Nine Energy Service, Inc.

Greetings and welcome to Nine Energy Service first quarter 2026 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Heather Schmidt, Interim Chief Financial Officer. Thank you. You may begin.

Thank you. Good morning, everyone, and welcome to the NINE interview service earnings conference call to discuss our results for the first quarter of 2026. With me today is Ann Fox, President and Chief Executive 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 earnings files 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, including reconciliations to the most directly comparable GAAP financial measures, are also included in our first quarter earnings release, which can be found in the investor relations section of our website. On March 5th, 2026, we emerged from bankruptcy and the company applied fresh start accounting on such date. The application of fresh start accounting resulted in a new basis of accounting and the company becoming a new entity for financial reporting purposes, which is referred to as the successor. The company prior to the application of Fresh Start Accounting is referred to as the predecessor. For simplicity and to reduce confusion for this call, we will be reporting the full quarter and combining these two periods. All SEC documents, including the 10Q and earnings release, have the periods reported separately and are available for your reference on our Investor Relations website. I will now turn the call over to Anne. Thank you, Heather, and good morning, everyone. Thank you for joining us today. to discuss NINE's first quarter 2026 results. As you can imagine, this was an unusual and complex quarter as we entered and emerged from Chapter 11 and began implementing Fresh Start Accounting effective March 5th. During this transition, we experienced some customer and vendor disruption, completed the revaluation of our assets, and implemented other required reporting changes to begin this new chapter for NINE. In addition, we had a $5.5 million non-cash inventory write-down that negatively affected net income and adjusted EBITDA for the quarter. To ensure consistency with prior period reporting, we have not added the $5.5 million inventory write-down back to reported adjusted EBITDA. Importantly, we believe these issues are behind us. We have not experienced any material customer or vendor losses, and we expect improved and more normalized quarterly run rates beginning in the second quarter and continuing through the remainder of 2026. Following this process, the company has been transformed in a meaningful way, and I am confident that we are now in a stronger financial position as we begin this next chapter for NARM. Turning to Q1, revenue for the quarter was $130 million, with reported adjusted EBITDA of $3 million. which included the $5.5 million inventory write-down. Completion activity was down in Q1 compared to Q4 due to weather impacts early in the quarter. Despite a flat U.S. grid count, pricing across our technology and service offerings remained mostly unchanged quarter over quarter. Natural gas prices remained constructive during the first quarter, averaging approximately $4.70 compared to $3.73 in the fourth quarter. But recently, prices trended down and are trading below $3. Lower 48 activity responded to the supportive gas price environment, most notably in the Hainesville Basin, which added approximately 25 rigs over the past four quarters and ended Q1 with 55 rigs, whereas the Northeast has remained relatively flat. NINDS is well-positioned across all of its service lines to capitalize on growth opportunities in the gas-leaguered basins. We recently opened a wireline facility in the Hainesville. This expansion enables us to directly participate in what we believe will be sustained natural gas-driven activity in both the near and medium term. We plan to leverage NINDS' established customer relationships, strong reputation across service lines, and our proven track record to gain traction and capture profitable market share. While industry activity and pricing were relatively steady in the first quarter, our revenue and profitability were negatively impacted by a combination of severe weather in January and February, which caused operational inefficiencies, fracked delays, and white space in the calendar. These impacts were most pronounced within our wireline division in the Northeast region, but also impacted Permian operations, where all of our service lines operate. We did see a normalization of operations and financial run rates during March, and we expect this improved operating cadence to continue into Q2. We saw minimal impact to our international business in relation to the Iranian conflict in Q1 and thus far in Q2. However, we are monitoring the situation closely as events unfold. Notwithstanding the conflict, the international tools business continues to perform well, and remains an important part of our growth strategy. In 2025, we delivered approximately 14% sequential growth in international tool revenue, driven primarily by sales in UAE, Argentina, and Saudi Arabia. The largest revenue declines in Q1 were seen in wireline and completion tools, both of which have significant market share in the Northeast and had severe weather impacts in January and February. Additionally, completion tool revenue was negatively impacted by the minimal international disruptions mentioned previously. Cementing and coil tubing revenue were both relatively flat, and incremental revenue in the Hainesville was able to offset some of the redder impacts in the Permian. Before turning it over to Heather, I want to acknowledge the outstanding application of our engineering and operational teams and completion tools. The nine teams have now surpassed 500,000 Scorpion plugs sold, a meaningful milestone that highlights the quality of the Scorpion product and the sustained demand we've seen in the market. We expect to build on this momentum with updated versions of the Scorpion plug and dissolvable stinger plugs, as well as new tools to enhance our existing portfolio. I would now like to turn the call over to Heather to walk through detailed financial information. Thank you, Anne. As of March 31, 2026, Nine's cash and cash equivalent for $11.2 million with $35.7 million of availability under the revolving credit facility, resulting in a total liquidity position of $46.9 million as of March 31, 2026. On March 31, the company had $90.4 million of borrowing under its revolving credit facility, and on April 28, 2026, the company borrowed an additional $5 million. During the first quarter, revenue totaled $130 million, with adjusted gross profit of $13.8 million. During the first quarter, we completed 1,022 cementing jobs, an increase of approximately 4% as compared to the fourth quarter of 2075. The average blended revenue per job decreased by approximately 2%. Cementing revenue for the quarter was $53.4 million, an increase of approximately 1%. During the first quarter, we completed 6,890 wireline stages, a decrease of approximately 4%. The average blended revenue per stage was down by approximately 1%. Wireline revenue for the quarter was $23.9 million, a decrease of approximately 5%. For completion tools, we completed 19,422 stages, a decrease of approximately 10%. Completion tool revenue was $25.8 million, a decrease of approximately 10%. During the first quarter, our toileting day work increased by approximately 28%, with the average blended day rate decreasing by approximately 18%. Coil tubing revenue was $26.9 million, an increase of approximately 4%. During the first quarter, the company reported general and administrative expense of $17.7 million. Depreciation and amortization expense was $8.2 million. Income taxes for the quarter were approximately for eight even, as a modest benefit in the successor period largely offset a modest provision in the predecessor period, with both driven primarily by state and non-U.S. taxes. For the first quarter, the company reported net cash using operating activities of $12.4 million. The average VSO for Q1 was 61 days. CapEx spend during Q1 was $5.6 million. Today, we anticipate full-year CapEx will range between $20 to $30 million, and annual cash interest expense will be approximately $7 million. I will now turn it back to Anne. Thank you, Heather. With the recent increase in oil prices, the near-term outlook for U.S. land activity has improved. That said, we have not seen material changes to customer plans so far in the second quarter. We believe operators remain disciplined and measured as they assess the durability of higher prices and evaluate potential adjustments in real time. We are seeing early indications that completion activity could increase, particularly through the drawdown of ducks, given the relatively short cycle times. and the ability to quickly monetize current oil prices. There have also been indications that incremental rigs could be added. However, the timing and magnitude of those increases remain uncertain. The conflict in Iran reminds us of the critical role of U.S. shale production from both an energy security and reliability standpoint and underscores Nine's strategy of being a premier completions provider in the U.S. At Nine, we remain focused on profitable growth across both our domestic and international businesses, We continue to see strong long-term opportunities in our international tool business. While the current geopolitical environment could lead to short-term disruptions in the Middle East, our presence there remains a critical part of our growth strategy. Operationally, we are well positioned for any incremental activity across U.S. basins, and our portfolio remains well balanced across commodities. Turning to the second quarter, we do not anticipate a meaningful change in U.S. trade counts, However, we expect improved financial performance driven by less weather-related downtime and continued operational efficiencies. As a result, we expect both revenue and adjusted EBITDA to increase sequentially in the first quarter. We currently project second quarter revenue in the range of $136 million to $146 million. Given the complexity of first quarter reporting, we are providing adjusted EBITDA guidance for the second quarter to improve visibility as we return to more normalized reporting. For Q2, we are projecting adjusted EBITDA of $10 to $15 million. Overall, NINE remains operationally strong and financially flexible, allowing us to execute on our strategic priorities while navigating a dynamic market environment. We continue to prioritize disciplined execution and profitable growth, and we remain confident in the long-term value creation potential of the business. We will now open up the call for Q&A.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question 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. Our first question comes from Steve Ferrazani with Sidodian Company. Your line is now live.