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Press release content from Business Wire. The AP news staff was not involved in its creation.

Nine Energy Service Announces Third Quarter 2021 Results

November 3, 2021 GMT

HOUSTON--(BUSINESS WIRE)--Nov 3, 2021--

Nine Energy Service, Inc. (“Nine” or the “Company”) (NYSE: NINE) reported third quarter 2021 revenues of $92.9 million, net loss of $(16.1) million, or $(0.53) basic loss per share, and adjusted EBITDA of $4.5 million. For the third quarter 2021, adjusted net loss B was $(15.7) million, or $(0.51) adjusted basic loss per share C.

The Company had provided original third quarter 2021 revenue guidance between $95.0 and $103.0 million, with actual results falling slightly below the provided range, but still representing a sequential revenue increase of approximately 9% quarter over quarter.

“Sequential revenue increases this quarter of approximately 9% outpaced EIA US completions, which increased approximately 6% over the same time period, but was less than what we anticipated due mostly to labor constraints in the Permian Basin,” said Ann Fox, President and Chief Executive Officer, Nine Energy Service. “Because of our inability to field labor, we were unable to complete all anticipated wireline jobs in the region. By the end of the quarter, we were able to fill most of our labor needs for our Permian wireline operations but do anticipate labor shortages will continue to be a significant challenge for Nine and the collective OFS industry moving forward.”

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“During Q3, we continued to see moderate activity increases with both US completions and active frac crews increasing between 5-6% quarter over quarter. Pricing for products and services remains low, and most price increases today are being offset by simultaneous price inflation for labor and materials. During the quarter, we had approximately $2.4 million of one-off items that positively affected earnings and adjusted EBITDA.”

“All of our service lines’ revenues increased sequentially, with our Completion Tool and Coiled Tubing service lines performing particularly well. Our Completion Tool performance was driven mostly by an increase in our Dissolvable Stinger units sold, which increased by approximately 18% quarter over quarter. We believe dissolvable plugs will continue to take share in the US and international markets, especially as labor and equipment availability for composite plug drill-outs tighten and customers continue efforts to reduce carbon emissions.”

“Looking into Q4, our customers remain focused on coming within or below their original 2021 capex budgets; however, we do not anticipate budget exhaustion, or the effects of holidays will be as severe as in previous years. We expect Q4 revenue will be flat to slightly up compared to Q3. With what we know today, we anticipate North American capex spending will increase in 2022, which coupled with the robust commodity price environment supports increased activity for 2022 over 2021.”

Operating Results

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During the third quarter of 2021, the Company reported revenues of $92.9 million with gross profit of $3.5 million and adjusted gross profit D of $14.0 million. During the third quarter, the Company generated ROIC E of (11)%.

During the third quarter of 2021, the Company reported selling, general and administrative (“SG&A”) expense of $11.1 million, compared to $12.2 million for the second quarter of 2021. Depreciation and amortization expense (“D&A”) in the third quarter of 2021 was $11.0 million, compared to $11.5 million for the second quarter of 2021.

The Company’s tax provision for the third quarter of 2021 was approximately $41 thousand and $163 thousand year to date. The provision for the year is primarily attributable to state and non-U.S. income taxes.

Liquidity and Capital Expenditures

During the third quarter of 2021, the Company reported net cash used in operating activities of $(1.8) million, compared to $(19.6) million for the second quarter of 2021. Capital expenditures totaled $2.1 million during the third quarter of 2021 bringing the total spent year-to-date as of September 30, 2021 to $4.9 million.

As of September 30, 2021, Nine’s cash and cash equivalents were $30.0 million, and the Company had $55.4 million of availability under the revolving credit facility, resulting in a total liquidity position of $85.4 million as of September 30, 2021.

ABCDE See end of press release for definitions

Conference Call Information

The call is scheduled for Thursday, November 4, 2021 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 18, 2021 and may be accessed by dialing U.S. (Toll Free): (877) 660-6853 or International: (201) 612-7415 and entering the passcode of 13723609.

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, 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 has been and may again be affected by the COVID-19 pandemic and related economic repercussions; the ability of the OPEC+ countries to agree on and comply with supply limitations; operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions; pricing pressures, reduced sales, or reduced market share as a result of intense competition in the markets for the Company’s dissolvable plug products; the Company’s ability to implement and commercialize new technologies, services and tools; the Company’s ability to grow its completion tool business; the Company’s ability to manage capital expenditures; the Company’s ability to accurately predict customer demand; the loss of, or interruption or delay in operations by, one or more significant customers; the loss of or interruption in operations of one or more key suppliers; the adequacy of the Company’s capital resources and liquidity; the incurrence of significant costs and liabilities resulting from litigation; the loss of, or inability to attract, key personnel, technical personnel and other skilled and qualified workers; the Company’s ability to successfully integrate recently acquired assets and operations and realize anticipated revenues, cost savings or other benefits thereof; 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,
2021

June 30,
2021

 

Revenues

$

92,868

 

$

84,832

 

Cost and expenses

Cost of revenues (exclusive of depreciation and

amortization shown separately below)

 

78,879

 

 

76,638

 

General and administrative expenses

 

11,114

 

 

12,167

 

Depreciation

 

6,921

 

 

7,438

 

Amortization of intangibles

 

4,029

 

 

4,091

 

Loss on revaluation of contingent liabilities

 

21

 

 

45

 

(Gain) loss on sale of property and equipment

 

(17

)

 

950

 

Loss from operations

 

(8,079

)

 

(16,497

)

Interest expense

 

7,968

 

 

7,981

 

Interest income

 

(3

)

 

(8

)

Other income

 

(34

)

 

(35

)

Loss before income taxes

 

(16,010

)

 

(24,435

)

Provision for income taxes

 

41

 

 

95

 

Net loss

$

(16,051

)

$

(24,530

)

 

Loss per share

Basic

$

(0.53

)

$

(0.81

)

Diluted

$

(0.53

)

$

(0.81

)

Weighted average shares outstanding

Basic

 

30,449,286

 

 

30,424,026

 

Diluted

 

30,449,286

 

 

30,424,026

 

 

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments, net of tax of $0 and $0

$

(102

)

$

29

 

Total other comprehensive income (loss), net of tax

 

(102

)

 

29

 

Total comprehensive loss

$

(16,153

)

$

(24,501

)

 

NINE ENERGY SERVICE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

 

September 30,
2021

June 30,
2021

 

Assets

Current assets

Cash and cash equivalents

$

29,969

 

$

33,128

 

Accounts receivable, net

 

58,579

 

 

58,888

 

Income taxes receivable

 

1,205

 

 

1,246

 

Inventories, net

 

43,019

 

 

41,300

 

Prepaid expenses and other current assets

 

11,084

 

 

8,741

 

Total current assets

 

143,856

 

 

143,303

 

Property and equipment, net

 

83,749

 

 

88,493

 

Operating lease right-of-use assets, net

 

33,877

 

 

34,062

 

Finance lease right-of-use assets, net

 

1,517

 

 

1,617

 

Intangible assets, net

 

120,312

 

 

124,341

 

Other long-term assets

 

2,572

 

 

2,823

 

Total assets

$

385,883

 

$

394,639

 

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable

$

23,713

 

$

28,597

 

Accrued expenses

 

29,455

 

 

17,805

 

Current portion of long-term debt

 

1,125

 

 

1,125

 

Current portion of operating lease obligations

 

5,689

 

 

5,732

 

Current portion of finance lease obligations

 

1,132

 

 

1,144

 

Total current liabilities

 

61,114

 

 

54,403

 

Long-term liabilities

Long-term debt

 

317,180

 

 

317,045

 

Long-term operating lease obligations

 

29,766

 

 

29,944

 

Long-term finance lease obligations

 

259

 

 

523

 

Other long-term liabilities

 

2,296

 

 

2,455

 

Total liabilities

 

410,615

 

 

404,370

 

 

Stockholders’ equity

Common stock (120,000,000 shares authorized at $.01 par value; 32,840,084 and
31,350,677 shares issued and outstanding at September 30, 2021 and June 30, 2021, respectively)

 

328

 

 

314

 

Additional paid-in capital

 

772,135

 

 

770,997

 

Accumulated other comprehensive loss

 

(4,533

)

 

(4,431

)

Accumulated deficit

 

(792,662

)

 

(776,611

)

Total stockholders’ equity

 

(24,732

)

 

(9,731

)

Total liabilities and stockholders’ equity

$

385,883

 

$

394,639

 

 

NINE ENERGY SERVICE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

Three Months Ended

September 30,
2021

June 30,
2021

 

Cash flows from operating activities

Net loss

$

(16,051

)

$

(24,530

)

Adjustments to reconcile net loss to net cash used in operating activities

Depreciation

 

6,921

 

 

7,438

 

Amortization of intangibles

 

4,029

 

 

4,091

 

Amortization of deferred financing costs

 

642

 

 

642

 

Amortization of operating leases

 

1,955

 

 

2,005

 

Recovery of doubtful accounts

 

(148

)

 

(118

)

Provision for inventory obsolescence

 

408

 

 

2,356

 

Stock-based compensation expense

 

1,153

 

 

1,028

 

(Gain) loss on sale of property and equipment

 

(17

)

 

950

 

Loss on revaluation of contingent liabilities

 

21

 

 

45

 

Changes in operating assets and liabilities, net of effects from acquisitions

Accounts receivable, net

 

419

 

 

(10,599

)

Inventories, net

 

(2,163

)

 

(4,874

)

Prepaid expenses and other current assets

 

(3,336

)

 

3,880

 

Accounts payable and accrued expenses

 

6,388

 

 

235

 

Income taxes receivable/payable

 

41

 

 

(104

)

Other assets and liabilities

 

(2,097

)

 

(2,071

)

Net cash used in operating activities

 

(1,835

)

 

(19,626

)

Cash flows from investing activities

Proceeds from sales of property and equipment

 

1,014

 

 

1,140

 

Purchases of property and equipment

 

(1,712

)

 

(692

)

Net cash provided by (used in) investing activities

 

(698

)

 

448

 

Cash flows from financing activities

Payments on Magnum promissory notes

 

(281

)

 

-

 

Purchases of senior notes

 

-

 

 

-

 

Payments on finance leases

 

(276

)

 

(270

)

Payments of contingent liabilities

 

(46

)

 

(34

)

Vesting of restricted stock

 

(1

)

 

(341

)

Net cash used in financing activities

 

(604

)

 

(645

)

Impact of foreign currency exchange on cash

 

(22

)

 

(31

)

Net decrease in cash and cash equivalents

 

(3,159

)

 

(19,854

)

Cash and cash equivalents

Beginning of period

 

33,128

 

 

52,982

 

End of period

$

29,969

 

$

33,128

 

 

NINE ENERGY SERVICE, INC.

RECONCILIATION OF ADJUSTED GROSS PROFIT (LOSS)

(In Thousands)

(Unaudited)

 

Three Months Ended

September 30,
2021

June 30,
2021

Calculation of gross profit (loss)

Revenues

$

92,868

$

84,832

 

Cost of revenues (exclusive of depreciation and

amortization shown separately below)

 

78,879

 

76,638

 

Depreciation (related to cost of revenues)

 

6,437

 

6,917

 

Amortization of intangibles

 

4,029

 

4,091

 

Gross profit (loss)

$

3,523

 

$

(2,814

)

 

Adjusted gross profit reconciliation

Gross profit (loss)

$

3,523

$

(2,814

)

Depreciation (related to cost of revenues)

 

6,437

 

6,917

 

Amortization of intangibles

 

4,029

 

4,091

 

Adjusted gross profit

$

13,989

 

$

8,194

 

 

NINE ENERGY SERVICE, INC.

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA

(In Thousands)

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended

 

 

September 30,
2021

 

June 30,
2021

EBITDA reconciliation:

Net loss

$

(16,051

)

$

(24,530

)

Interest expense

 

7,968

 

 

7,981

 

Interest income

 

(3

)

 

(8

)

Provision for income taxes

 

41

 

 

95

 

Depreciation

 

6,921

 

 

7,438

 

Amortization of intangibles

 

4,029

 

 

 

4,091

 

EBITDA

$

2,905

 

$

(4,933

)

Loss on revaluation of contingent liabilities (1)

 

21

 

 

45

 

Restructuring charges

 

375

 

 

745

 

Stock-based compensation expense

 

1,153

 

 

1,028

 

(Gain) loss on sale of property and equipment

 

(17

)

 

950

 

Legal fees and settlements (2)

 

17

 

 

1,735

 

Adjusted EBITDA

$

4,454

 

 

$

(430

)

 
 

(1) Amounts relate to the revaluation of contingent liabilities associated with the Company's 2018 acquisitions

 

(2) 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

 

 

September 30,
2021

 

June 30,
2021

 

Net loss

$

(16,051

)

$

(24,530

)

Add back:

Interest expense

 

7,968

 

 

7,981

 

Interest income

 

(3

)

 

(8

)

Restructuring charges

 

375

 

 

745

 

After-tax net operating loss

$

(7,711

)

$

(15,812

)

 

Total capital as of prior period-end:

Total stockholders' equity

$

(9,731

)

$

14,083

 

Total debt

 

322,031

 

 

322,031

 

Less: cash and cash equivalents

 

(33,128

)

 

 

(52,982

)

Total capital as of prior period-end:

$

279,172

 

 

$

283,132

 

 

Total capital as of period-end:

Total stockholders' equity

$

(24,732

)

$

(9,731

)

Total debt

 

321,750

 

 

322,031

 

Less: cash and cash equivalents

 

(29,969

)

 

 

(33,128

)

Total capital as of period-end:

$

267,049

 

$

279,172

 

 

 

 

Average total capital

$

273,111

 

 

$

281,152

 

ROIC

 

-11

%

 

-22

%

 

NINE ENERGY SERVICE, INC.

RECONCILIATION OF ADJUSTED NET LOSS AND ADJUSTED BASIC EARNINGS (LOSS) PER SHARE CALCULATION

(In Thousands)

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended

 

 

September 30,
2021

 

June 30,
2021

Reconciliation of adjusted net loss:

Net loss

$

(16,051

)

$

(24,530

)

Add back:

Restructuring charges

 

375

 

 

745

 

Adjusted net loss

$

(15,676

)

 

$

(23,785

)

 

Weighted average shares

Weighted average shares outstanding for basic

 

30,449,286

 

 

30,424,026

 

and adjusted basic earnings (loss) per share

 

Loss per share:

Basic loss per share

$

(0.53

)

$

(0.81

)

Adjusted basic loss per share

$

(0.51

)

$

(0.78

)

(a) Amount represents the difference between the repurchase price and the carrying amount

of Senior Notes repurchased during the respective period.

A Adjusted 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) loss or gain on revaluation of contingent liabilities, (iv) loss or gain on the extinguishment of debt, (v) loss or gain on the sale of subsidiaries, (vi) restructuring charges, (vii) stock-based compensation expense, (viii) loss or gain on sale of property and equipment, and (ix) 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.

B Adjusted Net Income (Loss) is defined as net income (loss) adjusted for (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) restructuring charges, (iv) loss or gain on the sale of subsidiaries, (v) loss or gain on the extinguishment of debt and (vi) the tax impact of such adjustments. Management believes Adjusted Net Income (Loss) is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period and helps identify underlying trends in our operations that could otherwise be distorted by the effect of the impairments and acquisitions.

C Adjusted Basic Earnings (Loss) Per Share is defined as adjusted net income (loss), divided by weighted average basic shares outstanding. Management believes Adjusted Basic Earnings (Loss) Per Share is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period and help identify underlying trends in our operations that could otherwise be distorted by the effect of the impairments and acquisitions.

D Adjusted 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.

E Return 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) interest expense (income), (iv) restructuring charges, (v) loss (gain) on the sale of subsidiaries, (vi) loss (gain) on extinguishment of debt, and (vii) the provision (benefit) for deferred income taxes. We define total capital as book value of equity 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.

View source version on businesswire.com:https://www.businesswire.com/news/home/20211103005055/en/

CONTACT: Nine Energy Service Investor Contact:

Heather Schmidt

Vice President, Strategic Development, Investor Relations and Marketing

(281) 730-5113

investors@nineenergyservice.com

KEYWORD: UNITED STATES NORTH AMERICA TEXAS

INDUSTRY KEYWORD: OIL/GAS ENERGY

SOURCE: Nine Energy Service, Inc.

Copyright Business Wire 2021.

PUB: 11/03/2021 05:00 PM/DISC: 11/03/2021 05:02 PM

http://www.businesswire.com/news/home/20211103005055/en