Cactus, Inc.WHD
Cactus, Inc. Income Taxes Disclosure
Income Taxes
Domestic and foreign components of income before income taxes were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 238,457 | $ | 272,689 | $ | 241,084 | |||||||||||
| Foreign | 22,212 | 26,587 | 21,292 | ||||||||||||||
| Income before income taxes | $ | 260,669 | $ | 299,276 | $ | 262,376 | |||||||||||
The provision for income taxes consisted of:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 13,156 | $ | 32,910 | $ | 18,354 | |||||||||||
| State | 2,484 | 5,183 | 4,040 | ||||||||||||||
| Foreign | 8,245 | 8,652 | 7,799 | ||||||||||||||
| Total current income taxes | 23,885 | 46,745 | 30,193 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 32,352 | 17,516 | 12,925 | ||||||||||||||
| State | 3,560 | 2,636 | 4,249 | ||||||||||||||
| Foreign | (770) | (379) | 169 | ||||||||||||||
| Total deferred income taxes | 35,142 | 19,773 | 17,343 | ||||||||||||||
| Total provision for income taxes | $ | 59,027 | $ | 66,518 | $ | 47,536 | |||||||||||
The effective income tax rate was different from the statutory U.S. federal income tax rate due to the following:
Year Ended | |||||||||||
December 31, 2025 (1) | |||||||||||
Amount | Percent | ||||||||||
U.S. federal statutory tax rate | $ | 54,740 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect (2) | 4,725 | 1.8 | |||||||||
| Foreign tax effects | 2,265 | 0.9 | |||||||||
| Effect of cross-border tax laws | 4,146 | 1.6 | |||||||||
| Tax credits | |||||||||||
| Foreign tax credits | (6,043) | (2.3) | |||||||||
| Other tax credits | (350) | (0.1) | |||||||||
| Changes in valuation allowances | |||||||||||
| Valuation allowance - foreign tax credits | 2,320 | 0.9 | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Executive Compensation Limited | 2,622 | 1.0 | |||||||||
| Other adjustments | |||||||||||
| Income allocable to non-controlling interest | (7,739) | (3.0) | |||||||||
| Other | 2,341 | 0.8 | |||||||||
Total provision for income taxes and effective tax rate | $ | 59,027 | 22.6 | % | |||||||
(1) Disaggregated in accordance with ASU 2023-09, which was adopted prospectively in 2025.
(2) For 2025, state taxes in New Mexico, Pennsylvania, and Texas make up majority (greater than 50%) of the tax effect of this category
| Year Ended December 31, | ||||||||||||||
2024 (1) | 2023 (1) | |||||||||||||
Income taxes at 21% statutory tax rate | $ | 62,849 | $ | 55,094 | ||||||||||
| Net difference resulting from: | ||||||||||||||
| Profit of non-controlling interest not subject to U.S. federal tax | (10,293) | (9,951) | ||||||||||||
| Foreign income taxes (net of foreign tax credit) | 2,646 | 1,918 | ||||||||||||
| State income taxes (excluding rate change) | 6,113 | 3,999 | ||||||||||||
| Impact of change in forecasted state income tax rate | 2,059 | 4,906 | ||||||||||||
| Foreign withholding taxes | 1,535 | 1,419 | ||||||||||||
| Change in valuation allowance | — | (12,067) | ||||||||||||
| Adjustments of prior year taxes | (1,757) | 480 | ||||||||||||
| Stock compensation | (661) | (1,193) | ||||||||||||
| Nondeductible expenses associated with acquisition | 2,036 | 3,951 | ||||||||||||
| Other | 1,991 | (1,020) | ||||||||||||
| Total provision for income taxes | $ | 66,518 | $ | 47,536 | ||||||||||
(1) As presented prior to adoption of ASU 2023-09, which was adopted prospectively in 2025.
Our effective tax rate was 22.6%, 22.2% and 18.1% for the years ended December 31, 2025, 2024 and 2023, respectively. Cactus Inc. is only subject to federal and state income tax on its share of income from Cactus Companies.
Income taxes paid (net of refunds) exceed 5% of total income taxes (net of refunds) in the following jurisdictions:
Year Ended | |||||
| December 31, 2025 | |||||
| Federal | $ | 36,750 | |||
| State | 3,080 | ||||
| Foreign | 8,296 | ||||
Total income taxes paid (net of refunds) | $ | 48,126 | |||
Except for the U.S. federal income tax cash payments reflected above, the only jurisdictions in which the Company remitted cash taxes in excess of 5% of total 2025 cash tax outflows were China and Australia, where cash taxes totaled $5.0 million and $2.8 million, respectively.
The components of deferred tax assets and liabilities are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Investment in Cactus Companies | $ | 171,647 | $ | 194,015 | |||||||
| Imputed interest | 13,874 | 14,080 | |||||||||
| Tax credits | 13,898 | 10,563 | |||||||||
| Net operating loss and other carryforwards | 505 | 9,062 | |||||||||
| Other | 347 | 356 | |||||||||
| Deferred tax assets | 200,271 | 228,076 | |||||||||
| Valuation allowance | (12,726) | (9,073) | |||||||||
| Deferred tax asset, net | 187,545 | 219,003 | |||||||||
| Foreign withholding taxes | 1,041 | 1,529 | |||||||||
| Other | 1,745 | 1,339 | |||||||||
| Deferred tax liability, net | $ | 2,786 | $ | 2,868 | |||||||
As of December 31, 2025, our liability related to the TRA was $262.9 million, representing 85% of the calculated net cash savings in the United States federal, state and local and franchise tax that we anticipate realizing in future years from certain increases in tax basis and certain tax benefits attributed to imputed interest as a result of our acquisition of CC Units. We have determined it is more-likely-than-not that we will be able to utilize all of our tax basis subject to the TRA; therefore, we have recorded a liability related to the TRA for the tax savings we may realize from certain increases in tax basis and certain tax benefits attributable to imputed interest as a result of our acquisition (or deemed acquisition for United States federal income tax purposes) of CC Units. If we determine the utilization of this tax basis is not more-likely-than-not in the future, our estimate of amounts to be paid under the TRA would be reduced. In this scenario, the reduction of the liability under the TRA would result in a benefit to our pre-tax consolidated results of operations in conjunction with an increase to the valuation allowance and an offsetting adjustment to tax expense.
We record a deferred tax asset for the differences between our tax and book basis in the investment in Cactus Companies (Cactus LLC prior to the CC Reorganization) and imputed interest on the TRA. Based upon our cumulative earnings history and forecasted future sources of taxable income, we believe that we will be able to realize our U.S. deferred tax assets associated with our investment in Cactus Companies in the future. Subsequent to completion of the FlexSteel acquisition during 2023, we determined that we expect to generate sufficient taxable income of the appropriate type to allow for the realization of the deferred tax asset associated with our investment in Cactus Companies and recognized a $12.1 million tax benefit associated with the release of our valuation allowance previously provided. As such, as of December 31, 2023, we no longer have a valuation allowance against the deferred tax asset for the investment in Cactus Companies. During the fourth quarter of 2024, we recognized $2.1 million of tax expense associated with the revaluation of our deferred tax asset (the difference between our tax and book basis in the investment in Cactus Companies and imputed interest) as a result of a change in our forecasted state rate. We also record deferred tax assets for imputed interest, certain tax credits and net operating loss and other carryforwards. As of December 31, 2025, we have a valuation allowance of $12.7 million against these deferred tax assets, primarily associated with our portion of Cactus Companies’ accrued foreign taxes and state tax credits, due to uncertainty of realization.
As of December 31, 2025, we have deferred tax assets on U.S. federal net operating loss (“NOL”) carryforwards of approximately $0.5 million which can be used to offset U.S. federal and state taxes payable in future years. The U.S. federal NOL carryforwards have no expiration date whereas the U.S. state NOL carryforwards generally will expire in periods beginning in 2041.
As of December 31, 2025, the Company had $5.5 million of unrecognized tax benefits all of which would not impact the effective tax rate if recognized. The Company recognizes the interest related to uncertain tax benefits as a component of income tax expense. No penalties or interest were recognized during the year ended December 31, 2025.
The aggregate changes in the balance of the Company's unrecognized tax benefits were as follows for the periods presented (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Balance, beginning of year | $ | 5,474 | $ | 5,666 | $ | — | |||||||||||
Gross increases based on tax positions related to current year | — | — | 5,666 | ||||||||||||||
Gross decreases based on tax positions related to prior years | — | (192) | — | ||||||||||||||
Balance, end of year | $ | 5,474 | $ | 5,474 | $ | 5,666 | |||||||||||
As a result of the FlexSteel acquisition, we acquired certain carryforward tax attributes, which were accounted for as unrecognized tax benefits in the acquisition accounting. This remains the balance of our uncertain tax positions as of December 31, 2025. The unrecognized tax benefits have been offset by an indemnification receivable from the seller of $5.5 million.
None of federal or state income tax returns are currently under examination by state taxing authorities. Our federal and state income tax returns for the years ended December 31, 2022 through December 31, 2024 remain open for all purposes of examination by the IRS and applicable state taxing jurisdictions. However, certain earlier tax years remain open for adjustment to the extent of their net operating loss and deferred interest carryforwards available for future utilization.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 15, 2019 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.