Q1 2024 NCS Multistage Holdings Inc Earnings Call

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Operator: Good day, and thank you for standing by, and welcome to the Q1 2024 NCS Multistage Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mike Morrison, CFO. Please go ahead.

Speaker Change: Good day, and thank you for standing by and welcome to the Q1 'twenty 'twenty four NCS Multistage earnings conference call. At this time, all participants are in a listen only mode.

Speaker Change: After the Speakers' presentation there'll be a question and answer session to ask a question. During this session you will need to press star one on your telephone you didn't hear an automated message of buys in your hand is raised.

Speaker Change: Your question. Please press Star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Mike Morris CFO. Please go ahead.

Michael L. Morrison: Thank you, Justin, and thank you for joining the NCS Multistage First Quarter 2024 conference call. Our call today will be led by our CEO, Ryan Hummer, and I will also make comments. I want to remind listeners that some of today's comments include forward-looking statements, such as our financial guidance and comments regarding our future expectations for financial results in business operations. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectations expressed herein.

Michael L. Morrison: Thank you Justin and thank you for joining the NCS multistage first quarter 'twenty 'twenty four conference call for our call today will be led by our CEO, Ryan Hummer and I will also provide comments I want to remind listeners that some of today's comments include forward looking statements such as our financial guidance and comments regarding our future expectations for financial results.

Michael L. Morrison: And business operations.

Michael L. Morrison: Statements are subject to many risks and uncertainties that could cause our actual results to differ.

Michael L. Morrison: Differ materially from any expectation expressed herein. Please refer to our most recent annual report on Form 10-K, and our latest SEC filings for risk factors and cautions regarding forward looking statements or comments yesterday as well as the results of operations included in our earnings release contain the following non-GAAP financial measures adjusted.

Michael L. Morrison: Please refer to our most recent annual report on Form 10-K and our latest SEC filings for risk factors and cautions regarding forward-looking statements. Our comments today, as well as the results of operations, including our earnings release, contain the following non-GAAP financial measures, adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit, adjusted gross margin, free cash flow, less distributions to non-controlling interest, and net working capital. The underlying details and reconciliations of these non-GAAP measures to the most comparable GAAP financial measures are provided in our first quarter earnings release, which can be found on our website, ncsmultistage.com. I'll now turn the call over to Ryan.

Michael L. Morrison: EBITDA adjusted EBITDA margin adjusted gross profit adjusted gross margin free cash flow less distributions to noncontrolling interest and net working capital the underlying details and reconciliations of these non-GAAP measures to the most comparable GAAP financial measures are provided in our first quarter earnings release, which can be found on our website.

Michael L. Morrison: <unk> multi stage dot com I will now turn the call over to Ryan.

Ryan Hummer: Thank you, Mike. Welcome to our investors, analysts, and employees joining our first quarter 2024 earnings conference call. NCS is off to a strong start in 2024. Our first quarter revenue of $43.9 million exceeded the high end of our guided range by nearly $4 million. The strength was broad-based, as we achieved or exceeded the high end of our guided revenue range for each of our U.S., Canadian, and international markets, with the largest relative outperformance coming from Canada. Our adjusted gross margin of 40%, which excludes depreciation and amortization expense, was within our guided range for the quarter.

Ryan Hummer: Thank you, Mike and welcome to our investors analysts and employees joining our first quarter 2024 earnings conference call.

Ryan Hummer: NCS is off to a strong start in 2024, our first quarter revenue of $43 $9 million exceeded the high end of our guided range by nearly $4 million.

Ryan Hummer: The strength was broad based as we achieved or exceeded the high end of our guided revenue range for each of our U S Canadian and international markets with the largest relative outperformance coming from Canada.

Ryan Hummer: Our adjusted gross margin of 40%, which excludes depreciation and amortization expense was within our guided range for the quarter.

Ryan Hummer: Our SG&A expense of $13.8 million for the quarter was $2.3 million lower than in the first quarter of 2020, resulting from cost savings measures that demonstrate our commitment to control expenses and a year-over-year reduction in litigation-related professional fees. We also benefited from an increase in other income as compared to the first quarter of last year, primarily royalty income related to licensing our intellectual property and benefits from a technical services agreement with a local partner in Oman. Our adjusted EBITDA for the first quarter of $6.1 million exceeded our estimate.

Ryan Hummer: Our SG&A expense of $13 8 million for the quarter was $2 $3 million lower than in the first quarter of 2023, resulting from cost savings measures that demonstrate our commitment to control expenses and a year over year reduction in litigation related professional fees.

Ryan Hummer: We also benefited from an increase in other income as compared to the first quarter of last year, primarily.

Ryan Hummer: Primarily royalty income related to licensing our intellectual property and the benefits from a technical services agreement with a local partner in Oman.

Ryan Hummer: Our adjusted EBITDA for the first quarter of $6 1 million exceeded our estimate of $3 million to $4 million and represents a year over year improvement of $1 2 million and a sequential improvement of $3 5 million.

Ryan Hummer: $3 to $4 million and represents a year-over-year improvement of $1.2 million and a sequential improvement of $3.5 million. In prior earnings calls, I've referenced NCS's core strategies for creating value for our state. We've included a new slide in our investor presentation, which is available on our website, slide 13, that helps to illustrate our strategy and provide examples of our progress. The first core strategy is to build upon our leading market position.

Ryan Hummer: In prior earnings calls I've referenced ncs's core strategies for creating value for our stakeholders.

Ryan Hummer: We've included a new slide in our Investor presentation, which is available on our website slide 13, it helps to illustrate our strategy and provide examples of our progress.

Ryan Hummer: The first core strategy is to build upon our leading market positions. We've demonstrated our commitment to this strategy in Canada, thus far in 2024.

Ryan Hummer: We've demonstrated our commitment to this strategy in Canada thus far in 2024. Our Q1 revenue in Canada of $32 million increased by 3% as compared to the first quarter of 2023, despite a reduction in the average rig count in Canada of 6% for the same period.

Ryan Hummer: Our Q1 revenue in Canada of $32 million increased by 3% as compared to the first quarter of 2023, Despite a reduction in the average rig count in Canada up 6% for the same period.

Ryan Hummer: This performance reflects initiatives to leverage the strength of our market position and customer relationships developed over time in our fracturing systems business and to pull through additional revenue opportunities across our other product lines. In particular, we continue to capture additional well construction opportunities with our fracturing systems customers and to grow the customer base for our purple seal frac plugs, fracture express systems, and plug-and-perf completions in Canada. Our second core strategy is to capitalize on international and offshore opportunities.

Ryan Hummer: This performance reflects the initiatives to leverage the strength of our market position and customer relationships developed over time in our fracturing systems business and to pull through additional revenue opportunities across our other product lines.

Ryan Hummer: In particular, we continue to capture additional well construction opportunities with our fracturing systems customers and to grow the customer base for our purple seal Frac plugs and fracture express systems, and plug and perf completions in Canada.

Ryan Hummer: Our second core strategy is to capitalize on international and offshore opportunities.

Ryan Hummer: We've previously discussed our efforts to grow our customer base in the North Sea and to position the company for long-term growth opportunities in the Middle East, in particular. We are now benefiting from these strategic investments. We're off to a good start so far this year, having sold sliding sleeves to a new North Sea customer in the first quarter. As we move to the second quarter, we expect activity in the North Sea to improve on a seasonal basis, with installation and completion activity increasing, including the expected delivery of sliding sleeves to yet another new North Sea customer. In addition, we are experiencing a meaningful increase in tracer diagnostics activity in the Middle East.

Ryan Hummer: We previously discussed our efforts to grow our customer base in the north sea and to position the company for long term growth opportunities in the middle East in particular.

Ryan Hummer: We are now benefiting from the strategic investments we're off to a good start so far this year, having sold sliding sleeves to a new north sea customer in the first quarter.

Ryan Hummer: As we move to the second quarter, we expect activity in the north sea to improve on a seasonal basis with installation and completion activity, increasing including the expected delivery of sliding sleeves to yet another new north sea customer.

Ryan Hummer: In addition, we are experiencing a meaningful increase in tracer diagnostics activity in the middle East and.

Ryan Hummer: In April, we completed tracing the first of multiple paths for a leading national oil company in the Middle East supporting development plans for their unconventional resource base. We expect to participate in at least two similar projects over the remainder of 2024. In addition, NCS has been awarded the opportunity to trace additional conventional wells for the same customer, supporting activity between the unconventional well pads. This is only possible because of the tireless effort of individuals across our organization to educate our customers on the value that our tracer diagnostic services can bring, to tackle the procurement and logistical challenges of the work, and to provide outstanding customer service throughout the jobs and for the reporting process.

Ryan Hummer: In April we completed tracing the first of multiple pads for a leading national oil company in the Middle East supporting development plans for their unconventional resource base.

Ryan Hummer: We expect to participate in at least two similar projects over the remainder of 2024.

Ryan Hummer: In addition, NCS has been awarded the opportunity to trace additional conventional wells for the same customer supporting activity between the unconventional well pads.

Ryan Hummer: This is only possible because of the tireless effort of individuals across our organization to educate our customer and the value that our tracer diagnostic services can bring.

Ryan Hummer: Tackled the procurement and logistical challenges of the work and to provide outstanding customer service throughout the jobs and for the reporting process.

Ryan Hummer: Including the expected midpoint for our international revenue guidance for the second quarter, our international revenues would approximate $7.2 million for the first half of 2025. This compares to $3.3 million for the first half of 2023 and would exceed our full year 2023 international revenue of $6.5 million. As a reminder, full-year international revenue for NCS exceeded $10 million for each of 2018 through 2021, reaching a high of over $15 million during that period, highlighting our opportunities outside of North America.

Ryan Hummer: Including the expected midpoint for our international revenue guidance for the second quarter, our international revenues would approximate $7 2 million for the first half of 2024.

Ryan Hummer: This compares to $3 3 million in the first half of 2023 and would exceed our full year 2023 international revenue of $6 $5 million.

Ryan Hummer: As a reminder, full year international revenue for NCS exceeded $10 million for each of 2018 through 2021, reaching a high of over $15 million during that period, highlighting our opportunity outside of North America.

Ryan Hummer: The third core strategy for NCS is to commercialize innovative solutions to complex customer challenges. We have internal objectives this year tied to obtaining field trials for new products and successfully entering new markets and regions. I spoke to this extensively on our prior call, so we'll just briefly highlight some of these exciting projects. We had a successful onshore trial during the first quarter for a completion system designed for deepwater operations. This was developed in conjunction with an international oil company with potential applications in the Gulf of Mexico and other deep water regions.

Ryan Hummer: The third core strategy for NCS is to commercialize innovative solutions to complex customer challenges.

Ryan Hummer: We have internal objectives. This year tie to obtaining field trials for new products and successfully entering new markets and regions I.

Ryan Hummer: I spoke to this extensively on our prior call. So I'll just briefly highlight some of these exciting projects.

Ryan Hummer: We had a successful onshore trial during the first quarter for a completion system designed for deepwater operations. This was developed in conjunction with an international oil company with potential applications in the Gulf of Mexico, and other deepwater regions.

Ryan Hummer: We've completed initial field trials for our pinpoint-oriented perforating gun system at repeat precision, and we continue to advance further testing and validation aligned with an influential customer's requirement. In the second quarter, we expect to install a well that will represent our highest ever sleeve count in the U.S. at over 200 sleeves. The well will be utilizing fiber optic technology to help the customer optimize a horizontal water flood program. We had a successful entry into the SAG-D market in Canada for our fracturing systems technology earlier this year.

Ryan Hummer: We completed initial field trials for our pinpoint oriented perforating gun system at repeat precision and we continue to advance further testing and validation aligned with an influential customers requirements.

Ryan Hummer: In the second quarter, we expect to install a well that will represent our highest ever sleeve count in the U S at over 200 sleeves.

Ryan Hummer: The well will be utilizing fiber optic technology to help the customer optimize a horizontal waterflood program.

Ryan Hummer: We had a successful entry into the <unk> market in Canada for our fracturing systems technology earlier. This year. This is a first for NCS and we expect to utilize our technology for additional applications and customers in this market over time in.

Ryan Hummer: This is a first for NCS, and we expect to utilize our technology for additional applications and customers in this market over time. In addition to these projects, we have several other technology developments underway across our various product lines, which I'm looking forward to discussing as they roll out. Mike will now review our results for the first quarter and our guidance for the second quarter. Thank you.

Ryan Hummer: In addition to these projects we have several other technology developments underway across our various product lines, which I'm looking forward to discussing as they rollout.

Ryan Hummer: Mike will now review our results for the first quarter and our guidance for the second quarter.

Michael L. Morrison: Thank you, Ryan. As reported in yesterday's earnings release, our first quarter revenues were $43.9 million, a 1% increase year-over-year, with our Canadian and international revenues up 3% and 39%, respectively, and our U.S. revenues down 12%. Despite a slight decrease in the average rig count, we saw a modest increase in our Canadian revenues. Additionally, our international revenues experienced growth driven by the sale of a FRAC system to a customer in the North Sea. Our U.S. revenues continue to be impacted by lower natural gas prices that have curtailed some customer activity.

Michael L. Morrison: Thank you Ryan as reported in yesterday's earnings release, our first quarter revenues were $43 9, million% to 1% increase year over year with our Canadian and international revenues up, 3% and 39%, respectively, and our U S revenues down 12%.

Ryan Hummer: Quite a slight decrease in average rig count we saw a modest increase in our Canadian revenues. Additionally, our international revenues experienced growth driven by the sale of a frac systems to a customer in the North Sea. Our U S revenues continued to be impacted by lower natural gas prices that have curtailed some customer activity.

Michael L. Morrison: sequentially, our revenues in the first quarter increased by 24%, with Canada up 27% and the U.S. up 10%, while international revenues nearly doubled. Our adjusted gross profit, defined as total revenues less total cost of sales, excluding depreciation and amortization expense, was $17.6 million in the first quarter of 2024. Our adjusted gross margin was 40%, down compared to our adjusted gross margin of 43% for the same period in 2023, but up sequentially from 37% for the fourth quarter of 2023.

Ryan Hummer: Sequentially, our revenues in the first quarter increased by 24% with Canada up 27% in the U S up 10%, while international revenues nearly doubled our adjusted gross profit defined as total revenues less total cost of sales, excluding depreciation and amortization expense was $17 6 million in the first.

Ryan Hummer: Quarter of 2024.

Ryan Hummer: Our adjusted gross margin was 40% down compared to our adjusted gross margin of 43% for the same period in 2023, but up sequentially from 37% for the fourth quarter of 2023 selling.

Michael L. Morrison: Selling general and administrative costs were $13.8 million for the first quarter, down by $2.3 million compared to the same period last year. This significant reduction was due in part to our restructuring efforts in 2023 to streamline operations and better leverage our SG&A spend.

Ryan Hummer: Selling general and administrative costs were $13 8 million for the first quarter down by $2 3 million compared to the same period last year. This significant reduction was due in part to our restructuring efforts in 2023 to streamline operations and better leverage our SG&A spend for.

Michael L. Morrison: For the first quarter, we reported net income of $2.1 million, or diluted earnings per share of $0.82, compared to a net loss of $15 million, or a loss per share of $6.10, for the same period in 2023. Our prior net loss was impacted by a 17.5 million litigation provision we recorded in the first quarter of 2023 that was later settled and reversed in the fourth quarter of 2023. Adjusted EBITDA for the first quarter was $6.1 million, an improvement over the $4.9 million in the same period in 2023.

Ryan Hummer: For the first quarter, we reported net income of $2 1 million or diluted earnings per share of 82.

Ryan Hummer: Compared to a net loss of $15 million or a loss per share of $6 10.

Ryan Hummer: For the same period in 2023, our prior year net loss was impacted by a $17 5 million litigation provision we recorded in the first quarter of 2023 that was later settled and reversed in the fourth quarter of 2023.

Ryan Hummer: Adjusted EBITDA for the first quarter was $6 1 million an improvement to the $4 9 million in the same period in 2023.

Michael L. Morrison: Now turning to cash flow items and the balance. Cash flow from operating activities and free cash flows led distributions to non-controlling interests where there were uses of cash of $1.9 and $2.5 million, respectively. Our forecast for the full year of 2024 is to be free cash flow positive, however, similar to the first quarter of 2023, our negative cash flow was primarily due to an increase in networking capital of approximately $6 million. This was due in part to an increase in our accounts receivable, partially offset by a reduction in our inventory balance.

Speaker Change: Now turning to cash flow items in the balance sheet.

Ryan Hummer: Cash flow from operating activities and free cash flows less distributions to Noncontrolling interests were uses of cash of one nine and $2 5 million respectively.

Ryan Hummer: Our forecast for the full year of 2024 is to be free cash flow positive. However, similar to the first quarter of 2023, our negative cash flow was primarily due to an increase in net working capital of approximately $6 million.

Ryan Hummer: This was due in part to an increase in our accounts receivable, partially offset by a reduction in our inventory balances.

Michael L. Morrison: On March 31st, we had $14 million in cash, and total debt of $8.9 million, which consists primarily of finance lease obligations, resulting in a positive net cash position of $5.1 million. At the end of March 2024, the barring base availability under our undrawn AVL facility was $20.4 million, and Repeat had $6 million of outstanding borrowings under a promissory note that was repaid in full in April.

Ryan Hummer: On March 31, we had $14 million in cash and total debt of $8 9 million, which consists primarily of finance lease obligations.

Ryan Hummer: Resulting in a positive net cash position of $5 1 million at.

Ryan Hummer: At the end of March 2020 for the borrowing base availability under our Undrawn ABL facility was $20 4 million.

Ryan Hummer: And repeat had $6 million of outstanding borrowings under a promissory note that was repaid in full in April.

Michael L. Morrison: Now turning to a few points of guidance for the second quarter. We currently expect second quarter total revenue in the range of $27 to $30 million. We expect Canadian revenue in the range of $12.5 to $13.5 million, U.S. revenue of $10 to $11 million, and international revenues of $4.5 to $5.5 million. We expect our adjusted gross margin to be between 36 and 38 percent, and an improvement to our Adjusted Gross Margin for the second quarter of 2023.

Ryan Hummer: Now turning to a few points of guidance for the second quarter. We currently expect second quarter total revenue in the range of 27% to $30 million.

Ryan Hummer: We expect Canadian revenue in the range of 12, five to $13 5 million U S revenue of $10 million to $11 million and international revenues of $4 five to $5 $5 million, we expect.

Ryan Hummer: Our adjusted gross margin to be between 36 and 38%.

Ryan Hummer: An improvement to our adjusted gross margin for the second quarter of 2023.

Michael L. Morrison: Due to the Canadian seasonal impact of spring breakup, we expect our adjusted EBITDA to be between break-even and a negative $2 million, and our second quarter depreciation and amortization expense to be approximately $1.2 million. With that, I'll hand it back over to Ryan to discuss our 2024 full year guidance and for closing remarks.

Ryan Hummer: Due to the Canadian seasonal impact of spring breakup, we expect our adjusted EBITDA to be between breakeven and a negative $2 million in our second quarter depreciation and amortization expense to be approximately $1 2 million.

Ryan Hummer: With that I'll hand, it back over to Ryan to discuss our 2020 for full year guidance and for closing remarks.

Ryan Hummer: We're making only slight adjustments to our full year guidance for 2024 at this time. We currently expect full year revenue of $150 to $160 million. This guidance increases the low end of the revenue range by $5 million and maintains the top end of the range. As a reminder, we expect our revenue growth will primarily result from increased sales at repeat precision, and our fracturing systems product line in the U.S. and in international markets, the North Sea and Middle East, in particular, are cautiously optimistic about Canadian activity as well.

Ryan Hummer: Thanks, Mike.

Ryan Hummer: We're making only slight adjustments to our full year guidance for 2024 at this time.

Ryan Hummer: We currently expect full year revenue of $150 million to $160 million. This guidance increases the low end of the revenue range by $5 million and maintains the top end of the range.

Ryan Hummer: As a reminder, we expect our revenue growth will primarily result from increased sales at repeat precision and our fracturing systems product line in the U S and in international markets, the North Sea and Middle East in particular.

Ryan Hummer: We're cautiously optimistic about Canadian activity as well.

Ryan Hummer: They're fundamental drivers supporting customer activity in Canada, including the TMX oil pipeline coming online this quarter and the Canada LNG facility due to come online in twenty five, which is driving activity increases to support increased natural gas production in advance of the Facilities Commission. In addition, the strong U.S. dollar supports Canadian activity, as our Canadian customers have operating expenses in Canadian dollars but can sell oil and condensate at prices linked to the strong U.S. dollar. These positive fundamental factors are tempered by the drought conditions that continue to exist in Western Canada.

Ryan Hummer: There are fundamental drivers supporting customer activity in Canada, including the <unk> oil pipeline coming online this quarter and the Canada LNG facility due to come online in 25, which is driving activity increases to support increased natural gas production in advance of this facility's commissioning and.

Ryan Hummer: In addition, the strong U S dollar supports Canadian activity as our Canadian customers have operating expenses in Canadian dollars, but can sell oil in condensate at prices linked to the strong U S dollar.

Ryan Hummer: These positive fundamental factors are tempered by the drought conditions that continue to exist in Western Canada. If we have a dry spring or in active wildfire season like we did in 2023 access to fresh water for our customers could be reduced which could reduce in lower could result in lower completions activity as firefighting and agricultural activity would have preferential access.

Ryan Hummer: If we have a dry spring or an active wildfire season like we did in 2023, access to fresh water for our customers could be reduced, which could result in lower completions activity as firefighting and agricultural activities would have preferential access to fresh water. At this point, our guidance incorporates at least some disruption from the drought conditions and wildfire prospects, though there could certainly be more favorable Canadian customer activity levels if we continue to benefit from a wet spring, as we have thus far, and a less active fire season. We've increased our adjusted EBITDA range to $14.5 to $17.5 million, with a midpoint of $16 million. The increase to the midpoint of the range is $1 million, with increases to both the bottom and top ends.

Ryan Hummer: So freshwater.

Ryan Hummer: At this point our guidance incorporates at least some disruption from the drought conditions and wildfire prospects. So there could certainly be more favorable Canadian customer activity levels. If we continue to benefit from a wet spring as we have thus far and a less active fire season.

Ryan Hummer: We've increased our adjusted EBITDA range to $14 five to $17 $5 million with a midpoint of $16 million increase to the midpoint of the range is $1 million with increases to both the bottom and top end.

Ryan Hummer: Due to the seasonality of our business and consistent with prior years, we anticipate that the achievement of our annual Adjusted EBITDA guidance range will be weighted to the second half of the year. The $4 million year-over-year increase in adjusted EBITDA at the midpoint of the current range represents an incremental adjusted EBITDA margin of over 32% on the $12.5 million increase implied by the midpoint of our revenue guidance rate, reflecting the impact of the business optimization initiatives undertaken by NCS in 2023 and our relatively fixed operating expenses. We expect our gross capital expenditures for the year to be between one and a half and two and a half million dollars.

Ryan Hummer: Due to the seasonality of our business and consistent with prior years, we anticipate that the achievement of our annual adjusted EBITDA guidance range will be weighted to the second half of the year.

Ryan Hummer: The $4 million year over year increase in adjusted EBITDA at the mid point of the current range represents an incremental adjusted EBITDA margin of over 32% on the $12 $5 million increase implied by the midpoint of our revenue guidance range, reflecting the impact of the business optimization initiatives undertaken by NCS in 2023.

Ryan Hummer: And our relatively fixed operating expenses.

Ryan Hummer: We expect our gross capital expenditures for the year to be between one five and $2 $5 million and we expect to generate over $5 million in free cash flow in 2024 after distributions to noncontrolling interests. Despite the modest investment in net working capital that could result from supporting our revenue growth.

Ryan Hummer: And we expect to generate over five million dollars in pre-cash flow in 2024 after distributions to non-controlling interests, despite the modest investment in net working capital that could result from supporting our revenue growth. We believe that our expectation for revenue and earnings growth in the current industry environment paired with our strong balance sheet positions us favorably amongst other publicly traded oil field services and equipment peers. This is illustrated on slide 19 of our investor presentation, which benchmarks analyst consensus revenue and EBITDA growth for 2024 for us and a group of publicly traded peers with a market capitalization of below $1 billion.

Ryan Hummer: We believe that our expectation for revenue and earnings growth in the current industry environment paired with our strong balance sheet positions us favorably amongst other publicly traded oilfield services and equipment peers.

Ryan Hummer: This is illustrated on slide 19 of our Investor presentation, which benchmarks analyst consensus revenue and EBITDA growth for 2024 for us and a group of publicly traded peers with a market capitalization of below $1 billion.

Ryan Hummer: The charts illustrate that NCS is expected to generate revenue and earnings growth that is above the median of the peer set. Another chart on the slide demonstrates that our debt-to-capitalization ratio at December 31, 2023 was below the median for the peer set, reflecting our resilient balance sheet. However, this favorable growth in the balance sheet profile is not reflected in our trading multiple, which at 3.4 times enterprise value to 2024 EBITDA was one multiple turn below that of the peer with the next lowest multiple and approximately two multiple turns below the peer median. Before we open the call to questions, I'll close with a couple of brief comments.

Ryan Hummer: The charts illustrate that NCS is expected to generate revenue and earnings growth that is above the median of the peer set.

Ryan Hummer: The other chart on the slide demonstrates that our debt to capitalization ratio at December 31, 2023 was below the median for the peer set reflecting our resilient balance sheet.

Ryan Hummer: However, this favorable growth and balance sheet profile is not reflected in our trading multiple which at three four times enterprise value to 2024 EBITDA was one multiple turn below that of the peer with the next lowest multiple and approximately two multiple turns below the peer median.

Speaker Change: Before we open the call to Q&A I'll close with a couple of brief comments.

Ryan Hummer: We're benefiting from the core strategies that we put in place in 2022 aimed at generating value for our stakeholders through organic growth and technological development. We have the infrastructure in place to support revenue growth in each of our geographic markets, providing leverage to grow future earnings. As demonstrated by our current guidance for 2024, achieving the midpoint of our guidance range would grow our annual revenue by 9% and our adjusted EBITDA by over 30%.

Speaker Change: We're benefiting from the core strategies that we put in place in 2022 aimed at generating value for our stakeholders through organic growth in technology development.

Ryan Hummer: We have the infrastructure in place to support revenue growth in each of our geographic markets, providing leverage to grow future earnings as.

Ryan Hummer: As demonstrated by Kirk by our current guidance for 2020 for achieving the midpoint of our guidance range, we grow our annual revenue by 9% and our adjusted EBITDA by over 30%.

Ryan Hummer: We maintain a strong balance sheet and liquidity position with a cash balance of over $14 million at the end of the first quarter. In addition, we expect to add to that cash balance by generating positive free cash flow in 2024, providing us with financial and strategic flexibility. Finally, we continue to benefit from the successful introduction of new technologies that meet the needs of our customers, adding to our portfolio and expanding our addressable market. With that, we'd welcome any questions, and thank you.

Ryan Hummer: We maintain a strong balance sheet and liquidity position with a cash balance of over $14 million at the end of the first quarter. In addition, we expect to add to that cash balance by generating positive free cash flow in 2020 for providing us with financial and strategic flexibility.

Ryan Hummer: Finally, we continue to benefit from the successful introduction of new technologies that meet the needs of our customers, adding to our portfolio and expanding our addressable market with that wed welcome any questions.

Operator: And thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Dave Storm from Stonegate. Your line is now open.

Ryan Hummer: And thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Ryan Hummer: One moment for your first question.

Ryan Hummer: And our first question comes from Dave <unk> from Stonegate. Your line is now open.

Dave: Good morning.

David Joseph Storms: I was just hoping we could start with the top line guidance. It's great to see that you've raised the low end. What would you need to see, you know, either in the international markets or elsewhere, to also raise the top end of that guidance?

Dave: Good morning, Dave.

Dave: Just hoping we could start with <unk>.

Dave: The topline guidance, it's great to see that you've raised the low end.

Dave: What would you need to see either in the international.

Dave: National markets are outswear.

Dave: So also raised the top end of that guidance.

Ryan Hummer: Sure, thanks. Thanks, Dave. I appreciate the question.

Speaker Change: Sure. Thanks, Thanks, Dave appreciate the question.

Speaker Change: I think for US the biggest thing right now is that we are taking a relatively conservative approach to the Canadian market.

Ryan Hummer: I think for us, the biggest thing right now is that we are taking a relatively conservative approach to the Canadian market. I outlined during the call what we think is a really, really strong fundamental backdrop for Canada, and I think that'll persist throughout the year. However, we certainly are aware that coming into 2024, you had a couple of years of extended drought conditions, and there was a very active wildfire season last year.

Speaker Change: I outlined during the call. What we think is a really really strong fundamental backdrop for Canada.

Speaker Change: And I think that will persist throughout the year. However, we certainly are aware that coming into 2024, you had a couple of years of extended drought conditions. There was a very active wildfire season last year.

Ryan Hummer: We're fortunate that there's been a relatively wet spring so far, but it's easy. So I think we're just being a little bit cautious right now around the potential prospect for some potential reduced activity on the completion side if our customers find that it's a bit more difficult to access fresh water for their completions as you move into the summer months. But so I think as we move through the second quarter and understand whether, you know, what the extent of that impact will be, if any, I think that's where we have a bit more confidence in really assessing whether there's some upsides at the top of the range as well.

Speaker Change: We're fortunate that there's been a relatively wet spring so far but it's easy. So I think we're just being a little bit cautious right now.

Speaker Change: Around that potential prospects for some potential reduced activity on the completion side, if our customers find that it's a bit more difficult to access freshwater for their completions as you move into the summer months, but.

Speaker Change: So I think as we move through the second quarter and understand whether.

Speaker Change: What the extent of that impact will be if any I think thats, where we have a bit more confidence and really assessing whether there is some upside to the top end of the range as well.

Speaker Change: Understood very helpful. And then you mentioned.

Ryan Hummer: That international markets used to, you know, operate around $15 million or so a year. What's the pathway to get back to that? Is that going to be getting catalogued with current companies? Is that going to be addressing new markets? What does that look like?

Speaker Change: The international markets use too.

Speaker Change: Operating around $15 million or so a year, what's the pathway to get back to that is that going to be getting catalogued with.

Speaker Change: Current current companies is that going to be addressing new markets.

Speaker Change: What does that look like.

Ryan Hummer: Yeah, thanks. Another great question, Dave. I think the path to that is the path we're on, quite frankly, and there are two components to it. I think first, during that period, we had one customer who was very active in the North Sea, in Acura BP, who we've referred to as kind of our anchor customer in the North Sea over time. And as you know, and as we've discussed, we've been really active in adding to our customer base in the North Sea.

Speaker Change: Yes, another great question, Dave I think the path to that is the path. We're on quite frankly, and there are two components to it.

Speaker Change: I think first is during that period.

Speaker Change: We had one customer who is very active in the north sea and acre BP, who we refer to as kind of our anchor customer and the north sea over time.

Speaker Change: And as you know and as we've discussed we've been really active in adding to our customer base for the North Sea. We think will work with at least five different companies. This year.

Ryan Hummer: We think we'll work with at least five different companies this year. And what we're really looking forward to is, you know, both Acura and one of the other customers have field development projects that they're looking to bring online as we move forward into 2005 and 2026, which would represent more consistent work and would look a lot more like the level of activity that we saw back in those months or those prior years.

Speaker Change: And what we're really looking forward to is both acre and one of the other customers have field development projects that theyre looking to bring online as we move forward into 2005, and 2026, which would represent more consistent work and would look a lot more like the level of activity that we saw back in those months are those those prior year.

Ryan Hummer: And you pair that with the work that we've been doing in the Middle East. And, you know, we're in a really good spot right now with tracer diagnostics in the Middle East. We're getting additional well construction products qualified to be called out there. So, with the North Sea back to historical activity levels that we saw during that period, tied together with the additional opportunities in the Middle East, I think we are on the path towards hitting those sorts of, you know, that revenue profile that we saw in those prior years.

Speaker Change: <unk>.

Speaker Change: And you pair that with the work that we've been doing in the middle East and.

Speaker Change: We're in a really good spot right now with tracer diagnostics in the Middle East, we're getting additional well construction products qualified to be called out there. So.

Speaker Change: With the North sea back to historical activity levels that we saw during that period tied to tied together with the additional opportunities in the middle East I think we are on the path towards towards hitting those sorts of.

Speaker Change: That revenue profile that we saw in those prior years.

Ryan Hummer: That's very helpful. Thank you. I'll get back to you.

Speaker Change: That's very helpful. Thank you I'll get back in queue.

Blake McLean: And thank you. And one moment for our next question, and our next question comes from Blake McLean from Daniel at Energy Partners. Your line is now open.

Speaker Change: And thank you.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Blake Mclean from Daniel Energy Partners. Your line is now open.

Blake McLean: Hey guys, thanks for taking my call.

Blake McLean: Hey, guys. Thanks for thanks for taking my call.

Ryan Hummer: Yeah, absolutely. Hey, Blake.

Ryan Hummer: So I was hoping you could provide a little bit more color on kind of how we should think about the offshore opportunity set, the timing associated with that, and kind of what that sort of path forward to incremental revenue looks like over the next year or two or whatever time frame.

Blake McLean: Yeah, absolutely Hey, Blake.

Blake McLean: Hey, Ryan So I was hoping you could provide a little bit more color on kind of how we should think about the offshore opportunity set timing associated with that and kind of what that sort of path forward to incremental revenue looks like over the next year or two or whatever whatever time frameworks.

Ryan Hummer: Sure, yeah; happy to do the best I can there. So again, you know, this year, we're going to be working for more customers in the North Sea than we ever have before. It will not be a large number of wells with any customers individually, but I think that sets the stage for some more work going forward. And I mentioned that there are two customers in particular operating in the North Sea, really one on the Norwegian side and one on the UK side, that have, you know, some larger development programs that we would expect to participate in, and we would see the work on those programs starting to ramp up more so next year, but could represent pretty consistent work for a multiple-year time frame.

Ryan Hummer: Sure, Yes happy to do the best I can there.

Ryan Hummer: So again this year, we're going to be work for more customers in the north sea than we ever have before.

Ryan Hummer: It will not be a large well count with any customers individually, but I think that sets the stage for some more work going forward.

Ryan Hummer: And I mentioned that there are two customers in particular operating in the North Sea really one on the Norwegian side, one on the UK side.

Ryan Hummer: Have.

Ryan Hummer: Some larger development programs that we would expect to participate in and we would see the work on those programs starting to ramp up more so next year, but could represent pretty consistent work for a multiple year timeframe.

Ryan Hummer: We pair that with the technology development project that we have for the deep water application. That's a little bit longer to develop, and I'd say the number of wells per year is not necessarily the same scope as the North Sea, but they're very attractive drilling opportunities for us on a single well basis. So that could move forward and be a small handful of wells per year, but those individual well opportunities would be pretty impactful for us as a company.

Ryan Hummer: We pair that with the technology development project that we have for the deepwater application, that's a little bit longer to develop and I'd say the number of wells per year is not necessarily at the same scope the north sea is but they're very attractive.

Ryan Hummer: All opportunities for us on a single well basis, so that could that could move forward and be a small handful of wells per year.

Ryan Hummer: But those individual well opportunities would be pretty impactful for us as a company.

Ryan Hummer: And again, that would develop over a longer-term timeframe. I don't think you'd see that ramping up really until we may have a first well in 2025, but that would pick up more in 2026 and beyond.

Ryan Hummer: And again that would develop develop over a longer term timeframe I don't think you'd see that ramping up really until.

Ryan Hummer: Yes, we may have our first well in 2025, but that would pick up more in 2026 and beyond.

Blake McLean: That's helpful. Thank you.

Speaker Change: That's helpful. Thank you.

Speaker Change: Maybe just one more and just building on the last set of questions and again, maybe zooming out a little bit how should we think about the opportunity set internationally.

Ryan Hummer: Maybe just one more, just building on the last set of questions and again, maybe zooming out a little bit. How should we think about the opportunity set internationally, and specifically in the Middle East? And how do you sort of tie yourselves up to be successful there? What does the sales and business development sort of team look like? How do you sort of execute well over there? Do you have that team in place?

Speaker Change: And specifically in the Middle East.

Speaker Change: And how do you sort of to yourselves out to be successful there what is the.

Speaker Change: What is the sales and business development team look like how do you how do you sort of execute well over there do you have that team in place to have a plan to kind of build that out.

Ryan Hummer: Do you have a plan to kind of build that out? And where do you think that the tracer diagnostics and some of the things you guys are doing out there, where does it really make sense if we think about it from a sort of multi-year perspective? Yeah.

Speaker Change: Where do you think that that.

Speaker Change: The tracer diagnostics and some of the things you guys are doing out there where do you think it really makes sense and we think about it from a sort of a multiyear.

Ryan Hummer: Another really good question. So, what I'd say is that, at the highest level, we've got the right teams and strategies in place when we think about the leadership for our international group and the business development teams from our international group. We're aligned with what we think are very strong local partners in the various geographies of Oman and Saudi Arabia, particularly, who are helping us to navigate that process of getting each of our product lines cataloged and in a position where asset managers in the various international regions can kind of call out our work very quickly and without getting additional approvals from procurement and whatever the case may be.

Speaker Change: Perspective.

Speaker Change: Yet another another really good question.

Speaker Change: So what I'd say is that at the highest level, we've got the right teams and strategies in place when we think about the leadership for our international group and the business development teams from the International group.

Speaker Change: We are aligned with what we think are very strong local partners in the various geographies in Oman, and Saudi particularly.

Speaker Change: Who are helping us to navigate that process of getting each of our product lines catalog and in a position where the.

Speaker Change: The asset managers in the various international regions can kind of call out our work very quickly and without getting additional approvals from procurement and whatever the case may be so moving it from call. It a technology trial into having our products and services utilized in production mode.

Ryan Hummer: So moving it from, call it a technology trial, into having our products and services utilized in production mode. You know, the big opportunity for us that we're executing on this year are these unconventional tracer projects, you know, for a Middle East customer. I'd say that customer is very early in their development of their unconventional resource, and the opportunity there is really that period where utilizing, you know, tracer diagnostics in particular is very, very valuable for a customer to help them understand their resource and optimize their development plans.

Speaker Change: The big opportunity for us that we're executing on this year are these unconventional tracer projects.

Speaker Change: For a middle East customer I would say there that customer is very early in their development of their unconventional resource.

Speaker Change: And the opportunity there.

Speaker Change: That's.

Speaker Change: Really that period were utilizing tracer diagnostics in particular.

Speaker Change: It is very very valuable for our customer to help them understand their resource and optimize their development plans. So I think theres a good good runway there.

Ryan Hummer: So, I think there's a good, good runway there where we'll probably need to support that development over time with additional operations personnel. You know, right now, we're mobilizing people from North America, from Argentina, from China to do some of that work in the Middle East. So, we'll probably need to make some more investments in personnel, both within our own headcount but also some folks within our local partners. And over time, we may look to make some strategic investments in the region as well, whether that's what I'd call sort of a relatively light footprint tracer lab for, you know, some other types of investment there.

Speaker Change: Where we will probably need to support that development over time will be with additional operations personnel.

Speaker Change: Right now we're mobilizing people from North America from Argentina from China to service some of that that will work in the middle East.

Speaker Change: So we will probably need to make some more investments in personnel both within our.

Speaker Change: Our own head count, but also some folks within our local partners.

Speaker Change: Over time, we may look to make some strategic investments in the region as well, whether that's a what I'd call sort of a relatively light footprint tracer lab.

Speaker Change: Sure.

Speaker Change: Some other types of investment there, but we would only do that once we've established the track record and have sort of several years of relatively robust revenue and earnings in those markets before we deploy additional <unk>.

Ryan Hummer: But we'd only do that once we've established the track record and have, you know, sort of several years of relatively robust revenue and earnings in those markets before we deploy additional capital into supporting that business.

Speaker Change: Capital into supporting that business.

Speaker Change: Got it.

Blake McLean: Thanks for walking through that in some detail. I've got just one more, if you don't mind. Could you provide a bit more color on the sleeve that you guys highlighted in your prepared remarks?

Speaker Change: Okay. Thanks for walking through that.

Speaker Change: And some of the detail I've got just one more.

Speaker Change: Mine.

Speaker Change: Could you provide a bit more color on the sleeve that you guys highlighted in your prepared remarks.

Speaker Change: Sure.

Operator: [inaudible] I think you're talking about the one in the U.S. with the fiber optics, is that right? Yes.

Speaker Change: I think youre talking about the one in the U S with the fiber optics is that right, yes, yes, yes.

Ryan Hummer: Yeah, so that's a pretty interesting project. So what we're able to do there, the customer wants to run a fiber optic line in that well. And it's a they're really they're a somewhat unique project, especially in the US, where historically water flood projects have used, you know, vertical injectors. This is an area that was developed horizontally.

Speaker Change: Yes.

Speaker Change: That's pretty interesting project.

Speaker Change: So what we're able to do there.

Speaker Change: The customer wants to run a fiber optic line in that well.

Speaker Change: And it's.

Speaker Change: They are really good.

Speaker Change: It's somewhat unique project, especially in the U S, where historically waterflood projects have used.

Speaker Change: Vertical injectors. This is an area that was developed horizontally. So theyre looking to execute a horizontal waterflood program and optimize that.

Ryan Hummer: So they're looking to execute a horizontal water flood program and optimize that. The well that's going to be installed will have a very large number of sliding sleeves, and they'll have a fiber optic cable clamped to it. And part of the reason the customer would use sleeves for that is one to be able to, you know, have as many well-known access points along that lateral. But more importantly, as opposed to if you were going to plug and perform that well, there's a risk of, you know, having your preparation, if it's not aligned properly, accidentally shoot that cable and cut off your ability to acquire the data.

Speaker Change: Well, that's going to be installed will have a very large number of sliding sleeves and have a.

Speaker Change: Fiber optic cable clamp to it.

Speaker Change: And part part of the reason that the customer would use sleeves for that as one to be able to.

Speaker Change: How does many well known access points, along that lateral but more importantly, as opposed to if youre going to plug and perf that well there is a risk of having your perforation. If it is not aligned properly accidentally shoot that cable.

Speaker Change: And cut off your ability to acquire the data.

Ryan Hummer: So we're able to channel that fiber in between the ports of our sleeves to take that risk off the table. And, you know, the customer will benefit in a number of ways. And the other piece with that, by installing sliding sleeves and specifically our recloseable sleeves. If the customer sees water breakthrough in parts of that well that's indicated by the fiber, what we can do is go in and help the customer manipulate those sleeves to shut off water breakthrough in certain areas and, again, just maximize the value for that area through the deployment of the technology.

Speaker Change: So we're able to channel that fiber in between the ports of our sleeves to take that risk off the table.

Speaker Change: So the customer will benefit in a number of ways and the other piece with that by installing sliding sleeves, and specifically our reclosable sleeves.

Speaker Change: The customer see as water breakthrough in parts of that well.

Speaker Change: Yes, Thats indicated by the fiber what we can do is go in and help the customer manipulate those sleeves.

Speaker Change: To shut off water breakthrough in certain areas and again just maximize the value.

Speaker Change: For for that area through the deployment of the technology.

Speaker Change: Okay.

Blake McLean: Okay, thanks for that detail, y'all. Kick it back to me, I'll kick it, and thank you.

Speaker Change: Okay. Thanks for that detail you I'll kick it back to I'll kick it back to you.

Operator: And thank you. And if you would like to ask a question, that is star 11. Again, if you'd like to ask a question, that is star 11. One moment while we compile the Q&A roster. And I am showing no further questions. I would now like to turn the call back over to Ryan Hummer, CEO, for closing remarks.

Speaker Change: And thank you.

Speaker Change: And if you would like to ask a question that is star one again, if you'd like to ask a question that is star 111 moment, while we compile the Q&A roster.

Speaker Change: And I am showing no further questions I would now like to turn the call back over to Ryan Hummer CEO for closing remarks.

Ryan Hummer: All right. Thank you, Justin. All right, on behalf of our management team and board, we'd like to thank everyone on the call today, including our shareholders, analysts, and especially our employees. I truly appreciate the tremendous work and dedication demonstrated by our team here at NCS and Repeat Precision as we implement our long-term strategy. We're only as good as our people, and I believe we have the best team in the industry. Our team continues to provide excellent service to our customers and is developing new products and services that will enable our customers to be more successful. We appreciate everyone's interest in NCS Multistage, and we look forward to talking again on our next quarterly earnings call.

Ryan Hummer: Alright, Thank you Joseph.

Ryan Hummer: On behalf of our management team and board, we'd like to thank everyone on the call today, including our shareholders analysts and especially our employees.

Ryan Hummer: I truly appreciate the tremendous work and dedication demonstrated by our team here at NCS in repeat precision as we implement our long term strategy for only as good as our people and I believe we have the best team in the industry.

Ryan Hummer: Our team continues to provide excellent service to our customers and is developing new products and services that will enable our customers to be more successful. We appreciate everyone's interest NCS multistage and we look forward to talking again on our next quarterly earnings call.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Okay.

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