Nine Energy Service, Inc. Q1 FY2026 earnings call

Post-Bankruptcy Transition

• Nine Energy emerged from Chapter 11 bankruptcy on March 5, 2026, and implemented fresh start accounting, creating successor and predecessor reporting periods; the full quarter is combined for this call, with separate period reporting available in SEC filings.
• The bankruptcy process created customer and vendor disruption during Q1, but no material customer or vendor losses occurred, and all transition issues are now resolved.
• A $5.5 million noncash inventory write-down negatively impacted Q1 net income and adjusted EBITDA, which was not added back to adjusted EBITDA for reporting consistency.
• The company now has a stronger financial position post-transformation, with total liquidity of $46.9 million as of March 31, 2026 ($11.2 million in cash and $35.7 million in revolving credit availability).

Market and Operational Activity

• Severe abnormal winter weather in January-February 2026 caused operational inefficiencies, delayed fracing, and idle time, disproportionately impacting Wireline operations in the Northeast and Permian Basin operations. Operations normalized in March 2026.
• U.S. rig count was flat quarter-over-quarter, with pricing for all offerings mostly unchanged. Natural gas prices averaged $4.70 in Q1 (up from $3.70 in Q4 2025), but have recently fallen below $3.
• Natural gas-levered basins saw growth: the Haynesville Basin added 25 rigs over the prior 4 quarters to end Q1 at 55 rigs, while Northeast activity remained flat. Nine opened a new wireline facility in Haynesville to capture sustained growth in the region.
• International operations saw minimal impact from the Iranian conflict in Q1 and early Q2, and remain a core growth driver; 2025 international tool revenue grew 14% sequentially, led by sales in the UAE, Argentina, and Saudi Arabia.
• Completion Tools achieved a key milestone: over 500,000 Scorpion plugs have been sold, demonstrating product quality and sustained market demand. The company plans to launch updated versions of Scorpion and Stinger dissolvable plugs, plus new product additions.

Financial Overview

• Reported adjusted EBITDA for Q1 was $3 million, and adjusted gross profit was $13.8 million. General and administrative expense totaled $17.7 million, depreciation and amortization was $8.2 million, and income taxes were approximately breakeven for the quarter.
• Net cash used in operating activities was $12.4 million, average days sales outstanding was 61 days, and Q1 capital expenditure was $5.6 million.

Nine Energy Service reported total first quarter 2026 revenue of $130 million across four operating segments:

1. Cementing: Revenue of $53.4 million, a 1% increase from Q4 2025. The segment completed 1,022 jobs (up 4% QoQ), with average blended revenue per job decreasing 2%. This segment contributed 41.1% of total Q1 2026 revenue.
2. Wireline: Revenue of $23.9 million, a 5% decrease from Q4 2025. The segment completed 6,890 stages (down 4% QoQ), with average blended revenue per stage decreasing 1%. This segment contributed 18.4% of total Q1 2026 revenue.
3. Completion Tools: Revenue of $25.8 million, a 10% decrease from Q4 2025. The segment completed 19,422 stages (down 10% QoQ), with revenue also pressured by minor international disruptions. This segment contributed 19.8% of total Q1 2026 revenue.
4. Coiled Tubing: Revenue of $26.9 million, a 4% increase from Q4 2025. The segment saw a 28% QoQ increase in days worked, offset by an 18% decrease in average blended day rate. This segment contributed 20.7% of total Q1 2026 revenue.

• Full year 2026 capital expenditure is projected to range between $20 million and $30 million, with annual cash interest expense expected to be approximately $7 million.
• Sequential improvement in both revenue and adjusted EBITDA is expected for Q2 2026, driven by the elimination of Q1 weather-related downtime and improved operational efficiencies.
• Q2 2026 revenue is guided in the range of $136 million to $146 million, and adjusted EBITDA is guided between $10 million and $15 million, provided to improve transparency as the company returns to normalized reporting.
• Management expects incremental activity growth from customer rig additions and DUC drawdowns to impact results in the second half of 2026, rather than Q2, as operators assess the durability of recent higher oil prices.
• The company expects to launch new and updated downhole tools starting in summer 2026, expanding its product portfolio across domestic and international markets.

• Recent declines in natural gas prices below $3 may dampen upstream operator activity levels in gas-levered basins, which could negatively impact Nine's revenue growth.
• The ongoing Iranian conflict creates uncertainty for international operations, with potential for unforeseen short-term disruptions to Middle East activity despite minimal impacts to date.
• Fixed labor costs create margin pressure during periods of unexpected operational downtime, as seen in Q1 2026 when severe weather idled operations but labor costs remained fixed.
• Incremental cost increases, including wage inflation and higher cost of goods, are expected to put upward pressure on costs that will require corresponding price increases for customer services.
• Forward-looking statements about future performance are subject to material risks and uncertainties that could cause actual results to differ materially from current expectations, as detailed in the company's SEC filings.

Q: Beyond the elimination of Q1's abnormal weather inefficiencies, are there activity or pricing green shoots already present in Q2, and are DUC completions and refracs ramping sooner than expected? / A: Incremental activity from operator rig additions and DUC drawdowns will not show up in Q2 results, and will instead impact the second half of 2026. Management confirmed it is seeing growing indications that DUC completions will accelerate, as operators move to quickly monetize current higher oil prices. The severe Q1 weakness in wireline and completion tools (Northeast-focused segments) was entirely driven by abnormal catastrophic winter weather that froze the Ohio River and delivered a record number of sub-freezing days, not underlying market weakness.

Q: The full-year 2026 CapEx guidance is higher than recent years. How much of this is catch-up investment versus growth CapEx for new opportunities, and can the company generate positive cash flow going forward? / A: A large share of the 2026 CapEx is catch-up investment that the company is layering in over time, but all CapEx is deployed to address identified needs and growth opportunities, including both organic and inorganic expansion. Bankruptcy was an expensive process that created cash flow noise in Q1, but in normalized years (starting as soon as 2027), Nine expects to generate meaningful positive cash flow. The company is positioned to capitalize on new growth opportunities post-bankruptcy.

Q: Have customer inquiries about incremental activity picked up recently amid higher oil prices, and what is the company's pricing strategy for the second half of 2026? / A: Customer inquiry volume has increased considerably over the past two weeks, compared to very low activity two to three months ago. Customer behavior has shifted, with larger private operators (previously inactive) now evaluating DUC completions and incremental rig adds. Management confirmed that pricing will need to increase across all service lines to offset expected rising wage inflation and higher cost of goods, full stop.

Q: Is there an appetite for tuck-in or larger acquisitions post-bankruptcy, and what operational efficiency improvements are expected in coming quarters? / A: The company always has an appetite for small tuck-in acquisitions aligned with its core business, and is also pursuing more transformational acquisition opportunities. The main sequential Q2 improvement comes from the elimination of fixed labor cost drag that occurred when weather idled operations in Q1; post-bankruptcy, the team has shifted focus from survival to growth, and is rethinking operating strategies to deliver ongoing efficiency gains across all service lines. All bankruptcy-related cleanup and one-time costs are complete, and no additional material write-downs are expected going forward.