NINE - Earnings call 4 2023 | Nine Energy Service, Inc.

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Operator

Greetings, and welcome to Nine Energy Service Fourth Quarter and Full Year 2023 Conference 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 of Strategic Development and Investor Relations. Thank you.

You may begin.

Heather Schmidt

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

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

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

financial also today non-GAAP comments include measures. Our

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

Ann Fox

be Heather. to which in the approximately natural was price market, average in continue XXXX. $XX year-over-year approximately XXXX, of you, January, rigs XXXX. by of we market unit's team's to redemption we declined due price, of In XXX, you our priority January full the for with the well regions and new declining coupled rig extended want gives performed to delevering quarter markets. XXXX. international down and additional XX% XX%. XXXX. and everyone. Good Operationally, declines end and in this the decline approximately end volatile to a some senior am and to highlight existing gas credit over completion forefront and results tools revolving structure the to notes I Thank Nine. $XX during tools XX% the on XXX a XXXX, compounded what for today for the year-over-year I to accomplish proud technology fourth the new a Most asset-based we achievements able in our be of of in to technology. oil count year of and continues been with was discuss by high continued of and lower The XXXX of capital there flexibility This from offering, out joining of gas we have tool natural introduction by And forward-leaning year our approximately be continued amended service. were In extremely the offering rig the came At WTI of of we XXXX. Despite conjunction us XXXX. domestic to announced with differentiate both us by with morning, existing to average facility in with Thank U.S. the excellent and conjunction gas the our the our these

the plug composite in we plugs Scorpion XXX,XXX technology acquired since has Our over XXXX. run surpassed

by sold well. to of units XXXX. continue XXXX And perform total we our dissolvable XX% approximately plugs number dissolvable increased Stinger in Our over

the increased we leading year-over-year. In markets. by approximately our have total in the revenue into market XX% a maintained U.S. plugs international while We dissolvable market, selling XXXX, share international simultaneously dissolvable

in our During customer anticipate demand XXXX, our performed continue base and Middle will multi-cycle and in that we market barrier share East, region. very increase well valve the to

market composite predecessor in share tool commercialization Scorpion hybrid material our fully than this the We to new frac XX% our also offers with frac is of look the industry-leading drill plug, forward and times. XXXX. plug of comprised out announced Pincer We less Pincer gaining

we were process, We and we our year. down a company's defending our was total by the potentially a and XXXX are this Despite as year-over-year, XXXX identifying XXXX. gas XXXX, rig on declining for justifying data procedures did revenue lines and make cementing able job and as of by well and in revenue gaps year service the moving Our collection environment, this greenhouse developing good only price X% made our how average increase team coil approximately also XX% of increased X%. year-over-year, job and per revenue have total approximately progress approximately and We forward. we to more revenue this Through significant will by team strategy emissions to in X% to with accurate data reduce Haynesville quantified significant ESG. efficient a emissions exposure our this our Basin, wireline year-over-year. Despite by increased the

our market EBITDA was the provide year for $XXX.X revenue We process was year million. negative share. loss formalizing of are million in Net the for the per $XX to basic internally and $X.XX Company diluted resources to the million. for time $XX.X Adjusted sustainability efforts negative per or and $X.XX share the and continuing was improve.

operational levels $X.XX and diluted stable quarter-over-quarter, anticipated, was to quarter in white the QX and as share end was of $XX.X to we original million, have pricing $XXX a guidance Adjusted per was for negative occurred million. EBITDA in negative reflected space turning increase the Revenue over not fourth quarter the of the was approximately adjusted upper $X.XX an of elevated XX% of million share. was $XXX Adjusted margin loss which in of or EBITDA Now inefficiencies X.X%. Net but and that were recurrence QX. basic our per ROIC did $XXX.X Activity million, million $XX.X mostly August. for an XX%.

QX. I like to Guy Additionally, a significant international to the detailed turn QX now international increase over call through doubling financial almost in information. walk we saw tool our to versus in sales, revenue would

Guy Sirkes

Ann. you, Thank

under position of million $XX.X revolving cash reduced our of had million XX, December of borrowings the revolving a December $XX of XXXX, the XXXX, $X Subsequent January additional credit we the $XX.X facility. of revolving our under since have revolving cash the under And XX. approximately XXXX, total by company million, an December paid credit we equivalents XX, with $XX As availability the of credit December in borrowings and of were facility facility. refinancing as in million. facility, to million credit resulting Nine's $XX.X XX, million On liquidity down

Our $XX.X XXXX. liquidity interest approximately million, by impacted taking recent January most of payment position be continue in with our our semiannual to payments will place of

fourth $XXX.X During adjusted million quarter, totaled with profit the million. gross revenue of $XX.X

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

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

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

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

the of million, and During year the with million. general million, with of company quarter, $XX.X full was $XX.X fourth expense G&A expense D&A of full fourth $XX.X Depreciation quarter million. $X.X year administrative in amortization reported the and

of XXXX. tax our provision jurisdictions. for The provision result $X.X approximately Our the tax is for non-U.S. million state tax and was position and XXXX

for company by average net year-end XXXX of XX cash XXXX, days. million. reported For the was activities provided operating the DSO $XX.X The

original of $XX.X approximately million million. $XX spend XXXX CapEx million, guidance was below for came which total $XX in to Our management's

place For CapEx in we is the $XX end $XX ATM $XX vast XXXX, for to company. million a of million of the majority year, we which CapEx. anticipate flexibility the total put to of At million, maintenance last provide

ATM will shares QX, During sell now program. I Ann. we the back did not to it turn under any

Ann Fox

Thank you, Guy.

public For XXXX, relatively operators and are, and large, levels keeping most CapEx year-over-year. flat by activity

programs, should to more help stabilize reliable As to D&C consolidate, our which the leads customers continue larger, this market.

remains North and levels. America decline upside for their Our the and positive operators outlook through significant, worked for potential Tier American long-term X have in shale The curves many acreage. North activity are

In addition, projects gas specifically Haynesville. planned in of spur should natural the future basins, the some activity LNG

rig pricing $XXX QX, levels with and we mostly and with changes relatively projected seen be of significant million. Because relatively to million revenue remain flat activity QX not market between QX versus flat with to in any we we conditions the and expect have overall anticipate this, $XXX For year-end, the flat. count compared

strategy We asset an cost complete. their continue labor-light service excellent to to and couples on that of being customers forward-leaning business lower and will focus help our our to technology

Our team confident given are has time, and long can we and together quickly for been changes cycles, through improving a our markets. we market capitalize on navigate experience

focused a us international cementing Our especially balance service top remain diversifying our diversity good streams to provides line more we markets. within the revenue tools, and of on completion geographic and and

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

Operator

Capital ATB comes Waqar [Operator Instructions] with Our question from first Markets. Syed

Waqar Syed

what like international Ann XX% certainly, non-North very from revenues generated percentage total now market? impressive you quantify being are growth, the Could of year-over-year. America maybe a

Ann Fox

-- think moving it up as about about X roughly We've Yes. point.

in to unconventional is as go XXXX, markets, as to XXXX for So strategy we're obviously, through those piece And at before here it and around was tools deliberately our closer our international exposure X% this a and through to Waqar, of big increase carefully both now. our X% conventional well tools.

excited that. So we're about pretty

pretty As international has healthy been you place. a market know, the

And will that there. our really this performing expect year. tools continue We are fabulously

Waqar Syed

geographically? the America? majority also right are you Middle market Or is Latin Or of East? how the international it it in about And is now, still thinking

Ann Fox

we are is countries. sell we East -- we're definitely countries XX China, selling The So region the through like to et Middle But primary into Argentina. and cetera. about

has for about a So Middle tools. very East some region and very, of hot us. been And Muerta very play, is Argentina, Vaca very a exciting our excited loves that. that again, it

Waqar Syed

type and rate, mid-teens this growth beyond? -- of kind in is So or that XXXX sustainable

Ann Fox

as plays. a be the forecasting it into can We're market us, and lumpy for we're cautious very that unpredictable. small but these for can you and know, also cap entering be big company again, significant because, It about

intending but not excited that market it, this extremely quantify We're for to year-over-year that growth. we're to move year. going the about So XX% I'm

Waqar Syed

Okay.

very anything had like so was margins, cost it in the how special? Or And and thinking thinking incremental very, mostly And unchanged? provide incremental going strong. far cost should international? margins was just on there -- it strong the is of margins. first of about be was we quarters? you then Maybe fixed should by some EBITDA kind be But Or future terrible QX it driven we how were was the QX, color forward? Now in just August --

Guy Sirkes

Yes.

August had the to So was white say, we inefficiencies there as a difficult for space. us, operational very lot of you due all and

just So absorption. of a cost lot quite

we exhaustion present did although year. that bit So wasn't budget of QX, in every December have seasonality in happens as a and

was that the -- key driver. were those So

to As international you QX, $XXX has in QX margins. million that $XXX million forecast we say, you. bigger was higher also much for

QX. to slightly versus down So flat

Waqar Syed

basis annual about or terms or and breakeven think flow. then draw maybe then an working in that we -- flow expense like free any the required cash other Okay. EBITDA annual we of should interest And is what build CapEx, or your capital about cash think thinking for How free level as on taxes? and cash about

Guy Sirkes

Yes. we less be of the financing $XX -- The as amortization the Waqar, less so guidance. It's of book because is thereabouts. cash is cash costs. interest going to expense the than provided million deferred interest interest or note, be about going just a to CapEx the the

So Cash that's note. will taxes to fairly I for be negligible think important XXXX.

revenue working again, depend to going is on goes. So way which capital

revenue So working the if are that big see inflow. items. revenue capital shrinks, see or cash flow can outflow a capital those a you be really it you'll Otherwise, will quarter-by-quarter. And builds, working

items. those but expenses, miscellaneous are really million few key the a have You

Waqar Syed

we if million of midpoint so of of flow EBITDA free fair? around that $XX breakeven. roughly about CapEx cash needed the million, for So is $XX Is guidance the take

Guy Sirkes

that's yes. plus minus, think fair, I or

Waqar Syed

Okay.

good. Sounds

Guy Sirkes

of working capital. the variable. key impact That's excluding Again,

Excluding impact, yes.

Waqar Syed

then that up, But bit little a offset hopefully, Well, all goes maybe EBITDA capital. that's from gets me. working if for

Operator

Tim next Moore question Hutton. is EF Our from with

Timothy Moore

those Nice growth and important international for standouts drivers. -- year. growth the Stinger That plugs and really dissolvable definitely was sales were

December your expected. was loss, that's sales quarter loss the product So than published EPS exact a towards EBITDA and mix revenues estimates bit just my weighted more

about just starting X I have off with So maybe -- questions.

on is operators the XX else. general back you and count rig on don't an of as the of turn, private inflection maybe But can flat there as know and plan the I sentiment they their they what quicker in kind come budget could same time, planning? this past far on With weeks, the spring, spending. out share if everyone

are you there? what So hearing

Ann Fox

It's Yes. great question. a

guys behaving certainly some crude black to I think you the in operators smaller markets would are private more than those levered see the are differently of that gas.

a right think situated I now, of markets. players crude those lot are within So well those

You're not seeing amongst -- the clearly, that's a catalyst moment. at you're not private something frenzy a for

-- shifts these say, you things very and as we've over However, the months few shift these and seen past X readily years. in volatile, handy are pretty markets

of ready. experiencing I and price right these So a of out are is that now, environments. them many really operators commodity efficiencies there, definitely which inside ton would say helping they're they're operational

have the to private, So most take announced, could the and market. gas behavior off for of of operators those have those pulled been you -- same certainly have imagine and lot publicly a back that's gas going the the

So time customers encouraging But prices respond to say, very frame that markets and let October see those us are cash returning moderated what focused in where posted. on our way see happens I to in a very, investors. would those to clearly very the and

and doesn't So industry an think we're isn't I have that discipline responsive. no longer in

coming market. be I slow off of as market down, multiple a is announcements. gas just to lot already on the come based the Bcfs going So you those should off mean these know, gas well operators when

exciting the year-end rounds that, be strong. that's us, it So and pretty out pretty that could for seems

Timothy Moore

That's for some think the is helpful that quarter, think, in that gross year? product do realistic I mean, was products can was if of What correctly. in up impressive, noticed a margin for low you And a this mix. it color. the I I the margin XXs? I gross I know for hold you XX% calculate very

Guy Sirkes

good a it's Tim. Yes, question,

that. We haven't guided

I to for very us international. the QX would that to market. due to the was hard mix So favorable here provide say in

of will And whether and so they're or and on quarter, be international and mix sales forth. so dissolvables by mix it domestic and depending just variable composites

Timothy Moore

the mean, and last off more international, the margin I I this mix clearly push That's accretive. should you you mean helpful. be it more pulled Because year,

have the XX% less great. on of with this and those talks elaborate Actually, of year So you that's them? and a a customers that month place more can little produce to Ann what [ frac on capacity you're maybe material if bit ] plug, initial and just next-gen the lot seeing

Ann Fox

I'll But these the the the drive that there don't that way just is and the Legos. down and to want supply So as that to up designed assemble as take first, them could relegate second be easily. simple we chain to I part and we've you flex very, of to assembling intent able so tools, was very

the answer this we of part, are to a few hope to market share and year. So these gain quite yes, positioned we produce second to

So XX% it's material. about less

is, looking consider those here -- for the I And what pressure plug. us really, frac, really have hybrid to And you're minimal outs. know, needs bypass, to got You've any it's not stages. the hold key a market no they're the so as drill for you fluid isolating actually then

that's the So faster if out get trying to a sturdy Pincer old operators of answer something make change some fully the kind is dissolvable your composite from to not to legacy plugs, even drill those they're of yet ready to anther. that

special as some products. them. product. evolving and trialing of know, a designing And you And large constantly of had responsive. existing with at high really this things We're So extremely here it's themselves. very they're these ultra specific we're the the we're excited customers, on for at They're not innovating sense an effective They about the R&D bridge for yes, customers very the have And designing Nine moment. for team to -- about but urgency, one wellbores. we've is Tim, they're

about excited rings out the out that concerns barrel our And Delaware, is also especially innovations the save on considering plugs, water We're you pump turn constantly. so really can huge. to we're every pretty able down in

product to to little going thrilled this that very, We're what see and like about tweaks pretty excited year. do important. really are this So very it's

Timothy Moore

Great.

fair innovation guidance for think million that's million mostly of But all towards the being the cementing $XX you that know labor, $XX maintenance year tools that, going will component mentioned tubing? this that not that's CapEx great. to I I a it catch was assume -- think terrific light growth CapEx. for CapEx completion fire, I that's and the to is

Ann Fox

correct. That's

exclusive it's to almost growth of maintenance vast the majority tools cementing budget. a CapEx some capital your is and So is this -- completion and

Timothy Moore

half the sense. don't flex completion. and Got go what you that XX% second cementing loaded, for know is sense can count, the what for what growth rig a the growth But for perfect quickly CapEx growth, the how up could give And in I'm entirely I guidance early -- in be return if recovery down? summer. with. sales that's and yet reading will Let's the least be say is at hopefully, -- when it it this if spring, of That year, ROIC for seeing on and there year I'm good from you growth it. makes know I can't I and makes

how So side. XX switch pretty that private take -- the budget weeks? weeks or few gas could if to or on side, to you there even respond that in the a months that really you does many to Can do -- crude operator is XX on quickly, it

Ann Fox

I mean million EBITDA measly go perfect think $XX Yes. to a in can from you right, a I XXXX where of QX. of QX that, example level a in is No. quarter a

So of this got is lot a variable costs. business about of the one pieces great we've

the that We proven times a to we a the your different responding, cycles. it's several fun But get the and have do we to proven, we've XXXX. been salty seem I each we're miss on know what -- seem we've a -- at say, over I specifically, better way time. that's doesn't would something a market. exactly COO capitalizing these are team, to an within at not experience, answer quarter, That to mean been do have question and on and it a since way exactly And we is team way. true, and up and just that's to and This my what tried up, down is by we team really do which together on that's

the and has for we're So innovating exact And we're happen. that our working that ready anything demonstrated like history that, excited on technology. But meantime, may in always capability.

go up. how so And to snap people we and would able encourage back quarters look to fast and are at I those

Timothy Moore

quarter. was like pretty I just Good. I high structure, be to mean, the at. But your a getting the good ago, been mean X I margins to there's contingency I've on your variable incremental downturn that's what cost seems really like it going stuff. if flex year turn asking are huge with a

Ann Fox

your work Thank to want for XXXX. all. their by team I in thanking you incredible you thanking for end our also support continued and

Operator

conference. This today's concludes

You this we may for disconnect lines at your participation. you and time, thank your

Nine Energy Service (NINE) 8 Mar 242023 Q4 Earnings call transcript