NINE - Earnings call transcript Q1 2022 | Nine Energy Service, Inc.

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Operator

Greetings and welcome to Nine Energy Service Q1 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Heather Schmidt, Vice President, Strategic Development and Investor Relations. Please go ahead, ma’am.

Heather Schmidt

Thank you. welcome discuss Nine first our XXXX. and conference Service quarter everyone to call results morning, to Energy the earnings of Good for the me Chief President Sirkes, With Financial Ann and Chief Officer Guy and Officer. are today Executive Fox, participation. We appreciate your

today Some statements reflecting events. include Nine’s of may forward-looking about views our future comments

listeners We actual number our Forward-looking our and risks control. a and results differ earnings many with from factors SEC. to advise our reason. discussed in of cause any We obligation materially risk to review and the any statements expectations. publicly to are subject of release uncertainties, no current These uncertainties statements update risks to which our beyond the revise can for forward-looking are filings or undertake

also non-GAAP include measures. today financial Our comments

the Relations and can directly website. of are quarter a financial measures our to Investor included and I press to now release the details the GAAP section reconciliation also in call comparable in over first turn Ann. our will found most be Additional

Ann Fox

of an line OFS strong most caused to experienced labor, implement increases double-digit or the have and reflecting generated will thus additional approximately in leverage approximately material the extraordinary, These The for had price guidance to recovery. equating anticipate drive to wells continue approximately completions original QX, year. our margin quarter-over-quarter on the EBITDA margins technology share the anticipated, quarter-over-quarter. increased XX% Thank for discuss equipment joining million, of count, increases us frac added most service but a activity across operate increases damaged had incremental our approximately most revenue shortages, service drilled the line in XXX% the lines adjusted and of very the We a activity X% lines fell are adjusted EIA, everyone. be Incremental Cementing our and increased X% approximately reflects margins. and market market rig XX strong Permian, According from pricing industry which increasing continue did U.S. versus million increasing XX%. and it quarter. above and We frac been $XXX.X enabling strong increase XX to quarter-over-quarter, a any for million were EBITDA price activity as Overall, service of quarter-over-quarter increases X% far incremental to has new XX% this to basins far an XX%. EBITDA $XXX by to a and service of results profitable through increases, $XXX growth average XX%. the us of activity improve million, crew quarter, Thank majority in active with count XX%. the gain average We We very XXXX. of in to increase and you you, approximately implement first $XX.X Along able increased quarter to revenue service. quarter, have our Haynesville pricing superior which remainder today with an morning, this Heather. we Good strong had Eagle the adjusted U.S., with with and including over crews. Ford, to exceptionally

at Haynesville after the market market has of the to end entering Our the share in grown approximately XX% just already XXXX.

cost-effective project the completion and of the one overall to steadily portfolios used ESG XX% by of of believe to the these top-performing increase plugs Along propel our estimated adoption should the to look SEC, at have update continue reduce XXXX U.S. technology increasing. will announced dissolvables and the plug XXXX. on call, recently end rules the of scalable help dissolvable is for XX% help end to that we last percentages XX% provided end on tool XXXX. we proposed U.S. As activity we the stages climate the XX% the dissolvable approximately by of over to with XX% in Wireline market a of versus as initiatives, completed emissions. at reminder, specifically an the dissolvables, operators U.S. We

won Our have Permian job the X% the in increase region, Northeast in quarter-over-quarter. excellent we a done strong have the share that reflected and is in position which Basin, team an market maintaining in share activity recently market

we price price gain Coiled but service extensive wireline XX% driven line increases the line landscape, service labor by XX% been increased a revenue has beginning mostly quarter-over-quarter. of competitive With tubing most implement due the exception we as to approximately net to forecast traction challenging to the increases, of by continues. are increases tools, rarely price scarcity approximately

While we continues traction especially inflation, gained on be cost challenge. have on pricing, a wages, to

For a example, require has over does the one our driving of months. CDL, XX hourly the to approximately rate entry-level which positions, last X for increased XX%

over share, quarter increases organization, $XXX.X million for Wage the these increases. up X.X%. margins. Guy organization. it revenue walk as was magnitude while was through affect was the I negative like to Basic customer the our $XX.X was possible through detailed as negative loss work now across million. the the case pass adjusted call earnings the million, of to the financial for $X.X to there Company to a is net not quarter typically And $X.XX. turn can and was EBITDA would per is illustrates which ROIC this flow with information. we quickly increases, the While these lag

Guy Sirkes

Ann. you, Thank

under ABL position XX, million of March liquidity million. As XX, XXXX, with total resulting million company the facility, of revolving $XX cash the had Nine’s and has under credit borrowed $X a in $XX.X XX, an million XXXX, as ABL $XX.X March On cash of of of March equivalents XXXX. and subsequently additional borrowings credit facility availability million were $XX.X the

the profit of $XXX.X approximately gross with $XX.X During quarter, increase million million, of revenue totaled first adjusted quarter-over-quarter. XX% an

of increased approximately per Cementing XX%. increase cementing an the approximately for first increase of $XX.X revenue the million, an XX% the average quarter XX%. revenue quarter, The During quarter. jobs, versus by job X,XXX approximately was fourth we blended completed

revenue of X%. the approximately decrease The a million, wireline was approximately average the approximately revenue During decreased quarter $XX.X for an Wireline we stages, X%. quarter, blended per X%. of first completed stage increase by X,XXX

For X%. was of a Completion tool completion we decrease decrease stages, tools, million, approximately approximately revenue completed a $XX.X XX,XXX of X%.

XX%. During utilization the by tubing quarter, an days approximately $XX.X tubing worked the day with revenue Coiled was approximately blended increase coiled average XX%. quarter million, decreased tubing first approximately our XX%. rate of for by the the Coiled increasing quarter during was X%,

approximately amortization quarter-over-quarter. for result activities for ended million used general fourth compared million. $XX.X net was quarter, XXXX. of tax million. quarter, primarily average $X.X The X.X% in was position first expense company negative reported of our administrative million, Depreciation effective The expense tax first XXXX CapEx quarter X $X.X million was company the foreign days. is QX XX, expense DSO rate $XX.X March the million The in reported quarter. company resulting XXXX and QX and the in expense in in The During spend of tax for tax state and of cash $X.X operating the months to $XX.X the XX.X tax jurisdictions. the income for an was which flat negative recognized of the for

largely $XX for CapEx of equipment. on that In this asset we our we delivery do guided for of balance CapEx As we cadence sales, year. CapEx to of of The $XX the to a will XXXX, QX offset the though not million year. continue depend reminder, forecast with million full the

changes. million, approximately will $XX For which Ann. senior note CapEx interest will and I payments it outflows QX, our mirror of turn our net revenue back capital, working closely now be largest changes in cash to will

Ann Fox

you, remain XXXX and of optimistic Thank rest Guy. the looking We XXXX. into into

increases in above the been seen recent U.S. pre-announced XXXX significant Although cost have implemented are OFS. inflation across from reserves, increases for extremely coupled WTI release activity with plans, we prices as have operators with the not supportive, especially price

has rate on will not mentioned service I into of and this drilling inflection at activity the line to QX. lines be tubing pricing continue due further We price wireline. well pace the and both at catalyst reliable, end coiled service cementing activity normalize. QX continue strong and as to but in grow equipment. in activity Nine’s do As same drilling throughout anticipate of finding the the completion We led rest activity as a challenges of previously, increase as the in increases for well-maintained should to which Labor the increases expect year,

wage continue While to and headwind the long-term. and/or increase as sustainable we see add This inflation. long operators the return near see will grow to will a begun be pricing the a for still I year. positive to have but traction pricing, in activity may also term, have in OFS to way in OFS is rest go facing we rigs believe incremental And of the medium throughout to needed maintain to profitability. we additional to production material to serve

bullish dissolvable the and outlook and its very with the I happy continued adoption I both As remain and for the we are mentioned of on performance the plug before, technology. growth, market

increase for net increases and we to We expect lines to of in service of price our majority continue QX, service the see revenue should all in our lines.

versus the with $XXX QX projected quarter, be $XXX into up of sequentially revenue next million to QX we to Looking expect million.

for increase EBITDA wage anticipate both be QX past this QX lower versus margins material adjusted in also will inflation, will QX. quarter. adjusted normalized to incremental more We EBITDA and Due and versus

our ability adjusted to growing in a our prove to doubling EBITDA continue only one capture than market, more quarter. We

positioned Our geographic team service well and prepared to lines generate is with footprint. and diversified growth

for open up Q&A. will call now the We

Operator

first with Partners. you. is line Thank of John question Energy Daniel [Operator Instructions] from the Daniel Please ahead. go Our

John Daniel

be let’s answer, of it, achieved acknowledge, market – estimated it’s I the can Ann, the dissolvable market going before I a is to But to ask. even first call question just hard XX%ish. guess share one assume I

the What mean think would number financial that prepared the your I that’s mentioned remarks. to results? in you

Ann Fox

the leader, market. these ways. we feel that the folks about few and think position we obviously, a have very in market So two dissolvable we’re have One,

talk So the just you not the is landscape saturated when about there competitive scaling technology.

when one. dependability us and about So execution, about I talk dissolution of number put material talk dissolution, would you when that on predictability material you at

accurate with in material very a operators, when be have course, will when So obviously, we to, the we And properly. work them gone. can, that of tell wellbore way, then, isolate we

fabulous we So a both in I way. do think

public obviously, when to inside share relatively our if line impact became market was of know, our be it well asset-light of part you space. strategy the we But will So as that revenue grows, OFS significantly.

huge that’s light generator very, you as know, And expense. on of R&D So also we’re very a cash.

overengineer incredible we a have this engineers, We don’t particular few just division. so

huge. in roof. market, and truck pickup So that quite I’ll tin drop business EBITDA, the is remind again, there. a cash almost free XXX%. But the down the of $X flow a CapEx it’s is cash conversion on Think It’s line about not

they but So – if you’ve it’s are regulations, I’m I sure at that part word. word. not a proposed is pretty kind the mean exciting. a And onerous is looked SEC kind

So frankly, our I been if thing these single to have look but, to think need emissions. down going they operators are every they to punch are first frac at looking at going

John Daniel

have customers, you know I it the rules, but do I what, we would for as should have you’re pivot read issue mean, be more. make clearly, At going I’m to they curious, that And Does the to to what epiphany an the sleep, not is them. put point say, talking sense? SEC me this and

Ann Fox

Yes.

quickly. going time I this months XX they large are very with X think get in to hit to accelerated because the some next filers, these

And large care. will turn you’re so your don’t I privates, quickly. they think Obviously, publics John, you’ll see

But up very is gobbled publics. stuff So furious to be pretty fast get kind the focus. SEC, it’s they like it’s I timing by think the and going And a if quick. for large of this implement how the fast it’s adopted, do to

John Daniel

run $XX of nonetheless. monkey then the And I one that a potentially sort I sort by I’ll million EBITDA know pass guys me, test? QX, adjusted Does could range. but you ask that the be of here. on seems question of a smell [indiscernible] Okay. me, to last math long-term, it’s mean, in for It rate

Ann Fox

It’s not. test. It does pass the smell

John Daniel

you much. very Thank

Ann Fox

Thank you, John.

Operator

Thank you.

Syed go from ahead. with Markets. is Capital Please next Our Waqar ATB question

Waqar Syed

on taking Thank for quarter. my question. great Congrats you a

Ann Fox

you. Thank

Waqar Syed

of kind a is you declined revenue some wireline why the there little maybe bit. and Could guidance on completion a tools revenues In decline? business, provide

Ann Fox

Sure.

X% So work, some had massive quarter-over-quarter. EIA has you remember, significant basins weather shortages. said of that a top just that if delays told the of obviously, completions remember, the us we do in sand on activity very up about we we But lot the went

saw pullback not some we there. that do We anticipate So QX. in

that, about that excited and again. we’re So shouldn’t see very you

Waqar Syed

the then And numbers QX? Okay. us for give and coil could cementing, for active your you tubing wireline units in

Ann Fox

fence you But post way, Yes. maxed one And to that, could line, is be all, The we’re think on are The tell in spare for call really is out chunky best. sector challenge there capacity if the would you that Waqar, service cementing. wireline. broadly where the a is about on utilization crews. happy I see you we do line maybe no service would this broadly,

an So the get hire to to large trying magnitude been for of cannot Marcellus for days, just them. give of a I’ve region XX in idea you the we XX problem, this Utica and individuals over

Now in and X labor young don’t bring tight in qualified about days, then That folks tap that we how I’m individuals. doesn’t XX mean talking this is they retaining market is. out

But stacked going and pressure that predict when crew which a labor it’s equipment, very we be So can’t to regardless of eases. problem, accurately it’s significant.

challenge OFS. continued that’s to a So be for going real

Waqar Syed

ordering the year in adding labor of be on for that given there tightness time that was you are comment the areas so what And talked what’s equipment. the kind about, of also you number of made one? you of equipment for new And that some CapEx And thinking Would is orders? additional equipment lead some capacity? the a

Ann Fox

is this market the we budget the So CapEx earlier. put to that

the QX the of that put The to worse. not zero expect picture delivery this you CapEx the mentioned I is continue net labor think almost challenges painted we to that is take in point market, those even equipment on do the going because of we market order units that the sometime wanted to I to is a market that, really make is we just year. of

delivered to to really in get is timely a manner. equipment struggle going OFS So

of So when up have doing March be they to today they equipment to backed set their they’ll the to year, go same operators largely think the they activity sometime to which deliveries production, on June want do increase are even I have U.S. if next and maintain already because will XXXX. that

goes which, chain opportunity don’t to this to struggle supply really we’re it is up. course, going of raise where because So see we dislike the price our that means

So about again, think times. can I lead think you

of you’re going place an that to equipment order to get ‘XX. June in If you’re today, going sometime

Waqar Syed

terms And Okay. mentioned of then more margins, of in kind normalized. you QX incremental

normalized So what consider you do margins?

Ann Fox

the and I’m I a stronger less because again, think a is but some in typically sector. very not definitely than XX% the could Guy, over that. to back flip quarter to service to I’ll far QX incrementals flip Well, incremental, you half And But going it see for strong it Guy.

Guy Sirkes

on margins Waqar, we’re yet. not guiding quite

changing; tough I material things these is margins. there incremental think be expect all many activating is incremental to so to positive pieces; crews. do because guide choppiness pricing margins labor just contribute moving it’s changing; there. costs, we’re costs I are to And there all

now. mean say XX% it right should haven’t or difficult level. a EBITDA increase. the incremental that. to there mean in historically, specific about margins continue know people I for I to And we sector to outside be this to XX% guided somewhere So But I it’s context. a but of range, in think broad that’s could

Waqar Syed

Thank Makes helpful. very you Alright. very sense. much. That’s

Ann Fox

much, so you Waqar. Thank

Operator

time. turn Ann now Ladies are like I closing you. to back for and the call no this gentlemen, would to remarks. at And there questions further Thank Fox

Ann Fox

employees, your thank want Thank for partners I investors. call E&P in you to our participation Thank the today. you. and our

Operator

you. This Thank conference. today’s concludes

You your you this at may time. disconnect lines participation. for Thank your

Nine Energy Service (NINE) 9 May 222022 Q1 Earnings call transcript