Cactus, Inc.WHD

Cactus, Inc. Fair Value Disclosure

10-KFiled Feb 26, 20262 min read
Fair Value Measurements
Authoritative guidance on fair value measurements provides a framework for measuring fair value and establishes a fair value hierarchy that prioritizes the inputs used to measure fair value, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).
The carrying value of cash and cash equivalents, receivables, accounts payable and accrued expenses approximates fair value based on the short-term nature of these accounts.
The fair value of our foreign currency forwards was less than $0.1 million as of December 31, 2025 and 2024, determined using market observable inputs including forward and spot prices (Level 2 inputs).
We had no long-term debt outstanding as of December 31, 2025 or 2024.
At December 31, 2023, the earn-out liability was measured at a fair value of $20.8 million using Level 3 unobservable inputs. The fair value at December 31, 2023 was determined based on the evaluation of the probability and amount of earn-out that may be achieved based on expected future performance of FlexSteel using a Monte Carlo simulation model. The Monte
Carlo simulation model used assumptions including revenue volatilities, risk free rates, credit discount rates and revenue discount rates. The following table sets forth the range of inputs for the significant assumptions utilized to determine the fair value as of December 31, 2023:
December 31, 2023
Risk-free interest rate5.40%to5.63%
Expected revenue volatility21.70%
Revenue discount rate10.02%to10.23%
Credit discount rate9.85%
The following table presents a summary of the changes in fair value of our earn-out liability measured using Level 3 inputs:
Opening balance at February 28, 2023$5,960 
Changes in fair value14,850 
Balance at December 31, 202320,810 
Changes in fair value16,318 
Balance at August 31, 2024
$37,128 
The FlexSteel acquisition contingent consideration earn-out period ended June 30, 2024. The earn-out payment was made in September 2024.

Historical Timeline

Fiscal YearFiled
2025Feb 26, 2026Showing above
2024Feb 27, 2025
2023Feb 29, 2024

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Other Available Disclosures

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