NCS Multistage Holdings, Inc. Q3 FY2025 earnings call

Core Strategies - Build leading market positions: Unmatched expertise in fracturing systems, market share in Canadian completions, and tracer diagnostic offerings including ResMetrix. - Capitalize on high-margin growth opportunities: Focus on North America markets like Alaska and heavy oil, and international markets like North Sea with growing customer base. - Commercialize innovative solutions: Showcasing Luminate multi-day composite sampling units, manufacturing ATRS AICV sliding sleeves and packers, and developing deepwater fracturing systems. ### ResMetrix Integration - Positive operational and financial performance since acquisition. Sales and operations teams coordinated early. Cost savings identified through integrating processes like chemical sourcing, insurance, and fleet management.

Third-quarter revenue was $46.5 million, exceeding the guided range. Excluding ResMetrix, U.S. revenue improved by 37% year-over-year. First 9 months of 2025 revenue was $133 million, up 13% year-over-year. Canadian revenue increased 9% for the first 9 months of the year despite a 6% decline in the average rig count. International revenue reached 10% of total revenue in 2024. Product segments include fracturing services, fracturing systems, and tracer diagnostics (with ResMetrix contributing positively since acquisition).

Q4 2025 - Total revenue expected $41M-$45M. - Canadian revenue $23M-$25M, U.S. revenue $15M-$16M, international revenue $3M-$4M. - Adjusted gross margin 40%-42%, adjusted EBITDA $5M-$6.5M. ### Full-Year 2025 - Annual revenue $174M-$178M (8% YOY growth). - Pro forma combined adjusted EBITDA $22.5M-$24M. - Free cash flow after distributions to noncontrolling interest $11M-$13M.

• Market conditions: Challenging market with stagnating U.S. rig count, double-digit activity declines in Canada, oversupplied oil market, and tariffs/trade uncertainties. - Integration risks: Potential challenges in fully integrating ResMetrix processes, though progress is ahead of schedule.

Q: It sounds like your integration of ResMetrix is going really well. And the rationale behind the deal was to expand the tracer diagnostics footprint in the Middle East. What does the opportunity set look like going forward and in 2026?

A: Yes. Thanks, Colby. Thanks for joining. Appreciate the question. So yes, look, I think what ResMetrix brought to us in the Middle East was certainly one part of the rationale for the deal. Just by way of background, we've had existing operations on the NCS side, tracer diagnostic operations in the Middle East for several years, but it really started to scale that up over the course of 2024 and 2025, primarily in Oman and Saudi Arabia. And what ResMetrix brought was some long-term contracts to participate in a couple of additional markets, including in the Emirates and in Kuwait. So it really helped to broaden our portfolio in the region and the way that we serve customers over there. So we continue to participate in that work, but I think there are a number of other compelling benefits to the ResMetrix acquisition beyond just that Middle East presence, but that was certainly something that was attractive to us as part of the evaluation of that transaction.

Q: Just wanted to circle back to ResMetris here for a minute. It was mentioned that maybe the integration is a little ahead of schedule. Could you spend a little more time talking about how much time is left to fully integrate? And maybe if you think it was mentioned last quarter, the $1 million to $2 million in synergies could be implied if you think that's still a potential?

A: Yes. So maybe 2 things there. One is, I think, the integration is progressing along the timeline that we had expected as far as really doing the work to align processes, arrive at best practices, and be in a position to implement those. Because I think, as we discussed, we were head-to-head competitors in the market doing the same thing, but doing everything a little bit differently from the way that we source chemicals, the way we deploy them in the field, the way we take samples, the way we prep them in the lab, and deliver reports to customers. So with that, we will continue to be methodical, but believe that by early next year, we will have really aligned all of those practices and be in a position to go out to the customer and to the market in an integrated way. What we've seen, however, is though, we're not waiting for that official integration to take place to find ways to work together and deliver some of those wins. And some of that's coming in ahead of schedule. So with respect to the overall kind of synergy opportunity for the deal, I think we're still confident that if you think about ResMetrix being about $10 million of annual revenue, the NCS tracer business ex-ResMetrix having been in the high teens. So you're talking about a $25 million to $30 million revenue base. Being able to get about 5 percentage points of benefit across that translates to, call it, $1.5 million of synergies at the midpoint, a mix of some on the SG&A side. But really, most of it is on the cost of sales side, and being able to more efficiently deploy the chemical portfolios should yield really good savings for us and savings that contribute not only to earnings, but also help to bolster that free cash flow profile of the company.

Q: Given the weakness in the Canadian rigs, are you seeing any changes in customer strategies that would alter your margin math for next year? Or if you could give us some color on what kind of levers you'll be pulling to defend those margins?

A: Sure. Yes. I think we're right now in budget season within our customer base. There are some customers who have put out preliminary budgets for next year, but many still haven't at this point. But just to maybe take a step back, the Canadian rig count was relatively flat to maybe even a little bit up year-over-year through the first half of the year. But as we came out of the breakup in the third quarter, I think we were down, call it, 15%-ish on a year-over-year basis, and that's continued here into the fourth quarter. So there certainly has been a pullback in activity in the Canadian market. Some of that had to do with local gas pricing. The AECO gas market was at very low levels for the late summer and early fall. We think there's a chance that it reverses itself. It's already recovered, but it reverses itself a bit more durably, especially as LNG Canada comes on and keeps taking more gas. So right now, the budgets that we've seen announced from customers speak to more or less flat year-over-year CapEx, not material reductions. If we do start seeing reductions in capital activity in Canada, we'll certainly look to take some actions in response to that. But the other thing I'd say is that we've historically had really good success in continuing to grow our market share in Canada over time. And we've been really successful in a couple of markets up there in growing our presence, including parts of the Montney that are really focused more on light oil and condensate. And we're continuing to grow our share with products even outside of our fracturing systems business, growing our share with plug and perf through repeat precision products in Canada, and bringing on additional well construction opportunities. So, big picture, I think we can continue to take share and grow revenue in a way that would outpace the market in Canada. But as it is the biggest revenue component of our business, if there are changes in that market, we'll definitely adapt to them. And if we need to, we'll adapt our cost structure as well.