Yahoo Finance NCS Multistage Holdings Inc (NCSM) (Q1 2024) Earnings Call Transcript Highlights: Strategic ...
Revenue: Q1 2024 revenue was $43.9 million, a 1% increase year-over-year.
Adjusted Gross Margin: Reported at 40% for Q1 2024.
Net Income: Q1 2024 net income was $2.1 million, with EPS of $0.82.
Adjusted EBITDA: $6.1 million for Q1 2024, showing improvement from previous periods.
Free Cash Flow: Negative $2.5 million in Q1 2024, primarily due to an increase in net working capital.
Canadian Revenue: $32 million in Q1 2024, up 3% year-over-year.
International Revenue: Expected to be approximately $7.2 million for the first half of 2024, a significant increase from $3.3 million in the first half of 2023.
SG&A Expenses: $13.8 million in Q1 2024, down $2.3 million from Q1 2023.
Full Year Revenue Guidance: Adjusted to $150 million to $160 million for 2024.
Adjusted EBITDA Guidance: Increased to $14.5 million to $17.5 million for 2024.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
NCS Multistage Holdings Inc (NASDAQ:NCSM) reported a strong start to 2024 with Q1 revenue of $43.9 million, surpassing the high end of their guided range by nearly $4 million.
Adjusted EBITDA for Q1 was $6.1 million, significantly exceeding the company's estimate of $3 million to $4 million, and showing both year-over-year and sequential improvements.
The company achieved a reduction in SG&A expenses by $2.3 million compared to Q1 2023, reflecting effective cost control measures and reduced litigation-related fees.
NCS Multistage Holdings Inc (NASDAQ:NCSM) demonstrated growth in international markets, with international revenues expected to exceed the full year 2023 international revenue of $6.5 million in just the first half of 2024.
The company is actively pursuing growth in international and offshore markets, including new customer acquisitions in the North Sea and increased activity in the Middle East.
Negative Points
Despite overall revenue growth, U.S. revenues declined by 12% due to lower natural gas prices affecting customer activity.
Adjusted gross margin for Q1 2024 decreased to 40% from 43% in the same period in 2023, indicating a slight compression in profitability.
The company reported a use of cash from operating activities and free cash flows less distributions to noncontrolling interest of $1.9 million and $2.5 million, respectively, primarily due to an increase in net working capital.
NCS Multistage Holdings Inc (NASDAQ:NCSM) is cautious about the potential impact of drought conditions and wildfire prospects in Canada, which could reduce customer activity levels.
The company's guidance for Q2 adjusted EBITDA is projected to be between breakeven and a negative $2 million, suggesting potential challenges in maintaining profitability in the short term.
Q & A Highlights
Q: Just hoping we could start with the top line guidance, just great to see that you've raised the low end of what would you need to see either in the international markets or elsewhere to also raise the top end. A: Ryan Hummer, CEO of NCS Multistage Holdings Inc, explained that the company is taking a conservative approach to the Canadian market due to potential disruptions from drought conditions and wildfire prospects. He mentioned that as they move through Q2 and better understand the extent of these impacts, they might reassess the potential to raise the top end of their guidance.
Q: Understood. Very helpful. And then you mentioned international markets used to operate around $15 million or so a year. What's the pathway to get back to that, is that going to be getting cataloged with current companies? Is that going to be addressing new markets? What does that look like? A: CEO Ryan Hummer highlighted that the path involves expanding the customer base in the North Sea and leveraging opportunities in the Middle East. He emphasized the importance of consistent work with multiple companies and the integration of well construction products to achieve historical revenue levels.
Q: So I was hoping you could provide a little bit more color on kind of how we should think about the offshore opportunity set timing associated with that and kind of what that sort of path forward to incremental revenue looks like over the next year or two or whatever, whatever timeframe works. A: Ryan Hummer discussed the offshore opportunities, particularly in the North Sea, where they expect to work with more customers than ever before. He mentioned that while the well count might not be large initially, it sets the stage for more consistent work in the future, potentially ramping up next year.
Q: That's helpful. Thank you. And maybe just one more just building on the last set of questions. And again, maybe zooming out a little bit, how should we think about the opportunity set internationally and specifically in the Middle East? And how do you sort of see yourselves up to be successful there? What does that and what is the sales and business development, sort of team look like, how do you how you sort of execute well over there? Do you have that team in place? You have a plan to kind of build that out and where do you think that that and the tracer diagnostics and some of the things you guys are doing out there? Where do you think it really makes sense if we think about it from a sort of multiyear perspective? A: CEO Ryan Hummer detailed the company's strategy for success in the Middle East, emphasizing the importance of strong local partnerships and the gradual buildup of operations personnel to support unconventional tracer projects. He outlined the potential for long-term development and the need for strategic investments once a solid track record is established.
Q: Got it. Thanks for walking through that in some detail. I've got just one more if you don't mind, could you provide a bit more color on the fleet that you guys highlighted in your prepared remarks? A: CEO Ryan Hummer elaborated on a specific project in the US involving a large number of sliding sleeves and fiber optics to optimize a horizontal waterflood program. He explained how the technology allows for precise control over water breakthrough, enhancing the project's efficiency and effectiveness.
Q: Okay. Thanks for that detail. Yes, I'll kick it back to line. A: CEO Ryan Hummer concluded the Q&A session, expressing gratitude for the questions and reiterating the company's strategic initiatives and growth prospects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
