HOUSTON–(BUSINESS WIRE)–Nine Energy Service, Inc. (“Nine” or the “Company”) (NYSE: NINE) reported fourth quarter 2020 revenues of $62.0 million, net loss of $(35.4) million and adjusted EBITDA of $(13.9) million. For the fourth quarter 2020, adjusted net lossB was $(35.7) million, or $(1.20) adjusted basic loss per shareC.

“As anticipated, holiday and weather shutdowns were not as pronounced as we have seen historically during the fourth quarter,” said Ann Fox, President and Chief Executive Officer, Nine Energy Service. “Activity improvements are reflected in our 25% increase in revenue quarter over quarter; however, a combination of continued pricing pressure, as well as one-off, non-cash items negatively affected net loss and adjusted EBITDA.”

“The market continues to face unparalleled uncertainty and heightened volatility. Throughout 2020, we were always balancing the short, medium, and long-term needs of the Company including making significant cost-reductions to preserve liquidity, but also maintaining key people, assets, and our footprint in order not to impede the future earnings of the Company. Although profitability was down year over year in conjunction with activity, we were able to demonstrate our ability to flex with the market and preserve liquidity through good working capital management and ended the year with a cash balance of $68.9 million and an undrawn ABL. We were also able to reduce our debt through opportunistic bond buybacks at approximately 27% of par value.”

“Operationally, our team once again demonstrated their ability to gain market share, growing our percentage of US stages completed from approximately 17% in 2019 to approximately 23% in 2020. We organically expanded our cementing service line into the Haynesville and continue to be pleased with the adoption of our dissolvable plugs, despite an unprecedented backdrop for commercializing new technology. Additionally, despite a year with new protocols and ways of working, Nine ended the year with the lowest TRIR in the Company’s history of 0.30.”

“While we have seen improvement in the market throughout Q4 2020, we are still anticipating a very challenging environment in 2021 and expect E&P capital spend will be down year over year. Q1 2021 is off to a slower start as customers finalize their 2021 activity plans and many completion schedules are delayed. Additionally, the inclement weather in Texas caused significant shutdowns within all service lines. Texas weather-related shutdowns in February aside, we anticipate the pace of Q1 activity and revenue will be better sequentially than Q4, but still expect to generate a net loss and negative adjusted EBITDA for the quarter. For Nine, we will continue to flex with the market and our strategy is unchanged. We are focused on building an asset-light business with high barriers to entry and will continue to differentiate through our service execution and leading technology.”

Operating Results

For the year ended December 31, 2020, the Company reported revenues of $310.9 million, net loss of $(378.9) million, or $(12.74) per basic share, and adjusted EBITDA of $(25.8) million. Full year 2020 adjusted net loss was $(118.1) million, or $(3.97) per adjusted basic share. For the full year 2020, the Company reported adjusted gross profitD of $8.7 million. For the year ended December 31, 2020, the Company generated ROICE of (16)%.

During the fourth quarter of 2020, the Company reported revenues of $62.0 million with adjusted gross loss of $(5.0) million. During the fourth quarter, the Company generated ROIC of (35)%.

During the fourth quarter of 2020, the Company reported selling, general and administrative (“SG&A”) expense of $11.0 million, compared to $10.7 million for the third quarter of 2020. For the year ended December 31, 2020, the Company reported SG&A expense of $49.3 million, compared to year ended December 31, 2019 SG&A expense of $81.3 million. Depreciation and amortization expense (“D&A”) in the fourth quarter of 2020 was $11.8 million, compared to $11.9 million for the third quarter of 2020. For the year ended December 31, 2020, the Company reported D&A expense of $48.9 million, compared to year ended December 31, 2019 D&A expense of $68.9 million.

The Company recognized an income tax benefit of approximately $0.1 million in the fourth quarter of 2020 and an overall income tax benefit for the year of approximately $2.5 million, resulting in an effective tax rate of 0.6% for 2020. The 2020 income tax benefit is primarily comprised of changes to our valuation allowance position due to impairment recorded during the first quarter of 2020, as well as tax benefit from the five-year net operating loss carryback provision provided by the Coronavirus Aid, Relief, and Economic Security Act signed into law during the first quarter of 2020.

Liquidity and Capital Expenditures

For the year ended December 31, 2020, the Company reported net cash used in operating activities of $(4.9) million. For the year ended December 31, 2020, the Company reported total capital expenditures of $10.2 million, which fell within Management’s guidance of $10-$15 million, compared to the year ended December 31, 2019 total capital expenditures of $62.1 million.

As of December 31, 2020, Nine’s cash and cash equivalents were $68.9 million, and the Company had $37.9 million of availability under the revolving credit facility, which remains undrawn, resulting in a total liquidity position of $106.8 million as of December 31, 2020.

ABCDESee end of press release for definitions

Conference Call Information

The call is scheduled for Monday, March 8, 2021 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 22, 2021 and may be accessed by dialing U.S. (Toll Free): (877) 660-6853 or International: (201) 612-7415 and entering the passcode of 13715295.

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 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 severity and duration of the COVID-19 pandemic, related economic repercussions and the resulting negative impact on demand for oil and gas; the current significant surplus in the supply of oil and the ability of the OPEC+ countries to agree on and comply with supply limitations; the duration and magnitude of the unprecedented disruption in the oil and gas industry currently resulting from the impact of the foregoing factors, which is negatively impacting our business; operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions; 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.

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, (iii) loss or gain on revaluation of contingent liabilities, (iv) gain on the extinguishment of debt, (v) loss or gain on the sale of subsidiaries, (vi) restructuring charges, (vii) stock-based compensation expense, (viii) loss or gain on sale of property and equipment, and (ix) 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. Management believes Adjusted EBITDA is useful because it allows 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 helps 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 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, (iii) restructuring charges, (iv) loss or gain on the sale of subsidiaries, (v) gain on the extinguishment of debt and (vi) tax impact of such adjustments. Management believes Adjusted Net Income (Loss) 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 helps identify underlying trends in our operations that could otherwise be distorted by the effect of the impairments and acquisitions.

CAdjusted Basic Earnings (Loss) Per Share is defined as adjusted net income (loss), divided by weighted average basic shares outstanding. Management believes Adjusted Basic Earnings (Loss) 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 Gross Profit (Loss) is defined as revenues less direct and indirect cost of revenues (excluding depreciation and amortization). This measure differs from the GAAP definition of gross profit (loss) because we do not include the impact of depreciation and amortization, which represent non-cash expenses. Our management uses adjusted gross profit (loss) to evaluate operating performance. We prepare adjusted gross profit (loss) to eliminate the impact of depreciation and amortization because we do not consider depreciation and amortization indicative of our core operating performance.

EReturn 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, (iii) interest expense (income), (iv) restructuring charges, (v) loss or gain on the sale of subsidiaries, (vi) gain on extinguishment of debt, and (vii) 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 total capital for use in this analysis. Management believes ROIC provides useful information 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 making capital resource allocation decisions and in evaluating business performance.

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,

2020

 

September 30,

2020

2020

 

2019

       

Revenues

 

$

61,971

 

 

$

49,521

 

$

310,851

 

 

$

832,937

 

Cost and expenses

     

Cost of revenues (exclusive of depreciation and

     

amortization shown separately below)

 

 

66,963

 

 

 

52,483

 

 

302,157

 

 

 

669,979

 

General and administrative expenses

 

 

10,966

 

 

 

10,701

 

 

49,346

 

 

 

81,327

 

Depreciation

 

 

7,678

 

 

 

7,763

 

 

32,431

 

 

 

50,544

 

Amortization of intangibles

 

 

4,091

 

 

 

4,091

 

 

16,467

 

 

 

18,367

 

Impairment of property and equipment

 

 

 

 

 

 

 

 

 

 

66,200

 

Impairment of goodwill

 

 

 

 

 

 

 

296,196

 

 

 

20,273

 

Impairment of intangibles

 

 

 

 

 

 

 

 

 

 

114,804

 

(Gain) loss on revaluation of contingent liabilities

 

 

(505

)

 

 

297

 

 

276

 

 

 

(21,187

)

Loss on sale of subsidiaries

 

 

 

 

 

 

 

 

 

 

15,896

 

(Gain) loss on sale of property and equipment

 

 

43

 

 

 

(535

)

 

(2,857

)

 

 

(538

)

Loss from operations  

 

(27,265

)

 

 

(25,279

)

 

(383,165

)

 

 

(182,728

)

Interest expense

 

 

8,615

 

 

 

9,130

 

 

36,759

 

 

 

39,770

 

Interest income

 

 

(22

)

 

 

(43

)

 

(615

)

 

 

(860

)

Gain on extinguishment of debt

 

 

(340

)

 

 

(15,798

)

 

(37,841

)

 

 

 

Other income

 

 

(33

)

 

 

(29

)

 

(62

)

 

 

 

Loss before income taxes  

 

(35,485

)

 

 

(18,539

)

 

(381,406

)

 

 

(221,638

)

Benefit for income taxes

 

 

(110

)

 

 

(37

)

 

(2,458

)

 

 

(3,887

)

Net loss  

$

(35,375

)

 

$

(18,502

)

$

(378,948

)

 

$

(217,751

)

       

Loss per share

     
Basic  

$

(1.18

)

 

$

(0.62

)

$

(12.74

)

 

$

(7.43

)

Diluted  

$

(1.18

)

 

$

(0.62

)

$

(12.74

)

 

$

(7.43

)

Weighted average shares outstanding

     
Basic  

 

29,852,516

 

 

 

29,849,753

 

 

29,744,830

 

 

 

29,308,107

 

Diluted  

 

29,852,516

 

 

 

29,849,753

 

 

29,744,830

 

 

 

29,308,107

 

       

Other comprehensive income (loss), net of tax

     

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

 

$

230

 

 

$

132

 

$

(34

)

 

$

376

 

Total other comprehensive income (loss), net of tax  

 

230

 

 

 

132

 

 

(34

)

 

 

376

 

Total comprehensive loss  

$

(35,145

)

 

$

(18,370

)

$

(378,982

)

 

$

(217,375

)

NINE ENERGY SERVICE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

 

At December 31,

 

2020

2019

   

Assets

 

Current assets

 

Cash and cash equivalents

 

$

68,864

 

$

92,989

 

Accounts receivable, net

 

 

41,235

 

 

96,889

 

Income taxes receivable

 

 

1,392

 

 

660

 

Inventories, net

 

 

38,402

 

 

60,945

 

Prepaid expenses and other current assets

 

 

16,270

 

 

17,434

 

Total current assets

 

 

166,163

 

 

268,917

 

Property and equipment, net

 

 

102,429

 

 

128,604

 

Operating lease right-of-use assets, net

 

 

36,360

 

 

 

Finance lease right-of-use assets, net

 

 

1,816

 

 

 

Goodwill

 

 

 

 

296,196

 

Intangible assets, net

 

 

132,524

 

 

148,991

 

Other long-term assets

 

 

3,308

 

 

8,187

 

Total assets

 

$

442,600

 

$

850,895

 

Liabilities and Stockholders’ Equity

 

Current liabilities

 

Accounts payable

 

$

18,140

 

$

35,490

 

Accrued expenses

 

 

17,139

 

 

24,730

 

Current portion of long-term debt

 

 

844

 

 

 

Current portion of operating lease obligations

 

 

6,200

 

 

 

Current portion of finance lease obligations

 

 

1,092

 

 

995

 

Total current liabilities

 

 

43,415

 

 

61,215

 

Long-term liabilities

 

Long-term debt

 

 

342,714

 

 

392,059

 

Deferred income taxes

 

 

 

 

1,588

 

Long-term operating lease obligations

 

 

32,295

 

 

 

Long-term finance lease obligations

 

 

1,109

 

 

2,201

 

Other long-term liabilities

 

 

2,658

 

 

3,955

 

Total liabilities

 

 

422,191

 

 

461,018

 

   

Stockholders’ equity

 
 

Common stock (120,000,000 shares authorized at $.01 par value; 31,557,809 and 30,555,677 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively)

 

 

316

 

 

306

 

Additional paid-in capital

 

 

768,429

 

 

758,853

 

Accumulated other comprehensive loss

 

 

(4,501

)

 

(4,467

)

Accumulated deficit

 

 

(743,835

)

 

(364,815

)

Total stockholders’ equity

 

 

20,409

 

 

389,877

 

Total liabilities and stockholders’ equity

 

$

442,600

 

$

850,895

 

NINE ENERGY SERVICE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

   
 

Year Ended December 31,

 

2020

2019

   

Cash flows from operating activities

 

Net loss

 

$

(378,948

)

$

(217,751

)

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

   

Depreciation

 

 

32,431

 

 

50,544

 

Amortization of intangibles

 

 

16,467

 

 

18,367

 

Amortization of deferred financing costs

 

 

2,836

 

 

2,984

 

Amortization of operating leases

 

 

8,897

 

 

 

Provision for doubtful accounts

 

 

2,820

 

 

849

 

Benefit for deferred income taxes

 

 

(1,588

)

 

(4,327

)

Provision for inventory obsolescence

 

 

8,957

 

 

5,148

 

Impairment of property and equipment

 

 

 

 

66,200

 

Impairment of goodwill

 

 

296,196

 

 

20,273

 

Impairment of intangibles

 

 

 

 

114,804

 

Impairment of operating lease

 

 

466

 

 

 

Stock-based compensation expense

 

 

9,744

 

 

14,057

 

Gain on extinguishment of debt

 

 

(37,841

)

 

 

Gain on sale of property and equipment

 

 

(2,857

)

 

(538

)

(Gain) loss on revaluation of contingent liabilities

 

 

276

 

 

(21,187

)

Loss on sale of subsidiaries

 

 

 

 

15,896

 

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

   

Accounts receivable, net

 

 

52,914

 

 

41,852

 

Inventories, net

 

 

13,600

 

 

22,545

 

Prepaid expenses and other current assets

 

 

1,368

 

 

2,395

 

Accounts payable and accrued expenses

 

 

(25,456

)

 

(27,901

)

Income taxes receivable/payable

 

 

(732

)

 

(294

)

Other assets and liabilities

 

 

(4,451

)

 

(2,611

)

Net cash provided by (used in) operating activities

 

 

(4,901

)

 

101,305

 

Cash flows from investing activities

 

Acquisitions, net of cash acquired

 

 

 

 

1,020

 

Proceeds from sale of subsidiaries

 

 

 

 

16,914

 

Proceeds from sales of property and equipment

 

 

6,402

 

 

3,702

 

Proceeds from property and equipment casualty losses

 

 

1,237

 

 

1,576

 

Proceeds from notes receivable payments

 

 

 

 

7,626

 

Purchases of property and equipment

 

 

(9,417

)

 

(64,959

)

Net cash used in investing activities

 

 

(1,778

)

 

(34,121

)

Cash flows from financing activities

 

Proceeds from 2018 ABL Credit Facility

 

 

 

 

10,000

 

Payments on 2018 ABL Credit Facility

 

 

 

 

(45,000

)

Payments on Magnum Promissory Notes

 

 

(281

)

 

 

Purchases of Senior Notes

 

 

(14,561

)

 

 

Payments on finance leases

 

 

(995

)

 

(903

)

Payments of contingent liabilities

 

 

(1,390

)

 

(374

)

Proceeds from exercise of stock options

 

 

 

 

15

 

Vesting of restricted stock

 

 

(158

)

 

(1,643

)

Net cash used in financing activities

 

 

(17,385

)

 

(37,905

)

Impact of foreign currency exchange on cash

 

 

(61

)

 

95

 

Net increase (decrease) in cash and cash equivalents

 

 

(24,125

)

 

29,374

 

Cash and cash equivalents

 

Beginning of period

 

 

92,989

 

 

63,615

 

End of period

 

$

68,864

 

$

92,989

 

NINE ENERGY SERVICE, INC.

RECONCILIATION OF ADJUSTED GROSS PROFIT (LOSS)

(In Thousands)

(Unaudited)

       
 

Three Months Ended

Year Ended December 31,

 

December 31,

2020

 

September 30,

2020

2020

 

2019

Calculation of gross profit (loss)

     

Revenues

 

$

61,971

 

 

$

49,521

 

$

310,851

 

 

$

832,937

Cost of revenues (exclusive of depreciation and

       
amortization shown separately below)  

 

66,963

 

 

 

52,483

 

 

302,157

 

 

 

669,979

Depreciation (related to cost of revenues)

 

 

7,141

 

 

 

7,219

 

 

30,161

 

 

 

47,006

Amortization of intangibles

 

 

4,091

 

 

 

4,091

 

 

16,467

 

 

 

18,367

Gross profit (loss)

 

$

(16,224

)

 

$

(14,272

)

$

(37,934

)

 

$

97,585

       

Adjusted gross profit (loss) reconciliation

     

Gross profit (loss)

 

$

(16,224

)

 

$

(14,272

)

$

(37,934

)

 

$

97,585

Depreciation (related to cost of revenues)

 

 

7,141

 

 

 

7,219

 

 

30,161

 

 

 

47,006

Amortization of intangibles

 

 

4,091

 

 

 

4,091

 

 

16,467

 

 

 

18,367

Adjusted gross profit (loss)

 

$

(4,992

)

 

$

(2,962

)

$

8,694

 

 

$

162,958

NINE ENERGY SERVICE, INC.

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA

(In Thousands)

(Unaudited)

       
 

Three Months Ended

Year Ended December 31,

 

December 31,

2020

 

September 30,

2020

2020

 

2019

EBITDA reconciliation:

     

Net loss

 

$

(35,375

)

 

$

(18,502

)

$

(378,948

)

 

$

(217,751

)

Interest expense

 

 

8,615

 

 

 

9,130

 

 

36,759

 

 

 

39,770

 

Interest income

 

 

(22

)

 

 

(43

)

 

(615

)

 

 

(860

)

Depreciation

 

 

7,678

 

 

 

7,763

 

 

32,431

 

 

 

50,544

 

Amortization of intangibles

 

 

4,091

 

 

 

4,091

 

 

16,467

 

 

 

18,367

 

Benefit for income taxes

 

 

(110

)

 

 

(37

)

 

(2,458

)

 

 

(3,887

)

EBITDA

 

$

(15,123

)

 

$

2,402

 

$

(296,364

)

 

$

(113,817

)

Impairment of property and equipment

 

 

 

 

 

 

 

 

 

 

66,200

 

Impairment of goodwill

 

 

 

 

 

 

 

296,196

 

 

 

20,273

 

Impairment of intangibles

 

 

 

 

 

 

 

 

 

 

114,804

 

Transaction and integration costs

 

 

 

 

 

 

 

146

 

 

 

13,047

 

Gain on extinguishment of debt

 

 

(340

)

 

 

(15,798

)

 

(37,841

)

 

 

 

 

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

 

 

(505

)

 

 

297

 

 

276

 

 

 

(21,187

)

Loss on sale of subsidiaries

 

 

 

 

 

 

 

 

 

 

15,896

 

Restructuring charges

 

 

25

 

 

 

459

 

 

4,907

 

 

 

3,976

 

Stock-based compensation expense

 

 

2,027

 

 

 

2,020

 

 

9,744

 

 

 

14,057

 

Gain (loss) on sale of property and equipment

 

 

43

 

 

 

(535

)

 

(2,857

)

 

 

(538

)

Legal fees and settlements (2)

 

 

 

 

 

15

 

 

39

 

 

 

307

 

Adjusted EBITDA

 

$

(13,873

)

 

$

(11,140

)

$

(25,754

)

 

$

113,018

 

 

(1) Amounts relate to the revaluation of contingent liabilities associated with the Company’s 2018 acquisitions

(2) Amounts represent fees and legal settlements associated with legal proceedings brought pursuant to the Fair Labor Standards Act and/or similar laws.

NINE ENERGY SERVICE, INC.

RECONCILIATION OF ROIC CALCULATION

(In Thousands)

(Unaudited)

       
 

Three Months Ended

Year Ended December 31,

 

December 31,

2020

 

September 30,

2020

2020

 

2019

       

Net loss

 

 $

            (35,375

)

 

 $

         (18,502

)

 $

      (378,948

)

 

 $

    (217,751

)

Add back:

     

   Impairment of property and equipment

 

 

                        –

 

 

 

                     –

 

 

                    –

 

 

 

           66,200

 

   Impairment of goodwill

 

 

                        –

 

 

 

                     –

 

 

          296,196

 

 

 

           20,273

 

   Impairment of intangibles

 

 

                        –

 

 

 

                     –

 

 

                    –

 

 

 

         114,804

 

   Interest expense

 

 

                  8,615

 

 

 

                9,130

 

 

            36,759

 

 

 

           39,770

 

   Interest income

 

 

                      (22

)

 

 

                   (43

)

 

                (615

)

 

 

              (860

)

   Transaction and integration costs

 

 

                        –

 

 

 

                     –

 

 

                 146

 

 

 

           13,047

 

   Restructuring charges

 

 

                       25

 

 

 

                   459

 

 

              4,907

 

 

 

             3,976

 

   Loss on sale of subsidiaries

 

 

                        –

 

 

 

                     –

 

 

                    –

 

 

 

           15,896

 

   Gain on extinguishment of debt

 

 

                    (340

)

 

 

            (15,798

)

 

           (37,841

)

 

 

                  –

 

   Benefit for deferred income taxes

 

 

                        –

 

 

 

                     –

 

 

             (1,588

)

 

 

           (4,327

)

After-tax net operating profit (loss)

 

 $

            (27,097

)

 

 $

         (24,754

)

 $

        (80,984

)

 

 $

        51,028

 

       

Total capital as of prior period-end:

     

   Total stockholders’ equity

 

 $

             53,599

 

 

 $

           69,950

 

 $

       389,877

 

 

 $

      594,823

 

   Total debt

 

 

              349,418

 

 

 

            372,584

 

 

          400,000

 

 

 

         435,000

 

   Less: cash and cash equivalents

 

 

               (80,338

)

 

 

            (88,678

)

 

           (92,989

)

 

 

         (63,615

)

Total capital as of prior period-end:

 

 $

           322,679

 

 

 $

         353,856

 

 $

       696,888

 

 

 $

      966,208

 

       

Total capital as of period-end:

     

   Total stockholders’ equity

 

 $

             20,409

 

 

 $

           53,599

 

 $

         20,409

 

 

 $

      389,877

 

   Total debt

 

 

              348,637

 

 

 

            349,418

 

 

          348,637

 

 

 

         400,000

 

   Less: cash and cash equivalents

 

 

               (68,864

)

 

 

            (80,338

)

 

           (68,864

)

 

 

         (92,989

)

Total capital as of period-end:

 

 $

           300,182

 

 

 $

         322,679

 

 $

       300,182

 

 

 $

      696,888

 

 

 

 

 

 

 

 

Average total capital

 

 $

           311,431

 

 

 $

         338,268

 

 $

       498,535

 

 

 $

      831,548

 

ROIC

 

 

-35

%

 

 

-29

%

 

-16

%

 

 

6

%

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,

2020

 

September 30,

2020

2020

 

2019

Reconciliation of adjusted net income (loss):

     

Net loss

 

$

(35,375

)

 

$

(18,502

)

$

(378,948

)

 

$

(217,751

)

Add back:

     

Impairment of property and equipment (b)

 

 

 

 

 

 

 

 

 

 

66,200

 

Impairment of goodwill (a) (b)

 

 

 

 

 

 

 

296,196

 

 

 

20,273

 

Impairment of intangibles (b)

 

 

 

 

 

 

 

 

 

 

114,804

 

Transaction and integration costs (c)

 

 

 

 

 

 

 

146

 

 

 

13,047

 

Gain on extinguishment of debt (d)

 

 

(340

)

 

 

(15,798

)

 

(37,841

)

 

 

 

Restructuring charges

 

 

25

 

 

 

459

 

 

4,907

 

 

 

3,976

 

Loss on sale of subsidiaries

 

 

 

 

 

 

 

 

 

 

15,896

 

Less: Tax benefit from add backs  
 

 

 

 

 

 

 

(2,547

)

 

 

(7,038

)

Adjusted net income (loss)

 

$

(35,690

)

 

$

(33,841

)

$

(118,087

)

 

$

9,407

 

       

Weighted average shares

     

Weighted average shares outstanding for basic

 

 

29,852,516

 

 

 

29,849,753

 

 

29,744,830

 

 

 

29,308,107

 

and adjusted basic earnings (loss) per share

     
       

Earnings (loss) per share:

     

Basic loss per share

 

$

(1.18

)

 

$

(0.62

)

$

(12.74

)

 

$

(7.43

)

Adjusted basic earnings (loss) per share

 

$

(1.20

)

 

$

(1.13

)

$

(3.97

)

 

$

0.32

 

 

(a) 2020 impairment charges were driven by sharp declines in global crude oil demand and an economic recession associated with the coronavirus pandemic, as well as, sharp declines in oil and natural gas prices.

 

(b) 2019 impairment charges were driven by 1) a reduction of the need for coil tubing during the drill-out phase of the overall completions process and 2) the transition of certain trade names associated with recent acquisitions to the Company’s trade names.

 

(c) Amounts represent transaction and integration costs, including the cost of inventory that was stepped up to fair value during purchase accounting associated with 2018 acquisitions.

 

(d) Amount primarily represents the difference between the repurchase price and the carrying amount of Senior Notes repurchased during quarterly and annual periods in 2020.

 



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