ncsm20240331

ncsm20240331_10q.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ Quarterly Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2024

☐ Transition Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the transition period from ______ to ______

Commission file number: 001-38071

NCS Multistage Holdings, Inc.

(Exact name of registrant as specified in its charter)

	Delaware		46-1527455
	(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification number)

	19350 State Highway 249, Suite 600
	Houston, Texas		77070
	(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (281) 453-2222

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	NCSM	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

As of May 1, 2024, there were 2,502,564 shares of common stock outstanding.

Table of Contents

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	27

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 5.	Other Information	28

Item 6.	Exhibits	29

Signatures		30

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

	*March 31,*			*December 31,*
	*2024*			*2023*
Assets
Current assets
Cash and cash equivalents	$	14,004		$	16,720
Accounts receivable—trade, net		33,919			23,981
Inventories, net		39,237			41,612
Prepaid expenses and other current assets		1,695			1,862
Other current receivables		4,065			4,042
Insurance receivable		—			15,000
Total current assets		92,920			103,217
Noncurrent assets
Property and equipment, net		23,143			23,336
Goodwill		15,222			15,222
Identifiable intangibles, net		4,240			4,407
Operating lease assets		4,461			4,847
Deposits and other assets		873			937
Deferred income taxes, net		66			66
Total noncurrent assets		48,005			48,815
Total assets	$	140,925		$	152,032
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable—trade	$	8,489		$	6,227
Accrued expenses		3,814			3,702
Income taxes payable		350			364
Operating lease liabilities		1,556			1,583
Accrual for legal contingencies		—			15,000
Current maturities of long-term debt		2,441			1,812
Other current liabilities		2,547			3,370
Total current liabilities		19,197			32,058
Noncurrent liabilities
Long-term debt, less current maturities		6,443			6,344
Operating lease liabilities, long-term		3,365			3,775
Other long-term liabilities		202			213
Deferred income taxes, net		239			249
Total noncurrent liabilities		10,249			10,581
Total liabilities		29,446			42,639
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding at March 31, 2024 and December 31, 2023		—			—
Common stock, $0.01 par value, 11,250,000 shares authorized, 2,540,626 shares issued and 2,485,708 shares outstanding at March 31, 2024 and 2,482,796 shares issued and 2,443,744 shares outstanding at December 31, 2023		25			25
Additional paid-in capital		445,404			444,638
Accumulated other comprehensive loss		(86,248	)		(85,752	)
Retained deficit		(263,547	)		(265,617	)
Treasury stock, at cost, 54,918 shares at March 31, 2024 and 39,052 shares at December 31, 2023		(1,913	)		(1,676	)
Total stockholders' equity		93,721			91,618
Non-controlling interest		17,758			17,775
Total equity		111,479			109,393
Total liabilities and stockholders' equity	$	140,925		$	152,032

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	*Three Months Ended*
	*March 31,*
	*2024*			*2023*
Revenues
Product sales	$	31,758		$	31,430
Services		12,100			12,124
Total revenues		43,858			43,554
Cost of sales
Cost of product sales, exclusive of depreciation and amortization expense shown below		19,692			18,833
Cost of services, exclusive of depreciation and amortization expense shown below		6,595			6,180
Total cost of sales, exclusive of depreciation and amortization expense shown below		26,287			25,013
Selling, general and administrative expenses		13,830			16,151
Depreciation		1,073			943
Amortization		167			167
Income from operations		2,501			1,280
Other income (expense)
Interest expense, net		(100	)		(209	)
Provision for litigation, net of recoveries		—			(17,514	)
Other income, net		1,137			292
Foreign currency exchange (loss) gain		(498	)		55
Total other income (expense)		539			(17,376	)
Income (loss) before income tax		3,040			(16,096	)
Income tax expense (benefit)		487			(1,100	)
Net income (loss)		2,553			(14,996	)
Net income (loss) attributable to non-controlling interest		483			(27	)
Net income (loss) attributable to NCS Multistage Holdings, Inc.	$	2,070		$	(14,969	)
Earnings (loss) per common share
Basic earnings (loss) per common share attributable to NCS Multistage Holdings, Inc.	$	0.83		$	(6.10	)
Diluted earnings (loss) per common share attributable to NCS Multistage Holdings, Inc.	$	0.82		$	(6.10	)
Weighted average common shares outstanding
Basic		2,508			2,452
Diluted		2,539			2,452

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	*Three Months Ended*
	*March 31,*
	*2024*			*2023*
Net income (loss)	$	2,553		$	(14,996	)
Foreign currency translation adjustments, net of tax of $0		(496	)		(99	)
Comprehensive income (loss)		2,057			(15,095	)
Less: Comprehensive income (loss) attributable to non-controlling interest		483			(27	)
Comprehensive income (loss) attributable to NCS Multistage Holdings, Inc.	$	1,574		$	(15,068	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

	*Three Months Ended March 31, 2024*
	*Preferred Stock*				*Common Stock*				Additional Paid-In		Accumulated Other Comprehensive			*Retained*			*Treasury Stock*						*Non-controlling*			Total Stockholders'
	*Shares*		*Amount*		*Shares*		*Amount*		*Capital*		*Loss*			*Deficit*			*Shares*			*Amount*			*Interest*			*Equity*
Balances as of December 31, 2023		—	$	—		2,482,796	$	25	$	444,638	$	(85,752	)	$	(265,617	)		(39,052	)	$	(1,676	)	$	17,775		$	109,393
Share-based compensation		—		—		—		—		766		—			—			—			—			—			766
Net income		—		—		—		—		—		—			2,070			—			—			483			2,553
Distribution to noncontrolling interest		—		—		—		—		—		—			—			—			—			(500	)		(500	)
Vesting of restricted stock		—		—		57,830		—		—		—			—			—			—			—			—
Shares withheld		—		—		—		—		—		—			—			(15,866	)		(237	)		—			(237	)
Currency translation adjustment		—		—		—		—		—		(496	)		—			—			—			—			(496	)
Balances as of March 31, 2024		—	$	—		2,540,626	$	25	$	445,404	$	(86,248	)	$	(263,547	)		(54,918	)	$	(1,913	)	$	17,758		$	111,479

	*Three Months Ended March 31, 2023*
	*Preferred Stock*				*Common Stock*				Additional Paid-In			Accumulated Other Comprehensive			*Retained*			*Treasury Stock*						*Non-controlling*			Total Stockholders'
	*Shares*		*Amount*		*Shares*		*Amount*		*Capital*			*Loss*			*Deficit*			*Shares*			*Amount*			*Interest*			*Equity*
Balances as of December 31, 2022		—	$	—		2,434,809	$	24	$	440,475		$	(85,617	)	$	(262,464	)		(26,335	)	$	(1,389	)	$	18,233		$	109,262
Share-based compensation		—		—		—		—		913			—			—			—			—			—			913
Net loss		—		—		—		—		—			—			(14,969	)		—			—			(27	)		(14,996	)
Vesting of restricted stock		—		—		41,489		1		(1	)		—			—			—			—			—			—
Shares withheld		—		—		—		—		—			—			—			(11,086	)		(264	)		—			(264	)
Currency translation adjustment		—		—		—		—		—			(99	)		—			—			—			—			(99	)
Balances as of March 31, 2023		—	$	—		2,476,298	$	25	$	441,387		$	(85,716	)	$	(277,433	)		(37,421	)	$	(1,653	)	$	18,206		$	94,816

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	*Three Months Ended*
	*March 31,*
	*2024*			*2023*
Cash flows from operating activities
Net income (loss)	$	2,553		$	(14,996	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		1,240			1,110
Amortization of deferred loan costs		51			51
Share-based compensation		902			1,265
Provision for inventory obsolescence		316			104
Deferred income tax expense		5			23
Gain on sale of property and equipment		(172	)		(83	)
Provision for litigation, net of recoveries		—			17,514
Net foreign currency unrealized loss (gain)		373			(205	)
Proceeds from note receivable		61			229
Changes in operating assets and liabilities:
Accounts receivable—trade		(10,282	)		(1,917	)
Inventories, net		1,521			(3,786	)
Prepaid expenses and other assets		29			933
Accounts payable—trade		2,355			831
Accrued expenses		130			274
Other liabilities		(1,339	)		(1,719	)
Income taxes receivable/payable		377			(1,179	)
Net cash used in operating activities		(1,880	)		(1,551	)
Cash flows from investing activities
Purchases of property and equipment		(299	)		(503	)
Purchase and development of software and technology		(13	)		(61	)
Proceeds from sales of property and equipment		176			84
Net cash used in investing activities		(136	)		(480	)
Cash flows from financing activities
Payments on finance leases		(449	)		(387	)
Line of credit borrowings		1,158			3,581
Payments of line of credit borrowings		(602	)		(3,349	)
Treasury shares withheld		(237	)		(264	)
Distribution to noncontrolling interest		(500	)		—
Net cash used in financing activities		(630	)		(419	)
Effect of exchange rate changes on cash and cash equivalents		(70	)		(151	)
Net change in cash and cash equivalents		(2,716	)		(2,601	)
Cash and cash equivalents beginning of period		16,720			16,234
Cash and cash equivalents end of period	$	14,004		$	13,633
Noncash investing and financing activities
Assets obtained in exchange for new finance lease liabilities	$	696		$	629
Assets obtained in exchange for new operating lease liabilities	$	—		$	38

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

NCS MULTISTAGE HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

Nature of Business

NCS Multistage Holdings, Inc., a Delaware corporation, through its wholly owned subsidiaries and subsidiaries for which it has a controlling voting interest (collectively referred to as the “Company,” “NCS,” “we,” “our” and “us”), is primarily engaged in providing engineered products and support services for oil and natural gas well construction, well completions and field development strategies. We offer our products and services primarily to exploration and production companies for use both in onshore and offshore wells. We operate through service facilities principally located in Houston and Odessa, Texas; Tulsa, Oklahoma; Calgary, Red Deer, Grande Prairie and Estevan, Canada; Neuquén, Argentina and Stavanger, Norway.

Basis of Presentation

Our accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities Exchange Act of 1934, as amended, issued by the Securities Exchange Commission (“SEC”) and have not been audited by our independent registered public accounting firm. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with our financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 (“Annual Report”). We consolidate Repeat Precision, LLC and its subsidiary (“Repeat Precision”), a 50% owned entity, with operations in the United States and Mexico, because NCS has a controlling voting interest. The other party’s ownership is presented separately as a non-controlling interest. In the opinion of management, these condensed consolidated financial statements reflect all normal, recurring adjustments necessary for a fair statement of the interim periods presented. The results of operations for interim periods are not necessarily indicative of those for a full year. All intercompany accounts and transactions have been eliminated for purposes of preparing these condensed consolidated financial statements. In addition, certain reclassifications of prior period balances have been made to conform to the current period presentation. The reclassifications had no effect on the previously reported net loss.

Significant Accounting Policies

Our significant accounting policies are described in “Note 2. Summary of Significant Accounting Policies” in our Annual Report.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU improves income tax disclosures including a requirement for specific categories in the effective tax rate reconciliation, additional information for reconciling items that meet a quantitative threshold, certain disclosures pertaining to income taxes paid (net of refunds received) and amendments to other disclosure requirements. The new standard is effective for fiscal years beginning after December 15, 2024 and should be applied prospectively although retrospective application is permitted. Early adoption is also permitted for financial statements that have not yet been issued. We are currently evaluating the impact of the adoption of this guidance.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements on an annual and interim basis and includes requirements for entities with a single reportable segment. The improvements include disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), the title and position of the CODM and explanation of how the CODM uses the reported measure of segment profit or loss in assessing performance and allocating resources along with other disclosure requirements. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and should be applied retrospectively. Early adoption is permitted. We are currently evaluating the impact of the adoption of this guidance.

Table of Contents

NCS MULTISTAGE HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2. Segment and Geographic Information

We have determined that we operate in one reportable segment that has been identified based on how our chief operating decision maker manages our business.

We aggregate revenue for presentation based on qualitative factors including the nature of the products and services, the nature and commonality of production processes, a shared customer base primarily in North America, the scope of geographic operations and a common industry and regulatory environment. However, we present revenue on a geographic basis, segregated between product sale and service revenues.

The following table summarizes revenue by geographic area attributed based on the current billing address of the customer (in thousands):

	*Three Months Ended*
	*March 31,*
	*2024*		*2023*
United States
Product sales	$	7,767	$	8,060
Services		2,244		3,259
Total United States		10,011		11,319
Canada
Product sales		22,675		22,561
Services		8,994		8,110
Total Canada		31,669		30,671
Other Countries
Product sales		1,316		809
Services		862		755
Total other countries		2,178		1,564
Total
Product sales		31,758		31,430
Services		12,100		12,124
Total revenues	$	43,858	$	43,554

Note 3. Revenues

Disaggregation of Revenue

We sell our products and services primarily in North America and in selected international markets. See above "Note 2. Segment and Geographic Information" for our disaggregated revenue by geographic area.

Contract Balances

If the timing of the delivery of products and provision of services is different from the timing of the customer payments, we recognize either a contract asset (performance precedes contractual due date in connection with estimates of variable consideration) or a contract liability (customer payment precedes performance) on our condensed consolidated balance sheet.

The following table presents the current contract liabilities as of March 31, 2024 and December 31, 2023 (in thousands):

Balance at December 31, 2023	$	460
Additions		88
Revenue recognized		(326	)
Balance at March 31, 2024	$	222

We currently do not have any contract assets or non-current contract liabilities. Our contract liability as of March 31, 2024 and December 31, 2023 is included in other current liabilities on the condensed consolidated balance sheets. Our performance obligations for our product and services revenues are typically satisfied before the customer’s payment; however, prepayments may occasionally b

SEC Form 10-Q filed by NCS Multistage Holdings Inc.