Expro Group Holdings N.V.

Hello and welcome to the EXPRO Q1 2026 earnings call. My name is Alex and I'll be coordinating today's call. If you'd like to ask a question at the end of the presentation, you may press star followed by one on your telephone keypad. And I'll hand it over to Dave Wilson, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to EXPRO's first quarter 2026 earnings call. I'm joined today by Mike Darden, CEO, and Sergio Mayworm, CFO. Both Mike and Sergio will have some prepared remarks, after which we'll open the call for questions. In association with today's call, we have an accompanying presentation and supplemental financial information on our first quarter results. Both of these are posted on the Expo website, expo.com, under the Investors section. Before we begin today's call, I'll remind everyone that some of today's comments may refer to or contain forward-looking statements. Such statements are not guaranteed of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These statements speak only as of today's date, and the company assumes no responsibility to update such forward-looking statements. The company has included in its SEC filings cautionary language identifying important risk 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 can be obtained on the SEC's website, sec.gov, or on our website, again, expo.com. Please note that any non-GAAP financial measures discussed during this call are defined and reconciled to the most directly comparable GAAP financial measures in our first quarter 2026 earnings release, which was issued this morning, and can also be found on our website. With that said, I'll turn the call over to Mike. Thanks, Dave.

Good morning, good afternoon, everyone, and welcome to EXPRO's first quarter 2026 earnings call. I'll begin by reviewing the first quarter of 2026 financial results from today's press release. I'll then comment on the overall macro environment, provide some insight into our Middle East and North Africa region, talk a bit about our exciting news today with our enhanced drilling acquisition announcement, then revisit our outlook for the year ahead. And finally, I will then conclude with some operational highlights for the quarter. Sergio will then provide some further details on our financial performance by geographic region and address the company's ongoing capital allocation framework. Let's begin on slide three. During the quarter, the company experienced the usual first quarter seasonality we have in our business. And as a reminder, this seasonality is a result of winter weather in the northern hemisphere which slows offshore activity due to ongoing winter storms and rougher than normal seas. Additionally, the seasonal dip is also a result of our customers' CapEx and operational spend cycle that tend to be lower at the start of their annual budget cycles. This is generally more typical with our NOC customers. Additionally, our first quarter results were only marginally impacted by the conflict in the Middle East. I am pleased to report that local emergency response plans were implemented quickly and the efficiency in which these actions were taken and that all of our employees still in the region remain safe. I will go into more detail regarding our MENA region in a moment, but from an overall perspective, the disruptions to our Middle East business late in the quarter only had a minor impact on our operational and financial results during the quarter. For the quarter, the company generated $368 million of revenue and $63 million of adjusted EBITDA, representing a 17% margin. Adjusted free cash flow for the quarter was $3 billion and was affected by changes in working capital, which Sergio will comment more on later in the call. Now, taking an assessment of the current environment, we, like others, see a global energy market that is increasingly influenced by the heightened geopolitical tensions, commodity price volatility, and an expanding focus on long-term energy security. At some point, the uncertainties will subside with the expectations that oil prices will reset and begin to stabilize once these disruptions ease. However, there is still a significant amount of disruption that will continue to have global implications in terms of not only near-term supply and demand dynamics, but also over the medium and longer term as countries and companies around the world look to prioritize energy security and what would be needed to achieve that. There has been intensified interest in strengthening supply resilience and geographic diversification, trends that could develop and will likely shape industry behavior longer term. It is our fundamental view that the new normal will look different than it did before the Middle East conflict. Many believe it will still take some time before the industry returns to a more normalized state of operations, and we believe that it will be the end of the second quarter before we have a sense of complete clarity. We remain optimistic that resolution of the situation could begin sooner than that, but we'll adapt our operations appropriately. One industry behavior that we are confident with that we do not believe will change is that of capital discipline. In this light, we see offshore and deep water developments remaining attractive, not only by providing stable, lower risk growth pathways, but also from an energy security standpoint as well. We expect such projects will continue to drive demand for ExPROs well construction and well management businesses. Additionally, brownfield optimization continues to see a growing focus as operators look to enhance production from existing assets to reduce capital risk. We believe this industry trend also presents an opportunity for XPROS technologies and services as well. We still expect activity to strengthen in the second half of the year, and with XPROS strong offshore and international positioning, along with its production optimization capabilities, believe the company is well-positioned to manage near-term uncertainty and benefit from increased activity in the coming quarters and years. To summarize, Expro maintains a constructive outlook for 2026 and beyond, allowing us to continue supporting customers throughout the full lifecycle of their assets. Moving to slide four, which reflects our MENA region. Oftentimes, when the MENA region is discussed, the focus is heavily on the Middle East portion. which is certainly understandable, and we have received our fair share of questions related to our exposure to countries in that region. Having lived and worked in that part of the world earlier in my career, I think it's helpful to give our stakeholders some more clarity on how EXPRO is exposed in the region. I'll look to address that really in three fundamental ways. First, for EXPRO, there's more of a balance between our Middle East and North Africa operations in terms of financial contribution. and there has been no disruption to our operations in North Africa. Second, for the countries in the Middle East, while we do have some exposure to countries like Qatar, Kuwait, and Iraq, they do not carry as large of a contribution to our revenue or even a generation. The biggest contributor in those regards is Saudi Arabia, and to a lesser extent, the Emirates. And while there were some interruptions in those countries' operations, we have continued to have more normal operational cadence. Third, Given the timing of the commencement of the conflict in the Middle East, there was only one month affected during the first quarter, so that, too, lessened the overall impact. Now, moving to slide five, we're very excited to announce EXPRO's acquisition of Enhanced Drilling. Enhanced Drilling is an industry and technological leader in managed pressure drilling, or MPD, really focused into deepwater offshore operations. For EXPRO, this acquisition adds a critical technology solution that is proven and is increasingly gaining traction within the industry. As structured, this acquisition will be immediately accretive to cash flows and EBITDA margins, and it adds over $275 million of order backlog. We see a lot of growth opportunities in the service line going forward, especially as part of the XPRO platform. Due to our size and breadth, we are able to bring services and technologies acquired into new markets around the world. We have a proven track record of doing this, with our most recent example of core tracks acquisition that we completed back in 2024. Currently, enhanced drilling is operating primarily in offshore Norway and in the Gulf of America. And we see opportunities in the Caribbean, West Africa, Brazil, and Australia where this technology could benefit customers tremendously. Turning to slide six, here's a quick summary of the transaction from a financial perspective. The purchase price is 2 billion Norwegian kroner, which is currently equating to roughly 215 million US dollars. We expect some final adjustments to the purchase price based upon customary and working capital adjustments as the transaction is finalized and closed. Expro will utilize a combination of cash on hand and borrowings under the revolving credit facility to fund the acquisition. Current projections are for enhanced drilling to add more than $50 million to our annual run rate adjusted EBITDA. Additionally, with adjusted EBITDA margins over 30%, this acquisition will contribute to further EBITDA margin expansion. Finally, we anticipate that the transaction will close in the third quarter, and based upon our understanding at this point, will likely be sometime in the early part of the quarter. The next few slides provide a little bit more detail on enhanced drilling and some of its services and offerings along its riser-based and riserless solutions. We have provided these slides for informational purposes. Now, let's jump ahead to slide number 10. On slide 10, we're providing our 2026 financial guidance based upon what we currently see in the global market. In essence, this means no change to our previously established annual guidance for 2026. With the continued global conflicts, uncertainty still exists, which adds to the complexity of providing forward guidance. That said, however, we believe that current industry optimism is tangible particularly towards the back end of 2026 and especially as we go into 2027 and beyond. We remain constructive and confident in our second half of 2026 and the associated ramp in revenue and adjusted EBITDA seeing sequential improvements in each subsequent quarter. With regards to the impact of the Middle East conflict on our future results, assuming a resolution to the Middle East conflict by the end of the second quarter, we would expect the impact on our second quarter results to be in the $10 to $15 million revenue range. Including the first quarter and projected second quarter, impacts of the Middle East conflict would equate to approximately 1% of total company revenues for the year. It is also worth noting for the second quarter, those revenue impacts carry elevated decrementals for EBITDA calculations. In other words, the impacts are disproportionate on the revenue versus the costs. Regarding our confidence and the ramp up for the back half of the year, there are a few aspects I'd like to highlight. We see opportunities in our North and Latin America region, which subsea well access and well flow management projects to the Gulf of America, tubular sales and well intervention integrity work in Columbia, all of which should contribute a healthy amount to the projected increases. In our Middle East and North Africa region, besides assuming a resolution in the Middle East by the end of the second quarter and a return to more normalized activity, we still expect increasing contributions from our North Africa operations particularly around a sizable production solutions project. For the back half of the year in our Asia Pacific region, we see our well construction and well management businesses in Southeast Asia contributing incrementally more, along with some subsea equipment sales in China. Additionally, we expect incremental contributions from our CoreTrax product line across our geographic regions. In Europe and Sub-Saharan Africa, while we do not expect much incremental growth in the back half of the year, We still expect operations there to be steady and be a sizable contributor to overall revenue and EBITDA. Finally, as we have mentioned before, we intend to expand our margins this year with a full year benefiting from our Drive 25 initiative and to improve our capital efficiency and wallet share with existing customers. Before moving on to our customer and technology highlights, I want to revisit a few attributes that we believe set Expro apart. These are included on slide number 11. Due to our breadth of services and technologies across the well-life cycle, we see opportunities to expand our wallet share with existing customers. EXPRO can leverage our installed base to provide additional services and technologies to customers, which adds value to their operations while at the same time helping to expand our underlying margins. Another thing that we see as distinct is our innovation and technology offerings. They are emblematic of how we see the industry evolving. Our technologies and our ability to address unique customer challenges place Expro as the vendor of choice for many of our customers and adds to the company's relevancy and longevity with those same customers. In addition to our service and technology breadth, we also have geographic breadth. Our global footprint enables us to leverage services and technologies, whether those are developed internally or acquired through M&A, to be deployed in multiple geographies where we operate. For example, as we've mentioned before, our acquisition of CoreTrax in 2024. That business was operating in circa 15 countries at the time of the acquisition, but now we are deploying those technologies across over 31 countries. We plan to use a similar blueprint with the enhanced drilling acquisition, both in terms of integration, but also in terms of market expansion. Now moving on to our customer technology highlights for the quarter on slide number 12. During the first quarter, Expro continued to demonstrate its innovative technological capabilities with additional deployments and introduction of new technologies into the market. Similar to last quarter, we had several examples to choose from, but only a few to quickly highlight. In Norway, Expro successfully delivered a world-first fully remote completion joint makeup with a downhole control line and clamp without a single person in the red zone. The combination of these disruptive technologies enhances safety, increases execution and operational efficiency and delivers consistent and repeatable outcomes. Another achievement during the quarter was Express Itong offering reaching a significant industry milestone. We have now successfully run and pulled over 1.2 million feet of casing and tubing in field operations since the technology was first deployed. This achievement underscores the Itong growing momentum in the market with an increasing number of clients adopting the technology and experiencing its operational, safety, and performance advantages. Also during the first quarter, we launched SOLUS, a single shear and seal valve that replaces conventional two valve subsea well access systems. This technology reduces the complexity, operational risk, time, and cost during subsea intervention and decommissioning operations. The last example I want to highlight is a successful deployment of our multi-trace gas tracing technology for a customer that enabled accurate flow measurement on a large diameter flare system. This technology overcomes significant process challenges caused by the highly transient conditions surrounding the flow of gas and fluctuating gas consumption. Multi-trace allows accurate measurement of the flare gas in complex conditions, helping operators understand emissions, and improve compliance without disrupting operations. At the heart of all these innovation examples, and a common thread with all of them, was the value creation for our customers. Before turning the call to Sergio, I'd like to briefly revisit Expro's long-term strategic pillars, those we focus on to drive value for our shareholders. These are included on slide number 13. Expro's long-term strategy is to build a large, diversified company that has increasing relevancy to our stakeholders. particularly our customers and our shareholders. Our relevancy to customers is built upon our service offering, including our innovative technologies, execution capabilities, and market leadership positions. For shareholders, we continue to move forward, building a company that is able to generate healthy levels of free cash flow, which will be used to achieve our various capital allocation goals, all of which Sergio will expand on in his following comments. One of the pillars of the strategy that we have talked a lot about is our commitment to improve the company's financial profile. We have seen evidence of this over the last several years with even a margin expansion and increasing free cash flow generation. These will remain in focus moving forward, and we expect to achieve further improvement through cost efficiencies and reducing our capital intensity. Another pillar and an important component of our strategy is our technology and innovation and how those are deployed into the market. We continue to develop and deploy new technologies into the market across Our global footprint, our expansive footprint also enables us to internationalize or globalize technologies, particularly those that we acquire through acquisitions that have limited geographic exposure, which leads to another component of our strategy. And that is to grow the company through scalable acquisition like today's enhanced drilling announcement. The company has a strong track record of execution with acquisitions that we have made over the last several years. For these acquisitions and potential ones in the future, EXPRA looks to add to its services and technology offerings. In general, we seek opportunities with international and offshore exposure that have adjacent product offerings and are accretive to the company's financial position. Again, very characteristic of today's announcement of enhanced drilling. Due to the slate of service offerings across the full well lifecycle, we have multiple avenues to pursue when looking at potential acquisitions. Our focus will continue to be on pursuing those that we believe will increase relevancy with our customers and shareholders.