DALLAS, TX -- August 4th, 2025 -- NCS Multistage Holdings, Inc. (NASDAQ: NCSM): Stonegate Capital Partners updates their coverage on NCS Multistage Holdings, Inc. (NASDAQ: NCSM). In 2Q25, NCSM reported total revenues of $36.5M, a 22.8% year-over-year increase, outperforming broader industry activity levels. Growth was primarily driven by increased fracturing systems activity and frac plug sales in both Canada and the U.S., despite a 52% sequential revenue decline in Canada due to spring break-up. International revenues declined year-over-year due to reduced tracer diagnostics work in the Middle East but were up 67.2% sequentially, supported by higher equipment sales in the North Sea. U.S. revenues rose 45% sequentially as previously delayed projects resumed. Adjusted Gross margins came in at 35.7%, down from 40.3% in 2Q24. Going forward, we continue to expect modest revenue and margin growth through FY25, supported by resilience in core product lines and contributions from the recent ResMetrics acquisition.
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 $27.6M, $10.8M, and $(1.1)M, respectively. This growth was driven by an outperformance in both products and services. The EPS for this quarter was $0.36, compared to $(1.21) 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, Liquidity, and Cash Flows: NCSM ended 2Q25 with net working capital of $64.0M, a sequential increase of 13% from $56.4M at year-end 2024, driven by increases in accounts receivable and inventory, and lower accrued expenses following bonus payouts earlier in the year. The Company reported $25.4M in cash and had an additional $17.2M available under its undrawn revolving credit facility, resulting in a total liquidity position of $42.6M. This liquidity compares favorably to total debt of only $7.7M, consisting entirely of lease obligations. Free cash flow and less distributions to non-controlling interest was a source of $0.5M in 1H25, down from $3.2M in the prior-year period. The decline reflects higher working capital demands, including incentive bonus payments and share-based compensation in 1Q.
ResMetrics Acquisition: On July 31, 2025, NCSM closed the all-cash acquisition of ResMetrics LLC for $5.9M plus an earn-out of up to $1.3M dependent on 2025 chemical tariff adjustments. ResMetrics, a leading chemical tracer diagnostics firm, generated $10M+ in trailing 12-month revenue with an EBITDA margin over 30%. The deal is immediately accretive, with expected revenue contribution of $4–5M and EBITDA of $1–1.5M for the remainder of FY25. ResMetrics enhances NCSM’s existing diagnostics portfolio, expands its customer base in the U.S. and Middle East, and provides a high-quality analytical lab and digital platform (PetroXY) to actionable insights to customers. The acquisition is aligned with management’s goal of expanding into adjacent high-margin diagnostics markets and scaling international operations.
Updated Guidance: The Company is guiding to a combined full year revenue range of $172.0M to $181.0M. This is coupled with a full year $22.0M to $25.5M 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 $38.09 to $44.52 with a mid-point of $40.89. Our EV/EBITDA valuation results in a range of $39.44 to $44.67 with a mid-point of $42.06.
