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 June 30,
2020.
Financial Review
Total revenues were $8.7 million for the quarter ended
June 30, 2020, which was a decrease of 78% compared to the
second quarter of 2019. This decrease reflected reductions in
product sales and services volumes in North America as well as
lower pricing for certain products and services, including
composite plugs and tracer diagnostics, partially offset by higher
services revenue in international markets. We believe the decrease
in both activity and pricing resulting from the decline in market
conditions primarily related to the Coronavirus disease 2019
(“COVID-19”) pandemic had a negative impact on our revenues during
the three months ended June 30, 2020 as drilling rig and completion
activity in North America began to decline sharply through the
month of March and continued to decline during the second quarter
of 2020. In addition, customer activity in China was delayed and
activity in Argentina was suspended from mid-March through June due
to government regulations. Total revenues decreased
by 84% as compared to the first quarter of 2020 with
decreases in both product sales and services in the United States,
Canada and outside of North America.
Gross profit, which we define as total revenues less total cost
of sales exclusive of depreciation and amortization, was $2.3
million, or 27% of total revenues, in the second quarter of 2020,
compared to $16.7 million, or 42% of total revenues, in the second
quarter of 2019. Cost of sales as a percentage of total revenues
increased due to the significant reduction in revenue, leading to
under-utilization of manufacturing capacity and field service
personnel, as well as a reduction in pricing for certain products
and services.
Selling, general and administrative (“SG&A”) expenses
totaled $15.5 million, a decrease of $7.4 million in the second
quarter of 2020 as compared to the second quarter of the prior
year. This overall decrease in expense reflects declines in
compensation and bonuses, share-based compensation, ERP-related
expenses, and bad debt expense. Additionally, professional fees,
including litigation fees, were lower this quarter by $2.5 million
as compared to the second quarter of 2019. These favorable
variances were partially offset by severance charges incurred for
the three months ended June 30, 2020 related to reductions in
workforce, which was higher this quarter by $3.4 million as
compared to the second quarter of 2019.
Net loss was $(8.8) million, or $(0.19) per diluted share, for
the quarter ended June 30, 2020, which included a net impact
of $0.2 million (after tax effect of $(0.5) million, or $(0.01) per
diluted share) related to realized and unrealized foreign currency
losses as well as a benefit of $1.1 million related to a reduction
in foreign tax expense. As with the first quarter of 2020, income
tax was impacted by the Coronavirus Aid, Relief, and Economic
Security Act (“CARES Act”) and income tax valuation allowances
recorded to reduce the carrying value of deferred tax assets.
Adjusted net loss, which excludes these items, was $(9.3) million,
or $(0.20) per diluted share, for the quarter ended June 30,
2020. This compares to a net loss of $(22.3) million, or
$(0.48) per diluted share, in the second quarter of 2019, which
included a net impact of $8.2 million (after tax effect of $17.1
million, or $0.37 per diluted share) related to an impairment
charge and realized and unrealized foreign currency gains and
losses. The income tax adjustment was significantly affected by 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. Adjusted net loss, which
excludes these items, was $(5.2) million, or $(0.11) per diluted
share, for the quarter ended June 30, 2019.
Adjusted EBITDA was $(7.9) million for the quarter ended
June 30, 2020, a decrease of $(6.9) million as compared to the
second quarter of 2019.
Capital Expenditures and Liquidity
The Company incurred capital expenditures of $0.6 million, net,
for the six months ended June 30, 2020 and $4.1 million, net, for
the six months ended June 30, 2019.
As of June 30, 2020, the Company had $31.3 million in cash
and $21.4 million in total debt. During the second quarter of 2020,
the Company increased its cash position by $15.8 million and its
total debt by $3.7 million. Our net working capital, which we
define as our current assets, excluding cash and cash equivalents,
minus our current liabilities, excluding current maturities of
long-term debt, was $48.6 million at June 30, 2020.
On August 6, 2020, we entered into Amendment No. 1 (the
“Amendment”) to our senior secured credit facility that (i) reduced
the U.S. Commitments from $50.0 million to $25.0 million and (ii)
reduced the Canadian Commitments from $25.0 million to $0. NCS
Multistage Inc., our Canadian Borrower, may make borrowings under
the U.S. Facility, subject to a $15.0 million sublimit. The
Amendment also limits total outstanding credit exposure of the
lenders under the U.S. Facility and the Canadian Facility to a
borrowing base calculated based on eligible receivables. There were
no changes to the maturity date which remains at May 1, 2023.
The Amendment (i) eliminated financial covenants requiring
compliance with maximum leverage, minimum interest coverage and
minimum asset coverage tests, (ii) added new financial covenants
requiring compliance with minimum liquidity and, in certain
circumstances of reduced liquidity, minimum fixed charge coverage
tests during any reduced liquidity period and (iii) added new
covenants, including a weekly sweep of available cash over a
specified threshold, more stringent limits on capital expenditures
and enhanced financial reporting requirements.
Cost Reduction and Liquidity Enhancement
Initiatives
In response to the current market conditions and reduction in
demand for our products and services, including as a result of the
COVID-19 pandemic, NCS has undertaken, and the Board of Directors
is monitoring and evaluating, multiple initiatives to reduce our
cost structure, limit capital expenditures and enhance our
liquidity and access to capital, including:
- Reductions in force which have reduced our headcount in the
U.S. and Canada by approximately 190 people, the implementation of
furloughs for certain employees in field operations and engineering
roles and reductions to salaries and hourly rates for substantially
all remaining employees, including reductions in salaries for
executives averaging 20%. These actions are expected to result in
approximately $20 million in annualized cost savings, with
approximately 70% of that amount associated with SG&A
expenses;
- A reduction in bonus accruals for 2020 and the decision to not
pay out 2019 bonuses;
- An elimination of the employer matching contributions for NCS’s
U.S. 401(k) plan and its Registered Retirement Savings Plan in
Canada;
- A moratorium on non-essential travel for all employees;
- Negotiation of new rates, work rules and payment schedules with
vendors;
- Strategies to reduce third-party spend, including information
technology, financial services and third-party research and
development;
- Deferral of U.S. employer payroll taxes, as permitted under the
CARES Act;
- Application for, and receipt of, benefits under the Canada
Emergency Wage Subsidy (“CEWS”) program;
- Accelerating the filing of our 2019 U.S. federal tax return to
utilize net operating loss carryback provisions from the CARES Act
in order to obtain a cash tax refund during the second half of
2020;
- Reducing planned capital expenditures for the year and selling
excess vehicles;
- Relocating our U.S. assembly operations to better align with
our supply chain partners, reduce overhead and improve fixed cost
absorption;
- Borrowing an additional $5.0 million under our senior secured
credit facility in March 2020 to fund severance costs associated
with the reductions in force while maintaining operational
liquidity;
- In April 2020, Repeat Precision entered into a new promissory
note providing up to $5.0 million in additional borrowing capacity;
and
- Amending our revolving credit facility to modify certain
covenants and to establish a borrowing base related to our accounts
receivable, which we believe provides us with enhanced financial
flexibility.
In connection with the reductions in workforce described above,
we recorded severance charges of approximately $1.3 million in the
first quarter of 2020 and $3.5 million of severance expense in the
second quarter of 2020, which is reflected in the condensed
consolidated statements of operations under SG&A expenses. NCS
expects to record $0.9 million of severance expense to be reflected
in the condensed consolidated statements of operations under
SG&A expenses in the third quarter of 2020.
NCS continues to evaluate market conditions and will continue to
take necessary actions to further reduce our cost base and try to
enhance liquidity should there be a further reduction in the demand
for our products and services.
Review and Outlook
NCS’s Chief Executive Officer, Robert Nipper commented, “As we
operate in these unusual and uncertain times, the health and safety
of our employees remains paramount and I sincerely thank the
exceptional people at NCS and Repeat Precision. This team continues
to deliver innovation to the industry and expertise to our
customers. We have a leadership position across our focused suite
of products and services which we believe enable our customers to
increase operating efficiencies, better understand and optimize
their assets and reduce their costs, which is critically important
in the current market environment.
We were faced with very challenging market conditions in the
second quarter, including a significant reduction in completion
activity and a land rig count in the United States that reached a
50+ year low in May and continued to decline through the quarter.
The Canadian land rig count also reached a 50+ year low during the
second quarter and activity in Canada did not begin to improve from
the lows until mid-July, much later than is typically experienced
upon the exit from Spring Break-up. As a result of the low level of
customer activity, our revenue this quarter was lower by 78% as
compared to last year’s second quarter and by 84% as compared to
the first quarter of 2020.
NCS had several highlights during the quarter. We had a high
level of service activity in the North Sea, we made significant
progress in new product development initiatives that we believe
will lower our costs and improve our market share, and our working
capital management in the quarter allowed us to bolster our balance
sheet. We have generated over $19 million in free cash flow through
the first two quarters of 2020 and ended the quarter with $9.9
million more in cash than total debt. NCS made significant progress
in further reducing our cost structure during the quarter as well,
and we now expect that our SG&A for the full year 2020 will be
more than $25 million lower than in 2019, a $5 million improvement
as compared to the target we communicated last quarter.
While customer activity remains at low absolute levels, we have
seen improvements in completions activity in the U.S. and an upturn
in the Canadian rig count so far in the third quarter. We believe
that the increase in activity, together with the full impact of our
cost reduction initiatives, should position us to improve our
profitability in the second half of the year as compared to the
second quarter.
Even with this improving outlook, we will continue to evaluate
market conditions and will take further action as necessary to
attempt to further enhance our financial position to allow us to
benefit from further improvements in industry activity.”
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA Less
Share-Based Compensation, Adjusted Net (Loss) Income, Adjusted Net
(Loss) Earnings per Diluted Share, Free Cash Flow and net working
capital 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 second
quarter 2020 results on Tuesday, August 11, 2020 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 1249830. 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 1249830.
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 (“NASDAQ”) 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; the risks and uncertainties
relating to public health crises, including the COVID-19 pandemic
and its continuing impact on market conditions and our business,
financial condition, results of operations, cash flows and stock
price; our inability to comply with the covenants in our debt
agreements depending on the duration of the decline in market
conditions primarily related to the COVID-19 pandemic and our
ability to negotiate with our lenders; risks and uncertainties
relating to cost reduction efforts or savings we may realize from
such cost reduction efforts; risks and uncertainties related to the
potential delisting of our common stock from NASDAQ; 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 that results in pricing pressures, reduced sales, or
reduced market share; our inability to accurately predict customer
demand, which may result in us holding excess or obsolete
inventory; 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; the financial health of our
customers including their ability to pay for products or services
provided; our inability to obtain sufficient liquidity on
reasonable terms, or at all; 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 anti-corruption and
environmental regulations, the CARES Act 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; our success in
attracting and retaining qualified employees and key personnel; and
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 |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
4,858 |
|
|
$ |
29,945 |
|
|
$ |
44,288 |
|
|
$ |
67,177 |
|
Services |
|
|
3,874 |
|
|
|
9,823 |
|
|
|
18,994 |
|
|
|
25,441 |
|
Total revenues |
|
|
8,732 |
|
|
|
39,768 |
|
|
|
63,282 |
|
|
|
92,618 |
|
Cost of
sales |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sales,
exclusive of depreciation and amortization expense
shown below |
|
|
3,869 |
|
|
|
16,490 |
|
|
|
27,317 |
|
|
|
33,236 |
|
Cost of services, exclusive of
depreciation and amortization expense shown
below |
|
|
2,524 |
|
|
|
6,591 |
|
|
|
9,690 |
|
|
|
16,608 |
|
Total cost of sales, exclusive of depreciation and
amortization expense shown below |
|
|
6,393 |
|
|
|
23,081 |
|
|
|
37,007 |
|
|
|
49,844 |
|
Selling, general and
administrative expenses |
|
|
15,473 |
|
|
|
22,893 |
|
|
|
36,308 |
|
|
|
45,919 |
|
Depreciation |
|
|
994 |
|
|
|
1,495 |
|
|
|
2,446 |
|
|
|
2,921 |
|
Amortization |
|
|
104 |
|
|
|
1,137 |
|
|
|
1,237 |
|
|
|
2,298 |
|
Change in fair value of
contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
37 |
|
Impairment |
|
|
— |
|
|
|
7,919 |
|
|
|
50,194 |
|
|
|
7,919 |
|
Loss from operations |
|
|
(14,232 |
) |
|
|
(16,757 |
) |
|
|
(63,910 |
) |
|
|
(16,320 |
) |
Other income
(expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(424 |
) |
|
|
(556 |
) |
|
|
(746 |
) |
|
|
(1,073 |
) |
Other income, net |
|
|
8 |
|
|
|
17 |
|
|
|
166 |
|
|
|
90 |
|
Foreign currency exchange
loss, net |
|
|
(217 |
) |
|
|
(250 |
) |
|
|
(207 |
) |
|
|
(547 |
) |
Total other expense |
|
|
(633 |
) |
|
|
(789 |
) |
|
|
(787 |
) |
|
|
(1,530 |
) |
Loss before income tax |
|
|
(14,865 |
) |
|
|
(17,546 |
) |
|
|
(64,697 |
) |
|
|
(17,850 |
) |
Income tax (benefit) expense |
|
|
(5,973 |
) |
|
|
2,022 |
|
|
|
(6,898 |
) |
|
|
11,596 |
|
Net loss |
|
|
(8,892 |
) |
|
|
(19,568 |
) |
|
|
(57,799 |
) |
|
|
(29,446 |
) |
Net (loss) income attributable
to non-controlling interest |
|
|
(135 |
) |
|
|
2,733 |
|
|
|
2,507 |
|
|
|
4,821 |
|
Net loss attributable
to NCS Multistage Holdings, Inc. |
|
$ |
(8,757 |
) |
|
$ |
(22,301 |
) |
|
$ |
(60,306 |
) |
|
$ |
(34,267 |
) |
Loss per common
share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per common share attributable to NCS
Multistage Holdings, Inc. |
|
$ |
(0.19 |
) |
|
$ |
(0.48 |
) |
|
$ |
(1.28 |
) |
|
$ |
(0.74 |
) |
Diluted loss per common share attributable to NCS
Multistage Holdings, Inc. |
|
$ |
(0.19 |
) |
|
$ |
(0.48 |
) |
|
$ |
(1.28 |
) |
|
$ |
(0.74 |
) |
Weighted average
common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
47,319 |
|
|
|
46,766 |
|
|
|
47,184 |
|
|
|
46,380 |
|
Diluted |
|
|
47,319 |
|
|
|
46,766 |
|
|
|
47,184 |
|
|
|
46,380 |
|
|
|
NCS MULTISTAGE HOLDINGS,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS*(In thousands, except share
data)(Unaudited)
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2020 |
|
|
2019 |
|
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
31,259 |
|
|
$ |
11,243 |
|
Accounts receivable—trade, net |
|
|
11,166 |
|
|
|
41,960 |
|
Inventories, net |
|
|
38,631 |
|
|
|
39,921 |
|
Prepaid expenses and other current assets |
|
|
3,349 |
|
|
|
2,444 |
|
Other current receivables |
|
|
6,751 |
|
|
|
5,028 |
|
Total current assets |
|
|
91,156 |
|
|
|
100,596 |
|
Noncurrent assets |
|
|
|
|
|
|
Property and equipment, net |
|
|
24,498 |
|
|
|
32,974 |
|
Goodwill |
|
|
15,222 |
|
|
|
15,222 |
|
Identifiable intangibles, net |
|
|
2,745 |
|
|
|
45,248 |
|
Operating lease assets |
|
|
6,294 |
|
|
|
5,071 |
|
Deposits and other assets |
|
|
3,572 |
|
|
|
3,460 |
|
Deferred income taxes, net |
|
|
68 |
|
|
|
6 |
|
Total noncurrent assets |
|
|
52,399 |
|
|
|
101,981 |
|
Total assets |
|
$ |
143,555 |
|
|
$ |
202,577 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable—trade |
|
$ |
2,932 |
|
|
$ |
8,549 |
|
Accrued expenses |
|
|
3,968 |
|
|
|
3,451 |
|
Income taxes payable |
|
|
1,005 |
|
|
|
1,883 |
|
Operating lease liabilities |
|
|
2,033 |
|
|
|
2,052 |
|
Current maturities of long-term debt |
|
|
1,725 |
|
|
|
1,481 |
|
Other current liabilities |
|
|
1,368 |
|
|
|
2,364 |
|
Total current liabilities |
|
|
13,031 |
|
|
|
19,780 |
|
Noncurrent liabilities |
|
|
|
|
|
|
Long-term debt, less current maturities |
|
|
19,678 |
|
|
|
11,436 |
|
Operating lease liabilities, long-term |
|
|
4,855 |
|
|
|
3,487 |
|
Other long-term liabilities |
|
|
1,684 |
|
|
|
1,373 |
|
Deferred income taxes, net |
|
|
749 |
|
|
|
2,956 |
|
Total noncurrent liabilities |
|
|
26,966 |
|
|
|
19,252 |
|
Total liabilities |
|
|
39,997 |
|
|
|
39,032 |
|
Commitments and
contingencies |
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no
shares issued and outstanding at |
|
|
|
|
|
|
June 30, 2020 and December 31, 2019 |
|
|
— |
|
|
|
— |
|
Common stock, $0.01 par value, 225,000,000 shares authorized,
47,414,602 shares issued |
|
|
|
|
|
|
and 47,179,589 shares outstanding at June 30, 2020 and
46,905,782 shares issued |
|
|
|
|
|
|
and 46,813,117 shares outstanding at December 31, 2019 |
|
|
474 |
|
|
|
469 |
|
Additional paid-in capital |
|
|
429,300 |
|
|
|
424,633 |
|
Accumulated other comprehensive loss |
|
|
(84,468 |
) |
|
|
(80,811 |
) |
Retained deficit |
|
|
(259,335 |
) |
|
|
(199,029 |
) |
Treasury stock, at cost; 235,013 shares at June 30, 2020 and
92,665 shares |
|
|
|
|
|
|
at December 31, 2019 |
|
|
(805 |
) |
|
|
(652 |
) |
Total stockholders’ equity |
|
|
85,166 |
|
|
|
144,610 |
|
Non-controlling interest |
|
|
18,392 |
|
|
|
18,935 |
|
Total equity |
|
|
103,558 |
|
|
|
163,545 |
|
Total liabilities and stockholders' equity |
|
$ |
143,555 |
|
|
$ |
202,577 |
|
_____________________* Preliminary
NCS MULTISTAGE HOLDINGS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(In
thousands)(Unaudited)
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
June 30, |
|
|
2020 |
|
|
2019 |
|
Cash flows from
operating activities |
|
|
|
Net loss |
|
$ |
(57,799 |
) |
|
$ |
(29,446 |
) |
Adjustments to reconcile net
loss to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
3,683 |
|
|
|
5,219 |
|
Impairment |
|
|
50,194 |
|
|
|
7,919 |
|
Amortization of deferred loan cost |
|
|
149 |
|
|
|
161 |
|
Share-based compensation |
|
|
4,737 |
|
|
|
6,526 |
|
Provision for inventory obsolescence |
|
|
657 |
|
|
|
(51 |
) |
Deferred income tax (benefit) expense |
|
|
(2,140 |
) |
|
|
9,278 |
|
Gain on sale of property and equipment |
|
|
(112 |
) |
|
|
(19 |
) |
Change in fair value of contingent consideration |
|
|
— |
|
|
|
37 |
|
Provision for doubtful accounts |
|
|
622 |
|
|
|
1,462 |
|
Payment of contingent consideration |
|
|
— |
|
|
|
(3,042 |
) |
Proceeds from note receivable |
|
|
299 |
|
|
|
— |
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
|
Accounts receivable—trade |
|
|
28,819 |
|
|
|
6,664 |
|
Inventories, net |
|
|
(432 |
) |
|
|
(4,629 |
) |
Prepaid expenses and other assets |
|
|
(2,700 |
) |
|
|
243 |
|
Accounts payable—trade |
|
|
(4,665 |
) |
|
|
5,344 |
|
Accrued expenses |
|
|
596 |
|
|
|
(749 |
) |
Other liabilities |
|
|
1,065 |
|
|
|
(1,165 |
) |
Income taxes receivable/payable |
|
|
(2,825 |
) |
|
|
2,320 |
|
Net cash provided by operating activities |
|
|
20,148 |
|
|
|
6,072 |
|
Cash flows from
investing activities |
|
|
|
|
|
|
Purchases of property and
equipment |
|
|
(687 |
) |
|
|
(4,080 |
) |
Purchase and development of
software and technology |
|
|
— |
|
|
|
(297 |
) |
Proceeds from sales of
property and equipment |
|
|
66 |
|
|
|
249 |
|
Net cash used in investing activities |
|
|
(621 |
) |
|
|
(4,128 |
) |
Cash flows from
financing activities |
|
|
|
|
|
|
Equipment note borrowings |
|
|
— |
|
|
|
835 |
|
Payments on equipment note and
finance leases |
|
|
(843 |
) |
|
|
(4,130 |
) |
Line of credit borrowings |
|
|
5,000 |
|
|
|
— |
|
Payments on revolver |
|
|
— |
|
|
|
(4,000 |
) |
Payment of contingent
consideration |
|
|
— |
|
|
|
(6,958 |
) |
Treasury shares withheld |
|
|
(153 |
) |
|
|
(309 |
) |
Distribution to noncontrolling
interest |
|
|
(3,050 |
) |
|
|
(600 |
) |
Proceeds from the issuance of
ESPP shares |
|
|
— |
|
|
|
677 |
|
Payment of deferred loan cost
related to senior secured credit facility |
|
|
— |
|
|
|
(871 |
) |
Net cash provided by (used in) financing activities |
|
|
954 |
|
|
|
(15,356 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
|
(465 |
) |
|
|
456 |
|
Net change in cash and cash equivalents |
|
|
20,016 |
|
|
|
(12,956 |
) |
Cash and cash equivalents
beginning of period |
|
|
11,243 |
|
|
|
25,131 |
|
Cash and cash equivalents end
of period |
|
$ |
31,259 |
|
|
$ |
12,175 |
|
Noncash investing and
financing activities |
|
|
|
|
|
|
Leased assets obtained in
exchange for new finance lease liabilities |
|
$ |
4,560 |
|
|
$ |
1,141 |
|
Leased assets obtained in
exchange for new operating lease liabilities |
|
$ |
2,573 |
|
|
$ |
377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. Net working capital is defined as total current assets,
excluding cash and cash equivalents, minus total current
liabilities, excluding current maturities of long-term debt.
Net working capital excludes cash and cash equivalents and current
maturities of long-term debt to evaluate the investment in working
capital required to support our business. 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. We
believe that net working capital is useful in analyzing the cash
flow and working capital needs of the Company, including
determining the efficiencies of our operations and our ability to
readily convert assets into cash. Accordingly, Adjusted EBITDA,
Adjusted EBITDA margin, Adjusted EBITDA Less Share-Based
Compensation, Adjusted Net (Loss) Income, Adjusted Net (Loss)
Earnings per Diluted Share, Free Cash Flow and net working capital
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, Adjusted
Net (Loss) Earnings per Diluted Share and Free Cash Flow 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, Free Cash Flow and net
working capital (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, working capital 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, working capital 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:
NET WORKING CAPITAL*
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2020 |
|
|
2019 |
|
Working capital |
|
$ |
78,125 |
|
|
$ |
80,816 |
|
Cash and cash equivalents |
|
|
(31,259 |
) |
|
|
(11,243 |
) |
Current maturities of long
term debt |
|
|
1,725 |
|
|
|
1,481 |
|
Net working capital |
|
$ |
48,591 |
|
|
$ |
71,054 |
|
_____________________* Preliminary
NCS MULTISTAGE HOLDINGS,
INC.RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
INFORMATION(In thousands, except per share
data) (Unaudited)
ADJUSTED NET LOSS AND ADJUSTED NET LOSS
PER DILUTED SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, 2020 |
|
June 30, 2019 |
|
June 30, 2020 |
|
June 30, 2019 |
|
|
Effect on Net Loss |
|
Impact on Diluted Loss Per Share |
|
Effect on Net Loss |
|
Impact on Diluted Loss Per Share |
|
Effect on Net Loss |
|
Impact on Diluted Loss Per Share |
|
Effect on Net Loss |
|
Impact on Diluted Loss Per Share |
Net loss attributable to NCS Multistage Holdings, Inc. |
|
$ |
(8,757 |
) |
|
$ |
(0.19 |
) |
|
$ |
(22,301 |
) |
|
$ |
(0.48 |
) |
|
$ |
(60,306 |
) |
|
$ |
(1.28 |
) |
|
$ |
(34,267 |
) |
|
$ |
(0.74 |
) |
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment (a) |
|
|
— |
|
|
|
— |
|
|
|
7,919 |
|
|
|
0.17 |
|
|
|
50,194 |
|
|
|
1.06 |
|
|
|
7,919 |
|
|
|
0.17 |
|
Realized and unrealized losses (b) |
|
|
174 |
|
|
|
— |
|
|
|
245 |
|
|
|
0.01 |
|
|
|
212 |
|
|
|
0.01 |
|
|
|
542 |
|
|
|
0.01 |
|
Change in fair value of contingent consideration (c) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
37 |
|
|
|
— |
|
Income tax impact from adjustments (d) |
|
|
(670 |
) |
|
|
(0.01 |
) |
|
|
8,895 |
|
|
|
0.19 |
|
|
|
131 |
|
|
|
— |
|
|
|
18,712 |
|
|
|
0.41 |
|
Adjusted net loss
attributable to NCS Multistage Holdings,
Inc. |
|
$ |
(9,253 |
) |
|
$ |
(0.20 |
) |
|
$ |
(5,242 |
) |
|
$ |
(0.11 |
) |
|
$ |
(9,769 |
) |
|
$ |
(0.21 |
) |
|
$ |
(7,057 |
) |
|
$ |
(0.15 |
) |
_____________________(a) Represents non-cash impairment
charges for property and equipment and intangible assets during
2020 and a non-cash impairment charge for goodwill in 2019 as the
fair values were lower than the carrying values.(b)
Represents realized and unrealized foreign currency translation
losses primarily due to movement in the foreign currency exchange
rates between the periods.(c) 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.(d) Represents the income tax adjustments
including a reduction in foreign income tax, valuation allowance
recorded to reduce the carrying value of both our U.S. and Canadian
deferred tax assets in 2020 and the impact of 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 in 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 |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net loss |
|
$ |
(8,892 |
) |
|
$ |
(19,568 |
) |
|
$ |
(57,799 |
) |
|
$ |
(29,446 |
) |
Income tax (benefit)
expense |
|
|
(5,973 |
) |
|
|
2,022 |
|
|
|
(6,898 |
) |
|
|
11,596 |
|
Interest expense, net |
|
|
424 |
|
|
|
556 |
|
|
|
746 |
|
|
|
1,073 |
|
Depreciation |
|
|
994 |
|
|
|
1,495 |
|
|
|
2,446 |
|
|
|
2,921 |
|
Amortization |
|
|
104 |
|
|
|
1,137 |
|
|
|
1,237 |
|
|
|
2,298 |
|
EBITDA |
|
|
(13,343 |
) |
|
|
(14,358 |
) |
|
|
(60,268 |
) |
|
|
(11,558 |
) |
Impairment (a) |
|
|
— |
|
|
|
7,919 |
|
|
|
50,194 |
|
|
|
7,919 |
|
Share-based compensation
(b) |
|
|
1,722 |
|
|
|
3,314 |
|
|
|
4,672 |
|
|
|
6,282 |
|
Professional fees (c) |
|
|
(426 |
) |
|
|
1,577 |
|
|
|
962 |
|
|
|
2,377 |
|
Foreign currency exchange loss
(d) |
|
|
217 |
|
|
|
250 |
|
|
|
207 |
|
|
|
547 |
|
Change in fair value of
contingent consideration (e) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
37 |
|
Severance and other
termination benefits (f) |
|
|
3,428 |
|
|
|
— |
|
|
|
4,774 |
|
|
|
— |
|
Other (g) |
|
|
481 |
|
|
|
268 |
|
|
|
776 |
|
|
|
645 |
|
Adjusted EBITDA |
|
$ |
(7,921 |
) |
|
$ |
(1,030 |
) |
|
$ |
1,317 |
|
|
$ |
6,249 |
|
Adjusted EBITDA Margin |
|
|
(91 |
)% |
|
|
(3 |
%) |
|
|
2 |
% |
|
|
7 |
% |
Adjusted EBITDA Less Share-Based Compensation |
|
$ |
(9,643 |
) |
|
$ |
(4,344 |
) |
|
$ |
(3,355 |
) |
|
$ |
(33 |
) |
_____________________(a) Represents non-cash impairment
charges for property and equipment and intangible assets during
2020 and a non-cash impairment charge for goodwill in 2019 as the
fair values were lower than the carrying values.(b)
Represents non-cash compensation charges related to share-based
compensation granted to our officers, employees and
directors.(c) Represents non-capitalizable costs of
professional services incurred in connection with our financings,
legal proceedings and the evaluation of potential acquisitions.
During the second quarter of 2020, we received $1.1 million of
proceeds from our directors and officers liability insurance
related to the reimbursement of legal expenses that we incurred to
defend a director and officer in the Diamondback Industries, Inc
litigation.(d) Represents realized and unrealized foreign
currency translation gains and losses primarily due to movement in
the foreign currency exchange rates between the periods.(e)
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.(f) Reflects charges incurred in
connection with the reductions in workforce implemented in
2020.(g) 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.
FREE CASH FLOW
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
June 30, |
|
|
2020 |
|
|
2019 |
|
Net cash provided by operating activities |
|
$ |
20,148 |
|
|
$ |
6,072 |
|
Purchases of property and
equipment |
|
|
(687 |
) |
|
|
(4,080 |
) |
Purchase and development of
software and technology |
|
|
- |
|
|
|
(297 |
) |
Proceeds from sales of
property and equipment |
|
|
66 |
|
|
|
249 |
|
Free cash flow |
|
$ |
19,527 |
|
|
$ |
1,944 |
|
|
|
NCS MULTISTAGE HOLDINGS,
INC.REVENUES BY GEOGRAPHIC
AREA(In
thousands)(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
United
States |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
3,687 |
|
$ |
21,069 |
|
$ |
21,127 |
|
$ |
40,633 |
Services |
|
|
917 |
|
|
5,674 |
|
|
4,445 |
|
|
11,455 |
Total United States |
|
|
4,604 |
|
|
26,743 |
|
|
25,572 |
|
|
52,088 |
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
|
1,171 |
|
|
8,801 |
|
|
21,978 |
|
|
25,422 |
Services |
|
|
329 |
|
|
2,705 |
|
|
8,888 |
|
|
11,080 |
Total Canada |
|
|
1,500 |
|
|
11,506 |
|
|
30,866 |
|
|
36,502 |
Other
Countries |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
|
- |
|
|
75 |
|
|
1,183 |
|
|
1,122 |
Services |
|
|
2,628 |
|
|
1,444 |
|
|
5,661 |
|
|
2,906 |
Total Other Countries |
|
|
2,628 |
|
|
1,519 |
|
|
6,844 |
|
|
4,028 |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
|
4,858 |
|
|
29,945 |
|
|
44,288 |
|
|
67,177 |
Services |
|
|
3,874 |
|
|
9,823 |
|
|
18,994 |
|
|
25,441 |
Total revenues |
|
$ |
8,732 |
|
$ |
39,768 |
|
$ |
63,282 |
|
$ |
92,618 |
NCS Multistage (NASDAQ:NCSM)
과거 데이터 주식 차트
부터 6월(6) 2024 으로 7월(7) 2024
NCS Multistage (NASDAQ:NCSM)
과거 데이터 주식 차트
부터 7월(7) 2023 으로 7월(7) 2024