[abrupt start] Q1 2025 Earnings Presentation. My name is Elliot, and I'll be your coordinator today. [Operator Instructions] I'd now like to hand over to Chad Stephenson, Director, Investor Relations. Please go ahead.

Welcome to Expro's first quarter 2025 conference call. I'm joined today by Expro's CEO, Mike Jardon; and Expro's CFO, Quinn Fanning. First, Mike and Quinn will have some prepared remarks. Then we will open up for questions. We have an accompanying presentation on our first quarter results that is posted on the Expro 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 everybody 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 results 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. A 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 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 2025 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 2025 financial results as summarized in today's earnings press release. I will then discuss what I would characterize as a dynamic operating environment, which despite our expectation that upstream investment will likely moderate in the near-term, we believe, supports a positive multiyear outlook for energy services companies like Expro that have a material exposure to the international and offshore markets. Quinn will supplement my commentary on the first quarter and outlook and share some additional financial information. For a recap of consolidated results and quarterly results by region, I'll direct you to Slides 2 through 9 of the presentation we posted to our website, expro.com. On Slide 2, Expro's Q1 2025 revenue was $391 million with an adjusted EBITDA of $76 million or 20% of revenue. This marks our highest first quarter performance in adjusted EBITDA and margin since merging with Frank in October 2021, continuing a multiyear trend of margin improvement. Our performance demonstrates the robustness of our business model, the benefits of having a comprehensive portfolio of services and solutions and a global presence, but modest exposure to markets such as U.S. land, Mexico, and offshore Saudi that are expected to contract in 2025. Organic investment and a successful M&A strategy continue to enable margin expansion, improve relevancy to our customers and better position the company for 2025 and beyond. In sum, we believe Expro is well prepared to handle expected market volatility and create long-term value for stakeholders. In terms of commercial activity, we secured $272 million in new contract awards in the first quarter. Safety, service delivery and cost-effective technology-enabled services and solutions have all contributed to these successes, which have included contracts across the lifecycle of the well. More specifically,…

Thank you, Mike. Good morning to everyone on the call. As Mike noted, we reported revenue of $391 million for the quarter ended March 31st as compared to the guidance range for Q1 2025 revenue of $370 million to $380 million that was provided on our Q4 earnings conference call. As anticipated, revenue down $46 million or about 11% relative to the fourth quarter of 2024, reflecting a combination of the winter season in the Northern Hemisphere, and the nonrepeat of large subsea projects in the fourth quarter of 2024. Year-over-year, revenue was up $7 million or approximately 2% relative to the first quarter of 2024. As Mike noted, Q1 2025 was the best first quarter performance since we completed the Expro Frank's merger. Adjusted EBITDA for the first quarter of 2025 was $76 million as compared to Q1 guidance of $65 million to $75 million, representing a sequential decrease of approximately $24 million or 24% relative to the fourth quarter of 2024. Compared to Q1 2024, adjusted EBITDA increased $9 million or 13%. Adjusted EBITDA margin for the first quarter was 20% and was down about 300 basis points quarter-over-quarter. As compared to Q1 2024, adjusted EBITDA margin increased about 200 basis points. Turning to regional results. For Northern Latin America or NLA, fourth quarter revenue was $134 million or down $5 million quarter-over-quarter, reflecting lower activity in well construction and well flow management, while subsea well access activity was higher in the U.S. and well intervention and integrity was higher in Argentina. NLA segment EBITDA margin improved to 23% from 22% in Q4 2024, reflecting increased subsea activity and resulting favorable activity mix in the region. Note that revenue generated from the U.S. land and Mexico markets was about 4% and 1% of consolidated 2024 revenue respectively, and…

Thank you, Quinn. As we evaluate the business, we believe Expro is positioned well with leading positions in our core product lines and good exposure to markets that will support the underlying activity for a multiyear growth cycle. Our organic investments allow us to maintain our position at the forefront of the energy services industry as we continue to evolve and expand our portfolio of differentiated solutions while maintaining our high service quality. Our M&A strategy has facilitated accretive growth and allowed us to acquire and integrate high-quality businesses with excellent margins and to acquire high-quality talent and integrate business builders into the Expro global platform. We continue to believe the macro backdrop sets up 2025 to be a transition year for the energy services industry. As such, while we expect Expro's top line revenue to be relatively flat compared to 2024, improved activity mix and operating efficiency gains should translate into margins at or above 2024 levels. The current geopolitical and oil supply disruptions have introduced market uncertainty, and we will navigate the international and offshore markets as the year progresses. Beyond 2025, we remain very bullish on the outlook for long cycle development driven by economic growth, security of supply considerations and policymakers, accepting that hydrocarbons and particularly natural gas will remain a key element of the global energy slate for the foreseeable future. Expro is poised for long-term growth, success, and value creation. With that, we can open up the call for questions.

Thank you. [Operator Instructions] First question comes from Arun Jayaram with JPMorgan. Your line is open, please go ahead.

Yes, good morning gentlemen.

Hey Arun.

Mike, I was wondering if you could elaborate on what you're seeing kind of in the MENA geographical segment seems to be a really strong growth here. Thoughts on maybe the sustainability of the margins that you clip at 37% margin. And maybe talk a little bit about the contribution you're seeing from Coretrax?

Sure. Good morning Arun and great question. Thanks for joining. I guess it's -- one of the -- and for myself, having lived and worked in the Middle East earlier in my career, it's -- it typically is -- the good thing about the operators there, our customers there, the NOCs, they tend to be -- they're more like an aircraft carrier. When they make adjustments and changes, it takes a while for them to start the course correct. So, it tends to be more stable for a longer period of time. we have really, really strong anchor contracts in Saudi and in Algeria in particular. And we've had great market penetration with Coretrax in particular, in Saudi. Most of our activity in Saudi is really focused around land, unconventional gas. And we've actually observed a rig count increase in unconventional gas last year, and we'll continue to see some this year. So, we continue to see some real strength there. And it's part of the reason why we continue to invest both in our own engineering efforts, but also some of the things we've done with our recently acquired bolt-on acquisitions. Just allows us to continue to provide services and solutions to our customers that drive efficiency or help them reduce the number of days drilling or increased speed of completion, those type of things. So, MENA continues to be a real strong growth engine for us. And generally, I believe we'll continue to be more stable here over the -- certainly over the short term and medium term and long term as well.

Great. And just Coretrax?

I mean Coretrax specifically, we continue to be really pleased at how the integration has went, how we're getting market penetration, both in the Middle East, but also in other jurisdictions. We didn't highlight it here in today's call, but we're having some really good market activity in Australia, in particular, for expendables services from Coretrax, really allows us to go into coal bed methane wells, reline those wells where they've had corrosion issues and put a large number of wells back on to production. So, it's been a great acquisition for us, really, really strong team. And the challenge for us is to make sure that we don't try to expand from eight or 10 countries that we were -- Coretrax was offering in initially, we don't try to run too quickly and move it into all 60 countries, the broader Expro is. So, we're trying to be very methodical, but I've been extremely pleased with the technology, the team, the customer feedback has been great with Coretrax.

Great. Maybe my follow-up, Mike, just thinking about the depressed valuation of the equity, you get a net cash, a balance sheet. Your guidance would imply probably $200 million plus of free cash flow this year. So, you're trading at over 20% free cash flow at least on our math. How are you, Quinn, the rest of management thinking about buybacks in this kind of environment? And how do you characterize buybacks versus some of the appeal of buybacks versus other kind of, call it, inorganic opportunities that you see in the marketplace today?

Sure. No, it's a great question. I think just to clarify, what we tried to say on the call was a free cash flow margin of about $120 million this year, circa 7%. So, I'll just pause with that on your comment around the $200 million number. But I think more importantly, it's -- yes, we are trading as many and all of our peers are trading at depressed values today, we continue to -- we've got some headroom available in our existing share repurchase authorization. And we look at all the capital across, we look at how it competes, whether it's CapEx or it's share repurchases or those types of things, we look at that, and I think it's a good opportunity for us to continue to lean into that here as we go into -- as we continue in 2025 with this kind of continued market choppiness, so to speak.

Maybe just a bit of definitions here, Arun, but we do expect something north of $200 million in adjusted cash flow from operations, but net of CapEx would be the previous numbers that we provided.

Okay. Sounds good. I was just looking at the EBITDA, taking out CapEx and a little bit of income tax, but we can follow up offline, but thanks a lot, Quinn.

Thanks Arun.

Thanks Arun.

We now turn to Atidrip Modak with Goldman Sachs. Your line is open, please go ahead.

Hi, good morning team. Mike, you kind of gave us a second half versus first half expectation. That was very helpful. Can you talk to us about what factors you are watching as you think about the full year guide and the revision there? And anything you can share in terms of the sensitivity that you are thinking of to help us understand the potential outcomes?

No. And again, thanks for joining. I think it's a really relevant question. It's -- we have had a -- really over the course of the last -- in particular, the last, I guess, 28 days since the second of April, we've had a tremendous level of engagement with our customers globally to go back and kind of look at projects and activity and kind of how they see things playing out the rest of the year. And what we've tried to highlight is our best -- the best information we have from our customer engagements. And I guess how I would kind of characterize those today is there's -- they're cautious especially for the projects that have already been sanctioned. They're going to continue moving those projects forward. We're not seeing -- or having any discussions about project stopping or activity stopping or those kind of things. So we've kind of gone through a bottoms-up effort to look at that activity set for the rest of the year. And I think there's just a little bit of a wait-and-see kind of mentality from our customers. I think more robustly, if you look at -- just look at the commentary from the subsea tree guys about orders and backlog and all those type things, our operators and our customers are not going out and buying expensive trees and putting them on a shelf because they just want to spend dollars unnecessarily. I think preparing themselves for activity that's going to happen in the medium term. So, we continue to see that level of activity, and that's what we've tried to give guidance to with you guys is kind of how we're seeing things lay out from a global standpoint. We tried to highlight a couple of the markets in a couple of the countries where they seem to have some -- maybe they're going to have some more softness i.e., Mexico, especially the Pemex activity in Mexico. So, that's really kind of what we were trying to steer towards.

That's very helpful. And then you kind of talked about MENA and you just mentioned Mexico. But do you mind elaborating on the other geographies as you see activity expectations, anything that you would want to point out and highlight? And then maybe give us a perspective on how you think about the well management and well construction businesses as you walk through that?

Sure. I guess probably a couple that I would highlight is, I think that Latin America is going to have -- it's going to be such a tremendous platform for strong activity and strong growth. We tried to highlight, obviously, Guyana is strong. Medium term, we'll see some Suriname-type activity, those type of things. Brazil continues to be robust with Petrobras and even some of the rig contracting, Petrobras is having conversations around. We're really positive on Argentina, it's a much more positive and constructive climate in Argentina today than what it has been over the course of the last several years. Inflation is more stable, more stable when it comes to the unions and those type things, and I certainly believe that, that's going to give some stability within the country. So, Latin America, I think, will continue to be strong. Middle East, we commented earlier, it's always going to be more resilient than others. Europe is still going to be somewhat suppressed with the U.K. sector of the North Sea, but I think Norway, we'll have some strong activity. And across Asia-Pacific, we highlighted in the previous call and kind of reiterated today that we continue to believe Australia is just because of the timing of some of the projects and those type of things, we were already anticipating some softness in Australia in 2025, and I don't think that's been affected at all by what's happened since this Liberation Day. So, I think there's just some good strong levels of activity that can have some strong -- you can have some strong service related. We did a highlight with Mexico. I think the Pemex activity for Mexico. You've heard from some talk about down 50% to 60% year-on-year. We don't have a massive amount of exposure in Mexico overall. But what we're starting to see here right now is non-Pemex related activity just kind of some of the market share we have, we're seeing some strong activity here in the second half of the year. So, that gives you a little bit of a walk across my views on it kind of geographically.

That’s super helpful. Thank you.

Good to speak. Thank you for the questions.

We now turn to Eddie Kim with Barclays. Your line is open, please go ahead.

Hey good morning. Just wanted to stay on the theme of recent customer conversations. You mentioned in your release that you're waiting for more clarity around timing of offshore FIDs and in your remarks, you highlighted West Africa is one of the regions you expect projects could get pushed out. So, just curious if you're actually hearing from your customers and getting early indications that project FIDs are likely to get pushed out? Or if this is more what you expect will happen just based on recent market volatility? Any color there would be great.

No. And Eddie, good to speak. I guess what I would -- this is not from our customers saying, hey, we're going to slow down FIDs sanctioning, this is just more our interpretation of the tea leaves, so to speak. And let's keep in mind the 2025 activity that's ongoing today is from already preapproved sanctioned FIDs. They've already moved into operational phases. So this is just more kind of an anticipation of given some of the caution from our customers, they may very well delay awarding FIDs here for some period of time. So, it's more of an anticipation than it is for any specific data points, but if I've learned nothing over my 30-plus years in the industry, sometimes I try to rely on what my -- what the history has been to try to predict how we think is going to be in the future. So, that's as much of it as anything, Eddie.

Understood. Understood. Thanks for that clarification. My follow-up is just on the potential tariff impact on your business. I realize it's very early days, and the situation seems to change by the day. But if the current tariff regime during this 90-day pause period holds, do you have an estimate or a range on what type of EBITDA impact we should expect on your business this year? And it sounded like this would already be reflected in your guidance for the full year, but -- and that if the tariff situation gets worse, it could represent further downside, but if you could confirm that also, that would be great.

Quinn, do you want to address that one?

I can take that, Eddie. I guess, consistent with some of our peers' comments, I think it's fair to say that the evolving landscape makes precise estimates of the impact of U.S. tariffs, both in operations and financial results somewhat challenging. But I guess, generally, we would be less impacted by tariffs than other companies because we're primarily a services company rather than a manufacturing. And I guess also 80% of our revenue is derived from activities outside of the United States. Those are probably two important context points. Nevertheless, Steve Russell, our Chief Technology Officer and his team have recently made an initial assessment of U.S. tariffs highlighting two primary elements of the business that could result in higher costs. Number one, we do import large OD pipe as a production input to our tubular products business. Domestic sales for that product line would clearly attract U.S. tariffs. However, pipe that's imported, and we add value to is that ultimately, reexport is generally not subject to U.S. tariffs because we work through free trade zones and free trading -- free trade zone regulations, excuse me, would exempt that activity, but we do import a bit of equipment and upgrade it that is not going to ultimately have free trade to some exemptions. We also import a small amount of services equipment that may be subject to tariffs. So, I guess the bottom line is our current view is that the potential impact of U.S. tariffs will likely affect activity more so than higher cost for Expro and at least our preliminary estimate based on the current announces so we probably have something less than a $5 million impact of U.S. tariffs, some of which could obviously be impacted by supply chain adjustments and some of which could be recovered from customers either through existing contract terms, contract adjustments or ultimately price increases. So, at least based on our current assessment, we don't think it's going to be a material driver to results for 2025.

Okay, got it. Thanks for that. Very helpful color. Thank you. I'll turn it back.

Thank you.

[Operator Instructions] Now, turning to Blake McLean with Daniel Energy Partners. Your line is open, please go ahead.

Hey, good morning. Thank you all for taking my call.

Blake, thanks for joining.

Yes. So, look, you guys highlighted automation and safety as driving a number of the recent contract awards. And I'm just wondering, are products like CENTRI-FI where you remove people from the rig floor, are they just less impacted by some of this volatility because of the safety component, and maybe just talk about the runway for that product and for products like that today versus where current market penetration might be?

No, it's a really good question. I guess, how I would characterize it as technologies like CENTRI-FI and iCAM, it really allows us to do two things. Number one, the personnel you do have on the rig floor, there's less amount of time if they have hands on pipe or they're in the red zone. So, you massively reduce the opportunity for there to be an HSE incident which is very critical, and red zone management is something that's very, very important to -- especially to our big IOC customers. This is something they're very, very focused on. And so this is a technology that's really helpful for that. But secondarily, it allows us to reduce the number of personnel that we actually have placed on the rig floor. So from a -- from our cost standpoint, it reduces the number of personnel, allows us to cover more rigs with the same headcount. So, it's really kind of -- it allows us to kind of -- have that kind of multiplicative effect of technologies, improving safety and also for us to kind of repurpose our personnel. And frankly, it's been one of those where we're going to introduce it at an appropriate rate because we have expectations around what kind of revenues and what kind of value we add to those operations. So, we're going to introduce these technologies and make sure that we're sharing in the benefit and sharing in the value with our customers as well as we are because we invested heavily in those type technologies throughout the pandemic and those types of things. So, that's where we're really trying to get to it and really using machine learning, automation, those type things, not only as a differentiator but also as a way for us to make operations safer and more repeatable. All of a sudden now you're torqueing up to a fixed torque every time you're recording it and are not relying on somebody on the rig floor, who's literally historically was going by sound or going by field as you're torqueing up connections, we've now kind of moved beyond that. So, it's been a tremendous advancement from an operational standpoint.

Good. That's helpful. Thank you. I guess my next question, I would ask you guys a little bit about the M&A market. I mean you guys have been active there and grown through M&A, it's -- I think you characterized as a dynamic operating environment, which I thought was great. Is that volatility, bringing people to the table? Is it pushing people away due to movements in bid-ask spreads. So any color you could give on the M&A market today and what that looks like for you all?

Yes. No, Blake, that's a hard one to -- that's harder for me to quantify. What I can tell you is we continue to work really hard on things that we believe will fit well under the Expro umbrella that will help us be more relevant to our customers, help us generate accretive margins and accretive cash generation, those type of things. We continue to look at them and there's still opportunities out there. And it just depends on -- you have to have some patience with these kind of things, you know. Several of the recent acquisitions that we completed those were multiyear endeavors. It was two years in the process from the time that we started it until we actually close them. So, we still have opportunities. We still have things we want to go out and do and how successful we can be in getting those closed only time will tell. But I think we've demonstrated that we're a good platform, we're a good portfolio to bring those things into. And we start looking at some of the smaller-type acquisitions. One of the key elements is we've had a really, really good ability to retain the management and the operational teams from the acquisitions we've made, we've got a good platform. And I think we have a pretty good approach when it comes to integration, and those kind of things. I think it's a good home and a good destination and we'll continue to work hard on those. And I still believe we'll be able to consummate some other bolt-ons, what that looks like and when we'll get them done is a little bit to be determined, but we're still working hard on those kind of things.

I think the only thing I would supplement, Blake, is the current balance sheet does give us some flexibility. We think we can do bolt-on M&A as well as acquire shares, so we can walk and chew gum at the same time. Scale also probably gives us some broader alternative sets in terms of funding alternatives. So, we have balance sheet capacity to take on a bit of leverage, but as Mike has said in a number of occasions in the past, M&A is going to be evaluated relative to where Expro trades. We'll invest our capital and we think it will have the most impact. We can do both.

Understood. Thanks very much color you all.

Great. Thank you. Appreciate it.

Ladies and gentlemen, we have no further questions. So, this concludes our Q&A and today's conference call. We'd like to thank you for your participation. You may now disconnect your lines.