10-Q: NCS Multistage Holdings Reports Strong Q1 2025 Results Driven by Canadian Activity and International Growth

NCS Multistage Holdings, Inc. announces increased revenue and improved profitability for the first quarter of 2025, driven by strong performance in Canada and international markets.

Summary

• NCS Multistage Holdings, Inc. reported a 14.0% increase in total revenues for the three months ended March 31, 2025, reaching $50.0 million compared to $43.9 million in the same period of 2024.
• The revenue growth was primarily driven by increased product sales in Canada and higher service revenues across all geographic regions.
• Product sales accounted for 70% of total revenues, amounting to $35.1 million, while service revenues contributed 30%, totaling $14.9 million.
• The company's cost of sales decreased as a percentage of revenues, improving to 57.7% from 61.3% in the prior year, due to higher-margin international work and efficiencies in supply chain and manufacturing operations.
• Selling, general, and administrative expenses increased to $16.2 million, driven by higher incentive bonus accruals, professional fees, and share-based compensation expenses.
• Net income attributable to NCS Multistage Holdings, Inc. increased by 95.9% to $4.056 million, or $1.58 per basic share, compared to $2.070 million, or $0.83 per basic share, in the first quarter of 2024.
• The company had cash and cash equivalents of $23.0 million as of March 31, 2025, and total outstanding indebtedness of $7.6 million related to finance lease obligations.
• NCS Multistage expects U.S. rig counts and completion activity to be slightly lower than 2024, while Canadian activity is expected to remain stable.
• Capital expenditures for 2025 are projected to be between $1.5 million and $1.8 million, focusing on upgrades to manufacturing facilities and equipment.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, particularly in revenue growth and profitability. While there are risks related to market volatility and competition, the company's strong cash position and available borrowing capacity provide a buffer. The overall tone is optimistic and confident.

Positives

• Strong revenue growth driven by Canadian product sales and international service revenues.
• Improved profitability due to higher-margin international work and operational efficiencies.
• Healthy cash position with $23.0 million in cash and cash equivalents.
• Available borrowing capacity of $26.8 million under the ABL Facility.
• Increased activity levels in Canada, particularly for fracturing systems completions.
• Reduction in the use of cash during the first quarter of 2025 reflected higher net income of $1.9 million.

Negatives

• Decline in U.S. product sales due to project delays.
• Increase in selling, general, and administrative expenses due to higher incentive bonus accruals, professional fees, and share-based compensation.
• Potential impact of tariffs on supply chain costs, particularly for steel and chemicals.
• Volatility in oil and natural gas prices, which could impact E&P activity.
• Ongoing legal proceedings, including patent matters in Canada and the U.S., which could result in financial losses.

Risks

• Volatility in oil and natural gas prices could lead to reduced drilling and completion activity.
• Intense competition could put pressure on pricing and market share.
• Escalating global trade tensions and potential tariffs could adversely impact commodity prices and activity forecasts.
• The company's ability to successfully implement its strategy of increasing sales of products and services into the U.S. and international markets.
• Ongoing legal proceedings, including patent matters in Canada and the U.S., which could result in financial losses.
• The company's ability to achieve suitable price increases to offset the impacts of cost inflation.

Future Outlook

The company expects U.S. rig counts and completion activity to be slightly lower than 2024, while Canadian activity is expected to remain stable. International markets may see increased activity. Capital expenditures for 2025 are projected to be between $1.5 million and $1.8 million.

Management Comments

• Based on year-to-date E&P company drilling and completion activity, projected capital budgets for the remainder of 2025, and recent industry reports, we believe: (i) activity in Canada will remain stable compared to 2024; (ii) the U.S. market will experience a modest decline in activity, driven by conservative oil production growth targets and ongoing consolidation within the E&P sector; and (iii) activity and spending in international markets may increase in the markets where NCS participates, including the North Sea, the Middle East, and Argentina, despite relatively flat overall international spending.

Industry Context

The report highlights the impact of oil and natural gas price volatility on E&P activity, as well as the influence of geopolitical events and trade tensions. The company's performance is closely tied to drilling and completion activity in North America and selected international markets, making it susceptible to fluctuations in commodity prices and industry trends.

Comparison to Industry Standards

• The report does not provide specific comparisons to industry standards or competitors.
• However, it mentions that the company faces significant competitive pressures across all offerings, which impacts market share and operating margins.
• The company's ability to manage costs and maintain a strong cash position is crucial for navigating the competitive landscape.

Legal Proceedings

• The company is involved in ongoing patent infringement lawsuits in Canada and the U.S.
• In Canada, the company is appealing a decision against it and is involved in a separate patent infringement lawsuit filed by Kobold.
• In the U.S., the company has received favorable jury verdicts against Nine Energy Services, Inc. and TCO AS, but these decisions are subject to appeal.

Stakeholder Impact

• Shareholders will benefit from the increased profitability and earnings per share.
• Employees may benefit from potential bonus accruals and share-based compensation.
• Customers will continue to have access to the company's products and services.
• Suppliers may be impacted by changes in the company's supply chain and procurement strategies.

Next Steps

• The company plans to continue focusing on increasing sales in the U.S. and international markets.
• NCS Multistage will continue to monitor the impact of tariffs and trade policies on its supply chain and costs.
• The company expects a decision on the appeal in the Canada patent matters in late 2025 or early 2026.
• The company expects the trial for this matter to be heard in late 2026.

Key Dates

Keywords

revenues, NCS Multistage, financial results, Q1 2025, oil and gas, fracturing systems, Canada, international markets, profitability