Nine Energy Service, Inc. Q3 FY2024 earnings call

• Revenue for Q3 was above the original guidance range. Adjusted EBITDA was $14.3 million, a 47% quarter-over-quarter increase with an incremental adjusted EBITDA margin of approximately 79%. - The cementing team achieved a 23% quarter-over-quarter increase in market share, with deliberate strategies including reevaluating pricing, boosting sales efforts, and offering advanced cement slurries. - Cost reduction initiatives such as reducing operating structure costs and vendor consolidation have positively impacted profitability. - Product innovations like the pincer hybrid frac plug and frac dart are gaining market share; the pincer plug has 50% less material and the frac dart saves time and costs. - Coiled tubing revenue increased due to better utilization with 8% more days worked.

Revenue for the third quarter was $138.2 million. The cementing business had revenue of $51.2 million, an increase of approximately 12% quarter-over-quarter, with 9% more jobs completed and a 3% increase in average blended revenue per job. Wireline revenue was $27.9 million, flat quarter-over-quarter. Completion tool revenue was $31.4 million, a decrease of approximately 3% despite a 4% increase in stages completed. Coiled tubing revenue was $27.7 million, an increase of approximately 5% due to 8% more days worked. The Northeast and Haynesville account for around 30% to 35% of the company's revenue.

• For Q4, the company anticipates a moderate slowdown with revenue projected between $132 million and $142 million, as well as lower adjusted EBITDA and margin due to budget exhaustion, weather, holidays, and decreased international tool sales. - The company expects a moderate activity pickup in 2025 if commodity prices are supportive, with the Northeast and Haynesville, which account for 30%-35% of revenue, being a growth catalyst. - Q3 results are seen as repeatable in a similar rig count environment.

• Low natural gas prices have led to sustained lower activity levels in the Haynesville and Northeast. - Q4 is likely to be affected by budget exhaustion, weather, holidays, and a decrease in international tool sales, causing a decline from Q3. - Commodity price volatility and the current low rig count environment pose risks to financial performance.

Q: What's leading to the market share gains in cementing and other businesses?

A: We devised a specific strategy with specific customers, evaluated our position in the market, and the team was deliberate in its approach. We also have targeted strategies in wireline, such as focusing on remedial wireline.

Q: Regarding international sales and the run rate for EBITDA to be free cash flow breakeven and positive?

A: International sales are small in number. For breakeven and positive free cash flow, around $15 million per quarter in EBITDA is targeted, with the team working towards that despite the depressed rig count environment.

Q: View on customers' response to potential price relief?

A: Instead of directly asking for price increases, we focus on cost reduction and efficiency to help customers show lower costs per lateral foot, as the Street is focused on customers' capital efficiency.

Q: Sense of assets coming back to work in Q1 2025?

A: There is a sense of uplift in 2025, and we anticipate some assets will come back to work as activity may pick up.