NCS Multistage Holdings, Inc. (NCSM) Q1 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the NCS Multistage First Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the call over to Corbin Woodhull of Hayden IR. Corbin, you can begin.

Thank you, Latif. I would like to welcome everyone to the conference call and thank NCS Multistage management for hosting today's call. With us on the call today are Mr. Ryan Hummer, the CEO of NCS Multistage and Mr. Mike Morrison, the CFO. I would like to remind listeners that some of today's comments include forward-looking statements such as our financial guidance and comments regarding our future expectations for financial results and business operations. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any other expectations expressed herein. Please refer to our most recent annual report on Form 10-K and our latest SEC filings for risk factors and cautions regarding forward-looking statements. Our comments today as well as the results of operations included in our earnings release contain the following non-GAAP financial measures: EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA less share-based compensation, adjusted gross profit, adjusted gross margin, free cash flow, free cash flow less distributions to noncontrolling interest and net working capital. These non-GAAP measures and reconciliations to our most comparable GAAP financial measures are provided in our first quarter earnings release, which can be found on our website at www.ncsmultistage.com. With that, I will now turn the call over to Ryan Hummer.

Thank you, Corbin, and welcome to our investors, analysts and employees who are joining our first quarter 2026 earnings call. I'll begin by discussing our results for the first quarter and our outlook for the remainder of the year. I'll then briefly review some recent commercial and operational highlights aligned with our strategy and long-term growth objectives. Mike will follow with additional detail on the first quarter and our guidance for the second quarter. Revenue for the first quarter of $45.6 million was slightly more than $5 million below the midpoint of our prior guidance. The shortfall was concentrated in Canada with the balance from international. In Canada, we experienced both challenging weather conditions in March in Southern Alberta and Saskatchewan as well as an earlier-than-expected onset of spring breakup, which contributed to a year-over-year first quarter Canadian rig count reduction of approximately 7%. In addition, certain of our customers experienced drilling issues or deferred their planned activity from Q1 until later in the year, while other customers reduced activity on recently acquired assets as they evaluate [Audio Gap] than we had anticipated under a new completions contract that was awarded last year. A high point for the quarter for us was our U.S. revenue, which improved by over 100% year-over-year and by 6% as compared to the fourth quarter of 2025. Despite the revenue shortfall, we met the midpoint of our adjusted gross margin guidance and reduced our SG&A, even with the inclusion of additional operating expenses related to ResMetrics. As we look forward to the remainder of the year, we're modestly increasing the midpoint of our revenue guidance for full year 2026 and maintaining our adjusted EBITDA guidance despite the challenges encountered late in the first quarter. Starting with Canada. Our expectations for full year capital spending by our customers remains unchanged. Accordingly, we expect the lower rig count in the first quarter of 2026 compared to the first quarter of 2025 to reverse after spring breakup, with modestly higher year-over-year activity in the second half of the year, including jobs that were deferred from Q1 by our customers, as mentioned previously. Importantly, this view of activity is based on current customer capital budgets and does not reflect any budget or activity adjustments that could result from higher oil prices ensuing from the current conflict in the Middle East. In the U.S., we've had 2 positive developments that improve our outlook. First, a large customer has placed an order for a multi-well, multi-basin fracturing systems project in the Permian and the Rockies after a successful initial 2-well project last year. We expect to deliver the sliding sleeves for this project later this year with most of the revenue to come in the fourth quarter. Completions for these wells are expected to take place in 2027. Second, Repeat Precision has successfully converted field trials that were underway during the first quarter into recurring work with several customers. This increase in activity started in late February and has since continued. Repeat Precision was awarded this work based on the operational performance of our products, validated in many cases by third-party diagnostics resulting from head-to-head comparisons with one or more competing products. Another key differentiator supporting growth at Repeat Precision is the StageSaver frac plug introduced last year. As a reminder, StageSaver is a product that helps customers keep operations running smoothly when unexpected problems happen in the well. It reduces disruptions from screenouts and other downhole issues, which helps customers get more value from their advanced completion methodologies like simulfrac and trimulfrac. Additional customer trials are underway for the StageSaver plug and also Repeat Precision's PurpleReign dissolvable plug. To support recent and potential future growth, we are investing in additional machining assets at Repeat Precision to increase capacity by approximately 25% and to reduce labor costs for overtime hours that we are currently using to support the increased volumes. Our guidance for 2026 currently excludes the potential delivery of sliding sleeves for our first deepwater opportunity in the Gulf of America. We continue to work with our customer and the regulators to advance this opportunity, which could materialize in late 2026 or in early 2027. Our international outlook for this year remains consistent with our prior call. We could see additional orders in the North Sea and higher volumes of frac plug sales to the Middle East, which may be offset slightly by lower tracer diagnostics activity in Saudi Arabia. Looking forward, we expect continued growth in North Sea activity in 2027 as 2 of our customers begin multiyear projects in fields that will be utilizing our technology. We've also submitted a tender for a 3-well project, which if awarded, would represent our first shallow water project outside of the North Sea and we continue to validate the applicability of our Ratek frac sleeve family in multiple geographies. I'll now spend just a few minutes reviewing some recent commercial and operational highlights that are aligned with our long-term strategy. During the first quarter, a customer in the Mid-Con region completed the first zipper frac of wells in the U.S. with NCS sleeves. While zipper and simulfrac completions using NCS sleeves occurs frequently in Canada, this is a great example of a U.S. customer pairing the downhole performance of our fracturing systems technology with efficient surface methods. This reduces costs and improves financial returns, and the customer plans to continue with zipper fracs in this area going forward. We installed several convertible sleeves in a well that the customer intends to use for enhanced oil recovery or EOR in the Permian area. These sleeves can be used during the initial completion and early production phase of the well with the option to later shift them for controlled injection as part of the overall EOR project. We're developing a 6-inch frac sleeve and service tool to support a customer project in the Rockies for 2027. For this project, our sleeves will be run in several new wells at a depth below an existing well pad and used to restimulate the existing asset. Regulatory approval for this application was supported by the unique attributes of our technology and the reliability of our Shift-Frac-Close operations. We've also been awarded a second fracturing systems job in Oman scheduled for later this year. This follows the successful operations and strong production results from our initial well in the region last year. In tracer diagnostics, we provided our SmartProp solution initially developed by ResMetrics to a customer in Canada. This SmartProp tracer carrier has properties that are very similar to frac sand, transporting like sand into the formation to provide a better indicator of stage level performance. Continuing in tracer diagnostics, we recently completed our first rapid trace project in the North Sea. This on-site testing solution provides qualitative results in nearly real time, eliminating the need to ship samples to our laboratories. The customer validated production from the lateral after the completion during the well testing phase, informing their decisions and helping them to release expensive day rate assets from location earlier than they otherwise would have. And last, the final ResMetrics integration steps are underway. We relocated our manufacturing and laboratory assets from ResMetrics facility in Houston to our facility in Tulsa. And over the next few weeks, we'll move the remaining Houston tracer inventory into our districts, fully consolidating field operations. Our NCS and ResMetrics team has done a fantastic job throughout the integration process. We're starting to benefit from operational synergies, which we expect to accelerate in the second half of the year. And our team in Canada, in particular, is leaning into the new service capabilities and combined offerings to capture revenue synergy potential. Mike will now review our results for the first quarter in more detail and provide our guidance for the second quarter of 2026.

Thanks, Ryan. As reported in yesterday's earnings release, our first quarter revenues were $45.6 million, a 9% decline compared to the first quarter of last year and below our guidance range. The decrease in revenue for the quarter was driven by lower activity and rig counts in Canada as well as a decline in international service revenue. From a geographic standpoint, the U.S. led with revenue that more than doubled year-over-year. International increased by 13% and Canada declined by 38%. The increase in the U.S. was broad-based, driven by Repeat Precision product sales and tracer diagnostic service revenue, including a $1.8 million contribution from ResMetrics, a business we acquired in July 2025. International benefited from well construction product sales in the Middle East, delivering a 63% year-over-year increase in international product revenue. Our adjusted gross profit, defined as total revenue less total cost of sales, excluding depreciation and amortization expense, was $18.2 million for the first quarter, representing an adjusted gross margin of 40% compared to adjusted gross margin of 44% for the same period in 2025. Adjusted gross margin was at the midpoint of our guidance. However, the year-over-year decline reflects a revenue contraction for the quarter attributable to lower activity in Canada and reduced higher-margin international tracer diagnostic activity in the Middle East. The favorable contribution from ResMetrics served to partially offset the gross margin pressure. Selling, general and administrative costs were $15.7 million for the first quarter, down 3% compared to the same period last year, reflecting lower incentive bonus accruals recorded in 2026 as well as lower share-based compensation expense associated with our cash-settled awards. ResMetrics contributed $0.7 million of SG&A in the quarter. Normalizing for these items, the rest of our SG&A was lower by $0.4 million year-over-year, further validating our financial discipline. Other income of $1.9 million increased from $0.9 million in the first quarter of 2025, driven primarily by royalty income from licenses associated with our intellectual property as well as stronger scrap sales. Our net loss for the quarter was $0.4 million or a loss per share of $0.14 compared to net income of $4.1 million or diluted earnings per share of $1.51 in the year ago period. Adjusted EBITDA was $5.6 million or an adjusted EBITDA margin of over 12%, short of the low end of our quarterly guidance range and a decline from the $8.2 million in the prior year. Turning to our cash flow and balance sheet. Our cash flow from operating activities was a positive $1.3 million, and our free cash flow was $0.7 million, both improvements to the use of cash from operating activities of $1.6 million and a negative free cash flow of $2.1 million in the same period in 2025. As of March 31, 2026, we had $34.5 million in cash and total debt of $7.2 million, which consisted entirely of finance lease obligations, resulting in a positive net cash position over $27 million. The borrowing base availability under our undrawn ABL Facility was $18.5 million, resulting in total liquidity of $53 million. Turning now to a few points of guidance for the second quarter of 2026. We currently expect second quarter total revenue in the range of $36 million to $39 million, implying an increase of 3% at the midpoint compared to the second quarter of 2025. We expect U.S. revenue from $18 million to $19 million, international revenue from $5 million to $6 million and Canadian revenue from $13 million to $14 million. Adjusted gross margin is expected to be between 35.5% and 37.5%, with the midpoint of the range representing a modest expansion compared to the second quarter of 2025. Adjusted EBITDA is expected to be between breakeven and $2 million and our second quarter depreciation and amortization expense is expected to be approximately $1.6 million. With that, I'll hand it back over to Ryan, who will provide our updated full year 2026 guidance and closing remarks.

Thank you, Mike. So I covered our market expectations, including the various product lines and geographies earlier. And accordingly, our full year guidance for 2026 is as follows. We currently expect full year revenue in the range of $186 million to $194 million. This reflects a $2 million increase to the low end of the range and a $1 million increase to the midpoint of our prior guidance. We're maintaining our full year adjusted EBITDA guidance range at $26 million to $29 million, with the benefit of the higher revenue offset by an expected increase in our cash-settled share-based compensation expense. We're also incurring additional supply chain costs, including shipping and transportation, resulting from the current conflict in the Middle East. We are increasing our planned capital expenditures for 2026 to $2.2 million to $2.8 million, an increase of $0.8 million at the midpoint. The increased capital investment is dedicated to expanding manufacturing capacity at Repeat Precision in support of growing sales volumes. We expect free cash flow after distributions to our joint venture partner of $11 million to $15 million. This is $1 million lower at the midpoint, reflecting the higher capital expenditures, potential working capital impacts related to revenue timing for the year and a higher mix of earnings derived from Repeat Precision this year. Consistent with prior years, we anticipate that the achievement of our annual adjusted EBITDA will be weighted to the second half of the year and that our free cash flow will be weighted towards the end of the year. As I mentioned earlier, our guidance at this time does not incorporate any expectation of increased customer activity that could result from improved customer cash flows associated with higher oil and liquids prices. I believe NCS is very well positioned if we do enter a market that supports higher oil prices over the medium to long term, both through our presence in North America as a source of shorter-cycle production and in international markets where we support highly capital-efficient resource development in growing markets. We've demonstrated our ability to deliver organic revenue growth at high incremental contribution margins, leveraging our relatively fixed SG&A and expect that we could continue to do so if a new structural demand cycle emerges as many are suggesting. Before Q&A, I'll close with a few comments. I'm proud of what the team at NCS accomplished during the quarter. While we fell short on our revenue expectation this quarter, we converted several opportunities that we expect to materialize as revenue later this year and into the future. Our business model continues to be proven as we generated free cash flow during the first quarter, a quarter when we've historically experienced a use of cash. We maintain a strong balance sheet and liquidity position with total liquidity of $53 million, including availability under our revolver. We continue to deliver impactful new technology to our customers as exemplified by our StageSaver composite frac plug and the dual-barrel frac sleeve for enhanced oil recovery. We are approaching the final stages of the ResMetrics operational integration and are on track to realize the expected cost synergies, and we're capitalizing on incremental revenue synergy opportunities. Finally, we're taking actions to better position NCS to capitalize on the growth opportunities that we've been targeting in global offshore markets. We're establishing an internal cross-functional team, including business development, technical services, product line, engineering and operations to identify and prioritize commercial and product development opportunities and to assist customers in planning for and delivering successful operations. This team is supported by a recent hire that we've made, bringing on board an individual with extensive global experience in stimulation design and execution, both offshore and onshore during his time at a supermajor. We believe that this enhanced focus will better position NCS to capitalize on our strong and growing track record in offshore completions.

Just wanted to start maybe with Canada. Obviously, there was a lot of things that were maybe headwinds in the quarter for you between the weather issues, spring breakup, customer delays. Would you be able to maybe break out a little bit more there about how much of a factor each of those variables were? I'm just trying to get a sense for what the risks could be going forward. Obviously, you kept your revenue guide still very strong. So that's encouraging, but just trying to figure out what the risks are there.

Yes. So I'll take them kind of one by one. Really kind of 3 things that kind of cropped up primarily in March with respect to Canada. The first was the weather that we had alluded to. Conditions got unfavorable in March for completions activity in Southern Alberta and Saskatchewan. And then we had a little bit earlier onset of spring breakup as the thaw line kind of progressed north faster than is typical. And I'd say that was probably half of the driver of kind of the miss in Canada relative to the Q1 expectations. And then beyond that, we had some customers who deferred their activity projects they had expected to kick off in February and March, and they deferred that. And if you think about it, the expectation coming into this year, budgets were set with $60 or $65 oil. There was an expectation that the market would potentially improve in the latter half of the year. So it makes sense that some of those customers might defer their planning. And with spring breakup hitting in the middle of the year, our Canadian customers have the ability to do that. So I think they were just kind of looking at what was in front of them and potential improving market later in the year and just decided to shift their capital a little bit further back. And then the last piece, which is smaller but is impactful is we mentioned that customers had some drilling issues. They either encountered tough formations or weren't able to get to depth, and we don't sell our sleeves until they get installed in the customers' wells. So a couple of wells for us where we had expected those sleeves to get installed and either they came up short or they had to drill a new lateral. So kind of the accumulation of all of those led up to kind of the miss in Q1. And I'd say most of that we'll be able to recover later in the year. Again, that's on kind of a basis of customers continuing with their initial budgets. I think there's potential upside from there if the markets start to react to the higher oil price environment.

Understood. That's great commentary. Maybe just wanted to talk to some of the new tech. You mentioned that the deepwater stuff could either come in '26 or '27. Maybe just walk us through some of the variables there. Is this just a matter of getting the tech right? Is there still qualification that needs to be done? Is this a customer timing thing at this point? I guess what would bring that into '26 versus '27? And then maybe additionally, what does the backlog for additional projects look like in deepwater, assuming this all goes well?

Yes. So for the initial well, right, the asset has been identified. We're working together with the customer and the regulator, as we've said, for that project. And that's being targeted. Drilling for that well is expected to start kind of late this year. We are targeting delivery of sleeves for that project in December. But obviously, with projects like that, there's an opportunity for it to slip a little bit. So we're just being a little bit cautious and not putting a large project into the guidance in December that if it slips by a week or 2, could fall into next year. So there is ongoing work there as far as finalizing the metallurgy that goes into the sleeves and some testing requirements and whatnot, but we do feel like we're on track. That customer has identified 2 other projects in the Gulf of America where we think that technology would have some application as you move into kind of thinking about later 2027, 2028. And then as with most projects in the offshore environment, there -- you have the operator for that well and then other companies who have smaller percentages of that project. And we've been talking to several customers about this deepwater solution. So we do think that we'll be able to grow that customer base over time. But again, this is a kind of long cycle from a customer acquisition standpoint, proving out the technology, making sure it's fit for the application in each customer and each well's environment. So we feel good about how that will play out over the course of the next couple of years. We think we're on track for this first well. That customer has plans for additional opportunities, but then it's from there expanding that customer base and moving into other markets worldwide.

That's great. Maybe one more for me before I jump back in the queue. Just on the macro, you guys both have a lot of conversations with operators in the industry. Obviously, the macro environment is fast changing. Are you seeing any operators changing their philosophy or their stance? Or is everyone still in a bit of a wait-and-see mode as the commodity prices change?

Yes. Those conversations are certainly starting to pick up. We are having those conversations, and I think that's been articulated also through some of the drilling contractors have reported recently, whether it be Patterson or Nabors talking about customer inquiries for increasing the rig count. You've seen some commentary from Halliburton and Liberty and Patterson talking about the ability to bring some completion crews back into the market. There's not as many excess rigs as it used to be. There's not as much excess frac capacity as there used to be, but those conversations are certainly taking place. They're taking place both in the U.S. and in Canada. But don't want to lean into that too much just yet. We'll wait for the customers to come up with their budgets and actually contract those rigs and move it from conversations about picking up activity to commitments to do so.

Just to call it a 2-part question for you. Let's assume we're positively surprised and the activity accelerations occur a bit faster and more assertively than conventional wisdom. In such a scenario, Ryan, what constraints, if any, do you think could become obstacles to growth? And what could you do right now to start getting ahead of it?

Yes, John, thanks for the question. For us, really, there's very little, right? And a lot of that comes from the way we've set up the business model. We are -- as I mentioned earlier, we're investing to increase the capacity at Repeat Precision. Those machining assets are coming online in the course of the next month or 2. So we'll be able to pick up capacity there and I think be able to handle growth should it pick up on the frac plug side. If it comes to fruition right across tracer diagnostics, across our frac systems business, from a supply chain standpoint, we're in really good shape across both of those. We've got an outsourced manufacturing model. We're not limited really with respect to any sort of roofline or equipment constraints. What we really need to do is start hiring some people to support that. In Canada, we use a contractor model. So we have some employees, but we can also flex our field capacity with contractors, and it's really good work for them. So if we have activity, I think no issues getting those contractors on board to support it. In the U.S., most of our activities in international is supported by employees. So to support a pickup in activity in the U.S. and international, we would need to start hiring folks and getting them out there and trained and on jobs. We maintain kind of a roster of folks who either previously worked at NCS or that have come to us in the past as we've had open positions. So we lean into that and try to build up that workforce as quickly as possible. But it's really more a people constraint than it is a manufacturing or supply chain constraint.

Okay. And sticking with a sort of a glass-half-full outlook here from my perspective, at least, is if we have that -- you guys went through a number of new projects that you're working on. As you think about the growth in the business, would you expect the faster growth rate to come from those new projects, products, if you will, or like, legacy products? And then -- and I'm not looking for specific financial guidance here, although it's going to sound like it, but like just speak to what happens in terms of margin impact over multiple quarters if the thing -- if we take off here.

Yes. It's a good question. Look, I think if the industry does inflect, I think in some ways, it leads with kind of our historical products. Now I'll say there's a little bit of nuance to that in that for Repeat, StageSaver, I think, has moved on to where it was introduced last year, and it's now probably half of the volume on the plug side. So that new product is really kind of at the leading edge and displacing our traditional composite plug. I think the increase in activity would be across our legacy products and projects, but it could lead to a little bit more rapid development and advancement of the opportunities across the newer products and solutions that we've been bringing to market. I think it helps on all fronts, but you react really -- you react more quickly to what you already know, right, from an operator standpoint. So I think it benefits both, but I think it's an uptick again, kind of traditional products, but does maybe accelerate the time line to introduce the newer solutions.

Can you hear me?

We can.

On the Canada, can you -- the accounts, the top 3 accounts, the specific customers, have they since reconfirmed the deferred work for H2? Or is the Canadian recovery assumptions more of a market level expectation?

It's a little bit of both, right? So our -- I think as we talked about a little bit, we had an M&A combination of 2 of our larger customers last year that was announced about this time and that closed, I think it was maybe late in the second quarter last year. And when you do have some of that consolidation on the upstream side, a lot of times, their pro forma activity will be reduced a bit. So we're seeing the year-over-year impacts of that really across more of the first and second half -- or sorry, first and second quarters of this year. We had already really kind of experienced the impact in the second half starting last year. Now with that customer, in particular, they use us in their operating areas where they use frac sleeves, so our fracturing system product line, but they also use us for precision products where they run plug-and-perf completions. So we've got a good sense for -- as their program moves forward. The projects where they're going to be using sleeves and the projects where they're going to be using plugs and how that plays into the revenue for the second half of the year. With respect to the rest of the customer base, yes, again, for our largest customers, our sales and business development team and also our COO have been in front of customers recently kind of confirming their plans for the second half of the year. So it's a bit of a customer-by-customer buildup for our larger customers together with a general sense for the market.

And just to look at the outlook, the H2 outlook, is that achievable at the current lower rig count levels? Or is that -- are you assuming the rig count in the Canada to level back to Q1 '25 levels?

Right. So for Canada, our expectation is unchanged with respect to the market. And that expectation is that the market as a whole, capital spending across our customer base is relatively flat year-over-year, and therefore, rig count would be relatively flat year-over-year across the year. So with that, with the rig count having been lower in the first quarter on a year-over-year basis, we do expect rig count will be a little bit higher in the second half on a year-over-year basis. But again, it doesn't include any change in our expectations for what the full year rig count would be.

Okay. Got you. On the Repeat Precision pricing, are the StageSaver and the PurpleReign, are they commanding a premium price over some of your legacy plugs? Or is this more still of a volume growth story?

For StageSaver, it's primarily volume growth. There's not much of a pricing differential between the StageSaver and our traditional PurpleSeal composite plugs. The PurpleReign is a different product entirely in that it's a dissolvable frac plug, and that does come at a higher price point in the market in part because the materials cost that goes into that is a bit more elevated. But I'd say just from a kind of profitability standpoint, they command relatively similar contribution margins.

Got you. On the multi-well customer in the U.S., with the sliding sleeves, are you able to give us a size of that project in terms of revenue terms? Is that a low single-digit or double-digit million-dollar opportunity and kind of the margin profile of that opportunity?

Sure. For that one and how it kind of plays into our guidance for the year, I'd say that the expectation is that, that could end up being somewhere in the order of 2% to 3% of our annual revenue. So think about it as a $4 million to $5 million project. And I'm thinking about it that way, primarily with respect to sort of the, call it, the standard costs of the sleeves. There is a potential that they would have us provide some additional value-added services related to those sleeves, which would increase revenue but come in at a lower contribution margin.

Got you. Okay. On the international side, is the cross-selling between the NCS legacy tracer offering and now the ResMetrics capabilities in the Middle East starting to show up in customer conversations? Or is that synergy still ahead of us?

Yes. I think there's definitely still some opportunity ahead, right? The alignment of the sales teams was one of the first things that we did, obviously, in the integration process. But the sales teams that came with the ResMetrics acquisition were a little bit less familiar with some of the things that we had that were unique on the NCS side and vice versa. So I think as the sales teams get more exposure to being able to offer that full service suite, you are seeing opportunities continue to expand. And we talked about a few of them, talked about the SmartProp offering, which was a legacy ResMetrics product, which has some good traction in the market, talked about the rapid trace onsite, which is really more for applications like we talked about in the North Sea or Alaska or maybe even some remote areas in the Middle East where you want that quick qualitative result and don't want -- don't need to take the time to send a sample back to a lab. The other one that we didn't talk about on this call is something called Lumen8, and that's what we call a composite multi-day sampler. We've had deployments on that. It's been proven to be very robust in the field and have good customer interest to take that out to location on new projects going forward. That was a legacy NCS development that, again, sort of that combined sales team is finding opportunities for. So I think we're still relatively early innings in being able to fully capitalize on the full service suite and then to capitalize on the relatively newer product introductions that each of us had coming into the combination.

Got you. And I'll make this my last one. On the EBITDA guidance for Q2, you've talked consistently about relatively fixed SG&A base as a key to operating leverage. So is the Q2 operating compression purely a gross margin issue from a lower revenue mix? At what revenue level does NCS kind of breakeven? Or is that some of the cost due to higher supply chain costs due to what's happening on a macro level?

Right. So as far as the EBITDA guidance then, yes, most of what you're seeing there is with respect to the fixed cost component that exists within cost of sales and the lower gross profit margin that Mike had articulated in Q2 and which we've experienced historically. Obviously, so bringing ResMetrics, which is a new -- a more U.S.-oriented business in from last year helps with that. It eliminates some of the seasonality. The pickup in the Repeat Precision business helps to address that a bit. But we're always going to have, so long as our Canadian business represents the majority of our work or a very large component of our work, you're going to see some seasonal impacts in Q2. As far as where does that kind of breakeven profitability sit, I think within the guidance, the lower end of the EBITDA range was breakeven. So call it, $35 million of revenue might get you to plus or minus breakeven at the EBITDA standpoint, and then you experience the benefits from there as you ramp up, you get a little bit better gross margin percentage flowing through and you're holding those operating costs flat.

All right. Thank you. So on behalf of our management team and our Board, we'd like to thank everyone for joining the call today, including our shareholders, analysts and especially our employees. I truly appreciate the depth and breadth of the expertise of our people at NCS, Repeat Precision and ResMetrics and the passion and effort that our people bring to their work. Our team continues to provide excellent service to our customers, commercializing new products and services that will enable our customers to be more successful. We're taking on demanding and technically challenging work and delivering results. We appreciate everyone's interest in NCS Multistage, and we look forward to speaking again on our next quarterly earnings call.

This concludes today's conference call. Thank you for participating. You may now disconnect.