NCS Multistage(US:NCSM)2023-08-01 20:25Market Activity and Trends - The company expects annual average drilling and completion activity in Canada to increase by up to 5% compared to the prior year, while activity in the United States is projected to decline by 5% to 10%[81]. - Oil prices averaged $74 per barrel in Q2 2023, down from approximately $83 per barrel in Q4 2022, reflecting a softer macroeconomic environment[87]. - Natural gas prices decreased to an average of $2.16 per MMBtu in Q2 2023, compared to $5.55 per MMBtu in Q4 2022[88]. - The average U.S. land rig count declined by 8% to 699 in Q2 2023 compared to Q4 2022, but is comparable to Q2 2022 levels[93]. - Approximately 56% of revenues for Q2 2023 were derived from sales in Canada, with contracts typically invoiced in Canadian dollars[98]. - The company anticipates international sales to increase over time, particularly in markets such as China and the Middle East[100]. Financial Performance - Total revenues for the three months ended June 30, 2023, were $25.4 million, a decrease of 7.5% compared to $27.5 million for the same period in 2022[106]. - Product sales decreased by 10.0% to $17.4 million for the three months ended June 30, 2023, down from $19.4 million in 2022[106]. - Total revenues for the six months ended June 30, 2023, were $68.9 million, an increase of 3.6% compared to $66.6 million for the same period in 2022[116]. - Product sales for the six months ended June 30, 2023, were $48.9 million, up 7.2% from $45.6 million in 2022[116]. - Net loss for the three months ended June 30, 2023, was $32.1 million, compared to a net loss of $5.5 million for the same period in 2022, representing an increase of 485.5%[105]. - The net loss attributable to NCS Multistage Holdings, Inc. for the six months ended June 30, 2023, was $47.2 million, compared to a net loss of $7.0 million for the same period in 2022, reflecting a 572.7% increase[115]. Costs and Expenses - Cost of sales was $16.9 million, representing 66.7% of revenues for the three months ended June 30, 2023, compared to $18.5 million or 67.4% of revenues in 2022[107]. - Selling, general and administrative expenses increased by 5.3% to $14.5 million for the three months ended June 30, 2023, from $13.7 million in 2022[109]. - Cost of sales for the six months ended June 30, 2023, was $41.9 million, a decrease of 1.8% from $42.7 million in 2022[115]. - Cost of sales for the six months ended June 30, 2023, was $41.9 million, or 60.8% of revenues, down from $42.7 million, or 64.2% of revenues for the same period in 2022[117]. - Selling, general and administrative expenses increased to $30.6 million for the six months ended June 30, 2023, compared to $29.8 million for the same period in 2022, primarily due to higher compensation and benefit costs[119]. Litigation and Provisions - The provision for litigation was $24.9 million for the three months ended June 30, 2023, reflecting an incremental provision related to a judgment rendered in May 2023[110]. - Provision for litigation totaled $42.4 million for the six months ended June 30, 2023, related to judgments in ongoing legal matters[120]. Cash Flow and Capital Expenditures - Net cash used in operating activities improved to $1.0 million for the six months ended June 30, 2023, from $5.2 million in the same period in 2022[133]. - Capital expenditures for the six months ended June 30, 2023, were $1.3 million, with plans to incur approximately $2 million to $3 million in capital expenditures during 2023[130]. - As of June 30, 2023, cash and cash equivalents were $13.7 million, with total outstanding indebtedness of $8.8 million[124]. - The company expects to fund capital expenditures and liquidity requirements for the next twelve months through existing cash, cash flows from operations, and potential borrowings[126]. - Net cash used in investing activities was $1.0 million for the six months ended June 30, 2023, reflecting increased investment in property and equipment[135]. Risks and Challenges - The company faces challenges in developing and implementing new technologies and services to meet customer needs, particularly in non-traditional energy markets[145]. - There is a risk of losing significant customers, which could impact overall revenue[145]. - The company is unable to effectively implement its strategy for increasing sales in U.S. and international markets[145]. - There are concerns regarding the ability to protect critical intellectual property assets, which could affect competitive positioning[145]. - The company is exposed to risks from uninsured or underinsured business activities and litigation, potentially leading to financial losses[145]. - The financial health of customers is a concern, impacting their ability to pay for products and services[145]. - The company faces challenges in accurately predicting customer demand, which may lead to excess or obsolete inventory[145]. - There are risks associated with currency exchange rate fluctuations that could affect profitability[145]. - The company is impacted by severe weather conditions and events such as Canadian wildfires, which could disrupt operations[145]. - Regulatory changes in the oil and natural gas industry, including emissions restrictions, pose additional operational risks[145].