Nine Energy Service Announces First Quarter 2023 Results
-
Revenue, net loss and adjusted EBITDAA of
$163.4 million $(6.1) million $25.0 million -
For the first quarter of 2023 the Company generated ROICB of
16.2% -
Total liquidity position of
$47.4 million
“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
“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
“Looking ahead,
“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
During the first quarter of 2023, the Company reported general and administrative expense of
The Company’s tax provision for the first quarter of 2023 was approximately
Liquidity and Capital Expenditures
During the first quarter of 2023, the Company reported net cash provided by operating activities of
As of March 31, 2023, Nine’s cash and cash equivalents were
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
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
About Nine Energy Service
Nine Energy Service is an oilfield services company that offers completion solutions within
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
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,
|
December 31,
|
|||||||
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 |
$ |
(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,
|
December 31,
|
|||||||
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 |
|
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,
|
December 31,
|
|||||||
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,
|
|
December 31,
|
||||||
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,
|
December 31,
|
|||||||
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,
|
December 31,
|
|||||
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
Source: Nine Energy Service, Inc.
