- Revenue, net loss and adjusted EBITDAA of $142.1 million,
$(8.1) million and $15.0 million, respectively, for the first
quarter of 2024
- Despite flat US rig count, increased gross profit in Q1 versus
Q4
- Surpassed 60,000 Stinger™ Dissolvable Plug units sold
Nine Energy Service, Inc. ("Nine" or the "Company") (NYSE: NINE)
reported first quarter 2024 revenues of $142.1 million, net loss of
$(8.1) million, or $(0.24) per diluted share and $(0.24) per basic
share, and adjusted EBITDA of $15.0 million. The Company had
provided original first quarter 2024 revenue guidance between
$135.0 and $145.0 million, with actual results coming within the
provided range.
“The US land market was relatively stable in Q1, with the
average US rig count remaining flat quarter over quarter. This was
reflected in our revenue, which also remained relatively flat
versus Q4 and was within the upper range of our original revenue
guidance,” said Ann Fox, President and Chief Executive Officer,
Nine Energy Service.
“Despite a flat rig count, we increased our gross profit quarter
over quarter due mostly to reduced whitespace, specifically within
coil tubing where revenue increased by approximately 11% quarter
over quarter. Completion tool revenue was relatively flat this
quarter, despite a decrease in international sales. Additionally,
we reached a major milestone in Q1, surpassing 60,000 Stinger
Dissolvable Plug units sold since we introduced the technology in
Q1 2020.”
“Although oil prices have been supportive, we saw a further
decline in natural gas prices to below $2.00 starting in February
and continuing into Q2. We do expect incremental activity slowdowns
in the natural-gas levered basins, specifically the Northeast and
Haynesville. Additionally, our cementing business will see full
quarter realizations of pricing pressure in Q2. Because of this, we
expect Q2 revenue to be down compared with Q1.”
“Despite this pause in activity in natural-gas levered basins,
we remain positive on the medium and long-term outlook for the
natural gas markets, and maintaining our footprint will be
imperative to ensure we are able to capitalize when gas prices
recover.”
“Our business is nimble, and we have shown our ability to
capitalize quickly when market shifts. I believe our service and
commodity diversity is critical, and we remain focused on
diversifying more of our revenue streams to completion tools and
the international markets. Our strategy of providing an asset-light
business with forward-leaning technology and excellent service is
unchanged and unique within oilfield services.”
Operating Results
During the first quarter of 2024, the Company reported revenues
of $142.1 million, gross profit of $17.1 million and adjusted gross
profitB of $26.1 million. During the first quarter, the Company
generated ROIC of (10.9)% and adjusted ROICC of 6.0%.
During the first quarter of 2024, the Company reported general
and administrative (“G&A”) expense of $12.3 million.
Depreciation and amortization expense ("D&A") in the first
quarter of 2024 was $9.5 million.
The Company’s tax provision was approximately $0.2 million for
the quarter. The provision for 2024 is the result of the Company’s
tax position in state and non-U.S. tax jurisdictions.
Liquidity and Capital Expenditures
During the first quarter of 2024, the Company reported net cash
used in operating activities of $(8.8) million. Capital
expenditures totaled $5.6 million during the first quarter of
2024.
As of March 31, 2024, Nine’s cash and cash equivalents were
$10.2 million, and the Company had $27.3 million of availability
under the revolving credit facility, resulting in a total liquidity
position of $37.5 million as of March 31, 2024. On March 31, 2024,
the Company had $52.0 million of borrowings under the revolving
credit facility.
As per the terms of the indenture governing Nine’s senior
secured notes, the Company is required to periodically offer to
repurchase such notes with a portion of any Excess Cash Flow. Nine
did not generate any Excess Cash Flow, as defined in the indenture,
in the most recently ended two fiscal quarters (the six-month
period ended March 31, 2024). As a result, no Excess Cash Flow
offer will be made to noteholders this month.
On November 6, 2023, the Company entered into an Equity
Distribution Agreement. During the quarter ended March 31, 2024, no
sales were made under the Equity Distribution Agreement.
ABCSee end of press release for definitions of these non-GAAP
measures. These measures are intended to provide additional
information only and should not be considered as alternatives to,
or more meaningful than, net income (loss), gross profit or any
other measure determined in accordance with GAAP. Certain items
excluded from these measures are significant components in
understanding and assessing a company’s financial performance, such
as a company’s cost of capital and tax structure, as well as the
historic costs of depreciable assets. Our computation of these
measures may not be comparable to other similarly titled measures
of other companies.
Conference Call Information
The call is scheduled for Tuesday, May 7, 2024, 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 21, 2024 and may
be accessed by dialing U.S. (Toll Free): (877) 660-6853 or
International: (201) 612-7415 and entering the passcode of
13739259.
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, Haynesville, 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 may
be affected by geopolitical and economic developments in the U.S.
and globally, including conflicts, instability, acts of war or
terrorism in oil producing countries or regions, particularly
Russia, the Middle East, South America and Africa, as well as
actions by members of the Organization of the Petroleum Exporting
Countries and other oil exporting nations; general economic
conditions and inflation, particularly, cost inflation with labor
or materials; equipment and supply chain constraints; the Company’s
ability to attract and retain key employees, technical personnel
and other skilled and qualified workers; the Company’s ability to
maintain existing prices or implement price increases on our
products and services; pricing pressures, reduced sales, or reduced
market share as a result of intense competition in the markets for
the Company’s dissolvable plug products; conditions inherent in the
oilfield services industry, such as equipment defects, liabilities
arising from accidents or damage involving our fleet of trucks or
other equipment, explosions and uncontrollable flows of gas or well
fluids, and loss of well control; the Company’s ability to
implement and commercialize new technologies, services and tools;
the Company’s ability to grow its completion tool business
domestically and internationally; the adequacy of the Company’s
capital resources and liquidity, including the ability to meet its
debt obligations; the Company’s ability to manage capital
expenditures; the Company’s ability to accurately predict customer
demand, including that of its international customers; the loss of,
or interruption or delay in operations by, one or more significant
customers, including certain of the Company’s customers outside of
the United States; the loss of or interruption in operations of one
or more key suppliers; the incurrence of significant costs and
liabilities resulting from litigation; cybersecurity risks; changes
in laws or regulations regarding issues of health, safety and
protection of the environment; 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, 2024
December 31, 2023
Revenues
$
142,120
$
144,073
Cost and expenses
Cost of revenues (exclusive of
depreciation and
amortization shown separately below)
116,006
118,514
General and administrative expenses
12,265
12,810
Depreciation
6,734
7,003
Amortization of intangibles
2,796
2,829
(Gain) loss on revaluation of contingent
liability
(74
)
25
(Gain) loss on sale of property and
equipment
(26
)
699
Income from operations
4,419
2,193
Interest expense
12,792
12,813
Interest income
(310
)
(324
)
Other income
(162
)
(162
)
Loss before income taxes
(7,901
)
(10,134
)
Provision for income taxes
154
171
Net loss
$
(8,055
)
$
(10,305
)
Loss per share
Basic
$
(0.24
)
$
(0.30
)
Diluted
$
(0.24
)
$
(0.30
)
Weighted average shares outstanding
Basic
33,850,317
33,850,317
Diluted
33,850,317
33,850,317
Other comprehensive income (loss), net
of tax
Foreign currency translation adjustments,
net of tax of $0 and $0
$
(210
)
$
213
Total other comprehensive income (loss),
net of tax
(210
)
213
Total comprehensive loss
$
(8,265
)
$
(10,092
)
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In Thousands)
(Unaudited)
March 31, 2024
December 31, 2023
Assets
Current assets
Cash and cash equivalents
$
10,237
$
30,840
Accounts receivable, net
90,968
88,449
Income taxes receivable
344
490
Inventories, net
56,340
54,486
Prepaid expenses and other current
assets
9,798
9,368
Total current assets
167,687
183,633
Property and equipment, net
81,232
82,366
Operating lease right of use assets,
net
40,600
42,056
Finance lease right of use assets, net
31
51
Intangible assets, net
87,633
90,429
Other long-term assets
3,227
3,449
Total assets
$
380,410
$
401,984
Liabilities and Stockholders’ Equity
(Deficit)
Current liabilities
Accounts payable
$
38,828
$
33,379
Accrued expenses
22,804
36,171
Current portion of long-term debt
1,805
2,859
Current portion of operating lease
obligations
10,396
10,314
Current portion of finance lease
obligations
21
31
Total current liabilities
73,854
82,754
Long-term liabilities
Long-term debt
317,100
320,520
Long-term operating lease obligations
30,903
32,594
Other long-term liabilities
1,867
1,746
Total liabilities
423,724
437,614
Stockholders’ equity (deficit)
Common stock (120,000,000 shares
authorized at $.01 par value; 35,324,861 shares issued and
outstanding at both March 31, 2024 and December 31, 2023)
353
353
Additional paid-in capital
795,687
795,106
Accumulated other comprehensive loss
(5,069
)
(4,859
)
Accumulated deficit
(834,285
)
(826,230
)
Total stockholders’ equity (deficit)
(43,314
)
(35,630
)
Total liabilities and stockholders’ equity
(deficit)
$
380,410
$
401,984
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
March 31, 2024
December 31, 2023
Cash flows from operating
activities
Net loss
$
(8,055
)
$
(10,305
)
Adjustments to reconcile net loss to net
cash provided (used in) by operating activities
Depreciation
6,734
7,003
Amortization of intangibles
2,796
2,829
Amortization of deferred financing
costs
1,795
1,728
Amortization of operating leases
3,294
3,454
Provision for (recovery of) doubtful
accounts
(1
)
-
Provision for inventory obsolescence
220
355
Stock-based compensation expense
581
578
(Gain) loss on sale of property and
equipment
(26
)
699
(Gain) loss on revaluation of contingent
liability
(74
)
25
Changes in operating assets and
liabilities, net of effects from acquisitions
Accounts receivable, net
(2,533
)
(3,352
)
Inventories, net
(2,229
)
3,941
Prepaid expenses and other current
assets
(430
)
(3,650
)
Accounts payable and accrued expenses
(7,796
)
24,102
Income taxes receivable/payable
148
405
Operating lease obligations
(3,251
)
(3,410
)
Other assets and liabilities
(10
)
(78
)
Net cash provided by (used in) operating
activities
(8,837
)
24,324
Cash flows from investing
activities
Proceeds from sales of property and
equipment
28
76
Purchases of property and equipment
(5,488
)
(8,518
)
Net cash used in investing activities
(5,460
)
(8,442
)
Cash flows from financing
activities
Payments on ABL credit facility
(5,000
)
-
Proceeds from short-term debt
-
4,733
Payments of short-term debt
(1,054
)
(1,874
)
Payments on finance leases
(10
)
(20
)
Payments of contingent liability
(159
)
(136
)
Vesting of restricted stock and stock
units
-
-
Net cash provided by (used in) financing
activities
(6,223
)
2,703
Impact of foreign currency exchange on
cash
(83
)
96
Net increase (decrease) in cash and cash
equivalents
(20,603
)
18,681
Cash and cash equivalents
Beginning of period
30,840
12,159
End of period
$
10,237
$
30,840
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED
EBITDA
(In Thousands)
(Unaudited)
Three Months Ended
March 31, 2024
December 31, 2023
Net loss
$
(8,055
)
$
(10,305
)
Interest expense
12,792
12,813
Interest income
(310
)
(324
)
Depreciation
6,734
7,003
Amortization of intangibles
2,796
2,829
Provision for income taxes
154
171
EBITDA
$
14,111
$
12,187
(Gain) loss on revaluation of contingent
liability (1)
(74
)
25
Restructuring charges
27
823
Stock-based compensation expense
581
578
Cash award expense
415
320
(Gain) loss on sale of property and
equipment
(26
)
699
Legal fees and settlements (2)
-
16
Adjusted EBITDA
$
15,034
$
14,648
(1) Amounts relate to the revaluation of
contingent liability associated with a 2018 acquisition.
(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 AND CALCULATION
OF ADJUSTED ROIC
(In Thousands)
(Unaudited)
Three Months Ended
March 31, 2024
December 31, 2023
Net loss
$
(8,055
)
$
(10,305
)
Add back:
Interest expense
12,792
12,813
Interest income
(310
)
(324
)
Restructuring charges
27
823
Adjusted after-tax net operating income
(loss) (1)
$
4,454
$
3,007
Total capital as of prior
period-end:
Total stockholders’ deficit
$
(35,630
)
$
(26,116
)
Total debt
359,859
357,000
Less: cash and cash equivalents
(30,840
)
(12,159
)
Total capital as of prior
period-end:
$
293,389
$
318,725
Total capital as of period-end:
Total stockholders’ deficit
$
(43,314
)
$
(35,630
)
Total debt
353,805
359,859
Less: cash and cash equivalents
(10,237
)
(30,840
)
Total capital as of period-end:
$
300,254
$
293,389
Average total capital
$
296,822
$
306,057
ROIC
-10.9
%
-13.5
%
Adjusted ROIC (1)
6.0
%
3.9
%
(1) Previously, in our SEC filings, press
releases and other investor materials issued prior to December 31,
2023, we referred to (a) adjusted ROIC as ROIC and (b) adjusted
after-tax net operating profit (loss) as after-tax net operating
profit (loss). We have made no changes to the manner in which these
measures are calculated and have only revised the titles of these
measures to more clearly identify them as non-GAAP measures.
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED
GROSS PROFIT (LOSS)
(In Thousands)
(Unaudited)
Three Months Ended
March 31, 2024
December 31, 2023
Calculation of gross profit:
Revenues
$
142,120
$
144,073
Cost of revenues (exclusive of
depreciation and
amortization shown separately below)
116,006
118,514
Depreciation (related to cost of
revenues)
6,263
6,513
Amortization of intangibles
2,796
2,829
Gross profit
$
17,055
$
16,217
Adjusted gross profit
reconciliation:
Gross profit
$
17,055
$
16,217
Depreciation (related to cost of
revenues)
6,263
6,513
Amortization of intangibles
2,796
2,829
Adjusted gross profit
$
26,114
$
25,559
NINE ENERGY SERVICE,
INC.
EXCESS CASH FLOW
CALCULATION
(In Thousands)
(Unaudited)
March 31, 2024
Net cash provided by operating
activities (1)
$
15,487
Repurchases of common stock in connection
with stock-based employee compensation
-
Capital expenditures used or useful in a
Permitted Business:
Purchases of property and equipment
(14,006
)
Proceeds from sales of property and
equipment
104
Repayments of ABL Obligations
1,655
Charges in respect of finance lease
obligations
(30
)
Debt issuance costs
-
Payments on short-term debt
(2,928
)
Impact of foreign exchange rate on
cash
13
Contingent liability payments
(295
)
Excess Cash Flow
$
-
Excess Cash Flow %
75
%
Excess Cash Flow Amount
$
-
(1) Amount consists of the Company's
consolidated operating cash flow, determined in accordance with
GAAP, for the fiscal quarter ended December 31, 2023 ($24.3 million
of net cash provided by operating activities) and for the fiscal
quarter ended March 31, 2024 ($8.8 million of net cash used in
operating activities).
See the definition of Excess Cash Flow
included in the Indenture filed as Exhibit 4.2 to the Current
Report on Form 8-K filed February 1, 2023.
AAdjusted EBITDA is defined as EBITDA (which is 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) fees and expenses
relating to our units offering and other refinancing activities,
(iv) loss or gain on revaluation of contingent liabilities, (v)
loss or gain on the extinguishment of debt, (vi) loss or gain on
the sale of subsidiaries, (vii) restructuring charges, (viii)
stock-based compensation and cash award expense, (ix) loss or gain
on sale of property and equipment, and (x) 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
provides useful information to us and our investors regarding our
financial condition and results of operations because it allows us
and them 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 impairments, acquisitions and
dispositions and costs that are not reflective of the ongoing
performance of our business.
BAdjusted 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 believes adjusted gross
profit (loss) provides useful information to us and our investors
regarding our financial condition and results of operation and
helps management evaluate our operating performance by eliminating
the impact of depreciation and amortization, which we do not
consider indicative of our core operating performance.
CAdjusted return on invested capital (“adjusted ROIC”) is
defined as adjusted after-tax net operating profit (loss), divided
by average total capital. We define adjusted after-tax net
operating profit (loss), which is a non-GAAP measure, 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) fees and expenses relating to
our units offering and other refinancing activities, (iv) interest
expense (income), (v) restructuring charges, (vi) loss (gain) on
the sale of subsidiaries, (vii) loss (gain) on extinguishment of
debt, and (viii) the provision (benefit) for deferred income taxes.
We define total capital as book value of equity (deficit) plus the
book value of debt less balance sheet cash and cash equivalents. We
compute and use the average of the current and prior period-end
total capital in determining adjusted ROIC. Management believes
adjusted ROIC provides useful information to us and our investors
regarding our financial condition and results of operations 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, and management uses adjusted ROIC to assist them
in capital resource allocation decisions and in evaluating business
performance. Previously, in our SEC filings, press releases and
other investor materials issued prior to December 31, 2023, we
referred to (a) adjusted ROIC as ROIC and (b) adjusted after-tax
net operating profit (loss) as after-tax net operating profit
(loss). We have made no changes to the manner in which these
measures are calculated and have only revised the titles of these
measures to more clearly identify them as non-GAAP measures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240506547672/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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