Hello, everyone, and welcome to the Expro Q4 2023 Earnings Presentation. My name is Emily and I'll be coordinating your call today. After the presentation, there will be the opportunity for you to ask any question. [Operator Instructions] I will now turn the call over to our host, Quinn Fanning, Chief Financial Officer. Please go ahead.

Welcome to Expro's fourth quarter 2023 conference call. I am joined today by Expro CEO, Mike Jardon. First, Mike and I have some prepared remarks. Then we will open it up for questions. We have an accompanying presentation on our fourth quarter results just posted on the Expro website, expro.com under the Investors section. In addition, supplemental financial information for the fourth quarter and full year results is downloadable on the Expro website likewise 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 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. More complete discussion of these risks is included in the company's SEC filings, which may be accessed on the SEC's website, sec.gov or on our website again 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 2023 earnings release, which can also be found on our website. With that, I'd like to turn the call over to Mike.

Thank you Quinn. Good afternoon, everyone. I'd like to start off by reviewing the fourth quarter financial results presented in today's earnings press release. I will then discuss the macro environment, which we believe supports a favorable multiyear outlook for energy services companies, levered to international and offshore markets and presents a compelling growth opportunity for Expro. Finally Quinn will share our outlook for 2024. For a recap of consolidated results and quarterly results by region, I'll direct you to slides 3 through 7 of the presentation that we posted to expro.com. As you can see on slide 3, Expro begins 2024 in a strong position for growth having delivered a solid fourth quarter with actual results at/or above the high end of the revenue and adjusted EBITDA guidance ranges that we provided on our third quarter earnings call. Fourth quarter revenue was $407 million and adjusted EBITDA was $85 million or 21% of revenue. Adjusted EBITDA for the three months ending December 31 includes $4 million of unrecoverable LWI related costs. Excluding such costs, adjusted EBITDA would have been $89 million or 22% of revenue. Revenue for the 12 months ended December 31, 2023 was $1.5 billion, up 18% year-over-year. Adjusted EBITDA for 2023 was $249 million or 16% of revenue. Excluding unrecoverable LWI related costs of $36 million, adjusted EBITDA for 2023 would have been $285 million or 19% of revenue. Most significantly fourth quarter results reflect the expected rebound in North and Latin America activity. The notable step-up in revenue and profitability in the fourth quarter followed a relatively weak third quarter. NLA revenue at $145 million was up sequentially by $40 million primarily reflect the increased well construction activity in the US Gulf of Mexico and Guyana and a rebound in well testing activity in Mexico.…

Thank you, Mike. Good morning, good afternoon to everyone on the call. I'll again remind you that our press release and the accompanying slides are available in the Investors section of our website expro.com. We plan to file our 10-K after the market closes today and we will also make available downloadable financials covering Q4 and full year 2023. As Mike noted, we reported revenue of $407 million for the December quarter, as compared to the guidance of $375 million to $385 million that was provided on our Q3 earnings conference call. Revenue was up sequentially $37 million or approximately 10% relative to the third quarter of 2023. Year-over-year, revenue was up by $56 million or approximately 16% and relative to the fourth quarter of 2022. Looking at the full year, revenue was up by $234 million or approximately 18% year-over-year. Adjusted EBITDA for the fourth quarter of 2023 was a bit over $85 million as compared to Q4 guidance of $75 million to $85 million, representing a sequential increase of approximately $35 million or 70% relative to the third quarter of 2023. Adjusted EBITDA margin for the fourth quarter was 21%. It was up approximately seven percentage points quarter-over-quarter. Excluding the $4 million impact of LWI related recoverable costs, adjusted EBITDA would have been $89 million and adjusted EBITDA margin would have been approximately 22% compared to $65 million and 18% for Q3 on a comparable basis. On a full year 2023 basis, adjusted EBITDA was $249 million, which represents an increase of $43 million or approximately 21% relative to 2022. Adjusted EBITDA margin for the full year was approximately 16%. For full year 2023, excluding unrecoverable LWI related cost approximately $36 million, adjusted EBITDA would have been $285 million and adjusted EBITDA margin would have been 19% compared…

Thanks, Quinn. In the fourth quarter of 2023, we captured strategically important contract wins, closed on a meaningful acquisition and continue to build on strong business momentum. Our performance reflects a culture of excellence in execution, and our focus on providing cost-effective, technology-enabled services and solutions to our customers. I am proud of what we've accomplished since the merger of the Expro on Frank's businesses two years ago, and I'm excited to lead this team as we grow into the future. As you heard from Quinn, our initial guidance for 2024 reflects a positive outlook for the year ahead with a midpoint expectation for about 9% revenue growth and adjusted EBITDA margin of 21% likewise at the midpoint of guidance. When we announced the Expro, Frank's merger, I indicated that we believe the company had a clear path to a $1.5 billion revenue and adjusted EBITDA margin of plus 20%. Today, we believe the international and offshore recovery is still in the early innings of a multi-year growth phase that will favor long cycle development in general and the cost and carbon advantaged barrels of deepwater development, in particular. Expro was built to ride the industry tailwinds that we expect to persist for the next several years with good leverage to the international offshore Middle East, North Africa capacity expansion and global gas themes that we believe will characterize energy markets for the balance of the decade. Our core competencies align well with operators that are motivated to maximize production and minimize emissions from existing well stock. At Expro, we are starting to see better financial results across our businesses, and over the medium term the company should be able to deliver on our medium-term targets, which include annual revenue of $2 billion and adjusted EBITDA margins of plus 25%. As activity continues to ramp up, we are well positioned to support our customers across the well life cycle and to deliver on the financial and other objectives that we have outlined. We appreciate the investment community's interest in Expro and your continued support of our ambitious business plan. With that, we'll be more than happy to open up the call for questions.

Thank you. [Operator Instructions] Our first question today comes from the line of Luke Lemoine with Piper Sandler. Luke, please go ahead.

Hey, good afternoon Mike, Quinn. Mike, you gave us the overall revenue and EBITDA guide for this year and talked about some of the global themes along with where you're seeing pricing this year. But just seeing if you could kind of maybe help us understand or build up kind of where your growth is coming from a 2024 either by geo-market or kind of major product lines?

So, Luke, great question, thanks for participating. Really, the two major areas for us are really going to be subsea. We're going to see a step-up in the traditional subsea landing string business. We're also going to see a step up in well construction and in particular, very strong growth in West Africa. And I think as you've heard me comment before, I still believe when you go back and you look at the either the number of FIDs or the dollars of FIDs that are being sanctioned in West Africa in particular we're still behind where the curve was back in 2013-2014. And I think we're going to continue to see those FIDs approved here in 2024 which tells me we're going to continue to have a really strong backlog of subsea projects and well construction projects. It was really tied to drilling of wells and completing the wells. I think we're really going to set up well for strong growth in 2024 and then even into 2025 as well.

Okay. Perfect. Thanks so much.

Thanks, Luke. Appreciate it.

The next question comes from Arti Mojack [ph] with Goldman Sachs. Please go ahead.

Hi. Good morning, team.

Hey.

On Coretrax it looks like it's a little bit more manufacturing focused or manufacturing of equipment versus services. Obviously, the margins look pretty good but curious if you think about how you think about the relative revenue mix as a target for the company between services and manufacturing. And what's the thought process around margins as you think about acquisitions going forward with that in mind?

Sure. No it's a great question. It's so it's -- Coretrax is not so much of a manufacturing. It's more of a rental business. So it's more rental of tools and probably less service intensity. One of the benefits for us quite frankly it's a lower -- it's a lower personnel requirement for operational things. It's oftentimes they'll either be rented to the operator or rented to the rig to be run and installed, but it very much fits in in particular with well construction and of course within our -- well Intervention integrity. So we see really good alignment with that but still around that very similar to the nature of Expro overall with -- we rent our equipment we provide services with our people. So it's very similar in that sense.

Got it. That’s very helpful. And then you mentioned market conditions and backlog for the 1% to 2% margin expansion, but maybe something similar on the long-term target of 25% if you can help us understand what the components and drivers there are?

Yes. I think it's -- I think part of it will be pricing traction. I also think it's going to be mixed. As we continue to -- if you go back to the question Luke just asked having increased service intensity with our well construction our subsea businesses those are typically higher margin because they're drilling-related completions-related type activity. So as we start to convert more into that type of mix in 2024 and going to 2025 that's why we'll continue to see some margin expansion and I think we'll also be able to really start to see the impact of some net pricing improvements here in 2024.

And obviously operating leverage is a significant part of the story as well. So I would say at least in the medium-term probably half of the margin expansion is coming from activity mix and pricing as Mike indicated and then probably the other half is the fact that support costs are growing at an inflationary factor and we expect top line to be at least 10% organically.

Makes sense. Thank you for taking the questions.

Great.

Thanks, Arti.

Thanks, Arti. Appreciate it.

The next question comes from Arun Jayaram with JPMorgan. Please go ahead.

Yes, Mike I want to get your perspective on what Expro's plans are to pursue the LWI kind of service line. Obviously, you mentioned that you weren't able to recover the subsea module. How does that factor in your thinking and your future thinking -- and just trying to maybe help investors understand what kind of invested capital did you have in the Subsea module?

Sure. No and thanks for asking the question. It's -- so we will continue to participate in the light well and intervention business. We have what we call our in-riser systems, which are more rig deployed. We continue to be active in that. We'll continue to expand our footprint in that and our commitment to it. And a lot of that has to do with our history and our knowledge with subsea landing string and valve technology and those kind of things, has a direct application for intervention type systems. And we continue -- frankly, we continue to look at alternatives for a vessel deployed type system. We're looking at partner's, we're looking at potential joint ventures or partnerships, those type things. Because ultimately, there is a massive need in the marketplace and in the industry for this type of technology to have efficient intervention capabilities so few wells are intervened on -- so few Subsea wells are intervened on today globally, there's just a market need there. So by no means are we abandoning the light well intervention concept because there's very much a market need. We're just rethinking how we're going to approach that and who we're going to partner with really to have a more balanced risk profile for that.

If I could -- I think -- one thing that I think is important to note is that, the decision to not participate in the recovery of the subsea module. And I think that's important to -- it's not that we couldn't recover the subsea module is that we chose not to participate in the recovery operations. But that is a separate decision process from whether or not we participate in the vessel deployed light well intervention business. We evaluated the cost of recovery, repair and recertification of the system and ultimately came to a conclusion that those costs could potentially exceed the value of the asset. We're basically putting in a position of having to make a decision before the recovery operations commenced. And ultimately, our weighting of the balance of risks and our desire to limit incremental out-of-pocket expenses brought us to a conclusion not to participate in the recovery. That the subsea module will be recovered but once we've decided not to participate in it, that is the responsibility of the vessel provider whose crane wire failed, which is the subsea modules on the seabed in the first place. So it's not that we couldn't recover it. We chose not to in the subsea module will be recovered, but it would be characterized as a rec from Expro's perspective, and we'll pursue a separate insurance claim.

Understood. And any sense of the invested capital?

I mean, you'd have to disaggregate it, obviously, we recovered the well control package and lubricator. I mean all in the system, we've invested circa $40 million we recognized accelerated depreciation in the just completed fourth quarter for about half of that. So obviously, we've got elements of the system that we can use to either build out something similar or packages as part of a joint venture partnership, as Mike indicated.

That's helpful. And just my follow-up, Quinn, you mentioned that the Congo project, as previously stated would be shifting from the construction phase to more of the services phase of that contract. Can you just help us about what will happen sequentially in 2Q as you transition?

Yeah. So a little bit of it is ultimately the timing of completion of effectively the plant sale portion of the contract. So, if you remember this was a $300 million contract directionally overall. About half of that represented the completion and delivery of the plant to the customer, and that's what will be completed we believe sometime in the second quarter. So, that's about $150 million of revenue the remaining balance will be spread over eight-plus years in an O&M contract. So really since the second quarter -- the fourth quarter of 2022, we have been recognizing $25 million to $30 million of revenue on a percentage of completion basis, and sometime in the second quarter that will probably step down into the mid-single-digits of revenue, so called $5 million $6 million of revenue, but had a substantially higher contribution margin generally consistent with the rest of our services. So, I think when you think about year-over-year top line growth, really we're starting effectively $100 million in the whole between our suspension of vessel deployed light well intervention operations and the Eni Congo project. So the guidance that we provided, yes, includes some contribution Coretrax at the back half of the year, but we're essentially making up $100 million of revenue that won't be repeated before kind of $1 in terms of growth. So if you think about same-store sales the actual underlying growth of the business is substantially better than the implied top line in our guidance albeit with a little bit of help from Coretrax.

Thanks for time. Appreciate it.

Thanks Arun.

Thanks for the question. Appreciate it.

Our next question comes from the line of Eddie Kim with Barclays. Eddie, please go ahead.

Hi. Good morning. My first question is just on the Saudi exposure in your business in light of their news of the capacity expansion curtailment. Could you just remind us roughly how much of your overall revenue is generated in Saudi, and if the primary exposure there is in the well flow management business, which I believe it is. And separatelym you mentioned Coretrax also has a strong position in the Middle East and I assume Saudi as well. So just any way you could help us understand the exposure to Saudi in your business would be great.

Sure. No, Eddie thanks for the question. So, yes, most of our revenue in Saudi is driven by well flow management. A strong proportion of our activity is actually tied more to gas and unconventional, and that's not going to -- that will not be very affected with the activity we have in Saudi. And I think what everybody needs to keep in mind is, there's still going to be significant growth in Saudi overall. It's just not going to be to the same level that I think everybody previously thought. But we still anticipate a very strong level of activity here in 2024 and 2025. So, it's going to be quite strong. And it's a market in which when you have differentiated services and you bring technology, that's what Aramco is really looking for. And so that fits in well, whether it's some of our traditional well flow management and services or the Coretrax services, they're very much differentiated technologies. So, we continue to see a very strong level of activity in Saudi in particular.

Okay. Got it. Thank you. And just my follow-up is on net pricing. Mike, around the middle of last year you said you expect the net pricing gains to kind of really start gaining traction and hitting the P&L towards the end of the year. But if I heard you correctly, it sounds like that might not have come through as you had expected. Did I get that right? And if so, could you talk about which product lines or segments maybe underperformed your expectations on the pricing front last year?

Sure. No. And Eddie you didn't get it wrong. What we said last year was we felt like we would start seeing the impact of net pricing at the back end of 2023 and that's really what's kind of setting us up for that kind of 1% to 2% expansion in margins we're going to see here in 2024. And it's very much going to be the tighter asset classes things like in well construction, TRS, deepwater activity, subsea landing string, deepwater activity that's where we're seeing more pricing traction. Some of the other business keep in mind we still have about 30% of our business is going to be more production-related -- production optimization related and generally tied more to customer OpEx spend. Those we don't -- we didn't anticipate and I don't anticipate we're going to see much net pricing traction there because it's more of a -- that's activity you're going to see and you're going to have day in, day out whether regardless of the number of FIDs or the CapEx dollars are being in spend. So, it's not so much that that segment underperformed. It kind of performed as was anticipated. We don't think we'll see much pricing in that. But that's the kind of work and activity you really want to have when you have softness in the market or you have a cycle that's why we stay focused on having a balance between CapEx and OpEx. And I think the industry overall if you kind of think back to last September, there was lots of discussion from the rig guys on rig rates and they felt like they would continue to see some strengthening. I think everybody reality is pricing traction those kind of things are still going to happen, but I think the slope of the curve isn't quite as great as maybe folks thought when we were back together in September last year.

Great. Understood. Thank you for all that color. I'll turn it back.

Great. Thanks. Appreciate the question.

Our next question comes from Steve Ferazani with Sidoti & Company. Steve, please go ahead.

Afternoon Quinn and Mike. I wanted to ask a little bit about the M&A pipeline. You've a couple of nice acquisitions announced over the last couple of quarters. These are higher margin. These aren't commodity-based products clearly accretive and you're not -- the multiples have been very reasonable. Is there -- and even going back to DeltaTek is there a lot out there given your balance sheet you clearly could do this all day long. What -- how are you looking at parameters you're considering and what the pipeline might look like?

No, it's a great question. I'll tell you it's something Steve. We spend a lot of time discussing and analyzing internally. And there's three-first criteria that have to be met; the industrial logic, the industrial logic, and the industrial logic. And we start with that on all those. And when it sits in, when it's so obvious from an industrial logic standpoint to our customers and to the market those kind of things, those are the kind of ones we move forward. And then yes, there are other deals we could look to go out and do, but we're going to maintain -- we need to make sure that we achieve deals that -- and transactions that the industrial logic fits, but also the financial logic fits, which means from a value standpoint, it has to be there. The other element is I don't want to become -- and we're not going to become a roll-up story. We're not going to go out and try to do 279 acquisitions. Because the difference when we do acquisitions is we're going to actually going to integrate them. We're going to bring them in, we're going to drive synergies, we're going to bring the entities together. But that's why we're thoughtful on these. We'll continue to do them. And I appreciate your analysis, your quick analysis on Coretrax because you hit -- you clearly have understood what we're trying to do there. It obviously makes sense for us to do. And we like those obvious ones that we can go out and get done and get across the line. So we continue to be active in that space.

Great. That’s helpful. On pricing in area where it's not developing as a market where you were talking about moving assets out US land. I know last quarter you were talking after the disappointment in LA, you talked about maybe getting some of those assets into international markets. I think you specifically noted TRS and US land. Given that 2024 is probably not going to be much better US land. Can you talk a little bit about progress there?

Yeah. I mean, we're continuing -- so we -- we talked about it in Q3 just because we want to give a complete picture of kind of how things happen in NLA. And I think as you can -- as you guys get a chance to look at the numbers, you'll see that the kind of how the stars misaligned in Q3 in NLA, we don't see that same issue here now. The level of activity in the Gulf of Mexico, the level of activity in well construction in Guyana, well flow management in Mexico those are all kind of went back to a normal fact pattern, a normal behavior pattern. But we've been looking at US land over the course of the last 18 months. We continue to -- we're not going to exit the US land business full scale, but we are going to focus on the right basins and in the right locations in the US. And if we end up having excess assets and we have had some excess assets. We'll take advantage of being able to redeploy those assets to markets that are going to be stronger more robust going forward. So we'll continue to size that business as appropriate. But that's been an ongoing process for US land for us for really the last six quarters.

Thanks, Mike.

Perfect. Good to talk to you. Thank you.

We have no further questions. So I'll turn the call back to the management team for any closing remarks.

Great. Thank you everybody. We really appreciate the time and look forward to catching up with all of you and some one-to-ones and those type things. Have a good afternoon. Thank you.

Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.