Nine(US:NINE)2023-08-04 19:47Financial Data and Key Metrics Changes - Revenue for Q2 2023 was $161.4 million, within the guidance of $158 million to $166 million, with adjusted EBITDA of $21.7 million and an adjusted EBITDA margin of 13% [22][9] - Diluted earnings per share was negative $0.08, and return on invested capital (ROIC) for the quarter was 12.9% [4] - The company reported net cash provided by operating activities of $27.1 million, with an average Days Sales Outstanding (DSO) of 52.4 days [12][9] - General and administrative expenses were $14.2 million, and depreciation and amortization expenses were $10.3 million [11] Business Line Data and Key Metrics Changes - Cementing revenue decreased by approximately 5% to $58.1 million, with a decrease in the average blended revenue per job by approximately 5% [29] - Wireline revenue increased by approximately 4% to $31 million, with a 12% increase in completed wireline stages, but the average blended revenue per stage decreased by approximately 7% [10] - Completion tool revenue was $38.9 million, an increase of approximately 3%, despite a 14% decrease in completed stages [10] - Coiled tubing revenue remained flat at $33.5 million, with a 16% decrease in coiled tubing days but a 19% increase in average blended day rate [30] Market Data and Key Metrics Changes - The Northeast rig count has been stable, but pricing pressure and completion delays are affecting revenue and margins [23] - The U.S. rig count declined approximately 14% through the first half of the year, with significant declines in the Eagle Ford and Haynesville regions [24] - International revenue is approximately 4% to 5% of consolidated revenue, with a strategy to increase this profile [37] Company Strategy and Development Direction - The company is focused on maintaining pricing and market share through proprietary slurries and well site execution, while also investing in internal R&D for new technology [6][13] - There is a cautious optimism regarding a potential rebound in rig counts and activity levels in the second half of 2023 and into 2024 [13][32] - The company aims to reduce dependency on North American land by increasing international sales and focusing on completion tools [37] Management's Comments on Operating Environment and Future Outlook - Management noted that the market remains volatile, with commodity prices being erratic and unpredictable, complicating capital allocation decisions [32] - There is an expectation for Q3 revenue to decline compared to Q2, projected between $140 million and $150 million, with anticipated declines in adjusted EBITDA and margins [14] - Management is optimistic about the potential for recovery in activity levels, but acknowledges the challenges posed by pricing pressures and market conditions [92][63] Other Important Information - The company completed 6,106 wireline stages in Q2, with a noted increase in international orders contributing to revenue [10][60] - The company has a strong liquidity position of $60.1 million as of June 30, 2023, with $41.1 million in cash and cash equivalents [28] Q&A Session Summary Question: Can you provide some color on international sales and completion tools? - Management indicated that international revenue is recurring and part of the strategy to increase this profile [17] Question: What are the plans for the remaining debt outstanding? - Management plans to use generated cash flow to pay down the credit facility first, then focus on bonds [19] Question: How is the demand for coiled tubing units affected by dissolvable plugs? - Management noted that demand for coiled tubing has remained strong despite the penetration of dissolvable plugs [40] Question: Have conversations with customers changed due to recent commodity price strength? - Management stated that conversations regarding pricing have not changed significantly yet, as stability in commodity prices is needed [41] Question: What is the strategy for growth in completion tools? - The company is focusing on internal R&D and has secured contracts in the Middle East, aiming for organic growth and potential M&A [44][45] Question: How is the company handling labor amidst market volatility? - Management emphasized the importance of retaining skilled labor and is cautious about making cuts, anticipating a recovery in activity [92][103]