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Nine Energy Service Second Quarter 2019 Results

Share Print Bookmark    |    Monday,August 12,2019

Nine Energy Service, Inc. reported its Q2 2019 results.

The company reported second quarter 2019 revenues of $237.5 million, net income of $6.1 million and adjusted EBITDA of $38.0 million. Second quarter basic earnings per share was $0.21. Second quarter 2019 adjusted net income^D was $8.8 million, or $0.30 adjusted basic earnings per share. The Company reported second quarter 2019 adjusted EBITDA of $38.0 million and a second quarter adjusted EBITDA margin^A of approximately 16%. During the second quarter of 2019, the Company generated ROIC of 7%. During the second quarter of 2019, the Company reported net cash provided by operating activities of $11.5 million compared to $5.9 million during the first quarter, an increase of approximately 95%.

The Company had provided original second quarter 2019 revenue guidance between $230.0 and $240.0 million and adjusted EBITDA guidance between $38.0 and $42.0 million, with actual results for both falling within Management’s original guidance range.

CEO Ann Fox said: “The first quarter was in-line with what we anticipated, with both revenue and adjusted EBITDA falling within the range of Management’s original guidance. Despite a challenging environment, we were able to increase cash flow from operations by approximately 95% and anticipate this trend continuing throughout the rest of the year. Since June 30, 2019, our cash balance has increased significantly to approximately $59.0 million as of August 9, 2019, and our revolving credit facility is undrawn.

“Our operations team continues to perform very well, outpacing market activity. In cementing, we continue to outperform the market, increasing revenue by approximately 7% quarter over quarter despite U.S. new wells drilled declining by approximately 4% quarter over quarter. In wireline and completions tools, we increased the number of stages completed as a company by approximately 19% despite seasonal headwinds in Canada associated with spring break-up and U.S. completions increasing by only 6%. Our coiled tubing group increased days worked and revenue quarter over quarter despite a number of new units coming into the market.

“We remain focused and confident on the introduction and commercialization of our new technologies in Q1 of 2020, including a low-temperature dissolvable plug targeted for the Permian and Northeast markets. These technology developments, along with cash generation and evaluation of our current service lines and geographies remain our top priorities for 2019.

“At Nine, we never forecasted a back-half recovery, which continues to be our view. With so much volatility in the market, in conjunction with operators unwavering commitment to staying within capital budgets, we do anticipate significant activity declines throughout the rest of the year, especially in the Northeast, which will adversely affect both our U.S. Wireline and Completion Tools divisions. Nonetheless, we remain extremely excited about our ability to generate strong cash flow in a volatile market and about the tools and technology we are developing.”

Business Segment Results

Completion Solutions

During the second quarter of 2019, the Company’s Completion Solutions segment, which includes the Company’s cementing, completion tools, wireline and coiled tubing services, reported revenues of $215.9 million compared to first quarter 2019 revenues of $209.1 million. For the second quarter of 2019, Completion Solutions reported adjusted gross profit^E of $49.8 million compared to first quarter 2019 adjusted gross profit of $47.7 million.

Production Solutions

During the second quarter of 2019, the Company’s Production Solutions segment, which includes well services, generated revenues of $21.6 million compared to first quarter 2019 revenues of $20.6 million. For the second quarter 2019, Production Solutions reported adjusted gross profit of $3.1 million compared to first quarter 2019 adjusted gross profit of $3.4 million.

Other Financial Information

During the second quarter of 2019, the Company reported selling, general and administrative expense of $21.8 million, compared to $19.9 million for the first quarter of 2019. Depreciation and amortization expense ("D&A") in the second quarter of 2019 was $18.5 million, compared to $18.2 million for the first quarter of 2019.

The Company recognized income tax benefit of approximately $2.7 million in the second quarter of 2019 and overall income tax benefit year to date of approximately $2.3 million, resulting in an effective tax rate of -10.8% against year to date results. The current year impact of our valuation allowance positions as well as state and non-US income taxes are the primary components of our 2019 tax position.

Liquidity and Capital Expenditures

During the second quarter of 2019, the Company reported net cash provided by operating activities of $11.5 million, compared to $5.9 million for the first quarter of 2019.Capital expenditures totaled $13.8 million during the second quarter of 2019, of which approximately 27% related to maintenance capital expenditures.

During the second quarter of 2019, the Company repaid its outstanding revolving credit facility borrowings in full. As of June 30, 2019, Nine’s cash and cash equivalents were $16.9 million with $161.1 million of availability under the revolving credit facility, resulting in a total liquidity position of $178.0 as of June 30, 2019.