Nine Energy Service, Inc.

And welcome to the 9 Energy Service Second Quarter 2025 earnings conference call. At this time, all participants are on a listen-only mode. A brief questionnaire for session will follow the formal presentation. If anyone should require operating assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Heather Schmidt, Senior Vice President of Strategic Development and Investment Relations. Thank you. You may begin.

Thank you. Good morning, everyone. And welcome to the 9 Energy Service earnings conference call to discuss our results for the second quarter of 2025. With me today are Anne Foss, President and Chief Executive Officer and Vice President and Chief Financial Officer. We appreciate your participation. Some of our comments today may include forward-looking statements reflecting 9 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 factual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filing for 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 to the most directly comparable GAAP financial measures are also included in our second quarter press release and can be found in the investor release and section of our website. I will now turn the call over to Anne. Thank you, Heather. Good morning, everyone. Thank you for joining us today to discuss our second quarter results for 2025. Revenue for the quarter was $147.3 million, which was in the upper range of our original guidance of $138 to $148 million, despite significant rig declines throughout the quarter. We generated a drastic EBITDA of $14.1 million. In April, following the announcement of new tariffs, oil prices declined from an average of approximately $72.81 to an average of approximately $65.62, while also dropping below $60 for the first time in four years. With the decline in commodity prices, increased cost due to tariffs, and uncertainty around the global timing, US activity and capex plans were reduced, resulting in significant rig declines throughout the second quarter. Between March 28 and July 3, 53 rigs came out of the US market, a decline of almost 10% in only three months. The majority of these rigs came out of oil lever basins like the Permian, where nine has historically generated approximately 40% of our total revenue. With these activity declines, we also began to receive pricing pressure across all of our service lines, most notably in the Permian, which negatively impacted revenue and earnings during the second quarter. Natural gas prices remained mostly supportive during the quarter, but declined from a Q1 average of approximately $4.14 to approximately $3.19 in Q2. We have begun to see a more positive sentiment around natural gas lever basins, as well as more consistent, efficient operations, which benefited nine, most specifically in the Northeast. However, overall rig counts in both the Northeast and Hanesville, once again, remained relatively flat in Q2 versus Q1. Natural gas continues to be a potential catalyst for nine, and we remain positive on the medium and long-term outlook for the commodity and natural gas lever region. Although activity declined throughout the quarter, our operational team performed well, and we were able to capitalize on an improving natural gas environment, as well as continuing to grow the international tool business. Despite a very challenging macro backdrop, both our completion tool and modeling business grew revenue this quarter. Completion tool revenue grew by approximately 9%, driven in large part by increased sales in the Northeast and Hanesville, as well as an increase in international tool sales. We have talked about our strategy for growing our international tools market share, and the team has been executing. Our total first-off international tools revenue has increased by approximately 20% when compared to the first half of 2024. This was driven by both increased sales of our multi-cycle barrier valve into the Middle East, as well as an overall increase in our blood sales. This will continue to be a focus for the team, and I am optimistic about the potential opportunities for nine in the international market. Our wireline team increased revenue by approximately 11% in Q2. We have strong market share in the Northeast, and the team has capitalized on an improving market with both traditional pump-down work, as well as increasing our market share on the remedial side. During Q2, we saw revenue declines in both C19 and Coil, driven by activity and pricing declines in the Fernand Basin, where both operations hold meaningful market share. As a reminder, neither of these service lines operate in the Northeast, and therefore did not benefit from any uplift in earnings from the improvement in those basins. I would now like to turn the call over to Guy, who will offer you detailed financial information.

Thank you, Anne. As of June 30, 2025, NINE's cash and cash equivalents were $14.2 million, with $51.3 million of availability under the revolving credit facility, resulting in a total liquidity position of $65.5 million as of June 30, 2025. On June 30, 2025, the company had $49.4 million of borrowings under the revolving credit facility. In July 2025, the company borrowed an additional $13.4 million under its revolving credit facility, part of which was used for funding of fees related to the closing of our new ADL. During Q2, we did not sell any shares under the ATM program. During Q2, revenue totaled $147.3 million, with an adjusted gross profit of $25.8 million. During Q2, we completed 1,061 cementing jobs, a decrease of approximately 15%. The average blended revenue for jobs increased by approximately 7%. Cementing revenue for the quarter was $52.2 million, a decrease of approximately 9%. During Q2, we completed 8,585 wireline stages, an increase of approximately 11%. The average blended revenue for stages was flat. Wireline revenue for the quarter was $33.0 million, an increase of approximately 11%. For completion tools, we completed 30,331 stages, an increase of approximately 4%. Completion tool revenue was $37 million, an increase of approximately 9%. During Q2, our coil tubing days worked, decreased by approximately 23%, with the average blended day rate increasing by approximately 9%. Coil tubing revenue was $25.1 million, a decrease of approximately 16%. During Q2, the company reported general and administrative expense of $13.9 million, depreciation and memorization expense was $8.6 million. The company's tax benefit was approximately $0.3 million year to date. The benefit for 2025 is a result of a $0.5 million discrete tax benefit, recorded during the second quarter of 2025, offset by tax provisions in state and -U.S. jurisdictions. For the second quarter, the company reported net cash provided by operating activities of $10.1 million. The average DSO for Q3 was 55.9 days. CapEx spend during Q2 was $6.1 million, and total CapEx for the first half of 2025 is $10.4 million. Our full year CapEx budget remains unchanged at $15-25 million. I will now turn it back to Anne.

Thank you guys. As I mentioned, we saw many operators reduce activity in Q2 in response to lower oil prices. There is a possibility additional rates could come out of the market in the back half of the year, specifically from private operators, and we do expect calendar gaps, completion delays, and overall more light space in conjunction with lower activity levels and oil prices. Natural gas prices remain mostly supportive, helping to drive more efficient operations in the northeast and Hainesville, and building a more positive sentiment which has benefited our operations and earnings. The rig activity in these regions has been mostly stable, and while we would benefit from any incremental activity increases, it may not be enough to completely offset the activity and pricing defined you've seen in the pernions, which impacts all of our service lines. We are continuing to play both offense and defense to grow revenue and increase margins. This includes market share gains with current and potential new customers, R&D, and technological advances across service lines, growing our international pool business, construction of our new completion tool facility, and potentially extending service lines to new geographies, which we are currently evaluating. We have been able to utilize waterline equipment and personnel from West Texas to cover work in the northeast, and we are constantly evaluating where to best utilize our assets and people in conjunction with market dynamics. We remain focused on increasing our exposure to international markets, and I believe the team has implemented this strategy well thus far, demonstrated by our 20% revenue increase in the first half of the year versus 2024. In conjunction with these growth initiatives, we are working on reducing costs without impeding the quality of our business. Over the last 12 months, we believe we have taken significant, sustainable costs out of the business. These include, but are not limited to, improvement in suite management and maintenance, reduction of corporate and field employees, reduction or elimination of consultants, software and subscriptions, and the consolidation and rationalization of vendors. We will continue to prioritize reducing costs while not impeding the quality of our technology, service, and safety. In Q3, we will see full quarter realizations of activity and pricing declines needed throughout Q2. As I mentioned, we also anticipate more white space in the calendar and the oil lever basins. Because of this, we anticipate both revenue and adjusted EBITDA will be down compared to Q2, and project Q3 revenue between $135 million and $145 million. Our team is focused on increasing profitability in a declining market. We are nimble and diversified in both our service and technology offerings and commodities. This has and will continue to allow us to navigate these uncertain markets while still being able to capitalize on any potential growth opportunities,

both domestically and internationally. We will now open up the call for Q&A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line of the question too. You may press star 2 if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from a line of Waqar Sayed, Wins ATD. Please indicate your question.

Thank you for taking my question. And you mentioned that there is some expectation that some private entities may cancel their work. Is that based on firm discussions with the customers, or is that just your view based on what your view on commodity prices is?

It's a great question, Waqar. Good morning. Actually, it is not based on conversations. It's based on our knowledge that if commodity prices were to move very negatively for the remainder of the quarter or in Q4, those private operators typically will react more quickly than the public. And so that's just the commentary. This is going to be for them more commodity price driven, and they'll be more reactionary than our large public.

Sure. And then in terms of your visibility into Q4, do you have any visibility there where customers have mentioned anything, what they're going to be doing in Q4?

Hi, Waqar. We don't. We don't have visibility into Q4 insofar as major changes up or down. I would say we have had customer conversations indicating increased activity in Q1, and that is standard risk with budget refresh, but not specifically for Q4.

And this increased activity in Q1, is this pernian comments or all over US comments?

Specifically with certain customers in the pernian.

Yes. And is that relative to where the activity was in Q2 or where relative activity is as of today?

That would be an increase relative to activity as of today.

Okay. Fair enough. Now, and in terms of your international sales, it looks like a pretty decent pick up in first half of Q25 versus last year's first half. Could you maybe highlight how was second half of Q24 versus the first half of Q24, and how does first half of Q25 compare to the second half of Q24?

So we had a 20% increase first half over second half last, first half over first half last year. I do think this is, as we've said many times to the market, it's a lumpy market. It's very hard to predict. Specifically, we've seen lots of traction in Argentina and also in the Middle East. We do expect we will be up year over year with QAR. It's hard to predict how much, but we are seeing traction there. And so if you look at Q25 on a full year basis, we would expect that number of international will be up over 2024.

Great. And then the fashion, what products are you seeing the most traction with in the international market?

We're seeing it with our plugs and our MCBD valves. And it's been really nice big volume orders.

Great. And do you have any visibilities of the second half, what do you expect

to be in fact with Q?

Again, it will be lumpy. What I can say is that if you look at the full year, we definitely anticipate the overlap year.

Great.

Yeah, I think that's all for me for now.

I appreciate the comment. Thank you.

Thank you, LaCar. Our next question comes to line of John Daniel with Daniel Energy Partners. Take a few of your questions.

Hey, Anne. First one just has to do with... Good morning. The first question has to do with the completion tool facility that you highlighted. Can you tell us a bit more about this and what it's expected to do, where it will be, anything like that would be helpful?

Sure. Yeah. Definitely not going to give away too many secrets, but it's going to be a little over 30,000 square feet. We're going to put this right next to our assembly and manufacturing location in Jacksboro. We're going to have multiple test wells where we are also going to be able to test lots of different pressures, temperatures. We're going to have drill-out capability, slow-back loop, all kinds of capabilities for our customers to log in and see all these test results. I think this will be probably the largest -the-art completion tool assessment facility in the US.

Okay. Got it. And John,

this is also becoming increasingly important for our international customers. Yes. So as you know with sustaining engineering, when you're working on building these tools, if issues arise, you need to be able to immediately test that. You need to be able to see those results. So we're just extremely excited about this. Very, very excited.

Is it open this year or is it next year?

It's a next year opening.

Okay. Got it. The next one is with the hope that we see some private operators strictly in the -e-market continue to pick up activity. I'm just curious if in your experience would you maybe say that there's a little bit less procurement rigor with these larger public peers? I mean, it would be the additive to margins if you will, just maybe because less pricing power on the part of those buyers. Sure. So there's

actually, yeah, there's of course, you know, the larger the customers get, the more that you're dealing with procurement and the further away you are from operations, right? And so oftentimes we see a correlation between mat and efficiency in the field. You can certainly look at the pioneer Exxon coming together as an example of that. But you're absolutely right. The smaller privates, they're very operationally driven, some of them very efficient. They do really grant their engineers in the field autonomy to pick the best service lines, to pick the best vendors, the best technology. So that usually worked out very well for us. And they're also very decisive and they're very fast. So that could be exciting for us. On top of that, there's a competitive dynamic that's a little bit kinder in areas like the Hays, Betel, and the Northeast versus the Permian. So those gas markets actually set up quite well for us. So we're pretty excited looking at all of the power demand where, you know, again, it seems like the country is going to need a lot of power generation from natural gas. So we're big believers in Hadbin and the go-forward health of the natural gas market.

All right. Okay. And the final one is in the press release, you've highlighted the incremental market share in the remedial wireline business. Is there any one thing in particular that is driving that?

You know, this is, we've got annual strategic meetings and we started this put a few years ago. Our leader of that business is very well versed in all things both pump down and remedial wireline. And this was an effort really to diversify that top line from the ups and downs of pump down work. And he's done a splendid job.

Okay. Awesome. Thank you for including me.

Thank you for taking the time to be on the call this morning. You bet. Thank you for your participation in the call today. I want to thank our employees, our EMC partners and investors. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.