Nine(NINE) - 2023 Q2 - Quarterly Report

PART I Item 1. Financial Statements (Unaudited) Unaudited H1 2023 financial statements show increased assets and revenues, positive operating cash flow, and a slight net loss increase Condensed Consolidated Balance Sheets As of June 30, 2023, total assets increased to $438.5 million, liabilities remained stable, and stockholders' deficit improved to $13.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $41,122 | $17,445 | | Total current assets | $207,960 | $196,725 | | Total assets | $438,475 | $426,834 | | Liabilities & Equity | | | | Total current liabilities | $83,812 | $81,003 | | Long-term debt | $332,555 | $338,031 | | Total liabilities | $451,887 | $450,341 | | Total stockholders' equity (deficit) | $(13,412) | $(23,507) | Condensed Consolidated Statements of Income and Comprehensive Income (Loss) Q2 2023 revenues increased to $161.4 million, but higher interest expense led to a net loss of $2.5 million, with six-month revenues reaching $324.8 million Statement of Income Highlights (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $161,428 | $142,346 | $324,836 | $259,281 | | Income from operations | $9,311 | $6,418 | $16,193 | $7,500 | | Interest expense | $12,994 | $8,133 | $25,448 | $16,210 | | Net loss | $(2,537) | $(978) | $(8,646) | $(7,877) | | Loss per share (Basic & Diluted) | $(0.08) | $(0.03) | $(0.26) | $(0.26) | Condensed Consolidated Statements of Cash Flows H1 2023 saw net cash from operations turn positive at $31.1 million, with cash and equivalents increasing to $41.1 million by period-end Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $31,095 | $(6,889) | | Net cash used in investing activities | $(11,100) | $(1,627) | | Net cash provided by financing activities | $3,864 | $9,521 | | Net increase in cash and cash equivalents | $23,677 | $899 | | Cash and cash equivalents end of period | $41,122 | $22,408 | Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, revenue disaggregation by service line, and a significant debt restructuring, with the company operating as a single segment - The company operates as a single reportable segment named Completion Solutions[28] Disaggregated Revenues by Service Line (in thousands) | Service Line | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Cement | $58,120 | $55,230 | $120,582 | $100,468 | | Tools | $38,852 | $33,127 | $76,640 | $61,840 | | Coiled tubing | $33,493 | $27,661 | $67,021 | $49,242 | | Wireline | $30,963 | $26,328 | $60,593 | $47,731 | | Total revenues | $161,428 | $142,346 | $324,836 | $259,281 | - In January 2023, the company completed a public offering of 300,000 units, consisting of $300 million in 13.000% Senior Secured Notes due 2028 and 1.5 million shares of common stock. Proceeds were used to redeem the outstanding 8.750% Senior Notes due 2023[41][53] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2023 revenue growth driven by pricing and activity, challenges from cost inflation and pricing pressure, and a liquidity position of $60.1 million - Q2 2023 revenue increased 13% YoY to $161.4 million, driven by pricing and activity increases across all service lines, particularly a 21% rise in coiled tubing revenue[90][91] - The company is experiencing pricing pressure from customers due to declining commodity prices and a drop in U.S. rig count by over 100 rigs from Q4 2022 to Q2 2023[86][87] - As of June 30, 2023, the company had a total liquidity position of $60.1 million, consisting of $41.1 million in cash and $19.0 million available under its ABL Credit Facility[129] Non-GAAP Reconciliation: Adjusted EBITDA (in thousands) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(2,537) | $(978) | $(8,646) | $(7,877) | | EBITDA | $19,802 | $16,887 | $37,162 | $28,573 | | Adjusted EBITDA | $21,714 | $18,914 | $46,723 | $31,137 | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," the company is exempt from providing quantitative and qualitative disclosures about market risk - As a "smaller reporting company," the company is exempt from providing quantitative and qualitative disclosures about market risk[153] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[155] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[156] PART II OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings, but management expects no material adverse effect on its financial condition or operations - The company is subject to various legal proceedings in the ordinary course of business but does not expect them to have a material adverse impact[159] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022, have occurred - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022, have occurred[160] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2023, the company withheld 175 shares at $5.47 per share to cover tax obligations from restricted stock vesting, not part of a repurchase plan - In Q2 2023, the company withheld 175 shares at an average price of $5.47 to satisfy tax obligations related to the vesting of restricted stock[161] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[162] Item 5. Other Information The company reported no other information for this item - None[164] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and Interactive Data Files (XBRL) - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Interactive Data Files (101, 104)[167]