Good morning, ladies and gentlemen. Welcome to the Expro Q1 2024 earnings presentation. My name is Jacquita. I will be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to your host, Chad Stephenson, Director, Investor Relations. One moment, please.

Welcome to Expro's First Quarter 2024 Conference Call. I'm joined today by Expro's CEO, Mike Jardon; and Expro's CFO, Quinn Fanning. First, Mike and Quinn have some prepared remarks. Then we will open it up for questions. We have an accompanying presentation on our first quarter results that is posted on Expro's website, expro.com, under the Investors section. In addition, supplemental financial information for the first quarter 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 to 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. A more complete discussion of these risks is included in the company's SEC filings, which may be accessed on the SEC 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 first quarter 2024 earnings release, which can also be found on our website. With that, I'd like to turn the call over to Mike.

Good morning, good afternoon, everyone. I'd like to start off by reviewing the first quarter financial results presented in today's earnings press release, including providing an update on commercial activity and the Coretrax acquisition. I will then discuss the macro environment, which we believe supports a favorable multiyear outlook for energy services companies that are levered to international and offshore markets and presents a compelling growth opportunity for Expro. Following my remarks, 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 we posted to expro.com. Turning to Slide 3, I am pleased to report another strong quarter for Expro, with Q1 2024 revenue of $383 million, exceeding guidance provided on our Q4 earnings call in February. Q1 2024 adjusted EBITDA, at $67 million, was at the midpoint of guidance. Overall, the first quarter results were in line with our full year expectations for revenue of, plus or minus, $1.65 billion in revenue and for adjusted EBITDA of, plus or minus, $350 million. Revenues decreased sequentially by $23 million, or 6%, compared to the quarter ending December 2023. This decrease is generally consistent with historic revenue trends, as we usually experience softer first quarter performance related to the winter season in the Northern Hemisphere and the budget cycles of our national oil company customers. This seasonal dynamic is typically most prevalent in our Europe and Sub-Saharan Africa region. First quarter revenue increased by 13% year-over-year, reflecting activity growth across the international and offshore markets. Of note, Q1 2024 adjusted EBITDA was up 61% compared to Q1 2023, which included $11 million of LWI-related unrecoverable costs. For North and Latin America, revenue of $130 million was down $15 million quarter-over-quarter, primarily reflecting…

Thank you, Mike. Good morning to everyone on the call. As Mike noted, we reported revenue of $383 million for the March quarter, as compared to the guidance of $365 million to $375 million that was provided in our Q4 conference call. As anticipated, revenue was down sequentially by $23 million, or approximately 6%, relative to the fourth quarter of 2023, largely reflecting seasonality. However, year-over-year revenue was up by $44 million, or approximately 13%, relative to the first quarter of 2023. The net loss for the first quarter of 2024 was $3 million, or $0.02 per diluted share, compared to a net loss of $6 million, or $0.06 per diluted share, in the first quarter of 2023. Adjusted net income, which excludes merger and integration expense, severance and other expense and stock-based compensation expense, for Q1 2024 was $10 million, or $0.09 per diluted share, as compared to $1 million, or $0.01 per diluted share, for Q1 2023. Adjusted EBITDA for the first quarter of 2024 was just over $67 million, as compared to Q1 guidance of $63 million to $73 million, representing a year-over-year increase of approximately $26 million, or 61%, relative to the first quarter of 2023. Adjusted EBITDA margin for the first quarter was 18%, up roughly 600 basis points year-over-year. The year-over-year increase in adjusted EBITDA and adjusted EBITDA margin primarily reflects good fall-through on incremental revenue due to activity mix, operating leverage and a nonrepeat of unrecoverable LWI-related costs in Q1 2023. Pricing is trending positively, particularly in our deepwater well construction and subsea landing stream-driven businesses, but net pricing gains are not yet a material driver to reported results. Nonetheless, relative to 2023, we continue to expect 100 to 200 basis points of incremental adjusted EBITDA margin from net pricing for the full…

Thank you, Quinn. The first quarter of 2024 establishes a solid foundation for the year for Expro, with strong financial performance relative to guidance. During the quarter, we continued to build business momentum and strategically grow the business through the acquisition of Coretrax and numerous meaningful contract wins. The team has continued to execute the business strategy to deliver on our financial goals, while maintaining our reputation of excellence and execution through cost-effective, technology-enabled services to our customers within a safety-focused culture. I'd like to thank our teams around the world for their dedication to delivering value for our customers and our shareholders. The macro backdrop is constructive. Demand for energy, including oil, gas and geothermal, is growing. And internationally, there is a heightened focus on energy security and diversification of supply. We remain confident that the business is poised to benefit from the momentum in the international and offshore markets as our customers focus on low-cost carbon-advantaged incremental production across essentially all international basins. We have a strong presence in key markets and are positioned to provide mission-critical services and solutions to our customers. As I stated previously, at Expro we are achieving better financial results across our business, and over the medium term we expect to deliver on our targets, which include annual revenue of $2 billion and adjusted EBITDA margin of 25%. We are confident we are taking the right steps to unlock the full value potential of Expro, and we are pleased that strong market fundamentals are serving as a tailwind helping to drive our company's continued profitable growth. As activity continues to ramp up, we are well positioned to support our customers across the full well life cycle, deliver on our strategic and financial objectives and drive sustainable long-term value for shareholders. With that, we'll open up the call for questions.

[Operator Instructions] The first question comes from the line of Luke Lemoine, with Piper Sandler.

I wanted to talk about the outlook a bit more. I wanted to start with the outlook and maybe the guidance as well. If I just kind of take the midpoint of the 2Q guide and use that for 3Q and 4Q, you basically get to the low end of the guide for the year, and that assumes no further growth past 2Q. Wouldn't include Coretrax either. But if you include Coretrax in the second half, I mean, it starts to look like the midpoint is very reasonable. Can you just talk about your confidence around this? And then, also, what are some of the puts and takes to get to the high end of the annual guidance this year?

I'll start, and Mike can probably add some supplemental comments. I think the first thing I would highlight is if you look at Q2 2023, we had a number of relatively chunky revenue contributions that will not be repeated in Q2 '24. So that's obviously LWI, where I think we had about $13 million of revenue in Q2 2023. In addition, as we phase the Congo OPT project from the plant delivery to the O&M phase, we're losing another plus-$10 million sort of revenue. So at the midpoint of guidance of $410 million of revenue, if you look at adjusted Q2 2023, that's a plus-10% year-over-year growth. So what kind of brings you to the low or high end of guidance is really 2 things in my mind. Most notably, when the Congo project starts the kind of production phase; so the delivery of the plant. Then we've got a couple of relatively significant subsea projects on the African coast that are kicking off in the second quarter of '23. So that's number one. And then Coretrax, if we can close it 1 month or 2 earlier, as Mike and I mentioned we think is a possibility, we're really just waiting for one antitrust clearance at this point, if we do get Coretrax closed, it's probably another $10-plus million a month in incremental revenue and another plus-$3 million worth of EBITDA. So I think those would be the kind of key drivers. As is always the case, projects can slip to the right or get pulled forward. But the range that we provided, excluding an early close of Coretrax, is the best available information we have today.

Luke, I guess 1 thing I would add is it's -- I mean, the way our subsea projects, in particular, timing-wise looks like those are going to get kicked off, it's really -- it's at the back end of Q2. So whether it moves to the left by a couple of days or to the right by a couple of days is going to make a difference in the quarter. But I think fundamentally, just the activity set, the customer engagements, the customer dynamics I think continue to be really strong. And Q4 is always -- we've got better visibility, and we've got better confidence in Q2 and a little bit less in Q3 and a little bit less in Q4. But I can tell you from travels and spending time with customers and those type things, I just -- I think we're going to continue to have strong activity sets in the back half of the year that should continue to give us confidence in being able to deliver on that guidance range.

Okay. And then you talked about net pricing gains not a material driver yet, but you're starting to see that in subsea test trees, deepwater TRS. What could be next outside of subsea test trees and deepwater TRS, do you think?

I think we'll have some opportunities. Just as you see more of the exploration and appraisal activity start to firm up. Some of the more drilling- and completions-related well test activity, whether it's flowbacks, cleanups, those type of things, I think we can get some pricing on. 70% of our activity is more tied to drilling and completions. So all of that will have pricing opportunities. It's just kind of the timing of those. Some are going to be more later in kind of the recovery cycle. We're always going to have that roughly 1/3 of our activities more OpEx related. And those, we're not going to get -- we're going to continue to try to make sure we get inflationary cost adjustments and those kind of things, but very minimal net pricing increases.

The next question comes from the line of Ati Modak, with Goldman Sachs.

Just curious on your capital allocation strategy here. You've previously noted 1/3 of free cash flow for returns and have historically leaned into buybacks. So how should we think about your latest thought process around the potential for a dividend in that mix? Is there a free cash flow margin target where that becomes more of a discussion?

I think it's an ongoing discussion that we have with our board of directors. We're really fortunate we have some really strong, financially astute board directors. So we have really good dialogue and discussion about those things. I think for any company what's tremendously important really is the longevity of a dividend. And once you commit to it, it's something you've got to have that kind of staying power, so to speak. We're still going to stick within that kind of 1/3 of our free cash flow. And at this point in time, I think we're probably going to continue at least in the short term to be more predisposed to buybacks as opposed to a dividend. But we're getting to that threshold. We're going to be more second half cash generative just with the nature of our activity. But we're going to get to that threshold kind of run rate, so to speak, back end of this year, going into next year, that I think more solid discussions around dividends will start to be had.

That's awesome. And then beyond the CapEx plans that you've announced, how should we think about the M&A component as a use of cash for the remainder of the year versus leaning into buybacks? It seems like there's some industry-wide acceleration in consolidation. So curious how you see it for Expro for this year.

It's tough to predict M&A. It obviously takes 2 to tango. We continue to look at lots of different opportunities. I think we've now gotten 2 either across the finish line or close to the finish line, with PRT and Coretrax. I'll just note that in both cases we were in dialogue with those counterparties for well over a year, in 1 case, and for a couple of years in another. We looked at 30-plus opportunities over the previous 12 or 14 months and got 2 to the finish line. So very tough to predict M&A. We're interested in M&A. We think we're good at integration. And as Mike highlighted, it all starts with industrial logic and where we actually believe we can add value. So M&A for us is not just big for big's sake, but it's big because we think it allows us to deliver something that is more differentiated to the customers and become more relevant to investors. I think we can do both. We today sit on a negative net debt position. So the balance sheet is strong. Our cash flow outlook is strong. So I think we can continue to allocate 1/3 of free cash flow to a return of capital plan, with plenty of free cash flow and balance sheet capacity to pursue M&A if it makes sense.

I guess the only thing I would add is, as Quinn highlighted, this is all going to be driven by the industrial logic. But fundamentally, we're also going to make sure -- we're not going to become a roll-up story. We're not going to try to go out and do 200-plus M&A transactions in a short period of time. Because we're actually going to integrate them, we're going to drive efficiencies, we're going to make sure we eliminate the silos and bring those things together. So we're going to be purposeful about the ones that come into the portfolio. We're going to make sure we add value to our customers and ultimately to our shareholders. But there are opportunities out there, and we'll continue to pursue those. And we're going to be patient. We're not going to -- as Quinn said, both of those had kind of a long interaction engagement. Sometimes you just have to be patient to get those things done. And we'll continue to be focused on opportunities of how do we strengthen the brand, how do we -- we have a great platform, and we can do more for our customers. And what I really like is with both of those transactions, when I go to customers right now and I try to say, hey, let me explain to you about PRT, let me explain to you about Coretrax, they put their hand up as a stop sign and say, no, no. We get it. We understand. You don't have to explain why it makes sense. That's how compelling the industrial logic is. And to me, that's tremendously positive for us. Because if our customers get the industrial logic without a lot of discussion, I know we can explain the industrial logic to investors or analysts alike.

The next question comes from the line of Arun Jayaram, with JPMorgan.

I wanted to get your thoughts maybe on 2 kind of markets that you participate in: TRS and cementing. And maybe give us a sense kind of internationally offshore kind of the dynamics that you see playing out in TRS between year-over-year volume gains, pricing. And maybe a similar thought on cementing, where I think you're at, call it, a $100 million run rate. And I think you've talked about growing that business to $200 million to $250 million of revenue over time.

I think especially with cementation today and even some of the technologies we're rolling out in TRS, particularly applicable in deepwater, a lot of this is around efficiency gains. A lot of this is around improving operations. Our cementing technologies, we have the ability -- we have a project in the Gulf of Mexico, where we've helped reduce the waiting on cement time by 17, 18 hours. And in an increasing rig rate environment, that starts to become more meaningful for our customers. And it's the same thing with some of our TRS technology that we've rolled out: our iTONG, our CENTRI-FI. Not only are we reducing the number of personnel on the rig floor, but we're also improving the efficiency, the makeup times, the running speeds, those kind of things. We're improving efficiencies, and we're taking people out of the red zone. So we're reducing the opportunities to have HSE events. And when you can bring both of those things, efficiencies and repeatable operations, it's tremendously valuable to customers. And as that rig rate goes up, the value proposition or the savings opportunity for them really starts to be strong. So I think our focus on technology and our focus on efficiency and some of the things we've done around M&A and transactions is going to help us with that. And that's also -- you're absolutely right. We've said openly that $100 million of cementing activity today, that's a $200 million, $250 million opportunity for us. And I think as the market continues to strengthen, as rig rates continue to move up, I think we're going to have more and more opportunities. Because we're going to introduce cementing technologies at the right rate because we're not going to give up on pricing. We create tremendous value. So we'll take a little slower activity introduction over a few quarters, because by the time we get into the back part of this year, into next year, and rig rates continue to be strong, then I think we're going to be in a good position on pricing.

Great. And just maybe a follow-up on some of the M&A discussion. Mike, are you still kind of targeting more bolt-on type of transactions that you've done, like DeltaTek and Coretrax? Or are you looking at perhaps some deals that may be a little bit larger in scale? And maybe just give us a sense of the pipeline as it sits today.

We will look at everything. And frankly, we do. Quinn alluded to we had 30-plus type transactions we discussed or were some level of diligence in last year. And I can tell you, some of those were up to transformational type things. So it's not just the $100 million to $200 million bolt-ons. We're going to look at all of these. But it all really starts with -- I know it sounds -- I keep repeating on my soapbox about the industrial logic, but that's exactly what it leads for us. That's the first, the second and the third conversation. If that makes sense, then we'll look at those. And it doesn't have to be -- it can be a merger of equals. We could be the smaller partner. It's -- we're going to look at things that make sense. So across the board, kind of across the pitch are the kind of things we're looking at and having conversations around.

I also wouldn't consider DeltaTek to be a real bolt-on. We actually think about M&A in 3 different silos. DeltaTek, SolaSense, these are very modest investments of cash, frequently with a performance-driven payout structure. That's a way for us to kind of add disruptive technologies to the portfolio and continue to have something that is differentiated for the end-user customer. Now PRT or Coretrax, which are now 9-figure transactions but still within the existing balance sheet capacity, that's what I would consider to be a bolt-on. So kind of $100 million to $500 million in aggregate value. Once you get beyond the high end of that range, it's probably involving some equity funding, potentially significant equity funding. And at that point, it's a relative valuation discussion as much as anything else. And we're open to transformational M&A or large equity-funded transactions, but it's got to be something that Mike can demonstrate as compelling to customers and, just as importantly, compelling to you and the investors that you represent.

We will go to the next question from the line of Steve Ferazani, with Sidoti.

The strength in top line this quarter, it sounds like -- I mean, well construction was soft year-over-year. So I'm trying to figure out where you made up for it. And was it just the expansion in new projects in Saudi and Algeria? If you can give a little bit more detail on the strength on top line this quarter.

As Mike mentioned, we had a very strong Q4 in terms of well construction; notably, large tubular product sales. It was a lighter quarter, not surprisingly, given the historical seasonal patterns in well construction. So we had some projects that were moving to the right, particularly in the North American offshore market, so the Gulf of Mexico. And as Mike also mentioned, Guyana. I guess a trend that we've seen across the sector is that rig maintenance or special surveys are seemingly taking much longer than was previously expected. So most of the rigs in Guyana have moved from 60- to 90-day type maintenance schedules, and that was a driver to some of the weaker NLA performance in well construction. Not something that we expect to be a continuing trend. But as the rigs come out of maintenance in Guyana and activity picks up in the Gulf of Mexico, we're expecting fourth quarter type performance in NLA. But until then, MENA and really other than the LPT project in Congo, ESSA had relatively strong quarters relative to our expectations. And I'd say MENA, in particular, seems to go from strength to strength, including revenue trajectory and margins. So very pleased with that performance.

Great. CapEx this quarter and then your guidance for the rest of the year, it sounds like you're trending towards the high end of that CapEx as a percentage of revenue range, which given the number of new projects and activity makes sense. But does that soften your view on free cash flow expectations for the year?

No. I think most of our CapEx tends to be project-driven. So if our CapEx is going to be higher, it's going to be because the backlog is growing. But no, I wouldn't say that in and of itself would change our view in terms of the expectations for free cash flow performance. You're correct that if you take the $30-plus million of CapEx in Q1 and the kind of range we provided in the press release, we would be closer to the 8% area. But I'm pretty confident that if CapEx continues at these elevated levels, it's going to be still within the percentage ranges because the denominator will grow at the same cadence. Over time, actually, CapEx should shrink as a percentage of revenue, particularly with pricing [ up ].

Great. On the integration process, PRT is well underway. You've got Coretrax coming up. You did the smaller one, DeltaTek, a year ago. Can you tell me what your learning curve has been on integration? Is it getting easier? Or is it going to be different for each one? And obviously, Coretrax is larger. Or does it matter more what you're buying in terms of the complexity of the integration, considering the number of opportunities that may or may not be out there down the road?

Steve, it's a great question. I can tell you, one of the things we did when we did the Frank's transaction, the Frank's merger, I really made sure that we looked at that through a long-term lens. We spent a lot of time and effort to develop an integration playbook, because I had every intention of us doing more of those type transactions, going forward. So we really laid out the methodology, the kind of the know-how. We dedicated one of the executives to be the integration lead on that project. So a lot of time and effort was spent on how do you develop a playbook and how do you make it sustainable and repeatable down the road. So we've really been able to -- now the other transactions have been smaller. So it's not been to the same extent. But it's the same methodology, the same approach. That particular executive has also played an advisory role for us, because he retired, I guess it was at the end of 2022, but he's continued to play an advisory role for that. So I think we're getting better at integration. A lot of lessons learned. A lot of -- we should double-down on this. We should not focus on that. A lot of those kind of discussions. So I think it's going to continue to help us be more efficient. But we learned a lot when we did the original Frank's transaction integration, and we're kind of able to use that as a good stepping stone how we lean into these other ones. The difference with PRT or with Coretrax, those are not fully full-fledged global integrations. Those are generally more regional integrations, which means that we should be able to execute on those more quickly than what we did on the bigger one.

The next question comes from the line of Josh Jayne, with Daniel Energy Partners.

Just to sort of build on the line of questioning around Frank's, there was a presentation highlighting adjusted EBITDA margins for the combination back when it was done, and they were between 7% and 14% in the 5 years prior to the deal closing, which also represented sort of a depressed offshore spending market. You were in the upper 20s, low 30s in 2014 and 2015. Obviously, low 20s guided for this year. As you sit today and look at the business, what can be done outside of price to get back to those margin levels? And how do you see those evolving over the next couple of years?

Josh, it's a good question. We appreciate it. A lot of it for us is really around the costs in the organization. If you look at kind of the last full quarter before we began the integration of the 2 companies, we were at 31% total support costs. And for us, just to be clear, the way we look at support costs is the support all the way down to the field level, to the guy who's going to go out and execute the job. So we don't try to be cute and just talk about corporate SG&A is 3%, 3.5%, because I think that's kind of hiding the bacon. I'm going to look at the total support that it takes for us to go out and execute a job. But we were at 31% then, and we finished 2023 at 19.4%, I believe. So we've taken a lot of support costs out of it, out of the organization. So I look at it as having a number of -- I've got 6 or 7 points of margin in my back pocket, so to speak. And as we continue to grow and we continue to add top line, our support costs will grow at more of an inflationary rate, not at the same rate that our top line will grow. So for us to get back to a -- it's the reason why we've talked about a pathway to $2 billion of revenue and mid-20s percent EBITDA margins. That's something that's imminently doable for us. And for me, it's not a question of if, it's a question of when, that we can get back to those kind of EBITDA margins and I think even be able to push through the mid-20s, into the upper 20s.

That's great. And just one follow-up. One of the things you mentioned, you talked about carbon capture for a moment. You highlighted in the press release Japan's first clean hydrogen production demonstration. As it relates to Expro, could you just talk about the addressable market for the company over the next few years and give us a sense of the other inquiries you're having or seeing there?

It's a massive addressable market. I think as we start to see the Exxon's in the Gulf of Mexico and other operators globally, I think it's really going to be at the pace at which they continue to address their carbon capture needs and requirements. For us, it's really -- we can multipurpose our personnel and a lot of our equipment, especially when you start talking about clean projects, whether it's clean hydrogen or ammonia type projects. We're going to go through well testing, wellbore cleanup, cleaning up fluids, separation of fluids, those type of things. So it gives us a lot of flexibility on utilizing the same assets and same people and having the technique and having the kind of reservoir of knowledge and understanding to apply that. So it's a very significant opportunity. It's really going to be driven by what's the pace at which those operators and those customers focus on carbon capture.

Thank you. There are no additional questions waiting at this time. So I would now like to pass the conference back to management for any additional or closing remarks.

Great. So we'll go ahead and close for now. I appreciate everybody listening in on in the first quarter. I think, as we said, we continue to see some gaining momentum in the space, in the sector, particularly offshore international. And we look forward to speaking to all of you in the next quarterly call. Thank you.

That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.