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MarketScreener Homepage  >  Equities  >  Nyse  >  Nine Energy Service, Inc.    NINE

NINE ENERGY SERVICE, INC.

(NINE)
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Nine Energy Service : Announces Fourth Quarter and Full Year 2019 Results

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03/09/2020 | 05:31am EDT

  • Full year 2019 revenue, net loss and adjusted EBITDAA of $832.9 million, $(217.8) million and $113.0 million, respectively
  • Full year 2019 basic EPS of $(7.43) and $0.32 adjusted basic EPSB
  • Full year 2019 cash flow from operations of $101.3 million
  • As of December 31, 2019, cash and cash equivalents of $93.0 million
  • Revenue, net loss and adjusted EBITDA of $163.4 million, $(220.5) million and $11.6 million, respectively for the fourth quarter of 2019
  • Fourth quarter 2019 basic EPS of $(7.51) and $(0.57) adjusted basic EPS

Nine Energy Service, Inc. ("Nine" or the "Company") (NYSE: NINE) reported fourth quarter 2019 revenues of $163.4 million, net loss of $(220.5) million and adjusted EBITDA of $11.6 million. The fourth quarter net loss of $(220.5) million, or $(7.51) per basic share, includes intangible assets, PP&E and goodwill impairments of $106.3 million associated with the Coiled Tubing service line and an intangible asset impairment of $95.0 million associated with the Completion Tools service line. For the fourth quarter 2019, adjusted net lossD was $(16.8) million, or $(0.57) adjusted basic earnings per share. During the fourth quarter, the Company generated ROICc of -3%.

The Company had provided original fourth quarter 2019 revenue guidance between $150.0 and $160.0 million and adjusted EBITDA guidance between $11.0 and $15.0 million, with actual results for revenue outperforming Management’s original guidance range and results for adjusted EBITDA falling within Management’s original guidance.

“The fourth quarter was as anticipated, with revenue outperforming and adjusted EBITDA falling within Management’s original guidance range,” said Ann Fox, President and Chief Executive Officer, Nine Energy Service. “Additionally, we continued our strong working capital management into Q4, ending the year with a cash balance of $93.0 million even with interest, capex and the retention bonus associated with the Magnum acquisition during the fourth quarter.”

“As expected, we saw drilling and completion activity decline in Q4 due to holidays, weather and budget exhaustion. Market share for Nine remained stable across the majority of service lines, but we did see full quarter realizations of Q3 pricing concessions, which led to the majority of the margin compression quarter over quarter. Coiled Tubing has been the hardest hit service line from a pricing and activity perspective due to an over-supply of large diameter units coming into the market, coupled with a decrease in activity across regions.”

“Despite a very tough market in 2019, the execution of our strategic initiatives throughout the year has been very successful. We effectively commercialized our low-temperature dissolvable plug for Q1 2020, which continues to be run and trialed with many customers across multiple basins, providing Nine a first-mover advantage in the low-temp dissolvable market. Additionally, the timeline for our new high-temp dissolvable and composite plug remain on schedule. These technology developments were accomplished in large part because of our acquisition of Magnum and collaboration between both legacy teams around both IP design and materials science. We also successfully completed the sale of our Production Solutions segment, and closed wireline operations in Canada, which will be accretive to ROIC, adjusted EBITDA margins and cash generation. Our operational teams were able to once again prove their ability to grow market share in a declining activity environment, with Nine’s percentage of U.S. stages completed increasing over 100 basis points in 2019. I am also extremely proud of our employees as Nine ended the year with the lowest and best TRIR safety score in the Company’s history at 0.77.”

“Throughout 2018 and 2019 we re-shaped the Company to align with our strategy of being asset-light and building additional barriers to entry, which we believe will enable us to increase profitability, expand margins and increase free cash flow for the future. We have just begun to see our thesis materialize with strong cash generation in the second half of 2019, which we anticipate continuing into 2020 and beyond. 2020 capex will decrease by over 60%, which will serve as a sustainable run-rate as we transition the derivation of more of our top-line revenue contribution from completion tools.”

“Q1 2020 is off to a slower start versus this time in 2019, and we anticipate Q1 2020 being relatively flat to Q4 2019. Despite market conditions, we are very optimistic about Nine’s opportunity to differentiate with our unique positioning in the market to grow within our tools business. Our team has and will remain focused on driving value for our shareholders, customers and employees and will continue to follow our returns-based growth strategy into 2020.”

For the year ended December 31, 2019, the Company reported revenues of $832.9 million, net loss of $(217.8) million and adjusted EBITDA of $113.0 million. Full year 2019 adjusted net income was $9.4 million, or $0.32 per adjusted basic share. For the year ended December 31, 2019, the Company generated ROIC of 6%.

Completion Solutions

During the fourth quarter of 2019, the Company’s Completion Solutions segment, which includes the Company’s cementing, completion tools, wireline and coiled tubing services, reported revenues of $163.4 million and adjusted gross profitE of $23.4 million.

For the year ended December 31, 2019, the Company’s Completion Solutions segment reported revenues of $774.7 million and adjusted gross profit of $154.5 million.

Other Financial Information

During the fourth quarter of 2019, the Company reported selling, general and administrative (“SG&A”) expense of $20.3 million, compared to $19.2 million for the third quarter of 2019. Depreciation and amortization expense ("D&A") in the fourth quarter of 2019 was $15.4 million, compared to $16.8 million for the third quarter of 2019.

For the year ended December 31, 2019, the Company reported SG&A expense of $81.3 million, compared to year ended December 31, 2018 SG&A expense of $73.1 million. For the year ended December 31, 2019, the Company reported D&A expense of $68.9 million, compared to year ended December 31, 2018 D&A expense of $63.8 million.

The Company recognized an income tax benefit of approximately $2.3 million in the fourth quarter of 2019 and an overall income tax benefit for the year of approximately $3.9 million, resulting in an effective tax rate of 1.8% for 2019. The fourth quarter income tax benefit was primarily attributable to a change in the Company’s deferred taxes due to the impairment associated with our Coiled Tubing and Completion Tools service lines. Cash tax expense for 2019 was approximately $0.4 million.

Liquidity and Capital Expenditures

For the year ended December 31, 2019, the Company reported net cash provided by operating activities of $101.3 million compared to the year ended December 31, 2018 net cash provided by operating activities of $89.6 million.

During the fourth quarter of 2019, total capital expenditures were $14.9 million, of which approximately 18% related to maintenance capital expenditures, compared to total capital expenditures of $10.0 million for the third quarter of 2019. For the year ended December 31, 2019, the Company reported total capital expenditures of $62.1 million of which approximately 22% related to maintenance capital expenditures, which fell within Management’s original guidance, compared to the year ended December 31, 2018 total capital expenditures of $52.6 million. Approximately $4.8 million in 2019 capital expenditures are delayed into 2020.

As of December 31, 2019, Nine’s cash and cash equivalents were $93.0 million and the Company had $99.2 million of availability under the revolving credit facility, which remains undrawn, resulting in a total liquidity position of $192.2 million as of December 31, 2019.

ABCDESee end of press release for definitions

Conference Call Information

The call is scheduled for Monday, March 9, 2020 at 9:00 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 23, 2020 and may be accessed by dialing U.S. (Toll Free): (877) 660-6853 or International: (201) 612-7415 and entering the passcode of 13697764.

About Nine Energy Service

Nine Energy Service is an oilfield services company that offers completion 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; pricing pressures, reduced sales, or reduced market share as a result of intense competition in the markets for the Company’s dissolvable plug products; the Company’s ability to implement and commercialize new technologies, services and tools; the Company’s ability to grow its completion tool business; the Company’s ability to reduce capital expenditures; the Company’s ability to accurately predict customer demand; 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 incurrence of significant costs and liabilities resulting from litigation; the loss of, or inability to attract, key personnel; the Company’s ability to successfully integrate recently acquired assets and operations and realize anticipated revenues, cost savings or other benefits thereof; and other factors described in the “Risk Factors” and “Business” sections of the Company’s most recently filed Annual Report on Form 10-K and 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 (LOSS)

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

 

Three Months Ended

 

Year Ended December 31,

December 31,
2019

September 30,
2019

 

2019

2018

 

Revenues

$

163,410

 

$

202,305

 

$

832,937

 

$

827,174

 

Cost and expenses

Cost of revenues (exclusive of depreciation and

amortization shown separately below)

 

139,985

 

 

166,849

 

 

669,979

 

 

639,298

 

General and administrative expenses

 

20,348

 

 

19,222

 

 

81,327

 

 

73,078

 

Depreciation

 

10,972

 

 

12,196

 

 

50,544

 

 

54,257

 

Amortization of intangibles

 

4,442

 

 

4,609

 

 

18,367

 

 

9,558

 

Impairment of property and equipment

 

66,200

 

 

-

 

 

66,200

 

 

45,694

 

Impairment of goodwill

 

20,273

 

 

-

 

 

20,273

 

 

12,986

 

Impairment of intangibles

 

114,804

 

 

-

 

 

114,804

 

 

19,065

 

(Gain) loss on revaluation of contingent liabilities

 

(486

)

 

(5,771

)

 

(21,187

)

 

3,262

 

Loss on sale of subsidiaries

 

62

 

 

15,834

 

 

15,896

 

 

-

 

(Gain) loss on sale of property and equipment

 

261

 

 

(466

)

 

(538

)

 

(1,731

)

Loss from operations

 

(213,451

)

 

(10,168

)

 

(182,728

)

 

(28,293

)

Interest expense

 

9,830

 

 

9,843

 

 

39,770

 

 

22,939

 

Interest income

 

(421

)

 

(111

)

 

(860

)

 

(624

)

Loss before income taxes

 

(222,860

)

 

(19,900

)

 

(221,638

)

 

(50,608

)

Provision (benefit) for income taxes

 

(2,339

)

 

727

 

 

(3,887

)

 

2,375

 

Net loss

$

(220,521

)

$

(20,627

)

$

(217,751

)

$

(52,983

)

 

Loss per share

Basic

$

(7.51

)

$

(0.70

)

$

(7.43

)

$

(2.17

)

Diluted

$

(7.51

)

$

(0.70

)

$

(7.43

)

$

(2.17

)

Weighted average shares outstanding

Basic

 

29,367,436

 

 

29,361,633

 

 

29,308,107

 

 

24,411,213

 

Diluted

 

29,367,436

 

 

29,361,633

 

 

29,308,107

 

 

24,411,213

 

 

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments, net of tax of $0 and $0

$

115

 

$

(179

)

$

376

 

$

(1,159

)

Total other comprehensive income (loss), net of tax

 

115

 

 

(179

)

 

376

 

 

(1,159

)

Total comprehensive loss

$

(220,406

)

$

(20,806

)

$

(217,375

)

$

(54,142

)

NINE ENERGY SERVICE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

At December 31,

2019

2018

Assets

Current assets

Cash and cash equivalents

$

92,989

 

$

63,615

 

Accounts receivable, net

 

96,889

 

 

154,783

 

Income taxes receivable

 

660

 

 

-

 

Inventories, net

 

60,945

 

 

91,435

 

Prepaid expenses and other current assets

 

17,434

 

 

15,717

 

Notes receivable from shareholders

 

-

 

 

7,626

 

Total current assets

 

268,917

 

 

333,176

 

Property and equipment, net

 

128,604

 

 

211,644

 

Definite-lived intangible assets, net

 

147,991

 

 

173,451

 

Goodwill

 

296,196

 

 

307,804

 

Indefinite-lived intangible assets

 

1,000

 

 

108,711

 

Other long-term assets

 

8,187

 

 

6,386

 

Total assets

$

850,895

 

$

1,141,172

 

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable

$

35,490

 

$

46,132

 

Accrued expenses

 

24,730

 

 

61,434

 

Current portion of capital lease obligations

 

995

 

 

665

 

Income taxes payable

 

-

 

 

57

 

Total current liabilities

 

61,215

 

 

108,288

 

Long-term liabilities

Long-term debt

 

392,059

 

 

424,978

 

Deferred income taxes

 

1,588

 

 

5,915

 

Long-term capital lease obligations

 

2,201

 

 

2,330

 

Other long-term liabilities

 

3,955

 

 

4,838

 

Total liabilities

 

461,018

 

 

546,349

 

 

Stockholders’ equity

Common stock (120,000,000 shares authorized at $.01 par value; 30,555,677 and 30,163,408 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively)

 

306

 

 

302

 

Additional paid-in capital

 

758,853

 

 

746,428

 

Accumulated other comprehensive loss

 

(4,467

)

 

(4,843

)

Accumulated deficit

 

(364,815

)

 

(147,064

)

Total stockholders’ equity

 

389,877

 

 

594,823

 

Total liabilities and stockholders’ equity

$

850,895

 

$

1,141,172

 

NINE ENERGY SERVICE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

Year Ended December 31,

2019

2018

Cash flows from operating activities

Net loss

$

(217,751

)

$

(52,983

)

Adjustments to reconcile net loss to net cash provided by operating activities

Depreciation

 

50,544

 

 

54,257

 

Amortization of intangibles

 

18,367

 

 

9,558

 

Amortization of deferred financing costs

 

2,984

 

 

2,966

 

Provision for (recovery of) doubtful accounts

 

849

 

 

(268

)

Provision (benefit) for deferred income taxes

 

(4,327

)

 

898

 

Provision for inventory obsolescence

 

5,148

 

 

844

 

Impairment of property and equipment

 

66,200

 

 

45,694

 

Impairment of goodwill

 

20,273

 

 

12,986

 

Impairment of intangibles

 

114,804

 

 

19,065

 

Stock-based compensation expense

 

14,057

 

 

13,221

 

Gain on sale of property and equipment

 

(538

)

 

(1,731

)

(Gain) loss on revaluation of contingent liabilities

 

(21,187

)

 

3,262

 

Loss on sale of subsidiaries

 

15,896

 

 

-

 

Loss on equity investment

 

-

 

 

347

 

Changes in operating assets and liabilities, net of effects from acquisitions

Accounts receivable, net

 

41,852

 

 

(24,972

)

Inventories, net

 

22,545

 

 

(15,041

)

Prepaid expenses and other current assets

 

2,395

 

 

(5,722

)

Accounts payable and accrued expenses

 

(27,901

)

 

27,156

 

Income taxes receivable/payable

 

(294

)

 

(255

)

Other assets and liabilities

 

(2,611

)

 

295

 

Net cash provided by operating activities

 

101,305

 

 

89,577

 

Cash flows from investing activities

Acquisitions, net of cash acquired

 

1,020

 

 

(349,986

)

Proceeds from sale of subsidiaries

 

16,914

 

 

-

 

Proceeds from sales of property and equipment

 

3,702

 

 

2,183

 

Proceeds from property and equipment casualty losses

 

1,576

 

 

1,743

 

Proceeds from notes receivable payments

 

7,626

 

 

2,941

 

Purchases of property and equipment

 

(64,959

)

 

(46,646

)

Net cash used in investing activities

 

(34,121

)

 

(389,765

)

Cash flows from financing activities

Proceeds from revolving credit facilities

 

10,000

 

 

35,000

 

Payments on revolving credit facilities

 

(45,000

)

 

(96,182

)

Proceeds from Senior Notes

 

-

 

 

400,000

 

Proceeds from term loan

 

-

 

 

125,000

 

Payments on term loans

 

-

 

 

(270,975

)

Payments on capital leases

 

(903

)

 

(128

)

Payments of contingent liabilities

 

(374

)

 

(3,445

)

Proceeds from issuance of common stock in IPO, net of offering costs

 

-

 

 

171,450

 

Proceeds from other issuances of common stock

 

-

 

 

300

 

Proceeds from exercise of stock options

 

15

 

 

2,905

 

Vesting of restricted stock

 

(1,643

)

 

(927

)

Cost of debt issuance

 

-

 

 

(16,307

)

Net cash provided by (used in) financing activities

 

(37,905

)

 

346,691

 

Impact of foreign currency exchange on cash

 

95

 

 

(401

)

Net increase in cash and cash equivalents

 

29,374

 

 

46,102

 

Cash and cash equivalents

Beginning of period

 

63,615

 

 

17,513

 

End of period

$

92,989

 

$

63,615

 

NINE ENERGY SERVICE, INC.

SEGMENT DATA

(In Thousands)

(Unaudited)

 

Three Months Ended

Year Ended December 31,

December 31, 2019

September 30, 2019

2019

2018

Revenues

Completion Solutions

$

163,410

 

$

186,252

 

$

774,665

 

$

745,316

 

Production Solutions

 

-

 

 

16,053

 

 

58,272

 

 

81,858

 

 

$

163,410

 

$

202,305

 

$

832,937

 

$

827,174

 

 

Cost of revenues (1)

Completion Solutions

$

139,985

 

$

152,679

 

$

620,125

 

$

568,497

 

Production Solutions

 

-

 

 

14,170

 

 

49,854

 

 

70,801

 

 

$

139,985

 

$

166,849

 

$

669,979

 

$

639,298

 

 

Adjusted gross profit

Completion Solutions

$

23,425

 

$

33,573

 

$

154,540

 

$

176,819

 

Production Solutions

 

-

 

 

1,883

 

 

8,418

 

 

11,057

 

 

$

23,425

 

$

35,456

 

$

162,958

 

$

187,876

 

 

General and administrative expenses

 

20,348

 

 

19,222

 

 

81,327

 

 

73,078

 

Depreciation

 

10,972

 

 

12,196

 

 

50,544

 

 

54,257

 

Amortization of intangibles

 

4,442

 

 

4,609

 

 

18,367

 

 

9,558

 

Impairment of property and equipment

 

66,200

 

 

-

 

 

66,200

 

 

45,694

 

Impairment of goodwill

 

20,273

 

 

-

 

 

20,273

 

 

12,986

 

Impairment of intangibles

 

114,804

 

 

-

 

 

114,804

 

 

19,065

 

(Gain) loss on revaluation of contingent liabilities

 

(486

)

 

(5,771

)

 

(21,187

)

 

3,262

 

Loss on sale of subsidiaries

 

62

 

 

15,834

 

 

15,896

 

 

-

 

(Gain) loss on sale of property and equipment

 

261

 

 

(466

)

 

(538

)

 

(1,731

)

Loss from operations

$

(213,451

)

$

(10,168

)

$

(182,728

)

$

(28,293

)

 

Capital expenditures

Completion Solutions

$

14,888

 

$

9,146

 

$

59,231

 

$

48,361

 

Production Solutions

 

-

 

 

804

 

 

2,790

 

 

3,548

 

Corporate

 

-

 

 

 

93

 

 

661

 

 

$

14,888

 

$

9,950

 

$

62,114

 

$

52,570

 

Total assets

Completion Solutions

$

739,142

 

$

977,633

 

$

739,142

 

$

1,045,643

 

Production Solutions

 

-

 

 

-

 

 

-

 

 

35,086

 

Corporate

 

111,753

 

 

103,950

 

 

111,753

 

 

60,443

 

 

$

850,895

 

$

1,081,583

 

$

850,895

 

$

1,141,172

 

 

Three Months Ended

Year Ended December 31,

December 31,
2019

September 30,
2019

2019

2018

Revenue by country

United States

$

163,158

 

$

195,400

 

$

814,639

 

$

796,221

 

Canada and other

 

252

 

 

6,905

 

 

18,298

 

 

30,953

 

$

163,410

 

$

202,305

 

$

832,937

 

$

827,174

 

 

Three Months Ended

Year Ended December 31,

December 31,
2019

September 30,
2019

2019

2018

Long-lived assets (2)

United States

$

271,791

 

$

351,772

 

$

271,791

 

$

377,623

 

Canada and other

 

4,804

 

 

6,633

 

 

4,804

 

 

7,472

 

$

276,595

 

$

358,405

 

$

276,595

 

$

385,095

 

 

(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,
2019

September 30,
2019

2019

2018

Calculation of gross profit

Revenues

$

163,410

$

202,305

$

832,937

$

827,174

Cost of revenues (exclusive of depreciation and

amortization shown separately below)

 

139,985

 

166,849

 

669,979

 

639,298

Depreciation (related to cost of revenues)

 

8,090

 

11,994

 

47,006

 

53,358

Amortization of intangibles

 

4,442

 

4,609

 

18,367

 

9,558

Gross profit

$

10,893

$

18,853

$

97,585

$

124,960

 

Adjusted gross profit (excluding depreciation and amortization)

reconciliation

Gross profit

$

10,893

$

18,853

$

97,585

$

124,960

Depreciation (related to cost of revenues)

 

8,090

 

11,994

 

47,006

 

53,358

Amortization of intangibles

 

4,442

 

4,609

 

18,367

 

9,558

Adjusted gross profit

$

23,425

$

35,456

$

162,958

$

187,876

NINE ENERGY SERVICE, INC.

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA

(In Thousands)

(Unaudited)

 

Three Months Ended

Year Ended December 31,

December 31,
2019

September 30,

2019

2019

2018

EBITDA reconciliation:

Net loss

$

(220,521

)

$

(20,627

)

$

(217,751

)

$

(52,983

)

Interest expense

 

9,830

 

 

9,843

 

 

39,770

 

 

22,939

 

Interest income

 

(421

)

 

(111

)

 

(860

)

 

(624

)

Depreciation

 

10,972

 

 

12,196

 

 

50,544

 

 

54,257

 

Amortization of intangibles

 

4,442

 

 

4,609

 

 

18,367

 

 

9,558

 

Provision (benefit) for income taxes

 

(2,339

)

 

727

 

 

(3,887

)

 

2,375

 

EBITDA

$

(198,037

)

$

6,637

 

$

(113,817

)

$

35,522

 

Impairment of property and equipment

 

66,200

 

 

-

 

 

66,200

 

 

45,694

 

Impairment of goodwill

 

20,273

 

 

-

 

 

20,273

 

 

12,986

 

Impairment of intangibles

 

114,804

 

 

-

 

 

114,804

 

 

19,065

 

Transaction and integration costs

 

4,183

 

 

1,418

 

 

13,047

 

 

10,327

 

Loss on equity method investment

 

-

 

 

-

 

 

-

 

 

347

 

(Gain) loss on revaluation of contingent liabilities (1)

 

(486

)

 

(5,771

)

 

(21,187

)

 

3,262

 

Loss on sale of subsidiaries

 

62

 

 

15,834

 

 

15,896

 

 

-

 

Restructuring charges

 

713

 

 

3,263

 

 

3,976

 

 

-

 

Stock-based compensation expense

 

3,504

 

 

3,286

 

 

14,057

 

 

13,221

 

Gain (loss) on sale of property and equipment

 

261

 

 

(466

)

 

(538

)

 

(1,731

)

Legal fees and settlements (2)

 

142

 

 

22

 

 

307

 

 

2,358

 

Adjusted EBITDA

$

11,619

 

$

24,223

 

$

113,018

 

$

141,051

 

(1) Amounts relate to the revaluation of contingent liabilities associated with the Company's recent acquisitions. The impact is included in the Company's Condensed Consolidated Statements of Income and Comprehensive Income (Loss).

(2) Amounts represent 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.

RECONCILIATION OF ROIC CALCULATION

(In Thousands)

(Unaudited)

 

Three Months Ended

Year Ended December 31,

December 31,
2019

September 30,
2019

 

2019

2018

 

Net loss

$

(220,521

)

$

(20,627

)

$

(217,751

)

$

(52,983

)

Add back:

Impairment of property and equipment

 

66,200

 

 

-

 

 

66,200

 

 

45,694

 

Impairment of goodwill

 

20,273

 

 

-

 

 

20,273

 

 

12,986

 

Impairment of intangibles

 

114,804

 

 

-

 

 

114,804

 

 

19,065

 

Interest expense

 

9,830

 

 

9,843

 

 

39,770

 

 

22,939

 

Interest income

 

(421

)

 

(111

)

 

(860

)

 

(624

)

Transaction and integration costs

 

4,183

 

 

1,418

 

 

13,047

 

 

10,327

 

Restructuring charges

 

713

 

 

3,263

 

 

3,976

 

 

-

 

Loss on sale of subsidiaries

 

62

 

 

15,834

 

 

15,896

 

 

-

 

Provision (benefit) for deferred income taxes

 

(1,451

)

 

143

 

 

(4,327

)

 

898

 

After-tax net operating profit (loss)

$

(6,328

)

$

9,763

 

$

51,028

 

$

58,302

 

 

Total capital as of prior period-end:

Total stockholders' equity

$

606,779

 

$

624,309

 

$

594,823

 

$

287,358

 

Total debt

 

400,000

 

 

400,000

 

 

435,000

 

 

242,235

 

Less: cash and cash equivalents

 

(93,321

)

 

(16,886

)

 

(63,615

)

 

(17,513

)

Total capital as of prior period-end:

$

913,458

 

$

1,007,423

 

$

966,208

 

$

512,080

 

 

Total capital as of period-end:

Total stockholders' equity

$

389,877

 

$

606,779

 

$

389,877

 

$

594,823

 

Total debt

 

400,000

 

 

400,000

 

 

400,000

 

 

435,000

 

Less: cash and cash equivalents

 

(92,989

)

 

(93,321

)

 

(92,989

)

 

(63,615

)

Total capital as of period-end:

$

696,888

 

$

913,458

 

$

696,888

 

$

966,208

 

 

 

 

 

Average total capital

$

805,173

 

$

960,441

 

$

831,548

 

$

739,144

 

ROIC

 

-3%

 

4%

 

6%

 

8%

NINE ENERGY SERVICE, INC.

RECONCILIATION OF ADJUSTED BASIC EARNINGS (LOSS) PER SHARE CALCULATION

(In Thousands)

(Unaudited)

 

Three Months Ended

Year Ended December 31,

December 31, 2019

September 30, 2019

2019

2018

Reconciliation of adjusted net income (loss):

Net loss

$

(220,521

)

$

(20,627

)

$

(217,751

)

$

(52,983

)

Add back:

Impairment of property and equipment (a)

 

66,200

 

 

-

 

 

66,200

 

 

45,694

 

Impairment of goodwill (a)

 

20,273

 

 

-

 

 

20,273

 

 

12,986

 

Impairment of intangibles (a)(b)

 

114,804

 

 

-

 

 

114,804

 

 

19,065

 

Transaction and integration costs (c)

 

4,183

 

 

1,418

 

 

13,047

 

 

10,327

 

Commitment fee (d)

 

-

 

 

-

 

 

-

 

 

6,900

 

Restructuring charges

 

713

 

 

3,263

 

 

3,976

 

 

-

 

Loss on sale of subsidiaries

 

62

 

 

15,834

 

 

15,896

 

 

-

 

Less: Tax benefit from add backs

 

(2,467

)

 

(4,571

)

 

(7,038

)

 

(1,375

)

Adjusted net income (loss)

$

(16,753

)

$

(4,683

)

$

9,407

 

$

40,614

 

 

Weighted average shares

Weighted average shares outstanding for basic

 

29,367,436

 

 

29,361,633

 

 

29,308,107

 

 

24,411,213

 

and adjusted basic earnings (loss) per share

 

Earnings (loss) per share:

Basic loss per share

$

(7.51

)

$

(0.70

)

$

(7.43

)

$

(2.17

)

Adjusted basic earnings (loss) per share

$

(0.57

)

$

(0.16

)

$

0.32

 

$

1.66

 

a) Impairment charges were due to deteriorating market conditions in the Company's Completion Solutions segment attributed to the

reduction of the need for coil tubing during the drill-out phase of the overall completions process attributed to a recent decline in exploration and production capital budgets and activity, the over-supply of coil tubing units and the introduction of dissolvable plug technology.

 

b) Impairment charges were primarily due to transition of certain trade names associated with recent acquisitions to the Company's trade names in order to better funnel and allocate resources, create a stronger identity, facilitate cross-selling and streamline and simplify

communication with existing customers.

 

(c) 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.

 

(d) 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 on the sale of subsidiaries, (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.

BAdjusted 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.

CReturn 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) property and equipment, goodwill, and/or intangible asset impairment charges, (ii) transaction and integration costs related to acquisitions and our IPO, (iii) interest expense (income), (iv) restructuring charges, (v) loss or gain on the sale of subsidiaries, and (vi) 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 period-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. Management uses ROIC to assist them in capital resource allocation decisions and in evaluating business performance.

DAdjusted Net Income (Loss) 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, (iii) restructuring charges, (iv) loss or gain on the sale of subsidiaries and (v) 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. 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.


© Business Wire 2020
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Financials (USD)
Sales 2020 320 M - -
Net income 2020 -233 M - -
Net Debt 2020 274 M - -
P/E ratio 2020 -0,16x
Yield 2020 -
Capitalization 48,6 M 48,6 M -
EV / Sales 2019
EV / Sales 2020 1,01x
Nbr of Employees 1 469
Free-Float 50,7%
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Mean consensus UNDERPERFORM
Number of Analysts 7
Average target price 1,55 $
Last Close Price 1,53 $
Spread / Highest target 129%
Spread / Average Target 1,31%
Spread / Lowest Target -67,3%
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Managers
NameTitle
Ann G. Fox President, CEO, Secretary & Director
Ernie L. Danner Chairman
David Crombie Chief Operating Officer & Executive Vice President
Guy Sirkes Chief Financial Officer & Senior Vice President
Clair Holley Chief Technology Officer
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