0001692427-17-000043.txt : 20171113 0001692427-17-000043.hdr.sgml : 20171110 20171113172010 ACCESSION NUMBER: 0001692427-17-000043 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20171113 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20171113 DATE AS OF CHANGE: 20171113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NCS Multistage Holdings, Inc. CENTRAL INDEX KEY: 0001692427 STANDARD INDUSTRIAL CLASSIFICATION: OIL, GAS FIELD SERVICES, NBC [1389] IRS NUMBER: 461527455 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-38071 FILM NUMBER: 171197175 BUSINESS ADDRESS: STREET 1: 19450 STATE HIGHWAY 249 STREET 2: SUITE 200 CITY: HOUSTON STATE: TX ZIP: 77070 BUSINESS PHONE: 281-453-2222 MAIL ADDRESS: STREET 1: 19450 STATE HIGHWAY 249 STREET 2: SUITE 200 CITY: HOUSTON STATE: TX ZIP: 77070 8-K 1 ncsm-20171113x8k.htm 8-K 2017 Q3 8-K for Earnings Release

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 8-K

CURRENT REPORT



Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



November 13, 2017

Date of Report (Date of earliest event reported)



NCS Multistage Holdings, Inc.

(Exact name of Registrant as specified in its charter)





 

 

Delaware

001-38071

46-1527455

(State or other jurisdiction of incorporation)

(Commission File Number)

(IRS Employer Identification Number)



19450 State Highway 249, Suite 200

Houston, Texas 77070

(Address of principal executive offices) (Zip code)



(281) 453-2222

(Registrant’s telephone number, including area code)



Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:





 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



 



Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).



 



Emerging growth company  



 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  




 

Item 2.02Results of Operations and Financial Condition.



On November 13, 2017, NCS Multistage Holdings, Inc. (the “Company”) issued a press release announcing its results for the quarter ended September  30, 2017. A copy of the Company’s press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.



The information contained in this Item 2.02 and the accompanying exhibit is being furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18. Furthermore, the information contained in this Item 2.02 and the accompanying exhibit shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.



Item 9.01Financial Statements and Exhibits.





 

 

 



(d)

 

Exhibits.



 

 

 



Exhibit

 

 



Number

 

Description of the Exhibit



99.1

 

Press Release dated November 13, 2017.



2


 

SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.







 

 

 

Date: November 13, 2017

NCS Multistage Holdings, Inc.

 



 

 

 



By:  

/s/ Ryan Hummer

 



 

Ryan Hummer

 



 

Chief Financial Officer

 



3


 

EXHIBIT INDEX





 

 

 



Exhibit

 

 



Number

 

Description of the Exhibit



99.1

 

Press Release dated November 13, 2017.





4


EX-99.1 2 ncsm-20171113xex99_1.htm EX-99.1 2017 Q3 Exhibit 99.1

Exhibit 99.1





 

Picture 1

NCS Multistage Holdings, Inc. 

19450 State Highway 249, Suite 200

Houston, Texas 77070



PRESS RELEASE



NCS MULTISTAGE HOLDINGS, INC. ANNOUNCES THIRD QUARTER 2017 RESULTS



Third Quarter Highlights



·

Total revenue of $56.0 million, a 95% year-over-year increase

·

Net income of $3.4 million, a $3.7 million improvement from the prior year

·

Earnings per diluted share of $0.07; adjusted earnings per diluted share of $0.09 

·

Adjusted EBITDA of $15.1 million, an $8.2 million improvement from the prior year, and a 27% Adjusted EBITDA margin

·

$83 million acquisition of Spectrum Tracer Services, LLC (“Spectrum”) completed during the quarter

·

Total liquidity of $75.2 million, comprised of $20.2 million in cash on hand and $55.0 million of revolver availability



November 13, 2017 - Houston, Texas – NCS Multistage Holdings, Inc. (NASDAQ: NCSM) (“NCS” or the “Company”), a leading provider of highly engineered products and support services that facilitate the optimization of oil and natural gas well completions and field development strategies, today announced its results for the quarter ended September 30, 2017.



Financial Review



Revenues were $56.0 million for the quarter, an increase of $27.3 million or 95%, as compared to the third quarter of 2016. This increase was primarily attributable to an increase in the volume of sales  of our completions products and services due to higher customer drilling and well completion activity as well as the contributions from Repeat Precision, LLC (“Repeat Precision”) and one month of revenue from the recent acquisition of Spectrum. On a sequential basis, total revenues increased by 52% as compared to the second quarter.



Net income was $3.4 million, or $0.07 earnings per diluted share for the quarter ended September 30, 2017, which included a net expense of $1.0 million ($0.8 million after tax, or $0.02 per diluted share) related to professional expenses incurred in connection with our IPO and Spectrum acquisition, realized and unrealized foreign currency gains and losses and the change in fair value of contingent consideration. Adjusted net income, which excludes these items, was $4.2 million or $0.09 per diluted share for the quarter ended September 30, 2017. This compares to a net loss of $(0.3) million, or $(0.01) per diluted share in the third quarter of 2016, which included a net income of $0.8 million ($0.6 million after tax, or $0.02 per diluted share) related to restructuring charges, professional expenses related to our acquisitions and realized and unrealized foreign currency gains and losses. Adjusted net loss, which excludes these items, was $(0.9) million or $(0.03) per diluted share for the quarter ended September 30, 2016.



Adjusted EBITDA was $15.1 million for the quarter, an increase of $8.2 million as compared to the third quarter of 2016. Adjusted EBITDA margin for the third quarter of 2017 was 27%, as compared to 24% for the third quarter of 2016.



For the first nine months of 2017, the Company reported revenues of $151.5 million, an increase of $88.4 million, or 140% as compared to the first nine months of 2016. Net income of $5.4 million for the first nine months of 2017 compares to a net loss of $(17.0) million for the first nine months of 2016.  Adjusted net income was $9.5 million for the first nine months of 2017 compared to an adjusted net loss of $(12.9) million for the first nine months of 2016. Adjusted EBITDA of $39.1 million for the first nine months of 2017 was an increase of $32.0 million as compared to the first nine months of 2016.



NCS completed its initial public offering of its common stock on May 3, 2017. Therefore, a portion of the first nine months of 2017 reflects a period during which the Company was privately-owned.

1


 

Purchase of 100% Interest in Spectrum



On August 31, 2017, the Company purchased a 100% interest in Spectrum, for approximately $83 million, subject to certain adjustments, which was comprised of (i) approximately $76 million in cash and (ii) 0.4 million shares of the Company’s common stock. The cash portion was funded with available cash and borrowings under our senior secured revolving credit facility. The Company also recorded a liability for an earn-out as a contingent adjustment to the asset purchase price in the amount of $0.4 million. The Company believes Spectrum’s tracer diagnostics services will strengthen NCS’s ability to provide its customers with actionable data and analysis to optimize oil and natural gas well completions and field development strategies.



Capital Expenditures and Liquidity



The Company spent $1.4 million in capital expenditures, net, during the third quarter of 2017. These expenditures were made to support the growth of the business.



As of September 30, 2017, the Company had $20.2 million in cash, total availability under its revolving credit facility of $55.0 million and $24.3 million in total debt. On August 31, 2017, the Company entered into an amendment to its senior secured revolving credit facility, which increased the loan commitment available to Pioneer Investment, Inc, a U.S. subsidiary of the Company, from $25.0 million to $50.0 million. The loan commitment available under the senior secured revolving credit facility to NCS Multistage, Inc., a Canadian subsidiary of the Company, remains at $25.0 million.    



NCS’s Chief Executive Officer, Robert Nipper, commented, “The highlight of the third quarter for NCS was closing the Spectrum acquisition. Spectrum’s suite of tracer diagnostic services is exceptionally well aligned with our strategy to provide products and services that will help our customers optimize their completion designs and field development strategies. In addition, we continue to deliver strong year-over-year revenue gains throughout North America while expanding our customer base. I’d like to thank all of our employees for their contributions to our success.



Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net Earnings (Loss) per Diluted Share are non-GAAP financial measures. For an explanation of these measures and a reconciliation, refer to “Non-GAAP Financial Measures” below.



Conference Call



The Company will host a conference call to discuss its third quarter 2017 results on Tuesday, November 14, 2017 at 7:30 a.m. Central Time (8:30 a.m. Eastern Time). To join the conference call from within the United States, participants may dial (844) 400-1696. To join the conference call from outside of the United States, participants may dial (703) 736-7385. The conference access code is 4895647. Participants are encouraged to log in to the webcast or dial in to the conference call approximately ten minutes prior to the start time. To listen via live webcast, please visit the Investors section of the Company’s website, http://www.ncsmultistage.com.



An audio replay of the conference call will be available shortly after the conclusion of the call and will remain available for approximately seven days. It can be accessed by dialing (855) 859-2056 within the United States or (404) 537-3406 outside of the United States. The conference call replay access code is 4895647. The replay will also be available in the Investors section of the Company’s website shortly after the conclusion of the call and will remain available for approximately seven days.



About NCS Multistage Holdings, Inc.



NCS Multistage Holdings, Inc. is a leading provider of highly engineered products and support services that facilitate the optimization of oil and natural gas well completions and field development strategies. The Company provides products and services to exploration and production companies for use in horizontal wells in unconventional oil and natural gas formations throughout North America and in selected international markets, including Argentina, China and Russia. The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “NCSM.” Additional information is available on the Company’s website, www.ncsmultistage.com.



2


 

Forward Looking Statements



This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, but are not limited to declines in the level of oil and natural gas exploration and production activity within Canada and the United States oil and natural gas price fluctuations; loss of significant customers; inability to successfully implement our strategy of increasing sales of products and services into the United States; significant competition for our products and services; our inability to successfully develop and implement new technologies, products and services; our inability to protect and maintain critical intellectual property assets; currency exchange rate fluctuations; impact of severe weather conditions; restrictions on the availability of our customers to obtain water essential to the drilling and hydraulic fracturing processes; our failure to identify and consummate potential acquisitions; our inability to integrate or realize the expected benefits from acquisitions; our inability to accurately predict customer demand; losses and liabilities from uninsured or underinsured drilling and operating activities; changes in legislation or regulation governing the oil and natural gas industry, including restrictions on emissions of GHGs; our inability to meet regulatory requirements for use of certain chemicals by our recently acquired tracer diagnostics business; failure to comply with federal, state and local and non-U.S. laws and other regulations; loss of our information and computer systems; system interruptions or failures, including cyber-security breaches, identity theft or other disruptions that could compromise our information; our failure to establish and maintain effective internal control over financial reporting; our success in attracting and retaining qualified employees and key personnel; our inability to satisfy technical requirements and other specifications under contracts and contract tenders and other factors discussed or referenced in our filings made from time to time with the Securities and Exchange Commission. Any forward-looking statement made by us in this press release speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.



Contacts



Ryan Hummer

Chief Financial Officer

(281) 453-2222

IR@ncsmultistage.com

 

3


 

NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Product sales

 

$

39,391 

 

$

21,346 

 

$

114,362 

 

$

47,305 

Services

 

 

16,566 

 

 

7,304 

 

 

37,088 

 

 

15,733 

Total revenues

 

 

55,957 

 

 

28,650 

 

 

151,450 

 

 

63,038 

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales, exclusive of depreciation
    and amortization expense shown below

 

 

19,326 

 

 

11,013 

 

 

59,774 

 

 

25,498 

Cost of services, exclusive of depreciation
    and amortization expense shown below

 

 

6,632 

 

 

3,700 

 

 

14,423 

 

 

8,399 

Total cost of sales, exclusive of depreciation
    and amortization expense shown below

 

 

25,958 

 

 

14,713 

 

 

74,197 

 

 

33,897 

Selling, general and administrative expenses

 

 

17,637 

 

 

8,491 

 

 

46,572 

 

 

25,363 

Depreciation

 

 

812 

 

 

433 

 

 

2,054 

 

 

1,335 

Amortization

 

 

6,486 

 

 

6,030 

 

 

18,481 

 

 

17,893 

Change in fair value of contingent consideration

 

 

(182)

 

 

 —

 

 

585 

 

 

 —

Income (loss) from operations

 

 

5,246 

 

 

(1,017)

 

 

9,561 

 

 

(15,450)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(235)

 

 

(1,682)

 

 

(3,751)

 

 

(4,739)

Other income (expense), net

 

 

94 

 

 

(18)

 

 

1,132 

 

 

(29)

Foreign currency exchange (loss) gain

 

 

(787)

 

 

1,615 

 

 

224 

 

 

(4,714)

Total other expense

 

 

(928)

 

 

(85)

 

 

(2,395)

 

 

(9,482)

Income (loss) before income tax

 

 

4,318 

 

 

(1,102)

 

 

7,166 

 

 

(24,932)

Income tax expense (benefit)

 

 

777 

 

 

(822)

 

 

2,022 

 

 

(7,935)

Net income (loss)

 

 

3,541 

 

 

(280)

 

 

5,144 

 

 

(16,997)

Net income (loss) attributable to non-controlling interest

 

 

155 

 

 

 —

 

 

(301)

 

 

 —

Net income (loss) attributable to
    NCS Multistage Holdings, Inc.

 

$

3,386 

 

$

(280)

 

$

5,445 

 

$

(16,997)

Earnings (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share attributable to
    NCS Multistage Holdings, Inc.

 

$

0.07 

 

$

(0.01)

 

$

0.13 

 

$

(0.50)

Diluted earnings (loss) per common share attributable to
    NCS Multistage Holdings, Inc.

 

$

0.07 

 

$

(0.01)

 

$

0.13 

 

$

(0.50)

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

43,676 

 

 

34,005 

 

 

39,329 

 

 

34,008 

Diluted

 

 

47,119 

 

 

34,005 

 

 

42,537 

 

 

34,008 

 

4


 

NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)







 

 

 

 

 

 



 

September 30,

 

December 31,



 

2017

 

2016

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

20,222 

 

$

18,275 

Accounts receivable—trade, net

 

 

55,174 

 

 

32,116 

Inventories

 

 

35,529 

 

 

17,017 

Prepaid expenses and other current assets

 

 

1,358 

 

 

2,445 

Other current receivables

 

 

2,621 

 

 

3,053 

Deferred income taxes, net

 

 

 —

 

 

2,116 

Total current assets

 

 

114,904 

 

 

75,022 

Noncurrent assets

 

 

 

 

 

 

Property and equipment, net

 

 

23,906 

 

 

9,759 

Goodwill

 

 

185,339 

 

 

122,077 

Identifiable intangibles, net

 

 

142,966 

 

 

118,697 

Deposits and other assets

 

 

1,682 

 

 

1,272 

Total noncurrent assets

 

 

353,893 

 

 

251,805 

Total assets

 

$

468,797 

 

$

326,827 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable—trade

 

$

10,485 

 

$

10,258 

Accrued expenses

 

 

7,374 

 

 

3,290 

Income taxes payable

 

 

11,656 

 

 

 —

Other current liabilities

 

 

1,960 

 

 

3,223 

Current maturities of long-term debt

 

 

3,204 

 

 

772 

Total current liabilities

 

 

34,679 

 

 

17,543 

Noncurrent liabilities

 

 

 

 

 

 

Long-term debt, less current maturities

 

 

21,051 

 

 

88,394 

Other long-term liabilities

 

 

10,226 

 

 

717 

Deferred income taxes, net

 

 

30,436 

 

 

42,695 

Total noncurrent liabilities

 

 

61,713 

 

 

131,806 

Total liabilities

 

 

96,392 

 

 

149,349 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock, $0.01 par value, 1 share authorized, issued, and outstanding at

 

 

 —

 

 

 —

September 30, 2017 and December 31, 2016, respectively

 

 

 

 

 

 

Common stock, $0.01 par value, 225,000,000 shares authorized, 43,929,984 shares issued

 

 

 

 

 

 

and 43,911,636 shares outstanding at September 30, 2017 and 54,000,000 shares authorized,

 

 

 

 

 

 

34,024,326 shares issued and 34,005,978 shares outstanding at December 31, 2016

 

 

439 

 

 

340 

Additional paid-in capital

 

 

397,199 

 

 

237,566 

Accumulated other comprehensive loss

 

 

(64,918)

 

 

(82,015)

Retained earnings

 

 

27,207 

 

 

21,762 

Treasury stock, at cost; 18,348 shares at September 30, 2017 and at December 31, 2016

 

 

(175)

 

 

(175)

Total stockholders’ equity

 

 

359,752 

 

 

177,478 

Non-controlling interest

 

 

12,653 

 

 

 —

Total equity

 

 

372,405 

 

 

177,478 

Total liabilities and stockholders' equity

 

$

468,797 

 

$

326,827 





















































5


 

NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)







 

 

 

 

 

 



 

 

 

 

 

 



 

Nine Months Ended



 

September 30,



 

2017

 

2016

Cash flows from operating activities

 

 

 

Net income (loss)

 

$

5,144 

 

$

(16,997)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

20,535 

 

 

19,228 

Amortization of deferred loan cost

 

 

360 

 

 

545 

Share-based compensation

 

 

3,889 

 

 

1,006 

Provision for inventory obsolescence

 

 

 —

 

 

600 

Deferred income tax benefit

 

 

(12,902)

 

 

(7,630)

(Gain) loss on sale of property and equipment

 

 

(40)

 

 

57 

Foreign exchange (gain) loss on financing item

 

 

(1,760)

 

 

4,640 

Write-off of deferred loan costs

 

 

1,422 

 

 

 —

Change in fair value of contingent consideration

 

 

585 

 

 

 —

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable—trade

 

 

(16,101)

 

 

1,862 

Inventories

 

 

(12,690)

 

 

2,756 

Prepaid expenses and other assets

 

 

(169)

 

 

(30)

Accounts payable—trade

 

 

(983)

 

 

745 

Accrued expenses

 

 

3,531 

 

 

622 

Other liabilities

 

 

129 

 

 

(138)

Income taxes receivable/payable

 

 

11,919 

 

 

(130)

Net cash provided by operating activities

 

 

2,869 

 

 

7,136 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(5,332)

 

 

(434)

Proceeds from sales of property and equipment

 

 

181 

 

 

231 

Proceeds (funding) of short-term note receivable

 

 

1,000 

 

 

(1,000)

Acquisitions of businesses, net of cash acquired

 

 

(80,928)

 

 

 —

Net cash used in investing activities

 

 

(85,079)

 

 

(1,203)

Cash flows from financing activities

 

 

 

 

 

 

Equipment note borrowings

 

 

1,533 

 

 

 —

Payments on equipment note

 

 

(158)

 

 

 —

Promissory note borrowings

 

 

6,541 

 

 

 —

Payments on promissory note

 

 

(3,661)

 

 

 —

Line of credit borrowings

 

 

20,000 

 

 

 —

Payment of deferred loan cost related to new credit agreement

 

 

(971)

 

 

 —

Payments related to public offering

 

 

(2,178)

 

 

 —

Proceeds from related party note receivable

 

 

752 

 

 

 —

Repayment of term note

 

 

(89,077)

 

 

 —

Purchases of treasury stock

 

 

 —

 

 

(175)

Proceeds from issuance of common stock, net of offering costs

 

 

151,356 

 

 

102 

Net cash provided by (used in) financing activities

 

 

84,137 

 

 

(73)

Effect of exchange rate changes on cash and cash equivalents

 

 

20 

 

 

679 

Net change in cash and cash equivalents

 

 

1,947 

 

 

6,539 

Cash and cash equivalents beginning of period

 

 

18,275 

 

 

9,545 

Cash and cash equivalents end of period

 

$

20,222 

 

$

16,084 

Noncash investing and financing activities

 

 

 

 

 

 

Issuance of common stock for business acquisition

 

$

6,907 

 

 

 —

 

6


 

NCS MULTISTAGE HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION 

(In thousands, except per share data)  

(Unaudited)



Non-GAAP Financial Measures



EBITDA is defined as net income (loss) before interest expense, net, income tax expense (benefit) and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted to exclude certain items which we believe are not reflective of ongoing performance or which, in the case of share-based compensation, are non-cash in nature. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenues. Adjusted Net Earnings (Loss) per Diluted Share is defined as net income (loss) attributable to NCS Multistage Holdings, Inc. adjusted to exclude certain items which we believe are not reflective of ongoing performance. We believe that Adjusted EBITDA and Adjusted Net Earnings (Loss) per Diluted Share are important measures that exclude costs that management believes do not reflect our ongoing operating performance and, in the case of Adjusted EBITDA, certain costs associated with our capital structure. Accordingly, Adjusted EBITDA and Adjusted EBITDA margin are key metrics that management uses to assess the period-to-period performance of our core business operations. We believe that presenting Adjusted EBITDA and Adjusted EBITDA margin enables investors to assess our performance from period to period using the same metrics utilized by management and that Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net (Loss) per Diluted Share enable investors to evaluate our performance relative to other companies that are not subject to such factors.



EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Earnings (Loss) per Diluted Share (our “non-GAAP financial measures”) are not defined under generally accepted accounting principles (“GAAP”), are not measures of net income, income from operations or any other performance measure derived in accordance with GAAP, and are subject to important limitations. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies in our industry and are not measures of performance calculated in accordance with GAAP. Our non-GAAP financial measures have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our financial performance as reported under GAAP and they should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance with GAAP as measures of operating performance or as alternatives to cash flow from operating activities as measures of our liquidity.



The tables below set forth reconciliations of our non-GAAP financial measures to the most directly comparable measure of financial performance calculated under GAAP:



ADJUSTED NET EARNINGS (LOSS) PER DILUTED SHARE







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30, 2017

 

September 30, 2016

 

September 30, 2017

 

September 30, 2016



 

Effect on
Net Income
(After-
Tax)

 

Impact on Diluted Earnings Per Share

 

Effect on
Net Loss
(After-
Tax)

 

Impact on Diluted Earnings Per Share

 

Effect on
Net Income
(After-
Tax)

 

Impact on Diluted Earnings Per Share

 

Effect on
Net Loss
(After-
Tax)

 

Impact on Diluted Earnings Per Share

Net income (loss) attributable to
NCS Multistage Holdings, Inc.

 

$

3,386 

 

$

0.07 

 

$

(280)

 

$

(0.01)

 

$

5,445 

 

$

0.13 

 

$

(16,997)

 

$

(0.50)

Adjustments (after tax)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Write-off of debt issuance costs (a)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,147 

 

 

0.03 

 

 

 —

 

 

 —

Restructuring charges (b)

 

 

 —

 

 

 —

 

 

42 

 

 

 —

 

 

 —

 

 

 —

 

 

219 

 

 

 —

IPO-related professional expense (c)

 

 

 

 

 —

 

 

 —

 

 

 —

 

 

1,822 

 

 

0.04 

 

 

 —

 

 

 —

Acquisition and merger costs (d)

 

 

315 

 

 

0.01 

 

 

509 

 

 

0.01 

 

 

843 

 

 

0.02 

 

 

606 

 

 

0.02 

Realized and unrealized (gains) losses (e)

 

 

652 

 

 

0.01 

 

 

(1,133)

 

 

(0.03)

 

 

(261)

 

 

(0.01)

 

 

3,307 

 

 

0.10 

Change in fair value of contingent consideration (f)

 

 

(154)

 

 

 —

 

 

 —

 

 

 —

 

 

472 

 

 

0.01 

 

 

 —

 

 

 —

Adjusted net income (loss) attributable

to NCS Multistage Holdings, Inc.

 

$

4,208 

 

$

0.09 

 

$

(862)

 

$

(0.03)

 

$

9,468 

 

$

0.22 

 

$

(12,865)

 

$

(0.38)

_____________________

(a)

Includes the remaining debt issuance costs of $1,422 related to the prior credit agreement that were expensed when the debt was repaid with a portion of our net proceeds from the initial public offering of shares of our common stock (“IPO”) during the second quarter of 2017.

(b)

Represents severance and other expenses associated with headcount reductions and other cost savings initiated as part of our restructuring initiatives.

(c)

Represents non-capitalizable costs of professional services incurred in connection with our IPO.

(d)

Represents costs of professional services incurred in connection with our acquisition of a 50% interest in Repeat Precision and Spectrum acquisition.

(e)

Represents realized and unrealized foreign currency translation gains and losses primarily in respect of our indebtedness.

(f)

Represents the change in the fair value of the earn-outs associated with our acquisitions.











7


 

NCS MULTISTAGE HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION 

(In thousands)

(Unaudited)



ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

Net income (loss)

 

$

3,541 

 

$

(280)

 

$

5,144 

 

$

(16,997)

Income tax expense (benefit)

 

 

777 

 

 

(822)

 

 

2,022 

 

 

(7,935)

Interest expense, net (a)

 

 

235 

 

 

1,682 

 

 

3,751 

 

 

4,739 

Depreciation

 

 

812 

 

 

433 

 

 

2,054 

 

 

1,335 

Amortization

 

 

6,486 

 

 

6,030 

 

 

18,481 

 

 

17,893 

EBITDA

 

 

11,851 

 

 

7,043 

 

 

31,452 

 

 

(965)

Share-based compensation (b)

 

 

2,053 

 

 

336 

 

 

3,889 

 

 

1,006 

Restructuring charges (c)

 

 

 —

 

 

61 

 

 

 —

 

 

312 

Professional fees (d)

 

 

391 

 

 

769 

 

 

3,337 

 

 

1,029 

Unrealized foreign currency loss (gain) (e)

 

 

735 

 

 

(1,718)

 

 

20,175 

 

 

4,915 

Realized foreign currency loss (gain) (f)

 

 

52 

 

 

104 

 

 

(20,399)

 

 

(200)

Change in fair value of contingent consideration (g)

 

 

(182)

 

 

 —

 

 

585 

 

 

 —

Other (h)

 

 

202 

 

 

262 

 

 

66 

 

 

960 

Adjusted EBITDA

 

$

15,102 

 

$

6,857 

 

$

39,105 

 

$

7,057 

Adjusted EBITDA Margin

 

 

27% 

 

 

24% 

 

 

26% 

 

 

11% 

_____________________

(a)

Includes the remaining debt issuance costs of $1,422 related to the prior credit agreement that were expensed when the debt was repaid with a portion of our net proceeds from the IPO during the second quarter of 2017.  

(b)

Represents non-cash compensation charges related to share-based compensation granted to our officers, employees and directors.

(c)

Represents severance and other expenses associated with headcount reductions and other cost savings initiated as part of our restructuring initiatives.

(d)

Represents non-capitalizable costs of professional services incurred in connection with our IPO, refinancings and the evaluation of proposed and completed acquisitions.

(e)

Represents unrealized foreign currency translation gains and losses primarily in respect of our indebtedness.

(f)

Represents realized foreign currency translation gains and losses with respect to principal and interest payments related to our indebtedness.

(g)

Represents the change in the fair value of the earn-outs associated with our acquisitions.

(h)

Represents the impact of a research and development subsidy that is included in income tax expense (benefit) in accordance with GAAP, fees incurred in connection with refinancing our credit facilities, arbitration awards, board of directors fees and travel expenses prior to our initial public offering as permitted by the terms of our prior credit agreement and other charges and credits.







8


 

NCS MULTISTAGE HOLDINGS, INC.

REVENUE BY GEOGRAPHIC AREA

(In thousands)

(Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

United States

 

 

 

 

 

 

 

 

 

 

 

 

Product Sales

 

$

7,608 

 

$

5,212 

 

$

32,736 

 

$

10,462 

Services

 

 

5,693 

 

 

946 

 

 

11,043 

 

 

3,181 

Total United States

 

 

13,301 

 

 

6,158 

 

 

43,779 

 

 

13,643 

Canada

 

 

 

 

 

 

 

 

 

 

 

 

Product Sales

 

 

30,342 

 

 

14,849 

 

 

74,954 

 

 

34,831 

Services

 

 

10,031 

 

 

4,820 

 

 

23,572 

 

 

10,287 

Total Canada

 

 

40,373 

 

 

19,669 

 

 

98,526 

 

 

45,118 

Other Countries

 

 

 

 

 

 

 

 

 

 

 

 

Product Sales

 

 

1,441 

 

 

1,285 

 

 

6,672 

 

 

2,012 

Services

 

 

842 

 

 

1,538 

 

 

2,473 

 

 

2,265 

Total Other Countries

 

 

2,283 

 

 

2,823 

 

 

9,145 

 

 

4,277 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Product Sales

 

 

39,391 

 

 

21,346 

 

 

114,362 

 

 

47,305 

Services

 

 

16,566 

 

 

7,304 

 

 

37,088 

 

 

15,733 

Total

 

$

55,957 

 

$

28,650 

 

$

151,450 

 

$

63,038 

 



9


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