Leading Global Energy Technology Leading Global Fneray Technology For the reasons described above, as well as factors identified in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, under the section entitled "Risk Factors" and other filings with the Securities and Exchange Commission, we caution you against relying on any forward-looking statements. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, our actual results and p ...

Industry Activity and Market Conditions - The company expects annual average industry drilling and completion activity in Canada to be flat to slightly lower compared to 2023, with U.S. activity expected to decline by 5% to 10%[74]. - Oil prices remained volatile in 2023, with WTI crude averaging $77.50 per barrel in Q1 2024, a slight decrease from $78.53 in Q4 2023[80]. - Natural gas prices averaged $2.15 per MMBtu in Q1 2024, down from $2.74 in Q4 2023, influenced by warm winter conditions and high storage levels[81]. - The average U.S. land rig count was 602 in Q1 2024, flat compared to Q4 2023 but down 19% from Q1 2023[85]. - The average rig count in the United States decreased by 19% in Q1 2024 compared to Q1 2023, while the average rig count in Canada decreased by only 6%[98]. Financial Performance - Total revenues for the three months ended March 31, 2024, were $43.9 million, a 0.7% increase from $43.6 million in the same period of 2023[98]. - Product sales for the three months ended March 31, 2024, were $31.8 million, up 1.0% from $31.4 million in the same period of 2023[98]. - Services revenues totaled $12.1 million for both the three months ended March 31, 2024, and 2023, reflecting a slight decrease of 0.2%[98]. - Cost of sales increased to $26.9 million, or 61.3% of revenues, for the three months ended March 31, 2024, compared to $25.5 million, or 58.6% of revenues, for the same period in 2023[99]. - Selling, general and administrative expenses decreased to $13.8 million for the three months ended March 31, 2024, down 14.4% from $16.2 million in the same period of 2023[100]. - Net income for the three months ended March 31, 2024, was $2.6 million, a significant increase from a net loss of $15.0 million in the same period of 2023, representing a 117.0% improvement[97]. Cost Management and Savings - In 2024, the company expects to realize annualized cost savings of approximately $4.0 million due to several cost reduction initiatives implemented in 2023[94]. - Competitive pressure has negatively impacted market share and operating margins, constraining the ability to raise prices in an inflationary environment[76]. - Supply chain disruptions and higher raw material prices have persisted, although steel prices have begun to moderate[77]. Cash Flow and Liquidity - As of March 31, 2024, the company had cash and cash equivalents of $14.0 million and total outstanding indebtedness of $8.9 million[105]. - The company believes its cash on hand, cash flows from operations, and potential borrowings will be sufficient to fund capital expenditures and liquidity requirements for the next twelve months[108]. - Net cash used in operating activities was $1.9 million in Q1 2024 compared to $1.6 million in Q1 2023, reflecting higher trade receivable balances[112]. - Net cash used in investing activities decreased to $0.1 million in Q1 2024 from $0.5 million in Q1 2023, indicating reduced investment in property and equipment[114]. - Net cash used in financing activities increased to $0.6 million in Q1 2024 from $0.4 million in Q1 2023, primarily due to principal payments related to finance leases and treasury shares[115]. - The net change in cash and cash equivalents was a decrease of $2.716 million in Q1 2024 compared to a decrease of $2.601 million in Q1 2023[111]. - The company anticipates potential liquidity needs to fund capital requirements and may seek additional debt or equity financing, though there are no assurances of favorable terms[110]. Strategic Investments and Future Outlook - The company owns a 50% interest in Repeat Precision, which sells composite frac plugs and related products[72]. - The company anticipates international sales to increase over time, particularly in markets such as the Middle East and China[91]. - Capital expenditures for Q1 2024 were $0.3 million, down from $0.6 million in Q1 2023, with plans to incur $1.5 million to $2.5 million in 2024 for various upgrades and new equipment[109]. Risks and Reporting - The company faces various risks, including oil and natural gas price fluctuations and competition, which could impact future performance[124]. - The company remains classified as a "smaller reporting company," allowing it to take advantage of reduced reporting requirements[119]. - There have been no significant changes in material cash requirements or critical accounting estimates since the last annual report[116][117]. - The company recorded a net loss in Q1 2023 due to a $17.5 million litigation provision, which was reversed in Q4 2023, impacting year-over-year comparisons[112].

PRESS RELEASE NCS MULTISTAGE HOLDINGS, INC. ANNOUNCES FIRST QUARTER 2024 RESULTS Exhibit 99.1 NCS Multistage Holdings, Inc. 19350 State Highway 249, Suite 600 Houston, Texas 77070 First Quarter Results HOUSTON, May 1, 2024 – NCS Multistage Holdings, Inc. (Nasdaq: NCSM) (the "Company," "NCS," "we" or "us"), a leading provider of highly engineered products and support services that facilitate the optimization of oil and natural gas well construction, well completions and field development strategies, today an ...

First Quarter Results Total revenues of $43.9 million, a 1% year-over-year increase and a 24% increase compared to the fourth quarter of 2023Net income of $2.1 million and earnings per diluted share of $0.82, compared to net loss of $(15.0) million and loss per share of $(6.10) in the same quarter of 2023Adjusted net income of $2.5 million and adjusted earnings per diluted share of $0.99, compared to adjusted net income of $1.2 million and adjusted earnings per diluted share of $0.50 in the first quarter of ...

HOUSTON, April 23, 2024 (GLOBE NEWSWIRE) -- NCS Multistage Holdings, Inc. ("NCS" or the "Company") (NASDAQ:NCSM) will host a conference call to discuss its first quarter 2024 results on Thursday, May 2, 2024 at 7:30 a.m. Central Time (8:30 a.m. Eastern Time). NCS will issue its first quarter 2024 earnings release the evening prior to the conference call. The conference call will be available via a live audio webcast. Participants who wish to ask questions may register for the call here to receive the dial-i ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 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) Delaware ...

[Press Release Overview](index=1&type=section&id=Press%20Release%20Overview) [Company Information](index=1&type=section&id=Company%20Information) NCS Multistage Holdings, Inc. is a leading provider of engineered products and support services optimizing oil and gas well construction, completion, and field development strategies - NCS Multistage Holdings, Inc. (Nasdaq: NCSM) is a leading provider of engineered products and support services focused on optimizing oil and gas well construction, completion, and field development strategies[2](index=2&type=chunk) [Announcement Highlights](index=1&type=section&id=Announcement%20Highlights) The company reported Q4 and full-year 2023 results, showing revenue declines but a significant Q4 net income increase due to a legal settlement 2023 Fourth Quarter and Full-Year Key Financial Data | Metric | Q4 2023 (Millions USD) | Q4 2022 (Millions USD) | Full-Year 2023 (Millions USD) | Full-Year 2022 (Millions USD) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $35.2 | $40.2 | $142.5 | $155.6 | | Net Income (Loss) | $39.6 | $2.0 | $(3.2) | $(1.1) | | Diluted EPS (Loss) | $15.80 | $0.81 | $(1.27) | $(0.45) | | Adjusted Net Loss | $(0.9) | $1.8 | $(1.3) | $(0.2) | | Adjusted Diluted EPS (Loss) | $(0.36) | $0.75 | $(0.51) | $(0.09) | | Adjusted EBITDA | $2.5 | $6.4 | $11.9 | $15.1 | | Free Cash Flow (after non-controlling interest distributions) | - | - | $2.6 | $(2.1) | [Financial Review](index=1&type=section&id=Financial%20Review) [Fourth Quarter 2023 Results](index=1&type=section&id=Fourth%20Quarter%202023%20Results) Q4 2023 total revenue decreased by 12% to $35.2 million, driven by lower sales across regions, while net income surged due to a $40.8 million legal settlement reversal 2023 Fourth Quarter Key Financial Metrics | Metric | Q4 2023 (Millions USD) | Q4 2022 (Millions USD) | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Total Revenue | $35.2 | $40.2 | -12% | | Gross Profit | $12.3 | $15.6 | -21.2% | | Gross Margin | 35% | 39% | -4.0 pp | | Adjusted Gross Profit | $12.9 | $16.1 | -19.9% | | Adjusted Gross Margin | 37% | 40% | -3.0 pp | | Selling, General and Administrative Expenses (SG&A) | $13.2 | $13.2 | 0% | | Other Income | $0.4 | $1.4 | -71.4% | | Net Income (Loss) | $39.6 | $2.0 | +1880% | | Diluted EPS | $15.80 | $0.81 | +1850.6% | | Adjusted Net Loss | $(0.9) | $1.8 | Loss Widened | | Adjusted Diluted EPS (Loss) | $(0.36) | $0.75 | Loss Widened | | Adjusted EBITDA | $2.5 | $6.4 | -60.9% | - Total revenue decline primarily resulted from decreased product sales and services in the US and international markets, and reduced Canadian service revenue, partially offset by increased Canadian product sales[3](index=3&type=chunk) - Net income significantly increased due to the Texas legal settlement, with the company reversing a previously recorded **$40.8 million** litigation accrual without cash payment[8](index=8&type=chunk)[9](index=9&type=chunk) - Adjusted EBITDA decreased by **$3.9 million**, primarily due to lower revenue[10](index=10&type=chunk) [Full Year 2023 Results](index=2&type=section&id=Full%20Year%202023%20Results) Full-year 2023 total revenue decreased by 8% to $142.5 million, with expanded net losses, but significant improvements in operating and free cash flow 2023 Full-Year Key Financial Metrics | Metric | Full-Year 2023 (Millions USD) | Full-Year 2022 (Millions USD) | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Total Revenue | $142.5 | $155.6 | -8% | | Gross Profit | $53.4 | $58.4 | -8.6% | | Gross Margin | 37% | 38% | -1.0 pp | | Adjusted Gross Profit | $55.6 | $60.4 | -7.9% | | Adjusted Gross Margin | 39% | 39% | 0.0 pp | | Net Income (Loss) | $(3.2) | $(1.1) | Loss Widened | | Adjusted Net Loss | $(1.3) | $(0.2) | Loss Widened | | Adjusted EBITDA | $11.9 | $15.1 | -21.2% | | Cash Flow from Operating Activities | $4.8 | $(1.4) | Improved by $6.2 Million | | Free Cash Flow (after non-controlling interest distributions) | $2.6 | $(2.1) | Improved by $4.7 Million | - Full-year revenue decline primarily reflects reduced US product sales and decreased service activities across the US, Canada, and international markets, partially offset by increased Canadian and international product sales[11](index=11&type=chunk) - Cash flow improvement is mainly attributed to a smaller increase in net working capital in 2023 compared to 2022, partially offset by a higher net loss[13](index=13&type=chunk) [Liquidity and Capital Expenditures](index=2&type=section&id=Liquidity%20and%20Capital%20Expenditures) As of December 31, 2023, the company maintained $16.7 million in cash, $8.2 million in total debt, and $16.4 million in available credit, with stable working capital 2023 Year-End Liquidity and Capital Expenditures | Metric | December 31, 2023 (Millions USD) | December 31, 2022 (Millions USD) | | :--- | :--- | :--- | | Cash | $16.7 | $16.2 | | Total Debt | $8.2 | - | | Available ABL Revolving Credit Facility | $16.4 | - | | Working Capital | $71.2 | $70.0 | | Capital Expenditures (Net) | $1.7 | $0.7 | - The company maintained a strong balance sheet and liquidity position[23](index=23&type=chunk) [Legal Matters](index=2&type=section&id=Legal%20Matters) [Texas Litigation Settlement](index=2&type=section&id=Texas%20Litigation%20Settlement) In December 2023, the company settled Texas litigation with insurers paying the settlement, resulting in a $40.8 million litigation accrual reversal - The Texas legal litigation has been settled, with insurance companies paying the settlement and NCS incurring no cash payment[16](index=16&type=chunk)[24](index=24&type=chunk) - The company reversed a previously recorded **$40.8 million** litigation accrual in Q4 2023[8](index=8&type=chunk)[16](index=16&type=chunk) [Canada Patent Infringement Case](index=2&type=section&id=Canada%20Patent%20Infringement%20Case) Mediation for the Canadian patent infringement case in late February 2024 did not result in an agreement, with the company planning an appeal - Mediation for the Canadian patent infringement case did not result in an agreement, but parties intend to continue discussions[17](index=17&type=chunk) - The company has paid approximately **$1.8 million** in fees and expenses and believes there are strong grounds to appeal the court's decision to significantly reduce the cost award[17](index=17&type=chunk) [Management Review and Outlook](index=3&type=section&id=Management%20Review%20and%20Outlook) [2023 Performance Summary](index=3&type=section&id=2023%20Performance%20Summary) Despite challenging market conditions in 2023 leading to reduced revenue, the company achieved growth in Canadian PurpleSeal composite frac plugs and secured new North Sea clients - Total revenue for 2023 was **$142.5 million**, an **8% year-over-year decrease**, with Canadian, US, and international market revenues declining by **3%**, **18%**, and **23%** respectively[21](index=21&type=chunk) - Despite revenue decline, the company achieved significant growth in Canadian PurpleSeal composite frac plug revenue and customer base, and added new frac system clients in the North Sea[21](index=21&type=chunk) - Through streamlined operations and cost reductions, the company maintained an adjusted gross margin of **39%** and reduced SG&A expenses by **$1.8 million**[22](index=22&type=chunk) [2024 Outlook and Strategy](index=3&type=section&id=2024%20Outlook%20and%20Strategy) For 2024, the company anticipates varied regional activity, aiming to outperform industry trends through customer expansion, new projects, and product innovation 2024 Industry Activity Outlook | Region | 2024 Activity Outlook (vs. 2023) | | :--- | :--- | | Canada | Flat to Slightly Down | | United States | Down 5% to 10% (expected to rebound by year-end) | | International | Up 5% to 10% | - The company believes its product and service portfolio value and ongoing innovation will enable it to outperform industry activity changes in 2024, particularly achieving revenue growth in the US and international markets[26](index=26&type=chunk) - 2024 strategic priorities include: i) solidifying leading market positions; ii) capturing international and offshore opportunities; and iii) commercializing innovative solutions for complex client challenges[28](index=28&type=chunk) [Additional Information](index=4&type=section&id=Additional%20Information) [Conference Call Details](index=4&type=section&id=Conference%20Call%20Details) A conference call on March 8, 2024, will discuss Q4 and full-year 2023 results and updated guidance, with live webcast and replay available - The conference call will be held on **March 8, 2024**, at 7:30 AM Central Time (8:30 AM Eastern Time), with a live webcast and approximately seven-day replay available[31](index=31&type=chunk)[32](index=32&type=chunk) [About NCS Multistage Holdings, Inc.](index=4&type=section&id=About%20NCS%20Multistage%20Holdings,%20Inc.) NCS Multistage Holdings, Inc. is a leading provider of engineered products and support services for optimizing oil and gas well construction and field development - The company provides products and services primarily for onshore and offshore oil and gas wells, especially horizontal wells, in North America and selected international markets like the North Sea, Middle East, Argentina, and China[33](index=33&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements subject to inherent uncertainties and risks that may cause actual results to differ materially from expectations - Forward-looking statements are based on current expectations and assumptions but are subject to inherent uncertainties, risks, and changing circumstances that may cause actual results to differ materially from expectations[36](index=36&type=chunk) - Key risk factors include decreased oil and gas exploration and production activity, volatile oil and gas prices, intense competition, inability to successfully execute strategies, customer loss, litigation losses, and supply chain disruptions[36](index=36&type=chunk) [Contact Information](index=5&type=section&id=Contact%20Information) Contact information for Mike Morrison, Chief Financial Officer and Treasurer, is provided for investor inquiries - Contact: Mike Morrison, Chief Financial Officer and Treasurer, Phone: **(281) 453-2222**, Email: **IR@ncsmultistage.com**[37](index=37&type=chunk) [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Statements%20of%20Operations) Q4 2023 net income surged to $39.8 million due to a legal settlement reversal, while full-year 2023 saw a $3.1 million net loss, with total revenue declining Condensed Consolidated Statements of Operations Summary (Thousands USD) | Metric | Q4 2023 (Thousands USD) | Q4 2022 (Thousands USD) | Full-Year 2023 (Thousands USD) | Full-Year 2022 (Thousands USD) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 35,247 | 40,186 | 142,471 | 155,632 | | Cost of Sales (excluding D&A) | 22,359 | 24,108 | 86,868 | 95,228 | | Selling, General and Administrative Expenses | 13,221 | 13,190 | 56,518 | 58,338 | | Operating Income (Loss) | (1,555) | 1,813 | (5,531) | (2,253) | | Litigation Accrual (Reversal), Net | 40,696 | — | (1,802) | — | | Net Income (Loss) | 39,849 | 2,291 | (3,111) | (952) | | Net Income (Loss) Attributable to NCS Multistage Holdings, Inc. | 39,639 | 1,979 | (3,153) | (1,102) | | Diluted EPS (Loss) | 15.80 | 0.81 | (1.27) | (0.45) | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Balance%20Sheets) As of December 31, 2023, total assets increased to $152.0 million, driven by higher current assets, while total liabilities also rose due to legal accruals Condensed Consolidated Balance Sheets Summary (Thousands USD) | Metric | December 31, 2023 (Thousands USD) | December 31, 2022 (Thousands USD) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 16,720 | 16,234 | | Accounts Receivable, Net | 23,981 | 27,846 | | Inventory, Net | 41,612 | 37,042 | | Insurance Receivable | 15,000 | — | | Total Current Assets | 103,217 | 87,663 | | Total Assets | 152,032 | 138,599 | | Accounts Payable | 6,227 | 7,549 | | Accrued Legal Contingencies | 15,000 | — | | Total Current Liabilities | 32,058 | 17,693 | | Total Liabilities | 42,639 | 29,337 | | Total Stockholders' Equity | 91,618 | 91,029 | | Total Equity | 109,393 | 109,262 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Statements%20of%20Cash%20Flows) Full-year 2023 operating cash flow turned positive to $4.8 million, a significant improvement from 2022, with increased investing outflows and decreased financing outflows Condensed Consolidated Statements of Cash Flows Summary (Thousands USD) | Metric | Full-Year 2023 (Thousands USD) | Full-Year 2022 (Thousands USD) | | :--- | :--- | :--- | | Cash Flow from Operating Activities | 4,774 | (1,423) | | Cash Flow Used in Investing Activities | (1,683) | (698) | | Cash Flow Used in Financing Activities | (2,441) | (2,742) | | Net Change in Cash and Cash Equivalents | 486 | (5,934) | | Cash and Cash Equivalents, End of Period | 16,720 | 16,234 | [Revenues by Geographic Area](index=9&type=section&id=Revenues%20by%20Geographic%20Area) Total revenue declined in Q4 and full-year 2023, with decreases in US and international markets, while Canadian product sales grew in Q4 but overall Canadian revenue slightly fell Revenues by Geographic Area (Thousands USD) | Region | Q4 2023 (Thousands USD) | Q4 2022 (Thousands USD) | Full-Year 2023 (Thousands USD) | Full-Year 2022 (Thousands USD) | | :--- | :--- | :--- | :--- | :--- | | **United States** | | | | | | Product Sales | 6,411 | 9,458 | 26,613 | 34,009 | | Services | 2,695 | 4,057 | 11,206 | 12,228 | | **Total United States** | **9,106** | **13,515** | **37,819** | **46,237** | | **Canada** | | | | | | Product Sales | 17,884 | 16,721 | 71,946 | 71,176 | | Services | 7,087 | 8,014 | 26,161 | 29,695 | | **Total Canada** | **24,971** | **24,735** | **98,107** | **100,871** | | **Other Countries** | | | | | | Product Sales | 3 | 131 | 1,888 | 674 | | Services | 1,167 | 1,805 | 4,657 | 7,850 | | **Total Other Countries** | **1,170** | **1,936** | **6,545** | **8,524** | | **Total Revenue** | **35,247** | **40,186** | **142,471** | **155,632** | - Compared to Q3 2023, total revenue decreased by **8%**, with Canadian revenue down **11%**, international revenue down **45%**, and US revenue up **14%**, driven by increased sales of sliding sleeves and composite plugs[4](index=4&type=chunk) [Non-GAAP Financial Measures Reconciliations](index=10&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliations) [Overview of Non-GAAP Measures](index=10&type=section&id=Overview%20of%20Non-GAAP%20Measures) The company utilizes non-GAAP financial measures like Adjusted EBITDA and Free Cash Flow to assess core business performance and enable comparative investor evaluation - Non-GAAP financial measures are not defined by GAAP and should not be considered in isolation or as a substitute for GAAP-reported financial performance analysis[47](index=47&type=chunk) - Management uses these metrics to evaluate period performance of core business operations and enable investors to assess the company's performance relative to other companies unaffected by specific factors[48](index=48&type=chunk) [Net Working Capital](index=10&type=section&id=Net%20Working%20Capital) Net working capital, defined as total current assets excluding cash minus total current liabilities excluding current portion of long-term debt, was $56.3 million as of December 31, 2023 - Net working capital is used to assess working capital investment required to support operations, analyze cash flow and working capital needs, including operational efficiency and asset liquidity[50](index=50&type=chunk) Net Working Capital Reconciliation (Thousands USD) | Metric | December 31, 2023 (Thousands USD) | December 31, 2022 (Thousands USD) | | :--- | :--- | :--- | | Working Capital | 71,159 | 69,970 | | Cash and Cash Equivalents | (16,720) | (16,234) | | Current Portion of Long-Term Debt | 1,812 | 1,489 | | **Net Working Capital** | **56,251** | **55,225** | [Adjusted Gross Profit and Margin](index=11&type=section&id=Adjusted%20Gross%20Profit%20and%20Margin) Adjusted gross profit, defined as total revenue less cost of sales excluding depreciation and amortization, was $12.9 million in Q4 2023, with a 36.6% margin Adjusted Gross Profit and Margin Reconciliation (Thousands USD) | Metric | Q4 2023 (Thousands USD) | Q4 2022 (Thousands USD) | Full-Year 2023 (Thousands USD) | Full-Year 2022 (Thousands USD) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 35,247 | 40,186 | 142,471 | 155,632 | | Cost of Sales (excluding D&A) | 22,359 | 24,108 | 86,868 | 95,228 | | Gross Profit | 12,284 | 15,588 | 53,398 | 58,432 | | Gross Margin | 34.9% | 38.8% | 37.5% | 37.5% | | Adjusted Gross Profit | 12,888 | 16,078 | 55,603 | 60,404 | | Adjusted Gross Margin | 36.6% | 40.0% | 39.0% | 38.8% | [Adjusted Net Income (Loss) and EPS](index=11&type=section&id=Adjusted%20Net%20Income%20(Loss)%20and%20EPS) Adjusted net income (loss) is defined as net income (loss) attributable to NCS Multistage Holdings, Inc., adjusted for specific non-recurring items Adjusted Net Income (Loss) and EPS Reconciliation (Thousands USD) | Metric | Q4 2023 (Thousands USD) | Q4 2022 (Thousands USD) | Full-Year 2023 (Thousands USD) | Full-Year 2022 (Thousands USD) | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) Attributable to NCS Multistage Holdings, Inc. | 39,639 | 1,979 | (3,153) | (1,102) | | Litigation Accrual (Reversal), Net | (40,696) | — | 1,802 | — | | Constructed Asset Write-off | 652 | — | 652 | — | | Adjusted Net Income (Loss) | (894) | 1,841 | (1,254) | (214) | | Adjusted Diluted EPS (Loss) | (0.36) | 0.75 | (0.51) | (0.09) | [Adjusted EBITDA and Margin](index=12&type=section&id=Adjusted%20EBITDA%20and%20Margin) Adjusted EBITDA, defined as EBITDA adjusted for non-recurring or non-cash items, was $2.5 million in Q4 2023 with a 7% margin, significantly lower than 2022 - Adjusted EBITDA excludes costs not reflecting ongoing operating performance, intellectual property litigation, and certain capital structure-related costs[62](index=62&type=chunk) Adjusted EBITDA and Margin Reconciliation (Thousands USD) | Metric | Q4 2023 (Thousands USD) | Q4 2022 (Thousands USD) | Full-Year 2023 (Thousands USD) | Full-Year 2022 (Thousands USD) | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | 39,849 | 2,291 | (3,111) | (952) | | EBITDA | 41,265 | 4,561 | 1,859 | 4,733 | | Litigation Accrual (Reversal), Net | (40,696) | — | 1,802 | — | | Constructed Asset Write-off | 652 | — | 652 | — | | Share-based Compensation Expense | 879 | 953 | 4,164 | 3,453 | | Professional Service Fees | 262 | 846 | 1,548 | 5,665 | | Adjusted EBITDA | 2,529 | 6,398 | 11,949 | 15,110 | | Adjusted EBITDA Margin | 7% | 16% | 8% | 10% | | Adjusted EBITDA less Share-based Compensation Expense | 1,650 | 5,445 | 7,785 | 11,657 | [Free Cash Flow](index=13&type=section&id=Free%20Cash%20Flow) Free cash flow, defined as operating cash flow less capital expenditures plus asset sales, was $3.1 million for full-year 2023, a significant improvement - Free cash flow provides investors with information on cash available during the period beyond capital expenditures and other investment needs[69](index=69&type=chunk) Free Cash Flow Reconciliation (Thousands USD) | Metric | Full-Year 2023 (Thousands USD) | Full-Year 2022 (Thousands USD) | | :--- | :--- | :--- | | Cash Flow from Operating Activities | 4,774 | (1,423) | | Purchases of Property and Equipment | (1,882) | (1,035) | | Purchases and Development of Software and Technology | (310) | (96) | | Proceeds from Sales of Property and Equipment | 509 | 433 | | **Free Cash Flow** | **3,091** | **(2,121)** | | Distributions to Non-Controlling Interests | (500) | — | | **Free Cash Flow after Non-Controlling Interest Distributions** | **2,591** | **(2,121)** |

Market Conditions - The average WTI crude oil price was $82.25 per barrel in Q3 2023, compared to approximately $83 per barrel in Q4 2022, reflecting a decrease in the first half of 2023[87]. - Natural gas prices averaged $2.59 per MMBtu in Q3 2023, down from $5.55 per MMBtu in Q4 2022, due to warm winter conditions and reduced demand[88]. - The average U.S. land rig count declined by 17% to 630 in Q3 2023 compared to Q4 2022, and by 15% compared to the same period in 2022[92]. - The average rig counts in Canada and the United States decreased by 6% and 15%, respectively, in Q3 2023 compared to Q3 2022, impacting sales[105]. - International industry activity is expected to improve by over 10% in 2023 compared to the prior year[81]. Revenue and Sales Performance - Total revenues for the three months ended September 30, 2023, were $38.3 million, a decrease of 21.7% compared to $48.9 million for the same period in 2022[105]. - Product sales accounted for 71% of revenues for the three months ended September 30, 2023, compared to 70% for the same period in 2022[95]. - Product sales decreased by 19.7% to $27.3 million, while services revenues fell by 26.2% to $11.0 million for the three months ended September 30, 2023[104]. - For the nine months ended September 30, 2023, total revenues were $107.2 million, a decrease of 7.1% from $115.4 million in the same period of 2022[114]. - Revenues for the nine months ended September 30, 2023, were $107.2 million, a decrease from $115.4 million in the same period of 2022, primarily due to lower U.S. product sales and decreased Canadian and international services activity[115]. - Product sales decreased to $76.1 million for the nine months ended September 30, 2023, compared to $79.5 million for the same period in 2022, while services revenues totaled $31.1 million, down from $35.9 million[115]. Cost and Expenses - Cost of sales was $22.6 million, representing 59.0% of revenues, compared to $28.4 million or 58.1% of revenues in the prior year[106]. - Cost of sales was $64.5 million, or 60.2% of revenues, for the nine months ended September 30, 2023, down from $71.1 million, or 61.6% of revenues, in the same period of 2022[116]. - Selling, general and administrative expenses decreased to $12.7 million, down 17.6% from $15.4 million in the same quarter of 2022[108]. - Selling, general and administrative expenses decreased to $43.3 million for the nine months ended September 30, 2023, compared to $45.1 million in 2022, reflecting lower professional fees and incentive bonus accruals[118]. Income and Financial Position - Net income for the three months ended September 30, 2023, was $4.1 million, a slight increase of 3.7% from $4.0 million in the prior year[104]. - Other income, net for the three months ended September 30, 2023, was $2.0 million, significantly up from $0.6 million in the same period of 2022[110]. - Other income, net increased to $3.8 million for the nine months ended September 30, 2023, compared to $1.6 million in the same period of 2022, driven by recovery of unpaid invoices and increased royalty income[120]. - Cash and cash equivalents as of September 30, 2023, were $11.4 million, with total outstanding indebtedness of $8.3 million related to finance lease obligations[123]. - Net cash used in operating activities improved to $1.4 million for the nine months ended September 30, 2023, from $9.0 million in the same period of 2022[131]. Litigation and Legal Matters - The provision for litigation resulted in a net expense of $42.5 million for the nine months ended September 30, 2023, compared to no expense in the same period of 2022[114]. - The provision for litigation, net of recoveries, totaled $42.5 million for the nine months ended September 30, 2023, primarily related to a judgment in the Texas Matter[119]. - The company intends to appeal the judgment related to the Texas Matter and believes it has strong arguments for a potential reversal of damages awarded[126]. Operational Challenges and Risks - The company has experienced supply chain disruptions and higher raw material costs, impacting both cost of sales and SG&A expenses[85]. - Competitive pressures have intensified, potentially impacting market share and operating margins for certain product lines[83]. - The company faces significant competition for its products and services, leading to pricing pressures and potential loss of market share[141]. - There is a risk of not successfully developing new technologies and products that meet customer needs, particularly in non-traditional energy markets[141]. - The company aims to increase sales in U.S. and international markets but may encounter challenges in implementation[141]. - Potential losses could arise from the inability to protect intellectual property and adverse outcomes in related disputes[141]. - The company is exposed to risks from uninsured business activities and litigation, which could impact financial stability[141]. - There are concerns regarding the ability to achieve price increases to counteract cost inflation[141]. - The company may face difficulties in attracting and retaining qualified employees, which could affect operational efficiency[141]. - Currency exchange rate fluctuations pose a risk to financial performance[141]. - The company must navigate regulatory changes in the oil and natural gas industry, including emissions restrictions[141]. - There is a risk of not accurately predicting customer demand, potentially leading to excess or obsolete inventory[141].

Financial Data and Key Metrics Changes - The third quarter revenues were $38.3 million, a 22% decrease compared to the same quarter last year [19] - Gross profit percentage was maintained at 41%, slightly below the previous year's percentage [43] - Adjusted EBITDA for the third quarter was $6.8 million, with an adjusted EBITDA margin of 18%, an improvement from 17% year-over-year [44] Business Line Data and Key Metrics Changes - Canadian revenues decreased by 19%, US revenues were down 30%, and international revenues decreased by 18% [19] - The company reported a net income of $4.4 million for the third quarter, an increase from $3.9 million in the same period last year [44] - Selling, general and administrative costs were $12.7 million, down by $2.7 million compared to the third quarter of last year [69] Market Data and Key Metrics Changes - Canadian revenues were impacted by a declining rig count due to commodity price volatility and Canadian wildfires [68] - US sales continued to be affected by lower natural gas prices, negatively impacting customer activity levels [68] - Sequentially, revenues in the third quarter increased by 51%, with Canada up almost 100% and international up by 26% [68] Company Strategy and Development Direction - The company aims to build upon its leading market positions and capitalize on international and offshore opportunities [5][10] - A multiyear project is underway with a leading international oil company to develop technology for deepwater offshore applications [8] - The company is focused on commercializing innovative solutions to complex customer challenges, with several new products available for field trials [35] Management's Comments on Operating Environment and Future Outlook - Management believes the company is in a multiyear cycle of improved growth and earnings prospects for the industry globally [73] - There is optimism about modest growth in rig activity in the US in the fourth quarter, with potential for further growth in 2024 [73] - Continuous improvement efforts are being made to enhance efficiency and support gross margin percentage [74] Other Important Information - The company settled one outstanding legal matter and expects both matters to be settled within insurance coverage limits [15] - An inaugural ESG report was released, highlighting the company's commitments to various stakeholders [16] - The company maintains a net cash position with an undrawn revolver and generated higher adjusted EBITDA compared to the same period in 2022 [38] Q&A Session All Questions and Answers Question: Commentary on product development for deepwater - Management discussed the transition from shallow water offshore to deepwater applications, highlighting the potential for multi-well opportunities in the future [52] Question: Drivers of strong EBITDA despite revenue decline - Management attributed the strong EBITDA to continuous improvement efforts, facility rationalizations, and efficient cost management [60] Question: Bidding environment in the Middle East compared to Canada - Management explained the long process of qualification in the Middle East, particularly with Saudi Aramco, and the progress made in cataloging multiple product lines [84]

Financial Data and Key Metrics Changes - The company's second quarter revenues were $25.4 million, an 8% decrease compared to the same period last year, with Canadian revenues increasing by 11% but offset by declines in U.S. and international revenues of 23% and 32% respectively [46] - The adjusted EBITDA for the second quarter was a negative $2.2 million, slightly declining from the negative $2 million in the same period of 2022, while the first half of 2023 saw adjusted EBITDA improve to a positive $2.6 million compared to $300,000 in the first half of 2022 [50] - The company reported a net loss of $32.2 million for the second quarter, primarily due to a $24.9 million charge related to a legal judgment [49] Business Line Data and Key Metrics Changes - U.S. revenue fell to $9.4 million in the second quarter, below the guidance range of $12 million to $13 million, reflecting a sequential decline due to reduced industry activity [26] - Canadian revenue of $14.3 million in the second quarter exceeded guidance and represented an 11% increase year-over-year, driven by higher sales of composite plugs [1][46] - International revenue was $1.7 million, below the guided range of $2 million to $3 million, with ongoing efforts to expand the customer base in the North Sea [37] Market Data and Key Metrics Changes - The company anticipates a year-over-year decline in average annual industry activity of 5% to 10% in the U.S. and an increase of up to 5% in Canada, while international industry activity is expected to grow by at least 10% in 2023 [38] - The company expects to return to sequential growth in the third quarter, particularly in fracturing systems and tracer diagnostics product lines [26] Company Strategy and Development Direction - The company is focused on maintaining an asset-light business model with low maintenance capital requirements, expecting gross capital expenditures of $2 million to $3 million for 2023 [6] - The company is consolidating operations to enhance efficiency, with expected annualized benefits of over $1.5 million from recent consolidation efforts [42] - The strategic focus includes expanding international markets, particularly in the Middle East and North Sea, with positive indications from multiple customers for future activity [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth prospects despite reduced U.S. rig counts, emphasizing the company's positioning to benefit from a multiyear cycle of improved growth and earnings [74] - The management noted that the recent Texas judgment is expected to be covered by insurance, and they do not anticipate a significant impact on liquidity or operations [7][45] Other Important Information - The company maintained a strong balance sheet with a cash balance of over $13 million at the end of the second quarter, expecting to generate positive free cash flow in 2023 [8][51] - The gross margin percentage improved to 39% for the first half of 2023, up from 36% in the same period of 2022, due to price increases [36][47] Q&A Session Summary Question: What are the expectations regarding the litigation and insurance payments? - Management indicated that they plan to appeal the Texas judgment and believe a significant portion of the damages will be covered by insurance, with mediation scheduled for the end of August [24][45] Question: Can you provide more details on the expansion plans beyond North America? - The company highlighted ongoing efforts in the Middle East and North Sea, with successful field trials and new customer acquisitions expected to drive growth [23][59] Question: How does the recent project in West Texas impact future operations? - The project demonstrated the efficiency of the company's technology, and management expects other operators to replicate this success, potentially leading to increased demand [10][61]