Nine(NINE) - 2024 Q3 - Quarterly Results

Nine Energy Service Third Quarter 2024 Results Financial & Operational Highlights In the third quarter of 2024, Nine Energy Service exceeded revenue guidance, achieving a 4% quarter-over-quarter increase to $138.2 million despite a decline in the US rig count, significantly improving profitability with a 28% decrease in net loss to $(10.1) million and a 47% increase in Adjusted EBITDA to $14.3 million, driven by strong cementing division performance Q3 2024 Key Metrics | Metric | Value (in millions) | Change (QoQ) | | :--- | :--- | :--- | | Revenue | $138.2 | ~4% Increase | | Net Loss | $(10.1) | ~28% Decrease | | Adjusted EBITDA | $14.3 | ~47% Increase | | Cementing Revenue | N/A | ~12% Increase | | Total Liquidity (as of Sep 30, 2024) | $43.3 | N/A | - The company's revenue of $138.2 million surpassed its original guidance of $127.0 to $137.0 million[1] Management Commentary & Business Outlook CEO Ann Fox highlighted that the company's outperformance was driven by market share gains in its cementing division, which differentiated itself through advanced slurries and strong execution, while anticipating a seasonal slowdown in Q4 but remaining positive on the long-term outlook for 2025 contingent on supportive commodity prices - The cementing division was the primary growth driver, with revenue increasing approximately 12% over Q2, offsetting a declining rig count[3] - Profitability was enhanced by improved asset utilization, an increase in international tool sales, and various cost-saving initiatives[3] - The company projects a decrease in Q4 revenue and profitability due to typical budget exhaustion, weather, holiday slowdowns, and an expected drop in international tool sales[3] - Management anticipates a moderate pickup in activity in 2025, contingent on supportive commodity prices and the resetting of customer budgets[3] Financial Performance The company's financial performance in Q3 2024 showed revenue of $138.2 million and a gross profit of $16.1 million, with key expenses including $12.4 million in G&A and $9.0 million in D&A, while operationally using $(5.9) million in cash and maintaining a total liquidity of $43.3 million with capital expenditures of $3.6 million Operating Results For the third quarter of 2024, the company reported revenues of $138.2 million and a gross profit of $16.1 million, with General and administrative (G&A) expenses at $12.4 million and depreciation and amortization (D&A) totaling $9.0 million, generating an adjusted ROIC of 3.9% Q3 2024 Operating Results | Metric | Value (in millions) | | :--- | :--- | | Revenues | $138.2 | | Gross Profit | $16.1 | | Adjusted Gross Profit | $24.7 | | G&A Expense | $12.4 | | D&A Expense | $9.0 | Liquidity and Capital Expenditures In Q3 2024, Nine Energy reported net cash used in operating activities of $(5.9) million and capital expenditures of $3.6 million, maintaining total liquidity of $43.3 million as of September 30, 2024, which included $15.7 million in cash and $27.6 million available under its revolving credit facility, while also generating $1.4 million in net proceeds from its at-the-market equity offering Liquidity and Capital Position (as of Sep 30, 2024) | Metric | Value (in millions) | | :--- | :--- | | Cash and Cash Equivalents | $15.7 | | Revolving Credit Facility Availability | $27.6 | | Total Liquidity | $43.3 | | Q3 2024 Capital Expenditures | $3.6 | | Net Cash Used in Operating Activities | $(5.9) | - The company sold approximately 1.2 million shares of common stock under its at-the-market (ATM) program, generating net proceeds of about $1.4 million in Q3 2024[10] - No Excess Cash Flow was generated in the six months ended September 30, 2024, meaning no mandatory offer to repurchase senior secured notes will be made[9] Financial Statements The unaudited condensed consolidated financial statements for the third quarter of 2024 reflect increased revenue and an improved net loss compared to the prior quarter, with the balance sheet showing a reduction in total assets and liabilities, and the cash flow statement indicating cash usage across operating, investing, and financing activities, leading to a lower cash balance at quarter-end Condensed Consolidated Statements of Income For the third quarter ended September 30, 2024, Nine reported revenues of $138.2 million, up from $132.4 million in the second quarter, posting income from operations of $2.5 million, a significant improvement from a loss of $(1.4) million in Q2, with the net loss narrowing to $(10.1) million, or $(0.26) per share, from $(14.0) million, or $(0.40) per share, in the prior quarter Income Statement Comparison (in thousands) | Metric | Q3 2024 | Q2 2024 | | :--- | :--- | :--- | | Revenues | $138,157 | $132,401 | | Income (loss) from operations | $2,451 | $(1,436) | | Net loss | $(10,143) | $(14,041) | | Diluted Loss Per Share | $(0.26) | $(0.40) | Condensed Consolidated Balance Sheets As of September 30, 2024, the company's balance sheet showed total assets of $353.2 million and total liabilities of $410.8 million, resulting in a total stockholders' deficit of $(57.6) million, compared to total assets of $381.7 million and a stockholders' deficit of $(49.7) million at the end of the previous quarter, with the decrease in assets primarily driven by a reduction in cash and cash equivalents Balance Sheet Comparison (in thousands) | Metric | Sep 30, 2024 | Jun 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $15,652 | $26,027 | | Total current assets | $157,616 | $178,333 | | Total assets | $353,232 | $381,722 | | Total liabilities | $410,793 | $431,437 | | Total stockholders' equity (deficit) | $(57,561) | $(49,715) | Condensed Consolidated Statements of Cash Flows For the third quarter of 2024, the company reported net cash used in operating activities of $(5.9) million, a reversal from the $12.9 million provided by operations in Q2, with net cash used in investing activities at $(3.1) million and net cash used in financing activities at $(1.4) million, resulting in a net decrease in cash and cash equivalents of $(10.4) million for the quarter Cash Flow Comparison (in thousands) | Metric | Q3 2024 | Q2 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(5,850) | $12,894 | | Net cash used in investing activities | $(3,083) | $(2,633) | | Net cash (used in) provided by financing activities | $(1,397) | $5,504 | | Net increase (decrease) in cash | $(10,375) | $15,790 | Non-GAAP Financial Measures & Reconciliations The company provides reconciliations for several non-GAAP measures to offer additional insight into its performance, with Adjusted EBITDA increasing significantly to $14.3 million in Q3 2024, Adjusted ROIC turning positive at 3.9%, Adjusted Gross Profit rising to $24.7 million, and the Excess Cash Flow calculation for the recent six-month period resulting in zero Reconciliation of Adjusted EBITDA Adjusted EBITDA for Q3 2024 was $14.3 million, a substantial increase from $9.7 million in Q2 2024, with the calculation starting from a net loss of $(10.1) million and adjusting for items such as interest expense ($12.9 million), D&A ($9.0 million), and stock-based compensation ($0.8 million) Adjusted EBITDA Reconciliation (in thousands) | Metric | Q3 2024 | Q2 2024 | | :--- | :--- | :--- | | Net loss | $(10,143) | $(14,041) | | Interest expense | $12,879 | $12,782 | | Depreciation & Amortization | $9,022 | $9,398 | | Provision for income taxes | $73 | $139 | | EBITDA | $11,635 | $8,124 | | Other Adjustments | $2,651 | $1,611 | | Adjusted EBITDA | $14,286 | $9,735 | Reconciliation and Calculation of Adjusted ROIC The company's Adjusted Return on Invested Capital (ROIC) improved to 3.9% in Q3 2024, compared to -1.5% in Q2 2024, reflecting its operating income relative to invested capital Adjusted ROIC Calculation | Metric | Value (in thousands) | Value (in thousands) | | :--- | :--- | :--- | | Adjusted after-tax net operating income (loss) | $2,717 | $(1,098) | | Average total capital | $276,888 | $288,621 | | Adjusted ROIC | 3.9% | -1.5% | Reconciliation of Adjusted Gross Profit Adjusted Gross Profit, which excludes non-cash depreciation and amortization from the cost of revenues, increased to $24.7 million in Q3 2024 from $20.4 million in Q2 2024, serving as a key management metric for evaluating core operating performance Adjusted Gross Profit Reconciliation (in thousands) | Metric | Q3 2024 | Q2 2024 | | :--- | :--- | :--- | | 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 | Excess Cash Flow Calculation For the six-month period ending September 30, 2024, the company's Excess Cash Flow calculation, as defined by its indenture, resulted in $0, based on net cash provided by operating activities of $7.0 million over the period, offset by capital expenditures and other specified payments - The Excess Cash Flow for the six-month period ended September 30, 2024 was calculated to be $0, meaning no mandatory offer to repurchase notes is required[9][24]