National Energy Services Reunited Corp. press release
National Energy Services Reunited Corp. Reports Second Quarter and First Half 2024 Financial Results
NASDAQ - Nasdaq Stock Market · Oil · Natural Gas · United States
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Revenue for the quarter ended June 30, 2024 is $325.0 million, growing 15.9% year-over-year and 9.5% on a sequential quarter basis
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Net income for the quarter ended June 30, 2024 is $18.9 million, growing 870.3% year-over-year and 89.1% on a sequential quarter basis
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Adjusted EBITDA (a non-GAAP measure) for the quarter ended June 30, 2024 is $78.7 million, growing 30.2% year-over-year and 22.5% on a sequential quarter basis_
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Diluted Earnings per Share (EPS) for the quarter ended June 30, 2024 is $0.20, growing 900.0% year-over-year and 100.0% on a sequential quarter basis
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Operating cash flow for the six months ended June 30, 2024, is $112.3 million, improving 55.1% year-over-year
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Free cash flow (a non-GAAP measure) for the six months ended June 30, 2024, is $59.6 million, improving 73.2% year-over-year_
HOUSTON, TX / ACCESSWIRE / August 29, 2024 / National Energy Services Reunited Corp. ("NESR" or the "Company") (OTC PINK:NESR)(OTC PINK:NESRW), a national, industry-leading provider of integrated energy services in the Middle East and North Africa ("MENA") region, today reported its financial results as of and for the three- and six-month periods ended June 30, 2024. The Company posted the following results for the periods presented:
| | | Three Months Ended | | | Variance | | | | | | | | | | | | | | | | | (in thousands except per share amounts and percentages) | | June 30,
2024 | | | March 31, 2024 | | | June 30,
2023 | | | Sequential | | | Year- over- year | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Revenue | | $ | 324,969 | | | $ | 296,848 | | | $ | 280,311 | | | | 9.5 | % | | | 15.9 | % | | Net income | | | 18,873 | | | | 9,982 | | | | 1,945 | | | | 89.1 | % | | | 870.3 | % | | Adjusted net income (non-GAAP)* | | | 27,356 | | | | 14,046 | | | | 6,041 | | | | 94.8 | % | | | 352.8 | % | | Adjusted EBITDA (non-GAAP)* | | | 78,655 | | | | 64,216 | | | | 60,411 | | | | 22.5 | % | | | 30.2 | % | | Diluted EPS | | | 0.20 | | | | 0.10 | | | | 0.02 | | | | 100.0 | % | | | 900.0 | % | | Adjusted Diluted EPS (non-GAAP)* | | | 0.29 | | | | 0.15 | | | | 0.07 | | | | 93.3 | % | | | 314.3 | % |
*The Company presents its financial results in accordance with generally accepted accounting principles in the United States of America ("GAAP"). However, management believes that using additional non-GAAP measures will enhance the evaluation of the profitability of the Company and its ongoing operations. Please see Tables 1, 2, 3, and 4 below for reconciliations of GAAP to non-GAAP financial measures. The Condensed Consolidated Balance Sheets, Condensed Consolidated Interim Statements of Operations, and Condensed Consolidated Interim Statements of Cash Flows are derived from the unaudited condensed consolidated interim financial statements present in our Period Report on Form 6-K as of and for the three- and six-month periods ended June 30, 2024.
Stefan Angeli, Chief Financial Officer, commented, "NESR achieved exemplary results during the first half of 2024 with outstanding revenue growth and margin expansion coupled with strong cash flow that drove a large reduction in Net Debt. First half 2024 Revenues grew 15.5% year-over-year and Adjusted EBITDA margin improved 218 basis points to 23.0% during the same period. Cash provided by operating activities for the first half of 2024 was $112.3 million. Free cash flow totalling $59.6 million was used to pay down debt. Net Debt to trailing Adjusted EBITDA was 1.13 as of June 30, 2024, a significant reduction from prior periods. Activity has continued to expand throughout 2024 with Revenues for the second quarter of 2024 up 9.5% sequentially to $325.0 million. Adjusted EBITDA margin also improved sequentially, expanding 257 basis points to 24.2% during the second quarter of 2024.
Despite macroeconomic volatility and geopolitical conflicts, we believe the MENA landscape remains very favorable with growth across most countries. Operational execution was exceptional in the first half of 2024, and our back office, with new and updated processes and procedures, also contributed significantly. Additionally, as you may have seen with yesterday's press release by the SEC, we have concluded our inquiry with the SEC in a very positive manner. On behalf of management, I would like to thank our entire workforce for their tireless contribution, together with our customers, our directors, shareholders and banking consortium, for their continued support. We look forward to exiting 2024 as a far larger and stronger corporation."
Sherif Foda, Chairman and Chief Executive Officer, commented, "I am extremely proud of the entire NESR organization, for not only achieving exceptional first half 2024 results on the back of solid momentum in 2023, but also for the substantial organizational improvements that position the Company to deliver continued outperformance in the MENA region. The positive macro backdrop has materialized as we had expected, and NESR continues to make progress on the key elements of our strategy, including core business outperformance, new technology expansion, and returns-driven growth punctuated by leading cash flow generation. Looking ahead, a robust activity environment with historically high rig counts in our largest countries, across both oil and gas basins, serves as a foundation for durable success in the next leg of NESR's evolution. We are very excited with our progress across the ROYA drilling portfolio, and we see excellent opportunities to establish ourselves as a main player in the advanced directional drilling arena. I extend my deepest thanks to our valued customers, our shareholders, and our hard-working people for their trust and loyalty during the past several years, and I look forward to a very bright future."
Net Income and Adjusted Net Income Results
The Company had net income for the quarter ended June 30, 2024, totaling $18.9 million, an improvement of $16.9 million year-over-year. The change is largely attributable to increased activity in our principal areas and businesses of operations, particularly in Saudi Arabia and Kuwait. Adjusted net income for the quarter ended June 30, 2024, was $27.4 million and included adjustments totaling $8.5 million ("Total Charges and Credits"), mainly related to increased costs associated with the restatement of our 2018-2020 financial statements, including the SEC inquiry and remediation, and current expected credit loss provisions. A complete list of the adjusting items and the associated reconciliation from GAAP has been provided in Table 1 below in the section entitled "Reconciliation of Net Income and Adjusted Net Income."
The Company reported $0.20 of diluted EPS for the quarter ended June 30, 2024. Adjusted for the impact of Total Charges and Credits, Adjusted Diluted EPS, a non-GAAP measure described in Table 1 below, for the quarter ended June 30, 2024, is $0.29.
Adjusted EBITDA Results
The Company generated Adjusted EBITDA of $78.7 million during the quarter ended June 30, 2024, improving 30.2% year-over-year and 22.5% sequentially. Adjusted EBITDA includes adjustments for certain Total Charges and Credits (those not related to interest, taxes, and/or depreciation and amortization). The Company posted the following results for the periods presented.
| | | Quarter ended | | | Quarter ended | | | Quarter ended | | | | | | (in thousands) | | June 30, 2024 | | | March 31, 2024 | | | June 30, 2023 | | | | | | Revenue | | $ | 324,969 | | | $ | 296,848 | | | $ | 280,311 | | | Adjusted EBITDA | | $ | 78,655 | | | $ | 64,216 | | | $ | 60,411 | |
Balance Sheet
Cash and cash equivalents are $75.0 million as of June 30, 2024, compared to $67.8 million as of December 31, 2023.
Free cash flow, a non-GAAP measure, for the six months ended June 30, 2024, was $59.6 million, as compared to $34.4 million for the six months ended June 30, 2023, due to improved operating results in 2024.
Total debt as of June 30, 2024, is $407.1 million with $105.7 million classified as short-term, as compared to $452.2 million and $120.6 million, respectively, on December 31, 2023. Net Debt (a non-GAAP measure), which is the sum of our recorded Current installments of long-term debt, Short-term borrowings, and Long-term debt less Cash and cash equivalents, totaled $332.1 million as of June 30, 2024, as compared to $384.4 million as of December 31, 2023. Net Debt has decreased as compared to the prior period primarily due to long-term debt repayments during 2024. A reconciliation of the comparable GAAP measures to Net Debt is provided in Table 4 below, entitled "Reconciliation to Net Debt."
About National Energy Services Reunited Corp.
Founded in 2017, NESR is one of the largest national oilfield services providers in the MENA and Asia Pacific regions. With over 6,000 employees, representing more than 60 nationalities in over 15 countries, the Company helps its customers unlock the full potential of their reservoirs by providing Production Services such as Hydraulic Fracturing, Cementing, Coiled Tubing, Filtration, Completions, Stimulation, Pumping and Nitrogen Services. The Company also helps its customers to access their reservoirs in a smarter and faster manner by providing Drilling and Evaluation Services such as Drilling Downhole Tools, Directional Drilling, Fishing Tools, Testing Services, Wireline, Slickline, Drilling Fluids and Rig Services.
Forward-Looking Statements
This communication contains forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). Any and all statements contained in this communication that are not statements of historical fact, may be deemed forward-looking statements. Terms such as "may," "might," "would," "should," "could," "project," "estimate," "predict," "potential," "strategy," "anticipate," "attempt," "develop," "plan," "help," "believe," "continue," "intend," "expect," "future," and terms of similar import (including the negative of any of these terms) may identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this communication may include, without limitation, the plans and objectives of management for future operations, projections of income or loss, earnings or loss per share, capital expenditures, dividends, capital structure or other financial items, the Company's future financial performance, expansion plans and opportunities, completion and integration of acquisitions, and the assumptions underlying or relating to any such statement.
The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon the Company's current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which the Company has no control over including the impact of the delayed SEC report filings on our business, the extent of any material weakness or significant deficiencies in our internal control over financial reporting and any action taken by the SEC including potential fines or penalties arising out of the SEC inquiry. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the accuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation: estimates of the Company's future revenue, expenses, capital requirements and the Company's need for financing; the risk of legal complaints and proceedings and government investigations; the Company's financial performance; success in retaining or recruiting, or changes required in, the Company's officers, key employees or directors; current and future government regulations; developments relating to the Company's competitors; changes in applicable laws or regulations; the possibility that the Company may be adversely affected by other economic and market conditions, particularly during extended periods of low oil and gas prices, political disturbances, war, terrorist acts, public health crises and threats, ongoing actions taken by businesses and governments and resulting significant disruption in international economies, international financial and oil markets; international currency fluctuations, business and/or competitive factors; and other risks and uncertainties set forth in the Company's most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission (the "SEC").
You are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. The Company disclaims any obligation to update the forward-looking statements contained in this communication to reflect any new information or future events or circumstances or otherwise, except as required by law. You should read this communication in conjunction with other documents which the Company may file or furnish from time to time with the SEC.
The preliminary financial results for the Company as of and for the three- and six-month periods ended June 30, 2024, included in this press release represent the most current information available to management. The Company's actual results when disclosed in its subsequent Periodic Reports on Form 6-K may differ from these preliminary results as a result of the completion of the Company's financial statement closing procedures, final adjustments, completion of the independent registered public accounting firm's review procedures, and other developments that may arise between now and the disclosure of the final results.
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NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In US$ thousands, except share data)
| | | June 30, 2024 | | | December 31, 2023 | | | | | | | | | | | | | | | Assets | | | | | | | | | | Current assets | | | | | | | | | | Cash and cash equivalents | | $ | 74,997 | | | | 67,821 | | | Accounts receivable, net | | | 155,942 | | | | 171,269 | | | Unbilled revenue | | | 144,976 | | | | 95,997 | | | Service inventories | | | 95,866 | | | | 98,434 | | | Prepaid assets | | | 16,835 | | | | 9,238 | | | Retention withholdings | | | 30,513 | | | | 48,419 | | | Other receivables | | | 31,747 | | | | 39,778 | | | Other current assets | | | 9,894 | | | | 10,759 | | | Total current assets | | | 560,770 | | | | 541,715 | | | Non-current assets | | | | | | | | | | Property, plant and equipment, net | | | 423,251 | | | | 442,666 | | | Intangible assets, net | | | 75,001 | | | | 84,304 | | | Goodwill | | | 645,095 | | | | 645,095 | | | Operating lease right-of-use assets | | | 27,395 | | | | 31,628 | | | Other assets | | | 57,842 | | | | 52,332 | | | Total assets | | $ | 1,789,354 | | | $ | 1,797,740 | | | | | | | | | | | | | Liabilities and equity | | | | | | | | | | Liabilities | | | | | | | | | | Accounts payable and accrued expenses | | | 373,387 | | | | 351,240 | | | Current installments of long-term debt | | | 70,945 | | | | 71,744 | | | Short-term borrowings | | | 34,797 | | | | 48,889 | | | Income taxes payable | | | 4,219 | | | | 8,421 | | | Other taxes payable | | | 6,215 | | | | 14,674 | | | Operating lease liabilities | | | 5,313 | | | | 7,406 | | | Other current liabilities | | | 29,004 | | | | 31,073 | | | Total current liabilities | | | 523,880 | | | | 533,447 | | | | | | | | | | | | | Long-term debt (Note 6) | | | 301,331 | | | | 331,565 | | | Deferred tax liabilities (Note 7) | | | - | | | | - | | | Employee benefit liabilities | | | 31,846 | | | | 28,935 | | | Non-current operating lease liabilities | | | 21,597 | | | | 25,145 | | | Other liabilities | | | 59,312 | | | | 57,154 | | | Total liabilities | | | 937,966 | | | | 976,246 | | | | | | | | | | | | | Equity | | | | | | | | | | Preferred shares, no par value; unlimited shares authorized; none issued and outstanding at June 30, 2024 and December 31, 2023, respectively | | | - | | | | - | | | Common stock and additional paid in capital, no par value; unlimited shares authorized; 95,408,453 and 94,996,397 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | | | 884,904 | | | | 883,865 | | | Retained (deficit) | | | (33,585 | ) | | | (62,440 | ) | | Accumulated other comprehensive income | | | 69 | | | | 69 | | | Total equity | | | 851,388 | | | | 821,494 | | | Total liabilities and equity | | $ | 1,789,354 | | | $ | 1,797,740 | |
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NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS (In US$ thousands, except share data and per share amounts)
| | | For the quarter-to-date period ended | | | For the year-to-date period ended | | | | | | | | | | | | | Description | | June 30, 2024 | | | June 30, 2023 | | | June 30, 2024 | | | June 30, 2023 | | | | | | | | | | | | | | | | | | | | | | | | | Revenues | | $ | 324,969 | | | $ | 280,311 | | | $ | 621,817 | | | $ | 538,311 | | | Cost of services | | | (271,830 | ) | | | (248,318 | ) | | | (525,736 | ) | | | (479,199 | ) | | Gross profit | | | 53,139 | | | | 31,993 | | | | 96,081 | | | | 59,112 | | | Selling, general and administrative expenses (excluding Amortization) | | | (14,329 | ) | | | (10,060 | ) | | | (28,020 | ) | | | (24,723 | ) | | Amortization | | | (4,694 | ) | | | (4,694 | ) | | | (9,387 | ) | | | (9,388 | ) | | Operating income | | | 34,116 | | | | 17,239 | | | | 58,674 | | | | 25,001 | | | Interest expense, net | | | (9,439 | ) | | | (11,067 | ) | | | (20,043 | ) | | | (21,986 | ) | | Other income, net | | | 184 | | | | 166 | | | | 805 | | | | 864 | | | Income before income tax | | | 24,861 | | | | 6,338 | | | | 39,436 | | | | 3,879 | | | Income tax expense | | | (5,988 | ) | | | (4,393 | ) | | | (10,581 | ) | | | (8,291 | ) | | Net income / (loss) | | $ | 18,873 | | | $ | 1,945 | | | $ | 28,855 | | | $ | (4,412 | ) | | | | | | | | | | | | | | | | | | | | Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | Basic | | | 95,437,068 | | | | 94,875,603 | | | | 95,250,744 | | | | 94,521,888 | | | Diluted | | | 95,525,679 | | | | 94,875,603 | | | | 95,484,020 | | | | 94,521,888 | | | | | | | | | | | | | | | | | | | | | Earnings / (loss) per share: | | | | | | | | | | | | | | | | | | Basic | | $ | 0.20 | | | $ | 0.02 | | | $ | 0.30 | | | $ | (0.05 | ) | | Diluted | | $ | 0.20 | | | $ | 0.02 | | | $ | 0.30 | | | $ | (0.05 | ) |
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NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (In US$ thousands)
| | | For the year-to-date period ended | | | | | | | | | | June 30, 2024 | | | June 30, 2023 | | | | | | | | | | | | | | | Cash flows from operating activities: | | | | | | | | | | Net income / (loss) | | $ | 28,855 | | | $ | (4,412 | ) | | Adjustments to reconcile net income / (loss) to net cash provided by operating activities: | | | | | | | | | | Depreciation and amortization | | | 68,819 | | | | 71,468 | | | Share-based compensation expense | | | 2,026 | | | | 3,693 | | | Loss / (Gain) on disposal of assets | | | 1,389 | | | | (93 | ) | | Non-cash interest (income) expense | | | (2,088 | ) | | | 1,111 | | | Deferred tax expense | | | 1,196 | | | | 1,591 | | | Allowance for (reversal of) doubtful receivables | | | 4,323 | | | | 506 | | | Charges on obsolete service inventories | | | 1,648 | | | | 69 | | | Other operating activities, net | | | (59 | ) | | | (367 | ) | | Changes in operating assets and liabilities: | | | | | | | | | | (Increase) decrease in accounts receivable | | | 10,694 | | | | 167 | | | (Increase) decrease in unbilled revenue | | | (49,019 | ) | | | (14,956 | ) | | (Increase) decrease in retention withholdings | | | 17,906 | | | | 5,522 | | | (Increase) decrease in inventories | | | 621 | | | | (3,737 | ) | | (Increase) decrease in prepaid expenses | | | (7,631 | ) | | | (11,821 | ) | | (Increase) decrease in other current assets | | | 10,172 | | | | (4,987 | ) | | Change in other long-term assets and liabilities | | | (2,858 | ) | | | (228 | ) | | Increase (decrease) in accounts payable and accrued expenses | | | 43,218 | | | | 23,291 | | | Increase (decrease) in other current liabilities | | | (16,931 | ) | | | 5,598 | | | Net cash provided by operating activities | | | 112,281 | | | | 72,415 | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | Capital expenditures | | | (52,698 | ) | | | (38,009 | ) | | IPM investments (Note 2) | | | - | | | | (15,304 | ) | | Proceeds from disposal of assets | | | 156 | | | | 273 | | | Other investing activities | | | (4,165 | ) | | | (1,000 | ) | | Net cash used in investing activities | | | (56,707 | ) | | | (54,040 | ) | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | Proceeds from long-term debt | | | 4,063 | | | | - | | | Repayments of long-term debt | | | (35,872 | ) | | | (26,675 | ) | | Proceeds from short-term borrowings | | | 24,276 | | | | 60,899 | | | Repayments of short-term borrowings | | | (38,513 | ) | | | (70,416 | ) | | Payments on capital leases | | | (507 | ) | | | (1,201 | ) | | Payments on seller-provided financing for capital expenditures | | | (1,682 | ) | | | (4,521 | ) | | Other financing activities, net | | | (163 | ) | | | (197 | ) | | Net cash used in financing activities | | | (48,398 | ) | | | (42,111 | ) | | | | | | | | | | | | Effect of exchange rate changes on cash | | | - | | | | - | | | Net increase (decrease) in cash | | | 7,176 | | | | (23,736 | ) | | Cash and cash equivalents, beginning of period | | | 67,821 | | | | 78,853 | | | Cash and cash equivalents, end of period | | $ | 74,997 | | | $ | 55,117 | |