10-Q: NCS Multistage Q2 2026 Earnings: Merger Looms, Revenue Flat

NCS Multistage Holdings reports flat Q2 revenues with increased SG&A due to merger costs, as the company progresses towards its acquisition by Weatherford.

Summary

• NCS Multistage Holdings reported total revenues of $38.4 million for the three months ended June 30, 2026, a slight increase from $36.5 million in the prior year period.
• For the six months ended June 30, 2026, total revenues were $84.0 million, down from $86.5 million in the same period last year.
• The company experienced a net loss of $3.0 million for the three months ended June 30, 2026, compared to a net income of $1.7 million in the prior year.
• For the six months ended June 30, 2026, the net loss was $1.3 million, a significant decrease from a net income of $6.2 million in the prior year.
• Selling, general, and administrative (SG&A) expenses increased significantly due to transaction costs related to the proposed merger with Weatherford.
• The company continues to be subject to Canadian tax reassessments, with ongoing administrative and judicial processes.
• The merger with Weatherford is expected to close in the second half of 2026, subject to customary closing conditions.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to the reported net loss, decreased year-to-date revenues, and significant increase in SG&A expenses, despite the ongoing merger process.

Positives

• Services revenue increased by 23.1% to $10.7 million for the three months ended June 30, 2026, driven by the ResMetrics acquisition and increased fracturing systems service revenue in the U.S.
• Product sales in the United States increased by 27.6% to $15.2 million for the three months ended June 30, 2026, attributed to Repeat Precision's growing customer base and new product commercialization.
• Product sales gross margin remained stable at 32.6% for the three months ended June 30, 2026.
• Services gross margin improved to 38.2% for the three months ended June 30, 2026, from 37.0% in the prior year.
• Total gross margin improved to 34.2% for the three months ended June 30, 2026, from 33.7% in the prior year.
• The company had $31.3 million in cash and cash equivalents as of June 30, 2026.
• The company was in compliance with its debt covenants as of June 30, 2026.

Negatives

• Net loss of $3.0 million for the three months ended June 30, 2026, compared to a net income of $1.7 million in the prior year.
• Net loss of $1.3 million for the six months ended June 30, 2026, compared to a net income of $6.2 million in the prior year.
• Total revenues decreased by 2.8% to $84.0 million for the six months ended June 30, 2026.
• Product sales in Canada decreased by 25.2% to $9.7 million for the three months ended June 30, 2026.
• Services revenue in Canada decreased by 25.7% to $3.7 million for the three months ended June 30, 2026.
• Selling, general, and administrative expenses increased by 31.8% to $18.0 million for the three months ended June 30, 2026, largely due to $2.7 million in merger-related professional fees.
• Foreign currency exchange loss of $0.3 million for the three months ended June 30, 2026, compared to a gain of $1.2 million in the prior year.

Risks

• The proposed merger with Weatherford may not be completed, which could adversely affect the business, financial condition, and operating results.
• Disruption to business relationships with customers, suppliers, and other parties due to uncertainty surrounding the merger.
• Failure to complete the merger could negatively impact the stock price and future business and financial results.
• Significant transaction-related costs associated with the merger, many of which are payable regardless of completion.
• Potential for additional income tax liabilities and reassessments related to Canadian tax matters.
• Fluctuations in oil and natural gas prices impacting E&P activity.
• Significant competition in the market leading to pricing pressures and reduced market share.
• Changes in trade policy, including the impact of tariffs, could increase product costs and affect international trade.

Future Outlook

The company expects Canadian and U.S. activity levels to increase modestly in 2026 compared to 2025. International market spending is expected to be stable. However, geopolitical tensions could lead to increased commodity prices and potentially higher drilling activity, tempered by E&P companies' focus on capital discipline. The merger with Weatherford is expected to close in the second half of 2026.

Management Comments

• "We believe that Canadian and U.S. activity levels will increase modestly in 2026 compared to 2025, and overall industry spending in international markets will be stable compared to 2025."
• "However, a prolonged conflict involving the United States, Israel and Iran could contribute to higher commodity prices, which may result in an increase in drilling and completion activity in Canada and the United States during the second half of 2026, but could also be tempered by uncertainty..."
• "Our products and services face significant competitive pressures across all offerings, which has, and may continue to have, a negative impact on market share and operating margins for certain product lines."
• "While inflationary cost pressures moderated somewhat in prior years, the implementation of new tariffs, including steel and aluminum, and the continued threats of additional tariffs, have led to additional costs that we may not be able to recover through price increases."

Industry Context

StockSavvy.ai notes that NCS Multistage's performance is closely tied to oil and gas commodity prices and drilling activity, which remain volatile due to geopolitical events and OPEC+ production policies. The company's strategic focus on expanding its U.S. operations and integrating acquisitions like ResMetrics is a key trend in the fragmented oilfield services sector.

Comparison to Industry Standards

• The company's revenue decline of 2.8% for the first six months of 2026, while product sales decreased by 4.1%, contrasts with some larger, more diversified oilfield service providers who may be experiencing more stable or growing revenues due to broader service offerings or different geographic exposures.
• The significant increase in SG&A expenses due to merger costs is a common occurrence for companies undergoing M&A, but it impacts short-term profitability compared to peers not engaged in such transactions.
• The company's gross margin of 36.3% for the first six months of 2026 is within a typical range for specialized oilfield service providers, but the decline from 38.6% in the prior year indicates margin pressure, potentially from increased costs or competitive pricing, which is a challenge across the industry.

Legal Proceedings

• Ongoing patent infringement litigation in Canada against Kobold, with a redetermination hearing scheduled for September 2026.
• Patent infringement lawsuit filed by Kobold against NCS in April 2020, with trial expected in Q4 2026.
• Ongoing appeals by Nine Energy Services, Inc. and TCO AS regarding patent infringement judgments, with decisions from the U.S. Court of Appeals for the Federal Circuit pending.

Stakeholder Impact

• Shareholders: The proposed merger with Weatherford offers shareholders the opportunity to receive Weatherford ordinary shares or a combination of cash and shares. However, the pending merger and current financial performance may create uncertainty.
• Employees: The merger may lead to integration challenges and potential disruptions. Share-based compensation continues to be a component of employee incentives.
• Customers: Business relationships may be subject to disruption due to merger uncertainty. The company's ability to provide products and services is dependent on oil and gas activity levels.
• Suppliers: Potential for disruption in supply chain due to merger uncertainty and ongoing trade policy changes affecting raw material costs.

Next Steps

• Completion of the merger with Weatherford International plc, expected in the second half of 2026.
• Continued pursuit of administrative and judicial remedies for Canadian tax reassessments.
• Management evaluation of the impact of new accounting pronouncements.
• Planning for capital expenditures in 2026, including upgrades to manufacturing facilities and R&D equipment.

Key Dates

Recommendation

The company is in a transitional phase with a pending merger, which introduces significant uncertainty. While the core business faces competitive pressures and revenue declines in certain segments, the potential upside from the merger warrants a hold recommendation. Investors should monitor the progress of the Weatherford transaction and the resolution of Canadian tax matters.

Keywords

oil and gas services, fracturing systems, completion services, tracer diagnostics, Weatherford merger, Canadian tax reassessment, Repeat Precision, ResMetrics acquisition