• Full year 2018 Revenue, Net Loss and Adjusted EBITDAA
increased approximately 52%, 22% and 142%, respectively year-over-year
• 2018 Annual ROICB of 12% for legacy Nine business and 8%
for Nine consolidated business, exceeding or meeting Management’s
original target
• Revenue, Net Loss and Adjusted EBITDA of $229.4 million, $(77.3) million and $48.0 million, respectively for the fourth quarter of 2018
• Fourth quarter Basic EPS of $(2.78) and $0.49 Adjusted Basic EPSC
HOUSTON--(BUSINESS WIRE)--
Nine Energy Service, Inc. ("Nine" or the "Company") (NYSE: NINE)
reported fourth quarter 2018 revenues of $229.4 million, net loss of
$(77.3) million and adjusted EBITDA of $48.0 million. Fourth quarter
2018 revenues increased approximately 5% as compared to the third
quarter 2018 revenues of $218.4 million. Fourth quarter net loss was
$(77.3) million, or $(2.78) per basic share, which includes property and
equipment, goodwill and intangible impairments of $77.7 million
associated with the Production Solutions segment. For the fourth quarter
2018, adjusted net incomeD was $13.6 million, or $0.49
adjusted basic earnings per share. The Company reported fourth quarter
2018 adjusted EBITDA of $48.0 million, an increase of approximately 25%
compared to third quarter adjusted EBITDA of $38.4 million, and a fourth
quarter adjusted EBITDA marginA of approximately 21%.
The Company had provided original fourth quarter 2018 revenue guidance
between $225.0 and $235.0 million and adjusted EBITDA guidance between
$40.0 and $45.0 million, with actual results meeting the midpoint of
fourth quarter 2018 revenue guidance and outperforming the midpoint of
fourth quarter 2018 adjusted EBITDA guidance by approximately 13%.
During the fourth quarter of 2018, the Company generated ROIC of 20% for
the legacy Nine business and 13% for Nine consolidated business.
Nine’s President and Chief Executive Officer, Ann Fox, commented, "I am
extremely proud of our team and the contributions that have come from
every part of the organization. In 2018, we grew through both profitable
organic growth within our existing service and product lines, as well as
through strategic M&A, with the acquisitions of two completion
technology companies, Magnum Oil Tools and Frac Technology. Nine has
realized tremendous financial growth year-over-year, growing revenue by
approximately 52%, adjusted EBITDA by over 140%, and adjusted EBITDA
margin by over 600 basis points. The Company increased cash flow from
operations by over 15 times over 2017.
In January, we completed our IPO and provided our shareholders with a
2018 organic growth plan, including annual ROIC and adjusted EBITDA
targets for the legacy Nine business, both of which we exceeded.
Our legacy Nine service lines performed exceptionally well throughout
2018, winning profitable market share, with the majority of our service
lines executing large activity and pricing growth. Year-over-year, we
completed approximately 51,000 more stages as a company, an increase of
approximately 86%. All of this was accomplished while staying within our
conservative capex plan.
In conjunction with organic growth, we successfully executed strategic
M&A with the completion of the Magnum and Frac Technology acquisitions,
further solidifying our strategy of coupling excellent service with
forward-leaning technology. These partnerships propel Nine to a more
balanced profile of completion tools and conveyance while creating
additional barriers to entry and differentiation. With the addition of
both teams, we expanded our R&D capabilities to help ensure we are
creating the tools of the future for our customers and staying ahead of
industry trends.
We were also very pleased with our performance in Q4, especially as we
saw significant declines in commodity prices starting in October,
coupled with budget exhaustion and typical seasonality. Despite this, we
once again beat adjusted EBITDA guidance and ended the quarter with an
approximately 21% adjusted EBITDA margin, one of the highest in our
sector.
We continue to navigate a lower commodity price environment and work
with customers on pricing concessions as they reduce 2019 capital budget
plans up to 30%. With these reductions, we do anticipate adjusted EBITDA
decline and margin compression for Q1 2019 compared to Q4 2018. We have
and will remain focused on driving value for our shareholders, customers
and employees and will continue to follow our returns-based growth
strategy into 2019.”
During the fourth quarter of 2018, the Company reported a net loss of
$(77.3) million, or $(2.78) per basic share, which includes property and
equipment, goodwill and intangible impairments of $77.7 million
associated with the Production Solutions segment comprised of 107 well
service rigs. The impairment is a result of deteriorating well services
market conditions due to lower commodity prices towards the end of the
fourth quarter coupled with deep reach coiled tubing and dissolvable
technology taking market share in the completion-based drill-out work.
For the year ended December 31, 2018, the Company reported revenues of
$827.2 million compared to year ended December 31, 2017 revenues of
$543.7 million, representing an approximate 52% increase. Net loss for
full year 2018 totaled $(53.0) million, or $(2.17) per basic share,
compared to year ended December 31, 2017 net loss of $(67.7) million, or
$(4.55) per basic share. For the year ended December 31, 2018, adjusted
net income was $40.6 million, or $1.66 adjusted basic earnings per
share. The Company reported year ended December 31, 2018 adjusted EBITDA
of $141.1 million, compared to year ended December 31, 2017 adjusted
EBITDA of $58.2 million, representing an approximate 142% increase.
For the year ended December 31, 2018, the Company generated ROIC of 12%
for the legacy Nine business and 8% ROIC for Nine consolidated business.
The Company is providing adjusted net income and adjusted basic earnings
per share to account for impairments, as well as transaction and other
one-time expenses related to the acquisitions and our IPO to provide a
more accurate representation of Company performance. Please see end of
press release for definitions and reconciliations.
Business Segment Results
Completion Solutions
During the fourth 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 $209.0 million
compared to third quarter 2018 revenues of $196.6 million, representing
an approximate 6% increase. For the fourth quarter 2018, Completion
Solutions reported adjusted gross profitE of $55.1 million
compared to third quarter 2018 adjusted gross profit of $49.4 million,
representing an approximate 11% increase.
For the year ended December 31, 2018, Completion Solutions reported
revenues of $745.3 million compared to year ended December 31, 2017
revenues of $465.8 million, representing an approximate 60% increase.
Completion Solutions reported year ended December 31, 2018 adjusted
gross profit of $176.8 million, compared to year ended December 31, 2017
adjusted gross profit of $81.1 million, representing an approximate 118%
increase.
Production Solutions
During the fourth quarter of 2018, the Company’s Production Solutions
segment, which includes well services, generated revenues of
$20.5 million compared to third quarter 2018 revenues of $21.8 million,
representing an approximate 6% decrease. For the fourth quarter 2018,
Production Solutions reported adjusted gross profit of $2.8 million
compared to third quarter 2018 adjusted gross profit of $3.1 million,
representing an approximate 10% decrease.
For the year ended December 31, 2018, Production Solutions reported
revenues of $81.9 million compared to year ended December 31, 2017
revenues of $77.9 million, representing an approximate 5% increase.
Production Solutions reported year ended December 31, 2018 adjusted
gross profit of $11.1 million, compared to year ended December 31, 2017
adjusted gross profit of $14.1 million, representing an approximate 21%
decrease.
Other Financial Information
During the fourth quarter of 2018, the Company reported selling, general
and administrative expense of $22.7 million, compared to $21.8 million
for the third quarter of 2018. Depreciation and amortization expense
("D&A") in the fourth quarter of 2018 was $18.2 million, compared to
$15.5 million for the third quarter of 2018.
For the year ended December 31, 2018, the Company reported D&A expense
of $63.8 million, compared to year ended December 31, 2017 D&A expense
of $62.2 million.
The Company recognized income tax expense of approximately $0.5 million
in the fourth quarter of 2018 and overall income tax expense for the
year of approximately $2.4 million, resulting in an effective tax rate
of -4.7% for 2018. The impact on pre-tax book income from the Q4
Production Solutions impairment and Magnum transaction costs is the
primary driver behind the negative effective tax rate for 2018. Cash tax
expense for 2018 was approximately $1.5 million.
Liquidity and Capital Expenditures
For the year ended December 31, 2018, the Company reported net cash
provided by operating activities of $89.6 million compared to the year
ended December 31, 2017 net cash provided by operating activities of
$5.7 million.
During the fourth quarter of 2018, total capital expenditures were $9.6
million of which approximately 29% related to maintenance capital
expenditures, compared to total capital expenditures of $21.0 million
for the third quarter of 2018. For the year ended December 31, 2018, the
Company reported total capital expenditures of $52.6 million of which
approximately 22% related to maintenance capital expenditures compared
to the year ended December 31, 2017 total capital expenditures of $45.2
million. Approximately $4.2 million in 2018 capital expenditures were
delayed into 2019.
As of December 31, 2018, Nine’s cash and cash equivalents were $63.6
million with $83.5 million of availability under our revolving credit
facility, resulting in a total liquidity position of $147.1 million as
of December 31, 2018.
All financial and operational results, unless noted, for the full year
2018 and fourth quarter 2018 are consolidated for Nine and Magnum Oil
Tools and includes only the last six days of October and full month
November and December for Magnum reflecting the close of the Magnum
transaction on October 25, 2018.
ABCDESee end of press release for definitions
Conference Call Information
The call is scheduled for Thursday, March 7, 2019 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 March 21, 2019 and may be accessed by
dialing U.S. (Toll Free): (877) 660-6853 or International: (201)
612-7415 and entering the passcode of 13686876.
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
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, 2018 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. |
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) |
(In Thousands, Except Per Share Amounts)
|
(Unaudited)
|
|
| |
| |
| |
| |
| |
Three Months Ended
| |
Year Ended December 31,
|
| |
December 31, 2018
|
|
September 30, 2018
| |
|
2018
|
|
|
|
2017
|
|
| | | | | | | |
|
Revenues | |
$
|
229,448
| | |
$
|
218,427
| | |
$
|
827,174
| | |
$
|
543,660
| |
Cost and expenses | | | | | | | | |
Cost of revenues (exclusive of depreciation and amortization shown
separately below)
| | |
171,598
| | | |
165,882
| | | |
639,298
| | | |
448,467
| |
General and administrative expenses
| | |
22,711
| | | |
21,784
| | | |
75,993
| | | |
49,552
| |
Depreciation
| | |
14,275
| | | |
13,661
| | | |
54,257
| | | |
53,422
| |
Amortization of intangibles
| | |
3,905
| | | |
1,857
| | | |
9,558
| | | |
8,799
| |
Impairment of property and equipment
| | |
45,694
| | | |
-
| | | |
45,694
| | | |
-
| |
Impairment of goodwill
| | |
12,986
| | | |
-
| | | |
12,986
| | | |
31,530
| |
Impairment of intangibles
| | |
19,065
| | | |
-
| | | |
19,065
| | | |
3,800
| |
Loss on equity method investment
| | |
77
| | | |
77
| | | |
347
| | | |
368
| |
(Gain) loss on sale of property and equipment
| |
|
(30
|
)
|
|
|
(1,190
|
)
| |
|
(1,731
|
)
|
|
|
4,688
|
|
Income (loss) from operations
| |
|
(60,833
|
)
|
|
|
16,356
|
| |
|
(28,293
|
)
|
|
|
(56,966
|
)
|
Other expense | | | | | | | | |
Interest expense
| |
|
16,002
|
|
|
|
1,568
|
| |
|
22,315
|
|
|
|
15,703
|
|
Total other expense
| |
|
16,002
|
|
|
|
1,568
|
| |
|
22,315
|
|
|
|
15,703
|
|
Income (loss) before income taxes
| | |
(76,835
|
)
| | |
14,788
| | | |
(50,608
|
)
| | |
(72,669
|
)
|
Provision (benefit) for income taxes
| |
|
500
|
|
|
|
1,130
|
| |
|
2,375
|
|
|
|
(4,987
|
)
|
Net income (loss)
| |
$
|
(77,335
|
)
| |
$
|
13,658
| | |
$
|
(52,983
|
)
| |
$
|
(67,682
|
)
|
Earnings (loss) per share
| | | | | | | | |
Basic
| |
$
|
(2.78
|
)
| |
$
|
0.57
| | |
$
|
(2.17
|
)
| |
$
|
(4.55
|
)
|
Diluted
| |
$
|
(2.78
|
)
| |
$
|
0.56
| | |
$
|
(2.17
|
)
| |
$
|
(4.55
|
)
|
Weighted average shares outstanding
| | | | | | | | |
Basic
| | |
27,815,401
| | | |
23,971,032
| | | |
24,411,213
| | | |
14,887,006
| |
Diluted
| | |
27,815,401
| | | |
24,389,295
| | | |
24,411,213
| | | |
14,887,006
| |
Other comprehensive income (loss), net of tax | | | | | | | | |
Foreign currency translation adjustments, net of tax of $0 and $0 | |
$
|
(722
|
)
|
|
$
|
207
|
| |
$
|
(1,159
|
)
|
|
$
|
(198
|
)
|
Total other comprehensive income (loss), net of tax
| |
|
(722
|
)
|
|
|
207
|
| |
|
(1,159
|
)
|
|
|
(198
|
)
|
Total comprehensive income (loss)
| |
$
|
(78,057
|
)
| |
$
|
13,865
| | |
$
|
(54,142
|
)
| |
$
|
(67,880
|
)
|
| | | | | | | |
|
|
NINE ENERGY SERVICE, INC. |
CONSOLIDATED BALANCE SHEETS |
(In Thousands)
|
|
|
|
Year Ended December 31,
|
| |
|
2018
|
|
|
|
2017
|
|
| | | |
|
Assets | | | | |
Current assets
| | | | |
Cash and cash equivalents
| |
$
|
63,615
| | |
$
|
17,513
| |
Accounts receivable, net
| | |
154,783
| | | |
99,565
| |
Inventories, net
| | |
91,435
| | | |
22,230
| |
Prepaid expenses and other current assets
| | |
15,717
| | | |
7,929
| |
Notes receivable from shareholders
| |
|
7,626
|
| |
|
-
|
|
Total current assets
| | |
333,176
| | | |
147,237
| |
Property and equipment, net
| | |
211,644
| | | |
259,039
| |
Definite-lived intangible asset, net
| | |
173,451
| | | |
41,514
| |
Goodwill
| | |
307,804
| | | |
93,756
| |
Indefinite-lived intangible assets
| | |
108,711
| | | |
22,031
| |
Other long-term assets
| | |
6,386
| | | |
4,806
| |
Notes receivable from shareholders
| |
|
-
|
| |
|
10,476
|
|
Total assets
| |
$
|
1,141,172
|
| |
$
|
578,859
|
|
Liabilities and Stockholders’ Equity | | | | |
Current liabilities
| | | | |
Current portion of long-term debt
| |
$
|
-
| | |
$
|
241,509
| |
Accounts payable
| | |
46,132
| | | |
29,643
| |
Accrued expenses
| | |
61,434
| | | |
14,687
| |
Current portion of capital lease obligations
| | |
665
| | | |
-
| |
Income taxes payable
| |
|
57
|
| |
|
581
|
|
Total current liabilities
| | |
108,288
| | | |
286,420
| |
Long-term liabilities
| | | | |
Long-term debt
| | |
424,978
| | | |
-
| |
Deferred income taxes
| | |
5,915
| | | |
5,017
| |
Long-term capital lease obligations
| | |
2,330
| | | |
-
| |
Other long-term liabilities
| |
|
4,838
|
| |
|
64
|
|
Total liabilities
| | |
546,349
| | | |
291,501
| |
| | | |
|
Stockholders’ equity
| | | | |
Common stock (120,000,000 shares authorized at $.01 par value;
30,163,408 and 15,810,540 shares issued and outstanding at
December 31, 2018 and 2017, respectively)
| | |
302
| | | |
158
| |
Additional paid-in capital
| | |
746,428
| | | |
384,965
| |
Accumulated other comprehensive loss
| | |
(4,843
|
)
| | |
(3,684
|
)
|
Accumulated deficit
| |
|
(147,064
|
)
| |
|
(94,081
|
)
|
Total stockholders’ equity
| |
|
594,823
|
| |
|
287,358
|
|
Total liabilities and stockholders’ equity
| |
$
|
1,141,172
|
| |
$
|
578,859
|
|
| | | |
|
|
NINE ENERGY SERVICE, INC. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In Thousands)
|
|
|
| |
| |
| |
Year Ended December 31,
|
| |
|
2018
|
| |
|
2017
|
|
| | | |
|
Cash flows from operating activities | | | | |
Net loss
| |
$
|
(52,983
|
)
| |
$
|
(67,682
|
)
|
Adjustments to reconcile net income to net cash provided by
operating activities
| | | | |
Depreciation
| | |
54,257
| | | |
53,422
| |
Amortization of intangibles
| | |
9,558
| | | |
8,799
| |
Amortization of deferred financing costs
| | |
2,966
| | | |
1,615
| |
Provision for (recovery of) doubtful accounts
| | |
(268
|
)
| | |
176
| |
Provision (benefit) for deferred income taxes
| | |
898
| | | |
(5,815
|
)
|
Provision for inventory obsolescence
| | |
844
| | | |
1,359
| |
Impairment of property and equipment
| | |
45,694
| | | |
-
| |
Impairment of goodwill
| | |
12,986
| | | |
31,530
| |
Impairment of intangible assets
| | |
19,065
| | | |
3,800
| |
Stock-based compensation expense
| | |
13,221
| | | |
7,568
| |
(Gain) loss on sale of property and equipment
| | |
(1,731
|
)
| | |
4,688
| |
Loss on revaluation of contingent liabilities
| | |
3,262
| | | |
415
| |
Loss on equity method investment
| | |
347
| | | |
368
| |
Changes in operating assets and liabilities, net of effects from
acquisitions
| | | | |
Accounts receivable, net
| | |
(24,972
|
)
| | |
(52,180
|
)
|
Inventories, net
| | |
(15,041
|
)
| | |
(8,212
|
)
|
Prepaid expenses and other current assets
| | |
(5,722
|
)
| | |
1,472
| |
Accounts payable and accrued expenses
| | |
27,156
| | | |
12,530
| |
Income taxes receivable/payable
| | |
(255
|
)
| | |
15,158
| |
Other assets and liabilities
| |
|
295
|
| |
|
(3,340
|
)
|
Net cash provided by operating activities
| |
|
89,577
|
| |
|
5,671
|
|
Cash flows from investing activities | | | | |
Acquisitions, net of cash acquired
| | |
(349,986
|
)
| | |
-
| |
Proceeds from sales of property and equipment
| | |
2,183
| | | |
1,452
| |
Proceeds from property and equipment casualty losses
| | |
1,743
| | | |
300
| |
Proceeds from notes receivable payments
| | |
2,941
| | | |
-
| |
Purchases of property and equipment
| | |
(46,646
|
)
| | |
(45,216
|
)
|
Equity method investment
| |
|
-
|
| |
|
(1,000
|
)
|
Net cash used in investing activities
| |
|
(389,765
|
)
| |
|
(44,464
|
)
|
Cash flows from financing activities | | | | |
Proceeds from revolving credit facilities
| | |
35,000
| | | |
56,481
| |
Payments on revolving credit facilities
| | |
(96,182
|
)
| | |
(38,287
|
)
|
Proceeds from Senior Notes
| | |
400,000
| | | |
-
| |
Proceeds from term loan
| | |
125,000
| | | |
-
| |
Payments on term loans
| | |
(270,975
|
)
| | |
(22,475
|
)
|
Payments on notes payable—insurance premium financing
| | |
-
| | | |
(272
|
)
|
Payments on capital leases
| | |
(128
|
)
| | |
-
| |
Payments of contingent liability on Scorpion purchase
| | |
(3,445
|
)
| | |
(1,325
|
)
|
Proceeds from issuance of common stock in IPO, net of offering costs
| | |
171,450
| | | |
-
| |
Proceeds from other issuances of common stock
| | |
300
| | | |
61,374
| |
Proceeds from exercise of stock options
| | |
2,905
| | | |
-
| |
Vesting of restricted stock
| | |
(927
|
)
| | |
-
| |
Distribution to non-accredited investors
| | |
-
| | | |
(2,438
|
)
|
Cost of debt issuance
| |
|
(16,307
|
)
| |
|
(716
|
)
|
Net cash provided by financing activities
| |
|
346,691
|
| |
|
52,342
|
|
Impact of foreign currency exchange on cash
| |
|
(401
|
)
| |
|
(110
|
)
|
Net increase in cash and cash equivalents
| | |
46,102
| | | |
13,439
| |
Cash, cash equivalents and restricted cash | | | | |
Beginning of period
| |
|
17,513
|
| |
|
4,074
|
|
End of period
| |
$
|
63,615
|
| |
$
|
17,513
|
|
| | | |
|
|
NINE ENERGY SERVICE, INC. |
SEGMENT DATA |
(In Thousands)
|
(Unaudited)
|
|
| |
| |
| |
| |
| |
Three Months Ended
| |
Year Ended December 31,
|
| |
December 31, 2018
|
|
September 30, 2018
| |
|
2018
|
| |
|
2017
|
|
Revenues | | | | | | | | |
Completion Solutions
| |
$
|
208,953
| | |
$
|
196,608
| | |
$
|
745,316
| | |
$
|
465,773
| |
Production Solutions
| |
|
20,495
|
|
|
|
21,819
|
| |
|
81,858
|
|
|
|
77,887
|
|
| |
$
|
229,448
|
|
|
$
|
218,427
|
| |
$
|
827,174
|
|
|
$
|
543,660
|
|
| | | | | | | |
|
Cost of revenues (1) | | | | | | | | |
Completion Solutions
| |
$
|
153,891
| | |
$
|
147,178
| | |
$
|
568,497
| | |
$
|
384,641
| |
Production Solutions
| |
|
17,707
|
|
|
|
18,704
|
| |
|
70,801
|
|
|
|
63,826
|
|
| |
$
|
171,598
|
|
|
$
|
165,882
|
| |
$
|
639,298
|
|
|
$
|
448,467
|
|
| | | | | | | |
|
Adjusted gross profit | | | | | | | | |
Completion Solutions
| |
$
|
55,062
| | |
$
|
49,430
| | |
$
|
176,819
| | |
$
|
81,132
| |
Production Solutions
| |
|
2,788
|
|
|
|
3,115
|
| |
|
11,057
|
|
|
|
14,061
|
|
| |
$
|
57,850
|
|
|
$
|
52,545
|
| |
$
|
187,876
|
|
|
$
|
95,193
|
|
| | | | | | | |
|
General and administrative expenses
| | |
22,711
| | | |
21,784
| | | |
75,993
| | | |
49,552
| |
Depreciation
| | |
14,275
| | | |
13,661
| | | |
54,257
| | | |
53,422
| |
Amortization of intangibles
| | |
3,905
| | | |
1,857
| | | |
9,558
| | | |
8,799
| |
Impairment of property and equipment
| | |
45,694
| | | |
-
| | | |
45,694
| | | |
-
| |
Impairment of goodwill
| | |
12,986
| | | |
-
| | | |
12,986
| | | |
31,530
| |
Impairment of intangibles
| | |
19,065
| | | |
-
| | | |
19,065
| | | |
3,800
| |
Loss on equity method investment
| | |
77
| | | |
77
| | | |
347
| | | |
368
| |
(Gain) loss on sale of property and equipment
| |
|
(30
|
)
|
|
|
(1,190
|
)
| |
|
(1,731
|
)
|
|
|
4,688
|
|
Income (loss) from operations | |
$
|
(60,833
|
)
| |
$
|
16,356
| | |
$
|
(28,293
|
)
| |
$
|
(56,966
|
)
|
| | | | | | | |
|
Capital expenditures | | | | | | | | |
Completion Solutions
| |
$
|
8,666
| | |
$
|
20,235
| | |
$
|
48,361
| | |
$
|
40,626
| |
Production Solutions
| | |
901
| | | |
689
| | | |
3,548
| | | |
4,590
| |
Corporate
| |
|
64
|
|
|
|
92
|
| |
|
661
|
|
|
|
-
|
|
| |
$
|
9,631
| | |
$
|
21,016
| | |
$
|
52,570
| | |
$
|
45,216
| |
Total assets | | | | | | | | |
Completion Solutions
| |
$
|
1,045,643
| | |
$
|
496,373
| | |
$
|
1,045,643
| | |
$
|
428,702
| |
Production Solutions
| | |
35,086
| | | |
116,516
| | | |
35,086
| | | |
119,607
| |
Corporate
| |
|
60,443
|
|
|
|
93,562
|
| |
|
60,443
|
|
|
|
30,550
|
|
| |
$
|
1,141,172
| | |
$
|
706,451
| | |
$
|
1,141,172
| | |
$
|
578,859
| |
| | | | | | | |
|
| |
Three Months Ended
| |
Year Ended December 31,
|
| |
December 31, 2018
|
|
September 30, 2018
| |
|
2018
|
|
|
|
2017
|
|
Revenue by country | | | | | | | | |
United States | |
$
|
223,178
| | |
$
|
208,907
| | |
$
|
796,221
| | |
$
|
521,914
| |
Canada and other
| |
|
6,270
|
|
|
|
9,520
|
| |
|
30,953
|
|
|
|
21,716
|
|
| |
$
|
229,448
| | |
$
|
218,427
| | |
$
|
827,174
| | |
$
|
543,630
| |
| | | | | | | |
|
| |
Three Months Ended
| |
Year Ended December 31,
|
| |
December 31, 2018
|
|
September 30, 2018
| |
|
2018
|
|
|
|
2017
|
|
Long-lived assets (2) | | | | | | | | |
United States | |
$
|
377,623
| | |
$
|
288,511
| | |
$
|
377,623
| | |
$
|
295,939
| |
Canada and other
| |
|
7,472
|
|
|
|
4,797
|
| |
|
7,472
|
|
|
|
4,614
|
|
| |
$
|
385,095
| | |
$
|
293,308
| | |
$
|
385,095
| | |
$
|
300,553
| |
| | | | | | | |
|
(1) Excludes depreciation and amortization, shown separately.
|
| | | | | | | |
|
(2) Inclusive of property and equipment and definite-lived
intangible assets
|
| | | | | |
|
|
NINE ENERGY SERVICE, INC. |
RECONCILIATION OF ADJUSTED GROSS PROFIT |
(In Thousands)
|
(Unaudited)
|
|
| |
| |
| |
| |
| |
Three Months Ended
| |
Year Ended December 31,
|
| |
December 31, 2018
|
|
September 30, 2018
| |
|
2018
|
|
|
2017
|
Calculation of gross profit | | | | | | | | |
Revenues
| |
$
|
229,448
| |
$
|
218,427
| |
$
|
827,174
| |
$
|
543,660
|
Cost of revenues (exclusive of depreciation and
amortization shown separately below)
| | | | | | | | |
| |
171,598
| | |
165,882
| | |
639,298
| | |
448,467
|
Depreciation (related to cost of revenues)
| | |
14,039
| | |
13,434
| | |
53,358
| | |
52,536
|
Amortization of intangibles
| |
|
3,905
|
|
|
1,857
| |
|
9,558
|
|
|
8,799
|
Gross profit | |
$
|
39,906
|
|
$
|
37,254
| |
$
|
124,960
|
|
$
|
33,858
|
| | | | | | | |
|
Adjusted gross profit (excluding depreciation and amortization)
reconciliation | | | | | | | | |
Gross profit
| |
$
|
39,906
| |
$
|
37,254
| |
$
|
124,960
| |
$
|
33,858
|
Depreciation (related to cost of revenues)
| | |
14,039
| | |
13,434
| | |
53,358
| | |
52,536
|
Amortization of intangibles
| |
|
3,905
|
|
|
1,857
| |
|
9,558
|
|
|
8,799
|
Adjusted gross profit | |
$
|
57,850
|
|
$
|
52,545
| |
$
|
187,876
|
|
$
|
95,193
|
| | | | | | | |
|
|
NINE ENERGY SERVICE, INC. |
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA |
(In Thousands)
|
(Unaudited)
|
|
| |
| |
| |
| |
| |
Three Months Ended
| |
Year Ended December 31,
|
| |
December 31, 2018
|
|
September 30, 2018
| |
|
2018
|
|
|
|
2017
|
|
EBITDA reconciliation: | | | | | | | | |
Net income (loss)
| |
$
|
(77,335
|
)
| |
$
|
13,658
| | |
$
|
(52,983
|
)
| |
$
|
(67,682
|
)
|
Interest expense
| | |
16,002
| | | |
1,568
| | | |
22,315
| | | |
15,703
| |
Depreciation
| | |
14,275
| | | |
13,661
| | | |
54,257
| | | |
53,422
| |
Amortization of intangibles
| | |
3,905
| | | |
1,857
| | | |
9,558
| | | |
8,799
| |
Provision (benefit) for income taxes
| |
|
500
|
|
|
|
1,130
|
| |
|
2,375
|
|
|
|
(4,987
|
)
|
EBITDA | |
$
|
(42,653
|
)
| |
$
|
31,874
| | |
$
|
35,522
| | |
$
|
5,255
| |
Impairment of property and equipment
| | |
45,694
| | | |
-
| | | |
45,694
| | | |
-
| |
Impairment of goodwill
| | |
12,986
| | | |
-
| | | |
12,986
| | | |
31,530
| |
Impairment of intangible assets
| | |
19,065
| | | |
-
| | | |
19,065
| | | |
3,800
| |
Transaction and integration costs
| | |
7,630
| | | |
2,320
| | | |
10,327
| | | |
3,622
| |
Loss on revaluation of contingent liabilities (1)
| | |
1,547
| | | |
45
| | | |
3,262
| | | |
415
| |
Loss on equity method investment
| | |
77
| | | |
77
| | | |
347
| | | |
368
| |
Stock-based compensation expense
| | |
3,502
| | | |
3,508
| | | |
13,221
| | | |
7,568
| |
(Gain) loss on sale of property and equipment
| | |
(30
|
)
| | |
(1,190
|
)
| | |
(1,731
|
)
| | |
4,688
| |
Legal fees and settlements (2)
| |
|
155
|
|
|
|
1,721
|
| |
|
2,358
|
|
|
|
974
|
|
Adjusted EBITDA | |
$
|
47,973
|
|
|
$
|
38,355
|
| |
$
|
141,051
|
|
|
$
|
58,220
|
|
(1) Amounts relate to the revaluation of contingent liabilities
associated with the Company's recent acquisitions. The impact is
included in "General and administrative expenses' in the Company's
Consolidated Statements of Income and Comprehensive Income (Loss).
|
|
(2) Amounts represent fees and settlements associated with legal
proceedings brought pursuant to the Fair Labor Standards Act and/or
similar state laws.
|
|
|
NINE ENERGY SERVICE, INC. |
RECONCILIATION OF ROIC CALCULATION |
(In Thousands)
|
(Unaudited)
|
|
|
|
|
|
| |
Nine Legacy
| |
Consolidated
|
| |
Three Months Ended
|
|
Year Ended
| |
Three Months Ended
|
|
Year Ended
|
| |
December 31, 2018
|
|
December 31, 2018
| |
December 31, 2018
|
|
December 31, 2018
|
| | |
| | | | | |
Net loss | |
$
|
(77,335
|
)
| |
$
|
(52,983
|
)
| |
$
|
(77,335
|
)
| |
$
|
(52,983
|
)
|
Add back:
| | | | | | | | |
Impairment of property and equipment
| | |
45,694
| | | |
45,694
| | | |
45,694
| | | |
45,694
| |
Impairment of goodwill
| | |
12,986
| | | |
12,986
| | | |
12,986
| | | |
12,986
| |
Impairment of intangibles
| | |
19,065
| | | |
19,065
| | | |
19,065
| | | |
19,065
| |
Interest expense
| | |
16,002
| | | |
22,315
| | | |
16,002
| | | |
22,315
| |
Transaction and integration costs
| | |
7,630
| | | |
10,327
| | | |
7,630
| | | |
10,327
| |
Provision (benefit) for deferred income taxes
| |
|
(67
|
)
|
|
|
898
|
| |
|
(67
|
)
|
|
|
898
|
|
After-tax net operating profit (1) | |
$
|
23,975
| | |
$
|
58,302
| | |
$
|
23,975
| | |
$
|
58,302
| |
| | | | | | | |
|
Total capital as of prior-year end: | | | | | | | | |
Total stockholders' equity
| |
$
|
490,630
| | |
$
|
287,358
| | |
$
|
490,630
| | |
$
|
287,358
| |
Total debt
| | |
115,274
| | | |
242,235
| | | |
115,274
| | | |
242,235
| |
Less cash and cash equivalents
| |
|
(86,534
|
)
|
|
|
(17,513
|
)
| |
|
(86,534
|
)
|
|
|
(17,513
|
)
|
Total capital as of prior-year end | |
$
|
519,370
|
|
|
$
|
512,080
|
| |
$
|
519,370
|
|
|
$
|
512,080
|
|
| | | | | | | |
|
Total capital as of year-end: | | | | | | | | |
Total stockholders' equity
| |
$
|
594,823
| | |
$
|
594,823
| | |
$
|
594,823
| | |
$
|
594,823
| |
Total debt
| | |
435,000
| | | |
435,000
| | | |
435,000
| | | |
435,000
| |
Less: cash and cash equivalents
| |
|
(63,615
|
)
|
|
|
(63,615
|
)
| |
|
(63,615
|
)
|
|
|
(63,615
|
)
|
Total capital as of year-end, consolidated: | |
$
|
966,208
| | |
$
|
966,208
| | |
$
|
966,208
| | |
$
|
966,208
| |
Less: capital impact of 2018 acquisitions (2)
| |
|
(531,086
|
)
|
|
|
(531,086
|
)
| | |
| | | |
| |
Total capital as of year-end, Nine Legacy: | |
$
|
435,122
|
|
|
$
|
435,122
|
| |
|
| | |
|
| |
Average total capital | |
$
|
477,246
|
|
|
$
|
473,601
|
| |
$
|
742,789
|
|
|
$
|
739,144
|
|
ROIC | | |
20
|
%
| | |
12
|
%
| | |
13
|
%
| | |
8
|
%
|
(1) Because acquisitions completed in 2018 have been fully
integrated into the Company’s existing operations, it is
impractical to quantify the acquisitions’ contribution to the
Company’s net income (loss) since their respective closing dates.
As such, Nine legacy’s after-tax net operating profit has not been
adjusted to exclude the net income impact of 2018 acquisitions.
The Company believes that the net income impact of the
acquisitions (both of which were completed in the fourth quarter
of 2018) on ROIC for Nine legacy is immaterial.
|
|
(2) Amount represents incremental impact to the Company's interest
expense, debt balance, cash balance and common stock, as a result of
2018 acquisitions.
|
|
NINE ENERGY SERVICE, INC. |
RECONCILIATION OF ADJUSTED NET INCOME AND ADJUSTED BASIC EARNINGS
(LOSS) PER SHARE CALCULATION |
(In Thousands)
|
(Unaudited)
|
|
| |
| |
| |
Three Months Ended
| |
Year Ended
|
| |
December 31, 2018
| |
December 31, 2018
|
Reconciliation of adjusted net income: | | | | |
Net income (loss)
| |
$
|
(77,335
|
)
| |
$
|
(52,983
|
)
|
Add back:
| | | | |
Impairment of property and equipment (a)
| | |
45,694
| | | |
45,694
| |
Impairment of goodwill (a)
| | |
12,986
| | | |
12,986
| |
Impairment of intangibles (a)
| | |
19,065
| | | |
19,065
| |
Transaction and integration costs (b)
| | |
7,630
| | | |
10,327
| |
Commitment fee (c)
| | |
6,900
| | | |
6,900
| |
Income tax impact of adjustments
| |
|
(1,375
|
)
| |
|
(1,375
|
)
|
| | | |
|
Adjusted net income (loss)
| |
$
|
13,565
| | |
$
|
40,614
| |
| | | |
|
Weighted average shares | | | | |
Weighted average shares outstanding for basic and adjusted basic
earnings (loss) per share
| | |
27,815,401
| | | |
24,411,213
| |
| | | |
|
Earnings per share: | | | | |
Basic earnings (loss) per share
| |
$
|
(2.78
|
)
| |
$
|
(2.17
|
)
|
Adjusted basic earnings (loss) per share
| |
$
|
0.49
| | |
$
|
1.66
| |
(a) 2018 impairment charges were due to deteriorating market
conditions in the Company's Production Solutions segment
attributed to depressed commodity prices towards the end of the
fourth quarter of 2018, coupled with customers focusing more on
the completions business where there is more technological
differentiation and value. 2017 impairment charges relate to
declining profitability and deteriorating market conditions,
including a shift from open hole completions to significantly less
profitable cemented liners in a reporting unit in the Company’s
Completion Solutions segment.
|
|
(b) Amounts for each period presented represent transaction and
integration costs, including the cost of inventory that was
stepped up to fair value during purchase accounting associated
with recent acquisitions, including the Company's IPO.
|
|
| |
(c) Amount represents commitment fee associated with a potential
bridge financing in the fourth quarter of 2018.
|
|
AAdjusted EBITDA is defined as net income (loss) before
interest, taxes, and depreciation and amortization, further adjusted for
(i) property and equipment, goodwill, and/or intangible asset impairment
charges, (ii) transaction and integration costs related to acquisitions
and our IPO, (iii) loss or gains from discontinued operations, (iv) loss
or gains from the revaluation of contingent liabilities, (v) loss or
gains on equity method investment, (vi) stock-based compensation
expense, (vii) loss or gains on sale of property and equipment and
(viii) other expenses or charges to exclude certain items which we
believe are not reflective of ongoing performance of our business, such
as legal expenses and settlement costs related to litigation outside the
ordinary course of business and restructuring costs. Adjusted EBITDA
margin is defined as Adjusted EBITDA divided by revenue. Management
believes Adjusted EBITDA and Adjusted EBITDA margin are useful because
they allow 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 and help identify
underlying trends in our operations that could otherwise be distorted by
the effect of the impairments, acquisitions and dispositions and costs
that are not reflective of the ongoing performance of our business.
BReturn on Invested Capital (“ROIC”) is defined as after-tax
net operating profit (loss), divided by average total capital. We define
after-tax net operating profit (loss) as net income (loss) plus (i)
transaction and integration costs related to acquisitions and our IPO,
(ii) property and equipment, goodwill, and/or intangible asset
impairment charges, (iii) interest expense, and (iv) the provision or
benefit for deferred income taxes. We define total capital as book value
of equity plus the book value of debt less balance sheet cash and cash
equivalents. We compute the average of the current and prior year-end
adjusted 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.
CAdjusted Basic Earnings Per Share is defined as adjusted net
income (loss), divided by weighted average basic shares outstanding.
Management believes Adjusted Basic Earnings Per Share is useful because
it allows us to more effectively evaluate our operating performance and
compare the results of our operations from period to period and help
identify underlying trends in our operations that could otherwise be
distorted by the effect of the impairments and acquisitions.
DAdjusted Net Income is defined as net income (loss) adjusted
for (i) property and equipment, goodwill and/or intangible asset
impairment charges, (ii) transaction and integration costs related to
acquisitions and our IPO, including the commitment fee associated with a
potential bridge financing in connection with an acquisition, and (iii)
the income tax impact of such adjustments. Management believes Adjusted
Net Income is useful because it allows us to more effectively evaluate
our operating performance and compare the results of our operations from
period to period and help identify underlying trends in our operations
that could otherwise be distorted by the effect of the impairments and
acquisitions.
EAdjusted 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/20190306005816/en/
Nine Energy Service Investor Contact:
Heather Schmidt
Vice
President, Investor Relations and Marketing
(281) 730-5113
[email protected]
Source: Nine Energy Service, Inc.