Hello, and welcome to today’s Expro Q4 2022 Earnings Presentation. My name is Elliot, and I will 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 fourth 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 fourth quarter results that is posted on the Expro website, expro.com, under the Investors section. In addition, supplemental financial information for the fourth quarter and prior periods is downloadable on the Expro website under the Investors section. Further, for an in-depth look at our business, strategy, and industry dynamics, I would refer you to the Expro company overview presentation that we posted on the website on January 24. 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’s 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 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. Expro delivered a strong fourth quarter with financial results at the top end of our expectations. We enter 2023 in a strong position for continued profitable growth with a robust order book supported by strong demand trends for our services and solutions. We recently crossed the one year mark since completing the merger of Expro and Frank’s International and our strong results for 2022 demonstrates potential of our platform. We’ve been able to successfully leverage legacy relationships and our broad operating footprint to secure new business and capitalize on market opportunities and key growth areas while driving efficiencies to improve profitability and expand margins. With our broad geographical footprint, leading portfolio of services and solutions and strong operational execution, we continue to punch above our weight to win new mandates and grow our business. We are confident that we will continue to build on our momentum to achieve strong relative growth throughout 2023 and beyond. We remain confident that the pipeline of projects we are seeing will support strong multi-year growth for the energy services sector. We believe we are well-positioned to capitalize on this multi-year industry upcycle driven by an extended period of underinvestment in global upstream production. We continue to win business through our strong presence in key international and offshore markets and the breadth of our portfolio of innovative solutions. With strong and gaining momentum and longer cycle projects, we expect international demand to accelerate through 2023 in order to add production capacity and thereby meet expected increases in demand. As 80% of Expro’s business is based in international markets and the 70% in offshore markets, Expro’s poised to capture significant upside from these positive industry trends. We are confident that as we continue our shift towards higher…

Thank you, Mike. Good morning. Good afternoon, everyone on the call. As Mike noted, I will cover the results for the quarter and year end December 31, 2022. As I review our fourth quarter performance, I’ll primarily highlight the sequential performance relative to the quarter ended September 30, 2022. I’ll also briefly review the year-over-year performance relative to the fourth quarter of 2021 on an as reported basis, which is consistent with the presentation of financial results in our press release and SEC filings. Because the Expro Frank’s merger closed on October 1, 2021, the full year performance comparison for 2022 relative to 2021 will be on a combined company 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 in the Investors section of our website expro.com. To recap, we reported revenue of $351 million for the December quarter, which was up sequentially $17 million or approximately 5% relative to the third quarter of 2022. The sequential increase in revenue was primarily driven by increased activity in Europe and Sub-Saharan Africa or ESSA and the Middle East and North Africa or MENA regions. Revenue was up $55 million or approximately 19% relative to the fourth quarter of 2021. The increase in revenue was primarily driven by increased activity North and Latin America or NLA and ESSA. Looking at the full year, on a combined company basis, consolidated revenue was up $136 million or approximately 12% year-over-year. The increase in revenue was primarily driven by higher well construction revenue in NLA reflecting increased drilling completions activity across the region and from higher well flow management revenue in ESSA from increased activities, particularly within our Sub-Saharan Africa production solutions business. Adjusted EBITDA for the fourth…

Thank you, Quinn. In the fourth quarter of 2022, we captured strategically important contract wins and continue to build on our strong momentum. Our performance reflects both the legacy strength of Expro and Frank’s businesses and the significant value that we can bring to customers as a combined organization. Additionally, as we have come together as a single organization, we have continued to drive efficiency and identify opportunities to work seamlessly across businesses and geographies. As you heard from Quinn, our initial guidance for 2023 reflects a positive outlook for the year ahead with a midpoint expectation for circa 15% revenue growth, implying a plus or minus 1.5 billion in revenue in 2023, an adjusted EBITDA margin of circa 20%. When we announced the proposed combination of Expro and Frank’s in early 2021, I indicated that we believe that combined company had a “clear path to $1.5 billion revenue”, more than 20% adjust EBITDA margin and an excess of $150 million of free cash flow generation. The anticipated international and offshore recovery is now gaining traction, and our successful integration of the two companies has allowed us to capture the vast majority of identified cost synergies within one year of closing the transaction. Our outlook and guidance assume a continuation of the constructive fundamental backdrop with Brent remaining at or above $75 per barrel and the global economy avoiding a major pullback. Results worth noting that our positive of outlook is based more on the increasing activity and improving business mix, more so than net pricing gains, which we expect will begin to materialize beginning in the second half of 2023 for our services. As markets continue to recover and customers ramp up activity, we are well positioned to support them in whatever region and at whatever stage of their projects they need. Further, our focus on sustainable solutions puts us front and center of customers minds as they continue to look for opportunities to lower their carbon footprints and work more efficiently. I’m very proud of what the expert team has been able to accomplish in the first year of our combined company. Our 2023 outlook highlights that we believe we are well positioned to start delivering on the financial and other objectives that we outlined when we announced the proposed combination of Expro and Frank’s in 2021. I’m confident that we will continue to drive profitable growth prudently invest in opportunities to enhance our portfolio and reinforce our role as well experts for our customers. As we do so, we expect to continue to deliver compelling value to Expro shareholders. With that, we’ll be more than happy to open up the call for questions.

Thank you. We’ll now open the floor to questions. [Operator Instructions] First question comes Luke Lemoine from Piper Sandler. Your line is open.

Hey, good morning. Good result there and nice guide as well for 2023. Mike, you touched on it a little bit with just pricing coming more in second half 2023, and you look back and your pro forma margins have improved three years in a row now, and guidance of course clearly indicates it’ll expand this year. But you look back kind of pro forma margins from 10 years ago, and I believe these were kind of high 20%, 30% range, and if you just kind of look out further with offshore inflecting, getting more pricing. What do you think kind of ultimately the margin potential is for the company?

Yes. Luke, it’s – I appreciate you asking that. I guess, two things I’d like to kind of reiterate. Number one, yes, what we said was the first half of the year, we think – we’re not really getting net pricing gains because pretty much any pricing traction we’re getting as being offset by inflationary effects, whether it’s supply chain costs or it’s employee costs and those kind of things. And we think we’ll work our way through that in the second half and start to – really start to see more net pricing impact. If you go back and you look historically at the two businesses kind of independently, upper 20%, lower 30% EBITDA percentages. So I think that’s the potential capacity of the business. I think you also have to keep in mind, but let’s keep in mind that was in the 2013, 2014 range, we had very, very high rig rates. You had rig rates that were pushing $1 million a day. You had spread rates that were well over $1 million a day. So I think a lot of things have to line up for that. The one thing we’ve really, really been focused on is margin expansion through improved efficiencies and improved cost controls. We – if you kind of go back and look at the two businesses separately in kind of the pro forma, you’ll see that the legacy Expro business was Quinn always uses a phrase, we managed the business to a revenue reality not a revenue aspiration, and that’s the kind of mentality we continue to drive through – with the business today. That’s one of the reasons why we were so focused on making sure we actually took the synergy costs out and we took them out as efficiently as we can. So this is a combined business that if we were to go back to the same market fundamentals that we had in 2013, 2014, which I think is possible, I think we’re a ways down the road in the recovery, but it’s a business that’s going to be in the – certainly in the mid to upper 20% EBITDA ranges within a fairly near-term – within kind of a medium term timeframe. Does that make sense?

Okay. Yes. Yes, absolutely. Appreciate that. And then just to follow-up, of course, you gave your revenue guidance for this year, but just wanted to see if you could kind of talk about your four product lines that you have or kind of reportable lines and the outlook for each of those this year.

Yes. I’ll start off and then I’ll let Quinn add in. I think one of the things that – so about 70% of our business is drilling completion related, so 70% of our revenue so certainly the well construction business is going to continue to gain traction. It’s always a real positive when we hear the offshore drillers start talking about rig rates that – and if we remember back in September, they were talking about rates that started with a four end of the year, early January, they were certainly talking about numbers with a five, and now you’re even starting to hear some of start with a six. So we think that bodes well for just an act – continued activity increase, our drilling and completions activity, so well construction, some of our subsea landing string type business will benefit from that. And then even a portion of our well flow management is tied to drilling completions type activity. So those are going to be kind of driven by some drilling completions recovery. And then I think more fundamentally our intervention business, which is much more tied to customers OpEx spend, they’re going to pursue incremental oil, they’re going to pursue production enhancement, production optimization, we’re going to continue to see some decent growth, there because our customers are very focused on making sure they maximize revenue generation and production from existing kind of brownfield assets. And then last element for us that kind of fits into well flow management, it’s really around production solutions. The project that we talked about in Q3 and we gave a little more commentary on here today, the E&I project in Congo very much production related you know, very much tied to the concerns around energy security in Europe and really around the kind of strengthening fundamentals of L N G. So long answer to say, we’re really seeing good growth in all four of the main business lines, but for different drivers, but we’re kind of seeing that all kind of move to the – kind of up and to the right, so to speak, in all four of the business lines, different drivers for each, but just continues to be very positive momentum, especially when you’re offshore and you’re international, we’re 80% of our activities international. We’re really starting to see just from customer dialogue and project sanctioning and project discussions, those type things. Offshore International, we continue to see really positive momentum there. Like miss anything Quinn?

Okay. I think the well construction business had a very good run in 2022 relative to 2021. I think the business expect to remain at high, you know, levels of activity, but maybe not the same year-over-year growth. And the top line there should be a mix improvement in the well construction business with a larger percentage of it coming from deep water and ultra deep water projects where the revenue opportunity is a multiple of the onshore activity. But if you think about the year playing out, I would expect that construction will continue to be strong. As we begin the year end and as the year moves into the second half, you’ll probably start to see better traction in the subsea completions business, which tends to lag a couple quarters. We are getting a decent bump in terms of the production solutions business because of the Congo project Mike mentioned, but been – we’ve got some other smaller business lines that we’re really excited about within well construction and elsewhere, the cementing acquisition that we did with DeltaTek is a very interesting technology that is essentially a [indiscernible] to what we already do within the well construction business. There’s not significant incremental assets that are required. There’s not significant personnel additions that are required for that. So it should be margin accretive to the businesses relatively small today, and we think that we can grow it pretty significantly. Give you a sense of our cementing business. It’s probably an $80 million, $90 million business today, and we’d like to double that over the next couple years. It’s high margin, relatively asset light in terms of its intensity, so it should be a very high return on capital business that we’re growing.

Okay, got it. Appreciate the time.

Thanks, Luke. We appreciate you’re listening in.

We’ll now turn to Eddie Kim from Barclays. Your line is open.

Hey, good morning. Just following on that kind of net pricing gain comment, you were clear about kind of the expectation to see net pricing gains really start to impact your P&L in the second half of the year. Could you just help us think about which product lines you expect to see the greatest kind of traction on net pricing gains, both well construction and well testing are fairly consolidated. So I would think that those two segments you see that the greatest ability to push pricing. But if you could just help us make about that, please.

Yes. I think you’re focused on the right things, Eddie. The businesses where we see net pricing gains sooner rather than later tend to be those that are capacity constrained. So it’s the deep water and ultra deep water TRS business, which isn’t with – which basically anchors the well construction product line family. And then subsea completions, our landing string business is essentially a relatively concentrated market. We and Schlumberger are relatively large players in that. And the tendering activity seems to be picking up and the bidding rates seem to be moving the right direction that is something that lags the drilling activity. But if I was to pick two businesses where we’re going to see sooner rather than later pricing traction is going to be in the capacity constraint classes of well construction and the subsea completions piece of subsea well access.

Got it. Got it. Understood. Just shifting to M&A, you did an acquisition here in the first quarter of DeltaTek, a cementing company that so seem to fit really nicely with their – your well construction portfolio. So you have $350 million of liquidity today. I mean to the extent that you’ll be doing more M&A going forward. Should we expect bolt-on acquisitions around well construction or are there also interesting opportunities in the other parts of your business?

No. So I mean, Eddie, it’s one that we have – we are very active in looking at potential opportunities for us, and we look at it on what really drives at us is really around the industrial logic, does the industrial logic make sense. And in this case, it was something for well construction, we think it can enhance our offering that the cementation technology is going to bring significant – very significant operational efficiencies for our customers. So we looked at it through that lens of the industrial logic. So not so much we don’t focus on well, it needs to be well construction. It needs to be subsea or it needs to be intervention now. It’s around the industrial logic. So we continue to look at those. We have – we completed one transaction in 2022. We got this one done here in essence in early 2023. And it’s something that we spend a lot of time on looking at these to see how we can continue to enhance the portfolio.

I guess the one thing I would add is, we pushed the organization hard during 2022 to capture the synergies that we had identified such that we could be externally focused in an improving market that we’re experiencing now. So I wouldn’t say we’ve put a bow on the integration of Expro and Frank’s, but we’re largely completed with the integration. We’re externally focused, and I guess I’d characterize this as aggressive window shoppers in terms of M&A today. The two deals we’ve done have been relatively small, but interesting technologies not a significant cash commitment up front, but if we could do something larger, we’d like to do something larger and certainly the organization is ready to take on more.

And I think it’s a great point. I guess the only thing – other thing I would add to that is, yes, the industrial logic is what drives us. Because we’re not looking to get bigger, do acquisitions just to do acquisitions, we’re looking to be able to enhance the portfolio. And whether it is really, really benefit from a strong drilling completions set of activities we’re going to have over the next several years, or it’s potentially to drive us more towards some of the OpEx related activity that really becomes a kind of counter cyclical to a drilling and recovery. Those are the kind of things we look at. We’re mindful of those and evaluate all those on an individual basis, but we’ll continue to look at it. I think especially now that we have – we’ve gotten the vast majority of the integration efforts done. This allows us to feel comfortable that, hey, we can’t integrate. Small ones are much easier to integrate. When you look at a big one like we’ve done here with the merger with Frank’s, by and large, I would say that’s been very, very successful from our internal standpoint. So that means that our willingness to take on something bigger or to look at bigger things now we’ve got – it’s easier when you’re doing something a second time versus the first time, so we just continue to be mindful about those, and again, really driven by the industrial logic.

Got it. Great. I appreciate all that color. Thank you. I’ll turn it back.

Thanks, Eddie. Appreciate it.

Our next question comes from Samantha Hoh from Evercore. Your line is open.

Hey guys, congrats on the great quarter.

Thank you, Samantha.

To just maybe dig a little bit into the revenue guidance, could you maybe break out for us in terms of like which regions you think is going to lead both revenue growth and margin expansion this year?

Well, we’re seeing increased activity across the pitch, different product lines and different regions seem to drive it. Well construction business has got a very strong position in LA today. We’ve had some early wins in terms of introducing the legacy Frank’s services portfolio to some of the legacy Expro geographic areas of import, but I guess NLA, particularly the Latin American market should continue to improve that, that is historically at least a business that’s dominated by our well construction business, which is legacy Frank’s business. Sub-Saharan Africa I think has probably got the greatest potential to surprise the upside in the back half of the year and into 2024. We will see good growth in ESSA, including Sub-Saharan Africa in our production solutions business, largely driven by this Congo project that’s been discussed. But ESSA should see good subsea activity as well, more so in the back half of the year based on tendering and awarding activity recently. Africa’s probably the toughest one to put a fine point on timing of projects. There certainly seems to be a lot of tendering activity and I think we’re getting our share and maybe then some in terms awards, but longer-term…

Maybe just to build on that…

With our peers comments regarding offshore MENA are probably the markets that have the best profile in terms of I don’t know if it’s three, five, or seven years of improved activity. And that’s certainly comments of our public peers, which we would agree with. And for that, those are markets that tend to be battleships or enterprise or aircraft carriers like they turn slowly, but when they get going in new direction, they tend to go strong.

Right. Okay. So I kind of also want to talk a little bit more about Norway. It’s – obviously, it’s not a very busy market right now, but there’s been record sanctioning of projects. And I was just wondering if you know, what are your views in terms of like when activity might start to pick up for some of those projects? I think someone mentioned that it’s like it – there’s – so there could be 190 wells over the next several years and I think we’ve seen some equipment on the subsea being ordered already. When does that translate into growth for you guys?

No, it’s a great question. And so typically in the normal cadence of a cycle – of a cyclic recovery, we’re about 9 months to 12 months kind of behind the drillers and the three guys when they start to see awards. But because we have such a close linkage now to drilling completions and really around well construction around the TRS business line, we’ll see some more of that. So that’s as one of the beauties of kind of how we have – what we’ve created here with the merger the two companies. We’ve got some earlier cycle recovery. But fundamentally I don’t think we’re really going to start to see a lot of that activity for it’s going to start with the drillers. I think you’re going to start to see that activity ramp up in the back half of 2023, really kind of more into 2024 when you start to see that from full activity, full drilling, full completions and then as they start to move more into actual production, those type things. So I think it’s more of a 2024 and beyond phenomenon to answer your question more specifically, Samantha.

Okay. Excellent. And then maybe it’s just an update on the buyback. I’m sorry, I called in late, but I thought you were going to complete the program in the second half. Did that happen or like how are you thinking about the buyback program now?

No, I mean, so Samantha, what we announced and what was approved by the Board back in June of 2022 was, we had authorization up to $50 million of buyback. We completed in the quarter circa 1% of total shares outstanding. And so no, we have – other than we have the ability to go out and continue to pick up some additional outstanding shares. We did not make a commitment on timing or on those type things, so very much TBD, so to speak.

Okay. All right. That does it for me. Thanks again for your time.

Great. Thanks, Samantha. Appreciate your listening and the questions.

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