- Revenue, net loss and adjusted EBITDAA of $163.4 million,
$(6.1) million and $25.0 million, respectively, for the first
quarter of 2023
- For the first quarter of 2023 the Company generated ROICB of
16.2%
- Total liquidity position of $47.4 million as of March 31,
2023
Nine Energy Service, Inc. ("Nine" or the "Company") (NYSE: NINE)
reported first quarter 2023 revenues of $163.4 million, net loss of
$(6.1) million, or $(0.19) per diluted share and $(0.19) per basic
share, and adjusted EBITDA of $25.0 million. The Company’s net loss
in the first quarter of 2023 includes the impact of fees and
expenses incurred in connection with its public offering of units
and other refinancing activities in January. The Company had
provided original first quarter 2023 revenue guidance between
$160.0 and $165.0 million, with actual results falling within the
provided range.
“First quarter results were as expected,” said Ann Fox,
President and Chief Executive Officer, Nine Energy Service, “with
revenue within our original guidance.”
“We have seen a softening in the market due largely to the
decline in natural gas prices over the past several months,
resulting in a decrease in activity and pricing thus far in 2023
versus Q4 levels. Operationally, our cementing service line
continues to be a strong performer, and we remain very excited
about this service line. We continue to believe we have one of the
top completion tool portfolios in the U.S. We increased the total
number of StingerTM Dissolvable plugs sold by approximately 23%,
due in large part to a significant international sale, and
increased completion tool revenue by approximately 7%, in each
case, quarter-over-quarter. Wireline and coiled tubing markets
remain fragmented and highly competitive but play a very important
role in the completions process and customer relationships.”
“Recessionary fears in the global market are affecting commodity
prices, which have been erratic over the last several months. I do
believe there will continue to be numerous factors that will impact
commodity prices; however, I remain optimistic on the outlook for
the energy sector with both OPEC’s and U.S. oil producers’
demonstrated commitment to capital discipline.”
“Looking ahead, U.S. rig and frac crew counts are good proxies
for both our revenue outlook and potential pricing leverage.
Activity levels thus far in Q2 are down, and we continue to see
some pricing pressure from select customers, especially in the
Northeast and Haynesville. As a result of this, we expect Q2
revenue to be down slightly sequentially to Q1.”
“We have purposely designed our business to be capital light,
which reduces capital allocation risk, as well as diversified in
terms of service lines, geography, and commodity exposure. We
continue to develop and look for new technologies to expand our
tool portfolio, as well as constantly improve our current
offerings. Our priorities are unchanged. We are focused on
generating free cash flowc, which would be used towards
de-levering. While 2023 has not been the growth market we
originally anticipated at the end of 2022, we have demonstrated our
ability to navigate through all market cycles and quickly increase
earnings in conjunction with activity growth.”
Operating Results
During the first quarter of 2023, the Company reported revenues
of $163.4 million, gross profit of $26.5 million and adjusted gross
profitD of $36.3 million. During the first quarter, the Company
generated ROIC of 16.2%.
During the first quarter of 2023, the Company reported general
and administrative expense of $19.7 million. Depreciation and
amortization expense in the first quarter of 2023 was $10.3
million.
The Company’s tax provision for the first quarter of 2023 was
approximately $0.9 million. The provision for 2023 is the result of
our tax position in state and non-U.S. tax jurisdictions.
Liquidity and Capital Expenditures
During the first quarter of 2023, the Company reported net cash
provided by operating activities of $4.0 million. Capital
expenditures totaled $5.0 million during the first quarter of
2023.
As of March 31, 2023, Nine’s cash and cash equivalents were
$21.4 million, and the Company had $26.0 million of availability
under the revolving credit facility, resulting in a total liquidity
position of $47.4 million as of March 31, 2023. On March 31, 2023,
the Company had $72.0 million of borrowings under the revolving
credit facility.
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 Tuesday, May 9, 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 May 23, 2023 and may
be accessed by dialing U.S. (Toll Free): (877) 660-6853 or
International: (201) 612-7415 and entering the passcode of
13734454.
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; 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; 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, 2023
December 31, 2022
Revenues
$
163,408
$
166,669
Cost and expenses
Cost of revenues (exclusive of
depreciation and amortization shown separately below)
127,118
126,616
General and administrative expenses
19,714
13,887
Depreciation
7,420
7,176
Amortization of intangibles
2,896
2,895
(Gain) loss on revaluation of contingent
liability
(292
)
217
Gain on sale of property and equipment
(330
)
(428
)
Income from operations
6,882
16,306
Interest expense
12,454
8,151
Interest income
(185
)
(134
)
Other income
(162
)
(162
)
Income (loss) before income taxes
(5,225
)
8,451
Provision for income taxes
884
467
Net income (loss)
$
(6,109
)
$
7,984
Income (loss) per share
Basic
$
(0.19
)
$
0.26
Diluted
$
(0.19
)
$
0.24
Weighted average shares outstanding
Basic
32,304,361
31,287,694
Diluted
32,304,361
32,804,647
Other comprehensive income (loss), net
of tax
Foreign currency translation adjustments,
net of tax of $0 and $0
$
(168
)
$
98
Total other comprehensive income (loss), net of tax
(168
)
98
Total comprehensive income (loss)
$
(6,277
)
$
8,082
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In Thousands)
(Unaudited)
March 31, 2023
December 31, 2022
Assets
Current assets
Cash and cash equivalents
$
21,374
$
17,445
Accounts receivable, net
98,498
105,277
Income taxes receivable
-
741
Inventories, net
67,030
62,045
Prepaid expenses and other current
assets
9,293
11,217
Total current assets
196,195
196,725
Property and equipment, net
87,650
89,717
Operating lease right-of-use assets,
net
39,520
36,336
Finance lease right-of-use assets, net
157
547
Intangible assets, net
99,049
101,945
Other long-term assets
4,123
1,564
Total assets
$
426,694
$
426,834
Liabilities and Stockholders’ Equity
(Deficit)
Current liabilities
Accounts payable
$
37,489
$
42,211
Accrued expenses
25,268
28,391
Income taxes payable
124
-
Current portion of long-term debt
1,305
2,267
Current portion of operating lease
obligations
8,702
7,956
Current portion of finance lease
obligations
82
178
Total current liabilities
72,970
81,003
Long-term liabilities
Long-term debt
331,533
338,031
Long-term operating lease obligations
31,672
29,370
Other long-term liabilities
1,860
1,937
Total liabilities
438,035
450,341
Stockholders’ equity (deficit)
Common stock (120,000,000 shares
authorized at $.01 par value; 34,720,752 and 33,221,266 shares
issued and outstanding at March 31, 2023 and December 31, 2022,
respectively)
347
332
Additional paid-in capital
793,434
775,006
Accumulated other comprehensive loss
(4,996
)
(4,828
)
Accumulated deficit
(800,126
)
(794,017
)
Total stockholders’ equity (deficit)
(11,341
)
(23,507
)
Total liabilities and stockholders’ equity
(deficit)
$
426,694
$
426,834
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
March 31, 2023
December 31, 2022
Cash flows from operating
activities
Net income (loss)
$
(6,109
)
$
7,984
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Depreciation
7,420
7,176
Amortization of intangibles
2,896
2,895
Amortization of deferred financing
costs
2,408
626
Amortization of operating leases
2,596
2,402
Provision for doubtful accounts
175
6
Provision for inventory obsolescence
319
400
Stock-based compensation expense
489
497
Gain on sale of property and equipment
(330
)
(428
)
(Gain) loss on revaluation of contingent
liability
(292
)
217
Abandonment of in-process research and
development
-
1,000
Changes in operating assets and
liabilities, net of effects from acquisitions
Accounts receivable, net
6,589
(1,363
)
Inventories, net
(5,421
)
(9,425
)
Prepaid expenses and other current
assets
1,222
(2,355
)
Accounts payable and accrued expenses
(6,357
)
651
Income taxes receivable/payable
867
443
Other assets and liabilities
(2,507
)
(2,285
)
Net cash provided by operating
activities
3,965
8,441
Cash flows from investing
activities
Proceeds from sales of property and
equipment
219
20
Proceeds from property and equipment
casualty losses
840
-
Purchases of property and equipment
(6,343
)
(19,190
)
Net cash used in investing activities
(5,284
)
(19,170
)
Cash flows from financing
activities
Redemption of 2023 Notes
(307,339
)
-
Proceeds from Units offering, net of
discount
279,750
-
Proceeds from ABL Credit Facility
40,000
12,000
Payments on ABL Credit Facility
-
(7,000
)
Payments on Magnum Promissory Notes
-
(281
)
Proceeds from short-term debt
-
4,086
Payments of short-term debt
(962
)
(1,819
)
Payments on finance leases
(124
)
(270
)
Payments of contingent liability
(66
)
(60
)
Cost of debt issuance
(5,915
)
-
Vesting of restricted stock and stock
units
-
(1
)
Net cash provided by financing
activities
5,344
6,655
Impact of foreign currency exchange on
cash
(96
)
29
Net increase (decrease) in cash and cash
equivalents
3,929
(4,045
)
Cash and cash equivalents
Beginning of period
17,445
21,490
End of period
$
21,374
$
17,445
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED
EBITDA
(In Thousands)
(Unaudited)
Three Months Ended
March 31, 2023
December 31, 2022
Adjusted EBITDA reconciliation:
Net income (loss)
$
(6,109
)
$
7,984
Interest expense
12,454
8,151
Interest income
(185
)
(134
)
Provision for income taxes
884
467
Depreciation
7,420
7,176
Amortization of intangibles
2,896
2,895
EBITDA
$
17,360
$
26,539
(Gain) loss on revaluation of contingent
liability (1)
(292
)
217
Certain refinancing costs (2)
6,396
-
Restructuring charges
406
1,574
Stock-based compensation and cash award
expense
1,469
2,116
Gain on sale of property and equipment
(330
)
(428
)
Legal fees and settlements (3)
-
31
Adjusted EBITDA
$
25,009
$
30,049
(1) Amounts relate to the revaluation of a
contingent liability associated with a 2018 acquisition.
(2) Amounts represent Units offering and
other refinancing fees and expenses, including cash incentive
compensation to employees following the successful completion of
the Units offering, that were not capitalized.
(3) Amounts represent fees, legal
settlements, and/or accruals associated with legal proceedings
brought pursuant to the Fair Labor Standards Act and/or similar
state laws.
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ROIC
CALCULATION
(In Thousands)
(Unaudited)
Three Months Ended
March 31, 2023
December 31, 2022
Net income (loss)
$
(6,109
)
$
7,984
Add back:
Interest expense
12,454
8,151
Interest income
(185
)
(134
)
Certain refinancing costs (1)
6,396
-
Restructuring charges
406
1,574
After-tax net operating income
$
12,962
$
17,575
Total capital as of prior
period-end:
Total stockholders' deficit
$
(23,507
)
$
(32,085
)
Total debt
341,606
334,620
Less: cash and cash equivalents
(17,445
)
(21,490
)
Total capital as of prior
period-end:
$
300,654
$
281,045
Total capital as of period-end:
Total stockholders' deficit
$
(11,341
)
$
(23,507
)
Total debt
373,305
341,606
Less: cash and cash equivalents
(21,374
)
(17,445
)
Total capital as of period-end:
$
340,590
$
300,654
Average total capital
$
320,622
$
290,850
ROIC
16.2
%
24.2
%
(1) Amounts represent Units offering and
other refinancing fees and expenses, including cash incentive
compensation to employees following the successful completion of
the Units offering, that were not capitalized.
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED
GROSS PROFIT (LOSS)
(In Thousands)
(Unaudited)
Three Months Ended
March 31, 2023
December 31, 2022
Calculation of gross profit:
Revenues
$
163,408
$
166,669
Cost of revenues (exclusive of
depreciation and amortization shown separately below)
127,118
126,616
Depreciation (related to cost of
revenues)
6,901
6,674
Amortization of intangibles
2,896
2,895
Gross profit
$
26,493
$
30,484
Adjusted gross profit
reconciliation:
Gross profit
$
26,493
$
30,484
Depreciation (related to cost of
revenues)
6,901
6,674
Amortization of intangibles
2,896
2,895
Adjusted gross profit
$
36,290
$
40,053
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) Units offering and other
refinancing fees and expenses, (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.
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) Units offering and other refinancing fees
and expenses, (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 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/20230508005125/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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