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 construction, well completions and field
development strategies, today announced its results for the quarter
and year ended December 31, 2022.
Financial Review
Fourth Quarter 2022 Financial Results
Total revenues were $40.2 million for the quarter ended
December 31, 2022, which was an increase of 11% compared to
the fourth quarter of 2021. This increase reflected
higher product sales and services volumes in Canada and the United
States, partially offset by lower international product sales
and services volumes, for which individual orders can be
larger and less frequent. We believe the overall increase in
revenues largely resulted from higher drilling and completion
activity in the fourth quarter of 2022 compared to the
same period in 2021, particularly in North
America, attributable to higher demand for oil
and natural gas and more favorable commodity prices. Total
revenues decreased by 18% compared to the third quarter
of 2022, with a decrease in revenue in Canada of 29%, reflecting
both strong customer activity during the third quarter and the
expected decline in the fourth quarter as customers reduced
activity for the winter holidays, as well as a decrease of 26% in
international markets, partially offset by an increase of 17% in
the United States, supported by increased fracturing systems
revenue.
Gross profit, which we define as total revenues less total cost
of sales exclusive of depreciation and amortization, was $16.1
million, or 40% of total revenues, for the fourth quarter of 2022,
compared to $15.9 million, or 44% of total revenues, for the fourth
quarter of 2021. Cost of sales as a percentage of total
revenues was higher due to increased costs impacted by
our supply chain, including raw materials, purchased materials,
labor costs and outsourced service activity, as well as a
decrease in international revenue as a percentage of total
revenue.
Selling, general and administrative expenses totaled $13.2
million for the fourth quarter of 2022, a decrease of $0.3 million
compared to the same period in 2021. This favorable decrease
in expense reflects lower professional fees, primarily
related to litigation matters, which was partially offset by higher
payroll expenses associated with salary increases from earlier in
2022 as well as increased insurance costs and stock-based
compensation expense.
Net income was $2.0 million, or $0.81 per diluted share, for the
quarter ended December 31, 2022. Adjusted net income was
$1.6 million, or $0.64 per diluted share, which excludes the
benefit associated with net foreign currency exchange gains as well
as a benefit for tax effects primarily associated with certain
stock options expiring unexercised and with changes in valuation
allowances. For the quarter ended December 31, 2021, net
income was $1.7 million, or $0.68 per diluted share. Adjusted
net income for this period was $1.2 million, or $0.48 per diluted
share, which excludes the benefit associated with net foreign
currency exchange gains and the related tax effects including
changes in valuation allowances.
Adjusted EBITDA was $6.4 million for the quarter ended
December 31, 2022, a slight reduction of $0.1 million compared
to the same period one year ago and a decline of $2.0 million
compared to the third quarter of 2022. Compared to the fourth
quarter of 2021, the positive impact of our revenue increase was
offset primarily by increases in our cost of sales related to the
current inflationary environment.
Full Year 2022 Financial Results
For the year ended December 31, 2022, NCS reported revenues
of $155.6 million, an increase of $37.1 million, or 31% compared to
the year ended December 31, 2021. The increase in revenues was
driven by significant increases in products and service revenues in
both the United States and Canada, partially offset by a decline in
foreign product sales. Net loss was $(1.1) million for the year
ended December 31, 2022 compared to a net loss of $(4.7)
million for the year ended December 31, 2021. Adjusted net
loss was $(0.9) million for the year ended December 31, 2022
compared to adjusted net loss of $(7.0) million for the year ended
December 31, 2021. Adjusted EBITDA was $15.1 million for the
year ended December 31, 2022, an increase of $6.0 million as
compared to the year ended December 31, 2021.
Cash flows from operating activities for the year ended December
31, 2022 was a use of $(1.4) million, $13.0 million lower than cash
provided for the year ended December 31, 2021. Cash flows used by
investing activities of $0.7 million for 2022 compares to $0.4
million for 2021. For the full year 2022, free cash flow after
distributions to non-controlling interest was a use of cash of
$(2.1) million compared to $8.4 million generated in 2021. The
overall decrease in net cash flows was primarily attributed to
increases in net working capital that were driven by the 31%
increase in revenue for the year.
Capital Expenditures and Liquidity
As of December 31, 2022, NCS had $16.2 million in cash and
$7.9 million in total debt, and the borrowing base under our
undrawn asset-based revolving credit facility (“ABL Facility”)
totaled $18.6 million. Our net working capital, which we define as
current assets excluding cash and cash equivalents, minus current
liabilities excluding current maturities of long-term debt, was
$55.2 million and $48.0 million as of December 31, 2022 and
2021, respectively.
NCS incurred capital expenditures, net of proceeds from the sale
of property and equipment, of $0.3 million for the fourth quarter
of 2022 and $0.7 million for the year ended December 31,
2022.
Review and Outlook
NCS’s Chief Executive Officer, Ryan Hummer commented, “Our
performance in the fourth quarter, while declining sequentially
from our strong third quarter due in part to seasonality and
customer budget exhaustion, capped a strong year for NCS in 2022,
as we continue to capitalize on what we believe will be a
multi-year growth cycle for our industry.
Our full year 2022 revenue of $155.6 million increased by $37.1
million, or 31%, compared to 2021, led by revenue increases of 38%
and 32% in Canada and the United States, respectively.
This revenue growth was supported by specific sales initiatives
and the continued commercialization of new products which expand
the addressable market that we participate in. In Canada, our focus
on growing customer adoption of our Well Construction products,
leveraging the strong relationships and market share we have in
Fracturing Systems, has resulted in significant growth in that
product line. During 2022, we made our first sale to a new customer
in the North Sea for Fracturing Systems products and services. In
addition, Repeat Precision commercialized the PurpleFire
perforating gun system, which was undergoing field trials at this
time last year.
We faced increased supply chain costs during the year which were
only partially offset by pricing increases achieved with our
customers, which led to a reduction in our gross margin percentage
from 41% in 2021 to 39% in 2022. This reduction in gross margin
percentage was more than offset by our ability to manage our
SG&A expense, which fell from 41% of revenue in 2021 to 37% of
revenue in 2022.
As a result, we were able to grow Adjusted EBITDA by over $6.0
million, or 66% from $9.1 million in 2021 to $15.1 million in 2022,
improving our Adjusted EBITDA margin from 8% in 2021 to 10% in
2022.
We maintain a strong balance sheet and liquidity position.
During 2022, we upsized and extended our ABL facility to reflect
the growth in our business. We ended 2022 with over $16 million in
cash, and an undrawn ABL facility with a borrowing base of nearly
$19 million.
Our free cash flow for the year of $(2.1) million largely
reflected investments in working capital to support the growth of
our business. While net working capital increased by $7.2 million
during 2022, we were able to reduce end of year net working capital
as a percentage of trailing twelve months revenue from 40% to 35%,
reflecting our focus on improving efficiency as we grow.
Based on E&P company announced capital budgets for 2023, we
believe that annual average industry drilling and completion
activity in the United States and Canada in 2023 will be equal to
2022 levels or higher by up to 10%, however, activity in the United
States in 2023 may decline from levels reached in the fourth
quarter of 2022 reflecting reductions in natural gas pricing
beginning in late 2022 and continuing into 2023. We currently
expect international industry activity to improve by over 10% in
2023 as compared to 2022.
We believe the value that we bring to our customers across our
product and service portfolio, together with continued product and
service innovation, positions us to outperform the underlying
market activity growth that we expect in the United
States, Canada and internationally, as we grow our market
share and access new markets. In support of this anticipated
growth, we expect to increase our capital spending to within a
range of $4 million to $5 million in 2023.
As we look to 2023, we will be focused on maximizing our
near-term opportunities and taking action to ensure long-term
success in alignment with our core strategies of: i) building upon
our leading market positions; ii) capitalizing on international and
offshore opportunities; and iii) commercializing innovative
solutions to complex customer challenges.
I am excited for 2023 and want to express my thanks to the team
at NCS and at Repeat Precision. I truly appreciate the hard work
and dedication of our outstanding people. We have the right team,
the right technology, and the right strategies in place to deliver
extraordinary outcomes to our customers, drive innovation in the
industry and to create value for our shareholders.”
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA Less
Share-Based Compensation, Adjusted Net Income (Loss), Adjusted
Earnings (Loss) per Diluted Share, Free Cash Flow, Free Cash Flow
Less Distributions to Non-Controlling Interest and net working
capital 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 fourth
quarter and full year 2022 results and updated guidance on Tuesday,
March 7, 2023 at 7:30 a.m. Central Time (8:30 a.m. Eastern Time).
To access the conference call, please dial 1-833-630-1956 and ask
to join the NCS Multistage call. It is recommended that
participants join at least 10 minutes prior to the event start.
The replay will 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 construction, well
completions and field development strategies. NCS provides products
and services primarily to exploration and production companies for
use in onshore and offshore wells, predominantly wells that have
been drilled with horizontal laterals in both unconventional and
conventional oil and natural gas formations. NCS’s products and
services are utilized in oil and natural gas basins throughout
North America and in selected international markets, including
Argentina, China, the Middle East and the North Sea. NCS’s common
stock is traded on the Nasdaq Capital 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 in Canada, the United States and
internationally; oil and natural gas price fluctuations;
significant competition for our products and services that results
in pricing pressures, reduced sales, or reduced market share; our
inability to successfully develop and implement new technologies,
products and services that align with the needs of our customers,
including addressing the shift to more non-traditional energy
markets as part of the energy transition; inability to successfully
implement our strategy of increasing sales of products and services
into the U.S. and international markets; loss of significant
customers; our inability to protect and maintain critical
intellectual property assets; 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; loss of any of our
key suppliers or significant disruptions negatively impacting our
supply chain; our inability to achieve suitable price increases to
offset the impacts of cost inflation; risks in attracting and
retaining qualified employees and key personnel or related to labor
cost inflation; risks resulting from the operations of our joint
venture arrangement; 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; changes in legislation or regulation
governing the oil and natural gas industry, including restrictions
on emissions of greenhouse gases; our inability to meet regulatory
requirements for use of certain chemicals by our tracer diagnostics
business; change in trade policy, including the impact of tariffs;
our inability to accurately predict customer demand, which may
result in us holding excess or obsolete inventory; 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, guidelines and regulations for the use
of explosives; the financial health of our customers including
their ability to pay for products or services provided; loss of our
information and computer systems; system interruptions or failures,
including complications with our enterprise resource planning
system, cyber-security breaches, identity theft or other
disruptions that could compromise our information; impairment in
the carrying value of long-lived assets including goodwill; our
failure to establish and maintain effective internal control over
financial reporting; the reduction in our ABL Facility borrowing
base or our inability to comply with the covenants in our debt
agreements; and our inability to obtain sufficient liquidity on
reasonable terms, or at all 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
Michael MorrisonChief Financial Officer(281)
453-2222IR@ncsmultistage.com
NCS MULTISTAGE HOLDINGS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except per share
data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
26,310 |
|
|
$ |
26,056 |
|
|
$ |
105,859 |
|
|
$ |
83,223 |
|
Services |
|
|
13,876 |
|
|
|
10,060 |
|
|
|
49,773 |
|
|
|
35,279 |
|
Total revenues |
|
|
40,186 |
|
|
|
36,116 |
|
|
|
155,632 |
|
|
|
118,502 |
|
Cost of
sales |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sales,
exclusive of depreciation and amortization expense shown below |
|
|
16,502 |
|
|
|
14,410 |
|
|
|
68,412 |
|
|
|
51,897 |
|
Cost of services, exclusive of
depreciation and amortization expense shown below |
|
|
7,606 |
|
|
|
5,776 |
|
|
|
26,816 |
|
|
|
18,130 |
|
Total cost of sales, exclusive of depreciation and
amortization expense shown below |
|
|
24,108 |
|
|
|
20,186 |
|
|
|
95,228 |
|
|
|
70,027 |
|
Selling, general and
administrative expenses |
|
|
13,190 |
|
|
|
13,505 |
|
|
|
58,338 |
|
|
|
49,094 |
|
Depreciation |
|
|
908 |
|
|
|
975 |
|
|
|
3,650 |
|
|
|
3,832 |
|
Amortization |
|
|
167 |
|
|
|
167 |
|
|
|
669 |
|
|
|
669 |
|
Income (loss) from operations |
|
|
1,813 |
|
|
|
1,283 |
|
|
|
(2,253 |
) |
|
|
(5,120 |
) |
Other income
(expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(221 |
) |
|
|
(204 |
) |
|
|
(1,015 |
) |
|
|
(733 |
) |
Other income, net |
|
|
1,394 |
|
|
|
1,008 |
|
|
|
2,950 |
|
|
|
2,054 |
|
Foreign currency exchange gain
(loss) |
|
|
279 |
|
|
|
127 |
|
|
|
(283 |
) |
|
|
283 |
|
Total other income |
|
|
1,452 |
|
|
|
931 |
|
|
|
1,652 |
|
|
|
1,604 |
|
Income (loss) before income tax |
|
|
3,265 |
|
|
|
2,214 |
|
|
|
(601 |
) |
|
|
(3,516 |
) |
Income tax expense |
|
|
974 |
|
|
|
218 |
|
|
|
351 |
|
|
|
263 |
|
Net income (loss) |
|
|
2,291 |
|
|
|
1,996 |
|
|
|
(952 |
) |
|
|
(3,779 |
) |
Net income attributable to
non-controlling interest |
|
|
312 |
|
|
|
334 |
|
|
|
150 |
|
|
|
955 |
|
Net income (loss)
attributable to NCS Multistage Holdings,
Inc. |
|
$ |
1,979 |
|
|
$ |
1,662 |
|
|
$ |
(1,102 |
) |
|
$ |
(4,734 |
) |
Earnings (loss) per
common share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share attributable to NCS
Multistage Holdings, Inc. |
|
$ |
0.81 |
|
|
$ |
0.69 |
|
|
$ |
(0.45 |
) |
|
$ |
(1.98 |
) |
Diluted earnings (loss) per common share attributable to NCS
Multistage Holdings, Inc. |
|
$ |
0.81 |
|
|
$ |
0.68 |
|
|
$ |
(0.45 |
) |
|
$ |
(1.98 |
) |
Weighted average
common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
2,439 |
|
|
|
2,402 |
|
|
|
2,432 |
|
|
|
2,396 |
|
Diluted |
|
|
2,452 |
|
|
|
2,455 |
|
|
|
2,432 |
|
|
|
2,396 |
|
NCS MULTISTAGE HOLDINGS,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS*(In thousands, except share
data)
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
|
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
16,234 |
|
|
$ |
22,168 |
|
Accounts receivable—trade, net |
|
|
27,846 |
|
|
|
24,392 |
|
Inventories, net |
|
|
37,042 |
|
|
|
33,917 |
|
Prepaid expenses and other current assets |
|
|
2,815 |
|
|
|
3,290 |
|
Other current receivables |
|
|
3,726 |
|
|
|
4,726 |
|
Total current assets |
|
|
87,663 |
|
|
|
88,493 |
|
Noncurrent assets |
|
|
|
|
|
|
Property and equipment, net |
|
|
23,316 |
|
|
|
24,708 |
|
Goodwill |
|
|
15,222 |
|
|
|
15,222 |
|
Identifiable intangibles, net |
|
|
5,076 |
|
|
|
5,744 |
|
Operating lease assets |
|
|
4,515 |
|
|
|
4,809 |
|
Deposits and other assets |
|
|
2,761 |
|
|
|
3,113 |
|
Deferred income taxes, net |
|
|
46 |
|
|
|
236 |
|
Total noncurrent assets |
|
|
50,936 |
|
|
|
53,832 |
|
Total assets |
|
$ |
138,599 |
|
|
$ |
142,325 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable—trade |
|
$ |
7,549 |
|
|
$ |
7,502 |
|
Accrued expenses |
|
|
4,391 |
|
|
|
6,323 |
|
Income taxes payable |
|
|
468 |
|
|
|
294 |
|
Operating lease liabilities |
|
|
1,274 |
|
|
|
1,556 |
|
Current maturities of long-term debt |
|
|
1,489 |
|
|
|
1,483 |
|
Other current liabilities |
|
|
2,522 |
|
|
|
2,660 |
|
Total current liabilities |
|
|
17,693 |
|
|
|
19,818 |
|
Noncurrent liabilities |
|
|
|
|
|
|
Long-term debt, less current maturities |
|
|
6,437 |
|
|
|
6,335 |
|
Operating lease liabilities, long-term |
|
|
3,680 |
|
|
|
3,779 |
|
Other long-term liabilities |
|
|
1,328 |
|
|
|
1,612 |
|
Deferred income taxes, net |
|
|
199 |
|
|
|
114 |
|
Total noncurrent liabilities |
|
|
11,644 |
|
|
|
11,840 |
|
Total liabilities |
|
|
29,337 |
|
|
|
31,658 |
|
Commitments and
contingencies |
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no
shares issued and outstanding at |
|
|
— |
|
|
|
— |
|
December 31, 2022 and December 31, 2021 |
|
|
|
|
|
|
Common stock, $0.01 par value, 11,250,000 shares authorized,
2,434,809 shares issued |
|
|
|
|
|
|
and 2,408,474 shares outstanding at December 31, 2022 and
2,397,766 shares issued |
|
|
|
|
|
|
and 2,380,374 shares outstanding at December 31, 2021 |
|
|
24 |
|
|
|
24 |
|
Additional paid-in capital |
|
|
440,475 |
|
|
|
437,022 |
|
Accumulated other comprehensive loss |
|
|
(85,617 |
) |
|
|
(82,094 |
) |
Retained deficit |
|
|
(262,464 |
) |
|
|
(261,362 |
) |
Treasury stock, at cost; 26,335 shares at December 31, 2022
and 17,392 shares |
|
|
|
|
|
|
at December 31, 2021 |
|
|
(1,389 |
) |
|
|
(1,006 |
) |
Total stockholders’ equity |
|
|
91,029 |
|
|
|
92,584 |
|
Non-controlling interest |
|
|
18,233 |
|
|
|
18,083 |
|
Total equity |
|
|
109,262 |
|
|
|
110,667 |
|
Total liabilities and stockholders' equity |
|
$ |
138,599 |
|
|
$ |
142,325 |
|
_____________________*Preliminary
NCS MULTISTAGE HOLDINGS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(In thousands)
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
|
Cash flows from
operating activities |
|
|
|
|
|
|
Net loss |
|
$ |
(952 |
) |
|
$ |
(3,779 |
) |
Adjustments to reconcile net
loss to net cash (used in) provided by operating
activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
4,319 |
|
|
|
4,501 |
|
Amortization of deferred loan cost |
|
|
231 |
|
|
|
281 |
|
Write-off of deferred loan costs |
|
|
196 |
|
|
|
— |
|
Share-based compensation |
|
|
6,039 |
|
|
|
6,621 |
|
Provision for inventory obsolescence |
|
|
2,542 |
|
|
|
1,754 |
|
Deferred income tax expense |
|
|
266 |
|
|
|
96 |
|
Gain on sale of property and equipment |
|
|
(361 |
) |
|
|
(378 |
) |
Provision for doubtful accounts |
|
|
(61 |
) |
|
|
(129 |
) |
Proceeds from note receivable |
|
|
590 |
|
|
|
281 |
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
|
Accounts receivable—trade |
|
|
(4,860 |
) |
|
|
(2,558 |
) |
Inventories, net |
|
|
(7,678 |
) |
|
|
(939 |
) |
Prepaid expenses and other assets |
|
|
1,347 |
|
|
|
(437 |
) |
Accounts payable—trade |
|
|
1,224 |
|
|
|
2,843 |
|
Accrued expenses |
|
|
(1,777 |
) |
|
|
3,000 |
|
Other liabilities |
|
|
(2,852 |
) |
|
|
(3,247 |
) |
Income taxes receivable/payable |
|
|
364 |
|
|
|
3,673 |
|
Net cash (used in) provided by operating activities |
|
|
(1,423 |
) |
|
|
11,583 |
|
Cash flows from
investing activities |
|
|
|
|
|
|
Purchases of property and
equipment |
|
|
(1,035 |
) |
|
|
(495 |
) |
Purchase and development of
software and technology |
|
|
(96 |
) |
|
|
(338 |
) |
Proceeds from sales of
property and equipment |
|
|
433 |
|
|
|
389 |
|
Net cash used in investing activities |
|
|
(698 |
) |
|
|
(444 |
) |
Cash flows from
financing activities |
|
|
|
|
|
|
Payments on finance
leases |
|
|
(1,463 |
) |
|
|
(1,318 |
) |
Line of credit borrowings |
|
|
11,780 |
|
|
|
360 |
|
Payments of line of credit
borrowings |
|
|
(11,724 |
) |
|
|
(360 |
) |
Treasury shares withheld |
|
|
(383 |
) |
|
|
(197 |
) |
Distribution to
non-controlling interest |
|
|
— |
|
|
|
(2,750 |
) |
Payment of deferred loan cost
related to ABL facility |
|
|
(952 |
) |
|
|
— |
|
Net cash used in financing activities |
|
|
(2,742 |
) |
|
|
(4,265 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
|
(1,071 |
) |
|
|
(251 |
) |
Net change in cash and cash equivalents |
|
|
(5,934 |
) |
|
|
6,623 |
|
Cash and cash equivalents
beginning of period |
|
|
22,168 |
|
|
|
15,545 |
|
Cash and cash equivalents end
of period |
|
$ |
16,234 |
|
|
$ |
22,168 |
|
Supplemental cash flow
information |
|
|
|
|
|
|
Cash paid for interest, net of
amounts capitalized |
|
$ |
557 |
|
|
$ |
423 |
|
Cash paid for income taxes
(net of refunds) |
|
|
(303 |
) |
|
|
(3,528 |
) |
Noncash investing and
financing activities |
|
|
|
|
|
|
Assets obtained in exchange
for new finance lease liabilities |
|
|
1,788 |
|
|
|
3,712 |
|
Assets obtained in exchange
for new operating lease liabilities |
|
|
1,450 |
|
|
|
2,000 |
|
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 operating performance or
which, in the case of share-based compensation, is 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 Income (Loss) is defined as net
income (loss) attributable to NCS Multistage Holdings, Inc.
adjusted to exclude certain items which we believe are not
reflective of ongoing performance. Adjusted Earnings (Loss) per
Diluted Share is defined as Adjusted Net Income (Loss) divided by
our diluted weighted average common shares outstanding during the
relevant period. Free cash flow is defined as net cash (used in)
provided by 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 define
free cash flow less distributions to non-controlling interest as
free cash flow less distributions to non-controlling interest, as
presented in the net cash used in financing activities section of
our consolidated statements of cash flows. Net working capital is
defined as total current assets, excluding cash and cash
equivalents, minus total current liabilities, excluding
current maturities of long-term debt. Net working capital excludes
cash and cash equivalents and current maturities of long-term debt
in order to evaluate the investment in working capital required to
support our business. We believe that Adjusted EBITDA,
Adjusted Net Income (Loss) and Adjusted Earnings (Loss) 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. We believe that free cash flow less
distributions to non-controlling interest 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, other investment needs, and cash
distributions to our joint venture partner. We believe that net
working capital is useful in analyzing the cash flow and working
capital needs of the Company, including determining the
efficiencies of our operations and our ability to readily convert
assets into cash. Accordingly, Adjusted EBITDA, Adjusted EBITDA
margin, Adjusted EBITDA Less Share-Based Compensation, Adjusted Net
Income (Loss), Adjusted Earnings (Loss) per Diluted Share, Free
Cash Flow, Free Cash Flow Less Distributions to Non-Controlling
Interest and net working capital are key metrics that management
uses to assess the period-to-period performance of our core
business operations. We believe that presenting these metrics
enables investors to assess our performance from period to period
using the same metrics utilized by management and 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 Income (Loss), Adjusted
Earnings (Loss) per Diluted Share, Free Cash Flow, Free Cash Flow
Less Distributions to Non-Controlling Interest and net working
capital (our “non-GAAP financial measures”) are not defined under
generally accepted accounting principles (“GAAP”), are not measures
of net income (loss), income from operations, cash (used in)
provided by operating activities, working capital 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), income from
operations, cash (used in) provided by operating activities,
working capital 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 measures of
financial performance calculated under GAAP:
NET WORKING CAPITAL*
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
2021 |
|
Working capital |
|
$ |
69,970 |
|
|
$ |
68,675 |
|
Cash and cash equivalents |
|
|
(16,234 |
) |
|
|
(22,168 |
) |
Current maturities of
long-term debt |
|
|
1,489 |
|
|
|
1,483 |
|
Net working capital |
|
$ |
55,225 |
|
|
$ |
47,990 |
|
_____________________* Preliminary
NCS MULTISTAGE HOLDINGS,
INC.RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
INFORMATION(In thousands, except per share
data) (Unaudited)
ADJUSTED NET INCOME (LOSS) AND ADJUSTED
EARNNGS (LOSS) PER DILUTED SHARE
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, 2022 |
|
December 31, 2021 |
|
December 31, 2022 |
|
December 31, 2021 |
|
|
Effect on Net Income |
|
Impact on Diluted Earnings Per Share |
|
Effect on Net Income |
|
Impact on Diluted Earnings Per Share |
|
Effect on Net Loss |
|
Impact on Diluted Loss Per Share |
|
Effect onNet Loss |
|
Impact on Diluted Loss Per Share |
Net income (loss) attributable toNCS
Multistage Holdings, Inc. |
|
$ |
1,979 |
|
|
$ |
0.81 |
|
|
$ |
1,662 |
|
|
$ |
0.68 |
|
|
$ |
(1,102 |
) |
|
$ |
(0.45 |
) |
|
$ |
(4,734 |
) |
|
$ |
(1.98 |
) |
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and unrealized foreign currency (gain) loss (a) |
|
|
(197 |
) |
|
|
(0.08 |
) |
|
|
(123 |
) |
|
|
(0.05 |
) |
|
|
365 |
|
|
|
0.15 |
|
|
|
(307 |
) |
|
|
(0.13 |
) |
Write-off of deferred loan costs (b) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
196 |
|
|
|
0.08 |
|
|
|
— |
|
|
|
— |
|
Net effect of ERC (c) |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,908 |
) |
|
|
(0.79 |
) |
Income tax impact from adjustments (d) |
|
|
(215 |
) |
|
|
(0.09 |
) |
|
|
(350 |
) |
|
|
(0.15 |
) |
|
|
(354 |
) |
|
|
(0.15 |
) |
|
|
(96 |
) |
|
|
(0.04 |
) |
Adjusted net income
(loss) attributable to NCS Multistage
Holdings, Inc. |
|
$ |
1,567 |
|
|
$ |
0.64 |
|
|
$ |
1,188 |
|
|
$ |
0.48 |
|
|
$ |
(895 |
) |
|
$ |
(0.37 |
) |
|
$ |
(7,045 |
) |
|
$ |
(2.94 |
) |
__________________ |
(a) |
Represents realized and unrealized foreign currency translation
gains and losses attributable to NCS Multistage Holdings, Inc.
primarily due to movement in the foreign currency exchange rates
during the applicable periods. |
(b) |
Represents deferred loan costs of $0.2 million expensed during
the second quarter of 2022 associated with the prior credit
facility replaced in May 2022. |
(c) |
Represents U.S. employee retention credit (“ERC”) benefits
recorded during the third quarter of 2021 less the effect on bonus
and associated payroll burden accruals. |
(d) |
Represents income tax adjustments including valuation allowance
applied to deferred tax assets and effect of expiring stock
options. |
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
__
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net income (loss) |
|
$ |
2,291 |
|
|
$ |
1,996 |
|
|
$ |
(952 |
) |
|
$ |
(3,779 |
) |
Income tax expense |
|
|
974 |
|
|
|
218 |
|
|
|
351 |
|
|
|
263 |
|
Interest expense, net |
|
|
221 |
|
|
|
204 |
|
|
|
1,015 |
|
|
|
733 |
|
Depreciation |
|
|
908 |
|
|
|
975 |
|
|
|
3,650 |
|
|
|
3,832 |
|
Amortization |
|
|
167 |
|
|
|
167 |
|
|
|
669 |
|
|
|
669 |
|
EBITDA |
|
|
4,561 |
|
|
|
3,560 |
|
|
|
4,733 |
|
|
|
1,718 |
|
Share-based compensation
(a) |
|
|
953 |
|
|
|
982 |
|
|
|
3,453 |
|
|
|
4,221 |
|
Professional fees (b) |
|
|
846 |
|
|
|
2,062 |
|
|
|
5,665 |
|
|
|
4,885 |
|
Net benefit of ERC (c) |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1,908 |
) |
Foreign currency (gain) loss
(d) |
|
|
(279 |
) |
|
|
(127 |
) |
|
|
283 |
|
|
|
(283 |
) |
Other (e) |
|
|
317 |
|
|
|
15 |
|
|
|
976 |
|
|
|
461 |
|
Adjusted EBITDA |
|
$ |
6,398 |
|
|
$ |
6,491 |
|
|
$ |
15,110 |
|
|
$ |
9,094 |
|
Adjusted EBITDA Margin |
|
|
16 |
% |
|
|
18 |
% |
|
|
10 |
% |
|
|
8 |
% |
Adjusted EBITDA Less Share-Based Compensation |
|
$ |
5,445 |
|
|
$ |
5,509 |
|
|
$ |
11,657 |
|
|
$ |
4,873 |
|
___________________ |
(a) |
Represents non-cash compensation charges related to share-based
compensation granted to our officers, employees and directors. |
(b) |
Represents non-capitalizable costs of professional services
incurred in connection with our financings, legal proceedings and
the evaluation of potential acquisitions. |
(c) |
Represents ERC benefits recorded during the third quarter of 2021
less the effect on bonus and associated payroll burden
accruals. |
(d) |
Represents realized and unrealized foreign currency translation
gains and losses primarily due to movement in the foreign currency
exchange rates during the applicable periods. |
(e) |
Represents the impact of a research and development subsidy that is
included in income tax expense in accordance with GAAP along with
other charges and credits. |
FREE CASH FLOW AND FREE CASH FLOW LESS
DISTRIBUTIONS TO NON-CONTROLLING INTEREST
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2022 |
|
|
2021 |
|
Net cash (used in) provided by operating activities |
|
$ |
(1,423 |
) |
|
$ |
11,583 |
|
Purchases of property and
equipment |
|
|
(1,035 |
) |
|
|
(495 |
) |
Purchase and development of
software and technology |
|
|
(96 |
) |
|
|
(338 |
) |
Proceeds from sales of
property and equipment |
|
|
433 |
|
|
|
389 |
|
Free cash
flow |
|
$ |
(2,121 |
) |
|
$ |
11,139 |
|
Distributions to
non-controlling interest |
|
|
— |
|
|
|
(2,750 |
) |
Free cash flow less
distributions to non-controlling interest |
|
$ |
(2,121 |
) |
|
$ |
8,389 |
|
NCS MULTISTAGE HOLDINGS,
INC.REVENUES BY GEOGRAPHIC
AREA(In thousands)
(Unaudited)
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, |
|
December 31, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
United States |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
9,458 |
|
$ |
7,523 |
|
$ |
34,009 |
|
$ |
26,285 |
Services |
|
|
4,057 |
|
|
2,542 |
|
|
12,228 |
|
|
8,870 |
Total United States |
|
|
13,515 |
|
|
10,065 |
|
|
46,237 |
|
|
35,155 |
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
|
16,721 |
|
|
16,524 |
|
|
71,176 |
|
|
53,401 |
Services |
|
|
8,014 |
|
|
5,029 |
|
|
29,695 |
|
|
19,682 |
Total Canada |
|
|
24,735 |
|
|
21,553 |
|
|
100,871 |
|
|
73,083 |
Other
Countries |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
|
131 |
|
|
2,009 |
|
|
674 |
|
|
3,537 |
Services |
|
|
1,805 |
|
|
2,489 |
|
|
7,850 |
|
|
6,727 |
Total Other Countries |
|
|
1,936 |
|
|
4,498 |
|
|
8,524 |
|
|
10,264 |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
|
26,310 |
|
|
26,056 |
|
|
105,859 |
|
|
83,223 |
Services |
|
|
13,876 |
|
|
10,060 |
|
|
49,773 |
|
|
35,279 |
Total revenues |
|
$ |
40,186 |
|
$ |
36,116 |
|
$ |
155,632 |
|
$ |
118,502 |
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