NCS Multistage (NCSM) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $29.7 million, up 17% year-over-year, driven by strong US and international growth, while Canadian revenue declined due to deferred projects and E&P consolidation.

• Adjusted EBITDA for Q2 was $0.9 million, a year-over-year improvement of over $3 million, with margin rising to 3% from (9)% last year.

• Net loss for Q2 was $3.1 million ($1.21/share), a significant improvement from the prior year, which included a large litigation provision.

• Free cash flow for H1 2024 was $3.2 million, up from $(2.0) million in H1 2023.

• Cash balance at June 30, 2024, was $18.6 million, with total debt of $8.9 million, all finance leases.

Financial highlights

• Q2 2024 revenue: $29.7 million (+17% YoY); international revenue up nearly 250%, US up 26%, Canada down 16%.

• Adjusted gross margin for Q2 was 40%, up from 33% in Q2 2023, driven by higher-margin international sales and operational restructuring.

• Net working capital stood at $55.4 million at June 30, 2024.

• Free cash flow (less distributions) for the first half was $3.2 million, up over $5 million YoY.

• SG&A expenses were $14.8 million in Q2 2024, up slightly due to higher incentive accruals, but offset by restructuring savings.

Outlook and guidance

• Q3 2024 revenue expected between $40 million and $44 million; Adjusted Gross Margin 40%-42%; Adjusted EBITDA guidance: $5 million-$7 million.

• Full-year 2024 revenue guidance raised to $152 million-$160 million; Adjusted EBITDA guidance increased to $16.5 million-$19.5 million.

• Free cash flow for 2024 projected at $6 million-$10 million after distributions; net capital expenditures for 2024 expected at $1.5 million-$2 million.

• Management expects Canadian drilling and completion activity to be flat or slightly higher in 2024, U.S. activity to decline 5–10%, and international activity to improve by about 5%.

• Management believes current liquidity and borrowing capacity are sufficient to fund operations and capital needs for the next twelve months and beyond.