NCSM - Earnings call transcript Q1 2022 | NCS Multistage Holdings, Inc.

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Operator

Welcome to the First Quarter 2022 NCS Multistage Earnings Conference Call. My name is Sylvia, and I'll be operator for today's call. At this time, all participants in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, the conference is being recorded. the to turn Hummer. now will call Ryan over I Mr. Hammer, begin. you may

Ryan Hummer

thank you, XXXX joining Thank right. you conference Sylvia, quarter All first and for Multistage the call. NCS

could risks and by call actual for to expectation to want financial uncertainties future operations. COVID-XX factors statements. such risk materially expressed Exchange Please invasion that and comments global business CEO, differ herein, Our Russia's regarding company. as cautions be today's listeners also to These the and led results of subject our the forward-looking of will Robert refer comments. and and and today cause remind Commission of to economy, our results Nipper, filings our and Securities statements expectations include forward-looking from oil I Ukraine some I comments on will provide our many for including any our that the are pandemic demand statements ongoing impact regarding latest

today on also working capital. Robert. Our our earnings net I'll can including non-GAAP reconciliations included details and measures GAAP free underlying turn to over ncsmultistage.com. found are release, and include of EBITDA, call quarter financial measures, comments be to in most flow The our comparable cash non-GAAP website, first financial the now which adjusted the

Robert Nipper

first I want earnings XXXX quarter conference our analysts investors, call joining Ryan. Thanks, morning. employees to welcome our all and this of

quarter. at Starting the in million before our of million activity U.S., slowly I'll with as the $X.X $X the outlook the largely Our international each briefly in million and was U.S., results guidance January we was the and performance our end low of for provided $XX Canada of the guidance during in first of in the early revenue markets. completions started discuss remainder line to that in improving the March. quarter with first of our quarter

second the growth sequential result, in the As in return U.S. quarter. to we to expect revenue a

We new revenue field perforating trial progress grow by our and continue expect that to for line year. for Fire to Purple system the modular product be encouraged gun throughout

incorporating are design. trials We gain knowledge the the into product field from

of excited our high-quality that with about setting charge Fire the most our gives is ability Purple plug, customers string introduction it composite modular gun that perforating provide includes for disposable downhole which us power an the the One with to plug-and-perf tool things we're the and the tool, the system. integrated, completion,

quarter. for Express trials We this the second Fire during expect Purple system, the

Canadian end of in work Our Canadian the $XX.X $XX.X of high our guidance proprietary very quarter complete first casing our million customers buoyancy reflecting onset systems as with pleased with the offerings. as of revenue million results, range and the operations possible construction team million of toe for sales and to quarter's met the I'm of breakup. well the our to as $XX.X hanger, liner business much the success spring growing first across activity strong sleeve in our push AirLock

to We're period slow with breakup, business to $X.X quarter encouraged revenue scope low timing as reflecting be recovering in available the in both permitting. $X.X the through robust expected by first activity that quarter International before our will weather June. exhibit with third Activity $X.X the us expect with million spring of Canadian economics after strong customers. the about May a in their seasonality low the of our our XXXX for Canada could We guidance million quarter, customers activity discussions our million. typical of at were in first the of of in of range as operations and

half in recover of increase into it and as we believe continue to will has begun second second move we activity quarter, to international the Our the the that year.

the maintained we pricing We chain during higher supply well million and receive realize XX service purchases led margins by price steel, and to expenses continue extended for to largest customers these an our - March actions, increases has larger second initiate as of price to early and full of increases rise. XXXX our first future costs, and undrawn and full commitments fuel strong and benefit as revolver glass with increases, labor partially in a as increases plan times allow employee benefit net which impacted expect until including we with year. our the third-party of balance working recently the continue a $X.X Ryan our gross implemented costs and of incurred cash lead year. in the input our standpoint, have this sheet We We're XXXX credit cost in volume entered later. strong surcharges as that a We that From the will cost wages, transportation before fiber new of to discuss and better facility be we pressure purchases increases We've and price the to to increases. cost from us mitigate secure approximately half half timing charges.

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

in year. of team so job, which we zero this at has to record am tremendous far incidents, through and incidents with extended that I our have track proud entire NCS no thus XXXX reportable began recordable XXXX Our say a done

ask in discuss more our detail. financial Now results to I'll Ryan

Ryan Hummer

Thank you, Robert.

X% or prior respectively. quarter. million XX% XX% first cost revenue increase $XX.X total of in XX% in in revenue first XX% compared or a of in $XX.X in and Canada, our the year, expense were and was XX% revenue total seasonally driven as defined and first reductions quarter of first in million quarter the As with the than yesterday's year's international excluding by was release, first markets, higher revenue million, XX% U.S. offset revenue reported fourth of $XX.X less last our the sales, depreciation Sequentially, Gross amortization the than prior of quarter earnings quarter in the higher to profit, year's revenues quarter. our

revenue $XX.X of last profit or was in a XX% quarter of comparison, our million fourth gross For year. the sequential

Our in contributions, has to of as revenue gross increases with due chain, which advance cost us increases. associated impacted percentage decreased of our well as the from mix margin supply to our primarily our price geographic ability benefit

quarter, of Our expense benefit increased costs increases. and salary the quarter restorations by were first year, administrative for the than driven salary million selling, general $XX compensation in and million first was primarily higher and $X.X last which

costs. including totaled Our million. expense reported SG&A includes and non-cash litigation certain In first quarter, our share-based compensation $X.X million share-based certain non-recurring our litigation expenses, expense was the and $X.X compensation non-recurring

$X.X Our for was $XXX,XXX prior million. $X.X first to adjusted an the in the quarter, EBITDA quarter compares million, first improvement year's of which

first was our Repeat amortization quarter, During net $X.X expense depreciation $X.X our and was our Precision million loss attributable million. the and interest in non-controlling to

flow the balance sheet. items cash to turning on Now

operations free quarter from cash capital. This net the the were was flow to resulting related flow cash quarter cash approximately and in an million, $XXX,XXX, Our for primarily of negative our for the in free working flow $X increase negative negative quarter million. first was for first capital expenditures $X.X

million $XX.X As of and in with million debt cash undrawn. of we XX, March our $X had credit facility XXXX, total

was with May, $XX which of facility, million. mature new prior provides was In loan into on as $XX date The additional compared $XX.X million had to into we in the We entered in the base borrowing to facility, capital which ABL million. of XX asset-based net as believe under early March working financial us we entered XXXX. $XX the scheduled a May we which also facility flexibility million new our

for expect guidance to $XX.X total second be few Turning million; recovering to levels million quarter. revenue be international million revenue the spring of of million in and second reflecting now Canadian the $XX.X the $XX.X between to we impact $XX.X revenue this, and million, $XX.X from expect and expect a $X.X quarter, revenue million Within our lower of seasonal We to million. breakup. U.S. between currently $X the of we our points $XX to first million, quarter

sequential our the to in impact in of gross markets, absorption XX% the under second quarter. We cost in expect with XX% the margin by U.S. between international fixed Canada be quarter offset the and growth and during

to the also and in non-cash litigation now and guidance I'll compensation approximately quarter, we million. expenses. our second our discuss million expect including it $X.X And $X.X hand $X.X our in approximately expect million financial second be share-based expense to G&A to be remarks. back to for full year Robert SG&A quarter $XX.X between for million XXXX reported and $XX.X million We closing

Robert Nipper

Thanks again, Ryan.

of calculations of earnings our maintaining expect $XXX year full adjusted are guidance million our year full $XX revenue million, $XXX $XX million We consistent currently full release. million to in We the XXXX. and for to EBITDA with year

million $X to We for capital expect million. of expenditures XXXX gross $X

will While given we be as free in industry of our to XXXX, cash growth revenue our a will XXXX. to growth in XX% anticipated be cash positive challenge activity capital Canada. to is strive in anticipate of Underpinning a we flow expectations expectations use be growth net XX% working that

the increase and U.S. XX% drilled wells XXXX. to in expect XX% U.S. as by increase wells to in completed to We least XXXX at compared in least by the at

XXXX. grow to XX% in least at activity industry by international expect we Finally,

our our of in continued technologies revenue through selected through perforating in activity the international growth and growth industry gun and expect share underlying markets Fire service Purple adoption introduced the system. market We lines, exceed to increases like in product growth the newly

price achievement be the of second weighted impact with impact of increases increases more the year. have Since range increased our costs, meaningful guidance of the the price personnel annual customers toward our expect our achieved and lagged full a year. sales second of the EBITDA that adjusted the that expect also of the half impact will We will we in half costs, have of

and Russia oil adding the governments gas global changes are meaningful chain. conditions, on the further sector sanctions that pressures inflationary by changes impact supply to stress components market by escalation increasing based and current to including Ukraine implemented hospitalities Russia's is market guidance and Our cause against certain could of and Russia conditions various to of by further global

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

growth build as We on our on performance execute our continue to strong initiatives. we

We place growth to revenue infrastructure in providing leverage markets, earnings. of support future our grow in each have to the geographic

adding new We our expanding our of to market. continue our addressable to the portfolio and successfully that introduce meet needs customers, technologies

diligently the are others chain supply We are and industry facing. challenges in through we our that managing

job recordable and that say and maintain very balance sheet tremendous a questions this do incidents any position, we we'll take to that we'll the had each queue. with in operationally, continues XXXX NCS and need. I'm so at if And the are incidents Sylvia, XXXX year. we that, providing a and there us with in to strong liquidity flexibility And proud zero of team recordable far Our no strategic

Operator

Thank you.

begin from now John Instructions] will question-and-answer from [Operator Energy the We comes session. question first Daniel Partners. the Daniel And

John Daniel

question, are first business commitments the mentioned guess, cost how I question. help I'm to my customers the of taking pressures, manage for volume point? volume you given talk they the commitments, to as far you Thank out just gentlemen. curious, to inflationary about at willing look this cetera. morning, Good sort you et

Robert Nipper

of trying will start to Well, about are the the after breakup we're most When and business, then season. business. get forward-looking with run winter you And are having Canadian talk the the through those aware, as conversations volume probably now in Canadian seasonality commitments. we generally that in drilling our volume commitments

there get the instead And calls get rest in need phone the working saying of what more we weeks. year to to the trying are out we their a so it's off for two of better plans just that see of understanding you of

John Daniel

Right.

conversations the is guessing say? Is fair I'm But encouraging. to are that Okay.

Robert Nipper

not buy a may talking customers are, more of U.S. customers extent they sure. full the both price when be [indiscernible] to mean, receptive markets, I in they increases I our don't say a are to on. going than joint Yes, casing I impacts our but But Canadian seem the the they the market, market. what want about it the what's of in are. in aware would see be or

John Daniel

if the you if Okay. don't appreciated. dance And course right, this, - How QX out probably curious but margin you color went trials for Purple of that heard around but get know 'XX into and any be you mentioned just that quantify correctly. Express, Just the just expansion? don't over I start terms to would color I'm want the you're perfectly. perhaps Fire I it, everything would can to in going revenue swimmingly, on reasons any can I for in of you competitive that, play uplift, 'XX and if

Robert Nipper

packaging John, the Purple business, guns. Precision. product that, it The running about think just Yeah. What is we will - Repeat would it of I already a that say be have at guns that rest is Express Fire have assuming goes impact meaningful perforating the well. on that we with everything We've will offering been our the

months we've for right we're - have approximately to now. we of phases now, north and guns trial so X guns X and X running months, been XX,XXX And

where a grow So system that volumes the pretty with expect to - have that we and good what gun perforating kind we market. can sense how of of are we

it So we're be think meaningful can encouraged, goes and everything if we well. somewhat

John Daniel

That’s you I Thank all me. Perfect. got, for guys. including

Robert Nipper

Thanks, John.

Ryan Hummer

Thanks. John. it, appreciate I

Operator

we the Mr. now I Robert turn no have this over time. will [Operator Instructions] And closing to questions further Nipper call for remarks. at

Robert Nipper

Sylvia. behalf been Precision. work thank and NCS, years. analysts we'd dedication management including quarter, about demonstrated employees. of the talk team by a today, our and and tough I'll Thanks, We've everyone of couple Board, especially appreciate Repeat our call really shareholders our at this every On the to on and tremendous our here our the but who and through NCS team research like cover I

light to advantage Now only and best some as and that. the in posed positioned the have believe tunnel, or that take we we're are of team But at that we of industry. I end we the to - have, the as people the we see take good

operate zero to reportable continue incidents with this year. We safely

excellent interest provide and next call to customers, our services is potential to in to in customers improved stakeholders. and our growth successful. a to customers and NCS continues will our for industry, shareholders and That and for talking we our how on everyone's developing enable really to call. participate the prospects of again more concludes our growth Multistage, by We positioned appreciate products excited see quarterly to team forward deliver We is our service Our cycle NCS I'm multiyear other and be new that employees, look benefit today. that

Operator

conference. Thank you you. for Ladies this participating. concludes and gentlemen, Thank today's

You may now disconnect.

NCS Multistage (NCSM) 8 May 222022 Q1 Earnings call transcript