Nine(US:NINE)2022-11-07 21:01Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $167.4 million, exceeding guidance of $145 million to $155 million, representing an 18% increase quarter-over-quarter [7] - Adjusted EBITDA was $32.6 million, reflecting a 72% increase quarter-over-quarter, with an adjusted EBITDA margin of 19% [7] - Free cash flow generated was $26.8 million before changes in net working capital and $9.2 million after changes [8] - Net income for the quarter was $14.3 million, with basic EPS of $0.46 and ROIC of approximately 29% [18] Business Line Data and Key Metrics Changes - Cementing revenue was $63.9 million, a 16% increase, with 1,130 jobs completed, down 2% from the previous quarter [22] - Wireline revenue was $29.3 million, an 11% increase, with 5,701 stages completed, up 5% [23] - Completion tools revenue was $40.8 million, a 22% increase, with 34,214 stages completed, up 17% [23] - Coiled tubing revenue was $33.4 million, a 21% increase, with days worked up 10% and utilization at 54% [24] Market Data and Key Metrics Changes - Average frac crew count increased by approximately 7% to between 270 and 275 [11] - EIA reported completions were flat quarter-over-quarter, while new wells drilled increased by approximately 6% [11] - Cementing pricing has increased by approximately 58% since Q4 2020, driven by undersupply of equipment and labor [12] Company Strategy and Development Direction - The company is focusing on expanding its market share in completion tools and cementing, with a strong emphasis on R&D and innovation [12][35] - Plans to electrify wireline units are driven by customer demand for ESG compliance [49] - The company aims to maintain strong free cash flow generation while reducing capital allocation risk in a cyclical business [35] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the outlook for 2023, citing North American shale production as critical for global supply [33] - The company expects pricing to remain steady into Q4 with potential increases in early 2023 as budgets reset [37] - Management anticipates Q4 revenue to be relatively flat compared to Q3, with projected revenue between $160 million to $170 million [37] Other Important Information - The company repurchased $13 million par value of bonds for $10.1 million, reducing total bonds outstanding to $307 million [8][21] - CapEx for Q3 2022 was $4.6 million, with full-year guidance unchanged at $20 million to $30 million [26] Q&A Session Summary Question: Can you frame the valve opportunity with the NOC in the Middle East? - Management indicated that this is a significant opportunity for Nine, reflecting their ability to design tools not offered by larger service providers internationally [42][44] Question: Do you agree with the expected 5% to 10% price increase for next year? - Management believes that the anticipated inflation is underestimated and expects higher price increases due to ongoing labor challenges [45][46] Question: How many electric wireline units will be operational by the end of 2023? - Management confirmed that there will be six fully electrified units by the end of 2023, with a seventh unit having options for electrification [50] Question: What is the cementing revenue number of stages? - Cementing revenue was confirmed at $63.9 million with 1,130 jobs completed [55][56] Question: When will the $10 million orders from the Middle East convert to revenues? - Management stated that these orders will convert over the course of the next year [58] Question: Are you negotiating with E&Ps for next year’s pricing? - Management has started conversations and is seeing traction on pricing above the stated 8% to 10% [63] Question: Do you expect EBITDA margins to remain flat in Q4? - Management did not provide specific guidance on EBITDA margins, indicating it will be mix-dependent [65] Question: What is the growth outlook for dissolvable plugs? - Management noted a broad customer base and increasing international sales, indicating strong momentum in the dissolvable plug market [87][89]