- Full year 2022 revenue, net income and adjusted EBITDAA of
$593.4 million, $14.4 million and $93.7 million, respectively
- For the full year 2022 the Company generated ROICB of
16.3%
- Revenue, net income and adjusted EBITDA of $166.7 million, $8.0
million and $30.0 million, respectively, for the fourth quarter of
2022
Nine Energy Service, Inc. ("Nine" or the
"Company") (NYSE: NINE) reported fourth quarter 2022 revenues of
$166.7 million, net income of $8.0 million, or $0.24 per diluted
share and $0.26 per basic share, and adjusted EBITDA of $30.0
million. The Company had provided original fourth quarter 2022
revenue guidance between $160.0 and $170.0 million, with actual
results falling within the provided range.
“2022 was a strong year for the oilfield services space, and
Nine was able to capitalize on an improving market,” said Ann Fox,
President and Chief Executive Officer, Nine Energy Service. “Price
increases across our service lines, as well as increased volumes
within completion tools, enabled us to drive strong incremental
margins throughout the year. Year-over-year, we increased our
revenue by approximately 70%, net income by over 5 times and
adjusted EBITDA by over 17 times. This is solid growth, especially
when considering the simultaneous navigation of inflationary
pressures, labor constraints and new hire employee turnover.”
“I am also very pleased with our team’s disciplined approach to
managing liquidity and de-levering throughout the year,
contributing to the successful execution of our refinancing in
January. The new capital structure allows for more optionality to
unlock equity value and we intend to continue to use any free cash
flowC to de-lever moving forward.”
“Our operational team continued to perform very well in 2022,
growing our U.S. market share of percentage of stages completed
from approximately 18% in 2021 to approximately 20% in 2022. In
cementing, we grew our market share of rigs followed within the
basins we operate from approximately 17% in 2021 to approximately
19% in 2022. The cementing division increased the total number of
jobs completed by approximately 50% year over year, while also
increasing the average price per job by over 30%. We remain
extremely happy with the performance of our dissolvable plug,
increasing the total number of Stinger Dissolvable units sold by
approximately 42% year-over-year.”
“Nine has made a substantial commitment to ESG through the
development of internal policies, procedures, and data collection,
as well as investment in new technologies that help our customers
reduce their GHG emissions. We have also made it a priority to
invest in technologies that both drive profitability for Nine and
reduce emissions. In 2022, we converted 2 hydraulic wireline units
to electric, and have made a commitment to convert 4 more wireline
units in 2023. I also want to recognize the incredible employees
who have led Nine through so many ups and downs, always keeping the
reputation, service quality and integrity of the Company intact.
Once again, we ended the year with an excellent safety score, with
a Total Recordable Incident Rate of 0.41.”
“In 2023 we anticipate total U.S. E&P capex to increase by
double digits over 2022 and that operators will need to drill more
wells to keep production flat. Oilfield service equipment and labor
availability remain constrained, and similar to the upstream sector
our sector is adopting capital discipline. This cycle may prove to
be more sustainable due to the changes in both access to capital
and the more disciplined deployment of it.”
“Q1 activity levels thus far are down compared to Q4, with the
U.S. rig count declining by 30 rigs since the end of 2022.
Additionally, Nine lost between 1-5 days of operations, depending
on the service line, to inclement weather requiring us to carry the
cost of labor with no matching revenues. As a result of this, we
expect Q1 revenue to be slightly down sequentially to Q4.”
“Nine is well positioned to take advantage of this sustained
cycle with both geographic and service line diversity, as well as
more differentiated service lines with domestic and international
pathways to growth. Management believes maintaining a strong
balance sheet is critical and generating free cash flow and
de-levering will continue to be one of Nine’s top priorities.”
Operating Results
For the year ended December 31, 2022, the Company reported
revenues of $593.4 million, net income of $14.4 million, or $0.45
per diluted share and $0.47 per basic share, and adjusted EBITDA of
$93.7 million. For the full year 2022, the Company reported gross
profit of $97.9 million, as compared to gross loss of $1.6 million
in 2021, and adjusted gross profitD of $136.3 million, an increase
of 229% year over year. For the year ended December 31, 2022, the
Company generated ROIC of 16.3%.
During the fourth quarter of 2022, the Company reported revenues
of $166.7 million, gross profit of $30.5 million and adjusted gross
profit of $40.1 million. During the fourth quarter, the Company
generated ROIC of 24.2%.
During the fourth quarter of 2022, the Company reported general
and administrative expense of $13.9 million. Depreciation and
amortization expense in the fourth quarter of 2022 was $10.1
million.
The Company recognized an income tax provision of approximately
$0.5 million for the year, resulting in an effective tax rate of
3.7% for 2022. Our tax provision for 2022 is primarily the result
of our tax position in state and foreign tax jurisdictions.
Liquidity and Capital Expenditures
For the year ended December 31, 2022, the Company reported net
cash provided by operating activities of $16.7 million. For the
year ended December 31, 2022, the Company reported total capital
expenditures of $32.3 million, which fell slightly above
management’s original full year 2022 guidance of $20-$30
million.
As of December 31, 2022, Nine’s cash and cash equivalents were
$17.4 million, and the Company had $66.6 million of availability
under the revolving credit facility, resulting in a total liquidity
position of $84.0 million as of December 31, 2022. On December 31,
2022, the Company had $32.0 million of borrowings under the
revolving credit facility. On January 27, 2023, the Company
borrowed an additional $40.0 million under the revolving credit
facility to pay for a portion of the redemption price of the 8.750%
Senior Notes due 2023 and to pay for fees and expenses related to
the units offering.
ABCDSee 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, net cash
provided by operating activities 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 or liquidity, 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 Wednesday, March 8, 2023, 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, 2023 and may
be accessed by dialing U.S. (Toll Free): (877) 660-6853 or
International: (201) 612-7415 and entering the passcode of
13735415.
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, and which has been and
may again be affected by the COVID-19 pandemic and related economic
repercussions; general economic conditions and inflation,
particularly, cost inflation with labor or materials; the adequacy
of the Company’s capital resources and liquidity, including the
ability to meet its debt obligations, which may including
refinancing or restructuring its indebtedness by seeking additional
sources of capital, selling assets, or a combination thereof;
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; 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; 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, 2022
September 30, 2022
2022
2021
Revenues
$
166,669
$
167,432
$
593,382
$
349,419
Cost and expenses
Cost of revenues (exclusive of
depreciation and
amortization shown separately below)
126,616
123,418
457,093
307,992
General and administrative expenses
13,887
13,475
51,653
45,301
Depreciation
7,176
6,593
26,784
28,905
Amortization of intangibles
2,895
2,896
13,463
16,116
Loss on revaluation of contingent
liability
217
46
454
460
(Gain) loss on sale of property and
equipment
(428
)
1,242
367
660
Income (loss) from operations
16,306
19,762
43,568
(50,015
)
Interest expense
8,151
8,125
32,486
32,527
Interest income
(134
)
(134
)
(305
)
(26
)
Gain on extinguishment of debt
-
(2,843
)
(2,843
)
(17,618
)
Other income
(162
)
(161
)
(709
)
(298
)
Income (loss) before income taxes
8,451
14,775
14,939
(64,600
)
Provision (benefit) for income taxes
467
489
546
(25
)
Net income (loss)
$
7,984
$
14,286
$
14,393
$
(64,575
)
Earnings (loss) per share
Basic
$
0.26
$
0.46
$
0.47
$
(2.13
)
Diluted
$
0.24
$
0.45
$
0.45
$
(2.13
)
Weighted average shares outstanding
Basic
31,287,694
31,100,712
30,930,890
30,302,925
Diluted
32,804,647
31,932,613
32,251,398
30,302,925
Other comprehensive income (loss), net
of tax
Foreign currency translation adjustments,
net of tax of $0 and $0
$
98
$
(225
)
$
(293
)
$
(34
)
Total other comprehensive income (loss),
net of tax
98
(225
)
(293
)
(34
)
Total comprehensive income (loss)
$
8,082
$
14,061
$
14,100
$
(64,609
)
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In Thousands)
(Unaudited)
At December 31,
2022
2021
Assets
Current assets
Cash and cash equivalents
$
17,445
$
21,509
Accounts receivable, net
105,277
64,025
Income taxes receivable
741
1,393
Inventories, net
62,045
42,180
Prepaid expenses and other current
assets
11,217
10,195
Total current assets
196,725
139,302
Property and equipment, net
89,717
86,958
Operating lease right-of-use assets,
net
36,336
35,117
Finance lease right-of-use assets, net
547
1,445
Intangible assets, net
101,945
116,408
Other long-term assets
1,564
2,383
Total assets
$
426,834
$
381,613
Liabilities and Stockholders’ Equity
(Deficit)
Current liabilities
Accounts payable
$
42,211
$
28,680
Accrued expenses
28,391
18,519
Current portion of long-term debt
2,267
2,093
Current portion of operating lease
obligations
7,956
6,091
Current portion of finance lease
obligations
178
1,070
Total current liabilities
81,003
56,453
Long-term liabilities
Long-term debt
338,031
332,314
Long-term operating lease obligations
29,370
30,435
Long-term finance lease obligations
-
65
Other long-term liabilities
1,937
1,613
Total liabilities
450,341
420,880
Stockholders’ equity (deficit)
Common stock (120,000,000 shares
authorized at $.01 par value; 33,221,266 and 32,826,325 shares
issued and outstanding at December 31, 2022 and December 31, 2021,
respectively)
332
328
Additional paid-in capital
775,006
773,350
Accumulated other comprehensive loss
(4,828
)
(4,535
)
Accumulated deficit
(794,017
)
(808,410
)
Total stockholders’ equity (deficit)
(23,507
)
(39,267
)
Total liabilities and stockholders’ equity
(deficit)
$
426,834
$
381,613
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Year Ended December 31,
2022
2021
Cash flows from operating
activities
Net income (loss)
$
14,393
$
(64,575
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities
Depreciation
26,784
28,905
Amortization of intangibles
13,463
16,116
Amortization of deferred financing
costs
2,545
2,602
Amortization of operating leases
8,670
8,020
Recovery of doubtful accounts
(166
)
(229
)
Provision for inventory obsolescence
2,966
4,831
Abandonment of in process research and
development
1,000
-
Stock-based compensation expense
2,440
5,406
Gain on extinguishment of debt
(2,843
)
(17,618
)
Loss on sale of property and equipment
367
660
Loss on revaluation of contingent
liability
454
460
Changes in operating assets and
liabilities, net of effects from acquisitions
Accounts receivable, net
(41,114
)
(22,540
)
Inventories, net
(22,968
)
(8,608
)
Prepaid expenses and other current
assets
(818
)
3,350
Accounts payable and accrued expenses
19,476
12,447
Income taxes receivable/payable
655
-
Other assets and liabilities
(8,632
)
(9,643
)
Net cash provided by (used in) operating
activities
16,672
(40,416
)
Cash flows from investing
activities
Proceeds from sales of property and
equipment
2,959
3,492
Proceeds from property and equipment
casualty losses
175
-
Purchases of property and equipment
(28,551
)
(15,413
)
Net cash used in investing activities
(25,417
)
(11,921
)
Cash flows from financing
activities
Proceeds from ABL Credit Facility
24,000
15,000
Payments on ABL Credit Facility
(7,000
)
-
Payments on Magnum Promissory Notes
(1,125
)
(844
)
Purchases of 2023 Notes
(10,081
)
(8,355
)
Proceeds from short-term debt
4,086
1,513
Payments of short-term debt
(2,787
)
(545
)
Payments on finance leases
(1,269
)
(1,094
)
Payments of contingent liability
(195
)
(154
)
Vesting of restricted stock and stock
units
(780
)
(473
)
Net cash provided by financing
activities
4,849
5,048
Impact of foreign currency exchange on
cash
(168
)
(66
)
Net decrease in cash and cash
equivalents
(4,064
)
(47,355
)
Cash and cash equivalents
Beginning of period
21,509
68,864
End of period
$
17,445
$
21,509
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED
EBITDA
(In Thousands)
(Unaudited)
Three Months Ended
Year Ended December 31,
December 31, 2022
September 30, 2022
2022
2021
EBITDA reconciliation:
Net income (loss)
$
7,984
$
14,286
$
14,393
$
(64,575
)
Interest expense
8,151
8,125
32,486
32,527
Interest income
(134
)
(134
)
(305
)
(26
)
Depreciation
7,176
6,593
26,784
28,905
Amortization of intangibles
2,895
2,896
13,463
16,116
Provision (benefit) for income taxes
467
489
546
(25
)
EBITDA
$
26,539
$
32,255
$
87,367
$
12,922
Gain on extinguishment of debt
-
(2,843
)
(2,843
)
(17,618
)
Loss on revaluation of contingent
liability (1)
217
46
454
460
Restructuring charges
1,574
729
3,393
1,588
Stock-based compensation and cash award
expense
2,116
1,113
4,914
5,406
(Gain) loss on sale of property and
equipment
(428
)
1,242
367
660
Legal fees and settlements (2)
31
10
86
1,809
Adjusted EBITDA
$
30,049
$
32,552
$
93,738
$
5,227
(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 OF ROIC
CALCULATION
(In Thousands)
(Unaudited)
Three Months Ended
Year Ended December 31,
December 31, 2022
September 30, 2022
2022
2021
Net income (loss)
$
7,984
$
14,286
$
14,393
$
(64,575
)
Add back:
Interest expense
8,151
8,125
32,486
32,527
Interest income
(134
)
(134
)
(305
)
(26
)
Restructuring charges
1,574
729
3,393
1,588
Gain on extinguishment of debt
-
(2,843
)
(2,843
)
(17,618
)
After-tax net operating income
(loss)
$
17,575
$
20,163
$
47,124
$
(48,104
)
Total capital as of prior
period-end:
Total stockholders' equity (deficit)
$
(32,085
)
$
(46,319
)
$
(39,267
)
$
20,409
Total debt
334,620
348,148
337,436
348,637
Less: cash and cash equivalents
(21,490
)
(22,408
)
(21,509
)
(68,864
)
Total capital as of prior
period-end:
$
281,045
$
279,421
$
276,660
$
300,182
Total capital as of period-end:
Total stockholders' deficit
$
(23,507
)
$
(32,085
)
$
(23,507
)
$
(39,267
)
Total debt
341,606
334,620
341,606
337,436
Less: cash and cash equivalents
(17,445
)
(21,490
)
(17,445
)
(21,509
)
Total capital as of period-end:
$
300,654
$
281,045
$
300,654
$
276,660
Average total capital
$
290,850
$
280,233
$
288,657
$
288,421
ROIC
24.2
%
28.8
%
16.3
%
-16.7
%
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED
GROSS PROFIT (LOSS)
(In Thousands)
(Unaudited)
Three Months Ended
Year Ended December 31,
December 31, 2022
September 30, 2022
2022
2021
Calculation of gross profit
(loss)
Revenues
$
166,669
$
167,432
$
593,382
$
349,419
Cost of revenues (exclusive of
depreciation and
amortization shown separately below)
126,616
123,418
457,093
307,992
Depreciation (related to cost of
revenues)
6,674
6,131
24,909
26,882
Amortization of intangibles
2,895
2,896
13,463
16,116
Gross profit (loss)
$
30,484
$
34,987
$
97,917
$
(1,571
)
Adjusted gross profit
reconciliation
Gross profit (loss)
$
30,484
$
34,987
$
97,917
$
(1,571
)
Depreciation (related to cost of
revenues)
6,674
6,131
24,909
26,882
Amortization of intangibles
2,895
2,896
13,463
16,116
Adjusted gross profit
$
40,053
$
44,014
$
136,289
$
41,427
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 and cash
award 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.
BReturn 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 (deficit) 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.
CFree cash flow is defined as net cash provided by operating
activities less (i) capital expenditures, (ii) payments on finance
leases, (iii) debt issuance costs, (iv) payments of contingent
liability, (v) payments on short-term debt, (vi) cash employment
taxes related to vesting of restricted stock and stock units and
(vii) the impact of foreign currency exchange on cash.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230307005088/en/
Nine Energy Service Investor Contact: Heather Schmidt
Vice President, Strategic Development, Investor Relations and
Marketing (281) 730-5113 investors@nineenergyservice.com
Nine Energy Service (NYSE:NINE)
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Nine Energy Service (NYSE:NINE)
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