Nine(US:NINE)2022-08-07 12:35Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $142.3 million, exceeding guidance of $130 million to $140 million, reflecting a 22% increase quarter-over-quarter [6][7] - Adjusted EBITDA was $18.9 million, a 55% increase quarter-over-quarter, with an adjusted EBITDA margin of 13% [6][15] - Net loss for the quarter was $1 million, with basic earnings per share at negative $0.03 [15] Business Line Data and Key Metrics Changes - Cementing service line revenue increased by approximately 22% quarter-over-quarter, totaling $55.2 million [10][19] - Completion tools revenue rose by approximately 15% quarter-over-quarter, driven by a 33% increase in Stinger dissolvable plugs sold [13][19] - Wireline revenue increased by approximately 23%, totaling $26.3 million, primarily due to market share gains and price increases [13][19] - Coiled tubing revenue increased by approximately 28%, driven by increased utilization and price increases [14][20] Market Data and Key Metrics Changes - Average frac crew count in Q2 was approximately 250, an 8% increase quarter-over-quarter [7] - EIA reported completions increased by approximately 3% and new wells drilled increased by approximately 15% [7] - Labor and supply chain bottlenecks remain significant issues, with an unemployment rate around 3.6% [10] Company Strategy and Development Direction - The company is optimistic about the outlook for the second half of 2022 and into 2023, focusing on price increases and market share growth [25][29] - The company anticipates continued price increases due to labor shortages and supply chain constraints [9][27] - The strategic focus on dissolvable technology is expected to drive growth, with a projected increase in revenue across all service lines in Q3 [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about potential recessionary pressures but believes North American shale production will remain vital for global supply [25][26] - The company expects Q3 revenue to be between $145 million to $155 million, with improved adjusted EBITDA and cash flow [29] - Management noted that supply chain disruptions could impact the availability of cement, which may lead to challenges in meeting customer demand [33][35] Other Important Information - As of June 30, 2022, the company had cash and cash equivalents of $22.4 million and total liquidity of $74.5 million [17] - The company reported general and administrative expenses of $12.5 million and depreciation and amortization expenses of $10.3 million for Q2 [21] Q&A Session Summary Question: Concerns about cement supply with increased rig count - Management acknowledged concerns about cement supply tightening and indicated that they are working through customer allocations based on efficiency and history [33][34] Question: Insights on dissolvable technology market growth - Management noted that gains in dissolvable technology sales are coming from both new customers and existing customers increasing their purchases [36][38] Question: Expectations for incremental gross profit margins in Q3 - Management expects much stronger incremental margins in Q3 due to price increases [42][44] Question: Free cash flow generation in Q3 - Management indicated that generating positive free cash flow in Q3 is a fair assumption [45] Question: Client activity levels in Haynesville and Permian - Management noted mixed signals regarding activity levels but indicated that operators may be more proactive due to supply chain constraints [47][48] Question: Expectations for SG&A expenses in Q3 and Q4 - Management expects SG&A expenses to remain similar going forward [49]