Hello and welcome to today's Expro Q2 2022 Earnings Presentation. My name is Elliot and I’ll be coordinating your call today. [Operator Instructions] I would now like to hand over to Karen David-Green. The floor is yours. Please go ahead.

Welcome everyone to Expro's second quarter 2022 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. We have an accompanying presentation on our second quarter results that is posted on the Expro website expro.com under the Investors section. In addition the second quarter financials are downloadable on the Expro website under the Investors section. 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 any 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 can 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 second quarter 2022 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 pleased to share with you that Expro delivered robust operational performance and financial results that exceeded the guidance we provided for the just completed second quarter. We are experiencing increase customer activity levels across all segments of our business, bolstered by a backdrop of strengthening industry fundamentals. We believe this positive momentum will not only continue, but will also accelerate going into 2023 and beyond. Expro is poised to capitalize on an expected increase in customer spending and activity. Today Expro has a scope and financial profile required to compete and win in what we believe is the best outlook for energy services in at least a decade. Our results in the second quarter and our market outlook underscore the benefits of Expro's balanced portfolio of services and solutions with leading capabilities and a culture built around safety, service quality, organizational efficiency and risk management. In addition, we believe our through-cycle resilience is a significant advantage and competitive differentiator for Expro. Our current portfolio of services and solutions is paired with a global operating footprint with established positions in key growth markets and the combination provides Expro with good leverage to improving industry fundamentals and in particular to the rebound that is beginning to take place in the international and offshore markets. We have never been better positioned to capture cyclical recovery upside. We also continue to have a best-in-class innovation platform and technology portfolio that enables us to support our customer’s efficiency and emissions-related goals, grow market share and capitalize on longer term industry trends. Finally, our strong balance sheet and merger related synergies provide us with significant financial, operational and strategic flexibility that will allow us to accelerate growth and create long-term stakeholder value. On today's call I'll…

Thank you, Mike. Good morning and good afternoon, to everyone on the call. As Mike noted, I will cover the results for the quarter ended June 30th 2022 and will primarily highlight our sequential performance compared to the quarter ended March 31st 2022. To recap, we reported revenue of $314 million for the June quarter, which was up sequentially $34 million or approximately 12% relative to Q1 2022. The sequential increase in revenue was driven by higher activity across the North and Latin America Europe and Sub-Saharan Africa and Asia Pacific segments partially offset by lower activities in the Middle East and North Africa segment. Adjusted EBITDA for Q2 2022 was approximately $51 million, representing a sequential increase of approximately $14 million or 39% relative to Q1 2022. Adjusted EBITDA margin in Q2 was 16%, as compared to 13% in Q1. The sequential increase in revenue and adjusted EBITDA was driven by strong results for well flow management and well construction in North and Latin America. As highlighted in our press release, adjusted net income for the second quarter of 2022 was $0.02 per diluted share compared to adjusted net income for the first quarter of 2022 of $0.01 per diluted share. As noted in our press release, adjusted net income for Q2 includes foreign exchange losses of $0.05 per diluted share, as compared to foreign exchange gains of $0.03 per diluted share in Q1. Q2 contribution margin of 38% was up approximately one percentage point sequentially, from Q1 2022, reflecting improved fall-through on higher revenue as a result of a more favorable activity mix. Q2 support costs of $70 million totaled 22% of group revenue and were down approximately $1 million sequentially or approximately three percentage points relate Q1 2022 and were down $8 million or approximately nine percentage…

Thank you, Quinn. We delivered exceptional operational performance that drove significant growth on a top and bottom line and is beginning to demonstrate the true capability of the company. Our broad portfolio of services and solutions continue to create opportunities in the growth markets that will be key to Expro's long-term success. Our innovative platform, next-generation technology and solutions and ESG applications are differentiators that continue to rapidly advance our reputation and outstanding track record with customers as a leading well expert. We continue to secure contracts and demonstrate the value of the breadth of our portfolio and the depth of our expertise can bring to clients across the life of their wells. Looking forward, the positive signs of a recovery we saw in the first quarter continued to gain momentum. We are seeing increased demand for our services and solutions as the recovery that began within the US onshore market has begun to gain traction in the offshore international markets. We remain confident that the pipeline of projects we are seeing will support strong multi-year growth and firmly believe Expro is uniquely positioned to capitalize on this favorable outlook. We are incredibly excited about the strength and positioning of Expro. Our results could only have been achieved by the hard work and focus of our team. It's through their dedication that we continue to accelerate growth, improve profitability and enhance value for shareholders, employees, customers and partners. Thank you, again. Operator, let's go ahead and open up for a few questions.

Thank you. [Operator Instructions] Our first question today comes from James West from Evercore ISI. Your line is open. Please go ahead.

Hey, good morning, guys.

Good morning, James.

So one Mike -- so curious, it seems like we've gone through a bit of acceleration in demand here over the last quarter maybe two quarters in a sense of urgency has arisen within your customer base? I guess -- so first is that -- am I getting that correct? And that this urgency is kicking in? And then second, are you seeing more of that urgency or increased demand on producing assets or new assets or interventions versus new well construction type work?

Yeah. So James, I can tell you one of the good things is we've really -- now that we're kind of more exited the pandemic. I've been able to spend an awful lot more time with customers, not only in the US, but in particular Middle East and Asia. And what I'd say is the conversations particularly around new FIDs, new projects, new drilling and completion type activity that's much more constructive, much more dialogue and discussion around that. I'd say that the -- we've had continuing strong commentary and strong game with customers around producing assets. So that's -- I think that's ramping up, but not at the same rate as the positivity from the discussions around new well type -- new well drilling activity and new well completion activity.

Okay. Fair enough. And then on the pricing side, are you -- at this point, are we back to kind of -- or getting close to back to pre-pandemic type of levels? Admittedly offshore wasn't as robust even then, but it's growing and robustness now. But are you achieving the returns on capital investments that you would like to see when you're allocating capital and what you're pricing new contracts?

So, I would -- and I tried to allude to it in my earlier comments, we're starting to see some spotty opportunities to push price, and we're pushing price every opportunity we can. It's more selective right now. I think, we'll continue to gain more momentum around our ability to continue to press price as we exit 2022 going into 2023, but we are starting to have -- it hasn't quite turned the quarter so to speak like North America. US land has where there's lots of pricing leverage and pricing traction, but we are starting to see in some particular markets and some particular service lines positive opportunity to continue to get that pricing. And I think we're all keen to make sure that we start to implement that absolutely as soon as we can.

James, I think the only thing add…

Okay. Got it. Thanks, Mike. Yes.

…I could just point you back to Mike's prepared remarks, there are capacity constraints within certain solutions and certain product groups complex well construction or to provide construction activity, or TROs as well as the subsea landing streams. It's obviously a market that is supported by just a handful of service providers ourselves being one of the two larger ones product lines. But obviously everything about the supply and demand there's less than a supply for those two equipment classes. The other thing I'd highlight is with the pickup in drilling and completion type activity. It's not necessarily how we present our supplemental disclosures. But what we consider to be our drilling completions over businesses, they were up 20% quarter-over-quarter revenue-wise and the thoughts for margins on the incremental activity is north of 50%. So that's really where you get the…

Okay. Got it. Quinn, that's great. Yes, no doubt. Thanks, Quinn. It’s very helpful.

Thanks, James.

Our next question comes from David Anderson from Barclays. Your line is open. Please go ahead.

Hi. Hey, good morning, Mike. I was just curious which of your product lines showed the greatest margin improvement this quarter. And I think you maybe just touched on it just now here. But curious if there's been much of improvement in well construction in particular as a rental business in TRS with high offshore exposure. Just curious how we should be thinking about the margin expansion upside in that particular business and how that should contribute overall.

Sure. We alluded to some of this in the prepared remarks. What kind of additional commentary, I'd add to it David is, we've really seen some increased mix, better mix of activity in North Latin America in particular. So yes, particularly around TRS around well construction, we've been able to start to see some margin expansion there. And then I think overall what you're really seeing is starting to gain more traction with the cost synergies, we're taking out the organization overall. We're in essence we're a full quarter ahead of that. And I think one of the real positives of us being able to get the synergies implemented is if we're being to completely honest anytime you're doing a consolidation, you're doing a merger, if there is a little too much internal focus that goes on. It's a necessary part of the eval as doing a merger, as we can get more of that behind us and we'll largely, because we're a quarter ahead of it that means going in exiting 2022 and going into 2023, we're really going to be much more externally focused. And that's one of the reasons why I've been challenging the organization is so hard to make sure we get these things done sooner rather than later. But overall we're seeing margin expansion across well construction and even in some of the well flow management and subsea access we're getting some traction in all three of those right now.

So if I just stay on the well construction side, we're hearing a lot of talk about rigs coming back to work both on the jack-ups and the deepwater side. Are you getting inquiries for those? I'm just kind of curious it's, obviously, only a couple of players in the TRS business. So I'm just, kind of, curious are you starting to kind of roll out some additional equipment at been sidelined for a while. Can you help us give us a handle on what that looks like in terms of -- I guess your capacity type of equipment out there and how that's moved up?

Yes. No, absolutely. We are seeing the same phenomenon that the drillers are seeing today with increased utilization those kind of things because keep in mind a drilling rig and TRS type equipment goes kind of hand-in-hand. So yes, we're able to start to put some of that equipment back to work. I referred to a casing running tool CRT opportunity we execute on in Brazil. That purely is taking assets and resources that were underutilized previously and putting those to work. So on the flip-side of that yes, we're seeing good traction with all construction. The other thing that we're seeing even more so than I had anticipated was it really becomes an early warning radar system for us so to speak because typically with customers they select the rig first almost in conjunction with that are certainly right behind it is selecting the TRS provider. And then you start moving into well completions and well testing and those type of activities. So we're getting earlier customer engagement. And I think that we'll continue to see that allow us to more upholster revenue opportunities those types of things.

That's interesting. So if I just -- on that on that well flow management it was up 14% sequentially this quarter I'm pretty sure what was pretty strong for business that I thought we would consider later cycle more production focused. So I guess the question was I think you had said in your remarks that MENA was a little bit weaker than expected. So where were the results? Was it more mix related this quarter? Was it regional? Was something else, kind of, picking up and offsetting what you said? I mean because I would have thought MENA would have actually been a driver of that growth. And it sounds like it wasn't.

Sure. MENA for us was really -- we had kind of a quarter-on-quarter product sales that didn't reoccur in the second quarter. So that was what gave us a little bit of softness there. Our strong activity in the Middle East -- Algeria in particular was actually up quarter-on-quarter. What is important to recognize with well flow management is in particular as well testing we can utilize those assets in a well completions cleanup load or you can use those assets in a production optimization mode. And that allows us to kind of flex that equipment to deploy it into one or the other. And part of the growth we saw was starting to see some better activity from a new well completions, new well flowback those type things within the quarter.

Okay. Thank you very much.

Absolutely. Thanks for the questions.

[Operator Instructions] This concludes our Q&A and today's conference call. An audio replay of the webcast will be available in the Investors section of the company's website approximately three hours after the conclusion of the call and remain available for a period of 12 months. We thank you for your participation. You may now disconnect your lines.