Nine(NINE) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Company revenue for Q2 2020 was $52.7 million, with a net loss of $24.2 million and adjusted EBITDA of negative $11 million [14][24] - Basic EPS was negative $0.81 per share, and adjusted net loss for the quarter was negative $33.7 million or negative $1.13 per share [14] - The company reported a strong cash balance of $88.7 million as of June 30, 2020, with total liquidity of $133.5 million [23] Business Line Data and Key Metrics Changes - U.S. completed wells decreased approximately 55% quarter-over-quarter, while new wells decreased by approximately 54% [11] - Cementing revenue for the quarter was $28.4 million, a decrease of approximately 58% quarter-over-quarter [26] - Wireline revenue for the quarter was $9.7 million, a decrease of approximately 79% [27] - Coiled tubing revenue was $7.6 million, a decrease of approximately 64% [28] Market Data and Key Metrics Changes - North American operators significantly cut capital expenditures due to reduced demand from the COVID-19 pandemic, with frac crews in the Permian Basin dropping to 20 to 25 [8] - Overall, U.S. frac crews were estimated to be down approximately 70% year-to-date by June [10] - Revenue in the Permian declined by approximately 70% from Q1 to Q2, while the Haynesville and Northeast saw revenue declines of approximately 42% [38] Company Strategy and Development Direction - The company is focused on cash preservation and debt service, implementing cost-cutting measures that included payroll reductions of approximately $54 million and a headcount reduction of approximately 56% [13] - The company aims to maintain geographic diversity and capitalize on potential activity increases in the Permian, Northeast, and Haynesville basins [36][38] - Future capital expenditures are expected to range from $10 million to $15 million for 2020, with a focus on maintaining operational flexibility [40] Management's Comments on Operating Environment and Future Outlook - The second half of 2020 is expected to remain challenging and unpredictable due to the ongoing COVID-19 pandemic [32] - There are early signs of minimal frac crew additions in July, with cautious optimism for slight activity increases in late August or early September [33] - Management believes they are at or near the trough from an activity perspective, with expectations for gradual recovery beginning in July and August [39] Other Important Information - The company has seen a significant increase in the deployment of its low-temperature dissolvable plug technology, doubling the number of Stingers deployed quarter-over-quarter [15] - The company is working on the commercialization of a new composite plug, which has been delayed due to supply chain issues related to the COVID pandemic [19] Q&A Session Summary Question: Confidence in sustaining the balance sheet without material cash burn - Management expressed confidence in sustaining the balance sheet, noting that they believe they have hit the trough in Q2 and can shelter margins due to variable costs [45][46] Question: Customer willingness to engage on new technology - Management noted a strong appetite for new technology, as evidenced by the increase in Stingers deployed despite overall market declines [49][52] Question: Immediate pickup in demand for specific service lines - Management indicated that completion-focused service lines, particularly coiled tubing and tools, have seen a response to increased frac crew activity [61] Question: Seasonal impacts and customer plans for Q4 - Management does not anticipate a significant decline in Q4 compared to previous years, although some seasonality is expected [60]