EXPRO GROUP HOLDINGS N.V. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Third Quarter Financial Results: Q3 2024 revenue was $423 million and adjusted EBITDA was $85 million, both within quarterly guidance ranges. Sequential revenue decline reflected Congo project ramp-up and Q2 subsea well access strength. Adjusted EBITDA decreased sequentially but increased year-over-year.
• Macro Environment: Despite near-term headwinds, energy services industry has solid multiyear outlook for international and offshore markets. Commodity prices under pressure but long-term outlook for energy services remains positive.
• Regions: North and Latin America saw revenue decrease; South America had strong performance in certain areas; Europe and Sub-Saharan Africa had revenue decline due to Congo project and subsea project delivery; Middle East and North Africa had revenue growth; Asia Pacific had revenue growth.
• Coretrax Integration: Integration efforts are well underway, with collaboration on tenders and potential revenue synergies. Examples include successful expandable jobs in Kuwait and cross-product line initiatives in Brunei.
• Industry Awards: Expro's CENTRI-FI consolidated control solution won 2024 Special Meritorious awards for engineering innovation, and Expro was a finalist in three categories in the Gulf Energy Excellence Awards.

Segment Performance

• North and Latin America: Third quarter revenue was $139 million, a decrease of $18 million or 11% quarter-over-quarter, reflecting decreased activity in well construction, well flow management, and subsea well access in the Lower 48, Gulf of Mexico, and Mexico.
• South America: Well flow management team had a strong quarter in Argentina, and well construction team continued strong performance in Guyana.
• Europe and Sub-Saharan Africa: Third quarter revenue was $131 million, a sequential decrease of $37 million or 22%, driven by delivery of a large subsea project in Q2 and lower revenue from the Congo Production Solutions project. Segment EBITDA margin at 24% was up 3 percentage points sequentially and down 4 percentage points relative to Q3 2023.
• Middle East and North Africa: Revenue of $87 million, up 7% driven by a full three months of revenue from Coretrax. Segment EBITDA margin at 35% was flat quarter-over-quarter and up about 6 percentage points year-over-year.
• Asia Pacific: Third quarter revenue was $65 million, up 4% relative to the June quarter, primarily reflecting increased activity in Thailand, Australia, and an increase in Coretrax revenue. Segment EBITDA margin at 25% was up 1 percentage point from the prior quarter.

Guidance

• 2024 Full Year: Refined guidance to revenue between $1.72 billion and $1.75 billion and adjusted EBITDA between $335 million and $350 million.
• Q4 2024: Revenue expected to be within $440 million to $470 million (sequential and year-on-year growth at midpoint of ~8% and ~12% respectively), adjusted EBITDA within $90 million to $105 million (adjusted EBITDA margin 20% - 22%). High end of Q4 guidance assumes favorable resolution of Congo project variation orders.
• Medium-Term Targets: Aim for $2 billion run rate revenue, mid-20s adjusted EBITDA margin, and 10% free cash flow margin over medium term, but 2025 may start slow due to market headwinds.

Risks

• Commodity Price Fluctuations: Weakened demand in China and uncertainty around OPEC+ production levels impact commodity prices.
• Customer Spending: Customers are cautious with discretionary spending, affecting growth in certain regions.
• Project Delays: Select projects may be delayed, resulting in slow start to 2025, particularly in North America onshore market.
• Geopolitical Tensions: Tensions in the Middle East create uncertainty and volatility in oil markets.

Question and Answer

• Q: Neil Mehta asked about 2024 outlook revision and path to $2 billion revenue and 25% EBITDA margin.

A: Quinn and Mike discussed market headwinds, project sanctioning, and Congo project resolution. Mentioned NLA soft spots, project sanctioning in international offshore markets as favorable, and Congo project variation orders impact.

• Q: Arun Jayaram asked about Congo project and fourth quarter guidance.

A: Mike clarified Congo project is moving to O&M phase and fourth quarter guidance includes margin recovery from Congo. Quinn discussed Q4 guidance range and margin recovery potential from Congo project.

• Q: Eddie Kim asked about 2025 outlook and net pricing.

A: Mike and Quinn talked about budget process, activity slope, and net pricing impact. Mentioned net pricing gains impact in second half of 2024 and early 2025, and activity mix and operating leverage as building blocks for margins.

• Q: Steve Ferazani asked about new contract awards and Coretrax integration.

A: Mike and Quinn talked about contract awards, Coretrax synergies, and growth opportunities. Highlighted Coretrax technology and revenue synergy potential in regions like Latin America.

• Q: Josh Jayne asked about deepwater white space and value proposition.

A: Mike discussed day rates, technology benefits (e.g., CENTRI-FI), and M&A opportunities. Mentioned technology driving operational efficiencies and relevance to customers.