PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for the period ended September 30, 2022, show a net income of **$4.0 million** for Q3 2022, despite negative cash from operations for the nine-month period due to increased working capital [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$137.1 million** as of September 30, 2022, from **$142.3 million** at year-end 2021, primarily due to a reduction in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $85,438 | $88,493 | | **Total Assets** | **$137,148** | **$142,325** | | **Total Current Liabilities** | $20,063 | $19,818 | | **Total Liabilities** | **$31,724** | **$31,658** | | **Total Equity** | **$105,424** | **$110,667** | | Cash and cash equivalents | $9,877 | $22,168 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Total revenues increased **50.8%** to **$48.9 million** in Q3 2022, resulting in **$3.9 million** net income, while the nine-month period still recorded a **$3.1 million** net loss despite **40.1%** revenue growth Q3 2022 vs Q3 2021 Operating Results (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $48,870 | $32,411 | 50.8% | | Income from Operations | $4,047 | $2,640 | 53.3% | | Net Income Attributable to NCS | $3,935 | $2,796 | | | Diluted EPS | $1.58 | $1.14 | | Nine Months 2022 vs 2021 Operating Results (in thousands, except per share data) | Metric | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | Total Revenues | $115,446 | $82,386 | | Loss from Operations | ($4,066) | ($6,403) | | Net Loss Attributable to NCS | ($3,081) | ($6,396) | | Diluted EPS | ($1.27) | ($2.67) | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Comprehensive income for Q3 2022 was **$0.6 million**, a decrease from Q3 2021, primarily due to a **$3.4 million** negative foreign currency translation adjustment, leading to a **$7.4 million** comprehensive loss for the nine-month period Comprehensive Income (Loss) (in thousands) | Period | 2022 | 2021 | | :--- | :--- | :--- | | **Three Months Ended Sep 30** | | | | Net income (loss) | $3,964 | $3,226 | | Foreign currency translation adjustments | ($3,359) | ($1,007) | | Comprehensive income (loss) | $605 | $2,219 | | **Nine Months Ended Sep 30** | | | | Net income (loss) | ($3,243) | ($5,775) | | Foreign currency translation adjustments | ($4,118) | ($184) | | Comprehensive income (loss) | ($7,361) | ($5,959) | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity decreased from **$110.7 million** at year-end 2021 to **$105.4 million** as of September 30, 2022, driven by the nine-month net loss and negative foreign currency translation adjustments - The change in total equity from **$110.7 million** at the end of 2021 to **$105.4 million** at the end of Q3 2022 was primarily driven by the nine-month net loss and a cumulative negative currency translation adjustment of **$4.1 million**, which were partially offset by share-based compensation[15](index=15&type=chunk)[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$9.0 million** for the nine months ended September 30, 2022, a reversal from the prior year, primarily due to increases in accounts receivable and inventory, leading to a **$12.3 million** decrease in cash and cash equivalents Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($9,036) | $6,721 | | Net cash used in investing activities | ($440) | ($297) | | Net cash used in financing activities | ($2,387) | ($3,405) | | **Net change in cash and cash equivalents** | **($12,291)** | **$2,899** | | Cash and cash equivalents end of period | $9,877 | $18,444 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes disclose accounting policies, revenue disaggregation by geography (Canada largest market), the replacement of the prior credit facility with a new **$35.0 million** ABL Facility, and specifics on share-based compensation grants - The company provides engineered products and support services for oil and natural gas well construction and completions, operating primarily in North America with facilities in the US, Canada, Argentina, and Norway[25](index=25&type=chunk) Revenue by Geographic Region (Nine Months Ended Sep 30, in thousands) | Region | 2022 | 2021 | | :--- | :--- | :--- | | United States | $32,722 | $25,090 | | Canada | $76,136 | $51,530 | | Other Countries | $6,588 | $5,766 | | **Total Revenues** | **$115,446** | **$82,386** | - On May 3, 2022, the company terminated its Prior Senior Secured Credit Facility and entered into a new **$35.0 million** asset-based revolving credit facility (ABL Facility) which matures in 2027[53](index=53&type=chunk)[54](index=54&type=chunk) - During the first nine months of 2022, the company granted **70,938** RSUs, **48,565** cash-settled ESUs, and **17,454** PSUs as part of its share-based compensation program[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the **50.8%** YoY revenue increase in Q3 2022 driven by North American activity, noting significant cost pressures from raw materials and labor, while expecting continued strong industry activity despite risks from competition, a strong U.S. dollar, and potential economic slowdown [Outlook](index=18&type=section&id=Outlook) The company anticipates increased drilling and completion activity in the U.S. and Canada for 2022, driven by strong commodity prices, but faces challenges from intense competition, rising raw material and labor costs, a strengthening U.S. dollar, and potential economic recession - Management expects U.S. drilling activity to increase over **30%** and completion activity by over **10%** in 2022, with Canadian drilling and completion activity expected to increase by **20%** to **25%**[84](index=84&type=chunk) - The company is experiencing increased prices for raw materials (steel, chemicals), components, and outsourced services, as well as labor cost inflation, which may negatively impact margins[86](index=86&type=chunk)[111](index=111&type=chunk) - A strengthening U.S. dollar poses a risk, as over **60%** of revenue is generated in Canada, resulting in lower reported revenue and gross profit when converted to U.S. dollars[87](index=87&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Q3 2022 revenues increased **50.8%** to **$48.9 million**, with income from operations growing **53.3%** to **$4.0 million**, though cost of sales as a percentage of revenue increased due to supply chain costs and the absence of the ERC benefit Q3 2022 vs Q3 2021 Results Summary (in thousands) | Metric | Q3 2022 | Q3 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $48,870 | $32,411 | 50.8% | | Total Cost of Sales | $28,394 | $17,636 | 61.0% | | SG&A | $15,379 | $10,982 | 40.0% | | Income from Operations | $4,047 | $2,640 | 53.3% | - Q3 2022 revenue growth was driven by higher product sales and services volumes in Canada and the U.S. due to increased industry activity[115](index=115&type=chunk) - Cost of sales as a percentage of revenue increased in Q3 2022 to **58.1%** from **54.4%** in Q3 2021, due to supply chain cost increases and the non-recurrence of the U.S. employee retention credit (ERC)[116](index=116&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2022, the company had **$9.9 million** in cash and access to a **$35.0 million** ABL facility, with net cash used in operations for the first nine months totaling **$9.0 million**, primarily due to increased accounts receivable and inventory - Primary liquidity sources are cash (**$9.9M**), cash from operations, and a new **$35.0M** ABL Facility, with the ABL borrowing base at **$23.8M** and no outstanding borrowings as of Sep 30, 2022[126](index=126&type=chunk) - Net cash used in operating activities was **($9.0) million** for the nine months ended Sep 30, 2022, compared to **$6.7 million** provided in the same period of 2021, primarily driven by increases in accounts receivable and inventory[24](index=24&type=chunk)[131](index=131&type=chunk) - Planned capital expenditures for 2022 are approximately **$1.0 million** to **$1.5 million**[128](index=128&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposure, primarily interest rate and foreign currency risk, remains largely unchanged since year-end 2021, with the new ABL Facility exposing it to variable interest rates, though no outstanding borrowings minimize immediate risk - The company's primary market risk exposure is to interest rates through its new ABL Facility, which has variable rates based on SOFR and CDOR, but as of September 30, 2022, there was no outstanding indebtedness under the facility[146](index=146&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective[147](index=147&type=chunk) - No changes occurred during the quarter ended September 30, 2022, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[148](index=148&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various ordinary course legal proceedings, which management does not expect to have a material adverse effect on its financial position, results of operations, or cash flows - The company is subject to various legal proceedings in the ordinary course of business but does not expect them to have a material adverse effect on its financial position, results of operations, or cash flows[65](index=65&type=chunk)[151](index=151&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors primarily focus on the new ABL Facility, including potential adverse effects of indebtedness on financial condition, restrictive covenants limiting business strategies, and the impact of volatile credit markets on future financing - The company's new ABL Facility, secured by substantially all assets, has a borrowing base that excludes assets of Repeat Precision and could be insufficient to meet liquidity needs[153](index=153&type=chunk) - The ABL Facility contains restrictive covenants that limit the company's ability to incur debt, grant liens, make investments, pay dividends, and make acquisitions[157](index=157&type=chunk) - A breach of covenants, such as the fixed charge coverage ratio (tested when liquidity is low), could lead to an event of default and acceleration of debt[158](index=158&type=chunk)[159](index=159&type=chunk) [Exhibits](index=33&type=section&id=Item%206.%20Exhibits) Exhibits filed with the Form 10-Q include amended employment agreements for executives and required CEO and CFO certifications under the Sarbanes-Oxley Act - Exhibits filed include amended employment agreements for the CEO and another executive, as well as Sarbanes-Oxley certifications[162](index=162&type=chunk)

PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited financial statements for the period ended June 30, 2022, indicate revenue growth, a net loss, and a decline in total assets primarily due to reduced cash and negative operating cash flow [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2022, total assets decreased to **$132.7 million** from **$142.3 million** at year-end 2021, primarily due to a reduction in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $79,740 | $88,493 | | Cash and cash equivalents | $14,930 | $22,168 | | **Total assets** | **$132,697** | **$142,325** | | **Total current liabilities** | $17,064 | $19,818 | | **Total liabilities** | **$28,730** | **$31,658** | | **Total equity** | **$103,967** | **$110,667** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the six months ended June 30, 2022, revenues increased **33%** to **$66.6 million**, yet the company reported a net loss of **$7.2 million**, a slight improvement over the prior year Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | **$27,464** | **$21,461** | **$66,576** | **$49,975** | | Loss from operations | $(5,910) | $(5,391) | $(8,113) | $(9,043) | | **Net loss** | **$(5,478)** | **$(5,544)** | **$(7,207)** | **$(9,001)** | | Net loss attributable to NCS | $(5,481) | $(5,795) | $(7,016) | $(9,192) | | Diluted loss per share | $(2.25) | $(2.41) | $(2.89) | $(3.85) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2022, net cash used in operating activities was **$(5.2) million**, a significant decrease from the prior year, leading to a **$7.2 million** net decrease in cash and cash equivalents Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(5,198) | $1,090 | | Net cash used in investing activities | $(301) | $(316) | | Net cash used in financing activities | $(1,525) | $(2,580) | | **Net change in cash and cash equivalents** | **$(7,238)** | **$(1,646)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide details on accounting policies, geographic revenue breakdown showing strong growth in Canada and the U.S., the new **$35.0 million** ABL Facility, and share-based compensation awards Revenue by Geographic Region (in thousands) | Region | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | United States | $12,133 | $9,228 | $21,211 | $17,051 | | Canada | $12,848 | $9,194 | $41,377 | $29,429 | | Other Countries | $2,483 | $3,039 | $3,988 | $3,495 | | **Total revenues** | **$27,464** | **$21,461** | **$66,576** | **$49,975** | - On May 3, 2022, the company entered into a new **$35.0 million** secured asset-based revolving credit facility (ABL Facility), which replaced and terminated its Prior Senior Secured Credit Facility[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - During the first six months of 2022, the company granted **66,793** restricted stock units (RSUs), **48,565** cash-settled equivalent stock units (ESUs), and **17,454** performance stock units (PSUs)[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the **28%** Q2 2022 revenue growth driven by North American activity, offset by competitive pressures, rising costs, and supply chain disruptions, while maintaining liquidity through cash and a new ABL facility [Outlook](index=18&type=section&id=Outlook) The company anticipates increased drilling and completion activity in North America for 2022, but faces challenges from intense competition, inflationary pressures on costs, and potential economic slowdowns - Management expects U.S. drilling and completion activity to increase by over **20%** and over **10%** respectively in 2022, while Canadian activity is expected to increase by **15%** to **25%**[85](index=85&type=chunk) - The company is experiencing increased prices for raw materials (steel, chemicals), purchased components, and outsourced services, which began in H2 2021 and continued into 2022[87](index=87&type=chunk) - Tight labor conditions have led to increased employee turnover, delays in hiring, and labor cost inflation, impacting both cost of sales and SG&A expenses[87](index=87&type=chunk)[112](index=112&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) For Q2 2022, revenues increased **28.0%** to **$27.5 million**, but cost of sales grew faster at **33.0%** due to inflation, leading to a widened operating loss of **$(5.9) million** Results of Operations Comparison (in thousands) | Metric | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Total revenues | $27,464 | $21,461 | 28.0% | | Total cost of sales | $18,523 | $13,927 | 33.0% | | SG&A expenses | $13,745 | $11,823 | 16.3% | | Loss from operations | $(5,910) | $(5,391) | (9.6)% | - The increase in cost of sales as a percentage of revenue was driven by lower pricing for certain products, a less favorable revenue mix, and increased costs for raw materials, labor, and outsourced services[117](index=117&type=chunk) - The rise in SG&A expenses was primarily due to **$1.1 million** in higher compensation and benefit costs following the reinstatement of salaries and benefits that were temporarily reduced in prior periods[118](index=118&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2022, liquidity was supported by **$14.9 million** in cash and a new **$35.0 million** ABL facility, despite negative operating cash flow of **$(5.2) million** for the first six months Liquidity Position as of June 30, 2022 (in millions) | Item | Amount | | :--- | :--- | | Cash and cash equivalents | $14.9 | | ABL Facility Size | $35.0 | | ABL Borrowing Base | $12.8 | | ABL Outstanding Borrowings | $0.0 | - The decrease in operating cash flow for the first six months of 2022 was primarily driven by the payment of a **$3.2 million** annual incentive bonus and increases in accounts receivable and inventories[135](index=135&type=chunk) - Capital expenditures for 2022 are planned to be between **$1.0 million** and **$2.0 million**[132](index=132&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk profile remains largely unchanged, with primary exposure to interest rate risk from the new ABL Facility, which had no outstanding borrowings as of June 30, 2022 - The company's primary market risk is interest rate risk, now tied to its new ABL Facility entered into on May 3, 2022, with borrowings bearing variable interest rates based on benchmarks including SOFR, CDOR, and prime rates[148](index=148&type=chunk)[149](index=149&type=chunk) - As of June 30, 2022, the company had no outstanding indebtedness under the ABL Facility[149](index=149&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[150](index=150&type=chunk) - There were no changes to internal control over financial reporting during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[151](index=151&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings in the ordinary course of business, which management does not expect to have a material adverse effect on its financial condition or operations - The company is involved in various legal proceedings in the ordinary course of business but does not expect the results to have a material adverse effect on its financial condition[66](index=66&type=chunk)[153](index=153&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) The company highlights new and updated risk factors primarily related to its new ABL Facility, including potential adverse effects on financial condition, restrictive covenants, and limitations on borrowing ability under certain liquidity conditions - The new ABL Facility is secured by substantially all company assets and availability is limited by a borrowing base calculation, which could be constrained by adverse market developments[155](index=155&type=chunk) - The ABL Facility contains restrictive covenants that limit the company's ability to, among other things, incur additional debt, grant liens, make certain investments, and pay dividends[159](index=159&type=chunk) - A financial covenant requires maintaining a fixed charge coverage ratio of at least **1.0 to 1.0** whenever liquidity is less than **20%** of revolving commitments, which could impact the ability to borrow under the facility[160](index=160&type=chunk) [Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including the Credit Agreement for the new ABL Facility, an amended CFO employment agreement, and required CEO and CFO certifications - Key exhibits filed include the Credit Agreement for the new ABL Facility, an amended employment agreement for Ryan Hummer (CFO), and Sarbanes-Oxley Act certifications[164](index=164&type=chunk)

NCS Multistage Holdings, Inc. (NASDAQ:NCSM) Q2 2022 Earnings Conference Call August 2, 2022 8:30 AM ET Company Participants Ryan Hummer - Chief Financial Officer Robert Nipper - Chief Executive Officer Conference Call Participants Aditya Ahluwalia - Arrowhead Operator Good day, and thank you for standing by. Welcome to the Q2 2022 NCS Multistage Conference Call. At this time, all participants are in a listen-only mode. After the speakers??? presentation, there will be a question-and-answer session. [Operato ...

Financial Performance - The company's share price as of July 29, 2022, was $33.46 [9] - The company's equity value is $80.6 million [10] - The company's enterprise value is $91.8 million [12] - Trailing 12-month Adjusted EBITDA less share-based compensation was $7.3 million [13] - Trailing 12-month Free Cash Flow was $9.2 million [14] - Net working capital was $49.7 million [17] - Q2 2022 total revenue was $27.5 million, a 28% increase compared to Q2 2021 [42] - Q2 2022 U S revenue was $12.1 million, Canadian revenue was $12.9 million, and International revenue was $2.5 million [42] - Q2 2022 net capital expenditures were $0.2 million and free cash flow was $0.7 million [42] Financial Guidance - Q3 2022 total revenue is expected to be $38.0 - $42.0 million [45] - Full year 2022 total revenue is expected to be $145.0 - $160.0 million [45] - Full year 2022 Adjusted EBITDA is expected to be $13.0 - $16.0 million [45] - Full year 2022 gross capital expenditures are expected to be $1.0 - $2.0 million [45] Revenue Profile - For the twelve months ended June 30, 2022, 63% of revenue was from Canada, 29% from the U S, and 8% from International markets [50, 51, 52] - For the twelve months ended June 30, 2022, 69% of revenue was from product and 31% from service [51]

NCS Multistage Holdings (NASDAQ:NCSM) Q1 2022 Earnings Conference Call May 6, 2022 8:30 AM ET Company Participants Robert Nipper - Chief Executive Officer Ryan Hummer - Chief Financial Officer Conference Call Participants John Daniel - Daniel Energy Partners Operator Welcome to the First Quarter 2022 NCS Multistage Earnings Conference Call. My name is Sylvia, and I'll be operator for today's call. At this time, all participants in a listen-only mode. Later, we will conduct a question-and-answer session. [Op ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (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, 2022 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 46-152745 ...

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 ...