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



November 6, 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 November 6, 2018, NCS Multistage Holdings, Inc. (the “Company”) issued a press release announcing its results for the quarter ended September 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 THIRD QUARTER 2018 RESULTS



Third Quarter Highlights





HOUSTON, November 6, 2018  – 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 September 30, 2018.



Financial Review



Revenues were $62.7 million for the quarter ended September 30, 2018,  an increase of $6.7 million or 12% as compared to the third quarter of 2017. This increase was primarily attributable to an increase in product sales and services revenue in the U.S. and international markets, including tracer diagnostics services, which we added in 2017 through the acquisition of Spectrum Tracer Services, LLC (“Spectrum”). These increases were offset by lower volumes of fracturing systems product sales and services in Canada, where customer activity was negatively impacted by weather conditions and increasing commodity price differentials during the quarter, and where we are facing increased pricing pressure. Total revenues increased by 44% as compared to the second quarter of 2018 with an increase of 110% in Canada and an increase of 297% in other international countries partially offset by a decrease of 5% in the U.S.



Net income was $6.3 million, or $0.13 per diluted share for the quarter ended September 30, 2018, which included a net benefit of $1.2 million ($0.9 million after tax, or $0.02 per diluted share) related to the change in fair value of contingent consideration and realized and unrealized foreign currency gains and losses.  Adjusted net income, which excludes these items, was $5.4 million, or $0.11 per diluted share, for the quarter ended September 30, 2018. This compares to a net income of $3.4 million, or $0.07 per diluted share in the third quarter of 2017, which included a net expense of $1.0 million ($0.8 million after tax, or $0.02 per diluted share) related to 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 income, which excludes these items, was $4.2 million or $0.09 per diluted share, for the quarter ended September 30, 2017. 



Adjusted EBITDA was $18.0 million for the quarter ended September 30, 2018,  an increase of $2.9 million as compared to the third quarter of 2017.  Gross profit, which we define as total revenues less total cost of sales exclusive of depreciation and amortization, increased to $33.9 million, or 54% of total revenues in the third quarter of 2018, as compared to $30.0 million, or 54% of total revenues, in the third quarter of 2017. This was offset by an increase in selling, general and administrative expenses in the third quarter as compared to the prior year, primarily related to increases in personnel to support growth and the inclusion of tracer diagnostics operations resulting from our Spectrum acquisition. Adjusted EBITDA margin for the quarter was 29%, as compared to 27% for the third quarter of 2017.



Based on current industry conditions and the Company’s revenue through the first three quarters of 2018, NCS no longer expects to achieve the revenue guidance previously announced in August for the 2018 calendar year.



Capital Expenditures and Liquidity



The Company spent $6.1 million in capital expenditures, net for the third quarter of 2018 and $9.6 million, net, for the nine months ended September 30, 2018.



As of September 30, 2018, the Company had $27.4 million in cash, total availability under its revolving credit facility of $55.0 million and $25.6 million in total debt.



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Review and Outlook



NCS’s Chief Executive Officer, Robert Nipper, commented, “I’m very proud of our team and how we are responding to dynamic market conditions. While our business was negatively impacted in the third quarter by a slowdown in completions activity in the U.S. and by a challenging operating environment in Canada, we grew our business on a year-over-year basis and had significant achievements in each of our geographical operating areas, including:





We look to continue to build on these accomplishments over the coming quarters as we navigate a challenging industry environment in the U.S. and Canada. In both the United States and Canada, we currently anticipate that industry completions activity will decline in the fourth quarter as a result of seasonal holidays, customer budget exhaustion and customer response to elevated differentials. We believe that the pricing differentials in the United States will moderate in 2019 as pipeline capacity is commissioned, which could lead to higher completions activity as the year progresses. We believe elevated pricing differentials in Canada are likely to persist into 2019 and potentially beyond, which we expect to result in reduced customer activity levels and to result in continued customer and competitor-driven pricing pressure for our products and services, negatively impacting our margins. We believe that the increased breadth of our product and service portfolio positions us to benefit from the potential recovery in completions activity in the United States and that our growing international presence provides us with additional long-term growth opportunities.”



Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted Net 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 third quarter 2018 results on Wednesday, November 7, 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 7987038. 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 7987038. 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, Russia, and the North Sea.  NCS’s common stock is traded on the NASDAQ Global Select Market under the symbol “NCSM.” Additional information is available on the website, www.ncsmultistage.com.



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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 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 INCOME

(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 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 Income is defined as net income attributable to NCS Multistage Holdings, Inc. adjusted to exclude certain items which we believe are not reflective of ongoing performance. Adjusted Net Earnings per Diluted Share is defined as Adjusted Net Income divided by our diluted weighted average common shares outstanding during the relevant period. We believe that Adjusted EBITDA, Adjusted Net Income and Adjusted Net 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 Income and Adjusted Net 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 Income and Adjusted Net 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 Income and Adjusted Net 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 Income and Adjusted Net Earnings per Diluted Share (our “non-GAAP financial measures”) are not defined under generally accepted accounting principles (“GAAP”), are not measures of net income, 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 INCOME AND ADJUSTED NET 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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