Nine Energy Service Inc

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 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.

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 of $2.11 for the first nine months of 2024, 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 third quarter of 2024 has declined by approximately 54% 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. Towards the end of the third quarter of 2024, West Texas Intermediate oil prices began to decline, reaching as low as $66.73 on September 10, 2024, a decline of approximately 24% as compared to the highest price thus far in 2024 of $87.69 on April 5, 2024, due to OPEC and other oil exporting nations potentially bringing production back. The ongoing conflict in the

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 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.

Current wording

Due to the spot-market nature of our business, our revenue and profitability generally moves very similarly to rig, frac, and stage counts in U.S. rig count. Since the end of 2023, the U.S. rig count has declined by around 35 rigs, or approximately 6%. 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. In the third quarter of 2024, despite a declining rig count as compared to the second quarter of 2024, we outperformed market drivers, and our revenue and profitability for the third quarter of 2024 was improved as compared to the second quarter of 2024 due in large part to market share gains achieved by our cementing division, which we believe has been able to differentiate itself in the market with its advanced cementing slurries and excellent wellsite execution. Due to typical budget exhaustion, weather, and holiday slow-downs, as well as an expected decrease in international tool sales, we anticipate fourth quarter revenue and profitability to be lower as compared to the third quarter of 2024.

Previous wording

Significant factors that are likely to affect commodity prices moving forward include actions of the members of OPEC and other oil exporting nations that relate to or impact oil production or supply; the effect of energy, monetary, and trade policies of the U.S.; the pace of economic growth in the U.S. and throughout the world, including the potential for macro weakness; geopolitical and economic developments in the U.S. and globally, including conflicts, instability, acts of war or terrorism in oil producing countries or regions, particularly Russia, the Middle East, South America and Africa; changes to energy regulations and policies, including those of the U.S. Environmental Protection Agency and other governmental bodies; and overall North American oil and natural gas supply and demand fundamentals, including the pace at which export capacity grows. Furthermore, although as noted above, our customers’ activity and spending levels, and thus demand for our services and products, are strongly influenced by current and expected oil and natural gas prices, even with price improvements in oil and natural gas, operator activity may not materially increase, as operators remain focused on operating within their capital plans and uncertainty remains around supply and demand fundamentals.

Current wording

Significant factors that are likely to affect commodity prices moving forward include geopolitical and economic developments in the U.S. and globally, including conflicts, instability, acts of war or terrorism in oil producing countries or regions, particularly the Middle East, Russia, South America and Africa; actions of the members of OPEC and other oil exporting nations that relate to or impact oil production or supply; weather conditions; the effect of energy, monetary, and trade policies of the U.S.; the pace of economic growth in the U.S. and throughout the world, including the potential for macro weakness; changes to energy regulations and policies, including those of the U.S. Environmental Protection Agency and other governmental bodies; and overall North American oil and natural gas supply and demand fundamentals, including the pace at which export capacity grows. Furthermore, although as noted above, our customers’ activity and spending levels, and thus demand for our services and products, are strongly influenced by current and expected oil and natural gas prices, even with price improvements in oil and natural gas, operator activity may not materially increase, as operators remain focused on operating within their capital plans and uncertainty remains around supply and demand fundamentals.

Previous wording

Revenues decreased $29.0 million, or 18%, to $132.4 million for the second quarter 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, each in comparison to the second quarter of 2023. More specifically, cementing revenue (including pump downs) decreased $12.3 million, or 21%, primarily due to pricing decreases coupled with a job count decrease of 8%, each in comparison to the second quarter of 2023. Coiled tubing revenue also decreased $7.3 million, or 22%, primarily driven by pricing decreases coupled with volume decreases as well as lower utilization as total days worked decreased 10%, all in comparison to the second quarter of 2023. In addition, tools revenue decreased $6.4 million, or 17%, driven by a decrease in completion tools stages of 14% in comparison to the second quarter of 2023. Wireline revenue also decreased $3.0 million, or 10%, due largely to pricing decreases, in comparison to the second quarter of 2023.

Current wording

Revenues decreased $2.5 million, or 2%, to $138.2 million for the third quarter of 2024. The decrease in comparison to the third quarter of 2023 was prevalent across all lines of service and was primarily due to pricing decreases and current market conditions, as the average U.S. rig count for the third quarter of 2024 decreased 10%, in comparison to the third quarter of 2023. More specifically, tools revenue decreased $1.2 million, or 4%, driven by a decrease in completion tools stages of 5%, in comparison to the third quarter of 2023. In addition, although job count increased 15% in comparison to the third quarter of 2023, cementing revenue (including pump downs) decreased $0.7 million, or 1%, primarily due to pricing decreases related to changes in mix of services between periods. Further, coiled tubing revenue decreased $0.2 million, or 1%, due largely to pricing decreases, and wireline revenue decreased $0.4 million, or 2%, due largely to changes in mix of services, each in comparison to the third quarter of 2023.

Previous 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.

Current wording

Cost of revenues decreased $4.2 million, or 4%, to $113.5 million for the third quarter of 2024. The decrease in comparison to the third quarter of 2023 was primarily driven by a reduction in activity for certain lines of service in comparison to the third quarter of 2023 as described above under “Revenues.” More specifically, the decrease was primarily attributed to a $1.9 million decrease in materials installed and consumed while performing services, a $0.9 million decrease in employee-related costs, a $0.5 million decrease in travel, meals, and entertainment expenses, a $0.3 million decrease in repairs and maintenance expenses, and a $0.3 million decrease in cost of revenue type restructuring costs, each in comparison to the third quarter of 2023.

Previous 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.”

Current wording

Adjusted gross profit increased approximately $1.8 million to $24.7 million for the third quarter of 2024 due to the factors described above under “Revenues” and “Cost of Revenues.”

Previous wording

General and administrative expenses decreased $1.8 million to $12.5 million for the second quarter of 2024. The decrease was primarily related to a $1.9 million decrease in employee-related costs between periods.

Current wording

General and administrative expenses decreased $0.7 million to $12.4 million for the third quarter of 2024. The decrease was primarily related to a $0.4 million decrease in marketing expenses and a $0.3 million decrease in professional fees between periods.

Previous 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.

Current wording

Depreciation expense decreased $1.1 million to $6.2 million for the third quarter of 2024. The decrease in comparison to the third 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 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.

Current wording

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

Previous wording

We recorded a $0.1 million gain on revaluation of contingent liability for the second quarter of 2024 compared to a $0.2 million loss on revaluation of contingent liability for the second quarter of 2023. The $0.3 million change was related to a decrease in the fair value of the earnout associated with our acquisition of Frac Technology AS in comparison to the second quarter of 2023.

Current wording

We recorded a $0.4 million loss on revaluation of contingent liability for the third quarter of 2024 compared to a $0.5 million loss on revaluation of contingent liability for the third quarter of 2023. The losses for both periods were related to increases in the fair value of the earnout associated with our acquisition of Frac Technology AS.

Previous wording

We recorded an income tax provision of $0.1 million for the second quarter of 2024 compared to an income tax benefit of $0.7 million for the second 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 $0.1 million for the third quarter of 2024 compared to an income tax provision of $0.2 million for the third quarter of 2023. The difference between the periods was primarily attributed to our income tax position in state and foreign tax jurisdictions.

Previous 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.

Current wording

Net loss decreased $3.1 million, or 24%, to $10.1 million for the third quarter of 2024, and Adjusted EBITDA increased $2.7 million, or 23%, to $14.3 million for the third quarter of 2024. The changes were primarily due to the fluctuations in revenues and expenses discussed above. See “Non-GAAP Financial Measures” below for further information regarding Adjusted EBITDA.

Previous wording

Results for the Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

Current wording

Results for the Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

Previous 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.

Current wording

Revenues decreased $52.8 million, or 11%, to $412.7 million for the first nine months of 2024. The decrease in comparison to the first nine months of 2023 was prevalent across all lines of service and was primarily due to pricing decreases and current market conditions, as the average U.S. rig count for the first nine months of 2024 decreased 15%, in comparison to the first nine months of 2023. More specifically, cementing revenue (including pump downs) decreased $27.2 million, or 16%, primarily due to pricing decreases coupled with a job count decrease of 1%, each in comparison to the first nine months of 2023. Coiled tubing revenue also decreased $10.3 million, or 11%, primarily due to pricing decreases as well as lower utilization as total days worked decreased 1%, each in comparison to the first nine months of 2023. In addition, tools revenue decreased $10.1 million, or 9%, driven by a decrease in completion tools stages of 13%, in comparison to the first nine months of 2023. Further, although total wireline stages increased 11%, in comparison to the first nine months of 2023, wireline revenue also decreased $5.2 million, or 6%, due largely to pricing decreases between periods.

Previous wording

Cost of revenues decreased $26.5 million, or 10%, to $228.1 million for the first six months of 2024. The decrease was primarily driven by a reduction in activity for certain lines of service in comparison to the first six months of 2023 as described above under “Revenues.” More specifically, the decrease was attributed to a $13.7 million decrease in materials installed and consumed while performing services, a $8.6 million decrease in employee costs, a $1.5 million decrease in vehicle expense, a $0.8 million decrease in repair and maintenance expense, a $0.7 million decrease in travel expenses, a $0.7 million decrease in restructuring-type expenses, and a $0.5 million decrease in other costs, each in comparison to the first six months of 2023.

Current wording

Cost of revenues decreased $30.7 million, or 8%, to $341.5 million for the first nine months of 2024. The decrease in comparison to the first nine months of 2023 was primarily driven by a reduction in activity for certain lines of service in comparison to the first nine months of 2023 as described above under “Revenues.” More specifically, the decrease was attributed to a $15.6 million decrease in materials installed and consumed while performing services, a $9.4 million decrease in employee costs, a $1.6 million decrease in vehicle expense, a $1.3 million decrease in travel, meals, and entertainment expenses, a $1.1 million decrease in repairs and maintenance expenses, a $1.0 million decrease in general and administrative type restructuring costs, and a $0.7 million decrease in other costs, each in comparison to the first nine months of 2023.

Previous wording

Adjusted gross profit decreased $23.8 million to $46.5 million for the first six months of 2024 due to the factors described above under “Revenues” and “Cost of Revenues.”

Current wording

Adjusted gross profit decreased $22.0 million to $71.2 million for the first nine months of 2024 due to the factors described above under “Revenues” and “Cost of Revenues.”

Previous 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.

Current wording

General and administrative expenses decreased $9.9 million to $37.1 million for the first nine months of 2024. The decrease in comparison to the first nine months of 2023 was primarily related to $6.4 million in costs associated with the Units offering in the first nine months of 2023 that did not reoccur in the first nine months of 2024. The decrease is also partially attributed to a $2.4 million decrease in employee costs, a $0.6 million decrease in marketing expenses, and a $0.5 million decrease in professional fees, each in comparison to the first nine months of 2023.

Previous wording

Depreciation expense decreased $1.5 million to $13.3 million for the first six months of 2024. The decrease in comparison to the first six months 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 $2.6 million to $19.6 million for the first nine months of 2024. The decrease in comparison to the first nine months 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 comprised of technology and customer relationships, decreased $0.2 million to $5.6 million for the first six months of 2024. The decrease in comparison to the first six months 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 $0.3 million to $8.4 million for the first nine months of 2024. The decrease in comparison to the first nine months of 2023 was related to certain intangible assets being fully amortized over the last twelve months.

Previous 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.

Current wording

We recorded a $0.2 million loss on revaluation of contingent liability for the first nine months of 2024 and a $0.4 million loss on revaluation of contingent liability for the first nine months of 2023. The losses for both periods were related to increases 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 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.

Current wording

We recorded a $0.5 million loss on sale of property and equipment for the first nine months of 2024 and a $0.4 million gain on sale of property and equipment for the first nine months of 2023. The change was primarily attributed to gains on equipment sales in the first nine months of 2023 that did not reoccur in the first nine months in 2024, as well as losses on equipment sales in the first nine months of 2024 that did not occur in the first nine months of 2023.

Previous 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.

Current wording

Non-operating expenses increased $0.4 million to $37.3 million for the first nine months of 2024. The increase in comparison to the first nine months of 2023 was primarily attributed to a $0.3 million decrease in interest income earned on cash in the first nine months of 2024, as our average cash for the period decreased in comparison to the first nine months of 2023. The increase was also partially attributed to an increase in interest expense on the 2028 Notes (as defined and described below) in the first nine months of 2024 compared to interest expense on the 2023 Notes (as defined and described below) and the 2028 Notes in the first nine months of 2023.

Previous 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.

Current wording

We recorded an income tax provision of $0.4 million for both the first nine months of 2024 and the first nine months of 2023. The provision for both periods was primarily attributed to our income tax position in state and foreign tax jurisdictions.

Previous wording

Net loss increased $13.5 million, or 156%, to $22.1 million for the first six months of 2024, and Adjusted EBITDA decreased $22.0 million, or 47%, to $24.8 million for the first six months 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 $10.3 million, or 47%, to $32.2 million for the first nine months of 2024, and Adjusted EBITDA decreased $19.3 million, or 33%, to $39.1 million for the first nine months of 2024. The changes were primarily due to the fluctuations in revenues and expenses discussed above. See “Non-GAAP Financial Measures” below for further information regarding Adjusted EBITDA.

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 and six months ended June 30, 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 nine months ended September 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)

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) 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.

Previous 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.

Current wording

The following table provides our calculation of Adjusted ROIC for the three and nine months ended September 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 nine months ended September 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 and six months ended June 30, 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 nine months ended September 30, 2024 and 2023:

Previous wording

Historically, we have met our liquidity needs principally from cash on hand, cash flows from operations and, if needed, external borrowings and issuances of debt securities. Our principal uses of cash are to fund capital expenditures, service our outstanding debt, and fund our working capital requirements. Due to our high level of variable costs and the asset-light make-up of our business, we have historically been able to quickly implement cost-cutting measures and will continue to adapt as the market dictates. We have also used cash to make open market repurchases of our debt and may, from time to time, continue to make such repurchases when it is opportunistic to do so to manage our debt maturity profile.

Current wording

Historically, we have met our liquidity needs principally from cash on hand, cash flows from operations and, if needed, external borrowings and issuances of debt and equity securities. Our principal uses of cash are to fund capital expenditures, service our outstanding debt, and fund our working capital requirements. Due to our high level of variable costs and the asset-light make-up of our business, we have historically been able to quickly implement cost-cutting measures and will continue to adapt as the market dictates. For example, earlier this year, we implemented certain cost reduction and supply chain initiatives. These ongoing initiatives have helped reduce some of our largest material costs, and starting at the end of the second quarter of 2024, we began to see positive impacts on our profitability as a result of such efforts. We have also used cash to make open market repurchases of our debt and may, from time to time, continue to make such repurchases when it is opportunistic to do so to manage our debt maturity profile.

Previous wording

We have decreased our planned capital expenditure budget, excluding possible acquisitions, for 2024 to be between $10.0 million and $15.0 million in conjunction with market declines and to preserve liquidity until the market returns to more normalized levels. The nature of our capital expenditures is comprised of a base level of investment required to support our current operations and amounts related to growth and company initiatives. Capital expenditures for growth and company initiatives are discretionary. We continually evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including expected industry activity levels and company initiatives.

Current wording

For 2024, our planned capital expenditure budget, excluding possible acquisitions, is expected to be between $10.0 million and $15.0 million. The nature of our capital expenditures is comprised of a base level of investment required to support our current operations and amounts related to growth and company initiatives. Capital expenditures for growth and company initiatives are discretionary. We continually evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including expected industry activity levels and company initiatives. For example, our planned capital expenditure budget, excluding possible acquisitions, for 2024 was initially expected to be between $15.0 million and $25.0 million and was subsequently reduced to be between $10.0 million and $15.0 million in conjunction with market declines and to preserve liquidity until the market returns to more normalized levels. Although we do not budget for acquisitions, pursuing growth through acquisitions may continue to be a part of our business strategy. Our ability to make significant additional acquisitions for cash will require us to obtain additional equity or debt financing, which we may not be able to obtain on terms acceptable to us or at all.

Previous wording

We continually monitor potential capital sources, including equity and debt financing, to meet our investment and target liquidity requirements. Our future success and growth will be highly dependent on our ability to continue to access outside sources of capital.

Current wording

We continually monitor potential capital sources, including equity and debt financing, to meet our investment and target liquidity requirements. Our future success and growth will be highly dependent on our ability to continue to access outside sources of capital, which we cannot guarantee.

Previous 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.

Current wording

At September 30, 2024, we had $15.7 million of cash and cash equivalents and $27.6 million of availability under the ABL Credit Facility (as defined and described below), which resulted in a total liquidity position of $43.3 million. Our liquidity position will continue to be impacted by the semi-annual interest payments ($19.5 million based on amounts outstanding as of September 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 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.

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 September 30, 2024, 1,181,090 shares were sold under the Equity Distribution Agreement, which generated net proceeds to us of $1.4 million after deducting commissions of $0.1 million. During the nine months ended September 30, 2024, 5,380,164 shares were sold under the Equity Distribution Agreement, which generated net proceeds to us of $8.2 million after deducting commissions of $0.3 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 was $0, and as such, no Excess Cash Flow Offer was 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

Previous 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.

Current wording

At September 30, 2024, we had $50.0 million of borrowings under the ABL Credit Facility, and our availability under the ABL Credit Facility was approximately $27.6 million, net of outstanding letters of credit of $2.2 million. On October 10, 2024, the Company repaid $3.0 million of outstanding borrowings on the ABL Credit Facility.

Previous 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:

Current wording

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

Previous 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.

Current wording

Net cash used in operating activities was $1.8 million in the first nine months of 2024 compared to $21.2 million in net cash provided in the first nine months of 2023. The change was primarily attributed to a $12.0 million decrease in cash provided by operations driven mainly by an increased net loss in comparison to the first nine months of 2023. The change was also partially attributed to a $11.0 million decrease in cash provided by working capital, driven mainly by a $11.6 million decrease in cash provided by accounts receivable collections in comparison to the first nine months of 2023.

Previous 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.

Current wording

Net cash used in investing activities was $11.2 million during the first nine months of 2024 compared to $14.7 million in net cash used in the first nine months of 2023. The decrease was attributed to a $4.5 million decrease in cash purchases of property and equipment, partially offset by a $1.0 million decrease in proceeds from the sale of property and equipment (including insurance), each in comparison to the first nine months of 2023.

Previous 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.

Current wording

Net cash used in financing activities was $2.1 million during the first nine months of 2024 compared to $11.6 million in net cash used in the first nine months of 2023. The decrease was primarily attributed to 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 nine months of 2023, neither of which reoccurred in the first nine months of 2024. The decrease in net cash used was also partially due to $8.2 million in proceeds received from the issuance of common stock under our ATM program in the first nine months of 2024 that did not occur in the first nine months of 2023. Additionally, the decrease was partly attributed to a $5.0 million reduction in payments on the ABL Credit Facility between periods. The overall decrease in net cash used was largely offset by $279.8 million in proceeds received from the Units offering in the first nine months of 2023, that did not reoccur in the first nine months of 2024. The decrease was also offset by a $37.0 million reduction in proceeds from the ABL Credit Facility between periods, as well as a $0.6 million increase in payments on short term debt between periods.