NCS Multistage Holdings, Inc. (NASDAQ: NCSM) (the “Company,” “NCS,”
“we” or “us”), a leading provider of highly engineered products and
support services that facilitate the optimization of oil and
natural gas well completions and field development strategies,
today announced its results for the quarter ended
September 30, 2019.
Financial Review
Revenues were $60.8 million for the quarter ended
September 30, 2019, which was a decrease of 3% compared to the
third quarter of 2018. This decrease was primarily attributable to
a decrease in the volume of sales of our fracturing systems
products and services and our well construction products in the
U.S., partially offset by increased sales of our Repeat Precision,
LLC (“Repeat Precision”) products. Total revenues increased
by 53% as compared to the second quarter of 2019 with
increases of 7% in the United States, 127% in Canada and 301%
outside of North America.
Gross profit, which we define as total revenues less total cost
of sales exclusive of depreciation and amortization, was $28.6
million, or 47% of total revenues, in the third quarter of 2019, a
decrease compared to $33.9 million, or 54% of total revenues, in
the third quarter of 2018. Cost of sales was a higher percentage of
revenues due to reductions in the pricing of our products and
services, the use of third-party machining capacity, and higher
cost of sales in tracer diagnostics, related to field service
staffing levels and increased chemical costs associated with
tariffs imposed on certain imports from China in September 2018 and
later increased in May 2019. These increases were partially offset
by increased sales at Repeat Precision, which enabled better fixed
cost utilization.
Selling, general and administrative (“SG&A”) expenses of
$20.4 million increased in the third quarter as compared to the
third quarter of the prior year. The increase was due to higher
professional services expenses, most notably litigation expenses,
and a one-time severance charge of $0.7 million related to a
reduction in workforce, partially offset by lower research and
development expenses.
Net income was $3.6 million, or $0.08 per diluted share, for the
quarter ended September 30, 2019, which included a net impact
of $0.1 million (after tax effect of $(6.8) million, or
$(0.15) per diluted share) related to realized and unrealized
foreign currency gains and losses as well as the income tax impact
of the income tax valuation allowance recorded to reduce the
carrying value of our U.S. deferred tax asset and the tax effect of
a non-deductible goodwill impairment recorded earlier this year.
Adjusted net loss, which excludes these items, was $(3.2) million,
or $(0.07) per diluted share, for the quarter ended
September 30, 2019. This compares to a net income of
$6.3 million, or $0.13 per diluted share, in the third quarter
of 2018, which included a net benefit of $1.2 million ($0.9 million
after tax, or $0.02 per diluted share) related to the change in
fair value of contingent consideration and realized and unrealized
foreign currency gains and losses. Adjusted net income, which
excludes these items, was $5.4 million, or $0.11 per diluted share,
for the quarter ended September 30, 2018.
Adjusted EBITDA was $13.6 million for the quarter ended
September 30, 2019, a decrease of $(4.4) million as compared
to the third quarter of 2018. Adjusted EBITDA margin for the
quarter was 22%, as compared to 29% for the third quarter of
2018.
Capital Expenditures and Liquidity
The Company incurred capital expenditures of $0.3 million, net,
for the third quarter of 2019 and $4.4 million, net, for the nine
months ended September 30, 2019.
As of September 30, 2019, the Company had $4.5 million in
cash, total potential availability under its revolving credit
facility of $62.0 million and $16.3 million in total debt. During
the third quarter, the Company reduced its total debt by $3.2
million, including a $3.0 million reduction in its revolving credit
facility balance.
Review and Outlook
NCS’s Chief Executive Officer, Robert Nipper, commented,
“I’m very proud of the tremendous team we have at NCS and the
results we were able to deliver during the third quarter. Despite a
difficult market environment which, for example, saw the average
U.S. land rig count fall by 7% on a sequential basis, we achieved
7% sequential total U.S. revenue growth and our eighth consecutive
quarter of sequential U.S. product sales growth. Market conditions
in Canada continue to be very challenging, with the average land
rig count in the third quarter 37% below last year’s levels. By
growing our market share in fracturing systems and focusing on
cross-selling each of our product and service lines, we limited our
year-over-year decline in Canadian revenue to only 10%. We also
demonstrated the benefit of our international footprint during the
quarter, having provided products or services in Argentina, China,
Russia, the Middle East, the North Sea and the UK.
As we look forward to the fourth quarter, we expect a continued
decline in rig count and completion activity in the U.S., as
customers constrain activity to stay within their capital budgets.
In Canada, the average rig count through the first three quarters
was 33% below the same period during 2018. We expect customer
activity in the fourth quarter to continue to be materially below
last year’s levels. International activity remains a relative
bright spot, being more resilient than customer activity in North
America.
We made good progress during the third quarter in advancing
initiatives undertaken to address the items that pressured our
gross margin during the second quarter. There is still room to
improve, and we continue to work to enhance the efficiency of our
supply chain and commercialize new products that we believe will
benefit our gross margin in the future. This is especially
important in an environment with declining customer activity, as we
face today, which creates significant competitive pricing pressure
among oilfield services companies.
We made the difficult decision to reduce our workforce by 6% in
July. We are highly focused on managing our spending as a company,
and were able to reduce our SG&A by over 10% in the third
quarter, as compared to the second quarter. We are again reducing
our expected full year gross capital spending to between $6.0 and
$7.0 million, the midpoint of which is less than half of 2018
capital spending. Our employees continue to provide us with
additional ideas for further improving the efficiency of our
operations and streamlining our spending, and the results speak for
themselves.
As always, I want to thank each and every one of our employees
for their efforts, actions, support and ideas. It is through this
team, which delivers excellent operational performance and customer
service every single day, that we are able to earn the right to
work for our customers and drive continued innovation in our
industry.”
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA Less
Share-Based Compensation, Adjusted Net (Loss) Income, Adjusted Net
(Loss) Earnings per Diluted Share and Free Cash Flow are non-GAAP
financial measures. For an explanation of these measures and a
reconciliation, refer to “Non-GAAP Financial Measures” below.
Conference Call
The Company will host a conference call to discuss its third
quarter 2019 results on Tuesday, November 5, 2019 at 7:30 a.m.
Central Time (8:30 a.m. Eastern Time). To join the conference
call from within the United States, participants may dial (844)
400-1696. To join the conference call from outside of the United
States, participants may dial (703) 736-7385. The conference access
code is 1753687. Participants are encouraged to log in to the
webcast or dial in to the conference call approximately ten minutes
prior to the start time. To listen via live webcast, please visit
the Investors section of the Company’s website,
http://www.ncsmultistage.com.
An audio replay of the conference call will be available shortly
after the conclusion of the call and will remain available for
approximately seven days. It can be accessed by dialing (855)
859-2056 within the United States or (404) 537-3406 outside of the
United States. The conference call replay access code is 1753687.
The replay will also be available in the Investors section of the
Company’s website shortly after the conclusion of the call and will
remain available for approximately seven days.
About NCS Multistage Holdings, Inc.
NCS Multistage Holdings, Inc. is a leading provider of highly
engineered products and support services that facilitate the
optimization of oil and natural gas well completions and field
development strategies. NCS provides products and services to
exploration and production companies for use in horizontal wells in
unconventional oil and natural gas formations throughout North
America and in selected international markets, including Argentina,
China, Russia, the Middle East and the North Sea. NCS’s common
stock is traded on the NASDAQ Global Select Market under the symbol
“NCSM.” Additional information is available on the website,
www.ncsmultistage.com.
Forward Looking Statements
This press release contains forward-looking statements within
the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as “anticipates,”
“intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and
similar references to future periods, or by the inclusion of
forecasts or projections. Examples of forward-looking statements
include, but are not limited to, statements we make regarding the
outlook for our future business and financial performance.
Forward-looking statements are based on our current expectations
and assumptions regarding our business, the economy and other
future conditions. Because forward-looking statements relate to the
future, by their nature, they are subject to inherent
uncertainties, risks and changes in circumstances that are
difficult to predict. As a result, our actual results may differ
materially from those contemplated by the forward-looking
statements. Important factors that could cause our actual results
to differ materially from those in the forward-looking statements
include regional, national or global political, economic, business,
competitive, market and regulatory conditions and the following:
declines in the level of oil and natural gas exploration and
production activity within Canada and the United States; oil and
natural gas price fluctuations; loss of significant customers;
inability to successfully implement our strategy of increasing
sales of products and services into the United States; significant
competition for our products and services; our inability to
accurately predict customer demand; impairment in the carrying
value of long-lived assets and goodwill; our inability to
successfully develop and implement new technologies, products and
services; our inability to protect and maintain critical
intellectual property assets; currency exchange rate fluctuations;
losses and liabilities from uninsured or underinsured business
activities; our failure to identify and consummate potential
acquisitions; our inability to integrate or realize the expected
benefits from acquisitions; impact of severe weather conditions;
restrictions on the availability of our customers to obtain water
essential to the drilling and hydraulic fracturing processes; our
inability to meet regulatory requirements for use of certain
chemicals by our tracer diagnostics business; change in trade
policy, including the impact of additional tariffs; changes in
legislation or regulation governing the oil and natural gas
industry, including restrictions on emissions of greenhouse gases;
failure to comply with or changes to federal, state and local and
non-U.S. laws and other regulations, including environmental
regulations and the U.S. Tax Cuts and Jobs Act of 2017; loss of our
information and computer systems; system interruptions or failures,
including cyber-security breaches, identity theft or other
disruptions that could compromise our information; our failure to
establish and maintain effective internal control over financial
reporting; complications with the design and implementation of our
new enterprise resource planning system; our success in attracting
and retaining qualified employees and key personnel; our inability
to satisfy technical requirements and other specifications under
contracts and contract tenders and other factors discussed or
referenced in our filings made from time to time with the
Securities and Exchange Commission. Any forward-looking statement
made by us in this press release speaks only as of the date on
which we make it. Factors or events that could cause our actual
results to differ may emerge from time to time, and it is not
possible for us to predict all of them. We undertake no obligation
to publicly update or revise any forward-looking statement, whether
as a result of new information, future developments or otherwise,
except as may be required by law.
Contact
Ryan HummerChief Financial Officer(281)
453-2222IR@ncsmultistage.com
NCS MULTISTAGE HOLDINGS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except per share
data)(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
43,756 |
|
|
$ |
44,633 |
|
|
$ |
110,933 |
|
|
$ |
122,514 |
|
Services |
|
|
17,017 |
|
|
|
18,058 |
|
|
|
42,458 |
|
|
|
54,261 |
|
Total revenues |
|
|
60,773 |
|
|
|
62,691 |
|
|
|
153,391 |
|
|
|
176,775 |
|
Cost of
sales |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sales,
exclusive of depreciation and amortization expense shown
below |
|
|
23,796 |
|
|
|
20,275 |
|
|
|
57,032 |
|
|
|
57,600 |
|
Cost of services, exclusive of
depreciation and amortization expense shown below |
|
|
8,413 |
|
|
|
8,542 |
|
|
|
25,021 |
|
|
|
24,721 |
|
Total cost of sales, exclusive of depreciation and
amortization expense shown below |
|
|
32,209 |
|
|
|
28,817 |
|
|
|
82,053 |
|
|
|
82,321 |
|
Selling, general and
administrative expenses |
|
|
20,441 |
|
|
|
19,356 |
|
|
|
66,360 |
|
|
|
62,508 |
|
Depreciation |
|
|
1,461 |
|
|
|
1,174 |
|
|
|
4,382 |
|
|
|
3,429 |
|
Amortization |
|
|
1,153 |
|
|
|
3,255 |
|
|
|
3,451 |
|
|
|
9,859 |
|
Change in fair value of
contingent consideration |
|
|
— |
|
|
|
(1,865 |
) |
|
|
37 |
|
|
|
(3,005 |
) |
Impairment |
|
|
— |
|
|
|
— |
|
|
|
7,919 |
|
|
|
— |
|
Income (loss) from operations |
|
|
5,509 |
|
|
|
11,954 |
|
|
|
(10,811 |
) |
|
|
21,663 |
|
Other income
(expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(424 |
) |
|
|
(317 |
) |
|
|
(1,497 |
) |
|
|
(1,382 |
) |
Other income, net |
|
|
259 |
|
|
|
28 |
|
|
|
349 |
|
|
|
68 |
|
Foreign currency exchange
loss |
|
|
(131 |
) |
|
|
(688 |
) |
|
|
(678 |
) |
|
|
(399 |
) |
Total other expense |
|
|
(296 |
) |
|
|
(977 |
) |
|
|
(1,826 |
) |
|
|
(1,713 |
) |
Income (loss) before income tax |
|
|
5,213 |
|
|
|
10,977 |
|
|
|
(12,637 |
) |
|
|
19,950 |
|
Income tax (benefit) expense |
|
|
(1,396 |
) |
|
|
3,211 |
|
|
|
10,200 |
|
|
|
3,137 |
|
Net income (loss) |
|
|
6,609 |
|
|
|
7,766 |
|
|
|
(22,837 |
) |
|
|
16,813 |
|
Net income attributable to
non-controlling interest |
|
|
2,988 |
|
|
|
1,443 |
|
|
|
7,809 |
|
|
|
3,565 |
|
Net income (loss)
attributable to NCS Multistage Holdings, Inc. |
|
$ |
3,621 |
|
|
$ |
6,323 |
|
|
$ |
(30,646 |
) |
|
$ |
13,248 |
|
Earnings (loss) per
common share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share attributable to NCS
Multistage Holdings, Inc. |
|
$ |
0.08 |
|
|
$ |
0.14 |
|
|
$ |
(0.66 |
) |
|
$ |
0.29 |
|
Diluted earnings (loss) per common share attributable to NCS
Multistage Holdings, Inc. |
|
$ |
0.08 |
|
|
$ |
0.13 |
|
|
$ |
(0.66 |
) |
|
$ |
0.28 |
|
Weighted average
common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
46,892 |
|
|
|
44,943 |
|
|
|
46,552 |
|
|
|
44,660 |
|
Diluted |
|
|
46,921 |
|
|
|
47,404 |
|
|
|
46,552 |
|
|
|
47,254 |
|
NCS MULTISTAGE HOLDINGS,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands, except share
data)(Unaudited)
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2019 |
|
|
2018 |
|
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,518 |
|
|
$ |
25,131 |
|
Accounts receivable—trade, net of allowances of $846 and $311 at
2019 and 2018, respectively |
|
|
57,826 |
|
|
|
49,984 |
|
Inventories |
|
|
40,614 |
|
|
|
32,753 |
|
Prepaid expenses and other current assets |
|
|
2,069 |
|
|
|
2,037 |
|
Other current receivables |
|
|
5,328 |
|
|
|
4,685 |
|
Total current assets |
|
|
110,355 |
|
|
|
114,590 |
|
Noncurrent assets |
|
|
|
|
|
|
Property and equipment, net |
|
|
33,670 |
|
|
|
32,296 |
|
Goodwill |
|
|
15,222 |
|
|
|
23,112 |
|
Identifiable intangibles, net |
|
|
46,146 |
|
|
|
48,985 |
|
Deposits and other assets |
|
|
7,672 |
|
|
|
1,392 |
|
Deferred income taxes, net |
|
|
— |
|
|
|
9,326 |
|
Total noncurrent assets |
|
|
102,710 |
|
|
|
115,111 |
|
Total assets |
|
$ |
213,065 |
|
|
$ |
229,701 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable—trade |
|
$ |
18,122 |
|
|
$ |
7,167 |
|
Accrued expenses |
|
|
3,194 |
|
|
|
4,084 |
|
Income taxes payable |
|
|
470 |
|
|
|
184 |
|
Current contingent consideration |
|
|
— |
|
|
|
9,963 |
|
Other current liabilities |
|
|
5,094 |
|
|
|
1,991 |
|
Current maturities of long-term debt |
|
|
1,609 |
|
|
|
2,236 |
|
Total current liabilities |
|
|
28,489 |
|
|
|
25,625 |
|
Noncurrent liabilities |
|
|
|
|
|
|
Long-term debt, less current maturities |
|
|
14,693 |
|
|
|
23,455 |
|
Other long-term liabilities |
|
|
4,856 |
|
|
|
1,258 |
|
Deferred income taxes, net |
|
|
3,180 |
|
|
|
3,132 |
|
Total noncurrent liabilities |
|
|
22,729 |
|
|
|
27,845 |
|
Total liabilities |
|
|
51,218 |
|
|
|
53,470 |
|
Commitments and
contingencies |
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no
shares issued and outstanding at |
|
|
|
|
|
|
September 30, 2019 and one share issued and outstanding at
December 31, 2018 |
|
|
— |
|
|
|
— |
|
Common stock, $0.01 par value, 225,000,000 shares authorized,
46,904,232 shares issued |
|
|
|
|
|
|
and 46,811,855 shares outstanding at September 30, 2019 and
45,100,771 shares issued |
|
|
|
|
|
|
and 45,072,463 shares outstanding at December 31, 2018 |
|
|
469 |
|
|
|
451 |
|
Additional paid-in capital |
|
|
421,583 |
|
|
|
411,423 |
|
Accumulated other comprehensive loss |
|
|
(82,025 |
) |
|
|
(84,030 |
) |
Retained deficit |
|
|
(196,852 |
) |
|
|
(166,206 |
) |
Treasury stock, at cost; 92,377 shares at September 30, 2019
and 28,308 shares |
|
|
|
|
|
|
at December 31, 2018 |
|
|
(667 |
) |
|
|
(337 |
) |
Total stockholders’ equity |
|
|
142,508 |
|
|
|
161,301 |
|
Non-controlling interest |
|
|
19,339 |
|
|
|
14,930 |
|
Total equity |
|
|
161,847 |
|
|
|
176,231 |
|
Total liabilities and stockholders' equity |
|
$ |
213,065 |
|
|
$ |
229,701 |
|
NCS MULTISTAGE HOLDINGS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(In
thousands)(Unaudited)
|
|
|
|
|
|
|
Nine Months Ended |
|
September 30, |
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
Cash flows from
operating activities |
|
|
Net (loss) income |
$ |
(22,837 |
) |
|
$ |
16,813 |
|
Adjustments to reconcile net
(loss) income to net cash provided by operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
7,833 |
|
|
|
13,288 |
|
Impairment |
|
7,919 |
|
|
|
— |
|
Amortization of deferred loan cost |
|
236 |
|
|
|
251 |
|
Share-based compensation |
|
9,380 |
|
|
|
8,197 |
|
Provision for inventory obsolescence |
|
417 |
|
|
|
1,219 |
|
Deferred income tax expense (benefit) |
|
9,281 |
|
|
|
(2,148 |
) |
Gain on sale of property and equipment |
|
(300 |
) |
|
|
(39 |
) |
Change in fair value of contingent consideration |
|
37 |
|
|
|
(3,005 |
) |
Provision for doubtful accounts |
|
1,715 |
|
|
|
— |
|
Payment of contingent consideration |
|
(3,042 |
) |
|
|
— |
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
Accounts receivable—trade |
|
(9,552 |
) |
|
|
(10,787 |
) |
Inventories |
|
(8,218 |
) |
|
|
(1,529 |
) |
Prepaid expenses and other assets |
|
723 |
|
|
|
(2,237 |
) |
Accounts payable—trade |
|
12,272 |
|
|
|
6,959 |
|
Accrued expenses |
|
(915 |
) |
|
|
(2,371 |
) |
Other liabilities |
|
(805 |
) |
|
|
816 |
|
Income taxes receivable/payable |
|
671 |
|
|
|
(17,812 |
) |
Net cash provided by operating activities |
|
4,815 |
|
|
|
7,615 |
|
Cash flows from
investing activities |
|
|
|
|
|
Purchases of property and
equipment |
|
(4,990 |
) |
|
|
(7,352 |
) |
Purchase and development of
software and technology |
|
(251 |
) |
|
|
(2,588 |
) |
Proceeds from sales of
property and equipment |
|
816 |
|
|
|
298 |
|
Net cash used in investing activities |
|
(4,425 |
) |
|
|
(9,642 |
) |
Cash flows from
financing activities |
|
|
|
|
|
Equipment note borrowings |
|
835 |
|
|
|
1,001 |
|
Payments on equipment note and
finance leases |
|
(4,552 |
) |
|
|
(1,437 |
) |
Promissory note
borrowings |
|
— |
|
|
|
5,053 |
|
Payments on promissory
note |
|
— |
|
|
|
(8,366 |
) |
Payments on revolver |
|
(7,000 |
) |
|
|
— |
|
Payment of contingent
consideration |
|
(6,958 |
) |
|
|
— |
|
Proceeds from the exercise of
options for common stock |
|
— |
|
|
|
1,001 |
|
Treasury shares withheld |
|
(330 |
) |
|
|
(161 |
) |
Distribution to noncontrolling
interest |
|
(3,400 |
) |
|
|
(500 |
) |
Proceeds from the issuance of
ESPP shares |
|
1,025 |
|
|
|
— |
|
Payment of deferred loan cost
related to senior secured credit facility |
|
(871 |
) |
|
|
— |
|
Net cash used in financing activities |
|
(21,251 |
) |
|
|
(3,409 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
248 |
|
|
|
(933 |
) |
Net change in cash and cash equivalents |
|
(20,613 |
) |
|
|
(6,369 |
) |
Cash and cash equivalents
beginning of period |
|
25,131 |
|
|
|
33,809 |
|
Cash and cash equivalents end
of period |
$ |
4,518 |
|
|
$ |
27,440 |
|
Supplemental cash flow
information |
|
|
|
|
|
Cash paid for income taxes
(net of refunds) |
$ |
210 |
|
|
$ |
22,922 |
|
NCS MULTISTAGE HOLDINGS,
INC.RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
INFORMATION(In thousands, except per share
data) (Unaudited)
Non-GAAP Financial Measures
EBITDA is defined as net (loss) income before interest expense,
net, income tax expense and depreciation and amortization. Adjusted
EBITDA is defined as EBITDA adjusted to exclude certain items which
we believe are not reflective of ongoing operating performance or
which, in the case of an impairment and share-based compensation,
are non-cash in nature. Adjusted EBITDA margin represents Adjusted
EBITDA as a percentage of total revenues. Adjusted EBITDA Less
Share-Based Compensation is defined as Adjusted EBITDA minus
share-based compensation expense. Adjusted Net (Loss) Income is
defined as net (loss) income attributable to NCS Multistage
Holdings, Inc. adjusted to exclude certain items which we believe
are not reflective of ongoing performance. Adjusted Net (Loss)
Earnings per Diluted Share is defined as Adjusted Net (Loss) Income
divided by our diluted weighted average common shares outstanding
during the relevant period. Free cash flow is defined as net cash
provided by (used in) operating activities less purchases of
property and equipment (inclusive of the purchase and development
of software and technology) plus proceeds from sales of property
and equipment, as presented in our consolidated statement of cash
flows. We believe that Adjusted EBITDA, Adjusted Net (Loss) Income
and Adjusted Net (Loss) Earnings per Diluted Share are important
measures that exclude costs that management believes do not reflect
our ongoing operating performance and, in the case of Adjusted
EBITDA, certain costs associated with our capital structure. We
believe that Adjusted EBITDA Less Share-Based Compensation presents
our financial performance in a manner that is comparable to the
presentation provided by many of our peers. We believe free cash
flow is useful because it provides information to investors
regarding the cash that was available in the period that was in
excess of our needs to fund our capital expenditures and other
investment needs. Accordingly, Adjusted EBITDA, Adjusted EBITDA
margin, Adjusted EBITDA Less Share-Based Compensation, Adjusted Net
(Loss) Income, Adjusted Net (Loss) Earnings per Diluted Share and
Free Cash Flow are key metrics that management uses to assess the
period-to-period performance of our core business
operations. We believe that presenting Adjusted EBITDA,
Adjusted EBITDA margin, Adjusted EBITDA Less Share-Based
Compensation, Adjusted Net (Loss) Income and Adjusted Net (Loss)
Earnings per Diluted Share enables investors to assess our
performance from period to period using the same metrics utilized
by management and that Adjusted EBITDA, Adjusted EBITDA margin,
Adjusted EBITDA Less Share-Based Compensation, Adjusted Net (Loss)
Income and Adjusted Net (Loss) Earnings per Diluted Share enable
investors to evaluate our performance relative to other companies
that are not subject to such factors.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA
Less Share-Based Compensation, Adjusted Net (Loss) Income, Adjusted
Net (Loss) Earnings per Diluted Share and Free Cash Flow (our
“non-GAAP financial measures”) are not defined under generally
accepted accounting principles (“GAAP”), are not measures of net
income, income from operations, cash provided by operating
activities or any other performance measure derived in accordance
with GAAP, and are subject to important limitations. Our non-GAAP
financial measures may not be comparable to similarly titled
measures of other companies in our industry and are not measures of
performance calculated in accordance with GAAP. Our non-GAAP
financial measures have important limitations as analytical tools
and you should not consider them in isolation or as substitutes for
analysis of our financial performance as reported under GAAP and
they should not be considered as alternatives to net income (loss),
cash provided by operating activities or any other performance
measures derived in accordance with GAAP as measures of operating
performance or as alternatives to cash flow from operating
activities as measures of our liquidity.
The tables below set forth reconciliations of our non-GAAP
financial measures to the most directly comparable measure of
financial performance calculated under GAAP:
NCS MULTISTAGE HOLDINGS,
INC.RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
INFORMATION(In thousands, except per share
data) (Unaudited)
ADJUSTED NET (LOSS) INCOME AND ADJUSTED
NET (LOSS) EARNINGS PER DILUTED SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, 2019 |
|
September 30, 2018 |
|
September 30, 2019 |
|
September 30, 2018 |
|
|
Effect on Net Income (Loss) |
|
Impact on Diluted Earnings (Loss) Per Share |
|
Effect on Net Income |
|
Impact on Diluted Earnings Per Share |
|
Effect on Net Loss |
|
Impact on Diluted Loss Per Share |
|
Effect on Net Income |
|
Impact on Diluted Earnings Per Share |
Net income (loss) attributable to NCS Multistage Holdings,
Inc. |
|
$ |
3,621 |
|
|
$ |
0.08 |
|
|
$ |
6,323 |
|
|
$ |
0.13 |
|
|
$ |
(30,646 |
) |
|
$ |
(0.66 |
) |
|
$ |
13,248 |
|
|
$ |
0.28 |
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment (a) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,919 |
|
|
|
0.17 |
|
|
|
— |
|
|
|
— |
|
Realized and unrealized losses (gains) (b) |
|
|
124 |
|
|
|
— |
|
|
|
666 |
|
|
|
0.01 |
|
|
|
667 |
|
|
|
0.01 |
|
|
|
368 |
|
|
|
0.01 |
|
Change in fair value of contingent consideration (c) |
|
|
— |
|
|
|
— |
|
|
|
(1,865 |
) |
|
|
(0.04 |
) |
|
|
37 |
|
|
|
— |
|
|
|
(3,005 |
) |
|
|
(0.06 |
) |
Income tax impact from adjustments (d) |
|
|
(6,973 |
) |
|
|
(0.15 |
) |
|
|
319 |
|
|
|
0.01 |
|
|
|
11,757 |
|
|
|
0.26 |
|
|
|
705 |
|
|
|
0.01 |
|
Adjusted net (loss)
income attributable to NCS Multistage
Holdings, Inc. |
|
$ |
(3,228 |
) |
|
$ |
(0.07 |
) |
|
$ |
5,443 |
|
|
$ |
0.11 |
|
|
$ |
(10,266 |
) |
|
$ |
(0.22 |
) |
|
$ |
11,316 |
|
|
$ |
0.24 |
|
_____________________
- Represents non-cash impairment charge for goodwill as the fair
value was lower than the carrying value.
- Represents realized and unrealized foreign currency translation
gains and losses primarily due to movement in the foreign currency
exchange rates between the periods.
- The change in 2019 represents the difference between the
December 31, 2018 liability balance and the $10.0 million cash
payment for the Repeat Precision earn-out consideration, which was
paid to our joint venture partner on January 31, 2019. The change
in 2018 was due to the revaluation of the earn-out obligations
associated with our acquisitions.
- Represents the income tax adjustments including the valuation
allowance recorded to reduce the carrying value of our U.S.
deferred tax asset and the tax effect of a non-deductible goodwill
impairment recorded during the three months ended June 30,
2019.
NCS MULTISTAGE HOLDINGS,
INC.RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
INFORMATION(In thousands)
(Unaudited)
ADJUSTED EBITDA, ADJUSTED EBITDA MARGIN,
AND ADJUSTED EBITDA LESS SHARE-BASED COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Net income (loss) |
|
$ |
6,609 |
|
|
$ |
7,766 |
|
|
$ |
(22,837 |
) |
|
$ |
16,813 |
|
Income tax (benefit)
expense |
|
|
(1,396 |
) |
|
|
3,211 |
|
|
|
10,200 |
|
|
|
3,137 |
|
Interest expense, net |
|
|
424 |
|
|
|
317 |
|
|
|
1,497 |
|
|
|
1,382 |
|
Depreciation |
|
|
1,461 |
|
|
|
1,174 |
|
|
|
4,382 |
|
|
|
3,429 |
|
Amortization |
|
|
1,153 |
|
|
|
3,255 |
|
|
|
3,451 |
|
|
|
9,859 |
|
EBITDA |
|
|
8,251 |
|
|
|
15,723 |
|
|
|
(3,307 |
) |
|
|
34,620 |
|
Impairment (a) |
|
|
— |
|
|
|
— |
|
|
|
7,919 |
|
|
|
— |
|
Share-based compensation
(b) |
|
|
2,872 |
|
|
|
2,865 |
|
|
|
9,154 |
|
|
|
8,197 |
|
Professional fees (c) |
|
|
1,363 |
|
|
|
486 |
|
|
|
3,740 |
|
|
|
1,248 |
|
Unrealized foreign currency
loss (d) |
|
|
67 |
|
|
|
515 |
|
|
|
317 |
|
|
|
2,172 |
|
Realized foreign currency loss
(gain) (e) |
|
|
64 |
|
|
|
173 |
|
|
|
361 |
|
|
|
(1,773 |
) |
Change in fair value of
contingent consideration (f) |
|
|
— |
|
|
|
(1,865 |
) |
|
|
37 |
|
|
|
(3,005 |
) |
Severance and other
termination benefits (g) |
|
|
721 |
|
|
|
— |
|
|
|
721 |
|
|
|
— |
|
Other (h) |
|
|
278 |
|
|
|
98 |
|
|
|
923 |
|
|
|
528 |
|
Adjusted EBITDA |
|
$ |
13,616 |
|
|
$ |
17,995 |
|
|
$ |
19,865 |
|
|
$ |
41,987 |
|
Adjusted EBITDA Margin |
|
|
22 |
% |
|
|
29 |
% |
|
|
13 |
% |
|
|
24 |
% |
Adjusted EBITDA Less Share-Based Compensation |
|
$ |
10,744 |
|
|
$ |
15,130 |
|
|
$ |
10,711 |
|
|
$ |
33,790 |
|
_____________________
- Represents non-cash impairment charge for goodwill as the fair
value was lower than the carrying value.
- Represents non-cash compensation charges related to share-based
compensation granted to our officers, employees and directors.
- Represents non-capitalizable costs of professional services
incurred in connection with our financings, legal proceedings and
the evaluation of potential acquisitions.
- Represents unrealized foreign currency translation gains and
losses primarily due to movement in the foreign currency exchange
rates between the periods.
- Represents realized foreign currency translation gains and
losses due to movement in the foreign currency exchange rates
between the periods.
- The change in 2019 represents the difference between the
December 31, 2018 liability balance and the $10.0 million cash
payment for the Repeat Precision earn-out consideration, which was
paid to our joint venture partner on January 31, 2019. The change
in 2018 was due to the revaluation of the earn-out obligations
associated with our acquisitions.
- Reflects charges incurred in connection with a reduction in
workforce implemented in the third quarter of 2019.
- Represents the impact of a research and development subsidy
that is included in income tax expense (benefit) in accordance with
GAAP along with other charges and credits.
NCS MULTISTAGE HOLDINGS,
INC.REVENUES BY GEOGRAPHIC
AREA(In
thousands) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
United
States |
|
|
|
|
|
|
|
|
|
|
|
Product sales |
$ |
21,639 |
|
$ |
18,125 |
|
$ |
62,272 |
|
$ |
48,011 |
Services |
|
6,915 |
|
|
8,157 |
|
|
18,370 |
|
|
27,976 |
Total United States |
|
28,554 |
|
|
26,282 |
|
|
80,642 |
|
|
75,987 |
Canada |
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
18,531 |
|
|
21,215 |
|
|
43,953 |
|
|
67,653 |
Services |
|
7,590 |
|
|
7,958 |
|
|
18,670 |
|
|
22,567 |
Total Canada |
|
26,121 |
|
|
29,173 |
|
|
62,623 |
|
|
90,220 |
Other
Countries |
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
3,586 |
|
|
5,293 |
|
|
4,708 |
|
|
6,850 |
Services |
|
2,512 |
|
|
1,943 |
|
|
5,418 |
|
|
3,718 |
Total Other Countries |
|
6,098 |
|
|
7,236 |
|
|
10,126 |
|
|
10,568 |
Total |
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
43,756 |
|
|
44,633 |
|
|
110,933 |
|
|
122,514 |
Services |
|
17,017 |
|
|
18,058 |
|
|
42,458 |
|
|
54,261 |
Total revenues |
$ |
60,773 |
|
$ |
62,691 |
|
$ |
153,391 |
|
$ |
176,775 |
NCS Multistage (NASDAQ:NCSM)
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NCS Multistage (NASDAQ:NCSM)
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