Nine(NINE) - 2024 Q1 - Quarterly Report

PART I Item 1. Financial Statements (Unaudited) Unaudited Q1 2024 financial statements show decreased total assets, increased stockholders' deficit, an $8.1 million net loss, and negative operating cash flow Condensed Consolidated Balance Sheets As of March 31, 2024, total assets decreased to $380.4 million, total liabilities decreased to $423.7 million, and the stockholders' deficit increased to $43.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $10,237 | $30,840 | | Total current assets | $167,687 | $183,633 | | Total assets | $380,410 | $401,984 | | Liabilities & Equity | | | | Total current liabilities | $73,854 | $82,754 | | Long-term debt | $317,100 | $320,520 | | Total liabilities | $423,724 | $437,614 | | Total stockholders' equity (deficit) | ($43,314) | ($35,630) | Condensed Consolidated Statements of Income and Comprehensive Income (Loss) Q1 2024 revenues decreased to $142.1 million, resulting in an increased net loss of $8.1 million, or ($0.24) per share, compared to Q1 2023 Q1 2024 vs Q1 2023 Income Statement (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenues | $142,120 | $163,408 | | Income from operations | $4,419 | $6,882 | | Interest expense | $12,792 | $12,454 | | Net loss | ($8,055) | ($6,109) | | Diluted loss per share | ($0.24) | ($0.19) | Condensed Consolidated Statements of Stockholders' Equity (Deficit) The stockholders' deficit increased to $43.3 million by March 31, 2024, primarily due to the $8.1 million net loss for the quarter - The stockholders' deficit widened to $43.3 million at the end of Q1 2024, mainly due to the net loss of $8.1 million incurred during the period[20] Condensed Consolidated Statements of Cash Flows Q1 2024 saw net cash used in operating activities of $8.8 million, leading to a $20.6 million net decrease in cash and equivalents, ending at $10.2 million Q1 2024 vs Q1 2023 Cash Flows (in thousands) | Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($8,837) | $3,965 | | Net cash used in investing activities | ($5,460) | ($5,284) | | Net cash provided by (used in) financing activities | ($6,223) | $5,344 | | Net increase (decrease) in cash | ($20,603) | $3,929 | | Cash and cash equivalents end of period | $10,237 | $21,374 | Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, disaggregated revenue declines across all service lines, and debt obligations including 13.000% Senior Secured Notes due 2028 Disaggregation of Revenues (in thousands) | Service Line | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Cement | $48,289 | $62,462 | | Tools | $35,227 | $37,788 | | Coiled tubing | $30,719 | $33,528 | | Wireline | $27,885 | $29,630 | | Total revenues | $142,120 | $163,408 | Total Debt Obligations (in thousands) | Debt Instrument | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | 2028 Notes | $300,000 | $300,000 | | ABL Credit Facility | $52,000 | $57,000 | | Short-term debt | $1,805 | $2,859 | | Total debt before deferred financing costs | $353,805 | $359,859 | - In January 2023, the company completed a public offering of 300,000 units, raising $279.8 million in net proceeds, which were used to redeem its 2023 Notes[42][53] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2024's 13% revenue decline and 40% Adjusted EBITDA drop to $15.0 million to lower activity and pricing, anticipating continued weakness in Q2 2024 Overview and Industry Outlook The company's performance, tied to E&P spending and volatile commodity prices, faces decreased activity due to depressed natural gas prices, with lower Q2 2024 revenue anticipated - The company's business is highly dependent on the capital spending of oil and natural gas companies, which is strongly influenced by volatile commodity prices[83] - Sustained low natural gas prices have resulted in decreased activity and pricing pressure, with the Haynesville rig count declining by approximately 50% since the end of 2022[83] - The company anticipates that revenue, net income, and adjusted EBITDA for Q2 2024 will be lower than Q1 2024, as operators in gas-levered basins are expected to decrease activity[84] Results of Operations Q1 2024 revenues decreased 13% to $142.1 million, leading to a 28% drop in adjusted gross profit and a 32% increase in net loss to $8.1 million Q1 2024 vs Q1 2023 Results of Operations (in thousands) | Metric | Q1 2024 | Q1 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $142,120 | $163,408 | (13)% | | Adjusted gross profit | $26,114 | $36,290 | (28)% | | General and administrative expenses | $12,265 | $19,714 | (38)% | | Net loss | ($8,055) | ($6,109) | 32% | - The decrease in revenue was prevalent across all service lines, with cementing revenue showing the largest decline of $14.2 million (23%) due to pricing and job count decreases[87] - The significant decrease in G&A expenses was primarily due to $6.4 million in costs associated with the Units offering in Q1 2023 that did not recur in Q1 2024[89] Non-GAAP Financial Measures Q1 2024 Adjusted EBITDA decreased 40% to $15.0 million, and Adjusted ROIC fell to 6.0%, reflecting a decline in non-GAAP performance metrics Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net loss | ($8,055) | ($6,109) | | EBITDA | $14,111 | $17,360 | | Adjusted EBITDA | $15,034 | $25,009 | Adjusted ROIC Calculation | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Adjusted after-tax net operating income | $4,454 | $12,962 | | Average total capital | $296,822 | $320,622 | | Adjusted ROIC | 6.0% | 16.2% | Liquidity and Capital Resources As of March 31, 2024, total liquidity was $37.5 million, comprising cash and ABL Credit Facility availability, with semi-annual interest payments on 2028 Notes impacting cash flow - Total liquidity at March 31, 2024 was $37.5 million, comprising $10.2 million in cash and $27.3 million of availability under the ABL Credit Facility[113] - The company's liquidity is impacted by semi-annual interest payments of $19.5 million on its 2028 Notes[113] - An at-the-market (ATM) equity distribution agreement was established in November 2023, allowing for the sale of up to $30.0 million in common stock, though no shares were sold in Q1 2024[114][115] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from providing market risk disclosures 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[135] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2024, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[137] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[138] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings, but management does not expect a material adverse effect on its financial condition - The company is subject to various legal proceedings but does not expect the outcomes to have a material adverse effect on its financial condition[140] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes have been made to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[141] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[142] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[143] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[144] Item 5. Other Information The company reported no other information for this item - None[145] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and Interactive Data Files (XBRL) - The report includes a list of exhibits filed, such as CEO/CFO certifications and XBRL data files[147][148]