- Increased revenue ~4% quarter over quarter, despite the average
Q3 US rig count declining by ~3%
- Sequential quarterly net loss improved and decreased by ~28%
for the third quarter of 2024
- Sequential quarterly adjusted EBITDAA increased by ~47% for the
third quarter of 2024
- Revenue, net loss and adjusted EBITDA of $138.2 million,
$(10.1) million and $14.3 million, respectively, for the third
quarter of 2024
- Increased cementing revenue by ~12% quarter over quarter
- Total liquidity as of September 30, 2024 of $43.3 million
Nine Energy Service, Inc. ("Nine" or the "Company") (NYSE: NINE)
reported third quarter 2024 revenues of $138.2 million, net loss of
$(10.1) million, or $(0.26) per diluted share and $(0.26) per basic
share, and adjusted EBITDA of $14.3 million. The Company had
provided original third quarter 2024 revenue guidance between
$127.0 and $137.0 million, with actual results coming in above the
provided range.
“Despite the average US rig count declining quarter over
quarter, we increased our revenue by approximately 4%, with revenue
coming in above the originally provided guidance,” said Ann Fox,
President and Chief Executive Officer, Nine Energy Service.
“Nine outperformed market drivers this quarter due in large part
to market share gains across operating basins in our cementing
division. Cementing revenue increased by approximately 12% over Q2,
despite a declining rig count. Our cementing team has been able to
differentiate itself in the market by offering what we believe to
be the most advanced cementing slurries in the industry, coupled
with excellent wellsite execution.”
“Revenue across the remaining service lines were relatively
flat, however better utilization across Nine, an increase in
international tool sales and cost saving initiatives helped
increase profitability this quarter.”
“The market has mostly stabilized from an activity and pricing
perspective, but commodity prices continue to fluctuate with global
conflicts, weather and OPEC+ behavior. Natural gas prices remain
challenging, keeping activity levels in basins like the Northeast
and Haynesville low, impacting all of Nine’s service lines. Due to
typical budget exhaustion, weather, and holiday slow-downs, as well
as an expected decrease in international tool sales, we anticipate
Q4 revenue and profitability to be down compared to Q3.”
“We remain positive on demand and the outlook for oil and
natural gas. It is too early to provide specifics on 2025 activity
levels, but if we see supportive commodity prices, in conjunction
with the resetting of customer budgets, we would anticipate a
moderate activity pick up in 2025 over current levels.”
“Nine is well positioned in the natural gas basins, as well as
throughout the US, to capitalize on an improving market. We have
seen our earnings respond significantly and quickly with increased
market activity. I believe our service and commodity diversity is
critical and that we are differentiated through our technology and
service offerings. Our strategy of providing an asset-light
business with forward-leaning technology is unchanged and we will
continue to focus on increasing profitability in whatever market we
are faced with.”
Operating Results
During the third quarter of 2024, the Company reported revenues
of $138.2 million, gross profit of $16.1 million and adjusted gross
profitB of $24.7 million. During the third quarter, the Company
generated ROIC of (14.7)% and adjusted ROICC of 3.9%.
During the third quarter of 2024, the Company reported general
and administrative (“G&A”) expense of $12.4 million.
Depreciation and amortization expense ("D&A") in the third
quarter of 2024 was $9.0 million.
The Company’s tax provision was approximately $0.4 million year
to date. The provision for 2024 is the result of the Company’s tax
position in state and non-U.S. tax jurisdictions.
Liquidity and Capital Expenditures
During the third quarter of 2024, the Company reported net cash
used in operating activities of $(5.9) million. Capital
expenditures totaled $3.6 million during the third quarter of 2024
and totaled $11.7 million for the full year through September 30,
2024. The Company’s full-year 2024 capex guidance is $10 to $15
million.
As of September 30, 2024, Nine’s cash and cash equivalents were
$15.7 million, and the Company had $27.6 million of availability
under the revolving credit facility, resulting in a total liquidity
position of $43.3 million as of September 30, 2024. On September
30, 2024, the Company had $50.0 million of borrowings under the
revolving credit facility. On October 10, 2024, the Company repaid
$3.0 million of outstanding borrowings under the revolving credit
facility.
As per the terms of the indenture governing Nine’s senior
secured notes, the Company is required to periodically offer to
repurchase such notes with a portion of any Excess Cash Flow. Nine
did not generate any Excess Cash Flow, as defined in the indenture,
in the most recently ended two fiscal quarters (the six-month
period ended September 30, 2024). As a result, no Excess Cash Flow
offer will be made to noteholders this month.
During the third quarter of 2024, the Company sold approximately
1.2 million shares of common stock under its at-the-market equity
offering program, which generated approximately $1.4 million in net
proceeds. For the nine months ended September 30, 2024, a total of
approximately 5.4 million shares have been sold, which generated
net proceeds of $8.2 million.
ABCSee end of press release for definitions of these non-GAAP
measures. These measures are intended to provide additional
information only and should not be considered as alternatives to,
or more meaningful than, net income (loss), gross profit or any
other measure determined in accordance with GAAP. Certain items
excluded from these measures are significant components in
understanding and assessing a company’s financial performance, such
as a company’s cost of capital and tax structure, as well as the
historic costs of depreciable assets. Our computation of these
measures may not be comparable to other similarly titled measures
of other companies.
Conference Call Information
The call is scheduled for Friday, November 1, 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 November 15, 2024 and
may be accessed by dialing U.S. (Toll Free): (877) 660-6853 or
International: (201) 612-7415 and entering the passcode of
13746652.
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
September 30, 2024
June 30, 2024
Revenues
$
138,157
$
132,401
Cost and expenses
Cost of revenues (exclusive of
depreciation and
amortization shown separately below)
113,451
112,048
General and administrative expenses
12,366
12,482
Depreciation
6,226
6,602
Amortization of intangibles
2,796
2,796
(Gain) loss on revaluation of contingent
liability
383
(118
)
Loss on sale of property and equipment
484
27
Income (loss) from operations
2,451
(1,436
)
Interest expense
12,879
12,782
Interest income
(196
)
(154
)
Other income
(162
)
(162
)
Loss before income taxes
(10,070
)
(13,902
)
Provision for income taxes
73
139
Net loss
$
(10,143
)
$
(14,041
)
Loss per share
Basic
$
(0.26
)
$
(0.40
)
Diluted
$
(0.26
)
$
(0.40
)
Weighted average shares outstanding
Basic
39,209,798
35,477,154
Diluted
39,209,798
35,477,154
Other comprehensive income (loss), net
of tax
Foreign currency translation adjustments,
net of tax of $0 and $0
$
(9
)
$
53
Total other comprehensive income (loss),
net of tax
(9
)
53
Total comprehensive loss
$
(10,152
)
$
(13,988
)
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In Thousands)
(Unaudited)
September 30, 2024
June 30, 2024
Assets
Current assets
Cash and cash equivalents
$
15,652
$
26,027
Accounts receivable, net
79,732
84,398
Income taxes receivable
615
679
Inventories, net
55,833
59,710
Prepaid expenses and other current
assets
5,784
7,519
Total current assets
157,616
178,333
Property and equipment, net
73,659
77,057
Operating lease right of use assets,
net
37,009
38,456
Finance lease right of use assets, net
27
48
Intangible assets, net
82,041
84,837
Other long-term assets
2,880
2,991
Total assets
$
353,232
$
381,722
Liabilities and Stockholders’ Equity
(Deficit)
Current liabilities
Accounts payable
$
30,465
$
39,395
Accrued expenses
23,070
32,393
Current portion of long-term debt
-
730
Current portion of operating lease
obligations
10,548
10,415
Current portion of finance lease
obligations
17
30
Total current liabilities
64,100
82,963
Long-term liabilities
Long-term debt
318,469
318,748
Long-term operating lease obligations
27,091
28,686
Other long-term liabilities
1,133
1,040
Total liabilities
410,793
431,437
Stockholders’ equity (deficit)
Common stock (120,000,000 shares
authorized at $.01 par value; 42,363,805 and 41,167,385 shares
issued and outstanding at September 30, 2024 and June 30, 2024,
respectively)
424
412
Additional paid-in capital
805,509
803,215
Accumulated other comprehensive loss
(5,025
)
(5,016
)
Accumulated deficit
(858,469
)
(848,326
)
Total stockholders’ equity (deficit)
(57,561
)
(49,715
)
Total liabilities and stockholders’ equity
(deficit)
$
353,232
$
381,722
NINE ENERGY SERVICE,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
September 30, 2024
June 30, 2024
Cash flows from operating
activities
Net loss
$
(10,143
)
$
(14,041
)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities
Depreciation
6,226
6,602
Amortization of intangibles
2,796
2,796
Amortization of deferred financing
costs
1,935
1,862
Amortization of operating leases
3,317
3,337
Provision for doubtful accounts
112
346
Provision for inventory obsolescence
429
338
Stock-based compensation expense
837
807
Loss on sale of property and equipment
484
27
(Gain) loss on revaluation of contingent
liability
383
(118
)
Changes in operating assets and
liabilities, net of effects from acquisitions
Accounts receivable, net
4,557
6,227
Inventories, net
3,487
(3,654
)
Prepaid expenses and other current
assets
1,736
2,279
Accounts payable and accrued expenses
(18,653
)
10,488
Income taxes receivable/payable
62
(334
)
Operating lease obligations
(3,274
)
(3,288
)
Other assets and liabilities
(141
)
(780
)
Net cash (used in) provided by operating
activities
(5,850
)
12,894
Cash flows from investing
activities
Proceeds from sales of property and
equipment
318
6
Purchases of property and equipment
(3,401
)
(2,639
)
Net cash used in investing activities
(3,083
)
(2,633
)
Cash flows from financing
activities
Proceeds from revolving credit
facility
3,000
-
Payments on revolving credit facility
(5,000
)
-
Payments of short-term debt
(730
)
(1,075
)
Principal payments of finance leases
(13
)
(17
)
Payments of contingent liability
(123
)
(184
)
Proceeds from issuance of common stock
under ATM program
1,469
6,780
Net cash (used in) provided by financing
activities
(1,397
)
5,504
Impact of foreign currency exchange on
cash
(45
)
25
Net increase (decrease) in cash and cash
equivalents
(10,375
)
15,790
Cash and cash equivalents
Beginning of period
26,027
10,237
End of period
$
15,652
$
26,027
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED
EBITDA
(In Thousands)
(Unaudited)
Three Months Ended
September 30, 2024
June 30, 2024
Net loss
$
(10,143
)
$
(14,041
)
Interest expense
12,879
12,782
Interest income
(196
)
(154
)
Depreciation
6,226
6,602
Amortization of intangibles
2,796
2,796
Provision for income taxes
73
139
EBITDA
$
11,635
$
8,124
(Gain) loss on revaluation of contingent
liability (1)
383
(118
)
Restructuring charges
177
315
Stock-based compensation expense
837
807
Cash award expense
770
580
Loss on sale of property and equipment
484
27
Adjusted EBITDA
$
14,286
$
9,735
(1) Amounts relate to the revaluation of
contingent liability associated with a 2018 acquisition.
NINE ENERGY SERVICE,
INC.
RECONCILIATION AND CALCULATION
OF ADJUSTED ROIC
(In Thousands)
(Unaudited)
Three Months Ended
September 30, 2024
June 30, 2024
Net loss
$
(10,143
)
$
(14,041
)
Add back:
Interest expense
12,879
12,782
Interest income
(196
)
(154
)
Restructuring charges
177
315
Adjusted after-tax net operating income
(loss)
$
2,717
$
(1,098
)
Total capital as of prior
period-end:
Total stockholders' deficit
$
(49,715
)
$
(43,314
)
Total debt
352,730
353,805
Less: cash and cash equivalents
(26,027
)
(10,237
)
Total capital as of prior
period-end:
$
276,988
$
300,254
Total capital as of period-end:
Total stockholders' deficit
$
(57,561
)
$
(49,715
)
Total debt
350,000
352,730
Less: cash and cash equivalents
(15,652
)
(26,027
)
Total capital as of period-end:
$
276,787
$
276,988
Average total capital
$
276,888
$
288,621
ROIC
-14.7
%
-19.5
%
Adjusted ROIC
3.9
%
-1.5
%
NINE ENERGY SERVICE,
INC.
RECONCILIATION OF ADJUSTED
GROSS PROFIT (LOSS)
(In Thousands)
(Unaudited)
Three Months Ended
September 30, 2024
June 30, 2024
Calculation of gross profit:
Revenues
$
138,157
$
132,401
Cost of revenues (exclusive of
depreciation and
amortization shown separately below)
113,451
112,048
Depreciation (related to cost of
revenues)
5,791
6,139
Amortization of intangibles
2,796
2,796
Gross profit
$
16,119
$
11,418
Adjusted gross profit
reconciliation:
Gross profit
$
16,119
$
11,418
Depreciation (related to cost of
revenues)
5,791
6,139
Amortization of intangibles
2,796
2,796
Adjusted gross profit
$
24,706
$
20,353
NINE ENERGY SERVICE,
INC.
EXCESS CASH FLOW
CALCULATION
(In Thousands)
(Unaudited)
September 30, 2024
Net cash provided by operating
activities (1)
$
7,044
Repurchases of common stock in connection
with stock-based employee compensation
-
Capital expenditures used or useful in a
Permitted Business:
Purchases of property and equipment
(6,040
)
Proceeds from sales of property and
equipment
324
Repayments of ABL Obligations
834
Charges in respect of finance lease
obligations
(30
)
Debt issuance costs
-
Payments on short-term debt
(1,805
)
Impact of foreign exchange rate on
cash
(20
)
Contingent liability payments
(307
)
Excess Cash Flow
$
-
Excess Cash Flow %
75
%
Excess Cash Flow Amount
$
-
(1) Amount consists of the Company's
consolidated operating cash flow, determined in accordance with
GAAP, for the
fiscal quarter ended June 30, 2024 ($12.9
million of net cash provided by operating activities) and for the
fiscal quarter
ended September 30, 2024 ($5.9 million of
net cash used in operating activities)
See the definition of Excess Cash Flow
included in the Indenture filed as Exhibit 4.2 to the Current
Report on Form 8-K
filed February 1, 2023
AAdjusted EBITDA is defined as EBITDA (which is net income
(loss) before interest, taxes, and depreciation and amortization)
further adjusted for (i) goodwill, intangible asset, and/or
property and equipment impairment charges, (ii) transaction and
integration costs related to acquisitions, (iii) fees and expenses
relating to our units offering and other refinancing activities,
(iv) loss or gain on revaluation of contingent liabilities, (v)
loss or gain on the extinguishment of debt, (vi) loss or gain on
the sale of subsidiaries, (vii) restructuring charges, (viii)
stock-based compensation and cash award expense, (ix) loss or gain
on sale of property and equipment, and (x) other expenses or
charges to exclude certain items which we believe are not
reflective of ongoing performance of our business, such as legal
expenses and settlement costs related to litigation outside the
ordinary course of business. Management believes adjusted EBITDA
provides useful information to us and our investors regarding our
financial condition and results of operations because it allows us
and them to more effectively evaluate our operating performance and
compare the results of our operations from period to period without
regard to our financing methods or capital structure and helps
identify underlying trends in our operations that could otherwise
be distorted by the effect of impairments, acquisitions and
dispositions and costs that are not reflective of the ongoing
performance of our business.
BAdjusted gross profit (loss) is defined as revenues less cost
of revenues excluding depreciation and amortization. This measure
differs from the GAAP definition of gross profit (loss) because we
do not include the impact of depreciation and amortization, which
represent non-cash expenses. Our management believes adjusted gross
profit (loss) provides useful information to us and our investors
regarding our financial condition and results of operation and
helps management evaluate our operating performance by eliminating
the impact of depreciation and amortization, which we do not
consider indicative of our core operating performance.
CAdjusted return on invested capital (“adjusted ROIC”) is
defined as adjusted after-tax net operating profit (loss), divided
by average total capital. We define adjusted after-tax net
operating profit (loss), which is a non-GAAP measure, as net income
(loss) plus (i) goodwill, intangible asset, and/or property and
equipment impairment charges, (ii) transaction and integration
costs related to acquisitions, (iii) fees and expenses relating to
our units offering and other refinancing activities, (iv) interest
expense (income), (v) restructuring charges, (vi) loss (gain) on
the sale of subsidiaries, (vii) loss (gain) on extinguishment of
debt, and (viii) the provision (benefit) for deferred income taxes.
We define total capital as book value of equity (deficit) plus the
book value of debt less balance sheet cash and cash equivalents. We
compute and use the average of the current and prior period-end
total capital in determining adjusted ROIC. Management believes
adjusted ROIC provides useful information to us and our investors
regarding our financial condition and results of operations because
it quantifies how well we generate operating income relative to the
capital we have invested in our business and illustrates the
profitability of a business or project taking into account the
capital invested, and management uses adjusted ROIC to assist them
in capital resource allocation decisions and in evaluating business
performance.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241031217756/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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