NCSM - Earnings call transcript Q2 2021 | NCS Multistage Holdings, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Q2 '21 NCS Multistage Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ryan Hummer. Please go ahead.

Ryan Hummer

right. All and Conference joining Call. Summer, Second NCS you XXXX Quarter thank you, the for Multistage Thank

the like oil working refer those capital issued allow to associated manner comments. may to public Our performance capital, contain remarks note our that the use over measures. forward-looking. financial better and EBITDA, performance. business protections. provide And CEO, today to statements consistently would regards information periods that cash Robert structure current would that we call are will call comments federal reflects us expectations on future harbor the on and and our to press flow to extent statements subject Nipper, other operations to and I various free be please made believe relying without company. night, SEC Such known on refer to in risks filings safe will for forward-looking impact with than could along global compare we the and COVID-XX I some because the information, listeners measures today including our of include are that results which caution costs pandemic non-GAAP led operating release demand our these are this they regarding unknown by We We call, of historical like be a our we our other also In financial today's with with last uncertainties, the to economy, adjusted and our made and risks. net you outline and that

the on provide presentation and are most the turn comparable both measure. website, will over financial to non-GAAP now updated Robert. the reconciliations ncsmultistage.com, press our yesterday, I to financial which posted measures call these release GAAP Our investor of of available

Robert Nipper

conference to quarter our investors, XXXX and call. joining analysts second Thanks, Ryan. employees our Welcome earnings

U.S., and each fracturing customer their steady favorable generally international provided Starting to a I'll Canada was our early program had quarter May. discuss second the the June has the in briefly activity a in third we for customer's at we large and quarter. planned $XX with completions the a through program. pricing quarter WTI restarted This completion performance With $XX Our and unanticipated to space of was activity barrel, of outlook XX%, U.S., the the benefits of in sequential private customers. our and guidance sliding systems and seen as activity markets. Repeat results sleeves using have million in in have completions the second basins the in by where U.S. but Precision our fell demonstrated pinpoint increase work as guidance white increased have impacted operational represented increased revenue below operators of our $X.X for

with as Our diagnostics well business tracer benefited projects pad several multi-well underway. has

As in in will U.S. a quarter. we result, expect continue the the that sequential growth third

XXXX range allowed $X.X revenue Canadian Our to spring in of U.S. a closely rig the far Canada Canadian year, breakup dry begin activity their our in guidance out Coming has this million, of increasing tracking than $X customers been levels, warm, thus second as quarter June. early with the $X our recovery of in count million exceeded stronger conditions in the to indicating million

just X,XXX This wells as number the be to in of wells under which the Canada through closely, compared the XXXX. and in continue prior drilled activity XXXX XX% year. X,XXX recently outpacing is to expect more expectation drilled reflected increased by to in their in compared to of also most the We recent X,XXX, by survey Services Association track for levels their as of recovery expectation in in April, the to remainder Canadian XXXX of U.S. growth Petroleum to Canada, the

America, increase North for of only that for activity managing million. believe lagged the it half markets the we move has projects quarter, SG&A staff international difficult million recovering the spending. recovery of $X million will in revenue discipline and $X.X operations up as second remain that continue capital our into second picked costs of the have guidance very $X.X We of international in to $X.X travel with and We us to in on million quarter, to COVID-related remains though focused significantly the several up quarter ahead international and our from the to due maintained to year, the on Although restrictions. first our

to to of the compared the XXXX XX% second of first decreased SG&A by by XXXX the X% quarter of decreased XXXX. quarter Our quarter as and second for compared as

Our net the capital-light were and nature highlighting financial only quarter capital both expenditures discipline. business our $X million, of for our the

We our balance for base have cash sheet with $X million. net end in XX, at also approximately revolver XXXX. our million strong June $XX of of June as exceeded The borrowing retained the

inflation supply working our steel, impacting or stresses our volume as wages, We're increases and and business system point allow cost to with well cost have employee to in We for add as our lead extended for growing to net secure out stream for intellectual that some pass to our pricing. times through of third-party gain us price royalty fiberglass but cost are these of related in that yet buoyancy charges. I'll service casing mitigate a chain seeing customers income. purchases signs commitments higher we providing these licensees we AirLock not increases, achieved property also of continue

and intellectual to become property will on defend aware we We our of as believe we assert competitors that our intellectual infringing continue property. are

far and a do have recordable incidents to our with X say we of thus continues record I'll I'm year. XXXX from Ryan discuss in proud XXXX no more reportable this into NCS ask results incidents at tremendous our track continued to that detail. financial job, now team Our to

Ryan Hummer

Robert. you, Thank

quarter defined in XX% quarter, in in XX% U.S. an our As reported revenues the first basis, Gross XXX% excluding second was was or profit, increase quarter second total increase second million depreciation the quarter. release, of than million international sequential million, $XX.X and higher driven XX% revenue total of the than XX% to second a revenue by $X.X the in second in prior expense, Canada. sales, less were as markets, of of offset quarter with a XXX% in yesterday's amortization an and or earnings of XX% of lower over compares quarter. revenue. $X.X prior in year revenue On revenue seasonally in the cost This decrease the year

gross profit $XX.X For quarter or XX% in of the a XXXX. million comparison, sequential of first revenue was

changes XX% as ability quarter sequential impact margin of costs spring in gross breakup was our the even to XX% design Our at year. general last in compared $XX.X $X.X compared of with implemented maintain the earlier and related or that we quarter the the Canada Selling, to to second lower first Repeat second related costs, million quarter in to or margin of administrative quarter, incurred in this demonstrated year. XXXX million our revenue the of Precision the lower XX% additional to during $XX.X which seasonal of SG&A, and XXXX, product million were second as the

second the SG&A compared to lower as Our $X million was first quarter. quarter also

expense $X.X expenses certain In the totaled includes nonrecurring SG&A costs. compensation totaled expenses, quarter, litigation certain million. noncash litigation share-based reported nonrecurring second $X our and share-based million and including Our compensation

and as for $X.X compared million year first was the This second compared adjusted as quarter decrease XXXX. Our quarter the to million prior a quarter second negative million. to $X.X of is EBITDA of improvement the a $X.X

quarter. net and in was Precision depreciation million for Our quarter the our $X.X was expense million, $X.X amortization interest second the to the noncontrolling and attributable income in Repeat

cash flow to items Turning now balance and sheet. the

and $X net Our flow is million. expenditures second capital X for quarter cash million the operations cash our resulting of were total for in million. for in quarter $X.X of quarter the first and free the months second the flow from $X.X of $XX.X debt had million, $X.X XX, On cash million. we million, June Free XXXX $X.X flow for was cash

XX, of commitments. June base under letter credit of is our net the million $XX.X As of million, credit of was facility $XX.X available, which with that borrowing

revolver. capacity capital had has as $XX.X separate over XX million In NCS addition, currently working borrowing net Repeat Precision of in is of well. to from access that as our $X June million

of revenue Turning total the a $XX $XX third and million our now million. We expect points currently between guidance few be quarter in quarter. to to third

our million of to revenue $X million international million of revenue $X.X expect and $XX U.S. to We $X.X million.

$XX.X We and also Canadian million following million, seasonal expect the increase spring between in activity reflecting $XX.X of revenue breakup.

product We revenue related XX% increase expect our between and Repeat to further at improve Precision. costs to designs XX%, gross to sequential margin the and the reflecting limited in

approximately We expect approximately $XX.X This share-based between million compensation nonrecurring of $X litigation reported quarter. $X.X $XX.X the our share-based in items, and in includes noncash to and compensation third and be expenses. million million in SG&A, million inclusive

credit, U.S. third CARES reported SG&A and benefits both We of impacted is which gross payroll the part the quarter. be expect profit retention tax the in from by that our will favorably employee Act

million benefit a our bonus is of $X remainder net of of reducing which expect with reducing accruals sales. over cost our benefit of XX% We SG&A that with $X.X approximately million, the to

amortization I'll quarter $X.X update and to of unused costs. expense XXXX amortization closing the our issuance be hand interest approximately depreciation third facility our our to expect and year guidance debt and net remarks. and be We for Robert over million, to to fees it $X.X million, expense reflecting full primarily

Robert Nipper

Thanks, Ryan.

of currently to full expect to of XXXX increasing $XXX follows: expect nonrecurring. $X currently revenue year $X $XX full low year this million. of increase net We include end in EBITDA credit, million, from $XXX the consistent we for earnings million, calculations million an we provided This previously the any adjusted $XX the with as provided range to million from in benefit updated note to of Our the guidance release. expect is as full $XXX I million employee year May; characterize which retention is prior does the not will range from million our that

million reducing we million XXXX capital $X.X $X previously. are to to provided to million gross the million for $X from expenditures We range expected $X.X

U.S. growth. and tracer expect of to the flow improvement than working that this the earnings Within credit in expect second year, from free We the in we continued and in cash contributions underlying will XXXX with the fracturing required support the benefit our more we diagnostics retention positive investments with systems, in half be covering guidance, Precision. revenue capital from a Repeat employee the

Middle assumes as throughout East OPEC+ of more the this and support increasing continuation Visibility continued XXXX guidance travel progress remains limited, however, of vaccination fuel things. oil as as levels. remain the year continue operations, consistent the throughout expect our second We XXXX We second activity of in half be of in North to anticipate in will year, we Canada Sea relatively with markets that active the international in with the activity economies half will among other in oil well especially that enables recover and the later improves. the demand year access normalization as market, in

Q&A, comments. Before to open a couple up we of the call brief close I'll with

are the market, positioned systems and higher the continued in the exhibited we second activity the levels continues as year. compared recovered XXXX, well as smaller our the activity operators. the sequential this half for in which markets, activity especially active increases consistent activity second the at remain for private position Sea activity Canadian strong year remainder of much XXXX quarter, by which North and from of levels We to a for to has rebound international U.S. as activity expect to We in with increases benefit fracturing in already Repeat growth Precision has international trough in to NCS maintain and in operations U.S.

products in invest innovations global a in I'm to is secure current the of possibility bring there intellectual in property. success for industry. our supply. and and our recovery that We believe technology strong managing oil the cyclical encouraged our to and to recovery services, of for enhance our OPEC+ multiyear We customers activity a by continue new demand

growth. to the associated in We are borrowing earnings each requirements place questions. of business. strong balance our support base our with capital assets for revenue leverage markets, grow providing sheet, with working And And we'll organic that, any capital growth support have strategic to in in and and working our position future welcome infrastructure NCS

Operator

Ian from MacPherson Instructions] Piper Sandler. Your [Operator of comes question first

Ian MacPherson

the was of by how us much thinking the for levels those those And out the than to are, drivers. is and you you of loud guidance structurally back your you I just that or Pleasantly the but think here just do U.S. mode thinking the a much familiar into quite as fundamentally who U.S. it XXXX plays over retracing for just Not for growth help to or next year, in with government-supported as XXXX your understand recovery follow bounce prospects how fundamental far so year, could as how of as with Canada? fundamentals business better closely in that if -- already this in wondering surprised compare just us regard Canada. don't you

Robert Nipper

the our for prior industry live cash I mean, rig we've think way pandemic, things support XXX got market. count versus, look was XX way have I years. not mean generating in to we our of the general now and to U.S. certainly learned has now would learning that time that a the last Well, has we the Right. at But customers I where increased. XX one a over I in the U.S. say If this and in activity overspending that year, king free Canadian the is of lot it live, flow is to in to the of right

market is a bit terms living of ahead U.S. within So U.S. their market the -- little I think of means. Canadian the in or the

And now million recover. at to in pricing, prepandemic we're so with of of I a recoveries couple almost seeing starting demand levels. mean, barrels we're within

we see to as activity. market So support pricing Canadian to continue continue increases, to the continue think see I base increase and customer we'll the in

Ian MacPherson

Okay.

its the you it organic Canadian call more next year? there's that earlier? recaptured do you to too Or a say that year difficult is Or Would upside think has better now? growth theoretical Okay. just market for right just headroom of

Robert Nipper

it's captured. far of think not I No, what that it's ahead

a again, think, I makes pricing difference.

Canadians had And enjoying so better have pricing the they've the past. than in been

think as there's increases. will activity just certainly helps. demand organic that increase And so to that continue I But still

Ian MacPherson

Okay.

you -- on sheet. a I your $XX quantum think capital net And you close said working the large to balance million to sheet, Okay. have that's of relative balance

the working the the on to of of next have on harvesting kind just business? you relative augment do that quarters? So of any optimized of over Or refresh rules in couple to levers any place capital us thumb

Ryan Hummer

Yes, absolutely.

relative relatively net a working So we with capital are our high revenue. running historical balance to

we I to about can or of a mid get think working cycle, later what to we've you capital revenue. of seen is net once get XX%

And in the So with I'd forward. say a be would our that target to receivables. move respect position we as very good we're

don't job has strong. have but Our team collections a done our we overly We payables, been the there. manage The manage great payables.

able inventory. for lever need And work to on us to to down going we So be the biggest is the growth and volume that inventory. activity certainly, And revenue side be I with that our throughout the growth what we'll to far on to we add see think inventory as efficient with growth we year, the be stock respect side. very as the

that down, biggest So capital revenue as far as ratio to a for out lever for inventory going compared think the side. coming working be the will you're gains of net see us I managing that as to

Operator

[Operator Instructions]

Robert Nipper

more that It questions. don't have we looks Is Summer? any like right,

Operator

for more Yes. questions it at this I'll closing. no Appear time. you to be turn to

Robert Nipper

I our that our appreciate in shareholders truly everyone by and management Thank cover Board, been Okay. and and our of behalf sacrifices to On team thank each including you. have like of our employees. NCS NCS, support other. the made to research today, company especially the employees our who everyone efforts analysts the and and we'd call the on the

recordable to year. continue this operate incidents We safely X with

provide Our and team continues more products that enable excellent service our developing our customers services is to to new will to and successful. be customers

and as good come Our that of tremendous team impacts a managing people COVID-XX. forward We're I'm appreciate so with only the the and you, our done we our job many that call of on that NCS challenges the have as today. proud talking Thank continued have in people, in here everyone's at earnings we NCS. call. next and our quarterly concludes Multistage, We interest to again look Summer,

Operator

today's Thank This participating. concludes you for conference. Thank you.

may now disconnect. You

NCS Multistage (NCSM) 7 Aug 212021 Q2 Earnings call transcript