Nine Energy Service Q2 2025 Earnings Call Transcript

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August 6, 2025

Key Takeaways

  • Positive Sentiment: Revenue for Q2 reached $147.3 million, generating $14.1 million in adjusted EBITDA, both at or above guidance despite significant rig declines.
  • Negative Sentiment: Average oil prices fell from about $72/Bbl in Q1 to $65/Bbl in Q2 (dropping below $60/Bbl), coinciding with a 10% drop in U.S. rig count (53 rigs) and pricing pressure across service lines, especially in the Permian.
  • Positive Sentiment: Completion tool revenue rose ~9% and wireline revenue grew ~11% in Q2, while international tools sales increased ~20% year-to-date, driven by strong plug and MPDV valve demand in the Middle East and Argentina.
  • Negative Sentiment: Management projects Q3 revenue of $135–145 million and expects adjusted EBITDA to decline as full-quarter impacts of reduced activity and pricing take effect.
  • Neutral Sentiment: The company is constructing a new 30,000 sq ft completion tool facility in Jacksboro to enhance R&D, test well performance for customers and support international growth, alongside ongoing cost-reduction efforts.
AI Generated. May Contain Errors.
Earnings Conference Call
Nine Energy Service Q2 2025
00:00 / 00:00

There are 4 speakers on the call.

Operator

Greetings, and welcome to the Nine Energy Service Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Heather Schmidt, Senior Vice President of Strategic Development and Investor Relations.

Operator

Thank you. You may begin.

Speaker 1

Thank you. Good morning, everyone, and welcome to the Nine Energy Service earnings conference call to discuss our results for the 2025. With me today are Ann Fox, President and Chief Executive Officer and Guy Sierkis, Chief Financial Officer. We appreciate your participation. Some of our comments today may include forward looking statements reflecting Nine's views about future events.

Speaker 1

Forward looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC. We undertake no obligation to revise or update publicly any forward looking statements for any reason. Our comments today also include non GAAP financial measures.

Speaker 1

Additional details and a reconciliation to the most directly comparable GAAP financial measures are also included in our second quarter press release and can be found in the Investor Relations section of our website. I will now turn the call over to Ann. Thank you, Heather. Good morning, everyone. Thank you for joining us today to discuss our second quarter results for 2025.

Speaker 1

Revenue for the quarter was $147,300,000 which was in the upper range of our original guidance of $138,000,000 to $148,000,000 despite significant rig declines throughout the quarter. We generated adjusted EBITDA of $14,100,000 In April, following the announcement of new tariffs, oil prices declined from an average of approximately $72 in Q1 to an average of approximately $65 in q two, while also dropping below $60 for the first time in four years. With the decline in commodity prices, increased costs due to tariffs, and uncertainty around the global economy, U. S. Activity and CapEx plans were reduced, resulting in significant rate declines throughout the second quarter.

Speaker 1

Between March 28 and July 3, 53 rigs came out of The U. S. Market, a decline of almost 10% in only three months. The majority of these rigs came out of oil levered basins like the Permian, where Nine has historically generated approximately 40% of our total revenue. With these activity declines, we also began to receive pricing pressure across all of our service lines, most notably in the Permian, which negatively impacted revenue and earnings during the second quarter.

Speaker 1

Natural gas prices remained mostly supportive during the quarter, but declined from the Q1 average of approximately $4.14 to approximately $3.19 in Q2. We have begun to see a more positive sentiment around natural gas labor basins as well as more consistent efficient operations, which benefited Nine, most specifically in the Northeast. However, overall rig count in both the Northeast and Haynesville once again remained relatively flat in Q2 versus Q1. Natural gas continues to be a potential catalyst for Nine, and we remain positive on the medium and long term outlook for the commodity and natural gas lever regions. Although activity declined throughout the quarter, our operational team performed well, and we were able to capitalize on an improving natural gas environment as well as continuing to international tool business.

Speaker 1

Despite a very challenging macro backdrop, both our completion tool and wireline business grew revenue this quarter. Completion tool revenue grew by approximately 9%, driven in large part by increased sales in the Northeast and Haynesville as well as an increase in international tool sales. We have talked about our strategy for growing our international tools market share, and the team has been executing. Our total first half international tools revenue has increased by approximately 20% when compared to the 2024. This was driven by both increased sales of our multi cycle barrier valve into The Middle East as well as an overall increase in our plug sales.

Speaker 1

This will continue to be a focus for the team, and I am optimistic about the potential opportunities for Nine in the international market. Our wireline team increased revenue by approximately 11% in Q2. We have strong market share in the Northeast, and the team has capitalized on an improving market with both traditional pump down work as well as increasing our market share on the remedial side. During Q2, we saw revenue declines in both cementing and coil, driven by activity and pricing declines in the Permian Basin, where both operations hold meaningful market share. As a reminder, neither of these service lines operate in the Northeast and therefore did not benefit from any uplift in earnings from the improvement in those basins.

Speaker 1

I would now like to turn the call over to Guy to walk through detailed financial information. Thank

Speaker 2

you, Anne. As of 06/30/2025, Nine's cash and cash equivalents were $14,200,000 with $51,300,000 of availability under the revolving credit facility, resulting in a total liquidity position of 65,500,000.0 as of 06/30/2025. On 06/30/2025, the company had 49,400,000.0 of borrowings under the revolving credit facility. In July 2025, the company borrowed an additional 13,400,000.0 under its revolving credit facility, part of which was used for funding of fees related to the closing of our new ABL. During Q2, we did not sell any shares under the ATM program.

Speaker 2

During the second quarter, revenue totaled $147,300,000 with adjusted gross profit of 25,800,000.0 During the second quarter, we completed ten sixty one cementing jobs, a decrease of approximately 15%. The average blended revenue per job increased by approximately 7%. Cementing revenue for the quarter was $52,200,000 a decrease of approximately 9%. During the second quarter, we completed 8,585 wireline stages, an increase of approximately 11%. The average blended revenue per stage was flat.

Speaker 2

Wireline revenue for the quarter was $33,000,000 an increase of approximately 11%. For completion tools, we completed 30,331 stages, an increase of approximately 4%. Completion tool revenue was $37,000,000 an increase of approximately 9%. During the second quarter, our coiled tubing days worked decreased by approximately 23% with the average run to day rate increasing by approximately 9%. Coiled tubing revenue was 25,100,000.0 a decrease of approximately 16%.

Speaker 2

During the second quarter, the company reported general and administrative expense of $13,900,000 Depreciation and amortization expense was 8,600,000.0 The company's tax benefit was approximately $300,000 year to date. The benefit for 2025 is a result of a $500,000 discrete tax benefit recorded during the 2025, offset by tax provisions in state and non U. S. Jurisdictions. For the second quarter, the company reported net cash provided by operating activities of 10,100,000.0 The average DSO for Q3 was fifty five point nine days.

Speaker 2

CapEx spend during Q2 was $6,100,000 and total CapEx for the 2025 is 10,400,000.0 Our full year CapEx budget remains unchanged at 15,000,000 to $25,000,000 I will now turn

Speaker 1

it back to Ann. Thank you, Guy. As I mentioned, we saw many operators reduce activity in Q2 in response to lower oil prices. There is a possibility additional rates could come out of the market in the back half of the year, specifically from private operators, and we do expect calendar gaps, completion delays and overall more white space in conjunction with lower activity levels and oil prices. Natural gas prices remain mostly supportive, helping to drive more efficient operations in the Northeast and Haynesville and building a more positive sentiment, which has benefited our operations and earnings.

Speaker 1

The rig activity in these regions has been mostly stable. And while we would benefit from any incremental activity increases, it may not be enough to completely offset the activity and pricing declines we've seen in the Permian, which impacts all of our service lines. We are continuing to play both offense and defense to grow revenue and increase margins. This includes market share gains with current and potential new customers, R and D and technological advances across service lines, growing our international tools business, construction of our new completion tool facility, and potentially expanding service lines to new geographies, which we are currently evaluating. We have been able to utilize waterline equipment and personnel from West Texas to cover work in the Northeast, and we are constantly evaluating where to best utilize our assets and people in conjunction with market dynamics.

Speaker 1

We remain focused on increasing our exposure to international markets, and I believe the team has implemented this strategy well thus far, demonstrated by our 20% revenue increase in the first half of the year versus 2024. In conjunction with these growth initiatives, we are working on reducing costs without impeding the quality of our business. Over the last twelve months, we believe we have taken significant sustainable costs out of the business. These include, but are not limited to, improvements in fleet management and maintenance, reduction of corporate and field employees, reduction or elimination of consultants, software and subscriptions, and the consolidation and rationalization of vendors. We will continue to prioritize reducing costs while not impeding the quality of our technology, service and safety.

Speaker 1

In Q3, we will see full quarter realizations of activity and pricing declines made throughout Q2. As I mentioned, we also anticipate more white space in the calendar in the Oil Leaver Basin. Because of this, we anticipate both revenue and adjusted EBITDA will be down compared to Q2 and project Q3 revenue between 135,000,000 and 145,000,000 Our team is focused on increasing profitability in a declining market. We are nimble and diversified in both our service and technology offerings and commodity. This has and will continue to allow us to navigate these uncertain markets while still being able to capitalize on any potential growth opportunities, both domestically and internationally.

Speaker 1

We will now open up the call for Q and A.

Operator

Thank you. We will now be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator

Our first question comes from the line of Waqar Syed with ATB. Proceed with your question.

Speaker 3

Thank you for taking my question. And you mentioned that there is some expectation that some pirates in East may temper their work. Is that based on some discussions with customers? Or is that just, you know, your view based on what your view on commodity prices is?

Speaker 1

It's a great question, Makar. Good morning. Actually, it is not based on conversations. It's based on our knowledge that if commodity prices, you know, were to move very negatively for the remainder of the quarter or or in q four, those private operators typically will react more quickly than the public. And so that's just the commentary is this is gonna be, for them, more commodity price driven, and they'll be more reactionary than our large public.

Speaker 3

Sure. And and then in terms of your visibility into q four, do you have any visibility there where customers have, you know, mentioned anything what they're gonna be doing in q four?

Speaker 1

Hi, Waqar. We don't. We don't have visibility into q four and so far as major changes up or down. I would say we have had customer conversations indicating increased activity in q one, and that is standard with with budget refresh. So but not specifically for q four.

Speaker 3

And this increased activity in q one, is this a Permian comment or all over US comment?

Speaker 1

Specifically with certain customers in the Permian.

Speaker 3

K. And is that relative to where activity was in q two or where where where relative activity is as of today?

Speaker 1

That would be an increase relative to activity as of today.

Speaker 3

Okay. Fair enough. Now and in terms of your international sales, it looks like a pretty decent pickup in, you know, first half twenty five versus last year's first half. Could you maybe highlight, like, how was second half twenty four versus the '24, and how does first half twenty five compare to the '24?

Speaker 1

So we had a 20% increase first half over second half last first half over first half last year. And I do think this is the as we've said many times to the market, it's a lumpy market. It's very hard to predict. Specifically, we've gained lots of traction in Argentina and also in The Middle East. We do expect we will be up year over year with car.

Speaker 1

It's hard to predict how much, but we are gaining traction there. And so if you look at 25 on a full year basis, we would expect that number internationally will be up over 2,024.

Speaker 3

Great. And then, you know, the fashion, what what products are you seeing the most traction with in the in the international market?

Speaker 1

We're seeing it with our plugs and our MPDV valves, and it's it's been really nice big volume orders.

Speaker 3

Alright. And do you have any visibility into the second half for these these interactive sales?

Speaker 1

Again, it'll be lumpy. What I can say is that if you look at the full year, we we definitely anticipate the up over last year.

Speaker 3

Okay. Great. Yeah. I think that's all for me for now. Appreciate the color.

Speaker 3

Thank you.

Speaker 1

Thank you, Waqar.

Operator

Our next question comes from the line of John Daniel with Daniel Energy Partners. Please proceed with your question.

Speaker 2

Hey, Anne. First one, just have to Good morning. Good morning. The first question has to do with the completion tools facility that you highlighted. Can you tell us a bit more about this and what it's expected to do, where it'll be?

Speaker 2

Anything like that would be helpful.

Speaker 1

Sure. Yeah. Definitely not to give away too many secrets, but it's gonna be a little over 30,000 square feet. We're gonna put this right next to our assembly and manufacturing location in Jacksboro. We're gonna have multiple test wells where we are also gonna be able to test lots of different pressures, temperatures.

Speaker 1

We're gonna have drill out capability, flowback loop, all kinds of capabilities for our customers to log in and see all these test results. I think I think this will be probably the largest data start completion tool assessment facility in The US.

Speaker 2

Okay. Got it. And and

Speaker 1

and, John, this is also becoming increasingly important for

Speaker 2

our

Speaker 1

international customers. That is. So as you know, with sustained engineering, when you're working on, you know, fielding these tools, if issues arise, you need to be able to immediately test that. They need to be able to see those results. So we're we're just extremely excited about this.

Speaker 1

Very, very excited.

Speaker 2

Does it open this year or is it next year?

Speaker 1

It's it's a next year opening. Okay.

Speaker 2

Got it. The the next one is with the, you know, the hope that we see some private operators, in the the gassy markets continue to pick up activity. I'm just curious if in your experience, would you maybe say that there's a little bit less procurement rigor vis a vis their larger public peers? I mean, would these be additive to margins, if you will, just maybe because of less pricing power on the part of those buyers? And it Sure.

Speaker 1

So there's actually yeah. There's of course, you know, the the larger the customers get, the more that you're dealing with procurement and the further away you are from operations. Right? And so oftentimes, we see a correlation between that efficiency in the field. You can certainly look at the Pioneer Exxon coming together as an example of that.

Speaker 1

But you you're absolutely right. They're smaller private. They're very operationally driven. Some of them very efficient. They do really grant their engineers in the field autonomy to pick the best service lines, to pick the best vendors, the best technology.

Speaker 1

So that usually works out very well for us. And they're also very decisive, and they're very fast. So that that could be exciting for us. On top of that, there's a competitive dynamic that's a little bit kinder in areas like the Haynesville and the Northeast versus the Permian. So those gas markets actually set up quite well for us, so we're pretty excited.

Speaker 1

Looking at all of the power demand, we're you know, again, it's it seems like the country is gonna need a lot of power generation from natural gas. So we're big believers and have been in the go forward health of the natural gas market.

Speaker 2

Got it. Okay. And and and the final one is in the press release, you've highlighted the incremental market share in the remedial wireline business. Is there any one in thing in particular that is driving that?

Speaker 1

You know, this is we've got annual strategic meetings, and we started this push a few years ago. Our leader of that business is very well versed in all things, both pump down and remedial wireline. And this was an effort really to diversify that top line from the ups and downs of pump down work, and he's done a splendid job.

Speaker 2

Okay. Awesome. Thank you for including me.

Speaker 1

Thank you for taking the time to be on the call this morning. You bet. You for your participation in the call today. I want to thank our employees, our E and P partners and investors. Thank you.

Operator

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

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