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NCS Multistage Holdings, Inc. Announces Second Quarter 2019 Results
Second Quarter Results
Gross profit, which we define as total revenues less total cost of sales exclusive of depreciation and amortization, was
Selling, general and administrative (“SG&A”) expenses increased in the second quarter as compared to the prior year due to increases in personnel, higher professional services expenses, including litigation expenses and support for our new enterprise resource planning system, higher share-based compensation expense and an increase in bad debt expense, partially offset by a reduction in accrued bonus expense and other professional services.
During the second quarter of 2019, we performed an impairment test for goodwill and determined that the carrying value of one of our reporting units exceeded its fair value. We recorded an impairment charge of
Net loss was
Adjusted EBITDA was
Capital Expenditures and Liquidity
The Company incurred capital expenditures of
As of June 30, 2019, the Company had
Cost Reduction Initiatives
The Company is implementing cost reduction initiatives in response to continuing decreases in current and expected customer activity levels in
Review and Outlook
NCS’s Chief Executive Officer,
We experienced meaningful pressure on our gross margin during the quarter, reflecting continued customer and competitor driven pricing pressure, the underutilization of fixed field service personnel and other costs during a seasonally slower quarter, higher-than-anticipated use of third-party machining capacity, and expenses incurred in advance of specific customer opportunities that we expect to contribute to revenue in the second half of the year. In addition, our SG&A costs in the second quarter were approximately in line with the first quarter, but higher than the second quarter of 2018.
We continue to expect that capital spending, drilling and completions activity for our U.S. customers will be lower than last year, and that activity will continue to decline from current levels in the second half of the year. Customer activity in
In response to these challenging market conditions, which we expect to persist into the foreseeable future, we are implementing cost reduction initiatives, and in July reduced our headcount by approximately 6% and implemented salary reductions for certain executives. We believe that these actions will result in an immediate pre-tax annualized cost reduction of approximately
I’m very proud of my co-workers at NCS who continue to deliver exemplary operational performance and customer service and who contributed to our highlights during the quarter, including:
We are executing on the key components of our strategy, which includes leveraging the full suite of our product and service offering across our geographic markets, commercializing new technologies that help our customers save money and operate more efficiently and making disciplined investments that will enable us to leverage our capital-light business model to generate free cash flow, enhance our balance sheet and improve financial returns.
At the same time, we are focused on controlling the items that we can manage, including the cost reduction initiatives and our capital spending, which we now expect to be between
We are focused on providing our customers with the products and services that will enable them to succeed, which will in turn allow us to generate value for our shareholders. Taking actions like those we did in July are never easy, and I want to thank all of my co-workers at NCS and Repeat Precision – in my view the best team in our industry – for their incredible efforts and support of our strategy.”
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA Less Share-Based Compensation, Adjusted Net (Loss) Income, Adjusted Net (Loss) Earnings per Diluted Share and Free Cash Flow 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 second quarter 2019 results on
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
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: declines in the level of oil and natural gas exploration and production activity within
Non-GAAP Financial Measures
EBITDA is defined as net (loss) income before interest expense, net, income tax expense and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted to exclude certain items which we believe are not reflective of ongoing operating performance or which, in the case of an impairment and share-based compensation, are non-cash in nature. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenues. Adjusted EBITDA Less Share-Based Compensation is defined as Adjusted EBITDA minus share-based compensation expense. Adjusted Net (Loss) Income is defined as net (loss) income attributable to
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA Less Share-Based Compensation, Adjusted Net (Loss) Income, Adjusted Net (Loss) Earnings per Diluted Share and Free Cash Flow (our “non-GAAP financial measures”) are not defined under generally accepted accounting principles (“GAAP”), are not measures of net income, income from operations, cash provided by operating activities or any other performance measure derived in accordance with GAAP, and are subject to important limitations. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies in our industry and are not measures of performance calculated in accordance with GAAP. Our non-GAAP financial measures have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our financial performance as reported under GAAP and they should not be considered as alternatives to net income (loss), cash provided by operating activities or any other performance measures derived in accordance with GAAP as measures of operating performance or as alternatives to cash flow from operating activities as measures of our liquidity.
The tables below set forth reconciliations of our non-GAAP financial measures to the most directly comparable measure of financial performance calculated under GAAP:
ADJUSTED NET (LOSS) INCOME AND ADJUSTED NET (LOSS) EARNINGS PER DILUTED SHARE
ADJUSTED EBITDA, ADJUSTED EBITDA MARGIN, AND ADJUSTED EBITDA LESS SHARE-BASED COMPENSATION
Source: NCS Multistage Holdings, Inc.