Nine Energy Service, Inc. (NINE) Bundle
Understanding Nine Energy Service, Inc. (NINE) Revenue Streams
Understanding Nine Energy Service, Inc.’s Revenue Streams
The revenue for Nine Energy Service, Inc. for the third quarter of 2024 was $138.2 million, reflecting a decrease of 2% compared to $140.6 million in the same quarter of 2023. This decline was attributed to reduced pricing and market conditions, including a 10% decrease in the average U.S. rig count year-over-year.
Revenue Breakdown by Source
| Revenue Source | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | Change (%) |
|---|---|---|---|
| Service | $106,744 | $108,058 | -1.2% |
| Product | $31,413 | $32,559 | -3.5% |
Year-over-Year Revenue Growth Rate
For the first nine months of 2024, total revenues were $412.7 million, down 11% from $465.5 million in the first nine months of 2023. The decline was largely due to pricing decreases and a 15% reduction in the average U.S. rig count during this period.
Segment Contribution to Overall Revenue
In the first nine months of 2024, the revenue contribution from different segments was as follows:
| Segment | Revenue (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Cementing | $142,800 | 34.6% |
| Coiled Tubing | $83,000 | 20.1% |
| Tools | $101,500 | 24.6% |
| Wireline | $85,400 | 20.7% |
Analysis of Significant Changes in Revenue Streams
During the first nine months of 2024, cementing revenue decreased by $27.2 million, or 16%, due to pricing and a slight job count decrease of 1%. Coiled tubing revenue also saw a decline of $10.3 million, or 11%, driven primarily by lower utilization rates. Tools revenue decreased by $10.1 million, or 9%, linked to a 13% drop in completion tool stages.
Overall, the revenue trends indicate a challenging market environment, characterized by pricing pressures and reduced activity levels across all service lines. This is reflected in the overall revenue decrease of $52.8 million, or 11%, for the first nine months of 2024 compared to the previous year.
A Deep Dive into Nine Energy Service, Inc. (NINE) Profitability
A Deep Dive into Nine Energy Service's Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit was $16.1 million on revenues of $138.2 million, yielding a gross profit margin of 11.6%. This is a decrease from the gross profit of $13.3 million on revenues of $140.6 million for the same quarter in 2023, which had a gross profit margin of 9.4%.
Operating Profit Margin: The income from operations for the third quarter of 2024 was $2.5 million, resulting in an operating profit margin of 1.8% compared to an operating loss of $0.8 million in the third quarter of 2023.
Net Profit Margin: The net loss for the third quarter of 2024 was $(10.1 million), leading to a net profit margin of (7.3%). This is an improvement from the net loss of $(13.3 million) in the third quarter of 2023, which equated to a net profit margin of (9.5%).
Trends in Profitability Over Time
For the first nine months of 2024, revenues decreased by 11% to $412.7 million compared to $465.5 million in the same period in 2023. The adjusted gross profit for the nine months ended September 30, 2024, was $71.2 million, down 24% from $93.2 million in 2023. The net loss increased to $(32.2 million) for the nine months ended September 30, 2024, compared to $(21.9 million) in 2023.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry average gross profit margin for oilfield services companies is approximately 25%. The company's gross profit margin of 11.6% indicates a significant deviation from industry standards, suggesting potential operational inefficiencies.
The net profit margin for the industry averages around 5%, while the company's net profit margin of (7.3%) further illustrates challenges in achieving profitability amidst declining revenues.
Analysis of Operational Efficiency
The cost of revenues for the third quarter of 2024 decreased by 4% to $113.5 million, down from $117.7 million in the same period of 2023. The adjusted gross profit increased by 8% to $24.7 million in the third quarter of 2024 compared to $22.9 million in 2023.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Revenue | $138.2 million | $140.6 million | -2% |
| Gross Profit | $16.1 million | $13.3 million | 21% |
| Adjusted Gross Profit | $24.7 million | $22.9 million | 8% |
| Net Loss | $(10.1 million) | $(13.3 million) | 24% improvement |
The general and administrative expenses decreased by 5% to $12.4 million for the third quarter of 2024, down from $13.1 million in the same quarter of 2023.
In summary, while the company has shown improvements in certain profitability metrics, significant challenges remain in aligning with industry standards, particularly regarding gross and net profit margins.
Debt vs. Equity: How Nine Energy Service, Inc. (NINE) Finances Its Growth
Debt vs. Equity: How Nine Energy Service, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, the total debt of Nine Energy Service, Inc. was $318.5 million, which includes:
- 2028 Notes: $300 million
- ABL Credit Facility: $50 million
- Short-term Debt: $0
The total debt before deferred financing costs was $350 million, with deferred financing costs amounting to $31.5 million.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Nine Energy Service, Inc. as of September 30, 2024, was calculated at approximately 5.54, based on total stockholders' equity of $(57.6 million). This ratio significantly exceeds the industry average, which typically ranges from 1.0 to 2.0 for similar companies in the energy sector.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
On January 30, 2023, the company completed a public offering of 300,000 units, which included $300 million principal amount of 13.000% Senior Secured Notes due 2028. The proceeds from this issuance were approximately $279.8 million after deducting underwriting discounts.
The company’s credit ratings have not been explicitly detailed but are influenced by the high interest rates on its debt, such as the 13.000% on the 2028 Notes.
How the Company Balances Between Debt Financing and Equity Funding
The company has utilized both debt and equity financing to support its operations. Recent equity issuances include 1,181,090 shares sold under its ATM program, generating approximately $1.5 million. The balance between debt and equity reflects the company’s strategy to leverage debt for growth while managing the risks associated with high leverage in a volatile market environment.
| Debt Type | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| 2028 Notes | $300 | 13.000% | February 1, 2028 |
| ABL Credit Facility | $50 | Variable | Ongoing |
| Short-term Debt | $0 | N/A | N/A |
| Total Debt | $318.5 | N/A | N/A |
The company’s approach to financing reflects a strategic mix that aims to optimize growth potential while managing financial risks associated with high levels of debt. Investors should monitor these metrics closely as they can significantly impact future profitability and operational flexibility.
Assessing Nine Energy Service, Inc. (NINE) Liquidity
Assessing Nine Energy Service, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.63, calculated from current assets of $64.1 million and current liabilities of $39.3 million.
Quick Ratio: The quick ratio was 0.86, indicating that the company has $27.3 million in liquid assets (current assets less inventory) against $39.3 million in current liabilities.
Working Capital Trends
The working capital as of September 30, 2024, was $25.3 million, reflecting a decrease from $29.2 million on December 31, 2023. This trend indicates a tightening in liquidity.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $64.1 | $39.3 | $25.3 |
| December 31, 2023 | $69.8 | $40.6 | $29.2 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flows from operating, investing, and financing activities were as follows:
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $(1.8) | $21.2 |
| Investing Activities | $(11.2) | $(14.7) |
| Financing Activities | $(2.1) | $(11.6) |
Potential Liquidity Concerns or Strengths
The total liquidity position as of September 30, 2024, was $43.3 million, comprising $15.7 million in cash and cash equivalents and $27.6 million available under the ABL Credit Facility. This liquidity is crucial for covering semi-annual interest payments of $19.5 million on the 2028 Notes, which began on August 1, 2023.
Despite a net loss of $32.2 million for the nine months ended September 30, 2024, cash provided by operations and existing liquidity sources are projected to be sufficient to fund capital requirements for the next twelve months, though this is contingent on achieving financial forecasts in a volatile market environment.
Is Nine Energy Service, Inc. (NINE) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we can analyze key financial ratios, stock price trends, dividends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial metric for evaluating a company's valuation. As of September 30, 2024, the company reported a net loss of $32.2 million for the first nine months, which translates to a loss per share of $0.89. Given the negative earnings, the P/E ratio is not applicable in this scenario.
Price-to-Book (P/B) Ratio
The book value per share as of September 30, 2024, is calculated from total stockholders' equity of $(57.6 million) divided by 42.36 million shares, resulting in a negative book value per share. Thus, the P/B ratio is also not applicable.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is useful for assessing valuation relative to earnings before interest, taxes, depreciation, and amortization. The company reported an Adjusted EBITDA of $39.1 million for the first nine months of 2024. With a total debt of $318.5 million and a market capitalization of approximately $80.5 million (based on the stock price of $1.90 as of September 30, 2024), the enterprise value can be calculated as:
- Enterprise Value = Market Cap + Total Debt - Cash
- Enterprise Value = $80.5 million + $318.5 million - $15.7 million = $383.3 million
- EV/EBITDA = $383.3 million / $39.1 million = 9.79
Stock Price Trends
The stock price has fluctuated considerably over the last 12 months. As of September 30, 2024, the stock price stood at $1.90. Over the past year, the stock reached a high of $4.50 and a low of $1.50. This indicates significant volatility, reflecting broader market conditions and company performance.
Dividend Yield and Payout Ratios
The company does not currently pay dividends, which is consistent with its net losses and capital structure. Therefore, the dividend yield is 0%.
Analyst Consensus on Stock Valuation
As per recent analyst reports, consensus ratings suggest a majority hold rating. Out of 10 analysts, 6 recommend holding the stock, 3 recommend selling, and 1 recommends buying.
| Metric | Value |
|---|---|
| P/E Ratio | N/A (Net Loss) |
| P/B Ratio | N/A (Negative Book Value) |
| EV/EBITDA | 9.79 |
| Stock Price | $1.90 |
| 12-Month High | $4.50 |
| 12-Month Low | $1.50 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold (6 Hold, 3 Sell, 1 Buy) |
Key Risks Facing Nine Energy Service, Inc. (NINE)
Key Risks Facing Nine Energy Service, Inc.
The financial health of Nine Energy Service, Inc. is influenced by a variety of internal and external risk factors that investors should consider. These risks can impact the company’s operational efficiency, financial stability, and overall market position.
Industry Competition
In the oilfield services sector, competition is intense, with numerous players vying for market share. Pricing pressures from competitors have led to a decline in revenue. For instance, the company's revenues decreased by $52.8 million, or 11%, to $412.7 million for the first nine months of 2024 compared to the previous year . Additionally, the average U.S. rig count decreased by 15% in the same period, further affecting service demand .
Regulatory Changes
Changes in regulations, particularly in environmental standards and safety protocols, pose significant risks. Compliance with these regulations can lead to increased operational costs and potential fines. The company has indicated that it continuously monitors regulatory developments to mitigate these risks, but any abrupt changes could have adverse effects on its operations.
Market Conditions
The company’s performance is closely tied to the fluctuations in oil and gas prices. A downturn in commodity prices can lead to reduced capital spending by exploration and production companies, impacting the demand for services. For example, revenues from cementing services decreased by $27.2 million, or 16%, primarily due to pricing decreases and a job count decrease of 1% .
Operational Risks
Operational risks include failures in service delivery, equipment malfunction, and supply chain disruptions. The company recorded a loss on the sale of property and equipment amounting to $0.5 million for the first nine months of 2024 . Such losses can affect profitability and operational continuity.
Financial Risks
Financial risks stem from the company’s capital structure and debt obligations. As of September 30, 2024, total debt stood at $318.5 million, with a significant portion related to the 2028 Notes, which bear an interest rate of 13% . The high-interest obligations can strain cash flow, especially in a low-revenue environment.
Strategic Risks
Strategic risks involve the company's ability to effectively execute its business plan, including growth through acquisitions. The planned capital expenditure for 2024 is between $10 million and $15 million, down from initial expectations of $15 million to $25 million . This reduction reflects a strategic pivot to preserve liquidity amid market declines.
Mitigation Strategies
The company has implemented cost-cutting measures and supply chain initiatives to reduce material costs and improve profitability. For example, general and administrative expenses decreased by $9.9 million, or 21%, to $37.1 million for the first nine months of 2024 . Additionally, ongoing monitoring of market trends and operational efficiency is crucial for adapting to changing conditions.
| Risk Factor | Impact on Financials | Mitigation Strategies |
|---|---|---|
| Industry Competition | Revenue decline of $52.8 million (11%) | Cost-cutting measures and efficiency improvements |
| Regulatory Changes | Increased compliance costs | Continuous monitoring of regulations |
| Market Conditions | Potential revenue loss due to price fluctuations | Diversification of services offered |
| Operational Risks | Loss of $0.5 million on equipment sales | Regular maintenance and equipment upgrades |
| Financial Risks | Total debt of $318.5 million; high interest costs | Focus on cash flow management and debt restructuring |
| Strategic Risks | Reduced capital expenditures | Strategic planning and market analysis |
Future Growth Prospects for Nine Energy Service, Inc. (NINE)
Future Growth Prospects for Nine Energy Service, Inc. (NINE)
Analysis of Key Growth Drivers
The company is actively exploring various avenues for growth, including product innovations, market expansions, and strategic acquisitions. In particular, the focus on enhancing its cementing division has yielded notable market share gains, attributed to advanced cementing slurries and superior wellsite execution.
Future Revenue Growth Projections and Earnings Estimates
For the first nine months of 2024, revenues decreased by $52.8 million, or 11%, to $412.7 million compared to the same period in 2023. This decline was largely due to pricing decreases and a 15% drop in the average U.S. rig count. The company anticipates a cautious recovery, with potential increases in activity levels in 2025 if commodity prices stabilize and customer budgets are reset.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company plans to maintain a capital expenditure budget between $10.0 million and $15.0 million for 2024, focusing on essential investments to support operations and discretionary growth initiatives. Additionally, the company has entered into an equity distribution agreement, allowing it to sell up to $30.0 million of common stock, which could provide further capital for strategic endeavors.
Competitive Advantages That Position the Company for Growth
Despite market challenges, the company has demonstrated resilience, with a 24% improvement in net loss year-over-year, decreasing from $13.3 million to $10.1 million in Q3 2024. Its ability to implement cost-cutting measures and adapt to market conditions enhances its competitive edge.
| Financial Metrics | Q3 2024 | Q3 2023 | Change (Amount) | Change (%) |
|---|---|---|---|---|
| Revenues | $138.2 million | $140.6 million | -$2.4 million | -2% |
| Cost of Revenues | $113.5 million | $117.7 million | -$4.2 million | -4% |
| Adjusted Gross Profit | $24.7 million | $22.9 million | +$1.8 million | +8% |
| Net Loss | $10.1 million | $13.3 million | +$3.2 million | +24% |
As of September 30, 2024, the company reported $15.7 million in cash and cash equivalents, with an additional $27.6 million available under its ABL Credit Facility, resulting in total liquidity of $43.3 million. This liquidity position is crucial for supporting ongoing operations and strategic growth initiatives.
Nine Energy Service, Inc. (NINE) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Nine Energy Service, Inc. (NINE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Nine Energy Service, Inc. (NINE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Nine Energy Service, Inc. (NINE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.