Nine(US:NINE)2021-05-09 10:13Financial Data and Key Metrics Changes - Company revenue for Q1 2021 was $66.6 million, representing an increase of approximately 8% quarter-over-quarter despite a 3% decrease in completed wells [16][8] - Net loss for the quarter was $8.2 million, with adjusted EBITDA at negative $3.4 million and basic EPS at negative $0.28 [16][24] - Cash and cash equivalents as of March 31, 2021, were $53 million, with total liquidity of $98.8 million [19] Business Line Data and Key Metrics Changes - Cementing revenue increased by approximately 22% quarter-over-quarter, totaling $22.9 million, driven by market share gains in the Delaware basin [11][21] - Coiled tubing revenue decreased by approximately 7% to $10.9 million due to weather-related shutdowns [23] - Completion tools revenue increased by approximately 11% to $20 million, with stages completed rising by 24% [23][20] Market Data and Key Metrics Changes - U.S. new wells drilled increased by approximately 25% quarter-over-quarter, with active frac crews estimated at 185 to 190 [7] - The company experienced a 6% market share gain in stages completed throughout 2020, despite a 3% decrease in completed wells [12] Company Strategy and Development Direction - The company is focused on gaining market share across service lines while maintaining positive gross margins, particularly in the Permian, Northeast, and Haynesville regions [32] - Plans to convert existing wireline units to electric wireline to reduce emissions and improve efficiency [31] - The company is monitoring supply chain issues closely, particularly cement shortages, which could impact operations [34][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that Q1 2021 would be the worst quarter for the company, with expectations for sequential revenue increases in Q2 and Q3 [27][33] - The labor market is tightening, which could lead to potential price increases and the ability to pass through incremental costs [29][30] - Management noted that the service sector is facing significant challenges, including service quality issues and labor shortages [42][56] Other Important Information - The company repurchased $26.3 million par value of bonds for $8.4 million cash, reducing annual cash interest expense [16][18] - Total capital expenditures for Q1 were $1.9 million, with anticipated cash outflows for Q2 including senior notes interest payments of approximately $14 million [25] Q&A Session Summary Question: What is embedded in the Q2 revenue guide regarding pricing and material shortages? - Management indicated that activity is primarily driving revenue growth, with hopes for price increases later in the year [39] Question: Are incremental margins expected to remain in the 20%-25% range? - Management stated that while higher incremental margins are possible as pricing increases, timing remains uncertain [50] Question: Is there potential for free cash flow positive quarters in 2021? - Management noted that free cash flow will depend on the timing of interest payments, CapEx, and working capital [52] Question: How does the simultaneous frac market growth impact Nine? - Management expressed that increased efficiency in customer operations would positively affect margins [53] Question: Any traction in international markets for completion tools? - Management confirmed that new tools have been introduced to international markets, with positive traction noted [54] Question: Will idle cementing units return to work this year? - Management indicated that there is a possibility for idle units to return to work due to market share gains [55] Question: Is service quality an issue across all service lines? - Management acknowledged that service quality issues are prevalent across multiple service lines, particularly in coiled tubing [56]