Financial Performance & Valuation - As of March 4, 2022, the share price was $50.58, leading to an equity value of $121.7 million [9, 11] - The company's enterprise value is $125.4 million [15] - The company has a strong net cash position of negative $14.3 million [19] - The total debt to total book capitalization is 6.6% [20] - Net working capital stands at $48 million as of December 31, 2021 [21] - Full year 2021 revenue reached $118.5 million, an 11% increase compared to 2020 [46] - Adjusted EBITDA for full year 2021 was $9.1 million, a $6.9 million increase compared to 2020 [46] - Free cash flow for full year 2021 was $11.1 million [46] Future Guidance - The company projects full year 2022 revenue between $145 million and $160 million [49] - Adjusted EBITDA for full year 2022 is projected to be between $13 million and $18 million [49] Revenue Mix - In 2021, product revenue accounted for 70% of the total, while service revenue made up 30% [54]

Part I [Business](index=5&type=section&id=Item%201.%20Business) NCS Multistage provides engineered products and services for oil and gas well completions, focusing on North American unconventional formations - The company's business strategy focuses on disciplined organic growth, developing innovative technologies, maintaining financial strength, and pursuing selective mergers, acquisitions, and joint ventures[24](index=24&type=chunk) - Revenue diversification has increased. In 2021, fracturing systems and enhanced recovery accounted for **65% of revenue**, Repeat Precision for **15%**, and well construction and tracer diagnostics for **10% each**, a shift from 2016 when fracturing systems were over **90% of revenue**[25](index=25&type=chunk)[26](index=26&type=chunk) Products and Services The company offers fracturing, enhanced recovery, tracer diagnostics, and well construction products to optimize well completions - **Fracturing Systems:** Enables pinpoint stimulation using casing-installed sliding sleeves (Innovus, Ratek) and downhole frac isolation assemblies, also includes sand jet perforating and the Accelus system[27](index=27&type=chunk)[28](index=28&type=chunk) - **Enhanced Recovery:** Includes valve systems like Innovus Convertible and the Terrus System to facilitate operations such as waterflood or gas injection[29](index=29&type=chunk) - **Repeat Precision:** A **50%-owned** joint venture that markets composite frac plugs (Purple Seal line), setting tools, and perforating guns[32](index=32&type=chunk) - **Tracer Diagnostics:** Provides chemical and radioactive tracers to assess completion performance and optimize field development[32](index=32&type=chunk) - **Well Construction:** Products include the AirLock casing buoyancy system, Vecturon and Vectraset liner hanger systems, and toe initiation sleeves[32](index=32&type=chunk) Intellectual Property and Patent Protection NCS protects its proprietary technologies with 50 US and 52 international patents, alongside trade secrets - The company holds **50 U.S. utility patents** expiring between 2030 and 2039, and **52 related international utility patents** expiring between 2025 and 2037[32](index=32&type=chunk) - In addition to patents, the company relies on trade secrets, know-how, and licensed third-party intellectual property to protect its technology[34](index=34&type=chunk) Customers NCS serves over 225 oil and gas producers, with the top five customers representing 30% of 2021 revenue - In 2021, the company served over **225 customers**, with the five largest customers accounting for approximately **30% of revenue**[35](index=35&type=chunk) - No single customer represented more than **10% of revenue** in 2021, though one customer accounted for **10% of revenue** in 2020[35](index=35&type=chunk) Competition NCS competes intensely in well completion markets against large multinational corporations, emphasizing technology, service, and price - Major competitors include Baker Hughes, Halliburton, Schlumberger, NOV Inc., and Nine Energy Service, among others[47](index=47&type=chunk) - The company believes customers select its products based on technical attributes, service level, and operational know-how, in addition to competitive pricing[48](index=48&type=chunk) Government Regulations NCS is subject to extensive environmental, health, and safety regulations, with hydraulic fracturing rules indirectly impacting demand - Operations are subject to regulations under the Clean Air Act, Clean Water Act, and RCRA, governing air emissions, water discharge, and waste management[54](index=54&type=chunk)[55](index=55&type=chunk) - Climate change regulations, such as those limiting GHG emissions, could increase costs for customers and reduce demand for oil and natural gas[53](index=53&type=chunk)[54](index=54&type=chunk) - The use of radioactive tracers requires compliance with licenses from the U.S. Nuclear Regulatory Commission (NRC) or equivalent state agencies[55](index=55&type=chunk) - Increased regulation or bans on hydraulic fracturing at federal, state, or local levels could significantly decrease demand for the company's products and services[57](index=57&type=chunk)[59](index=59&type=chunk) [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks across its business, industry, indebtedness, and stock ownership, including market volatility and governance issues Risks Related to Our Business and the Oil and Natural Gas Industry Performance depends on the cyclical oil and gas industry, facing COVID-19 impacts, E&P spending volatility, intense competition, and regulatory risks - The business has been and may continue to be adversely affected by the COVID-19 pandemic, which has impacted demand, operations, and the supply chain[70](index=70&type=chunk)[77](index=77&type=chunk) - Business depends on E&P spending, which is highly cyclical and sensitive to volatile oil and natural gas prices[78](index=78&type=chunk)[82](index=82&type=chunk) - Significant customer concentration risk exists, with the five largest customers accounting for **30% of revenue** in 2021, where the loss of a significant customer could substantially reduce revenue[87](index=87&type=chunk) - The company faces intense competition from large multinational corporations and smaller regional players, which can lead to pricing pressure and loss of market share[83](index=83&type=chunk) - Federal and state legislative initiatives relating to hydraulic fracturing and climate change could increase costs for customers and decrease demand for the company's products and services[120](index=120&type=chunk)[125](index=125&type=chunk) Risks Relating to Our Indebtedness The company's Senior Secured Credit Facility poses risks due to restrictive covenants, potential default, and refinancing challenges upon its May 2023 maturity - The Senior Secured Credit Facility contains restrictive covenants that limit the ability to pursue certain business strategies[159](index=159&type=chunk) - The facility requires maintaining a minimum liquidity of **$7.5 million** and a fixed charge coverage ratio of at least **1.0 to 1.0** if availability falls below **20% of the borrowing base**[160](index=160&type=chunk) - A breach of covenants could result in an event of default, allowing lenders to accelerate all outstanding borrowings[162](index=162&type=chunk) Risks Relating to Ownership of Our Common Stock Common stock ownership risks include price volatility and significant control by Advent International, impacting governance and investor appeal - Funds managed by Advent International Corporation control **62.1% of the common stock**, giving them effective control over all matters requiring stockholder approval, where their interests may differ from those of public stockholders[169](index=169&type=chunk) - The company qualifies as a "controlled company" and is exempt from certain Nasdaq governance rules, including the requirement for a majority-independent board[176](index=176&type=chunk) - As an "emerging growth company" and "smaller reporting company," NCS may comply with reduced reporting requirements, which could make its common stock less attractive to investors[180](index=180&type=chunk)[182](index=182&type=chunk) [Properties](index=35&type=section&id=Item%202.%20Properties) The company operates from its Houston headquarters, one owned property in Calgary, and 19 leased facilities for various operational needs - Corporate headquarters is in Houston, Texas, and the company owns one property in Calgary, Alberta, and leases **19 other properties** for its operations[191](index=191&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) NCSM common stock trades on Nasdaq, with 2.4 million shares outstanding held by 17 record holders, and no current dividend plans - Common stock trades on the Nasdaq Capital Market under the symbol "NCSM"[196](index=196&type=chunk) - As of March 4, 2022, there were **2,405,746 shares** of common stock outstanding held by approximately **17 record holders**[197](index=197&type=chunk) - The company does not intend to pay cash dividends in the foreseeable future[198](index=198&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 2021 revenue growth to $118.5 million, reduced net loss, 2022 activity outlook, and ongoing liquidity management amid market challenges Outlook Management anticipates higher 2022 industry activity, with drilling and completion growth across US, Canada, and international markets, despite competitive pressures - **United States:** 2022 drilling activity expected to increase by over **20%**; completion activity by over **10%**[208](index=208&type=chunk) - **Canada:** 2022 drilling and completion activity expected to increase by **10% to 15%**[208](index=208&type=chunk) - **International:** 2022 industry activity expected to improve by over **10%**[208](index=208&type=chunk) COVID-19 Impacts COVID-19 impacted the oil and gas market, prompting NCS to implement cost-saving measures and record significant impairment charges in 2020 - In response to the pandemic's impact, the company undertook significant cost reduction initiatives, including reductions in force, salary cuts, a moratorium on non-essential travel, and deferral of U.S. employer payroll taxes[215](index=215&type=chunk) - The company recorded severance expense of **$5.7 million** in 2020 related to workforce reductions[217](index=217&type=chunk) - Due to the market decline, the company recorded impairment charges totaling **$50.2 million** (**$9.7 million** for property & equipment, **$40.5 million** for identifiable intangibles) in the first quarter of 2020[218](index=218&type=chunk) Results of Operations (2021 vs 2020) 2021 revenues increased to $118.5 million, with operating loss significantly improving from 2020 due to higher activity and reduced SG&A expenses | Line Item | 2021 (in thousands) | 2020 (in thousands) | Variance (%) | | :--- | :--- | :--- | :--- | | **Total Revenues** | $118,502 | $106,977 | 10.8% | | **Total cost of sales** | $70,027 | $62,907 | 11.3% | | **SG&A expenses** | $49,094 | $59,425 | (17.4)% | | **Impairments** | $0 | $50,194 | (100.0)% | | **Loss from operations** | $(5,120) | $(71,440) | 92.8% | | **Gain on patent infringement settlement** | $0 | $25,678 | (100.0)% | | **Net loss attributable to NCS** | $(4,734) | $(57,599) | 91.8% | - Revenue increased by **$11.5 million**, reflecting higher product and service volumes in Canada and increased U.S. services, partially offset by lower U.S. product sales and pricing pressure[245](index=245&type=chunk) - SG&A expenses decreased by **$10.3 million**, primarily due to lower compensation from reduced headcount, lower share-based compensation, reduced professional fees, a **$5.6 million** decline in severance charges, and a **$2.3 million** employee retention credit benefit[247](index=247&type=chunk) Non-GAAP Financial Measures Adjusted EBITDA significantly increased to $9.1 million in 2021, while Free Cash Flow decreased to $11.1 million, impacted by prior year's patent settlement | Reconciliation to Adjusted EBITDA (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | **Net loss** | $(3,779) | $(39,106) | | EBITDA | $1,718 | $(39,202) | | Impairments | — | $50,194 | | Gain on patent infringement settlement | — | $(25,678) | | Share-based compensation | $4,221 | $7,723 | | Severance and other termination benefits | — | $5,661 | | **Adjusted EBITDA** | **$9,094** | **$2,184** | | Reconciliation to Free Cash Flow (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $11,583 | $35,117 | | Purchases of property and equipment | $(495) | $(2,098) | | Purchase and development of software and technology | $(338) | $(55) | | Proceeds from sales of property and equipment | $389 | $1,094 | | **Free cash flow** | **$11,139** | **$34,058** | Liquidity and Capital Resources NCS maintains liquidity through cash, operations, and its credit facility, with $22.2 million cash and $15.4 million available, sufficient for 2022 needs - As of December 31, 2021, the company had **$22.2 million** in cash and cash equivalents[266](index=266&type=chunk) - The Senior Secured Credit Facility had an available borrowing base of **$15.4 million** with no outstanding borrowings at year-end 2021[266](index=266&type=chunk) - Planned capital expenditures for 2022 are approximately **$2 million to $3 million**[267](index=267&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks including commodity price volatility, significant foreign currency exposure (62% CAD revenue), interest rate fluctuations, and E&P credit risk - The business is indirectly exposed to commodity price risk through its impact on customer E&P activity[292](index=292&type=chunk) - Significant foreign currency risk exists, with **62% of 2021 revenue** denominated in Canadian dollars[293](index=293&type=chunk) - Credit risk is concentrated within the oil and gas industry, with customers being E&P companies and other oilfield service providers[296](index=296&type=chunk) [Financial Statements and Supplementary Data](index=52&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2019-2021, including balance sheets, income statements, cash flows, and detailed notes Note 10. Commitments and Contingencies Key commitments and contingencies include a 2020 patent settlement gain of $25.7 million and $3.2 million in 2021 Employee Retention Credits - A patent infringement settlement with Diamondback in 2020 resulted in a gain of **$25.7 million**, which included cash, a patent transfer, and future payments[409](index=409&type=chunk) - The company qualified for and claimed **$3.2 million** in Employee Retention Credits (ERC) for the year ended December 31, 2021[412](index=412&type=chunk) Note 18. Segment and Geographic Information NCS operates as a single segment, with Canada as its largest market (62% of 2021 revenue) and most long-lived assets in the US and Canada | Revenue by Geography (in thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | United States | $35,155 | $46,179 | $103,291 | | Canada | $73,083 | $48,549 | $86,563 | | Other Countries | $10,264 | $12,249 | $15,631 | | **Total Revenues** | **$118,502** | **$106,977** | **$205,485** | | Long-Lived Assets by Geography (in thousands) | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | United States | $17,835 | $16,616 | | Canada | $9,604 | $10,356 | | Other Countries | $2,078 | $2,633 | | **Total** | **$29,517** | **$29,605** | [Controls and Procedures](index=83&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[462](index=462&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2021[464](index=464&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=84&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 2022 Proxy Statement - The company has a Code of Business Conduct and Ethics applicable to all employees, officers, and directors[470](index=470&type=chunk) - Other required information for this item is incorporated by reference from the 2022 Proxy Statement[471](index=471&type=chunk) [Executive Compensation](index=84&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the company's 2022 Proxy Statement - The information required by this item will be included in the 2022 Proxy Statement and is incorporated by reference[472](index=472&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=84&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details equity compensation plans, including 264,831 securities for issuance and 429,602 available for future grants | Plan Category | Securities to be Issued Upon Exercise | Weighted-Average Exercise Price | Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by stockholders | 264,831 | $122.14 | 429,602 | - The number of securities remaining available for future issuance includes **86,416 shares** under the ESPP, which was suspended as of July 1, 2019[477](index=477&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=85&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists Form 10-K exhibits, including financial statements and various certifications, with financial statement schedules omitted - All required financial statement schedules have been omitted because the information is not applicable or is included in the consolidated financial statements and notes[479](index=479&type=chunk) - A list of exhibits filed with the report is provided, including the company's credit agreement, equity incentive plans, and various certifications[481](index=481&type=chunk)[482](index=482&type=chunk)

Financial Data and Key Metrics Changes - Revenue for 2021 increased to $118.5 million, an 11% increase compared to 2020, primarily driven by a revenue increase of over 50% in Canada [11] - Gross margin for the full year 2021 was 41%, consistent with 2020, despite inflationary pressures [20] - Free cash flow for 2021 was over $11 million, with cash and cash equivalents totaling over $22 million as of December 31, 2021 [23][34] Business Line Data and Key Metrics Changes - Significant progress was made in product and service lines, including the qualification of Raytech sleeves for the North Sea and advancements in completion systems for deepwater applications [12][13] - The Airlock casing buoyancy product line saw commercialization and expansion, contributing to increased sales in Canada [14] - The Repeat Precision segment introduced the Purple Fire modular perforating gun system, achieving first revenue in late 2021 [17] Market Data and Key Metrics Changes - U.S. completions activity outpaced drilling activity early in 2021, with expectations for drilling to outpace completions later in the year [8] - Canadian market activity surpassed pre-pandemic levels in the second half of 2021, indicating a strong recovery [9] - International markets faced challenges due to COVID-19, but access improved towards the end of 2021 [10] Company Strategy and Development Direction - The company aims to capitalize on growth opportunities through strategic objectives set for 2022, including market share increases and technology adoption [7][42] - Industry consolidation is viewed as necessary, with the company positioned to participate due to its strong balance sheet and diverse product lines [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about industry growth, expecting a 10% to 15% increase in Canadian activity and a 20% increase in U.S. wells drilled in 2022 [41] - The company anticipates challenges from inflation and supply chain issues, which may pressure gross margins in early 2022 [19][35] - Future revenue growth is expected to exceed industry activity growth through strategic initiatives and technology advancements [42] Other Important Information - The company reported a gross profit of $15.9 million in Q4 2021, representing 44% of revenue, an increase from the previous year's fourth quarter [27] - SG&A expenses for Q4 2021 were $13.5 million, reflecting increased compensation and litigation-related expenses [30] - The company plans to maintain a focus on managing costs while investing in growth [21] Q&A Session Summary - No questions were posed during the Q&A session, indicating a lack of inquiries from participants [46][48]

Investor Update November 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 objective ...

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 September 30, 2021 OR Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the ...

NCS Multistage Holdings Inc. (NASDAQ:NCSM) Q3 2021 Earnings Conference Call November 2, 2021 8:30 AM ET Company Participants Ryan Hummer - CFO Robert Nipper - CEO Conference Call Participants John Daniel - Daniel Energy Partners Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edit ...

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)

NCS Multistage Holdings Inc. (NASDAQ:NCSM) Q1 2021 Earnings Conference Call May 4, 2021 8:30 AM ET Company Participants Ryan Hummer - CFO Robert Nipper - CEO Operator Good day, and thank you for standing by. Welcome to Quarter 1 2021 NCS Multistage Earnings Conference Call. [Operator Instructions] Please be advised that today???s conference is being recorded. [Operator Instructions] I would now like to transfer the conference over to your speaker, Mr. Ryan Hummer. Please go ahead. Ryan Hummer Thank you, and ...