Hello, and welcome to today’s Expro Fourth Quarter Earnings 2021 Conference Call. My name is Elliot, and I’ll be coordinating your call today. [Operator Instructions] I would now like to hand over to our host, Karen David-Green. Please go ahead.

Welcome, everyone, to the Expro’s fourth quarter 2021 conference call. I'm joined today by Mike Jardon, CEO; and Quinn Fanning, CFO. First, Mike and Quinn will share their prepared remarks, and then we will open it up for questions. The condensed consolidated financial statements of the company reflect the financial position, results of operations and cash flow as only legacy Expro for all periods prior to October 1, 2021, the merger day, and of the combined company, including activities of Frank’s for all periods subsequent to the merger. We have an accompanying presentation on our fourth quarter results that is also posted on the Expro website expro.com, under the Investors section. The presentation, along with the downloadable financials, those reflect the pro forma combined company result of legacy Expro and legacy Frank’s. I'd like to remind everyone that some of today's comments may refer to or contain forward-looking statements. Such remarks are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such statements speak only as of today's date, and the company assumes no responsibility to update any forward-looking statements as of future date. The company has included in its SEC filings cautionary language identifying important factors that could cause actual results to be materially different from those set forth in any forward-looking statements. A more complete discussion of these risks is included in the company's SEC filings, which may be accessed on the SEC website or on our website at expro.com. Please note that any non-GAAP financial measures discussed during this call are defined and reconciled to the most directly comparable GAAP financial measure in our fourth quarter 2021 earnings release, which can be found on our website. With that, I'd like to turn the call over to Mike.

Thank you, Karen. Good morning and good afternoon, everyone. I'm excited to be speaking with all of you today to discuss Expro’s strong results for the fourth quarter, which marks the first full quarter of our new company after completing our merger with Frank's International. While Expro and Frank's were both leaders in their own right, together we have a more resilient business model that is positioned to continue to win in the market and lead the next chapter of our industry, given the following: our balanced portfolio of services and solutions that span the well lifecycle, which provides true cycle resilience and ability to better capture cyclical recovery upside; our diversified global footprint with operations and key growth markets; our best in class innovation platform and technology portfolio that enabled us to support our customers carbon capture reduction goals; and finally, our strong balance sheet and merger related synergies, which bring a significant degree of operational flexibility and strategic optionality in order to accelerate growth and create long term shareholder value. The fourth quarter results we announced today and our outlook for 2022 underscores the strong business combination that we have created through the merger and the opportunities ahead for our business, as we continue to capitalize on positive industry trends. On today's call, I plan to first walk you through our fourth quarter performance. Secondly, give you an update on our integration process and finally, provide some perspective on trends we are seeing in the broader industry environment. Starting with our fourth quarter performance, we deliver outstanding results that demonstrate our progress unlocking the value inherent in our scale, broad portfolio of solutions, global operating footprint, through-cycle capabilities and strong financial profile. For the fourth quarter, we delivered revenue at $296 million and adjusted EBITDA a $51 million.…

Thank you, Mike. Good morning. Good afternoon to everyone on the call. As Mike noted, I will cover the results for the quarter and year ended December 31, 2021. And we'll highlight sequential and year-over-year performance on both an as reported basis, which is consistent with the presentation of financial results of our press release and SEC filings and on a pro forma basis, which is consistent with the presentation of financial results in the slides that Karen referenced at the top of the call and that are available to the investor section of our website, expro.com. To recap, we reported revenue of approximately $296 million for the third quarter, which was up $98 million, or approximately 50% relative to the September quarter. The increase was driven by the merger between legacy Frank’s International and legacy Expro, which contributed $112 million in additional revenue, partially offset by $21 million in production equipment sales that occur during Q3 2021 but did not reoccur in Q4. On a pro forma basis, revenue was down $17 million, or approximately 5.5% quarter-over-quarter, excluding the adjust reference, Q3 production equipment sales and consistent with the guidance provided on our third quarter earnings conference call, revenue was essentially flat quarter-over-quarter and largely reflected our expectations for seasonally weaker fourth quarter. As reported, adjusted EBITDA for Q4 2021 was approximately $51 million, representing a sequential improvement of approximately $20 million or 61% quarter-over-quarter. In percentage terms, adjusted EBITDA was up approximately 120 basis points quarter-over-quarter to 17% of consolidated revenue. The merger contributed $17 million of the quarters adjusted EBITDA increase. The balance of the adjusted EBITDA increase reflects a modestly, more favorable activity mix, but limited pricing traction today, at least in international markets. On a pro forma basis, adjusted EBITDA was up $6 million, or…

Thank you, Quinn. We ended 2021, on a strong note with excellent fourth quarter operating performance that demonstrates potential of our resilient flexible business model. As we look ahead to 2022, we are well-positioned to build on our momentum, given our strong business fundamentals and tailwinds from broader industry trends. We are gaining more traction in the market to win new business and expand our mandate with existing customers as our team capitalizes on broader portfolio, best-in-class service quality and our reputation as an industry leading well expert with a focus on well integrity. Leveraging our strong innovation platform, we continue to advance our technology to develop the next generation of solutions, to address our customer’s needs and support their carbon reduction objectives. We are capitalizing on the industry recovery as drilling activity continues to ramp-up particularly offshore and a key growth markets where we are fortunate to have already strong presence. As customers increased activity, we're also seeing more demand for carbon reduction solutions across the board. Suffice to say, we are firing on all cylinders, and we are well-positioned to continue delivering excellent service to our customers by implementing our thoughtful plans to unleash the full power of Expro. I am particularly proud to see how our combined team is coming together to support each other and deliver exceptional service to our clients. Their work is inspiring and to be the bedrock of our success. I'm excited by entering 2022 as a new company and look forward to what the future holds for us as we focus on accelerating growth, improving profitability and enhancing value for shareholders, employees, customers and partners. Thank you again. Operator, let's go ahead and open up for questions.

Thank you. We will now proceed with the Q&A. [Operator Instructions] Today, we'll first begin our Q&A session with a few questions that we have received from our pre-registered callers. The first question, could you provide more detail on how you believe Expro is differentiated in the market? What do you believe you are providing that others are not?

Great. I think, it's a good question. You know, I always like to think about Expro really in terms of upscale solutions and overall service. With a new combined company, we have a significant global footprint. This includes operations in all the key growth markets that we serve our customers really wherever they operate in our scale and our geographic footprint is going to allow us to expand our relationships with those customers, and ultimately provide them with the same services they rely on across different regions and different operations. In particular, we're really well-positioned across many of the key markets where we see strong growth activity potential, in particular North America, the North Sea and the Middle East. In terms of – in addition of our really broad footprint, we -- now with a new combined company, we offer an expanded suite of solutions that allows us to serve our customers in all stages of the world lifecycle. So when our customers are beginning new activity, exploration activity or if they're managing current wealth flow or completing new wells, we ultimately had to new company have best-in-class solutions that can support that full lifecycle activity. This prop solution does not allows us to serve the customers today, but I think it positions as well to give us further visibility in their future projects, and really ultimately help us anticipate what we can do to support them better in the future. A good example is in the Middle East, we won a well construction contract, which was our first noteworthy revenue synergies from the merger. We're also very focused on leveraging our strong innovation and technology platforms that allow us to continue to advance solutions that ultimately help support our customers in the industry. Finally, lastly, I think what customers oftentimes come to Expro for our solutions. The reason our customers stay with us is because of our excellent service quality. Both Frank's and Expro have always been known for our service quality. And really since completing the merger, we're already starting to see the tremendous potential of the benefits of this combination from our customer’s perspective. Our outstanding service quality was highlighted by the work that I mentioned earlier in the call from the performance of our ESSA team in the quarter. I can't stress how important it is to how very strong confirmation is when you exceed 97% on customer feedback, it means you're really clicking on all cylinders. I think it's a real testament to how well the team is performing and in ESSA. So ultimately, with a broader footprint, a new suite of solutions, and really, really solid service quality allows us to really be a tremendous force, and allows us to be more of a partner for our customers in the industry.

The second question, can you provide more perspective on the industry's energy transition and Expro’s role in supporting it?

It’s an interesting question. I can tell you that the energy transition is really of top of everyone's mind in the industry. Almost every conversation that I have with our customers, our partners, this is usually if not the very first topic, it certainly is certainly one of the first topics we talked about, ultimately around how do we as an industry reduce our carbon footprint. As I commented earlier, we've really seen from the International super majors in increasing their focus on reducing emissions, and ultimately positioning their businesses for their carbon -- in a lower carbon world. In the coming years, I think we're going to start that the first question customers will always ask for new projects will be around sustainability. And I think that business will be won or lost on whether they can -- as a service company, whether we can help reduce the project's carbon footprint more so than a competition. One of the things that Expro has really built around is ultimately we're leveraging ourselves towards a lower carbon world. We believe that our commitment to sustainability and our strong portfolio, carbon reduction solutions is that one of our key differentiators. I alluded to earlier in the call in 2021, 40% of our R&D efforts have spending was really focused around solutions to help our customers reduce their carbon footprint and have a more sustainable future. Ultimately, we'll allocate almost 50% of our R&D effort to this in 2022. Because I think it's an area we can continue to leverage. And ultimately, if I knew this, I think we think that we'll be able to develop advanced solutions that will help play a critical role for our customers, as they try to achieve their own emission reduction goals, as well as us producing ours as a company. But the other thing to keep in mind is that our customers prepare for a lower carbon future is ultimately our own focus on sustainability. And what are we going to do within our own operations. We as a company are targeting a 50% reduction in our carbon emissions by 2030. And the ultimate goal of achieving net zero carbon emissions by 2050. We think that in doing this, we're really demonstrating to our customers that we truly practice what we preach. And we're focused on sustainability, not in -- not only in how we help them reduce their carbon emissions, but also how we reduce ours as a company as well.

Our next question comes from Taylor Zurcher from Tudor Pickering Holt. Taylor, your line is now open.

Hey, Mike and Quinn, thanks for taking my question. I have first one on the MENA region really strong Q4 results in that geographic base segment for Q4. And I'm just curious on 2022, in this really constructive commodity price environment? And I just hoping, you could shed some light on the mindset of some of your NOC customers in that region today? And what that might mean for growth in the MENA region for you guys over the course of 2022?

Yeah. Hi Taylor, good question. I think what we're really seeing is continued investment from our NOC customers in the Middle East. They tend to be more methodical, a little bit more careful on their investment decisions and ramping up activity, those kinds of things. But I can tell you, in speaking with a number of them we'll continue to see that the strong commodity price right now will help with that. And I think that, as we saw the events we highlight earlier where we were able to leverage a TRS contract in Saudi. I think, because we have a good presence with some of the historic legacy Expro business. I think we're going to be able to leverage some of those relationships and really expand our footprint throughout the Middle East. So I think we're well positioned as a company. I also think that's the whole city, overall the industry be strong in the Middle East here as we continue into 2022.

Yeah. Good to hear. Follow-up on free cash flow, so I imagined here and I asked this question last quarter as well. But I imagined some more cash outlays for merger and integration type expenses here in the near-term. But now as we think about the full year of 2022, is it reasonable to assume that the cash balance on the balance sheet is likely to build for from current levels exiting 2022, relative to today?

That's certainly our expectation Taylor. Free cash flow obviously is defined differently by to praise people. I guess the guidance we've given today, in regards to EBITDA margins with 12% to 14% in Q1 and ultimately getting the plus or minus 20%. In the back half year, you can certainly interpolate to get to I guess for Q2. But if you kind of average that out, you're going to be in the 17% to 17.5% for the year for just EBITDA margins. And the management remains focused on constraining CapEx. Potential revenues it's still at 78%. Non- CapEx, if you at least use EBITDA plus CapEx as a potential proxy that puts you in the high-single digit area as a percentage of revenue. That is our target is high-single digit, free cash flow margin. But we do expect that we'll build cash this year. Notwithstanding, the fact that we do have integration related expenses, including some CapEx associated with facilities consolidation, but your basic assumption is consistent with our views.

Awesome, thanks for the answers.

Thanks, Taylor.

Our next question comes from James West of Evercore ISI. James, please go ahead.

Hey, good morning, Mike and Quinn.

Hi West.

Good morning Sir.

Yeah. Yeah. Thanks for the guidance for the full year that was extremely helpful. As we think about the integrated business. Curious, Mike, in your conversations with customers, particularly, the -- on the offshore environment, I think, I understand kind of the cadence of activity because Quinn gave us the numbers for this year. But as we look into kind of 2023, 2024, do you start to see really some momentum building for at least a decent offshore cycle?

I think, its -- what are the benefits of us completing the merger is, it really has given me a great opportunity to speak with and talk with and meet with an awful lot more customers than the neither what I normally would. I think today, there continues to be some cautious optimism. I think offshore, circuit 60% of the FIDs that are going to be approved are going to be offshore type FIDs. I think we're going to see that momentum starts to build in the second half of the year. It's part of the reasons why we've given some guidance around where we see revenue and where we see margins. I don't think we're going to see the same number of -- massive number of well FIDs approved in the short term that we historically would have. We’re going to continue to see operators that are going to prove two, three, four well projects and then they'll roll out into another two, three, four wells. But, yes, there's a lot more positive sentiment. And I certainly have much more confidence today in what our activity set looks like for the end of this year, than even what I did when we were going through our budgeting process at the end of last calendar year.

I think, the only thing I would account to that, is if you look at kind of our customer inquiry activity. As Mike points out, what may have been neat well campaign that we would have had 12 to 18 months worth of visibility on in terms of project planning. The customers or at least the IOCs are proving them in smaller or more discrete elements. So if you had an 8 well program, historically, they end up being two separate four well approvals. I think one of the interesting knock-on effects of that is that the customer turnaround requests, as an example for subsea completions work seems to be shortening.

Okay. That’s very interesting. Okay. Thanks for that Quinn. And then on the carbon reduction solutions that you provide, are those scoped into contracts at this point, where they're specifically asking for those or is it more of a conversation topic?

Right now it's more of a conversation topic. I mean, we're starting to see some requests for some requirements from, especially from some of the more the European-centric operators. It's not compulsory, but there certainly is starting to be some scope and some definition. I kind of view this kind of like, in some ways, kind of like HSE performance was 15 years ago, it initially started as you've got to provide your data, and then it become a prerequisite. And I think we're in the scope right now of providing data for some of them, and I think that'll become more of an industry norm.

Right. Okay. Got it. All right. Thanks, guys.

Thanks, James.

Thanks, James.

Our next question comes from Ian Macpherson from Piper Sandler. Your line is now open.

Hi, good morning. This is John [ph] stepping in for Ian. My first question is that given that you currently have over $2 per share of cash on the balance sheet and installed visibility for free cash flow generation, could you please provide a reminder on your capital allocation priorities?

In regards to free cash flow, our number one priority is generating it. We have – we're not one quarter into this is combined company and will certainly have a robust dialogue with our board in regards to capital allocation as we have better visibility on the timing and trajectory of -- particularly recovery in offshore. But we understand what investor expectations are and I'm sure the full suite of alternatives, be on the table, whether it's incremental organic investments, bolt-on M&A or some repatriation strategy. I think that's going to be something that plays out over 2022. But again, our initial focus is on generating cash flow, more so than it is on what we do want to happen.

Okay, great. Thanks for the color there. And then to follow-up, we're obviously early in the integration period, and there's naturally some noise in EBITDA adjustments, specifically with stock-based comp and merger and integration expenses. Could you help us think about maybe how these items settle over the next few quarters?

Sure. Well, I guess one thing I mentioned is our expectations, we'll file our "inaugural 10-K" early next week, and I think a lot of the details regards to stock-based compensation that will be embedded in that will help you understand go forward expectation. But I will point out that the vast majority of the stock-based compensation expenses recognized in Form Q, is essentially a valuation of legacy Expro options based on I think the 1890 stock price as the merger closing day. Obviously, we're south of that, and certainly south of the average exercise price, and there is 40-plus million dollar expenses recognized related to legacy Expro options program. Those details will be available to -- in the K. In regards to merger integration expenses, we will continue at least for a couple quarters to recognize severance associated with a support cost, rationalization and both some operating expense and likely a bit of CapEx associated with the consolidation of facilities. We were within a couple weeks of closing consolidated a single headquarters in Houston. Recognize some lease abandonment costs fourth quarter related to that. We'll continue to have some of those expenses, but I think once we get through 2022, the numbers will settle down a bit and you'll see much fewer adjustments, hopefully those schedules that we provide with the press release. Please help me cut through the noise and see at least what we consider to be kind of traditional core operational performance.

Great. Thanks for taking my questions. I'll turn it back.

Yes, sure.

Thanks, James.

Thank you, ladies and gentlemen. That concludes your conference for today. We appreciate your participation You may now disconnect.