HOUSTON--(BUSINESS WIRE)--
Nine Energy Service, Inc. ("Nine" or the "Company") (NINE) reported third quarter 2018 revenues of $218.4 million, net income of $13.7 million and adjusted EBITDA of $38.4 million. Third quarter 2018 revenues increased approximately 6% as compared to the second quarter 2018 revenues of $205.5 million. For the third quarter of 2018, the Company reported net income of $13.7 million, or $0.56 per diluted share. This compares to net income of $9.0 million, or $0.37 per diluted share in the second quarter of 2018. This represents an increase in net income of approximately 51% compared to second quarter 2018. The Company reported third quarter 2018 adjusted EBITDA of $38.4 million, an increase of approximately 25% compared to second quarter 2018 adjusted EBITDA of $30.6 million, and represented the seventh sequential quarterly increase. The Company had provided original third quarter 2018 revenue guidance between $208.0 and $216.0 million and adjusted EBITDA guidance between $34.0 and $37.0 million, with actual results outperforming the midpoint of third quarter 2018 revenue guidance by approximately 3% and the midpoint of third quarter adjusted EBITDA guidance by approximately 8%. For the third quarter of 2018, the Company generated an ROIC of 12%, as compared to second quarter 2018 ROIC of 8%.
“I am extremely proud of our team and their accomplishments in the field,†said Ann Fox, President and Chief Executive Officer, Nine Energy Service. “Thanks to a relentless focus on our customers, we continue to outperform the market with profitable market share gains across the business. Our expertise in downhole completions ensures we provide the premier offering of both conveyance and technology. Providing customers with a sustainable value proposition that is proven through decreased cycle time and higher efficiencies is a key differentiator for Nine.â€
“While we are happy with the 6% revenue growth this quarter, I am equally pleased with the profitability metrics that continue to improve throughout the year. ROIC, net income and cash flow from operations increased by approximately 40%, 51% and 224%, respectively this quarter. All three of these metrics will continue to guide management on future capital deployment decisions and measuring company performance. The positive trends in Nine’s organic performance are magnified by completions complexity with longer laterals, more stages and large-scale manufacturing development, all of which will help drive more selective service selection and future growth and profitability for Nine. â€
“While the fourth quarter is historically affected by weather and holidays, the overall market outlook for 2019 is positive. Our addition of Magnum Oil Tools gives us an even more balanced technology offering for our customers, and we believe there will be a strong call for North American shale activity. Nine is well positioned for growth and I am excited for our future,†Fox concluded.
Business Segment Results
Completion Solutions
During the third quarter of 2018, the Company’s Completion Solutions segment, which includes the Company’s cementing, completion tools, wireline and coiled tubing services reported revenues of $196.6 million compared to second quarter 2018 revenues of $185.1 million, representing an approximate 6% increase. For the third quarter 2018, Completion Solutions reported adjusted gross profitc of $49.4 million compared to second quarter 2018 adjusted gross profit of $39.1 million, representing an approximate 26% increase.
Production Solutions
During the third quarter of 2018, the Company’s Production Solutions segment, which includes well services, generated revenues of $21.8 million compared to second quarter 2018 revenues of $20.4 million, representing an approximate 7% increase. For the third quarter 2018, Production Solutions reported adjusted gross profit of $3.1 million compared to second quarter 2018 adjusted gross profit of $2.8 million, representing an approximate 12% increase.
Other Financial Information
During the third quarter of 2018, the Company reported selling, general and administrative expense of $21.8 million, compared to $16.1 million for the second quarter of 2018. Depreciation and amortization expense ("D&A") in the third quarter of 2018 was $15.5 million, compared to $15.1 million for the second quarter of 2018.
During the third quarter of 2018, the Company’s effective tax rate was 7.6%. The effective tax rate for the quarter was primarily attributable to changes in pre-tax book income and valuation allowance positions, as well as tax liabilities in states where income is expected to exceed available net operating losses.
Liquidity and Capital Expenditures
During the third quarter of 2018, the Company reported net cash provided by operating activities of $25.6 million, compared to $7.9 million for the second quarter of 2018.
As of September 30, 2018, Nine’s cash and cash equivalents were $86.5 million with $50.0 million of revolver capacity, $49.5 million of which is currently available, resulting in a total liquidity position of $136.0 million as of September 30, 2018.
Capital expenditures totaled $11.5 million during the third quarter of 2018, compared to $11.6 million in the second quarter of 2018.
Magnum Oil Tools Acquisition
On October 25, 2018, Nine completed the acquisition of Magnum Oil Tools International, LTD, a market-leading downhole technology provider with a broad offering of downhole completion products. Total upfront consideration of $493 million consisted of approximately $334 million of cash, subject to customary adjustments, as well as 5 million shares of Nine common stock. The Company funded the cash purchase price with net proceeds from a private offering of $400 million in aggregate principal amount of 8.75% senior unsecured notes due 2023 at par together with cash on hand and borrowings under a new asset-based loan credit facility entered in connection with the consummation of the transaction. The Magnum partnership solidifies Nine as one of the premier providers of completion focused technology combined with excellence in both service execution and conveyance capability.
ABCSee end of press release for definitions
Conference Call Information
The call is scheduled for Tuesday, November 13, 2018 at 10:00 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 Callâ€. 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 November 27, 2018 and may be accessed by dialing U.S. (Toll Free): (877) 660-6853 or International: (201) 612-7415 and entering the passcode of 13684535.
About Nine Energy Service
Nine Energy Service is an oilfield services company that offers completion and production 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, SCOOP/STACK, Niobrara, Barnett, Bakken, Marcellus, Utica and throughout 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, including those related to the Company’s acquisition of Magnum and potential securities offering, 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 general energy service industry risks; volatility of crude oil and natural gas commodity prices; a decline in demand for the Company’s services, including due to declining commodity prices; the Company’s ability to implement price increases or maintain pricing of the Company’s core services; the loss of, or interruption or delay in operations by, one or more significant customers; the loss of or interruption in operations of one or more key suppliers; the adequacy of the Company’s capital resources and liquidity; the Company’s ability to implement new technologies and services; the incurrence of significant costs and liabilities resulting from litigation; the loss of, or inability to attract, key personnel; and other factors described in the “Risk Factors†and “Business†sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and the 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 | ||||||||
| (In Thousands, Except Per Share Amounts) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended | ||||||||
| September 30, 2018 | June 30, 2018 | |||||||
| Revenues | $ | 218,427 | $ | 205,492 | ||||
| Cost and expenses | ||||||||
|
Cost of revenues (exclusive of depreciation and amortization shown separately below) |
165,882 | 163,591 | ||||||
| General and administrative expenses | 21,784 | 16,070 | ||||||
| Depreciation | 13,661 | 13,212 | ||||||
| Amortization of intangibles | 1,857 | 1,896 | ||||||
| Loss on equity method investment | 77 | 118 | ||||||
| Gain on sale of property and equipment | (1,190 | ) | (881 | ) | ||||
| Income from operations | 16,356 | 11,486 | ||||||
| Other expense | ||||||||
| Interest expense | 1,568 | 1,815 | ||||||
| Total other expense | 1,568 | 1,815 | ||||||
| Income before income taxes | 14,788 | 9,671 | ||||||
| Provision for income taxes | 1,130 | 652 | ||||||
| Net income | $ | 13,658 | $ | 9,019 | ||||
| Net income per share | ||||||||
| Basic | $ | 0.57 | $ | 0.38 | ||||
| Diluted | $ | 0.56 | $ | 0.37 | ||||
| Weighted average shares outstanding | ||||||||
| Basic | 23,971,032 | 23,895,858 | ||||||
| Diluted | 24,389,295 | 24,351,000 | ||||||
| Other comprehensive income (loss), net of tax | ||||||||
| Foreign currency translation adjustments, net of tax of $0 and $0 | $ | 207 | $ | (250 | ) | |||
| Total other comprehensive income (loss), net of tax | 207 | (250 | ) | |||||
| Total comprehensive income | $ | 13,865 | $ | 8,769 | ||||
| NINE ENERGY SERVICE, INC. | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (In Thousands) | ||||||||
| (Unaudited) | ||||||||
|
September 30, |
June 30, |
|||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 86,534 | $ | 70,860 | ||||
| Accounts receivable, net | 162,437 | 140,968 | ||||||
| Income taxes receivable | 84 | 109 | ||||||
| Inventories, net | 29,571 | 23,091 | ||||||
| Prepaid expenses and other current assets | 7,035 | 7,431 | ||||||
| Notes receivable from shareholders | 10,551 | 10,526 | ||||||
| Total current assets | 296,212 | 252,985 | ||||||
| Property and equipment, net | 257,447 | 248,803 | ||||||
| Goodwill | 93,756 | 93,756 | ||||||
| Intangible assets, net | 57,892 | 59,749 | ||||||
| Other long-term assets | 1,144 | 1,093 | ||||||
| Total assets | $ | 706,451 | $ | 656,386 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Current portion of long-term debt | $ | - | $ | 5,899 | ||||
| Accounts payable | 49,497 | 39,002 | ||||||
| Accrued expenses | 44,600 | 25,871 | ||||||
| Current portion of lease obligations | 372 | - | ||||||
| Total current liabilities | 94,469 | 70,772 | ||||||
| Long-term liabilities | ||||||||
| Long-term debt | 114,048 | 107,980 | ||||||
| Deferred income taxes | 5,983 | 5,392 | ||||||
| Long-term lease obligations | 1,266 | - | ||||||
| Other long-term liabilities | 55 | 62 | ||||||
| Total liabilities | 215,821 | 184,206 | ||||||
| Stockholders’ equity | ||||||||
|
Common stock (120,000,000 shares authorized at $. | ||||||||