- Total liquidity position of $85.4 million as of September 30,
2021
- Revenue, net loss and adjusted EBITDAA of $92.9 million,
$(16.1) million and $4.5 million, respectively, for the third
quarter of 2021
- Third quarter basic loss per share of $(0.53)
Nine Energy Service, Inc. ("Nine" or the "Company") (NYSE: NINE)
reported third quarter 2021 revenues of $92.9 million, net loss of
$(16.1) million, or $(0.53) basic loss per share, and adjusted
EBITDA of $4.5 million. For the third quarter 2021, adjusted net
lossB was $(15.7) million, or $(0.51) adjusted basic loss per
shareC.
The Company had provided original third quarter 2021 revenue
guidance between $95.0 and $103.0 million, with actual results
falling slightly below the provided range, but still representing a
sequential revenue increase of approximately 9% quarter over
quarter.
“Sequential revenue increases this quarter of approximately 9%
outpaced EIA US completions, which increased approximately 6% over
the same time period, but was less than what we anticipated due
mostly to labor constraints in the Permian Basin,” said Ann Fox,
President and Chief Executive Officer, Nine Energy Service.
“Because of our inability to field labor, we were unable to
complete all anticipated wireline jobs in the region. By the end of
the quarter, we were able to fill most of our labor needs for our
Permian wireline operations but do anticipate labor shortages will
continue to be a significant challenge for Nine and the collective
OFS industry moving forward.”
“During Q3, we continued to see moderate activity increases with
both US completions and active frac crews increasing between 5-6%
quarter over quarter. Pricing for products and services remains
low, and most price increases today are being offset by
simultaneous price inflation for labor and materials. During the
quarter, we had approximately $2.4 million of one-off items that
positively affected earnings and adjusted EBITDA.”
“All of our service lines’ revenues increased sequentially, with
our Completion Tool and Coiled Tubing service lines performing
particularly well. Our Completion Tool performance was driven
mostly by an increase in our Dissolvable Stinger units sold, which
increased by approximately 18% quarter over quarter. We believe
dissolvable plugs will continue to take share in the US and
international markets, especially as labor and equipment
availability for composite plug drill-outs tighten and customers
continue efforts to reduce carbon emissions.”
“Looking into Q4, our customers remain focused on coming within
or below their original 2021 capex budgets; however, we do not
anticipate budget exhaustion, or the effects of holidays will be as
severe as in previous years. We expect Q4 revenue will be flat to
slightly up compared to Q3. With what we know today, we anticipate
North American capex spending will increase in 2022, which coupled
with the robust commodity price environment supports increased
activity for 2022 over 2021.”
Operating Results
During the third quarter of 2021, the Company reported revenues
of $92.9 million with gross profit of $3.5 million and adjusted
gross profitD of $14.0 million. During the third quarter, the
Company generated ROICE of (11)%.
During the third quarter of 2021, the Company reported selling,
general and administrative (“SG&A”) expense of $11.1 million,
compared to $12.2 million for the second quarter of 2021.
Depreciation and amortization expense ("D&A") in the third
quarter of 2021 was $11.0 million, compared to $11.5 million for
the second quarter of 2021.
The Company’s tax provision for the third quarter of 2021 was
approximately $41 thousand and $163 thousand year to date. The
provision for the year is primarily attributable to state and
non-U.S. income taxes.
Liquidity and Capital Expenditures
During the third quarter of 2021, the Company reported net cash
used in operating activities of $(1.8) million, compared to $(19.6)
million for the second quarter of 2021. Capital expenditures
totaled $2.1 million during the third quarter of 2021 bringing the
total spent year-to-date as of September 30, 2021 to $4.9
million.
As of September 30, 2021, Nine’s cash and cash equivalents were
$30.0 million, and the Company had $55.4 million of availability
under the revolving credit facility, resulting in a total liquidity
position of $85.4 million as of September 30, 2021.
ABCDESee end of press release for definitions
Conference Call Information
The call is scheduled for Thursday, November 4, 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 November 18, 2021 and
may be accessed by dialing U.S. (Toll Free): (877) 660-6853 or
International: (201) 612-7415 and entering the passcode of
13723609.
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 level of capital spending and well
completions by the onshore oil and natural gas industry, which has
been and may again be affected by the COVID-19 pandemic and related
economic repercussions; the ability of the OPEC+ countries to agree
on and comply with supply limitations; 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 manage 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, technical personnel and other skilled and qualified
workers; 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
September 30, 2021
June 30, 2021
Revenues
$
92,868
$
84,832
Cost and expenses
Cost of revenues (exclusive of
depreciation and
amortization shown separately below)
78,879
76,638
General and administrative expenses
11,114
12,167
Depreciation
6,921
7,438
Amortization of intangibles
4,029
4,091
Loss on revaluation of contingent
liabilities
21
45
(Gain) loss on sale of property and
equipment
(17
)
950
Loss from operations
(8,079
)
(16,497
)
Interest expense
7,968
7,981
Interest income
(3
)
(8
)
Other income
(34
)
(35
)
Loss before income taxes
(16,010
)
(24,435
)
Provision for income taxes
41
95
Net loss
$
(16,051
)
$
(24,530
)
Loss per share
Basic
$
(0.53
)
$
(0.81
)
Diluted
$
(0.53
)
$
(0.81
)
Weighted average shares outstanding
Basic
30,449,286
30,424,026
Diluted
30,449,286
30,424,026
Other comprehensive income (loss), net
of tax
Foreign currency translation adjustments,
net of tax of $0 and $0
$
(102
)
$
29
Total other comprehensive income (loss),
net of tax
(102
)
29
Total comprehensive loss
$
(16,153
)
$
(24,501
)
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In Thousands)
(Unaudited)
September 30, 2021
June 30, 2021
Assets
Current assets
Cash and cash equivalents
$
29,969
$
33,128
Accounts receivable, net
58,579
58,888
Income taxes receivable
1,205
1,246
Inventories, net
43,019
41,300
Prepaid expenses and other current
assets
11,084
8,741
Total current assets
143,856
143,303
Property and equipment, net
83,749
88,493
Operating lease right-of-use assets,
net
33,877
34,062
Finance lease right-of-use assets, net
1,517
1,617
Intangible assets, net
120,312
124,341
Other long-term assets
2,572
2,823
Total assets
$
385,883
$
394,639
Liabilities and Stockholders’
Equity
Current liabilities
Accounts payable
$
23,713
$
28,597
Accrued expenses
29,455
17,805
Current portion of long-term debt
1,125
1,125
Current portion of operating lease
obligations
5,689
5,732
Current portion of finance lease
obligations
1,132
1,144
Total current liabilities
61,114
54,403
Long-term liabilities
Long-term debt
317,180
317,045
Long-term operating lease obligations
29,766
29,944
Long-term finance lease obligations
259
523
Other long-term liabilities
2,296
2,455
Total liabilities
410,615
404,370
Stockholders’ equity
Common stock (120,000,000 shares
authorized at $.01 par value; 32,840,084 and 31,350,677 shares
issued and outstanding at September 30, 2021 and June 30, 2021,
respectively)
328
314
Additional paid-in capital
772,135
770,997
Accumulated other comprehensive loss
(4,533
)
(4,431
)
Accumulated deficit
(792,662
)
(776,611
)
Total stockholders’ equity
(24,732
)
(9,731
)
Total liabilities and stockholders’
equity
$
385,883
$
394,639
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
September 30, 2021
June 30, 2021
Cash flows from operating
activities
Net loss
$
(16,051
)
$
(24,530
)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation
6,921
7,438
Amortization of intangibles
4,029
4,091
Amortization of deferred financing
costs
642
642
Amortization of operating leases
1,955
2,005
Recovery of doubtful accounts
(148
)
(118
)
Provision for inventory obsolescence
408
2,356
Stock-based compensation expense
1,153
1,028
(Gain) loss on sale of property and
equipment
(17
)
950
Loss on revaluation of contingent
liabilities
21
45
Changes in operating assets and
liabilities, net of effects from acquisitions
Accounts receivable, net
419
(10,599
)
Inventories, net
(2,163
)
(4,874
)
Prepaid expenses and other current
assets
(3,336
)
3,880
Accounts payable and accrued expenses
6,388
235
Income taxes receivable/payable
41
(104
)
Other assets and liabilities
(2,097
)
(2,071
)
Net cash used in operating activities
(1,835
)
(19,626
)
Cash flows from investing
activities
Proceeds from sales of property and
equipment
1,014
1,140
Purchases of property and equipment
(1,712
)
(692
)
Net cash provided by (used in) investing
activities
(698
)
448
Cash flows from financing
activities
Payments on Magnum promissory notes
(281
)
-
Purchases of senior notes
-
-
Payments on finance leases
(276
)
(270
)
Payments of contingent liabilities
(46
)
(34
)
Vesting of restricted stock
(1
)
(341
)
Net cash used in financing activities
(604
)
(645
)
Impact of foreign currency exchange on
cash
(22
)
(31
)
Net decrease in cash and cash
equivalents
(3,159
)
(19,854
)
Cash and cash equivalents
Beginning of period
33,128
52,982
End of period
$
29,969
$
33,128
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED
GROSS PROFIT (LOSS)
(In Thousands)
(Unaudited)
Three Months Ended
September 30, 2021
June 30, 2021
Calculation of gross profit
(loss)
Revenues
$
92,868
$
84,832
Cost of revenues (exclusive of
depreciation and
amortization shown separately below)
78,879
76,638
Depreciation (related to cost of
revenues)
6,437
6,917
Amortization of intangibles
4,029
4,091
Gross profit (loss)
$
3,523
$
(2,814
)
Adjusted gross profit
reconciliation
Gross profit (loss)
$
3,523
$
(2,814
)
Depreciation (related to cost of
revenues)
6,437
6,917
Amortization of intangibles
4,029
4,091
Adjusted gross profit
$
13,989
$
8,194
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF EBITDA AND
ADJUSTED EBITDA
(In Thousands)
(Unaudited)
Three Months Ended
September 30, 2021
June 30, 2021
EBITDA reconciliation:
Net loss
$
(16,051
)
$
(24,530
)
Interest expense
7,968
7,981
Interest income
(3
)
(8
)
Provision for income taxes
41
95
Depreciation
6,921
7,438
Amortization of intangibles
4,029
4,091
EBITDA
$
2,905
$
(4,933
)
Loss on revaluation of contingent
liabilities (1)
21
45
Restructuring charges
375
745
Stock-based compensation expense
1,153
1,028
(Gain) loss on sale of property and
equipment
(17
)
950
Legal fees and settlements (2)
17
1,735
Adjusted EBITDA
$
4,454
$
(430
)
(1) Amounts relate to the revaluation of
contingent liabilities associated with the Company's 2018
acquisitions
(2) Amounts represent fees, legal
settlements and/or accruals 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
September 30, 2021
June 30, 2021
Net loss
$
(16,051
)
$
(24,530
)
Add back:
Interest expense
7,968
7,981
Interest income
(3
)
(8
)
Restructuring charges
375
745
After-tax net operating loss
$
(7,711
)
$
(15,812
)
Total capital as of prior
period-end:
Total stockholders' equity
$
(9,731
)
$
14,083
Total debt
322,031
322,031
Less: cash and cash equivalents
(33,128
)
(52,982
)
Total capital as of prior
period-end:
$
279,172
$
283,132
Total capital as of period-end:
Total stockholders' equity
$
(24,732
)
$
(9,731
)
Total debt
321,750
322,031
Less: cash and cash equivalents
(29,969
)
(33,128
)
Total capital as of period-end:
$
267,049
$
279,172
Average total capital
$
273,111
$
281,152
ROIC
-11
%
-22
%
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED NET
LOSS AND ADJUSTED BASIC EARNINGS (LOSS) PER SHARE
CALCULATION
(In Thousands)
(Unaudited)
Three Months Ended
September 30, 2021
June 30, 2021
Reconciliation of adjusted net
loss:
Net loss
$
(16,051
)
$
(24,530
)
Add back:
Restructuring charges
375
745
Adjusted net loss
$
(15,676
)
$
(23,785
)
Weighted average shares
Weighted average shares outstanding for
basic
30,449,286
30,424,026
and adjusted basic earnings (loss) per
share
Loss per share:
Basic loss per share
$
(0.53
)
$
(0.81
)
Adjusted basic loss per share
$
(0.51
)
$
(0.78
)
(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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211103005055/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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