• Full year 2023 revenue, net loss and adjusted EBITDAA of $609.5 million, $(32.2) million and $73.0 million, respectively
  • Revenue, net loss and adjusted EBITDA of $144.1 million, $(10.3) million and $14.6 million, respectively, for the fourth quarter of 2023
  • Increased total number of Stinger Dissolvable units sold by approximately 18% year- over-year
  • Increased international revenue by approximately 16% year-over-year

HOUSTON–(BUSINESS WIRE)–Nine Energy Service, Inc. (“Nine” or the “Company”) (NYSE: NINE) reported fourth quarter 2023 revenues of $144.1 million, net loss of $(10.3) million, or $(0.30) per diluted share and $(0.30) per basic share, and adjusted EBITDA of $14.6 million. The Company had provided original fourth quarter 2023 revenue guidance between $137.0 and $147.0 million, with actual results coming within the provided range.


Fourth quarter revenue was in-line with expectations, coming within the upper end of our original guidance,” said Ann Fox, President and Chief Executive Officer, Nine Energy Service.

The oil and gas market continued to be volatile in 2023, with the US rig count declining by approximately 20% since the end of 2022. Many of these rig declines came out of the gassy basins in conjunction with the average natural gas price declining by over 60% year-over-year. 2023 once again illustrated that the market can shift quickly, which is why we have created a nimble business that can flex quickly with market conditions.”

Despite a challenging market backdrop, the Nine team accomplished a lot in 2023, including our 2028 senior secured notes offering, extension of our ABL credit facility and full redemption of our prior senior notes due 2023. This new capital structure gives us additional flexibility and de-levering continues to be a high priority for Nine.”

I am extremely proud of our completion tool offering and what we have been able to accomplish in 2023 with both our existing tools and the introduction of new tools in the domestic and international markets. We have surpassed over 370,000 Scorpion Composite Plugs run since we acquired the technology in 2015. Despite activity declines year-over-year, we increased the total number of Stinger Dissolvable units sold by approximately 18% and increased our total international revenue by approximately 16% year-over-year. We also introduced new technology with our Pincer Hybrid Frac Plug and look forward to gaining market share with this tool in 2024.”

During 2023, we made significant progress with ESG, quantifying the Company’s greenhouse gas emissions for 2021 and 2022 and we will have 2023 data in 2024. We are identifying gaps and procedures to make the collection of this data more accurate and efficient, as well as developing a strategy on how to potentially reduce our emissions moving forward.”

Turning to Q4, activity levels and pricing were mostly stable versus Q3. We had a significant increase in our international tools sales quarter-over-quarter, which helped drive strong incremental margins.”

The market can change quickly, but I do not foresee any catalyst for activity increases in the near-term. Q1 activity levels and pricing have been mostly flat compared to Q4, in conjunction with the US rig count. Because of this, we expect Q1 revenue to be relatively flat compared with Q4.”

We will continue to focus on our strategy of being an asset and labor light business that couples excellent service and forward-leaning technology to help our customers lower their cost to complete. Our team can navigate sharp market changes and quickly capitalize on improving markets. Our service and geographic diversity provides us balance and we are focused on diversifying more of our top-line revenue streams to completion tools and the international markets.”

Operating Results

For the year ended December 31, 2023, the Company reported revenues of $609.5 million, net loss of $(32.2) million, or $(0.97) per diluted share and $(0.97) per basic share, and adjusted EBITDA of $73.0 million. For the full year 2023, the Company reported gross profit of $80.2 million and adjusted gross profitB of $118.8 million. For the year ended December 31, 2023, the Company generated ROIC of (10.8)% and adjusted ROICC of 8.8%.

During the fourth quarter of 2023, the Company reported revenues of $144.1 million, gross profit of $16.2 million and adjusted gross profit of $25.6 million. During the fourth quarter, the Company generated ROIC of (3.4)% and adjusted ROIC of 3.9%.

During the fourth quarter of 2023, the Company reported general and administrative (“G&A”) expense of $12.8 million. For the year ended December 31, 2023, the Company reported G&A expense of $59.8 million. Depreciation and amortization expense (“D&A”) in the fourth quarter of 2023 was $9.8 million. For the year ended December 31, 2023, the Company reported D&A expense of $40.7 million.

The Company’s tax provision was approximately $0.6 million for the year ended December 31, 2023. The provision for 2023 is the result of the Company’s tax position in state and non-U.S. tax jurisdictions.

Liquidity and Capital Expenditures

For the year ended December 31, 2023, the Company reported net cash provided by operating activities of $45.5 million. For the year ended December 31, 2023, the Company reported total capital expenditures of approximately $22.3 million, which was below management’s original full year 2023 guidance of $25 to $35 million.

As of December 31, 2023, Nine’s cash and cash equivalents were $30.8 million, and the Company had $28.1 million of availability under the revolving credit facility, resulting in a total liquidity position of $58.9 million as of December 31, 2023. On December 31, 2023, the Company had $57.0 million of borrowings under the revolving credit facility. Subsequent to December 31, 2023, the Company paid down an additional $5.0 million of borrowings on the revolving credit facility.

On November 6, 2023, the Company entered into an Equity Distribution Agreement. During the quarter ended December 31, 2023, no sales were made under the Equity Distribution Agreement.

ABC See end of press release for definitions of these non-GAAP measures. These measures are intended to provide additional information only and should not be considered as alternatives to, or more meaningful than, net income (loss), gross profit or any other measure determined in accordance with GAAP. Certain items excluded from these measures are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets. Our computation of these measures may not be comparable to other similarly titled measures of other companies.

Conference Call Information

The call is scheduled for Friday, March 8, 2024, at 9:00 am Central Time. Participants may join the live conference call by dialing U.S. (Toll Free): (877) 524-8416 or International: (412) 902-1028 and asking for the “Nine Energy Service Earnings Call”. Participants are encouraged to dial into the conference call ten to fifteen minutes before the scheduled start time to avoid any delays entering the earnings call.

For those who cannot listen to the live call, a telephonic replay of the call will be available through March 22, 2024 and may be accessed by dialing U.S. (Toll Free): (877) 660-6853 or International: (201) 612-7415 and entering the passcode of 13739256.

About Nine Energy Service

Nine Energy Service is an oilfield services company that offers completion solutions within North America and abroad. The Company brings years of experience with a deep commitment to serving clients with smarter, customized solutions and world-class resources that drive efficiencies. Serving the global oil and gas industry, Nine continues to differentiate itself through superior service quality, wellsite execution and cutting-edge technology. Nine is headquartered in Houston, Texas with operating facilities in the Permian, Eagle Ford, Haynesville, SCOOP/STACK, Niobrara, Barnett, Bakken, Marcellus, Utica and Canada.

For more information on the Company, please visit Nine’s website at nineenergyservice.com.

Forward Looking Statements

The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. Forward-looking statements also include statements that refer to or are based on projections, uncertain events or assumptions. The forward-looking statements included herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, the level of capital spending and well completions by the onshore oil and natural gas industry, which may be affected by geopolitical and economic developments in the U.S. and globally, including conflicts, instability, acts of war or terrorism in oil producing countries or regions, particularly Russia, the Middle East, South America and Africa, as well as actions by members of the Organization of the Petroleum Exporting Countries and other oil exporting nations; general economic conditions and inflation, particularly, cost inflation with labor or materials; equipment and supply chain constraints; the Company’s ability to attract and retain key employees, technical personnel and other skilled and qualified workers; the Company’s ability to maintain existing prices or implement price increases on our products and services; pricing pressures, reduced sales, or reduced market share as a result of intense competition in the markets for the Company’s dissolvable plug products; conditions inherent in the oilfield services industry, such as equipment defects, liabilities arising from accidents or damage involving our fleet of trucks or other equipment, explosions and uncontrollable flows of gas or well fluids, and loss of well control; the Company’s ability to implement and commercialize new technologies, services and tools; the Company’s ability to grow its completion tool business domestically and internationally; the adequacy of the Company’s capital resources and liquidity, including the ability to meet its debt obligations; the Company’s ability to manage capital expenditures; the Company’s ability to accurately predict customer demand, including that of its international customers; the loss of, or interruption or delay in operations by, one or more significant customers, including certain of the Company’s customers outside of the United States; the loss of or interruption in operations of one or more key suppliers; the incurrence of significant costs and liabilities resulting from litigation; cybersecurity risks; changes in laws or regulations regarding issues of health, safety and protection of the environment; and other factors described in the “Risk Factors” and “Business” sections of the Company’s most recently filed Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof, and, except as required by law, the Company undertakes no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.

 

NINE ENERGY SERVICE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

   

Three Months Ended

 

Year Ended December 31,

December 31,

2023

September 30,

2023

 

2023

2022

   

Revenues

$

144,073

 

$

140,617

 

 

$

609,526

 

$

593,382

 

Cost and expenses

 

Cost of revenues (exclusive of depreciation and

 

amortization shown separately below)

 

118,514

 

 

117,676

 

 

 

490,750

 

 

457,093

 

General and administrative expenses

 

12,810

 

 

13,060

 

 

 

59,817

 

 

51,653

 

Depreciation

 

7,003

 

 

7,285

 

 

 

29,141

 

 

26,784

 

Amortization of intangibles

 

2,829

 

 

2,895

 

 

 

11,516

 

 

13,463

 

Loss on revaluation of contingent liability

 

25

 

 

493

 

 

 

437

 

 

454

 

Loss on sale of property and equipment

 

699

 

 

21

 

 

 

292

 

 

367

 

Income (loss) from operations

 

2,193

 

 

(813

)

 

 

17,573

 

 

43,568

 

Interest expense

 

12,813

 

 

12,858

 

 

 

51,119

 

 

32,486

 

Interest income

 

(324

)

 

(462

)

 

 

(1,270

)

 

(305

)

Gain on extinguishment of debt

 

 

 

 

 

 

 

 

(2,843

)

Other income

 

(162

)

 

(162

)

 

 

(648

)

 

(709

)

Income (loss) before income taxes

 

(10,134

)

 

(13,047

)

 

 

(31,628

)

 

14,939

 

Provision for income taxes

 

171

 

 

215

 

 

 

585

 

 

546

 

Net income (loss)

$

(10,305

)

$

(13,262

)

 

$

(32,213

)

$

14,393

 

   

Earnings (loss) per share

 

Basic

$

(0.30

)

$

(0.39

)

 

$

(0.97

)

$

0.47

 

Diluted

$

(0.30

)

$

(0.39

)

 

$

(0.97

)

$

0.45

 

Weighted average shares outstanding

 

Basic

 

33,850,317

 

 

33,659,386

 

 

 

33,282,234

 

 

30,930,890

 

Diluted

 

33,850,317

 

 

33,659,386

 

 

 

33,282,234

 

 

32,251,398

 

   

Other comprehensive income (loss), net of tax

 

Foreign currency translation adjustments, net of tax of $0 and $0

$

213

 

$

(22

)

 

$

(31

)

$

(293

)

Total other comprehensive income (loss), net of tax

 

213

 

 

(22

)

 

 

(31

)

 

(293

)

Total comprehensive income (loss)

$

(10,092

)

$

(13,284

)

 

$

(32,244

)

$

14,100

 

NINE ENERGY SERVICE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

At December 31,

2023

 

2022

 

Assets

Current assets

Cash and cash equivalents

$

30,840

 

$

17,445

 

Accounts receivable, net

 

88,449

 

 

105,277

 

Income taxes receivable

 

490

 

 

741

 

Inventories, net

 

54,486

 

 

62,045

 

Prepaid expenses and other current assets

 

9,368

 

 

11,217

 

Total current assets

 

183,633

 

 

196,725

 

Property and equipment, net

 

82,366

 

 

89,717

 

Operating lease right of use assets, net

 

42,056

 

 

36,336

 

Finance lease right of use assets, net

 

51

 

 

547

 

Intangible assets, net

 

90,429

 

 

101,945

 

Other long-term assets

 

3,449

 

 

1,564

 

Total assets

$

401,984

 

$

426,834

 

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities

Accounts payable

$

33,379

 

$

42,211

 

Accrued expenses

 

36,171

 

 

28,391

 

Current portion of long-term debt

 

2,859

 

 

2,267

 

Current portion of operating lease obligations

 

10,314

 

 

7,956

 

Current portion of finance lease obligations

 

31

 

 

178

 

Total current liabilities

 

82,754

 

 

81,003

 

Long-term liabilities

Long-term debt

 

320,520

 

 

338,031

 

Long-term operating lease obligations

 

32,594

 

 

29,370

 

Other long-term liabilities

 

1,746

 

 

1,937

 

Total liabilities

 

437,614

 

 

450,341

 

 

Stockholders’ equity (deficit)

Common stock (120,000,000 shares authorized at $.01 par value; 35,324,861 and 33,221,266 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively)

 

353

 

 

332

 

Additional paid-in capital

 

795,106

 

 

775,006

 

Accumulated other comprehensive loss

 

(4,859

)

 

(4,828

)

Accumulated deficit

 

(826,230

)

 

(794,017

)

Total stockholders’ equity (deficit)

 

(35,630

)

 

(23,507

)

Total liabilities and stockholders’ equity (deficit)

$

401,984

 

$

426,834

 

NINE ENERGY SERVICE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

 

Year Ended December 31,

2023

 

2022

 

Cash flows from operating activities

Net income (loss)

$

(32,213

)

$

14,393

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities

Depreciation

 

29,141

 

 

26,784

 

Amortization of intangibles

 

11,516

 

 

13,463

 

Amortization of deferred financing costs

 

7,413

 

 

2,545

 

Amortization of operating leases

 

12,524

 

 

8,670

 

Provision for (recovery of) doubtful accounts

 

333

 

 

(166

)

Provision for inventory obsolescence

 

2,320

 

 

2,966

 

Abandonment of in process research and development

 

 

 

1,000

 

Stock-based compensation expense

 

2,169

 

 

2,440

 

Gain on extinguishment of debt

 

 

 

(2,843

)

Loss on sale of property and equipment

 

292

 

 

367

 

Loss on revaluation of contingent liability

 

437

 

 

454

 

Changes in operating assets and liabilities, net of effects from acquisitions

Accounts receivable, net

 

16,489

 

 

(41,114

)

Inventories, net

 

5,219

 

 

(22,968

)

Prepaid expenses and other current assets

 

1,148

 

 

(818

)

Accounts payable and accrued expenses

 

1,058

 

 

19,476

 

Income taxes receivable/payable

 

252

 

 

655

 

Operating lease obligations

 

(12,344

)

 

(8,698

)

Other assets and liabilities

 

(245

)

 

66

 

Net cash provided by operating activities

 

45,509

 

 

16,672

 

Cash flows from investing activities

Proceeds from sales of property and equipment

 

606

 

 

2,959

 

Proceeds from property and equipment casualty losses

 

840

 

 

175

 

Purchases of property and equipment

 

(24,603

)

 

(28,551

)

Net cash used in investing activities

 

(23,157

)

 

(25,417

)

Cash flows from financing activities

Proceeds from ABL credit facility

 

40,000

 

 

24,000

 

Payments on ABL credit facility

 

(15,000

)

 

(7,000

)

Proceeds from units offering, net of discount

 

279,750

 

 

 

Redemption of senior notes due 2023

 

(307,339

)

 

 

Purchases of senior notes due 2023

 

 

 

(10,081

)

Cost of debt issuance

 

(6,290

)

 

 

Payments on Magnum promissory notes

 

 

 

(1,125

)

Proceeds from short-term debt

 

4,733

 

 

4,086

 

Payments of short-term debt

 

(4,141

)

 

(2,787

)

Payments on finance leases

 

(217

)

 

(1,269

)

Payments of contingent liability

 

(387

)

 

(195

)

Vesting of restricted stock and stock units

 

(2

)

 

(780

)

Net cash provided by (used in) financing activities

 

(8,893

)

 

4,849

 

Impact of foreign currency exchange on cash

 

(64

)

 

(168

)

Net increase (decrease) in cash and cash equivalents

 

13,395

 

 

(4,064

)

Cash and cash equivalents

Beginning of period

 

17,445

 

 

21,509

 

End of period

$

30,840

 

$

17,445

 

NINE ENERGY SERVICE, INC.

RECONCILIATION OF ADJUSTED EBITDA

(In Thousands)

(Unaudited)

 

Three Months Ended

 

Year Ended December 31,

December 31,

2023

September 30,

2023

 

2023

2022

 

Net income (loss)

$

(10,305

)

$

(13,262

)

$

(32,213

)

$

14,393

 

Interest expense

 

12,813

 

 

12,858

 

 

51,119

 

 

32,486

 

Interest income

 

(324

)

 

(462

)

 

(1,270

)

 

(305

)

Depreciation

 

7,003

 

 

7,285

 

 

29,141

 

 

26,784

 

Amortization of intangibles

 

2,829

 

 

2,895

 

 

11,516

 

 

13,463

 

Provision for income taxes

 

171

 

 

215

 

 

585

 

 

546

 

EBITDA

$

12,187

 

$

9,529

 

$

58,878

 

$

87,367

 

Gain on extinguishment of debt

 

 

 

 

 

 

 

(2,843

)

Loss on revaluation of contingent liability (1)

 

25

 

 

493

 

 

437

 

 

454

 

Restructuring charges

 

823

 

 

315

 

 

2,027

 

 

3,393

 

Stock-based compensation and cash award expense

 

898

 

 

1,208

 

 

4,867

 

 

4,914

 

Certain refinancing costs (2)

 

 

 

 

 

6,396

 

 

 

Loss on sale of property and equipment

 

699

 

 

21

 

 

292

 

 

367

 

Legal fees and settlements (3)

 

16

 

 

29

 

 

69

 

 

86

 

Adjusted EBITDA

$

14,648

 

$

11,595

 

$

72,966

 

$

93,738

 

(1) Amounts relate to the revaluation of contingent liability associated with a 2018 acquisition.

(2) Amounts represent fees and expenses relating to our units offering and other refinancing activities, including cash incentive compensation to employees following the successful completion of the units offering, that were not capitalized.

(3) Amounts represent fees and legal settlements associated with legal proceedings brought pursuant to the Fair Labor Standards Act and/or similar state laws.

NINE ENERGY SERVICE, INC.

RECONCILIATION AND CALCULATION OF ADJUSTED ROIC

(In Thousands)

(Unaudited)

 

Three Months Ended

 

Year Ended December 31,

December 31,

2023

September 30,

2023

 

2023

2022

 

Net income (loss)

$

(10,305

)

$

(13,262

)

$

(32,213

)

$

14,393

 

Add back:

Interest expense

 

12,813

 

 

12,858

 

 

51,119

 

 

32,486

 

Interest income

 

(324

)

 

(462

)

 

(1,270

)

 

(305

)

Certain refinancing costs (1)

 

 

 

 

 

6,396

 

 

 

Restructuring charges

 

823

 

 

315

 

 

2,027

 

 

3,393

 

Gain on extinguishment of debt

 

 

 

 

 

 

 

(2,843

)

Adjusted after-tax net operating income (loss) (2)

$

3,007

 

$

(551

)

$

26,059

 

$

47,124

 

 

Total capital as of prior period-end:

Total stockholders’ deficit

$

(26,116

)

$

(13,412

)

$

(23,507

)

$

(39,267

)

Total debt

 

357,000

 

 

372,329

 

 

341,606

 

 

337,436

 

Less: cash and cash equivalents

 

(12,159

)

 

(41,122

)

 

(17,445

)

 

(21,509

)

Total capital as of prior period-end:

$

318,725

 

$

317,795

 

$

300,654

 

$

276,660

 

 

Total capital as of period-end:

Total stockholders’ deficit

$

(35,630

)

$

(26,116

)

$

(35,630

)

$

(23,507

)

Total debt

 

359,859

 

 

357,000

 

 

359,859

 

 

341,606

 

Less: cash and cash equivalents

 

(30,840

)

 

(12,159

)

 

(30,840

)

 

(17,445

)

Total capital as of period-end:

$

293,389

 

$

318,725

 

$

293,389

 

$

300,654

 

 

 

 

 

Average total capital

$

306,057

 

$

318,260

 

$

297,022

 

$

288,657

 

 

 

 

 

 

 

ROIC

 

-3.4

%

 

-4.2

%

 

-10.8

%

 

5.0

%

Adjusted ROIC (2)

 

3.9

%

 

-0.7

%

 

8.8

%

 

16.3

%

(1) Amounts represent fees and expenses relating to our units offering and other refinancing activities, including cash incentive compensation to employees following the successful completion of the units offering, that were not capitalized.

 

(2) Previously, in our SEC filings, press releases and other investor materials issued prior to December 31, 2023, we referred to (a) Adjusted ROIC as ROIC and (b) adjusted after-tax net operating profit (loss) as after-tax net operating profit (loss). We have made no changes to the manner in which these measures are calculated and have only revised the titles of these measures to more clearly identify them as non-GAAP measures.

NINE ENERGY SERVICE, INC.

RECONCILIATION OF ADJUSTED GROSS PROFIT (LOSS)

(In Thousands)

(Unaudited)

 

Three Months Ended

 

Year Ended December 31,

December 31,

2023

September 30,

2023

 

2023

2022

Calculation of gross profit:

Revenues

$

144,073

$

140,617

$

609,526

$

593,382

Cost of revenues (exclusive of depreciation and

amortization shown separately below)

 

118,514

 

117,676

 

490,750

 

457,093

Depreciation (related to cost of revenues)

 

6,513

 

6,775

 

27,101

 

24,909

Amortization of intangibles

 

2,829

 

2,895

 

11,516

 

13,463

Gross profit

$

16,217

$

13,271

$

80,159

$

97,917

 

Adjusted gross profit reconciliation:

Gross profit

$

16,217

$

13,271

$

80,159

$

97,917

Depreciation (related to cost of revenues)

 

6,513

 

6,775

 

27,101

 

24,909

Amortization of intangibles

 

2,829

 

2,895

 

11,516

 

13,463

Adjusted gross profit

$

25,559

$

22,941

$

118,776

$

136,289

AAdjusted EBITDA is defined as EBITDA (which is net income (loss) before interest, taxes, and depreciation and amortization) further adjusted for (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) fees and expenses relating to our units offering and other refinancing activities, (iv) loss or gain on revaluation of contingent liabilities, (v) loss or gain on the extinguishment of debt, (vi) loss or gain on the sale of subsidiaries, (vii) restructuring charges, (viii) stock-based compensation and cash award expense, (ix) loss or gain on sale of property and equipment, and (x) other expenses or charges to exclude certain items which we believe are not reflective of ongoing performance of our business, such as legal expenses and settlement costs related to litigation outside the ordinary course of business. Management believes Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure and helps identify underlying trends in our operations that could otherwise be distorted by the effect of the impairments, acquisitions and dispositions and costs that are not reflective of the ongoing performance of our business.

Contacts

Nine Energy Service Investor Contact:
Heather Schmidt

Vice President, Strategic Development, Investor Relations and Marketing

(281) 730-5113

investors@nineenergyservice.com

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