obligated for debt, liabilities, contracts or other obligations of Cactus LLC. Profits and losses are allocated to members as defined in the Cactus Wellhead LLC Agreement.
10.Commitments and 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.
11.Earnings per Share
Basic earnings per share of Class A common stock is calculated by dividing the net income attributable to Cactus Inc. during the period by the 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.
We use the 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 assuming that the proceeds will be used to purchase shares of Class A common stock and the contingently issuable share method to determine the potential dilutive effect of unvested performance stock units.
The following table summarizes the basic and diluted earnings per share calculations:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
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 shares15,799 20,949 16,353 23,831 
Weighted average Class A shares outstanding—diluted76,322 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 Cactus, Inc. (“Cactus Inc.”) and its consolidated subsidiaries, unless we state otherwise or the context otherwise 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 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 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.
We operate through service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, Marcellus, Utica, Haynesville, Eagle Ford, Bakken and SCOOP/STACK, among other active oil and gas regions in the United States, and in Eastern Australia. These service centers support our field services and provide equipment assembly and repair services. We also provide rental and service operations in the Kingdom of Saudi Arabia. Our manufacturing and production facilities are located in Bossier City, Louisiana and Suzhou, China.
We operate in 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 of equipment used during the completion process, the repair of such equipment and the rental of tools used during drilling 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 reconditioning services to customers that have previously installed wellheads or production trees. Items sold or rented generally have an associated service component. As a result, there is a close correlation between field service and other revenues and revenues from product sales and rentals.
During the six months ended June 30, 2022, we derived 65% of total revenues from the sale of our products, 15% of total revenues from rental and 20% of total revenues from field service and other. During the six months ended June 30, 2021, we derived 63% of total revenues from the sale of our products, 14% of total revenues from rental and 23% of total revenues from field service and other. We have predominantly domestic operations with 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 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, 2022 and 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. 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 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 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 services 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, but not limited to, a scarcity of shipping containers, congested seaports, a shortage of commercial drivers, capacity constraints on vessels and lockdowns in 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 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 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 been any changes in our critical accounting policies since December 31, 2021.
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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 June 30, 2022 Compared to Three Months Ended March 31, 2022

The following table presents summary consolidated operating results for the periods indicated:
Three Months Ended
June 30, 2022March 31, 2022$ Change% Change
(in thousands)
Revenues
Product revenue$112,232 $94,040 $18,192 19.3 %
Rental revenue23,695 22,343 1,352 6.1 
Field service and other revenue34,288 29,516 4,772 16.2 
Total revenues170,215 145,899 24,316 16.7 
Costs and expenses
Cost of product revenue69,172 60,920 8,252 13.5 
Cost of rental revenue15,328 15,089 239 1.6 
Cost of field service and other revenue26,734 24,806 1,928 7.8 
Selling, general and administrative expenses14,740 14,094 646 4.6 
Total costs and expenses125,974 114,909 11,065 9.6 
Income from operations44,241 30,990 13,251 42.8 
Interest income (expense), net304 (100)404 nm
Other expense, net— (1,115)1,115 nm
Income before income taxes44,545 29,775 14,770 49.6 
Income tax expense8,765 2,692 6,073 nm
Net income35,780 27,083 8,697 32.1 
Less: net income attributable to non-controlling interest8,636 6,467 2,169 33.5 
Net income attributable to Cactus Inc.$27,144 $20,616 $6,528 31.7 %
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 second quarter of 2022 was $23.7 million, an increase of $1.4 million, or 6%, from $22.3 million for the first quarter of 2022. The increase was mainly attributable to higher customer drilling and completion activity and associated repairs.
Field service and other revenue of $34.3 million for the second quarter of 2022 increased $4.8 million, or 16%, from $29.5 million for the first quarter of 2022. The increase was primarily due to higher billable hours from increased customer activity and 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 materials, freight and overhead.
Cost of rental revenue for the 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 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 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 $0.6 million, or 5%, from $14.1 million for the first quarter of 2022. The increase was primarily due to increased annual incentive bonus accruals, bad debt expense and travel costs offset by lower benefits, primarily payroll taxes, and 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, 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 higher interest income earned on cash invested resulting from increased interest rates.
Other expense, net. Other expense, net for the first quarter of 2022 of $1.1 million represented a non-cash adjustment for the revaluation of the liability related to the tax receivable agreement as a result of changes to the state tax rate.
Income tax expense. Income tax expense for the second quarter of 2022 was $8.8 million compared to $2.7 million for the first quarter of 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 and a $0.8 million tax benefit associated with the partial valuation allowance release in conjunction with first quarter 2022 redemptions of CW Units.
Cactus Inc. is only subject to federal and state income tax on its share of income from Cactus LLC. Income allocated to the non-controlling interest is not subject to U.S. federal or state tax.
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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,
20222021$ Change% Change