Q3 2025 Earnings Call Contradictions: Service Market Pressures, International Strategy Shifts, and Future Activity Uncertainty

Date of Call: October 31, 2025

Financials Results

• Revenue: $132M, below original guidance of $135M–$145M; revenue down sequentially across divisions due to rig declines and pricing pressure

Guidance:

• Q4 2025 revenue projected $122M–$132M; revenue and adjusted EBITDA expected to be down versus Q3.
• Expect no significant activity changes in Q4 but typical seasonality (weather, holidays, budget exhaustion) and continued low pricing.
• 2026 activity remains uncertain as operators evaluate CapEx; company expects international revenue to increase year-to-date.

Business Commentary:

* Market Challenges and Revenue Impact: - Nine Energy Service reported revenue of $132 million for Q3 2025, below the original guidance range of $135 million to $145 million. - The decline was driven by significant rig declines, oil price drops, and market tariffs.

• Activity and Pricing Pressure:
• The U.S. rig count declined from 592 to 549 rigs between Q1 and Q3 2025, a 7% drop.

• This led to pricing pressure, especially in the Permian, where average rig count decreased by 15%.

• Domestic Market Share Losses:

• The Completion Tools division experienced domestic market share losses due to customer consolidation and changes in completion designs.

• This resulted in revenue and earnings impacts for the quarter.

• International Revenue Growth:

• Nine Energy Service grew international revenue by approximately 19% in the first 9 months of 2025 compared to the same period in 2024.

• Growth was driven by increased sales in the UAE, Argentina, and Australia.

• Financial Liquidity and Cash Management:

• As of September 30, 2025, Nine's total liquidity position was $40.3 million.
• The company's borrowing base is expected to be reduced by $2.2 million due to appraised inventory value impact.

Sentiment Analysis:

Overall Tone: Negative

• Revenue was $132 million, "below the range of our original guidance of $135 million to $145 million." Management cited "significant pricing pressure" and rig declines (U.S. rig count down from 592 to 549). Q4 revenue/EBITDA expected to be down and Permian pricing is especially pressured.

Q&A:

• Question from John Daniel (Daniel Energy Partners, LLC): So Ann, I'm going to ask probably one of the dumbest questions of your career. But when you think about like the pain that's happening right now in the service market, and I think most people would say that we're probably flattish next year, right, maybe down -- maybe down if oil prices drop. But I'm just curious, like, in this environment, at what point do customers recognize that relief is needed, where we got to -- you've been through plenty of cycles or at some point, you can go to your customers and say, "Hey, this ain't working anymore." When do we hit that point? And when will they listen?
  Response: Management: We may be approaching operational pain points (e.g., frac availability issues), but operators' constrained CapEx and weak commodity prices make meaningful relief unlikely or complicated in the near term.

• Question from John Daniel (Daniel Energy Partners, LLC): Okay. Fair enough. And then just one sort of a nerdy question on coiled tubing, but there's at least 1 person that's rolled out the 2 7/8 unit. I'm just curious, is there a chance that we could see a step change, if you will, in terms of what type of equipment will be needed for the coiled market? Or is that -- do you see that as sort of a unique opportunity, If you will?
  Response: Management: Technically larger coiled tubing could be a step change for long laterals, but capital constraints in the service sector limit adoption despite ongoing demand for long laterals.

Contradiction Point 1

Demand and Pricing Pressures in the Service Market

It reflects differing perspectives on the demand and pricing pressures affecting the service market, which could impact the company's financial performance and strategic positioning.

When will customers recognize the need for service market relief and act accordingly? - John Daniel (Daniel Energy Partners, LLC)

2025Q3: We are starting to hear about frac availability problems due to underinvestment, reaching a point where operators are realizing the need for relief. However, operators are under pressure with flat or reduced CapEx next year and moving to Tier 2 or lesser acreage, making it challenging for the service sector. The situation is complicated with pressure on both service and upstream sectors. - Ann Fox(CEO)

Can you detail the pricing pressures and specify which business line is most affected, including the magnitude of the impact? - Waqar Syed (ATB Capital Markets)

2025Q1: It's early to quantify the magnitude of pricing pressure. This pressure is mainly related to West Texas activities, impacting the cementing division. Conversations with customers are ongoing. Tariff and commodity price uncertainties are influential factors. Q2 guidance reflects uncertainty, with April being strong and May good. - Ann Fox(CEO)

Contradiction Point 2

International Market Expansion and Focus

It highlights the inconsistency in the company's strategy regarding international market expansion and the extent to which they are focusing on international opportunities.

Are you considering expanding internationally in the U.S., or is international expansion essential for growth? - Jason Wangler (Empire Securities Research)

2025Q3: We don't have any interest to spend a lot of money on international. We're trying to put our capital on the ground in the North American market and get better technology out. - Ann Fox(CEO)

With increased international tool sales, could this drive demand for other services? - John Daniel (Daniel Energy Partners)

2025Q1: We have no interest in expanding equipment or human assets on the ground for international markets. We focus on product and technology offerings and expanding conventional wellbore tools. - Ann Fox(CEO)

Contradiction Point 3

Visibility into Future Activity Levels

It involves differing perspectives on the visibility and expectations for future activity levels, which are crucial for strategic planning and investor confidence.

Can you provide visibility into Q4 given customer discussions on increased Q1 activity? - Waqar Mustafa Syed (ATB Capital Markets Inc., Research Division)

2025Q3: We don't have visibility into Q4 for major changes, but there are indications of increased activity in Q1 for certain customers in the Permian. - Ann Fox(CEO)

How did international sales in H2 '24 compare to H1 '24, and how did H1 '25 compare to H2 '24? - John Matthew Daniel (Daniel Energy Partners, LLC)

2025Q2: There's less visibility and some caution about the second half, but we're encouraged by the fact that we've not seen any slowdown in the second half. - Ann G. Fox(CEO)

Contradiction Point 4

Demand for Frac Services and Equipment

It highlights the differing perspectives on the demand for frac services and the need for relief in the service market, which is crucial for understanding the company's outlook and investment strategy.

When will customers recognize the need for service market relief and act on it? - John Daniel(Daniel Energy Partners, LLC)

2025Q3: We are starting to hear about frac availability problems due to underinvestment, reaching a point where operators are realizing the need for relief. - Ann Fox(CEO)

What discussions are underway about natural gas demand and timing for increased activity? - Waqar Syed(ATB Capital Markets)

2024Q4: We expect to see increased activity in Appalachia and Haynesville as early as Q2, driven by a supportive natural gas price environment. - Ann Fox(CEO)