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



March 2, 2020

Date of Report (Date of earliest event reported)



NCS Multistage Holdings, Inc.

(Exact name of Registrant as specified in its charter)





19350 State Highway 249, Suite 600

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:





Securities registered pursuant to Section 12(b) of the Act:





Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).





If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☑

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Item 2.02Results of Operations and Financial Condition.



On March 2, 2020, NCS Multistage Holdings, Inc. (the “Company”) issued a press release announcing its results for the quarter and year ended December 31, 2019. 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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PRESS RELEASE



NCS MULTISTAGE HOLDINGS, INC. ANNOUNCES FOURTH QUARTER AND FULL YEAR 2019 RESULTS



Fourth Quarter Results





HOUSTON, March 2, 2020 – 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 and year ended December 31, 2019.



Financial Review



Fourth Quarter 2019 Financial Results



Revenues were $52.1 million for the quarter ended December 31, 2019, which was an increase of 4% compared to the fourth quarter of 2018. Our Canadian and international revenues increased by 24% and 58%, respectively on a year-over-year basis, while our U.S. revenue fell by 18%, reflecting a reduction in industry activity in the U.S. during the quarter as compared to the prior year. Total revenues decreased by 14% as compared to the third quarter of 2019 with decreases of 21% in the United States, 8% in Canada and 10% outside of North America.



Gross profit, which we define as total revenues less total cost of sales exclusive of depreciation and amortization, was $26.1 million, or 50% of total revenues, in the fourth quarter of 2019,  an increase compared to $24.2 million, or 48% of total revenues, in the fourth quarter of 2018. Cost of sales in the fourth quarter of 2019 was a lower percentage of revenues due to increased sales at Repeat Precision, LLC (“Repeat Precision”), which enabled better fixed cost utilization, increased sales in Canada and in international markets, and leveraging our volumes with our vendors. This was partially offset by reductions in sales of fracturing systems and well construction products in the United States, increased customer and competitor driven pricing pressure for our products and services, and higher cost of sales in tracer diagnostics, related to field service staffing levels and increased chemical costs associated with tariffs imposed on certain imports from China that were increased in May 2019.



Selling, general and administrative (“SG&A”) expenses of $22.2 million increased in the fourth quarter as compared to the fourth quarter of the prior year.  The increase was primarily due to higher litigation expenses and bad debt expense, partially offset by a reduction in professional services and research and development expenses.



Net loss was $(2.2) million, or $(0.05) per diluted share, for the quarter ended December 31, 2019, which included a net impact of $0.3 million (after tax effect of $0.2 million, or  $0.01 per diluted share) related to realized and unrealized foreign currency gains and losses as well as the income tax impact of the income tax valuation allowance recorded to reduce the carrying value of our U.S. deferred tax asset and the tax effect of a non-deductible goodwill impairment recorded in the second quarter of 2019. Adjusted net loss,  which excludes these items, was $(2.0) million, or $(0.04) per diluted share, for the quarter ended December 31, 2019. This compares to a net loss of $(203.6) million, or $(4.51) per diluted share, in the fourth quarter of 2018, which included a net impact of $227.1 million (after tax effect of $201.1 million, or $4.45 per diluted share) related to impairments, the change in fair value of contingent consideration and realized and unrealized foreign currency gains and losses in addition to the tax effect of non-deductible impairment charges in the fourth quarter of 2018. Adjusted net loss, which excludes these items, was  $(2.5) million, or $(0.06) per diluted share, for the quarter ended December 31, 2018.  



Adjusted EBITDA was $8.3 million for the quarter ended December 31, 2019,  an increase of $0.6 million as compared to the fourth quarter of 2018.  Adjusted EBITDA margin for the quarter was 16%, as compared to 15% for the fourth quarter of 2018.



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Full Year 2019 Financial Results



For the year ended December 31, 2019, the Company reported revenues of $205.5 million, a decrease of $21.5 million, or 9% as compared to the year ended December 31, 2018. Net loss was $(32.8) million for the year ended December 31, 2019 compared to $(190.3) million for the year ended December 31, 2018. Adjusted net loss was $(11.0) million for the year ended December 31, 2019 compared to adjusted net income of $9.3 million for the year ended December 31, 2018. Adjusted EBITDA of $28.2 million for the year ended December 31, 2019 was a decrease of $21.6 million as compared to the year ended December 31, 2018.



Cash flows from operating activities during 2019 of $17.9 million was $3.9 million higher than in the prior year, while cash flows from investing activities of $(5.0) million compared favorably to $(15.4) million in 2018.



Capital Expenditures and Liquidity



The Company incurred capital expenditures of $0.6 million, net, for the fourth quarter of 2019 and $5.0 million, net, for the year ended December 31, 2019.



As of December 31, 2019, the Company had $11.2 million in cash and $12.9 million in total debt. During the fourth quarter, the Company reduced its total debt by $3.4 million, including a $3.0 million reduction in its revolving credit facility balance.



Review and Outlook



NCS’s Chief Executive Officer, Robert Nipper, commented, “NCS had a very successful year in 2019, despite a challenging market environment. Our revenue outperformed the underlying rig count in each of the U.S., Canadian and international markets. We grew our full-year international revenue by 11%, with international markets representing 8% of our total revenue for the year as compared to 6% in 2018. In the U.S., our revenue in 2019 was flat relative to 2018, despite an 8% percent drop in the average horizontal rig count, largely due to continued market share gains and product innovation at Repeat Precision. In Canada, while our full-year revenue declined due to a reduction in customer activity, we were able to improve our market position throughout the year, which resulted in year-over-year revenue growth in the fourth quarter of 24% as compared to an underlying rig count decline of 23%.



As market conditions deteriorated, we demonstrated our focus on controlling our expenses and maximizing our cash flow. We reduced our workforce by 6% in July and continue to increase the efficiency of our operations. During the year we continued to review our capital expenditure needs, leading to a year-over-year reduction of over $10 million, or 68%. We were able to utilize cash on hand as well as cash generated during the year to both reduce our gross debt balance by $12.8 million and make a one-time $10.0 million earn-out payment to our partner in Repeat Precision. We ended the year with a cash balance of $11.2 million, which exceeds the $10.0 million drawn under our revolving credit facility.



We currently expect that customer capital budgets in the U.S. for 2020 will be 10%-15% lower than 2019 levels, and that customer capital budgets in Canada will be modestly lower than in 2019. We are encouraged by positive developments of major projects currently underway that, once completed, would improve pipeline takeaway capacity for our Canadian customers. We currently expect that customer budgets in international markets will increase modestly in 2020 as compared to 2019. Actual activity levels will depend in part on the ultimate impact of the Coronavirus on the Chinese and global economy and the resulting impact on oil demand. 



We believe that our products and services enable our customers to increase operating efficiencies, better understand and optimize their assets and reduce their costs, which has allowed us to improve our market position over time. We are delivering the breadth of our product and service offerings across the geographies where we operate and expect to continue to bring new technologies to our customers. We believe that we are well positioned to outperform the underlying customer spending changes that we expect in each of the U.S., Canada and internationally.



We will continue to be disciplined in making investments in our business. We expect our capital spending in 2020 to be at or below 2019 levels and we believe we are positioned to grow our free cash flow generation in 2020, which will further enhance our strong balance sheet and allow us to improve our return on invested capital.



I’d like to thank all of the employees at NCS and at Repeat Precision for their dedication and contributions. We have the right team and the right strategies in place to deliver value to customers, drive innovation in the industry and 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 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.

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Conference Call



The Company will host a conference call to discuss its fourth quarter and full year 2019 results on Tuesday,  March 3, 2020 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 6371077. 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 6371077. 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, the Middle East 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.



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 accurately predict customer demand; impairment in the carrying value of long-lived assets and goodwill; 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; 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; impact of severe weather conditions; restrictions on the availability of our customers to obtain water essential to the drilling and hydraulic fracturing processes; 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; 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 anti-corruption and environmental regulations and the U.S. Tax Cuts and Jobs Act of 2017; 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; 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)













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NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)





























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NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)













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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 (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 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. Free cash flow is defined as net cash provided by (used in) operating activities less purchases of property and equipment (inclusive of the purchase and development of software and technology) plus proceeds from sales of property and equipment, as presented in our consolidated statement of cash flows. 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. We believe that Adjusted EBITDA Less Share-Based Compensation presents our financial performance in a manner that is comparable to the presentation provided by many of our peers. We believe free cash flow is useful because it provides information to investors regarding the cash that was available in the period that was in excess of our needs to fund our capital expenditures and other investment needs. Accordingly, 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 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 EBITDA Less Share-Based Compensation, 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 EBITDA Less Share-Based Compensation, 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 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:

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NCS MULTISTAGE HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

(In thousands, except per share data)  

(Unaudited)



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, ADJUSTED EBITDA MARGIN, AND ADJUSTED EBITDA LESS SHARE-BASED COMPENSATION





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NCS MULTISTAGE HOLDINGS, INC.

REVENUES BY GEOGRAPHIC AREA

(In thousands)

(Unaudited)





 

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