Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NCS Multistage Holdings Inc (NCSM, Financial) reported a 15% increase in third-quarter revenue, reaching $44 million, which was at the high end of their guidance range.
- The company's adjusted EBITDA for the third quarter was $7.1 million, exceeding their guided range and showing an improvement over the previous year.
- International revenue for the first nine months of 2024 has already surpassed the full-year 2023 figures, indicating strong growth in overseas markets.
- NCSM's balance sheet remains robust with a cash balance of $15.3 million and total liquidity exceeding $37 million.
- The company is successfully expanding its market presence with innovative solutions, such as the sliding sleeve technology for seismic event mitigation and tracer diagnostics in geothermal and carbon capture projects.
Negative Points
- SG&A expenses increased by $1.5 million in the third quarter compared to the same period last year, primarily due to higher incentive bonus accruals.
- International revenue saw a sequential decline of 31% in the third quarter, mainly due to the timing of tracer service work in the Middle East.
- Despite revenue growth, the company's trading multiple remains low, at three times enterprise value to 2024 adjusted EBITDA, which is below the peer median.
- The company faces challenges in maintaining cost structure improvements, as most low-hanging cost reduction opportunities have already been captured.
- NCSM's revenue guidance for the fourth quarter indicates a potential decrease compared to the third quarter, with expected revenues ranging from $38 to $42 million.
Q & A Highlights
Q: Can you discuss the strong growth in product sales in the US and Canadian markets? Is this typical or an inventory build-up by customers?
A: Ryan Hummer, CEO, explained that the growth is part of normal operations. Sales in North America typically have short lead times and are called out on a well-to-well basis, indicating no significant inventory build-up by customers.
Q: What caused the timing issues with tracer work in the Middle East, and how is it progressing?
A: Ryan Hummer noted that the work is progressing as planned, with revenue recognized in phases. There have been minor delays, but these have been offset by additional conventional tracing work, keeping the overall schedule on track.
Q: Are there any cost-saving opportunities you are targeting in the next few months?
A: Ryan Hummer stated that most low-hanging fruit has been addressed, with ongoing efforts to reduce costs, such as insurance spend and third-party service contracts. The focus is now on maintaining cost structure through diligent efforts.
Q: Are there any unusual market conditions expected for 2025 that could affect seasonal patterns?
A: Ryan Hummer indicated that US activity levels might remain consistent with the second half of 2024, while Canadian activity is expected to grow due to structural support from projects like the TMX pipeline and LNG Canada. Internationally, growth is anticipated in Argentina, Norway, and the Middle East.
Q: How do you leverage successful case studies to attract new customers, particularly in regions with seismic challenges?
A: Ryan Hummer explained that information sharing among operators in Canada happens naturally, and NCS proactively uses white papers and technical presentations to communicate operational successes to potential customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
