PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)



	September 30,		December 31,		September 30,		December 31,
	2019		2018		2020		2019
Assets
Current assets
Cash and cash equivalents	$	4,518	$	25,131	$	8,635	$	11,243
Accounts receivable—trade, net of allowances of $846 and $311 at 2019 and 2018, respectively		57,826		49,984
Inventories		40,614		32,753
Accounts receivable—trade, net						14,130		41,960
Inventories, net						36,586		39,921
Prepaid expenses and other current assets		2,069		2,037		3,251		2,444
Other current receivables		5,328		4,685		10,425		5,028
Total current assets		110,355		114,590		73,027		100,596
Noncurrent assets
Property and equipment, net		33,670		32,296		24,511		32,974
Goodwill		15,222		23,112		15,222		15,222
Identifiable intangibles, net		46,146		48,985		2,689		45,248
Operating lease assets						5,634		5,071
Deposits and other assets		7,672		1,392		3,497		3,460
Deferred income taxes, net		—		9,326		65		6
Total noncurrent assets		102,710		115,111		51,618		101,981
Total assets	$	213,065	$	229,701	$	124,645	$	202,577
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable—trade	$	18,122	$	7,167	$	3,149	$	8,549
Accrued expenses		3,194		4,084		3,594		3,451
Income taxes payable		470		184		365		1,883
Current contingent consideration		—		9,963
Operating lease liabilities						1,918		2,052
Current maturities of long-term debt						1,446		1,481
Other current liabilities		5,094		1,991		2,349		2,364
Current maturities of long-term debt		1,609		2,236
Total current liabilities		28,489		25,625		12,821		19,780
Noncurrent liabilities
Long-term debt, less current maturities		14,693		23,455		4,537		11,436
Operating lease liabilities, long-term						4,364		3,487
Other long-term liabilities		4,856		1,258		1,965		1,373
Deferred income taxes, net		3,180		3,132		880		2,956
Total noncurrent liabilities		22,729		27,845		11,746		19,252
Total liabilities		51,218		53,470		24,567		39,032
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding at
September 30, 2019 and one share issued and outstanding at December 31, 2018		—		—
Common stock, $0.01 par value, 225,000,000 shares authorized, 46,904,232 shares issued
and 46,811,855 shares outstanding at September 30, 2019 and 45,100,771 shares issued
and 45,072,463 shares outstanding at December 31, 2018		469		451
September 30, 2020 and December 31, 2019						—		—
Common stock, $0.01 par value, 225,000,000 shares authorized, 47,439,214 shares issued
and 47,197,895 shares outstanding at September 30, 2020 and 46,905,782 shares issued
and 46,813,117 shares outstanding at December 31, 2019						474		469
Additional paid-in capital		421,583		411,423		430,902		424,633
Accumulated other comprehensive loss		(82,025)		(84,030)		(83,659)		(80,811)
Retained deficit		(196,852)		(166,206)		(265,198)		(199,029)
Treasury stock, at cost; 92,377 shares at September 30, 2019 and 28,308 shares
at December 31, 2018		(667)		(337)
Treasury stock, at cost; 241,319 shares at September 30, 2020 and 92,665 shares
at December 31, 2019						(809)		(652)
Total stockholders’ equity		142,508		161,301		81,710		144,610
Non-controlling interest		19,339		14,930		18,368		18,935
Total equity		161,847		176,231		100,078		163,545
Total liabilities and stockholders' equity	$	213,065	$	229,701	$	124,645	$	202,577



	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Revenues
Product sales	$	43,756	$	44,633	$	110,933	$	122,514	$	11,660	$	43,756	$	55,948	$	110,933
Services		17,017		18,058		42,458		54,261		4,652		17,017		23,646		42,458
Total revenues		60,773		62,691		153,391		176,775		16,312		60,773		79,594		153,391
Cost of sales
Cost of product sales, exclusive of depreciation and amortization expense shown below		23,796		20,275		57,032		57,600		7,874		23,796		35,191		57,032
Cost of services, exclusive of depreciation and amortization expense shown below		8,413		8,542		25,021		24,721		2,334		8,413		12,024		25,021
Total cost of sales, exclusive of depreciation and amortization expense shown below		32,209		28,817		82,053		82,321		10,208		32,209		47,215		82,053
Selling, general and administrative expenses		20,441		19,356		66,360		62,508		12,474		20,441		48,782		66,360
Depreciation		1,461		1,174		4,382		3,429		1,000		1,461		3,446		4,382
Amortization		1,153		3,255		3,451		9,859		103		1,153		1,340		3,451
Change in fair value of contingent consideration		—		(1,865)		37		(3,005)		—		—		—		37
Impairment		—		—		7,919		—		—		—		50,194		7,919
Income (loss) from operations		5,509		11,954		(10,811)		21,663
(Loss) income from operations										(7,473)		5,509		(71,383)		(10,811)
Other income (expense)
Interest expense, net		(424)		(317)		(1,497)		(1,382)		(876)		(424)		(1,622)		(1,497)
Other income, net		259		28		349		68		414		259		580		349
Foreign currency exchange loss		(131)		(688)		(678)		(399)
Foreign currency exchange loss, net										(260)		(131)		(467)		(678)
Total other expense		(296)		(977)		(1,826)		(1,713)		(722)		(296)		(1,509)		(1,826)
Income (loss) before income tax		5,213		10,977		(12,637)		19,950
(Loss) income before income tax										(8,195)		5,213		(72,892)		(12,637)
Income tax (benefit) expense		(1,396)		3,211		10,200		3,137		(3,058)		(1,396)		(9,956)		10,200
Net income (loss)		6,609		7,766		(22,837)		16,813
Net (loss) income										(5,137)		6,609		(62,936)		(22,837)
Net income attributable to non-controlling interest		2,988		1,443		7,809		3,565		726		2,988		3,233		7,809
Net income (loss) attributable to NCS Multistage Holdings, Inc.	$	3,621	$	6,323	$	(30,646)	$	13,248
Earnings (loss) per common share
Basic earnings (loss) per common share attributable to NCS Multistage Holdings, Inc.	$	0.08	$	0.14	$	(0.66)	$	0.29
Diluted earnings (loss) per common share attributable to NCS Multistage Holdings, Inc.	$	0.08	$	0.13	$	(0.66)	$	0.28
Net (loss) income attributable to NCS Multistage Holdings, Inc.									$	(5,863)	$	3,621	$	(66,169)	$	(30,646)
(Loss) earnings per common share
Basic (loss) earnings per common share attributable to NCS Multistage Holdings, Inc.									$	(0.12)	$	0.08	$	(1.40)	$	(0.66)
Diluted (loss) earnings per common share attributable to NCS Multistage Holdings, Inc.									$	(0.12)	$	0.08	$	(1.40)	$	(0.66)
Weighted average common shares outstanding
Basic		46,892		44,943		46,552		44,660		47,351		46,892		47,240		46,552
Diluted		46,921		47,404		46,552		47,254		47,351		46,921		47,240		46,552

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)


	Nine Months Ended September 30, 2019																			Three and Nine Months Ended September 30, 2020
	Preferred Stock			Common Stock			Additional Paid-In		Accumulated Other Comprehensive		Retained		Treasury Stock			Non-controlling		Total Stockholders'		Preferred Stock			Common Stock			Additional Paid-In		Accumulated Other Comprehensive		Retained		Treasury Stock			Non-controlling		Total Stockholders'
	Shares	Amount		Shares	Amount		Capital		Loss		Deficit		Shares	Amount		Interest		Equity		Shares	Amount		Shares	Amount		Capital		Loss		Deficit		Shares	Amount		Interest		Equity
Balances as of December 31, 2018	1	$	—	45,100,771	$	451	$	411,423	$	(84,030)	$	(166,206)	(28,308)	$	(337)	$	14,930	$	176,231
Balances as of December 31, 2019																				—	$	—	46,905,782	$	469	$	424,633	$	(80,811)	$	(199,029)	(92,665)	$	(652)	$	18,935	$	163,545
Share-based compensation	—		—	—		—		2,968		—		—	—		—		—		2,968	—		—	—		—		2,950		—		—	—		—		—		2,950
Net (loss) income	—		—	—		—		—		—		(11,966)	—		—		2,088		(9,878)	—		—	—		—		—		—		(51,549)	—		—		2,642		(48,907)
Distribution to noncontrolling interest	—		—	—		—		—		—		—	—		—		(600)		(600)	—		—	—		—		—		—		—	—		—		(3,050)		(3,050)
Vesting of restricted stock	—		—	168,563		2		(2)		—		—	—		—		—		—	—		—	481,996		5		(5)		—		—	—		—		—		—
Shares withheld	—		—	—		—		—		—		—	(54,529)		(309)		—		(309)	—		—	—		—		—		—		—	(137,855)		(151)		—		(151)
Proceeds from the issuance of ESPP shares	—		—	156,486		2		675		—		—	—		—		—		677
Cemblend exchangeable shares	(1)		—	1,326,935		13		(13)		—		—	—		—		—		—
Currency translation adjustment	—		—	—		—		—		1,537		—	—		—		—		1,537	—		—	—		—		—		(5,249)		—	—		—		—		(5,249)
Balances as of March 31, 2019	—	$	—	46,752,755	$	468	$	415,051	$	(82,493)	$	(178,172)	(82,837)	$	(646)	$	16,418	$	170,626
Balances as of March 31, 2020																				—	$	—	47,387,778	$	474	$	427,578	$	(86,060)	$	(250,578)	(230,520)	$	(803)	$	18,527	$	109,138
Share-based compensation																				—		—	—		—		1,722		—		—	—		—		—		1,722
Net loss																				—		—	—		—		—		—		(8,757)	—		—		(135)		(8,892)
Exercise of stock options																				—		—	13,500		—		—		—		—	—		—		—		—
Vesting of restricted stock																				—		—	13,324		—		—		—		—	—		—		—		—
Shares withheld																				—		—	—		—		—		—		—	(4,493)		(2)		—		(2)
Currency translation adjustment																				—		—	—		—		—		1,592		—	—		—		—		1,592
Balances as of June 30, 2020																				—	$	—	47,414,602	$	474	$	429,300	$	(84,468)	$	(259,335)	(235,013)	$	(805)	$	18,392	$	103,558
Share-based compensation	—		—	—		—		3,314		—		—	—		—		—		3,314	—		—	—		—		1,602		—		—	—		—		—		1,602
Net (loss) income	—		—	—		—		—		—		(22,301)	—		—		2,733		(19,568)	—		—	—		—		—		—		(5,863)	—		—		726		(5,137)
Currency translation adjustment	—		—	—		—		—		1,485		—	—		—		—		1,485
Balances as of June 30, 2019	—	$	—	46,752,755	$	468	$	418,365	$	(81,008)	$	(200,473)	(82,837)	$	(646)	$	19,151	$	155,857
Share-based compensation	—		—	—		—		2,872		—		—	—		—		—		2,872
Net income	—		—	—		—		—		—		3,621	—		—		2,988		6,609
Distribution to noncontrolling interest	—		—	—		—		—		—		—	—		—		(2,800)		(2,800)	—		—	—		—		—		—		—	—		—		(750)		(750)
Vesting of restricted stock	—		—	36,285		—		—		—		—	—		—		—		—	—		—	24,612		—		—		—		—	—		—		—		—
Shares withheld	—		—	—		—		—		—		—	(9,540)		(21)		—		(21)	—		—	—		—		—		—		—	(6,306)		(4)		—		(4)
Proceeds from the issuance of ESPP shares	—		—	115,192		1		346		—		—	—		—		—		347
Currency translation adjustment	—		—	—		—		—		(1,017)		—	—		—		—		(1,017)	—		—	—		—		—		809		—	—		—		—		809
Balances as of September 30, 2019	—	$	—	46,904,232	$	469	$	421,583	$	(82,025)	$	(196,852)	(92,377)	$	(667)	$	19,339	$	161,847
Balances as of September 30, 2020																				—	$	—	47,439,214	$	474	$	430,902	$	(83,659)	$	(265,198)	(241,319)	$	(809)	$	18,368	$	100,078


	Nine Months Ended September 30, 2018																			Three and Nine Months Ended September 30, 2019
	Preferred Stock			Common Stock			Additional Paid-In		Accumulated Other Comprehensive		Retained		Treasury Stock			Non-controlling		Total Stockholders'		Preferred Stock			Common Stock			Additional Paid-In		Accumulated Other Comprehensive		Retained		Treasury Stock			Non-controlling		Total Stockholders'
	Shares	Amount		Shares	Amount		Capital		Loss		Earnings		Shares	Amount		Interest		Equity		Shares	Amount		Shares	Amount		Capital		Loss		Deficit		Shares	Amount		Interest		Equity
Balances as of December 31, 2017	1	$	—	43,931,484	$	439	$	399,426	$	(66,707)	$	23,864	(18,348)	$	(175)	$	12,144	$	368,991
Adoption of ASC 606	—		—	—		—		—		—		247	—		—		—		247
Balances as of December 31, 2018																				1	$	—	45,100,771	$	451	$	411,423	$	(84,030)	$	(166,206)	(28,308)	$	(337)	$	14,930	$	176,231
Share-based compensation	—		—	—		—		2,374		—		—	—		—		—		2,374	—		—	—		—		2,968		—		—	—		—		—		2,968
Net income	—		—	—		—		—		—		10,978	—		—		887		11,865
Exercise of stock options	—		—	275,653		3		350		—		—	—		—		—		353
Net (loss) income																				—		—	—		—		—		—		(11,966)	—		—		2,088		(9,878)
Distribution to noncontrolling interest																				—		—	—		—		—		—		—	—		—		(600)		(600)
Vesting of restricted stock																				—		—	168,563		2		(2)		—		—	—		—		—		—
Shares withheld																				—		—	—		—		—		—		—	(54,529)		(309)		—		(309)
Proceeds from the issuance of ESPP shares																				—		—	156,486		2		675		—		—	—		—		—		677
Cemblend exchangeable shares	—		—	442,312		4		(4)		—		—	—		—		—		—	(1)		—	1,326,935		13		(13)		—		—	—		—		—		—
Currency translation adjustment	—		—	—		—		—		(6,689)		—	—		—		—		(6,689)	—		—	—		—		—		1,537		—	—		—		—		1,537
Balances as of March 31, 2018	1	$	—	44,649,449	$	446	$	402,146	$	(73,396)	$	35,089	(18,348)	$	(175)	$	13,031	$	377,141
Balances as of March 31, 2019																				—	$	—	46,752,755	$	468	$	415,051	$	(82,493)	$	(178,172)	(82,837)	$	(646)	$	16,418	$	170,626
Share-based compensation	—		—	—		—		2,958		—		—	—		—		—		2,958	—		—	—		—		3,314		—		—	—		—		—		3,314
Net (loss) income	—		—	—		—		—		—		(4,053)	—		—		1,235		(2,818)	—		—	—		—		—		—		(22,301)	—		—		2,733		(19,568)
Exercise of stock options	—		—	277,216		3		446		—		—	—		—		—		449
Currency translation adjustment	—		—	—		—		—		(4,235)		—	—		—		—		(4,235)	—		—	—		—		—		1,485		—	—		—		—		1,485
Balances as of June 30, 2018	1	$	—	44,926,665	$	449	$	405,550	$	(77,631)	$	31,036	(18,348)	$	(175)	$	14,266	$	373,495
Balances as of June 30, 2019																				—	$	—	46,752,755	$	468	$	418,365	$	(81,008)	$	(200,473)	(82,837)	$	(646)	$	19,151	$	155,857
Share-based compensation	—		—	—		—		2,865		—		—	—		—		—		2,865	—		—	—		—		2,872		—		—	—		—		—		2,872
Net income	—		—	—		—		—		—		6,323	—		—		1,443		7,766	—		—	—		—		—		—		3,621	—		—		2,988		6,609
Distribution to noncontrolling interest	—		—	—		—		—		—		—	—		—		(500)		(500)	—		—	—		—		—		—		—	—		—		(2,800)		(2,800)
Exercise of stock options	—		—	75,548		1		198		—		—	—		—		—		199
Vesting of restricted stock	—		—	36,721		—		—		—		—	—		—		—		—	—		—	36,285		—		—		—		—	—		—		—		—
Shares withheld	—		—	—		—		—		—		—	(9,960)		(162)		—		(162)	—		—	—		—		—		—		—	(9,540)		(21)		—		(21)
Proceeds from the issuance of ESPP shares																				—		—	115,192		1		346		—		—	—		—		—		347
Currency translation adjustment	—		—	—		—		—		4,371		—	—		—		—		4,371	—		—	—		—		—		(1,017)		—	—		—		—		(1,017)
Balances as of September 30, 2018	1	$	—	45,038,934	$	450	$	408,613	$	(73,260)	$	37,359	(28,308)	$	(337)	$	15,209	$	388,034
Balances as of September 30, 2019																				—	$	—	46,904,232	$	469	$	421,583	$	(82,025)	$	(196,852)	(92,377)	$	(667)	$	19,339	$	161,847

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

NCS MULTISTAGE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended

September 30,

2019

2018
Cash flows from operating activities

Net (loss) income

$
(22,837)

$
16,813
Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

7,833

13,288
Impairment

7,919

—
Amortization of deferred loan cost

236

251
Share-based compensation

9,380

8,197
Provision for inventory obsolescence

417

1,219
Deferred income tax expense (benefit)

9,281

(2,148)
Gain on sale of property and equipment

(300)

(39)
Change in fair value of contingent consideration

37

(3,005)
Provision for doubtful accounts

1,715

—
Payment of contingent consideration

(3,042)

—
Changes in operating assets and liabilities:

Accounts receivable—trade

(9,552)

(10,787)
Inventories

(8,218)

(1,529)
Prepaid expenses and other assets

723

(2,237)
Accounts payable—trade

12,272

6,959
Accrued expenses

(915)

(2,371)
Other liabilities

(805)

816
Income taxes receivable/payable

671

(17,812)
Net cash provided by operating activities

4,815

7,615
Cash flows from investing activities

Purchases of property and equipment

(4,990)

(7,352)
Purchase and development of software and technology

(251)

(2,588)
Proceeds from sales of property and equipment

816

298
Net cash used in investing activities

(4,425)

(9,642)
Cash flows from financing activities

Equipment note borrowings

835

1,001
Payments on equipment note and finance leases

(4,552)

(1,437)
Promissory note borrowings

—

5,053
Payments on promissory note

—

(8,366)
Payments on revolver

(7,000)

—
Payment of contingent consideration

(6,958)

—
Proceeds from the exercise of options for common stock

—

1,001
Treasury shares withheld

(330)

(161)
Distribution to noncontrolling interest

(3,400)

(500)
Proceeds from the issuance of ESPP shares

1,025

—
Payment of deferred loan cost related to senior secured credit facility

(871)

—
Net cash used in financing activities

(21,251)

(3,409)
Effect of exchange rate changes on cash and cash equivalents

248

(933)
Net change in cash and cash equivalents

(20,613)

(6,369)
Cash and cash equivalents beginning of period

25,131

33,809
Cash and cash equivalents end of period

$
4,518

$
27,440
Supplemental cash flow information

Cash paid for income taxes (net of refunds)

$
210

$
22,922


	Nine Months Ended
	September 30,
	2020		2019
Cash flows from operating activities
Net loss	$	(62,936)	$	(22,837)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		4,786		7,833
Impairment		50,194		7,919
Amortization of deferred loan cost		226		236
Write-off of deferred loan costs		606		—
Share-based compensation		6,477		9,380
Provision for inventory obsolescence		1,198		417
Deferred income tax (benefit) expense		(2,069)		9,281
Gain on sale of property and equipment		(514)		(300)
Change in fair value of contingent consideration		—		37
Provision for doubtful accounts		895		1,715
Payment of contingent consideration		—		(3,042)
Proceeds from note receivable		300		—
Changes in operating assets and liabilities:
Accounts receivable—trade		25,814		(9,552)
Inventories, net		1,386		(8,218)
Prepaid expenses and other assets		(2,754)		723
Accounts payable—trade		(4,555)		12,272
Accrued expenses		131		(915)
Other liabilities		1,421		(805)
Income taxes receivable/payable		(6,098)		671
Net cash provided by operating activities		14,508		4,815
Cash flows from investing activities
Purchases of property and equipment		(1,882)		(4,990)
Purchase and development of software and technology		—		(251)
Proceeds from sales of property and equipment		704		816
Net cash used in investing activities		(1,178)		(4,425)
Cash flows from financing activities
Equipment note borrowings		—		835
Payments on equipment note and finance leases		(1,268)		(4,552)
Line of credit borrowings		5,000		—
Payments on revolver		(15,000)		(7,000)
Payment of contingent consideration		—		(6,958)
Treasury shares withheld		(157)		(330)
Distribution to noncontrolling interest		(3,800)		(3,400)
Proceeds from the issuance of ESPP shares		—		1,025
Payment of deferred loan cost related to senior secured credit facility		(482)		(871)
Net cash used in financing activities		(15,707)		(21,251)
Effect of exchange rate changes on cash and cash equivalents		(231)		248
Net change in cash and cash equivalents		(2,608)		(20,613)
Cash and cash equivalents beginning of period		11,243		25,131
Cash and cash equivalents end of period	$	8,635	$	4,518
Noncash investing and financing activities
Leased assets obtained in exchange for new finance lease liabilities	$	5,102	$	1,371
Leased assets obtained in exchange for new operating lease liabilities	$	2,573	$	336
Return of vehicles under finance lease	$	(722)	$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NCS MULTISTAGE HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

Nature of Business

NCS Multistage Holdings, Inc., a Delaware corporation, through its wholly owned subsidiaries and subsidiaries for which ~~we have~~it has a controlling voting interest (collectively referred to as the “Company,” “NCS,” “we,” “our” and “us”), is primarily engaged in providing engineered products and support services for oil and natural gas well completions and field development strategies. We offer our products and services primarily to exploration and production companies for use in onshore wells. We operate through service facilities principally located in Houston ~~Midland~~ and ~~Corpus Christi,~~Odessa, Texas; Tulsa, ~~and Oklahoma City,~~ Oklahoma; Billings, Montana; Morgantown, West Virginia; Calgary, Red Deer, Grande Prairie and Estevan, Canada; Neuquén, Argentina and Stavanger, Norway.

Basis of Presentation

Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities Exchange Act of 1934, as amended, ~~(the “Exchange Act”),~~ issued by the Securities Exchange Commission (“SEC”) and have not been audited by our independent registered public accounting firm. The ~~Condensed Consolidated Balance Sheet~~condensed consolidated balance sheet at December 31, ~~2018~~2019 is derived from our audited financial statements. However, certain information and footnote disclosures required by GAAP for complete annual financial statements have been omitted or condensed as permitted by the rules and regulations of the SEC, and, therefore, these interim financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March ~~8, 2019.~~3, 2020. As NCS has the controlling voting interest in Repeat Precision, LLC (“Repeat Precision”), the other party’s ownership percentage is presented separately as a non-controlling interest. In the opinion of management, these condensed consolidated financial statements ~~which have been prepared pursuant to the rules of the SEC and GAAP for interim financial reporting,~~ reflect all ~~adjustments, which consisted only of~~ normal, recurring adjustments ~~that were~~ necessary for a fair statement of the interim periods presented. The results of operations for interim periods are not necessarily indicative of those for a full year. Certain reclassifications have been made to conform 2019 balances to our 2020 presentation on the condensed consolidated balance sheets. All intercompany accounts and transactions have been eliminated for purposes of preparing these condensed consolidated financial statements.

~~Summary of New Significant Accounting Policy~~

~~Inventories~~

Inventories consist primarily of raw material, product components, assembled products, certain components used to internally construct our frac isolation assemblies and chemicals, in raw material or finished goods, used in our tracer diagnostics services. Inventories are stated at the lower of cost or estimated net realizable value. Cost is determined at standard costs approximating the first-in first-out basis. We continuously evaluate inventories, based on an analysis of inventory levels, historical sales experience and future sales forecasts, to determine obsolete, slow-moving and excess inventory. Adjustments to reduce such inventory to its estimated recoverable value have been recorded as an adjustment to cost of sales.

Recent Accounting Pronouncements

~~Pronouncement~~Pronouncements Adopted in ~~2019~~

~~In February 2016, the FASB issued Accounting Standards Update (“ASU”)No. 2016-02,Leases(Topic 842)~~, which requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability for all leases with terms longer than 12 months. Under the new standard, lessees need to recognize leases on their balance sheets as lease liabilities with corresponding ROU assets. We adopted the standard effective January 1, 2019, using a modified retrospective transition method and applying certain optional practical expedients. NCS elected an optional transition method that allowed application of the new standard at the adoption date and the recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption with no adjustment to previously reported results. We also elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the carry forward of historical lease classification as well as additional practical expedients related to land easements, short-term leases, and non-lease components. We did not elect the practical expedient related to hindsight. The standard had a material impact on our condensed consolidated balance sheet but did not materially impact our condensed consolidated statements of operations or condensed consolidated statements of cash flows. Adoption of the new standard resulted in the recording of ROU assets and lease liabilities of $7.5 million on January 1, 2019. See “Note 8. Leases” for more information.

~~Table of Contents~~

~~NCS MULTISTAGE HOLDINGS, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Pronouncements Not Yet Effective~~2020

In August 2018, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) No. 2018-15, ~~Intangibles-Goodwill~~Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40). The ASU aligns the requirements to capitalize implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements to capitalize implementation costs incurred to develop or obtain internal-use software. For public entities, this guidance isbecame effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption iswas permitted, including adoption in any interim period. We ~~are currently evaluating the~~adopted ASU No. 2018-15 on a prospective basis on January 1, 2020, with no material impact ~~of the adoption of this guidance.~~on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). The ASU modifies, removes and adds certain disclosure requirements on fair value measurements. For public entities, this guidance isbecame effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption iswas permitted for all amendments. ~~Further,~~Alternatively, entities ~~may early adopt~~could early-adopt certain eliminated or modified disclosure requirements and delay the adoption of all new disclosure requirements until the effective date. We adopted ASU No. 2018-13 on January 1, 2020, with no material impact on our condensed consolidated financial statements.

Pronouncements Not Yet Effective

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848). The ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or other interest rates used globally that could be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact of the adoption of this guidance.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU No. 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance ~~but do not~~to improve consistent application. For public

Table of Contents

NCS MULTISTAGE HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

entities, this guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years.We are currently ~~expect that~~evaluating the impact of the adoption of this ~~guidance will have a material impact on our consolidated financial statements.~~guidance.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326). This ASU introduces a new impairment model that is based on expected credit losses rather than incurred credit losses for financial instruments, including trade accounts receivable. It requires an entity to measure expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The new standard iswas to become effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. ~~On October 16,~~In November 2019, the FASB ~~affirmed its decision on amendments to~~issued ASU No. 2019-10, which deferred the effective dates for certain ~~ASUs.~~accounting guidance (ASUs). The effective date for ASU No. 2016-13 will remain the same for public business entities that are SEC filers, ~~excluding~~except for entities ~~eligible to be small~~who are deemed smaller reporting companies (“SRC”). The effective date for all other entities, including SRCs, will begin after December 15, 2022 ~~including~~and interim periods within those fiscal years. ~~The FASB expects the final ASU on effective dates will be issued in mid-November 2019.~~NCS qualifies as a SRC. We are currently evaluating the impact of the adoption of this guidance.

Note 2. Revenues

Disaggregation of Revenue

We sell our products and services primarily in North America and in selected international markets. Revenue by geography is attributed based on the current billing address of the customer. The following table depicts the disaggregation of revenue by geographic region (in thousands):

��


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2019		2018		2019		2018		2020		2019		2020		2019
United States
Product sales	$	21,639	$	18,125	$	62,272	$	48,011	$	8,192	$	21,639	$	29,319	$	62,272
Services		6,915		8,157		18,370		27,976		1,143		6,915		5,588		18,370
Total United States		28,554		26,282		80,642		75,987		9,335		28,554		34,907		80,642
Canada
Product sales		18,531		21,215		43,953		67,653		2,762		18,531		24,740		43,953
Services		7,590		7,958		18,670		22,567		931		7,590		9,819		18,670
Total Canada		26,121		29,173		62,623		90,220		3,693		26,121		34,559		62,623
Other Countries
Product sales		3,586		5,293		4,708		6,850		706		3,586		1,889		4,708
Services		2,512		1,943		5,418		3,718		2,578		2,512		8,239		5,418
Total Other Countries		6,098		7,236		10,126		10,568		3,284		6,098		10,128		10,126
Total
Product sales		43,756		44,633		110,933		122,514		11,660		43,756		55,948		110,933
Services		17,017		18,058		42,458		54,261		4,652		17,017		23,646		42,458
Total revenues	$	60,773	$	62,691	$	153,391	$	176,775	$	16,312	$	60,773	$	79,594	$	153,391

When the timing of the delivery of products and provision of services is different from the timing of the customer payments, we recognize either a contract asset (performance precedes contractual due date in connection with estimates of variable consideration) or a contract liability (customer payment precedes performance) on our condensed consolidated balance sheet. We currently do not have any contract ~~assets.~~assets or non-current contract liabilities. The following table includes the current contract liabilities as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 (in thousands):

Our contract liability as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 is included in current liabilities on our condensed consolidated balance sheet. Our performance obligations for our product and service revenues are satisfied before the customer’s payment however prepayments may occasionally be required for international sales. Revenue recognized from the contract liability balance was ~~$31~~$8 thousand and ~~$0.1 million for the three months ended September 30, 2019 and 2018, respectively, and~~ $0.6 ~~million and $0.2~~ million for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively.

We do not disclose the value of unsatisfied performance obligations when the related contract has a duration of one year or less or we recognize revenue equal to what we have the right to invoice when that amount corresponds directly with the value to the customer of our performance to date.

Inventories consist of the following as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 (in thousands):

Other current receivables consist of the following as of September 30, 2020 and December 31, 2019 (in thousands):

Employee receivables relate primarily to amounts paid by us for foreign withholding tax paid on behalf of employees working on international assignments, which is expected to be reimbursed to us by the employees when refunded as foreign tax credits on home-country tax returns.

Property and equipment by major asset class consist of the following as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 (in thousands):

In May 2020, we commenced a finance lease for land and a building in Odessa, Texas and recorded a long-term asset totaling $4.0 million and a corresponding lease liability. The lease has a ten-year term with two renewal periods available for an additional five years each.

We also maintain a vehicle leasing arrangement with a fleet management company in order to lease light vehicles and trucks that meet the criteria to record as finance leases. Due to unfavorable market conditions during 2020 associated primarily with theCoronavirus disease 2019 (“COVID-19”) pandemic, we returned many of these vehicles to the fleet management company for sale. During the nine months ended September 30, 2020, we retired lease vehicles with a historical cost of $2.9 million and accumulated depreciation of $1.8 million, or a net book value of $1.1 million, and an outstanding lease obligation totaling $0.7 million. The fleet management company sold the vehicles and we were entitled to proceeds of $1.0 million, of which we have received $0.7 million as of September 30, 2020. The surrender of the assets for sale and the retirement of the related lease obligations of $0.7 million has been included as a non-cash investing and financing activity in the accompanying condensed consolidated statements of cash flows for the nine months ended September 30, 2020.

The following table presents the depreciation expense associated with the following income statement line items for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):

We evaluate our property and equipment for impairment whenever changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. We performed an impairment analysis to assess the recoverability of the carrying values for our property and equipment during the first quarter of 2020 because we determined that a triggering event had occurred. Evidence that led to a triggering event included the industry conditions, such as a reduction in global economic growth expectations, a significantly reduced demand for crude oil and refined products, the significant decline in commodity prices and the corresponding impact on future expectations of demand for our products and services primarily related to the COVID-19 pandemic as well as the resulting decline in the quoted price of our common stock. As a result of the analysis, we recorded an impairment charge of $9.7 million in our property and equipment, primarily related to our land, building and improvements and machinery and equipment, because the carrying value exceeded the estimated fair value as of March 31, 2020. We did not identify any triggering events after March 31, 2020 through September 30, 2020 that required further impairment testing. Therefore, we have not recorded any impairment charges since March 31, 2020. No impairment charges were recorded for the three and nine months ended September 30, 2019.

We perform our annual impairment ~~tests~~analysis of goodwill as of December 31, or when there is an indication an impairment may have occurred.

~~On December~~ As of March 31, ~~2018,~~2020, we performed ~~our annual~~a quantitative impairment ~~test~~analysis for goodwill ~~on each~~utilizing a market participant perspective and determined that the fair value exceeded the carrying value of our three reporting units. As a result of unfavorable oil and gas industry market conditions in late 2018 that continued to persist into 2019 and the related impact on expected customer activity levels, particularly in Canada, as well as a decline in the quoted price of our common stock, we concluded that there had been an impairment because the carrying values exceeded the estimated fair values. We recorded impairment charges in the fourth quarter of 2018 in two reporting units, totaling $154.0 million. As a result of the impairment loss, we have no remaining goodwill in the fracturing systems and well construction reporting unit. During the second and third quarters of 2020, we did not identify any triggering events indicating potential impairment of goodwill. Accordingly, there was no impairment charge recorded for goodwill for the three and nine months ended September 30, 2020.

During the second quarter of 2019, we performed an impairment ~~test~~analysis for ~~goodwill and determined that the carrying value~~ goodwill. Evidence of ~~one~~an indication of ~~our reporting units exceeded its fair~~ ~~value. We recorded an~~ impairment ~~charge of $7.9 million for our tracer diagnostic services reporting unit as a result of a~~included further deterioration in customer activity levels in North ~~America. This~~America, which resulted in lower demand for oilfield services driving a decrease in our market share and increased customer and competitor-driven pricing pressures in addition to a decline in the quoted price of our common stock. We determined that the carrying value of one of our reporting units exceeded its fair value and we recorded an impairment charge of $7.9 million for our tracer diagnostic services reporting unit. Following the impairment, our tracer ~~diagnostic services reporting unit has no remaining goodwill balance.~~

~~There was no impairment recorded at any reporting unit for the three months ended September 30, 2019, and no impairment recorded in~~ ~~any other reporting unit for the nine months ended September 30, 2019.~~

diagnostic services reporting unit had no remaining goodwill balance as of June 30, 2019. There was no indication an impairment may have occurred in any other reporting unit for the three and nine months ended September 30, 2019.

Identifiable intangibles by major asset class consist of the following (in thousands):

Total amortization expense, which is associated with the selling, general and administrative expenses on the condensed consolidated statements of operations ~~income statement line item,~~, was ~~$1.2~~$0.1 million and ~~$3.3~~$1.2 million for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$3.5~~$1.3 million and ~~$9.9~~$3.5 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

Identifiable intangibles with definite lives are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. On ~~December~~March 31, ~~2018, as~~2020, we evaluated our finite-lived intangible assets for impairment due to current industry conditions including a ~~result of unfavorable~~reduction in global economic growth expectations, a significantly reduced demand for crude oil and ~~gas industry market conditions~~refined products, the significant decline in ~~late 2018 that continued to persist into early 2019~~commodity prices and the ~~related~~corresponding impact on ~~expected customer activity levels, particularly in Canada,~~future expectations of demand for our products and services primarily related to the COVID-19 pandemic as well as athe resulting decline in the quoted price of our common ~~stock,~~stock. As a result of the analysis, we determined that the carrying values of certain intangible assets were no longer recoverable, which resulted in an impairment charge of ~~$73.5~~$11.9 million in ~~our~~the asset group that includes fracturing systems and well construction ~~which we~~related to technology and internally-developed software and an impairment charge of $28.6 million in our tracer diagnostics asset group related to customer relationships, technology, internally developed software and trademarks, each recorded on March 31, 2020. Following the impairment charges in the ~~fourth~~first quarter of ~~2018. There~~2020, we had no remaining identifiable intangible balances in the asset group that includes our fracturing systems and well construction or our tracer diagnostics asset group. There were no ~~impairments~~impairment charges recorded for our identifiable intangibles for the three ~~and nine~~ months ended September 30, 2020 and 2019.

Accrued expenses consist of the following as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 (in thousands):

Our long-term debt consists of the following as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 (in thousands):

The estimated fair value of total debt ~~for the periods ended~~as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 was ~~$15.8~~$5.4 million and ~~$25.3~~$12.5 million, respectively. The carrying value of the senior secured revolving credit facility and the lines of credit approximated the fair value of debt ~~as they~~at December 31, 2019 since these facilities have variable interest rates and can be paid at any time. The fair value for the remaining debt was estimated using Level 2 inputs by calculating the sum of the discounted future interest and principal payments through the date of maturity.

Below is a description of our ~~prior and new~~ credit ~~agreements~~agreement and other financing arrangements.

On May 4, 2017, we entered into a credit agreement (the “Prior Credit Agreement”) with a group of financial institutions which originally consisted of a (i) senior secured revolving credit facility (the “Prior U.S. Facility”) in an aggregate principal amount of $25.0 million made available to Pioneer Investment, Inc. (the “U.S. Borrower”), of which up to $5.0 million was available for letters of credit and up to $5.0 million was available for swingline loans and (ii) senior secured revolving credit facility (the “Prior Canadian Facility”) (together, the “Prior Senior Secured Credit Facility”) in an aggregate principal amount of $25.0 million made available to NCS Multistage Inc. (the “Canadian Borrower”).

We entered into Amendment No. 1 to the Prior Credit Agreement on August 31, 2017, which increased the loan commitment available to the U.S. Borrower to $50.0 million from $25.0 million under the Prior U.S. Facility. The loan commitment available under the Prior Canadian Facility remained at $25.0 million. ~~On February 16,~~ ~~2018 and October 9, 2018, we entered into Amendments No.2 and No. 3, respectively, to the Prior Credit Agreement, which amended certain negative covenants contained in the Prior Credit Agreement.~~ ~~As of December 31, 2018, we had $20.0 million in outstanding indebtedness under the Prior U.S. Facility and no outstanding indebtedness under the Prior Canadian Facility.~~

~~Borrowings under the Prior U.S. Facility were available in U.S. dollars, Canadian dollars or Euros and had an interest rate~~ ~~equal to the~~ ~~Adjusted~~ Base Rate or Eurocurrency Rate (each as defined in the Prior Credit Agreement), in each case, plus an applicable interest margin as set forth in the Prior Credit Agreement. Borrowings under the Prior Canadian Facility were available in U.S. dollars or Canadian dollars and accrued interest at the Canadian (Cdn) Base Rate, Canadian (U.S.) Base Rate, Eurocurrency Rate or Discount Rate (each as defined in the Prior Credit Agreement), in each case, plus an applicable interest margin as set forth in the Prior Credit Agreement. The Adjusted Base Rate, Canadian (U.S.) Base Rate and Canadian (Cdn) Base Rate applicable margin could have been between 2.25% and 3.00% and the Eurocurrency Rate applicable margin could have been between 3.25% and 4.00%, in each case, depending on the Company’s leverage ratio.

We incurred interest expense related to the Prior Senior Secured Credit Facility, including commitment fees, of $0.5 million and $0.9 million for the nine months ended September 30, 2019 and 2018, respectively.

The obligations of the U.S. Borrower under the Prior U.S. Facility were guaranteed by Pioneer Intermediate, Inc. and the Company (together, the “Parent Guarantors”) and each of the other existing and future direct and indirect restricted subsidiaries of the Company organized under the laws of the United States (subject to certain exceptions) and were secured by substantially all of the assets of the Parent Guarantors, the U.S. Borrower and such other subsidiary guarantors, in each case, subject to certain exceptions and permitted liens. The obligations of the Canadian Borrower under the Prior Canadian Facility were guaranteed by the Parent Guarantors, the U.S. Borrower and each of the future direct and indirect restricted subsidiaries of the Company organized under the laws of the United States and Canada (subject to certain exceptions) and were secured by substantially all of the assets of the Parent

~~Guarantors, the U.S. Borrower, the Canadian Borrower and such subsidiary guarantors, in each case, subject to certain exceptions and permitted liens.~~

~~Direct costs of $1.0 million were incurred in connection with the~~ Prior Senior Secured Credit Facility. The costs were capitalized as an asset as they represented the benefit of being able to access capital over the contractual term. The costs were amortized over the term of the Prior Senior Secured Credit Facility using the straight-line method. As a result of our New Credit Agreement (as defined below), which was a modification of our revolving credit facility, unamortized deferred costs of $0.3 million related to the Prior Senior Secured Credit Facility were deferred and are being amortized over the term of the new arrangement.

~~On May 1, 2019, we entered into a new Second Amended and Restated Credit Agreement (the “New Credit Agreement”) amending and restating the Prior Credit Agreement.~~

On May 1, 2019, we entered into ~~the New~~a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with Pioneer Investment, Inc., as ~~U.S.~~ borrower (the “U.S. Borrower”), NCS Multistage Inc., as ~~Canadian~~ borrower (the “Canadian Borrower”, together with the U.S. Borrower, the “Borrowers”), Pioneer Intermediate, Inc. (together with the Company, the “Parent Guarantors”) and the lenders party thereto, Wells Fargo Bank, National Association as administrative agent in respect of the ~~New~~ U.S. Facility (as defined below) and Wells Fargo Bank, National Association, Canadian Branch, as administrative agent in respect of the ~~New~~ Canadian Facility (as defined below) (the senior secured revolving credit facilities provided thereunder, the ~~“New Senior~~“Senior Secured Credit Facility”). The ~~New~~ Credit Agreement amended and restated ~~the Prior Credit Agreement~~our prior credit agreement in its entirety.

On August 6, 2020, we entered into Amendment No. 1 (the “Amendment”) to the Credit Agreement (as amended by the Amendment, the “Amended Credit Agreement”) with Pioneer Investment, Inc., as borrower, NCS Multistage Inc., as borrower, Pioneer Intermediate, Inc., certain subsidiaries of the Borrowers, the lenders party thereto, Wells Fargo Bank, National Association as administrative agent in respect of the U.S. Facility and Wells Fargo Bank, National Association, Canadian Branch, as administrative agent in respect of the Canadian Facility (the U.S. Facility and the Canadian Facility, collectively, the “Facilities”).

The ~~New Senior Secured~~Amendment (i) reduced the U.S. Commitments (as defined in the Amended Credit ~~Facility consists of a (i) senior secured revolving credit facility in an aggregate principal amount of~~Agreement) from $50.0 million ~~made available~~ to ~~the U.S. Borrower (the “New U.S. Facility”),~~$25.0 million, of which up to ~~$5.0~~$2.5 million may be made available for letters of credit and up to ~~$5.0~~$2.5 million may be made available for swingline loans and (ii) ~~senior secured revolving credit facility~~reduced the Canadian Commitments (as defined in ~~an aggregate principal amount of~~the Amended Credit Agreement) from $25.0 million ~~made available~~ to ~~the~~$0. The Canadian Borrower ~~(the “New Canadian Facility”).~~may make borrowings under the U.S. Facility, subject to a $15.0 million sublimit. The ~~New~~Amendment also limits total outstanding credit exposure of the lenders under the Facilities to a borrowing base calculated based on eligible receivables. Our borrowing base under the Senior Secured Credit Facility ~~will mature on~~as of September 30, 2020 was $4.2 million. The maturity date of the Amended Credit Agreement remains May 1, 2023. We repaid the $15.0 million outstanding under the Senior Secured Credit Facility in connection with the Amendment. As of September 30, ~~2019,~~2020, we had ~~$13.0 million in outstanding indebtedness under the New U.S. Facility and~~ no outstanding indebtedness under the ~~New Canadian~~Senior Secured Credit Facility.

Borrowings under the ~~New U.S.~~Senior Secured Credit Facility may be made in U.S. dollars for Adjusted Base Rate Advances, and in U.S. dollars, Canadian dollars or Euros for Eurocurrency Rate Advances (each as defined in the ~~New~~Amended Credit Agreement). Such advances bear interest at the Adjusted Base Rate or at the Eurocurrency Rate (each as defined in the Amended Credit Agreement)plus an applicable interest margin ~~as set forth in the New Credit Agreement. Borrowings under the New Canadian Facility may be made in U.S. dollars or Canadian dollars~~between 2.75% and ~~bear interest at the Canadian (Cdn) Base Rate, Canadian (U.S.) Base Rate, Eurocurrency Rate or Discount Rate (each as defined in the New Credit Agreement)~~3.75%, ~~in each case, plus an applicable interest margin as set forth in the New Credit Agreement.~~depending on our leverage ratio. The applicable interest rate at September 30, ~~2019~~2020 was ~~5.125%.~~4.375% on the Senior Secured Credit Facility. We incurred interest expense related to the ~~New~~ Senior Secured Credit Facility, including commitment fees, of $0.1 million and $0.3 million for the three months ended September 30, 2020 and 2019, respectively, and $0.6 million and $0.5 million for the ~~three and~~ nine months ended September 30, 2020 and 2019, respectively.

~~The~~Pursuant to amended guaranty and security documents entered into concurrently with the Amendment, the obligations of the ~~U.S. Borrower~~Borrowers under the ~~New U.S.~~Senior Secured Credit Facility are guaranteed by the Parent Guarantors, ~~and~~as well as each of the other existing and future direct and indirect restricted subsidiaries of ~~the Company~~NCS organized under the laws of the United States and Canada (subject to certain

exceptions), and are secured by substantially all of the assets of the Parent Guarantors, the U.S. Borrower and such other subsidiary guarantors, in each case, subject to certain exceptions and permitted liens. The obligations of the Canadian Borrower under the New Canadian Facility are guaranteed by the Parent Guarantors, the U.S. Borrower and each of the other future direct and indirect restricted subsidiaries of the Company organized under the laws of the United States and Canada (subject to certain exceptions) and are secured by substantially all of the assets of the Parent Guarantors, the U.S. Borrower, the Canadian BorrowerBorrowers and such other subsidiary guarantors, in each case, subject to certain exceptions and permitted liens.

~~The New~~Prior to giving effect to the Amendment, the Credit Agreement ~~contains~~contained financial covenants that ~~require~~required (i) commencing with the fiscal quarter ending June 30, 2019, compliance with a maximum leverage ratio test set at 2.50 to 1.00 as of the last day of each fiscal quarter, (ii) commencing with the fiscal quarter ending June 30, 2019, compliance with an interest coverage ratio test set at not more than 2.75 to 1.00 as of the last day of each fiscal quarter, (iii) if the leverage ratio as of the end of any fiscal quarter is greater than 2.00 to 1.00 and the amount outstanding under the ~~New~~ Canadian Facility at any time during such fiscal quarter was greater than $0, compliance as of the end of such fiscal quarter with a Canadian asset coverage ratio test of at least 1.00 to 1.00 and (iv) if the leverage ratio as of the end of any fiscal quarter is greater than 2.00 to 1.00 and the amount outstanding under the ~~New U.S.~~Senior Secured Credit Facility at any time during such fiscal quarter was greater than $0, compliance as of the end of such fiscal quarter with a U.S. asset coverage ratio test of at least 1.00 to 1.00. Pursuant to the Amendment, we are no longer required to comply with the foregoing financial covenants.

Pursuant to the Amendment, the Amended Credit Agreement now requires us to (i) maintain liquidity (defined as availability under the Senior Secured Credit Facility plus certain cash deposits) of at least $7.5 million as of the date of each borrowing base certificate due to be delivered either monthly (if availability is greater than or equal to than 12%) or weekly (if availability is less than 12%) thereunder, (ii) maintain, for quarters during which availability is less than 20% of the borrowing base, a fixed charge coverage of at least 1.0 to 1.0 and (iii) on the last business day of each week, prepay advances to the extent that available cash exceeds $12.0 million. As of September 30, ~~2019,~~2020, we were in compliance with these financial covenants. The ~~New Credit Agreement~~ Amendment also ~~contains customary affirmative and negative covenants, including, among other things, restrictions~~narrowed or eliminated several exceptions to prohibitions on the creation of liens, the incurrence of indebtedness, the making of investments ~~dividends~~and restricted payments and other ~~restricted payments, dispositions~~negative covenants, rendering these covenants generally more restrictive. The Amendment reduced the dollar thresholds above which certain cross-defaults and ~~transactions with affiliates.~~adverse employee benefit plan events constitute events of default. The Amendment added a new event of default if the indebtedness of Repeat Precision exceeds $10.0 million. ~~New~~

The Amended Credit Agreement~~also~~ includes customary events of default for facilities of this type (with customary materiality thresholds and grace periods, as applicable). If an

event of default occurs, the lenders ~~under each of~~party to the ~~New U.S. Facility and the New Canadian Facility~~Amended Credit Agreement may elect (after the expiration of any applicable notice or grace periods) to declare all outstanding borrowings under such facility, together with accrued and unpaid interest and other amounts payable thereunder, to be immediately due and payable. The lenders ~~under each of~~party to the ~~New U.S. Facility and the New Canadian Facility~~Amended Credit Agreement also have the right upon an event of default thereunder to terminate any commitments they have to provide further borrowings ~~under such facility. Further, following an event of default under each of the New U.S. Facility~~ and ~~the New Canadian Facility, the lenders thereunder will have the right~~ to proceed against the collateral ~~granted to them to secure such facility~~securing the Senior Secured Credit Facility.

We believe that our cash on hand, cash flows from operations and potential borrowings under our Senior Secured Credit Facility will be sufficient to fund our capital expenditures and liquidity requirements for the next twelve months. However, if the depressed market conditions, including reduced demand for oil, lower customer spending and the resulting low level of demand for our products and services continue, it will have a material negative impact on our financial performance. We can make no assurances that the current actions taken by us will provide us with enough liquidity in the future if the current economic environment worsens.

Direct costs of $0.9 million were incurred in 2019 in connection with the ~~New~~ Senior Secured Credit ~~Facility.~~Facility in addition to $0.3 million of unamortized deferred costs related to the modification of the prior senior secured credit facility. The costs were capitalized as an asset as they represent the benefit of being able to access capital over the contractual ~~term. Additionally, $0.3 million of unamortized deferred costs related to the Prior Senior Secured Credit Facility are also~~term and were being amortized over the term of the ~~New~~ Senior Secured Credit Facility using the straight-line method. The Amendment reduced the overall potential capacity under the Amended Credit Agreement from $75.0 million to $25.0 million. Therefore, we expensed $0.6 million of deferred loan costs during the third quarter of 2020, which was commensurate with the reduction in potential capacity. We recorded new deferred loan costs associated with the Amendment totaling $0.6 million, which have been capitalized and will be amortized over the remaining term of the facility. Amortization expense of the deferred financing charges of $0.1 million was included in interest expense, net for each of the three months ended September 30, 2020 and 2019, respectively, and $0.2 million and $0.1 million for the nine months ended September 30, ~~2019.~~2020 and 2019, respectively.

On February 27, 2017, Repeat Precision ~~LLC (“Repeat Precision”)~~ entered into a promissory note with Security State Bank & Trust, Fredericksburg, for an aggregate borrowing capacity of $3.8 million. ItThe note bears interest at a variable interest rate based on prime plus 1.00%. The promissory note is ~~secured against~~collateralized by certain equipment, inventory and receivables. The promissory note was renewed on February 16, 2018 for an aggregate borrowing capacity of $4.3 million and was renewed again on February ~~15, 2019.~~14, 2020. The note is scheduled to mature on February ~~16, 2020.~~14, 2021. No other terms were changed. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had no outstanding indebtedness under the promissory note.

In February 2017, Repeat Precision entered into an equipment note in the amount of $0.8 million with Security State Bank & Trust, Fredericksburg. The equipment note bears interest at prime plus 1.00%, matures on February 27, 2021 and is collateralized by certain property. During the first quarter of 2019, the equipment note was paid in full and we had no outstanding indebtedness under the equipment note as of September 30, 2019. As of December 31, 2018, the outstanding balance on the equipment note was $0.4 million.

In September 2018, Repeat Precision entered into an equipment note for an aggregate borrowing capacity of $3.8 million with Security State Bank & Trust, Fredericksburg. The equipment note bears interest at prime plus 1.00%, matures on June 7, 2023 and is collateralized by certain property. As of September 30, 2019, we had no outstanding indebtedness under the equipment note. At December 31, 2018, the outstanding balance on the equipment note was $2.0 million.

We determine if a contract contains a lease at the inception of an arrangement. If so, ROU assets representing the right to use an underlying asset for the lease term and lease liabilities representing an obligation to make lease payments arising from the lease are included on the condensed consolidated balance sheet.

We have operating and finance leases for facilities, vehicles, and equipment. Some leases include one or more options to renew, with renewal terms that can extend the lease term from five to ten years with exercise of lease renewal options being at the sole discretion of NCS as lessee. Certain leases also include options to purchase the leased property. Some leases may include an option to terminate the contract with notice. ROU assets and lease liabilities with a term of longer than 12 months are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, our interest rate under the senior secured credit facility is used as an incremental borrowing rate applied to the present value calculation at the lease commencement date unless the implicit rate is readily determinable. Lease expense for operating leases is recognized on a straight-line basis over the lease term. At adoption, ROU assets included any lease payments already made and excluded any initial direct costs.

Our lease agreements are from a lessee perspective and do not contain (i) any leases with variable lease payments (e.g., payments that depend on a percentage of sales of a lessee or payments that increase based upon an index such as a consumer price index), (ii) residual value guarantees probable of being paid or (iii) material restrictive covenants. Lease agreements with lease and non-lease components are generally accounted for separately when practical. For leases where the lease and non-lease component are comingled and the non-lease component is determined to be insignificant when compared to the lease component, the lease and non-lease components are treated as a single lease component for all asset classes.

On April 30, 2020, Repeat Precision entered into a promissory note with Security State Bank & Trust, Fredericksburg, for an aggregate borrowing capacity of $5.0 million. The note bears interest at a variable interest rate based on prime plus 1.00%. The promissory note is collateralized by certain equipment and inventory. The note is scheduled to mature on April 30, 2021. As of September 30, ~~2019,~~2020, we ~~do not have any lessor leases. We do have additional operating leases that have not yet commenced in~~had no outstanding indebtedness under the ~~amount of $8.6 million.~~

~~Supplemental balance sheet information related to leases are as follows (in thousands):~~

~~Supplemental cash flow and other information related to leases are as follows (in thousands):~~

~~Future annual commitments at December 31, 2018 under ASC 840 are as follows:~~

In the ordinary course of our business, from time to time, we have various claims, lawsuits and administrative proceedings that are pending or threatened with respect to commercial, intellectual property and employee matters.

On July 24, 2018, we filed a patent infringement lawsuit against Kobold Corporation, Kobold Completions Inc. and 2039974 Alberta Ltd. (“Kobold”) in the Federal Court of Canada, alleging that Kobold’s fracturing tools and methods infringe on several of our Canadian patents. We previously filed a breach of contract lawsuit on March 16, 2018, against Kobold Corporation in the Court of Queen’s Bench of Alberta, alleging breach of a prior settlement agreement. Both of these lawsuits seek unspecified monetary damages and injunctive relief. On July 12, 2019, Kobold filed a counterclaim seeking unspecified damages alleging that our fracturing tools and methods infringe on their patent and that we made false and misleading statements about Kobold.

~~In early February 2019, we filed a lawsuit against Diamondback Industries, Inc. (“Diamondback”) in~~On April 3, 2020, the United States District Court for the Western District of Texas, Waco Division ~~alleging~~(“District Court”) issued a final judgment in connection with the litigation with Diamondback Industries, Inc (“Diamondback”) awarding Repeat Precision approximately $39.9 million (the “Award”) plus attorneys’ fees in connection with its breach of exclusive license, patent infringement ~~breach~~and tortious interference claims. In its ruling, the District Court validated the terms of ~~contract and related claims stemming from Diamondback’s breach of an exclusive license, granted by Diamondback to~~ Repeat Precision, to a patent necessary for the manufacture and sale of a disposable setting tool. Around the same time, Diamondback filed a lawsuit against Repeat Precision and various NCS entities in an effort to invalidate thePrecision’s exclusive license agreement with respect to the setting tool technology practicing U.S. Patent No. 9,810,035 (the “’035 Patent’) and ~~requested monetary damages. We believe~~enjoined Diamondback from selling its infringing SS line of setting tools. The judgment remains subject to appeal and, on April 21, 2020, Diamondback filed for Chapter 11 bankruptcy protection which stays any collection efforts. As of September 30, 2020, we have not recorded any amount in our condensed consolidated financial statements related to this gain contingency. In April 2020, we received $1.1 million of proceeds from our directors and officers liability insurance related to the ~~exclusive license is enforceable~~reimbursement of legal expenses that we incurred to defend a director and ~~there is no basis to support~~officer in the ~~claims asserted by~~ Diamondback litigation, which was recordedin the condensed consolidated statements of operations under general and ~~we intend to vigorously enforce our rights under~~administrative expenses for the ~~license agreement.~~

In accordance with GAAP, we accrue for contingencies where the occurrence of a material loss is probable and can be reasonably estimated, based on our estimate of the expected liability. If we have any outstanding legal accruals, we may increase or decrease these in the future, on a matter-by-matter basis, to account for developments. Our assessment of the likely outcome of litigation matters is based on our judgment of a number of factors, including experience with similar matters, past history, precedents, relevant financial information and other evidence and facts specific to the matter. While the outcome of any legal proceeding cannot be predicted with any certainty, based on a consideration of relevant facts and circumstances, our management currently does not expect that the results of these legal proceedings would have a material adverse effect on our financial position, results of operations or cash flows.

In February 2020, we commenced an operating lease for our corporate headquarters in Houston, Texas and recorded a long-term asset totaling $2.4 million and a corresponding lease liability. The lease has a seven and a half year term with two renewal periods available for an additional five years each.

On March 31, and April 1, 2020, we implemented, effective as of such date, a workforce reduction resulting in the termination of over 80 employees, furloughs for certain employees and lower compensation levels for executives and employees not participating in furloughs in response to the decrease in crude oil pricing, customer capital spending plans and activity as a result of the decline in market conditions primarily related to the COVID-19 pandemic and reduced demand for oil. On May 4, 2020 and in July 2020, we implemented, effective as of such date, additional workforce reductions resulting in the termination of approximately 50 employees per each reduction. In connection with these reductions in workforce and executive departures, we incurred cash severance costs, which are reflected in the condensed consolidated statements of operations under general and administrative expenses, of $0.8 million and $5.6 million for the three and nine months ended September 30, 2020.

Below is a reconciliation of the beginning and ending liability balance (in thousands):

We expect to finish paying off this severance and other terminations liability by May 2021.

During the nine months ended September 30, ~~2019,~~2020, we granted ~~1,030,216~~501,049 equity-classified restricted stock units (“RSUs”) primarily to nonemployee members of the Board of Directors with a weighted average grant date fair value of ~~$5.28. Of the~~$1.11. We account for RSUs granted ~~842,236~~to employees at fair value on the date of grant, which we measure as the closing price of our stock on the date of grant, and recognize the compensation expense in the financial statements over the requisite service period. RSUs ~~will~~generally vest ~~and settle ratably in~~over a period of three equal annual installments beginning on the anniversary of the date of grant ~~and 187,980 RSUs, which were granted~~other than those issued in connection with yearly award grants to ~~the nonemployee~~ members of ~~the~~our Board of ~~Directors, will generally vest on the one year anniversary of the grant date.~~ Directors.The RSUs for the members of our Board will vest on the ~~Board~~one-year anniversary of ~~Directors~~ the grant date and will either settle at vesting or, if the director has elected to defer the RSUs, within thirty days following the earlier of the termination of the director’s service for any reason or a change of control.

During the nine months ended September 30, ~~2019,~~2020, we granted ~~625,488~~3,001,168 equivalent stock units, or cash-settled, liability-classified RSUs (“ESUs”), with a weighted average grant date fair value of ~~$5.51,~~$1.09. When the ESUs are originally granted to employees, they are valued at fair value, which we measure as the closing price of our common stock on the date of grant. As the ESUs will be settled in cash, they are remeasured each reporting period at fair value based upon the closing price of our common stock until the awards are settled. The ESUs will vest and settle ratably in three equal annual installments beginning on the anniversary of the date of grant. The ~~ESUs will be settled in cash and the~~ cash settled for any ESU will not exceed the maximum payout established by our Compensation, Nominating and Governance Committee, which is generally two times the fair market value of our common stock as of ~~the~~a day ~~before~~near the grant ~~date. Compensation cost is remeasured each reporting period at fair value based upon the closing stock price of our common stock until the awards are settled.~~date.

In addition, during the nine months ended September 30, ~~2019,~~2020, we granted ~~377,334~~1,036,185 performance stock unit awards (“PSUs”), which have a performance period from January 1, ~~2019~~2020 to December 31, ~~2021.~~2022. The grant date fair value of the PSUs of ~~$6.50~~$1.31 was measured using a Monte Carlo simulation. The number of PSUs ultimately issued under the program is dependent upon our total shareholder return relative to ~~our~~a performance peer group (“relative TSR”) over the three-year performance period. Each PSU will settle for between zero and two shares of our common stock in the first quarter of ~~2021.~~2023. The threshold performance level (25th percentile relative TSR) starts to earn PSUs, the mid-point performance level (50th percentile relative TSR) earns 65% of the target PSUs and the maximum performance level (90th percentile relative TSR) or greater earns 200% of the target PSUs.

Our Employee Stock Purchase Plan for U.S. Employees and our Employee Stock Purchase Plan for non-U.S. Employees (together, the “ESPP”) allows eligible employees to purchase shares of our common stock at a discounted price. In July 2019, we issued 115,192 shares of our common stock to our employees in connection with the settlement of the purchase of shares for the January 1, 2019 to June 30, 2019 offering period, which increased our common stock outstanding. The ESPP was temporarily suspended for future offering periods beginning on July 1, 2019.

~~The total~~Total share-based compensation expense for all awards was $1.7 million and $2.9 million for ~~each of~~ the three months ended September 30, 2020 and 2019, respectively, and ~~2018~~$6.5 million and $9.4 ~~million and $8.2~~ million for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively.

The computation of the annual expected effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income (or loss) for the year, projections of the proportion of income (or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events

occur, more experience is acquired or additional information is obtained. The computation of the annual effective rate would include applicable modifications, which were projected for the year, such as certain book expenses not deductible for tax, tax credits and foreign deemed dividends.

We recorded a tax ~~(benefit) expense~~benefit of ~~$(1.4)~~$3.1 million and ~~$3.2~~$1.4 million for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. For the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we recorded a tax (benefit) expense of $(10.0) million and $10.2 million, respectively. Included in the tax benefit for the nine months ended September 30, 2020 were several U.S. tax (benefit) expense adjustments related to the enactment of the Coronavirus Aid, Relief, and ~~$3.1~~Economic Security Act (the “CARES Act”) including: (1) a tax benefit of $0.9 million ~~respectively.~~which includes a decision to elect bonus depreciation in a prior year resulting in a Net Operating Loss (“NOL”) carryback and (2) tax expense of $9.7 million for an increase in a valuation allowance on deferred tax assets not expected to be realized. Also, included in tax benefit for the nine months ended September 30, 2020 was a tax expense in the amount of $1.2 million for a valuation allowance against our Canadian deferred tax asset based on management’s position that NCS has not met the more likely than not condition of realizing part of the deferred tax asset, as well as a benefit of $1.3 million related to a reduction in foreign tax expense. Included in tax expense for the nine months ended September 30, 2019 was a tax expense for a valuation allowance against our U.S. deferred tax asset based on management’s position that ~~we have~~NCS has not met the more likely than not condition of realizing the deferred tax asset ~~based on the existence of sufficient projected U.S. taxable income of the appropriate character to recognize the tax benefit~~ as well as the tax effect of a non-deductible goodwill impairment. These adjustments resulted in additional tax (benefit) expense for the three and nine months ended September 30, 2019 of approximately $(6.9) million and $11.7 million, respectively. ~~For the three and~~

nine months ended September 30, 2018, our effective rates were 29.3% and 15.7%, respectively. The income tax expense and effective tax rates for the three and nine months ended September 30, 2018 were significantly impacted by the ~~U.S. Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act~~”) including administrative guidance issued by the Internal Revenue Service on April 2, 2018. This guidance along with other updates resulted in a change to the calculation of the mandatory one-time tax on accumulated earnings of foreign subsidiaries in 2017 and a tax expense (benefit) of approximately $0.5 million and $(2.1) million for the three and nine months ended September 30, 2018, respectively. Additionally, the effective tax rate for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 included a tax expense ~~(benefit)~~ of ~~$0.4~~$1.4 million and ~~$(0.4)~~$0.4 million, respectively, for the tax effect of stock awards.

~~The 2017 Tax~~On March 27, 2020, the CARES Act was enacted and signed into law and includes several provisions for corporations including allowing companies to carryback certain NOLs and increasing the amount of NOLs that corporations can use to offset income. Corporate taxpayers may carryback NOLs originating during 2018 through 2020 for up to five years and the CARES Act removes the 80% taxable income limitation on ~~December 22, 2017. The 2017 Tax Act significantly revised~~utilization of those NOLs if carried back to prior tax years or utilized in tax years beginning before 2021, which was not previously allowed under the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%, eliminating certain deductions, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries asTax Cuts and Jobs Act of 2017 ~~introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax. Our preliminary estimate of the 2017~~(the “2017 Tax Act and the remeasurement of our deferred tax assets and liabilities is subject to the finalization of management’s analysis related to certain matters, such as developing interpretations of the provisions of the 2017 Tax Act, changes to certain estimates and the filing of our tax returns. U.S. Treasury regulations, administrative interpretations or court decisions interpreting the 2017 Tax Act may require further adjustments and changes in our estimates. Those adjustments may impact our provision for income taxes in the period in which the adjustments are made.

For our calendar year beginning in 2018 we are subject to several provisions of the 2017 Tax Act including computations under Global Intangible Low Taxed Income (“GILTI”) and Foreign Derived Intangible Income (“FDII”Act”). ~~We were able to make a reasonable estimate of the impact of each provision of the 2017 Tax Act on our effective tax rate for the three and nine months ended September 30, 2019 and 2018.~~

ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The impact of an uncertain income tax position on the income tax returns must be recognized at the largest amount that is more-likely-than-not to be required to be recognized upon audit by the relevant taxing authority. This standard also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting for interim periods, disclosure and transition issues with respect to tax positions. We include interest and penalties as a component of other income (expense), net in the condensed consolidated statements of ~~operations~~operations. There were no interest and penalties for the nine months ended September 30, 2020. We recognized $42 thousand in interest and ~~$58 thousand~~penalties for the nine months ended September 30, 2019 ~~and 2018, respectively.~~.

The following table presents the reconciliation of the numerator and denominator for calculating (loss) earnings ~~(loss)~~ per common share from net (loss) income ~~(loss)~~ (in thousands, except per share data):



	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Numerator—Basic
Net income (loss)	$	6,609	$	7,766	$	(22,837)	$	16,813
Less: income attributable to participating shares		—		223		—		510
Net (loss) income									$	(5,137)	$	6,609	$	(62,936)	$	(22,837)
Less: income attributable to non-controlling interest		2,988		1,443		7,809		3,565		726		2,988		3,233		7,809
Net income (loss) attributable to NCS Multistage Holdings, Inc.––Basic	$	3,621	$	6,100	$	(30,646)	$	12,738
Net (loss) income attributable to NCS Multistage Holdings, Inc.––Basic									$	(5,863)	$	3,621	$	(66,169)	$	(30,646)

Numerator—Diluted
Net income (loss)	$	6,609	$	7,766	$	(22,837)	$	16,813
Net (loss) income									$	(5,137)	$	6,609	$	(62,936)	$	(22,837)
Less: income attributable to non-controlling interest		2,988		1,443		7,809		3,565		726		2,988		3,233		7,809
Net income (loss) attributable to NCS Multistage Holdings, Inc.––Diluted	$	3,621	$	6,323	$	(30,646)	$	13,248
Net (loss) income attributable to NCS Multistage Holdings, Inc.––Diluted									$	(5,863)	$	3,621	$	(66,169)	$	(30,646)

Denominator
Basic weighted average number of shares		46,892		44,943		46,552		44,660		47,351		46,892		47,240		46,552
Exchangeable shares for common stock		—		1,327		—		1,398
Dilutive effect of stock options, RSUs, PSUs and ESPP		29		1,134		—		1,196		—		29		—		—
Diluted weighted average number of shares		46,921		47,404		46,552		47,254		47,351		46,921		47,240		46,552

Earnings (loss) per common share
(Loss) earnings per common share
Basic	$	0.08	$	0.14	$	(0.66)	$	0.29	$	(0.12)	$	0.08	$	(1.40)	$	(0.66)
Diluted	$	0.08	$	0.13	$	(0.66)	$	0.28	$	(0.12)	$	0.08	$	(1.40)	$	(0.66)

Potentially dilutive securities excluded as anti-dilutive		4,184		54		4,357		187		4,598		4,184		4,594		4,357

The below pro-forma computation of loss (earnings) per share reflects the 1-for-20 reverse stock split that was approved by our Board of Directors and Advent International Corporation, who holds approximately 62.6% of our shares of common stock, on October 27, 2020 but is not yet effective (see Note 15) assuming it was retroactively effective for each of the periods presented:

We have determined that we operate in one reportable segment that has been identified based on how our chief operating decision maker manages our business. See “Note 2. Revenues” for our disaggregated revenue by geographic area.

In October 2020, we entered into an agreement to settle the Award entered into by the District Court, which will be effectuated through a ~~result~~Chapter 11 plan of ~~events~~reorganization that ~~occurred~~was filed by Diamondback and is currently set for confirmation on November 12, 2020. The agreement terminates if the bankruptcy court does not approve the plan by December 31, 2020. In connection with Repeat Precision releasing Diamondback and Derrek Drury (“Drury”) from the monetary damages in the Award and certain other claims, Repeat Precision expects to receive: (i) an upfront cash payment of approximately $15.5 million, (ii) the transfer of the ‘035 Patent from Diamondback to Repeat Precision, (iii) payments for future sales of certain setting tool sold by Diamondback or its successor as restitution, until $5 million has been paid in total, and (iv) a note from Drury payable in two years in the principal amount of up to $5 million secured by certain properties and other collateral. Repeat Precision and another claimant in the Diamondback bankruptcy have also agreed to provide mutual releases of all claims in exchange for consideration to be received by Repeat Precision, which is also conditioned on the effectiveness of the Chapter 11 plan. There are no assurances that the terms of any settlement will become effective, including uncertainty as to whether a Chapter 11 plan will be approved by the bankruptcy court, or that we will receive any portion of the settlement consideration.

In connection with our ~~customers subsequent~~efforts to ~~September 30, 2019,~~regain compliance with Nasdaq Listing Rule 5450(a)(1), we expect to ~~record~~effect a ~~provision for doubtful accounts~~reverse stock split of upour issued and outstanding common stock on or about December 1, 2020. On October 27, 2020, funds affiliated with Advent

International Corporation, who beneficially hold 29,568,536 shares of our common stock as of such date, or approximately 62.6% of our shares of common stock, executed and delivered to ~~$1.8 million~~the Board of Directors a written consent approving a proposal to effect a reverse stock split of our issued and outstanding common stock, with a ratio of 1-for-20 (the “reverse stock split”) and to reduce the number of authorized shares of our common stock by the same ratio as the reverse stock split. Our Board of Directors also approved the above reverse stock split and authorized share reduction on October 27, 2020. We expect our common stock to begin trading on Nasdaq on a split-adjusted basis when the market opens on December 1, 2020. Our Board of Directors reserves its right to elect not to proceed and abandon the reverse stock split if it determines, in its sole discretion, that this reverse stock split is no longer in the ~~fourth quarter.~~best interests of our stockholders.

To show the effect of the reverse stock split in the event it becomes effective, pro forma basic and diluted earnings per common share are disclosed in Note 13.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of our 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.

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 completions and field development strategies. We provide our products and services primarily to exploration and production (“E&P”) companies for use in onshore wells, predominantly wells that have been drilled with horizontal laterals in unconventional 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 Argentina, China, Russia, the Middle East and the North Sea. We have provided our products and services to various customers, including leading 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 are typically utilized in cemented wellbores and enable our customers to precisely place stimulation treatments in a more controlled and repeatable manner as compared with traditional completion techniques. Our fracturing systems products and services are utilized in conjunction with third-party providers of pressure pumping, coiled tubing and other services.

We sell products for well construction, including our AirLock casing buoyancy system, liner hanger systems and toe initiation sleeves. We provide tracer diagnostics services for well completion and reservoir characterization that utilize downhole chemical and radioactive tracers and consult on reservoir strategies by providing engineering services. We own a 50% interest in Repeat Precision, LLC (“Repeat Precision”), which sells composite frac plugs and related products. We provide tracer diagnostics services for well completion and reservoir characterization that utilize downhole chemical and radioactive tracers. We sell products for well construction, including our AirLock casing buoyancy system, liner hanger systems and ~~provides third-party manufacturing services.~~ toe initiation sleeves. We operate in one reportable segment.

COVID-19 Impacts on the Oil & Gas Market and NCS Multistage

Coronavirus disease 2019 (“COVID-19”), an infectious disease caused by severe acute respiratory syndrome coronavirus 2, has spread globally. The World Health Organization (“WHO”) declared the COVID-19 outbreak a public health emergency of international concern on January 30, 2020 and a pandemic on March 11, 2020. According to Johns Hopkins University, as of October 31, 2020 there have been over 45 million confirmed cases, resulting in over 1.1 million deaths related to COVID-19 on a global basis.

Federal, state, provincial and local governments around the world have implemented measures designed to slow the spread of the coronavirus. These measures include, but are not limited to, quarantines, travel restrictions involving areas with large or growing confirmed case counts, school closures, social distancing guidelines intended to limit the size of group gatherings and maintain physical space between individuals and orders that workers in non-essential industries or roles work from home. In many countries, the most restrictive measures were eased throughout the second quarter, though case counts began rising during the third and fourth quarters in some areas, including several states in the U.S. and in Europe, following the relaxation of the restrictions.

These measures and restrictions have had material impacts on the global economy, resulting in a significant reduction in estimates for global gross domestic product (“GDP”) in 2020. In addition, businesses have been forced to shut down, either temporarily or permanently, resulting in a significant growth in unemployment rates, which have partially declined, but remain at elevated levels by historical standards.

The demand for crude oil has been materially reduced as a result of the measures taken by governments around the world to mitigate the spread of COVID-19, primarily due to significant reductions in air and motor vehicle travel, which has reduced the demand for jet fuel, diesel and gasoline, the key refined products derived from crude oil. In its September 2020 Oil Market Report, the International Energy Agency (“IEA”) stated that demand for crude oil for the full year in 2020 could be reduced by 8.4 MMBBL/D as compared to 2019, depending on COVID-19 case counts and the timing of and nature of a further resumption in global economic activity.

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The significant reduction in global demand led to a decline in the average WTI crude oil price which was $27.96/BBL in the second quarter of 2020 before measures to restrict the spread of COVID-19 were put in place for most of the world. The average WTI crude oil price recovered to $40.89/BBL in the third quarter of 2020 but remains volatile. In addition, oil storage in OECD countries remains at elevated levels and floating storage is being utilized to hold excess crude oil. Members of the Organization of Petroleum Exporting Countries (“OPEC”) and certain other countries, including Russia, agreed to a collective reduction in oil production of 9.7 MMBBL/D in May, June and July of 2020, 7.7 MMBBL/D in August through December 2020 and 5.8 MMBBL/D in January 2021 through April 2022. The intent of the voluntary supply reductions is to attempt to increase the realized price of crude oil, and more specifically avoid overwhelming global oil storage capacity, allowing storage levels to return to normal over time as the economy and oil demand recovers.

As a result of the rapid and material reduction in oil pricing, E&P companies responded by significantly reducing their capital expenditure budgets for 2020, resulting in significant reductions in planned drilling and completion activity. In North America, reductions to initial 2020 E&P company capital budgets have ranged from 30% to nearly 100%, with some only spending the capital required to safely operate their existing productive assets. Reductions in activity began in mid-to-late March and decreases in completions activity occurred faster than reductions to drilling activity, as completions equipment is typically contracted on a short-term basis, while drilling rigs may be contracted for several months or years. Many E&P companies partially shut in production in areas where the marginal cash operating cost exceeds the market price. The amount of shut-in capacity in North America is believed to have peaked in May, with the volume of shut-in production reducing over time.

Low commodity prices are also impacting E&P companies that carry significant debt on their balance sheets and companies that rely on liquidity from loans that are based on the value of their oil and gas reserves. There have been several recent Chapter 11 bankruptcy filings by E&P companies, and the credit quality of the upstream oil and gas sector, our customer base, has been negatively impacted by the decline in market conditions, primarily related to the COVID-19 pandemic. We recorded a provision for bad debt expense of $0.9 million during the nine months ended September 30, 2020.

The reduction in customer capital spending and responses as a result of a decline in market conditions primarily related to the COVID-19 pandemic began to impact NCS in March 2020. Customers in North America began to quickly reduce the number of active completions crews, travel restrictions began to impact international operations, and activity in certain regions, including Argentina and China, was shut down due to government actions to contain the spread of COVID-19. In addition, customers began to notify us of their plans to further reduce capital spending and the resulting drilling and completion activity, which has reduced the anticipated level of demand for our products and services and the pricing we may receive for our products and services. These factors reduce our expectation of the amount of revenue and profit that we may generate for the remainder of the year and for as long as demand for oil remains below supply or as long as global oil storage levels remain elevated.

While we experienced modest disruptions to our supply chain as a result of the COVID-19 pandemic, including delays in importation of certain chemical products from China and temporary work-from-home orders that have reduced the capacity at the Repeat Precision machine shop operations in Mexico, such disruptions were temporary in nature, the impacted products are available through alternative sources of supply and we believe we have sufficient inventory on hand to meet customer demand. We have also experienced delays in access to certain materials and products utilized in our research and development activities, which may lead to delays in new product introductions.

In response to the current market conditions and reduction in demand for our products and services, including as a result of the COVID-19 pandemic, NCS has undertaken, and the Board of Directors is monitoring and evaluating, multiple initiatives to reduce our cost structure, limit capital expenditures and enhance our liquidity and access to capital, including:

Reductions in force which have reduced our headcount in the U.S. and Canada by approximately 190 people, the implementation of furloughs for certain employees in field operations and engineering roles and reductions to salaries and hourly rates for substantially all remaining employees, including reductions in salaries for executives averaging 20%. These actions are expected to result in approximately $20 million in annualized cost savings, with approximately 70% of that amount associated with selling, general and administrative (“SG&A”) expenses;

A reduction in bonus accruals for 2020 and the decision to not pay out 2019 bonuses;

An elimination of the employer matching contributions for NCS’s U.S. 401(k) plan and its Registered Retirement Savings Plan in Canada;

A moratorium on non-essential travel for all employees;

Negotiation of new rates, work rules and payment schedules with vendors;

Strategies to reduce third-party spend, including information technology, financial services and third-party research and development;

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Deferral of U.S. employer payroll taxes, as permitted under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”);

Application for, and receipt of, benefits under the Canada Emergency Wage Subsidy (“CEWS”) program;

Accelerating the filing of our 2019 U.S. federal tax return to utilize Net Operating Loss (“NOL”) carryback provisions from the CARES Act in order to obtain a cash tax refund during the fourth quarter of 2020;

Reducing planned capital expenditures for the year and selling excess vehicles;

Closing our district operational facilities in Corpus Christi and Oklahoma City and relocating our U.S. assembly operations to better align with our supply chain partners, which reduces overhead and improves fixed cost absorption;

In April 2020, Repeat Precision entered into a new promissory note providing up to $5.0 million in additional borrowing capacity; and

Amending our revolving credit facility to modify certain covenants and to establish a borrowing base related to our accounts receivable, which we believe provides us with enhanced financial flexibility (as described in more detail in “Note 8. Debt” in our unaudited condensed consolidated financial statements).

NCS continues to evaluate market conditions and will continue to take necessary actions to further reduce our cost base and enhance liquidity should there be a further reduction in the demand for our products and services.

In connection with the reductions in force described above, NCS recorded severance expense of $1.3 million in the first quarter of 2020, $3.5 million in the second quarter of 2020 and $0.8 million in the third quarter of 2020.

As a result of the decrease in crude oil pricing, customer capital spending plans and activity as a result of the decline in market conditions primarily related to the COVID-19 pandemic as well as the resulting decline in the quoted price of our common stock, we assessed the recoverability of the carrying value of our property and equipment and finite-lived intangible assets as of March 31, 2020 and determined that a triggering event had occurred. As a result of the analysis, we recorded impairment charges of $9.7 million in property and equipment and $40.5 million related to identifiable intangible assets, which we recorded during the first quarter of 2020. There were no impairment charges recorded on our property and equipment or identifiable intangible assets during the second or third quarters of 2020. For additional information, see “Note 5. Property and Equipment” and “Note 6. Goodwill and Identifiable Intangibles” of our unaudited condensed consolidated financial statements.

On August 6, 2020, we entered into an amendment to our Senior Secured Credit Facility which, among other changes, reduced the lender commitments in the U.S. under our Senior Secured Credit Facility to $25.0 million and further limited the amount we may borrow dependent on a borrowing base calculated based on eligible receivables. See —Liquidity and Capital Resources—Financing Arrangements for a description of the amendment. Our borrowing base under the Senior Secured Credit Facility as of September 30, 2020 was $4.2 million. The amount available to be drawn under the Senior Secured Credit Facility may decline from current levels, including as a result of reductions in our borrowing base or a springing financial covenant, if our business continues to be adversely impacted by a decline in market conditions primarily related to the COVID-19 pandemic.

See Item 1A. Risk Factors below for a discussion of additional actual or potential impacts of the COVID-19 pandemic on our business and operations.

Outlook

Based on revised capital budgets for 2020 that have been set by E&P companies, ~~and capital spending incurred by E&P companies year-to-date,~~ we believe that industry drilling and completions activity in North America will be more than 50% lower in ~~2019~~2020 than it was in ~~2018.~~2019. Many of our customers in North America are ~~prioritizing~~reducing capital spending as much as possible in order to generate free cash flow ~~and~~or minimize the ~~return~~extent of capital to shareholders over production growth, which is leading to lower levels of capital expenditures. This is due to relatively low commodity prices at the time our customers established their budgets, concerns over global demand for oil and natural gas based on macroeconomic conditions and the perceived shareholder preference for E&P companies to spend withinnegative free cash ~~flow and improve returns on invested capital. We expect customer~~flow. Drilling activity in the U.S. has declined sequentially throughout 2020 before stabilizing at low levels at the end of the third quarter and increasing modestly early in the fourth quarter. Completions activity in the U.S. is also expected to ~~decline on~~increase slightly in the fourth quarter of 2020 as compared to the third quarter. We believe that the rig count in Canada in the second quarter of 2020 was at the lowest levels of the last 50 years and did not experience a ~~year-over-year basis, with activity levels continuing to decline throughout 2019~~material seasonal increase in the third quarter of 2020. The Canadian rig count remains well below seasonal averages thus far in the fourth quarter, but has improved from ~~year-end 2018 and current levels. With~~ the ~~reduction~~average rig count observed in the third quarter of 2020. The low level of industry activity ~~we are experiencing increased competition~~has led, and is expected to continue to lead, to intense competitive pressure across all of our product and ~~services~~service offerings in ~~the United States,~~North America, which ~~is negatively impacting~~impacts our market share ~~and~~as well as our margins. We believe that customer activity in Canada in 2019 will continue to be significantly below activity levels in prior years. This is due to the factors mentioned above and to mandatory production curtailments that continue to be imposed on certain operators in Alberta. Market conditions in Canada have resulted in continued customer and competitor-driven pricing pressure for our products and services, negatively impacting our margins and market share in certain markets. We currently expect international industry activity to ~~increase slightly~~decline in ~~2019~~2020 as compared to ~~2018~~2019 as international E&P companies continue to adjust their budgets and activity levels in response to the COVID-19 pandemic and the resulting market ~~conditions remain more constructive than in North America.~~conditions.

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Market Conditions

Oil and Natural Gas Drilling and Completion Activity

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

Oil and natural gas prices remain volatile, with WTI crude oil pricing ~~falling to~~of approximately ~~$45~~$61 per barrel in December ~~2018~~2019 before ~~recovering~~falling significantly to approximately ~~$54~~$21 per barrel by the end of ~~September 2019.~~March 2020 and averaging $40.89 per barrel during the third quarter of 2020. Crude oil pricing has historically been supported by voluntary oil production reductions by members of ~~the Organization of Petroleum Exporting Countries (“OPEC”), and certain other countries,~~

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~~including Russia.~~ ~~Most recently, in response to continued concern over global demand and high global inventory levels,~~ OPEC, and certain other countries, including ~~Russia,~~Russia. In response to decreased demand related to the COVID-19 pandemic, this group agreed to ~~extend~~a collective reduction in oil production of 9.7 MMBBL/D in May, June and July of 2020, 7.7 MMBBL/D in August through December 2020 and 5.8 MMBBL/D in January 2021 through April 2022. The intent of the voluntary supply reductions ~~that have been in place since early 2019 through March 31, 2020.~~is to attempt to increase the realized price of crude oil, and more specifically avoid overwhelming global oil storage capacity and allow storage levels to return to normal levels over time as the economy and oil demand recovers. There can be no assurance that the countries involved will ~~continue to~~ comply with the intended ~~reductions and the amount of oil supply that may be returned to the market if the supply reductions are not extended further is unknown.~~reductions.

On August 6, 2018, the United States announced its intent to impose economic sanctions on Iran, following the United States’ withdrawal from an international accord intended to limit Iran’s nuclear programs. The sanctions, including secondary sanctions targeting companies that do business with Iran, were intended to reduce Iran’s level of crude oil exports and went into effect in November 2018. Temporary waivers were granted to eight countries that import oil from Iran, but those waivers expired on May 2, 2019. Other oil exporting countries, including Saudi Arabia and Russia may increase oil supplies to offset any shortfall related to a reduction in Iranian oil exports.

Over the course of 2018, there was an increase in the difference between the benchmark crude oil pricing in certain markets and WTI, known in the industry as differentials. Crude oil in certain areas, including West Texas, North Dakota and Canada traded at a larger discount to WTI than in historical periods due to current and forecasted production levels that are in excess of local refining demand and pipeline capacity. In response to these price differentials, many E&P companies operating in these areas reduced their drilling and completion activity in the second half of 2018 and into 2019 or chose to delay completions until additional pipeline or rail capacity is placed into service. In Canada, the Province of Alberta implemented measures intended to reduce the differential in the region, including the implementation of mandatory production curtailments for companies producing more than 10,000 barrels per day in the province, which are expected to be in place through the end of 2019 and may continue into 2020.

Natural gas pricing was at an average level of ~~$3.15~~$2.56 per MMBtu during ~~2018~~2019 but has fallen to an average level of ~~$2.38~~$2.00 per MMBtu during the third quarter of ~~2019~~2020 as supply ~~growth~~ has exceeded demand, ~~growth.~~which has been negatively impacted by the COVID-19 pandemic and resulting market conditions. Realized natural gas prices for Canadian E&P customers are typically at a discount to U.S. Henry Hub pricing. Spot pricing for Canadian natural gas at the AECO hub has been volatile since mid-2017, with wide discounts to Henry Hub pricing resulting from infrastructure bottlenecks. ~~Some Canadian E&P customers have reacted to the lower prices by shutting in a portion of their natural gas production, negatively impacting their cash flows, capital spending and drilling activity.~~

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

Listed and depicted below are recent crude oil and natural gas pricing trends, as provided by the Energy Information Administration (“EIA”) of the U.S. Department of Energy:

Average Price
Quarter Ended

WTI Crude
(per Bbl)

Brent Crude
(per Bbl)

Henry Hub Natural Gas
(per MMBtu)
9/30/2018

$
69.69

$
75.07

$
2.93
12/31/2018

59.97

68.76

3.77
3/31/2019

54.82

63.10

2.92
6/30/2019

59.88

69.04

2.57
9/30/2019

56.34

61.95

2.38


	Average Price
Quarter Ended	WTI Crude (per Bbl)		Brent Crude (per Bbl)		Henry Hub Natural Gas (per MMBtu)
9/30/2019		56.34		61.95		2.38
12/31/2019		56.82		63.17		2.40
3/31/2020		45.54		50.45		1.90
6/30/2020		27.96		29.70		1.70
9/30/2020		40.89		42.91		2.00

2325

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Listed and depicted below are the average number of operating onshore rigs in the U.S. and in Canada per quarter since the third quarter of ~~2018,~~2019, as provided by Baker Hughes Company (“Baker Hughes”). The quarterly changes in the Canadian land rig count can be partially attributed to seasonality of activity in that market:

Average Drilling Rig Count
Quarter Ended

U.S. Land

Canada Land

North America Land
9/30/2018

1,032

207

1,239
12/31/2018

1,050

177

1,227
3/31/2019

1,023

181

1,204
6/30/2019

967

79

1,046
9/30/2019

894

130

1,024


	Average Drilling Rig Count
Quarter Ended	U.S. Land	Canada Land	North America Land
9/30/2019	894	130	1,024
12/31/2019	797	136	933
3/31/2020	764	194	958
6/30/2020	378	23	401
9/30/2020	241	46	287

Over the past several years, North American E&P companies have been able to reduce their cost structures and have also utilized technologies, including ours, to increase efficiency and improve well performance. ~~After a period of declining drilling and completion activity from late 2014 through early 2016, North American E&P companies began to increase activity levels beginning~~The rig count in the ~~second quarter of 2016, as evidenced by increasing rig counts in the~~ U.S. ~~and Canada. The rate of increase slowed in the U.S. during 2018 and~~ began to decline in ~~2019. Declines have continued,~~2019, and the decline has accelerated in 2020 with the U.S. rig count ~~having decreased~~decreasing during the third quarter of ~~2019~~2020 from the second quarter of ~~2019~~2020 by 7%36%. The average land rig count in Canada for the third quarter ~~of 2019~~ was ~~37%~~65% lower than in the same period in ~~2018.~~2019 and was at 85 rigs by the end of October 2020, up from 12 rigs at June 30, 2020, the lowest level ever recorded by Baker Hughes. The U.S. and Canadian rig counts are expected to remain significantly below prior year levels for the remainder of 2020.

A substantial portion of our business is subject to 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

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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 drill 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 lower than activity in the first quarter. However, as a result of the decline in market conditions primarily related to the COVID-19 pandemic, we do not expect to experience a material seasonal increase in Canada in the fourth quarter of this year. Our business can also be impacted by a reduction in customer activity during the winter holidays in late December and early January. ~~We anticipate that activity in Canada~~In recent years, many customers in the U.S. exhausted their capital budgets prior to the end of the year, leading to reductions in drilling and completion activity during the fourth ~~quarter of 2019 will be significantly lower than in the same period of prior years due to reduced customer budgets and production curtailments that are currently in place in Alberta.~~quarter.

The market in Canada also continues to be impacted by logistical constraints in moving oil and natural gas from areas of production activity to demand centers. These constraints have led to lower realized pricing for our Canadian ~~customers, which have~~

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been partially offset by the initiatives implemented by the Province of Alberta. As a result, industry activity and capital spending in Canada in 2019 has been, and is currently forecasted to be, materially below 2018 levels, both for producers of oil and liquids-rich natural gas and producers of natural gas. During the ten months ended October 31, 2019, the average land drilling rig count in Canada, as provided by Baker Hughes, was 32% lower than in the same period in 2018. Commodity price differentials are forecasted to remain at elevated levels for an extended period of time, which we expect to have a negative impact on customer activity in 2019 and beyond.customers.

The industry experienced a reduction in completions activity in the United States that began in the second half of 2018, which has extended through 2019 and into ~~2019.~~2020, with the reduction further accelerating beginning in March 2020 before reversing during the late third quarter and early fourth quarter of 2020. In addition, revised capital budgets from E&P companies indicate that capital spending in ~~2019~~2020 is expected to be at least 50% below capital spending in 2018, with a number of customers taking steps to reduce the number of rigs and completion crews that they are operating throughout the year. We currently anticipate a further reduction in customer activity during the fourth quarter of 2019.

Adoption of Pinpoint Stimulation

Traditional well completion techniques, including plug and perf and ball drop, currently account for the majority of unconventional well completions in North America and over 90% of unconventional well completions in the U.S. We believe that pinpoint stimulation provides benefits compared to these traditional well completion techniques. Our ability to grow our market share, as evidenced by the percentage of horizontal wells in North America completed using our products and services, will depend in large part on the industry’s further adoption of pinpoint stimulation to complete wells, our ability to continue to innovate our technology to compete against continuing technological advances in competing traditional well completions techniques, and our ability to successfully compete with other providers of pinpoint stimulation products and services, including adjusting our pricing in certain markets to respond to customer demands and to competitors that may provide discounted pricing to our customers.

Increasing Well Complexity and Focus on Completion Optimization

In recent years, E&P companies have drilled longer horizontal wells and completed more hydraulic fracturing stages per well to maximize the volume of hydrocarbon recoveries per well. This trend towards longer and more complex wells has resulted in us selling more sliding sleeves or composite frac plugs per well on average, which increases our revenue opportunity per well completion and has led to increased sales of our AirLock casing buoyancy systems. Additionally, E&P companies have become increasingly focused on well productivity through optimization of completion designs and we believe this trend may further the adoption of pinpoint stimulation, and in turn, increase the opportunity for sales of our products and services if our customers observe operational benefits and long-term production results from the application of pinpoint stimulation. This trend towards more complex well completions has also resulted in increased use of tracer diagnostics services, which can be utilized to assess the effectiveness of various well completion techniques and well spacing strategies in support of completion and field development optimization efforts.

How We Generate Revenues

We derive ~~the majority of~~ our revenues from the sale of our fracturing systems products and the provision of related ~~services. The~~ ~~remainder~~services, the sale of ~~our revenues are generated~~composite frac plugs and related products through Repeat Precision and from sales of our tracer diagnostics services, AirLock casing buoyancy system, liner hanger systems and toe initiation sleeves products and tracer diagnostics and reservoir strategies services. Repeat Precision generates revenue through the sale of composite frac plugs and related products and the provision of third-party manufacturing services.products.

Product sales represented ~~72%~~71% and ~~71%~~72% of our ~~revenue~~revenues for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~72%~~70% and ~~69%~~72% for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. 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 filled on negotiated terms. Services represented ~~28%~~29% and ~~29%~~28% of our revenues for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~28%~~30% and ~~31%~~28% for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Services include our tool charges and associated services related to our fracturing systems ~~reservoir strategies consulting~~ and ~~our~~ tracer diagnostics services ~~and Repeat Precision’s provision of third-party manufacturing~~ (which are classified together as “services” in our financial results). Services are provided at agreed rates we charge to our customers for the provision of our downhole frac isolation assembly, 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 will, in certain instances, lower the prices of our products and services. Our revenues are also impacted by well complexity, with wells with more stages resulting in longer jobs and increased revenue attributable to selling more sliding sleeves or composite frac plugs and the provision of our services.

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The percentages of our revenue derived from sales in Canada and denominated in Canadian dollars were approximately ~~43%~~23% and ~~47%~~43% for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and approximately ~~41%~~43% and ~~51%~~41% for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Because our Canadian contracts are typically invoiced in Canadian dollars, the effects of foreign currency fluctuations impact our revenues and are regularly monitored.

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Although most of our sales are to North American E&P companies, we doalso have sales to customers outside of North America and expect sales to international customers to increase over time. These international sales are made through local NCS entities or to our local operating partners on a free on board or free carrier basis with a point of sale in the United States. Some of the locations in which we have operating partners or sales representatives include China and the Middle East. Our operating partners and representatives do not have authority to contractually bind ~~our company,~~NCS but market our products in their respective territories as part of their product or service 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 and payments made to machine shops for the manufacturing of product components ~~used in our products~~and finished assemblies and costs related to our employees that perform quality control analysis, assemble and test our products. Our strategic 50% purchase of Repeat Precision has allowed us to reduce our costs for certain product categories. We review forecasted activity levels in our business and either directly procure or ensure that our vendors procure the required raw materials with sufficient lead time to meet our business requirements. On March 8, 2018, the President of the United States signed an order to impose a tariff of 25% on steel imported from certain countries. On July 1, 2018, Canada implemented retaliatory tariffs on certain U.S. imports, including steel. These tariffs have resulted in an increase in our cost of sales. On September 24, 2018, the United States implemented a tariff of 10% on a significant number of commodities originating from China, including certain chemicals utilized in our tracer diagnostics business. The tariffs were subsequently increased to 25% in May 2019. The increased tariffs have resulted in an increase in our cost of sales. ~~We will~~While we strive to pass through some of the increases in raw material costs directly resulting from the tariffs to our customers, ~~however~~ there can be no assurance that we will be able to do so. 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, ~~and~~ revaluation orand scrap related to our existing inventory and costs related to the chemicals and laboratory analysis associated with our tracer diagnostics services.

Our ~~selling, general and administrative (“~~SG~~&A”)~~&A expenses are comprised of compensation expense, which includes compensation and benefit-related expenses for our employees who are not directly involved in revenue generating activities, including those involved in our research and development activities, as well as our general operating costs. These 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 severance expenses, litigation expenses and provisions for doubtful accounts. As a result of being a public company, our legal, accounting and other expenses have increased and will further increase for costs associated with our compliance with the Sarbanes-Oxley Act.

The percentage of our costs, defined as cost of sales, excluding depreciation and amortization, and including SG&A, denominated in Canadian dollars were approximately ~~22%~~9% and ~~26%~~22% for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and approximately 20% ~~and 23%~~ for each of the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

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Table of Contents

Results of Operations

Three Months Ended September 30, ~~2019 compared~~2020 Compared to Three Months Ended September 30, ~~2018~~2019

The following table summarizes our revenues and expenses for the ~~period~~periods presented (dollars in thousands):



	Three Months Ended								Three Months Ended
	September 30,				Variance				September 30,				Variance
	2019		2018		$		%		2020		2019		$		%
Revenues
Product sales	$	43,756	$	44,633	$	(877)	(2.0)	%	$	11,660	$	43,756	$	(32,096)	(73.4)	%
Services		17,017		18,058		(1,041)	(5.8)	%		4,652		17,017		(12,365)	(72.7)	%
Total revenues		60,773		62,691		(1,918)	(3.1)	%		16,312		60,773		(44,461)	(73.2)	%
Cost of sales
Cost of product sales, exclusive of depreciation and amortization expense shown below		23,796		20,275		3,521	17.4	%		7,874		23,796		(15,922)	(66.9)	%
Cost of services, exclusive of depreciation and amortization expense shown below		8,413		8,542		(129)	(1.5)	%		2,334		8,413		(6,079)	(72.3)	%
Total cost of sales, exclusive of depreciation and amortization expense shown below		32,209		28,817		3,392	11.8	%		10,208		32,209		(22,001)	(68.3)	%
Selling, general and administrative expenses		20,441		19,356		1,085	5.6	%		12,474		20,441		(7,967)	(39.0)	%
Depreciation		1,461		1,174		287	24.4	%		1,000		1,461		(461)	(31.6)	%
Amortization		1,153		3,255		(2,102)	(64.6)	%		103		1,153		(1,050)	(91.1)	%
Change in fair value of contingent consideration		—		(1,865)		1,865	100.0	%
Income from operations		5,509		11,954		(6,445)	(53.9)	%
(Loss) income from operations										(7,473)		5,509		(12,982)	(235.7)	%
Other income (expense)
Interest expense, net		(424)		(317)		(107)	(33.8)	%		(876)		(424)		(452)	(106.6)	%
Other income, net		259		28		231	NM	%		414		259		155	59.8	%
Foreign currency exchange loss		(131)		(688)		557	81.0	%
Foreign currency exchange loss, net										(260)		(131)		(129)	(98.5)	%
Total other expense		(296)		(977)		681	69.7	%		(722)		(296)		(426)	(143.9)	%
Income before income tax		5,213		10,977		(5,764)	(52.5)	%
Income tax (benefit) expense		(1,396)		3,211		(4,607)	(143.5)	%
Net income		6,609		7,766		(1,157)	(14.9)	%
(Loss) income before income tax										(8,195)		5,213		(13,408)	(257.2)	%
Income tax benefit										(3,058)		(1,396)		(1,662)	(119.1)	%
Net (loss) income										(5,137)		6,609		(11,746)	(177.7)	%
Net income attributable to noncontrolling interest		2,988		1,443		1,545	107.1	%		726		2,988		(2,262)	(75.7)	%
Net income attributable to NCS Multistage Holdings, Inc.	$	3,621	$	6,323	$	(2,702)	(42.7)	%
Net (loss) income attributable to NCS Multistage Holdings, Inc.									$	(5,863)	$	3,621	$	(9,484)	(261.9)	%

Revenues were $16.3 million for the three months ended September 30, 2020 as compared to $60.8 million for the three months ended September 30, 2019. This decrease reflected reductions in product sales and services volumes in North America as well as lower pricing for certain products and services, including composite plugs and tracer diagnostics, and lower product sales in international markets. We believe the decrease in both activity and pricing resulting from the decline in market conditions primarily related to the COVID-19 pandemic, which had a negative impact on our revenues during the three months ended September 30, 2020 as drilling rig and completion activity in the U.S. declined sequentially throughout 2020 before stabilizing at low levels at the end of the third quarter and did not experience a material seasonal increase in Canada in the third quarter of 2020. Product sales for the three months ended September 30, 2020 were $11.7 million as compared to $43.8 million for the three months ended September 30, 2019. Services revenue was $4.7 million for the three months ended September 30, 2020 as compared to $17.0 million for the three months ended September 30, 2019.

Cost of sales was $10.2 million, or 62.6% of revenues, for the three months ended September 30, 2020 as compared to $32.2 million, or 53.0% of revenues, for the three months ended September 30, 2019. Cost of sales as a percentage of revenues increased due to the significant reduction in revenue, leading to under-utilization of manufacturing capacity and field service personnel, as well as a reduction in pricing for certain products and services. We believe that our cost of sales as a percentage of revenue was negatively impacted by the reduction in revenue activity associated with the decline in market conditions primarily related to the COVID-19 pandemic, which contributed to fixed cost under absorption. Cost of product sales was $7.9 million, or 67.5% of product sales revenue, and cost of services was $2.3 million, or 50.2% of service revenue, for the three months ended

September 30, 2020. For the three months ended September 30, 2019, cost of product sales was $23.8 million, or 54.4% of product sales revenue, and cost of services was $8.4 million, or 49.4% of service revenue.

Selling, general and administrative expenses were $12.5 million for the three months ended September 30, 2020 as compared to $20.4 million for the three months ended September 30, 2019. This overall decrease in expense reflects declines in compensation and benefits, share-based compensation and research and development expenses of $4.7 million, $1.1 million and $0.4 million, respectively. We believe that travel restrictions enacted in response to the COVID-19 pandemic had a slightly favorable impact on our SG&A expense, primarily due to a reduction in travel and entertainment expenses, which decreased by $0.6 million. Additionally, professional fees were lower by $0.7 million.

Depreciation was $1.0 million for the three months ended September 30, 2020 as compared to $1.5 million for the three months ended September 30, 2019. The decrease is primarily attributable to a non-cash impairment charge of $9.7 million during the first quarter of 2020, which reduced the carrying values of our land, building and improvements and machinery and equipment. Additionally, our capital expenditures were lower in 2020 as compared to 2019. See “Note 5. Property and Equipment” of our unaudited condensed consolidated financial statements for additional detail.

Amortization was $0.1 million for the three months ended September 30, 2020 as compared to $1.2 million for the three months ended September 30, 2019. The decrease in amortization was related to non-cash impairment charges of $40.5 million during the first quarter of 2020, which reduced the carrying values of technology, internally-developed software, customer relationships, and trademarks. See “Note 6. Goodwill and Intangibles” of our unaudited condensed consolidated financial statements for additional detail.

Interest expense, net was $0.9 million for the three months ended September 30, 2020 as compared to $0.4 million for the three months ended September 30, 2019. The increase in interest expense, net was primarily a result of the $0.6 million write-off of deferred loan costs associated with the amendment to our Senior Secured Credit Facility, which reduced the lender commitments.

Income tax benefit was $3.1 million for the three months ended September 30, 2020 as compared to $1.4 million for the three months ended September 30, 2019. Included in tax benefit for the three months ended September 30, 2019 was a valuation allowance against our U.S. deferred tax asset as well as the tax effect of a non-deductible goodwill impairment. These adjustments resulted in additional tax benefit for the three months ended September 30, 2019 of approximately $6.9 million.

On March 27, 2020, the CARES Act was enacted and signed into law and includes several provisions for corporations including allowing companies to carryback certain NOLs and increasing the amount of NOLs that corporations can use to offset income. Corporate taxpayers may carryback NOLs originating during 2018 through 2020 for up to five years and the CARES Act removes the 80% taxable income limitation on utilization of those NOLs if carried back to prior tax years or utilized in tax years beginning before 2021, which was not previously allowed under the U.S. Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”).

As a result of the geographic mix of earnings and losses, including discrete items, our tax rate has been and will continue to be volatile.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

The following table summarizes our revenues and expenses for the periods presented (dollars in thousands):

Revenues were ~~$60.8~~$79.6 million for the ~~three~~nine months ended September 30, ~~2019~~2020 as compared to $62.7 million for the three months ended September 30, 2018. This decrease was primarily attributable to a decrease in the volume of sales of our fracturing systems products and services and our well construction products in the U.S., partially offset by increased sales of our Repeat Precision products. Product sales for the three months ended September 30, 2019 were $43.8 million as compared to $44.6 million for the three months ended September 30, 2018. Our service revenue was $17.0 million for the three months ended September 30, 2019 as compared to $18.1 million for the three months ended September 30, 2018.

Cost of sales was $32.2 million, or 53.0% of revenues, for the three months ended September 30, 2019 as compared to $28.8 million, or 46.0% of revenues, for the three months ended September 30, 2018. Cost of sales was a higher percentage of revenues due to reductions in the pricing of our products and services, the use of third-party machining capacity, and higher cost of sales in tracer diagnostics, related to field service staffing levels and increased chemical costs associated with tariffs imposed on certain imports from China in September 2018 and later increased in May 2019. These increases were partially offset by increased sales at Repeat Precision, which enabled better fixed cost utilization. Cost of product sales was $23.8 million, or 54.4% of product sales revenue, and cost of services was $8.4 million, or 49.4% of service revenue, for the three months ended September 30, 2019. For the three months ended September 30, 2018, cost of product sales was $20.3 million, or 45.4% of product sales revenue, and cost of services was $8.5 million, or 47.3% of service revenue.

Selling, general and administrative expenses were $20.4 million for the three months ended September 30, 2019 as compared to $19.4 million for the three months ended September 30, 2018. The increase was due to higher professional services expenses, most notably litigation expenses, and a ~~one-time severance charge of $0.7 million related to a reduction in workforce, partially offset by lower research and development expenses.~~

Depreciation was $1.5 million for the three months ended September 30, 2019 as compared to $1.2 million for the three months ended September 30, 2018. The increase is primarily attributable to capital expenditures made during 2018.

Amortization was $1.2 million for the three months ended September 30, 2019 as compared to $3.3 million for the three months ended September 30, 2018. The decrease in amortization was related to non-cash impairment charges of $73.5 million in customer relationships and technology during the fourth quarter of 2018, which reduced the carrying values of those intangible assets.

We had no change in fair value of contingent consideration for the three months ended September 30, 2019. Change in fair value of contingent consideration was $(1.9) million for the three months ended September 30, 2018 due to the revaluation of the earn-out obligations for Repeat Precision and Spectrum Tracer Services, LLC (“Spectrum”), of which the fair value measures included the impact of both actual results and forecasted future earnings at the time.

Foreign currency exchange loss was $(0.1) million for the three months ended September 30, 2019 as compared to a loss of $(0.7) million for the three months ended September 30, 2018. The change was primarily due to the movement in the foreign currency exchange rates between the periods.

Income tax (benefit) expense was $(1.4) million for the three months ended September 30, 2019 as compared to $3.2 million for the three months ended September 30, 2018. Included in tax expense for the three months ended September 30, 2019 was a valuation allowance against our U.S. deferred tax asset based on management’s position that we have not met the more likely than not condition of realizing the deferred tax asset based on the existence of sufficient projected U.S. taxable income of the appropriate character to recognize the tax benefit as well as the tax effect of a non-deductible goodwill impairment. These adjustments resulted in additional tax (benefit) in the amount of approximately $(6.9) million for the three months ended September 30, 2019. For the three months ended September 30, 2018, our effective income tax rate was 29.3%. The income tax expense and effective tax rate for the three months ended September 30, 2018 was impacted by the ~~U.S. Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”).~~

The 2017 Tax Act significantly changes how the U.S. taxes corporations. The 2017 Tax Act requires complex computations to be performed that were not previously required by U.S. tax law, significant judgments to be made in interpretation of the provisions of the 2017 Tax Act, significant estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced. The ultimate impact of the 2017 Tax Act may differ from our estimates, possibly materially, due to changes in the interpretations and assumptions made as well as additional regulatory guidance that may be issued and actions we may take as a result of the 2017 Tax Act.

The 2017 Tax Act was signed into law on December 22, 2017. The 2017 Tax Act significantly revised the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%, eliminating certain deductions, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries as of 2017, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax. Our preliminary estimate of the 2017 Tax Act and the remeasurement of our deferred tax assets and liabilities is subject to the finalization of management’s analysis related to certain matters, such as developing interpretations of the provisions of the 2017 Tax Act, changes to certain estimates and the filing of our tax returns. U.S. Treasury regulations, administrative interpretations or court decisions interpreting the 2017 Tax Act may require further adjustments and changes in our estimates. Those adjustments may impact our provision for income taxes in the period in which the adjustments are made.

For our calendar year beginning in 2018 we are subject to several provisions of the 2017 Tax Act including computations under Global Intangible Low Taxed Income (“GILTI”) and Foreign Derived Intangible Income (“FDII”). We were able to make a reasonable estimate of the impact of each provision of the 2017 Tax Act on our effective tax rate for the three months ended September 30, 2019 and 2018.

~~On a longer term basis, certain aspects of the 2017 Tax Act are expected to have a positive impact on our future income tax expense, including the reduction in the U.S. corporate income tax rate.~~

~~As a result of the geographic mix of earnings and losses, including discrete items, our tax rate has been and will continue to be volatile.~~

~~Nine Months Ended September 30, 2019 compared to Nine Months Ended September 30, 2018~~

~~The following table summarizes our revenues and expenses for the period presented (dollars in thousands):~~

~~Revenues were~~ $153.4 million for the nine months ended September 30, ~~2019 as compared~~2019. This decrease reflected reductions in product sales and services volumes in North America, particularly during the second and third quarters and lower product sales in international markets, partially offset by higher services revenue in international markets. We believe the decrease in both activity and pricing resulting from the decline in market conditions primarily related to ~~$176.8 million for~~the COVID-19 pandemic, which had a negative impact on our revenues during the nine months ended September 30, ~~2018. This decrease~~2020 as drilling rig and completion activity in North America declined sequentially throughout 2020 before stabilizing at low levels at the end of the third quarter of 2020. In addition, customer activity in China was ~~primarily attributable~~delayed and activity in Argentina was suspended from mid-March until June due to a decrease in the volume of sales of our fracturing systems products and services, especially in the U.S. and Canada and lower tracer diagnostics revenue in the U.S., partially offset by increased sales of our well construction and Repeat Precision products.government regulations. Product sales for the nine months ended September 30, ~~2019~~2020 were ~~$110.9~~$55.9 million as compared to ~~$122.5~~$110.9 million for the nine months ended September 30, ~~2018. Our service~~2019. Services revenue was $23.6 million for the nine months ended September 30, 2020 as compared to $42.5 million for the nine months ended September 30, ~~2019 as compared to $54.3 million for the nine months ended September 30, 2018.~~2019.

Cost of sales was $47.2 million, or 59.3% of revenues, for the nine months ended September 30, 2020 as compared to $82.1 million, or 53.5% of revenues, for the nine months ended September 30, ~~2019~~2019. Cost of sales as ~~compared~~a percentage of revenues increased due to ~~$82.3~~the significant reduction in revenue, leading to under-utilization of manufacturing capacity and field service personnel, as well as a reduction in pricing for certain products and services, particularly during the second and third quarters. We believe that our cost of sales as a percentage of revenue was negatively impacted by the reduction in revenue activity associated with the decline in market conditions primarily related to the COVID-19 pandemic, which contributed to fixed cost under absorption. Cost

of product sales was $35.2 million, or ~~46.6%~~62.9% of ~~revenues,~~product sales revenue, and cost of services was $12.0 million, or 50.9% of service revenue, for the nine months ended September 30, ~~2018. Cost of sales was a higher percentage of revenues due to reduced fixed~~2020. For the nine months ended September 30, 2019, cost utilization related to lower sales volumes for fracturing systems products and services, especially in the U.S. and Canada, reductions in the pricing of our products and services, higher-than-anticipated use of third-party machining capacity in 2019, and higher cost of sales in tracer diagnostics, related to field service staffing levels and increased chemical costs associated with tariffs imposed on certain imports from China in September 2018 and later increased in May 2019. These increases were partially offset by increased sales of well construction products and increased sales at Repeat Precision, which enabled better fixed cost utilization. Cost of product sales was $57.0 million, or 51.4% of product sales revenue, and cost of services was $25.0 million, or 58.9% of service ~~revenue,~~revenue.

Selling, general and administrative expenses were $48.8 million for the nine months ended September 30, ~~2019. For the nine months ended September 30, 2018, cost of product sales was $57.6 million, or 47.0% of product sales revenue, and cost of services was $24.7 million, or 45.6% of service revenue.~~

~~Selling, general and administrative expenses were~~2020 as compared to $66.4 million for the nine months ended September 30, ~~2019 as compared~~2019. This overall decrease in expense reflects declines in compensation and benefits, share-based compensation, research and development expenses, ERP-related expenses, and bad debt expense of $10.8 million, $2.9 million, $1.3 million, $1.1 million, and $0.8 million, respectively. We believe that travel restrictions enacted in response to ~~$62.5~~the COVID-19 pandemic had a favorable impact on our SG&A expense, primarily due to a reduction in travel and entertainment expenses of $1.5 million. Additionally, professional fees, including litigation fees, were lower by $3.1 million, which includes $1.1 million of proceeds from our directors and officers liability insurance related to the reimbursement of legal expenses that we incurred to defend a director and officer in the Diamondback litigation. These favorable variances were partially offset by severance charges incurred for the nine months ended September 30, 2020 related to reductions in workforce, which was higher by $4.8 million.

Depreciation was $3.4 million for the nine months ended September 30, ~~2018. The increase was due~~2020 as compared to ~~higher professional services expenses, most notably litigation expenses, and support for our new enterprise resource planning (“ERP”) system, higher share-based compensation expense, a~~ ~~one-time severance charge of $0.7 million related to a reduction in workforce~~ ~~and an increase in bad debt expense, partially offset by lower compensation and research and development expenses.~~

~~Depreciation was~~ $4.4 million for the nine months ended September 30, ~~2019 as~~2019. The decrease is primarily attributable to a non-cash impairment charge of $9.7 million during the first quarter of 2020, which reduced the carrying values of our land, building and improvements and machinery and equipment. Additionally, our capital expenditures were lower in 2020 compared to ~~$3.4~~2019. See “Note 5. Property and Equipment” of our unaudited condensed consolidated financial statements for additional detail.

Amortization was $1.3 million for the nine months ended September 30, ~~2018. The increase is primarily attributable~~2020 as compared to ~~capital expenditures made during 2018.~~

~~Amortization was~~ $3.5 million for the nine months ended September 30, ~~2019 as compared to $9.9 million for the nine months ended September 30, 2018.~~2019. The decrease in amortization was related to non-cash impairment charges of ~~$73.5~~$40.5 million ~~in customer relationships and technology~~ during the ~~fourth~~first quarter of ~~2018,~~2020, which reduced the carrying values of ~~those intangible assets.~~technology, internally-developed software, customer relationships, and trademarks. See “Note 6. Goodwill and Intangibles” of our unaudited condensed consolidated financial statements for additional detail.

~~Change~~In the first quarter of 2020, we evaluated our property and equipment and finite-lived intangible assets for impairment due to current industry conditions such as a reduction in ~~fair value~~global economic growth expectations, a significantly reduced demand for crude oil and refined products, the significant decline in commodity prices and the corresponding impact on future expectations of ~~contingent consideration was $37 thousand~~demand for ~~the nine months ended September 30, 2019 compared to $(3.0) million for the nine months ended September 30, 2018. The change for the nine months ended September 30, 2019 was~~our products and services primarily related to the ~~passage~~COVID-19 pandemic as well as the resulting decline in the quoted price of ~~time from December 31, 2018 to January 31, 2019 when~~our common stock. We determined that the ~~$10.0~~carrying amount of certain of our long-lived assets exceeded the corresponding fair value. We recorded impairment charges of $9.7 million ~~cash payment for~~in property and equipment and $40.5 million in finite-lived intangible assets.There were no impairment charges recorded on our goodwill, property and equipment or identifiable intangible assets during the ~~Repeat Precision earn-out was paid to the joint venture partner. No payment was made for the Spectrum earnout. The change for the nine months ended September 30, 2018 was due to the revaluation~~second or third quarters of ~~the earn-out obligations for Repeat Precision and Spectrum, of which the fair value measures included the impact of both actual results and forecasted future earnings at the time.~~

During the second quarter of 2019, we performed an impairment test for goodwill and determined that the carrying value of one of our reporting units exceeded its fair value. We recorded an impairment charge of $7.9 million for our tracer diagnostic services reporting unit as a result of a further deterioration in customer activity levels in North America. This resulted in lower demand for oilfield services driving a decrease in our market share and increased customer and competitor-driven pricing pressures in addition to a decline in the quoted price of our common stock. In addition to goodwill, we also assessed our identifiable intangibles for impairment ~~during the second quarter~~as of June 30, 2019 and determined those assets were not impaired. ~~There were no additional indications of impairment during the third quarter of 2019.~~ See “Note 5.6. Goodwill and Intangibles” of our consolidated financial statements for additional detail.

Income tax (benefit) expense was $(10.0) million for the nine months ended September 30, 2020 as compared to $10.2 million for the nine months ended September 30, ~~2019 as compared to $3.1 million~~2019. Included in the tax benefit for the nine months ended September 30, ~~2018.~~2020 were several U.S. tax (benefit) expense adjustments related to the enactment of the CARES Act including: (1) a tax benefit of $0.9 million which includes a decision to elect bonus depreciation in a prior year resulting in a NOL carryback and (2) tax expense of $9.7 million for an increase in a valuation allowance on deferred tax assets not expected to be realized. Also, included in tax benefit for the nine months ended September 30, 2020 was a tax expense in the amount of $1.2 million for a valuation allowance against our Canadian deferred tax asset based on management’s position that NCS has not met the more likely than not condition of realizing part of the deferred tax

asset, as well as a benefit of $1.3 million related to a reduction in foreign tax expense. Included in tax expense for the nine months ended September 30, 2019 was a valuation allowance against our U.S. deferred tax asset based on management’s position that we have not met the more likely than not condition of realizing the deferred tax asset based on the existence of sufficient projected U.S. taxable income of the appropriate character to recognize the tax benefit as well as the tax effect of a non-deductible goodwill impairment. These adjustments resulted in additional tax expense infor the nine months ended September 30, 2019 of approximately $11.7 million. ~~The income tax expense and~~Additionally, the effective tax rate for the nine months ended September 30, ~~2018 was significantly impacted by the~~ ~~2017 Tax Act~~ ~~including administrative guidance~~

issued by the Internal Revenue Service on April 2, 2018. This guidance resulted in a final change to the calculation of the mandatory one-time tax on accumulated earnings of foreign subsidiaries in the 2017 tax return filing2020 and 2019 included a tax ~~benefit~~expense of ~~$2.1~~$1.4 million and $0.4 million, respectively, for the ~~nine months ended September 30, 2018 was recorded in~~ tax ~~expense with a corresponding reduction in the effective tax rate~~effect of ~~10.6%~~stock awards.

~~The 2017 Tax~~On March 27, 2020, the CARES Act ~~significantly changes how~~was enacted and signed into law and includes several provisions for corporations including allowing companies to carryback certain NOLs and increasing the ~~U.S. taxes corporations. The 2017 Tax~~amount of NOLs that corporations can use to offset income. Corporate taxpayers may carryback NOLs originating during 2018 through 2020 for up to five years and the CARES Act ~~requires complex computations~~removes the 80% taxable income limitation on utilization of those NOLs if carried back to ~~be performed that were~~prior tax years or utilized in tax years beginning before 2021, which was not previously required by U.S. tax law, significant judgments to be made in interpretation of the provisions of the 2017 Tax Act, significant estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced. The ultimate impact of the 2017 Tax Act may differ from our estimates, possibly materially, due to changes in the interpretations and assumptions made as well as additional regulatory guidance that may be issued and actions we may take as a result ofallowed under the 2017 Tax Act.

For our calendar year beginning in 2018 we are subject to several provisions of the 2017 Tax Act including computations under GILTI and FDII. We were able to make a reasonable estimate of the impact of each provision of the 2017 Tax Act on our effective tax rate for the nine months ended September 30, 2019 and 2018.

~~On a longer term basis, certain aspects of the 2017 Tax Act are expected to have a positive impact on our future income tax expense, including the reduction in the U.S. corporate income tax rate.~~

As a result of the geographic mix of earnings and losses, including discrete items, our tax rate has been and will continue to be volatile.

Our primary sources of liquidity are our existing cash and cash equivalents, cash provided by operating activities and borrowings under our ~~New~~ Senior Secured Credit ~~Facility (defined below).~~Facility. As of September 30, ~~2019,~~2020, we had cash and cash equivalents of ~~$4.5~~$8.6 million and ~~potential availability~~total outstanding indebtedness of $6.0 million, of which no amount is currently outstanding under ~~the New~~our Senior Secured Credit ~~Facility of $62.0 million. Our total indebtedness was $16.3 million as of September 30, 2019.~~ Facility. The ~~New~~ Senior Secured Credit Facility consists of a senior secured revolving credit ~~facilities~~facility in an aggregate principal amount of ~~$75.0~~$25.0 million. ~~Our principal liquidity needs have been, and~~Total borrowings are ~~expected~~limited to ~~continue to be, capital expenditures, working capital,~~a borrowing base calculated based on eligible receivables. We were in compliance with our debt ~~service and potential mergers and acquisitions.~~

~~Our capital expenditures for the nine months ended~~covenants at September 30, ~~2019 and 2018 were $5.2 million and $9.9 million, respectively.~~2020. We plan to incur approximately $6.0 million to $7.0 million in capital expenditures during 2019, which includes capital expenditures related to (i) additional machining capacity at Repeat Precision, (ii) additional production equipment and instrumentation to support tracer diagnostics services, (iii) machinery and equipment utilized in manufacturing and engineering and (iv) our research and development facility. We believe that our cash on hand, cash flows from operations and potential borrowings under our ~~New~~ Senior Secured Credit Facility will be sufficient to fund our capital expenditure and liquidity requirements for the next twelve months.Our borrowing base under the Senior Secured Credit Facility at September 30, 2020 was $4.2 million. The amount available to be drawn under the Senior Secured Credit Facility may decline from current levels, including as a result of reductions in our borrowing base or a springing financial covenant, if our business continues to be adversely impacted by a decline in market conditions primarily related to the COVID-19 pandemic. Our principal liquidity needs have been, and are expected to continue to be, capital expenditures, working capital, severance payments, debt service and potential mergers and acquisitions.

Our capital expenditures for the nine months ended September 30, 2020 and 2019 were $1.9 million and $5.2 million, respectively. We plan to incur approximately $2.0 million to $2.5 million in capital expenditures during 2020, which includes capital expenditures related to (i) additional machining capacity at Repeat Precision, (ii) machinery and equipment utilized in manufacturing and engineering, (iii) additional equipment to support our tracer diagnostics services and (iv) leasehold improvements associated with operations facilities. We expect to generate proceeds from the sale of property and equipment of $1.0 million, primarily related to the sale of excess vehicles utilized in field operations, most of which were obtained through finance leases.

We anticipate that to the extent that we require additional liquidity to fund our capital requirements or repay existing indebtedness, it will be funded through the incurrence of additional indebtedness, the proceeds of equity issuances, or a combination thereof. We cannot assure you that we will be able to obtain this additional liquidity on reasonable terms, or at all. Our liquidity and our ability to meet our obligations and fund our capital requirements are also dependent on our future financial performance and ability to reduce costs, which is subject to general economic, financial and other factors that are beyond our ~~control.~~control, including the COVID-19 pandemic. Accordingly, we cannot assure you that our business will generate sufficient cash flow from operations or that funds will be available from additional indebtedness, the capital markets or otherwise to meet our liquidity needs. If we decide to pursue one or more significant acquisitions, we may incur additional debt or sell additional equity to finance such acquisitions, which could result in additional expenses or dilution.

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

Net cash provided by operating activities was ~~$4.8~~$14.5 million and ~~$7.6~~$4.8 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The ~~reduction~~increase in cash flow was primarily driven by no payment of contingent consideration in 2020 compared to $3.0 million in 2019, and favorable changes in accounts receivable and inventories, partially offset by lower net income and unfavorable changes in ~~inventories, partially offset by favorable changes in accounts payable,~~deferred income tax (benefit) expense, prepaid expenses and other assets, ~~deferred tax (expense) benefit~~accounts payable and income ~~tax~~taxes receivable/~~payable.~~payable as well as lower non-cash share-based compensation and depreciation and amortization expenses.

Net cash used in investing activities was ~~$4.4~~$1.2 million and ~~$9.6~~$4.4 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The decrease in cash used in investing activities during the nine months ended September 30, ~~2019~~2020 as compared to the nine months ended September 30, ~~2018~~2019 was primarily related to reduced capital expenditures ~~including~~for property, equipment, software and technology ~~of $5.2~~which totaled $1.9 million in the nine months ended September 30, ~~2019~~2020 compared to ~~$9.9~~$5.2 million for the same period in ~~2018.~~2019.

Net cash used in financing activities was ~~$21.3~~$15.7 million and ~~$3.4~~$21.3 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The ~~increase~~decrease was primarily related to ~~the~~lower payments on equipment note and finance leases of $3.3 million. Additionally, on January 31, 2019, we made a $10.0 million cash payment to the joint venture partner for the Repeat Precision earn-out consideration, ~~on January 31, 2019,~~ of which $7.0 million was classified as a financing activity to reflect the acquisition date fair value of the contingent consideration liability and $3.0 million was included in operating activities as the liability was settled at an amount greater than the acquisition date fair value. ~~We also made~~The decrease in net cash ~~payments totaling $7.0 million on our New~~used in financing activities was partially offset by net repayments under the Senior Secured Credit Facility ~~(as defined below) during the second and third quarters~~ of ~~2019 and made distributions to our joint venture partner of $3.4 million during the nine months ended September 30, 2019 as compared to $0.5 million of distributions for the same period in 2018.~~$3.0 million.

On May ~~4, 2017,~~1, 2019, we entered into ana Second Amended and Restated Credit Agreement (the ~~“Prior~~“2019 Credit Agreement”) with Pioneer Investment, Inc., as U.S. borrower (the “U.S. Borrower”), NCS Multistage Inc., as Canadian borrower (the “Canadian Borrower”; together with the U.S. Borrower, the “Borrowers”), Pioneer Intermediate, Inc. (together with the Company, the “Parent Guarantors”) ~~and~~, the lenders party thereto, Wells Fargo Bank, National Association as administrative agent (the “U.S. Agent”) in respect of the ~~Prior~~ U.S. ~~Facility (as defined below)~~facility provided therein and Wells Fargo Bank, National Association, Canadian Branch, as administrative agent (the “Canadian Agent”) in respect of the ~~Prior~~ Canadian Facility ~~(as defined below)~~provided therein. The 2019 Credit Agreement amended and restated our prior credit agreement in its entirety. See “Note 8. Debt” to our unaudited condensed consolidated financial statements for additional details regarding our 2019 Credit Agreement.

On August 6, 2020, we entered into Amendment No. 1 to Second Amended and Restated Credit Agreement (the ~~senior secured revolving credit facilities~~“Amendment”; the 2019 Credit Agreement, as amended by the Amendment, the “Amended Credit Agreement”) with the Borrowers, Pioneer Intermediate, Inc., certain subsidiaries of the Borrowers, the lenders party thereto, the U.S. Agent and the Canadian Agent. The facility provided ~~thereunder,~~pursuant to the ~~“Prior Senior~~Amended Credit Agreement is referred to herein as the “Senior Secured Credit Facility”).

The ~~Prior~~ Senior Secured Credit Facility ~~consisted~~consists of a (i) senior secured revolving credit facility in an aggregate principal amount of $50.0 million made available to the U.S. Borrower (the “Prior U.S. Facility”), of which up to $5.0 million could be made available for letters of credit and up to $5.0 million could be made available for swingline loans and (ii) senior secured revolving credit facility in an aggregate principal amount of $25.0 million made available to the ~~Canadian Borrower (the “Prior Canadian Facility”). We amended and restated the Prior Senior Secured Credit Facility.~~ ~~See “Note 7.~~ ~~Debt” to our unaudited condensed consolidated financial statements for additional details regarding our Prior Senior Secured Credit Facility.~~

On May 1, 2019, we entered into a Second Amended and Restated Credit Agreement (the “New Credit Agreement”) with Pioneer Investment, Inc., as U.S. borrower, NCS Multistage Inc., as Canadian borrower, Pioneer Intermediate, Inc. and the lenders party thereto, Wells Fargo Bank, National Association as administrative agent in respect of the New U.S. Facility (as defined below) and Wells Fargo Bank, National Association, Canadian Branch, as administrative agent in respect of the New Canadian Facility (as defined below) (the senior secured revolving credit facilities provided thereunder, the “New Senior Secured Credit Facility”). The New Credit Agreement amended and restated the Prior Credit Agreement in its entirety.

~~The New Senior Secured Credit Facility consists of a (i) senior secured revolving credit facility in an aggregate principal amount of $50.0 million made available to the~~ U.S. Borrower, ~~(the “New U.S. Facility”),~~ of which up to ~~$5.0~~$2.5 million may be made available for letters of credit and up to ~~$5.0~~$2.5 million may be made available for swingline ~~loans and (ii) senior secured revolving credit facility in an aggregate principal amount~~loans. The Canadian Borrower may make borrowings under the Senior Secured Credit

Facility, subject to a $15.0 million ~~made~~sublimit. Total borrowings available to the ~~Canadian Borrower (the “New Canadian Facility”).~~Borrowers under the Senior Secured Credit Facility is limited to a borrowing base calculated based on eligible receivables. The ~~New~~ Senior Secured Credit Facility will mature on May 1, 2023. ~~At September 30, 2019, we had $13.0 million in outstanding indebtedness under the New U.S. Facility and no outstanding indebtedness under the New Canadian Facility.~~

Borrowings under the ~~New U.S.~~Senior Secured Credit Facility may be made in U.S. dollars for Adjusted Base Rate Advances, and in U.S. dollars, Canadian dollars or Euros for Eurocurrency Rate Advances (each as defined in the ~~New~~Amended Credit Agreement). Such advances bear interest at the Adjusted Base Rate or at the Eurocurrency Rate (each as defined in the Amended Credit Agreement) plus an applicable interest margin as set forth in the New Credit Agreement. Borrowings under the New Canadian Facility may be made in U.S. dollars or Canadian dollars and bear interest at the Canadian (Cdn) Base Rate, Canadian (U.S.) Base Rate, Eurocurrency Rate or Discount Rate (each as defined in the New Credit Agreement), in each case, plus an applicable interest margin as set forth in the New Credit Agreement. ~~The Adjusted Base Rate, Canadian (U.S.) Base Rate, Canadian (Cdn) Base Rate and Eurocurrency Rate applicable margin will be~~ between 2.75% and ~~3.50%~~3.75%, ~~in each case,~~ depending on ~~the Company’s~~NCS’s leverage ratio. ~~The applicable~~We incurred interest ~~rate at~~expense related to the Senior Secured Credit Facility, including commitment fees, of $0.1 million and $0.3 million for the three months ended September 30, 2020 and 2019, ~~was 5.125%.~~respectively, and $0.6 million and $0.5 million for the nine months ended September 30, 2020 and 2019, respectively.

The obligations of the ~~U.S. Borrower~~Borrowers under the ~~New U.S.~~Senior Secured Credit Facility are guaranteed by the Parent Guarantors, ~~and~~as well as each of the other existing and future direct and indirect restricted subsidiaries of ~~the Company~~NCS organized under the laws of the United States and Canada (subject to certain exceptions), and are secured by substantially all of the assets of the Parent Guarantors, the U.S. Borrower and such other subsidiary guarantors, in each case, subject to certain exceptions and permitted liens. The obligations of the Canadian Borrower under the New Canadian Facility are guaranteed by the Parent Guarantors, the U.S. Borrower and each of the other future direct and indirect restricted subsidiaries of the Company organized under the laws of the United States and Canada (subject to certain exceptions) and are secured by substantially all of the assets of the Parent Guarantors, the U.S. Borrower, the Canadian BorrowerBorrowers and such other subsidiary guarantors, in each case, subject to certain exceptions and permitted liens.

The ~~New~~Amended Credit Agreement ~~contains financial covenants that require~~requires us to (i) ~~commencing with~~maintain liquidity (defined as availability under the ~~fiscal quarter ending June 30, 2019, compliance with a maximum leverage ratio test set~~Senior Secured Credit Facility plus certain cash deposits) of at ~~2.50 to 1.00~~least $7.5 million as of the date of each borrowing base certificate due to be delivered either monthly (if availability is greater than or equal to than 12%) or weekly (if availability is less than 12%) thereunder, (ii) maintain, for quarters during which availability is less than 20% of the borrowing base, a fixed charge coverage of at least 1.0 to 1.0 and (iii) on the last business day of each ~~fiscal quarter, (ii) commencing with~~week, prepay advances to the fiscal quarter ending June 30, 2019, compliance with an interest coverage ratio test set at not more than 2.75 to 1.00 as of the last day of each fiscal quarter, (iii) if the leverage ratio as of the end of any fiscal quarter is greater than 2.00 to 1.00 and the amount outstanding under the New Canadian Facility at any time during such fiscal quarter was greater than $0, compliance as of the end of such fiscal quarter with a Canadian asset coverage ratio test of at least 1.00 to 1.00 and (iv) if the leverage ratio as of the end of any fiscal quarter is greater than 2.00 to 1.00 and the amount outstanding under the New U.S. Facility at any time during such fiscal quarter was greater than $0, compliance as of the end of such fiscal quarter with a U.S. asset coverage ratio test of at least 1.00 to 1.00.extent that available cash exceeds $12.0 million. As of September 30, ~~2019,~~2020, we were in compliance with these financial covenants. The ~~New~~Amended Credit Agreement also contains customary affirmative and negative covenants, including, among other things, restrictions on the creation of liens, the incurrence of indebtedness, investments, dividends and other restricted payments, dispositions and transactions with affiliates.

The ~~New~~Amended Credit Agreement ~~also~~ includes customary events of default for facilities of this type (with customary materiality thresholds and grace periods, as applicable). If an event of default occurs, the lenders ~~under~~ ~~each of~~party to the ~~New U.S. Facility and the New Canadian Facility~~ Amended Credit Agreement may elect (after the expiration of any applicable notice or grace periods) to declare all outstanding borrowings under such facility, together with accrued and unpaid interest and other amounts payable thereunder, to be immediately due and payable. The lenders ~~under each of~~party to the ~~New~~ ~~U.S. Facility and the New Canadian Facility~~Amended Credit Agreement also have the right upon an event of default thereunder to terminate any commitments they have to provide further borrowings ~~under such facility. Further, following an event of default under~~ ~~each of the New U.S. Facility~~ and ~~the New Canadian Facility, the lenders thereunder will have the right~~ to proceed against the collateral ~~granted to them to secure such facility.~~securing the Senior Secured Credit Facility.

~~There~~Except for the finance lease as discussed in “Note 5. Property and Equipment” and operating lease as discussed in “Note 9. Commitments and Contingencies” of our unaudited condensed consolidated financial statements, there have been no material changes in our contractual obligations and commitments disclosed in the Annual Report for the year ended December 31, ~~2018.~~2019.

See “Note 1. Basis of Presentation” to our unaudited condensed consolidated financial statements for our new significant accounting policy. We have also updated our lease accounting policies in conjunction with our adoption of ASU 2016-02 and its related amendments (collectively known as “ASC 842”) as further described in “Note 8. Leases” in our unaudited condensed consolidated financial statements. There are no other material changes to our critical accounting policies from those included in the Annual Report for the year ended December 31, ~~2018.~~2019.

See “Note 1. Basis of Presentation” to our unaudited condensed consolidated financial statements for a discussion of the accounting ~~pronouncement~~pronouncements we recently adopted and the accounting pronouncements recently issued by the Financial Accounting Standards Board.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We will remain an emerging growth company until the earlier of (1) the last day of our fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. Additionally, we are also a “smaller reporting company” as defined by Section 12b-2 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), meaning that 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 an emerging growth company and a smaller reporting company, we may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies that do not qualify for those classifications.

This Quarterly Report contains 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 we make regarding the outlook for our future business and financial performance, including the effects of the COVID-19 pandemic thereon, such as those contained in this 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:

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.

Item 3. Qu~~alitative~~antitative and ~~Quantitative~~Qualitative Disclosures About Market Risk

For our quantitative and qualitative disclosures about market risk, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” ofin our Annual Report for the ~~fiscal~~ year ended December 31, ~~2018.~~2019. With the exception of the uncertainty that exists with respect to the economic impact of the global COVID-19 pandemic and our ~~New Senior Secured Credit Facility, which has similar terms and conditions~~repayment of all outstanding variable rate debt under the amendment to our ~~Prior~~ Senior Secured Credit Facility, our exposure to market risk has not changed materially since December 31, ~~2018.~~2019.

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, ~~2019,~~2020, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

On January 2, 2019, we implemented our ERP system, which was designed to upgrade our technology and improve our financial and operational information. In connection with this ERP system implementation, we updated our internal controls over financial reporting, as necessary, to accommodate modifications to our business processes and accounting procedures. We will continue to evaluate and test these control changes in order to provide certification asAlthough most of our ~~fiscal year ending December 31, 2019 on the effectiveness of our internal control over financial reporting.~~

~~There~~employees and office-based workforce were working remotely due to COVID-19, there have been no ~~other~~ changes to our internal ~~control over financial reporting that occurred~~controls during the quarter ended September 30, ~~2019~~2020 and we have not experienced any changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.We continue to monitor the COVID-19 pandemic and its effects on the design and operating effectiveness of our internal controls.

~~In early February 2019, we filed a lawsuit against Diamondback Industries, Inc. (“Diamondback”) in~~On April 3, 2020, the United States District Court for the Western District of Texas, Waco Division ~~alleging~~(“District Court”) issued a final judgment in connection with the litigation with Diamondback Industries, Inc (“Diamondback”) awarding Repeat Precision approximately $39.9 million (the “Award”) plus attorneys’ fees in connection with its breach of exclusive license, patent infringement ~~breach~~and tortious interference claims. In its ruling, the District Court validated the terms of ~~contract and related claims stemming from Diamondback’s breach of an~~Repeat Precision’s exclusive license ~~granted~~agreement with respect to the setting tool technology practicing U.S. Patent No. 9,810,035 (the “’035 Patent’) and enjoined Diamondback from selling its infringing SS line of setting tools. The judgment remains subject to appeal and, on April 21, 2020, Diamondback filed for Chapter 11 bankruptcy protection which stays any collection efforts. As of September 30, 2020, we have not recorded any amount in our condensed consolidated financial statements related to this gain contingency. In April 2020, we received $1.1 million of proceeds from our directors and officers liability insurance related to the reimbursement of legal expenses that we incurred to defend a director and officer in the Diamondback litigation, which was recorded in the condensed consolidated statements of operations under general and administrative expenses for the nine months ended September 30, 2020.

In October 2020, we entered into an agreement to settle the Award entered into by the District Court, which will be effectuated through a Chapter 11 plan of reorganization that was filed by Diamondback and is currently set for confirmation on November 12, 2020. The agreement terminates if the bankruptcy court does not approve the plan by December 31, 2020. In connection with Repeat Precision releasing Diamondback and Derrek Drury (“Drury”) from the monetary damages in the Award and certain other claims, Repeat Precision expects to receive: (i) an upfront cash payment of approximately $15.5 million, (ii) the transfer of the ‘035 Patent from Diamondback to Repeat Precision, (iii) payments for future sales of certain setting tool sold by Diamondback or its successor as restitution, until $5 million has been paid in total, and (iv) a note from Drury payable in two years in the principal amount of up to ~~a patent necessary for the manufacture~~$5 million secured by certain properties and ~~sale of a disposable setting tool. Around the same time, Diamondback filed a lawsuit against~~other collateral. Repeat Precision and ~~various NCS entities~~another claimant in ~~an effort~~the Diamondback bankruptcy have also agreed to ~~invalidate~~provide mutual releases of all claims in exchange for consideration to be received by Repeat Precision, which is also conditioned on the ~~exclusive license agreement and requested monetary damages. We believe~~effectiveness of the ~~exclusive license is enforceable and there is~~Chapter 11 plan. There are no ~~basis~~assurances that the terms of any settlement will become effective, including uncertainty as to ~~support~~whether a Chapter 11 plan will be approved by the ~~claims asserted by Diamondback and~~bankruptcy court, or that we ~~intend to vigorously enforce our rights under~~will receive any portion of the ~~license agreement.~~settlement consideration.

While the outcome of any legal proceeding cannot be predicted with any certainty, based on a consideration of relevant facts and circumstances, our management currently does not expect that the results of these legal proceedings would have a material adverse effect on our financial position, results of operations or cash flows.

There have been no material changes from the risk factors disclosed in our Annual Report for the year ended December 31, ~~2018.~~2019, except as set forth below:

Our business, financial condition, results of operations, cash flows and stock price have been negatively impacted and may in the future be materially adversely affected by the COVID-19 pandemic.

Our business, financial condition, results of operations, cash flows and stock price have been negatively impacted and may in the future be materially adversely affected by the decline in market conditions primarily related to COVID-19 which has spread from China to many other countries including the United States. In March 2020, the WHO characterized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 pandemic a national emergency. The pandemic has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures.

The demand for crude oil has been materially reduced as a result of such measures taken by governments around the world, which has resulted in excess supply of crude oil and a rapid and material reduction in crude oil prices. As a result, E&P companies have responded by significantly reducing their capital expenditure budgets for 2020, resulting in significant reductions in planned drilling and completion activity, which has led to and will lead to a decrease in demand by our customers for our products and services. For as long as we remain in a low commodity price environment, we would generally expect our customers and potential customers to continue to operate at these lower levels of drilling, completion and other production activities or, if conditions worsen, they may further reduce their capital expenditures. These lower capital expenditure levels have resulted in and will continue to result in a reduction in spending on our products and services and impact the prices we are able to charge our customers. Furthermore, if any of our significant customers decides not to continue to use our products and services, or if any of our key suppliers experiences a significant disruption that limits our ability to manufacture and sell certain of our products, as a result of the COVID-19 pandemic, our revenue would decline, which could have a material adverse effect on our business, financial condition and results of operations.

Our cash on hand, cash flows from operations and potential borrowings under our Senior Secured Credit Facility may not be sufficient to fund our capital expenditures and liquidity requirements, particularly if the decline in market conditions primarily related to the COVID-19 pandemic on the demand for crude oil, customer spending and the resulting demand for our products and services continues for an extended period of time or worsens. These negative impacts of the COVID-19 pandemic are likely to have a material negative impact on our financial performance, which could result in a breach of the covenants and a default under the Amended Credit Agreement. In the event of a default, the lenders may elect to declare all outstanding borrowings under the facility immediately due and payable. In addition, the total amount available to be drawn under our Senior Secured Credit Facility is substantially lower than the commitments due to borrowing limits imposed by our borrowing base that is calculated based on eligible receivables, and the amount available may decline if our business continues to be materially adversely impacted by the decline in market conditions primarily related to the COVID-19 pandemic. In the event of a reduction in liquidity as a result of a default under the Amended Credit Agreement or the reduction of our borrowing capacity as result of business conditions, we may not be able to obtain liquidity from additional indebtedness, the capital markets or otherwise on reasonable terms, or at all, and our business may not generate sufficient cash flow from operations to fund our debt obligations or capital requirements.

We are considered a critical infrastructure industry, as defined by the U.S. Department of Homeland Security. Although we have continued to operate our facilities to date consistent with federal guidelines and state and local orders, the COVID-19 pandemic and any preventive or protective actions taken by governmental authorities may have a material adverse effect on our operations, supply chain, customers and transportation networks, including business shutdowns or disruptions. To date, we have experienced delays in importation of certain chemical products from China, and temporary work-from-home orders have reduced operating capacity at the Repeat Precision machine shop operations in Mexico. We have also experienced delays in access to certain materials and products utilized in our research and development activities, which may lead to delays in new product introductions. Work-from-home orders and other restrictions have also led to delays in planned work in Argentina and China.

On March 31 and April 1, 2020, we also implemented, as of such date, a workforce reduction resulting in termination of over 80 employees, furloughs for certain employees and lower compensation levels for executives and employees not participating in furloughs and on May 4, 2020 and in July 2020, we implemented, as of such date, additional workforce reductions resulting in the termination of approximately 50 employees per each reduction in response to the current difficult market conditions primarily related to the COVID-19 pandemic, the recent fall in demand for, and the price of, crude oil and reductions in customer capital spending plans. The reductions result in the loss of longer-term employees, institutional knowledge and expertise and the reallocation and combination of certain roles and responsibilities across the organization. These reductions, or others which may be caused by, but not limited to, the temporary inability of our workforce to work due to illness, quarantine, or government action, may negatively impact our operations.

The increase in certain of our employees working remotely has amplified certain information technology risks to our business and increased the demand on our information technology resources and systems, including increased phishing and other cybersecurity attacks as cybercriminals attempt to exploit uncertainty surrounding the COVID-19 pandemic and an increase in the number of points of potential attack, including laptops and mobile devices, to be secured. Any failure to effectively manage these risks, including to identify and appropriately respond to any cyberattacks, may adversely affect our business.

The extent to which the COVID-19 pandemic may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, depending upon the severity and duration of the pandemic and the effectiveness of actions taken globally to contain or mitigate its effects. Any resulting financial impact cannot be estimated reasonably at this time, but may materially adversely affect our business, financial condition, results of operations and cash flows. Even after the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression. To the extent the COVID-19 pandemic adversely affects our business, financial results and results of operations, it may also have the effect of heightening many of the other risks described in our Annual Report for the year ended December 31, 2019.

Our failure to meet the continued listing requirements of NASDAQ could result in a delisting of our common stock.

On April 24, 2020, NCS received a notification letter from the Nasdaq Listing Qualifications Staff of The NASDAQ Stock Market LLC (“Nasdaq”) notifying us that the closing bid price for our common stock had been below $1.00 for the previous 30 consecutive business days and that NCS therefore is not in compliance with the minimum bid price requirement for continued inclusion on the Nasdaq Global Select Market under Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Requirement”). The notification has no immediate effect on the listing of our common stock on the Nasdaq Global Select Market.

Under Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days to regain compliance with the Minimum Bid Requirement. However, in response to the COVID-19 pandemic and related extraordinary market conditions, Nasdaq provided temporary relief from the Minimum Bid Requirement through June 30, 2020 such that companies will have additional time to regain compliance, and compliance periods for any newly identified non-compliance will not begin until July 1, 2020. Therefore, our compliance period is extended until December 28, 2020.

To regain compliance with the Minimum Bid Requirement, the closing bid price of our common stock must be at least $1.00 or higher for a minimum of ten consecutive business days, and in such case, Nasdaq will provide NCS with written confirmation of compliance. If NCS does not regain compliance before December 28, 2020, we may be eligible for an additional 180 calendar days to regain compliance with the Minimum Bid Requirement, if we elect to transfer to the Nasdaq Capital Market. To qualify, NCS would be required to meet the applicable market value of publicly held shares requirement for continued listing and all other applicable requirements for initial listing on the Nasdaq Capital Market (except for the Minimum Bid Requirement), and NCS will need to provide written notice to Nasdaq of our intention to cure the deficiency during the second compliance period. If we are not eligible or it appears to Nasdaq that we will not be able to cure the deficiency during the second compliance period, Nasdaq will provide written notice to NCS that our common stock will be subject to delisting. In the event of such notification, we may appeal Nasdaq’s determination to delist our securities, but there can be no assurance that Nasdaq would grant our request for continued listing.

On October 27, 2020, funds affiliated with Advent International Corporation, who beneficially hold 29,568,536 shares of our common stock as of such date, or approximately 62.6% of our shares of common stock, had executed and delivered to the Board of Directors a written consent approving a proposal to effect a reverse stock split of our issued and outstanding common stock, with a ratio of 1-for-20 (the “reverse stock split”) and to reduce the number of authorized shares of our common stock by the same ratio as the reverse split. Our Board of Directors also approved the above reverse stock split and authorized share reduction on October 27, 2020. We expect our common stock to begin trading on Nasdaq on a split-adjusted basis when the market opens on December 1, 2020. Our Board of Directors reserves its right to elect not to proceed and abandon the reverse stock split if it determines, in its sole discretion, that this reverse stock split is no longer in the best interests of our stockholders.

If we do not regain compliance during any applicable compliance periods, our common stock could be delisted from any or all of the Nasdaq market tiers. The failure to maintain our listing on Nasdaq could have an adverse effect on the liquidity and market price of our common stock. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements, including by effecting a reverse stock split, if necessary, would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq Minimum Bid Requirement or prevent future non-compliance with Nasdaq’s listing requirements.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Delaware		46-1527455
	(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification number)

	~~19450~~19350 State Highway 249, Suite ~~200~~600
	Houston, Texas		77070
	(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	NCSM	NASDAQ Global Select Market


Large accelerated filer	☐	Accelerated filer	☑☐
Non-accelerated filer	☐☑	Smaller reporting company	☑
		Emerging growth company	☑


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3537

Item 4.	Controls and Procedures	3537

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3638

Item 1A.	Risk Factors	3638

Item 6.	Exhibits	3741

Signatures		3842


	~~Contract Liabilities~~
	~~Current~~		~~Non-Current~~
Balance at December 31, ~~2018~~2019	$	~~515~~	$	— 59
Additions		99		—-
Revenue recognized		~~(560)~~		— (8)
Balance at September 30, ~~2019~~2020	$	54	$	— 51



	Gross Value		Accumulated Impairment		Net		Gross Value		Accumulated Impairment		Net
At December 31, 2017	$	184,478	$	—	$	184,478
Purchase price allocation adjustment		54		—		54
Impairment		—		(154,003)		(154,003)
Currency translation adjustment		(7,417)		—		(7,417)
At December 31, 2018	$	177,115	$	(154,003)	$	23,112	$	177,115	$	(154,003)	$	23,112
Impairment		—		(7,937)		(7,937)		—		(7,937)		(7,937)
Currency translation adjustment		47		—		47		47		—		47
At September 30, 2019	$	177,162	$	(161,940)	$	15,222
At December 31, 2019							$	177,162	$	(161,940)	$	15,222
Impairment								—		—		—
At September 30, 2020							$	177,162	$	(161,940)	$	15,222



		September 30, 2019							September 30, 2020
	Estimated	Gross						Estimated	Gross
	Useful	Carrying		Accumulated		Net		Useful	Carrying		Accumulated		Net
	Lives (Years)	Amount		Amortization		Balance		Lives (Years)	Amount		Amortization		Balance
Technology	8 - 18	$	17,559	$	(1,933)	$	15,626	1 - 18	$	157	$	(64)	$	93
Trademarks	5 - 10		1,600		(333)		1,267
Customer relationships	10 - 21		28,634		(3,527)		25,107	10		4,100		(1,504)		2,596
Internally developed software	5		4,881		(735)		4,146
Total identifiable intangibles		$	52,674	$	(6,528)	$	46,146		$	4,257	$	(1,568)	$	2,689



		December 31, 2018							December 31, 2019
	Estimated	Gross						Estimated	Gross
	Useful	Carrying		Accumulated		Net		Useful	Carrying		Accumulated		Net
	Lives (Years)	Amount		Amortization		Balance		Lives (Years)	Amount		Amortization		Balance
Technology	8 - 18	$	17,289	$	(516)	$	16,773	8 - 18	$	17,721	$	(2,380)	$	15,341
Trademarks	5 - 10		1,600		(213)		1,387	5 - 10		1,600		(373)		1,227
Customer relationships	10 - 21		28,544		(2,339)		26,205	10 - 21		28,689		(3,928)		24,761
Internally developed software	5		4,620		—		4,620	5		4,904		(985)		3,919
Total identifiable intangibles		$	52,053	$	(3,068)	$	48,985		$	52,914	$	(7,666)	$	45,248


		~~September 30,~~
~~Leases~~	~~Condensed Consolidated Balance Sheet Classification~~	~~2019~~
~~Assets~~
~~Operating lease right-of-use assets~~	~~Deposits and other assets~~	$	~~5,507~~
~~Finance lease right-of-use assets (1)~~	~~Property and equipment, net~~		~~3,810~~
~~Total leased right-of-use assets~~		$	~~9,317~~

~~Liabilities~~
~~Current~~
~~Operating lease liabilities~~	~~Other current liabilities~~	$	~~2,217~~
~~Finance lease liabilities~~	~~Current maturities of long-term debt~~		~~1,609~~

~~Noncurrent~~
~~Operating lease liabilities~~	~~Other long-term liabilities~~		~~3,448~~
~~Finance lease liabilities~~	~~Long-term debt, less current maturities~~		~~1,693~~
~~Total lease liabilities~~		$	~~8,967~~


Year Ending December 31,	Operating Leases		Finance Leases
2019 (excluding the nine months ended September 30, 2019)	$	783	$	575
2020		2,220		1,538
2021		1,584		1,041
2022		781		449
2023		267		—
Thereafter		590		—
Total lease payments	$	6,225	$	3,603
Less: interest		560		301
Present value of lease liabilities	$	5,665	$	3,302


	~~September 30,~~
~~Lease Term and Discount Rate~~	~~2019~~
~~Weighted-average remaining lease term (years):~~
~~Operating leases~~		~~3.4~~
~~Finance leases~~		~~1.6~~
~~Weighted-average discount rate:~~
~~Operating leases~~		~~5.9~~	%
~~Finance leases~~		~~5.5~~	%


	~~Nine Months Ended~~
	~~September 30,~~
~~Other Information~~	~~2019~~
~~Cash paid for amounts included in measurement of lease liabilities:~~
~~Operating cash flows from operating leases~~	$	~~2,492~~
~~Operating cash flows from finance leases~~		~~196~~
~~Financing cash flows from finance leases~~		~~1,304~~
~~Right-of-use assets obtained in exchange for new lease liabilities:~~
~~Operating leases~~	$	~~336~~
~~Finance leases~~		~~1,371~~


Beginning balance, December 31, 2019	$	—
Additions for costs expensed		5,618
Severance payments		(4,330)
Currency translation adjustment		28
Ending balance, September 30, 2020	$	1,316


Exhibit
No.		Description
†	10.1	Amendment No. 1 to Second ~~Amendment to~~Amended and Restated Credit Agreement, dated as of August 6, 2020, by and among NCS Multistage Holdings, Inc. ~~Employee Stock Purchase Plan for U.S. Employees~~, Pioneer Intermediate, Inc., Pioneer Investment, Inc., NCS Multistage Inc., Wells Fargo Bank, National Association, Wells Fargo Bank, National Association, Canadian Branch, and the lenders party thereto (incorporated by reference to Exhibit ~~10.2~~10.1 to the Company’s ~~Quarterly~~Current Report on Form ~~10-Q (File No. 001-38071)~~8-K/A filed on August ~~6, 2019)~~11, 2020).
†	~~10.2~~	Second Amendment to NCS Multistage Holdings, Inc. Employee Stock Purchase Plan for Non-U.S. Employees (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q (File No. 001-38071) filed on August 6, 2019).
*	31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*	31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
**	32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**	32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
***	101.INS	XBRL Instance Document
***	101.SCH	XBRL Taxonomy Extension Schema
***	101.CAL	XBRL Taxonomy Extension Calculation Linkbase
***	101.DEF	XBRL Taxonomy Extension Definition Linkbase
***	101.LAB	XBRL Taxonomy Extension Label Linkbase
***	101.PRE	XBRL Taxonomy Extension Presentation Linkbase

†	~~Management contracts or compensatory plans or arrangements.~~
*	Filed herewith.
**	Furnished herewith.
***	Submitted electronically with this Report.



Date: November 5, ~~2019~~2020	NCS Multistage Holdings, Inc.

	By:	/s/ Ryan Hummer
		Ryan Hummer
		Chief Financial Officer and Treasurer

		(Principal Financial Officer and Authorized
		Signatory)



	September 30,		December 31,		September 30,		December 31,
	2019		2018		2020		2019
Land	$	2,054	$	1,995	$	1,616	$	2,090
Building and improvements		11,663		5,185		7,954		12,242
Machinery and equipment		21,158		18,135		17,817		21,469
Computers and software		2,466		2,373		2,333		2,694
Furniture and fixtures		1,191		1,097		1,296		1,208
Vehicles		7,226		6,980		499		646
Right of use assets - finance leases						7,938		5,739
Service equipment		244		244		244		244
		46,002		36,009		39,697		46,332
Less: Accumulated depreciation and amortization		(13,594)		(10,270)		(15,325)		(14,333)
		32,408		25,739		24,372		31,999
Construction in progress		1,262		6,557		139		975
Property and equipment, net	$	33,670	$	32,296	$	24,511	$	32,974