DALLAS, TX -- May 2nd, 2025 -- NCS Multistage Holdings, Inc. (NASDAQ: NCSM): Stonegate Capital Partners updates their coverage on NCS Multistage Holdings, Inc. (NASDAQ: NCSM). In 1Q25, NCSM reported total revenues of $50.0M, a 14% year-over-year increase and its highest quarterly revenue since 1Q20. Growth was primarily driven by increased product sales in Canada and services revenue across all geographies, partially offset by a decline in U.S. product sales due to project delays. Canadian activity remained robust, particularly for fracturing system completions, while international revenue was supported by continued tracer diagnostics work in the Middle East and product and service sales in the North Sea. Compared to 4Q24, total revenues rose 11%, with a 26% sequential increase in Canadian sales offsetting a 34% decline in international revenue due to timing of tracer work and a 13% drop in U.S. revenue. 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 40.1% in 1Q24 to 43.7% in 1Q25.
Company Updates:
Quarterly Results: NCSM reported revenue, gross profit, and adj EBITDA of $50.0M, $21.9M, and $8.2M, respectively. This compares to our estimates of $44.4M, $17.9M, and $5.6M, respectively. This growth was driven by an outperformance in both products and services. The EPS for this quarter was $1.58, compared to $0.83 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 1Q25 with net working capital of $64.4M, representing a 12.4% increase from $56.4 million at year-end, driven primarily by higher accounts receivable and a reduction in accrued expenses following the payout of 2024 bonuses. The Company also closed the quarter with $23.0M in cash and ~$26.8M of undrawn revolver for a total liquidity position of $49.8M, a substantial increase from the Company's 1Q24 liquidity of $34.4M. This compares favorably to only $7.6M in debt.
International Growth: In the first quarter of 2025, NCSM reported $2.9M in international revenues, marking a 33.8% year-over-year increase. This growth was supported by Middle East tracer diagnostics projects and increased North Sea activity. However, international revenues declined 34% sequentially from 4Q24 due to the timing of tracer service work. Despite the quarterly pullback, management remains focused on high-margin international opportunities and views select international markets, such as the Middle East and North Sea, as key contributors to long-term growth.
Cash Flows: FCF less distributions to non-controlling interest was a use of $(2.1M) in 1Q25, slightly improved from $(2.5M) in 1Q24. This modest improvement was driven by better operating results and the absence of a distribution to non-controlling interest, partially offset by increased capital expenditures and working capital uses, including payments for incentive bonuses and share-based awards.
Updated Guidance: The Company is guiding to a full year revenue range of $167.0M to $175.0M. This is coupled with a full year $20.0M to $24.0M 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 $32.34 to $38.36 with a mid-point of $34.96. Our EV/EBITDA valuation results in a range of $32.17 to $36.56 with a mid-point of $34.36.
