Nine(NINE) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the period ended June 30, 2025, show an increase in total revenues and a reduction in net loss compared to the same period in 2024, despite a decrease in cash and an increased stockholders' deficit Condensed Consolidated Balance Sheets As of June 30, 2025, total assets slightly increased to $361.2 million, while total liabilities rose to $442.9 million, leading to a larger total stockholders' deficit of $(81.7) million and a significant decrease in cash to $14.2 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $14,216 | $27,880 | | Total current assets | $175,731 | $170,464 | | Total assets | $361,165 | $360,076 | | Liabilities & Equity | | | | Total current liabilities | $93,930 | $81,545 | | Long-term debt | $323,454 | $317,264 | | Total liabilities | $442,902 | $426,140 | | Total stockholders' equity (deficit) | $(81,737) | $(66,064) | Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) For Q2 2025, revenues increased to $147.3 million and net loss narrowed to $(10.4) million, with similar improvements for the six-month period Income Statement Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $147,251 | $132,401 | $297,717 | $274,521 | | Income (loss) from operations | $3,378 | $(1,436) | $9,007 | $2,983 | | Net loss | $(10,391) | $(14,041) | $(17,452) | $(22,096) | | Basic & Diluted Loss per share | $(0.25) | $(0.40) | $(0.43) | $(0.64) | Condensed Consolidated Statements of Stockholders' Equity (Deficit) The total stockholders' deficit increased from $(66.1) million at year-end 2024 to $(81.7) million by June 30, 2025, primarily due to a net loss of $17.5 million - For the six months ended June 30, 2025, the total stockholders' deficit increased by $15.7 million, mainly due to a net loss of $17.5 million[20] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $4.8 million, but net cash used in investing and financing activities led to a net decrease in cash of $10.1 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,811 | $4,057 | | Net cash used in investing activities | $(9,746) | $(8,093) | | Net cash used in financing activities | $(5,471) | $(719) | | Net decrease in cash and cash equivalents | $(10,125) | $(4,813) | Notes to the Condensed Consolidated Financial Statements The notes detail accounting policies, revenue disaggregation showing growth in Cementing and Wireline services, the new $125.0 million 2025 ABL Credit Facility, and contingent liabilities including a patent infringement lawsuit Disaggregated Revenues for Six Months Ended June 30 (in thousands) | Service Line | 2025 | 2024 | | :--- | :--- | :--- | | Cement | $109,349 | $94,077 | | Coiled tubing | $54,928 | $56,949 | | Wireline | $62,561 | $55,838 | | Tools (Product) | $70,879 | $67,657 | | Total revenues | $297,717 | $274,521 | - On May 1, 2025, the Company entered into a new $125.0 million asset-based revolving credit facility (2025 ABL Credit Facility), which matures in May 2028 and was used to repay all borrowings under the previous 2018 ABL Credit Facility[55][57] - The company is a defendant in a patent infringement lawsuit regarding its Breakthru Casing Flotation Device and has posted a $2.2 million letter of credit, with management believing they will prevail on appeal and thus no accrual has been made[67][68] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses an 11% revenue increase in Q2 2025 driven by cementing and wireline services, a cautious outlook due to declining oil prices, enhanced liquidity of $65.5 million from a new ABL credit facility, and a 45% increase in Adjusted EBITDA for Q2 2025 Industry Trends and Outlook The company's business is heavily influenced by volatile commodity prices, with declining WTI oil prices in Q2 2025 leading to decreased customer activity and anticipated lower revenue and earnings in Q3 2025 - Declining WTI oil prices in Q2 2025, which fell below $60 per barrel for the first time in four years, led to an 8% decrease in U.S. rig count from Q1 2025, negatively impacting the company's activity and pricing[87][89] - The company anticipates that revenue and earnings in the third quarter of 2025 will be down compared to the second quarter of 2025, reflecting a full quarter's impact of activity and pricing declines[90] Results of Operations For Q2 2025, revenues rose 11% to $147.3 million and Adjusted Gross Profit increased 27% to $25.8 million, driven by increased activity in cementing, wireline, and tools, despite pricing pressure in coiled tubing Q2 2025 vs Q2 2024 Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $147,251 | $132,401 | $14,850 | 11% | | Adjusted gross profit | $25,812 | $20,353 | $5,459 | 27% | | Income (loss) from operations | $3,378 | $(1,436) | $4,814 | 335% | | Net loss | $(10,391) | $(14,041) | $3,650 | (26)% | H1 2025 vs H1 2024 Performance (in thousands) | Metric | H1 2025 | H1 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $297,717 | $274,521 | $23,196 | 8% | | Adjusted gross profit | $53,808 | $46,467 | $7,341 | 16% | | Income from operations | $9,007 | $2,983 | $6,024 | 202% | | Net loss | $(17,452) | $(22,096) | $4,644 | (21)% | Non-GAAP Financial Measures The company's Adjusted EBITDA increased 45% to $14.1 million in Q2 2025 and 24% to $30.7 million for H1 2025, with Adjusted ROIC significantly improving to 6.7% in Q2 2025 Adjusted EBITDA Reconciliation (in thousands) | Period | Net loss | Adjusted EBITDA | | :--- | :--- | :--- | | Q2 2025 | $(10,391) | $14,123 | | Q2 2024 | $(14,041) | $9,735 | | H1 2025 | $(17,452) | $30,660 | | H1 2024 | $(22,096) | $24,769 | Adjusted ROIC Calculation | Period | ROIC | Adjusted ROIC | | :--- | :--- | :--- | | Q2 2025 | (16.2)% | 6.7% | | Q2 2024 | (19.5)% | (1.5)% | | H1 2025 | (13.7)% | 7.8% | | H1 2024 | (15.5)% | 2.4% | Liquidity and Capital Resources As of June 30, 2025, the company's total liquidity was $65.5 million, supported by $14.2 million in cash and $51.3 million available under its new $125.0 million 2025 ABL Credit Facility, with a 2025 capital expenditure budget of $15 million to $25 million - Total liquidity was $65.5 million at June 30, 2025, comprising $14.2 million in cash and $51.3 million of availability under the 2025 ABL Credit Facility[125] - On May 1, 2025, the company entered into a new 2025 ABL Credit Agreement for $125.0 million, maturing in 2028, and used the initial borrowing of $48.9 million to repay the previous 2018 ABL facility[136][137] - The planned capital expenditure budget for 2025 is between $15 million and $25 million, excluding potential acquisitions[123] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is not required to provide this information as it qualifies as a "smaller reporting company" under the Securities Exchange Act of 1934 - As a "smaller reporting company," the company is exempt from providing quantitative and qualitative disclosures about market risk[146] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[148] - No changes occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[149] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various claims and lawsuits, but management believes the ultimate liability will not have a material adverse effect on its business, operating results, or financial condition - The company states that any ultimate liability from pending legal proceedings is not expected to have a material adverse effect on its financial condition[152] Item 1A. Risk Factors A significant new risk factor involves the company's non-compliance with NYSE continued listing standards, including minimum market capitalization and stock price requirements, which could lead to delisting and negatively impact common stock liquidity and price - The company is out of compliance with the NYSE's minimum market capitalization standard as of October 2024 and has submitted a plan to regain compliance within an 18-month cure period[154] - The company received a notice in April 2025 for its average stock price being below $1.00 for 30 consecutive trading days and has a six-month period to regain compliance[155] - Failure to regain compliance with NYSE standards could lead to the delisting of the company's common stock, which would likely reduce its liquidity and market price[156][157] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the reporting period - None[158] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - None[159] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[160] Item 5. Other Information There is no other information to report for this item - None[161] Item 6. Exhibits This section lists the exhibits filed with the report, including certifications by the CEO and CFO, and the Loan and Security Agreement for the new credit facility