NCS Multistage's Q1 Surge: Growth Amid Global Crosscurrents

NCS Multistage Holdings (NCS) delivered a robust first-quarter 2025 performance, defying headwinds in select markets to report its highest quarterly revenue since early 2020. With total revenue climbing to $50 million—up 14% year-over-year and 11% sequentially—the company demonstrated resilience in a sector still navigating trade tensions and uneven demand. Gross margins expanded to 42%, fueled by high-margin international projects, while net income more than doubled to $4.1 million. These results underscore NCS’s strategic pivot toward international markets and its ability to capitalize on opportunities in Canada and the Middle East.

Financial Performance: A Margin-Driven Lift

The quarter’s standout achievement was margin improvement. Gross profit margins rose to 42% from 39% in Q1 2024, driven by a mix shift toward higher-margin international work, particularly in the Middle East and North Sea, where tracer diagnostics projects and product sales commanded premium pricing. Adjusted gross margin reached 44%, reflecting operational efficiencies in supply chain management and manufacturing. This margin expansion, combined with a 14% sequential revenue surge in Canada’s fracturing systems segment, formed the backbone of NCS’s financial turnaround.

Net income nearly doubled year-over-year to $1.51 per diluted share, while adjusted EBITDA hit $8.2 million—up $2.1 million from a year ago. Liquidity remained strong, with $23 million in cash and a net cash position of $15.4 million, bolstered by an undrawn $26.8 million credit facility. This financial flexibility positions NCS to weather volatility, though rising SG&A expenses ($16.2 million, up 15% year-over-year) highlight the costs of scaling operations and incentivizing performance.

Geographic Divergence: Canada Shines, U.S. Stumbles

NCS’s geographic performance revealed stark contrasts. Canada led with a 26% sequential revenue jump, benefiting from strong completions activity in fracturing systems. Meanwhile, international markets (Middle East/North Sea) contributed significantly to margin growth but saw revenues fall 34% sequentially due to delayed Middle East tracer work. In contrast, U.S. product sales dropped 13% year-over-year, as project delays and logistical challenges constrained activity.

The geographic split underscores NCS’s dual strategy: leveraging high-margin international contracts while maintaining core U.S. operations. However, management warned that U.S. tariffs on Chinese steel imports—a critical input for drilling equipment—could pressure costs later in 2025, complicating profitability.

Risks on the Horizon: Trade Tensions and Litigation

Despite strong results, NCS faces notable risks. CEO Ryan Hummer flagged potential impacts from U.S.-China trade disputes, which could elevate steel costs and reduce drilling activity. Additionally, ongoing intellectual property litigation—with $2.4 million in legal fees already incurred—adds uncertainty. Oil and gas price fluctuations also remain a wildcard, as lower commodity prices could dampen customer spending on completions services.

Conclusion: A Balancing Act of Growth and Caution

NCS Multistage’s Q1 results paint a company in transition: one that has harnessed international opportunities to drive margin growth while contending with domestic headwinds. With adjusted EBITDA up 35% year-over-year and a net cash position of $15.4 million, the balance sheet provides a solid foundation to navigate risks. However, the path forward hinges on resolving trade-related cost pressures and resolving litigation efficiently.

Investors should monitor NCS’s May 1 conference call for clarity on tariff impacts and project timelines. The company’s focus on capital-light operations—exemplified by $0.5 million in Q1 capital expenditures—also bodes well for preserving cash flow. While risks linger, NCS’s Q1 performance suggests it can sustain momentum if global markets stabilize. For now, the verdict is clear: NCS is positioning itself to outperform in a challenging sector, but execution remains key.

This article synthesizes NCS’s financial and operational data, contextualizing its achievements and challenges within broader industry dynamics. The company’s ability to balance margin growth with risk mitigation will determine its trajectory in the quarters ahead.