Nine Energy Service Announces First Quarter 2024 Results
-
Revenue, net loss and adjusted EBITDAA of
$142.1 million ,$(8.1) million and$15.0 million , respectively, for the first quarter of 2024 - Despite flat US rig count, increased gross profit in Q1 versus Q4
- Surpassed 60,000 Stinger™ Dissolvable Plug units sold
“The US land market was relatively stable in Q1, with the average US rig count remaining flat quarter over quarter. This was reflected in our revenue, which also remained relatively flat versus Q4 and was within the upper range of our original revenue guidance,” said
“Despite a flat rig count, we increased our gross profit quarter over quarter due mostly to reduced whitespace, specifically within coil tubing where revenue increased by approximately 11% quarter over quarter. Completion tool revenue was relatively flat this quarter, despite a decrease in international sales. Additionally, we reached a major milestone in Q1, surpassing 60,000 Stinger Dissolvable Plug units sold since we introduced the technology in Q1 2020.”
“Although oil prices have been supportive, we saw a further decline in natural gas prices to below
“Despite this pause in activity in natural-gas levered basins, we remain positive on the medium and long-term outlook for the natural gas markets, and maintaining our footprint will be imperative to ensure we are able to capitalize when gas prices recover.”
“Our business is nimble, and we have shown our ability to capitalize quickly when market shifts. I believe our service and commodity diversity is critical, and we remain focused on diversifying more of our revenue streams to completion tools and the international markets. Our strategy of providing an asset-light business with forward-leaning technology and excellent service is unchanged and unique within oilfield services.”
Operating Results
During the first quarter of 2024, the Company reported revenues of
During the first quarter of 2024, the Company reported general and administrative (“G&A”) expense of
The Company’s tax provision was approximately
Liquidity and Capital Expenditures
During the first quarter of 2024, the Company reported net cash used in operating activities of
As of
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
On
Conference Call Information
The call is scheduled for
For those who cannot listen to the live call, a telephonic replay of the call will be available through
About
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
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) |
|||||||
(In Thousands, Except Share and Per Share Amounts) |
|||||||
(Unaudited) |
|||||||
Three Months Ended |
|||||||
|
|
||||||
Revenues |
$ |
142,120 |
|
$ |
144,073 |
|
|
Cost and expenses |
|||||||
Cost of revenues (exclusive of depreciation and |
|||||||
amortization shown separately below) |
|
116,006 |
|
|
118,514 |
|
|
General and administrative expenses |
|
12,265 |
|
|
12,810 |
|
|
Depreciation |
|
6,734 |
|
|
7,003 |
|
|
Amortization of intangibles |
|
2,796 |
|
|
2,829 |
|
|
(Gain) loss on revaluation of contingent liability |
|
(74 |
) |
|
25 |
|
|
(Gain) loss on sale of property and equipment |
|
(26 |
) |
|
699 |
|
|
Income from operations |
|
4,419 |
|
|
2,193 |
|
|
Interest expense |
|
12,792 |
|
|
12,813 |
|
|
Interest income |
|
(310 |
) |
|
(324 |
) |
|
Other income |
|
(162 |
) |
|
(162 |
) |
|
Loss before income taxes |
|
(7,901 |
) |
|
(10,134 |
) |
|
Provision for income taxes |
|
154 |
|
|
171 |
|
|
Net loss |
$ |
(8,055 |
) |
$ |
(10,305 |
) |
|
Loss per share |
|||||||
Basic |
$ |
(0.24 |
) |
$ |
(0.30 |
) |
|
Diluted |
$ |
(0.24 |
) |
$ |
(0.30 |
) |
|
Weighted average shares outstanding |
|||||||
Basic |
|
33,850,317 |
|
|
33,850,317 |
|
|
Diluted |
|
33,850,317 |
|
|
33,850,317 |
|
|
Other comprehensive income (loss), net of tax |
|||||||
Foreign currency translation adjustments, net of tax of |
$ |
(210 |
) |
$ |
213 |
|
|
Total other comprehensive income (loss), net of tax |
|
(210 |
) |
|
213 |
|
|
Total comprehensive loss |
$ |
(8,265 |
) |
$ |
(10,092 |
) |
|
|||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||
(In Thousands) |
|||||||
(Unaudited) |
|||||||
|
|
||||||
Assets |
|||||||
Current assets |
|||||||
Cash and cash equivalents |
$ |
10,237 |
|
$ |
30,840 |
|
|
Accounts receivable, net |
|
90,968 |
|
|
88,449 |
|
|
Income taxes receivable |
|
344 |
|
|
490 |
|
|
Inventories, net |
|
56,340 |
|
|
54,486 |
|
|
Prepaid expenses and other current assets |
|
9,798 |
|
|
9,368 |
|
|
Total current assets |
|
167,687 |
|
|
183,633 |
|
|
Property and equipment, net |
|
81,232 |
|
|
82,366 |
|
|
Operating lease right of use assets, net |
|
40,600 |
|
|
42,056 |
|
|
Finance lease right of use assets, net |
|
31 |
|
|
51 |
|
|
Intangible assets, net |
|
87,633 |
|
|
90,429 |
|
|
Other long-term assets |
|
3,227 |
|
|
3,449 |
|
|
Total assets |
$ |
380,410 |
|
$ |
401,984 |
|
|
Liabilities and Stockholders’ Equity (Deficit) |
|||||||
Current liabilities |
|||||||
Accounts payable |
$ |
38,828 |
|
$ |
33,379 |
|
|
Accrued expenses |
|
22,804 |
|
|
36,171 |
|
|
Current portion of long-term debt |
|
1,805 |
|
|
2,859 |
|
|
Current portion of operating lease obligations |
|
10,396 |
|
|
10,314 |
|
|
Current portion of finance lease obligations |
|
21 |
|
|
31 |
|
|
Total current liabilities |
|
73,854 |
|
|
82,754 |
|
|
Long-term liabilities |
|||||||
Long-term debt |
|
317,100 |
|
|
320,520 |
|
|
Long-term operating lease obligations |
|
30,903 |
|
|
32,594 |
|
|
Other long-term liabilities |
|
1,867 |
|
|
1,746 |
|
|
Total liabilities |
|
423,724 |
|
|
437,614 |
|
|
Stockholders’ equity (deficit) |
|||||||
Common stock (120,000,000 shares authorized at |
|
353 |
|
|
353 |
|
|
Additional paid-in capital |
|
795,687 |
|
|
795,106 |
|
|
Accumulated other comprehensive loss |
|
(5,069 |
) |
|
(4,859 |
) |
|
Accumulated deficit |
|
(834,285 |
) |
|
(826,230 |
) |
|
Total stockholders’ equity (deficit) |
|
(43,314 |
) |
|
(35,630 |
) |
|
Total liabilities and stockholders’ equity (deficit) |
$ |
380,410 |
|
$ |
401,984 |
|
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
(In Thousands) |
|||||||
(Unaudited) |
|||||||
Three Months Ended |
|||||||
|
|
||||||
Cash flows from operating activities |
|||||||
Net loss |
$ |
(8,055 |
) |
$ |
(10,305 |
) |
|
Adjustments to reconcile net loss to net cash provided (used in) by operating activities |
|||||||
Depreciation |
|
6,734 |
|
|
7,003 |
|
|
Amortization of intangibles |
|
2,796 |
|
|
2,829 |
|
|
Amortization of deferred financing costs |
|
1,795 |
|
|
1,728 |
|
|
Amortization of operating leases |
|
3,294 |
|
|
3,454 |
|
|
Provision for (recovery of) doubtful accounts |
|
(1 |
) |
|
- |
|
|
Provision for inventory obsolescence |
|
220 |
|
|
355 |
|
|
Stock-based compensation expense |
|
581 |
|
|
578 |
|
|
(Gain) loss on sale of property and equipment |
|
(26 |
) |
|
699 |
|
|
(Gain) loss on revaluation of contingent liability |
|
(74 |
) |
|
25 |
|
|
Changes in operating assets and liabilities, net of effects from acquisitions |
|||||||
Accounts receivable, net |
|
(2,533 |
) |
|
(3,352 |
) |
|
Inventories, net |
|
(2,229 |
) |
|
3,941 |
|
|
Prepaid expenses and other current assets |
|
(430 |
) |
|
(3,650 |
) |
|
Accounts payable and accrued expenses |
|
(7,796 |
) |
|
24,102 |
|
|
Income taxes receivable/payable |
|
148 |
|
|
405 |
|
|
Operating lease obligations |
|
(3,251 |
) |
|
(3,410 |
) |
|
Other assets and liabilities |
|
(10 |
) |
|
(78 |
) |
|
Net cash provided by (used in) operating activities |
|
(8,837 |
) |
|
24,324 |
|
|
Cash flows from investing activities |
|||||||
Proceeds from sales of property and equipment |
|
28 |
|
|
76 |
|
|
Purchases of property and equipment |
|
(5,488 |
) |
|
(8,518 |
) |
|
Net cash used in investing activities |
|
(5,460 |
) |
|
(8,442 |
) |
|
Cash flows from financing activities |
|||||||
Payments on ABL credit facility |
|
(5,000 |
) |
|
- |
|
|
Proceeds from short-term debt |
|
- |
|
|
4,733 |
|
|
Payments of short-term debt |
|
(1,054 |
) |
|
(1,874 |
) |
|
Payments on finance leases |
|
(10 |
) |
|
(20 |
) |
|
Payments of contingent liability |
|
(159 |
) |
|
(136 |
) |
|
Vesting of restricted stock and stock units |
|
- |
|
|
- |
|
|
Net cash provided by (used in) financing activities |
|
(6,223 |
) |
|
2,703 |
|
|
Impact of foreign currency exchange on cash |
|
(83 |
) |
|
96 |
|
|
Net increase (decrease) in cash and cash equivalents |
|
(20,603 |
) |
|
18,681 |
|
|
Cash and cash equivalents |
|||||||
Beginning of period |
|
30,840 |
|
|
12,159 |
|
|
End of period |
$ |
10,237 |
|
$ |
30,840 |
|
|
|||||||
RECONCILIATION OF ADJUSTED EBITDA |
|||||||
(In Thousands) |
|||||||
(Unaudited) |
|||||||
Three Months Ended |
|||||||
|
|
||||||
Net loss |
$ |
(8,055 |
) |
$ |
(10,305 |
) |
|
Interest expense |
|
12,792 |
|
|
12,813 |
|
|
Interest income |
|
(310 |
) |
|
(324 |
) |
|
Depreciation |
|
6,734 |
|
|
7,003 |
|
|
Amortization of intangibles |
|
2,796 |
|
|
2,829 |
|
|
Provision for income taxes |
|
154 |
|
|
171 |
|
|
EBITDA |
$ |
14,111 |
|
$ |
12,187 |
|
|
(Gain) loss on revaluation of contingent liability (1) |
|
(74 |
) |
|
25 |
|
|
Restructuring charges |
|
27 |
|
|
823 |
|
|
Stock-based compensation expense |
|
581 |
|
|
578 |
|
|
Cash award expense |
|
415 |
|
|
320 |
|
|
(Gain) loss on sale of property and equipment |
|
(26 |
) |
|
699 |
|
|
Legal fees and settlements (2) |
|
- |
|
|
16 |
|
|
Adjusted EBITDA |
$ |
15,034 |
|
$ |
14,648 |
|
|
(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. |
|
|||||||
RECONCILIATION AND CALCULATION OF ADJUSTED ROIC |
|||||||
(In Thousands) |
|||||||
(Unaudited) |
|||||||
Three Months Ended |
|||||||
|
|
||||||
Net loss |
$ |
(8,055 |
) |
$ |
(10,305 |
) |
|
Add back: |
|||||||
Interest expense |
|
12,792 |
|
|
12,813 |
|
|
Interest income |
|
(310 |
) |
|
(324 |
) |
|
Restructuring charges |
|
27 |
|
|
823 |
|
|
Adjusted after-tax net operating income (loss) (1) |
$ |
4,454 |
|
$ |
3,007 |
|
|
Total capital as of prior period-end: |
|||||||
Total stockholders’ deficit |
$ |
(35,630 |
) |
$ |
(26,116 |
) |
|
Total debt |
|
359,859 |
|
|
357,000 |
|
|
Less: cash and cash equivalents |
|
(30,840 |
) |
|
(12,159 |
) |
|
Total capital as of prior period-end: |
$ |
293,389 |
|
$ |
318,725 |
|
|
Total capital as of period-end: |
|||||||
Total stockholders’ deficit |
$ |
(43,314 |
) |
$ |
(35,630 |
) |
|
Total debt |
|
353,805 |
|
|
359,859 |
|
|
Less: cash and cash equivalents |
|
(10,237 |
) |
|
(30,840 |
) |
|
Total capital as of period-end: |
$ |
300,254 |
|
$ |
293,389 |
|
|
Average total capital |
$ |
296,822 |
|
$ |
306,057 |
|
|
ROIC |
|
-10.9 |
% |
|
-13.5 |
% |
|
Adjusted ROIC (1) |
|
6.0 |
% |
|
3.9 |
% |
|
(1) Previously, in our |
|
|||||||
RECONCILIATION OF ADJUSTED GROSS PROFIT (LOSS) |
|||||||
(In Thousands) |
|||||||
(Unaudited) |
|||||||
Three Months Ended |
|||||||
|
|
||||||
Calculation of gross profit: |
|||||||
Revenues |
$ |
142,120 |
$ |
144,073 |
|||
Cost of revenues (exclusive of depreciation and |
|||||||
amortization shown separately below) |
|
116,006 |
|
|
118,514 |
|
|
Depreciation (related to cost of revenues) |
|
6,263 |
|
|
6,513 |
|
|
Amortization of intangibles |
|
2,796 |
|
|
2,829 |
|
|
Gross profit |
$ |
17,055 |
|
$ |
16,217 |
|
|
Adjusted gross profit reconciliation: |
|||||||
Gross profit |
$ |
17,055 |
|
$ |
16,217 |
|
|
Depreciation (related to cost of revenues) |
|
6,263 |
|
|
6,513 |
|
|
Amortization of intangibles |
|
2,796 |
|
|
2,829 |
|
|
Adjusted gross profit |
$ |
26,114 |
|
$ |
25,559 |
|
|
|||
EXCESS CASH FLOW CALCULATION |
|||
(In Thousands) |
|||
(Unaudited) |
|||
|
|||
|
|||
Net cash provided by operating activities (1) |
$ |
15,487 |
|
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 |
|
(14,006 |
) |
Proceeds from sales of property and equipment |
|
104 |
|
Repayments of ABL Obligations |
|
1,655 |
|
Charges in respect of finance lease obligations |
|
(30 |
) |
Debt issuance costs |
|
- |
|
Payments on short-term debt |
|
(2,928 |
) |
Impact of foreign exchange rate on cash |
|
13 |
|
Contingent liability payments |
|
(295 |
) |
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 |
|||
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 |
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.
CAdjustedreturn 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. Previously, in our
View source version on businesswire.com: https://www.businesswire.com/news/home/20240506547672/en/
Nine Energy Service Investor Contact:
Vice President, Strategic Development, Investor Relations and Marketing
(281) 730-5113
investors@nineenergyservice.com
Source: