NCSM - Earnings call transcript Q3 2019 | NCS Multistage Holdings, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Q3 2019 Multistage Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Hummer. Ryan sir. ahead, go Please

Ryan Hummer

you, Stephanie. third joining Multistage's you And XXXX conference thank quarter for call. NCS Thank

Our call comments. today Chief will be led by and will Executive Robert I also provide Officer, Nipper, our

like Before today's by remarks extent of statements in could will subject Safe federal we that note please that that are nature Harbor information, may protections today call the comments listeners made this risks. forward results call, would our afforded known the on begin Such be historical future be than other unknown that include law. to relying we statements I and to some information, caution forward-looking contain financial looking on and the regarding to and several are

release periods associated less capital public cash and to non-GAAP performance. regard in the flow, operating manner of also measures which with use we and EBITDA over night, share-based I'd to EBITDA like margin, conference costs in current better issued risks. outline out free to these last EBITDA, measures consistently that various they performance operating believe to We call, filings performance. allow that compensation adjusted compare with because us our we time earnings with our from are our refer other time adjusted without SEC to that to and point a I those release press along structure need you adjusted today's made our in refer to reflects

GAAP which non-GAAP measures site provides these ncsmultistage.com, from measures. financial release Web yesterday, nearest the reconciliations press posted is our on Our to of financial

to our call the Robert CEO, turn over Nipper. now I'll

Robert Nipper

and welcome our to joining earnings quarter Thank you. conference third employees call. and investors, XXXX our analysts Ryan,

reduce operations. we our initiatives aims high made will and and This the I our on we've margin U.S. level are also we international and quarterly gross what that to have results morning, in improve the SG&A outline that our expenses. I'll progress Canadian, seeing performance discuss will review underway

and for I quarterly turn upcoming some guidance closing I'll provide recent quarter. Ryan over discuss accomplishments. highlighting more it will some that to to the remarks the our of provide After detail results in then

revenue sequentially. a was quarter X% period increase Total XX% third $XX.X below the and year-ago the in million,

Our total last the third in quarter's provided of within Adjusted reflected EBITDA guidance XX%. we $XX.X was revenue in margin the call. million an adjusted quarter of EBITDA

XXXX our with revenue for of with in million than third our higher line sequentially call. quarter's in lower the last guidance XX% operations, the of Canadian quarter the and $XX.X Starting the third was XXX% quarter provided

revenue face demonstrating Our in XX% spite reduction the decline in of average late continued market Canada was in in pricing improvements last count year quarter in third share. we the in in achieved adjustments year-over-year rig the made of and XX%

a The area accomplishing Canada place that proud in some including team what is we've Group I'm strategies in our market. in delivering challenging is for time. of the highlight environment. on we Deep Basin, share targeting is the are have the in that One gaining in business Montney, been market an very we

position Tracer in grow of Products our providing Construction Well market Diagnostic fracturing our leveraging systems and incremental strategically with are We opportunities. us to revenue Services, sales

effort the our the efficiency field Diagnostics that customer of field the from in set relationships, our execution and competition. operations to The quality us in new Tracer from continues is our excellent One third delivering revenue record quarterly take strengthening and is this away differentiate a Canada team in supporting our sales our quarter.

supports to as continue product rigorous customer initiatives. new we development conversations this based year. from Canada technology the count last benefit believe will remains on our the testing below market the rig in well the challenging, of and the the fourth to having, The overall current breadth and year, utilizing appreciate center product that to that We opened that our continue capabilities, ensure it that significantly earlier customers be our as quarter we offering in service we're

there It's customer and more XXXX will released for excess capacity and incentive flows capacity, remains and point debt as We capital customers the to or to activity low on cash continue will primary firm preliminary budgets our budgets to at have of and early our reduce year. we too be Without production. shareholders is until view believe for market added. this a ability this to early grow are next return additional later application pipeline customers' year know to

of and Repeat third the X% in for Precision. higher product quarter. eighth was was Systems U.S., year X% with the sequentially. higher in in quarter quarter by to Fracturing our for now X% We the revenue product revenues third than the The and consecutive million Turning growth delivered growth growth driven sales $XX.X period the ago sequential

sales market Precision has Repeat mix plug Purple Express share is is over higher time. our increased of Seal representing a and

quarter, the service Construction the a and Tracer Diagnostics Revenue revenue a during revenue. U.S. in pricing sequentially XX% activity Fracturing reflecting volume increases Well our with in and fell in from by competitive products services environment. decline increased Systems

we the the active into count customer quarter currently for and have the With XXXX. in fourth the active completion expected decline is activity in to rig significantly activity limited reductions spreads continued customer and visibility

our of end guidance of Our for increased $X.X third at international million, sequentially. quarter the revenue high and the

and worked Argentina, and third Sea, we the sold Russia East, the China, products During to customers in the North U.K. Middle quarter the

to performance for efforts efficiently. quarter review the gross ongoing our now I'll and our operate more margin

of margin quarter the given renegotiated utilization level for our vendors of all new allowing revenue capacity the for third the drivers Precision range. performance guidance percentage in sleeve increased higher in higher gross a to our the XX% at primary The components margin and were rates above end Mexico, and activity with improved improved up was of in-house. quarter from geographies our across XX% Repeat Our build facility us the high second

by we on pressure shorter trials contributions the to of which positive additional to gross margin end secure with field the high year commercialized quarter, we our sleeve the in XXXX. During have to were able expect

lines end we the put more was online in third-party reducing levels addition, capacity second competition and completions sleeve have at to trained Houston, industry environment. across depressed depressed has This one This in-house customers our personnel declining manufacturing very year. continue. have Canada levels industry North all is to and current in spending. U.S. position at which which competitive service for we for cost in allow expect critical is and this product oilfield rig This over is the shift been in improve in the price and activity of given apparently activity to In for overcapacity America. counts will Continuing hired a October. us and resulted our has a and in assembly We're and a

In and chain customers pressure. to we combat addition our supply pricing on product specific to focused the demonstrating initiatives, to bring are value we the that

each efficiently, We service to underway improve in of product also cost reduce market profitability. to bring projects allow our and our lines operate R&D drive customers innovation have to and more and that solutions

executive related driver than Our that SG&A below million we to reductions of the low-end $XX.X expense and in implemented quarter in total is in quarter The lower in the guidance. SG&A expense our the July. third our salary the reduction last lower force of primary of was was and quarter XX%

the previously annualized expense on in increased million. beyond an we cost overall management reductions approximately focused further with those As indicated, million benefits actions providing in $X $X resulted

investments growth past opportunities provide initiatives We years efficient generation. several believe the multiple and us free cash for of flow the with capital and

disciplined on our market progress and the challenges expect improve We the our for have continue and to growth shareholders. impact flow for taken to make year. earlier create cash on current invested and steps Through to generation, environment our right-size return gross free margin our capital the operations that value we in

Ryan more over detail. to it financial to hand our in now discuss I'll results

Ryan Hummer

Thank Robert. you,

reported quarter than the revenues On and revenue with each overall last the was our quarter in increases yesterday's release, second Canada a in the As we lower third sequential sequential provided U.S., call. higher and with quarter International on basis, line X% year's million, third markets. the the of guidance $XX.X revenue in in than in third quarter's prior earnings were quarter XX% the

margins the Gross high-end lower above XX% the third third quarter expense product in Gross and on or the profit of or profit, was the defined both to million in $XX.X sales revenue second depreciation revenue. total million This amortization excluding we quarter. or and percentage compared $XX.X margin gross quarter revenue was the total with million guidance in XX% prior for sequential the year's a provided comparison. as revenue cost of of revenue $XX.X sales, of services of XX% for quarter less was

of $XX.X were compared Our quarter's were year's the to lower prior than $XX.X level second quarter in the in third third $XX.X SG&A as the There million also XX% costs quarter. million. million

implemented million the in was the reminder, year's $XX.X revenue quarter. Adjusted expenses. third share-based percentage well quarter for was to in of quarter, in expenses the related workforce certain litigation as million the that XX% In one-time Adjusted a reduction EBITDA million as EBITDA $XX to as as non-recurring $X.X SG&A reported As SG&A third total compared in includes prior our our third the third costs including XXXX. July. in we quarter a also included compensation, of

income expense the $X amortization $X.X the at Precision. non-controlling quarter, had million our million. interest to income net in attributable of net During and positive totaled depreciation quarter, We reflecting Repeat

counts for both were the basic average Our share diluted million. quarter $XX.X and

items flow sheet. in million the Cash XX. operations a third has negative $X.X year through flow positive cash the for September been $X.X now balance Turning quarter the and million to from was for

$X.X Our quarter the net through September million capital third were the for and been expenditures for have million XX. year $X.X

$X.X credit XX flow for At through million debt $XX.X As negative quarter of in been and million the which a $XX facility. had million September included million cash cash positive was result, million XX. has we September our drawn our year-to-date revolving U.S. total free the under $X.X and for $X.X

by balance we million and through reduced reduced XX. $X.X year for quarter, the million During the we've September our it by cash $X.X

million approximately $XX XX total $XX.X million. to up potential availability in at have revolving to also liquidity credit We our bringing September our under potential facilities, total

fourth and We and to activity. points count lower revenue further in million $XX with XX% a XX% with by $XX close rig fourth currently for completion the U.S. to basis, quarter reductions between I'll be million a few reflecting of revenue sequential guidance quarter. on expect

by XX% the December. quarter, In driven a decline expect typical activity reduction the second Canada, in of from to third sequential of primarily half we in X% the in seasonal revenue

we revenue ongoing work international geographies. multiple to $X the approximately expect of from across have million million $X We as we benefit

this consistent we in progress and activity moderation the through drilling U.S. end December in depend Approaching completion range, as pace and of the we early on of reduction quarter. Canada will fourth of the through a higher primarily the activity levels

to related be offset the lower margin relative XX% third a XX% between company gross our initiatives. With to absorption our the and reflecting decrease in to progress expect specific impacts partially quarter. continued revenue, We by negative modest

We items $XX SG&A occurring expect amount customer-related over million and our reported for non-recurring million inclusive related excludes share-based expenses. in approximately to the quarter. be events accounts million share-based including and and compensation compensation This doubtful provisions million $X fourth litigation in to during potential $X $XX of between

our amortization be $X.X fourth to expect expense and approximately quarter, We depreciation million.

expect our interest between expense $X.X in $X.X be We million to and quarter. net fourth the

expected a last reduced again range XX% for reduction of gross capital $X the from represents million $X million of our full range XXXX year a have over the to We of midpoint to of new year. expenditures this

it Robert for closing remarks. I'll over now to hand

Robert Nipper

you, Thank Ryan.

is sold accomplishments. call to strong increase market our compared and quarter open sliding market third presence. XX% XX% on In recent like Before capitalize year, completed a services more approximately the this and on the the the cross-sell over for reduction I'd our in more executing wells to in Q&A, face products count. strategy in third up of team to to XX% last fully our our year-over-year some quarter as highlight rig Canada, Canada share and our we sleeves our We of in

Tracer seal sleeve had highest We growth increased for sliding revenue our Services sales. eighth the a for Diagnostics we also of had consecutive purple by sales frac our quarter increase in In plugs share driven business sequential and quarter U.S., ever our market product Canada. our in

our grow to continue international believe we markets, outlook more North stable near We and have presence in which medium-term a than America.

in an sleeves over Russia completion with record recently sliding XX have for with and a set have installed well well over sleeves a upcoming in XX a completing China. We

our presence for preparing are international Middle diagnostics the an East for We upcoming offering, work. expanding tracer

simultaneously wells supporting currently Sea. multiple are North We completions offshore for in the

along I'll close couple especially significant a We, comments. with in America. our others in with are of challenges, North industry brief facing

competition increased resulted Our opportunities levels, are limits companies. customers activity in reducing growth amongst and which service has

challenges. in these leveraging in several we address and taking years, the the executing service lines we We actions for positions lines leadership specific are had and that We're compete. have on to the product the past strategies which place

have international and We to product allow in on offering across have invested expanded globe. infrastructure sales tactically our and us to revenue our time service the over capitalize opportunities force and

We in to have faced made we the second supply optimize take chain. steps substantial progress to continue specific addressing challenges quarter company's and our the

We X% market. reduction our in better with reduction workforce have to in that the cost align included the implemented operations a initiatives opportunities order

expect We approximately run-rate achieved in already the reductions to from achieve savings of workforce have million savings that. $X addition additional to and

expected our throughout year. reduced CapEx the We've

highly reducing driven technology bring to continue costs, that we a company, customers, recoveries improving services market by new improving innovate enhancing and As to returns. and their efficiency, are to products financial valued our

of efficient, organic innovative deliver to well-positioned adoption are growth equipment completion we services. and believe increased we result, our a capital through As long-term

capital flow turn, maintaining a to balance of to sheet. options us capital to strong model provides with business ability free our time. investments us to with while return Our over allocate in This the capital the return ability light and very cash shareholders for evaluate high the generate provides

experience highlight current to variety having new Valerie we as at technologies introduce served valuable Board, during Corterra of Directors environment believe well navigate Newfield Valerie's very roles our Mitchell member develop Valerie our to want and perspective our from Energy. to Exploration be to welcomed as as and as brings NCS a and that will CEO the quarter. a of of perspective Board E&P as a customers. we in of I we new that the the to while as We Also breadth founding serving market

happy we'd With that, be to your take questions.

Operator

from line comes MacPherson [Operator Instructions] with question Simmons. Ian first the of Your

Ian MacPherson

look morning. this making Robert, far good of [indiscernible] Good to so Thanks. don't you've as have just seems we I it you next a And wonder, it Ryan, visibility. year, out were job like quarter. done when great

be U.S. knows. to going there's approximate swift the that recovery in have You market, who

year discontinued Assuming exploring or to that to steps you worth more Or that to at this think outperform along, market point expansion your path more other think geographic you just the do expansions, company's guess in possibilities a muddle regard incremental and challenging metrics? you that try to increase M&A with we this I relevance top-line the continue demonstrated do to on line bolder market? will product and you've

exposure perf together in radical step your guess to and have than out or expansions I line you maybe the to, years. regard With else cobbled currently you've more of just something product an past couple plug that's over of commendable more than that the

Robert Nipper

question. Great

what XXXX, So looking annualize of you I take and it's view that's that XXXX mean, probably, last on XXXX, the half we're that is at. our

XXXX, So that's what we in down think. bit a

our so, cost some And left have we in still initiatives. reduction fairway

chip to So we continue at away that.

see We to that from forward. expect continued going benefit

on I have projects a going in. projects on, as have R&D said working line, We before, number of we we're product every that almost our -- all R&D

in. will be there So, new products coming

looking be think opportunities. that certainly have sometime. there -- somewhere, an think about we on We we a focus we will at M&A, opportunity When

yet, We got look very to haven't found balance but right the we being we've we a at low in that sheet, like clean one it. position. and debt continue But,

if I So, to us M&A it's the do ability that really interesting But, comes to along. to going something execute, do opportunity have be an we to that have something that's from think standpoint. for right

are pretty NCS. both But interesting, we some Precision technology and have developments that at Repeat at

to adoption, described know So, which it, what gains, hope is but in get cost we control we'll reductions I not can market, what as that we market and is continue that and share continue I transformational we can don't new to technology I have you to think on we continue better. bring the focus but customer control,

Ian MacPherson

Well, have to Okay. otherwise I imply think didn't whatsoever. you been. mean I

So thanks.

or just sleeves broadly You of roll talked higher of What also oriented your suite? commercialize applicable out next looking specifically is pressure kind is about improvement a the in market towards, year. a early to it that you're product of shorter segment the more that or

Robert Nipper

bit That's behind now. a Yes. something we're little right on

XXXX, first but well. started is or plug that, for year the seeing development better just start that originally, in lower but We benefit market out was helps a U.S. in we're because accelerated pressure lower the and expect with version Canadian U.S. that the the seeing in price we was ago it rolling that customers, the from perf our what getting the market. of because Canadian market pricing Because it of to the to version point We full we us the market. as we're over that the and -- cost bring compete

Ian MacPherson

Robert. thanks Well, it right. will over. All I it. Got pass

Robert Nipper

Ian. Thanks

Operator

Your line Pickering, Tudor, with O'Leary George next of question Holt. comes from the

George O'Leary

morning, Good guys.

Robert Nipper

Good morning, George.

Ryan Hummer

morning. Good

George O'Leary

the have fourth sequentially quarter for about of U.S., the revenue guided in to peers XX%. a U.S. guide XX% couple On down your I activity the completions guess

there So, to get in for of U.S. band range of if XX% that be down of of kind you you to gives the market. broader framed XX% speak the think that front? XX%. you a how the on able and some with trend kind might you to assume XX% that that just revenue could and I what that imply that share Is guys do wondered of you the I capture guidance kind confidence you the kind you you line about guys outlined guess, is

Robert Nipper

introducing we're with probably lower adoption the of that, lines the XX%. some range we that the continued of from status is mean, a seeing think I the end Yes. share. about think quo down it our down-trending probably, in of with upper We The gain how end that the we range that's lot is U.S. have we're our don't customer what base of it's product is that, we market that of

George O'Leary

see of XXXX. out on CapEx find then, nice ways budget guys cut the to And the to it's CapEx Great. you front, for

As we is sit about the end we standpoint for opportunity there bottom should of to could think a X to kind is further think or about CapEx from forward? the of going XXXX, guys X that you fall where CapEx

Robert Nipper

for to just for I where X X reduce I think are. X looking being opportunities to at now. spending, to about We're say about probably X look we CapEx but would

George O'Leary

that's I front, there, spend very one pick business environment, important trying R&D the this I'll I in could. if guys imagine And to then, are as more but to you a willing from your you're spots of component sneak well. where obviously the In cash

on do from R&D an you guys focused standpoint? most So today what

Robert Nipper

Yes, that's really question. good a

So over the we've XX we made product on a line research new think number of to how engineering, last development, We changes of execute to a company development, structure. shift product focus the the management about months new and introduction. and product

So, by directed project we on on management very we're management product engineering their for of right to is is made that have lines they of is and and is prioritization things for make product line the product sure work the for product the the line line clear different also our role team all engineering working that managers now. And that scope what group. in

able to and been we've and is, pull a engineering able what into been stuff that working to re-prioritize the do scope system. on plug So of back we've lot out been we've of clarify

of and we're without is to we've and able new an this seen being to to to was expect technologies, develop the some we so some remove do benefits that we a it Because costs So year way had removing of able we what engineering. what in get out believe. of increase far efficiency

that I'm from really far. so the effort so seen with results that And happy we've

history we for first the projects different the months; time last -- working all engineering X internally that of the this the is had product last We're we've working that time over first X the lines on have. the that of company we're on in the is months

we have development research line. every for projects So, product our and

them our Some changes of of talked and those are incremental are we've effort. the changes, past about some significant in EOR

EOR systems activities. working control to on our we're customers allow So better their that

We've in from step will. you run would XXXX or that of lines. the projects late one the and Canada going if on XXXX system got So other probably benefit on well. won't we a have We've as until their expansions be that in more project U.S. the change, system. -- is the December see product ground both of the then in and type we're But in that XXXX. XXXX other we But, working

we make that aren't with to will we looking Precision, currently So we there, selling for sell Repeat other we're changes opportunities that selling. our at tools products

in the We're process of bore some inside So to up we're expand or making well open-hole construction and Repeat there. services. Precision the products changes type to of our team setting offering a product

we're and it's So coming that a customers, different things cost our also pass out. around products savings of some to that cost reductions, lot focused new that so but there doing we is can more on are

hope question. So of long I answer your and I sort answered

George O'Leary

very was That Thank No. you, Robert. helpful.

Operator

RBC. line Your next question comes from Kurt of with Hallead the

Kurt Hallead

Hey, good morning.

Robert Nipper

Good morning, Kurt.

Kurt Hallead

when Robert, here regarding I could type of was -- the you you could wondering introducing in been if make kind us know your the was against services good. on getting customer the headway from products third you've insights performance of some just difficult it's kind your of and give So are going quarter additional always been trends you've I base but market feedback extremely to the that and

question are give may the to would be, for out services? that of challenges so you products pressures around and some what that just second there pricing could element you of dynamic competing And with be and respect kind color some that facing

Robert Nipper

not seen companies part service seem try lot There be believe before. we it's take as conversation -- having and work will how biggest second today and to driving are ever reduce really that you I and that's what the on still to are services, at how help it market the but at certainly lot customers our don't of But, into as sustainable. can is, customers just everyone, mean, are a reduce for that our are other probably willing with reduce products probably cost are open our consideration. competitors at affecting I Well, that strong the of to they customers question there can we're and the costs the is and costs. to not levels capacity our also the say to the all about cost products I've that market, a it's of is acquisition they in them pricing looking services pressure; of looking

so much not And cost help as it's reducing sell, of sell, services so possible, much that and as our we the the our that's and that on focus products we something reduce we customers products also sell that but cost. how services we that the

in tell telling composite plug almost composite For talked this instance, are the of that us our line with plugs out out us that they than with plugs. customers have have any Repeat faster that Precision other drill our they drilling our that all customers the the plugs we our about and records plugs, of

a a translate it cost customers. cost, it reduction reduction necessarily does in so doesn't plug result And for in our but to

with well sleeves are not the our they a the of thing where cost our sleeves customers Same the sliding the perf because sliding but the for fracturing US, as is single maybe instead and on plug reduced. services using applications decrease, are in in set cost places them of there

now to reduce trying the cost. we reduction. That's we're that haven't what to manage that's So focus to on say not cost had and

that way. trying tremendous that's Our sales manage of on services, out to of but our amount there, and we're some Kurt. price products pressure

Kurt Hallead

on us in insights give quarter, some then fourth on how great. great Okay, I give progress the if your on here you may some that the that would end, capital, context in insights color. of That's Ryan be Thanks. great. wonder working And

Ryan Hummer

Yes.

think guidance be know, And typically free a capital about would position which brings in line cash we positive the for have I as just quarter fair period. in that receivables, as a third seasonality it the slightly But, in reduction believe our today see our amount cash with in we where that of fourth quarter the consume did. Kurt, that we we the and working do for we bottom year-to-date would So, that well us. and a during and are to call, cash last business flow had you quarter's given seasonality

be So the both fourth the we positive, of believe cash that and that the in of combination earnings from be will quarter. a in cash high call flow be and will it free digits flow a free single benefit during quarter a little bit will

Kurt Hallead

then, here international I into And front, sneak one on great. different to markets. if variety you've done presence pretty your of job kind a another a of maybe Okay, in the good expanding

fact in to to XXXX, that expanding to some focused you areas the countries additional your see grow more expect the most you're operating. maybe get that in the is international penetration Given market on continue already do to existing the or going be into opportunity it

Ryan Hummer

Bob?

Kurt Hallead

expand to like you Would on that?

Robert Nipper

investing Well, that starting we've been international see years actually from the and we're of pretty to heavily in for number a rewards now.

East a time Aker that operating were we last next and that. in working on, think one countries the be number with I sweet in XXXX will BP different there's spot contract at progress in countries. quarter Middle year the Our we're East, in for We're making in seven of Middle the

in services other and right product compared push is see seems getting the fracturing than So, some able really countries other into very traction be other countries, to that we also else we're that focused anything U.S. out of than on getting those being lines well to tracer fracturing expansion internationally, but now other services, out, market. to but one services faster compete

the that in. So as by countries expanding both well adding we are as again, in countries

Kurt Hallead

Thanks. Yes. I appreciate that.

Operator

of comes Lowe question JB from line next Citi. with the Your

JB Lowe

Hey, good morning guys.

Robert Nipper

Lowe. Good morning,

JB Lowe

capability margin guys are more building out in-house what that at how in-house? are gross I can squeeze of the of wanted on-the-sleeves sleeves of you that you the of touch component bringing doing, kind manufacturing you how guys you more in-house to and percentage actually much moment, that on optimize that,

Robert Nipper

that Well, there is can do. a more little we bit

that a So, had was new opened Mexico. that we this one manufacturing issues facility we year of the in up

same was when initial low set for recall, you was that venture the that manufacturing cost, quality the and the we the if We're one run -- more sleeves high they're sliding connections our had equipment connects sleeves stock manufacturing the do can thread U.S. that we that facility we up that and It Precision sliding in for in build-to-suit. Mexico So, venture was are we Canada. joint predominantly the venture manufacturer. same Repeat in for business joint purpose joint the it's the all Canada, because we the in

everyone of new facility our of of year, wasn't the coming were but completely we're QX out it grow trained facility into in and to guard, little as business this process bit we Mexico, caught opening a hadn't gotten QX up in completely finished we So, started -- this yet. off manufacturing out

end caught up So we at we in when in the of outside activity machine Canada the having anticipate. off in for our we use the we manufacture to market to quarter, had had didn't U.S. second the that this Canadian guard for go ended products rush third-party are ramp shops the of the and to activity

as in we facility we've -- So, a up have get been that to Mexico able and result second running.

some do we run We and capacity have getting more to quite manufacturing there. be to not to want room still work some there. and where We're have, we still yet have we

what locations. Houston assembled Mexico sent that in either and or third-party parts out are the we the final manufacturing tested for we it customer that so in been is Houston. in about it not is us take a The component facility, but -- shop. into talked call facility then really the to and them I Houston, second machine shift And facility We shift have where bring in the then products a second added a Houston manufactured we pressure

little some little we a So, required to a had bottleneck out us party which costs go third bit where in us of Canada of a higher. our do are to there, to the for assembly bit a

Houston now shift them so have second capacity now. that added got in we've more trained and we up So,

still quarter already a in -- in but gross will some it continue gotten we've margin to seek on lot So the improvement we the third see of quarter. line, this or

JB Lowe

of -- going terms if your forward. share market rank And XXXX? in how kind would gains gains potential market in of then that lines Okay, great. greatest And up see that guys tracer in is quarter you Canada you guys penetration record product order guess Thanks. then you greatest I had there. guys one share line a -- product potential what not improving the diagnostics is

Robert Nipper

Yes.

we bit room have little still to a in and of grow. So, Canada

to we're the I diagnostics help North have is some mean according we but what still at projects but is, to tracer tracer there necessarily some the land that in we've we're one gained, got number competitors, share diagnostics we in think the some value in think will We Research, but already of number we're from provider American customers. be Spears not on R&D our to room U.S., more looking bring

trace is to the from And something call so, move the we're rate tracers wells percent being to -- higher that. of trying than trying what do XX-ish it today of adoption to

number And the our we X, think bring market. we to number able in higher We we that Repeat think drive customers. to are more X Precision so can are as value it adoption. U.S.

market So, their. there. basis, on to run think is grow room to share We're fair we And some a fracturing monthly that there services. still gaining have our so we way some

to gains is we So, be market our some U.S. there. made sleeve sliding that there business the share think in still market,

to Precision to new the still seen there, product is because next that then, And share there. say out the it's push of as product half -- we One but we being products market push setting of of we've think got it's And this year with a lines, working markets. out going in some years, Repeat those plugs one and composite these room for on and then, the that to would tracers some there. less of environment simple able think we value relatively But international line I the that tools in the bridge some today environment. over we're two that difficult the it's the there's the the to really and be services changes things gains

JB Lowe

annualized frame growth from That initiatives? XXXX And the I'm a for you business international me potential next on that to look then your just year's great. and the is your mentioned, last BP how the of that kind half top-line? rolls of is, big Okay, kind wondering ' XX would back imply to of Is what pretty for kind on a Thanks. like. kind other good international any proxy of one next then jump year, of same of Aker it's going

Robert Nipper

the market. specifically that When that comment was Yes. I U.S. made at directed

customers probably the our be around So, I what today. we're sort flattish from going to hearing is is market Canada, think of

think We continue quarters, as generally I market that to is make gains in about last market several over there the share but we Canada. flat have

I think that's that's room going said the this, you a to annualize markets market I U.S. but macro Again, environment, that's And few we the up to a down be grow I probably the think be as U.S. bit, in market bit. international looks have is what a XXXX. areas, half going of like. back kind of the we to think still but

JB Lowe

much. All very right. Thanks

Robert Nipper

you. Thank

Operator

Your next of line question Chris the Voie comes Fargo. Wells with from

ChrisVoie

Good guys. morning

Robert Nipper

Chris. Good morning,

Chris Voie

to up prior I in fourth XX% XX% following question, guided you Just the quarter. on think margins so to the

margin costs. I the XQ outlook think can much the XXXX, What is that compared how to for improved you're still on guide? working

Robert Nipper

to to decrease, work to there in fixed assuming to get ability we've the our Well, and cost. not going is perfect margin, cost what to quarter in a so maximize closer to I and absorption bit get an not XX% think better so XXXX, a to the fourth saw some got commit able little that our of is that XX% left if than we're I'm some something do. activity we mean the a QX of I some

Chris Voie

front, And you've taken do that but costs, there Okay. is Can improve well? the SG&A work then XXXX as some in on to obviously more out there?

Robert Nipper

to anything commit still We're to ready not working again, that, Yes. It that. on on can.

in for pulled we've reduction maintain sure and there I additional next basis but As have the we make to some cost cost I we're the you it. already can want costs the from committed but seen $X we the million commit reductions we've on headcount that some to an that we out, out annualized quarter, update reductions, an before it to we'll at and seeing taken said,

Chris Voie

you. Thank Okay.

Robert Nipper

Thanks.

Operator

Your next with Simmons. question MacPherson from Ian is a follow-up

Ian MacPherson

that at close to Canada in it Canada Thanks been -- the that? like up follow-up. wanted light Montney you're it the is midpoint, XX% or year-on-year, the is pricing got unfolding, sounds QX explained pressure because moving is just the that that especially I make by And what sure all so, that's understood I correctly if right. for I else of that guidance to for

Ryan Hummer

Yes.

of right last in Canada Your you if part took we year. in reductions of remember it, our in and quarter is pricing the math fourth

with comps for big remarks is kind than even sales get described. So, quarter we've our market up easier. were thing the third revenue 'XX, XX% sliding in But third the up completions and a about Robert little his year-on-year us that versus of bit mentioned more quarter in sleeve our the XX% 'XX prepared it

just the and So, the we what we that revenue can kind as beyond share we market share as well with in that think continue and allows gains work doing oil value momentum there described completion and given in some increased the Montney, the the of performance of light the the we're differentiated continues some plays of deliver to to we've what the that increase activity doing fracturing systems market been intensity as market. that in us through have you Canadian broadening opposed

Ian MacPherson

Not Ryan. at Thanks, all. that Yes.

Ryan Hummer

All right.

Operator

to turn conference over Mr. now like no am questions Robert at back showing further to the time. would I Nipper. I this

Robert Nipper

research today, nearly as our the employees as call entire to cover shareholders, joint everyone employees including management Repeat that XXX thank I'd our like our the analysts you team at Board. to the on Precision like employees Thank of who We'd and NCS. joined well globe our us personally and thank the on around behalf venture.

innovations that again the Multistage concludes call industry. look the the our industry. we believe NCS team Thank the year. in is service appreciate that grow bring base, everyone's of this we Operator. exemplary our and customer NCS provide able call. It We to best we effort next I and quarterly the through talents and the dedication have to interest talking on next forward to drive in you, to team That continue customer that is

Operator

this you gentlemen, have today's for Thank wonderful and participation and conference a your concludes day. call. Ladies

now disconnect. may You

NCS Multistage (NCSM) 10 Nov 192019 Q3 Earnings call transcript