NESR revenue for 2nd quarter 2019 reaches $160 million: Report

The Company had net income for the second quarter of 2019 totaling $11.4 million as compared to a net loss of $5.5 million for the second quarter of 2018.

National Energy Services Reunited Corp. ("NESR" or the "Company") (NASDAQ: NESR) (NASDAQ: NESRW) (NESR.com), a national, industry-leading provider of integrated energy services in the Middle East and North Africa ("MENA") and Asia Pacific regions, today reported its financial results for the quarter ended June 30, 2019.

Operating and Financial Highlights

Revenue for the second quarter of 2019 is $160 million, growing 22% year-over-year

Net Income for the second quarter of 2019 is $11 million, an increase of $17 million year-over-year on a combined basis

Adjusted Net Income (a non-GAAP measure) for the second quarter of 2019 is $16 million, up 13% sequentially*

Adjusted EBITDA (a non-GAAP measure) is $46 million as compared to $34 million in the prior year combined period, producing year-over year-growth of over 33%*

Diluted Earnings per Share (EPS) for the second quarter of 2019 is $0.13, which included $0.06 per share of Charges and Credits

Adjusted Diluted EPS (a non-GAAP measure) for the second quarter of 2019 is $0.19*

Sherif Foda, Chairman of the Board and CEO of NESR said, "We are very delighted with our outstanding results this quarter. We celebrated the first-year anniversary of the Company in June and it is amazing how much has been achieved in such a short time. In this quarter alone, along with the refinancing of our debt facility at very favorable terms, we have secured and expanded our core contracts in Saudi Arabia for more than 5 years. We continue to make inroads in new countries like Bahrain as we did earlier in Kuwait and Chad. With these and all of the incremental contracts we have won over the last year, we are in a very strong position to kick off the remaining part of the year and the foreseeable future."

Mr. Foda continued, "As we have been continuously emphasizing since last year, the MENA region will be at the forefront of the international recovery and spending will continue to grow. This is now being recognized with broad market acceptance. We believe that as the National Champion of the region, we are uniquely positioned to capitalize on this ongoing activity growth. We are presently growing at more than double the rate and we believe we can further accelerate this growth in the coming quarters with the commencement of several of our previously announced and upcoming projects. We are proud to be from the region and aspire to continue to be key partners to our customers who share our vision of creating long-term sustainable In-Country Value. Our recently approved Environmental, Social and Governance (ESG) strategy is designed to deliver long-term economic, social and environmental value to all the communities we operate in."

Net Income Results

The Company had net income for the second quarter of 2019 totaling $11.4 million as compared to a net loss of $5.5 million for the second quarter of 2018. Adjusted net income for the second quarter of 2019 is $16.4 million and includes adjustments totaling $5.1 million mainly related to integration and restructuring costs, exceptional interest charges, and other discrete provisions (collectively, "Total Charges and Credits"). A complete list of the adjusting items and associated reconciliation from GAAP has been provided in Table 1 below in the section entitled "Total Charges and Credits." The effective tax rate for the Company for the three-month period ended June 30, 2019, is 21% as adjusted for Total Charges and Credits.

The Company reported $0.13 of diluted earnings per share for the second quarter of 2019 compared to $0.00 per share during the Predecessor second quarter period of 2018, a loss per share of $0.05 during the Successor second quarter period of 2018, and $0.15 per share during the first quarter 2019 period. Adjusted for the impact of Total Charges and Credits described in Table 1 below, Adjusted EPS for the second quarter of 2019 is $0.19.

EBITDA Results

The Company produced Adjusted EBITDA of $45.7 million during the second quarter of 2019. Adjusted EBITDA includes adjustments for certain Total Charges and Credits (those not related to interest, taxes, and/or depreciation and amortization) of $2.9 million.

Production Services Segment Results

The Production Services segment contributed $95.4 million to consolidated revenue for the second quarter of 2019 as compared to $86.9 million during the second quarter of 2018 and $92.1 million of revenue during the prior quarter. Segment EBITDA totaled $33.8 million in the second quarter of 2019, improving 6.6% as compared to $31.7 million in the prior quarter and 35% as compared to $25.0 million in the second quarter of 2018. The Production Services segment continued to grow quarter-over-quarter and year-over-year, with increases driven in the second quarter of 2019 by higher coil tubing and stimulation activities in Saudi Arabia, Iraq, and the United Arab Emirates.

Drilling and Evaluation Services Segment Results

The Drilling and Evaluation ("D&E") Services segment contributed $64.5 million to consolidated revenue for the second quarter of 2019 as compared to revenue of $44.4 million in the second quarter of 2018 and $59.6 million during the prior quarter. The D&E Services segment revenue has grown by over 45% over the past year as the Company continues to actively cross-sell its portfolio in the countries where it did not previously provide those services. Segment EBITDA totaled $15.0 million in the second quarter of 2019, improving 39.8% as compared to $10.7 million in the prior quarter, and 105.3% as compared to $7.3 million in the prior-year quarter.

Offsetting both the Production Services segment and D&E Services segment results were certain corporate costs, which are not allocated to segment operations.

Balance Sheet

Cash and cash equivalents are $69.6 million as of June 30, 2019, compared to $24.9 million as of December 31, 2018. As previously disclosed, the Company completed a $525 million refinancing of existing debt in the second quarter of 2019.

Total debt as of June 30, 2019, is $366.5 million with $5.3 million of such debt classified as short-term. Working capital for the Company totaled $229.7 million as of June 30, 2019. Net debt totaled $296.9 million as of June 30, 2019. Net debt has increased by $19.7 million since December 31, 2018, to fund working capital growth as well as a consequence of a slowdown in collections in some countries. While collections are approximately $35.0 million below the prior year run rate, we expect collections to improve during the second half of 2019.

Predecessor/Successor Accounting Treatment

NESR continues to report in a Predecessor/Successor format whereby NPS Holdings Limited ("NPS") is the Predecessor for periods prior to the completion of the Business Combination on June 7, 2018, and NESR, including NPS and Gulf Energy S.A.O.C. ("GES"), is the Successor for post-transaction periods.

Conference Call Information

NESR will host a conference call on Wednesday, August 7, 2019, to discuss second-quarter financial results. The call will begin at 9:00 AM Eastern Time.

Investors, analysts and members of the media interested in listening to the conference call are encouraged to participate by dialing into the U.S. toll-free line at 1-877-407-0312 or the international line at 1-201-389-0899. A live, listen-only webcast will also be available under the "Investors" section of the Company's website at NESR.com. A replay of the conference call will be available after the event under the "Investors" section of the Company's website.

(With Inputs from APO)