Nine Energy Service Announces Fourth Quarter and Full Year 2023 Results
-
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
“Fourth quarter revenue was in-line with expectations, coming within the upper end of our original guidance,” said
“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
During the fourth quarter of 2023, the Company reported revenues of
During the fourth quarter of 2023, the Company reported general and administrative (“G&A”) expense of
The Company’s tax provision was approximately
Liquidity and Capital Expenditures
For the year ended
As of
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 |
|
Year Ended |
|||||||||||
|
|
|
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 |
$ |
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 |
|
|
|||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||
(In Thousands) |
|||||||
(Unaudited) |
|||||||
At |
|||||||
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 |
|
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 |
|
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
(In Thousands) |
|||||||
(Unaudited) |
|||||||
Year Ended |
|||||||
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 |
|
|
|||||||||||||
RECONCILIATION OF ADJUSTED EBITDA |
|||||||||||||
(In Thousands) |
|||||||||||||
(Unaudited) |
|||||||||||||
Three Months Ended |
|
Year Ended |
|||||||||||
|
|
|
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. |
|
|||||||||||||
RECONCILIATION AND CALCULATION OF ADJUSTED ROIC |
|||||||||||||
(In Thousands) |
|||||||||||||
(Unaudited) |
|||||||||||||
Three Months Ended |
|
Year Ended |
|||||||||||
|
|
|
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 |
|
|||||||||
RECONCILIATION OF ADJUSTED GROSS PROFIT (LOSS) |
|||||||||
(In Thousands) |
|||||||||
(Unaudited) |
|||||||||
Three Months Ended |
|
Year Ended |
|||||||
|
|
|
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.
CAdjustedReturn on
View source version on businesswire.com: https://www.businesswire.com/news/home/20240307535120/en/
Nine Energy Service Investor Contact:
Vice President, Strategic Development, Investor Relations and Marketing
(281) 730-5113
investors@nineenergyservice.com
Source: