NINE - Earnings call transcript Q2 2022 | Nine Energy Service, Inc.

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Operator

Good day, and welcome to your Q2 2022 Nine Energy Service Earnings Call. [Operator Instructions] At this time, it is my pleasure to turn the floor over to Heather Schmidt, Vice President, Strategic Development, Investor Relations and Marketing. The floor is yours.

Heather Schmidt

Thank you. Good morning, everyone, and welcome to the Nine Energy Service earnings conference call to discuss our results for the second quarter of 2022. Ann Chief and Financial are and Executive today Sirkes, Guy Officer. me Fox, Chief President Officer; With We appreciate your participation.

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

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

Our comments measures. include today non-GAAP financial also

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

Ann Fox

Thank discuss another XX%. results joining Good and both X% count quarter-over-quarter increased We which crew Thank increase by quarter-over-quarter. an for margins to an frac from wells a XX%. quarter-over-quarter. us original was market activity you and approximately fell We were X% pricing Heather. the of growth above strong EBITDA approximately to QX completions an reflects average very XXXX. adjusted EBITDA continues and EIA adjusted $XX.X reflecting to Incremental today increased of approximately of for approximately improve of by drilled $XXX adjusted and XX% EBITDA with our a margin quarter approximately morning, the $XXX.X XX%. you, Overall, $XXX million in estimate of generated reported revenue XXX, increase new increase million, quarter second We XX% everyone. guidance million, our million had perspective.

approximately and improvements. have revenue service increased both quarter-over-quarter activity majority In which rig average count, our versus pricing increased seen As our lines, XX% approximately we the XX%. by by the mentioned, I of

will is and cementing main drive only have chain to remainder of the throughout specifically we service increases the and incremental with the increases what and has into unemployment XXXX still continue for know the And in by Labor our this us We new price catalyst incremental of bottlenecks and of around a exacerbated be to be quarter. coming for labor Because continues net qualified strong again issue, an little supply our today, any activity remain peers. there tubing very increases, which and coiled industry, enabling and X.X%. in equipment been the labor price added margins to Nine rate shortage XXXX. this, implement of lines This will There energy anticipate we and price phase. continue. remains to many

with versus strong revenue another quarter service Our very QX. by had XX% approximately cementing line increasing

of the have about leverage coupled We far barriers the we capital in across to service basins pricing this entry. thus competitive strongest strong jobs favorable with and all have of completed which in this in operate. seen talked the landscape technical line increases line XXXX, Because service we this, in in and

and availability believe We service of for opportunities power as within there constrained price is issues earnings and share margins. chain the raw continue expand supply market Additionally, pricing have we the providing competitors, Nine. move to around additional some cement line

increase approximately sold. dissolvable by quarter-over-quarter, XX% in a plugs mostly Our tool completion division XX% Stinger driven by increased revenue

and quarter in price to the adoption believe forward. second continues we perform the technology increased Wireline revenue the XX%, increases. the continue of gains dissolvable driven mostly Our in approximately market by technology and by moving to share well, in Permian

helped mostly out revenue pricing, running Eagle revenue Guy adjusted quarter the walk propel in over our loss $XXX.X turn $X to by increased EBITDA line in a for Net increases. Ford negative financial service but XX%, ROIC of negative information. would million, traction detailed million. price $X.XX. generating operations XX.X%. see million. to the be our and starting in quarter tubing service utilization began are driven earnings the we the like revenue for for and share was net challenging Recently, price of some increases. wireline the was line. through was combination earnings facility, Basic most to coil Company I and has cementing $XX.X Coiled was was to call continues per this by now increased to We approximately which

Guy Sirkes

you, Ann. Thank

with in cash a million million the $XX.X and company were million the position total cash million As XXXX, XX, ABL ABL equivalents under Nine's $XX under credit XX, of XXXX. as availability had revolving June of of On liquidity facility. of XX, borrowings of $XX.X the June June XXXX, resulting facility, credit $XX.X

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

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

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

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

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

the spend million, million XXXX million. XX and general CapEx benefit to tax the XX in $XX.X for used as benefit and was million. QX quarter in and our activities second operating approximately expense $XX.X quarter, total second million. second QX and of CapEx for The the of of of During $X.X quarter year-to-date. result cash position was non-U.S. million the $X.X reported average company's is net June days. company The $X.X $X.X Depreciation jurisdictions. The reported for tax spend million. state The amortization DSO negative was XXXX the administrative tax $X.X expense in was bringing company for

year CapEx full of of delivery million to The that at on unchanged $XX CapEx $XX cadence Our is equipment. will million. depend guidance

also $XX quarter, note This paid approximately our we million. of payment senior interest

I be payment will turn back it will second in Our October. now to Ann.

Ann Fox

the Thank recessionary We It any half outlook gauge you, Guy. remain that the into on difficult and magnitude may optimistic for second XXXX. the to Nine's very XXXX of of impact industry. pressures is

believe be North for we production short-cycle American supply. and vital However, global shale will

will discipline, meet While seen have customers activity we be incremental U.S. to remain committed to forecast. capital needed our public production

from per QX. in strategic are OFS which in reserves will capital month has discipline, the equipment also million market. Additionally, the $X end the companies day adopting per limited

XX those orders months. For that delayed up are capital, allocating to are growth

are EBITDA we on throughout majority will material adjusted remainder and Despite prices, OFS new well have not margin our both anticipate points of XXXX. continue So to and and arise over into equipment increased which and to mid-XXXX backdrop will until wage XXXX need basis for and be still accrued. XXX Nine. the inflation, will quarters, increase focused up the two quite increasing we sets last the This of we

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

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

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

We, further We cash positions growth. line service also us anticipate and the Nine's for diversity for EBITDA adjusted QX. well are improve on peers, sequentially like will flow bullish geographic and cycle. our

well. working Our strategy asset and is labor-lite

adjusted margin our is within tools. volumes points QX lines margin our year runway with full well service as as below moving price of additional XXX EBITDA Our XXXX basis only increasing in our

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

Operator

We'll Sir, go question with our from John take Instructions] Daniel Daniel [Operator first ahead. please Energy.

John Daniel

start Ann, market. the I'd to like cement on

existed, how if goes that wisdom I'm which You QX, cement question. share? noted [indiscernible] rig and how that another I'm the the count How out? mistaken, this late does curious, is up QX early is, X,XXX not is the think sort if I the play conventional does of gained what I think, cement you've supply? and just rigs, challenges

Ann Fox

team I are of wolf, customers tighter on cried boy we every and this being and We're we've closer gets we solved little tighter. for the time not to to it. think And John, concerned who our our but of some single is it. And able well, think about one it for come solve situation, said, like, folks our the closer

import and on it et through list who get working kind base also obviously efficiencies cement doing of do are of do not from lot kind market where our maintenance. with Turkey, a our us, largest to U.S. could already a We with length are the run more of who may providers seeing we're U.S. a amount clearly the So seeing of We're the into think that's cetera. we -- imports lot may seeming of and I challenges time deciding problem. customer cement in and

-- think really I So seen it's I very, think of worst very it yet. and the don't challenged a we've situation,

John Daniel

dissolvables a moment. enough. Okay. turn to for Fair I'm to going the

increase sold. existing gains customers much could of any color. just new how think are I you the characterize curious in said stepping their versus units up XX% I'm just purchases, you if

Ann Fox

I would wellbore XX%. gaining somewhere we acquired We're between new of the Yes. the too, in When remind moving traction we gaining And the today. just estimate it's a had where we're within we And John, I we market, around seen, well at up as to XXXX, mean, been would customers U.S. XX% split, as XX% in to Sure. U.S. market. be technology for it hoped really share market say that XX% market technology. I the the the by as the we we've XX% to said that think XXXX, time, was we've that and convinced said, minute. with dissolvable dissolvable

wellbore. customers, So I will, conversion you rent, seeing we're seeing and if seeing think We're plug in the then composite we're of more both.

emissions, I wherever those is And the SEC disclosure drill-outs and to current think requirements down with potential push and friendly around our obviously, have ESG are customers certainly environmentally very try avoiding emissions going possible. a to also option.

about we're excited pretty this. again, think, I So

John Daniel

for of And me, I where much making making we will, if from dumb think don't I where Okay. for these in up as of much are units, that's room more, we capacity know you one plant about like think mess as more how dissolvable exists? hopefully you this we it. trying a like like and ask But standpoint? don't last I it's to are capacity, just market, I question, how but terms a kind a the understand of -- could then

Ann Fox

it's cement very no, dumb on question. a given not allocations, one. your previous question relevant it's a And No, actually,

we don't constrained think feel I right now.

got we we've to the at serve like capacity So moment, feel the market.

But at supply see a aware, moment, very you're as for ways Now in see, we very to visibility. don't the we come in like instance, CEOs chain little there, unexpected with constraints cement. disruptions

Operator

our take Syed We'll Waqar Please Markets. ATB next with ahead. question Capital from go

Waqar Syed

question. you gross in Thank your QX? XX% Ann, were taking margins incremental around the profit roughly my expectations Good for for QX. morning. What's

Ann Fox

I much Yes, think stronger.

going customers. you're price see into to QX given think incremental increases handing I margins the we're significant that coming

you're a think going incremental I see So to stronger much margin.

Waqar Syed

to is doable XX% a XX% that range, number? kind So of

Ann Fox

it think and I starting think are to in excess I that, see some to We're to of really nice. Waqar. going here very margin the profile going could what back get is half folks is be be traction

Waqar Syed

-- lines, do QX? you on free generating free in see cash And cash Great. flow flow the same us Okay. positive

Ann Fox

yes. I assumption, fair think that's very a

Waqar Syed

run not certainly changed And CapEx, Okay. low you've seems know -- to rate seems be CapEx. that's That The then positive. the very guidance. for for I

is the end, the lower like realistic upper $XX say million is than to So more fair like it end?

Guy Sirkes

I deliveries. of depend going it's the to on Waqar, pace just think

like we'd XX%. to the range, full think maintain I XX% So to

to things difficult now. get it's know, you right As

working on these lands to exact And we're fulfilling be it will It just on going so deliveries. timing And is figure back-weighted. depend program. our the of

Waqar Syed

kind you what XXXX clients what Permian And about levels? in the generally levels having you activity about as in saying hearing? of And discussions well? like half then Haynesville also, of for -- and like, initial terms Okay. the are second are are in activity the And your

Ann Fox

chain time. question big aware be could different that to happens for Operators QX fact I I their the need supply market think with is not are mean what seasonality. that trains We're And Yes. of meet well all year given the production the think on I standard running guidelines. constraints. the this very

to see it's could think bag, little activity. I end operators more of a their I guided So range. CapEx a bit on already you be mixed forward think upper but I've the their

growth, next are growth. level be many For of year, indicating them there'll some although of single-digit

And from bodes So I are on pricing challenged us, think constrained as and well and equipment both already perspective. now. both a for for right market said, very I us, an people an that activity very the

walks think incremental continued Again, year. So strong significance. for any very up next well I of margin activity it sets any into

Waqar Syed

million And for what's Okay. QX? one then SG&A. for was QX on QX. Guy, question It and $X.X final around just expectations the

Guy Sirkes

Generally It forward, going similar similar. should be Waqar.

Operator

We'll take Ben our from with ahead. Piggott EF next Hutton. question Please go

Ben Piggott

I you question. little appreciate margin question, Waqar's you into guys the it just wanted could key taking Hi, bit deeper. Ann, to a dial maybe off

incremental on exceptionally bullish. the XX% Your comments

Just all maybe longer margin the retooling work the to and business term, guys a that of margin kind of kind you of the looks the of portfolio, at sustainability for look have what like, of you kind given when done? mix peak the

Ann Fox

a at fell time. around like? adjusted right, you think which it's it's look about question, mean If in XX% a peak rig that does obviously, count everybody's I XX% I -- to XXXX, business margin, what The margin Yes. is had at look EBITDA the robust XXXX.

we're back ability be the your very XXXX. because the do inflationary get close half And, cash-generative do where of level. for profile what we've see forward. now course, much margin what's I continue And business to very more with? so customers looks us a to much in from derivation XXXX, going we of a got see that was norm relative to out it's forward But tools to will think think of margins activity question of price? to of come I revenue XXXX our to completion going our What it that And not kind that facing? certainly similar environment in So type are then

achieved completion a you're very think about $X.X So And tools initiative spend So more both a try capital completion line. our we're that came tools, and when that that of it this through of of talking light, was CapEx become low heavier we pleased CapEx when are public as with year, really balances very business you and really part labor strategic asset-light those was maybe outlay. million right? about and a to which off

we as your pretty excited for it happy margin traction we're doesn't, the see And So as hope on that to about business. it. I the answers generation question, expand I'm the both cash if flow well

Operator

like This to concludes closing call question-and-answer our session. now for over I turn remarks. the Fox Ann would to back

Ann Fox

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

Operator

thank participation. teleconference. This you We does your conclude today's again for

You may day. this lines and at great time, disconnect have a your

Nine Energy Service (NINE) 7 Aug 222022 Q2 Earnings call transcript