WHD

Cactus, Inc. 2025 Annual Report (10-K) Summary

Business Context and Reporting Period

This summary covers the fiscal year ended December 31, 2025. Cactus, Inc. is a leading provider of pressure control and spoolable pipe technologies for the oil and gas industry, operating through two segments: Pressure Control (wellheads, trees, and rental equipment) and Spoolable Technologies (FlexSteel pipe). The company operates globally with manufacturing in the U.S., China, and Vietnam, and service centers in the U.S., Canada, Australia, and the Middle East.

A significant subsequent event occurred on January 1, 2026, when Cactus acquired a 65% interest in Baker Hughes Pressure Control LLC for approximately $344.5 million, expanding its international footprint.

Key Financial Metrics (Year Ended Dec 31, 2025)

Note: Restricted cash of $371.0 million was held in escrow for the Baker Hughes transaction and released upon closing in January 2026.

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased 4.5% to $1.079 billion. The Pressure Control segment fell 0.9% due to lower drilling activity, while the Spoolable Technologies segment dropped 9.5% due to reduced domestic activity.
• Margin Compression: Operating income declined 13.5% to $250.5 million. This was driven by escalated tariff costs (Section 232 tariffs on steel), increased legal expenses, and lower sales volumes.
• Working Capital: Operating cash flow decreased primarily due to higher inventory purchases ($26.8 million increase) driven by tariff-escalated values and lower earnings.
• Dividends: The annual dividend rate increased to $0.54 per share in 2025 from $0.50 in 2024.

Outlook, Risks, and Management Commentary

• Market Conditions: Management notes that lower oil prices (down 15% in 2025) and reduced U.S. land drilling rig counts (down 6%) negatively impacted demand. However, natural gas prices rose 61%, providing some offsetting activity.
• Tariff Impact: The company is incurring elevated costs due to U.S. tariffs on steel and imports from China and Vietnam. While partially mitigated by pricing adjustments, these costs have impacted profitability.
• Baker Hughes Transaction: The acquisition of Baker Hughes Pressure Control (closed Jan 1, 2026) expands operations into the Middle East. The deal includes a "Put Right" for Baker Hughes to sell its remaining interest starting in 2028, with a valuation cap of $660 million and a floor of $530 million.
• Tax Receivable Agreement (TRA): The company has a TRA liability of $262.9 million. If terminated early, the estimated payment would be approximately $251.2 million. This liability is a critical liquidity consideration.
• Risks: Key risks include volatility in oil and gas prices, supply chain disruptions, geopolitical instability (Ukraine, Middle East), and the potential for increased regulation regarding hydraulic fracturing and climate change.

Investor Verification Checklist

• Baker Hughes Integration: Verify the financial impact and integration progress of the Baker Hughes Pressure Control acquisition in the first quarter of 2026.
• Tariff Exposure: Monitor the company's ability to pass through increased steel and import costs to customers without further volume erosion.
• TRA Liability: Review the trajectory of the Tax Receivable Agreement liability and the company's cash flow sufficiency to meet future payment obligations.
• Drilling Activity: Track U.S. land rig counts and oil price trends as primary drivers of the Pressure Control segment's revenue.
• Inventory Levels: Assess inventory turnover given the $276.6 million balance and the risk of obsolescence in a cyclical downturn.