• Revenue: $138.2 million, above original guidance of $127 to $137 million.
• Adjusted EBITDA: $14.3 million, a 47% increase quarter over quarter.
• Diluted EPS: Negative $0.26.
• Incremental Adjusted EBITDA Margins: Approximately 79%.
• Cementing Revenue: $51.2 million, a 12% increase quarter over quarter.
• Wireline Revenue: $27.9 million, flat compared to Q2.
• Completion Tool Revenue: $31.4 million, a 3% decrease.
• Coil Tubing Revenue: $27.7 million, a 5% increase.
• Cash and Cash Equivalents: $15.7 million as of September 30, 2024.
• Total Liquidity Position: $43.3 million.
• Borrowings under ABL Credit Facility: $50 million, reduced to $47 million after additional payments.
• Interest Payment: Approximately $19.5 million during Q3.
• General and Administrative Expense: $12.4 million.
• Depreciation and Amortization Expense: $9 million.
• Net Cash Used in Operating Activities: $5.9 million.
• CapEx Spend for Q3: $3.6 million, total $11.7 million year-to-date.

• Warning! GuruFocus has detected 7 Warning Signs with NINE.

Release Date: November 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nine Energy Service Inc (NYSE:NINE) reported Q3 2024 revenue of $138.2 million, exceeding the original guidance range of $127 to $137 million.
• Adjusted EBITDA increased by approximately 47% quarter over quarter, with incremental margins of approximately 79%.
• The cementing business saw a significant market share increase of approximately 23% quarter over quarter, with revenue growing by approximately 12%.
• International completion tool revenue increased quarter over quarter, indicating successful commercialization of new products like the pincer hybrid frac plug.
• Cost reduction and supply chain initiatives positively impacted profitability, with ongoing efforts to sustain these improvements.

Negative Points

• Despite revenue growth, Nine Energy Service Inc (NYSE:NINE) reported a diluted EPS of negative $0.26.
• The US rig count declined by approximately 3% from Q2, reflecting a challenging market environment.
• Low natural gas prices, averaging just above $2 for the year, led to sustained lower activity levels in key regions like Haynesville and the northeast.
• Wireline revenue remained flat quarter over quarter, despite efforts to differentiate in a competitive market.
• Q4 2024 is anticipated to see a moderate slowdown due to budget exhaustion, weather, and holidays, with projected revenue expected to be down compared to Q3.

Q & A Highlights

Q: What's leading to these market share gains in cementing and other businesses? A: Ann Fox, President and CEO, explained that the company devised a specific strategy targeting certain customers, focusing on key performance indicators and metrics. This deliberate approach led to significant market share gains, particularly in cementing and wireline services. The strategy included cost reduction efforts, such as vendor consolidation and internal efficiencies, which are expected to be sustainable.

Q: How are international sales tracking compared to last year? A: Ann Fox noted that international sales might be slightly lower this year due to the small numbers involved. However, the company is working on a deliberate strategy to expand internationally, particularly in the Middle East, and expects incremental awards based on recent tool successes.

Q: What is the EBITDA run rate needed to achieve free cash flow break-even? A: Ann Fox stated that the company aims for a cash flow neutral position at around $15 million in EBITDA per quarter. Despite the current depressed rig count environment, the company believes this target is achievable, especially with anticipated activity increases and ongoing cost-cutting measures.

Q: Will cost reductions remain if activity picks up? A: Ann Fox confirmed that the cost reductions are expected to be sticky and sustainable, improving the incremental margin on revenue. The company has fundamentally improved its cost structure, which should remain even if activity levels increase.

Q: What are customers' views on natural gas activity, particularly in Appalachia and Haynesville? A: Ann Fox mentioned that customers are optimistic about medium and long-term natural gas demand. A gas price with a "three handle" could spur activity, especially in the Northeast. Haynesville may require a slightly higher price due to its technical complexity. The company continues to focus on creating efficiencies and providing new technologies to support customers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.