UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 8-K

CURRENT REPORT



Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



August 7, 2018

Date of Report (Date of earliest event reported)



NCS Multistage Holdings, Inc.

(Exact name of Registrant as specified in its charter)





19450 State Highway 249, Suite 200

Houston, Texas 77070

(Address of principal executive offices) (Zip code)



(281) 453-2222

(Registrant’s telephone number, including area code)



Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:





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Item 2.02Results of Operations and Financial Condition.



On August 7, 2018, NCS Multistage Holdings, Inc. (the “Company”) issued a press release announcing its results for the quarter ended June 30, 2018. A copy of the Company’s press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.



The information contained in this Item 2.02 and the accompanying exhibit is being furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18. Furthermore, the information contained in this Item 2.02 and the accompanying exhibit shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.



Item 9.01Financial Statements and Exhibits.





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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.







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Exhibit 99.1





PRESS RELEASE



NCS MULTISTAGE HOLDINGS, INC. ANNOUNCES SECOND QUARTER 2018 RESULTS



Second Quarter Highlights





HOUSTON, August 7, 2018  – NCS Multistage Holdings, Inc. (NASDAQ: NCSM) (“NCS” or the “Company”), 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 June 30, 2018.



Financial Review



Revenues were $43.4 million for the quarter ended June 30, 2018,  an increase of $6.5 million or 18% as compared to the second quarter of 2017. This increase was primarily attributable to an increase in services revenue, including tracer diagnostics services, which we added in 2017 through the acquisition of Spectrum Tracer Services, LLC (“Spectrum”). We also experienced an increase in sales volumes of well construction products and composite frac plugs. These increases were offset by lower fracturing systems product sales, primarily in Canada, which was negatively impacted by reduced industry activity as a result of an extended Spring Break-up.  Total revenues decreased by 39% as compared to the first quarter of 2018 with a decrease of 71% in Canada partially offset by increases of 26% in the U.S. and 21% in other countries.



Net loss was $(4.1) million, or $(0.09) per diluted share for the quarter ended June 30, 2018, which included a net expense of $0.1 million ($0.1 million after tax, or $0.00 per diluted share) related to the change in fair value of contingent consideration and realized and unrealized foreign currency gains and losses.  Adjusted net loss, which excludes these items, was $(4.0) million or $(0.09) per diluted share for the quarter ended June 30, 2018. This compares to a net loss of $(4.5) million, or $(0.11) per diluted share in the second quarter of 2017, which included a net expense of $1.4 million ($1.0 million after tax, or $0.02 per diluted share) related to the write-off of debt issuance costs, professional expenses incurred in connection with the initial public offering of our common stock (“IPO”) and acquisitions, change in fair value of contingent consideration and realized and unrealized foreign currency gains and losses. Adjusted net loss, which excludes these items, was $(3.5) million or $(0.09) per diluted share for the quarter ended June 30, 2017. 



Adjusted EBITDA was $5.3 million for the quarter ended June 30, 2018,  an increase of $0.6 million as compared to the second quarter of 2017.  Gross profit, which we define as total revenues less total cost of sales exclusive of depreciation and amortization, increased to $23.5 million, or 54% of total revenues in the second quarter of 2018, as compared to $18.0 million, or 49% of total revenues, in the second quarter of 2017. This was offset by an increase in selling, general and administrative expenses in the second quarter as compared to the prior year, primarily related to increases in personnel to support growth, the inclusion of tracer diagnostics operations resulting from our Spectrum acquisition and public company costs. As a result, Adjusted EBITDA margin for the quarter was 12%, as compared to 13% for the second quarter of 2017.



Capital Expenditures and Liquidity



The Company spent $2.5 million in capital expenditures, net during the second quarter of 2018 and $3.6 million, net, for the six months ended June 30, 2018.



As of June 30, 2018, the Company had $33.5 million in cash, total availability under its revolving credit facility of $55.0 million and $25.0 million in total debt.



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Announcement of North Sea Frame Agreement



NCS is pleased to announce that it has entered into a five-year frame agreement with a customer operating in the North Sea for stimulation support services. Work for NCS under the agreement is subject to individual purchase orders, with purchase orders having been issued for several wells that are expected to be completed in late 2018 and 2019.



Revision to 2018 Full Year Revenue Expectation



NCS is revising its expected consolidated revenue growth rate for 2018 to 35% to 40%, as compared to the 35% to 45% growth rate previously announced. This revision is the result of:





NCS continues to deliver sequential improvements in its U.S. business, as demonstrated in its second quarter 2018 revenue performance and the Company continues to expect that its full year consolidated revenue growth will primarily result from increased product sales and services in the U.S.   



Review and Outlook



NCS’s Chief Executive Officer, Robert Nipper, commented, “I am incredibly proud of our team at NCS. We performed well in Canada, managing through an extended Spring Break-up which led to the Canadian rig count being 9% lower in the second quarter of 2018 as compared to 2017. We are encouraged by the recent increase in industry activity following Spring Break-up.

  

In the U.S., we achieved sequential quarterly revenue growth of 26% for the second quarter and a growth rate in excess of the increase in industry completions activity, reflecting quarterly increases in sales of sliding sleeves, AirLock casing buoyancy systems and composite frac plugs, as well as an increase in revenue from tracer diagnostics services. During the quarter, we also grew the number of customers that have utilized our fracturing systems technology within the prior twelve months in the U.S. to over 30, reflecting a balance of repeat customers and new customer additions.



We continue to open up new markets for our products and services in international markets, and the frame agreement we signed with a leading North Sea operator demonstrates our ability to continue to introduce technology that can reduce costs and improve efficiencies for our customers.”



Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net (Loss) Income and Adjusted Net (Loss) Earnings per Diluted Share are non-GAAP financial measures. For an explanation of these measures and a reconciliation, refer to “Non-GAAP Financial Measures” below.



Conference Call



The Company will host a conference call to discuss its second quarter 2018 results on Wednesday, August 8, 2018 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 4296059. 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, http://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 4296059. 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.



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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. The Company 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 and Russia. The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “NCSM.” Additional information is available on the Company’s 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. 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 Canada and the United States; oil and natural gas price fluctuations; loss of significant customers; inability to successfully implement our strategy of increasing sales of products and services into the United States; significant competition for our products and services; our inability to successfully develop and implement new technologies, products and services; our inability to protect and maintain critical intellectual property assets; currency exchange rate fluctuations; impact of severe weather conditions; restrictions on the availability of our customers to obtain water essential to the drilling and hydraulic fracturing processes; our failure to identify and consummate potential acquisitions; our inability to integrate or realize the expected benefits from acquisitions; our inability to meet regulatory requirements for use of certain chemicals by our tracer diagnostics business; our inability to accurately predict customer demand; losses and liabilities from uninsured or underinsured drilling and operating activities; changes in legislation or regulation governing the oil and natural gas industry, including restrictions on emissions of greenhouse gases; failure to comply with or changes to federal, state and local and non-U.S. laws and other regulations, including environmental regulations and the U.S. Tax Cuts and Jobs Act of 2017; changes in trade policy, including the impact of additional tariffs; loss of our information and computer systems; system interruptions or failures, including cyber-security breaches, identity theft or other disruptions that could compromise our information; our failure to establish and maintain effective internal control over financial reporting; complications with the design and implementation of our new enterprise resource planning system; our success in attracting and retaining qualified employees and key personnel; our inability to satisfy technical requirements and other specifications under contracts and contract tenders 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.



Contact



Ryan Hummer

Chief Financial Officer

(281) 453-2222

IR@ncsmultistage.com

 

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NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



















 

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NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited) 















































































































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NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)













 

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NCS MULTISTAGE HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION 

(In thousands, except per share data)  

(Unaudited)



Non-GAAP Financial Measures 



EBITDA is defined as net income (loss) before interest expense, net, income tax expense (benefit) and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted to exclude certain items which we believe are not reflective of ongoing performance or which, in the case of share-based compensation, are non-cash in nature. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenues. Adjusted Net (Loss) Income is defined as net (loss) income attributable to NCS Multistage Holdings, Inc. adjusted to exclude certain items which we believe are not reflective of ongoing performance. Adjusted Net (Loss) Earnings per Diluted Share is defined as Adjusted Net (Loss) Income divided by our diluted weighted average common shares outstanding during the relevant period. We believe that Adjusted EBITDA, Adjusted Net (Loss) Income and Adjusted Net (Loss) Earnings per Diluted Share are important measures that exclude costs that management believes do not reflect our ongoing operating performance and, in the case of Adjusted EBITDA, certain costs associated with our capital structure. Accordingly, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net (Loss) Income and Adjusted Net (Loss) Earnings per Diluted Share are key metrics that management uses to assess the period-to-period performance of our core business operations. We believe that presenting Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net (Loss) Income and Adjusted Net (Loss) Earnings per Diluted Share enables investors to assess our performance from period to period using the same metrics utilized by management and that Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net (Loss) Income and Adjusted Net (Loss) Earnings per Diluted Share enable investors to evaluate our performance relative to other companies that are not subject to such factors.



EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net (Loss) Income and Adjusted Net (Loss) Earnings per Diluted Share (our “non-GAAP financial measures”) are not defined under generally accepted accounting principles (“GAAP”), are not measures of net (loss) income, (loss) income from operations 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) 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 





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NCS MULTISTAGE HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION 

(In thousands)

(Unaudited)



ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN



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NCS MULTISTAGE HOLDINGS, INC.

REVENUE BY GEOGRAPHIC AREA

(In thousands)

(Unaudited)















 



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