NCS Multistage(US:NCSM)2023-08-02 03:35Financial Data and Key Metrics Changes - The company's second quarter revenues were $25.4 million, an 8% decrease compared to the same period last year, with Canadian revenues increasing by 11% but offset by declines in U.S. and international revenues of 23% and 32% respectively [46] - The adjusted EBITDA for the second quarter was a negative $2.2 million, slightly declining from the negative $2 million in the same period of 2022, while the first half of 2023 saw adjusted EBITDA improve to a positive $2.6 million compared to $300,000 in the first half of 2022 [50] - The company reported a net loss of $32.2 million for the second quarter, primarily due to a $24.9 million charge related to a legal judgment [49] Business Line Data and Key Metrics Changes - U.S. revenue fell to $9.4 million in the second quarter, below the guidance range of $12 million to $13 million, reflecting a sequential decline due to reduced industry activity [26] - Canadian revenue of $14.3 million in the second quarter exceeded guidance and represented an 11% increase year-over-year, driven by higher sales of composite plugs [1][46] - International revenue was $1.7 million, below the guided range of $2 million to $3 million, with ongoing efforts to expand the customer base in the North Sea [37] Market Data and Key Metrics Changes - The company anticipates a year-over-year decline in average annual industry activity of 5% to 10% in the U.S. and an increase of up to 5% in Canada, while international industry activity is expected to grow by at least 10% in 2023 [38] - The company expects to return to sequential growth in the third quarter, particularly in fracturing systems and tracer diagnostics product lines [26] Company Strategy and Development Direction - The company is focused on maintaining an asset-light business model with low maintenance capital requirements, expecting gross capital expenditures of $2 million to $3 million for 2023 [6] - The company is consolidating operations to enhance efficiency, with expected annualized benefits of over $1.5 million from recent consolidation efforts [42] - The strategic focus includes expanding international markets, particularly in the Middle East and North Sea, with positive indications from multiple customers for future activity [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth prospects despite reduced U.S. rig counts, emphasizing the company's positioning to benefit from a multiyear cycle of improved growth and earnings [74] - The management noted that the recent Texas judgment is expected to be covered by insurance, and they do not anticipate a significant impact on liquidity or operations [7][45] Other Important Information - The company maintained a strong balance sheet with a cash balance of over $13 million at the end of the second quarter, expecting to generate positive free cash flow in 2023 [8][51] - The gross margin percentage improved to 39% for the first half of 2023, up from 36% in the same period of 2022, due to price increases [36][47] Q&A Session Summary Question: What are the expectations regarding the litigation and insurance payments? - Management indicated that they plan to appeal the Texas judgment and believe a significant portion of the damages will be covered by insurance, with mediation scheduled for the end of August [24][45] Question: Can you provide more details on the expansion plans beyond North America? - The company highlighted ongoing efforts in the Middle East and North Sea, with successful field trials and new customer acquisitions expected to drive growth [23][59] Question: How does the recent project in West Texas impact future operations? - The project demonstrated the efficiency of the company's technology, and management expects other operators to replicate this success, potentially leading to increased demand [10][61]