Q3 2024 NCS Multistage Holdings Inc Earnings Call
The National Security Council
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Speaker Change: Good day and thank you for standing by. Welcome to the third quarter 2024 and C.S. Multi-stage earnings conference call.
Speaker Change: After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will then hear an automated message advising your hand, there's ways to withdraw your question. Please press star one again, please be advised that today's conference is.
Speaker Change: Being recorded I would now like to hand, the conference over to your Speaker today, Mike Morrison Chief Financial Officer. Please go ahead.
Mike Morrison: Thank you Didi and thank you for joining the NCS Multistage third quarter 2024 conference call. Our call today will be led by CEO, Ryan Hummer and I will also provide comments.
Mike Morrison: Want to remind listeners that some of today's comments include forward looking statements such as our financial guidance and expectations for future financial results and business operations. These.
Ryan Hummer: Leading market positions I'll start with fracturing systems, where we continue to deliver unique value for our customers.
Ryan Hummer: During the third quarter, our customer in Canada adopted our sliding sleeve solutions to mitigate the impact of seismic events during fracturing operations.
Ryan Hummer: This customers are required to monitor seismic activity, while they frac their wells.
Ryan Hummer: Previously this customer was forced to shut down operations, one seismic events exceeded established thresholds.
Ryan Hummer: The customer had a difficult decision to make either wait to resume operations decreasing efficiency or to move uphold to a different section of the lateral sacrificing a portion of the well.
Ryan Hummer: To mitigate this the customer recently adopted NCS sliding sleeves in the region employing our ship Frac close process.
Ryan Hummer: When elevated seismic activity was encountered the operators simply moved up the Wellbore, a few hundred feet and resumed operations maintaining efficiency.
Ryan Hummer: Once the remaining stages of the well we're complete the customer is able to run back to the bypassed area, where the pressure it since dissipated and stimulate the zone that had previously been bypassed.
This type of solution is simply not available when using alternative completion techniques and highlights our differentiated technology the quality of our robust service tools and multi cycle sleeves, and perhaps more importantly represents the expertise that our people bring to the customers well sites to deliver valuable solutions to our customers' challenges.
Ryan Hummer: We've also demonstrated the benefits of our strategy to build on our leading market positions and our tracer diagnostics product line.
Ryan Hummer: Increasing by 139%, reflecting seasonality associated with the spring breakup in the second quarter. This increase was partially offset by a decline of 31% and international revenues, primarily due to the timing of tracer service work in the middle East and a 6% decline in the U S.
Our adjusted gross profit, which excludes depreciation and amortization expense was $18 5 million in the third quarter of 2024, our adjusted gross margin was 42% an improvement compared to the adjusted gross margin of 41% in the third quarter of last year.
Ryan Hummer: Other income for the third quarter of 2024 was $1 5 million and primarily relates to royalty income generated by licensing our intellectual property compared to the third quarter one year ago. Our other income was down approximately 500000 as the 2023 results included the recovery of unpaid invoices associated with the <unk>.
Ryan Hummer: Legal settlement and the reversal of a legal contingency fee that did not recur in 2024.
Ryan Hummer: Our adjusted EBITDA for the third quarter of 2024 was $7 1 million an improvement of 300000 compared to the same period in 2023.
Ryan Hummer: Our adjusted EBITDA reflects an increase in revenues improved gross margin non bonus SG&A savings and increased royalty income, partially offset by an increase in bonus incentive accruals associated with our improved year to date operating performance.
Speaker Change: Three pads in an unconventional resource development for a customer in the middle East in the unconventional gas development.
Speaker Change: And in addition to that we work through the local pressure pumping companies.
Speaker Change: To provide tracer diagnostic services on some more conventional wells as well and thats more of a call out basis.
Speaker Change: So that's progressed as we've moved through the year.
Speaker Change: We have completed the injection on two of those well pads, we're out injecting on the third well pad right now.
Speaker Change: The way that we generate and recognize revenue for those theres a couple of different phases involved one with respect to the injection another with respect to the sampling and then another with respect to reporting so youll see that revenue kind of flow and come in in bits and pieces through the year, but what I'd say is that in general the work that we're doing with tracer.
Speaker Change: Diagnostics in the Middle East is running more or less on schedule.
Speaker Change: There have been some circumstances, where things may have been pushed back a month or so but no no big delays with respect to any of those projects.
Speaker Change: And to the extent, there's been any delay in any of that pad work, it's been backfill by more.
Speaker Change: More work on the conventional tracing side.
Speaker Change: Understood that's very helpful.
Speaker Change: Then a couple more for me on the expense front.
Speaker Change: Is there any low hanging fruit that you are.
Speaker Change: Take that forward into into their operations going forward.
Speaker Change: Okay.
Speaker Change: I appreciate the thoughtful answers good luck out there guys.
Alright, Thanks, John look forward to seeing you next week, yes, Sir.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Jeff Robertson of Water Tower Research. Your line is open.
Jeff Robertson: Thank you good morning, Ryan.
Jeff Robertson: <unk> on well complexity as you see wells getting more complex and operators trying to drill longer laterals, where where does that impact NCS in terms of product demand and margin and are you seeing opportunities to innovate new solutions for.
Jeff Robertson:
Jeff Robertson: To solve operators problems over the next couple of years.
Speaker Change: Yes, absolutely great great question.
Speaker Change: So I think a couple of answers for that one is as more of the industry or a higher percentage of wells move to true extended reach laterals I think that will improve the market penetration for casing buoyancy systems more broadly and as we can leverage that proprietary piece of technology with within NCS, we can.
Speaker Change: Bring to bear the full suite of our well construction portfolio with a number of those those customers.
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Speaker Change: Yeah.
Speaker Change: Yes.