Stonegate Capital Updates Coverage on NCS Multistage Holdings Following Strong Q3 Performance

Stonegate Capital Partners has updated its coverage on NCS Multistage Holdings, Inc. following the company's third-quarter 2025 financial results that demonstrated resilience amid varying market conditions. NCSM reported total revenues of $46.5 million, representing a 6.0% year-over-year increase that outperformed broader industry activity levels. The growth was primarily driven by higher U.S. and international product sales, particularly in fracturing systems including operations in the North Sea and wellbore construction activities in the Middle East.

International revenue showed particularly strong performance with approximately 38.0% year-over-year growth, while U.S. revenue increased by approximately 36.0% during the same period. The company's tracer diagnostics business contributed significantly to this growth, including approximately $2 million from the recently acquired ResMetrics platform. Canadian operations showed sequential improvement with 32% growth as spring break-up effects eased, though overall Canadian product sales remained softer due to lower rig counts in the region.

The company reported adjusted gross margins of 41.7%, slightly down from 42.1% in the third quarter of 2024. NCSM delivered gross profit of $19.4 million and adjusted EBITDA of $7.0 million for the quarter, with EPS coming in at $1.47 compared to $1.67 in the same quarter last year. Stonegate Capital Partners maintains that NCSM should continue to demonstrate reasonably strong margins through the remainder of fiscal year 2025, supported by increasing market capture in international markets and resilience in core product lines.

Financial position remains robust with NCSM ending the third quarter with net working capital of $63.0 million, representing a 12.6% increase from $56.4 million at year-end 2024. The company reported $25.3 million in cash and had an additional $19.4 million available under its undrawn revolving credit facility, resulting in a total liquidity position of $44.7 million. This strong liquidity compares favorably to total debt of only $7.4 million, consisting entirely of finance lease obligations. Free cash flow less distributions to non-controlling interest was a source of $6.8 million as of the third quarter, significantly improved from just $0.35 million in the prior year period.

The ResMetrics acquisition, closed in late July 2025, is already contributing to performance with integration progressing ahead of plan. The combination brings together ResMetrics' chemical tracer lab capabilities and PetroXY web portal with NCS's existing tracer portfolio and international footprint. Management expects the combined diagnostics platform to become a category leader in the industry, with medium-term synergy potential from best-practice adoption and scaled product and service development across global markets.

Looking forward, management has provided guidance for the fourth quarter of 2025 with revenue expectations of $41-45 million, adjusted gross margin of 40-42%, and adjusted EBITDA of $5.0-6.5 million. For the full fiscal year 2025, the company forecasts revenue of $174-178 million and adjusted EBITDA of $22.5-24.0 million, along with free cash flow less distributions to non-controlling interest of $11-13 million and gross capital expenditures of $1.3-1.5 million. Stonegate's valuation analysis using both discounted cash flow and EV/EBITDA comparison methods produces a valuation range of $46.61 to $56.97, with midpoint valuations of $52.05 and $51.76 respectively.