• Revenue, Net Income and Adjusted EBITDAA of $218.4 million,
$13.7 million and $38.4 million, respectively for the third quarter of 2018
• Third quarter 2018 Revenue, Net Income and Adjusted EBITDA increased approximately 6%, 51% and 25%, respectively over the second quarter 2018
• Third quarter 2018 ROICB of 12%
HOUSTON--(BUSINESS WIRE)--
Nine Energy Service, Inc. ("Nine" or the "Company") (NYSE: 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."
"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. "
"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 Call". 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, 2018
| |
June 30, 2018
|
| | | |
|
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 $.01 par value;
25,114,597 and 25,030,863 shares issued and outstanding at
September 30, 2018 and June 30, 2018, respectively)
| | |
251
| | | |
250
| |
Additional paid-in capital
| | |
564,229
| | | |
559,645
| |
Accumulated other comprehensive loss
| | |
(4,121
|
)
| | |
(4,328
|
)
|
Accumulated deficit
| |
|
(69,729
|
)
| |
|
(83,387
|
)
|
Total stockholders' equity
| |
|
490,630
|
| |
|
472,180
|
|
Total liabilities and stockholders' equity
| |
$
|
706,451
|
| |
$
|
656,386
|
|
| | | |
|
|
NINE ENERGY SERVICE, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In Thousands)
|
(Unaudited)
|
|
| |
| |
| |
Three Months Ended
|
| |
September 30, 2018
| |
June 30, 2018
|
| | | |
|
Cash flows from operating activities | | | | |
Net income
| |
$
|
13,658
| | |
$
|
9,019
| |
Adjustments to reconcile net income to net cash provided by
operating activities
| | | | |
Depreciation
| | |
13,661
| | | |
13,212
| |
Amortization of intangibles
| | |
1,857
| | | |
1,896
| |
Amortization of deferred financing costs
| | |
169
| | | |
169
| |
Recovery of doubtful accounts
| | |
(19
|
)
| | |
(30
|
)
|
Provision for deferred income taxes
| | |
590
| | | |
422
| |
Provision for inventory obsolescence
| | |
50
| | | |
228
| |
Stock-based compensation expense
| | |
3,508
| | | |
3,971
| |
Gain on sale of property and equipment
| | |
(1,190
|
)
| | |
(881
|
)
|
Loss on revaluation of contingent liabilities
| | |
45
| | | |
607
| |
Loss on equity method investment
| | |
77
| | | |
118
| |
Changes in operating assets and liabilities, net of effects from
acquisitions
| | | | |
Accounts receivable, net
| | |
(21,334
|
)
| | |
(24,981
|
)
|
Inventories, net
| | |
(6,489
|
)
| | |
(1,622
|
)
|
Prepaid expenses and other current assets
| | |
1,574
| | | |
(571
|
)
|
Accounts payable and accrued expenses
| | |
19,533
| | | |
7,227
| |
Income taxes receivable/payable
| | |
25
| | | |
(831
|
)
|
Other assets and liabilities
| |
|
(159
|
)
| |
|
(60
|
)
|
Net cash provided by operating activities
| |
|
25,556
|
| |
|
7,893
|
|
Cash flows from investing activities | | | | |
Proceeds from sales of property and equipment
| | |
497
| | | |
198
| |
Proceeds from property and equipment casualty losses
| | |
-
| | | |
1,743
| |
Purchases of property and equipment
| |
|
(11,480
|
)
| |
|
(11,597
|
)
|
Net cash used in investing activities
| |
|
(10,983
|
)
| |
|
(9,656
|
)
|
Cash flows from financing activities | | | | |
Proceeds from issuance of common stock in IPO, net of offering costs
| | |
-
| | | |
(166
|
)
|
Proceeds from exercise of stock options
| | |
1,867
| | | |
-
| |
Vesting of restricted stock
| |
|
(790
|
)
| |
|
-
|
|
Net cash provided by (used in) financing activities
| |
|
1,077
|
| |
|
(166
|
)
|
Impact of foreign currency exchange on cash
| |
|
24
|
| |
|
(111
|
)
|
Net increase (decrease) in cash and cash equivalents
| | |
15,674
| | | |
(2,040
|
)
|
Cash and cash equivalents | | | | |
Beginning of period
| |
|
70,860
|
| |
|
72,900
|
|
End of period
| |
$
|
86,534
|
| |
$
|
70,860
|
|
| | | |
|
|
NINE ENERGY SERVICE, INC. |
SEGMENT DATA |
(In Thousands)
|
(Unaudited)
|
|
| |
| |
| |
Three Months Ended
|
| |
September 30, 2018
|
|
June 30, 2018
|
Revenues | | | | |
Completion Solutions
| |
$
|
196,608
| | |
$
|
185,111
| |
Production Solutions
| |
|
21,819
|
|
|
|
20,381
|
|
| |
$
|
218,427
|
|
|
$
|
205,492
|
|
| | | |
|
Cost of revenues (1) | | | | |
Completion Solutions
| |
$
|
147,178
| | |
$
|
146,002
| |
Production Solutions
| |
|
18,704
|
|
|
|
17,589
|
|
| |
$
|
165,882
|
|
|
$
|
163,591
|
|
| | | |
|
Adjusted gross profit | | | | |
Completion Solutions
| |
$
|
49,430
| | |
$
|
39,109
| |
Production Solutions
| |
|
3,115
|
|
|
|
2,792
|
|
| |
$
|
52,545
|
|
|
$
|
41,901
|
|
| | | |
|
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
| |
| | | |
|
Capital expenditures | | | | |
Completion Solutions
| |
$
|
10,723
| | |
$
|
10,630
| |
Production Solutions
| | |
665
| | | |
955
| |
Corporate
| |
|
92
|
|
|
|
12
|
|
| |
$
|
11,480
| | |
$
|
11,597
| |
Total Assets | | | | |
Completion Solutions
| |
$
|
496,373
| | |
$
|
461,683
| |
Production Solutions
| | |
116,516
| | | |
116,672
| |
Corporate
| |
|
93,562
|
|
|
|
78,031
|
|
| |
$
|
706,451
| | |
$
|
656,386
| |
| | | |
|
(1) Excludes depreciation and amortization, shown separately.
|
|
|
NINE ENERGY SERVICE, INC. |
GEOGRAPHICAL SPLIT |
(In Thousands)
|
(Unaudited)
|
|
|
|
Three Months Ended
|
| |
September 30, 2018
|
|
June 30, 2018
|
Revenues
| | | | |
United States | |
$
|
208,907
| |
$
|
197,431
|
Canada | |
|
9,520
| |
|
8,061
|
| |
$
|
218,427
| |
$
|
205,492
|
| | | |
|
| |
| |
|
| |
September 30, 2018
| |
June 30, 2018
|
Long-lived assets(2) | | | | |
United States | |
$
|
310,530
| |
$
|
303,788
|
Canada | |
|
4,809
| |
|
4,764
|
| |
$
|
315,339
| |
$
|
308,552
|
| | | |
|
(2) Inclusive of property and equipment and intangible assets
|
|
|
NINE ENERGY SERVICE, INC. |
RECONCILIATION OF ADJUSTED GROSS PROFIT |
(In Thousands)
|
(Unaudited)
|
| |
| | |
| | |
Three Months Ended
|
| | |
September 30, 2018
|
June 30, 2018
|
Calculation of gross profit | | | |
Revenues
| |
$
|
218,427
|
$
|
205,492
|
Cost of revenues (exclusive of depreciation and amortization shown
separately below)
| | |
165,882
| |
163,591
|
Depreciation (related to cost of revenues)
| | |
13,434
| |
12,993
|
Amortization of intangibles
| |
|
1,857
|
|
1,896
|
Gross profit | |
$
|
37,254
|
$
|
27,012
|
| | | |
|
Adjusted gross profit | | | |
(excluding depreciation and amortization) reconciliation | | | |
Gross profit
| |
$
|
37,254
|
$
|
27,012
|
Depreciation (related to cost of revenues)
| | |
13,434
| |
12,993
|
Amortization of intangibles
| |
|
1,857
|
|
1,896
|
Adjusted gross profit | |
$
|
52,545
|
$
|
41,901
|
| | |
|
|
NINE ENERGY SERVICE, INC. |
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA |
(In Thousands)
|
(Unaudited)
|
| |
| |
| |
| | |
Three Months Ended
|
| | |
September 30, 2018
|
|
June 30, 2018
|
EBITDA reconciliation: | |
|
|
|
Net income
| | $ 13,658 |
| $ 9,019 |
Interest expense
| |
1,568
| |
1,815
|
Depreciation
| |
13,661
| |
13,212
|
Amortization of intangibles
| |
1,857
| |
1,896
|
Provision for income taxes
| |
1,130
|
|
652
|
EBITDA | | $ 31,874 |
| $ 26,594 |
| | | | |
|
Adjusted EBITDA reconciliation: | | | | |
EBITDA | | $ 31,874 |
| $ 26,594 |
Transaction expenses
| |
2,320
| |
-
|
Loss on revaluation of contingent liabilities (1)
| |
45
| |
607
|
Loss on equity method investment
| |
77
| |
118
|
Stock-based compensation expense
| |
3,508
| |
3,971
|
Gain on sale of property and equipment
| |
(1,190)
| |
(881)
|
Legal fees and settlements (2)
| |
1,721
|
|
177
|
Adjusted EBITDA | | $ 38,355 |
| $ 30,586 |
| | | | |
|
(1) Loss on revaluation of contingent liabilities relates to our
acquisition of Scorpion to be paid in shares of common stock and
in cash, contingent upon quantities of Scorpion Composite Plugs
sold during 2016 and gross margin related to the product sales for
three years following the acquisition.
(2) Amount represents fees and legal settlements associated with
legal proceedings brought pursuant to the Fair Labor Standards Act
and/or similar state laws.
|
|
|
NINE ENERGY SERVICE, INC. |
RECONCILIATIONS OF ROIC CALCULATIONS |
(In Thousands)
|
(Unaudited)
|
|
| |
| |
| |
Three Months Ended
|
| |
September 30, 2018
|
|
June 30, 2018
|
| | | |
|
Net income | |
$
|
13,658
| | |
$
|
9,019
| |
Add back:
| | | | |
Interest expense
| | |
1,568
| | | |
1,815
| |
Taxes on interest
| |
|
(330
|
)
|
|
|
(381
|
)
|
After-tax net operating profit | |
$
|
14,896
| | |
$
|
10,453
| |
| | | |
|
Total capital as of prior-period end: | | | | |
Total stockholders' equity
| |
$
|
472,180
| | |
$
|
459,440
| |
Total debt
| | |
115,274
| | | |
115,274
| |
Less cash and cash equivalents
| |
|
(70,860
|
)
|
|
|
(72,900
|
)
|
Total capital | |
$
|
516,594
|
|
|
$
|
501,814
|
|
| | | |
|
Total capital as of period-end: | | | | |
Total stockholders' equity
| |
$
|
490,630
| | |
$
|
472,180
| |
Total debt
| | |
115,274
| | | |
115,274
| |
Less cash and cash equivalents
| |
|
(86,534
|
)
|
|
|
(70,860
|
)
|
Total capital | |
$
|
519,370
|
|
|
$
|
516,594
|
|
Average total capital | |
$
|
517,982
|
|
|
$
|
509,204
|
|
ROIC | | |
12
|
%
| | |
8
|
%
|
| | | |
|
AAdjusted EBITDA is defined as EBITDA further adjusted for
(i) impairment of goodwill and other intangible assets, (ii) transaction
expenses related to acquisitions or the Combination, (iii) loss from
discontinued operations, (iv) loss or gains from the revaluation of
contingent liabilities, (v) non-cash stock-based compensation expense,
(vi) loss or gains on sale of assets, (vii) inventory write-down and
(viii) adjustment for other expenses or charges, to exclude certain
items which we believe are not reflective of ongoing performance of our
business, such as transaction expenses associated with our IPO, legal
expenses and settlement costs related to litigation outside the ordinary
course of business, and restructuring costs. Management believes
Adjusted EBITDA is useful because it allows us to more effectively
evaluate our operating performance and compare the results of our
operations from period to period without regard to our financing methods
or capital structure.
BROIC is defined as after-tax net operating profit, divided
by average total capital. We define after-tax net operating profit as
income (loss) from continuing operations (net of tax) plus interest
expense, less taxes on interest. We define total capital as book value
of equity plus the book value of debt less balance sheet cash and cash
equivalents. We then take the average of the current and prior
period-end total capital for use in this analysis. Management believes
ROIC is a meaningful measure because it quantifies how well we generate
operating income relative to the capital we have invested in our
business and illustrates the profitability of a business or project
taking into account the capital invested. Management uses ROIC to assist
them in capital resource allocation decisions and in evaluating business
performance.
CAdjusted gross profit is defined as revenues less cost of
revenues excluding depreciation and amortization. This measure differs
from the GAAP definition of gross profit because we do not include the
impact of depreciation and amortization, which represent non-cash
expenses. Our management uses adjusted gross profit to evaluate
operating performance and to determine resource allocation between
segments. We prepare adjusted gross profit (excluding depreciation and
amortization) to eliminate the impact of depreciation and amortization
because we do not consider depreciation and amortization indicative of
our core operating performance.

View source version on businesswire.com: https://www.businesswire.com/news/home/20181112005792/en/
Nine Energy Service Investor Contact:
Heather Schmidt
Director,
Investor Relations and Marketing
(281) 730-5113
[email protected]
Source: Nine Energy Service, Inc.