Nine Energy Service, Inc. (NYSE:NINE) Q3 2018 Earnings Conference Call Transcript

Nov 13, 2018 • 11:00 am ET

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Nine Energy Service, Inc. (NYSE:NINE) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Greetings, and welcome to Nine Energy Service Third Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator instructions). As a reminder, this conference is being recorded.

I would now like to turn the conference over to Heather Schmidt, Director of IR. Thank you. You may begin.

Executive
Heather Schmidt

Thank you. Good morning, everyone, and welcome to the Nine Energy Service earnings conference call to discuss our results for the third quarter of 2018. With me today are Ann Fox, President and CEO, and Clinton Roeder, CFO. We appreciate your participation.

(Forward-Looking Cautionary Statements)

Our comments today also include non-GAAP financial measures. Additional details and a reconciliation to the most directly comparable GAAP financial measures are also included in our third quarter press release and can be found in the IR section of our website.

For today's call, we'll begin with Q3 financial and operational results for the Legacy Nine business only. Magnum Q3 numbers are still under review by their auditors and nine-month actuals as of September 30, 2018, will be filed on an 8-K by January 9, 2019, which is within 75 days of the acquisition date of October 25th of this year. All of Magnum's financial information from the acquisition date forward will be included in our consolidated results and reported under our Completion Solutions segment as part of our completion tools service line. Finally, to end the call, we will provide an update on our technology trials, Q4 guidance, and our 2019 outlook.

I will now turn the call over to Ann Fox.

Executive
Ann Fox

Thank you, Heather. Good morning, everyone. Thank you for joining us today to discuss our third quarter results for 2018. We had another strong and differentiated quarter of growth exceeding the midpoint of management's original revenue guidance by approximately 3% and the midpoint of original adjusted EBITDA guidance by approximately 8%. All of our service lines across the Completion Solutions segment outperformed this quarter, adding approximately 4 percentage points to the adjusted gross profit margin in that segment.

Company revenue for the quarter was $218.4 million, an approximate 6% increase over Q2; net income was $13.7 million, an increase of approximately 51%; and adjusted EBITDA was $38.4 million, an increase of approximately 25%. Incremental adjusted EBITDA margins for the company were approximately 60% and incremental adjusted gross profit margins in our Completion Solutions segment were approximately 90%. Cash flow from operations was $25.6 million, an increase of over 220% quarter-over-quarter, and we generated a cash flow yield of approximately 6% for Q3. ROIC for the third quarter was 12%, up 400 basis points over Q2 ROIC of 8%.

We are very pleased with our performance this quarter and continue to see activity increases across almost all of our service lines with the strongest increases in completion tools and wireline as well as price increases across all of our service lines with the exception of completion tools with the strongest increases coming from coil