A Headwind Expected In Q2: Although natural gas prices declined in Q1, NINE Energy’s (NINE) management expects activities in the natural gas-heavy Northeast and Haynesville to stabilize in Q2. However, pricing pressure can mount in the cementing business, leading to lower revenues in Q2. The company plans to diversify into completion tools and the international markets, which should benefit its medium-term outlook. Read more about this in our recent article here.

Revenue And EBITDA Margin Steadied In Q1: Quarter-over-quarter, NINE’s revenues decreased marginally, by 1.4%, in Q1, while its adjusted EBITDA margin expanded by 60 basis points. Quarter-over-quarter, its coil tubing sales increased in Q1. It recorded a net loss in Q1, but the magnitude of the loss lessened compared to a quarter earlier.

NINE’s Cash Flows And Negative Equity: NINE’s cash flow from operations turned negative in Q1 2024 compared to a positive CFO a quarter ago. As a result, free cash flow also turned negative in Q1. Due to negative shareholders’ equity, its debt-to-equity remained negative as of March 31, 2024. So, a high net debt ($309 million), negative cash flows, and negative equity render the stock financially risky.

Thanks for reading the NINE Take Three, designed to give you three critical takeaways from NINE’s earnings report.  Soon, we will present a second update on NINE earnings, highlighting its current strategy, news, and notes we extracted from our deeper dive.