Good day, ladies and gentlemen. Thank you for standing by. Welcome to the FlexSteel Acquisition conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during that session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to John Fitzgerald, Director of Corporate Development and IR. Please go ahead. Thank you. Good morning. We appreciate you joining us on today's call. Our speakers will be Scott Bender, our Chief Executive Officer, Steve Tadlock, our Chief Financial Officer. We are joined by the rest of the Cactus executive management team as well as Thirucherai Sathyanarayanan, also known as TS, the President and CEO of FlexSteel. Please note that any comments we make on today's call regarding projections or expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC. Any forward-looking statements we make today are only as of today's date, and we undertake no obligation to publicly update or review any forward-looking statements. In addition, during today's call, we will reference certain non-GAAP financial measures. Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included at the end of our investor presentation. With that, I'll turn the call over to Scott. Thanks, John. Good morning to everyone. Pardon me. I'm extremely excited to announce our agreement to acquire FlexSteel today. As we've mentioned on previous calls, we've been on the lookout for ways to utilize our cash to increase shareholder value. FlexSteel represents the high-quality acquisition candidate on the right terms for which we've patiently been searching. We couldn't be happier to have seized this opportunity to combine with one of the few businesses that rivals our own in terms of margins and returns. FlexSteel has been on our radar for a number of years, given our interactions with the company and the reputation the business has with E&P operators, most of whom we share as customers. In addition, we have the benefit of a deep understanding of this business by virtue of our CFO's prior experience in the spoolable space. The slides we'll walk through today will look familiar if you've seen our previous investor presentations. This is a testament to the similarities between the two businesses, which are highly complementary. On slide three, you'll see how FlexSteel meets the required qualities we've described when considering acquisition candidates. FlexSteel is an innovative manufacturer of a highly differentiated product. Its unique technology is sold directly to the end user like our own. FlexSteel is a variable cost business with a strong margin profile through the cycle. The business is capital light. The acquisition will allow us to utilize Cactus' existing network of service branches and infrastructures over time. Finally, this business has attractive growth prospects. Turning to slide seven, I show a quick overview of the investment highlights which mirror our own. FlexSteel designs, manufactures, and installs highly differentiated and mission-critical equipment sold directly to end users. Its products are deployed at the well site, downstream of the wellhead, and are sold to the same customer base, making this a highly complementary acquisition for Cactus. FlexSteel is an industry leader in a growing segment of the market. It generates strong through-cycle margins and does so with modest capital requirements. Finally, there are exciting growth opportunities for the FlexSteel business as this technology is still in its early stages of adoption. I'll now turn the call over to Steve Tadlock, our CFO, who'll provide a brief overview of the transaction. Following his remarks, TS and I will provide some additional thoughts before opening the lines for Q&A. Steve. Thanks, Scott. As seen on slide five, this acquisition increases Cactus' product diversification and enhances our product portfolio. The acquisition increases Cactus' exposure further downstream into the production and midstream segments of the market. FlexSteel also offers additional growth potential into the shallow water and carbon capture markets. While FlexSteel is primarily a U.S. land-focused business, it is further along in its international expansion efforts relative to Cactus. We believe this transaction enhances our international opportunities while we maintain the flexibility to pursue consolidation or organic international growth plans. The acquisition enables Cactus to optimize the existing operating footprints of both companies, and given the low CapEx needs and variable cost nature of the business, should be supportive of continued capital returns to Cactus shareholders. Cactus is acquiring FlexSteel for $621 million on a cash-free, debt-free basis. Consideration will be paid 100% in cash at closing, which is expected to occur in early 2023. In addition to the upfront consideration, up to $75 million in additional purchase price will be due to the seller in mid-2024 if certain revenue targets are achieved by the business. Together with cash on hand, Cactus has obtained fully committed bridge financing to fund the entire non-cash portion of the purchase price if necessary at closing. We intend to finance the acquisition through a mix of cash and debt and/or equity. The company is in advanced discussions with lenders regarding longer-term financing solutions, and we anticipate having an expanded ABL and a new term loan facility in place prior to closing. At closing, we would anticipate net debt to 2022 Adjusted EBITDA of less than 1 x. Given the cash flow profiles of both businesses, we would expect meaningful de-leveraging on a go-forward basis. Slide six provides additional high-level details on the business. FlexSteel, headquartered in Houston, is a market-leading provider of spoolable pipe technologies for the onshore North American markets. These offerings are sold to many of the largest exploration and production companies in North America. 100% of the products sold by FlexSteel are manufactured in-house at the company's state-of-the-art facility in Baytown, Texas. FlexSteel services its customers through a network of service centers and yards in various oil and gas basins across the U.S. and in Canada. Historically, the company has generated 5%-10% of its revenue outside of North America. For the first nine months of 2022, FlexSteel generated $265 million in revenue and $78 million in Adjusted EBITDA for a 29% Adjusted EBITDA margin. This has been achieved with net CapEx of approximately $7 million. Like Cactus, FlexSteel is a high-margin variable cost business with modest CapEx needs. I'll now turn it over to TS, FlexSteel's President and CEO, who can provide additional details on the technology. Thanks, Steve. Good morning, everybody. My name is TS, I'm President and CEO of FlexSteel, and I'm excited to be here this morning. I'll walk you over a few slides and then turn it over to Scott. Slide seven provides an overview of the application of FlexSteel's products. Spoolable line pipe is installed for operators in order to bring their wells on production. This can be in the form of, A, production lines that are installed at the edge of the well pad or connect to a production tree. B, as gathering lines that go from the central tank battery to the midstream sales meter. C, further downstream as takeaway lines for the midstream industry. FlexSteel sells its spoolable pipe technologies, and like Cactus, charges for the associated installation of the equipment as well. Slide eight highlights the advantages of our spoolable pipe. Over the last five to 10 years, the industry has shifted from conventional equipment to more sophisticated spoolable offerings. This industry shift is much like what has occurred in the wellhead industry since Cactus opened its doors, but is in the earlier stages of adoption. Stick steel pipe was traditionally used to transport hydrocarbons from a well to a central tank battery, the midstream sales meter and beyond. While reliable, this generally requires relatively short lengths of pipe being laboriously installed, requiring hundreds of welded connections. Spoolable technologies rolled onto reels or coils enable the rapid insulation of thousands of feet of pipe, which save operators significant time and money while enhancing safety. FlexSteel's spoolable technology combines the strength and reliability of steel, the flexibility of high-density polyethylene to meet customer demands at various ID sizes, temperature and pressure ratings. Like Cactus' well heads, the value proposition for Flexsteel is that its products are more efficient for operators than traditional equipment, generating revenue faster, saving the customer time and money while maintaining reliability and reducing the overall cost of ownership for an E&P operator. Next slide. Slide nine highlights how Flexsteel's products, much like Cactus's, enable E&Ps to meet their ESG-related goals. Flexsteel's spoolable pipe can be installed faster than conventional equipment, leading to less equipment, fewer people on-site, and faster time to production. The prefabricated fittings and the spoolable nature of the equipment require limited welding on-site, which improves employee safety and minimizes lost time incidents. Flexsteel's products are ideally suited for CO2 transportation as they enable the capture and management of permeated gases and result in lower emission systems for operators. The company booked its first large CCUS transportation order this year for a major U.S. operator. While this market is still in its infancy, there is potential for growth given attractive industry dynamics. Scott? Thanks, TS. Slide 10 highlights the differentiated margin profile of the two businesses relative to our peers. FlexSteel generates attractive EBITDA margins today of nearly 30%. Like Cactus, FlexSteel was able to generate strong margins through the COVID-related downturn, highlighting the differentiated nature of the business through the industry cycles. Slide 11 highlights the attractive financial profile of both businesses and showcases the increased scale achieved by the transaction. During the first nine months of 2022, FlexSteel generated $265 million in revenue, $78 million in Adjusted EBITDA. This was done at comparable margins and with fewer CapEx dollars compared to Cactus. The transaction adds considerable financial scale for Cactus while maintaining the differentiated margin profile and capital-light nature of the business. Slide 12 shows the complementary operating footprint of the two businesses. FlexSteel utilizes its Baytown, Texas manufacturing facility for 100% of its equipment, and then, like Cactus, ships its equipment to its network of locations or directly to the customer. As seen on the map, FlexSteel is active in most of the largest U.S. onshore basins. There is likely room to optimize the roofline footprint of the combined businesses over time, although we're not publicly announcing any synergies related to this. TS? Thanks, Scott. Slide 13 emphasizes some of the growth opportunities for FlexSteel. First is continued growth in our core production line products. The industry continues to shift towards spoolable pipe technologies. FlexSteel will be a beneficiary of that. FlexSteel as an industry leader will benefit from its higher diameter offerings and more reliable equipment and is well-positioned to capitalize on this trend. In addition, we are tremendously excited about introducing the FlexSteel team and its technology to the deep pool of loyal customers at Cactus. Second is the expansion of spoolables further downstream into the midstream space. This is a large market, relatively untapped by spoolables due to the limited diameter capabilities witnessed historically. FlexSteel is well-positioned to benefit due to its unique capability of offering higher diameter products of up to 10 in. Third is CCUS. CO2 has historically been transported utilizing traditional stick steel pipe. The same benefits that have allowed spoolable technologies to grow in the production line market are apparent in the CCUS world. Flexsteel is actively engaged in multiple customer opportunities for this potential market. Flexsteel has been working on the development of a product that will target shallow water, oil, and gas development. Not yet commercialized, the benefits of the product should translate well to this additional market. Like Cactus, Flexsteel can attribute most of its success to strong performance in the U.S. market. Flexsteel products are also well suited for application in international markets. We have had a multi-year relationship with Saudi Aramco in the Middle East and have sold our products into over 20 countries since inception. Penetration of international markets is still in its early stages, Flexsteel has the ability to open additional doors for Cactus products abroad. Like Cactus, FlexSteel prides itself on its technological differentiation and constant stream of innovation and improvement. Our company continues to innovate by offering technologies that incorporate larger ID sizes, higher temperature ratings, or increased product flexibility. We're excited to share further product developments in the future. In closing, I'm incredibly proud of the business that FlexSteel has become and our ability to grow over the last several years. We see so many similarities between Cactus and ourselves, and the complementary nature of these two businesses should enable continued success. I'd like to reiterate our excitement about becoming part of the Cactus family and the incredible opportunities for FlexSteel product and people that will come as a result of this combination. Back to you, Scott. Thanks, TS. I'd like to close by reiterating how thrilled we are to combine these two industry leaders. FlexSteel is a logical fit for Cactus, given the many similarities between the two companies. Both design, manufacture, and install differentiated equipment that increases operator efficiency while providing improved reliability. Both have achieved above-market growth via market share gains in recent years. Both businesses generate industry-leading margins while operating under a capital-light business model. Both have significant growth potential on a go-forward basis. This combination is a great fit given the complementary nature of these two businesses. We're excited about the potential to generate significant value for our shareholders and from the combination going forward. With that, I'll turn it back over to the operator to take any questions. Operator? Thank you. As a reminder, to ask a question, simply press star one one on your telephone. We ask that you please limit your questions to one and one follow-up. One moment for our first question. Our first question comes from the line of Chase Mulvehill with Bank of America. Please go ahead. Morning, Chase. Hey, good morning, Scott. Happy New Year. I guess first. Yeah, Happy New Year to you as well. First question, just kinda wonder, slide seven I thought was a pretty interesting slide when you talked about the total addressable market. Could you maybe walk through and take a minute, you know, just kinda walking through FlexSteel's position, you know, in each of those addressable markets and maybe kinda, you know, how you plan to, you know, further penetrate each of these end markets. Well, Chase, I'm gonna let TS probably expand on that, but I do wanna tell you, we're not gonna give you market share numbers. I think we can provide at least a comparison of how well FlexSteel has penetrated these different markets, and our Okay. -plans going forward. TS. This slide here, slide seven in the deck, talks about, you know, broadly speaking, where FlexSteel plays in the oil and gas space. There are three columns here. First one is a production line or pipe on the pad segment. To the right of it is a gathering line segment, and the final one on the right is the takeaway lines. As you can see from the graphics, you know, they start with the wellhead on the left and end with the refining on the, on the right. The place where FlexSteel currently plays is really in the left side of the segment, primarily. That's the place where FlexSteel entered the market, really in 2014-2015. We've been really making a lot of headway and gaining a lot of customers in the left side of the space. On the right side of the middle column, as well as the rightmost, the takeaway lines, are relatively newer spaces with lots of white space on the board for Flexsteel, and we'll be making our focus to penetrate those segments going forward. Okay, perfect. You know, maybe as a follow-up, you know, you mentioned international and, you know, for Cactus, Scott, obviously, you know, it's the next leg of the story has kind of been about international penetration. Maybe talk about FlexSteel's international presence today. You know, you said it was a little bit ahead of kind of where Cactus was. You know, talk about maybe the regions where FlexSteel has had some penetration, and the opportunity, you know, on a combined basis to maybe pull through some of Cactus', legacy business with, FlexSteel on the international side. Yeah, Chase, let me just say that, you know, similar to Cactus, FlexSteel's penetration internationally has been opportunistic, low CapEx requirements. Unlike Cactus, where our penetration has been limited to a handful of countries, as you note from the deck, FlexSteel has been a lot more successful, particularly in areas like Latin America. They have a much deeper and longer relationship with Saudi Aramco. Frankly, they've been successful in virtually every continent in the world. They're very well known and very well regarded. In terms of pull through, you know, I'm not gonna kid you, just because a company buys a Cactus wellhead doesn't mean they're gonna buy a spoolable from FlexSteel or vice versa. To the extent that we're able to leverage, both international teams and utilize, I think that infrastructure, I think you'll see some benefits. It also is fair to say that one company, particularly FlexSteel, can provide some introductions for Cactus that may be a bit more difficult for us without the large footprint. You know, I view this as just, I can't quantify it for you, Chase, but this has got to be a positive for both companies. It's just more products, offered to the same customer base. Okay, perfect. Appreciate the color. I'll turn it back over. Thank you. One moment for our next question, please. Our next question comes from Stephen Gengaro with Stifel. Please go ahead. Your line is open. Thanks. Good morning and Happy New Year, gentlemen. Good morning. Happy New Year to you, Stephen. Thanks. two things from me. What I'd start with is, I mean, the differentiation you talk about in your walkthrough in the presentation is obviously a key aspect to this and kind of maintaining what Cactus is. What how do you feel about how defendable the FlexSteel product line is? Any color on kind of what else is out there nipping at their heels, if there's anything, would be helpful? TS, you can feel free to pipe in. I can just tell you from the Cactus perspective, 'cause this was a key consideration. This company is at least as differentiated as Cactus, and that is both in terms of the way the product. Nobody else has a steel reinforced spoolable pipe. No one. No one makes it as efficiently or as Flexsteel produces it, and no one has the same sort of deployment tools, all protected by IP as Flexsteel. When I look at the package, the technology, the manufacturing skill, and the deployment model, there's not a competitor, in our view, that comes close to Flexsteel. I again, you know, I have to tell you, it's at least as defensible as the Cactus model. In terms of. what was the next question? Oh, no. Just if there's anybody out there nipping at the heels of that, but it sounds like your, the, the margin is wide. Well, you know, you know, Stephen, there are other spoolable manufacturers, you know, that NOV makes a spoolable, Shawcor makes a spoolable, Baker makes a spoolable, but none of them make the steel reinforced onshore product that FlexSteel makes. Great. Thank you. The follow-up was, and my math might be a little bit off, but you're basically buying 50% of your EBITDA for 16% of your market cap. I'm just curious about the valuation discussion, and it seems to be a pretty accretive deal from a Cactus perspective and whether there was any thought to the buyer taking equity participate in the upside. You mean to the seller taking equity? Excuse me, the seller. Yes, sir. We never offered him any equity. Okay. Okay, great. I appreciate the color. Thanks. Thank you. Thank you. One moment for our next question. Please come from Connor Lynagh with Morgan Stanley. Please go ahead. Your line is open. Hey, Connor. Hey, Happy New Year. Happy New Year to you. How are you? Good. Good. Just wondering if you could give a little bit more color on financing and just sort of how you're thinking about, you know, what you're looking for in the market. I know you'd said equity is a possibility. You said, you know, debt, and then obviously you got a lot of cash and cash generation to work with. Just, you know, maybe help us think through the puts and takes and what you'd be looking for out there to solidify the mix of the financing. I can take that, Steve. I mean, as we mentioned, obviously we our patience has helped us build up our cash position. First and foremost is to use a good piece of that cash. We have committed financing, obviously we're looking for more permanent financing. We've had, I would say, you know, advanced discussions with lenders, looking at a term loan as well as an expanded ABL. Our ABL has always been sort of undersized versus our capacity, just because we haven't needed it. Longer term, well, at closing, you know, regardless of whether we were to look to equity, we expect to be 1x net debt to EBITDA on a 2022 basis. We intend to continue to be conservative in our in our leverage profile. Ultimately, we wanna be low net debt, maybe net cash position again, to be able to take advantage of opportunities in the future. That's about all we're, you know, we're willing to say at this point in time. Just continue to be flexible. We have lots of flexibility. Yep. Yep, that's clear. I wish we could. Go ahead, sorry. I wish we could be more clear because I know you're looking for a more specific response, but. Understood. Understood. Sorry. I think I know the answer to this, but, given that you're highlighting a desire for, you know, conservative balance sheet and, Stephen, I think you were just talking about potentially having other opportunities out there. It would seem like, you know, you wanna get the balance sheet de-levered a bit and potentially look at other things. I guess the crux of the question is, you would not be considering a major incremental shareholder returns on top of this or at least for the time being. Is that fair? Yeah. Not for the time being. I mean, certainly our dividend, we view that as sort of sacrosanct and intend to increase capital return over the future. We think this will de-lever very rapidly given the similar characteristics it shares with our business, and that's why that was a big part of the appeal. All right. Understood. I'll turn it back. Thank you. One moment for our next question, please. Our next question is from Scott Gruber with Citi. Please proceed. Hey, Scott. Yes, good morning and Happy New Year. Happy New Year to you, buddy. Yeah. Just following up on the last line of inquiry. It sounds like there is a target, kind of post-close to get back to call it a net debt zero position. Would that be the focus? You know, that's down the road, Scott. I mean, that's not a, you know, post-close goal. That's. No, I did a post-close strategy. Yes. If you will. Okay. I think that's fair. Then, you know, going back to the growth of FlexSteel, just trying to understand the business a bit more. It sounds like there's an opportunity for further market penetration, you know, kind of on the upstream side of the business. You have these, you know, additional growth opportunities more in the midstream. There's a shallow water opportunity, international opportunity. As we think about the growth drivers over the next two to three years, is it gonna be more driven by further market penetration, you know, more on the upstream side or, you know, these new growth opportunities materializing? What's gonna be driving the growth over the next two to three years mainly? Yeah. Let me take that. This is TS. The opportunities are fundamentally gonna come from increased penetration into the customer base that exists today at Cactus. Cactus and Flexsteel share a lot of, you know, blue chip customers. We're gonna continue penetrating through that, especially in the pipe on the pad segment where Flexsteel's products connect to that of Cactus wellhead. That's gonna be the first area. Second one is gonna be share of wallet. Flexsteel has been very successful growing its share of wallet with once we get to a customer, we continue to get lots of revenue out of the existing customers over and over. That's a very efficient way to run a business because the cost of acquisition is already behind us. Those are the two places where Flexsteel has played, you know, and seen growth in the last several years, the last 10 years or so. Going forward, you know, we expect to continue growing in these areas, but in addition to that, also grow in the other areas that you've talked about. Midstream is an opportunity, gathering lines is an opportunity, shallow water when the offshore market comes back a little bit more, and international segments. Those are all upside opportunities for Scott and the rest of the Cactus team to work together with Flexsteel to execute. Got it. Appreciate the color. I'll turn it back. Thank you. Thanks, Scott. Thank you. One moment for our next question, please. It comes from Sean Mitchell with Energy Partners. I'm sorry, this is from David Smith from PEP Advisory. Hey, good morning, gentlemen, and Happy New Year. David Smith from Pickering Energy Partners. We've all been wondering what you were gonna do with that cash, and this looks like a pretty good answer. I did have a question for TS. When looking at the revenue for FlexSteel for the first nine months of 2022, could you offer maybe a rough view of how your output in that period compares to, you know, the potential output of your existing footprint? Then the follow-up, maybe how you would think about the potential, you know, future expansion of your output capacity in the future, you know, whether that would likely be a new facility or if there might be some capital efficient opportunities to, you know, expand the Baytown facility. Yeah. That's a great question. FlexSteel operates, you know, primarily out of Baytown, Texas. We've got a 55 ac, 57 ac campus there. We very recently in 2018, 2019 expanded our capacity in a footprint. We think we have adequate capacity at the plant to produce up to $200 million of EBITDA, and we feel pretty good about that. There will be of course, growing challenges in terms of staffing and the like that every other manufacturing company will have to go through. We feel pretty good about the capacity. Currently, we're running at about four to five days of capacity, and that can be easily up to seven days and with lots more shifts to come and to be added. Yeah. Scott, anything else to add to that? I think that's it. No, really, really appreciate that color. Okay, David. If I could go one other. Sure. I'm sorry, David, can you press star one one again? Your line is open. Thank you so much for your patience. Hey, sorry about that. Am I on now? Yes, sir. I can hear you loud and clear. Just a real quick follow-up. Thank you. I like the details on the growth opportunities on slide 13. wanted to ask if you see, you know, anything, you know, any potential opportunities from, you know, maybe potential regulatory actions, you know, if there's anything on the horizon from the Pipeline and Hazardous Materials Safety Administration, for example. Yeah. Yeah, I'm not, I'm not particularly clear what exactly you're getting at. You wanna expand on that a little bit? Yeah. I can follow up later. I was just scrambling this morning after seeing the announcement and was looking at this thing they're calling the Mega Rule from that agency I just mentioned. I think there is some discussion about the potential for maybe reducing the maximum allowable operating pressure for certain types of lines, which might force operators to install new lines or put, you know, the stronger FlexSteel liners inside existing lines to get those, you know, the MAOP, you know, and flow rates high enough to avoid hampering production. I'll follow up later on. Okay. Okay. Thank you, David. Thank you. One moment for our next question, please. It comes from the line of Sean Mitchell with Daniel Energy Partners. Please proceed. Hi, guys. Thanks for taking my question. I think you answered one of them, which is, it doesn't sound like you guys need to add much roof line to expand into the kind of midstream and international space as of today. As you look at slide 12, and you guys have similar field office locations, do you plan to consolidate those over the next year or two, or what kind of synergies are you expecting out of consolidation of field offices? Yeah, Sean, I'll answer that. We, in our financial model, we didn't include one dollar of synergies. We would be foolish as leases come due, if we don't consolidate our footprints. How's that? We have, you know, lots of property. We have lots of property in New Mexico. We have lots of property in Odessa, lots of property in the Haynesville. When I say lots, not maybe compared to our large competitors 'cause we're much more conservative. We have property in Williston, we have property available in South Texas, in Pleasanton. We have property in the Northeast, quite frankly. Yes. One more maybe just as you both have a very capital light business model. Your CapEx relative to revenue is very low, which is great for generating free cash flow for you guys. As you move into the international markets and you may be potentially into these kind of midstream markets, do you expect that to stay the same? Yeah, you know, what you're looking at here is basically working capital for international, and it's just, you know, by virtue of the fact that the transit times are so much longer. I wouldn't consider CapEx to be a factor in Flexsteel's international growth. Okay. Thank you, guys. Looks like a great deal. Thanks. Thank you. That concludes our Q&A session. I will turn it back to management for final remarks. Yep. Just wanna say on behalf of the Cactus team again, how excited we are and we'll look forward to answering more of your questions as we're able. Have a great day and happy New Year. Ladies and gentlemen, thank you for participating in today's conference. You may now disconnect.