UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
6-K
REPORT
OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For
the month of April 2024
Commission
File Number: 001-38091
NATIONAL
ENERGY SERVICES REUNITED CORP.
(Exact
name of Registrant as specified in its charter)
Not
Applicable
(Translation
of registrant’s name into English)
777
Post Oak Blvd., Suite 730
Houston,
Texas 77056
(Address
of principal executive office)
Indicate
by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form
20-F ☒ Form 40-F ☐
Information
Contained in this Form 6-K Report
On
April 30, 2023, National Energy Services Reunited Corp. (the “Company”) issued a press release announcing the filing
of audited financial statements for the year ended December 31, 2023, with the Securities and Exchange Commission. A copy of the
press release is furnished as Exhibit 99.1 to this report on Form 6-K.
The
information contained in this report and the exhibit hereto shall not be deemed to be “filed” for purposes of Section 18
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that
section, and shall not be deemed incorporated by reference into any filings made by NESR under the Securities Act of 1933, as amended,
or the Exchange Act, except as may be expressly set forth by specific reference in such filing.
Financial
Statements and Exhibits
Exhibits.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
| |
NATIONAL
ENERGY SERVICES REUNITED CORP. |
| |
|
|
| Date:
April 30, 2024 |
By:
|
/s/
Stefan Angeli |
| |
Name: |
Stefan
Angeli |
| |
Title: |
Chief
Financial Officer |
Exhibit
99.1
National
Energy Services Reunited Corp. Reports Full Year 2023 Financial Results
| |
● |
Revenue
for the year ended December 31, 2023, is $1.146 billion, growing 26% year-over-year |
| |
● |
Operating
cash flow for the year ended December 31, 2023, is $177.0 million, improving 91% year-over-year |
| |
● |
Free
cash flow (a non-GAAP measure) for the year ended December 31, 2023, is $108.8 million* |
| |
● |
Net
income for the year ended December 31, 2023, is $12.6 million |
| |
● |
Adjusted
EBITDA (a non-GAAP measure) for the year ended December 31, 2023, is $262.3 million* |
| |
● |
Diluted
Earnings per Share (EPS) for the year ended December 31, 2023, is $0.13 |
| |
● |
Adjusted
Diluted EPS (a non-GAAP measure), which includes $0.40 per share of Charges and Credits, for the year ended December 31, 2023,
is $0.53* |
HOUSTON,
April 30, 2024 – National Energy Services Reunited Corp. (“NESR” or the “Company”) (OTCMKTS: NESR)
(OTCMKTS: NESRW), a national, industry-leading provider of integrated energy services in the Middle East and North Africa (“MENA”)
region, today reported its financial results for the year ended December 31, 2023. The Company posted the following results for the periods
presented:
| | |
For The Year Ended |
|
|
Variance | |
| (in thousands except per share amounts and percentages) | |
December 31, 2023 | | |
December
31, 2022 | |
|
Sequential | | |
Year-over- year | |
| | |
| | |
| |
|
| | |
| |
| Revenue | |
$ | 1,145,915 | | |
$ | 909,517 | |
|
$ | 236,398 | | |
| 26.0 | % |
| Net income | |
| 12,580 | | |
| (36,420 | ) |
|
| 49,000 | | |
| 134.5 | % |
| Adjusted net income (non-GAAP)* | |
| 50,221 | | |
| (2,991 | ) |
|
| 53,212 | | |
| 1779.1 | % |
| Adjusted EBITDA (non-GAAP)* | |
| 262,306 | | |
| 162,868 | |
|
| 99,438 | | |
| 61.1 | % |
| Diluted EPS | |
| 0.13 | | |
| (0.39 | ) |
|
| 0.52 | | |
| 133.3 | % |
| Adjusted Diluted EPS (non-GAAP)* | |
| 0.53 | | |
| (0.03 | ) |
|
| 0.56 | | |
| 1747.4 | % |
| Operating cash flows | |
| 176,959 | | |
| 92,576 | |
|
| 84,383 | | |
| 91.1 | % |
| Free cash flows (non-GAAP)* | |
| 108,769 | | |
| (29,839 | ) |
|
| 138,608 | | |
| 464.5 | % |
*The
Company presents its financial results in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
However, management believes that using additional non-GAAP measures will enhance the evaluation of the profitability of the Company
and its ongoing operations. Please see Tables 1, 2, 3, and 4 below for reconciliations of GAAP to non-GAAP financial measures. The
Consolidated Balance Sheets, Statements of Operations, and Statements of Cash Flows are derived from the audited financial statements
present in our Annual Report on Form 20-F for the year ended December 31, 2023.
Stefan
Angeli, Chief Financial Officer, commented, “The strength of our competitive position in MENA, the execution capabilities of our
employees, and the relationships we have with our customers all contributed to our record 2023 results. I am thankful to our NESR team
and our customers for these outstanding operating fundamentals. During 2023, we also made measurable improvements in our balance sheet
structure with reductions in days sales outstanding, inventory, and capital expenditures combined with the record EBITDA, allowing us to
pay down debt significantly. Looking ahead, we continue to see tight service capacity in the markets
we serve coupled with customers who are eager to maximize or expand production. For the first quarter of 2024, the Company’s
performance was again strong, generating $297 million of revenue during the quarter which was up 15% compared to the first quarter of 2023.”
Sherif
Foda, Chairman and Chief Executive Officer, commented, “The global commodity outlook remains remarkably strong. As we predicted
more than a year ago, the multi-year underinvestment in upstream energy, underpinned by increased capital discipline among producers
and regulatory headwinds in certain markets, has led to a favorable supply-demand dynamic for hydrocarbons. With this backdrop, the MENA
region has reasserted itself as a key swing production source, which has led to outsized MENA activity growth for over a year. In anticipation
of this trend, NESR front-loaded expansion capital expenditures in our core businesses and invested in strategic technologies
like the RoyaTM Drilling Platform & NESR Environmental & Decarbonization Applications portfolio, which are expected to lead our growth in the coming years. We are
very excited about the future and our strong position in the region, and we thank our shareholders, customers, and employees for their
trust, loyalty, and support.”
Net
Income and Adjusted Net Income Results
The
Company had net income for the year ended December 31, 2023, totaling $12.6 million, an improvement of $49.0 million compared to the
prior year. The change is largely attributable to increased activity in our principal areas and businesses of operations, particularly in Saudi Arabia. Adjusted
net income for the year ended December 31, 2023, is $50.2 million and includes adjustments totaling $37.6 million (collectively,
“Total Charges and Credits”) mainly related to matters identified in our Annual Report on Form 20-F for the year ended December
31, 2022, relating to restatement of our previously issued audited financial statements as of and for the year-ended December 31, 2020.
A complete list of the adjusting items and the associated reconciliation from GAAP has been provided in Table 1 below in the section
entitled “Reconciliation of Net Income and Adjusted Net Income.”
The
Company reported $0.13 of diluted earnings per share (“EPS”) for the year ended December 31, 2023. Adjusted for the impact
of Total Charges and Credits, Adjusted Diluted EPS, a non-GAAP measure described in Table 1 below, for the year ended December 31, 2023,
is $0.53.
Adjusted
EBITDA Results
The
Company produced Adjusted EBITDA of $262.3 million during the year ended December 31, 2023, improving 61.1% as compared
to 2022. Year ended 2023 Adjusted EBITDA includes adjustments for certain Total Charges and Credits (those not related to interest, taxes,
and/or depreciation and amortization) of $37.6 million. The Company posted the following results for the periods presented.
| (in thousands) | |
Year ended December
31, 2023 | | |
Year ended December
31, 2022 | |
| Revenue | |
$ | 1,145,915 | | |
$ | 909,517 | |
| Adjusted EBITDA | |
$ | 262,306 | | |
$ | 162,868 | |
Balance
Sheet
Cash
and cash equivalents are $67.8 million as of December 31, 2023, compared to $78.9 million as of December 31, 2022.
Free
cash flow, a non-GAAP measure, for 2023 is $108.8 million, as compared to ($29.8) million in 2022 due to strength of
improved operating results in 2023 coupled with additional capital expenditure discipline.
Total
debt as of December 31, 2023, is $452.2 million with $120.6 million classified as short-term, as compared to $535.1 million and $143.2
million, respectively, at December 31, 2022. Net Debt (a non-GAAP measure), which is the sum of our recorded Current installments
of long-term debt, Short-term borrowings, and Long-term debt less Cash and cash equivalents, totaled $384.4 million as of December 31,
2023, as compared to $456.2 million as of December 31, 2022. Net Debt has decreased as compared to the prior period primarily due to
$54.8 million of long-term debt repayments during 2023 plus payments on short-term borrowings during the year that were also in excess
of incremental borrowing. A reconciliation of the comparable GAAP measures to Net Debt is provided in Table 4 below, entitled
“Reconciliation to Net Debt.”
About
National Energy Services Reunited Corp.
Founded
in 2017, NESR is one of the largest national oilfield services providers in the MENA and Asia Pacific regions. With over 6,000 employees,
representing more than 60 nationalities in over 15 countries, the Company helps its customers unlock the full potential of their reservoirs
by providing Production Services such as Hydraulic Fracturing, Cementing, Coiled Tubing, Filtration, Completions, Stimulation, Pumping
and Nitrogen Services. The Company also helps its customers to access their reservoirs in a smarter and faster manner by providing Drilling
and Evaluation Services such as Drilling Downhole Tools, Directional Drilling, Fishing Tools, Testing Services, Wireline, Slickline,
Drilling Fluids and Rig Services.
Forward-Looking
Statements
This
communication contains forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended). Any and all statements contained in this communication that are
not statements of historical fact, may be deemed forward-looking
statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,”
“estimate,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,”
“develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,”
“future,” and terms of similar import (including the negative of any of these terms) may identify forward-looking statements.
However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this communication
may include, without limitation, the plans and objectives of management for future operations, projections of income or loss, earnings
or loss per share, capital expenditures, dividends, capital structure or other financial items, the Company’s future financial
performance, expansion plans and opportunities, completion and integration of acquisitions, and the assumptions underlying or relating
to any such statement.
The
forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be
realized because they are based upon the Company’s current projections, plans, objectives, beliefs, expectations, estimates and
assumptions and are subject to a number of risks and uncertainties and other influences, many of which the Company has no control over
including the impact of the delayed SEC report filings on our business, the extent of any material weakness or significant deficiencies
in our internal control over financial reporting and any action taken by the SEC including potential fines or penalties arising out of
the SEC inquiry. Actual results and the timing of certain events and circumstances may differ materially from those described by the
forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the accuracy of
the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation:
estimates of the Company’s future revenue, expenses, capital requirements and the Company’s need for financing; the risk
of legal complaints and proceedings and government investigations; the Company’s financial performance; success in retaining or
recruiting, or changes required in, the Company’s officers, key employees or directors; current and future government regulations;
developments relating to the Company’s competitors; changes in applicable laws or regulations; the possibility that the Company
may be adversely affected by other economic and market conditions, particularly during extended periods of low oil and gas prices, political
disturbances, war, terrorist acts, public health crises and threats, ongoing
actions taken by businesses and governments and resulting significant disruption in international economies, international financial
and oil markets; international currency fluctuations, business and/or competitive factors; and other risks and uncertainties set forth
in the Company’s most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission (the “SEC”).
You
are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to
the risk factors. The Company disclaims any obligation to update the forward-looking statements contained in this communication to reflect
any new information or future events or circumstances or otherwise, except as required by law. You should read this communication in
conjunction with other documents which the Company may file or furnish from time to time with the SEC.
The
preliminary financial results for the Company’s first quarter ended March 31, 2024, included in this press release represent the
most current information available to management. The Company’s actual results when disclosed in its subsequent Periodic Reports
on Form 6-K may differ from these preliminary results as a result of the completion of the Company’s financial statement closing
procedures, final adjustments, completion of the independent registered public accounting firm’s review procedures, and other developments
that may arise between now and the disclosure of the final results.
NATIONAL
ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In
US$ thousands, except share data)
| | |
December
31, 2023 | | |
December
31, 2022 | |
| | |
| | |
| |
| Assets | |
| | | |
| | |
| Current assets | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 67,821 | | |
| 78,853 | |
| Accounts receivable, net | |
| 171,269 | | |
| 148,709 | |
| Unbilled revenue | |
| 95,997 | | |
| 110,186 | |
| Service inventories | |
| 98,434 | | |
| 110,521 | |
| Prepaid assets | |
| 9,238 | | |
| 337 | |
| Retention withholdings | |
| 48,419 | | |
| 34,268 | |
| Other receivables | |
| 39,778 | | |
| 38,271 | |
| Other current assets | |
| 10,759 | | |
| 16,669 | |
| Total current assets | |
| 541,715 | | |
| 537,814 | |
| Non-current assets | |
| | | |
| | |
| Property, plant and equipment, net | |
| 442,666 | | |
| 461,061 | |
| Intangible assets, net | |
| 84,304 | | |
| 102,914 | |
| Goodwill | |
| 645,095 | | |
| 645,095 | |
| Operating lease right-of-use assets | |
| 31,628 | | |
| 29,970 | |
| Other assets | |
| 52,332 | | |
| 51,473 | |
| Total assets | |
$ | 1,797,740 | | |
$ | 1,828,327 | |
| | |
| | | |
| | |
| Liabilities and equity | |
| | | |
| | |
| Liabilities | |
| | | |
| | |
| Accounts payable and accrued expenses | |
| 351,240 | | |
| 353,536 | |
| Current installments of long-term debt | |
| 71,744 | | |
| 53,352 | |
| Short-term borrowings | |
| 48,889 | | |
| 89,885 | |
| Income taxes payable | |
| 8,421 | | |
| 7,262 | |
| Other taxes payable | |
| 14,674 | | |
| 7,604 | |
| Operating lease liabilities | |
| 7,406 | | |
| 6,263 | |
| Other current liabilities | |
| 31,073 | | |
| 26,166 | |
| Total current liabilities | |
| 533,447 | | |
| 544,068 | |
| | |
| | | |
| | |
| Long-term debt | |
| 331,565 | | |
| 391,863 | |
| Deferred tax liabilities | |
| - | | |
| - | |
| Employee benefit liabilities | |
| 28,935 | | |
| 24,382 | |
| Non-current operating lease liabilities | |
| 25,145 | | |
| 25,051 | |
| Other liabilities | |
| 57,154 | | |
| 40,615 | |
| Total liabilities | |
| 976,246 | | |
| 1,025,979 | |
| | |
| | | |
| | |
| Equity | |
| | | |
| | |
| Preferred shares, no par value; unlimited shares authorized; none issued and outstanding at December 31, 2023 and December 31, 2022, respectively | |
| - | | |
| - | |
| Common stock and additional paid in capital, no par value; unlimited shares authorized; 94,996,397 and 94,012,752 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively | |
| 883,865 | | |
| 877,299 | |
| Retained (deficit) / earnings | |
| (62,440 | ) | |
| (75,020 | ) |
| Accumulated other comprehensive income | |
| 69 | | |
| 69 | |
| Total equity | |
| 821,494 | | |
| 802,348 | |
| Total liabilities and equity | |
$ | 1,797,740 | | |
$ | 1,828,327 | |
NATIONAL
ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In
US$ thousands, except share data and per share amounts)
| | |
Year Ended | |
| Description | |
December
31, 2023 | | |
December
31, 2022 | | |
December
31, 2021 | |
| | |
| | |
| | |
| |
| Revenues | |
$ | 1,145,915 | | |
$ | 909,517 | | |
$ | 876,729 | |
| Cost of services | |
| (997,265 | ) | |
| (844,039 | ) | |
| (873,948 | ) |
| Gross profit | |
| 148,650 | | |
| 65,478 | | |
| 2,781 | |
| Selling, general and administrative expenses (excluding Amortization) | |
| (49,173 | ) | |
| (47,530 | ) | |
| (28,071 | ) |
| Amortization | |
| (18,774 | ) | |
| (18,865 | ) | |
| (18,042 | ) |
| Operating income / (loss) | |
| 80,703 | | |
| (917 | ) | |
| (43,332 | ) |
| Interest expense, net | |
| (45,826 | ) | |
| (34,126 | ) | |
| (15,174 | ) |
| Other (expense) / income, net | |
| (5,031 | ) | |
| 5,242 | | |
| (2,073 | ) |
| Income / (loss) before income tax | |
| 29,846 | | |
| (29,801 | ) | |
| (60,579 | ) |
| Income tax expense | |
| (17,266 | ) | |
| (6,619 | ) | |
| (3,989 | ) |
| Net income / (loss) | |
$ | 12,580 | | |
$ | (36,420 | ) | |
$ | (64,568 | ) |
| | |
| | | |
| | | |
| | |
| Weighted average shares outstanding: | |
| | | |
| | | |
| | |
| Basic | |
| 94,748,324 | | |
| 92,962,048 | | |
| 91,043,830 | |
| Diluted | |
| 94,748,324 | | |
| 92,962,048 | | |
| 91,043,830 | |
| | |
| | | |
| | | |
| | |
| Net earnings per share: | |
| | | |
| | | |
| | |
| Basic | |
$ | 0.13 | | |
$ | (0.39 | ) | |
$ | (0.71 | ) |
| Diluted | |
$ | 0.13 | | |
$ | (0.39 | ) | |
$ | (0.71 | ) |
NATIONAL
ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
US$ thousands)
| | |
Year Ended | |
| | |
December
31, 2023 | | |
December
31, 2022 | | |
December
31, 2021 | |
| | |
| | |
| | |
| |
| Cash flows from operating activities: | |
| | | |
| | | |
| | |
| Net (loss) / income | |
$ | 12,580 | | |
$ | (36,420 | ) | |
$ | (64,568 | ) |
| Adjustments to reconcile net (loss) / income to net cash provided by operating activities: | |
| | | |
| | | |
| | |
| Depreciation and amortization | |
| 142,230 | | |
| 115,845 | | |
| 122,125 | |
| Share-based compensation expense | |
| 6,763 | | |
| 9,269 | | |
| 9,759 | |
| Loss (Gain) on disposal of assets | |
| 487 | | |
| (60 | ) | |
| 333 | |
| Non-cash interest (income) expense | |
| 1,549 | | |
| 8,087 | | |
| 3,041 | |
| Deferred tax expense / (benefit) | |
| (3,753 | ) | |
| (10,261 | ) | |
| (12,140 | ) |
| Allowance for (reversal of) doubtful receivables | |
| 410 | | |
| 8,185 | | |
| 1,114 | |
| Charges on obsolete service inventories | |
| 137 | | |
| 100 | | |
| 3,610 | |
| Earn-outs on business combinations | |
| - | | |
| - | | |
| 1,767 | |
| Impairments and other charges | |
| 7,917 | | |
| - | | |
| - | |
| (Gain) on Buyer Stock Adjustment Amount | |
| - | | |
| (4,236 | ) | |
| - | |
| Other operating activities, net | |
| 933 | | |
| 837 | | |
| (75 | ) |
| Changes in operating assets and liabilities: | |
| | | |
| | | |
| | |
| (Increase) decrease in accounts receivable | |
| (22,971 | ) | |
| (29,252 | ) | |
| (8,289 | ) |
| (Increase) decrease in unbilled revenue | |
| 14,189 | | |
| (1,704 | ) | |
| 56,088 | |
| (Increase) decrease in retention withholdings | |
| (14,151 | ) | |
| 6,837 | | |
| (4,000 | ) |
| (Increase) decrease in inventories | |
| 11,951 | | |
| (16,756 | ) | |
| (3,236 | ) |
| (Increase) decrease in prepaid expenses | |
| (8,901 | ) | |
| 6,164 | | |
| (884 | ) |
| (Increase) decrease in other current assets | |
| 2,817 | | |
| (13,711 | ) | |
| (16,717 | ) |
| (Increase) decrease in other long-term assets and liabilities | |
| 16,259 | | |
| 6,075 | | |
| 8,854 | |
| Increase (decrease) in accounts payable and accrued expenses | |
| (3,365 | ) | |
| 33,651 | | |
| 31,221 | |
| Increase (decrease) in other current liabilities | |
| 11,878 | | |
| 9,926 | | |
| (260 | ) |
| Net cash provided by operating activities | |
| 176,959 | | |
| 92,576 | | |
| 127,743 | |
| | |
| | | |
| | | |
| | |
| Cash flows from investing activities: | |
| | | |
| | | |
| | |
| Capital expenditures | |
| (68,190 | ) | |
| (122,415 | ) | |
| (107,076 | ) |
| IPM investments | |
| (16,031 | ) | |
| (17,367 | ) | |
| - | |
| Proceeds from disposal of assets | |
| 1,758 | | |
| 626 | | |
| 2,760 | |
| Acquisition of business, net of cash acquired | |
| - | | |
| - | | |
| (51,921 | ) |
| Other investing activities | |
| (1,000 | ) | |
| (7,552 | ) | |
| (8,299 | ) |
| Net cash used in investing activities | |
| (83,463 | ) | |
| (146,708 | ) | |
| (164,536 | ) |
| | |
| | | |
| | | |
| | |
| Cash flows from financing activities: | |
| | | |
| | | |
| | |
| Proceeds from long-term debt | |
| 11,300 | | |
| 3,194 | | |
| 527,488 | |
| Repayments of long-term debt | |
| (54,763 | ) | |
| (78,755 | ) | |
| (360,000 | ) |
| Proceeds from short-term borrowings | |
| 94,506 | | |
| 139,482 | | |
| 123,787 | |
| Repayments of short-term borrowings | |
| (137,402 | ) | |
| (119,165 | ) | |
| (78,983 | ) |
| Payments on capital leases | |
| (2,403 | ) | |
| (3,108 | ) | |
| (21,361 | ) |
| Payments on seller-provided financing for capital expenditures | |
| (15,569 | ) | |
| (14,443 | ) | |
| (15,333 | ) |
| Other financing activities, net | |
| (197 | ) | |
| - | | |
| (8,054 | ) |
| Net cash provided by (used in) financing activities | |
| (104,528 | ) | |
| (72,795 | ) | |
| 167,544 | |
| | |
| | | |
| | | |
| | |
| Effect of exchange rate changes on cash | |
| - | | |
| 8 | | |
| 9 | |
| Net increase (decrease) in cash | |
| (11,032 | ) | |
| (126,919 | ) | |
| 130,760 | |
| Cash and cash equivalents, beginning of period | |
| 78,853 | | |
| 205,772 | | |
| 75,012 | |
| Cash and cash equivalents, end of period | |
$ | 67,821 | | |
$ | 78,853 | | |
$ | 205,772 | |
NATIONAL
ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES
RECONCILIATION
OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In
US$ thousands except per share amounts)
The
Company uses and presents certain key non-GAAP financial measures to evaluate its business and trends, measure performance, prepare financial
projections and make strategic decisions. Included in this release are discussions of earnings before interest, income tax and depreciation
and amortization adjusted for certain non-recurring and non-core expenses (“Adjusted EBITDA”), net income and diluted earnings
per share (“EPS”) adjusted for certain non-recurring and non-core expenses (“Adjusted Net Income” and “Adjusted
Diluted EPS,” respectively), as well as a reconciliation of these non-GAAP measures to net income and diluted EPS, respectively,
in accordance with GAAP. The Company also discusses the non-GAAP balance sheet measure of the sum of our recorded current installments
of long-term debt, short-term borrowings, and long-term debt less cash and cash equivalents (“Net Debt”) in this release
and provides a reconciliation to the GAAP measures of cash and cash equivalents, current installments of long-term debt, short-term borrowings,
and long-term debt to Net Debt. The Company also discusses Free Cash Flow reconciled to Operating Cash Flow.
The
Company believes that the presentation of Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS provides useful information
to investors in assessing its financial performance and results of operations as the Company’s board of directors, management and
investors use Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS to compare the Company’s operating performance on
a consistent basis across periods by removing the effects of changes in capital structure (such as varying levels of interest expense),
asset base (such as depreciation and amortization), items that do not impact the ongoing operations (transaction, integration, and startup
costs) and items outside the control of its management team. Similarly, Net Debt is used by management as a liquidity measure used to
illustrate the Company’s debt level absent variability in cash and cash equivalents, and the Company believes that the presentation
of Net Debt provides useful information to investors in assessing its financial leverage. Adjusted EBITDA, Adjusted Net Income, and Adjusted
Diluted EPS should not be considered as an alternative to operating income, net income, or diluted EPS, respectively, the most directly
comparable GAAP financial measures. Net Debt also should not be considered as an alternative to GAAP measures of cash and cash equivalents,
current installments of long-term debt, short-term borrowings, and long-term debt. Finally, Free Cash Flow is used by management as a
liquidity measure to illustrate the Company’s ability to produce cash that is available to be distributed in a discretionary manner,
after excluding investments in capital assets. Free Cash Flow should not be considered as an alternative to Net cash provided by (used
in) operations or Net cash provided by (used in) investing activities, respectively, the most directly comparable GAAP financial measures.
Non-GAAP financial measures have important limitations as analytical tools because they exclude some but not all items that affect the
most directly comparable GAAP financial measure. You should not consider non-GAAP measures in isolation or as a substitute for an analysis
of the Company’s results as reported under GAAP.
Table
1 - Reconciliation of Net Income and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS
| | |
Year Ended December 31, 2023 | | |
Year Ended December 31, 2022 | |
| | |
Net Income | | |
Diluted EPS | | |
Net Income | | |
Diluted EPS | |
| | |
| | |
| | |
| | |
| |
| Net Income | |
$ | 12,580 | | |
$ | 0.13 | | |
$ | (36,420 | ) | |
$ | (0.39 | ) |
| Add Charges and Credits: | |
| | | |
| | | |
| | | |
| | |
| Restatement costs (professional fees and bonuses) | |
| 23,702 | | |
| 0.25 | | |
| 17,263 | | |
| 0.19 | |
| Other than temporary impairment on equity method investment | |
| 6,991 | | |
| 0.07 | | |
| - | | |
| - | |
| Current Expected Credit Loss Provisions | |
| - | | |
| - | | |
| 6,664 | | |
| 0.07 | |
| Litigation provisions for non-employee matters | |
| 2,500 | | |
| 0.03 | | |
| 1,210 | | |
| 0.01 | |
| Integration and restructuring projects | |
| - | | |
| - | | |
| 3,783 | | |
| 0.04 | |
| Other write-offs and provisions | |
| 4,448 | | |
| 0.05 | | |
| 4,509 | | |
| 0.05 | |
| Total Charges and Credits (1) | |
| 37,641 | | |
| 0.40 | | |
| 33,429 | | |
| 0.36 | |
| Total Adjusted Net Income | |
$ | 50,221 | | |
$ | 0.53 | | |
$ | (2,991 | ) | |
$ | (0.03 | ) |
| |
(1) |
In the year ended December 31, 2023, Total Charges and
Credits included $23.7 million of professional (legal and accounting) and employee (bonus and retention) costs associated
with the matters identified in our Annual Report on Form 20-F for the year ended December 31, 2022, relating to restatement of our
previously issued audited financial statements as of and for the year-ended December 31, 2020, $7.0 million related to an other
than temporary impairment on an equity method investment, $2.5 million in provisions for litigation unrelated to employee matters,
and $4.4 million related to other write-offs and provisions. In the year ended December 31, 2022, Total Charges
and Credits included $17.3 million of professional (legal and accounting) costs associated with the matters identified in our
Annual Report on Form 20-F for the year ended December 31, 2022, relating to restatement of our previously issued audited financial
statements as of and for the year-ended December 31, 2020, $6.7 million related to current expected credit loss provisions, $1.2
million in provisions for litigation unrelated to employee matters, $3.8 million related to integration and restricting projects,
and $4.5 million related to other write-offs and provisions. |
Table
2 - Reconciliation of Net Income to Adjusted EBITDA
| | |
Year Ended December
31, 2023 | | |
Year Ended December
31, 2022 | |
| | |
| | |
| |
| Net Income | |
$ | 12,580 | | |
$ | (36,420 | ) |
| Add: | |
| | | |
| | |
| Income Taxes | |
| 17,266 | | |
| 6,619 | |
| Interest Expense, net | |
| 45,826 | | |
| 34,126 | |
| Depreciation and Amortization | |
| 148,993 | | |
| 125,114 | |
| Total
Charges and Credits impacting Adjusted EBITDA
(2) | |
| 37,641 | | |
| 33,429 | |
| Total Adjusted EBITDA | |
$ | 262,306 | | |
$ | 162,868 | |
| |
(2) |
Charges
and Credits impacting Adjusted EBITDA are described in Table 1 above. Charges and Credits impacting Adjusted EBITDA exclude items
related to interest, income tax and depreciation and amortization. |
Table
3 - Reconciliation of Net cash provided by (used in) operating activities to Free Cash Flow
| | |
December 31, 2023 | | |
December 31, 2022 | |
| | |
| | |
| |
| Net cash provided by operating activities | |
$ | 176,959 | | |
$ | 92,576 | |
| Less: | |
| | | |
| | |
| Capital expenditures | |
| (68,190 | ) | |
| (122,415 | ) |
| Free cash flow | |
$ | 108,769 | | |
$ | (29,839 | ) |
Table
4 - Reconciliation to Net Debt
| | |
December 31, 2023 | | |
December 31, 2022 | |
| | |
| | |
| |
| Current installments of long-term debt | |
$ | 71,744 | | |
$ | 53,352 | |
| Short-term borrowings | |
| 48,889 | | |
| 89,885 | |
| Long-term debt | |
| 331,565 | | |
| 391,863 | |
| Less: | |
| | | |
| | |
| Cash and cash equivalents | |
| (67,821 | ) | |
| (78,853 | ) |
| Net Debt | |
$ | 384,377 | | |
$ | 456,247 | |
For
inquiries regarding NESR, please contact:
Blake
Gendron or Stefan Angeli
National
Energy Services Reunited Corp.
832-925-3777
investors@nesr.com
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