Expro Group Holdings N.V.

My name is Elliot, and I'll be your coordinator for today. If you would like to register your question during today's event, please press star 1 on your teleprompter pad. I would now like to hand over to Chad Stevenson, Director of Investor Relations. Please go ahead.

Welcome to Expro's second quarter 2025 conference call. I am joined today by Expro CEO Mike Jarden and Expro CFO Sergio Myworm. First, Mike and Sergio will have some paired remarks. Then we will open up for questions. We have an accompanying presentation on our second quarter results that is posted on the EXPRO website, expro.com, under the investor section. In addition, supplemental financial information for the second quarter results is downloadable on the EXPRO website, likewise, under the investor 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 in 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 statement. a more complete discussion of these risks included in the 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 second 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, everyone. I'm happy to welcome Sergio Meyerwurm, EXPRO's new Chief Financial Officer, to discuss our financial results today. Sergio has more than two decades of experience in financial roles in the energy industry and brings a proven track record of driving financial performance and operational excellence. I look forward to working closely with Sergio as we continue to advance our strategic initiatives and build on our strong financial foundation. Now, I'd like to start off by reviewing the second quarter 2025 financial results as summarized in today's earnings press release. I am proud to announce very strong quarterly results. This marks the third sequential record-setting quarterly EBITDA margin and robust free cash flow generation. I will then discuss the broader evolving macro environment, which we believe the underinvestment in traditional hydrocarbons in both the international and offshore markets supports a positive multi-year outlook for energy services companies like Expro who have technology enabled services supporting the long cycle development projects. We'll move on to our operational highlights for the second quarter, discuss our outlook, and then turn the call over to Sergio to share additional financial information. For a recap of consolidated results and quarterly results by region, I'll direct you to slides two through nine of the presentation that we posted to Expro.com. On slide two, Expo reported an excellent quarter, reporting increased revenue to $423 million, even a growth to $94 million, and expanded even a margin representing 22% of revenue. Expo also generated a robust $36 million in free cash flow on an adjusted basis, or 9% of revenue. This marks the third consecutive quarter of financial results above expectations. In fact, EXPRO has reported financial results above expectations in six of the last seven quarters, evidencing EXPRO's continued focus on operational execution despite market headwinds. Our second quarter financial results also represent a record-setting second quarter EBITDA margin. Our EBITDA margin ranks among the top in our peer group and is a continuation of a multi-year trend of margin improvement. Our results demonstrate we're on the right track to deliver the robust free cash flow generation to our shareholders and the success of the organic and inorganic investments that we have made to drive growth and expand margins. It's also the result of permanent structural cost savings through our Drive 25 initiatives, improved business activity mix, and operational leverage. Additionally, we are capitalizing and continue to see meaningful benefits on our diverse geographic footprint which is mainly focused on the international and offshore markets. As discussed in other calls, Expro has very limited exposure in regions such as U.S. land, Mexico, and offshore Saudi, markets that will continue to be soft in 2025. Commercial activity and tenders remain robust in our main markets, with new order awards of $595 million in the second quarter, marking it the second highest quarter of new order intakes in our company's history. These awards were spread across key markets and product lines, highlighting the diversity of our portfolio and setting a new benchmark for our core business performance. Our results and success in the marketplace reflect the confidence our customers have in us and our focus on safety, service quality, and delivering cost-effective, technology-driven solutions across the well lifecycle. To highlight the more significant awards, We had contract wins in Guyana, covering well construction services with revenues in excess of $120 million, and two contracts in North Africa for gas compression services and production solutions with revenues of approximately $100 million and $60 million, respectively. Our backlog has increased to approximately $2.3 billion at the end of the second quarter, remaining both healthy and in line with our expectations. All in all, this quarter presented a challenging market backdrop yet we continue to deliver operationally and financially. From a continuous innovation point, we deploy three new industry-first technologies. Those innovations and industry-first are a direct result of expert understanding the challenges that our customers face and their operations day in and day out, and finding new creative solutions to address those challenges. This is what we refer to as innovation with a purpose. That is how we continue to provide differentiated services to our customers, And that is why we continue to get repeat business from our customer base. With that, we continue to drive efficient and safe operations to our customers in every single one of our global operations. Turning to the market outlook, the second quarter of 2025 presented a dynamic operating environment marked by commodity price fluctuations driven by ongoing trade negotiations, OPEC plus production increases, and geopolitical conflicts. As a result, Brent crude traded within a $20 per barrel range over this period, peaking at $80 per barrel in June. As geopolitical tensions recede in certain areas, the market's focus has returned to fundamentals, particularly on supply dynamics and seasonal demand. OPEC Plus has accelerated the phase-out of production cuts in a strategy pivot from output constraint to regain market share. Although ongoing increases in production may exert downward pressure on commodity prices, The elimination of OPEC plus voluntary cuts provides more clarity and is anticipated to support longer term market stability. Barring any significant shifts in the current commodity price range, the industry is expected to demonstrate continued resilience. Though the market has experienced challenges in the recent quarters, the oil and gas industry demonstrated fortitude and set operational expectations with limited impact on upstream spending in our key geomarkets year to date. which highlights the positive within the cycle for EXPRO. Despite current customer caution, new project approvals are expected to return to growth in 2026 with offshore approvals accounting for 80% of all 2025 and 2026 sanctioning. This provides plenty of opportunity for growth in EXPRO's well construction, well flow management, and subsea product lines. With subdued greenfield activity and the current volatility, Operators are focusing on optimizing production from existing assets to generate revenue, driving sustained OPEC spending and subsequent brownfield activity. The strategic focus aligns with EXPRO's strengths in well intervention, production optimization, and digital services. Overall, in the current market environments, we will continue to focus on maintaining cost and capital discipline and otherwise controlling what we can control. With disciplined execution, a strong international and offshore presence, and a focus on operational efficiency, Expo remains well positioned to navigate the current market. We expect our differentiated service lines and resilient business model will allow us to continue to expand margins year over year. Stabilizing commodity prices at current levels, steady demand growth, and continued project sanctioning will drive demand for Expo's services and solutions. We maintain a positive multi-year perspective on the overall opportunity set and Expo's relative market position. Moving to our operational performance for the quarter, safety and innovation with a purpose are both central to who we are as a company. Just as safety is embedded in everything we do, so too is our drive to innovate with purpose. In the second quarter, we achieved industry first through the deployment of our innovative technologies, each designed to reduce the operational risk and increase efficiencies for our customers. With artificial intelligence, machine learning, automation, and digitalization playing key roles. First, we introduced the Brute Armor Packer, our most advanced high-pressure, high-tensile packer system. It's built for the extreme conditions of deepwater wells, with a leading differential rating and retrievability that ensures sealing integrity in harsh environments. This allows operators to work more efficiently and with more confidence in the extreme conditions of deepwater wells. We expect customers to rapidly deploy this technology, as two supermajors have already successfully deployed the system in the Gulf of America. Second, we completed the first full deployment of EXPRO's Remote Clamp Installation System, or RCIS. This technology was developed with and partially sponsored by a supermajor with a focus to provide a unique industry solution that fully automates the installation of control line clamps on the tubing during the completion of operations. It eliminates manual steps, speeds up the process, and most importantly, removes people from the red zone. The RCIS technology was deployed in the North Sea where Expro successfully ran a fully hands-free upper completion and reduced each clamp installation time by approximately two minutes or 50% per clamp. Based on the success of the operation, the customer has awarded additional work scopes for future deployments of the technology. And finally, we delivered the world's first fully remote five-plug cementing operation using Expro's Generation X remote plug launcher and Skyhook. Cement line make-up device. It's designed for safety, control, and field adaptability, removing the need for anyone to enter the red zone while giving operators more operational control. The deployment marks a major step forward in the company's expansion of cementing services in the Middle East offshore and reflects the progress of the strategic initiatives for the region. These are not just technical wins. They are real-world examples of how we bring innovation, efficiency, and safety together to move the industry forward. Further, these technologies give EXPRO competitive advantages and highly specialized service offerings and create future revenue opportunities by enabling scalable technology applications with improved margins. We are also demonstrating that innovation can be both effective and efficient, and that focus is evident in our regional activity this quarter. Beginning with the North and Latin America region, as we anticipated in the first quarter, activity in Brazil and Guyana has remained stable is due to the development plans stemming from high volumes of FIDs in recent years. We capitalized on its improving environment as we secured a five-year multi-reg contract with revenue in excess of $120 million to provide completion and to the running services in Guyana. We similarly continue to drive activity in Brazil, securing contracts with revenue of more than $50 million across production optimization and well decommissioning related activities highlighting the breadth of capability across the life cycle of the well. And as referenced in our July 14th press release, EXPRO secured a significant three-year contract award with Woodside Energy to support the Trion deepwater oil and gas development in offshore Mexico. This project marks Mexico's first deepwater field development and underscores our longstanding partnership with Woodside and the trust they have placed in EXPRO. We will provide TRS and cementing services with a focus to optimize well performance, drive cost efficiencies, and enhance operational reliability throughout the project lifecycle. Moving to Europe and Sub-Saharan Africa, we successfully completed a multi-well campaign for a major operator in Angola, conducting 11 cleanup and 12 well intervention operations of over approximately 5,000 man-hours with a 98% job performance rating. In the UK and North Sea, Our 30-year partnership with a major operator remains strong as we recently secured a three-year contract extension with revenue of approximately $30 million for well intervention, well services, and well testing operations. This is testament to our exceptional service delivery and strong client relationships. In North Africa, we have further expanded our production optimization business. We secured a significant seven-year, approximately $100 million contract to deliver a gas compression system on low pressure gas wells in order to maintain throughput at the processing facility. Additionally, as a result of the high service quality delivered to the customer, the team has secured a six-month contract extension with revenue of approximately $60 million for early production facilities and gas compression services. Shifting focus to Asia Pacific, particularly Indonesia, we won four contracts from a single customer with revenue totaling approximately $15 million. This covers well intervention and integrity services, which plays a critical role in brownfield production optimization by enhancing reservoir access, restoring well integrity, and maximizing hydrocarbon recovery. These new awards demonstrate the ongoing strategic focus on production optimization in these mature basins. And finally, in Australia, within TRS, EXPR performed the first rigless conductor driving operation on a customer's platform in over a decade, underscoring our commitment to reintroducing and delivering solutions to the region. The team successfully completed a six-slot conductor installation safely and ahead of schedule. Before we move to our financial performance, I'll comment on the guidance for the full year 2025 that was included in our press release. The macro environment has created challenges for the entire industry, and we also see that several pockets in the market are softening and will remain challenging for the next 12 to 18 months. We are still assessing what that means to ExPro in 2026. However, we firmly believe the international and offshore segments of the market will generally perform better than other segments. Those are markets with longer duration development plans and primarily dominated by the super majors, large IOCs, and the NOCs. Those customers tend to be less susceptible to short-term market volatility and tend to focus more on the longer-term fundamentals of their business. If we combine our presence weighted to the international and offshore markets, With our strong relationships with customers, leading market positions and key services, we still see relative stability and a relatively constructive outlook for the business. In the near term for 2025, we are reaffirming our full year outlook and as stated during the Q1 earnings call, we continue to expect at least mid single digit revenue growth in the second half of 2025 compared to the first half of the year. This is supported by our line of sight and the customer scheduled activities and delivery of products and services for the next two quarters. More specifically, we are not relying on binary outcomes of large individual projects to meet our guidance. Our anticipated annual revenue is circa $1.7 billion and EBITDA of at least $350 million. We continue to anticipate our free cash flow on an adjusted basis to be approximately 7% of revenue for the full year 2025. Despite the definitional change we announced this morning in earnings release, George Munro, Sergio will go into more detail on that shortly. Consistent with historical trends, we expect free cash flow generation to be more weighted to the second half of the year. George Munro, Overall, we have seen customers prioritize key projects and it is expected that our customers upstream investments will be largely unaffected by short term commodity price movements through 2025 and several of our geo markets are proving to be more resilient than the current markets perception. In our NLA region, activity should be stable in Brazil and Guyana as a result of a continuation of existing development plans. In the Gulf of America, we anticipate steady to slightly increasing activity in the second half of 2025. Similarly, we see growth from LATAM countries such as Brazil and Colombia. Overall, for the second half of the year, we anticipate NLA revenue to demonstrate growth over the first half of the year. In ESA, the outlook is constructive for the North Sea and parts of Europe with a stable outlook on revenue and improving margins based on activity mix in the region for the remainder of the year. In the Middle East and North Africa, we are anticipating stability between Saudi Arabia and Algeria, two of our largest markets in the region. And as a reminder, in Saudi, our business is levered to onshore and unconventional gas more so than offshore oil. In Algeria, our business is levered to production optimization activity, which provides more predictability. In Asia Pacific, the remainder of 2025, we are expecting an increase in activity for Southeast Asia, specifically in Indonesia, Brunei, and Thailand, related to well construction and well intervention services. Additionally, in Australia, we see incremental activity in subsea well access related to project timing and the onshore core tracks expandable business. For these reasons, we believe the region will see revenue growth with improved margins in the second half of 2025 compared to the first half of the year. With that, I'll turn the call to Sergio to review our financial results in detail.