Nine(US:NINE)2021-08-07 23:17Financial Data and Key Metrics Changes - For Q2 2021, the company reported revenue of $84.8 million, a 27% increase compared to Q1 2021, and within the guidance range of $78 million to $86 million [5][19] - The net loss for the quarter was $24.5 million, with adjusted EBITDA at negative $0.4 million [13][18] - Cash and cash equivalents stood at $33.1 million, with total liquidity of $85.4 million as of June 30, 2021 [14] Business Line Data and Key Metrics Changes - Cementing revenue increased by approximately 19% quarter-over-quarter, totaling $27.3 million, driven by activity and price increases [11][15] - Coiled tubing revenue rose by approximately 32% quarter-over-quarter, reaching $14.5 million, with a 25% increase in days worked [17] - Wireline revenue surged by 46% to $18.6 million, with significant market share gains in the Permian [12][16] - Completion tools revenue increased by approximately 22%, totaling $24.4 million, with a 26% increase in completed stages [16] Market Data and Key Metrics Changes - The EIA reported a 19% increase in completed wells quarter-over-quarter, primarily driven by a 26% increase in the Permian [6][7] - The average active frac crews in the U.S. increased by approximately 13% quarter-over-quarter, with about half operating in the Permian [7] Company Strategy and Development Direction - The company is focused on implementing price increases in cementing (10% to 20%) and coiled tubing (8% to 12%) services while navigating labor and materials inflation [9][10] - The strategy emphasizes being an asset and labor-light company, with revenue growth outpacing headcount increases [10][21] - The company is converting existing wireline units to electric wireline to reduce carbon emissions and enhance service offerings [20] Management's Comments on Operating Environment and Future Outlook - Management anticipates Q3 2021 to outperform Q2 in terms of activity and revenue, projecting revenue between $95 million and $103 million [21] - The labor shortage is a significant challenge, impacting service quality and revenue potential [9][54] - The company expects moderate activity increases for the remainder of 2021, with a focus on maintaining service quality and safety [19][54] Other Important Information - The company wrote down $2.4 million of tools inventory during the quarter as part of transitioning to new technology [6][15] - General and administrative expenses increased to $12.2 million due to a legal accrual [17] Q&A Session Summary Question: Incrementals going into Q3 - Management indicated that a gross margin increment of about 35% in Q2 could be expected for Q3, but it is not guaranteed [25] Question: Pricing and cost inflation - Management noted the dynamic nature of the market makes it difficult to predict how much pricing can be pushed through due to fluctuating costs [27] Question: Free cash flow expectations - Management stated that working capital will continue to be a cash drain, and free cash flow positivity is not expected in the near term due to CapEx and coupon payments [30][32] Question: ESG benefits of dissolvables - Management highlighted significant reductions in carbon emissions with dissolvable plugs compared to traditional methods, making them more appealing to customers [35][36] Question: Customer interest in ESG - There has been a notable increase in customer interest in ESG metrics and cleaner technologies over the past 60 to 90 days [40][41] Question: Cementing supply chain issues - Management acknowledged ongoing cement shortages and emphasized the importance of strong supplier relationships to mitigate risks [48][49] Question: Labor quality concerns - Management expressed concerns about the quality of labor available and its potential impact on service quality and revenue [53][54] Question: Coupon payments - Management confirmed that a coupon payment of $14 million is due in Q4 [56]