Market Activity and Trends - NCS Multistage Holdings, Inc. expects U.S. drilling and completions activity to be modestly higher in 2021 compared to 2020, with Canadian activity expected to exceed 2020 levels by a greater margin [91]. - The Canadian rig count was 228% higher in Q3 2021 compared to Q3 2020, indicating a stronger recovery than in the U.S. [92]. - The demand for crude oil contracted by 8.6 MMBBL/D in 2020 compared to 2019, with a projected increase of 5.5 MMBBL/D in 2021 [99]. - OPEC+ plans to gradually increase production capacity by approximately 0.4 MMBBL/D each month from August 2021 to September 2022 [100]. - The average WTI crude oil price was $70.58/BBL in Q3 2021, recovering from a low of $27.96/BBL in Q2 2020 [100]. - WTI crude oil pricing increased from approximately $48 per barrel at the end of December 2020 to approximately $71 per barrel in Q3 2021 [113]. - Natural gas pricing rose from an average of $2.03 per MMBtu in 2020 to $4.35 per MMBtu in Q3 2021, reflecting increased demand and supply disruptions [114]. Financial Performance - Total revenues for the three months ended September 30, 2021, were $32.4 million, an increase of 98.7% compared to $16.3 million for the same period in 2020 [132]. - Product sales reached $21.2 million, up 82.1% from $11.7 million in the prior year, while services revenue increased by 140.4% to $11.2 million from $4.7 million [132][134]. - Net income for the three months ended September 30, 2021, was $3.2 million, compared to a net loss of $5.1 million in the same period of 2020, marking a 162.8% improvement [132]. - For the nine months ended September 30, 2021, total revenues were $82.4 million, a 3.5% increase from $79.6 million in the same period of 2020 [141]. - Selling, general and administrative expenses decreased by 27.0% to $35.6 million for the nine months ended September 30, 2021, down from $48.8 million in 2020 [144]. - The company reported a loss from operations of $6.4 million for the nine months ended September 30, 2021, significantly improved from a loss of $71.4 million in the same period of 2020 [140]. Cost Management - NCS implemented cost-saving measures resulting in over $19 million in savings during 2020, primarily from reductions in selling, general and administrative expenses [107]. - Cost of sales was $17.6 million, representing 54.4% of revenues, a decrease from 62.6% of revenues in the same quarter of 2020 [135]. - Cost of sales for the nine months ended September 30, 2021, was $49.8 million, or 60.5% of revenues, compared to $47.2 million, or 59.3% of revenues, in the same period of 2020 [142]. - NCS has begun to experience labor cost inflation, impacting both cost of sales and SG&A expenses due to increased salaries and turnover [130]. Asset Management and Impairments - NCS recorded a provision for doubtful accounts of $0.8 million in 2020, with a recovery of $0.1 million during the nine months ended September 30, 2021 [103]. - Impairment charges of $9.7 million in property and equipment and $40.5 million related to identifiable intangible assets were recorded in Q1 2020 due to decreased crude oil pricing and market conditions [111]. - Amortization decreased to $0.5 million for the nine months ended September 30, 2021, from $1.3 million in the same period of 2020, due to non-cash impairment charges of $40.5 million in Q1 2020 [146]. - Impairment charges recorded were $9.7 million for property and equipment and $40.5 million for finite-lived intangible assets due to adverse industry conditions related to COVID-19 [147]. Cash Flow and Financing - Cash and cash equivalents as of September 30, 2021, were $18.4 million, with total outstanding indebtedness of $8.2 million [152]. - Net cash provided by operating activities was $6.7 million for the nine months ended September 30, 2021, down from $14.5 million in the same period of 2020 [156]. - Capital expenditures for the nine months ended September 30, 2021, were $0.7 million, down from $1.9 million in the same period of 2020 [153]. - Net cash used in financing activities decreased to $3.4 million for the nine months ended September 30, 2021, from $15.7 million in the same period of 2020 [158]. - The Senior Secured Credit Facility has an aggregate principal amount of $25.0 million, with no amounts currently outstanding as of September 30, 2021 [161]. Risks and Challenges - The company cautions against reliance on forward-looking statements due to inherent uncertainties and risks, including the impact of the COVID-19 pandemic [175]. - Key risks include fluctuations in oil and natural gas prices, competition, and the ability to implement new technologies and products [175]. - The company faces challenges in increasing sales in the United States and potential losses from uninsured business activities [175]. - There are risks related to regulatory compliance, including changes in legislation governing the oil and natural gas industry [175]. - The company has not experienced material changes in its exposure to market risk since December 31, 2020 [177]. Company Structure and Classification - The company owns a 50% interest in Repeat Precision, LLC, which sells composite frac plugs and related products [89]. - NCS's fracturing systems products enable efficient pinpoint stimulation, utilized in cemented wellbores for controlled treatment placement [88]. - The company expects international sales to increase over time, with current sales made through local entities or operating partners in regions like China and the Middle East [127]. - The company is classified as an "emerging growth company" and a "smaller reporting company," allowing it to benefit from reduced reporting requirements [172]. - The company will maintain its emerging growth status until it reaches total annual gross revenue of at least $1.07 billion or a market value exceeding $700 million [172].

Financial Data and Key Metrics Changes - The company's Q3 2021 revenue was $32.4 million, a 99% increase compared to Q3 2020 and a 51% increase sequentially from Q2 2021 [23] - Gross profit for Q3 2021 was $14.8 million, representing a gross margin of 46%, up from 37% in the prior year's third quarter [24][26] - Adjusted EBITDA for Q3 2021 was $4.2 million, a significant improvement from a loss of $2.1 million in Q3 2020 [29] Business Line Data and Key Metrics Changes - US revenue for Q3 2021 was $8 million, which was below guidance due to reduced product sales in precision and fracturing systems, partially offset by improved performance in well construction and tracer product lines [8] - Canadian revenue reached $22.1 million, a sequential growth of 140%, outperforming the Canadian land rig count growth of 111% [12] - International revenue was $2.3 million, within the guided range, with activity accelerating in the North Sea and operations resuming in Argentina [15] Market Data and Key Metrics Changes - The US market showed a correlation between oil prices and tracer diagnostics activity, with job volumes increasing in late Q3 and maintaining higher levels into Q4 [9] - Canadian industry activity is expected to continue tracking at or above 2019 levels for the remainder of the year [12] - International operations are seeing steady work in the North Sea and ongoing operations in Argentina and China [16] Company Strategy and Development Direction - The company aims to leverage its strong presence in Canada to drive growth across other product lines [12] - There is a focus on managing costs and maintaining discipline on SG&A and capital spending, with SG&A costs decreasing by 12% year-over-year [17] - The company is investing in technology to enhance current products and services while securing intellectual property [39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a potential multi-year cyclical recovery in the oil industry, supported by OPEC+ supply management [40] - The company anticipates continued growth in the US market, particularly in well construction and tracer diagnostics [38] - There are expectations for a strong winter drilling season in Canada, with double-digit activity growth projected for 2022 [48] Other Important Information - The company maintained a strong balance sheet with approximately $10 million in net cash as of September 30, 2021 [18] - The company is experiencing early impacts of cost inflation and supply chain stresses, leading to selective price increases [18] Q&A Session Summary Question: Timeline for product trials in the Middle East - Management indicated that the timeline for revenue generation from field trials in the Middle East could be conservatively within the next twelve months [42][43] Question: Sustainability of revenue growth in Canada - Management expects continued strong activity in Canada, with growth anticipated to exceed double digits in 2022 compared to 2021 [47] Question: Concerns about US performance - Management expressed disappointment in recent US performance but remains optimistic about future growth, particularly with improvements in product offerings [49]

Investor Update August 2021 Disclaimer Leave nothing behind. Forward-Looking Statements The information in this presentation includes "forward-looking statements" that are subject to risks and uncertainties. All statements, other than statements of historical fact included in this presentation, regarding NCS Multistage Holdings, Inc.'s (the "Company," "NCS", "NCSM", "we" or "us") strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives ...

Financial Data and Key Metrics Changes - The company's Q2 2021 revenues were $21.5 million, a 146% increase compared to Q2 2020, but a 25% decrease sequentially from Q1 2021 [15] - Gross profit for Q2 2021 was $7.5 million, representing 35% of revenue, compared to $2.3 million or 27% of revenue in Q2 2020 [15][16] - Adjusted EBITDA for Q2 2021 was negative $1.6 million, showing a $6.3 million improvement year-over-year but a decrease of $1.7 million from Q1 2021 [18] - The company maintained a strong balance sheet with approximately $8 million in net cash as of June 30, 2021 [11] Business Line Data and Key Metrics Changes - U.S. revenue for Q2 2021 was $9.2 million, an 18% sequential increase, but below guidance due to unexpected issues [7] - Canadian revenue also reached $9.2 million, exceeding guidance of $5 million to $6 million, indicating a stronger recovery than the U.S. [9] - International revenue significantly increased to $3 million in Q2 2021, up from $0.5 million in Q1 2021, surpassing guidance [10] Market Data and Key Metrics Changes - The Canadian rig count is tracking closely with 2019 levels, indicating a stronger recovery compared to the U.S. [9] - The Petroleum Services Association of Canada increased its well drilling expectations for 2021 by 18% to 4,250 wells [9] - International operations are expected to continue increasing, although staffing remains challenging due to COVID-related travel restrictions [10] Company Strategy and Development Direction - The company is focused on managing costs, with SG&A expenses decreasing by 24% year-over-year [11] - There is an emphasis on maintaining a capital-light business model, with net capital expenditures for Q2 at only $3 million [11] - The company plans to continue investing in technology and intellectual property to enhance products and services [28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in global oil demand and the potential for a multiyear cyclical recovery in the industry [28] - The company expects continued sequential growth in U.S. operations and a strong position in the Canadian market [27] - Future guidance for Q3 2021 anticipates total revenue between $32 million and $35 million, with improved gross margins [21][24] Other Important Information - The company reported zero recordable incidents in 2021, highlighting its commitment to safety [13][39] - Management noted signs of cost inflation and supply chain stresses impacting the business [11] Q&A Session Summary Question: Insights on Canadian market recovery compared to the U.S. - Management noted that the Canadian market has learned to operate within its means, leading to a quicker recovery compared to the U.S. [31][32] Question: Future growth prospects in Canada - Management indicated that while pricing has improved, there is still organic activity growth potential as demand increases [33] Question: Management of net working capital - The company is targeting a net working capital of about 35% of revenue and plans to manage inventory effectively to optimize working capital [34][36]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for the periods ended June 30, 2021, and 2020, along with detailed notes on accounting policies and financial items [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2021, shows a decrease in total assets to $132.3 million from $138.7 million at year-end 2020, primarily due to lower accounts receivable and cash, while total liabilities slightly increased to $26.7 million and total equity decreased to $105.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total current assets** | $77,592 | $83,674 | | **Total assets** | $132,294 | $138,678 | | **Total current liabilities** | $15,917 | $14,884 | | **Total liabilities** | $26,712 | $25,192 | | **Total equity** | $105,582 | $113,486 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2021, revenues increased significantly to $21.5 million from $8.7 million, leading to a reduced net loss of $5.8 million, while for the six-month period, revenues decreased to $50.0 million from $63.3 million, with the net loss narrowing to $9.2 million from $60.3 million due to a prior-year impairment charge Key Operational Results (in thousands, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | $21,461 | $8,732 | $49,975 | $63,282 | | **Loss from operations** | $(5,391) | $(14,232) | $(9,043) | $(63,910) | | **Net loss attributable to NCS** | $(5,795) | $(8,757) | $(9,192) | $(60,306) | | **Basic loss per common share** | $(2.41) | $(3.70) | $(3.85) | $(25.56) | - The six months ended June 30, 2020, included a significant impairment charge of **$50.2 million**, which heavily impacted the loss from operations and net loss for that period[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2021, net cash provided by operating activities was $1.1 million, a significant decrease from $20.1 million in the prior-year period, mainly due to unfavorable changes in working capital, with cash and cash equivalents ending the period at $13.9 million Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $1,090 | $20,148 | | **Net cash used in investing activities** | $(316) | $(621) | | **Net cash (used in) provided by financing activities** | $(2,580) | $954 | | **Net change in cash and cash equivalents** | $(1,646) | $20,016 | | **Cash and cash equivalents end of period** | $13,899 | $31,259 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures supporting the financial statements, including revenue disaggregation by geography, debt facilities, ongoing patent infringement legal proceedings, and the impact of cost-saving measures Revenue by Geographic Region (in thousands) | Region | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Total United States** | $9,228 | $4,604 | $17,051 | $25,572 | | **Total Canada** | $9,194 | $1,500 | $29,429 | $30,866 | | **Total Other Countries** | $3,039 | $2,628 | $3,495 | $6,844 | | **Total revenues** | $21,461 | $8,732 | $49,975 | $63,282 | - The company has a **$25.0 million** Senior Secured Credit Facility maturing in May 2023, with a borrowing base of **$10.2 million** as of June 30, 2021, and no amount was outstanding under this facility at quarter-end[54](index=54&type=chunk) - The company is involved in ongoing patent infringement lawsuits against Kobold Corporation, Nine Energy Service, Inc., and TCO AS, with trials scheduled for early 2022[66](index=66&type=chunk)[67](index=67&type=chunk) - In 2020, the company implemented workforce reductions resulting in **$5.7 million** in severance costs, with the remaining liability of **$0.73 million** at year-end 2020 fully paid as of April 2021[74](index=74&type=chunk)[75](index=75&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the impact of the COVID-19 pandemic on market conditions, the company's cost-reduction initiatives, and its financial performance and liquidity, providing an outlook for future operations [COVID-19 Impacts and Company Response](index=20&type=section&id=COVID-19%20Impacts%20and%20Company%20Response) The COVID-19 pandemic significantly reduced crude oil demand and prices, prompting E&P companies to cut capital expenditures, to which NCS responded with extensive cost-saving measures, including workforce reductions and salary cuts, resulting in over $19 million in savings in 2020 - The pandemic led to a significant reduction in global oil demand, causing E&P companies to cut capital expenditure budgets by **30% or more** in 2020[92](index=92&type=chunk)[95](index=95&type=chunk) - NCS implemented multiple cost-reduction initiatives, including workforce reductions of approximately **190 people**, salary cuts, and deferral of payroll taxes, resulting in over **$19 million** in savings in 2020[100](index=100&type=chunk)[101](index=101&type=chunk) - Due to the market decline, the company recorded impairment charges of **$9.7 million** for property and equipment and **$40.5 million** for identifiable intangible assets in the first quarter of 2020[102](index=102&type=chunk) [Outlook and Market Conditions](index=23&type=section&id=Outlook%20and%20Market%20Conditions) Management anticipates modestly higher U.S. drilling and completions activity in 2021 compared to 2020, with a more significant increase expected in Canada, despite continued intense competitive pressure - The company expects drilling and completion activity in the U.S. and Canada in the second half of 2021 to be above the historically low levels of the same period in 2020[106](index=106&type=chunk) Average Drilling Rig Count (North America Land) | Quarter Ended | U.S. Land | Canada Land | | :--- | :--- | :--- | | 6/30/2020 | 378 | 23 | | 9/30/2020 | 241 | 46 | | 12/31/2020 | 297 | 88 | | 3/31/2021 | 378 | 144 | | 6/30/2021 | 437 | 71 | [Results of Operations](index=27&type=section&id=Results%20of%20Operations) In Q2 2021, revenue increased 145.8% year-over-year to $21.5 million, narrowing the net loss to $5.8 million, while for the first six months of 2021, revenue decreased 21.0% to $50.0 million, but the net loss significantly narrowed to $9.2 million from $60.3 million due to prior-year impairment charges Three Months Ended June 30, 2021 vs 2020 (in thousands) | Account | 2021 | 2020 | Variance $ | Variance % | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | $21,461 | $8,732 | $12,729 | 145.8% | | **Loss from operations** | $(5,391) | $(14,232) | $8,841 | 62.1% | | **Net loss attributable to NCS** | $(5,795) | $(8,757) | $2,962 | 33.8% | Six Months Ended June 30, 2021 vs 2020 (in thousands) | Account | 2021 | 2020 | Variance $ | Variance % | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | $49,975 | $63,282 | $(13,307) | (21.0)% | | **Loss from operations** | $(9,043) | $(63,910) | $54,867 | 85.9% | | **Net loss attributable to NCS** | $(9,192) | $(60,306) | $51,114 | 84.8% | - The decrease in SG&A for the six months ended June 30, 2021 was driven by lower headcount, reduced compensation, a **$4.8 million** decline in severance charges, and lower share-based compensation[143](index=143&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are cash on hand ($13.9 million at June 30, 2021), operating cash flow, and its Senior Secured Credit Facility, with management believing existing liquidity is sufficient for the next twelve months - As of June 30, 2021, the company had **$13.9 million** in cash and cash equivalents and **$10.2 million** available under its Senior Secured Credit Facility borrowing base[151](index=151&type=chunk) - Net cash provided by operating activities decreased to **$1.1 million** for the first six months of 2021 from **$20.1 million** in the same period of 2020, primarily due to lower net income (adjusted for non-cash items) and unfavorable changes in working capital[155](index=155&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that the company's exposure to market risk has not materially changed since the end of the previous fiscal year, December 31, 2020 - The company reports no material changes to its market risk exposure since December 31, 2020[176](index=176&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of June 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls over financial reporting during the quarter - Management concluded that as of June 30, 2021, disclosure controls and procedures were effective[177](index=177&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[178](index=178&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) This section directs readers to Note 9 of the financial statements for information on legal proceedings, which details ongoing patent infringement lawsuits the company has filed against several competitors - For details on legal proceedings, the report refers to Note 9 of the condensed consolidated financial statements[181](index=181&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) The company notes no material changes to its previously disclosed risk factors, with the exception of adding a new risk related to the use of explosive materials in its business, highlighting potential operational disruptions and adverse financial consequences - A new risk factor was added concerning the inherent dangers of using explosive materials in manufacturing processes and products, which could lead to operational disruptions, injuries, property damage, and potential loss of licenses[182](index=182&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section provides a list of all exhibits filed with the Form 10-Q, including certifications from the CEO and CFO as required by the Sarbanes-Oxley Act, as well as interactive data files (XBRL) - The exhibits filed with the report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, along with XBRL data files[183](index=183&type=chunk)

Financial Data and Key Metrics Changes - The company's first quarter revenues were $28.5 million, which is 48% lower than the prior year's first quarter, but 4% higher than the fourth quarter of the previous year [10] - Gross profit for the first quarter was $10.2 million, representing 36% of revenue, compared to 44% in the prior year's first quarter [10] - Selling, general and administrative (SG&A) costs decreased by 39% to $12.8 million compared to $20.8 million in the first quarter of last year [11] - Adjusted EBITDA for the first quarter was $0.1 million, down from $9.2 million in the prior year's first quarter [12] - Cash flow from operations was negative $1.8 million, resulting in free cash flow of negative $1.9 million for the quarter [12] - As of March 31, 2021, the company had $12 million in cash and total debt of $5.7 million [13] Business Line Data and Key Metrics Changes - U.S. revenue was $7.8 million, slightly above guidance, driven by increased volumes at Repeat Precision and fracturing systems [5] - Canadian revenue was $20.2 million, near the high end of guidance, despite weather-related activity reductions [6] - International revenue was only $0.5 million, reflecting slow recovery compared to North America [7] Market Data and Key Metrics Changes - The Petroleum Services Association of Canada increased their expectation for the number of wells to be drilled in Canada in 2021 by 11% compared to initial expectations [7] - The company expects a return to sequential revenue growth in the U.S. in the second quarter due to increased activity from private operators [6] Company Strategy and Development Direction - The company aims to return U.S. operations to sequential growth and maintain a strong position in the Canadian market [18] - There is a focus on investing in technology to enhance current products and services, as well as securing intellectual property [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of international operations and expects improvement in the second half of the year [7][17] - The guidance for full-year revenue is projected to be between $110 million and $125 million, with adjusted EBITDA between $5 million and $10 million [16] Other Important Information - The company maintained a strong balance sheet with approximately $6 million in net cash and an undrawn revolver as of March 31, 2021 [8] - SG&A costs were managed effectively, with a significant reduction compared to the previous year [11] Q&A Session Summary Question: Could you elaborate on the product tied to post-completion activity? - Management discussed the Terrus product line, which allows for controlled fluid injection in horizontal wells, enhancing operational efficiency [23][24] Question: When was the Terrus product introduced? - The Terrus system was introduced close to a year ago and is now fully commercial [25] Question: Does the Terrus product have global opportunities? - Yes, the product is applicable in any region where secondary recovery is occurring with horizontal wells [26]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☑ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2021 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______ Commission file number: 001-38071 NCS Multistage Holdings, Inc. (Exact name of registrant as specified in its charter) | De ...

Investor Update May 2021 Disclaimer Leave nothing behind. Forward-Looking Statements The information in this presentation includes "forward-looking statements" that are subject to risks and uncertainties. All statements, other than statements of historical fact included in this presentation, regarding NCS Multistage Holdings, Inc.'s (the "Company," "NCS", "NCSM", "we" or "us") strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of ...

PART I [Business Overview](index=8&type=section&id=Item%201.%20Business) NCS Multistage provides engineered products and services for oil and natural gas well completions, emphasizing organic growth, innovation, and financial stability - NCS is a leading provider of engineered products and services for oil and natural gas well completions, focusing on onshore unconventional wells in North America and selected international markets[20](index=20&type=chunk)[217](index=217&type=chunk) - Key offerings include fracturing systems (pinpoint stimulation), composite frac plugs (Repeat Precision), tracer diagnostics, and well construction products[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk) - The business strategy emphasizes disciplined organic growth, innovative technology development, financial stability, and selective M&A[26](index=26&type=chunk) Key Financial Metrics (in millions) | Metric | 2020 (in millions) | 2019 (in millions) | 2018 (in millions) | | :--------------------------------------- | :----------------- | :----------------- | :----------------- | | Total Revenues | $107.0 | $205.5 | $227.0 | | Net Loss attributable to NCS Multistage | $(57.6) | $(32.8) | $(190.3) | | Total Assets | $138.7 | $202.6 | $229.7 | - Revenue diversification in 2020: Fracturing systems (~**50%**), Repeat Precision (~**30%**), well construction (~**10%**), and tracer diagnostics (~**10%**). Canadian market revenue share reduced from **71% in 2016** to **45% in 2020**[27](index=27&type=chunk) - The company holds **40 U.S. utility patents** (expiring 2030-2039) and **43 international utility patents** (expiring 2025-2036), along with pending applications, and relies on trade secrets[35](index=35&type=chunk)[36](index=36&type=chunk)[38](index=38&type=chunk) - Customer base includes over **200 oil and natural gas producers** and oilfield service companies. Crescent Point Energy accounted for **10% of 2020 revenue**, and the top five customers for **31%**[39](index=39&type=chunk) - Business is subject to quarterly variability, with higher activity in Canada during Q1 and declines in Q2 due to weather conditions, and potential Q4 reductions in the U.S. due to capital budget exhaustion[44](index=44&type=chunk) - Supply chain experienced modest disruptions in 2020 due to COVID-19, including delays in chemical imports and reduced capacity at Repeat Precision's Mexico machine shop, but sufficient inventory was maintained[48](index=48&type=chunk) - The company operates in highly competitive markets, competing on technology, service quality, safety, and price, and is subject to stringent environmental, health, and safety regulations[50](index=50&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) NCS Multistage faces significant risks from volatile oil and natural gas markets, COVID-19 impacts, intense competition, intellectual property issues, and financial indebtedness - The COVID-19 pandemic negatively impacted crude oil demand, E&P capital expenditures, and NCS's revenue and pricing in 2020, leading to workforce reductions and significant asset impairment charges[67](index=67&type=chunk)[68](index=68&type=chunk)[72](index=72&type=chunk)[75](index=75&type=chunk)[234](index=234&type=chunk) - Business success is highly dependent on volatile oil and natural gas prices and E&P activity levels, with prolonged low commodity prices leading to reduced customer spending and credit risk (e.g., **$0.8 million provision for doubtful accounts in 2020**)[75](index=75&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk)[227](index=227&type=chunk) - Challenges in increasing U.S. market share for pinpoint stimulation against traditional completion techniques and intense competition from larger, more resourced companies pose significant risks[81](index=81&type=chunk)[82](index=82&type=chunk)[84](index=84&type=chunk) - Reliance on developing new technologies, protecting intellectual property, and managing operational hazards (e.g., equipment failures, personal injury claims) are critical, with potential for substantial liabilities[86](index=86&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[96](index=96&type=chunk)[98](index=98&type=chunk) - Approximately **45% of 2020 revenue** was denominated in Canadian dollars, exposing the company to significant foreign currency exchange rate risk[102](index=102&type=chunk)[338](index=338&type=chunk) - The company's outstanding indebtedness (**$5.8 million as of Dec 31, 2020**) and restrictive covenants in its Senior Secured Credit Facility (matures May 2023, **$25.0 million capacity**, limited by borrowing base) could adversely affect financial condition and flexibility[152](index=152&type=chunk)[156](index=156&type=chunk)[158](index=158&type=chunk)[300](index=300&type=chunk) - Advent International Corporation controls **62.6% of the company's voting power**, which may lead to interests differing from public stockholders and limit their influence on corporate matters[166](index=166&type=chunk)[167](index=167&type=chunk) - As an 'emerging growth company' and 'smaller reporting company,' NCS benefits from reduced reporting requirements, which could make its common stock less attractive to some investors[180](index=180&type=chunk)[182](index=182&type=chunk)[334](index=334&type=chunk) [Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report - No unresolved staff comments[189](index=189&type=chunk) [Properties](index=35&type=section&id=Item%202.%20Properties) NCS Multistage's corporate headquarters are in Houston, Texas, owning one property in Calgary and leasing 19 others for various operations - Corporate headquarters are in Houston, Texas[190](index=190&type=chunk) - Owns one property in Calgary, Alberta, for engineering and R&D activities[190](index=190&type=chunk) - Leases **19 additional properties** for corporate, sales, manufacturing, engineering, district operations, laboratory, warehousing, and storage yards[190](index=190&type=chunk) - Existing facilities are deemed adequate for current operations[190](index=190&type=chunk) [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 10, 'Commitments and Contingencies,' of the consolidated financial statements - Refer to Note 10. Commitments and Contingencies for details on legal proceedings[191](index=191&type=chunk) [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[192](index=192&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) NCS Multistage's common stock trades on NASDAQ under 'NCSM,' with **2.36 million shares outstanding** as of March 4, 2021, and no anticipated cash dividends or equity repurchases - Common stock trades on the NASDAQ Capital Market under the symbol "**NCSM**"[195](index=195&type=chunk) - As of March 4, 2021, there were **2,360,007 shares of common stock outstanding**, held by approximately **17 record holders**[6](index=6&type=chunk)[196](index=196&type=chunk) - The company does not intend to pay cash dividends on its common stock in the foreseeable future[197](index=197&type=chunk) - No issuer purchases of equity securities were made[200](index=200&type=chunk) [Selected Financial Data](index=37&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents selected consolidated financial data for 2016-2020, including statements of operations, cash flows, and balance sheets, adjusted for a 1-for-20 reverse stock split Consolidated Statements of Operations Data (in thousands, except per share amounts) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------------------------------------- | :----- | :----- | :----- | :----- | :----- | | Product sales | $75,197 | $145,826 | $156,781 | $144,666 | $73,220 | | Services | $31,780 | $59,659 | $70,182 | $56,968 | $25,259 | | Total revenues | $106,977 | $205,485 | $226,963 | $201,634 | $98,479 | | Total cost of sales (excl. D&A) | $62,907 | $108,030 | $108,306 | $98,792 | $53,833 | | Selling, general and administrative expenses | $59,425 | $88,554 | $82,813 | $64,707 | $37,061 | | Depreciation | $4,426 | $5,877 | $4,747 | $3,193 | $1,766 | | Amortization | $1,465 | $4,559 | $13,090 | $24,458 | $23,801 | | Impairments | $50,194 | $7,919 | $227,543 | $0 | $0 | | Loss from operations | $(71,440) | $(9,491) | $(206,664) | $4,959 | $(17,982) | | Gain on patent infringement settlement | $25,678 | $0 | $0 | $0 | $0 | | Net loss attributable to NCS Multistage Holdings, Inc. | $(57,599) | $(32,823) | $(190,317) | $2,102 | $(17,927) | | Basic loss per common share | $(24.37) | $(14.08) | $(85.00) | $1.01 | $(10.55) | | Diluted loss per common share | $(24.37) | $(14.08) | $(85.00) | $0.96 | $(10.55) | | Weighted average common shares outstanding (Basic) | 2,364 | 2,332 | 2,239 | 2,024 | 1,700 | | Weighted average common shares outstanding (Diluted) | 2,364 | 2,332 | 2,239 | 2,179 | 1,700 | Consolidated Statements of Cash Flows Data (in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :-------------------------------- | :----- | :----- | :----- | :----- | :----- | | Net cash provided by (used in) Operating activities | $35,117 | $17,949 | $14,026 | $16,114 | $10,684 | | Net cash used in Investing activities | $(1,059) | $(5,002) | $(15,410) | $(85,221) | $(1,840) | | Net cash used in Financing activities | $(29,773) | $(27,306) | $(5,130) | $84,033 | $(315) | Other Financial Data (in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :-------------------------------- | :----- | :----- | :----- | :----- | :----- | | Adjusted EBITDA | $2,184 | $28,184 | $49,739 | $49,498 | $13,880 | | Adjusted EBITDA Less Share-Based Compensation | $(5,539) | $15,980 | $38,809 | $43,390 | $12,526 | Consolidated Balance Sheet Data (in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :-------------------------------- | :----- | :----- | :----- | :----- | :----- | | Cash and cash equivalents | $15,545 | $11,243 | $25,131 | $33,809 | $18,275 | | Total assets | $138,678 | $202,577 | $229,701 | $463,913 | $326,827 | | Total debt, net | $5,789 | $12,917 | $25,691 | $27,036 | $89,166 | | Total liabilities | $25,192 | $39,032 | $53,470 | $94,922 | $149,349 | | Total stockholders' equity | $93,608 | $144,610 | $161,301 | $356,847 | $177,478 | - All share and per share information has been retrospectively adjusted for the **1-for-20 reverse stock split** effective December 1, 2020[204](index=204&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes NCS Multistage's financial condition and operational results, focusing on COVID-19 impacts, liquidity, capital resources, and critical accounting policies [Overview](index=40&type=section&id=Overview) NCS Multistage provides engineered products and support services for oil and natural gas well completions, operating as a single reportable segment - NCS provides highly engineered products and support services for oil and natural gas well completions, primarily in onshore unconventional wells[217](index=217&type=chunk) - Key offerings include fracturing systems for pinpoint stimulation, composite frac plugs (Repeat Precision), tracer diagnostics, and well construction products[218](index=218&type=chunk)[219](index=219&type=chunk) - The company operates in one reportable segment[219](index=219&type=chunk) [COVID-19 Impacts on the Oil & Gas Market and NCS Multistage](index=40&type=section&id=COVID-19%20Impacts%20on%20the%20Oil%20%26%20Gas%20Market%20and%20NCS%20Multistage) The COVID-19 pandemic severely impacted the oil and gas market in 2020, leading to reduced demand, pricing pressure, cost cuts, and significant asset impairment charges for NCS - COVID-19 caused an **8.8 MMBBL/D contraction** in global crude oil demand in 2020 and a decline in WTI crude oil prices (average **$27.96/BBL in Q2 2020**)[223](index=223&type=chunk)[225](index=225&type=chunk) - E&P companies significantly reduced 2020 capital expenditure budgets (**30-100% cuts**), leading to substantial reductions in drilling and completion activity[226](index=226&type=chunk) - NCS experienced reduced demand and pricing for its products and services, delayed international operations, and modest supply chain disruptions[229](index=229&type=chunk)[230](index=230&type=chunk) - Workforce reductions: Approximately **190 employees** in U.S. and Canada - Salary reductions: Executives averaged **20% cuts** - Bonus elimination: No 2019 or 2020 bonuses paid - Benefit suspension: Temporary elimination of employer matching contributions for 401(k) and RRSP - Severance expense: **$5.7 million** recorded in 2020 - Recorded impairment charges of **$9.7 million** in property and equipment and **$40.5 million** in identifiable intangible assets during Q1 2020 due to market decline[234](index=234&type=chunk) - Amended Senior Secured Credit Facility in August 2020, reducing U.S. commitments to **$25.0 million** and limiting borrowings to an **$11.0 million borrowing base** (as of Dec 31, 2020)[235](index=235&type=chunk)[300](index=300&type=chunk) [Outlook](index=43&type=section&id=Outlook) NCS anticipates modestly lower North American drilling and completions activity in 2021, with flat international activity and intense competitive pressure impacting margins - North American drilling and completions activity is expected to be modestly lower in 2021 than in 2020[238](index=238&type=chunk) - E&P companies are committed to generating free cash flow and maintaining production at late 2020 levels[238](index=238&type=chunk) - International industry activity is expected to be approximately flat in 2021 compared to 2020, with increases through the year[238](index=238&type=chunk) - Intense competitive pressure is expected across all product and service offerings in North America, impacting market share and margins[238](index=238&type=chunk) [Market Conditions](index=43&type=section&id=Market%20Conditions) Oil and natural gas prices remained volatile in 2020, impacting North American drilling activity, though a trend towards complex wells benefits NCS's specialized products - WTI crude oil prices were volatile, falling to approximately **$48 per barrel** in December 2020, while natural gas prices fell to an average of **$2.03 per MMBtu** in 2020[240](index=240&type=chunk)[244](index=244&type=chunk) - OPEC+ implemented significant oil production reductions throughout 2020 and early 2021 to stabilize crude oil prices and reduce global storage capacity[240](index=240&type=chunk) Average Drilling Rig Count (U.S. Land, Canada Land, North America Land) | Quarter Ended | U.S. Land | Canada Land | North America Land | | :-------------- | :-------- | :---------- | :----------------- | | 3/31/2020 | 764 | 194 | 958 | | 6/30/2020 | 378 | 23 | 401 | | 9/30/2020 | 241 | 46 | 287 | | 12/31/2020 | 297 | 88 | 385 | - The trend towards longer, more complex wells and increased focus on completion optimization has led to higher sales of NCS's sliding sleeves, composite frac plugs, and tracer diagnostics services[255](index=255&type=chunk) [How We Generate Revenues](index=46&type=section&id=How%20We%20Generate%20Revenues) NCS generates revenue from product sales (**70% in 2020**) and services, with **45% of 2020 revenue** from Canada, exposing it to currency fluctuations and well complexity - Revenues are derived from product sales (fracturing systems, well construction, composite plug products) and services (downhole frac isolation assembly, tracer diagnostics)[256](index=256&type=chunk) Revenue Breakdown | Category | 2020 | 2019 | 2018 | | :--------------- | :--- | :--- | :--- | | Product sales | 70% | 71% | 69% | | Services | 30% | 29% | 31% | - Approximately **45% of 2020 revenues** were from sales in Canada and denominated in Canadian dollars, making the company susceptible to foreign currency fluctuations[260](index=260&type=chunk) - Revenue is impacted by well complexity (more stages lead to increased sales) and pricing adjustments in competitive markets[259](index=259&type=chunk) [Costs of Conducting our Business](index=47&type=section&id=Costs%20of%20Conducting%20our%20Business) Costs include manufacturing, support services, and SG&A, with tariffs increasing cost of sales and approximately **19% of total costs** denominated in Canadian dollars in 2020 - Cost of sales includes manufacturing expenses (raw materials, machining, product assembly, quality control) and support services (employee compensation, travel)[262](index=262&type=chunk) - SG&A expenses cover compensation, R&D, facility costs, IT, software licensing, marketing, insurance, and professional services[263](index=263&type=chunk) - Tariffs on imported steel and Chinese commodities have increased cost of sales[262](index=262&type=chunk) - Approximately **19% of total costs** (cost of sales and SG&A) were denominated in Canadian dollars for the year ended December 31, 2020[264](index=264&type=chunk) [How We Evaluate our Results of Operations](index=47&type=section&id=How%20We%20Evaluate%20our%20Results%20of%20Operations) Management evaluates performance using revenues, Adjusted EBITDA, Free Cash Flow, and related non-GAAP measures to assess core business operations and comparability - Management uses revenues, Adjusted EBITDA, Adjusted EBITDA Less Share-Based Compensation, Free Cash Flow, and Free Cash Flow Less Distributions to Non-Controlling Interest to analyze performance[265](index=265&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk) - Adjusted EBITDA and Adjusted EBITDA Less Share-Based Compensation are non-GAAP measures that exclude items not reflective of ongoing operating performance or non-cash in nature, such as impairments and share-based compensation[267](index=267&type=chunk) - Free Cash Flow is defined as net cash from operating activities less capital expenditures plus proceeds from asset sales, providing insight into cash available beyond investment needs[268](index=268&type=chunk) [Results of Operations](index=49&type=section&id=Results%20of%20Operations) NCS Multistage reported a significant revenue decline and increased net loss in 2020 due to COVID-19, partially offset by a patent settlement gain and a shift to an income tax benefit Key Financial Results (2020 vs. 2019, in thousands) | Metric | 2020 | 2019 | Variance ($) | Variance (%) | | :------------------------------------------------- | :----- | :----- | :----------- | :----------- | | Total revenues | $106,977 | $205,485 | $(98,508) | (47.9)% | | Total cost of sales (excl. D&A) | $62,907 | $108,030 | $(45,123) | (41.8)% | | Selling, general and administrative expenses | $59,425 | $88,554 | $(29,129) | (32.9)% | | Depreciation | $4,426 | $5,877 | $(1,451) | (24.7)% | | Amortization | $1,465 | $4,559 | $(3,094) | (67.9)% | | Impairments | $50,194 | $7,919 | $42,275 | 533.8% | | Loss from operations | $(71,440) | $(9,491) | $(61,949) | NM | | Gain on patent infringement settlement | $25,678 | $0 | $25,678 | 100.0% | | Income tax (benefit) expense | $(7,783) | $10,752 | $(18,535) | (172.4)% | | Net loss attributable to NCS Multistage Holdings, Inc. | $(57,599) | $(32,823) | $(24,776) | (75.5)% | - Revenue decrease primarily due to reduced North American activity and lower international product sales, driven by the COVID-19 pandemic[272](index=272&type=chunk) - Cost of sales as a percentage of revenues increased from **52.6% in 2019** to **58.8% in 2020** due to significant revenue reduction and fixed cost under-absorption[273](index=273&type=chunk) - SG&A expenses decreased due to lower compensation, share-based compensation, bad debt, R&D, ERP expenses, and travel, partially offset by **$4.9 million higher severance charges**[275](index=275&type=chunk) - Depreciation and amortization decreased primarily due to non-cash impairment charges of **$9.7 million** on property and equipment and **$40.5 million** on identifiable intangible assets in Q1 2020[276](index=276&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) - Income tax shifted to a benefit of **$(7.8) million** in 2020, influenced by a **$(0.9) million NOL carryback benefit** from the CARES Act and a **$6.5 million expense** for an increased valuation allowance on deferred tax assets[284](index=284&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) NCS Multistage's liquidity is supported by cash, operating cash flows, and its Senior Secured Credit Facility, with **$15.5 million in cash** and **$5.8 million in debt** as of December 31, 2020 - Primary liquidity sources are cash and cash equivalents, cash provided by operating activities, and borrowings under the Senior Secured Credit Facility[287](index=287&type=chunk) Liquidity and Debt (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :--------------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $15,545 | $11,243 | | Total outstanding indebtedness | $5,789 | $12,917 | | Outstanding under Senior Secured Credit Facility | $0 | $10,000 | | Borrowing base under Senior Secured Credit Facility | $11,000 | N/A | - Anticipates **$1-2 million** in capital expenditures during 2021 for machining, software, tracer diagnostics equipment, and international vehicles[288](index=288&type=chunk) Cash Flow Summary (in thousands) | Metric | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $35,117 | $17,949 | $14,026 | | Net cash used in investing activities | $(1,059) | $(5,002) | $(15,410) | | Net cash used in financing activities | $(29,773) | $(27,306) | $(5,130) | | Free cash flow | $34,058 | $12,947 | $(1,384) | | Free cash flow less distributions to non-controlling interest | $16,508 | $6,947 | $(3,684) | - Net cash provided by operating activities increased in 2020 due to **$21.4 million cash** from a patent infringement settlement, no contingent consideration payment, and favorable changes in accounts receivable and inventories[292](index=292&type=chunk) - Net cash used in financing activities increased in 2020 primarily due to higher distributions to the joint venture partner (**$17.6 million vs. $6.0 million in 2019**)[296](index=296&type=chunk) [Contractual Obligations](index=54&type=section&id=Contractual%20Obligations) As of December 31, 2020, NCS Multistage had total contractual obligations of **$17.4 million**, primarily comprising finance lease obligations, purchase obligations, tax obligations, and operating leases Contractual Obligations (in thousands) | Type | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :----------------------------------- | :----- | :--------------- | :-------- | :-------- | :---------------- | | Finance lease obligations (incl. interest) | $6,780 | $1,597 | $2,016 | $985 | $2,182 | | Purchase obligations | $3,300 | $3,300 | $0 | $0 | $0 | | Tax obligations | $796 | $235 | $317 | $244 | $0 | | Equipment and office operating leases | $6,533 | $2,074 | $2,172 | $1,357 | $930 | | **Total** | **$17,409** | **$7,206** | **$4,505** | **$2,586** | **$3,112** | [Off-Balance Sheet Arrangements](index=54&type=section&id=Off-Balance%20Sheet%20Arrangements) NCS Multistage Holdings, Inc. does not have any off-balance sheet financing arrangements - The company has no off-balance sheet financing arrangements[308](index=308&type=chunk) [Effects of Inflation](index=55&type=section&id=Effects%20of%20Inflation) Inflation has not materially affected NCS Multistage's business to date, but future significant pressures could adversely impact financial performance if not offset by price increases - Inflation has not had a material effect on the business, financial condition, or results of operations[309](index=309&type=chunk) - Inability to offset future significant inflationary cost increases through price adjustments could materially adversely affect financial results[309](index=309&type=chunk) [Critical Accounting Policies](index=55&type=section&id=Critical%20Accounting%20Policies) NCS Multistage's financial statements rely on critical accounting policies involving significant judgment, including revenue recognition, impairment assessments, income taxes, and share-based compensation - Revenue recognition: Product sales recognized when control transfers (shipment/delivery); service revenue recognized upon job completion or over time using a unit rate output method[311](index=311&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk)[316](index=316&type=chunk)[379](index=379&type=chunk)[382](index=382&type=chunk)[383](index=383&type=chunk)[384](index=384&type=chunk) - Impairment assessments for property, equipment, finite-lived intangibles, and goodwill require significant judgment regarding future cash flows, market conditions, and other assumptions. **$50.2 million impairment** recorded in 2020[320](index=320&type=chunk)[321](index=321&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk)[398](index=398&type=chunk) - Income taxes are accounted for using the liability method, with deferred tax assets subject to a valuation allowance if their realization is not more likely than not[328](index=328&type=chunk)[406](index=406&type=chunk) - Share-based compensation is measured at fair value using various models (Black-Scholes, Monte Carlo) depending on the award type, with liability-classified ESUs remeasured each period[330](index=330&type=chunk)[407](index=407&type=chunk) - Recently adopted ASU 2018-15 (cloud computing) and ASU 2018-13 (fair value disclosures) in 2020 with no material impact. Evaluating ASU 2020-04 (reference rate reform) and ASU 2019-12 (income taxes)[416](index=416&type=chunk)[417](index=417&type=chunk)[418](index=418&type=chunk)[419](index=419&type=chunk) [Emerging Growth Company and Smaller Reporting Company Status](index=58&type=section&id=Emerging%20Growth%20Company%20and%20Smaller%20Reporting%20Company%20Status) NCS Multistage's status as an 'emerging growth company' and 'smaller reporting company' allows for reduced reporting requirements until certain financial thresholds are met - NCS is an "emerging growth company" and a "smaller reporting company"[334](index=334&type=chunk) - This status allows for reduced reporting requirements, including exemption from auditor attestation on internal controls and reduced executive compensation disclosures[334](index=334&type=chunk) - The company will retain this status until it meets certain thresholds, such as **$1.07 billion in annual gross revenues** or a public float exceeding **$700 million**[334](index=334&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) NCS Multistage is exposed to commodity price, foreign currency, interest rate, and credit risks, amplified by COVID-19, with no current hedging strategies in place - The company is indirectly exposed to commodity price risk through fluctuations in crude oil and natural gas prices, which impact customer drilling and completion activity. No current hedging is in place[336](index=336&type=chunk) - Significant foreign currency exchange rate risk exists as approximately **45% of 2020 revenues** were derived in Canada and denominated in Canadian dollars. No current hedging for CAD or other foreign currencies[338](index=338&type=chunk) - Interest rate risk arises from the variable interest rates on the Senior Secured Credit Facility, with an applicable interest rate of **4.375%** at December 31, 2020[339](index=339&type=chunk)[340](index=340&type=chunk) - Credit risk is heightened due to the concentration of customers in the oil and gas industry, managed through financial condition analysis and credit limit monitoring[341](index=341&type=chunk) - These market risks and related uncertainties have increased due to heightened volatility in oil and gas prices and financial markets as a result of the COVID-19 pandemic[335](index=335&type=chunk) [Financial Statements and Supplementary Data](index=60&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2018-2020, including balance sheets, statements of operations, cash flows, and comprehensive notes detailing accounting policies and financial data [Report of Independent Registered Public Accounting Firm](index=61&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued an unqualified opinion on NCS Multistage's consolidated financial statements for 2018-2020, without an audit of internal control over financial reporting - PricewaterhouseCoopers LLP provided an unqualified opinion on the consolidated financial statements for 2020, 2019, and 2018[348](index=348&type=chunk) - The audit was conducted in accordance with PCAOB standards[351](index=351&type=chunk) - An audit of internal control over financial reporting was not performed[351](index=351&type=chunk) [Consolidated Balance Sheets](index=62&type=section&id=Consolidated%20Balance%20Sheets) NCS Multistage's consolidated balance sheets show total assets decreased from **$202.6 million in 2019** to **$138.7 million in 2020**, primarily due to reductions in receivables, intangibles, and property and equipment Consolidated Balance Sheet (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $15,545 | $11,243 | | Accounts receivable—trade, net | $21,925 | $41,960 | | Inventories, net | $34,871 | $39,921 | | Prepaid expenses and other current assets | $2,975 | $2,444 | | Other current receivables | $8,358 | $5,028 | | **Total current assets** | **$83,674** | **$100,596** | | Property and equipment, net | $24,435 | $32,974 | | Goodwill | $15,222 | $15,222 | | Identifiable intangibles, net | $6,413 | $45,248 | | Operating lease assets | $5,170 | $5,071 | | Deposits and other assets | $3,559 | $3,460 | | Deferred income taxes, net | $205 | $6 | | **Total noncurrent assets** | **$55,004** | **$101,981** | | **Total assets** | **$138,678** | **$202,577** | | Accounts payable—trade | $4,943 | $8,549 | | Accrued expenses | $3,347 | $3,451 | | Income taxes payable | $653 | $1,883 | | Operating lease liabilities | $1,826 | $2,052 | | Current maturities of long-term debt | $1,347 | $1,481 | | Other current liabilities | $2,768 | $2,364 | | **Total current liabilities** | **$14,884** | **$19,780** | | Long-term debt, less current maturities | $4,442 | $11,436 | | Operating lease liabilities, long-term | $3,989 | $3,487 | | Other long-term liabilities | $1,864 | $1,373 | | Deferred income taxes, net | $13 | $2,956 | | **Total noncurrent liabilities** | **$10,308** | **$19,252** | | **Total liabilities** | **$25,192** | **$39,032** | | Total stockholders' equity | $93,608 | $144,610 | | Non-controlling interest | $19,878 | $18,935 | | **Total equity** | **$113,486** | **$163,545** | | **Total liabilities and stockholders' equity** | **$138,678** | **$202,577** | [Consolidated Statements of Operations](index=63&type=section&id=Consolidated%20Statements%20of%20Operations) Total revenues for NCS Multistage decreased significantly to **$107.0 million in 2020**, resulting in a net loss of **$(57.6) million**, influenced by impairment charges and a patent settlement gain Consolidated Statements of Operations (in thousands, except per share data) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------------- | :----- | :----- | :----- | | Product sales | $75,197 | $145,826 | $156,781 | | Services | $31,780 | $59,659 | $70,182 | | **Total revenues** | **$106,977** | **$205,485** | **$226,963** | | Total cost of sales (excl. D&A) | $62,907 | $108,030 | $108,306 | | Selling, general and administrative expenses | $59,425 | $88,554 | $82,813 | | Depreciation | $4,426 | $5,877 | $4,747 | | Amortization | $1,465 | $4,559 | $13,090 | | Change in fair value of contingent consideration | $0 | $37 | $(2,872) | | Impairments | $50,194 | $7,919 | $227,543 | | **Loss from operations** | **$(71,440)** | **$(9,491)** | **$(206,664)** | | Interest expense, net | $(1,796) | $(1,925) | $(1,963) | | Gain on patent infringement settlement | $25,678 | $0 | $0 | | Other income, net | $1,729 | $308 | $182 | | Foreign currency exchange (loss) gain | $(1,060) | $(958) | $162 | | **Total other income (expense)** | **$24,551** | **$(2,575)** | **$(1,619)** | | **Loss before income tax** | **$(46,889)** | **$(12,066)** | **$(208,283)** | | Income tax (benefit) expense | $(7,783) | $10,752 | $(23,052) | | **Net loss** | **$(39,106)** | **$(22,818)** | **$(185,231)** | | Net income attributable to non-controlling interest | $18,493 | $10,005 | $5,086 | | **Net loss attributable to NCS Multistage Holdings, Inc.** | **$(57,599)** | **$(32,823)** | **$(190,317)** | | Basic loss per common share | $(24.37) | $(14.08) | $(85.00) | | Diluted loss per common share | $(24.37) | $(14.08) | $(85.00) | | Weighted average common shares outstanding (Basic) | 2,364 | 2,332 | 2,239 | | Weighted average common shares outstanding (Diluted) | 2,364 | 2,332 | 2,239 | [Consolidated Statements of Comprehensive Loss](index=64&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) NCS Multistage's comprehensive loss attributable to the company was **$(58.6) million in 2020**, driven by net loss and foreign currency translation adjustments Consolidated Statements of Comprehensive Loss (in thousands) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------------- | :----- | :----- | :----- | | Net loss | $(39,106) | $(22,818) | $(185,231) | | Foreign currency translation adjustments, net of tax of $0 | $(969) | $3,219 | $(17,323) | | **Comprehensive loss** | **$(40,075)** | **$(19,599)** | **$(202,554)** | | Comprehensive income attributable to non-controlling interest | $18,493 | $10,005 | $5,086 | | **Comprehensive loss attributable to NCS Multistage Holdings, Inc.** | **$(58,568)** | **$(29,604)** | **$(207,640)** | [Consolidated Statements of Changes in Stockholders' Equity](index=65&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Total stockholders' equity decreased from **$144.6 million in 2019** to **$93.6 million in 2020**, primarily due to net loss and distributions to non-controlling interest Total Stockholders' Equity (in thousands) | Date | Total Stockholders' Equity | | :------------------- | :----------------------- | | Dec 31, 2017 | $368,991 | | Dec 31, 2018 | $176,231 | | Dec 31, 2019 | $163,545 | | Dec 31, 2020 | $113,486 | - Key changes in 2020 include a net loss attributable to NCS Multistage Holdings, Inc. of **$(57.6) million** and distributions to non-controlling interest of **$17.6 million**, partially offset by **$7.7 million** in share-based compensation[363](index=363&type=chunk) [Consolidated Statements of Cash Flows](index=66&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities increased to **$35.1 million in 2020** due to a patent settlement, while investing cash use decreased and financing cash use increased due to higher distributions Consolidated Statements of Cash Flows (in thousands) | Metric | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $35,117 | $17,949 | $14,026 | | Net cash used in investing activities | $(1,059) | $(5,002) | $(15,410) | | Net cash used in financing activities | $(29,773) | $(27,306) | $(5,130) | | Effect of exchange rate changes on cash and cash equivalents | $17 | $471 | $(2,164) | | **Net change in cash and cash equivalents** | **$4,302** | **$(13,888)** | **$(8,678)** | | Cash and cash equivalents end of period | $15,545 | $11,243 | $25,131 | - Net cash provided by operating activities increased to **$35.1 million in 2020**, partly due to **$21.4 million** in net proceeds from a patent infringement settlement[292](index=292&type=chunk)[366](index=366&type=chunk) - Net cash used in investing activities decreased to **$1.1 million in 2020**, primarily due to reduced capital expenditures[294](index=294&type=chunk)[366](index=366&type=chunk) - Net cash used in financing activities increased to **$29.8 million in 2020**, mainly driven by **$17.6 million** in distributions to non-controlling interest[296](index=296&type=chunk)[366](index=366&type=chunk) [Notes to Consolidated Financial Statements](index=67&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on NCS Multistage's accounting policies, revenue, inventory, debt, commitments, and other financial data, crucial for understanding financial reporting [Organization and Basis of Presentation](index=67&type=section&id=Note%201.%20Organization%20and%20Basis%20of%20Presentation) NCS Multistage provides engineered products and services for oil and gas well completions, with financial statements prepared under GAAP and adjusted for a 1-for-20 reverse stock split - NCS provides engineered products and support services for oil and natural gas well completions and field development strategies[368](index=368&type=chunk) - Consolidated financial statements are prepared in accordance with GAAP, consolidating subsidiaries where NCS has a controlling voting interest[369](index=369&type=chunk) - A **1-for-20 reverse stock split** was effective on December 1, 2020, and authorized common stock shares were decreased[370](index=370&type=chunk) [Summary of Significant Accounting Policies](index=67&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note details NCS Multistage's critical accounting policies, including revenue recognition, impairment tests, income taxes, and share-based compensation, along with recently adopted and evaluated ASUs - Financial statements require management to make estimates and assumptions, including for accounts receivable, inventories, goodwill impairment, long-lived assets, share-based compensation, and income tax contingencies[371](index=371&type=chunk) - Revenue from product sales is recognized when control transfers (shipment/delivery), while service revenue is recognized upon job completion or over time using a unit rate output method[379](index=379&type=chunk)[382](index=382&type=chunk)[383](index=383&type=chunk)[384](index=384&type=chunk) - Impairment tests for property, equipment, finite-lived intangibles, and goodwill are performed when triggering events occur or annually, using estimates and assumptions about future cash flows and market conditions[395](index=395&type=chunk)[396](index=396&type=chunk)[398](index=398&type=chunk) - Income taxes are accounted for using the liability method, with deferred tax assets subject to a valuation allowance if realization is not more likely than not[406](index=406&type=chunk) - Share-based compensation is measured at fair value using Black-Scholes (options, ESPP), Monte Carlo (PSUs), or market price (RSUs, ESUs), with liability-classified ESUs remeasured each period[407](index=407&type=chunk) - Adopted ASU No. 2018-15 (cloud computing) and ASU No. 2018-13 (fair value measurement) in 2020 with no material impact. Evaluating ASU No. 2020-04 (reference rate reform) and ASU No. 2019-12 (income taxes)[416](index=416&type=chunk)[417](index=417&type=chunk)[418](index=418&type=chunk)[419](index=419&type=chunk) [Revenues](index=73&type=section&id=Note%203.%20Revenues) NCS Multistage disaggregates revenue by geographic area, with most product and service revenues considered single performance obligations, and current contract liabilities of **$51 thousand** as of December 31, 2020 - Revenue is disaggregated by geographic area (U.S., Canada, Other Countries) based on the customer's billing address[423](index=423&type=chunk) Current Contract Liabilities (in thousands) | Date | Balance | | :------------------- | :------ | | Dec 31, 2018 | $515 | | Dec 31, 2019 | $59 | | Dec 31, 2020 | $51 | - Approximately **99% of product and service revenues** are considered a single performance obligation[425](index=425&type=chunk) - The company expenses sales commissions when incurred and does not disclose unsatisfied performance obligations for contracts with a duration of one year or less[426](index=426&type=chunk)[427](index=427&type=chunk) [Inventories, net](index=74&type=section&id=Note%204.%20Inventories%2C%20net) Inventories, net, decreased to **$34.9 million in 2020**, valued at the lower of cost or net realizable value, using standard costs approximating FIFO or average cost Inventories, net (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :--------------- | :----------- | :----------- | | Raw materials | $1,752 | $1,986 | | Work in process | $287 | $523 | | Finished goods | $32,832 | $37,412 | | **Total inventories, net** | **$34,871** | **$39,921** | - Inventories are stated at the lower of cost or estimated net realizable value, with cost determined at standard costs approximating FIFO or average cost basis[394](index=394&type=chunk) - The company continuously evaluates inventories for obsolescence, slow-moving, and excess items, with adjustments recorded to cost of sales[394](index=394&type=chunk) [Other Current Receivables](index=74&type=section&id=Note%205.%20Other%20Current%20Receivables) Other current receivables increased to **$8.4 million in 2020**, comprising current income tax receivables, employee receivables, and other miscellaneous receivables Other Current Receivables (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :------------------------ | :----------- | :----------- | | Current income tax receivables | $6,295 | $4,777 | | Employee receivables | $544 | $5 | | Other receivables | $1,519 | $246 | | **Total other receivables, net** | **$8,358** | **$5,028** | - Employee receivables primarily relate to foreign withholding tax paid on behalf of employees, expected to be reimbursed[431](index=431&type=chunk) [Property and Equipment](index=74&type=section&id=Note%206.%20Property%20and%20Equipment) Property and equipment, net, decreased from **$33.0 million in 2019** to **$24.4 million in 2020**. This decline was primarily due to a **$9.7 million impairment charge** recorded in Q1 2020 on land, buildings, and machinery, triggered by adverse industry conditions and the COVID-19 pandemic. Depreciation expense for 2020 was **$4.4 million**, a decrease from **$5.9 million in 2019**, also influenced by lower capital expenditures Property and Equipment, net (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------------- | :----------- | :----------- | | Land | $1,695 | $2,090 | | Building and improvements | $8,511 | $12,242 | | Machinery and equipment | $18,211 | $21,469 | | Computers and software | $2,374 | $2,694 | | Furniture and fixtures | $1,150 | $1,208 | | Vehicles | $442 | $646 | | Right of use assets - finance leases | $8,020 | $5,739 | | Service equipment | $244 | $244 | | Construction in progress | $100 | $975 | | Less: Accumulated depreciation and amortization | $(16,312) | $(14,333) | | **Property and equipment, net** | **$24,435** | **$32,974** | Depreciation Expense (in thousands) | Category | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Cost of product sales | $1,679 | $2,711 | $2,003 | | Cost of services | $1,043 | $1,266 | $1,070 | | Selling, general and administrative expenses | $1,704 | $1,900 | $1,674 | | **Total depreciation** | **$4,426** | **$5,877** | **$4,747** | - A **$9.7 million impairment charge** was recorded in Q1 2020 on property and equipment, primarily land, buildings, and machinery, due to adverse industry conditions and the COVID-19 pandemic[435](index=435&type=chunk) [Goodwill and Identifiable Intangibles](index=75&type=section&id=Note%207.%20Goodwill%20and%20Identifiable%20Intangibles) Goodwill remained at **$15.2 million** as of December 31, 2020, primarily related to Repeat Precision, with no impairment recorded in 2020. Identifiable intangibles, net, significantly decreased from **$45.2 million in 2019** to **$6.4 million in 2020**, primarily due to **$40.5 million in impairment charges** recorded in Q1 2020 on technology, software, customer relationships, and trademarks. Amortization expense for 2020 was **$1.5 million** Goodwill (in thousands) | Date | Net Goodwill | | :------------------- | :----------- | | Dec 31, 2018 | $23,112 | | Dec 31, 2019 | $15,222 | | Dec 31, 2020 | $15,222 | - No goodwill impairment was recorded in 2020. A **$7.9 million impairment** was recorded in 2019 for the tracer diagnostic services reporting unit, and **$154.0 million** in 2018 for fracturing systems and well construction[437](index=437&type=chunk)[438](index=438&type=chunk)[441](index=441&type=chunk) Identifiable Intangibles, net (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------- | :----------- | :----------- | | Technology | $3,871 | $15,341 | | Trademarks | $0 | $1,227 | | Customer relationships | $2,494 | $24,761 | | Internally developed software | $0 | $3,919 | | Technology - not subject to amortization | $48 | $0 | | **Total identifiable intangibles, net** | **$6,413** | **$45,248** | - A **$40.5 million impairment charge** was recorded in Q1 2020 on finite-lived intangible assets (technology, internally-developed software, customer relationships, and trademarks) due to adverse industry conditions[444](index=444&type=chunk) Total Amortization Expense (in thousands) | Year | Amortization Expense | | :--- | :------------------- | | 2020 | $1,465 | | 2019 | $4,559 | | 2018 | $13,090 | [Accrued Expenses](index=77&type=section&id=Note%208.%20Accrued%20Expenses) Accrued expenses decreased slightly to **$3.3 million in 2020**, including payroll, taxes, and an increased severance accrual reflecting workforce reductions Accrued Expenses (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------------- | :----------- | :----------- | | Accrued payroll and bonus | $999 | $2,558 | | Property and franchise taxes accrual | $505 | $462 | | Severance and other termination benefits | $730 | $0 | | Accrued other miscellaneous liabilities | $1,113 | $431 | | **Total accrued expenses** | **$3,347** | **$3,451** | [Debt](index=77&type=section&id=Note%209.%20Debt) Total debt decreased to **$5.8 million in 2020**, with no outstanding balance on the Senior Secured Credit Facility, which was amended to **$25.0 million capacity** and an **$11.0 million borrowing base** Total Debt (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------- | :----------- | :----------- | | Senior Secured Credit Facility | $0 | $10,000 | | Finance leases | $5,789 | $2,917 | | **Total debt** | **$5,789** | **$12,917** | | Less: current portion | $(1,347) | $(1,481) | | **Long-term debt** | **$4,442** | **$11,436** | - The Senior Secured Credit Facility was amended in August 2020, reducing U.S. commitments to **$25.0 million** and establishing an **$11.0 million borrowing base** as of December 31, 2020. It matures on May 1, 2023[455](index=455&type=chunk)[300](index=300&type=chunk) - Repeat Precision has outstanding promissory notes with an aggregate borrowing capacity of up to **$9.3 million**[305](index=305&type=chunk)[465](index=465&type=chunk)[466](index=466&type=chunk) - NCS was in compliance with all financial covenants under the Amended Credit Agreement as of December 31, 2020[459](index=459&type=chunk) [Commitments and Contingencies](index=79&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) NCS Multistage is involved in patent infringement lawsuits and settled one for a **$25.7 million gain** in 2020, with management not expecting material adverse effects from current proceedings - NCS is involved in patent infringement lawsuits against Kobold Corporation (Canada), Nine Energy Service, Inc. (U.S.), and TCO AS (U.S.)[468](index=468&type=chunk)[473](index=473&type=chunk) - A patent infringement settlement with Diamondback Industries, Inc. in 2020 resulted in a **$25.7 million gain**, including cash payments and the transfer of a patent[469](index=469&type=chunk)[472](index=472&type=chunk) - A technical services and assistance agreement with SOS generated **$1.6 million** in tracer diagnostics services revenue and **$0.9 million** in other income in 2020[475](index=475&type=chunk) - Management does not expect current legal proceedings to have a material adverse effect on the company's financial position, results of operations, or cash flows[474](index=474&type=chunk) [Severance and Other Termination Benefits](index=80&type=section&id=Note%2011.%20Severance%20and%20Other%20Termination%20Benefits) NCS Multistage incurred **$5.7 million in cash severance costs** in 2020 due to workforce reductions, with a remaining liability of **$0.7 million** expected to be paid by May 2021 - Incurred **$5.7 million in cash severance costs** during 2020 due to workforce reductions in response to market conditions and the COVID-19 pandemic[478](index=478&type=chunk) Severance and Other Termination Benefits Liability (in thousands) | Metric | Amount | | :-------------------------------- | :----- | | Beginning balance, Dec 31, 2019 | $0 | | Additions for costs expensed | $5,661 | | Severance payments | $(4,969) | | Currency translation adjustment | $38 | | **Ending balance, Dec 31, 2020** | **$730** | - The remaining severance liability of **$0.7 million** as of December 31, 2020, is expected to be paid by May 2021[479](index=479&type=chunk) [Stockholders' Equity](index=81&type=section&id=Note%2012.%20Stockholders%27%20Equity) NCS Multistage implemented a **1-for-20 reverse stock split** in December 2020, resulting in **2.36 million shares outstanding**, with Advent International Corporation controlling **62.6% of voting power** - A **1-for-20 reverse stock split** was implemented on December 1, 2020, to regain compliance with Nasdaq listing rules[480](index=480&type=chunk)[481](index=481&type=chunk) - The number of authorized common stock shares was decreased from **225,000,000 to 11,250,000**[483](index=483&type=chunk) - As of December 31, 2020, **2,359,918 shares of common stock** were outstanding[483](index=483&type=chunk) - Funds affiliated with Advent International Corporation beneficially own approximately **62.6% of the combined voting power**[480](index=480&type=chunk) - No dividends were declared on common stock during the years ended December 31, 2020, or 2019[485](index=485&type=chunk) [Share-Based Compensation](index=82&type=section&id=Note%2013.%20Share-Based%20Compensation) NCS Multistage grants stock options, RSUs, ESUs, and PSUs under its equity plans, with total share-based compensation expense of **$8.5 million in 2020**, and the ESPP temporarily suspended - The company operates under the 2012 Equity Incentive Plan (no new grants) and the 2017 Equity Incentive Plan (**551,626 authorized shares**, **383,848 available for future issuance**)[489](index=489&type=chunk)[490](index=490&type=chunk) - Stock options, RSUs, ESUs, and PSUs are granted, with fair values estimated using Black-Scholes (options), market price (RSUs, ESUs), and Monte Carlo simulation (PSUs)[492](index=492&type=chunk)[500](index=500&type=chunk)[503](index=503&type=chunk)[505](index=505&type=chunk)[506](index=506&type=chunk) Total Share-Based Compensation Expense (in thousands) | Category | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Stock options | $1,459 | $5,263 | $5,865 | | Restricted stock units | $3,921 | $5,032 | $3,672 | | Equivalent stock units | $759 | $338 | $0 | | Performance stock unit awards | $2,343 | $1,682 | $800 | | ESPP | $0 | $227 | $593 | | **Total share-based compensation expense** | **$8,482** | **$12,542** | **$10,930** | - The Employee Stock Purchase Plan (ESPP) was temporarily suspended for future offering periods beginning July 1, 2019[509](index=509&type=chunk) [Employee Benefit Plan](index=85&type=section&id=Note%2014.%20Employee%20Benefit%20Plan) NCS Multistage offers 401(k) and RRSP plans, but employer matching contributions were suspended from June 1, 2020, resulting in **$0.6 million in contributions** for the year - U.S. employees participate in a 401(k) plan, and Canadian employees in a Group Registered Retirement Savings Program[512](index=512&type=chunk) - Employer matching contributions to these benefit plans were suspended beginning June 1, 2020[512](index=512&type=chunk) Employer Contributions to Benefit Plans (in thousands) | Year | Contributions | | :--- | :------------ | | 2020 | $600 | | 2019 | $1,500 | | 2018 | $1,300 | [Leases](index=86&type=section&id=Note%2015.%20Leases) NCS Multistage accounts for operating and finance leases, with total leased ROU assets of **$11.0 million** and lease liabilities of **$11.6 million** as of December 31, 2020, and a total lease cost of **$5.3 million** - ROU assets and lease liabilities are recognized for operating and finance leases with terms longer than 12 months[514](index=514&type=chunk)[515](index=515&type=chunk) Lease Information (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------- | :----------- | :----------- | | Total leased right-of-use assets | $11,021 | $8,450 | | Total lease liabilities | $11,604 | $8,456 | | Total lease cost | $5,276 | $5,455 | - Weighted-average remaining lease terms in 2020 were **4.1 years** for operating leases and **7.2 years** for finance leases, with weighted-average discount rates of **5.4%** and **4.9%**, respectively[527](index=527&type=chunk) - In 2020, commenced an operating lease for corporate headquarters (**$2.4 million ROU asset**) and a finance lease for land and a building in Odessa, Texas (**$4.0 million asset**)[517](index=517&type=chunk)[518](index=518&type=chunk) [Income Taxes](index=88&type=section&id=Note%2016.%20Income%20Taxes) NCS Multistage reported an income tax benefit of **$(7.8) million in 2020**, influenced by CARES Act provisions and an increased valuation allowance against deferred tax assets Total Income Taxes (in thousands) | Metric | 2020 | 2019 | 2018 | | :---------------- | :----- | :----- | :----- | | Current tax expense (benefit) | $(4,581) | $1,752 | $5,788 | | Deferred tax expense (benefit) | $(3,202) | $9,000 | $(28,840) | | **Total income taxes** | **$(7,783)** | **$10,752** | **$(23,052)** | - The effective tax rate was **16.6% in 2020**, **(89.1)% in 2019**, and **11.1% in 2018**[530](index=530&type=chunk) - 2020 tax benefit included a **$(0.9) million NOL carryback benefit** from the CARES Act and a **$6.5 million expense** for an increased valuation allowance on deferred tax assets[530](index=530&type=chunk) Net Deferred Tax Assets (Liabilities) (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------- | :----------- | :----------- | | Total deferred tax assets | $305 | $68 | | Total deferred tax liabilities | $(113) | $(3,018) | | **Net deferred tax assets (liabilities)** | **$192** | **$(2,950)** | - A valuation allowance of **$20.7 million** (U.S.) and **$1.4 million** (Canadian) was provided against deferred tax assets in 2020[534](index=534&type=chunk) [Loss Per Share](index=91&type=section&id=Note%2017.%20Loss%20Per%20Share) NCS Multistage reported basic and diluted loss per common share of **$(24.37) for 2020**, with potentially dilutive securities excluded due to anti-dilutive effects from the net loss Loss Per Common Share | Metric | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Basic loss per common share | $(24.37) | $(14.08) | $(85.00) | | Diluted loss per common share | $(24.37) | $(14.08) | $(85.00) | - Weighted average common shares outstanding (Basic) were **2,364 thousand in 2020**, **2,332 thousand in 2019**, and **2,239 thousand in 2018**[537](index=537&type=chunk) - Potentially dilutive securities (**221 thousand in 2020**) were excluded from the diluted EPS calculation as they were anti-dilutive[537](index=537&type=chunk) [Segment and Geographic Information](index=91&type=section&id=Note%2018.%20Segment%20and%20Geographic%20Information) NCS Multistage operates as one reportable segment, with revenue and long-lived assets disaggregated by geographic area, primarily the United States and Canada - The company operates in one reportable segment[538](index=538&type=chunk) Revenue by Geographic Area (in thousands) | Country | 2020 | 2019 | 2018 | | :-------------- | :----- | :----- | :----- | | United States | $46,179 | $103,291 | $103,442 | | Canada | $48,549 | $86,563 | $109,478 | | Other Countries | $12,249 | $15,631 | $14,043 | | **Total revenues** | **$106,977** | **$205,485** | **$226,963** | Long-Lived Assets by Geographic Area (in thousands) | Country | Dec 31, 2020 | Dec 31, 2019 | | :-------------- | :----------- | :----------- | | United States | $16,616 | $18,137 | | Canada | $10,356 | $17,831 | | Other Countries | $2,633 | $2,077 | | **Total** | **$29,605** | **$38,045** | [Quarterly Financial Data (Unaudited)](index=92&type=section&id=Note%2019.%20Quarterly%20Financial%20Data%20(Unaudited)) This note provides unaudited quarterly financial data for 2019-2020, highlighting significant variability, including a sharp Q2 2020 revenue decline and a **$50.2 million impairment charge** in Q1 2020 Unaudited Quarterly Financial Data (in thousands, except per share amounts) | Metric | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | | :------------------------------------------------- | :------ | :------ | :------ | :------ | | Revenue | $54,550 | $8,732 | $16,312 | $27,383 | | Gross profit | $22,937 | $1,695 | $5,595 | $11,121 | | Impairments | $50,194 | $0 | $0 | $0 | | Net loss attributable to NCS Multistage Holdings, Inc. | $(51,549) | $(8,757) | $(5,863) | $8,570 | | Basic loss per common share | $(21.92) | $(3.70) | $(2.48) | $3.62 | | Diluted loss per common share | $(21.92) | $(3.70) | $(2.48) | $3.59 | | | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | | Revenue | $52,850 | $39,768 | $60,773 | $52,094 | | Gross profit | $25,139 | $15,671 | $27,562 | $25,106 | | Impairments | $0 | $7,919 | $0 | $0 | | Net loss attributable to NCS Multistage Holdings, Inc. | $(11,966) | $(22,301) | $3,621 | $(2,177) | | Basic loss per common share | $(5.20) | $(9.54) | $1.54 | $(0.93) | | Diluted loss per common share | $(5.20) | $(9.54) | $1.54 | $(0.93) | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=93&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[544](index=544&type=chunk) [Controls and Procedures](index=93&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that NCS Multistage's disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with no material changes due to COVID-19 - Disclosure controls and procedures were effective as of December 31, 2020[545](index=545&type=chunk) - Internal control over financial reporting was effective as of December 31, 2020[547](index=547&type=chunk) - As an "emerging growth company" and non-accelerated filer, auditor attestation on internal control over financial reporting is not required[548](index=548&type=chunk) - No material changes to internal controls were experienced during the quarter ended December 31, 2020, despite most employees working remotely due to COVID-19[549](index=549&type=chunk) [Other Information](index=93&type=section&id=Item%209B.%20Other%20Information) There is no other information to report under this item - No other information to report[550](index=550&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=94&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement, with a Code of Business Conduct and Ethics available online - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement[554](index=554&type=chunk) - A Code of Business Conduct and Ethics applies to employees, officers, and directors, available on the company's website[553](index=553&type=chunk) [Executive Compensation](index=94&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2021 Proxy Statement - Information on executive compensation will be included in the 2021 Proxy Statement[555](index=555&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=94&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of December 31, 2020, **227,031 securities** are issuable under equity compensation plans, with **493,177 shares** remaining available for future issuance, and the ESPP temporarily suspended Equity Compensation Plans (as of Dec 31, 2020) | Metric | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | :------------------------ | :-------------------------------------------------------------------------- | :-------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------ | | Approved by stockholders | 227,031 | $122.33 | 493,177 | | Not approved by stockholders | $0 | $0 | $0 | - The number of shares subject to outstanding PSUs is based on the target number of shares, with potential for larger amounts if performance metrics are met[556](index=556&type=chunk) - **86,416 shares** remained available for issuance under the ESPP, which was temporarily suspended for future offering periods beginning July 1, 2019[560](index=560&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=94&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships and related transactions, as well as director independence, is incorporated by reference from the company's 2021 Proxy Statement - Information on certain relationships and related transactions, and director independence will be included in the 2021 Proxy Statement[558](index=558&type=chunk) [Principal Accounting Fees and Services](index=94&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's 2021 Proxy Statement - Information on principal accounting fees and services will be included in the 2021 Proxy Statement[559](index=559&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=95&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists documents filed as part of the 10-K report, including financial statements and exhibits, with schedules om

Investor Update March 2021 Disclaimer Leave nothing behind. Forward-Looking Statements The information in this presentation includes "forward-looking statements" that are subject to risks and uncertainties. All statements, other than statements of historical fact included in this presentation, regarding NCS Multistage Holdings, Inc.'s (the "Company," "NCS", "NCSM", "we" or "us") strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives o ...