NCS Multistage at Emerging Growth Conference 82: Strategic Expansion Amid Challenges

On Wednesday, 21 May 2025, NCS Multistage Holdings Inc. (NASDAQ:NCSM) presented at the Emerging Growth Conference 82, offering a strategic overview of its operations. Led by CEO Ryan Hummer, the company highlighted its technology-focused approach in the oil field services sector, targeting expansion despite market challenges. While revenue growth and margin improvement were positive, uncertain market conditions and customer consolidation posed challenges.

Key Takeaways

• NCS Multistage reported a 14% revenue growth in 2024, with expectations for continued growth in 2025.
• Gross margins improved by 250 basis points in 2024, with further enhancement in early 2025.
• The company maintains a capital-light model, aiming to convert 50% to 60% of adjusted EBITDA to free cash flow.
• Approximately $23 million in cash and $27 million available through a revolving credit facility as of March 31.
• Focus on internal R&D projects, with potential for strategic acquisitions or shareholder capital returns.

Financial Results

The company achieved a 14% increase in revenue, adding $20 million in 2024, and anticipates further growth in 2025. Gross margins stood at approximately 40%, reflecting a 250 basis point improvement over the previous year. NCS Multistage reported a trailing twelve-month EBITDA of $24 million and free cash flow of $12 million. The company aims to convert 50% to 60% of adjusted EBITDA into free cash flow.

Operational Updates

CEO Ryan Hummer outlined the company’s strategic focus on building market positions in fracturing systems and tracer diagnostics, capitalizing on offshore and international opportunities, and commercializing innovative solutions. Despite a generally flat market outlook for 2025, with slight declines in the US and growth in Canada, international opportunities remain promising. However, lower spot oil prices and customer consolidation in Canada present challenges.

Future Outlook

NCS Multistage has held its annual revenue guidance flat, with a wider range due to market uncertainties. The company prioritizes investment in internal R&D projects to drive organic growth, while also considering strategic acquisitions. If mergers and acquisitions are not feasible, returning capital to shareholders is an option.

Q&A Highlights

During the Q&A session, Hummer emphasized the company’s commitment to investing in high-return R&D projects to enhance organic growth and generate attractive incremental EBITDA margins. The company also remains open to returning capital to shareholders while strategically utilizing its balance sheet.

In conclusion, NCS Multistage continues to navigate a challenging market environment with a focus on strategic growth and financial discipline. For more detailed insights, please refer to the full transcript below.

Full transcript - Emerging Growth Conference 82:

Anna, Host, Emerging Growth Conference: Holdings Inc. Trades on the NASDAQ under the symbol NCSM. Happy to welcome back CEO and director Ryan Hummer. Ryan, thank you for joining us. We won’t see you, but we can hear you.

The floor is yours.

Ryan Hummer, CEO and Director, Holdings Inc.: Alright. Thank you, Anna. And, yeah, hope everyone’s having a great day. I wanna thank Emerging Growth Conference for inviting us and wanna thank everyone that’s taking the time to watch. So we move on to to slide three.

We gave a full presentation at an earlier emerging growth conference in March. So we’ll plan to use the time today primarily as an update. So I’ll take a moment to cover who we are and where we’re focused as a company. So we’re a technology focused oil field services and equipment company. We tend to sell directly to the E and P companies.

So oil and natural gas producers like Chevron, Conoco, Oxy, BP, Equinor, CNRL, Tourmaline, Whitecap, and and similar customers. And we compete with Schlumberger or SLB, Halbern, NOB, Innovex, Core Lab, and others. And we typically take on larger, more established competitors in what we do. Within that market, we focus on certain areas where we can obtain a leadership position and earn attractive margins. And over time, this has led us to four product lines that have a common theme.

We provide products and services that enable capital efficient unconventional resource development. Historically, this is primarily taking place in North America, and increasingly, we’re doing this in other global regions. And we focus on innovation and partnering with our customers to bring new solutions to market, solutions that will typically save our customers time, save them money or both, and help them make better and more productive wells. And we pair this focus on r and d and innovation with a capital light business model, which includes outsourced manufacturing. So this enables us to minimize our capital investment requirements and to convert EBITDA to free cash flow through the business cycles.

The charts at the bottom of the slide provide our revenue by geography, our product and service mix, and our revenue by product line, and I’ll highlight that we worked for over 200 customers in 02/2004 with limited concentration in our customer base. Before I leave this page, I’ll note that we’re traded on Nasdaq with the ticker NCSM. Our recent market capitalization and enterprise value are both currently just below $90,000,000 with a trailing twelve month EBITDA and free cash flow of 24,000,000 and $12,000,000 respectively, implying a relatively low trading multiple and a robust free cash flow yield. So we can move on to the next slide. So we operate through four product lines.

And this this slide provides really just a few highlights about our technology and the value that we bring to our customers. So as I referenced in the introduction, the key connection across our product and service portfolio is that we help our customers maximize their return on investment from unconventional resource development. In North America, this is typically focused on enabling operational efficiencies, although in some cases, we do enable better production results as compared to competing technologies. In international markets, we’re helping to accelerate our customers’ learning curve in unconventional development and to maximize the value of their more mature assets. I’d encourage anyone that’s learning about NCS for the first time today to review our emerging growth presentation from March where I review our products and the value proposition that we bring to our customers in more detail.

So turning to the next slide, we’ll highlight briefly the three core business strategies that we have as a company. And this was introduced in late two thousand twenty two, and we are benefiting from the results. The first strategy is to build on our leading market positions. And for us, our leading market positions include our fracturing systems product line on a global basis, our presence in Canadian completions and the strong resulting customer relationships we have in that market, and then also our global capabilities and presence in tracer diagnostics. The second component of the strategy is to capitalize on offshore and international opportunities, which we’ve been pursuing.

We do this because international markets are growing faster than North America. The international and offshore customers tend to buy based on technical characteristics rather than just on price. And therefore, there’s a built an ability to build stickier customer relationships and for us to be compensated for the value that we provide to our customers. The third strategic component is to commercialize innovative solutions to complex customer challenges. We obtain and understand the voice of the customer and emerging market needs and deliver a solution that brings tangible value to our customers.

We believe that this strategy will allow us to continue to create value for our stakeholders over time. So turning to the next slide, delivering on that business strategy that we’ve been pursuing has produced favorable financial results. We grew revenue by about 14% or $20,000,000 in 2024 and expect it will grow revenue again in 2025, despite what I generally characterize as a challenging market environment for the oil and gas industry. Our gross margin of approximately 40% reflects the value of the products and services that we provide to our customers. And with our outsourced manufacturing model, our cost of sales is highly variable in nature.

So we were able to improve our gross margins by approximately two fifty points in 2024 compared to the prior year, and we’re continuing that momentum through the first quarter in twenty twenty five. In addition, our capital light model positions us to generate free cash flow through industry cycles. And over time, we expect that we can convert approximately 50% or 60% of our adjusted EBITDA to free cash flow. So going on to the next slide before we open the floor to questions. In short, what I’d say is, you know, I certainly believe and our board and company believes that NCS is compelling investment opportunity.

We have an attractive organic growth track record and we’re focused on increasing our presence in growth markets for unconventional resource development. We’re delivering gross profit and EBITDA growth with strong incremental margins. We continue to bring innovative technology to our customers, especially for technically demanding applications, which leverage our engineering capabilities and provide an opportunity for higher margins. Our capital light business model minimizes capital investment and allows us to generate free cash flow through the cycles. And we have a strong balance sheet and expect to further strengthen it this year with additional free cash flow.

At March 31, we had approximately $23,000,000 in cash and approximately $27,000,000 available through our revolving credit facility. This positions us well to opportunistically participate in industry consolidation or to evaluate a framework to return capital to shareholders in the future. So Anna, that concludes the presentation and I’d be happy to take any questions from you or the audience.

Anna, Host, Emerging Growth Conference: Perfect. Thank you. Yes, so you held your full year guidance relatively flat after a strong first quarter. Can you discuss how you’re thinking about the market right now? Talk a little bit more about that.

Ryan Hummer, CEO and Director, Holdings Inc.: Sure. Sure. Great question, Anna. So coming into 2025, we’d expected that market activity for us would generally be flat, maybe a slightly declining market in The U. S, some slight growth in Canada and good opportunities in our focus markets outside of North America.

Since that time, we did have a strong first quarter, as you mentioned, exceeding our guidance across the board. However, there are a few items that we expect to serve as headwinds as we move through the remainder of the year. First, spot oil prices are about $10 per barrel lower, which has already led to some customers reducing their planned drilling and completion spending. So now believe the market environment is a little bit less favorable than before. In addition, we saw a combination of two of our good customers in Canada.

We’re excited to work for that now larger organization and the opportunities that they’re pursuing. But what often happens in our industry is that the combined entity, when our customers consolidate, will drill and complete fewer wells than those two companies would independently. So it reduces the market opportunity for us a bit as we as we navigate, that pro form a organization. And finally, while we’re encouraged by some of the recent frameworks and trade agreements as well as the pause on the very high tariff rates on China, which could limit the negative impact of some of the trade actions that are taking place on and their impact on global economic growth, we do continue to operate in what I’d call an uncertain market and believe our customers will continue to be cautious. So, you know, offsetting those headwinds are some attractive company specific commercial opportunities that we’ve been pursuing across our geographies and across the various product lines, And we did discuss several of those on a recent earnings call.

So, you know, would would certainly recommend going back. And if you’re interested in some of the detail around that, you know, listen to the earnings call to, you know, understand a bit better what we are pursuing. We also have actions that we’re taking to improve product and service margins and some new products that are reaching the field trial stage, which could serve to continue to expand our addressable market. So taking all that in balance, we’ve largely held our annual guidance flat, but with a little bit wider range than we typically would have at this point in the year given some of the uncertainty. And we’ll continue to adjust that as we move through the year.

Anna, Host, Emerging Growth Conference: Perfect. Thank you, Ryan. One more question due to time. At the end of your presentation, you mentioned a cash balance of 23,000,000 with significant revolving credit capacity. So how do you prioritize potential uses for that cash?

Ryan Hummer, CEO and Director, Holdings Inc.: Yeah. Another really good question, Anna. So first and foremost, we want to invest in our internal research and development projects that will contribute to sustained organic revenue growth. And with our business model, we’re fortunate to be able to do that and not to be capital constrained. So that’s the first priority for us is really optimizing the organic growth path and the market development opportunities that we have in front of us.

And as we grow organically through these high return projects, we can generate attractive incremental EBITDA margins and improve our return on invested capital. As we touched on briefly in our discussion in March, we do believe that we can leverage our operational capabilities, our global footprint and our public company infrastructure to create additional value through strategic acquisitions, especially for businesses that are in or close to our current product lines. However, if we don’t find that right M and A opportunity and cash continues to build up on our balance sheet, we could then explore options to prudently return capital to shareholders while retaining the ability to use our balance sheet strategically going forward. So I know we got a little bit of a late start and we’re short on time. I think you mentioned that’s the last question.

Just want to thank you again and thank Emerging Growth again. We appreciate the discussion and look forward to sharing some future updates later this year and as we move forward.

Anna, Host, Emerging Growth Conference: Perfect. Thank you. We will send you these questions. You can answer on your own and we’ll give you a little bit more time on the next conference you join us at. So we appreciate your time today.

Thank you.

Ryan Hummer, CEO and Director, Holdings Inc.: All right. Thank

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