NCS Multistage(US:NCSM)2021-03-02 17:50Financial Data and Key Metrics Changes - Fourth quarter revenues were $27.4 million, a 47% decrease compared to the same quarter last year, but a 68% increase sequentially from the third quarter [24] - Full year revenue for 2020 was $107 million, representing a 48% reduction compared to 2019 [25] - Gross profit for the fourth quarter was $11.7 million, or 43% of revenue, compared to 50% in the prior year's fourth quarter [25] - Selling, general and administrative (SG&A) costs were $10.6 million in the fourth quarter, a 52% decrease from the prior year's fourth quarter [26] - Adjusted EBITDA for the fourth quarter was $3 million, down from $8.3 million in the prior year's fourth quarter [27] - Free cash flow for the fourth quarter was $20.7 million, with a total of $34.1 million for the full year [28] Business Line Data and Key Metrics Changes - Revenue in Canada increased sequentially by 279% in the fourth quarter, driven by a recovery from an artificially low base [18] - US revenue is expected to be lower in the first quarter of 2021 compared to the fourth quarter of 2020, primarily due to decreased activity at Repeat Precision [19] - International revenue decreased by 35% sequentially in the fourth quarter [24] Market Data and Key Metrics Changes - The Canadian market is expected to see flat to modestly lower industry activity in 2021, but the company is well-positioned to grow revenue despite this [17] - In the US, industry capital spending is expected to be flat to 10% lower in 2021 compared to 2020, with a sequential increase in drilling and completion activity anticipated [19] - International operations represented an increase from 8% to 11% of total revenue last year, with expectations for further growth in 2021 [15] Company Strategy and Development Direction - The company aims to commercialize new products that will facilitate near-term opportunities and position for long-term growth within the oil and gas industry [14] - Focus on maintaining cost discipline to support gross margins and manage capital expenditures and SG&A [23] - The company is pursuing accretive growth in international markets, which are expected to continue to grow as a percentage of total revenue [33] Management's Comments on Operating Environment and Future Outlook - The management highlighted the challenges faced in 2020 due to the pandemic but noted that the team successfully navigated these challenges [11] - The company is focused on delivering value through its product offerings and expects to generate free cash flow in 2021 [15] - Management expressed confidence in returning to sequential growth in the second quarter of 2021 after addressing issues with new product designs [40] Other Important Information - The company ended 2020 with a stronger balance sheet, increasing cash balance by over $4 million while reducing debt by over $7 million [12] - A significant highlight was the settlement related to historical litigation with Diamondback, resulting in over $23 million in cash and ownership of a patent [13] Q&A Session Summary Question: Insights on Q1 guidance and factors affecting revenue - Management indicated that the expected revenue decline in Q1 is primarily due to Repeat Precision and disruptions from winter storms [37] Question: Impact of simul-fracs and coiled tubing pricing - Management noted that simul-fracs positively impact the tracer product line and that coiled tubing pricing is at historic lows, providing a tailwind for the business [41][43] Question: Drivers of raw material price increases - Management stated that while they have not yet seen material price increases affect them due to bulk purchasing, they expect to see impacts in the latter half of the year [47] Question: Customer willingness to adopt new products - Management observed that customers are generally willing to try new technologies if they see a clear value proposition, although recent product issues have required a pivot back to previous designs [48] Question: Margins outlook and M&A discussions - Management provided guidance for Q1 margins and indicated that discussions around industry consolidation are ongoing as companies look to strengthen their positions [50][51]