Q1 2025 NCS Multistage Holdings Inc Earnings Call

Earnings Conference call all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again, thank you.

I'd now like to turn over the call to Mike Morrison Chief Financial Officer. Please go ahead.

David Storms: And then maybe just one more from me, I wanted to touch on the product sales in the U.S. I know you mentioned that you expect them to be kind of a strength going through the remainder of 2025. They also... followed up the quarter, you know, probably on the weaker end compared to the rest of your portfolio. Maybe any more you could give us here as to how you see that playing out for the remainder of 2025. Sure, yeah, a couple things within that. One is, you know, despite the overall strong performance in Q1, we did have some opportunities within FRAC systems in particular in the U.S.

Mike Morrison: Thank you Janice and thank you for joining the NCS Multistage first quarter 2025 conference call. Our call today will be led by our CEO, Ryan Hummer and I'll 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.

Our results and business operations.

Mike Morrison: Statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein.

Mike 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.

Ryan Hummer: in the first quarter that got deferred into the second quarter. And then within repeat precision, we've had a lot of, you know, what I call successful customer field trials that have taken place throughout the first quarter. And those trials are starting to convert into more regular activity. And that's across both the traditional composite plug and mentioned specifically on the call the stage saver technology, which is a variation of the composite plug, but brings some specific benefits around simulFRAC operations. And as more customers adopt simulFRAC, trimulFRAC, et cetera, you know, the features built into that stage saver are ones that are, you know, certainly on the radar screen for customers.

Mike Morrison: Rents today as well as the results of operations included in our earnings release contain the following non-GAAP financial measures adjusted EBITDA adjusted EBITDA margin adjusted gross profit adjusted gross margin and free cash flow less distributions to Noncontrolling interest. These non-GAAP measures and reconciliations to the most comparable GAAP financial measures are provided in our.

Ryan Hummer: <unk> first quarter earnings release, which can be found on our website NCS multistage dot com I will now turn the call over to Ryan.

Ryan Hummer: Thank you, Mike and welcome to our investors analysts and employees joining our first quarter 2025 earnings conference call.

Speaker Change: Mike will cover our quarterly financial results in more detail and I'll speak to a few highlights.

Ryan Hummer: NCS is off to a strong start in 2025.

David Storms: As we move that product through trials, we think that we can certainly grow that business through repeat in the U.S. as well. So, I feel pretty good about where, you know, where we think the product sale activity in the U.S. will go during the first quarter. in a remainder of the year. Understood.

Ryan Hummer: Our first quarter revenue of $50 million exceeded the high end of our guided range provided on our last call by $4 million.

Ryan Hummer: This represents the highest quarterly revenue for NCS since the first quarter of 2020.

David Storms: Thanks for taking my questions and good luck in Q2. All right. Thanks, Dave.

Ryan Hummer: While we exceeded the midpoint of the guided range in each geography, our performance in Canada was the standout for the quarter.

John Daniel: Your next question comes from the line of John Daniel with Daniel Energy Partners. Please go ahead. Good morning, guys. Ryan, it would seem that the second half could get pretty dicey, at least certainly here in the US. I'm just curious, given the strength of your balance sheet and is about to get better.

Ryan Hummer: Our adjusted gross margin of 44%, which excludes depreciation and amortization expense exceeded the high end of our guided range for the quarter as well.

Ryan Hummer: We benefited from the operating leverage associated with the revenue outperformance with our robust concrete contribution from our higher margin international activity.

Ryan Hummer: Do you see yourself leaning more towards using market disruptions to go after tactical M&A deals or do you think you'd lean more conservative and hoard cash and just ride this thing out? Yeah, so, you know, John, we'll certainly be active in evaluating, you know, the M&A market. And, yeah, I think one of the things that, you know, at least we've experienced in the past is When you have changes in the market environment and market opportunity, it takes a little bit of time for seller price expectations to adjust. So certainly we'll engage in discussions and think about deploying cash through M&A where it makes sense.

Ryan Hummer: Our adjusted EBITDA of $8 2 million exceeded our estimated range for the quarter of four 5% to $6 5 million and represents a year over year improvement of $2 1 million.

Ryan Hummer: To reiterate NCS is off to a strong start.

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

Ryan Hummer: Slide 13 of our Investor presentation helps to illustrate our strategy with examples of our progress the.

The first core strategy is to build upon our leading market positions.

Ryan Hummer: Our progress towards this goal continues to be reflected in our year to date results in Canada.

Ryan Hummer: Our Q1 revenue in Canada of $38 million increased by 19% as compared to the first quarter of 2024, outpacing a 3% increase in the average rig count.

John Daniel: We do expect the balance sheet to continue to strengthen. I also think that if we don't find right M&A opportunity, we have a pretty outstanding investment opportunity within NCS as well. So again, if we don't find opportunities to deploy that capital externally, I think we and the board will have conversations around what makes sense with respect to return of capital shareholders or even kind of thinking through whether it makes sense to buy NCS stock back. Sure. I guess going back to, I guess this is an unknown question. I'll just pose it to... I'm going to feel it out, but I mean, if activity goes lower second half, I'm assuming it doesn't come ramping back super fast in 26.

Ryan Hummer: This favorable performance was most prevalent for our fracturing systems product line as more operators in the Montney have adopted our single point of entry Frac technology and have experienced strong production results and increased operational flexibility.

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

Ryan Hummer: We're seeking to build on the success, we achieved in 2024, a year in which international revenue reached 10% of total revenue an important milestone for NCS.

Ryan Hummer: We expect continued success with customers in the North sea as our growing customer base and operational track record have positioned us well for long term growth in that market.

Ryan Hummer: In 2024, we signed commercial purchase agreements with a customer in the middle East and we're encouraged by the pace of adoption of our well construction products and unconventional wells in the region.

Ryan Hummer: We'll see. Who knows? Would the opportunities start presenting themselves, in your view, in the second half or in the first half of next year? That makes no sense. I'm just trying to get the time. Yeah. No. Yeah. Good question. And look, I think we're We're looking at Yeah, the current market environment is one where, you know, there's I guess a reduction in anticipated demand, right? So if we have the impact of tariffs on global economy, I think oil demand slows but doesn't crater. You pair that with the unknowns on the supply side with OPEC+, but I would see it more as a kind of U-shaped, if you will, cycle or mini cycle where you come down potentially pretty quickly, stay at the bottom for a while and then recover.

Ryan Hummer: We recently installed an enhanced recovery system for a customer in Argentina are first in that market with another installation planned for later this year.

Ryan Hummer: We believe that this product line will provide an attractive additional market for us in the Latin American region building on our existing tracer diagnostics business.

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 that are tied to field trials for new products and for successfully entering new markets and regions.

Ryan Hummer: Some of these exciting products and projects.

Ryan Hummer: Include the first application of our seven inch siding, so even service tools for Cray remedial cementing application in Alaska, which is scheduled for later this month.

Ryan Hummer: So it's a bit of a hard one to answer, but I think the general timing is right. Whether I can pin it to the second half of this year, first half of next year, but give it, call it six, nine months for the market to adjust and for expectations to recalibrate, that's probably fair.

Ryan Hummer: Qualification of our fracturing system sleeves and service tools at higher temperature ratings.

Ryan Hummer: Enable us to participate in certain offshore Sag D and geothermal applications.

Ryan Hummer: The deployment of our illuminate multi day automated sampler for tracer diagnostics customers, which reduces on site service requirements.

John Daniel: Okay, that's all I got. Thank you for entertaining this question. All right, thanks, John.

Ryan Hummer: We're expecting field trials for our new rapid trace tracer diagnostics flow assurance solution, which will provide our customers with immediate tracer results at the well site.

Gauri Sri: Your next question comes from the line of Gauri Sri of Singular Research. Please go ahead. Good morning, guys. Can you hear me? I can hear you just fine. Hello? Thank you.

Ryan Hummer: This data will provide value for our customers by allowing them to make cost saving decisions without without having to wait for production sample analysis from our labs.

Michael Morrison: The first question is that $3 million estimate for the international revenue for Q2, is that tracer work to well construction that was – and what's the pipeline for the North Sea projects in Q2 and Q3 to compensate any kind of project delays that you're seeing? Yeah, this is Mike. I appreciate the question. I would say, you know, part of the question you asked is that attributed to well construction? I would say yes, part of it is well construction, you know, in the Middle East with the agreement that we have and the throughput that we're seeing.

Ryan Hummer: We're expecting the commercialization of a broader portfolio of Dissolvable, frac plugs and our stage saver composite plug at repeat precision.

Ryan Hummer: The stage favors designed to de risk certain issues that can arise during simultaneous operations.

Ryan Hummer: Finally.

Ryan Hummer: We expect a broadened our enhanced recovery portfolio to include solutions for preferential production control complementing our injection conformance offerings.

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 throughout the year and into the future.

Michael Morrison: It's also we have some tracer activity that we experienced last year that we continue to, you know, to see, you know, activity in that the North Sea, I would say North Sea. That is, there are some, you know, opportunities. We continue to see those opportunities. I think for our guidance, there is some in the second quarter, but probably more weighted toward the back half of the year as we look to the North Sea. And the Canadian activity might have been stronger than anticipated.

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

Mike Morrison: Thank you Ryan as reported in yesterday's earnings release, our first quarter revenues were $50 zero million dollars.

Mike Morrison: A year over year increase of 14% and 11% sequentially. This year over year increase was led by Canada, contributing a 19% increase in revenue and our international results, reflecting a 34% increase in revenue primarily associated with activity in the middle East and the North Sea.

Mike Morrison: This was partially offset by a 6% decline in the U S.

Michael Morrison: Did you see any pull forward due to the current macroeconomic conditions, the current policy conditions? Is there any pull forward that we have to model into? For Canada in the first quarter, it's hard to attribute much of that specifically to a pull forward. I think what we did see in the first quarter was some generally favorable or benign weather conditions. You know, so we got off to a little bit stronger start in, you know, January. There was a pretty short holiday break towards the end of last year. And then we've had our customers kind of continue to work into, you know, past the first week in March, and sometimes you do see activity fall off pretty quickly there.

Mike Morrison: Our adjusted gross profit defined as total revenues less total cost of sales, excluding depreciation and amortization expense was $21 9 million in the first quarter, representing an adjusted gross margin of 44% up compared to our adjusted gross margin of 40% from one year ago.

Selling general and administrative costs were $16 2 million for the first quarter up by $2 4 million compared to the same period last year. This increase was primarily due to higher incentive bonus accruals associated with our improved operating performance professional fees and an increase in stock based compensation expense associated with our <unk>.

Mike Morrison: <unk> settled stock awards, which we recognized additional expense due to the increase in our stock price.

Mike Morrison: Our other income of <unk> 9 million for the first quarter relates primarily to royalty income from licenses of our intellectual property and prior periods. Other income was benefited from the contribution of a technical services agreement with a local partner in Oman, which ended in November 2024.

Michael Morrison: I think another piece of it that's maybe just a little bit more fundamental that's helped us in March has been a bit of a transition in activity where we've picked up more work with customers that will work through breakup, whether that be on the frac system side. Also, the success we've had in building the composite plug business in Canada, a lot of the operators there will set up their well pads so they can work through breakup. So I don't think we're going to have as drastic a fall off typically, you know, through the second quarter as we've had in prior years.

Mike Morrison: Our net income for the first quarter was $4 1 million or diluted earnings per share of $1 51 and.

Mike Morrison: An improvement to last year's first quarter net income of $2 1 million or diluted earnings per share of <unk> 82.

Michael Morrison: It'll still be, you know, a big reduction for us, but we're working to build up that base of customers that work through the second quarter and help to mitigate at least some of that seasonality.

Mike Morrison: Our adjusted EBITDA was $8 2 million, an improvement compared to $6 1 million in the first quarter 2024.

Ryan Hummer: That's it for me. Given the tariff and the price increases that you might have to pass through, and as you're testing these new products in the North, especially in the U.S. market, how well is the pricing environment, or are there any pushbacks, and are you able to maintain pricing discipline as you test these products? Yeah, so there's sort of two components to it. One is when we're bringing in, you know, a new technology, right, or that will have a benefit that will help the operator save money or avoid a potential disruption. You know, typically we can get paid for that.

Mike Morrison: Now turning to cash flow items in the balance sheet.

Mike Morrison: Cash flow from operating activities and free cash flow less distributions to Noncontrolling interest reflects uses of cash of one six and $2 1 million respectively for the first quarter as.

Mike Morrison: As Ryan will discuss in further detail shortly our full year $2025 forecast is free cash flow positive. However results for the first quarter reflect the payment of our incentive bonuses related to 2024 as well as the annual vesting and payment of our cash settled stock awards.

Mike Morrison: On March 31, we had 23 zero million in cash and total debt of $7 6 million, which consisted entirely of finance lease obligations, resulting in a positive net cash position of $15 4 million.

Ryan Hummer: It's not a lot, right, but we can generally get a pretty good margin on new technology we bring to market. You know, the question around pricing discipline and the question around, you know, passing through costs, I think this is going to be, you know, a bit more of a challenge, certainly, where we're seeing, you know, relatively low commodity prices, operators potentially dropping activity at the same time that, you know, we and other service companies will be facing increased costs. We'll see that in the form of steel. You know, others will see it and we'll see it a bit, you know, still some pressure on the labor side.

Borrowing base under our Undrawn ABL facility was $26 8 million and our total liquidity was approximately $50 million, including cash and availability under our revolving credit facility.

Mike Morrison: Now turning to a few points of guidance for the second quarter.

Mike Morrison: Due to the seasonal spring breakup in Canada. We currently expect second quarter total revenue in the range of $26 million to $29 million.

Mike Morrison: We expect Canadian revenue in the range of $12 million to $13 million U S. Revenue of 10, five to $11 5 million and international revenue of three five to $4 $5 million we.

Ryan Hummer: So I think it's going to be a more challenging environment to pass some of the costs that we're seeing on the tariff side through to customers. There will be areas where we're able to do it and areas where we'll strategically, you know, have to consider whether or not we try to really push that or not. But we, you know, we will be as disappointed as we can, we're not going to lead the market down, but I can't speak to what some of some of what our competitors will will do on the pricing front, unfortunately.

Mike Morrison: We expect our adjusted gross margin to range from 37% to 39% and our adjusted EBITDA to range from negative 2 million to breakeven are.

Mike Morrison: Our second quarter, depreciation and amortization expense is projected to be approximately $1 4 million.

Mike Morrison: With that I'll hand, it back over to Ryan to discuss our 2025 full year guidance and closing remarks.

Ryan Hummer: Thank you Mike.

Ryan Hummer: Is the pricing environment different in Canada as opposed to the US? Is it vastly different or is it? Look, I think the the broad similarity and the broad truth is that, you know, when when commodity prices come down, our customers will look to the service companies to help contribute and help them lower their well cost to maintain activity as much as possible. That's true in Canada. It's true in the US. I think part of it has to do really with the differentiation that you're able to provide through your products and services. And I think we're very well-placed, certainly, with our FraxSystems product line in Canada.

Ryan Hummer: We're making only slight adjustments to our full year guidance for 2025.

Ryan Hummer: Context, when we provided our initial full year guidance in March it excluded the potential impacts from threatened or enacted trade actions.

Ryan Hummer: Our current guidance guidance reflects the known impacts from certain tariffs, including tariffs imposed by the U S on steel imports and on products from China.

Ryan Hummer: As a reminder, we've implemented initiatives to partially mitigate cost increases associated with the tariffs imposed by the U S and we believe a portion of these costs can be recovered.

Ryan Hummer: Our guidance also reflects the current commodity price environment, which has weakened somewhat for both oil and natural gas since our last discussion in early March.

Ryan Hummer: We expect this lower commodity pricing will result in reduced customer and industry activity levels compared to initial budgets, primarily impacting the second half of the year.

Ryan Hummer: And from an operational standpoint, what we're able to enable in that market, we've got a pretty nice differentiation versus the peer set. So while there will be certainly price pressure coming from competitors, I think we do offer distinct advantages operationally that the competitors can't.

Ryan Hummer: There is currently a heightened level of uncertainty related to trade and the related impact on economic growth. This is amplified by geopolitical uncertainty as well as announced and potential actions by OPEC plus countries to increase production levels at a time when global demand global demand growth appears to be decelerating.

Gauri Sri: Thank you guys. That's all I had. Good luck with the rest of the year. All right. Thanks. I appreciate the call and I appreciate the question.

Ryan Hummer: Given that backdrop, we are maintaining our expectation for annual revenue of $165 million to $175 million in 2025, which represents a year over year growth of 5% at the midpoint led by Canada and product sales at repeat precision and the United States.

Ryan Hummer: I will now turn the call back over to Ryan Hummer, Chief Executive Officer, for closing remarks. Please go ahead. All right. Thank you, Janice. On behalf of our management team and board, we'd like to thank everyone joining 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 who continually demonstrate why I believe we have the best team in the industry. This team continues to provide excellent service to our customers while developing new products and services that will enable our customers to be even more successful.

Ryan Hummer: We've modified our adjusted EBITDA range to $20 million to $24 million, a modest increase to the high end with a midpoint of $22 million.

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

Ryan Hummer: We expect free cash flow after distributions to our joint venture partner of $7 million to $11 million further strengthening our robust balance sheet and positioning us to pursue strategic investment opportunities.

Ryan Hummer: We appreciate everyone's interest in NCS Multistage, and we look forward to talking again on our next quarterly earnings call.

Ryan Hummer: While NCS performed well during the first quarter of 2025, we are a bit more cautious regarding the second half of the year. Therefore, we are maintaining a wider than normal range for annual operating guidance.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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

Ryan Hummer: Slide 19 of our Investor presentation benchmarks, our balance sheet through total debt to total book capitalization and our current enterprise value to estimated 2025 EBITDA based on analyst consensus figures, which compare our performance to a group of publicly traded peers with a market capitalization below $1 billion.

Ryan Hummer: We believe that our favorable growth and balance sheet profile is not reflected in our trading multiple which is three five times enterprise value to 2025 estimated EBITDA is a 20% discount to the peer median of four four.

Ryan Hummer: Although our shares have performed relatively well over the last year in which we have presented and discussed these measures. The improvement has been almost entirely due to the higher underlying adjusted EBITDA earnings and an increase in our net cash position.

Ryan Hummer: At this time last year, we traded at a multiple of three four times enterprise value to estimated 2020 for adjusted EBITDA, which compares to the current multiple of three five times that I discussed earlier.

Ryan Hummer: We believe that as NCS continues to perform well operationally and to deliver on the financial benefits of our growth strategy that I discussed earlier in the call that we can earn a higher multiple over time.

Ryan Hummer: Before we open the call up to questions I'll close with a couple of brief comments.

Ryan Hummer: We are delivering on our core strategies that we put in place in 2022 that are designed to generate value for our stakeholders through both organic growth and continued 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.

Ryan Hummer: We maintain a strong balance sheet and liquidity position with a cash balance of $23 million at the end of the first quarter and total liquidity, including availability under our revolver of $50 million. This is a $15 million increase from this time a year ago.

Ryan Hummer: In addition, we expect to increase our cash balance by generating positive free cash flow in 2025, providing us with incremental financial and strategic flexibility.

Ryan Hummer: Finally, we continue to benefit from the successful introduction of new solutions that meet the needs of our customers, adding to our technology portfolio and expanding our addressable market.

Ryan Hummer: With that we welcome any questions.

Ryan Hummer: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Speaker Change: Your first question comes from the line of Deane storms of Stonegate Capital Partners, Inc.

Ryan Hummer: Please go ahead.

Deane Storms: Hey, good morning, everyone and thank you for taking my questions.

Ryan Hummer: Just wanted to start good morning, it seems like.

Deane Storms: This was a strong showing of really operating leverages.

Ryan Hummer: And on CSM thinking about.

Ryan Hummer: The scale that you guys are able to achieve going forward are there any break points.

Ryan Hummer: We should maybe be aware of in terms of.

Ryan Hummer: Capacity constraints or anything like that and maybe on the horizon.

Dave: Theres really not Dave and we think about that in two ways right. One one is through the supply chain.

Where we have some vertical integration through the operations at repeat precision, which supports us both in the repeat precision sales and in the U S.

Dave: Sorry, the sliding sleeve biz.

Dave: Business for Canada.

Speaker Change: We generally operate an outsourced manufacturing model and believe there is plenty of capacity at our supply chain partners to continue to service as we grow without requiring additional investment or having too.

Have anything that would impact our gross margin profile there and then when we think about the.

Speaker Change: Really the infrastructure that we had across our operating business right. We've got a presence in our sales force in place to serve the U S, Canada, Argentina, the North sea and the middle East that can accommodate.

Speaker Change: <unk> additional growth.

Speaker Change: What you might see us in certain individual international markets. If we achieve scale, we might decide to have a little bit more in country presence there.

Speaker Change: An example of that is this year, we're likely to set up a.

Speaker Change: An entity in the U K, we've got increased business on the UK side of the North Sea, we have an operating entity in Norway already but so we may do something there. This year and then as the business grows in the middle East we may have more.

Speaker Change: Local service personnel that we decided to locate in country.

Speaker Change: Versus some of those jobs that we serve by rotating people from.

Other regions as the work Pops up so no no real breakpoint.

Speaker Change: We'll just find where we where we hit that.

Speaker Change: Critical mass of repeatable revenue.

Speaker Change: Makes sense for us to put some additional investment into certain geographies.

Speaker Change: Understood very helpful. And then I guess thinking about the sales pipeline.

Speaker Change: I guess kind of what are you seeing there from a texture standpoint are you feel to more inbound calls as customers are trying to.

Speaker Change: Meaning EQM this macro uncertainty are you seeing.

Speaker Change: Yourselves folks in a little more idle as everyone's waiting for the dust to settle maybe just any color there would be very helpful.

Speaker Change: Yes, yes, thanks, Dave obviously, I think there's a lot of scenario planning that's going on in real time within our customer base. We have seen over the course of the last even just the last week or so.

Speaker Change: Oil prices in particular start to come down a bit.

Speaker Change: We outlook, it's it's early.

Speaker Change: But we are anticipating that there will be decisions made here in the course of the next couple of weeks that will.

Speaker Change: Fulsome activity out of the market, especially if WJ hangs in there with a five handle.

Speaker Change: Again, I think that that starts to come into the market first through private operators and maybe some of the smaller publics I think your larger public companies and international oil companies in North America.

Speaker Change: They plan, a little bit differently, but certainly they will react to commodity prices as they need to so I would say the discussions are fluid right now and that speaks to North America, especially in Canada, where we're sitting and breakup. So a period of lower activity right now where the customers are planning.

Speaker Change: What their what their winter drilling activity will look like so the conversations are ongoing.

Speaker Change: What I can say is I feel really good about our technology portfolio because our solutions are generally designed to provide customers with an ability to operate more efficiently to save cost or to generate more economic value through through their resources. So I think we've got the right portfolio to help our customers win and survive through this environment, but.

Speaker Change: We won't be immune to lower activity.

Speaker Change: Understood and then maybe just one more for me.

Speaker Change: I wanted to touch on the product sales in the U S. I know you mentioned that.

Speaker Change: Do you expect them to be kind of a strength.

Speaker Change: Going through the remainder of 2025. They also just follow.

Speaker Change: Load up the quarter.

Speaker Change: The weaker end compared to the rest of your portfolio, maybe any more you can give us here is to.

Speaker Change: How you see that playing out for the remainder of 2025.

Speaker Change: Sure, Yes, a couple of things within that one is.

Speaker Change: Despite the overall strong performance in Q1, we did have some opportunities within Frac systems in particular in the U S. In the first quarter that got deferred into the second quarter.

Speaker Change: And then within repeat precision we've had a lot of.

Speaker Change: What I would call a successful customer field trials that have taken place throughout the first quarter.

Speaker Change: And those trials are starting to convert into more regular activity.

Speaker Change: Across both the traditional composite plug and mentioned specifically on the call. The stage state of our technology, which is a variation of the composite plug, but bring some specific benefits around simulcast <unk> operations.

Speaker Change: And as more customers adopt simulcast triangle frack et cetera.

Speaker Change: <unk> built into that stage saver are ones that are.

Certainly.

Speaker Change: On the radar screen for for customers. So as we move that product through trials. We think that we can can certainly grow that business through repeat in the U S. As well so so feel pretty good about where.

Speaker Change: Where you think the product sale activity in the U S will will go during the year.

Speaker Change: The remainder of the year.

Speaker Change: Understood. Thanks for taking my questions and good luck in Q2.

Speaker Change: Alright, Thanks, Ed.

Speaker Change: Your next question comes from the line of John Daniel with Daniel <unk> Partners. Please go ahead.

John Daniel: Hey, good morning, guys.

Speaker Change: Brian It would seem that the second half to get pretty dicey at least certainly here in the U S. I'm just curious given the strength of your balance sheet.

John Daniel: Which is about to get better.

John Daniel: You see yourself leaning more towards using market disruptions that go after tactical M&A deals are.

John Daniel: Do you think you'd lean more conservative than hoard cash and just ride this thing out.

John Daniel: Yes.

John Daniel: John we'll certainly be active in evaluating M&A market.

John Daniel: Yes, I think one of the things that at least we've experienced in the past is.

John Daniel: When you have changes in the market environment and market opportunity. It takes a little bit of time for seller price expectations to adjust.

John Daniel: So certainly well engaged in discussions and think about deploying cash through M&A, where it makes sense.

John Daniel: We do expect the balance sheet to continue to continue to strengthen and I also think that if we don't find that rate M&A opportunity.

John Daniel: We have a pretty pretty outstanding investment opportunity within NCS as well so.

John Daniel: If we don't find opportunities to deploy that capital externally I think we and the board will have conversations around what makes sense with respect to return of capital to shareholders or even kind of thinking through whether whether it makes sense to buy.

John Daniel: By NCI stock back.

John Daniel: Sure and I guess going back to I guess this is an unknown question I'll just pose it to.

John Daniel: And we feel it out but I mean, it's.

If activity goes lower second half I'm, assuming it doesn't come ramping back Super fast and 26, we'll see who knows.

John Daniel: With the opportunities to be start presenting itself in your view in the second half where in the first half of next year.

John Daniel: That makes any sense I'm, just trying to get the time, yes.

Speaker Change: Yes, good question.

John Daniel: And look I think we're.

John Daniel: We're looking at.

John Daniel: The current market environment is one where there is.

John Daniel: I guess a reduction in anticipated demand right. So if we have the impact of tariffs on global economy.

John Daniel: I think oil demand slows, but doesn't crater you pair that with the unknowns on the supply side with OPEC plus but.

John Daniel: I would see it more as a kind of U shaped if you will.

John Daniel: Cycle or mini cycle, where where you come down potentially.

John Daniel: Potentially pretty quickly stay at a bottom for a while and then recover so.

John Daniel: It's a bit of a hard one to answer but I think the general timing is right, whether whether I can pin it to the second half of this year first half of next year, but give it call. It six to nine months for the market to adjust and for expectations to recalibrate, that's probably fair.

John Daniel: Okay Thats all I got thank you for entertaining those questions.

John Daniel: Alright, Thanks John.

Speaker Change: And next question comes from the line of Carnegie Center of singular Research. Please go ahead.

Speaker Change: Good morning, guys can you hear me.

Speaker Change: And here, you're just fine, though yes.

Speaker Change: Thank you.

Speaker Change: First question is that 3 million estimate for the international.

Speaker Change: So Q2 is that is that trade.

Speaker Change: Tracy.

Speaker Change: Well construction that was and what the pipeline for the North Sea projects in Q2, and Q3 to compensate any kind of project delays that you see.

Mike Morrison: Yes. This is Mike I appreciate your question I would say part.

Mike Morrison: Part of the question you asked is that attributed to well construction I would say, yes part of it is well construction in the middle East with the agreement that we have and the throughput that we're seeing it's also we have some tracer activity that we experienced last year that we continue to see activity in that the north Sea I would say.

Mike Morrison: North Sea that is there are some opportunities we continue to see those opportunities I think for our guidance. There is some in the second quarter, but probably more weighted toward the back half of the year as we look to the north sea.

Mike Morrison: Okay.

Mike Morrison: And in the.

Mike Morrison: The Canadian activity.

Stronger than anticipated.

Mike Morrison: You see any pull forward due to the current macroeconomic conditions.

Mike Morrison: Policy.

Is there any pull forward that we have to modeling.

Mike Morrison: For Canada in the first quarter.

Mike Morrison: It's hard to attribute much of that specifically to a pull forward.

Mike Morrison: I think what we did see in the first quarter was some some generally favorable or benign weather conditions.

So we got off to a little bit stronger start.

Mike Morrison: In January there was a pretty short holiday break towards the end of last year.

Mike Morrison: And then we've had our customers kind of continue to to work into.

Mike Morrison: More work with customers that will work through breakup, whether that be on the Frac system side also the success. We've had in building the composite plug business in Canada, a lot of the operators there will set up their well pads. They can work through breakup. So I don't think were going to have as drastic a falloff typically.

Mike Morrison: Through the second quarter as we've had in prior years it'll still be.

Mike Morrison: A big reduction for us, but we're working to build up that base of customers that worked through the second quarter and helped to mitigate at least some of that seasonality.

Speaker Change: Got you.

Speaker Change: Given the catalysts.

Speaker Change: And the price increases that you might have to pass through.

Speaker Change: And as you are testing these new products.

Speaker Change: Especially in the U S market.

Speaker Change: How well.

Speaker Change: Is the pricing environment.

Speaker Change: Are there any pushback, you're able to maintain pricing discipline as we test these products.

Speaker Change: Yes.

Speaker Change: Sort of two components to it one is when we're bringing in.

Speaker Change: A new technology that will have a benefit that will help the operators save money or avoid a potential disruption typically we can we can get paid for that.

Speaker Change: But we can we can generally get a pretty good margin on new technology, we bring to market.

Speaker Change: Bit more of a challenge certainly were.

We're seeing.

Speaker Change: Relatively low commodity prices operators potentially dropping activity at the same time that we and other service companies will be facing increased costs, we will see that in the form of steel.

Speaker Change: Others will see it and we will see it a bit you still still some pressure on the labor side. So I think going to be a more challenging environment to pass some of the costs that we're seeing on the tariff side through to customers there will be areas, where we're able to do it in areas, where we will strategically.

Speaker Change: Yes.

Speaker Change: We will be as disciplined as we can we're not going to lead the market down, but I can't speak to what some of them. Some of what our competitors will will do on the pricing front. Unfortunately.

Speaker Change: If the pricing environment different in Canada as opposed to the U S.

Speaker Change: Look I think the broad similarity in the broad truth is that.

Speaker Change: When when commodity prices come down our customers will look to the service companies to help contribute and help them lower their well costs to maintain activity as much as possible that is true in Canada, it's true in the U S.

Speaker Change: From an operational standpoint, what we're able to enable and that market, we've got a pretty nice.

Speaker Change: The competitors can't meet.

Speaker Change: Thank you guys Thats all I had good luck with the rest of the year.

Speaker Change: Alright, Thanks, I appreciate the color and I appreciate the questions.

Speaker Change: I will now turn it back over to you Ryan Hummer Chief Executive Officer for closing remarks. Please go ahead.

Ryan Hummer: Alright, Thank you Dennis.

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

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 strategies, we're only as good as our people who continually demonstrate why I believe we have the best team in the industry.

Ryan Hummer: This team continues to provide excellent service to our customers, while developing new products and services that will enable our customers to be even 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: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.