Stonegate Updates Coverage on NCS Multistage Holdings, Inc. (NCSM) 2025 Q1May 02, 2025 9:31 AM EDT | Source: Reportable, Inc.Dallas, Texas--(Newsfile Corp. - May 2, 2025) - NCS Multistage Holdings, Inc. (NASDAQ: NCSM): Stonegate Capital Partners updates their coverage on NCS Multistage Holdings, Inc. (NASDAQ: NCSM). In 1Q25, NCSM reported total revenues of $50.0M, a 14% year-over-year increase and its highest quarterly revenue since 1Q20. Growth was primarily driven by increased product sales ...

Financial Data and Key Metrics Changes - The company achieved high single-digit sales growth of 7% in Q1 2025, with adjusted earnings per share (EPS) growing 11% to $1.09, finishing at the high end of the guidance range [12][29][27] - Excluding COVID testing sales, sales growth was over 8% [12] - Gross margin expanded by 140 basis points, and operating margin increased by 130 basis points compared to the prior year [27][30] Business Line Data and Key Metrics Changes - Nutrition sales increased by 7%, driven by high single-digit growth in adult nutrition and double-digit growth in US pediatric nutrition [14] - Diagnostics sales declined by 5%, primarily due to a decrease in COVID-19 testing sales; core laboratory diagnostics grew 6.5% excluding China [15][29] - Established a new system, Alinity N, for molecular nucleic acid testing, representing a billion-dollar market opportunity [17] - Medical devices sales grew 12.5%, with continuous glucose monitors achieving over 20% growth [19] Market Data and Key Metrics Changes - Sales in the EPD segment increased by 8%, with double-digit growth in more than half of the key 15 markets [18] - The US dollar's weakening had a favorable impact on sales compared to exchange rates at the time of the previous earnings call [29] Company Strategy and Development Direction - The company is focused on navigating the complexities of a dynamic economic environment, including the impact of new tariff policies [10][11] - A diversified business model is emphasized as a strength, allowing the company to manage global challenges effectively [10] - The company plans to launch over 25 key new products over the next three years, contributing to sustained growth [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining guidance despite tariff impacts, estimating a few hundred million dollars in tariff-related costs for 2025 [45][46] - The company is actively assessing various scenarios to mitigate tariff impacts and is optimistic about its manufacturing network's flexibility [50][52] - Management expects the second half of 2025 to outperform the first half due to new product launches and improved market conditions [102] Other Important Information - The company is investing in R&D and expanding its portfolio in biosimilars and diagnostics, with a focus on enhancing its competitive position [18][90] - The company is also exploring M&A opportunities in medical devices and diagnostics while maintaining a disciplined approach to capital allocation [94][96] Q&A Session Summary Question: Impact of tariffs on full-year guidance - Management confirmed that tariffs will have a financial impact, estimating a few hundred million dollars for 2025, with a focus on mitigating strategies [45][46] Question: State of the EP franchise and Volt approval timeline - Management expressed optimism about the EP franchise, highlighting strong initial feedback for Volt and a potential US approval timeline in early 2026 [65][66] Question: Broader diagnostic strategy and M&A considerations - Management acknowledged challenges in the diagnostics segment, particularly in China, and emphasized the importance of M&A to enhance growth [82][90] Question: Acceleration of top-line growth in the second half - Management indicated that new product launches and favorable comparisons to previous year performance will drive growth acceleration [102][106] Question: Gross margin expectations amid tariff impacts - Management confirmed that tariffs would primarily affect gross margins, but favorable FX movements could help offset some impacts [108] Question: Plans for seeking exemptions from tariffs - Management stated that while they are engaged with industry associations, they do not rely on hope for tariff exemptions and are focused on data-driven strategies [130][132] Question: Diversified model and potential for unlocking value - Management reiterated the value of their diversified model and stated that they are continuously evaluating opportunities to create value without current plans for divestitures [138][140]

Financial Data and Key Metrics Changes - Total organic sales increased by 2%, primarily driven by volume and product mix growth, partially offset by pricing [7][29] - Adjusted operating income declined by 5%, with a 3% decrease on a constant currency basis, primarily due to increased SG&A expenses [33][34] - First quarter adjusted earnings per share was $0.60 compared to $0.63 for the same period last year [36] Business Line Data and Key Metrics Changes - In the Global Consumer segment, organic sales increased by 1%, with a 3% volume growth offset by a 2% impact from pricing investments [29][30] - The Flavor Solutions segment saw organic sales growth of 3%, driven by 2% volume growth and a 1% contribution from price [32] - In the Americas, Flavor Solutions organic sales increased by 4%, reflecting a 3% price contribution and 1% volume growth [32] Market Data and Key Metrics Changes - In EMEA, consumer organic sales grew by 4%, driven by a 2% increase in volume and a 2% increase in price [30] - Asia Pacific region saw consumer organic sales increase by 3%, driven by a 2% increase in volume and a 1% contribution from price [31] - Flavor Solutions in Asia Pacific experienced a significant 15% organic sales increase, with 16% volume growth driven by QSR customer promotions [33] Company Strategy and Development Direction - The company remains focused on growth through category management, brand marketing, new products, and proprietary technologies [25][26] - Investments in brand marketing are prioritized to connect with consumers and fuel growth, with an expected increase in brand marketing spend in the high single digits [27][43] - The company aims to capitalize on secular trends in health and wellness, with a focus on meeting changing consumer dietary needs [14][15] Management's Comments on Operating Environment and Future Outlook - Management noted increasing consumer uncertainty and inflation concerns impacting consumer sentiment, particularly among lower-income consumers [11][12] - The company expects to maintain its guidance for the year, reflecting confidence in strong sales performance and growth across both segments [39][60] - Management anticipates gross margin expansion throughout the year, driven by product mix and cost savings from the CCI program [42][43] Other Important Information - The company returned $121 million to shareholders through dividends and used $37 million for capital expenditures [38] - The outlook for 2025 includes expectations for organic net sales growth to range between 3% and 4%, with volume-led growth anticipated [41][42] Q&A Session Summary Question: What drove the stronger than forecast operating profit decline in the consumer segment? - Management indicated that timing shifts related to stock-based compensation and brand marketing investments impacted the operating profit, but they remain confident in the full-year guidance due to strong sales performance [54][56][58] Question: Can you provide context on pricing dynamics in the Americas consumer business? - Management explained that pricing in the Americas is expected to be flat, with some incremental pricing in EMEA to address commodity pressures, while volume growth remains the primary driver [66][70] Question: How is the company addressing tariff risks? - Management stated that known tariffs on China have been accounted for in their forecasts, and they are closely monitoring potential future tariff changes while preparing to manage any impacts [94][96] Question: What should investors expect in terms of EBIT and EPS in Q2? - Management noted that Q1 was expected to be different from the rest of the year, with continued top-line growth and gross margin improvements anticipated in the second half of the year [99][100]

Financial Data and Key Metrics Changes - The company achieved a non-GAAP EPS growth of 31% year-over-year, reaching $9.43, supported by a 200 basis points gross margin expansion to 44.4% [7][39] - Free cash flow for 2024 was $173 million, equating to $14.70 per share, allowing for $239 million in share repurchases [8][39] - Fourth quarter gross margin was 39.9%, an increase of 230 basis points year-over-year, marking the highest fourth quarter gross margin since 2020 [41] Business Line Data and Key Metrics Changes - Depletions in the fourth quarter were flat, with shipments decreasing by 0.5%, primarily due to declines in Truly Hard Seltzer, offset by growth in Twisted Tea, Sun Cruiser, and Hard Mountain Dew [40] - Twisted Tea maintained an 84% market share in the hard tea category, contributing over 50% of the dollar growth in that category in 2024 [20] - The Truly portfolio has been repositioned to focus on light flavors, with the higher ABV Truly Unruly performing above expectations [24] Market Data and Key Metrics Changes - The hard seltzer category faced headwinds, with category dollars down 4% in the fourth quarter [23] - The company noted that the beer category remains relevant, with significant growth opportunities in the "beyond beer" segment as consumer preferences evolve [8][9] Company Strategy and Development Direction - The company plans to increase advertising investments across its portfolio to improve market share and support the national launch of Sun Cruiser [10][12] - Strategic priorities for 2025 include nurturing core brands, developing margin-accretive innovations, and modernizing the supply chain while driving efficiency [17] - The company is focusing on a disciplined approach to innovation, particularly with the launch of vodka-based hard tea Sun Cruiser and the expansion of Samuel Adams [18][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of inflation on consumer behavior and increased competition in the "beyond beer" category [8][9] - The company expressed confidence in its strategy and team, emphasizing the importance of operational execution for long-term sustainable growth [12][36] - The 2025 financial guidance anticipates a range of outcomes due to the dynamic consumer demand environment [12][53] Other Important Information - The company reported a non-GAAP loss per diluted share of $1.68, primarily due to increased advertising and promotional expenses [45] - Capital expenditures for 2025 are expected to be between $90 million and $110 million, focusing on brewery capabilities and efficiencies [57] Q&A Session Summary Question: Can you elaborate on the new compensation plan? - The new compensation plan aligns incentives with business objectives, encouraging equal effort across all brands rather than focusing solely on volume [60][62] Question: How is beer demand starting the year? - The company is starting from a flat depletion point, with some brands like Twisted Tea facing challenges, but overall, they are satisfied with the beginning of the year [74][75] Question: What is the growth outlook for Twisted Tea? - The company is planning for single-digit growth for Twisted Tea, focusing on increasing advertising and introducing new products to attract new drinkers [108][110] Question: How is the company addressing health and wellness concerns? - The company is actively advocating for the alcohol industry and monitoring health trends, acknowledging potential shifts in consumer behavior [106][128] Question: What is the impact of cannabis beverages on the alcohol market? - While cannabis beverages are a potential threat, the company has not yet seen a significant impact on its portfolio and is prepared to enter the market if opportunities arise [87][92]

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