- Full year 2023 revenue, net loss and adjusted EBITDAA of $609.5
million, $(32.2) million and $73.0 million, respectively
- Revenue, net loss and adjusted EBITDA of $144.1 million,
$(10.3) million and $14.6 million, respectively, for the fourth
quarter of 2023
- Increased total number of Stinger™ Dissolvable units sold by
approximately 18% year- over-year
- Increased international revenue by approximately 16%
year-over-year
Nine Energy Service, Inc. ("Nine" or the "Company") (NYSE: NINE)
reported fourth quarter 2023 revenues of $144.1 million, net loss
of $(10.3) million, or $(0.30) per diluted share and $(0.30) per
basic share, and adjusted EBITDA of $14.6 million. The Company had
provided original fourth quarter 2023 revenue guidance between
$137.0 and $147.0 million, with actual results coming within the
provided range.
“Fourth quarter revenue was in-line with expectations, coming
within the upper end of our original guidance,” said Ann Fox,
President and Chief Executive Officer, Nine Energy Service.
“The oil and gas market continued to be volatile in 2023, with
the US rig count declining by approximately 20% since the end of
2022. Many of these rig declines came out of the gassy basins in
conjunction with the average natural gas price declining by over
60% year-over-year. 2023 once again illustrated that the market can
shift quickly, which is why we have created a nimble business that
can flex quickly with market conditions.”
“Despite a challenging market backdrop, the Nine team
accomplished a lot in 2023, including our 2028 senior secured notes
offering, extension of our ABL credit facility and full redemption
of our prior senior notes due 2023. This new capital structure
gives us additional flexibility and de-levering continues to be a
high priority for Nine.”
“I am extremely proud of our completion tool offering and what
we have been able to accomplish in 2023 with both our existing
tools and the introduction of new tools in the domestic and
international markets. We have surpassed over 370,000 Scorpion™
Composite Plugs run since we acquired the technology in 2015.
Despite activity declines year-over-year, we increased the total
number of Stinger™ Dissolvable units sold by approximately 18% and
increased our total international revenue by approximately 16%
year-over-year. We also introduced new technology with our Pincer
Hybrid Frac Plug and look forward to gaining market share with this
tool in 2024.”
“During 2023, we made significant progress with ESG, quantifying
the Company’s greenhouse gas emissions for 2021 and 2022 and we
will have 2023 data in 2024. We are identifying gaps and procedures
to make the collection of this data more accurate and efficient, as
well as developing a strategy on how to potentially reduce our
emissions moving forward.”
“Turning to Q4, activity levels and pricing were mostly stable
versus Q3. We had a significant increase in our international tools
sales quarter-over-quarter, which helped drive strong incremental
margins.”
“The market can change quickly, but I do not foresee any
catalyst for activity increases in the near-term. Q1 activity
levels and pricing have been mostly flat compared to Q4, in
conjunction with the US rig count. Because of this, we expect Q1
revenue to be relatively flat compared with Q4.”
“We will continue to focus on our strategy of being an asset and
labor light business that couples excellent service and
forward-leaning technology to help our customers lower their cost
to complete. Our team can navigate sharp market changes and quickly
capitalize on improving markets. Our service and geographic
diversity provides us balance and we are focused on diversifying
more of our top-line revenue streams to completion tools and the
international markets.”
Operating Results
For the year ended December 31, 2023, the Company reported
revenues of $609.5 million, net loss of $(32.2) million, or $(0.97)
per diluted share and $(0.97) per basic share, and adjusted EBITDA
of $73.0 million. For the full year 2023, the Company reported
gross profit of $80.2 million and adjusted gross profitB of $118.8
million. For the year ended December 31, 2023, the Company
generated ROIC of (10.8)% and adjusted ROICC of 8.8%.
During the fourth quarter of 2023, the Company reported revenues
of $144.1 million, gross profit of $16.2 million and adjusted gross
profit of $25.6 million. During the fourth quarter, the Company
generated ROIC of (3.4)% and adjusted ROIC of 3.9%.
During the fourth quarter of 2023, the Company reported general
and administrative (“G&A”) expense of $12.8 million. For the
year ended December 31, 2023, the Company reported G&A expense
of $59.8 million. Depreciation and amortization expense ("D&A")
in the fourth quarter of 2023 was $9.8 million. For the year ended
December 31, 2023, the Company reported D&A expense of $40.7
million.
The Company’s tax provision was approximately $0.6 million for
the year ended December 31, 2023. The provision for 2023 is the
result of the Company’s tax position in state and non-U.S. tax
jurisdictions.
Liquidity and Capital Expenditures
For the year ended December 31, 2023, the Company reported net
cash provided by operating activities of $45.5 million. For the
year ended December 31, 2023, the Company reported total capital
expenditures of approximately $22.3 million, which was below
management’s original full year 2023 guidance of $25 to $35
million.
As of December 31, 2023, Nine’s cash and cash equivalents were
$30.8 million, and the Company had $28.1 million of availability
under the revolving credit facility, resulting in a total liquidity
position of $58.9 million as of December 31, 2023. On December 31,
2023, the Company had $57.0 million of borrowings under the
revolving credit facility. Subsequent to December 31, 2023, the
Company paid down an additional $5.0 million of borrowings on the
revolving credit facility.
On November 6, 2023, the Company entered into an Equity
Distribution Agreement. During the quarter ended December 31, 2023,
no sales were made under the Equity Distribution Agreement.
ABC See 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 Friday, March 8, 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 March 22, 2024 and may
be accessed by dialing U.S. (Toll Free): (877) 660-6853 or
International: (201) 612-7415 and entering the passcode of
13739256.
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
Year Ended December 31,
December 31, 2023
September 30, 2023
2023
2022
Revenues
$
144,073
$
140,617
$
609,526
$
593,382
Cost and expenses
Cost of revenues (exclusive of
depreciation and
amortization shown separately below)
118,514
117,676
490,750
457,093
General and administrative expenses
12,810
13,060
59,817
51,653
Depreciation
7,003
7,285
29,141
26,784
Amortization of intangibles
2,829
2,895
11,516
13,463
Loss on revaluation of contingent
liability
25
493
437
454
Loss on sale of property and equipment
699
21
292
367
Income (loss) from operations
2,193
(813
)
17,573
43,568
Interest expense
12,813
12,858
51,119
32,486
Interest income
(324
)
(462
)
(1,270
)
(305
)
Gain on extinguishment of debt
-
-
-
(2,843
)
Other income
(162
)
(162
)
(648
)
(709
)
Income (loss) before income taxes
(10,134
)
(13,047
)
(31,628
)
14,939
Provision for income taxes
171
215
585
546
Net income (loss)
$
(10,305
)
$
(13,262
)
$
(32,213
)
$
14,393
Earnings (loss) per share
Basic
$
(0.30
)
$
(0.39
)
$
(0.97
)
$
0.47
Diluted
$
(0.30
)
$
(0.39
)
$
(0.97
)
$
0.45
Weighted average shares outstanding
Basic
33,850,317
33,659,386
33,282,234
30,930,890
Diluted
33,850,317
33,659,386
33,282,234
32,251,398
Other comprehensive income (loss), net
of tax
Foreign currency translation adjustments,
net of tax of $0 and $0
$
213
$
(22
)
$
(31
)
$
(293
)
Total other comprehensive income (loss),
net of tax
213
(22
)
(31
)
(293
)
Total comprehensive income (loss)
$
(10,092
)
$
(13,284
)
$
(32,244
)
$
14,100
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In Thousands)
(Unaudited)
At December 31,
2023
2022
Assets
Current assets
Cash and cash equivalents
$
30,840
$
17,445
Accounts receivable, net
88,449
105,277
Income taxes receivable
490
741
Inventories, net
54,486
62,045
Prepaid expenses and other current
assets
9,368
11,217
Total current assets
183,633
196,725
Property and equipment, net
82,366
89,717
Operating lease right of use assets,
net
42,056
36,336
Finance lease right of use assets, net
51
547
Intangible assets, net
90,429
101,945
Other long-term assets
3,449
1,564
Total assets
$
401,984
$
426,834
Liabilities and Stockholders’ Equity
(Deficit)
Current liabilities
Accounts payable
$
33,379
$
42,211
Accrued expenses
36,171
28,391
Current portion of long-term debt
2,859
2,267
Current portion of operating lease
obligations
10,314
7,956
Current portion of finance lease
obligations
31
178
Total current liabilities
82,754
81,003
Long-term liabilities
Long-term debt
320,520
338,031
Long-term operating lease obligations
32,594
29,370
Other long-term liabilities
1,746
1,937
Total liabilities
437,614
450,341
Stockholders’ equity (deficit)
Common stock (120,000,000 shares
authorized at $.01 par value; 35,324,861 and 33,221,266 shares
issued and outstanding at December 31, 2023 and December 31, 2022,
respectively)
353
332
Additional paid-in capital
795,106
775,006
Accumulated other comprehensive loss
(4,859
)
(4,828
)
Accumulated deficit
(826,230
)
(794,017
)
Total stockholders’ equity (deficit)
(35,630
)
(23,507
)
Total liabilities and stockholders’ equity
(deficit)
$
401,984
$
426,834
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Year Ended December 31,
2023
2022
Cash flows from operating
activities
Net income (loss)
$
(32,213
)
$
14,393
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Depreciation
29,141
26,784
Amortization of intangibles
11,516
13,463
Amortization of deferred financing
costs
7,413
2,545
Amortization of operating leases
12,524
8,670
Provision for (recovery of) doubtful
accounts
333
(166
)
Provision for inventory obsolescence
2,320
2,966
Abandonment of in process research and
development
-
1,000
Stock-based compensation expense
2,169
2,440
Gain on extinguishment of debt
-
(2,843
)
Loss on sale of property and equipment
292
367
Loss on revaluation of contingent
liability
437
454
Changes in operating assets and
liabilities, net of effects from acquisitions
Accounts receivable, net
16,489
(41,114
)
Inventories, net
5,219
(22,968
)
Prepaid expenses and other current
assets
1,148
(818
)
Accounts payable and accrued expenses
1,058
19,476
Income taxes receivable/payable
252
655
Operating lease obligations
(12,344
)
(8,698
)
Other assets and liabilities
(245
)
66
Net cash provided by operating
activities
45,509
16,672
Cash flows from investing
activities
Proceeds from sales of property and
equipment
606
2,959
Proceeds from property and equipment
casualty losses
840
175
Purchases of property and equipment
(24,603
)
(28,551
)
Net cash used in investing activities
(23,157
)
(25,417
)
Cash flows from financing
activities
Proceeds from ABL credit facility
40,000
24,000
Payments on ABL credit facility
(15,000
)
(7,000
)
Proceeds from units offering, net of
discount
279,750
-
Redemption of senior notes due 2023
(307,339
)
-
Purchases of senior notes due 2023
-
(10,081
)
Cost of debt issuance
(6,290
)
-
Payments on Magnum promissory notes
-
(1,125
)
Proceeds from short-term debt
4,733
4,086
Payments of short-term debt
(4,141
)
(2,787
)
Payments on finance leases
(217
)
(1,269
)
Payments of contingent liability
(387
)
(195
)
Vesting of restricted stock and stock
units
(2
)
(780
)
Net cash provided by (used in) financing
activities
(8,893
)
4,849
Impact of foreign currency exchange on
cash
(64
)
(168
)
Net increase (decrease) in cash and cash
equivalents
13,395
(4,064
)
Cash and cash equivalents
Beginning of period
17,445
21,509
End of period
$
30,840
$
17,445
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED
EBITDA
(In Thousands)
(Unaudited)
Three Months Ended
Year Ended December 31,
December 31, 2023
September 30, 2023
2023
2022
Net income (loss)
$
(10,305
)
$
(13,262
)
$
(32,213
)
$
14,393
Interest expense
12,813
12,858
51,119
32,486
Interest income
(324
)
(462
)
(1,270
)
(305
)
Depreciation
7,003
7,285
29,141
26,784
Amortization of intangibles
2,829
2,895
11,516
13,463
Provision for income taxes
171
215
585
546
EBITDA
$
12,187
$
9,529
$
58,878
$
87,367
Gain on extinguishment of debt
-
-
-
(2,843
)
Loss on revaluation of contingent
liability (1)
25
493
437
454
Restructuring charges
823
315
2,027
3,393
Stock-based compensation and cash award
expense
898
1,208
4,867
4,914
Certain refinancing costs (2)
-
-
6,396
-
Loss on sale of property and equipment
699
21
292
367
Legal fees and settlements (3)
16
29
69
86
Adjusted EBITDA
$
14,648
$
11,595
$
72,966
$
93,738
(1) Amounts relate to the revaluation of
contingent liability associated with a 2018 acquisition.
(2) Amounts represent fees and expenses
relating to our units offering and other refinancing activities,
including cash incentive compensation to employees following the
successful completion of the units offering, that were not
capitalized.
(3) 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
Year Ended December 31,
December 31, 2023
September 30, 2023
2023
2022
Net income (loss)
$
(10,305
)
$
(13,262
)
$
(32,213
)
$
14,393
Add back:
Interest expense
12,813
12,858
51,119
32,486
Interest income
(324
)
(462
)
(1,270
)
(305
)
Certain refinancing costs (1)
-
-
6,396
-
Restructuring charges
823
315
2,027
3,393
Gain on extinguishment of debt
-
-
-
(2,843
)
Adjusted after-tax net operating income
(loss) (2)
$
3,007
$
(551
)
$
26,059
$
47,124
Total capital as of prior
period-end:
Total stockholders' deficit
$
(26,116
)
$
(13,412
)
$
(23,507
)
$
(39,267
)
Total debt
357,000
372,329
341,606
337,436
Less: cash and cash equivalents
(12,159
)
(41,122
)
(17,445
)
(21,509
)
Total capital as of prior
period-end:
$
318,725
$
317,795
$
300,654
$
276,660
Total capital as of period-end:
Total stockholders' deficit
$
(35,630
)
$
(26,116
)
$
(35,630
)
$
(23,507
)
Total debt
359,859
357,000
359,859
341,606
Less: cash and cash equivalents
(30,840
)
(12,159
)
(30,840
)
(17,445
)
Total capital as of period-end:
$
293,389
$
318,725
$
293,389
$
300,654
Average total capital
$
306,057
$
318,260
$
297,022
$
288,657
ROIC
-3.4
%
-4.2
%
-10.8
%
5.0
%
Adjusted ROIC (2)
3.9
%
-0.7
%
8.8
%
16.3
%
(1) Amounts represent fees and expenses
relating to our units offering and other refinancing activities,
including cash incentive compensation to employees following the
successful completion of the units offering, that were not
capitalized.
(2) 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
Year Ended December 31,
December 31, 2023
September 30, 2023
2023
2022
Calculation of gross profit:
Revenues
$
144,073
$
140,617
$
609,526
$
593,382
Cost of revenues (exclusive of
depreciation and
amortization shown separately below)
118,514
117,676
490,750
457,093
Depreciation (related to cost of
revenues)
6,513
6,775
27,101
24,909
Amortization of intangibles
2,829
2,895
11,516
13,463
Gross profit
$
16,217
$
13,271
$
80,159
$
97,917
Adjusted gross profit
reconciliation:
Gross profit
$
16,217
$
13,271
$
80,159
$
97,917
Depreciation (related to cost of
revenues)
6,513
6,775
27,101
24,909
Amortization of intangibles
2,829
2,895
11,516
13,463
Adjusted gross profit
$
25,559
$
22,941
$
118,776
$
136,289
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 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 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.
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 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20240307535120/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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