DALLAS, TX -- March 12th, 2025 -- NCS Multistage Holdings, Inc. (NASDAQ: NCSM): Stonegate Capital Partners updates their coverage on NCS Multistage Holdings, Inc. (NASDAQ: NCSM). In 4Q24, the Company experienced a 28% year-over-year increase in total revenues, reaching $45.0M. This growth was driven by a significant rise in international revenues across both product sales and services, with strength in the Middle East tracer diagnostics projects. Canada also saw strong Y/Y growth of 19.5%. Results were mixed in the U.S. with product sales increasing 29.1 and services revenues decreasing 9.5%. Going forward we expect that the Company will continue to see modest revenue growth through FY25 despite the threat of increasing tariffs. Consolidated gross margins expanded from 36.6% in 4Q23 to 43.1% in 4Q24.
Quarterly Results: NCSM reported revenue, gross profit, and adj EBITDA of $45.0M, $19.4M, and $8.2M, respectively. This compares to our estimates of $40.6M, $16.7M, and $5.3M, respectively. This growth was driven by an outperformance in both products and services as well as across all geographic segments. The EPS for this quarter was $1.36, compared to $15.96 in the same quarter last year. We expect NCSM to maintain reasonably strong margins due to increasing market capture in the international markets through FY25.
Balance Sheet and Liquidity Position: NCSM ended 4Q24 with net working capital of $56.4M, representing a 0.3% increase from $56.3M, reported in 4Q23. The Company also closed the quarter with $25.9M in cash and $20.1M of undrawn revolver for a total liquidity position of $46.0M, a substantial increase from last quarter’s liquidity of $37.0M. This compares favorably to only $8.1M in debt. The Company ended the year with $10.32 per share, equal to ~36.9% of the current share price.
International Growth: In the fourth quarter of 2024, NCSM reported $4.4M in international revenues, marking a 279.8% year-over-year increase. This growth was driven by Middle East tracer work and North Sea frac systems. The year-over-year growth highlights the Company’s expanding footprint. The Company expects end markets to outperform the overall international market with accommodative markets jurisdictions like Argentina. NCSM’s strategic focus on high-margin international projects has positioned it well for continued growth.
Cash Flows: As of 4Q24, NCSM delivered $9.5M of YTD FCF after distributions to non-controlling interests. This is compared to a FCF balance of $5.6M over the same period in FY23. The increase in free cash flow was mainly due to improved operating results, changes in net working capital, and reduced net cash used in investing activities, partially offset by distributions to non-controlling interest. It is notable that this FCF level is equal to approximately 14% of current market cap.
Updated Guidance: Currently, we anticipate flat revenue performance in the first quarter of 2025 compared to 4Q24 across the U.S., Canadian, and international markets. It is expected that Canada will see top line sequential growth in 1Q25, with slight decreases in the U.S. and international markets. The Company is guiding to a full year revenue range of $165.0M to $175.0M. This is coupled with a full year $20.0M to $23.0M adjusted EBITDA guidance. We have made modest adjustments to our model.
Valuation: We use both a DCF and EV/EBITDA comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $31.76 to $37.72 with a mid-point of $34.36. Our EV/EBITDA valuation results in a range of $34.57 to $39.15 with a mid-point of $36.86.
