Nine Energy (NINE) Q3 2026 Earnings Call Transcript

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DATE

Nov. 10, 2026

CALL PARTICIPANTS

• Senior Vice President of Corporate Finance and Investor Relations - Josh Riley
• President and Chief Executive Officer - Ann Fox
• Chief Financial Officer - Heather Schmidt

TAKEAWAYS

• Revenue -- $142.0 million, reflecting strong performance in cementing offset by operating constraints in coiled tubing and lower international tool sales.
• Adjusted EBITDA -- $8.3 million, supported by improved U.S. drilling activity and cost management initiatives.
• Net Loss -- $5.1 million, or $0.36 per basic and diluted share, compared to a net loss of $4.9 million in the second quarter.
• Cementing Revenue -- Increased 11% year over year, driven by sustained customer demand and market share gains.
• U.S. Rig Count -- 599 rigs at the end of the third quarter, an increase from 573 rigs at the end of the second quarter.
• Total Liquidity -- $46.0 million, consisting of $16.1 million in cash and $29.9 million in availability under the revolving credit facility.
• Debt -- $98.7 million in outstanding borrowings under the credit facility as of Sept. 30, 2026.
• Adjusted Gross Profit -- $20.6 million, representing approximately 14.5% of total revenue.
• General and Administrative Expense -- $16.5 million for the third quarter, compared with $15.6 million in the second quarter.
• Depreciation and Amortization -- $7.4 million, including $7.2 million specifically for depreciation.
• Operating Cash Flow -- $4.7 million provided by operating activities during the third quarter.
• Days Sales Outstanding -- 60 days for the third quarter.
• Capital Expenditures -- $2.8 million for the quarter, bringing the year-to-date total to $13.2 million.
• Full-Year CapEx Guidance -- $20 million to $30 million, with management expecting to finish near the midpoint.
• Fourth Quarter Revenue Guidance -- $137 million to $147 million, reflecting expectations for flat sequential top-line performance.
• Cementing Utilization -- 106% for the quarter, which management indicated was supported by operational efficiencies.
• Testing Facility Specifications -- New facility designed to test tools at pressures exceeding 30,000 psi and temperatures above 500 degrees Fahrenheit.
• Testing Capacity Expansion -- New facility will run up to six tests simultaneously, tripling current capacity to support research and development.
• Tax Provision -- Approximately $100,000 for the quarter, primarily attributed to state and non-U.S. jurisdictions.
• Guidance Profitability -- Management expects increased profitability in the fourth quarter due to a shift toward higher-margin cementing and international tools.

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RISKS

• Fox stated, "The continued unavailability of this unit constrained our ability to fully participate in the improvement in industry activity and adversely affected both revenue and profitability within that service line," referring to a large-diameter coiled tubing unit that remained out of service for maintenance.
• Fox stated, "We and our peers are, of course, fighting inflation. Diesel is a huge component of every cost of everything we do," noting that price increases with customers often involve a lag.
• Schmidt warned that the return of the large-diameter coiled tubing unit was baked into guidance conservatively because the supply chain remains difficult and a specialized provider is required for the repair.

SUMMARY

Nine Energy Service, Inc. (NYSEMKT:NINE) reported third quarter results that highlighted a strategic transition from liquidity preservation to returns-focused operational management. Management reported that while consolidated revenue remained relatively flat, the cementing business delivered double-digit growth and outperformed the U.S. rig count through market share gains and lab-driven slurry designs. The company stated that it is leveraging its improved balance sheet following a restructuring to exit low-return wireline operations in West Texas and North Dakota, refocusing resources on high-temperature gas basins like the Haynesville. Management indicated that it expects fourth quarter profitability to rise despite seasonal trends, supported by higher-margin product mixes and the anticipated return of out-of-service coiled tubing capacity by Dec. 2026.

• Management indicated that cementing often serves as a leading indicator for completions activity, suggesting positive momentum for the completion tools business heading into 2027.
• Fox stated, "We are finally now able to look at this business strategically, reposition it how we see fit, and start to focus on returns," highlighting the shift in strategy since the company's restructuring.
• The company is making a multiyear investment in a new testing facility, scheduled to be operational in the first half of 2027, to support global expansion and higher-pressure wellbore requirements.
• Management noted that they engaged external resources to improve the centralized procurement function, aiming to leverage scale for sustainable cost efficiencies.
• The company reported success in international markets like the Vaca Muerta in Argentina and unconventional plays in the UAE, focusing on dissolvable products to avoid international drill-out challenges.
• Schmidt stated that while they are investing in growth capital like the completion tools facility, they remain conservative with the balance sheet, maintaining a liquidity position of $46.0 million.
• Fox indicated that the Haynesville Shale is a priority for all service lines due to its relevance to the LNG export market and high temperatures that favor dissolvable tool technology.

INDUSTRY GLOSSARY

• Cementing: The process of pumping a specialized slurry between the well casing and the wellbore to provide structural integrity and zonal isolation.
• Coiled Tubing: A continuous, flexible steel pipe used for well interventions, transported on a large reel.
• Dissolvable Plugs: Completion tools designed to isolate sections of a well during fracturing that later dissolve, eliminating the need for a mechanical drill-out.
• DSO (Days Sales Outstanding): A measure of the average number of days it takes a company to collect payment after a sale has been made.
• Haynesville Shale: A major natural gas-producing formation located in East Texas and Northwest Louisiana.
• Psi (Pounds per Square Inch): A unit of pressure used to measure the stress capacity of completion tools.
• Vaca Muerta: A prominent shale oil and gas formation located in the Neuqun Basin in Argentina.

Full Conference Call Transcript

Operator: Greetings, and welcome to the Nine Energy Service Third Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Josh Riley, Senior Vice President of Corporate Finance and Investor Relations. Thank you. You may begin.

Josh Riley: Thank you. Good morning, everyone, and welcome to the Nine Energy Service earnings conference call to discuss our results for the third quarter of 2026. With me today are Ann Fox, President and Chief Executive Officer; and Heather Schmidt, Chief Financial Officer. We appreciate your participation. Some of our comments today may include forward-looking statements reflecting Nine's views about future events. 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. Additional details and a reconciliation of these measures to their most directly comparable GAAP financial measures are also included in our third quarter press release and can be found in the Investor Relations section of our website. I will now turn the call over to Ann.

Ann Fox: Thank you, Josh, and good morning, everyone. Before we get started, I would like to wish the United States Marine Corps a very happy 251st birthday. Thank you for joining us today to discuss Nine's third quarter 2026 results. Revenue for the quarter was $142 million, and adjusted EBITDA was $8.3 million. Our third quarter results reflect improving U.S. activity, particularly within cementing, as well as continued operating constraints in coiled tubing and a lower level of international completion tools activity compared to the second quarter. The U.S. rig count increased from 573 rigs at the end of the second quarter to 599 rigs at the end of the third quarter.

Higher oil prices and modestly improving activity supported stronger operating momentum in our cementing business, which benefited from sustained customer demand during the quarter as well as market share gains. At the same time, one of our large-diameter coiled tubing units remained out of service throughout the third quarter due to the maintenance issue discussed on our last call. The continued unavailability of this unit constrained our ability to fully participate in the improvement in industry activity and adversely affected both revenue and profitability within that service line. Completion tools revenue declined sequentially as the elevated level of international activity that benefited our second quarter results did not recur in the third quarter.

International sales are driven by the timing of customer orders and projects, so it is typical for results to vary from one quarter to the next. The division continues to make meaningful progress, advancing several new products and investments designed to expand our testing, research and development, and manufacturing capabilities. I will now turn the call over to Heather to discuss our financial results.

Heather Schmidt: Thank you, Ann. As of September 30, 2026, Nine's cash and cash equivalents were $16.1 million with $29.9 million of availability under our credit facility, resulting in a total liquidity position of $46 million. At September 30, we had $98.7 million in outstanding borrowings under our credit facility. During the third quarter, revenue totaled $142 million with adjusted gross profit of $20.6 million. General and administrative expense was $16.5 million, and depreciation and amortization expense was $7.4 million. The company's tax provision was approximately $0.1 million for the third quarter, primarily attributed to state and non-U.S. jurisdictions. For the third quarter, the company reported net cash provided by operating activities of $4.7 million.

The average DSO for Q3 was 60 days. CapEx spend during Q3 was $2.8 million, bringing total CapEx spend year-to-date to $13.2 million. Today, we anticipate full-year CapEx will come in near the midpoint of our full-year guidance range of $20 million to $30 million. Before turning the call back to Ann, I would note that the detailed operating statistics for each of our service lines are available in our third quarter investor presentation. Going forward, we intend to use the presentation to provide the supporting data while keeping our prepared remarks focused on the primary drivers of our financial performance and our outlook for the business. I will now turn the call back to Ann.

Ann Fox: Thank you, Heather. As we look ahead, we believe Nine is entering the fourth quarter with improving operating momentum and several important strategic initiatives underway. The macroeconomic and geopolitical environment remains uncertain, and operators continue to exercise capital discipline. Nevertheless, the sustained improvement in oil prices during the third quarter supported an increase in U.S. activity. Based on current market conditions, we expect that activity improvement to continue into the fourth quarter, with our cementing business primarily positioned to benefit from sustained customer demand. Historically, cementing has served as an early indicator for broader completions activity.

While it remains early, we are cautiously encouraged by current trends and the potential for similar improvements across our other completion-oriented businesses over the coming quarters. We are also focused on restoring our full operating capacity in coiled tubing. The large-diameter unit that remained out of service throughout the third quarter is expected to return to service in December. The timing of that return remains an important variable in our near-term outlook. As for our Completion Tools division, our objective is to build on our established portfolio by developing products that respond to changing well designs and customer requirements while maintaining a strong emphasis on reliability and execution.

Prior to our Chapter 11 filing, Nine had little to no flexibility to make investments to improve the underlying business. Now we are making tangible progress on returns-focused investments that we believe can broaden Nine's growth opportunities, strengthen our technology platform, increase margins, and drive our strategy of increasing Nine's completion tool revenue exposure in the international markets. Most notably, we expect our new completion tools testing facility to become operational in the first half of 2027. This facility represents an important investment in our research and development, product qualification, manufacturing, and testing capabilities. The new facility has been designed to provide substantially greater testing capacity and flexibility.

It will expand our ability to test tools at pressures exceeding 30,000 psi and temperatures above 500 degrees Fahrenheit. And it is designed to run as many as 6 tests simultaneously, tripling our current testing capacity. This added capacity should enable both new product research and development as well as increased manufacturing throughput, including production pressure testing when needed. These capabilities will also enhance the continued development and qualification of new technologies across our Completion Tools portfolio.

The early-stage commercialization of several new products, including the Scorpion 2.0 and Stinger 2.0 for the Permian and Marcellus-Utica basins and the 4.5-inch Scorpion Frac Dart the Bakken Shale and various Canadian markets, provides Nine with opportunities to increase market share across multiple basins. While these products remain in varying stages of commercialization and ongoing field trials, we are encouraged by the early results. We remain focused on internal processes under our control and are making targeted investments to improve the structural profitability of Nine.

During the quarter, we engaged external resources to assess and improve our centralized procurement function that will give us greater visibility into our spend, improve purchasing discipline, and allow us to leverage our scale more effectively across the organization. This is one of several internal initiatives we believe can drive sustainable cost efficiencies and margin expansion over time, while enhancing the operating leverage inherent in our business as activity improves and we seek to scale the business. That same discipline extends to our footprint. We recently exited our wireline operations in West Texas and North Dakota as those locations were not generating acceptable returns.

Before our restructuring, every dollar of revenue was important from a liquidity standpoint, which limited our ability to make decisions like this. Today, we can make operational decisions with a greater focus on returns and long-term value creation. Turning to fourth quarter expectations. Our results will continue to be influenced by the pace of customer activity, the timing of the coiled tubing units returned to service, and the mix of products and services sold. Based on these factors, we currently expect flat revenue and increased profitability compared with the third quarter, and we are projecting fourth quarter revenue in the range of $137 million to $147 million.

The increase in profitability reflects a shift in revenue towards our higher-margin cementing and international tools business. As we move toward 2027, we believe Nine has multiple avenues for growth. These include improving U.S. activity, the return of our full large-diameter coiled tubing capacity, the continued commercialization of our new completion tools products, and the addition of our new testing facility. Our business remains diversified across service lines, basins, commodities, and domestic and international markets. We believe that diversification, together with our technology portfolio and asset-light operating model, provides a strong foundation as we navigate near-term volatility and pursue profitable growth. We will now open up the call for Q&A.

Operator: [Operator Instructions] Our first question comes from Steve Ferazani with Sidoti & Company.

Steve Ferazani: Ann, did want to touch on the strength in cementing this quarter. It's certainly the reason why you beat our top line, it looks like cementing was up double digits sequentially, more than 20% year-over-year. If we look at the active rig count, you outpaced the U.S. rig count. You outpaced the rig count even in your 3 primary areas. It sounded like you indicated market share was a contributor. Can you add a little bit more color there on the outperformance for cementing?

Ann Fox: Yes. Steve, thank you for your great question. As you know, cementing is a pillar of the Nine business. The cementing business generally is one that we absolutely love in the oilfield service sector because it's one of the least saturated businesses in the space. So, you've got a competitive environment that you can actually really work with. Where you're really making money there is you start with your lab facilities and your slurry designs. And I think we've definitely outpaced the market on that. And then, of course, execution. So, the team is not only gaining market share and doing that profitably. I mean, we've had some of our best margins in recent history. They're also doing it safely.

So, we've also had some of our best safety scores that we've seen in a long period of time. So, we're tremendously proud of them. We love to see this business succeeding like this, and we expect this to continue. It's been a tremendous pace. And again, we're just really looking forward to continued benefits from this in the fourth quarter.

Steve Ferazani: Fantastic. When I look at your service line margins, I expected them to be under pressure with the coiled tubing unit down. In fact, it was sequentially improved. Is that primarily you have the greater contribution from the higher-margin cementing? Or were there other factors in play for the nice rebound in that -- in the service margin?

Ann Fox: Yes. So, again, as we noted, we are making changes internally to the business where we can finally focus on profitability, and we're not done yet. We're not done yet. So, you will continue to see that margin move in the right direction. But yes, obviously, cementing is a big contributor here, which we're very pleased with. But as you know, we're making a lot of internal changes that we were just literally hamstrung from doing prior to the Chapter 11 filing, right? If it created $1 of EBITDA previously, you took that $1 because your interest expense was so overwhelming.

So, we are finally now able to look at this business strategically, reposition it how we see fit, and start to focus on returns.

Steve Ferazani: Excellent. That's great. As far as the fourth quarter guidance goes, we're hearing different -- I know we're almost mid-November now. We're hearing different things from folks in terms of what the typical year-end slowdown looks like. What's sort of implied in that guidance, you're sort of flat, but you're getting that coiled tubing unit back maybe for a couple of weeks. Are you expect -- what kind of a seasonal slowdown is or year-end slowdowns kind of factored in that range?

Ann Fox: Yes. I mean it's a great point. The sector usually sees a pretty sharp decline, especially in December. So, there is seasonality. But again, you've had a rig count rise in the U.S. and you have had a sustained commodity price that has supported activity. So, I would say we're seeing less of a slowdown in Q4. We and our peers are, of course, fighting inflation. Diesel is a huge component of every cost of everything we do. And so what we're doing is we're working with customers on increasing price and trying to cover those costs. And as I've said before, there's a lag.

So, there's a great deal of strength for us to be forecasting improved profitability in an inflationary environment like the one that we're in. So, we're very pleased with the business and some of the repositioning within it.

Steve Ferazani: What are the opportunities given the activity pickup in your 3 larger service lines? What's -- Is there any point?

Ann Fox: Yes, what typically happens in this well construction, right, is you've got the wellbore drilled, you've got to cement that well, and then you have a lag impact for when you actually start to see those wells completed. And so what we are trying to tell the market is we think this bodes quite nicely for our completion services moving into 2027. We are also obviously positioning those completion services, as we mentioned, with the testing facility to be prepared to capture that growth. We're also doing that with the inventory line. As you see geopolitically, the supply chain has become very challenged and disrupted. We have been defensive there purposely.

And so we are preparing for good completions activity in 2027.

Steve Ferazani: Excellent. If I get one more in, in terms of you did report modest free cash flow this quarter. Obviously, the balance sheet is much improved post the proceedings of earlier in the year. That being said, obviously, there's some investments you want to make, particularly with U.S. picking up, and I know on your completion tools side. How are you thinking about balancing those 2 pieces going forward?

Heather Schmidt: This is Heather. I'll take that. So, we're obviously always want to be careful with the balance sheet. I mean it's pretty consistent quarter-over-quarter. As we talked about, CapEx was slightly higher this year with that completion tool facility and some growth capital that we put into that. We had a new coil unit that came in earlier in the year, and we had some deferred maintenance capital that we had to put into this year. So, we're watching that really closely, but I feel like we now are able to invest in the business, and we can do that and feel comfortable with the liquidity today.

And just -- it's a good balance, and we feel like we're doing it okay right now, and we'll continue to focus on that.

Operator: Our next question comes from Dave Storms with Stonegate.

David Storms: I wanted to stick with cementing for another second here. Utilization was running a little high at 106% in the quarter. Maybe just any thoughts on how comfortable you are with the existing capacity, maybe when you would think about adding additional investments here?

Ann Fox: Yes. So, I think we are comfortable with our capacity. I think the mantra always around shale is we keep getting more efficient, and I think that's absolutely the case. So, I think our pace is sustainable. And as I said, we're watching, of course, safe operations always, and that our safety scores have been some of the best year we've ever seen in the business, in the history of the business, and that's really over a decade. So, I think we're kind of -- we're really starting to get all of the teams clicking, and we believe that operational excellence is also tied to safety. So, I think our pace is sustainable, if that was your question.

Heather Schmidt: And when you asked about capacity, I think we're going to have to see some pricing improvement before you look at anyone. I think we've seen that across the space. We want to see some pricing improvement before we look at any growth capital in any of these service lines.

Ann Fox: Yes. And I would add to that, what you would see probably before that is consolidation. The space is ripe for consolidation. And similar to kind of what we saw our upstream customers do in the Northeast when they fixed their balance sheets, they then consolidated. I wouldn't be surprised at all if you start to see that on the service side.

David Storms: Understood. I really appreciate that commentary. With some of the -- kind of having a strong quarter, you mentioned in your report that it's probably due to market share gains. I know you also mentioned that 2027 should set up nicely for the part of business that follows cementing. Do you expect those market share gains then to translate into the completion tools? Or will the market share gains come from some of the more innovation that you're putting out there in terms of Scorpion, et cetera?

Ann Fox: Right. So, it's a great question. The new products that we are in field trials with are showing very promising results. And those aren't revolutionary products, but what they are is very important because we're offering benefits to the customer like lower drill-out times, better isolation on the dissolvable tool, but we're also really working on that design to ameliorate our own COGS so that we can be more competitive on the price side and gain market share. I'll be very disappointed if we don't gain market share with those tools in 2027. They are specifically designed to address the Permian Basin, which, as you know, carries a preponderance of the rig count and the production in the United States.

So, we are absolutely targeting that. And we're very, very hopeful based on these early trials that's a market where you'll see a good chunk of market share gain in '27.

David Storms: Understood. And then maybe with the coiled tube coming back online hopefully in December. Is there anything more you could tell us about if that's come online a little bit earlier, what would happen for that to get pushed out? Maybe how much of that coming back online is baked into the fourth quarter guidance? Anything around there?

Heather Schmidt: Yes. I'd say that we were conservative in baking that into the fourth quarter guidance because, I mean, you get the unit back, you got to get the string on, you got to get back into customers and get it back online. So, I would say we're pretty conservative. So, I would say there's -- I don't want to say upside, but more upside than downside with that because we did want to be conservative. As you know, the supply chain is difficult. This is a specialized provider who's fixing this, and everything you can be delayed. So, I'd say it's conservative.

David Storms: If I could sneak one more in. Just around international completion tools. I know that tends to be a lumpier business. Maybe anything you could tell us about the pipeline there or what's the outlook in the real short term for that?

Ann Fox: Yes. So, those dissolvable products have done very well in markets like the Vaca Muerta in Argentina. Those are very hot plays, I think temperature-wise, and things love to dissolve there. It's very hard to do drill outs internationally for a number of reasons. But we are absolutely pursuing the unconventional shale markets abroad. We're also very excited. We remain very excited about the unconventional plays in the UAE, and we've established good positions, relationships there as well. So, the international markets are definitely a bright spot for us coming into 2027. They're also a bright spot for us for Q4. So, again, very excited about that.

We're always trying to increase that product portfolio, which you know our R&D team, which sits in Norway, does an excellent job of pursuing tools also for the conventional wellbore. So, we expect that, that's a very bright spot for '27 for us, which, again, this test facility is hugely important for those outside of the tools world, you have both research and development. You also have sustaining engineering. And sustaining engineering is extremely important, and it requires a lot of testing. So, previously, you have to knock out R&D tests to continue sustaining engineering, and we're no longer going to face that problem.

Those psi and temperatures are also specifically designed to allow us to address global markets where you're seeing wellhead pressures are very high. And so when we contemplated the construction of this facility, we were doing that from a global perspective.

Operator: Our next question comes from Blake McLean with Daniel Energy Partners.

Blake McLean: I was hoping maybe we could zoom in a bit on the Haynesville opportunity. So, maybe just how do you guys see activity evolving there as gas demand continues to grow, you build out your presence there, kind of where you see the opportunities there for Nine specifically as well?

Ann Fox: Well, thank you. It's a great question. So, we repositioned a lot of our businesses to face the gas markets and added exposure into the Haynesville. So, we actually -- when we exited the North Dakota and West Texas facilities for wireline, we very expressly did that with an aim to establish ourselves in the Haynesville. So, we have successfully done that now since the Chapter 11 filing. We believe the Haynesville will be an important market to serve the LNG export market.

So, you have kind of when you think about gas, as you well know, Blake, and all your power exposure, you have the gas market that serves the domestic power industry, and then you have the gas market that serves that LNG export market. And we believe the Haynesville is very, very well suited to do that. It also, as you know, is a lever of all things dissolvable because the temperatures are so high. So, we're actively positioned there with tools and wireline, coil and cement.

So, it's one of the few basins where we have every single service line exposed despite kind of some of what you're hearing in the market right now on data centers, we believe that the U.S. will pivot and ensure that data centers are built and that we can meet the AI demands that are placed on us. So, we're really looking forward to that. I'm very exposed to that. And if that didn't answer your question, please let me know. Thank you for your participation in the call today. I want to thank our employees, our E&P partners and investors. Thank you.

Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

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