NCS Multistage Reports 15% Revenue Increase with Strong Third Quarter Results

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NCS Multistage Reports 15% Revenue Increase with Strong Third Quarter Results

NCS Multistage (ticker: NCSM) reported revenue of $44 million in the third quarter of 2024, a 15% increase compared to the previous year, along with a net profit of $4.1 million or $1.60 per diluted share. The company's adjusted EBITDA of $7.1 million exceeded expectations, and year-to-date revenue reached $118 million, reflecting a 10% increase from last year.

NCS Multistage's international revenue saw significant growth, climbing 89%, contributing positively to financial performance. The company provided guidance for fourth-quarter revenue, expecting between $38 million and $42 million, and adjusted full-year revenue projections to be between $155.5 million and $159.5 million.

Key Highlights:

  • Third-quarter revenue of $44 million, a 15% increase year-over-year; net profit of $4.1 million.
  • Adjusted gross margin at 42%; international revenue growth at 89%.
  • Year-to-date revenue reached $118 million, up 10% from last year.
  • Adjusted EBITDA for the third quarter surpassed expectations at $7.1 million.
  • Full-year revenue guidance revised to $155.5 million to $159.5 million, representing an 11% increase over 2023.
  • Expected free cash flow for 2024 is forecasted between $6 million and $10 million, with an anticipated cash position exceeding $20 million by year-end.

Company Outlook:

  • Fourth-quarter revenue guidance is set between $38 million and $42 million.
  • Full-year revenue estimates have been revised to $155.5 million to $159.5 million, an 11% increase over 2023.
  • For the full year, adjusted EBITDA guidance is currently in the range of $18 million to $20.5 million.
  • Expected free cash flow for 2024 is projected between $6 million and $10 million, with a year-end cash position expected to exceed $20 million.

Negatives:

  • Other income for the third quarter declined by $500,000 due to non-recurring legal settlements.

Positives:

  • Strong strategic advancements in international markets, with revenues exceeding $12 million in the first nine months.
  • Expansion of product offerings, including a larger frac sleeve for 7-inch casing, and successful product trials in carbon capture and geothermal applications.
  • Market conditions are expected to remain stable in the U.S., while growth is anticipated in Canada, along with strong growth in Argentina, Norway, and the Middle East.

Shortcomings:

  • SG&A expenses increased to $14.1 million due to higher incentive bonuses.

Q&A Highlights: CEO Ryan Hummer discussed the positive structural outlook for the Canadian market, forecasting low single-digit growth for the next few years. Hummer expressed optimism regarding robust growth in Argentina and Vaca Muerta in 2024, as well as ongoing expansion in Norway and the Middle East. The discussion emphasized advancements in geothermal developments and the critical importance of developing a 7-inch system for high-temperature applications, including geothermal and carbon capture. The role of NCS in supporting its customers in improving their ESG scores and carbon footprints with advanced technologies was highlighted.

NCS Multistage's third-quarter earnings call underscored particularly strong financial performance and strategic advancements in international markets. With a solid outlook for the fourth quarter and the full year, the company is well-positioned to capitalize on market opportunities and maintain its growth trajectory.

InvestingPro Insights: NCS Multistage's (NCSM) strong financial performance in the third quarter of 2024 is also supported by InvestingPro data. The company's market capitalization stands at $46.4 million, reflecting its position in the oilfield services sector.

One striking InvestingPro Insight is that NCSM is trading at a low earnings multiple. This is confirmed by the company's P/E ratio of 1.09, which is quite low and suggests the stock may be undervalued relative to its earnings. This aligns with the reported net profit of $4.1 million in the third quarter and indicates potential for a price increase should the market recognize this discrepancy.

Another relevant InvestingPro Insight highlights that NCSM holds more cash than debt on its balance sheet. This strong liquidity position supports the company's projection of ending 2024 with a cash position exceeding $20 million and aligns with the forecasted free cash flow of $6 million to $10 million for the year.

As noted in another InvestingPro Insight, the company's profitability over the past twelve months is reflected in a robust return on assets ratio of 31.55%. This metric underscores NCS Multistage's efficiency in generating profit from its assets, which is crucial in the capital-intensive oilfield services industry.

It is worth mentioning that NCSM has outperformed many of its competitors in the sector, achieving a 31.96% total return over the past year. This performance, combined with the company's strong third-quarter results and positive outlook, indicates that investors recognize the value of the company.

For readers looking for deeper analysis, InvestingPro provides five additional insights on NCSM, offering a more comprehensive view of the company's financial health and market position.