Nine Energy Service, Inc. 2026 Q2 Earnings Call

Good morning, ladies and gentlemen, and welcome to the Q2 2026 Nine Energy Service Earnings Conference Call. At this time, all lines are in listen-only mode, and following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 7, 2026. I would now like to turn the conference call over to Mr. Josh Riley, Senior Vice President, Corporate Finance and Investor Relations. Please go ahead. Thank you.

Good morning, everyone, and welcome to the Nine Energy Service Earnings Conference Call to discuss our results for the second 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 the reconciliation of these measures to the most directly comparable GAAP financial measures are also included in our second quarter press release and can be found in the investor relations section of our website. I will now turn the call over to Ann.

Thank you, Josh, and good morning, everyone. Thank you for joining us today to discuss our second quarter results for 2026. Revenue for the quarter was $141.8 million, which was within the range of our original guidance. However, adjusted EBITDA was $8.6 million, which was below our original guidance. While industry activity improved modestly during the second quarter, rising from 543 rigs at the end of Q1 to 573 rigs at the end of Q2, our profitability was negatively impacted by significant margin compression within our Coiled Tubing business. During the quarter, two of our large diameter Coiled Tubing units, representing approximately 17% of our large diameter fleet, were taken out of service due to maintenance related issues.

This is a unique situation, we have not previously experienced this percentage of our active fleet unexpectedly taken out of service. One of the affected Coiled Tubing units returned to service early in the third quarter, while the second unit remains under repair and is currently expected to return near year-end. As a result, we anticipate our Coiled Tubing operations will remain constrained until that unit is restored to service. Coiled Tubing also experienced meaningful inflationary pressures across several cost categories, including consumables, labor and repairs, and maintenance, which on average increased by approximately 12% quarter-over-quarter. Although we implemented incremental price increases during the quarter, these increases did not fully offset the inflationary cost pressures.

In addition, there is typically a delay between when cost increases are incurred and when pricing adjustments can be negotiated and reflected in customer work, which contributed to the margin compression in the quarter. While the EBITDA shortfall is disappointing, we do not believe it reflects the underlying momentum of the broader business. Our Completion Tools business delivered a strong quarter, supported by increased domestic sales and continued growth in international markets, where revenue increased 17% in the first six months of 2026 versus the same period last year. We also continue to make meaningful progress commercializing our new technologies and demand for our dissolvable solutions is increasing as operators extend lateral length. These trends reinforce our confidence in the long-term growth opportunities across our product offerings. Cementing remained a steady contributor.

However, this business also experienced inflationary cost pressures during Q2 related to materials and labor, negatively impacting margins. In wireline, we are making steady progress executing our expansion in the Haynesville Basin. I would now like to turn the call over to Heather to walk through detailed financial information.

Thank you, Ann. As of June 30, 2026, Nine's cash and cash equivalents were $16.8 million, with $30 million of availability under our credit facility, resulting in a total liquidity position of $46.8 million. At June 30, the company had $97.3 million in outstanding borrowings under our credit facility. During the second quarter, revenue totaled $141.8 million, with adjusted gross profit of $19.9 million. During the second quarter, we completed 1,155 Cementing jobs, an increase of approximately 13% as compared to the first quarter of 2026. The average blended revenue per job decreased by approximately 8%, primarily due to job mix versus pricing. Cementing revenue for the quarter was $55.3 million, an increase of approximately 3% from the first quarter of this year.

During the second quarter, we completed 6,414 wireline stages, a decrease of approximately 7% quarter-over-quarter. The average blended revenue per stage was up by approximately 3%. Wireline revenue for the quarter was $23 million, a decrease of approximately 4%. For Completion Tools, we completed 28,256 stages, an increase of approximately 45%. Completion tool revenue was $37.1 million, an increase of approximately 44% from the prior quarter. During the second quarter, our coiled tubing days worked increased by approximately 16%, while the average blended day rate decreased by approximately 15%, driven primarily by job mix and increased white space between jobs. Coiled tubing revenue declined approximately 2% to $26.4 million.

During the second quarter, the company reported general and administrative expense of $15.6 million. Depreciation and amortization expense was $7.2 million. The company's tax provision was approximately $0.4 million year to date, primarily attributed to state and non-U.S. jurisdictions. For the second quarter, the company reported net cash used in operating activities of $2.3 million. The average DSO for Q2 was 59 days. CapEx spend during Q2 was $4.8 million, bringing total CapEx spend year to date to $10.4 million. Today, we anticipate full year CapEx will range between $20 million-$30 million. I will now turn it back to Ann.

Thank you, Heather. The macro backdrop remains uncertain, particularly given recent geopolitical events and the continued focus by operators on capital discipline. With what we know today, we expect the average U.S. rig count during the third quarter to be relatively flat to slightly up compared to the second quarter, with any incremental activity likely to be measured and dependent on the sustainability of commodity prices. In the near term, we will continue to navigate a dynamic market environment. As mentioned, we are facing inflationary cost pressure across our service lines, and we often see lags between price increases and cost inflation that results in margin compression. One of our large diameter coiled tubing units that was out of service during the second quarter remains under repair and is expected to be inactive for potentially the remainder of the year.

With the sustained revenue loss from this unit, combined with cost inflation that continues to outpace pricing adjustments, we expect third quarter revenue and adjusted EBITDA to be flat to modestly down compared to the second quarter. We are currently projecting third quarter revenue in the range of $133 million-$143 million. We remain focused on disciplined execution, cost control, and the continued development of our technology portfolio. Our operations are diversified across service lines, basins, commodities, and domestic and international markets, which remains an important differentiator for Nine. Longer term, the fundamentals supporting U.S. shale, the need for efficient completion services, and the potential growth in natural gas demand remain constructive for Nine. We believe our strengthened financial position, combined with our asset light operating model, provides flexibility to execute through market volatility and continue pursuing profitable growth. We will now open up the call for Q&A.

Please go ahead. Ann, my first question relates to the CT units, that current nickel on the revenue decline would be suggestive that there's no slack in the system.