NCS Multistage(NCSM) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and accompanying notes Condensed Consolidated Balance Sheets Total assets increased to $158.0 million, while total liabilities decreased and total equity rose as of June 30, 2025 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $110,970 | $105,570 | | Total Assets | $157,977 | $152,812 | | Total Current Liabilities | $23,806 | $25,419 | | Total Liabilities | $33,998 | $36,703 | | Total Equity | $123,979 | $116,109 | Condensed Consolidated Statements of Operations The company reported a net income of $0.9 million in Q2 2025, a significant turnaround driven by a 22.8% revenue increase Q2 and H1 2025 vs 2024 Statement of Operations (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $36,454 | $29,690 | $86,459 | $73,548 | | Income (Loss) from Operations | $(2,030) | $(4,150) | $2,259 | $(1,649) | | Net Income (Loss) Attributable to NCS | $924 | $(3,095) | $4,980 | $(1,025) | | Diluted EPS | $0.34 | $(1.21) | $1.84 | $(0.41) | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities decreased to $1.9 million for H1 2025, with overall cash and equivalents decreasing by $0.5 million Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,876 | $4,099 | | Net cash used in investing activities | $(474) | $(393) | | Net cash used in financing activities | $(2,240) | $(1,669) | | Net change in cash and cash equivalents | $(508) | $1,894 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail financial aspects including Canada's market growth, ABL facility, ongoing patent litigation, a deferred tax benefit, and a subsequent acquisition - Canada is the company's largest market, with revenues growing 27.4% to $55.7 million for the six months ended June 30, 2025, compared to the prior year period[27] - The company has an undrawn ABL Facility with an available borrowing base of $17.2 million as of June 30, 2025. Total debt of $7.7 million consists solely of finance leases[42][45] - The company is involved in ongoing patent litigation. An appeal in a Canadian case against Kobold was heard in April 2025, with a decision expected by late 2025 or early 2026. Favorable U.S. verdicts against Nine Energy and TCO are also under appeal[56][58] - A deferred income tax benefit of $1.4 million was recorded during the period due to the reversal of a valuation allowance against its Canadian subsidiary's deferred tax assets[66] - On July 31, 2025, the company acquired Reservoir Metrics, LLC for $5.9 million in cash and assumed debt, plus a potential earn-out[69] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, Q2 2025 revenue growth, market outlook, key risks, and the company's sufficient liquidity position Overview and Outlook NCS provides oil and gas well optimization products, with a 2025 outlook of stable Canadian activity, U.S. decline, and international growth, facing commodity and tariff risks - The company acquired Reservoir Metrics, LLC on July 31, 2025, to expand and complement its existing tracer diagnostics offerings[74] - Management's 2025 outlook anticipates: (i) stable or slightly decreased activity in Canada, (ii) continued decline in the U.S. market, and (iii) potential activity increases in international markets where NCS participates[76] - The company faces risks from competitive pressures, cost inflation, and trade tariffs on steel and chemicals from China, which could negatively impact costs and margins[78][79] Market Conditions Q2 2025 saw volatile commodity prices and declining U.S. and Canadian rig counts, reflecting seasonal market conditions Average Quarterly Commodity Prices | Quarter Ended | WTI Crude (per Bbl) | Henry Hub Natural Gas (per MMBtu) | | :--- | :--- | :--- | | 3/31/2025 | $71.78 | $4.14 | | 6/30/2025 | $64.57 | $3.19 | Average Quarterly Drilling Rig Count | Quarter Ended | U.S. Land | Canada Land | | :--- | :--- | :--- | | 6/30/2024 | 583 | 134 | | 3/31/2025 | 574 | 214 | | 6/30/2025 | 559 | 127 | Results of Operations Q2 2025 total revenues increased 22.8% to $36.5 million, driven by product sales, resulting in net income despite a gross margin decrease due to mix shift Q2 2025 vs Q2 2024 Results (in thousands) | Metric | Q2 2025 | Q2 2024 | Change % | | :--- | :--- | :--- | :--- | | Total Revenues | $36,454 | $29,690 | 22.8% | | Product Sales | $27,776 | $19,022 | 46.0% | | Services | $8,678 | $10,668 | (18.7)% | | Total Gross Profit | $12,269 | $11,318 | 8.4% | | Total Gross Margin | 33.7% | 38.1% | - | | Net Income (Loss) | $1,698 | $(2,839) | 159.8% | - Revenue growth in Q2 was primarily driven by increased fracturing systems activity in Canada and higher frac plug sales by Repeat Precision in the United States[96] - SG&A expenses decreased by 8.1% to $13.6 million in Q2 2025, mainly due to lower professional fees and payroll expenses[98] Liquidity and Capital Resources The company maintains sufficient liquidity with $25.4 million cash and an undrawn ABL facility, despite a decrease in H1 2025 operating cash flow to $1.9 million - As of June 30, 2025, the company had $25.4 million in cash and cash equivalents and $17.2 million available under its ABL facility, with no outstanding borrowings[109] - Planned capital expenditures for the full year 2025 are estimated to be between $1.4 million and $1.6 million[112] - Net cash provided by operating activities for the first six months of 2025 was $1.9 million, a decrease from $4.1 million in the same period of 2024[115] Quantitative and Qualitative Disclosures About Market Risk Market risk exposure remains largely unchanged since year-end 2024, though customer concentration risk increased due to a merger - There has been no material change in market risk exposure since year-end 2024[126] - A business combination of two large customers resulted in a single entity constituting 17% of trade receivables as of June 30, 2025, increasing customer concentration risk[126] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control - Management concluded that disclosure controls and procedures were effective as of June 30, 2025[127] - No material changes in internal control over financial reporting were identified during the quarter ended June 30, 2025[128] PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 10 of the financial statements for detailed information on ongoing legal proceedings - For information regarding legal proceedings, the report refers to "Note 10. Commitments and Contingencies" in the financial statements[130] Risk Factors No material changes to the risk factors disclosed in the company's 2024 Annual Report on Form 10-K have occurred - There have been no material changes to the risk factors disclosed in the company's 2024 Annual Report[131] Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the quarter ended June 30, 2025[132] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - The report lists filed exhibits, including CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[133]