- As of March 31, 2021, cash and cash equivalents of $53.0
million
- During Q1, repurchased additional bonds with a face value of
$26.3 million for a total purchase price of $8.4 million, leaving
$320.3 million of senior notes outstanding
- Revenue, net loss and adjusted EBITDAA of $66.6 million, $(8.2)
million and $(3.4) million, respectively, for the first quarter of
2021
- First quarter basic loss per share of $(0.28)
Nine Energy Service, Inc. ("Nine" or the "Company") (NYSE: NINE)
reported first quarter 2021 revenues of $66.6 million, net loss of
$(8.2) million, or $(0.28) basic loss per share, and adjusted
EBITDA of $(3.4) million. For the first quarter 2021, adjusted net
lossB was $(25.4) million, or $(0.85) adjusted basic loss per
shareC.
“While overall market activity improved quarter over quarter, we
saw a much slower start in January versus last year, coupled with
weather-related shut-downs in February,” said Ann Fox, President
and Chief Executive Officer, Nine Energy Service. “Despite EIA
reported completed wells decreasing approximately 3% in Q1 versus
Q4, Nine’s revenue increased by approximately 8%, driven mostly by
strong activity increases in cementing and completion tools.
Pricing has stabilized across service lines but remains extremely
depressed. We have begun to feel some tightness, specifically in
the labor market, but any potential pricing leverage will depend
significantly on the timing and pace of rig and frac crew
additions.”
“Our team once again saw an opportunity to purchase additional
bonds on the open market at a significant discount to par, lowering
our annual cash interest expense, and reducing our overall debt
outstanding. During Q1, the Company repurchased $26.3 million par
value of bonds for $8.4 million of cash. To date, Nine has
repurchased approximately $79.7 million of bonds for $22.9 million
leaving $320.3 million of bonds outstanding and an undrawn
ABL.”
“We continue to make progress with the commercialization of our
new dissolvable plug technology across all basins with our total
number of Stinger Dissolvable plugs sold increasing by over 80%
quarter over quarter. During the quarter, we also began running
trials for our new Scorpion Pincer Composite plug, which is
approximately 35% shorter than our current offering.”
“While we continue to see improvements in the market, we are
still anticipating a challenging environment in 2021. That said, we
expect Q2 to be better sequentially than Q1 with double-digit
sequential revenue increases, followed by sequential revenue
increases in Q3 over Q2.”
Operating Results
During the first quarter of 2021, the Company reported revenues
of $66.6 million with gross loss of $(7.0) million and adjusted
gross profitD of $4.3 million. During the first quarter, the
Company generated ROICE of (23)%.
During the first quarter of 2021, the Company reported selling,
general and administrative (“SG&A”) expense of $10.2 million,
compared to $11.0 million for the fourth quarter of 2020.
Depreciation and amortization expense ("D&A") in the first
quarter of 2021 was $11.9 million, compared to $11.8 million for
the fourth quarter of 2020.
The Company’s tax provision for the first quarter of 2021 was
less than $0.1 million.
Liquidity and Capital Expenditures
During the first quarter of 2021, the Company reported net cash
used in operating activities of $(5.2) million, compared to $(9.5)
million for the fourth quarter of 2020. Capital expenditures
totaled $1.9 million during the first quarter of 2021.
As of March 31, 2021, Nine’s cash and cash equivalents were
$53.0 million, and the Company had $45.8 million of availability
under the revolving credit facility, which remains undrawn,
resulting in a total liquidity position of $98.8 million as of
March 31, 2021.
During the first quarter, the Company repurchased approximately
$26.3 million of the senior notes for a repurchase price of
approximately $8.4 million in cash. As a result, the Company
recorded a $17.6 million gain on extinguishment of debt with no
cash tax obligation. To date, the Company has repurchased
approximately $79.7 million of the senior notes for a repurchase
price of approximately $22.9 million in cash, leaving $320.3
million of bonds outstanding.
ABCDESee end of press release for definitions
Conference Call Information
The call is scheduled for Thursday, May 6, 2021 at 9:00 am
Central Time. Participants may join the live conference call by
dialing U.S. (Toll Free): (877) 524-8416 or International: (412)
902-1028 and asking for the “Nine Energy Service Earnings Call”.
Participants are encouraged to dial into the conference call ten to
fifteen minutes before the scheduled start time to avoid any delays
entering the earnings call.
For those who cannot listen to the live call, a telephonic
replay of the call will be available through May 20, 2021 and may
be accessed by dialing U.S. (Toll Free): (877) 660-6853 or
International: (201) 612-7415 and entering the passcode of
13718631.
About Nine Energy Service
Nine Energy Service is an oilfield services company that offers
completion solutions within North America and abroad. The Company
brings years of experience with a deep commitment to serving
clients with smarter, customized solutions and world-class
resources that drive efficiencies. Serving the global oil and gas
industry, Nine continues to differentiate itself through superior
service quality, wellsite execution and cutting-edge technology.
Nine is headquartered in Houston, Texas with operating facilities
in the Permian, Eagle Ford, SCOOP/STACK, Niobrara, Barnett, Bakken,
Marcellus, Utica and Canada.
For more information on the Company, please visit Nine’s website
at nineenergyservice.com.
Forward Looking Statements
The foregoing contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Forward-looking
statements are those that do not state historical facts and are,
therefore, inherently subject to risks and uncertainties.
Forward-looking statements also include statements that refer to or
are based on projections, uncertain events or assumptions. The
forward-looking statements included herein are based on current
expectations and entail various risks and uncertainties that could
cause actual results to differ materially from those
forward-looking statements. Such risks and uncertainties include,
among other things, the severity and duration of the COVID-19
pandemic, related economic repercussions and the resulting negative
impact on demand for oil and gas; the current significant surplus
in the supply of oil and the ability of the OPEC+ countries to
agree on and comply with supply limitations; the duration and
magnitude of the unprecedented disruption in the oil and gas
industry currently resulting from the impact of the foregoing
factors, which is negatively impacting our business; operational
challenges relating to the COVID-19 pandemic and efforts to
mitigate the spread of the virus, including logistical challenges,
protecting the health and well-being of our employees, remote work
arrangements, performance of contracts and supply chain
disruptions; pricing pressures, reduced sales, or reduced market
share as a result of intense competition in the markets for the
Company’s dissolvable plug products; the Company’s ability to
implement and commercialize new technologies, services and tools;
the Company’s ability to grow its completion tool business; the
Company’s ability to reduce capital expenditures; the Company’s
ability to accurately predict customer demand; the loss of, or
interruption or delay in operations by, one or more significant
customers; the loss of or interruption in operations of one or more
key suppliers; the adequacy of the Company’s capital resources and
liquidity; the incurrence of significant costs and liabilities
resulting from litigation; the loss of, or inability to attract,
key personnel; the Company’s ability to successfully integrate
recently acquired assets and operations and realize anticipated
revenues, cost savings or other benefits thereof; and other factors
described in the “Risk Factors” and “Business” sections of the
Company’s most recently filed Annual Report on Form 10-K and
subsequently filed Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the
date hereof, and, except as required by law, the Company undertakes
no obligation to update those statements or to publicly announce
the results of any revisions to any of those statements to reflect
future events or developments.
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
(In Thousands, Except Share and
Per Share Amounts)
(Unaudited)
Three Months Ended
March 31,
2021
December 31,
2020
Revenues
$
66,626
$
61,971
Cost and expenses
Cost of revenues (exclusive of
depreciation and
amortization shown separately below)
62,283
66,963
General and administrative expenses
10,224
10,966
Depreciation
7,789
7,678
Amortization of intangibles
4,092
4,091
Gain on revaluation of contingent
liabilities
(190)
(505)
(Gain) loss on sale of property and
equipment
(273)
43
Loss from operations
(17,299)
(27,265)
Interest expense
8,585
8,615
Interest income
(13)
(22)
Gain on extinguishment of debt
(17,618)
(340)
Other income
(34)
(33)
Loss before income taxes
(8,219)
(35,485)
Provision (benefit) for income taxes
27
(110)
Net loss
$
(8,246)
$
(35,375)
Loss per share
Basic
$
(0.28)
$
(1.18)
Diluted
$
(0.28)
$
(1.18)
Weighted average shares outstanding
Basic
29,878,426
29,852,516
Diluted
29,878,426
29,852,516
Other comprehensive income (loss), net
of tax
Foreign currency translation adjustments,
net of tax of $0 and $0
$
41
$
230
Total other comprehensive income, net of tax
41
230
Total comprehensive loss
$
(8,205)
$
(35,145)
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In Thousands)
(Unaudited)
March 31,
2021
December 31,
2020
Assets
Current assets
Cash and cash equivalents
$
52,982
$
68,864
Accounts receivable, net
48,139
41,235
Income taxes receivable
1,142
1,392
Inventories, net
38,759
38,402
Prepaid expenses and other current
assets
13,115
16,270
Total current assets
154,137
166,163
Property and equipment, net
96,530
102,429
Operating lease right-of-use assets,
net
35,186
36,360
Finance lease right-of-use assets, net
1,716
1,816
Intangible assets, net
128,432
132,524
Other long-term assets
3,048
3,308
Total assets
$
419,049
$
442,600
Liabilities and Stockholders’
Equity
Current liabilities
Accounts payable
$
21,385
$
18,140
Accrued expenses
24,547
17,139
Current portion of long-term debt
844
844
Current portion of operating lease
obligations
5,897
6,200
Current portion of finance lease
obligations
1,118
1,092
Total current liabilities
53,791
43,415
Long-term liabilities
Long-term debt
316,910
342,714
Long-term operating lease obligations
30,948
32,295
Long-term finance lease obligations
819
1,109
Other long-term liabilities
2,498
2,658
Total liabilities
404,966
422,191
Stockholders’ equity
Common stock (120,000,000 shares
authorized at $.01 par value; 31,517,982 and 31,557,809 shares
issued and outstanding at March 31, 2021 and December 31, 2020,
respectively)
315
316
Additional paid-in capital
770,309
768,429
Accumulated other comprehensive loss
(4,460)
(4,501)
Accumulated deficit
(752,081)
(743,835)
Total stockholders’ equity
14,083
20,409
Total liabilities and stockholders’
equity
$
419,049
$
442,600
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
2021
December 31,
2020
Cash flows from operating
activities
Net loss
$
(8,246)
$
(35,375)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation
7,789
7,678
Amortization of intangibles
4,092
4,091
Amortization of deferred financing
costs
676
676
Amortization of operating leases
2,041
8,897
Provision for doubtful accounts
34
699
Provision for inventory obsolescence
906
7,038
Impairment of operating lease
-
466
Stock-based compensation expense
2,010
2,027
Gain on extinguishment of debt
(17,618)
(340)
(Gain) loss on sale of property and
equipment
(273)
43
Gain on revaluation of contingent
liabilities
(190)
(505)
Changes in operating assets and
liabilities, net of effects from acquisitions
Accounts receivable, net
(6,921)
(7,050)
Inventories, net
(1,247)
7,356
Prepaid expenses and other current
assets
2,412
2,825
Accounts payable and accrued expenses
11,136
1,617
Income taxes receivable/payable
250
(146)
Other assets and liabilities
(2,094)
(9,538)
Net cash used in operating activities
(5,243)
(9,541)
Cash flows from investing
activities
Proceeds from sales of property and
equipment
843
454
Proceeds from property and equipment
casualty losses
-
682
Purchases of property and equipment
(2,428)
(2,364)
Net cash used in investing activities
(1,585)
(1,228)
Cash flows from financing
activities
Payments on Magnum Promissory Notes
(281)
(281)
Repurchases of senior notes
(8,355)
(151)
Payments on finance leases
(264)
(257)
Payments of contingent liabilities
(30)
(59)
Vesting of restricted stock
(131)
-
Net cash used in financing activities
(9,061)
(748)
Impact of foreign currency exchange on
cash
7
43
Net decrease in cash and cash
equivalents
(15,882)
(11,474)
Cash and cash equivalents
Beginning of period
68,864
80,338
End of period
$
52,982
$
68,864
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED
GROSS PROFIT (LOSS)
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
2021
December 31,
2020
Calculation of gross loss
Revenues
$
66,626
$
61,971
Cost of revenues (exclusive of
depreciation and
amortization shown separately below)
62,283
66,963
Depreciation (related to cost of
revenues)
7,244
7,141
Amortization of intangibles
4,092
4,091
Gross loss
$
(6,993)
$
(16,224)
Adjusted gross profit (loss)
reconciliation
Gross loss
$
(6,993)
$
(16,224)
Depreciation (related to cost of
revenues)
7,244
7,141
Amortization of intangibles
4,092
4,091
Adjusted gross profit (loss)
$
4,343
$
(4,992)
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF EBITDA AND
ADJUSTED EBITDA
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
2021
December 31,
2020
EBITDA reconciliation:
Net loss
$
(8,246)
$
(35,375)
Interest expense
8,585
8,615
Interest income
(13)
(22)
Provision (benefit) for income taxes
27
(110)
Depreciation
7,789
7,678
Amortization of intangibles
4,092
4,091
EBITDA
$
12,234
$
(15,123)
Gain on extinguishment of debt
(17,618)
(340)
Gain on revaluation of contingent
liabilities (1)
(190)
(505)
Restructuring charges
468
25
Stock-based compensation expense
2,010
2,027
Gain (loss) on sale of property and
equipment
(273)
43
Legal fees and settlements (2)
12
-
Adjusted EBITDA
$
(3,357)
$
(13,873)
(1) Amounts relate to the revaluation of
contingent liabilities associated with the Company's 2018
acquisitions
(2) Amounts represent fees and legal
settlements associated with legal proceedings brought pursuant to
the Fair Labor Standards Act and/or similar state laws.
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ROIC
CALCULATION
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
2021
December 31,
2020
Net loss
$
(8,246)
$
(35,375)
Add back:
Interest expense
8,585
8,615
Interest income
(13)
(22)
Restructuring charges
468
25
Gain on extinguishment of debt
(17,618)
(340)
After-tax net operating loss
$
(16,824)
$
(27,097)
Total capital as of prior
period-end:
Total stockholders' equity
$
20,409
$
53,599
Total debt
348,637
349,418
Less: cash and cash equivalents
(68,864)
(80,338)
Total capital as of prior
period-end:
$
300,182
$
322,679
Total capital as of period-end:
Total stockholders' equity
$
14,083
$
20,409
Total debt
322,031
348,637
Less: cash and cash equivalents
(52,982)
(68,864)
Total capital as of period-end:
$
283,132
$
300,182
Average total capital
$
291,657
$
311,431
ROIC
-23%
-35%
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED NET
LOSS AND ADJUSTED BASIC EARNINGS (LOSS) PER SHARE
CALCULATION
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
2021
December 31,
2020
Reconciliation of adjusted net
loss:
Net loss
$
(8,246)
$
(35,375)
Add back:
Gain on extinguishment of debt (a)
(17,618)
(340)
Restructuring charges
468
25
Adjusted net loss
$
(25,396)
$
(35,690)
Weighted average shares
Weighted average shares outstanding for
basic
29,878,426
29,852,516
and adjusted basic earnings (loss) per
share
Loss per share:
Basic loss per share
$
(0.28)
$
(1.18)
Adjusted basic loss per share
$
(0.85)
$
(1.20)
(a) Amount represents the difference
between the repurchase price and the carrying amount of senior
notes repurchased during the respective period.
AAdjusted EBITDA is defined as net income (loss) before
interest, taxes, and depreciation and amortization, further
adjusted for (i) goodwill, intangible asset, and/or property and
equipment impairment charges, (ii) transaction and integration
costs related to acquisitions, (iii) loss or gain on revaluation of
contingent liabilities, (iv) loss or gain on the extinguishment of
debt, (v) loss or gain on the sale of subsidiaries, (vi)
restructuring charges, (vii) stock-based compensation expense,
(viii) loss or gain on sale of property and equipment, and (ix)
other expenses or charges to exclude certain items which we believe
are not reflective of ongoing performance of our business, such as
legal expenses and settlement costs related to litigation outside
the ordinary course of business. Management believes Adjusted
EBITDA is useful because it allows us to more effectively evaluate
our operating performance and compare the results of our operations
from period to period without regard to our financing methods or
capital structure and helps identify underlying trends in our
operations that could otherwise be distorted by the effect of the
impairments, acquisitions and dispositions and costs that are not
reflective of the ongoing performance of our business.
BAdjusted Net Income (Loss) is defined as net income (loss)
adjusted for (i) goodwill, intangible asset, and/or property and
equipment impairment charges, (ii) transaction and integration
costs related to acquisitions, (iii) restructuring charges, (iv)
loss or gain on the sale of subsidiaries, (v) loss or gain on the
extinguishment of debt and (vi) the tax impact of such adjustments.
Management believes Adjusted Net Income (Loss) is useful because it
allows us to more effectively evaluate our operating performance
and compare the results of our operations from period to period and
helps identify underlying trends in our operations that could
otherwise be distorted by the effect of the impairments and
acquisitions.
CAdjusted Basic Earnings (Loss) Per Share is defined as adjusted
net income (loss), divided by weighted average basic shares
outstanding. Management believes Adjusted Basic Earnings (Loss) Per
Share is useful because it allows us to more effectively evaluate
our operating performance and compare the results of our operations
from period to period and help identify underlying trends in our
operations that could otherwise be distorted by the effect of the
impairments and acquisitions.
DAdjusted Gross Profit (Loss) is defined as revenues less cost
of revenues excluding depreciation and amortization. This measure
differs from the GAAP definition of gross profit (loss) because we
do not include the impact of depreciation and amortization, which
represent non-cash expenses. Our management uses adjusted gross
profit (loss) to evaluate operating performance. We prepare
adjusted gross profit (loss) to eliminate the impact of
depreciation and amortization because we do not consider
depreciation and amortization indicative of our core operating
performance.
EReturn on Invested Capital (“ROIC”) is defined as after-tax net
operating profit (loss), divided by average total capital. We
define after-tax net operating profit (loss) as net income (loss)
plus (i) goodwill, intangible asset, and/or property and equipment
impairment charges, (ii) transaction and integration costs related
to acquisitions, (iii) interest expense (income), (iv)
restructuring charges, (v) loss (gain) on the sale of subsidiaries,
(vi) loss (gain) on extinguishment of debt, and (vii) the provision
(benefit) for deferred income taxes. We define total capital as
book value of equity plus the book value of debt less balance sheet
cash and cash equivalents. We compute the average of the current
and prior period-end total capital for use in this analysis.
Management believes ROIC provides useful information because it
quantifies how well we generate operating income relative to the
capital we have invested in our business and illustrates the
profitability of a business or project taking into account the
capital invested. Management uses ROIC to assist them in making
capital resource allocation decisions and in evaluating business
performance.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210506005009/en/
Nine Energy Service Investor Contact: Heather Schmidt
Vice President, Strategic Development, Investor Relations and
Marketing (281) 730-5113 investors@nineenergyservice.com
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