Nine Energy Service Inc

Previous wording

We provide (i) cementing services, which consist of blending high-grade cement and water with various solid and liquid additives to create a cement slurry that is pumped between the casing and the wellbore of the well, (ii) an innovative portfolio of completion tools, including those that provide pinpoint frac sleeve system technologies, technologies used for completing the toe stage of a horizontal well, and fully-composite, dissolvable, and extended range frac plugs to isolate stages during plug-and-perf operations, (iii) wireline services, the majority of which consist of plug-and-perf completions, which is a multistage well completion technique for cased-hole wells that consists of deploying perforating guns and isolation tools to a specified depth, and (iv) coiled tubing services, which perform wellbore intervention operations utilizing a continuous steel pipe that is transported to the wellsite wound on a large spool, providing a cost-effective solution for well work due to the ability to deploy efficiently and safely into a live well.

Current wording

We provide (i) cementing services, which consist of blending high-grade cement and water with various solid and liquid additives to create a cement slurry that is pumped between the casing and the wellbore of the well, (ii) an innovative portfolio of completion tools, including those that provide technologies used for completing the toe stage of a horizontal well and fully-composite, dissolvable, and extended range frac plugs to isolate stages during plug-and-perf operations, (iii) wireline services, the majority of which consist of plug-and-perf completions, which is a multistage well completion technique for cased-hole wells that consists of deploying perforating guns and isolation tools to a specified depth, and (iv) coiled tubing services, which perform wellbore intervention operations utilizing a continuous steel pipe that is transported to the wellsite wound on a large spool, providing a cost-effective solution for well work due to the ability to deploy efficiently and safely into a live well.

Previous wording

Our business depends, to a significant extent, on the level of unconventional resource development activity and corresponding capital spending of oil and natural gas companies. These activity and spending levels are strongly influenced by current and expected oil and natural gas prices. In recent years, commodity prices have been extremely volatile and unpredictable, and this has continued into early 2024. Natural gas prices have continued to be extremely depressed, with average natural gas prices for the first quarter of 2024 being 15% lower than average prices in 2023, which had already declined by over 60% as compared to 2022. This sustained lower natural gas price environment has resulted in, and is expected to continue to result in, decreased activity and lower rig counts, especially in natural gas-levered basins like the Haynesville, where the rig count has declined by approximately 50% since the end of 2022. It has also led to, and is expected to continue to lead to, pricing pressure from customers, impacting both revenue and margins. Unlike natural gas prices, oil prices have been supportive and have somewhat stabilized in the first quarter of 2024. Nonetheless, as discussed below, activity levels have remained relatively flat in oil-levered basins.

Current wording

Our business depends, to a significant extent, on the level of unconventional resource development activity and corresponding capital spending of oil and natural gas companies. These activity and spending levels are strongly influenced by current and expected oil and natural gas prices. In recent years, commodity prices have been extremely volatile and unpredictable, and this has continued in 2024 thus far. Natural gas prices have continued to be extremely depressed, with average natural gas prices for the first half of 2024 averaging $2.10, which is 17% lower than average prices in 2023, which had already declined by over 60% as compared to 2022. This sustained lower natural gas price environment has resulted in, and is expected to continue to result in, decreased activity and lower rig counts, especially in natural gas-levered basins like the Haynesville, where the rig count as of the end of the second quarter of 2024 has declined by approximately 50% since the end of 2022. It has also led to, and is expected to continue to lead to, pricing pressure from customers, impacting both revenue and margins. Oil prices have been mostly stable thus far in 2024. Nonetheless, as discussed below, activity levels have remained relatively flat in oil-levered basins.

Previous wording

Due to the spot-market nature of our business, our revenue and profitability move very similarly to rig, frac, and stage counts in U.S. land. During the first quarter of 2024, the U.S. land rig count was flat. For the full year 2024, most public operators with acreage in oil-levered basins, like the Permian, appear to be keeping activity and capital expenditure levels relatively flat year-over-year. However, we anticipate both private and public operators with acreage in gas-levered basins, like the Haynesville and in the Northeast, could decrease activity levels in the near-term until natural gas prices start to improve. As a result, we expect revenue, net income (loss), and adjusted EBITDA for the second quarter of 2024 will be lower than the first quarter of 2024. Nonetheless, we remain cautiously optimistic on the medium and long-term outlook for the energy sector, and we believe there is potential upside for North American activity levels, especially if natural gas prices begin to recover.

Current wording

Due to the spot-market nature of our business, our revenue and profitability move very similarly to rig, frac, and stage counts in U.S. land. During the first half of 2024, the U.S. land rig count continued to decline with over 40 rigs coming out of the market. This is following a rig count decline of over 150 rigs from the end of 2022 to the end of 2023, creating an already depressed oil and gas market. For the full year 2024, most public operators with acreage in oil-levered basins, like the Permian, appear to be keeping activity and capital expenditure levels relatively flat year-over-year. However, we anticipate both private and public operators with acreage in gas-levered basins, like the Haynesville and in the Northeast, will maintain low activity levels until natural gas prices start to improve. As a result, we expect revenue, net income (loss), and adjusted EBITDA for the third quarter of 2024 will be relatively flat compared to the second quarter of 2024. Nonetheless, we remain cautiously optimistic on the medium and long-term outlook for the energy sector, and we believe there is potential upside for North American activity levels, especially if natural gas prices begin to recover.

Previous wording

Cost of revenues decreased $11.1 million, or 9%, to $116.0 million for the first quarter of 2024. The decrease was primarily driven by a reduction in activity for certain lines of service in comparison to the first quarter of 2023 as described above under “Revenues.” More specifically, the decrease was attributed to a $4.7 million decrease in materials installed and consumed while performing services, a $3.0 million decrease in employee costs, a $2.3 million decrease in vehicle expense and repair and maintenance expense, and a $1.1 million decrease in other costs such travel and restructuring type expenses, each in comparison to the first quarter of 2023.

Current wording

Cost of revenues decreased $15.4 million, or 12%, to $112.0 million for the second quarter of 2024. The decrease was primarily driven by a reduction in activity for certain lines of service in comparison to the second quarter of 2023 as described above under “Revenues.” More specifically, the decrease was attributed to a $9.3 million decrease in materials installed and consumed while performing services, a $5.5 million decrease in employee-related costs, and a $0.6 million decrease in other costs such travel and restructuring type expenses, each in comparison to the second quarter of 2023.

Previous wording

Adjusted gross profit decreased $10.2 million to $26.1 million for the first quarter of 2024 due to the factors described above under “Revenues” and “Cost of Revenues.”

Current wording

Adjusted gross profit decreased $13.6 million to $20.4 million for the second quarter of 2024 due to the factors described above under “Revenues” and “Cost of Revenues.”

Previous wording

Depreciation expense decreased $0.7 million to $6.7 million for the first quarter of 2024. The decrease in comparison to the first quarter of 2023 was primarily due to a decrease in capital expenditures across certain lines of service over the last twelve months.

Current wording

Depreciation expense decreased $0.8 million to $6.6 million for the second quarter of 2024. The decrease in comparison to the second quarter of 2023 was primarily due to a decrease in capital expenditures across certain lines of service over the last twelve months.

Previous wording

Amortization of intangibles, which is primarily comprised of technology and customer relationships, decreased $0.1 million to $2.8 million for the first quarter of 2024. The decrease in comparison to the first quarter of 2023 was related to certain intangible assets being fully amortized over the last twelve months.

Current wording

Amortization of intangibles, which is comprised of technology and customer relationships, decreased $0.1 million to $2.8 million for the second quarter of 2024. The decrease in comparison to the second quarter of 2023 was related to certain intangible assets being fully amortized over the last twelve months.

Previous wording

Net loss increased $1.9 million, or 32%, and Adjusted EBITDA decreased $10.0 million, or 40%, to $15.0 million for the first quarter of 2024. The net loss increase and Adjusted EBITDA decrease were primarily due to the changes in revenues and expenses discussed above. See “Non-GAAP Financial Measures” below for further information regarding Adjusted EBITDA.

Current wording

Net loss increased $11.5 million, or 453%, to $14.0 million for the second quarter of 2024, and Adjusted EBITDA decreased $12.0 million, or 55%, to $9.7 million for the second quarter of 2024. The net loss increase and Adjusted EBITDA decrease were primarily due to the changes in revenues and expenses discussed above. See “Non-GAAP Financial Measures” below for further information regarding Adjusted EBITDA.

Previous wording

Revenues decreased $21.3 million, or 13%, to $142.1 million for the first quarter of 2024. The decrease was prevalent across all lines of service and was primarily due to activity and pricing decreases, which were driven by a reduction in the U.S. rig count, as well as changes in product mix, each in comparison to the first quarter of 2023. More specifically, cementing revenue (including pump downs) decreased $14.2 million, or 23%, primarily due to pricing decreases coupled with a job count decrease of 8% in comparison to the first quarter of 2023. Coiled tubing revenue also decreased $2.8 million, or 8%, as total days worked decreased 2% in comparison to the first quarter of 2023. In addition, tools revenue decreased $2.6 million, or 7%, driven by a decrease in completion tools stages of 13% that was partially offset by changes in product mix, in comparison to the first quarter of 2023. Wireline revenue also decreased $1.7 million, or 6%, due largely to changes in product mix, in comparison to the first quarter of 2023.

Current wording

Revenues decreased $50.3 million, or 15%, to $274.5 million for the first six months of 2024. The decrease was prevalent across all lines of service and was primarily due to volume and pricing decreases, which were driven by a reduction in the U.S. rig count, in comparison to the first six months of 2023. More specifically, cementing revenue (including pump downs) decreased $26.5 million, or 22%, primarily due to pricing decreases coupled with a job count decrease of 8%, each in comparison to the first six months of 2023. Coiled tubing revenue also decreased $10.1 million, or 15%, primarily due to pricing decreases as well as lower utilization as total days worked decreased 6%, each in comparison to the first six months of 2023. In addition, tools revenue decreased $9.0 million, or 12%, driven by a decrease in completion tools stages of 16%, in comparison to the first six months of 2023. Wireline revenue also decreased $4.7 million, or 8%, due largely to pricing decreases in comparison to the first six months of 2023.

Previous wording

General and administrative expenses decreased $7.4 million to $12.3 million for the first quarter of 2024. The decrease was primarily related to $6.4 million in costs associated with the Units offering in the first quarter of 2023 that did not recur in the first quarter of 2024. The decrease is also partially attributed to a $0.8 million decrease in employee costs and a $0.2 million decrease in professional fees, each in comparison to the first quarter of 2023.

Current wording

General and administrative expenses decreased $9.2 million to $24.7 million for the first six months of 2024. The decrease was primarily related to $6.4 million in costs associated with the Units offering in the first six months of 2023 that did not recur in the first six months of 2024. The decrease is also partially attributed to a $2.6 million decrease in employee costs and a $0.2 million decrease in other general and administrative costs, each in comparison to the first six months of 2023.

Previous wording

We recorded a $0.1 million gain on revaluation of contingent liability for the first quarter of 2024 compared to a $0.3 million gain on revaluation of contingent liability for the first quarter of 2023. The gains for both periods were related to decreases in the fair value of the earnout associated with our acquisition of Frac Technology AS.

Current wording

We recorded a $0.2 million gain on revaluation of contingent liability for the first six months of 2024 compared to a $0.1 million gain on revaluation of contingent liability for the first six months of 2023. The gains for both periods were related to decreases in the fair value of the earnout associated with our acquisition of Frac Technology AS.

Previous wording

Gain on sale of property and equipment for the first quarter of 2024 decreased $0.3 million in comparison to the first quarter of 2023. The decrease was primarily attributed to lower gains on equipment sales between periods.

Current wording

Gain on sale of property and equipment for the first six months of 2024 decreased $0.4 million in comparison to the first six months of 2023. The decrease was primarily attributed to larger gains on equipment sales in the first six months of 2023 that did not recur in the first six months in 2024.

Previous wording

Non-operating expenses increased $0.2 million to $12.3 million for the first quarter of 2024. The increase was primarily attributed to an increase in interest expense on the 2028 Notes (as defined below) in comparison to interest expense on the 2023 Notes (as defined below) and the 2028 Notes in the first quarter of 2023.

Current wording

Non-operating expenses increased $0.1 million to $24.8 million for the first six months of 2024. The increase was primarily attributed to an increase in interest expense on the 2028 Notes (as defined and described below) in the first six months of 2024 compared to interest expense on the 2023 Notes (as defined and described below) and the 2028 Notes in the first six months of 2023.

Previous wording

We recorded an income tax provision of $0.2 million for the first quarter of 2024 compared to an income tax provision of $0.9 million for the first quarter of 2023. The difference between the periods was primarily attributed to our income tax position in state and foreign tax jurisdictions.

Current wording

We recorded an income tax provision of $0.3 million for the first six months of 2024 compared to an income tax provision of $0.2 million for the first six months of 2023. The difference between the periods was primarily attributed to our income tax position in state and foreign tax jurisdictions.

Previous wording

The following table presents a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measure of net income (loss) for the three months ended March 31, 2024 and 2023:

Current wording

The following table presents a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measure of net income (loss) for the three and six months ended June 30, 2024 and 2023:

Previous wording

Adjusted ROIC is a non-GAAP financial measure. We define Adjusted ROIC as adjusted after-tax net operating profit (loss), divided by average total capital. We define adjusted after-tax net operating profit (loss), which is a non-GAAP financial measure, as net income (loss) plus (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) fees and expenses relating to our Units offering and other refinancing activities, (iv) interest expense (income), (v) restructuring charges, (vi) loss (gain) on the sale of subsidiaries, (vii) loss (gain) on extinguishment of debt, and (viii) the provision (benefit) for deferred income taxes. We define total capital as book value of equity (deficit) plus the book value of debt less balance sheet cash and cash equivalents. We compute and use the average of the current and prior period-end total capital in determining Adjusted ROIC. Previously, in our SEC filings, press releases, and other investor materials issued prior to December 31, 2023, we referred to (a) Adjusted ROIC as ROIC and (b) adjusted after-tax net operating profit (loss) as after-tax net operating profit (loss). We have made no changes to the manner in which these measures are calculated and have only revised the titles of these measures to more clearly identify them as non-GAAP measures.

Current wording

Adjusted ROIC is a non-GAAP financial measure. We define Adjusted ROIC as adjusted after-tax net operating profit (loss), divided by average total capital. We define adjusted after-tax net operating profit (loss), which is a non-GAAP financial measure, as net income (loss) plus (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) fees and expenses relating to our Units offering and other refinancing activities, (iv) interest expense (income), (v) restructuring charges, (vi) loss (gain) on the sale of subsidiaries, (vii) loss (gain) on extinguishment of debt, and (viii) the provision (benefit) for deferred income taxes. We define total capital as book value of equity (deficit) plus the book value of debt less balance sheet cash and cash equivalents. We compute and use the average of the current and prior period-end total capital in determining Adjusted ROIC. Previously, in our SEC filings, press releases, and other investor materials issued prior to December 31, 2023, we referred to (a) Adjusted ROIC as ROIC and (b)

Previous wording

The following table provides our calculation of Adjusted ROIC for the three months ended March 31, 2024 and 2023. The following table also presents ROIC (defined as net income (loss), divided by average total capital) and a reconciliation of the non-GAAP financial measure of adjusted after-tax net operating profit (loss) to the most directly comparable GAAP measure of net income (loss), in each case for the three months ended March 31, 2024 and 2023.

Current wording

The following table provides our calculation of Adjusted ROIC for the three and six months ended June 30, 2024 and 2023. The following table also presents ROIC (defined as net income (loss), divided by average total capital) and a reconciliation of the non-GAAP financial measure of adjusted after-tax net operating profit (loss) to the most directly comparable GAAP measure of net income (loss), in each case for the three and six months ended June 30, 2024 and 2023.

Previous wording

The following table presents a reconciliation of adjusted gross profit (loss) to GAAP gross profit (loss) for the three months ended March 31, 2024 and 2023:

Current wording

The following table presents a reconciliation of adjusted gross profit (loss) to GAAP gross profit (loss) for the three and six months ended June 30, 2024 and 2023:

Previous wording

At March 31, 2024, we had $10.2 million of cash and cash equivalents and $27.3 million of availability under the ABL Credit Facility (as defined and described below), which resulted in a total liquidity position of $37.5 million. Our liquidity position will continue to be impacted by the semi-annual interest payments ($19.5 million based on amounts outstanding as of March 31, 2024) to the holders of the 2028 Notes, which began on August 1, 2023. We believe that, based on our current forecasts, our cash on hand, together with cash flows from operations and borrowings under the ABL Credit Facility, should be sufficient to fund our capital requirements for at least the next twelve months from the issuance date of our condensed consolidated financial statements. However, we can make no assurance regarding our ability to achieve our forecasts, which are materially dependent on our financial performance and the ever-changing market.

Current wording

At June 30, 2024, we had $26.0 million of cash and cash equivalents and $24.8 million of availability under the ABL Credit Facility, which resulted in a total liquidity position of $50.8 million. Our liquidity position will continue to be impacted by the semi-annual interest payments ($19.5 million based on amounts outstanding as of June 30, 2024) to the holders of the 2028 Notes, which began on August 1, 2023. We believe that, based on our current forecasts, our cash on hand, together with cash flows from operations and borrowings under the ABL Credit Facility, should be sufficient to fund our capital requirements for at least the next twelve months from the issuance date of our condensed consolidated financial statements. However, we can make no assurance regarding our ability to achieve our forecasts, which are materially dependent on our financial performance and the ever-changing market.

Previous wording

Under the Equity Distribution Agreement, we will set the parameters for the sale of the shares thereunder, including the number of shares to be sold, the time period during which sales are requested to be made and any price below which sales may not be made. During the quarter ended March 31, 2024, no sales were made under the Equity Distribution Agreement.

Current wording

Under the Equity Distribution Agreement, we will set the parameters for the sale of the shares thereunder, including the number of shares to be sold, the time period during which sales are requested to be made and any price below which sales may not be made. During the three months ended June 30, 2024, 4,199,074 shares were sold under the Equity Distribution Agreement, which generated net proceeds to us of $6.8 million after deducting commissions of $0.2 million.

Previous wording

On each May 15 and November 14, commencing November 14, 2023 (each, an “Excess Cash Flow Offer Date”), we are required to make an offer (an “Excess Cash Flow Offer”) to all holders of the 2028 Notes and, if required by the terms of any Pari Passu Notes Lien Indebtedness (as defined in the 2028 Notes Indenture), to any holders of any Pari Passu Notes Lien Indebtedness to purchase, prepay or redeem, together on a pro-rata basis, the maximum principal amount of the 2028 Notes and any such Pari Passu Notes Lien Indebtedness (plus all accrued interest (including additional interest, if any) on the 2028 Notes and any such Pari Passu Notes Lien Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be purchased, prepaid or redeemed using an amount of cash equal to the Excess Cash Flow Amount (as defined in the 2028 Notes Indenture and which is 75.0% of Excess Cash Flow (as defined in the 2028 Notes Indenture), as determined immediately prior to the Excess Cash Flow Offer Date), if any, subject to certain exceptions set forth in the 2028 Notes Indenture. The offer price in any such offer will be equal to 100% of the principal amount of the 2028 Notes and any such Pari Passu Notes Lien Indebtedness (or, in respect of any such Pari Passu Notes Lien Indebtedness, such lesser price, if any, as may be provided for by the terms of such Pari Passu Notes Lien Indebtedness), plus accrued and unpaid interest and additional interest, if any, to, but excluding, the date of purchase, prepayment or redemption, subject to the rights of holders of the 2028 Notes or any such Pari Passu Notes Lien Indebtedness on the relevant record date to receive interest due on an interest payment date that is on or prior to the date of purchase, prepayment or redemption, and will be payable in cash. For the Excess Cash Flow Offer Date of May 15, 2024, the Excess Cash Flow Amount will be $0, and as such, no Excess Cash Flow Offer will be made.

Current wording

On each May 15 and November 14, commencing November 14, 2023 (each, an “Excess Cash Flow Offer Date”), we are required to make an offer (an “Excess Cash Flow Offer”) to all holders of the 2028 Notes and, if required by the terms of any Pari Passu Notes Lien Indebtedness (as defined in the 2028 Notes Indenture), to any holders of any Pari Passu Notes Lien Indebtedness to purchase, prepay or redeem, together on a pro-rata basis, the maximum principal amount of the 2028 Notes and any such Pari Passu Notes Lien Indebtedness (plus all accrued interest (including additional interest, if any) on the 2028 Notes and any such Pari Passu Notes Lien Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be purchased, prepaid or redeemed using an amount of cash equal to the Excess Cash Flow Amount (as defined in the 2028 Notes Indenture and which is 75.0% of Excess Cash Flow (as defined in the 2028 Notes Indenture), as determined immediately prior to the Excess Cash Flow Offer Date), if any, subject to certain exceptions set forth in the 2028 Notes Indenture. The offer price in any such offer will be equal to 100% of the principal amount of the 2028 Notes and any such Pari Passu Notes Lien Indebtedness (or, in respect of any such Pari Passu Notes Lien Indebtedness, such lesser price, if any, as may be provided for by the terms of such Pari Passu Notes Lien Indebtedness), plus accrued and unpaid interest and additional interest, if any, to, but excluding, the date of purchase, prepayment or redemption, subject to the rights of holders of the 2028 Notes or any such Pari Passu Notes Lien Indebtedness on the relevant record date to receive interest due on an interest payment date that is on or prior to the date of purchase, prepayment or redemption, and will be payable in cash. For the Excess Cash Flow Offer Date of May 15, 2024, the Excess Cash Flow Amount was $0, and as such, no Excess Cash Flow Offer was made.

Previous wording

On October 25, 2018, we entered into a credit agreement dated as of October 25, 2018 (the “2018 ABL Credit Agreement”) that permitted aggregate borrowings of up to $200.0 million, subject to a borrowing base, including a Canadian tranche with a sub-limit of up to $25.0 million and a sub-limit of $50.0 million for letters of credit (the “ABL Credit Facility”). On January 17, 2023, we entered into the First Amendment to Credit Agreement (the “ABL Facility Amendment”) with JP Morgan Chase Bank, N.A., as administrative agent, and the lender parties thereto, which amended certain terms of the 2018 ABL Credit Agreement (as amended, the “ABL Credit Agreement”).

Current wording

On October 25, 2018, we entered into a credit agreement dated as of October 25, 2018 (the “2018 ABL Credit Agreement”) that permitted aggregate borrowings of up to $200.0 million, subject to a borrowing base, including a Canadian tranche with a sub-limit of up to $25.0 million and a sub-limit of $50.0 million for letters of credit (the “ABL Credit Facility”).

Previous wording

Offered Rate to Term Secured Overnight Financing Rate with a 10 basis point spread adjustment and increased pricing from the existing range of 1.75% to 2.25% to a range of 2.00% to 2.50%, in each case depending on our leverage ratio, (c) decreased the Canadian tranche sub-limit from $25.0 million to $5.0 million, and (d) decreased the letter of credit sub-limit from $50.0 million to $10.0 million. Certain other changes to the terms of the ABL Credit Facility as a result of the ABL Facility Amendment are summarized in Note 8 – Debt Obligations included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Current wording

On January 17, 2023, we entered into the First Amendment to Credit Agreement (the “First ABL Facility Amendment”) with JP Morgan Chase Bank, N.A., as administrative agent, and the lender parties thereto, which became effective on January 30, 2023. Pursuant to the First ABL Facility Amendment, the maturity date of the ABL Credit Facility was extended from October 25, 2023 to January 29, 2027. In addition, the First ABL Facility Amendment, among other changes, revised the terms of the ABL Credit Facility as follows: (a) decreased the size of the ABL Credit Facility from $200.0 million to $150.0 million, subject to the borrowing base, (b) changed the interest rate benchmark from London Interbank Offered Rate to Term Secured Overnight Financing Rate with a 10 basis point spread adjustment and increased pricing from the existing range of 1.75% to 2.25% to a range of 2.00% to 2.50%, in each case depending on our leverage ratio, (c) decreased the Canadian tranche sub-limit from $25.0 million to $5.0 million, and (d) decreased the letter of credit sub-limit from $50.0 million to $10.0 million. Certain other changes to the terms of the ABL Credit Facility as a result of the First ABL Facility Amendment are summarized in Note 8 – Debt Obligations included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Previous wording

The ABL Credit Agreement contains various affirmative and negative covenants, including financial reporting requirements and limitations on indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other restricted payments, investments (including acquisitions) and transactions with affiliates. We were in compliance with all covenants contained in the ABL Credit Agreement as of March 31, 2024.

Current wording

The 2018 ABL Credit Agreement, as amended by the ABL Facility Amendments (the “ABL Credit Agreement”), contains various affirmative and negative covenants, including financial reporting requirements and limitations on indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other restricted payments, investments (including acquisitions) and transactions with affiliates. We were in compliance with all covenants contained in the ABL Credit Agreement as of June 30, 2024.

Previous wording

At March 31, 2024, we had $52.0 million of borrowings under the ABL Credit Facility, and our availability under the ABL Credit Facility was approximately $27.3 million, net of outstanding letters of credit of $1.3 million.

Current wording

At June 30, 2024, we had $52.0 million of borrowings under the ABL Credit Facility, and our availability under the ABL Credit Facility was approximately $24.8 million, net of outstanding letters of credit of $1.9 million. On July 29, 2024, we borrowed an additional $3.0 million under the ABL Credit Facility.

Previous wording

For additional information on the ABL Credit Facility and the ABL Facility Amendment, see Note 8 – Debt Obligations included in Item 1 of Part I of this Quarter Report on Form 10-Q.

Current wording

For additional information on the ABL Credit Facility and the ABL Facility Amendments, see Note 8 – Debt Obligations included in Item 1 of Part I of this Quarter Report on Form 10-Q.

Previous wording

Cash flows provided by (used in) operations by type of activity were as follows for the three months ended March 31, 2024 and 2023:

Current wording

Cash flows provided by (used in) operations by type of activity were as follows for the six months ended June 30, 2024 and 2023:

Previous wording

Net cash used in operating activities was $8.8 million in the first three months of 2024 compared to $4.0 million in net cash provided in the first three months of 2023. The change was primarily attributed to a $9.1 million decrease in cash provided by accounts receivable collections, coupled with a $1.4 million decrease in cash provided by other working capital, as well as a $2.3 million decrease in cash provided by operations, adjusted for any non-cash items, each in comparison to the first three months of 2023.

Current wording

Net cash provided by operating activities was $4.1 million in the first six months of 2024 compared to $31.1 million in net cash provided in the first six months of 2023. The change was primarily attributed to a $14.1 million decrease in cash provided by operations driven mainly by an increased net loss in comparison to the first six months of 2023. The change was also partially attributed to a $12.9 million decrease in cash provided by working capital, driven mainly by a $6.5 million decrease in cash provided by accounts receivable collections in comparison to the first six months of 2023.

Previous wording

Net cash used in investing activities was $5.5 million during the first three months of 2024 compared to $5.3 million in net cash used in the first three months of 2023. The increase was attributed to a $1.0 million decrease in proceeds from the sale of property and equipment (including insurance), largely offset by a $0.8 million decrease in cash purchases of property and equipment, each in comparison to the first three months of 2023.

Current wording

Net cash used in investing activities was $8.1 million during the first six months of 2024 compared to $11.1 million in net cash used in the first six months of 2023. The decrease was attributed to a $4.2 million decrease in cash purchases of property and equipment, partially offset by a $1.2 million decrease in proceeds from the sale of property and equipment (including insurance), each in comparison to the first six months of 2023.

Previous wording

Net cash used in financing activities was $6.2 million during the first three months of 2024 compared to $5.3 million in net cash provided in the first three months of 2023. The change was primarily attributed to $279.8 million in proceeds received from the Units offering as well as $40.0 million in proceeds received in connection with the ABL Credit Facility in the first three months of 2023, neither of which recurred in the first three months of 2024. Additionally, the change was partly attributed to $5.0 million in payments on the ABL Credit Facility in the first three months of 2024 that did not occur in 2023. The overall increase in net cash used was largely offset by the $307.3 million redemption of the 2023 Notes as well as

Current wording

Net cash used in financing activities was $0.7 million during the first six months of 2024 compared to $3.9 million in net cash provided in the first six months of 2023. The change was primarily attributed to $279.8 million in proceeds received from the Units offering as well as $40.0 million in proceeds received in connection with the ABL Credit Facility in the first six months of 2023, neither of which recurred in the first six months of 2024. Additionally, the change was partly attributed to $5.0 million in payments on the ABL Credit Facility in the first six months of 2024 that did not occur in the first six months of 2023. The overall increase in net cash used was largely offset by the $307.3 million redemption of the 2023 Notes as well as $6.3 million in debt issuance costs associated with the Units offering in the first six months of 2023, neither of which recurred in the first six months of 2024. The overall increase in net cash used was also partially offset by the $6.8 million in proceeds received from the issuance of common stock under our ATM program in the first six months of 2024 that did not occur in the first six months of 2023.