10-Q: Nine Energy Service Reports Q1 2025 Results: Revenue Up, Net Loss Narrows

Nine Energy Service saw a revenue increase in Q1 2025, with a reduced net loss compared to the same period last year.

Summary

• Nine Energy Service, Inc. reported its Q1 2025 financial results, showing a revenue increase of 6% to $150.5 million compared to $142.1 million in Q1 2024.
• The company's net loss decreased by 12% to $7.1 million, compared to a net loss of $8.1 million in the same quarter last year.
• Adjusted EBITDA increased by 10% to $16.5 million.
• Cementing revenue increased by 18%, and wireline revenue increased by 6%, while completion tools revenue decreased by 4%.
• The company replaced its 2018 ABL Credit Facility with a new $125 million facility in May 2025.
• Nine Energy is facing potential delisting from the NYSE due to non-compliance with continued listing standards.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While revenue and EBITDA increased and net loss decreased, the company faces challenges including potential delisting from the NYSE and anticipates lower results in the next quarter. The outlook is cautiously optimistic.

Positives

• Revenue increased by 6% year-over-year.
• Net loss decreased by 12% year-over-year.
• Adjusted EBITDA increased by 10% year-over-year.
• Cementing and wireline services showed revenue growth.
• The company successfully refinanced its ABL credit facility, securing a new $125 million agreement.
• Cost-cutting measures implemented in 2024 have positively impacted profitability.

Negatives

• Completion tools revenue decreased by 4% due to pricing pressure.
• The company is currently out of compliance with NYSE continued listing standards, posing a risk of delisting.
• The company anticipates second quarter revenue and profitability to be down compared to the first quarter of 2025.
• The company recorded a net loss of $7.1 million for the quarter.

Risks

• The company's business is cyclical and depends on oil and natural gas prices, which are volatile.
• Inflation may adversely affect the company's financial position and operating results.
• The company may be unable to attract and retain key employees.
• Substantial debt obligations could have adverse consequences.
• The company faces intense competition from companies with greater resources.
• Tariffs and other trade measures could adversely affect the business.
• The company is dependent on customers in a single industry.
• The company is subject to potential claims for personal injury and property damage.
• The company is subject to environmental and safety regulations.
• The company's success may be affected by the use and protection of its proprietary technology.
• The company may be adversely affected by disputes regarding intellectual property rights.
• Cybersecurity risks could harm the business.
• Increased scrutiny of sustainability matters could have an adverse effect.
• Seasonal and adverse weather conditions adversely affect demand.
• The company is at risk of being delisted from the NYSE.

Future Outlook

The company anticipates second quarter revenue and profitability to be down compared to the first quarter of 2025 due to declining oil prices and activity declines, particularly in the Permian Basin. The company remains cautiously optimistic about the long-term outlook for the energy sector, especially in natural gas basins.

Management Comments

• The company outperformed market drivers due to sustained market share gains in cementing and better utilization in coiled tubing.
• Increased profitability is attributed to cost-cutting measures implemented in the first half of 2024.
• Customers are reviewing their capital plans in real-time, and the impacts of oil price reductions on U.S. land activity are still unknown.

Industry Context

The company's performance is tied to the level of unconventional resource development activity and capital spending by oil and natural gas companies, which are influenced by commodity prices. The report notes the volatility in commodity prices and the impact of OPEC production decisions and governmental policies on U.S. activity levels.

Comparison to Industry Standards

• The report mentions Baker Hughes rig count data to provide context for the company's performance.
• The company's revenue and profitability generally move similarly to U.S. rig, frac, and stage counts, indicating a correlation with industry activity levels.
• No specific competitor comparisons are made in this report.

Legal Proceedings

• The company is involved in various claims, lawsuits, and administrative proceedings.
• The company is a defendant in a patent infringement lawsuit regarding its Breakthru Casing Flotation Device and has posted a $2.1 million letter of credit representing the judgment amount and accrued royalties.

Related Party Transactions

• The company leases office space, yard facilities, and equipment and purchases building maintenance and repair services from entities owned by David Crombie, an executive officer of the Company.
• The company also purchased products and services from an entity in which Mr. Crombie is a limited partner.
• Ann G. Fox, President and Chief Executive Officer and a director of the Company, is a director of Devon Energy Corporation, from which the company generated revenue.

Stakeholder Impact

• Shareholders face the risk of delisting from the NYSE, which could negatively impact the stock price.
• Employees may be affected by cost-cutting measures and the company's ability to attract and retain talent.
• Customers may experience changes in pricing and service availability due to market conditions.
• Creditors are exposed to risks associated with the company's debt obligations.

Next Steps

• The company intends to consider all available options to cure the minimum share price deficiency and regain compliance with NYSE listing standards, including a potential reverse stock split.

Key Dates

Keywords

Nine Energy Service, oilfield services, completion services, financial results, revenue, net loss, EBITDA, debt, NYSE, ABL Credit Facility