First Quarter Results
- Total revenues of $28.5 million, a 48% year-over-year decrease and a 4% increase from the fourth quarter of 2020
- Net loss of $(3.4) million and loss per diluted share of $(1.43); adjusted net loss of $(2.8) million and adjusted loss per diluted share of $(1.18)
- Adjusted EBITDA of $0.1 million
- $12.0 million in cash on hand and $5.7 million of total debt as of March 31, 2021
HOUSTON, May 03, 2021 (GLOBE NEWSWIRE) — NCS Multistage Holdings, Inc. (NASDAQ: NCSM) (the “Company,” “NCS,” “we” or “us”), a leading provider of highly engineered products and support services that facilitate the optimization of oil and natural gas well completions and field development strategies, today announced its results for the quarter ended March 31, 2021.
Total revenues were $28.5 million for the quarter ended March 31, 2021, which was a decrease of 48% compared to the first quarter of 2020. This decrease reflected reductions in product sales and services volumes in all geographic areas as well as lower pricing for certain products and services, including composite plugs and tracer diagnostics. We believe the decrease in both activity and pricing resulted from the decline in market conditions primarily related to the Coronavirus disease 2019 (“COVID-19”) pandemic, which had a negative impact on our revenues during the three months ended March 31, 2021 as drilling rig and completion activity was substantially lower in the first quarter of 2021 as compared to 2020, particularly in North America. Total revenues increased by 4% as compared to the fourth quarter of 2020 with an increase of 45% in Canada partially offset by decreases of 31% in the United States and 79% in international markets.
Gross profit, which we define as total revenues less total cost of sales exclusive of depreciation and amortization, was $10.2 million, or 36% of total revenues, in the first quarter of 2021, compared to $23.9 million, or 44% of total revenues, in the first quarter of 2020. Cost of sales as a percentage of total revenues increased due to the significant reduction in revenue, leading to under-utilization of manufacturing capacity and field service personnel, even after the reduction of our capacity and staff, as well as a reduction in pricing for certain products and services. Cost of sales in the first quarter of 2021 was also impacted by higher scrap expense and inventory reserves at Repeat Precision related to product design changes implemented during the quarter. We believe that our cost of sales as a percentage of revenue was negatively impacted by a decline in oil and gas market activity levels primarily related to the COVID-19 pandemic.
Selling, general and administrative (“SG&A”) expenses totaled $12.8 million in the first quarter of 2021, a decrease of $8.1 million as compared to the first quarter of the prior year. This overall decrease in expense reflects reductions in compensation and benefits, severance charges, professional fees, share-based compensation, bad debt expense and travel and entertainment expenses.
Net loss was $(3.4) million, or $(1.43) per diluted share, for the quarter ended March 31, 2021, which included a net impact of $0.2 million (after tax effect of $(0.6) million, or $(0.25) per diluted share) related to foreign currency exchange gain and income tax valuation allowances recorded to reduce the carrying value of deferred tax assets. Adjusted net loss, which excludes these items, was $(2.8) million, or $(1.18) per diluted share, for the quarter ended March 31, 2021. This compares to a net loss of $(51.5) million, or $(21.92) per diluted share, in the first quarter of 2020, which included a net impact of $(50.2) million (after tax effect of $(51.0) million, or $(21.70) per diluted share) related to impairment charges and foreign currency exchange loss as well as the tax impact of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and income tax valuation allowances recorded to reduce the carrying value of our U.S. and Canadian deferred tax assets. Adjusted net loss, which excludes these items, was $(0.5) million, or $(0.22) per diluted share, for the quarter ended March 31, 2020.
Adjusted EBITDA was $0.1 million for the quarter ended March 31, 2021, a decrease of $9.2 million as compared to the first quarter of 2020.
Capital Expenditures and Liquidity
The Company incurred capital expenditures of $0.1 million, net, during the first quarter of 2021 as compared to $0.4 million, net, for the first quarter of 2020.
As of March 31, 2021, the Company had $12.0 million in cash and $5.7 million in total debt, with our senior secured credit facility remaining undrawn. The borrowing base under the senior secured credit facility as of March 31, 2021 was $14.4 million. The Company’s net working capital, which we define as our current assets, excluding cash and cash equivalents, minus our current liabilities, excluding current maturities of long-term debt, was $55.5 million at March 31, 2021.
Review and Outlook
NCS’s Chief Executive Officer, Robert Nipper commented, “The strong performance of our Canadian operations allowed NCS to grow total revenue for the quarter by 4% as compared to the fourth quarter of 2020, despite lower seasonal activity in international markets and challenges faced in the U.S. related to winter storm Uri and at our Repeat Precision joint venture early in the quarter.
We are maintaining our cost and capital discipline, having reduced our SG&A expenses by 39% in the first quarter of 2021 as compared to the first quarter of 2020 and limiting net capital expenditures to $0.1 million during the quarter, highlighting the capital-light nature of our business.
Our strong balance sheet is demonstrated by our net cash position of $6.3 million at the end of the first quarter. In addition, our credit facility remains undrawn with a borrowing base of over $14 million at March 31, 2021.
We are encouraged by the recent performance of our U.S. business, including Repeat Precision, which exited the first quarter with increasing activity in March as compared to the prior month, which we expect to continue into the second quarter, allowing our U.S. operations to return to sequential revenue growth. We expect to experience a meaningful sequential decline in our Canadian revenue in the second quarter, associated with typical seasonal patterns related to spring break-up, however, we expect activity in Canada in the second quarter of 2021 to exceed activity from the second quarter of 2020, which was at multi-decade low levels. The international rig count appears to have bottomed during the first quarter of 2021, and we expect our activity in international markets to increase sequentially in the second quarter.
I am proud to say that we have continued our excellent operational performance from 2020 into 2021. We had zero total recordable incidents in 2020 and have had zero thus far in 2021. This accomplishment speaks to the quality of our people and processes.
I want to thank the entire team at NCS and Repeat Precision. It is through their hard work and determination that we can deliver on our commitments to provide value to customers, to drive innovation in the industry, and to create value for our shareholders.”
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA Less Share-Based Compensation, Adjusted Net (Loss) Income, Adjusted Net (Loss) Earnings per Diluted Share, Free Cash Flow, Free Cash Flow Less Distributions to Non-Controlling Interest and net working capital are non-GAAP financial measures. For an explanation of these measures and a reconciliation, refer to “Non-GAAP Financial Measures” below.
The Company will host a conference call to discuss its first quarter 2021 results and future financial expectations on Tuesday, May 4, 2021 at 7:30 a.m. Central Time (8:30 a.m. Eastern Time). To join the conference call from within the United States, participants may dial (844) 400-1696. To join the conference call from outside of the United States, participants may dial (703) 736-7385. The conference access code is 4598373. Participants are encouraged to log in to the webcast or dial in to the conference call approximately ten minutes prior to the start time. To listen via live webcast, please visit the Investors section of the Company’s website, www.ncsmultistage.com.
An audio replay of the conference call will be available shortly after the conclusion of the call and will remain available for approximately seven days. It can be accessed by dialing (855) 859-2056 within the United States or (404) 537-3406 outside of the United States. The conference call replay access code is 4598373. The replay will also be available in the Investors section of the Company’s website shortly after the conclusion of the call and will remain available for approximately seven days.
About NCS Multistage Holdings, Inc.
NCS Multistage Holdings, Inc. is a leading provider of highly engineered products and support services that facilitate the optimization of oil and natural gas well completions and field development strategies. NCS provides products and services to exploration and production companies for use in horizontal wells in unconventional oil and natural gas formations throughout North America and in selected international markets, including Argentina, China, the Middle East and the North Sea. NCS’s common stock is traded on the NASDAQ Capital Market under the symbol “NCSM.” Additional information is available on the website, www.ncsmultistage.com.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods, or by the inclusion of forecasts or projections. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause our actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and the following: the risks and uncertainties relating to public health crises, including the COVID-19 pandemic and its continuing impact on market conditions and our business, financial condition, results of operations, cash flows and stock price; declines in the level of oil and natural gas exploration and production activity within Canada and the United States; oil and natural gas price fluctuations; the financial health of our customers including their ability to pay for products or services provided; inability to successfully implement our strategy of increasing sales of products and services into the United States; significant competition for our products and services that results in pricing pressures, reduced sales, or reduced market share; loss of significant customers; our inability to successfully develop and implement new technologies, products and services; our inability to protect and maintain critical intellectual property assets; losses and liabilities from uninsured or underinsured business activities; our failure to identify and consummate potential acquisitions; our inability to integrate or realize the expected benefits from acquisitions; currency exchange rate fluctuations; impact of severe weather conditions; risks resulting from the operations of a joint venture arrangement; restrictions on the availability of our customers to obtain water essential to the drilling and hydraulic fracturing processes; changes in legislation or regulation governing the oil and natural gas industry, including restrictions on emissions of greenhouse gases; our inability to meet regulatory requirements for use of certain chemicals by our tracer diagnostics business; change in trade policy, including the impact of additional tariffs; our inability to accurately predict customer demand, which may result in us holding excess or obsolete inventory; failure to comply with or changes to federal, state and local and non-U.S. laws and other regulations, including anti-corruption and environmental regulations, the CARES Act and the U.S. Tax Cuts and Jobs Act of 2017; loss of our information and computer systems; system interruptions or failures, including complications with our enterprise resource planning system, cyber-security breaches, identity theft or other disruptions that could compromise our information; impairment in the carrying value of long-lived assets and goodwill; our failure to establish and maintain effective internal control over financial reporting; our success in attracting and retaining qualified employees and key personnel; risks and uncertainties relating to cost reduction efforts or savings we may realize from such cost reduction efforts; the reduction in our senior secured credit facility borrowing base or our inability to comply with the covenants in our debt agreements; and our inability to obtain sufficient liquidity on reasonable terms, or at all and other factors discussed or referenced in our filings made from time to time with the Securities and Exchange Commission. Any forward-looking statement made by us in this press release speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
Chief Financial Officer