NCS Multistage Holdings Inc (NCSM) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to NCS Multistage Second Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) And as a reminder, this conference will be recorded. I would now like to introduce your host for today's conference, Mr. Ryan Hummer, Chief Financial Officer. Sir, you may begin.

Thank you, Sabrina. And thanks to everyone for joining NCS Multistage's Second Quarter 2017 Conference Call. Our call today will be led by Robert Nipper, our Chief Executive Officer, and I will also provide comments. Also joining us this morning are our Corporate President, Marty Stromquist; our Chief Operations Officer, Tim Willems; and our Chief Accounting Officer and Treasurer, Wade Bitter.

Before we begin our call today, we would like to caution listeners that some of the statements that will be made on this call could be forward-looking statements, and to the extent that our remarks today contain information other than historical information, please note that we are relying on the safe harbor protections afforded by federal law. Such forward-looking statements may include comments regarding future financial results and reflect a number of known and unknown risks. I'd like to refer you to our press release issued last night along with other public filings made from time to time with the Securities and Exchange Commission that outline those risks.

I also need to point out that in our earnings release and in today's conference call, we have discussed and will refer to adjusted EBITDA, adjusted EBITDA margin, and adjusted net earnings per diluted share. These are non-GAAP measures of operating performance. We use adjusted EBITDA, adjusted EBITDA margin, and adjusted net earnings per diluted share as measures of operating performance because they allow us to compare performance consistently over various periods without regard to costs associated with our current capital structure and in a manner that better reflects our ongoing operating performance.

Our press release from yesterday, which is posted on our website ncsmultistage.com, provides reconciliations of these non-GAAP financial measures to net income, the nearest GAAP financial measure. With that said, I'll turn the call over to Robert Nipper, our CEO.

Thanks, Ryan, and welcome to all our investors, analysts, and employees joining our second quarter 2017 earnings conference call. I'll begin with a discussion of the company and our strategy. I'll then discuss a few highlights from our quarterly results and speak to our recent IPO. I'll then turn it over to Ryan to review the quarterly results in more detail and I'll add some closing remarks.

I'd like to remind everyone that NCS is a technology company, and we are committed to providing our customers with information and solutions to help them optimize their completions and overall field development strategies. Our core Multistage Unlimited Pinpoint Fracturing technology allows our customers to more precisely deploy predictable, verifiable, and repeatable completions designed to maximize formation connectivity. We are well established in Canada where our technology was utilized in 26% of the horizontal wells drilled in 2016. We entered the U.S. market in 2013 and believe our technology is currently utilized in less than 1% of horizontal completions in the U.S., presenting the opportunity for significant market share growth over time.

Finally, it's important to note that we operate an asset-light business model, providing us significant operational flexibility and reducing both our maintenance and growth capital requirements. Our strategy is centered around increasing the market penetration for our core technology, especially in high-impact markets including the deep basin in Canada, the U.S., and selected international markets, including Argentina, while continuing to invest in research and development to bring new services and technologies to our customers. By executing on our strategy, we can draw financial returns and create long-term value for our shareholders.

I'll now discuss some highlights from our second quarter. Our results in the second quarter reflect the continued execution of our strategy. Our revenue for the second quarter was $36.9 million, which is a 227% increase from the year-ago period. This performance was broad based as on a year-over-year basis we posted revenue increases of more than 350% in the United States, more than 130% in Canada, and over 500% internationally. U.S. revenue of $15.4 million was 42% of overall revenue, up from 30% in the same quarter in 2016.

We've continued to make good progress in the U.S. working with existing customers and generating trial opportunities. While the majority of our work in the U.S. continues to be in the Permian Basin, we also installed our completed wells for customers operating in the Rockies, East Texas, Marcellus, Bakken, and Alaska in the second quarter. Our international operations provided revenue of $5 million, the most in any quarter in our history. We've been making great strides internationally, especially in Argentina where we have a growing base of E&P customers. While we don't expect this same level of revenue performance throughout the rest of 2017, we're pleased with the progress we're making on our core international markets in Argentina, China, and Russia as well as other regions where we expect to work later this year and into 2018. Our total revenue fell by 37% compared to the first quarter. With over 70% of our revenue coming from Canada in 2016, this sequential decline in total revenue was expected and due to the seasonality associated with breakup in Canada. While our Canadian revenue fell by 60% as compared to the first quarter, we posted revenue increases in the U.S. and internationally. We've made great strides in reducing the seasonality in our business over the years as we have grown in the U.S. and also in the deep basin plays in Western Canada where activity isn't as impacted as much as by spring breakup. The overall sequential decline in total revenue of 37% in the second quarter of 2017 compares to a sequential decline of 51% in 2016.

From a historical perspective, the $36.9 million in revenue in the quarter marked the highest second quarter revenue for NCS from any year. In addition, we sold more sliding sleeves and completed more wells in the quarter than in any second quarter in our history. As a result of our strong revenue performance, we delivered EBITDA of $3.1 million and adjusted EBITDA of $4.8 million or 13% of revenue, good performance in what is historically our weakest quarter.

I'll now discuss a few of our strategic actions taken during the quarter and subsequent to the quarter, which we believe position us to continue to capture future growth opportunities. In the call last quarter, I discussed our purchase of a 50% interest in Repeat Precision, a strategic investment to secure high-quality and low-cost machining services for our sliding sleeves. Since our initial investment, we have worked with Repeat to add machining capacity and optimize workflows in their primary facility to increase output. We are benefiting from this directly through lower costs relative to other machining suppliers and indirectly through our 50% ownership in the business.

We also discussed our move to a new manufacturing facility in Houston last quarter. That move is now complete and we have all 3 assembly lines operational and recently moved from a 5-day work schedule to a 7-day work schedule. Through adding shifts, we believe that that facility could scale to produce more than 40,000 sliding sleeves per quarter. We've recently started a project to renovate a building that we own in Calgary to become our permanent technology center. As we continue to grow our engineering staff and research and development efforts, we believe that the new facility will bring additional testing capabilities in-house and will facilitate our continued innovation and new product development efforts. Construction on the facility will start later this year and is expected to be complete in late 2018.

We are excited to have been able to complete our initial public offering during the quarter raising proceeds of $161.5 million. We've utilized the proceeds to repay our term loan leaving NCS essentially debt free and the IPO added approximately $60 million in cash to our balance sheet, significantly enhancing our liquidity position. We believe that we are well positioned to continue to fund the organic growth of the business and to execute on strategic opportunities that may arise.

Coming off a second -- a strong second quarter in absolute terms, we expect to see a significant increase in revenue in the third quarter as activity in Canada ramps up through the end of the summer into the fall and winter drilling seasons. We expect that this increase in revenue will allow us to earn attractive incremental margins for the quarter. And with that, I'd like to now turn the call over to Ryan to discuss the financials in more detail.

Thanks, Robert. As reflected in yesterday's earnings release, our second quarter revenues were $36.9 million compared to $11.3 million in the prior year second quarter, an increase of 227%. The increase in revenue is driven by a combination of higher overall industry activity, increased completions intensity, increased market share for NCS, and an earlier-than-normal emergence from spring breakup, which benefited our Canadian operations. On a sequential basis, revenue in the second quarter was 37% lower than revenue in the first quarter due to typical second quarter seasonality driven by spring breakup in Canada, the 37% sequential revenue decline compared to a 51% sequential decline in the same period in 2016 as Robert mentioned in his remarks.

The improvement reflects the relative strength of our U.S. and international businesses, which contributed 55% of our revenue during the second quarter as well as our success in growing our customer base in the Canadian deep basin, which exhibits more limited seasonality as compared to the light oil plays in Southern Canada. Gross profit defined as total revenue less total cost of sales, excluding depreciation and amortization expense, increased to $18 million in the second quarter or 49% of revenues, as compared to $4.8 million or 42% of revenue during the prior year second quarter due to higher revenues and better utilization of our fixed operating cost base.

For reference, gross profit was $29.3 million or 50% of revenue in the first quarter of 2017. Selling, general, and administrative costs, or SG&A, increased to $16.2 million in the second quarter from $8.4 million in the prior year's quarter. As a reminder, our reported SG&A includes share-based compensation as well as a number of non-recurring IPO related expenses. The year-over-year increase was driven by a growing headcount to support the growth of our business, increased salaries, higher bonus accruals, increases in share-based compensation, and both recurring and one-time expenses related to our IPO preparations and ongoing operations as a public company.

SG&A as a percentage of total revenue was 44% in the second quarter as compared to 75% in the prior year's quarter. On a sequential basis, SG&A increased by $3.4 million or 27% versus the first quarter of 2017, primarily due to increased headcount, higher bonus accruals, higher share-based compensation, and additional ongoing costs associated with operating as a public company.

One item to note here which will impact our reported SG&A going forward and detailed in our 10-Q which we expect to be filed this evening, is that in connection with the IPO we modified the vesting related to stock options that previously vested only in connection with a liquidity event to include a time-based element. This modification resulted in an increase in unamortized compensation expense while being recognized over a period of 3 years from the date of the modification in May. For the third quarter, we expect our reported SG&A, which includes share-based compensation and non-recurring items, to be between $17 million and $17.5 million and between $14.5 million and $15 million excluding these items. Our second quarter 2017 depreciation and amortization expense totaled $6.6 million, and we expect our third quarter depreciation and amortization expense to be approximately $7 million.

Adjusted EBITDA for the second quarter was $4.8 million, an improvement of $7.3 million as compared to a negative $2.5 million adjusted EBITDA in the prior year second quarter. Adjusted EBITDA as a percentage of total revenue was 13% in the second quarter of 2017 as compared to negative 22% in the prior year second quarter. For the first quarter of 2017, adjusted EBITDA of $19.2 million was 33% of revenue.

A couple of other items to note with respect to our income statement in the second quarter. First, we recorded a non-cash expense of $0.8 million, which reflects an increase to the liability we have on our balance sheet related to the contingent earn-out provision associated with the formation of our Repeat Precision joint venture. The value of this liability will be measured quarterly with increases to the liability resulting in an income statement expense and a decrease to the liability having the opposite effect. As a reminder, the total maximum earn-out payment available to our JV partner is $10 million. If earned, the payment would be based on the JV's financial performance in 2018 and would be payable in early 2019.

Second, for the quarter, we reported interest expense of $2 million. This amount includes a non-recurring and non-cash amount of $1.4 million related to the write-off of unamortized loan fees in connection with the repayment of our term loan with IPO proceeds.

And third, we recognized a gain on foreign currency exchange of $2 million during the quarter. This primarily relates to the retirement of our prior term loan, which was denominated in Canadian dollars. Our diluted loss attributed to NCS per share for the second quarter was $0.11, which compared to a loss of $0.25 in the prior year's quarter. Adjusting for certain one-time items, including the write-off of unamortized loan fees, IPO-related fees, the increase in contingent liability, and net FX items, reduced our net loss attributed to NCS on a per diluted share basis to $0.09 for the second quarter.

Turning to cash flow and the balance sheet. Cash flow from operations for the second quarter was $4.5 million bringing the total cash flow from operations to $7 million for the year. Our net capital expenditures for the second quarter were $2.2 million, bringing total net CapEx for the year to $3.7 million. At June 30th, we had $80 million in cash and total debt of $3.2 million. We repaid the remaining $87.2 million balance of our term loan in May using a portion of the proceeds from the IPO. We also have up to $50 million in total availability under our new revolving credit facility bringing our total potential liquidity to $130 million.

We expect our net interest expense to be below $0.3 million for the third quarter following the repayment of our term loan. Our book effective tax rate in the second quarter was a benefit of 15%, and we expect our rate for the full year to be between 28% and 32%. We currently expect consolidated capital expenditures for the year to be between $6 million and $8 million, inclusive of Repeat Precision and initial spending related to the renovation of the tech center in Calgary that Robert mentioned earlier.

One additional note from a tax standpoint is that we expect to make a U.S. income tax payment of approximately $7.5 million in September, which is primarily related to the realized gain on debt retirement that was recognized when we repaid our term loan in May. I'll hand it over to Robert for closing remarks.

Thanks, Ryan. I'll close with just a couple of quick comments. First, a reminder of how we think about NCS. We are a technology company providing our customers with tools and data that they need to optimize well completions and field development strategies. We have the ability to deliver on differentiated growth through our leverage to completions activity, completions intensity, and our ability to drive further market share gains relative to traditional completion methodologies. We deliver significant value to our customers, which is reflected in our margin profile, and our capital-light model allows us to scale rapidly without requiring significant capital investment. We are laser focused on creating long-term value for our shareholders. We are and will continue to be responsible stewards of capital.

I'd like to personally thank all the employees for their efforts in connection with the IPO and also for remaining focused on our business and delivering the operational and financial performance we have exhibited so far this year. I believe that we have the best team in the industry, and we're committed to preserving the culture of employee development and innovation that has supported our business from the beginning. With that, we'd be happy to take questions.

(Operator Instructions). And our first question will come from the line of Jude Bailey with Wells Fargo.

A question, maybe Robert, if you could maybe talk a little bit more broadly about how you feel like your operations are progressing in the U.S. You have been obviously aggressively trying to expand here in several different basins. Maybe if you could talk about some of the field trials you do have going on and kind of how early response has been from some of the new customers that have been using your sliding sleeve technology.

Sure. So we're happy with our performance so far. We've got regular work with multiple customers in the Permian and in the Rockies, and over the course of the quarter we've added new customers as well who are trialing our technology. When we think about our field trials, we do initial field trials, and the first thing that we have to do is operationally perform. So we believe that operationally we've been performing as planned. And as you know, when the field trials are complete, there's a number of different outcomes that can occur: one is that the customer can adopt the technology on a limited basis in a particular basin. They can go for more field trials or they can go for something greater than that. Generally, there is an evaluation period that takes place, evaluating production results, and that lasts for some period of time and it varies between customers.

So we would expect to see the results of the field trials that we've been conducting over the last couple of quarters. The results of that probably no earlier than the end of this year or early 2018, but we are pleased with where we are right now. Within the U.S., we have multiple opportunities that we've been taking advantage of over the last 2 quarters with our customers: one is with customers that they believe that there's something different out there available. They're not completely happy with their current completion methodology, whether it be cluster efficiency, problems drilling out composite bridge plugs, or whatever. So those are the kinds of customers that we target for field trials, customers that value the new technology, that value the data that we can bring to them, to help them, to be able to optimize their completions as well as their field development strategies. So there's a lot to evaluate.

With ATRS, we've been able to help accelerate that evaluation period in some cases and we continue to push that forward. So just to sum it up, Jud, I think that we're happy with the progress that we've made. New adoption in oilfield services can sometimes be a long process, but we're happy in where we are and where we expected to be at this point.

And then just one follow-up on that is in terms of the number of field trials, is that number still expanding or are you kind of topped out from a personnel standpoint on how many you can accommodate at this point in time?

We haven't topped out on a field standpoint. In fact, we've added new field service personnel over the course of the quarter. We have a very formal training program. So we've been able to train people. So we continue to add field trials as we go forward.

And then my follow-up question is you referenced in your prepared comments I think you said a significant increase in revenue and incrementals for the third quarter. Is there perhaps a little more detailed way we can think about that? Is something that you did in the first quarter in terms of revenue achievable or is that a little too much? Just help us think maybe about as Canada recovers seasonally and trying to think about how things look in the U.S., any more color on revenues or incrementals will be appreciated.

Sure, Jud. This is Ryan. So we're not planning to give specific guidance but certainly as we look at where consensus sits for the third quarter, I believe it's at about $55 million of revenue, which would imply a sequential growth of about 50% from what we've produced in the second quarter. And in general I think we're comfortable with that, maybe something a little bit above that with the performance in Canada. There's always going to be some variation when you get into specific geographic markets, products, service mixes, but the Canadian market was certainly more active during spring breakup in some regions and emerged from breakup earlier than normal in other regions, which supported our activity in that market in June, which gives us a good starting point heading into the third quarter. And we do expect to see continued strength in the Canadian market throughout the quarter as well.

With the relatively small base of our U.S. and international operations, there will be quarter-to-quarter performance volatility, timing delays and changes to individual customer schedules will have a little bit of an impact on the quarterly performance for those regions. But by and large, I think we're comfortable with where consensus is and maybe a little bit above that from a revenue standpoint in the third quarter.

From an incremental margin perspective, again looking at where the Street is right now, it would imply incremental margins in the mid-50% range, which is slightly above gross margin, which we think is fair. We think we're going to moderate out. On the operating expense side, the rate of increase will slow so that we should be able to deliver some incrementals in the third quarter that are slightly above the gross margin profile.

And the next question will come from the line of Ian MacPherson with Simmons.

And I would say great start to the year for NCS. So congratulations there. Robert, maybe you could talk a little bit about the opportunity in the deeper Canadian plays and how that is evolving from a penetration standpoint and maybe give us a couple of data points with regard to the significance of that within your Canadian mix and where you think a target would be over the next projectable timeframe?

Yes, so glad you asked about Canada. So the deep basin play for us is a significant opportunity. The majority of our business is concentrated in Eastern Canada in the light oil plays and shorter laterals, less stages to complete, so less sellable products in the wells. So when we think about the deep basin plays, each well is a incrementally significantly better opportunity for us.

We've continued to add several new customers each month in Canada and the deep basins, and so we continue to grow our market share there. I mean just as a reference point, we moved into the deep basins in 2013 as we were talking about the Cardium at that point, and then subsequently into the Montney and Duvernay. And where there was 0% market share in 2013, over time we've been able to grow that to about 1/3 of the wells being completed in the Cardium using pinpoint stimulation.

So now we're seeing the same type of incremental growth in the other 2 basins and some of the sub-basins there in the deep plays. So the success that we've had in Canada, it continues to grow, and what we have seen so far is that unlike the U.S., because we have been operating in Canada for over 9 years now, we're well known there. Pinpoint stimulation has been adopted fairly broadly in Canada. The adoption in the deeper basins seem to be -- is faster than we see in the U.S. where we haven't had as much time. So that's the color that we can add around the deep basins there.

I think one additional data point on that, Ian. When we look at the mix within our Canadian business, if we look at kind of Cardium, Montney, Duvernay, and other deep basin plays, last year through the first 6 months of the year those areas accounted for about 20% of our sliding sleeve sales, whereas this year it's over 30%.

That's for total world, not just for Canada?

Within Canada, specifically.

Within Canada, okay. That's very helpful. Thanks. For my follow up, I think I'm sure you've covered this amply with your IPO road show narrative, but just for the benefit of the broader audience, maybe you could talk about how you view the balance sheet at this point given your significant cash balance, the capital-light nature of your existing operations, and how you see the strategic opportunities going forward and whether you see opportunities for inorganic growth that's very narrowly focused around your pinpoint completion tools, or if there is a broader product offering that NCS could be embracing as we go through the cycle.

Yes, well, you're right, our balance sheet is a lot different than it was in the first quarter this year, and over time we've evaluated a number of M&A opportunities and we continue to evaluate. Up to this point, the opportunities that we saw that we thought were significant and strategic, we have chosen again up to this point to execute on those internally.

So just as a couple of examples, we made the decision a few years ago that we needed to be in the liner hanger business to help support our pinpoint stimulation and installation of sleeves in areas like the U.S. Bakken. So we looked around and saw what was available and we made the decision to develop that in-house and we did that successfully and commercialized the system.

Another example is we felt like we needed to have a reservoir group inside the company to help us better understand pinpoint stimulation, how it affects our customers' economics, and so we looked at a number of different opportunities that were inorganic and we've made the decision to start that business from scratch. As we move forward, we have a balance sheet that's very, very strong. It gives us the flexibility to be able to evaluate opportunities that would be significant for NCS, and we think about what those opportunities might be from a strategic standpoint, it would be opportunities for a differentiated type of technology, technologies that will help our customers to be able to continue to optimize not only their well completions but optimize the field development strategies that they have.

Financial profiles that are similar to NCS, something that is more higher margin, something that is not capital intensive, and so we think that is something that also would promote faster adoption in the U.S. for our pinpoint stimulation core product line. So we were looking inside the full completions chain, all the way from planning, field developments to individual well placement to how we complete those wells and then through the life of the wells, how do we come back in and refrac those wells, how can we collect more data and understand what we're actually doing, and then even when we move into secondary and tertiary recovery. So, hopefully, that's helpful Ian. That's kind of how we think about the strategic opportunities.

And the next question will come from the line of Marshall Atkins with Raymond James.

Since you all have come out and done so well so far, it looks like you're starting to see competitors emerge certainly in the coiled tubing, conveyed, sliding sleeve business or at least several announcements that people are coming into this space. Could you give us an update on the competitive landscape and maybe comment -- I mean you guys have such a strong beachhead here already established in this niche technology. What are those competitors coming into the market going to face in terms of competing with you?

And, yes, it's very interesting that since we filed our prospectus, there seem to be a number of companies that have come out and said that they have a competing-type technology to what we do. Broadly we view the competition out there in a couple different ways. One, primarily we view it as we're introducing pinpoint stimulation and competing against plug-and-perf and open-hole ball sleeves. So from that standpoint, we believe that our technology is applicable broadly across virtually every basin and in the plays that we work in, both in North America and internationally.

But then there are a few companies that have come out with a competing technology. Some we have seen in the field, but what I'll say is that when we think about the direct competitors, I'd like to point out that we've completed over 170,000 frac stages and about 8,000 wells in the 9 years that we've been doing this. The technology has evolved over time significantly. It's hard to pick a point in time in our history where you can look at a particular year at the technology that we have and then look back a year behind that and see the same technology. It's evolved that fast.

We started in the shallow basins in the light oil plays in Canada where the conditions were a lot less benign. That's where we got our foothold, that's where we did the world's first pinpoint stimulation in a horizontal well bore. And we've made over -- in the service tool alone that we used to shift our sleeves open, there's been over 120 changes made to that over time. And it's all been changes to operationally help us to be successful.

When we moved out of that area or expanded from that area and moved into the deeper plays in Canada and into the U.S. in 2013, we knew that when we moved out there were going to be significant future enhancements that were going to have to be made to work in some of the longer laterals. We've never worked in a lateral that was 5,000 feet long. And when we first came into those wells, we struggled. And so we had to -- and we knew that we were going to have to evolve the technology. So we did that. We've made a number of enhancements to the technology, and now we've done over 100 wells or about 100 wells where the lateral lengths are over 9,000 feet long.

So there's been a lot of learning over time and I think when we consider competitors that could be coming into the market, there's -- along with the intellectual property that we've developed and the knowhow that we've developed, I think that there are some meaningful barriers there, at least for some period of time.

Specifically it sounds like on the learning curve side?

Not on the learning curve, but on the intellectual property side as well. We've got almost 30 issued patents, around 80 more patent applications that are in process. We've actually asserted our intellectual property against a couple of other companies in the past successfully. So it's not just the knowhow, which we believe that that is probably the most significant part of it, but some of the enhancements that we've made that have helped us be successful do have a bit of a beachhead around them as well.

And then a follow up here, kind of a little different subject. Going back to the U.S. in the trials, recognizing this could take a while for these guys to figure out whether they think it works or not. Are you still pushing into a lot of new customers that are willing to say, "Hey, yes, we'll give this a shot" and are you seeing that base of people trying it expand in the U.S.?

Yes. Every quarter we're adding new customers to the roster that are trying the technology.

(Operator Instructions) And the next question comes from the line of Sean Meakim with JPMorgan.

Rob or maybe for Ryan, so I'm wondering if we could get a little bit of the puts and takes on the margin progression in services. Just the sequential decline seems like maybe is just a function of fixed cost absorption in Canada given breakup, but anything else to think about there as we head into the third quarter?

No. You nailed it. So I think if you look at on the product side, our margins have been very consistent over really the course of the last 12, 15 months we have seen an uptick. First 6 months of this year versus last year about 200 basis points on the product side. The service side we've seen a bigger improvement relative to last year, very strong service margins in the first quarter. It did dip down a bit in the second and you're absolutely right. It's really just a fixed cost absorption and primarily related to Canada. In Canada for field operations, we use both NCS employees as well as a contractor model. So the contractors help to mitigate that to some degree, but yes there is less utilization for our in-house field employees during the spring breakup period.

And then I guess maybe could you comment a little bit more about the activity in the quarter given how much stronger it was year-on-year in Canada? We've heard from the some of the pumpers already, they were pretty successful being able to stay on site more (technical difficulty) for pad work, some backlog of the first quarter carried over into 2Q. You highlighted on one of the other questions, just some of the better penetration you're seeing in the deep basins. Just curious as you think about how that seasonality can look in your business in future years given trends around a move towards pad work how that can influence this?

As Ryan said earlier, we've moved from 20% in deep basin to 30% over time and that does affect the seasonality of our business. Still the majority of our business is in the lateral plays in Eastern Canada where breakup basically shuts us down, whereas the deeper basins we can continue to work on through the season in many cases. So as we continue to grow our market share in Canada in the deeper basins, it will help insulate us a bit more from some of the effects of breakup.

Thank you. And I'm showing no further questions at this time. I would now like to turn the call back over to Mr. Robert Nipper, CEO, for closing remarks.

Thanks. On behalf of the entire management team and our board, we'd like to thank everyone that joined us on the call today, including our shareholders, the research analysts who cover NCS, and especially our employees whose hard work has positioned us to deliver these results. We certainly appreciate your interest in the NCS Multistage and look forward to talking to you again on our next quarterly call or earlier.

Ladies and gentlemen, thank you for participating in today's conference. That does conclude your program. You may all disconnect. Everyone, have a great day.

Thank you.