Welcome to Nine Energy Service second quarter 2023 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 will now turn the conference over to Heather Schmidt, your host. Thank you. Thank you. Good morning, everyone, welcome to the Nine Energy Service earnings conference call to discuss our results for the second quarter of 2023. With me today are Ann Fox, President and Chief Executive Officer, and Guy Sirkes, Chief Financial 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 filings 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 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 relations section of our website. I will now turn the call over to Ann. Thank you, Heather. Good morning, everyone. Thank you for joining us today to discuss our second quarter results for 2023. Revenue for the quarter was $161.4 million, which was within our original guidance of $158 million-$166 million. We generated adjusted EBITDA of $21.7 million, reflecting an adjusted EBITDA margin of 13%. Diluted earnings per share was -$0.08. ROIC for the quarter was 12.9%. We continued to see activity decline throughout the quarter. Since the peak in Q4, the rig count has declined by over 100 rigs, or approximately 14% through Q2, with approximately 74% of these coming out of the market in the second quarter versus the first. These rig declines have resulted in additional pricing pressure throughout the quarter, affecting all of our service lines. While activity and pricing declines have been strongest in gas-levered basins like the Haynesville and Eagle Ford, we are seeing some impact in the oil-driven plays as well. The Northeast rig count has been more stable, however, we are receiving pricing pressure from customers, as well as seeing completion delays and white space in the calendar, affecting both revenue and margins for completion tools and wireline. EIA reported completions were down by approximately 8% quarter-over-quarter, and new wells drilled decreased by approximately 5%. Cementing is our service line, most driven by rig count and new wells drilled, and is usually impacted first with activity changes. In conjunction with the rig decline, cementing activity and pricing were down single digits this quarter compared to Q1. We have significant operations in the Eagle Ford and Haynesville, which collectively have seen rig count declines of approximately 27% through Q2 since the end of 2022. The US rig count declined approximately 14% through the first half of the year, but our total jobs completed in Q2 2023 only declined by approximately 2% compared to Q1 2023. We are focused on maintaining pricing wherever we can, as well as maintaining market share with targeted customers through our proprietary slurries and well site execution. We remain excited about this service line and our differentiation in the marketplace, but it too, is subject to this market decline. Completion tool revenue was up this quarter, due in large part to a sizable international order again this quarter. North American revenue was down, however, and has been significantly impacted by lower activity levels in areas like the Haynesville, where dissolvable frac plugs are frequently used. We do believe this is temporary and that Haynesville activity will rebound and be a vital component of exported natural gas in the medium term. Even with the declining market thus far, in 2023, we have sold approximately 50% more Stinger dissolvable units in the first half of 2023 versus the first half of 2022. Wireline continues to be challenging from a pricing perspective, but remains an important part of Nine's portfolio. The Permian Basin is highly fragmented and saturated, and we are receiving pricing pressure in this service line, which is despite minimal price increases in 2022. In the Northeast, we are maintaining market share, we are receiving pricing pressure due to lower natural gas prices and delayed completions programs, which will compress margins. Coiled tubing is performing well, considering over 50% of our revenue is generated in the Haynesville and Eagle Ford. The DUC count has increased in the Haynesville, which could potentially provide significant future opportunities for the service line as well as for completion tools. I would now like to turn the call over to Guy to walk through detailed financial information. Thank you, Ann. As of June 30th, 2023, Nine's cash and cash equivalents were $41.1 million, with $19 million of availability under the revolving ABL credit facility, resulting in a total liquidity position of $60.1 million as of June 30th, 2023. At June 30th, 2023, we had $72 million of borrowings under the ABL credit facility, and our availability was approximately $19 million, net of outstanding letters of credit of $1.3 million. Subsequent to June 30, we repaid $2 million of our outstanding borrowings under the ABL credit facility. Additionally, our liquidity position will be impacted by the semiannual interest payments of $19.5 million based on amounts outstanding as of June 30th, 2023, to the holders of the 2028 Notes which began on August 1st, 2023. During the second quarter, revenue totaled $161.4 million, with adjusted gross profit of $34 million. During the second quarter, we completed 1,004 cementing jobs, a decrease of approximately 2% versus the first quarter. The average blended revenue per job decreased by approximately 5%. Cementing revenue for the second quarter was $58.1 million, a decrease of approximately 5%. During the second quarter, we completed 6,106 wireline stages, an increase of approximately 12%. The average blended revenue per stage decreased by approximately 7%. Wireline revenue for the quarter was $31 million, an increase of approximately 4%. For completion tools, we completed 27,734 stages, a decrease of approximately 14%. Completion tool revenue was $38.9 million, an increase of approximately 3%. During the second quarter, our coiled tubing days work decreased by approximately 16%, with the average blended day rate increasing by approximately 19%. Coiled tubing utilization during the quarter was 54%. Coiled tubing revenue for the quarter was $33.5 million, which was flat quarter-over-quarter. During the second quarter, the company reported general and administrative expense of $14.2 million. Depreciation and amortization expense in the second quarter was $10.3 million. The company's tax provision was approximately $0.2 million year to date. The provision for 2023 is the result of our tax position in state and non-US tax jurisdictions. The company reported net cash provided by operating activities of $27.1 million. The average DSO for Q2 was 52.4 days. CapEx spend for Q2 was $7.3 million, bringing the total for the first half of the year to $12.3 million. Our full year CapEx guidance is unchanged at $25 million-$35 million. We do anticipate coming in at the lower end of the range. I will now turn it back to Ann. Thank you, Guy. The market remains volatile, causing commodity prices to be erratic and unpredictable. This makes capital allocation decisions much more difficult for our customers, peers, and Nine. While inflation is slowing, the job market remains tight, making it difficult to push down wages and material costs. It is imperative that we maintain key talent throughout the organization, since markets can turn very quickly. We will continue to invest in internal R&D to improve and create new technology within Nine. I am cautiously optimistic that the rig count will reach a bottom during the third quarter, and if current strip prices remain supportive, we could begin to see rigs being added back into the market starting in early 2024. In 2024, budgets will reset, and operators will focus on the need to maintain flat production. We are a spot business, and our financial results will move closely with US land activity levels, including rig count and frac stages. cementing is most closely tied to the rig count and has been impacted the most by activity declines in the first half of this year. Our remaining completion-based businesses often lag rig count, and we anticipate completion activity in the second half of the year to decline compared to the first half. Activity levels thus far in Q3 are down, and we continue to see pricing pressure from customers. Because of this, we expect Q3 to be down compared with Q2, with projected revenue between $140 million and $150 million. We also anticipate that adjusted EBITDA and our adjusted EBITDA margin will be down as well. Our business is nimble, which allows us to navigate unexpected market shifts like we have seen so far this year. Additionally, we are capital light, helping reduce capital allocation risk in what has become much shorter and sharper cycles. We have a very strong team with a long tenure together, allowing us to effectively manage through this volatility as we have done before. We are always focused on developing and looking for new technology, and we will continue to pursue increasing our market share, both in the North American land and international markets. We have demonstrated our ability to navigate these shifting markets and proven we are able to capitalize very quickly on an improving market. I also want to end by thanking David Baldwin for his contributions, time, and support as a director on the Nine board. He resigned from Nine forward, effective yesterday, to have more time to spend focusing on energy transition-related opportunities with SCF Partners. We are deeply appreciative for all he has done for Nine and wish him continued success in his future endeavors. SCF remains our largest shareholder and owns approximately 26% of the company. Andy Waite is the Managing Partner of SCF Partners and will remain on the board. 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 one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. One moment, please, while we poll for questions. Our first question comes from Waqar Syed with ATB Capital Markets. Please proceed with your question. Good morning. Good morning, Waqar. Thank you. To the extent that you can provide some color on the international sales in completion tools, could you maybe talk about?... the magnitude of the sales, and it also looks like these sales are more recurring than non-recurring now. Maybe, maybe if you could elaborate on that and maybe most also talk about the sales strategy there. Sure. It's a great question, Waqar. As you know, depending on the time frame, international revenue is roughly 4% or 5% of our revenue on a consolidated basis. Part of our strategy over the medium long term is to really increase that profile, decrease dependency, exclusively on unconventional North American land. We intend to do that through different tools that we offer into those conventional markets. I've been cautious with the market to, to let them know that this takes a long time. We're obviously a small company. We're not gonna outrun R&D spend to try and do this, but we are slowly picking at it. I would say that our international revenue, you are correct, recurs each and every year. However, it is lumpy, and we have recently received a couple of lumps. Those have been helpful. I would love to say that those are gonna recur. I don't see that happening in Q3, but I am pleased with the traction that we're gaining in the international markets. We sell through to about 22 countries now. That's, again, a big piece of our go-forward strategy. We have zero intention of putting any heavy service lines into the international market. As far as completion goes, we're hyper-focused on it. As you know, we have a, an R&D center in Norway, and they've proven to be extremely effective in thinking about how to design tools, especially for the Middle East market. As you know, those, those engineers are used to designing tools with tolerances that can withstand North Sea operations. We're extremely lucky to have them. We acquired that team in 2018. You know, as you know, it takes a long time, and they've, spent the past couple of years effectively designing some tools, so we're excited about it. I do think you're gonna see it recur, but in the, the amount and the magnitude of which it hit the financials in Q2, I don't see that as recurring yet. If that answers your question. It does. Thank you very much. Then on the cementing business line, you know, how many units do you have stacked now? Waqar, we'll, we'll get back to you on the exact figures in our follow-up call. We'll pull those up. Okay. Then, Ann, with regards to your debt outstanding, you know, there is an option to buy back some of the debt with the free cash flow. You did generate significant free cash flow in the quarter. What's the plans there for the remaining of the year? Yeah, Waqar, we did generate good cash flow in Q2. A lot of that was a working capital release as revenue declines. You know, we anticipate further revenue declines in Q3, as Ann mentioned. We are going to have more cash flow. We're going to use that to pay down our credit facility first, then we'll look to work on the bonds afterwards. I think the thing that we need to be cautious about is that working capital is now a source of cash as revenue is declining. To the extent that there is a rebound in activity, then we'll need that cash again to absorb the working capital hit when revenue rises. We wanna be cautious with that. Okay. Then, you know, Ann, on the coiled tubing business line, you had a view that with the dissolvable plugs making more inroads, there'll be an impact on the demand for coiled tubing units. Are you seeing that or are you seeing that demand has stayed relatively strong despite the penetration of the dissolvable plugs? Well, as you know, we have a small fleet. We also think we have a very expert team out there. We've really been able to deploy them both in the Permian South Texas. As you know, East Texas has been hit pretty hard with the rig count decline. We have not seen our own business be impacted. We do know that as our operators move into laterals that extend beyond three miles, it becomes enormously challenging and extremely risky to drill plugs out. These are, you know, of course, reels and equipment that we're looking at. We wanna be able to answer that, that call, we do think that's gonna be a huge driver for dissolvable plugs coming forward. We're very excited about the dissolvable plug market. We also do like the size of our coil business. We're, you know, we're not intending to make any kind of M&A or massive organic growth in that service line. To answer your question, we do believe over time, that coil tubing market will be less than what it is today in the US. Okay, then just a last, last question. You know, have, have your conversations with your customers changed over the last couple of weeks with the, you know, strength that we've seen in commodity prices and some alleviation of concerns regarding economic recession in the US? Yeah, I wish I could tell you, that we've had a long enough duration with these strong commodity prices, to have conversations around, you know, moving some of that pricing pressure that we saw in the, in the right direction. That, for us, has not been the case, and I think we need to see this commodity price environment continue to stabilize as it has and maybe even move up. Obviously, those conversations will start again. We do, we do believe that we're gonna find the bottom in the rig count this quarter. We are, you know, very cautiously optimistic about the market activity moving up. I think that pricing, those pricing conversations will come with activity. They do tend to lag a bit, Waqar, because as you know, we're spot. Typically you'll see rigs come back on, and pricing will then lag activity. That's what we expect. To answer your question very specifically, we are not having conversations with customers right now about moving price up. Okay. Just last question, you know, in my coverage universe of North American leveraged companies, I think Nine stood out in terms of the exposure to the gasier basins, Haynesville and Eagle Ford, as you mentioned. Yet your revenues have held up a lot better than a lot of the peers. What would you attribute that to? Is it mostly just the international piece, or is there something else as well there? Yeah. I mean, it's a great question. The international certainly helps, and again, as I said, it was, it was a, it was pretty sizable this quarter, so that was extremely helpful. I do think that we've been able to hold market share, in our basins with our technology, but we've also had our management teams do a spectacular job of moving assets and people around, which I did caution the market. That's easier said than done, oftentimes as we head into these downturns, people will say: "Oh, no problem, I'll just move all my stuff out of the gas markets and roll into the, you know, black crude markets." That's kind of the easy answer, but oftentimes we've seen that be very challenging. we've actually been quite effective at that, and so I think you've seen a little bit of resilience in some of these service lines around the very nimble approach that the team has taken to moving both, you know, heavy, hard assets as well as our human assets into other locations. Okay, great. Thank you very much. Appreciate the answers. Thank you, Waqar. Thanks, Waqar. Our next question comes from Tim Moore with EF Hutton. Please proceed with your question. Great, thanks. I have two questions. Ann, I was just wondering maybe if you can provide some examples of tactics or maybe some details or even example of, you know, how you're really pursuing more of the growth of completion tools, you know, as you want to maybe get that to 40% of sales and, you know, maybe away from the more CapEx-intensive service lines. You know, could you just maybe give us some more examples of how you're talking to customers or demonstrating things and such? Yes, it's a great question, Tim. We, of course, are very keen to start doing our own internal R&D, and you've seen this done very effectively, as I said, through the Norway team. We designed a tool specific for You know, can be run, of course, in other unconventional markets, but specifically for one of our Middle Eastern customers, ADNOC, where we won a contract with a tool that they did design. One of the ways in which we're approaching this is organically, with our own engineering teams and figuring out where to address the market, where perhaps the larger cap customers are contracting that work out may not have those tools, or we may see a way to engineer something that creates efficiency. The other way, certainly, that we are working on is through M&A. There are a bunch of wonderful inventors and entrepreneurs out there that have designed certain tools that are very interesting. Oftentimes, as you know, they find that it really accelerates their potential growth and profitability to partner with larger companies. I think our traction in the Middle East now is not just with plugs, but it's with a couple of other tools. That can then also be alluring to potential would-be M&A candidates. It's going to be a dual-pronged strategy of both organic growth as well as M&A. That, that's great color. Yeah, it seems like a terrific approach for the three prongs there. You know, maybe just my other question, dissolvable plugs, the frac plugs. You know, maybe can you elaborate a little bit, just for me to understand, maybe some of the investors a little bit more, just, you know, Nine seems to have a materials and science edge? I mean, you can kind of track how long the formation takes to warm back up after it's fracked. Can you maybe just talk about that? Because, you know, my, my estimate is, you know, you're probably gaining some market share from two of the other peers, and, just love to hear a little bit more story on that. Yeah, sure. Another great question. This is, you know, was all kind of an example of using our wireline service line, as well as our coiled tubing service line, in the development of what we call built for the temperature dissolvable. What we really put forward is that we have dissolvable materials that we design in concert with our operators that can really address temperatures that are, you know, very cold, room temperature-type situations, all the way through the very natural hot markets that have always loved dissolvables. We think we really differentiate on the material science insofar as understanding the predictability of dissolution. The operators are so highly specialized now in exactly the amount of time that they want to spend, you know, completing a lateral foot. We are now very good at saying, "Well, you're operating in this formation at this depth, at this bottom hole temperature. You're gonna frack for this long, and you're also, by the way, using these fluids." Those may be fresh water. Those, those may have high salinity. So we've spent an enormous amount of time gathering a library of data to understand how various different materials will respond, inside of those wellbores. So I think, a major differentiator for us is it's not one size fits all. It's a very, very specialized tool, designed, in concert with the operator. So it's a strong partnership. As I said, we've seen a huge amount of growth in those sales. I'm very excited to see, more large, large operators, become very interested in this. I think you'll continue to see that as they are successful in lengthening out these laterals, where it becomes very risky to drill out and complete past a certain depth. We're pretty excited about that. It's a very, very few people that are competing inside of the dissolvable space in a legitimate way at scale. That is the other thing we feel we've mastered is the QA/QC and the manufacturing process. Even the way you deliver these plugs, the way you package them, it is all highly specialized because, of course, they're dissolvable. There's only a few players we compete with that do this at scale. Of course, you're always gonna have your, your folks in garages saying, "We have a plug." But as far as who we see in the field, we're, we're we think we're one of the top three. We are also, by the way, seeing a lot of traction in the international markets, on the unconventional side, and that's been very exciting for us. The final piece I'll just add here is, depending on what the SEC comes out with this fall, as far as, those climate and emissions-related disclosures, this will be an even larger piece of the pie. Because, of course, you're taking out so much combustion and therefore CO2 emissions whenever you use dissolvables, because you just don't have diesel-based pumps or stick-type diesel-based engines drilling out plugs. We think this is environmentally a much greener option. We certainly have quantified that for the market through independent studies, through ERM. We're also excited about that. It was certainly part of the industrial logic and strategic rationale when we did the acquisition. I think we were just a little bit maybe early, and now our operators are very, very focused on those emissions and strategies to reduce those emissions. This is certainly a fabulous way to do that. Oh, great, Ann. Those are very helpful insights. The greener optionality just seems terrific for catalyst to grow sales. The rest of my questions were already answered today, so thanks, and have a nice weekend. Thank you, Sam. You, too. Thank you. Our next question is from John Daniel with Daniel Energy Partners. Please proceed with your question. Hey, good morning, all. Hey, good morning. Good morning. I'd like to think that the sort of consensus or conventional wisdom holds that, you know, activity fades, moderates back half of the year, but then budgets reset, and we go right back to work in the first half of 2024. Assuming that is the scenario, I guess the question is: How are you handling labor right now, given the volatility of the work schedules, with also a hope that we're gonna recover? Oh, this is a great question. It's I don't have an easy answer for you, John, because it's something we actively debate. I think you've heard a lot of, you know, a lot of folks in this sector say, "You know, we're not, we're not gonna take lower pricing. We're focused on returns. We're gonna park our equipment, and that's it. If, if you're not gonna give us the price we want, we're done." Well, that's very easy to say, except there is a human component called labor. The problem is that in order to hold those crews together, which, as you know, is critically important because the implicit communication and then the operational know-how developed inside those crews, if you're specializing them, is extremely value, valuable. So that collection of workforce is something that we have tried, through this, you know, terrible rig count decline, that we have tried to hold together. That obviously rips into a margin, and we're cognizant of that. I think, you know, had we not seen our high-spec drilling rig companies and kind of our market feelers say, "Hey, we think September kind of bottoms out, and the market starts to come back," had we not seen kind of strip prices where they are, maybe we would have made a different choice. This, to me, feels. We've been through a lot of these, and know you have as well, John. This feels very different to me than some of, kind of, the longer-term, long-dated downturns that we've been through before, where you're cutting a workforce quickly. Mm-hmm. Because you're gonna stay down under the water for a long time. This, this feels like our teams collectively have to get used to up, like, run up the mountain, run down the mountain, run right back up the next mountain. So I'm not necessarily saying, by the way, that this is gonna be a mountain, because I don't think it serves anyone to just be, you know, overly optimistic about 2024 activity. I'm not saying that either. Right. I do think it will be better than Q3. I don't want to suggest to the market that I think this is going to be a huge ramp like it was in 2022. I am suggesting to the market that we value what we have, and we're really working hard to hang on to that. I can't guarantee that, but I would rather take other, you know, actions than just cut right now, because I do feel we're going to see some recovery in activity. Yeah. Yeah, I would agree. I, the next one, this is another tricky question. It's not meant to be a trick question, but it does come back to the pricing, right? I mean, this, when the cycle started out, the requests from customers were, "Hey, we need some relief on service costs. Commodity prices have fallen, and you guys charge too much," which we can, you know, agree to disagree with, right? That was the original sort of comments. Then activity starts to fall, and now it's just simply a supply/demand. There's too much supply, not enough demand, so prices fall. Like, and as you're sitting there with your customers, I, I mean, and you work and you want to work with them and partner with them, if you will, if that still, if that still exists or even exists. How do you get that reset on the price where if you worked with your customer and, you know, gave some relief, where you get to recover that? I mean, I don't know. I don't know what I'm asking, if that makes any sense, but just seems like- No, I know what you're asking. It's as vicious as it's always been, so it's not changing. Yeah. It is, I stab you, and then you stab me. It's. That's just how it is, and that is how it will be. You said supply/demand fundamentals. That is what it is. Right. What will happen if activity returns is, if the privates decide they want to chase the commodity price, it will start to tighten up the market. You know, the CapEx over the past few years in the service sector is not close to what it was. Eventually, you know, that, that lack of investment in equipment, both maintenance programs as well as new equipment, catches up. You know, we, we will hit our customers with price when, when there's not enough equipment to go around, and when they become scared about availability, they will pay that price. Right. That's just how it works. You know, again, even for the, I think, the longer term contract guys, they're gonna contract I think, when they feel that they can get the best price. Right. For us, it's about market. We're just gonna reflect the actual market, and I wish I could tell you that it's different, but it's not. Okay. My, my last one is, on the wireline business, I was at the McDonald's drive-through when you were going through the numbers, so I apologize. I think you said, Guy, that the revenues are actually up quarter-over-quarter? That's right, yes. In light of the market. Yeah ... any color you guys could elaborate, because that's- Yeah, I, I wish, I wish that I could tell you, that that was anything but catching some frac crews that we frankly didn't expect to catch. Those were- Okay - some spot frac crews that we picked up, drove that up, which is fabulous and great, and that is just some sales guys literally, you know, turning over every rock, and we appreciate that. Right. It is a little bit counter to where the market was. It completes the picture, it was just- Right a really good grab. Okay. That's all I got. Thanks for letting me ask some questions. Okay, thanks so much, John. Good to hear from you. Bye, bye. We have reached the end of the question and answer session. I would now like to turn the call back over to Ann Fox for closing remarks. Thank you for your participation in the call today. I want to thank our employees, our E&P partners and investors. Thank you. This concludes today's call. You may disconnect your lines at this time, and we thank you for your participation.