NCSM Q2 Profit Jumps 23%

Ncs Multistage (NCSM 3.16%), a specialist in oilfield services and completion technologies, released its results for the second quarter of fiscal 2025 on July 31, 2025. The most prominent headline from the quarter was a sharp swing to profitability on both the top and bottom line, easily surpassing industry expectations, as GAAP revenue of $36.5 million exceeded the analysts' estimate of $27.74 million by $8.76 million, or 31.6%. The company recorded GAAP earnings per share of $0.34 compared with an analyst estimate for a $1.29 loss, and reported GAAP revenue of $36.5 million, well above consensus estimates of $27.7 million. Despite beating internal and analyst guidance by wide margins, with GAAP revenue of $36.5 million exceeding the analyst estimate of $27.74 million by $8.76 million or 31.6%, and GAAP EPS of $0.34 exceeding the analyst estimate of -$1.295, the quarter also showed cost pressures, margin contraction, and mixed international results, balancing what was otherwise a period of strong operational performance.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Priorities

Ncs Multistage delivers specialized products and services for oil and gas well completions, focusing on technologies that help oil producers extract hydrocarbons more efficiently. Its core offering is pinpoint stimulation, a process allowing precise placement of fractures in a reservoir to enhance output from oil and gas wells. This method competes with traditional techniques such as plug-and-perf and ball-drop systems but is designed for higher precision in complex well environments.

The company’s recent focus has been expanding the adoption of pinpoint stimulation technology, increasing product penetration in horizontal wells, and rolling out new products such as sliding sleeves (downhole valves that control reservoir access) and tracer diagnostics (tools that help operators analyze well performance). Maintaining efficient operations amid a competitive environment, adapting quickly to regulatory changes, and continually bringing new innovation to market remain critical success factors.

Highlights of the Quarter: Revenue, Profit, and Margins

Revenue (GAAP) rose 23.0% year-over-year, led by surging activity in Canada and continued growth in the United States. Canadian revenue was $17.97 million compared to $12.06 million in Q2 2024, an increase of approximately 49%. This growth came even as the overall Canadian rig count declined. U.S. revenue was $13.61 million compared to $11.79 million in Q2 2024, an increase of approximately 15.5%. International revenue, however, slipped by 16.6%, chiefly due to a slowdown in tracer diagnostics work in the Middle East. This was partially offset by higher sales of well construction products in the region and increased fracturing system shipments to the North Sea.

Gross profit and margins (GAAP) did not keep pace with revenue outperformance. Adjusted gross margin dropped 4.0 percentage points to 36% as product mix shifted toward lower-margin offerings and cost pressures increased. Operating expenses (SG&A, GAAP) fell year over year to $13.6 million, attributed to reductions in payroll and professional fees, partially offset by an uptick in share-based compensation. Net income (GAAP) swung to a profit of $0.9 million compared to a $3.1 million loss in Q2 2024, but this included a one-time, non-cash tax benefit of $1.4 million recognized for the release of a deferred tax valuation allowance in Canada.

Adjusted EBITDA more than doubled to $2.2 million. Other income fell $0.6 million year over year as revenue from a technical services agreement in Oman rolled off and royalty income normalized. Despite operational improvements, free cash flow (non-GAAP) for the first half (six months ended June 30, 2025) shrank to $1.4 million from $3.7 million in the same period of 2024, mainly due to working capital increases and higher incentive compensation paid in Q1. The company ended the quarter with $25.4 million in cash, $7.7 million in debt, and $17.2 million of liquidity still available under its asset-based lending facility.

Innovation, Products, and Strategic Actions

The main product family of pinpoint stimulation systems, a portfolio of downhole tools that allow precisely controlled fracking, continued to see adoption in Canada. Management cited growing uptake of sliding sleeves and dissolvable frac plugs -- both critical to enabling complex well completions -- as customers increasingly opted for pinpoint stimulation over traditional completion systems. The Stage Saver Composite Plug, developed by Repeat Precision (an NCS subsidiary), is designed to help mitigate difficulties encountered during simultaneous fracturing operations known as Simulfrac, and is gaining traction through field trials and regular use by customers.

The company also advanced several innovation initiatives, including commercialization of a 7-inch sliding sleeve for certain remedial and high-temperature applications, expanded field trials of the Lumen8 automated tracer sampler (which allows oil producers to monitor well performance in real time), and the rapidTrack on-site tracer diagnostics system for immediate feedback at well sites. Internationally, Ncs Multistage reported recent growth in sales of well construction products in the Middle East and an increased presence in the North Sea, with plans to establish a dedicated UK entity as business scales up.

During the period, a significant strategic move was the acquisition of ResMetrics, a provider of tracer diagnostics services (which help operators analyze oil flow patterns). The purchase price was $5.9 million, with up to $1.3 million in performance-based earnouts, for the acquisition of ResMetrics on July 31, 2025. ResMetrics generated over $10 million in unaudited revenue for the trailing twelve months ended June 30, 2025 and delivered EBITDA margins above 30% for the trailing twelve months ended June 30, 2025. Management described this as a complementary fit with NCS’s existing tracer diagnostics services, positioned to strengthen its foothold in this critical and growing market niche.

While innovation and growth were evident, the quarter exposed ongoing pressures, including tighter margins and international sales volatility. Both gross margin (GAAP) and adjusted gross margin (non-GAAP) fell compared to Q2 2024, primarily due to an unfavorable product mix. Management also flagged risks related to tariff and trade uncertainty, which could squeeze margins further if costs rise or competitive pricing intensifies, especially as commodity prices impact customer budgets. These risks could affect results in the second half and full year 2025. No dividends were paid or declared, nor changes announced.

Looking Ahead: Guidance and Watch Areas

Management did not provide new or updated numeric guidance for the third quarter or full fiscal year in its quarterly release. Prior full-year 2025 guidance called for revenue of $165–175 million and adjusted EBITDA (non-GAAP) of $20–24 million, but the company struck a more cautious tone, emphasizing deteriorating market conditions. Risks were flagged around U.S. rig count declines, the slow pace of Canadian recovery following spring break-up, OPEC+ production changes, and lingering trade uncertainties -- all of which could affect customer activity and pricing for the back half of 2025.

Investors will likely watch for ongoing adoption of new technologies (such as pinpoint stimulation and advanced tracer diagnostics), progress on further international expansion, and whether cost pressures subside or intensify. NCSM does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.