National Energy Services Reunited Corp. Q4 FY2024 earnings call

• 2024 Highlights: 2024 was an exceptional year with milestones like NASDAQ relisting in October. Operationally, the company secured new contracts, enhanced its core business, and advanced into new technology frontiers with the ROYA direction drilling platform and NEDA decarbonization portfolio. It expanded and deepened its presence in MENA countries. In Saudi, it was the fastest-growing country, gaining market share; in Oman, it maintained solid execution and introduced the ROYA platform; in Kuwait, it became the third-biggest country with high growth potential; in UAE, Algeria, and Iraq, it maintained steady performance. The fourth quarter result was a testament to continuous improvement and new innovations. - Technology Insights: The ROYA direction drilling platform had a key pilot milestone with a successful single run well board delivery in Kuwait. NEDA saw success with over 2,000 metric tons of CO2 delivery for a CCS reservoir injection pilot in Indonesia and continued developing a circular mineral and water process in the GCC, formalizing a zero liquid discharge strategy with Salttech.

In the fourth quarter of 2024, NESR achieved a record revenue of $343.7 million, marking a 2.2% sequential increase and an 11.8% year-over-year growth. The adjusted EBITDA for the quarter stood at $87.2 million with a margin of 25.4%. For the full year 2024, revenue reached $1.3 billion, up 13.6% year-over-year, and adjusted EBITDA was $310.1 million, up 18.2% year-over-year with a margin of 23.8%. Cash flow from operations in the fourth quarter was $46.3 million, and for the full year, it was $229.3 million. The free cash flow for 2024 was $124 million. The net debt-to-adjusted EBITDA ended the year at 0.89 times, which is below the goal of one times.

• MENA upstream activity is expected to be a relative bright spot for growth in 2025, with the gas development theme being central. - The 2025 growth outlook for NESR relative to the market remains unchanged. - 2025 is expected to follow a seasonal pattern similar to 2024, with the first quarter being the slowest and sequential activity building up through the year. - The frontier technology growth leg is on track, with ROYA expected to be a linear driver of growth, and NEDA and the water business representing significant potential with catalysts in 2025.

• Uncertainties in oil prices can impact the budgets and business operations of MENA countries' customers. - Geopolitical developments may affect the deployment of projects and growth plans in the countries where NESR operates.

Q: How do you view the region's spending patterns in 2025 and NESR's position?

A: The Middle East growth in 2025 is expected to be low single digits, but NESR anticipates doubling that growth. In Saudi, offshore and oil activity is stable, while the gas unconventional program is growing. Kuwait is set for double-digit growth, and UAE, Oman, and Iraq have stable performances with technology deployment. North Africa, particularly Libya, has exponential growth potential.

Q: Discuss the mix change in Saudi and Jafurah progress.

A: Offshore and oil activity in Saudi is stable. The gas unconventional program in Saudi, especially Jafurah, is increasing with huge potential. Tendering for completion contracts in Jafurah is expected in the second half of 2025, with NESR involved and having a positive outlook.

Q: Talk about capital allocation and strategic direction.

A: NESR will spend capital on internal technology development like ROYA and NEDA. It is looking at M&A for innovative solutions in areas such as mineral recovery and direct lithium extraction. A capital return program like share buyback or dividend will be evaluated in the second half of 2025.

Q: Margin performance in Q4 2024 and 2025 outlook.

A: Good margin performance in Q4 was due to strong execution and service quality. Expect margins to track 2024 in 2025 with high single-digit growth, but there will be more competition.

Q: Commercially in Kuwait and the Ahmadi Innovation Valley.

A: Kuwait is a bright spot with strong activity and an offshore discovery. It is planned to be the second-largest country for NESR. NESR is part of the Ahmadi Innovation Valley, which involves an innovation center, joint research projects, and potential for direct awarded contracts.

Q: ROYA platform pathway and testing.

A: The ROYA platform technology is working, with successful testing in different environments. It is expected to be commercial by the second half of 2025, with ongoing deliberate extensive testing.

Q: Valuation gap and warrants.

A: There is a valuation gap issue, and NESR is monitoring and considering listing options. Warrants have been extended until June 2026.

Q: Market growth, visibility, oil price sensitivity, and capital deployment.

A: MENA region growth in 2025 is expected to be 3%-4%, while NESR expects to grow 8%-10%. Oil price is expected to stay between $60-$70, and below that could lead to production curtailment. The gas program is independent of oil price. Capital deployment will be evaluated in the second half with new contracts and projects potentially adding significant revenue.