Nine Energy Service, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Although the request refers to 2021 Q4, this filing reports full-year results; the supplied text does not provide a clear standalone fourth-quarter financial summary.
Business context and reporting period
Nine provides completion services and products for unconventional oil and gas wells, principally in North America. Its offerings include cementing, completion tools, wireline, and coiled tubing. The company reports one segment, Completion Solutions. Results depend heavily on customer activity and spending, which are influenced by oil and gas prices.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $349.4 million | $310.9 million |
| GAAP gross profit (loss) | $(1.6) million | $(37.9) million |
| Adjusted gross profit | $41.4 million; 11.9% of revenue | $8.7 million; 2.8% of revenue |
| Operating loss | $(50.0) million | $(383.2) million |
| Net loss | $(64.6) million; $(2.13) per diluted share | $(378.9) million; $(12.74) per diluted share |
| Adjusted EBITDA | $5.2 million | $(25.8) million |
| Cash flow from operations | $(40.4) million | $(4.9) million |
Revenue rose 12%. Tools revenue increased 27%, coiled tubing 31%, and cementing 11%; wireline revenue declined 11%. Adjusted gross profit improved with higher activity, while the GAAP gross loss reflects depreciation and amortization included in cost of revenue. The 2021 net loss included a $17.6 million gain on extinguishment of debt; the 2020 comparison included a $296.2 million goodwill impairment and a $37.8 million debt-extinguishment gain.
Cash and cash equivalents were $21.5 million at year-end, down from $68.9 million. The company reported $43.2 million of availability under its ABL facility and total liquidity of $64.7 million. Operating cash use worsened mainly because of working-capital changes, including higher receivables. Cash purchases of property and equipment were $15.4 million.
At year-end, principal debt included $320.3 million of 8.750% Senior Notes due October 2023 and $15.0 million drawn under the ABL facility, plus other debt. Total debt on the balance sheet, net of deferred financing costs, was $334.4 million. Stockholders’ equity was negative $39.3 million. Management said liquidity was expected to erode, partly due to $14.0 million semiannual Senior Notes interest payments, and identified refinancing or restructuring, additional capital, asset sales, or a combination as plans to address the 2023 maturities.
Material changes versus the prior comparable period
- Revenue increased $38.6 million as activity recovered from 2020; U.S. completions and active frac crews increased, although customer spending remained constrained by capital discipline.
- Adjusted gross profit improved by $32.7 million and Adjusted EBITDA improved by $31.0 million to positive $5.2 million.
- Operating cash outflow increased by $35.5 million, and year-end cash declined by $47.4 million.
- General and administrative expense fell by $4.0 million, while cost of revenue increased by $5.8 million amid higher activity and labor and materials inflation.
Outlook, risks, contingencies, and unusual items
- Management was optimistic about 2022–2023 activity and expected potential price increases across service lines. It cautioned that labor and materials inflation, worker shortages, supply-chain constraints, and customer capital discipline could offset pricing gains or limit work performed.
- Management expected 2022 capital expenditures of $20–30 million, including approximately $15–20 million for maintenance. It stated that available cash, operating cash flow, and current or potential ABL borrowings should meet requirements for at least 12 months, but emphasized that this depends on improved performance and market conditions.
- The Senior Notes and ABL facility mature in 2023; the ABL may mature earlier if the notes have not been redeemed or repurchased. The auditor’s unqualified opinion included an emphasis of matter referencing these maturities and management’s mitigation plans.
- On January 5, 2022, Nine received NYSE notice that it failed the minimum market-capitalization and stockholders’ equity listing standards. It submitted a plan to regain compliance; delisting remained a risk.
- In January 2022, a jury found that Nine’s BreakThru Casing Flotation Device infringed another party’s intellectual property. Nine said it intended to appeal; the outcome and potential financial effect are not clear from the supplied filing text.
- Nine disclosed a $1.7 million wage-and-overtime class-action settlement, plus payroll taxes, payable in four quarterly installments. It also faces ordinary-course claims and litigation; management did not expect other ultimate liabilities, net of provisions and insurance, to be material.
- Major risks include commodity-price and activity volatility, debt and refinancing, inflation and labor availability, competition and pricing pressure, customer concentration, safety and environmental liabilities, climate-related regulation, and possible further asset impairments. The top five customers accounted for about 29% of 2021 revenue.
Most important facts for investors to verify
- Progress and feasible terms for refinancing or otherwise addressing the 2023 Senior Notes and ABL maturities, including any effect on liquidity and dilution.
- Whether operating cash flow improves and receivables convert to cash; monitor liquidity, ABL availability, and debt balances.
- Whether activity and pricing gains materialize, and whether labor, materials, and supply-chain costs absorb those gains.
- Outcome and financial exposure from the BreakThru patent appeal and wage-related litigation.
- NYSE plan acceptance and progress toward restoring listing compliance.