Executive Summary / Key Takeaways

• Differentiated Technology Driving Growth: NCS Multistage leverages its proprietary fracturing systems and tracer diagnostics, including recent advancements like the Stage Saver frac plug and Luminate sampling units, to deliver efficiency and enhanced production for E&P customers, particularly in complex well environments.
• Strategic International Expansion & Acquisition Synergies: The acquisition of ResMetrics significantly bolsters NCSM's global tracer diagnostics footprint, especially in the Middle East, and is expected to generate $1 million to $2 million in operational synergies, primarily from cost of sales optimization.
• Robust Financial Health Amidst Market Volatility: Despite challenging market conditions, NCSM reported strong Q3 2025 revenue of $46.5 million and $17.5 million in Adjusted EBITDA for the first nine months of 2025, maintaining a positive net cash position of $17.9 million (as of December 31, 2024) and projecting robust free cash flow generation.
• Canadian Outperformance and U.S. Resilience: The company continues to outpace the Canadian rig count, driven by market share gains in the Montney, while its U.S. operations show resilience, with strong contributions from fracturing systems and tracer diagnostics.
• Undervalued Growth and Strong Balance Sheet: Management believes NCSM's favorable growth and strong balance sheet are not fully reflected in its current valuation, trading at a discount to peers, with a projected free cash flow yield of 11% to its market capitalization.

A Niche Innovator in Well Completions

NCS Multistage Holdings, Inc. ($NCSM) operates as a specialized provider of engineered products and support services crucial for optimizing oil and natural gas well construction, completions, and field development strategies. Founded in 2006, the company has carved out a distinct position within the broader oilfield services industry by focusing on technically differentiated solutions for exploration and production (E&P) companies, primarily in onshore and offshore wells. Its overarching strategy centers on building upon leading market positions, capitalizing on high-margin international and offshore opportunities, and commercializing innovative solutions to complex customer challenges. This approach is underpinned by a commitment to maximizing financial flexibility and upholding its core values.

The company's journey has been marked by strategic evolution, including its name change from Pioneer Super Holdings, Inc. in 2016 and the establishment of key partnerships. A significant structural development was the consolidation of Repeat Precision, LLC in February 2018, where NCS holds a 50% interest and controlling voting rights, expanding its offerings in frac plugs and related manufacturing capabilities. This history of focused development and strategic alliances has shaped NCSM's current competitive stance, allowing it to offer specialized expertise that often provides a distinct advantage in its target markets.

Technological Edge: Precision and Efficiency Downhole

NCSM's competitive moat is largely built on its portfolio of proprietary technologies designed to enhance well performance and operational efficiency. Its core offerings span several critical areas of well completions and construction:

Fracturing Systems: NCSM's primary offering, these systems enable efficient pinpoint stimulation, allowing for precise and repeatable placement of stimulation treatments in both cemented and open-hole wellbores. A notable advancement is the successful 7-inch sliding sleeve offering, which expands the company's addressable market. Furthermore, NCSM is actively qualifying its fracturing system sleeves and service tools for higher temperature ratings, targeting demanding offshore, SAGD (Steam-Assisted Gravity Drainage), and geothermal applications. This technological evolution allows customers to achieve superior production results and increased operational flexibility, particularly evident in the Montney Formation in Canada.

Tracer Diagnostics Services: This segment, significantly bolstered by the July 2025 acquisition of ResMetrics, utilizes downhole chemical and radioactive tracers for well completion and reservoir characterization. ResMetrics brought liquid oil tracer capabilities and expertise in enhanced oil recovery (EOR) and high-temperature applications, complementing NCSM's existing offerings. The integration is already yielding benefits, with ResMetrics' thermal stability tracers being used with NCS sliding sleeves in Canada, and NCS's Tulsa lab now processing ResMetrics samples, improving turnaround times. New innovations include the Luminate multi-day composite sampling units, designed to improve sample quality and significantly reduce well site visits, and the rapidTrack tracer diagnostics flow assurance solution, which promises immediate tracer results at the well site, enabling faster, cost-saving decisions for customers. These advancements provide NCSM with a more comprehensive and scientifically robust offering, differentiating it in a market with a "handful of global competitors".

Repeat Precision Products: Through its 50% interest in Repeat Precision, NCSM offers composite and dissolvable frac plugs, setting tools, and perforating guns. The Stage Saver composite frac plug has seen strong uptake in the U.S. and Canada, specifically designed to mitigate issues like screenouts and perforating gun misfires during simulfrac operations. This technology directly addresses critical customer challenges, enhancing operational reliability and efficiency.

Well Construction & Enhanced Recovery Systems: The company provides products like the AirLock casing buoyancy system, liner hanger systems, and toe initiation sleeves for well construction. The enhanced performance of the AirLock system recently secured a commercial purchase agreement with a key customer in the Middle East. Additionally, NCSM's enhanced recovery systems, an extension of its fracturing offerings, enable controlled injection of fluids or gases to increase hydrocarbon production. The company is manufacturing ATRS AICV sliding sleeves and proprietary packers for a 3-well installation, aiming to optimize production in mature wells and reduce water cut. A deepwater fracturing system solution, the Ratek PropX system, which allows the sleeve to be put in a screen position after the frac, is slated for deployment in the Gulf of America in the second half of 2026.

These technological differentiators are not merely product features; they are foundational to NCSM's competitive moat. By offering solutions that enable customers to operate more efficiently, save costs, and generate greater economic value from their resources, NCSM can command better margins and secure long-term relationships. This focus on innovation allows the company to maintain pricing discipline even in challenging markets, as its offerings provide distinct operational advantages that competitors often cannot match.

Competitive Dynamics and Strategic Positioning

NCSM operates within a competitive landscape dominated by larger, more diversified oilfield service giants such as Halliburton Company (HAL), Schlumberger NV (SLB), Baker Hughes Company (BKR), and Weatherford International plc (WFRD). While these larger players offer integrated solutions across the entire oilfield value chain, NCSM strategically focuses on specialized niches within well completions and construction.

Compared to Halliburton, NCSM's approach is more regionally concentrated, particularly in North America, allowing for greater operational agility and a direct, technically-trained sales force. This specialized focus can lead to faster response times and deeper client relationships in its core segments. Against Schlumberger, a leader in digital solutions, NCSM's strength lies in its practical, field-deployable products and specialized tracer diagnostics, which can offer superior performance in reservoir characterization for specific well types. While Schlumberger's digital integration provides comprehensive data analytics, NCSM's cost-effective, targeted solutions resonate with customers seeking specific operational improvements.

NCSM's well completion tools directly compete with offerings from Baker Hughes and Weatherford. NCSM differentiates itself through precise, engineered solutions that can offer greater efficiency in diagnostic services and reliability in fracturing systems. Its market positioning, often leveraging operating partners, can enable faster deployment in some regions. While larger competitors benefit from economies of scale and broader R&D investments, NCSM's adaptability in field development and its ability to customize solutions provide a competitive edge. The competitive environment for tracer diagnostics, in particular, is noted as "pretty well behaved" with fewer global competitors compared to fracturing systems or well construction, allowing NCSM to leverage its value proposition effectively.

The acquisition of ResMetrics is a prime example of NCSM's strategic response to industry consolidation. As E&P customers consolidate to achieve economies of scale, NCSM believes oilfield service providers must follow suit with strategic horizontal combinations. This acquisition not only expanded NCSM's tracer diagnostics offerings but also broadened its Middle East presence into the UAE and Kuwait through strategic partnerships, enhancing its global market position in a less crowded competitive segment.

Financial Performance and Outlook

NCS Multistage has demonstrated robust financial performance, particularly in the first nine months of 2025, despite a challenging and volatile market environment.

For the three months ended September 30, 2025, total revenues reached $46.5 million, a 6% year-over-year improvement. Net income for the quarter was $3.8 million, or diluted earnings per share of $1.37. Adjusted EBITDA stood at $7.0 million, consistent with the prior year's third quarter. For the nine months ended September 30, 2025, total revenues were $133.0 million, marking a 13.1% increase from $117.6 million in the same period of 2024. Net income attributable to NCS Multistage Holdings, Inc. for this period was $8.8 million, a significant improvement from $3.1 million in the prior year. Adjusted EBITDA for the nine months reached $17.5 million, up 24% year-over-year.

Geographically, the U.S. market showed strong momentum, with revenue increasing 26% sequentially and 54% year-over-year in Q3 2025. Excluding the ResMetrics contribution, U.S. revenue still improved by 37% year-over-year, driven by fracturing services, fracturing systems, and tracer diagnostics. Canadian revenue, while experiencing a 17.8% decline in Q3 2025 year-over-year due to lower rig counts, still saw a 9.4% increase for the first nine months of 2025 compared to the prior year, outpacing a 6% decline in the average rig count. This outperformance highlights NCSM's ability to gain market share and deliver value in a contracting market. International revenue also grew, increasing 41.3% year-over-year in Q3 2025 and 11.8% for the nine months ended September 30, 2025, driven by projects in the Middle East and North Sea.

Profitability metrics reflect the company's operational effectiveness. The adjusted gross margin for Q3 2025 was 42%, consistent with the prior year. For the nine months ended September 30, 2025, the total gross margin was 39.1%. The acquisition of ResMetrics favorably impacted the cost of sales as a percentage of revenues in Q3 2025. Selling, general, and administrative (SG&A) expenses increased, primarily due to higher share-based compensation and additional expenses from the ResMetrics acquisition. Notably, NCSM recorded a deferred income tax benefit of $1.8 million during the nine months ended September 30, 2025, due to the reversal of a valuation allowance against its Canadian operating subsidiary's deferred tax assets, reflecting sustained improvements in operating results and future taxable income forecasts.

Liquidity and cash flow generation remain a core strength. As of September 30, 2025, NCSM maintained a positive net cash position with $25.3 million in cash and cash equivalents and total debt of $7.4 million, consisting entirely of finance lease obligations. The company's undrawn ABL facility provided $19.4 million in borrowing base availability, bringing total liquidity to $44.7 million. For the first nine months of 2025, net cash provided by operating activities was $9.0 million, a significant improvement from $2.1 million in the same period of 2024. Free cash flow, less distributions to noncontrolling interest, improved by over $6 million year-over-year.

Looking ahead, NCSM projects full-year 2025 revenue to be between $174 million and $178 million, representing an 8% year-over-year growth, with 5% organic and 3% from ResMetrics. The pro forma combined adjusted EBITDA is expected to range from $22.5 million to $24 million, with a midpoint of $23.25 million. The company is increasing its expectation for free cash flow after distributions to noncontrolling interest (excluding the cash paid for ResMetrics) to $11 million to $13 million, further strengthening its balance sheet. Management anticipates converting 50% to 60% of adjusted EBITDA to free cash flow in a flat working capital environment. Capital expenditures for 2025 are projected to be modest, between $1.3 million and $1.5 million, focused on equipment upgrades.

Risks and Challenges

Despite its strengths, NCSM faces several risks. The oil and natural gas market remains volatile, influenced by geopolitical events, OPEC+ supply decisions, and global demand fluctuations. This volatility directly impacts drilling and completion activity, which could negatively affect NCSM's revenue. Competitive pressures are significant across all offerings, potentially impacting market share and operating margins. The ongoing threat of new tariffs, particularly on steel and chemicals, could increase costs that may be difficult to pass through to customers in a soft pricing environment.

Seasonality is a consistent factor, particularly in Canada, where spring breakup and winter holidays lead to quarterly variability in activity. Legal proceedings, such as the ongoing patent dispute in Canada, introduce uncertainty, although the recent Federal Court of Appeal decision was favorable to NCSM. Management acknowledges that while the court's reasoning suggests Kobold's patent may be invalid, the outcome of remand proceedings cannot be predicted with certainty.

Conclusion

NCS Multistage Holdings, Inc. presents a compelling investment narrative, characterized by its strategic focus on specialized, high-value technologies and a disciplined approach to growth. The company's ability to consistently outpace underlying market activity, particularly in Canada, and its successful expansion into international markets underscore the strength of its differentiated product and service portfolio. The strategic acquisition of ResMetrics further solidifies its position in the growing tracer diagnostics market, promising operational synergies and an expanded global footprint.

NCSM's robust financial health, marked by strong revenue growth, improving profitability, and significant free cash flow generation, provides a solid foundation for future endeavors. Despite the inherent volatility of the oil and gas sector and ongoing competitive and geopolitical challenges, the company's commitment to innovation and its strong balance sheet position it favorably. Management's belief that NCSM's valuation does not fully reflect its growth and financial strength suggests a potential opportunity for discerning investors who recognize the long-term value creation potential of a technologically advanced, strategically expanding niche player in the energy services industry.