NCSM - Earnings call transcript Q4 2023 | NCS Multistage Holdings, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the NCS Multistage Fourth Quarter 2023 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mike Morrison, Chief Financial Officer, you may begin. Ladies and gentlemen, please stand by. Please remain on your line.

shortly. resume will conference Your

Michael Morrison

Good morning. Morrison. is Mike This

Sorry the Full NCS delay. Year for joining Thank you Multistage Conference for Call. the XXXX Fourth Quarter and

uncertainties and that expressed by Our statements cause to our to to want are latest risks future comments and for results factors materially on such that expectation subject results comments financial SEC CEO, be actual any our report as risk today today's differ listeners our and also and led herein. expectations of These could to XX-K forward-looking call annual Ryan many comments. for our will remind refer Hummer, and cautions business regarding include Form filings statements. most I regarding from recent some Please I our will forward-looking provide guidance, our operations. statements financial

including release, cash comparable margin, adjusted and our flow financial in which adjusted noncontrolling less distributions most details are on today underlying reconciliations measures following can these non-GAAP full our comments quarter year included cash operations per net Our in measures, found EBITDA, non-GAAP earnings well of and as to contain our free and be the share, interest. The fourth of provided measures ncsmultistage.com. free margin, the and to GAAP release, results website, loss gross profit our adjusted adjusted earnings flow loss as financial adjusted EBITDA

call the turn Ryan. now I'll to over

Ryan Hummer

efforts XXXX. this financial company-specific outline will for and year. in XXXX and I'll the also analysts review for performance the Call. strategic accomplishments year how throughout our Conference employees XXXX Thank have us our for XXXX cover I'll and growth follow you, joining our quarter. our Mike, Mike objectives full and fourth quarter to and welcome results investors, our opportunities and positioned Earnings in

districts in in second challenging our last the pricing the levels be throughout the In rig XXXX XXXX, and bottoming for much of and half turned activity anticipated count of trend year-over-year resulting anticipated of with year. The decline started competitive decline strong impact the slipping X% Activity with in activity XXXX, operations. for the of changing for progress. declines took in limited the on International year meaningful the revenue more of a declining In quarter NCS. industry in our manufacturing environment, the resulting this in Mexico. the a as facilities power, in our time in year we observed revenue the operations than and market Canada each similar the of Canada, last while to action had to U.S. year environment in activity we U.S., we year-over-year and U.S. further certain out consolidating at declined response first by

the prior our and margin and also gross maintain the We with our consistent International and along year personnel U.S. diagnostics actions to common technical in operations supply head revenue. with count tireless XXXX, the our of XX% in team reduced and teams These chain us of adjusted under aligned allowed decline tracer despite leadership. work

on our We given SG&A in spend as cost XXXX. A to XXXX environment. also in a reduced inflationary expense meaningful SG&A proactively $X.X in million the reduction compared pressure overall and resulting reduction the wages

compared million by approximately to million of $XX actions flow free was less timing the reduction compared approximately XXXX due than that $X cash nearly an realized we during to of result improved actions. Adjusted cost EBITDA half will XXXX of our in in expect We XXXX. We approximately XXXX. in million $XX which in our million, annualized those $X benefit performance XXXX to

in XXXX. free we our distributions JV compared negative last $X.X partner to cash to after cash flow year million generated million $X.X Specifically, flow in free of

to lower further For activity to U.S. much levels that part and by activity declines, with to the in and in North in decline by we currently support we due revenue made XXXX in XXXX and to be markets a as oil XX%. the to grow water companies. expand magnitude, not in TMX levels believe average ongoing anticipate conditions the as which project our in expansion in activity. to product XXXX, activity projected XXXX is the decline these driven levels with levels. Despite compared during U.S. tempered a same companies both are the XXXX, water and summer and drought the our LNG current Canada, in by certain industry large independents America oil compared completion, national for our expect significant nearing This restrictions better offering of by in producers months align Canada in service to Canada low as possible and annual progress new We likely should to result presence the Canada activity international Including customers.

company-specific few I'll highlight service a efforts lines. these opportunities across product our and and of

Beginning with fracturing systems.

customer previously the we continue to North expand Sea. in As base discussed, our

first we install and the Canada, our year recently X relationship of work a these service conventional application in sleeve part including of expect systems provide extended to during first customer XXXX, for we or sands more installs operations. for fracturing from oil the a customers. In customers SAGD long-standing job For least as for a gas completed oil successfully their This X at targeted development. our in

in an we partner, additional build to to through well in SAGD successfully for system such the as to trial develop We working success the testing other early with high-temperature successful customer replicate and service the for a applications validates completed a the participate use success with to installed environments follows new look Gulf will strategic this onshore on application this of expect deepwater with producers. In U.S., a for technically NCS, positioning and sleeve Mexico. This XXXX were lease demanding trial the well surface occurring earlier The deepwater in This completed market. in successful in XXXX. for activity us design late XXXX. trial

asset to XXX we addition, a in sleeves interesting for a second the very install plans U.S. project the the base. This plan in enhanced ever and globally. have sleeves U.S. recovery run its most well the NCS evaluate a over NCS sleeves running most the in a well to for quarter, X.X-inch well will whereby the customer ever be strategies In in

pressures well to the Within by systems. temperatures, voice also operating buoyancy of at expanded on higher successfully enable enabled accommodate the for premium we construction, the the AirLock casing additional higher envelope torque to customer Building and operation connections.

our hanger trade system field. We systems categories addition, Houston. show In add at Refrac technology certain was these of new previously to that understimulated will and applications customer recently wells. significant very the and SlimStim near are This provide This continue enable believe liner a we introduced product unique we with benefits size our customer operational input contingencies new meet in to the to system. high-intensity and refracs designed

significant our to is of business expect this of expect of the next expect trials other this international system first in growth Testing our chemicals. new to XXXX. Perhaps field such markets. We during half of region tracer a complete We market the year. the testing plan XXXX diagnostics diagnostics, in which in X conduct expansion in complete over of be we importantly, Middle testing and enter tracer most one we East a to several this required the year months. In expect meaningful of to additional year, each we markets

well-respected details after A are which an successes pressure out our crews multi-pad this utilized good We during the second key plugs cloud such only U.S. At test project, Permian E&P had the providers. job, the decided run finalizing [indiscernible] with diagnostic extensive and multiple how features East well largest Middle as we've composite market of to well. behind evaluate as frac to to frac hold multiple several The position a our different Precision, basin wash test the that could out. drill system time tracer be of year, Repeat tools plugs company

Our this first began with December ramping of XXXX. quarter throughout work last up the and is customer

trials had becoming perforating front, system a control product system, which practices base legal internally risk matters patterns repeat and compatibility prevalent its which has oriented in is perforating of oriented The pinpoint preferred initial perforating various E&P development field, HSE and more shaped maintains a systems, customer the the America. pinpoint purple successful to of field North of ease the across reduced designed On the use charge. I'll few preassembly now. gun customer's in a fire benefits on of with the environment, manufacturing update provide include quick gun a

quarter fourth our previously reversed in amounts XXXX. litigation disclosed the insurance carrier XXXX, the in of matter to our plaintiff carrier the settlement during cash million the Consequently, provision settlement payments reported and agreed by plaintiff a insurance no $XX.X reached in NCS. resulting to where December Regarding the the pay NCS, we previously Texas, legal of

the mediation As February the in meeting in infringement for patent a case disclosed Canada, attended late previously XXXX. parties

expressed discussions. continuing in agreement has no with both While been parties have interest settlement reached,

However, reached, law the appeal settlement strong decision. we cannot believe that be grounds supports the on for applicable

process However, could years. litigation continue for on the several

last and long-term we our Finally, declining the to or In I adjusted flow. for margin, think with improve aim straightforward free discussed and EBITDA strategy a are our call. that cash in while are aligned flat quarter's I goals grow XXXX market in XXXX, all generating revenue

XXXX. so processes safety. that We'll We improve ensure the enter aim And and fourth guidance and engagement review and and new the workplace our quarter markets. for improve effective. Mike to successfully obtain our can we within we'll employee be quarter continuously the efficient will for for collaboration results new our of field our company first now trials offerings and our more finally,

Michael Morrison

Thank you, Ryan.

were As fourth last reported our XX% revenues decrease quarter. quarter in a earnings to $XX.X yesterday's million, release, fourth compared year's

and Canadian down by XX%, X%, were respectively. Our and were our U.S. up revenues while XX% revenues International

while international by negatively the with the activity Lower negatively fourth North quarter Sequentially, of in by related the activity down Sea X%, customers Canada higher but to normal U.S. impacted revenues. down in the U.S. And repeats by the XX%, by decreased composite The customer International revenues the sales in gas year-end by prices affected in improvement levels, increased natural sliding Canada timing with plugs. revenues our XX%. primarily seasonality. was U.S. driven and sleeves decrease of was XX%, in

gross adjusted an and representing the defined XXXX. portion of adjusted in primarily total was from The of quarter revenue profit, sales, XXXX, as period coming gross for adjusted service excluding of was XX% of depreciation to cost total Our revenues in down fourth decline same gross revenues. with XX%, expense, in a adjusted the of our decline margin revenue million attributable mix, to margin gross $XX.X an less our compared in and higher-margin margin overall decline the amortization larger

general compared and full year $XX.X full in year. Selling, was year fourth of compared revenues, year Our our revenues X% the for to XXXX last same gross the a this XX% quarter, administrative to of million, were decline with remaining decline year. adjusted period Despite $XXX.X margin were full the for costs flat the of consistent million XXXX. prior the

a For costs the SG&A were $X XXXX, XXXX. to full of compared million, year approximately million decline of $XX.X our

For reported diluted or compared earnings the share income fourth quarter, in $XX.X of period income the earnings we or million per million diluted for XXXX. to share same $X.XX net of $X $XX.XX per of of net

For resulting positively matter legal fourth cash the impacted income quarter NCS. taxes by by was net settlement -- fourth payment our in quarter no of the

Excluding this or of per net $X.XX. $XXX,XXX loss fourth an XXXX loss for adjusted benefit, quarter share our was of the adjusted

the to period in decline million the XXXX. $X.X compared for EBITDA million, same of EBITDA fourth for a Adjusted quarter $X.X was adjusted

to decline year of compared the XXXX, of was For million, a adjusted $X.X million full EBITDA $XX.X XXXX. our

Turning cash sheet. now balance items to the flow and

operations flow million, During of after free $X.X generated we respectively. JV million the our flow and fourth distributions $X.X from cash and quarter, cash

flow $X.X distributions XXXX Our JV was full after million. year cash free

cash net obligations, total borrowing On outstanding had availability December facility under the end XX, had million, finance our ABL a no which under of cash lease December, in position $X.X $X.X undrawn in million. the consisted million of note. of million positive and borrowings was $XX.X of debt entirely their repeat we $XX.X and At base resulting promissory

million, $XX We end guidance sequentially in points quarter. currently modest and the of a first the -- million of range high turning improvement a now few U.S. the improvement of quarter first a slight for Now revenues with $XX expect showing low the end in both range, showing and the to to Canada

revenue revenues of $X U.S. $XX to $XX international the range expect $X of and million million, of to to revenue million Canadian million $XX million. We $X million in

to gross margin and XX%, of to XX% our be adjusted the adjusted expect between improvement XXXX. margin We compared an our quarter to fourth gross

our back We between full remarks. to depreciation year $X to over expect that, million and expense $X our Ryan for provide be to first approximately hand and be it adjusted and and million I'll closing EBITDA quarter XXXX $X.X amortization million. With to our guidance

Ryan Hummer

All right. Thank you, Mike.

is year $XX expect $XX follows: and million we year to currently XXXX million EBITDA full year $XXX in between full full as $XXX million adjusted revenue and be a to of our So for range guidance million.

that our the primarily particular. North increased Repeat and Sea U.S. revenue result in Middle international We sales expect and from of the will Precision growth in East, the markets, in

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

may cash again the -- year, free providing be While during represent strategic expect during flow modest free us working cash use positive XXXX, strengthening with capital to sheet further our balance robust and of a flexibility. cash we

modestly outside seasonality that business and gas-directed just of industry activity. the half to prior will and North of increase EBITDA in XXXX. And adjusted lower due had believe with expect to America with and annual XXXX of we for growth, to gains market activity that America view and the Reflecting our adjusted do our of years, in year. the We spending though respect anticipated weighted overall in second efficiency be EBITDA expect to to the also guidance achievement cautious in industry even activity We range achieve the a XXXX. natural be than both markets North revenue on will guidance we consistent our

navigated made Q&A, benefit to market and faced brief open of the technology the on at way couple to international adapt to to companies our focused and team business advanced independents, large growth despite with we comments. the necessary Before technology proud during ourselves I'll stand portfolio the NCS national made international with environment, company a close We companies. large the efforts remain for XXXX. we that and oil our adjustments challenges of distractions. We customers the I'm investments and multiyear we've that markets external position from to several to the oil including certain in the align our

X%, required we our cost infrastructure to reduction grow by the this growth support in leverage our benefit margins XX%, expect enacted we anticipating EBITDA adjusted incremental and the fixed XXXX. the At are but growth we midpoint revenue revenue our maintained we of ranges, We efforts of the from year. guidance strong delivering cost we as base

The our we market. needs are presence commercializing to aligned of customers. this our the with expanding are our and that addressable market and year our portfolio technologies both Adding

cash and of liquidity And balance nearly position. entered finally, million. we XXXX Ending strong XXXX, the $XX with a sheet balance

add free by XXXX, expect positive in cash we'll strategic In to flow to addition, financial balance have as and again we that additional cash generating flexibility.

welcome With that, we'll any questions.

Operator

of first with Our Instructions] Storms [Operator Dave question comes from the line Stonegate.

David Joseph Storms

Sorry about that.

especially know a You're in prepared takes guiding the current growth environment. puts and the year-over-year, about your market to talked nice you of given I remarks. some

in it little upside we be could could restrengthening surprises get some would you Just what on the in hoping at maybe a on go that Mountain positive helpful. be detail information Just a more of pipeline? Is the your Trans any mix? more could

Ryan Hummer

Yes, to absolutely. high pretty at We'll a talk level. that

the move us the that relationship expect big Repeat remarks, concluding customer prepared as we do XXXX, plugs. than forward to year the pieces last X have as grow really the allow market us we to with will of opportunity extensive and that late of testing and faster Precision the that after we think I developed kind into were for

work the So -- starting X different to with Basin. with that, in on Permian the crews we're customer

pick that bit expect could from a further. up there We

a -- standpoint relatively year-over-year at Canadian move get really point we flat year-over-year down we're of revenue you so customer market impact that's win little in business, be that as December, in started to this from just to XXXX. The work flat that bit. So the a expected a full through

-- past how to around the customers change a enabling little really Canadian as bit to we've do the to areas. the the market, far we're way certain upsides in in talked As business they Canadian potential

that more So basin region, other design, given we've had higher with density. takes be that source the if customers for wins completion and sleeve with sort in deep program so some that really could that good And running are hold the in at lateral a a of operators looking upside us. length, in of sleeves as

customer a a a area the more area company, couple and customer and deep working been started of pushing who another assets that across also bought new long-standing has a high-intensity new companies, different with complex design of completions some who's we There's in a basin. who's

to with flat then can you those drive upside share looking Precision start to earlier, between point, the mentioned plan. But Canada guidance market I and year-over-year repeat, as relatively and upsides the far think So the at also the in But part I other our in plugs, in into grow this international. the the execute kind there. that upside there's hopefully, outperformance some to some we're Repeat is and continuing probably which Canada, in PurpleSeal portfolio as on what's of upside of versus big addition baked at to

that portfolio either on an service with having customer we'll that So North growth grown we'll with customers nice install Sea. in to basis, X the a see or be working

the the third largest thought and Canada then -- work could accelerated and be in our bit for talked trailing one us, second Middle time. company, turn being additionally, largest oil could into only a we that operating That's We national East. in opportunity surpassing U.S. about in and the the And in how growth particular, even tracer before region the for tracers that,

we've baseline secure flattish with repeat. at few and the Canada been over the from working last really the to a couple on in in executing internationally of that really So really, it's Flattish hard opportunities U.S. upside specific opportunities years.

David Joseph Storms

on focus that. more sounds could. guess, accomplished of last lot to you've continue to opportunity you more, you 'XX, And over do the if a And appetite on that? of your I have working How pull It initiatives savings kind year, what's here? cost to levers one like then just an I gave many

Ryan Hummer

Dave. Yes,

cost that ] (sic) especially activity, hard market reduction right the gave a with business the U.S. operational at globally. to impetus take through consolidating really standpoint, some from in the certainly you're [ at facilities XXXX the our in an did supports and a Repeat So manufacturing work also base that our from that in field. look And standpoint. XXXX We the that us

as sure as possible. So make we're we running efficiently

what it's improvement, reduce or our growing in take focused SG&A supply every of a is be through to dollar that, engineering support Within out to the to I'll going driving at continuous the XXXX. But are investments that that's system, and be we're growth. our always the strategic on both side. working on we whether side of whether looking some to cost on side say and chain capital to -- standard team the personnel look hard We're the there continuing at costs products going make, that

same looking leverage of that forward. to level the So that I of a the be cost don't standpoint. that we'll going We'll to think cost We're and to system as make be we it's cost can. move year of we base balanced But we're take from sure a to just more out we able that justify efficient I be as we have. going as know that

Operator

[Operator Energy Instructions] John question line the Daniel from Our Partners. next from of comes Daniel

John Daniel

field could be off, meant question. provide the you descriptive more successful soft think you've about kicked of do that be guidance, to your helpful. as you potential that? and years? couple like color you Just from talked about upside some you is Or next be. might color But not as in it's assume growth successful, are trials a trials the This you if if when know any there's to, do curious I'm would that some actually that It's

Ryan Hummer

-- significant the lengthy -- question, you we've product that's of gone to a each different trial you've effort. trial a tracking for John. field When get measures we and success we're number good of got, stage, of those. field obviously, a are Yes, And development through opportunities, internally, pretty

some gone earnings when field your there expect in additional manufacturing You've through that well. that may And out as design effort. trial, get be you you

we the trial tremendous say of for category, what not contribution contribution. that some I'd expect is XXXX, amount but So in that are within things here field a

stage the set more trajectory. does for growth really it longer-term think the I

either something generator could trials, iteration make So if out into we more or it first the production and it's of and when time go there, a we on that we've down be revenue execute nailed those field the more road. get straight one we back

a the up some engagement starting to and back customer fruit. XXXX market. lot in we talked got and that's XXXX we're bear good that we've to we're really that of of interesting pulled technology past, in really -- and back development that lot we're 'XX. of So the 'XX We've there, a and right, products ramp of kind around in out And our bringing getting effort interaction

John Daniel

X so Okay. Ryan, The talked had, copy I apologize, crews. next and I I about I'm notes. able write to But wasn't down, -- getting one driving, was these you on

you was Permian it do you gospel that? like of what in your on that think like? that how will, if win you the they the they product And success mentioned. see spread I something the [indiscernible] do When you

Ryan Hummer

the Thanks question John. absolutely. Yes, for there,

the X So E&P do this the providers think or like that we leaders I was a that In would they'll frac one in being they customer, the X plugs, of technology it a look and were number was space. them every and now competitors evaluated certain different take of case, XXXX, did it in they in a I something the then, where one -- at were And as different space. view there. of

for lot best. determine to tracers said, tools a I them As other set a was fiber performed was that of and work plug right, performance optics, which diagnostic the of there across criteria, including done

we're us. results to certainly work the with there then encouraged and with So starting

a yes, off kicked them with we've of Permian. couple crews in And with the

made to spread going long the West They've that's well is you customer. and at made they're I term. connected one some gospel operating Right. they of to -- it's the think How some to very Why that I the [ decisions a they with willing about community well. obviously in that That very us also Texas there's share some extent. got think in area. as customer other chance internally grow ]? do regions

that So that -- that and be grow one testing -- there taking customers every that that the of business. making translate was of work and area and angle help by utilized by of we're that sure the more the done can that, certainly in done, and sense was sort working us customer right, to technical kind work

Operator

time, questions. showing I'd Mr. further over closing no conference to this for I'm the Ryan like Executive turn At back Officer, to Chief remarks. Hummer,

Ryan Hummer

All right. call and Marna. I everyone to their of that people management Board, work. today, on the we'd analysts of and Thanks, expertise the bring behalf On team our people our our and our shareholders, thank and breadth including the truly and employees. like Repeat of appreciate and at our depth to the especially effort NCS our passion Precision

continues taking NCS and speaking enable again call. earnings look Our service that on and will interest technically more forward our new to our products team everyone's services provide quarterly commercializing we be delivering customers challenging our to on to is Multistage, work in results. demanding customers and and We're appreciate successful. We next to excellent in

Operator

call. you for conference today's concludes your This Thank participation.

You may have now wonderful a disconnect. day. Everyone,

NCS Multistage (NCSM) 8 Mar 242023 Q4 Earnings call transcript