Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q ("Quarterly Report") and with our audited financial statements and the related notes thereto included in our Annual Report on Form 10-K ("Annual Report"), filed with the Securities and Exchange Commission (the "SEC"). This discussion and analysis contains forward-looking statements regarding the industry outlook, estimates and assumptions concerning events and financial and industry trends that may affect our future results of operations or financial condition and other non-historical statements. These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to the risks and uncertainties described in "-Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors." Our actual results may differ materially from those contained in or implied by these forward-looking statements. As used in this Quarterly Report, except where the context otherwise requires or where otherwise indicated, the terms "Company," "NCS," "we," "our" and "us" refer to NCS Multistage Holdings, Inc.

Acquisition of NCS by Weatherford

As previously disclosed on Form 8-K filed on June 2, 2026, on May 31, 2026, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Weatherford International plc ("Weatherford"), pursuant to which a wholly owned subsidiary of Weatherford will merge with and into the Company, with the Company continuing as the surviving corporation and becoming a wholly owned subsidiary of Weatherford (the "Merger"). Upon completion of the transaction, our stockholders will have the right to receive Weatherford ordinary shares or a combination of cash and Weatherford ordinary shares, in each case subject to the terms of the Merger Agreement. The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the second half of 2026. The holder of more than 50% of our outstanding common stock has approved the transaction by written consent; accordingly, no further stockholder approval is required. For additional information regarding the proposed merger, see "Note 1. Basis of Presentation, Weatherford Transaction" of our unaudited condensed consolidated financial statements.

We have incurred, and expect to incur additional, transaction-related costs in connection with the proposed merger and may experience disruptions to our business, operations and relationships with customers, suppliers and employees as the transaction progresses. While the Merger is pending, we are subject to certain operating covenants that may restrict our ability to pursue certain business opportunities. The completion of the transaction is subject to various closing conditions and is not assured. Accordingly, the timing and outcome of the proposed merger could affect our financial condition, results of operations and cash flows.

Overview and Outlook

We are a leading provider of highly engineered products and support services that facilitate the optimization of oil and natural gas well construction, well completion and field development strategies. We provide our products and services primarily to exploration and production ("E&P") companies for use in onshore and offshore wells, predominantly those that have been drilled with horizontal laterals in both unconventional and conventional oil and natural gas formations. Our products and services are utilized in oil and natural gas basins throughout North America and in selected international markets, including the North Sea, the Middle East and Argentina. We provide our products and services to various customers, including large independent oil and natural gas companies and major oil companies.

Our primary offering is our fracturing systems products and services, which enable efficient pinpoint stimulation: the process of individually stimulating each entry point into a formation targeted by an oil or natural gas well. Our fracturing systems products and services can be used in both cemented and open-hole wellbores and enable our customers to precisely place stimulation treatments in a more controlled and repeatable manner as compared with alternative completion techniques. Our fracturing systems products and services are utilized in conjunction with third-party providers of pressure pumping, coiled tubing and other services. As an extension of fracturing systems, we offer enhanced recovery systems, which enable our customers to inject water, other fluids, or gases in a controlled manner with the objective of increasing the amount of hydrocarbons produced from their assets.

We own a 50% interest in Repeat Precision, LLC ("Repeat Precision"), which sells composite and dissolvable frac plugs, setting tools, perforating guns and related products. We provide tracer diagnostics services for well completion and reservoir characterization that utilize downhole chemical tracers. We sell products for well construction, including casing buoyancy systems, liner hanger systems and toe initiation sleeves as well as certain complementary products provided by third parties. We operate in one reportable segment that has been identified based on how our chief operating decision maker manages our business.

On July 31, 2025, we acquired 100% of the equity interests of Reservoir Metrics, LLC, and its related entities ("ResMetrics"), a provider of tracer diagnostics services, for $7.1 million, on a cash-free, debt-free basis. The purchase consideration included $1.3 million of contingent consideration, which was paid in January 2026. The acquisition expands our tracer diagnostics capabilities and strengthens our service offerings.

Our products and services are primarily sold to North American E&P companies. Our ability to generate revenues from our products and services depends largely upon oil and natural gas drilling and completion activity in North America. Oil and natural gas drilling and completion activity is directly influenced by oil and natural gas prices.

Based on year-to-date E&P company drilling and completion activity, expected capital budgets for the remainder of 2026, and recent industry reports, we believe that Canadian and U.S. activity levels will increase modestly in 2026 compared to 2025, and overall industry spending in international markets will be stable compared to 2025. However, a prolonged conflict involving the United States, Israel and Iran could contribute to higher commodity prices, which may result in an increase in drilling and completion activity in Canada and the United States during the second half of 2026, but could also be tempered by uncertainty as many E&P companies may be reluctant to increase activity in response to short-term price movements, consistent with their focus on capital discipline and longer-term commodity price expectations. Such a prolonged conflict could result in lower-than-anticipated activity in the Middle East, if it results in the shut-in of production in the region due to restricted options for the transport of crude oil and refined products to customers in Asia and other global markets.

Oil and natural gas prices were volatile through 2025, a trend that continued into 2026. This volatility has been influenced by multiple factors, including trade tensions, the ongoing war between Russia and Ukraine, conflicts in the Middle East, including the recent and ongoing war involving the United States and Israel against Iran and associated disruptions and threats to commercial shipping in the Strait of Hormuz. Trade disruptions or any further escalation of these conflicts could intensify commodity price volatility. Also impacting commodity prices are adjustments in oil supply by OPEC+ countries, which began to phase out voluntary cuts in 2025, but recently announced a flexible approach to future production adjustments in response to evolving market conditions and regional conflicts. See further discussion below on oil and natural gas pricing.

Our products and services face significant competitive pressures across all offerings, which has, and may continue to have, a negative impact on market share and operating margins for certain product lines. This competitive pressure constrains our ability to raise prices to offset rising costs, particularly during periods of higher cost inflation or periods affected by the uncertainty of escalating and de-escalating tariffs, with supply-chain costs impacted by the level of tariffs then in effect. While inflationary cost pressures moderated somewhat in prior years, the implementation of new tariffs, including steel and aluminum, and the continued threats of additional tariffs, have led to additional costs that we may not be able to recover through price increases.

Beginning in April 2025, and continuing thereafter, the U.S. Administration announced targeted tariff measures affecting multiple countries, many of which were substantial. Certain countries have since negotiated trade agreements with the United States, while others remain subject to elevated tariff rates, including baseline tariffs on imported goods and existing tariffs on steel and aluminum imposed under Section 232 of the Trade Expansion Act. These tariffs have increased our manufacturing costs, notably the cost of steel, and chemicals which are largely imported from China. Tariffs imposed by the U.S. Administration, or retaliatory tariffs imposed by other countries on goods imported from the United States could further increase our product costs-particularly tariffs affecting trade relations with Mexico, Canada, or China. Furthermore, U.S. tariffs on certain Canadian energy exports could reduce drilling and completion activity by our Canadian customers, potentially lowering demand for our products and services in that market. Goods covered by the United States-Mexico-Canada Agreement ("USMCA") continue to be exempt from tariffs; however, following the July 2026 joint review of the USMCA, the United States indicated that it would seek changes to the agreement and continue discussions with Canada and Mexico regarding potential amendments, changes in interpretation or enforcement, or the implementation of additional measures that could affect USMCA-compliant goods. In addition, the United States did not agree to extend the USMCA for an additional term during the July 2026 review, which may increase uncertainty regarding future amendments to, and the administration of, the agreement. Our Repeat Precision joint venture provides manufacturing services for components used in our fracturing systems products in Mexico. We believe our supply chain in Mexico is currently compliant with the USMCA. We believe that products we ship from the United States to Canada are also compliant with the USMCA.

In February 2026, the U.S. Supreme Court issued a decision invalidating certain tariffs imposed by the U.S. Administration under the International Emergency Economic Powers Act. However, following that decision, the U.S. Administration announced and implemented alternative tariff measures under other statutory authorities, including expanded and restructured tariffs on steel, aluminum, and related products, while continuing to signal a willingness to impose additional or modified tariffs in response to trade and national security considerations. As a result, uncertainty and volatility related to tariffs and trade policy remain elevated.

To counter inflationary pressures on the economy, central banks, including the U.S. Federal Reserve, raised benchmark interest rates several times prior to September 2024, actions typically intended to increase borrowing costs and moderate economic activity. Beginning in September 2024, the U.S. Federal Reserve began lowering rates, with additional reductions throughout 2025 amid improving inflation and decelerating employment data growth. During 2026, the Federal Reserve has held benchmark interest rates steady while continuing to assess incoming economic data, including developments related to inflation, labor market conditions, tariff-related cost pressures, and global geopolitical risks. The pace and timing of any future rate adjustments remain uncertain and will depend on economic conditions and the evolving outlook.

Market Conditions

Oil and Natural Gas Drilling and Completion Activity

Oil and natural gas prices remain volatile. The average WTI crude oil price increased in the second quarter of 2026 compared to the first quarter of 2026, largely attributable to heightened geopolitical tensions in the Middle East, including the conflict involving Iran, significant supply disruptions, and concerns regarding global oil supply and inventory levels. While incremental increases in oil supply from certain producing countries, including members of the Organization of the Petroleum Exporting Countries and certain other producing countries (collectively referred to as "OPEC+"), as well as certain non-OPEC+ countries, provided modest supply support, these increases did not fully offset the impact of supply disruptions arising from geopolitical tensions, infrastructure risks, and transportation and logistical constraints.

Over the past several years, to address the uncertain outlook for the global economy and, specifically, the oil markets, and to reduce the potential for an oversupply of oil and gas inventory, members of OPEC+ agreed to several collective voluntary oil production reductions. Beginning in 2025, OPEC+ began a gradual phase out of these voluntary reductions, while maintaining its stated commitment to market stability and retaining flexibility to pause, adjust, or reverse production changes. In early 2026, OPEC+ announced a pause on planned production increases for the first quarter of 2026 and subsequently announced in March 2026 that it would resume the gradual unwinding of voluntary production cuts beginning in April 2026. Since that time, OPEC+ has continued its phased increases in production while reaffirming its commitment to supporting oil market stability and maintaining flexibility to increase, pause, or reverse production adjustments in response to evolving market conditions. In May 2026, the United Arab Emirates exited OPEC and OPEC+, and additional changes in OPEC+ membership or production policies could increase uncertainty regarding future oil supply coordination. The pace and scope of further OPEC+ production adjustments remain dependent on evolving market conditions, geopolitical developments, and broader economic indicators. Continued geopolitical instability, including potential attacks on energy infrastructure or disruptions to international maritime routes, could contribute to further volatility in global oil markets.

Natural gas pricing continues to be volatile and decreased in the second quarter of 2026 to an average of $2.95 per MMBtu compared to an average of $4.71 per MMBtu for the first quarter of 2026. The decrease during the second quarter of 2026 was primarily driven by continued strong production growth and elevated natural gas inventory levels. These price decreases were partially offset by warmer weather and increased demand associated with strong U.S. liquefied natural gas exports, which are operating near available capacity. Realized natural gas prices for U.S. producers in West Texas and for Canadian E&P customers are typically at a discount to U.S. Henry Hub pricing due to regional basis differentials.

Sustained significant declines in commodity prices, or sustained periods when the local pricing received in regional markets is below benchmark pricing, known in the industry as high differentials, which could be the result of tariffs, would be expected to lead North American E&P companies to reduce drilling and completion activity, which could negatively impact our business.

		Average Price
Quarter Ended		WTI Crude (per Bbl)				Brent Crude (per Bbl)				Henry Hub Natural Gas (per MMBtu)
6/30/2025		$	64.57			$	68.07			$	3.19
9/30/2025			65.78				69.03				3.03
12/31/2025			59.62				63.65				3.73
3/31/2026			72.74				80.72				4.71
6/30/2026			95.65				102.63				2.95

		Average Drilling Rig Count
Quarter Ended		U.S. Land				Canada Land				North America Land
6/30/2025			559				127				686
9/30/2025			527				176				703
12/31/2025			530				185				715
3/31/2026			533				199				732
6/30/2026			541				147				688

A substantial portion of our business is subject to seasonality, which results in quarterly variability. In Canada, we typically experience higher activity levels in the first quarter of each year, as our customers take advantage of the winter freeze to gain access to remote drilling and production areas. In the past, our revenue in Canada has declined during the second quarter due to warming weather conditions that result in thawing, softer ground, difficulty accessing well sites and road bans that curtail drilling and completion activity. Access to well sites typically improves throughout the third and fourth quarters in Canada, leading to activity levels that are higher than in the second quarter, but usually lower than activity in the first quarter. Canadian completions activity can be impacted by wildfires that are usually experienced in the spring and summer seasons, as well as shortages of water available to oil and gas operators. Our business activity can also be affected by customer spending patterns. In some years, customers in both the United States and Canada may exhaust their capital budgets before year-end or reduce their activities during the winter holidays in late December, which can result in lower drilling and completion activity during the fourth quarter.

How We Generate Revenues

We derive our revenues from the sale of products and provision of services. Our products include fracturing systems and enhanced recovery systems, casing buoyancy systems, liner hanger systems and toe initiation sleeves, as well as composite and dissolvable frac plugs, setting tools, and perforating guns sold through Repeat Precision. Our services include fracturing systems field services and tracer diagnostics.

Product sales represented 72% and 76% of our revenues for the three months ended June 30, 2026 and 2025, respectively, and 72% and 73% for the six month periods then ended. Most of our sales are on a just-in-time basis, as specified in individual purchase orders, with a fixed price for our products. We occasionally supply our customers with large orders that may be fulfilled on negotiated terms. Services represented 28% and 24% of our revenues for the three months ended June 30, 2026 and 2025, respectively, and 28% and 27% for the six month periods then ended. Services include tool charges and associated personnel services related to fracturing systems and tracer diagnostics services. Our services are provided at agreed-upon rates to customers for the provision of our downhole frac isolation assembly, which may include our personnel, and for the provision of tracer diagnostics services.

During periods of low drilling and well completion activity, or as may be needed to compete in certain markets, we may, in some instances, lower the prices of our products and services. Our revenues are also impacted by well complexity since wells with more stages typically result in longer jobs, which may increase revenue due to the use of more sliding sleeves or more frac plugs and increase the volume of services we provide.

The percentages of our revenues derived from sales in Canada and denominated in Canadian dollars were approximately 35% and 49% for the three months ended June 30, 2026 and 2025, respectively, and approximately 44% and 64% for the six months then ended. Our Canadian contracts are typically invoiced in Canadian dollars; therefore, the effects of foreign currency fluctuations impact our revenues and are regularly monitored. Strengthening of the U.S. dollar, our reporting currency, relative to the Canadian dollar would result in lower reported revenues, partially offset by lower reported cost of sales and selling, general and administrative ("SG&A") expenses.

Although most of our sales are to North American E&P companies, we also have sales to customers outside of North America, and we expect sales to international customers to increase over time. These international sales are made through local NCS entities or to our local operating partners, primarily in the Middle East, usually on a free on board or free carrier basis with a point of sale in the United States. Our operating partners and representatives do not have authority to contractually bind NCS but market our products in their respective territories as part of their product or services offering.

Costs of Conducting our Business

Our cost of sales is comprised of expenses relating to the manufacture of our products in addition to the costs of our support services. Manufacturing cost of sales includes payments made to our suppliers for raw materials, such as steel, and payments made to machine shops for the manufacture of product components and finished assemblies and costs related to our employees that perform quality control analysis, assemble and test our products. We obtain certain chemicals utilized in our tracer diagnostics services business from suppliers in China, which are subject to tariffs that increase our costs. In addition, Repeat Precision operates a manufacturing facility with supporting personnel in Mexico, which has allowed us to reduce our costs for certain product categories. We also source certain product categories from other international suppliers. We review forecasted activity levels in our business and either directly procure or support our vendors in procuring the required raw materials with sufficient lead time to meet our business requirements. Prices for certain raw materials, including steel and chemicals, and for purchased components and outsourced services, have increased in recent years due to inflation and geopolitical factors. Cost of sales for support services includes compensation and benefit-related expenses for employees who provide direct revenue generating services to customers in addition to the costs incurred by these employees for travel and subsistence while on site. Cost of sales includes other variable manufacturing costs, such as shrinkage, obsolescence, revaluation and scrap related to our existing inventory and costs related to the chemicals used and laboratory analysis associated with our tracer diagnostics services.

Our SG&A expenses include general operating costs and compensation expense, primarily the compensation and benefits for our employees who are not directly involved in revenue generating activities, including those involved in research and development activities. Our general operating costs include but are not limited to rent and occupancy for our facilities, information technology infrastructure services, software licensing, advertising and marketing, third party research and development, risk insurance and professional service fees for audit, legal and other consulting services. Our SG&A expenses also include transaction-related costs associated with strategic initiatives, including merger and acquisition activities, litigation expenses and expected credit losses.

The percentage of our operating costs denominated in Canadian dollars (including cost of sales and SG&A expenses but excluding depreciation and amortization expense) approximated 16% and 25% for the three months ended June 30, 2026 and 2025, respectively, and 19% and 30% for the six months then ended.

Results of Operations

Three Months Ended June 30, 2026Compared to Three Months Ended June 30, 2025

The following tables summarize our results of operations, gross margins and revenues by geographic area for the periods presented (dollars in thousands):

		Three Months Ended
		June 30,								Variance
		2026				2025				$				% (1)
Revenues
Product sales		$	27,678			$	27,776			$	(98	)			(0.4	)%
Services			10,686				8,678				2,008				23.1	%
Total revenues			38,364				36,454				1,910				5.2	%
Cost of sales
Cost of product sales, exclusive of depreciation and amortization expense shown below			18,059				18,214				(155	)			(0.9	)%
Cost of services, exclusive of depreciation and amortization expense shown below			6,358				5,242				1,116				21.3	%
Total cost of sales, exclusive of depreciation and amortization expense shown below			24,417				23,456				961				4.1	%
Selling, general and administrative expenses			17,958				13,626				4,332				31.8	%
Depreciation			1,289				1,235				54				4.4	%
Amortization			303				167				136				81.4	%
Loss from operations			(5,603	)			(2,030	)			(3,573	)			(176.0	)%
Other income (expense)
Interest expense, net			(84	)			(68	)			(16	)			(23.5	)%
Other income, net			1,558				1,563				(5	)			(0.3	)%
Foreign currency exchange (loss) gain, net			(275	)			1,201				(1,476	)			(122.9	)%
Total other income			1,199				2,696				(1,497	)			(55.5	)%
(Loss) income before income tax			(4,404	)			666				(5,070	)			NM
Income tax benefit			(1,367	)			(1,032	)			(335	)			(32.5	)%
Net (loss) income			(3,037	)			1,698				(4,735	)			(278.9	)%
Net income attributable to non-controlling interest			1,569				774				795				102.7	%
Net (loss) income attributable to NCS Multistage Holdings, Inc.		$	(4,606	)		$	924			$	(5,530	)			NM

(1)	NM - Percentage not meaningful

		Three Months Ended
		June 30,								Variance
		2026				2025				$				%
Gross Margin and Gross Margin Percentage:
Cost of product sales, exclusive of depreciation and amortization expense		$	18,059			$	18,214			$	(155	)			(0.9	)%
Depreciation and amortization attributable to cost of product sales			601				505				96				19.0	%
Cost of product sales			18,660				18,719				(59	)			(0.3	)%
Product sales gross profit		$	9,018			$	9,057			$	(39	)			(0.4	)%
Product sales gross margin			32.6	%			32.6	%
Cost of services, exclusive of depreciation and amortization expense		$	6,358			$	5,242			$	1,116				21.3	%
Depreciation and amortization attributable to cost of services			244				224				20				8.9	%
Cost of services			6,602				5,466				1,136				20.8	%
Services gross profit		$	4,084			$	3,212			$	872				27.1	%
Services gross margin			38.2	%			37.0	%
Total cost of sales		$	25,262			$	24,185			$	1,077				4.5	%
Total gross profit		$	13,102			$	12,269			$	833				6.8	%
Total gross margin			34.2	%			33.7	%

		Three Months Ended
		June 30,								Variance
		2026				2025				$				%
Revenues by Geographic Area:
United States
Product sales		$	15,220			$	11,930			$	3,290				27.6	%
Services			5,244				1,682				3,562				211.8	%
Total United States			20,464				13,612				6,852				50.3	%
Canada
Product sales			9,737				13,021				(3,284	)			(25.2	)%
Services			3,677				4,948				(1,271	)			(25.7	)%
Total Canada			13,414				17,969				(4,555	)			(25.3	)%
Other Countries
Product sales			2,721				2,825				(104	)			(3.7	)%
Services			1,765				2,048				(283	)			(13.8	)%
Total other countries			4,486				4,873				(387	)			(7.9	)%
Total
Product sales			27,678				27,776				(98	)			(0.4	)%
Services			10,686				8,678				2,008				23.1	%
Total revenues		$	38,364			$	36,454			$	1,910				5.2	%

Revenues

Revenues were $38.4 million for the three months ended June 30, 2026 compared to $36.5 million for the three months ended June 30, 2025. Overall product sales contribution was consistent when comparing these periods. In the United States, there was an increase of $6.1 million related to Repeat Precision stemming from a growing customer base and the successful commercialization of new products, partially offset by a decrease in sliding sleeve sales, as the prior year included a large sale to a multinational customer which did not recur in 2026. In Canada, fracturing systems activity was lower in 2026 than in prior year, due in part to customer delays of planned projects and the impact of customer consolidation. International product sales remained consistent with the prior year. Services revenue increased overall largely due to the contribution of ResMetrics, acquired in July 2025, which provided $2.3 million of services revenue for the quarter ended June 30, 2026, as well as an increase in fracturing systems service revenue in the United States, partially offset by declines in Canada and internationally. Overall, product sales for the three months ended June 30, 2026 totaled $27.7 million compared to $27.8 million for the three months ended June 30, 2025. Services revenue totaled $10.7 million compared to $8.7 million for the same period.

Cost of sales was $25.3 million, or 65.8% of revenues, for the three months ended June 30, 2026, compared to $24.2 million, or 66.3% of revenues, for the three months ended June 30, 2025. The modest improvement in cost of sales as a percentage of revenues year-over-year was primarily driven by the mix of products and services, including the contribution from ResMetrics. The improvement was partially offset by activities in the prior year that did not recur at the same levels in 2026, including the year-over-year decline in revenue in Canada and a reduction in higher-margin international tracer diagnostics projects in the Middle East. For the three months ended June 30, 2026, cost of product sales was $18.7 million, or 67.4% of product sales revenue, and cost of services was $6.6 million, or 61.8% of services revenue. For the three months ended June 30, 2025, cost of product sales was $18.7 million, or 67.4% of product sales revenue, and cost of services was $5.5 million, or 63.0% of services revenue.

Selling, general and administrative expenses

Selling, general and administrative expenses were $18.0 million for the three months ended June 30, 2026, compared to $13.6 million for the three months ended June 30, 2025. The increase was primarily driven by higher professional fees of $3.4 million, which includes $2.7 million of fees related to strategic acquisition activities, including the Weatherford transaction. In addition, the increase reflects incremental expenses of $0.7 million associated with ResMetrics for the quarter ended June 30, 2026.

Other income, net

Other income, net was $1.6 million for each of the three months ended June 30, 2026 and 2025, which primarily includes royalty income from licensees.

Foreign currency exchange (loss) gain, net

Foreign currency exchange (loss) gain, net was $(0.3) million for the three months ended June 30, 2026 compared to $1.2 million for the three months ended June 30, 2025. The change was due to the movement in the foreign currency exchange rates during the periods, primarily the impact of the Canadian dollar relative to the U.S. dollar.

Income tax benefit

Income tax benefit was $1.4 million for the three months ended June 30, 2026 as compared to $1.0 million for the three months ended June 30, 2025. Our effective tax rate ("ETR") from continuing operations was 31.0% and (155.0%) for the three months ended June 30, 2026 and 2025, respectively. The income tax benefit for these periods relates to results generated by our businesses in the United States, Canada, and certain other foreign jurisdictions. During the second and fourth quarters of 2025, respectively, we reversed substantially all of the valuation allowance previously recorded against the deferred tax assets of our Canadian and U.S. operating subsidiaries due to sustained improvements in operating results, including a return to profitability and forecasts of future taxable income sufficient to realize the remaining deferred tax assets. Management considered a variety of positive and negative evidence which provided a basis for the conclusion that it is more likely than not that the deferred tax assets will be realized in future periods.

Results of Operations

Six Months Ended June 30, 2026Compared to Six Months Ended June 30, 2025

The following tables summarize our results of operations, gross margins and revenues by geographic area for the periods presented (dollars in thousands):

	Six Months Ended
	June 30,						Variance
	2026			2025			$			%
Revenues
Product sales	$	60,261		$	62,842		$	(2,581	)	(4.1	)%
Services		23,740			23,617			123		0.5	%
Total revenues		84,001			86,459			(2,458	)	(2.8	)%
Cost of sales
Cost of product sales, exclusive of depreciation and amortization expense shown below		37,788			38,566			(778	)	(2.0	)%
Cost of services, exclusive of depreciation and amortization expense shown below		14,095			13,040			1,055		8.1	%
Total cost of sales, exclusive of depreciation and amortization expense shown below		51,883			51,606			277		0.5	%
Selling, general and administrative expenses		33,686			29,821			3,865		13.0	%
Depreciation		2,582			2,439			143		5.9	%
Amortization		605			334			271		81.1	%
(Loss) income from operations		(4,755	)		2,259			(7,014	)	(310.5	)%
Other income (expense)
Interest expense, net		(110	)		(110	)		-		-	%
Other income, net		3,421			2,446			975		39.9	%
Foreign currency exchange (loss) gain, net		(385	)		1,198			(1,583	)	(132.1	)%
Total other income		2,926			3,534			(608	)	(17.2	)%
(Loss) income before income tax		(1,829	)		5,793			(7,622	)	(131.6	)%
Income tax benefit		(533	)		(359	)		(174	)	(48.5	)%
Net (loss) income		(1,296	)		6,152			(7,448	)	(121.1	)%
Net income attributable to non-controlling interest		3,681			1,172			2,509		214.1	%
Net (loss) income attributable to NCS Multistage Holdings, Inc.	$	(4,977	)	$	4,980		$	(9,957	)	(199.9	)%

		Six Months Ended
		June 30,								Variance
		2026				2025				$				%
Gross Margin and Gross Margin Percentage:
Cost of product sales, exclusive of depreciation and amortization expense		$	37,788			$	38,566			$	(778	)			(2.0	)%
Depreciation and amortization attributable to cost of product sales			1,151				1,008				143				14.2	%
Cost of product sales			38,939				39,574				(635	)			(1.6	)%
Product sales gross profit		$	21,322			$	23,268			$	(1,946	)			(8.4	)%
Product sales gross margin			35.4	%			37.0	%
Cost of services, exclusive of depreciation and amortization expense		$	14,095			$	13,040			$	1,055				8.1	%
Depreciation and amortization attributable to cost of services			494				436				58				13.3	%
Cost of services			14,589				13,476				1,113				8.3	%
Services gross profit		$	9,151			$	10,141			$	(990	)			(9.8	)%
Services gross margin			38.5	%			42.9	%
Total cost of sales		$	53,528			$	53,050			$	478				0.9	%
Total gross profit		$	30,473			$	33,409			$	(2,936	)			(8.8	)%
Total gross margin			36.3	%			38.6	%

		Six Months Ended
		June 30,								Variance
		2026				2025				$				%
Revenues by Geographic Area:
United States
Product sales		$	29,429			$	18,797			$	10,632				56.6	%
Services			10,175				4,187				5,988				143.0	%
Total United States			39,604				22,984				16,620				72.3	%
Canada
Product sales			25,901				39,864				(13,963	)			(35.0	)%
Services			10,724				15,823				(5,099	)			(32.2	)%
Total Canada			36,625				55,687				(19,062	)			(34.2	)%
Other Countries
Product sales			4,931				4,181				750				17.9	%
Services			2,841				3,607				(766	)			(21.2	)%
Total other countries			7,772				7,788				(16	)			(0.2	)%
Total
Product sales			60,261				62,842				(2,581	)			(4.1	)%
Services			23,740				23,617				123				0.5	%
Total revenues		$	84,001			$	86,459			$	(2,458	)			(2.8	)%

Revenues

Revenues were $84.0 million for the six months ended June 30, 2026 compared to $86.5 million for the six months ended June 30, 2025. Product sales declined year-over-year while services revenue remained stable. The overall decrease was primarily attributable to lower Canada-based revenues largely attributed to delays of planned customer activity, as well as decreased services revenue for international markets, particularly in the Middle East, due to timing of tracer diagnostics projects. Product sales revenue in the United States increased significantly, primarily due to the impact of successful field trials and new product introductions at Repeat Precision, partially offset by a decline in U.S. fracturing systems activity, as a large fracturing systems sale in the second quarter of 2025 did not recur in 2026 at the same time. Services revenue associated with tracer diagnostics increased reflecting a $4.1 million contribution in 2026 by ResMetrics, mainly offset by a decrease in activity in Canada and the timing of jobs in the Middle East and North Sea. Product sales for the six months ended June 30, 2026 totaled $60.3 million compared to $62.8 million for the six months ended June 30, 2025. Services revenue totaled $23.7 million compared to $23.6 million for the same period.

Cost of sales was $53.5 million, or 63.7% of revenues, for the six months ended June 30, 2026, compared to $53.1 million, or 61.4% of revenues, for the six months ended June 30, 2025. The increase in cost of sales as a percentage of revenues year-over-year was primarily driven by the mix of products and services and the decline in total revenue. In addition, the prior year period benefited from increased activity in Canada and higher-margin international tracer diagnostics activity in the Middle East, which did not recur at similar levels in 2026. The increase was partially offset by a favorable contribution from ResMetrics. For the six months ended June 30, 2026, cost of product sales was $38.9 million, or 64.6% of product sales revenue, and cost of services was $14.6 million, or 61.5% of services revenue. For the six months ended June 30, 2025, cost of product sales was $39.6 million, or 63.0% of product sales revenue, and cost of services was $13.5 million, or 57.1% of services revenue.

Selling, general and administrative expenses

Selling, general and administrative expenses were $33.7 million for the six months ended June 30, 2026, compared to $29.8 million for the six months ended June 30, 2025. The increase was primarily driven by higher professional fees of $3.3 million, which includes $2.8 million of fees related to strategic acquisition activities, including the Weatherford transaction. In addition, the increase reflects incremental expenses of $1.4 million associated with ResMetrics. These increases were partially offset by annual incentive bonus accruals which were $0.6 million lower in 2026, as well as lower share-based compensation expense of $0.3 million, attributable to cash settled awards remeasured at fair value based on the price of our common stock.

Amortization

Amortization totaled $0.6 million for the six months ended June 30, 2026, compared to $0.3 million for the six months ended June 30, 2025. The increase was primarily associated with an increase in amortizable intangible assets due to the ResMetrics acquisition.

Other income, net

Other income, net was $3.4 million for the six months ended June 30, 2026, compared to $2.4 million for the six months ended June 30, 2025. The year-over-year increase was primarily attributable to more royalty income from licensees and higher scrap sales.

Foreign currency exchange (loss) gain, net

Foreign currency exchange (loss) gain, net was $(0.4) million for the six months ended June 30, 2026 compared to $1.2 million for the six months ended June 30, 2025. The change was due to the movement in the foreign currency exchange rates during the periods, primarily the impact of the Canadian dollar relative to the U.S. dollar.

Income tax benefit

Income tax benefit was $0.5 million for the six months ended June 30, 2026 as compared to $0.4 million for the six months ended June 30, 2025. Our effective tax rate ("ETR") from continuing operations was 29.1% and (6.2%) for the six months ended June 30, 2026 and 2025, respectively. The income tax benefit for these periods relates to results generated by our businesses in the United States, Canada, and certain other foreign jurisdictions. During the second and fourth quarters of 2025, respectively, we reversed substantially all of the valuation allowance previously recorded against the deferred tax assets of our Canadian and U.S. operating subsidiaries due to sustained improvements in operating results, including a return to profitability and forecasts of future taxable income sufficient to realize the remaining deferred tax assets. Management considered a variety of positive and negative evidence which provided a basis for the conclusion that it is more likely than not that the deferred tax assets will be realized in future periods.

Liquidity and Capital Resources

Our primary sources of liquidity are our existing cash and cash equivalents, cash flows from operations, and potential borrowings under our secured asset-based revolving credit facility (the "ABL Facility"). As of June 30, 2026, we had cash and cash equivalents of $31.3 million, and total outstanding indebtedness of $7.5 million related to finance lease obligations. Our ABL Facility consists of an asset-based revolving credit facility in an aggregate principal amount of $35.0 million. Total borrowings available under the ABL Facility may be limited subject to a borrowing base calculated based on eligible accounts receivable and inventory, provided such eligible balances cannot include the assets of Repeat Precision. At June 30, 2026, our available borrowing base under the ABL Facility was $14.5 million, with no outstanding borrowings. As of June 30, 2026, we utilized letter of credit commitments of $0.2 million. The amount available to be drawn under the ABL Facility may decline from current levels due to reductions in our borrowing base or a springing financial covenant if our business were to be adversely impacted by a decline in market conditions. We were in compliance with our debt covenants as of June 30, 2026.

In addition, Repeat Precision's promissory note, which is a revolving credit facility with Security State Bank & Trust, Fredericksburg (the "Repeat Precision Promissory Note"), has total aggregate borrowing capacity of $2.5 million, with a maturity date in May 2027 and has no borrowings outstanding as of June 30, 2026.

We believe that our cash on hand, cash flows from operations and potential borrowings under our ABL Facility will be sufficient to fund our capital expenditure and liquidity requirements for at least the next twelve months. Our principal liquidity needs have been, and are expected to continue to be, capital expenditures, working capital, additional deposits associated with our Canadian tax reassessments (see "Note 13. Income Taxes" to the accompanying unaudited condensed consolidated financial statements for additional information regarding our Canadian tax reassessments) and costs associated with the Weatherford transaction.

In connection with the proposed merger with Weatherford, we have incurred, and will incur additional, transaction-related costs, including legal, advisory and other professional fees, which are expected to be funded through existing cash on hand and cash flows from operations.

Our capital expenditures for each of the six months ended June 30, 2026 and 2025 were $1.2 million and $0.7 million, respectively. We plan to incur approximately $1.8 million to $2.1 million in capital expenditures in total during 2026, which includes (i) upgrades to our Repeat Precision manufacturing facilities, (ii) additional research and development equipment for product development, (iii) upgrades to our tracer diagnostics deployment, sampling and laboratory equipment, and (iv) upgrades to our manufacturing and field service equipment to support North American fracturing systems and well construction businesses. Our expected 2026 capital expenditures increased slightly compared to our initial expectations primarily due to additional investments to expand Repeat Precision's manufacturing capacity in Mexico to meet increased demand.

Cash Flows

The following table provides a summary of cash flows from operating, investing and financing activities for the periods presented (in thousands):

		Six Months Ended
		June 30,
		2026				2025
Net cash (used in) provided by operating activities		$	(636	)		$	1,876
Net cash used in investing activities			(1,008	)			(474	)
Net cash used in financing activities			(3,540	)			(2,240	)
Effect of exchange rate changes on cash and cash equivalents			(223	)			330
Net change in cash and cash equivalents		$	(5,407	)		$	(508	)

Operating Activities

Net cash (used in) provided by operating activities was $(0.6) million and $1.9 million for the six months ended June 30, 2026 and 2025, respectively. The decrease in net cash provided by operating activities was primarily attributable to lower net income of $7.4 million, an increase in inventory and prepaid expenses, an increase in long-term deposits paid in connection with the Canadian tax reassessments and the timing of payments associated with incentive bonuses and cash-settled share-based awards. These decreases were partially offset by favorable working capital changes, including improved collections of trade receivables, in part resulting from a year-over-year decline in revenue, and the timing of payments for materials and components.

Investing Activities

Net cash used in investing activities was $1.0 million and $0.5 million for the six months ended June 30, 2026 and 2025, respectively, primarily reflecting an increase in investment in property and equipment partially offset by a decrease in proceeds received from the sale of property and equipment.

Financing Activities

Net cash used in financing activities was $3.5 million and $2.2 million for the six months ended June 30, 2026 and 2025. Our primary uses of funds for the six months ended June 30, 2026 and 2025 were principal payments related to our finance lease obligations totaling $1.2 million and $1.1 million, respectively, and payments of $1.1 million and $0.3 million, respectively, for treasury shares withheld to settle withholding tax requirements for equity-settled awards. In addition, during the six months ended June 30, 2026, we paid $1.3 million of contingent consideration associated with the ResMetrics acquisition. Net borrowings and repayments under the Repeat Precision Promissory Note had no relative impact on cash flows from financing activities for each of the six months ended June 30, 2026 and 2025.

Material Cash Requirements

There have been no significant changes in our material cash requirements from those disclosed in the Annual Report for the year ended December 31, 2025. See "Note 13. Income Taxes" of our unaudited condensed consolidated financial statements for further information regarding our Canada tax reassessments.

Critical Accounting Estimates

There are no material changes to our critical accounting estimates from those included in the Annual Report for the year ended December 31, 2025.

Recently Issued Accounting Pronouncements

See "Note 1. Basis of Presentation" to our unaudited condensed consolidated financial statements for a discussion of the recent accounting pronouncements issued by the Financial Accounting Standards Board.

Smaller Reporting Company Status

We are a "smaller reporting company" as defined by Rule 12b-2 under the Exchange Act, because we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $250 million as of the last business day of our most recently completed second fiscal quarter. As a smaller reporting company, we may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies, including among other things, being exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, providing only two years of audited financial statements, and providing reduced disclosure obligations regarding executive compensation.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects" and similar references to future periods, or by the inclusion of forecasts or projections. Examples of forward-looking statements include, but are not limited to, statements about the merger with Weatherford and statements we make regarding the outlook for our future business and financial performance, such as those contained in Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause our actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and the following:

●

the ability of the Company and Weatherford to satisfy the conditions to complete the proposed merger, the timing of the proposed merger, the risk that the proposed merger may not be completed, the effects of the proposed merger on our business, operations and relationships with customers, suppliers and employees, and the risk of litigation and/or enforcement proceedings arising out of the proposed merger;

●

declines in the level of oil and natural gas E&P activity in Canada, the United States and internationally;

●

oil and natural gas price fluctuations;

●

significant competition for our products and services that results in pricing pressures, reduced sales, or reduced market share;

●

inability to successfully implement our strategy of increasing sales of products and services into the U.S. and international markets;

●

loss of significant customers;

●

losses and liabilities from uninsured or underinsured business activities and litigation;

●

additional income tax liabilities and reassessments;

●

change in trade policy, including the impact of tariffs;

●

our failure to identify and consummate potential acquisitions;

●

the financial health of our customers including their ability to pay for products or services provided;

●

our inability to integrate or realize the expected benefits from acquisitions;

●

our inability to achieve suitable price increases to offset the impacts of cost inflation;

●

loss of any of our key suppliers or significant disruptions negatively impacting our supply chain;

●

risks in attracting and retaining qualified employees and key personnel;

●

risks resulting from the operations of our joint venture arrangement;

●

currency exchange rate fluctuations;

●

impact of severe weather conditions;

●

our inability to accurately predict customer demand, which may result in excess or obsolete inventory;

●

failure to comply with or changes to federal, state and local and non-U.S. laws and other regulations, including tax policies, anti-corruption and environmental regulations, guidelines and regulations for the use of explosives;

●

impairment in the carrying value of long-lived assets including goodwill;

●

system interruptions or failures, including complications with our enterprise resource planning system, cybersecurity breaches, identity theft or other disruptions that could compromise our information;

●

our inability to successfully develop and implement new technologies, products and services that align with the needs of our customers, including addressing the shift to more non-traditional energy markets as part of the energy transition and the adoption of artificial intelligence and machine learning;

●

our inability to protect and maintain critical intellectual property assets, the inability to protect our current royalty income, or the losses and liabilities from adverse decisions in intellectual property disputes;

●

loss of, or interruption to, our information and computer systems;

●

our failure to establish and maintain effective internal control over financial reporting;

●

restrictions on the availability of our customers to obtain water essential to the drilling and hydraulic fracturing processes;

●

changes in legislation or regulation governing the oil and natural gas industry, including restrictions on emissions of greenhouse gases;

●

our inability to meet regulatory requirements for use of certain chemicals by our tracer diagnostics business;

●

the reduction in our ABL Facility borrowing base or our inability to comply with the covenants in our debt agreements; and

●

our inability to obtain sufficient liquidity on reasonable terms, or at all.

For the reasons described above, as well as factors identified in "Item 1A. Risk Factors" in this Quarterly Report and the section of the Annual Report entitled "Risk Factors," we caution you against relying on any forward-looking statements. Any forward-looking statement made by us in this Quarterly Report speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.