EXPRO GROUP HOLDINGS N.V. ANNOUNCES FOURTH QUARTER AND FULL YEAR 2022 RESULTS

Robust operational performance and profitable growth driven by breadth of portfolio, depth of expertise, global operating footprint and strong financial profile

Realized annualized merger-related cost synergies of approximately $66 million through fourth quarter of 2022, 

thereby achieving company's target for total support costs as a percentage of revenue of 20%

Provides 2023 revenue and Adjusted EBITDA margin outlook

HOUSTON - February 23, 2023 - Expro Group Holdings N.V. (NYSE: XPRO) (the “Company” or “Expro”) today reported financial and operational results for the three months and year ended December 31, 2022.

Fourth Quarter 2022 Financial Highlights

• Revenue was $351 million compared to revenue of $334 million in the third quarter of 2022, a sequential increase of $17 million, or 5%, driven by increased activity in Europe and Sub-Saharan Africa (ESSA) and Middle East and North Africa (MENA).
• Net income for the fourth quarter of 2022 was $13 million, or $0.12 per diluted share, compared to a net loss of $18 million, or $0.16 per diluted share, for the third quarter of 2022. Adjusted net income1 for the fourth quarter of 2022 was $24 million, or $0.22 per diluted share, compared to an adjusted net loss for the third quarter of 2022 of $8 million, or $0.07 per diluted share. Results for the fourth quarter of 2022 and third quarter of 2022 include foreign exchange gains (losses) of $2 million and ($8) million, respectively, or $0.02 and ($0.07) per diluted share, respectively.
• Adjusted EBITDA1 was $70 million, a sequential increase of $22 million, or 46%, driven by higher activity during the fourth quarter and lower start-up and commissioning costs incurred on a large subsea project in Asia Pacific (APAC) during the fourth quarter of 2022 as compared to the third quarter of 2022. Adjusted EBITDA margin for fourth quarter of 2022 and third quarter of 2022 was 20% and 14%, respectively. Excluding $5 million and $17 million of start-up and commissioning costs on the above referenced subsea project that were recognized during the fourth and third quarter of 2022, Adjusted EBITDA would have been $75 million and $65 million, in the fourth and third quarter respectively, and Adjusted EBITDA margin would have been 21% and 19%, respectively.
• Net cash provided by operating activities for the fourth quarter of 2022 was $93 million compared to net cash used in operating activities of $1 million for the third quarter of 2022. The increase was primarily due to a combination of a $46 million decrease in working capital during the fourth quarter as compared to an increase in working capital by $29 million during the third quarter of 2022, higher Adjusted EBITDA (as referenced above), and dividend receipts of $4 million during the fourth quarter of 2022. Adjusted cash flow from operations1 for the fourth quarter of 2022 was $99 million compared to $8 million for the third quarter of 2022. 

Full Year 2022 Financial Highlights

• Revenue was $1,279 million for the year ended December 31, 2022, an increase of $453 million, or 55%, compared to $826 million for the year ended December 31, 2021. The merger of legacy Frank's and legacy Expro, which closed on October 1, 2021 (the "Merger"), contributed $386 million of the increase, with the remaining increase driven by increased activity across all of Expro’s operating segments.
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• Net loss was $20 million for  the year ended December 31, 2022, or $0.18 per diluted share, compared to a net loss of $132 million, or $1.64 per diluted share, for the year ended December 31, 2021. Adjusted net income for the year ended December 31, 2022 was $19 million, or $0.18 per diluted share, compared to adjusted net loss for the year ended December 31, 2021 of $19 million, or $0.24 per diluted share. 
• Adjusted EBITDA increased by $80 million, or 63%, to $206 million for the year ended December 31, 2022 from $126 million for the prior year. The increase in Adjusted EBITDA was due to impacts of the Merger, synergies associated with the Merger, and increased activity during the year ended December 31, 2022, partially offset by start-up and commissioning costs incurred on a large subsea project during 2022. Adjusted EBITDA margin was approximately 16% and 15% for 2022 and 2021, respectively, with the improvement in margins driven by a combination of a more favorable activity mix and lower support costs as a result of Merger-related synergies, partially offset by start-up and commissioning costs incurred on a large subsea project. Excluding the $28 million of start-up and commissioning costs incurred during the year ended December 31, 2022, Adjusted EBITDA would have been $234 million and Adjusted EBITDA margin would have been 18%.
• Net cash provided by operating activities for the year ended December 31, 2022 was $80 million compared to $16 million for year ended December 31, 2021, primarily due to an increase in Adjusted EBITDA (as referenced above), partially offset by an increase in income tax payments of $13 million. Adjusted cash flow from operations for the year ended December 31, 2022 was $115 million compared to $65 million for year ended December 31, 2021.

 1. A non-GAAP measure.                                                                                     

Michael Jardon, Chief Executive Officer, noted “Expro delivered an exceptionally strong fourth quarter with financial results at the top end of our expectations. Having recently crossed the one-year mark since completing the merger of Expro and Frank’s International, our strong results show that we are beginning to realize the full potential of our combined organization while achieving efficiencies and expanding margins. As a result, we enter 2023 in a strong position for continued profitable growth, with a robust order book supported by strong demand trends for our services and solutions.

“A positive fundamental backdrop, together with our broad portfolio of services and solutions, global reach, and merger-related efficiency gains, should allow us to better leverage the combined organization’s customer relationships, capitalize on market opportunities in key growth areas, and achieve profitable growth throughout 2023 and beyond. 

“We are also pleased to announce that our sustainability efforts have again received external recognition. MSCI, one of the most important organizations evaluating companies’ ESG programs, upgraded Expro’s sustainability rating by two full levels from a BB to a single-A rating in 2022. We have also achieved an upgrade rating from CDP, a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts.

“This recognition is a reflection of our substantial company-wide efforts to both advance our carbon-reduction capabilities and to embed our environmental, social and governance strategy into everything that we do, both within our business and in the communities in which we operate. 

 
“We believe our industry must be part of the solution to realize a lower carbon future, and as we advance our strategy through 2023 and beyond, we will continue to develop the technologies and solutions to manage our own emissions and assist our clients in reducing theirs.
  
“We remain confident that the pipeline of projects we are seeing will support strong, multi-year growth for the energy services sector, driven by an extended period of under-investment in global upstream production. We are also confident that we will continue to grow our pipeline of projects due to our strong presence in key international and offshore markets and the breadth of our portfolio of innovative solutions. With strong momentum building in longer-cycle projects, we expect international demand to accelerate through 2023 in order to add production capacity and thereby meet expected increases in demand.

“We are incredibly excited about the platform we have built and the opportunities ahead for our business. For 2023, we expect improving profitability to drive improved cash flow generation as we capitalize on tailwinds in our industry and the strong demand for our innovative, sustainable solutions. Based on our strong performance in 2022 and a positive activity outlook, we currently anticipate generating revenues of between $1,450 million to $1,550 million in 2023. Adjusted EBITDA in 2023 is expected to be between $275 million and $325 million, and Adjusted EBITDA margin is expected to be between 19% and 21% of revenue. Consistent with historical patterns, revenue and profitability in the first quarter of 2023 are expected to be negatively impacted by the winter season in the Northern Hemisphere and the budget cycles of our national oil company customers, with revenue flat to down modestly sequentially and Adjusted EBITDA margin in the mid-teens.”

Notable Awards and Achievements 

 
Expro was named Champion Integrated Well Service Company and also received the Most Innovative Solution award for its Octopoda^TM annulus intervention services at the OWI Global Awards 2022. Organized by Offshore Network, the awards recognize the best in well intervention excellence. Expro was also shortlisted for the Best Example in Collaboration, Best Project Outcome, and Plug and Abandonment (P&A) Excellence awards.

Expro continues to develop partnerships and win work beyond oil and gas, demonstrating that its well-established technologies and depth of expertise are transferable, and that our services and solutions can be utilized in support of the energy transition. Expro’s Geothermal business continues to develop globally, and we recently have secured a contract for shoot-and-pull Tubing Conveyed Perforating (TCP) work for multiple wells on a Carbon Capture Usage and Storage (CCUS) project in Wyoming.

Expro’s technical capabilities also helped secure a Subsea Plug & Abandonment contract. This is a new contract for a 21-well abandonment campaign offshore UK on a semi-submersible rig, with an expected duration of 36 months. Our Subsea team also successfully completed the pre-operations testing of our vessel-deployed, wire-through-water lightwell intervention, or LWI, system, is finalizing its work plan with the vessel owner and customer, and expects to be operational and revenue generative during the first quarter of 2023.

Expro’s broad range of services also helped secure a wireline services contract in the UK. This new contract complements the existing Well Test and Subsea Contract entered into in the first quarter of 2022 and provides a springboard to deliver additional services to this important client. Additionally, an integrated well test contract for rig-less sites in Saudi Arabia, was secured. In India, Expro secured a Drill Stem Testing / Tubing Conveyed Perforating (DST/TCP) contract for offshore operations. 

The Company’s well construction team continues to demonstrate its position as the premium provider of tubular running services (TRS) and products, with contract wins and operational success across the world, including in Brazil, where the team won multiple contracts for the provision of TRS offshore services for a 48-month duration.

 
The acquisition of the SolaSense well surveillance business in March 2022 continues to deliver value to Expro clients through its Distributed Fiber Optic Sensing (DFOS) technology. One recent success involved a customer in Asia who was experiencing gas lift performance issues affecting its entire field production. Expro’s DFOS service was selected to jointly evaluate the integrity and monitor the gas lift performance during production in multiple wells. DFOS evaluation and data allowed the customer to maintain two days of production when compared with the associated shut-in times of other available surveillance technologies.

In the first quarter of 2023, Expro announced the acquisition of DeltaTek Global (“DeltaTek”). This acquisition creates a broader offering, as well as enhanced capabilities and technology within the well construction cementing portfolio, while accelerating DeltaTek’s international deployment ambitions through Expro’s global footprint. The DeltaTek range of low-risk open water cementing solutions increases clients’ operational efficiency, delivers rig time and cost savings, and improves the quality of cementing operations.

Segment Results

Unless otherwise noted, the following discussion compares the quarterly results for the fourth quarter of 2022 to the results for the third quarter of 2022.

North and Latin America (NLA)

NLA segment revenue totaled $132 million for the three months ended December 31, 2022, a decrease of $3 million, or 2%, compared to $135 million for the three months ended September 30, 2022. The decrease was primarily due to lower well management services revenue in Mexico and the U.S., partially offset by higher well construction services revenue in the Gulf of Mexico driven by higher customer activities.

NLA Segment EBITDA was $35 million, or 27% of revenues, during the three months ended December 31, 2022, compared to $40 million or 30% of revenues during the three months ended September 30, 2022. The decrease of $5 million in Segment EBITDA was attributable to lower activity and the reduction in Segment EBITDA margin was attributable to a less favorable product mix during the three months ended December 31, 2022.

Europe and Sub-Saharan Africa (ESSA)

ESSA segment revenue totaled $117 million for the three months ended December 31, 2022, an increase of $17 million, or 17%, compared to $100 million for the three months ended September 30, 2022. The increase in revenues was primarily driven by higher well flow management revenue in Congo from a new long term production solutions contract with Eni Congo S.A. and in the U.K. from increased customer activities.

ESSA Segment EBITDA was $30 million, or 26% of revenues, for the three months ended December 31, 2022, an increase of $12 million, or 67%, compared to $18 million, or 18% of revenues, for the three months ended September 30, 2022. The increase in Segment EBITDA and Segment EBITDA margin was primarily attributable to higher activity levels and a more favorable activity mix during the three months ended December 31, 2022.

Middle East and North Africa (MENA)

MENA segment revenue totaled $55 million for the three months ended December 31, 2022, an increase of $5 million, or 10%, compared to $50 million for the three months ended September 30, 2022. The increase in revenue was driven by higher well flow management services revenue in Algeria and the Kingdom of Saudi Arabia.

MENA Segment EBITDA was $19 million, or 35% of revenues, for the three months ended December 31, 2022, an increase of $4 million, or 27%, compared to $15 million, or 29% of revenues, for the three months ended September 30, 2022. The increase in Segment EBITDA and Segment EBITDA margin was primarily due to higher activity and a more favorable activity mix during the three months ended December 31, 2022.

Asia Pacific (APAC)

APAC segment revenue totaled $47 million for the three months ended December 31, 2022, a decrease of $3 million, or 6%, compared to $50 million for the three months ended September 30, 2022. The decrease in revenue was primarily due to lower subsea well access revenue in Australia and Malaysia.

APAC Segment EBITDA was $4 million, or 8% of revenues, for the three months ended December 31, 2022, an increase of $13 million compared to $(9) million, or (17)% of revenues, for the three months ended September 30, 2022. The increase in Segment EBITDA (despite the decrease in revenues) was primarily due to lower start-up and commissioning costs incurred on a large subsea project during the three months December 31, 2022 as compared to the three months ended September 30, 2022. Excluding $5 million and $17 million of start-up and commissioning costs during the three months ended December 31, 2022 and September, 30, 2022, respectively, Segment EBITDA would have been $9 million and $8 million and Segment EBITDA margin would have been 18% and 16% respectively, for the three months ended December 31, 2022 and September 30, 2022.

Other Financial Information

The Company’s capital expenditures totaled $31 million in the fourth quarter of 2022 and approximately $82 million for the full year 2022. Expro plans for capital expenditures in the range of approximately $120 million to $130 million for 2023.

As of December 31, 2022, Expro’s consolidated cash and cash equivalents, including restricted cash, totaled $218 million. The Company had no outstanding debt as of December 31, 2022 and has no outstanding debt today. The Company’s total liquidity as of December 31, 2022 was $348 million. Total liquidity includes $130 million available for drawdowns as loans under the Company’s new revolving credit facility entered into in connection with the Merger (the “New Facility”).

Expro’s provision for income taxes for the fourth quarter of 2022 was $12 million compared to $15 million in the prior quarter. The sequential change in income taxes was primarily due to changes in the mix of taxable profits between jurisdictions, in particular decreased taxable profits in Latin America. The Company’s effective tax rate on a U.S. generally accepted accounting principles (“GAAP”) basis for the three months and year ended December 31, 2022 also reflects liability for taxes in certain jurisdictions that tax on an other than pre-tax profits basis, including so-called “deemed profits” regimes.

The financial measures provided that are not presented in accordance with GAAP are defined and reconciled to their most directly comparable GAAP measures. Please see “Use of Non-GAAP Financial Measures” and the reconciliations to the nearest comparable GAAP measures. 

Additionally, downloadable financials are available on the Investor section of www.expro.com.

Conference Call

The Company will host a conference call to discuss fourth quarter 2022 results on Thursday, February 23, 2023, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time).

Participants may also join the conference call by dialing:

US: +1 (844) 200-6205

International: +1 (929) 526-1599

Access ID: 744040

To listen via live webcast, please visit the Investor section of www.expro.com.

The fourth quarter 2022 Investor Presentation is available on the Investor section of www.expro.com.

An audio replay of the webcast will be available on the Investor section of the Company’s website approximately three hours after the conclusion of the call and will remain available for a period of approximately 12 months.

To access the audio replay telephonically:

Dial-In: US +1 (929) 458-6194 or +44 (204) 525-0658

Access ID: 744577

Start Date: February 23, 2023, 1:00 p.m. CT

End Date: March 2, 2023, 11:00 p.m. CT

A transcript of the conference call will be posted to the Investor relations section of the Company’s website after the conclusion of the call.

ABOUT EXPRO

Working for clients across the entire well life cycle, Expro is a leading provider of energy services, offering cost-effective, innovative solutions and best-in-class safety and service quality. The Company’s extensive portfolio of capabilities spans well construction, well flow management, subsea well access, and well intervention and integrity.

With roots dating to 1938, Expro has more than 7,600 employees and provides services and solutions to leading energy companies in both onshore and offshore environments in approximately 60 countries.

For more information, please visit: www.expro.com and connect with Expro on Twitter @ExproGroup and LinkedIn @Expro.

Contact:

Karen David-Green - Chief Communications, Stakeholder & Sustainability Officer

+1 281 994 1056

[email protected]