EXPRO GROUP HOLDINGS N.V. ANNOUNCES THIRD QUARTER 2022 RESULTS

Operational Performance Driven by Balanced Growth Across Geographies and Supported by Robust Activity in Key International and Offshore Markets

Achieved $62 million of Cost Synergies in First Year Post-Transaction Close, Exceeding Target by 13%

HOUSTON - November 3, 2022 - Expro Group Holdings N.V. (NYSE: XPRO) (the “Company” or “Expro”) today reported financial and operational results for the three and nine months ended September 30, 2022.

Third Quarter 2022 Highlights

• Revenue was $334 million compared to revenue of $314 million in the second quarter of 2022, an increase of $20 million, or 7%, driven by higher activity across all of Expro’s segments, most notably in Europe and Sub-Saharan Africa (ESSA).
• Net loss for the third quarter of 2022 was $18 million, or $0.16 per diluted share, compared to a net loss of $4 million, or $0.04 per diluted share, for the second quarter of 2022. Adjusted net loss¹ for the third quarter of 2022 was $8 million, or $0.07 per diluted share, compared to adjusted net income for the second quarter of 2022 of $3 million, or $0.02 per diluted share. Results for the third quarter of 2022 and second quarter of 2022 include foreign exchange losses of $8 million and $5 million, respectively, or $0.07 and $0.05 per diluted share, respectively.
• Adjusted EBITDA¹ was $48 million, a sequential decrease of $3 million, or 6%, primarily attributable to higher start-up and commissioning costs incurred on a large subsea project in APAC during the three months ended September 30, 2022, partially offset by a more favorable product mix and lower support costs as a result of merger related synergies. Adjusted EBITDA margin1 for the third quarter of 2022 and second quarter of 2022 was 14% and 16%, respectively. Excluding $17 million of start-up and commissioning costs on the above referenced subsea project that were recognized during the third quarter of 2022, Adjusted EBITDA would have been $65 million, and Adjusted EBITDA margin would have been 19%.
• Net cash used in operating activities for the third quarter of 2022 was $1 million compared to net cash provided by operating activities of $2 million for the second quarter of 2022, primarily driven by dividend receipts of $3 million in the second quarter of 2022 that did not recur during the current quarter. Adjusted cash flow from operations1 for the third quarter of 2022 was $8 million compared to $10 million for the second quarter of 2022. Net cash used in operating activities and Adjusted cash flow from operations for the three and nine months ended September 30, 2022 include increases in working capital of $29 million and $99 million, respectively, which is expected to reverse beginning in the fourth quarter of 2022 and into 2023. 

1. A non-GAAP measure.

Michael Jardon, Chief Executive Officer, noted, “Expro’s strong operational performance across our businesses demonstrates that our balanced portfolio, well-established partnerships, and unique blend of expertise and technology, continue to deliver value to customers across the life of their wells. We continue to capitalize on new business opportunities in the third quarter, winning contracts and successfully entering new markets, based on the strength of our relationships and our reputation for delivering extraordinary performance. 

“Our solid performance in the quarter reflects balanced growth across our geographies. We sustained the recently strong performance in NLA and also delivered strong performance in ESSA and MENA as our teams capitalized on accelerated activity and continued to expand relationships with key customers. Despite transitory margin pressure in APAC, we remain confident that Expro is well-positioned to capitalize on a growth cycle that should be multi-year in duration, global in scope, span all phases of oil and gas development, and include all operating environments.  We are also expanding our partnerships beyond oil and gas and demonstrating that our tried-and-tested technologies and depth of expertise can be utilized in emerging new energy segments, such as geothermal, where we are already supporting sustainable energy solutions. 
 
“As we outlined in our inaugural Environmental, Social and Governance report earlier this year, we are committed to addressing Expro’s and our industry’s effects on the planet, and this includes working with customers around the world to develop and implement the right solutions. Technology is a critical component of advancing sustainable energy solutions, and our team has made significant progress introducing innovative solutions to meet customers’ challenges. This includes advances in fully autonomous tubular running, a suite of digitally intelligent well construction solutions and integrated services in support of the geothermal market are key examples that focus on supporting customers’ lower carbon objectives.

“The end of the third quarter also marked the end of our first year since the Expro and Frank’s transaction closed, and I am pleased with how our employees around the world have come together to support each other and our customers as a combined company. We have made excellent progress on our synergy capture efforts as we delivered more than $60 million in cost savings, exceeding our first-year targets of $55 million in costs savings by more than 10%. Importantly, we have achieved our initial goal of driving overall support costs to 20% of consolidated revenue and we remain on track to deliver on our medium-term target of $70 million in cost savings and total synergies of $80 to $100 million in the first 24 to 36 months post close. We also expect to continue to capture new opportunities for margin expansion as we strengthen our global operating model and drive efficiencies through our organization.

“Looking ahead, we are well positioned in markets that benefit from strong industry fundamentals. Despite the uncertain broader macro-economic environment, we are experiencing an upswing in global activity driven by increasing demand, coupled with the industry’s growing recognition that sustained investments are needed to stabilize energy production over the long term. Given our strong presence in key international and offshore markets where activity is accelerating, and our leading portfolio of offshore solutions, Expro is poised to benefit from industry-wide tailwinds. In particular, we expect significant growth in our well construction business as offshore activity continues to ramp up in the fourth quarter and into 2023.

“As recognized global well experts and a trusted industry partner, Expro continues to compete and win on a worldwide basis. We remain on track to deliver run-rate quarterly revenue of $325 - $350 million in the fourth quarter with EBITDA margins of approximately 20%. In due course, improved profitability will drive strong cash flow generation as we capitalize on tailwinds in our industry and the strong demand for our innovative, sustainable solutions.” 

Notable Awards and Achievements

One of the most important organizations that evaluates companies’ ESG programs upgraded Expro’s sustainability rating two full levels from below average to an A (above average). Expro achieved this outstanding milestone less than a year following the merger and the expansion of our company.

Expro won the Best Health, Safety, Environment/Sustainable Development Offshore award for its CENTRI-FI™ technology at the 2022 World Oil Awards in October. The CENTRI-FI™ Consolidated Control Console is one element of a suite of digitally intelligent well construction solutions that are intended to address today’s and tomorrow’s energy challenges. In particular, CENTRI-FI™ allows the tong makeup, elevator and slips function, and a single joint elevator to be precisely controlled and operated via wireless control tablet by a single operator.

Expro’s iTONG™ system, which advances fully autonomous tubular running, successfully completed field trials for an important customer in the North Sea, taking part in 22 jobs, resulting in more than 1,600 connections being made. This digital technology is designed to enhance operations and reduce personnel on the rig floor, resulting in improved safety and efficiency, with lower operational costs.

Expro was awarded Tubing Conveyed Perforating (“TCP”) work to support the energy transition on a 10-well campaign across three geothermal projects in the Netherlands. This campaign will provide geothermal district heat to the community and marks the first such TCP project in the country. Expro delivered an excellent technical solution to the client, underlining the Expro team’s expertise, experience, and tried-and-tested technologies in support of the geothermal market.

Expro has also been awarded a geothermal contract in Indonesia for a 12-well, 24-month contract for pipe recovery in a hostile environment. This was a significant new business win for the Indonesia team and based on the Expro team’s excellent service quality. These wins, combined with the strengthening of the Company’s Portfolio Advancement leadership team, positions Expro well to capitalize on new geothermal market opportunities.

Expro has successfully completed an 18-well plug and abandonment operation in Australia, building on the Company’s established subsea well access experience and track record, to assist its customer in solving unique abandonment challenges. Expro’s industry-leading subsea well access technology provides clients with a safe and environmentally secure operating system for the commissioning and decommissioning of subsea wells.

Expro’s ability to meet client’s exacting needs for mercury removal led to the award of a significant contract in North Africa. The client approached Expro to design a mercury removal system to tackle a higher-than-expected concentration of mercury. Expro’s solution was an ideal technical fit to tackle the challenges, and our fast mobilization time was key to securing this three-year award.

Finally, a major International Oil Company (IOC) recently awarded Expro a contract to construct, operate and maintain a fast-track, onshore facility in West Africa in order to increase its liquified natural gas (LNG) production from the area.  Upon completion, the facility will facilitate incremental gas production (and feedstock for low-carbon electricity generation) targeting the continental Europe market that is increasingly focused on security of supply and energy security issues.  The contract has potential to generate in excess of $300 million in revenue over a contract term of up to 10 years.

Segment Results

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

North and Latin America (NLA) 
 
NLA revenue totaled $135 million for the three months ended September 30, 2022, an increase of $5 million, or 4%, compared to $130 million for the three months ended June 30, 2022. The increase was primarily due to higher well construction product sales and services revenue in the U.S. and Mexico, and higher well flow management services revenue in Canada, partially offset by lower well flow management revenue in the U.S. and lower well construction revenue in Guyana.

NLA Segment EBITDA was $40 million, or 30% of segment revenue, during the three months ended September 30, 2022, compared to $39 million, or 30% of segment revenue, during the three months ended June 30, 2022. The increase of $1 million was attributable to higher activity during the three months ended September 30, 2022.
 
Europe and Sub-Saharan Africa (ESSA) 
 
ESSA revenue totaled $100 million for the three months ended September 30, 2022 compared to $90 million for the prior quarter, an increase of $10 million. The sequential increase of 11% was primarily driven by higher subsea well access revenue in Azerbaijan and Angola and higher well flow management revenue in the United Kingdom and Nigeria due to increased customer activities. The increase in revenues was partially offset by lower subsea well access revenue in the United Kingdom.

ESSA Segment EBITDA during the three months ended September 30, 2022 was $18 million, or 18% of segment revenue, compared to $15 million, or 17% of segment revenue, in the prior quarter. The increase of $3 million was primarily attributable to higher activity levels and a more favorable activity mix during the three months ended September 30, 2022.
 
Middle East and North Africa (MENA) 
 
MENA revenue totaled $50 million for the three months ended September 30, 2022 compared to $45 million for the three months ended June 30, 2022. The sequential increase in revenue of $5 million, or 11%, was primarily driven by higher well flow management revenue in Saudi Arabia and Algeria.

MENA Segment EBITDA for the three months ended September 30, 2022 was $15 million, or 29% of segment revenue, compared to $14 million, or 30% of segment revenue, in the prior quarter. The increase in Segment EBITDA was primarily due to higher activity during the three months ended September 30, 2022.
 
Asia Pacific (APAC)
 
APAC revenue for the three months ended September 30, 2022 totaled $50 million compared to $48 million in the prior quarter, an increase of $2 million. The 4% increase in revenue was primarily due to higher subsea well access revenue in Australia, China and Indonesia and higher well construction revenue in Japan. The increase in revenue was partially offset by lower equipment sales related to well flow management services in Malaysia.

APAC Segment EBITDA for the three months ended September 30, 2022 totaled $(9) million, or (17)% of segment revenue, compared to $4 million, or 9% of segment revenue, in the prior quarter. The reduction in Segment EBITDA despite the increase in revenues was primarily due to higher start-up and commissioning costs on a large subsea project that were incurred during the quarter as well as lower activity on higher margin contracts. Excluding $17 million and $4 million, respectively, of the above-mentioned start-up and commissioning costs during the three months ended September 30, 2022, and June 30, 2022, Segment EBITDA was $8 million and $8 million, respectively, and Segment EBITDA margin was 16% and 17%, respectively.

Other Financial Information
 
On March 10, 2021, Frank’s International N.V. (“Frank’s”) and New Eagle Holdings Limited, an exempted company limited by shares incorporated under the laws of the Cayman Islands and a direct wholly owned subsidiary of Frank’s (“Merger Sub”), entered into an Agreement and Plan of Merger with Expro Group Holdings International Limited (“Legacy Expro”), an exempted company limited by shares incorporated under the laws of the Cayman Islands, providing for the merger of Legacy Expro with and into Merger Sub in an all-stock transaction, with Merger Sub surviving the merger as a direct, wholly owned subsidiary of Frank’s (the “Merger”). The Merger closed on October 1, 2021, and Frank's was renamed to Expro Group Holdings N.V. 
 
The Company’s capital expenditures totaled $19 million in the third quarter of 2022. Expro plans for capital expenditures in the range of approximately $30 million to $40 million for the fourth quarter of 2022.
 
As of September 30, 2022, Expro’s consolidated cash and cash equivalents, including restricted cash, totaled $157 million. The Company had no outstanding debt as of September 30, 2022 and has no outstanding debt today. The Company’s total liquidity as of September 30, 2022 was $287 million. Total liquidity includes $130 million available for drawdowns as loans under the Company’s revolving credit facility entered into in connection with the Merger.
 
Expro established a non-cash reserve of $8 million in the third quarter related to its ongoing discussions with the U.S. Securities and Exchange Commission (“SEC”) regarding actions of certain legacy Frank’s subsidiaries that included possible legacy violations of the U.S. Foreign Corrupt Practices Act that occurred prior to the Expro-Frank’s merger in 2021. There can be no assurance as to the timing or the terms of any final resolution, or that a settlement will be reached.

Expro’s provision for income taxes for the third quarter of 2022 was $15 million compared to $10 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 increased taxable profits in Latin America and Sub-Saharan Africa, and an increase in withholding taxes in various jurisdictions. The Company’s effective tax rate on a U.S. generally accepted accounting principles (“GAAP”) basis for the three and nine months ended September 30, 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 third quarter 2022 results on Thursday, November 3, 2022, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time).
 
Participants may also join the conference call by dialing:
 
U.S.: +1 (844) 200-6205
International: +1 (929) 526-1599
Access ID: 181589
 
To listen via live webcast, please visit the Investor section of www.expro.com.
 
The third 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: U.S. +1 (929) 458-6194 or +44 (204) 525-0658
Access ID: 382360
Start Date: November 3, 2022, 1:00 p.m. CT
End Date: November 10, 2022, 11:00 p.m. CT
 
A transcript of the conference call will be posted to the Investor relations section of the Company’s website as soon as practicable 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 what the Company believes to be 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 solutions.
 
With roots dating to 1938, Expro has approximately 7,200 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]
[email protected]
 
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