EXPRO GROUP HOLDINGS N.V. ANNOUNCES THIRD QUARTER 2023 RESULTS

EXPRO GROUP HOLDINGS N.V. ANNOUNCES THIRD QUARTER 2023 RESULTS

Revenue of $370 million, down 7% sequentially and up 11% year-over-year. 

Net loss of $14 million, as compared to net income of $9 million for the second quarter of 2023 and net loss of $18 million for the third quarter of 2022.

Adjusted EBITDA1 of $50 million, down 31% sequentially and up 4% year-over-year. Adjusted EBITDA margin1 of 14%, down sequentially from 18%. 

Adjusted EBITDA¹ , excluding $15 million of demobilization and other unrecoverable operating costs within the Company’s light well intervention, or LWI, business, of $66 million, down 15% sequentially and up 2% year-over-year. Adjusted EBITDA margin¹ , excluding LWI-related unrecoverable operating costs, would have been 18%, down sequentially from 20%.

HOUSTON - October 26, 2023 – 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, 2023.

Third Quarter 2023 Highlights

• Revenue was $370 million compared to revenue of $397 million in the second quarter of 2023, a decrease of $27 million, or 7%, driven by lower activity, primarily in the North and Latin America (“NLA”) region.
• Net loss for the third quarter of 2023 was $14 million, or $0.10 per diluted share, compared to net income of $9 million, or $0.08 per diluted share, for the second quarter of 2023. Adjusted net loss1 for the third quarter of 2023 was $3 million, or $0.03 per diluted share, compared to adjusted net income for the second quarter of 2023 of $19 million, or $0.17 per diluted share. 
• Adjusted EBITDA was $50 million, a sequential decrease of $22 million, or 31%, primarily attributable to lower revenue, a less favorable activity mix, and demobilization and other unrecoverable operating costs within our light well intervention (“LWI”) business. For the three months ended September 30, 2023, Adjusted EBITDA includes LWI-related unrecoverable operating costs of $15 million. Adjusted EBITDA for the three months ended June 30, 2023, includes LWI-related unrecoverable operating costs of $6 million. Adjusted EBITDA margin for the third quarter of 2023 and second quarter of 2023 was 14% and 18%, respectively. Excluding LWI-related unrecoverable operating costs, Adjusted EBITDA for the third and second quarter of 2023 would have been $66 million and $78 million, and Adjusted EBITDA margin would have been 18% and 20%, respectively.
• Net cash provided by operating activities for the third quarter of 2023 was $59 million compared to net cash provided by operating activities of $25 million for the second quarter of 2023, primarily driven by a favorable movement in net working capital of $46 million and a decrease in cash paid for exceptional costs of $7 million, partially offset by a decrease in Adjusted EBITDA of $22 million. Adjusted cash flow from operations¹ and cash conversion1 for the third quarter of 2023 were $64 million and 127%, respectively, compared to $36 million and 50%, respectively, for the second quarter of 2023.

Michael Jardon, Expro Chief Executive Officer, noted, “Despite near-term volatility, the macro backdrop for energy services remains quite constructive and the international and offshore markets to which Expro is most leveraged are expected to be resilient, with increased upstream spending supporting a multi-year growth phase. Sequentially lower activity in the U.S. reflects a combination of what we expect will be short-term softness in the U.S. Gulf of Mexico and what we believe to be structural challenges for our tubular running services, or TRS, business within the well construction product line in several U.S. onshore markets. In addition to a dynamic operating environment, third quarter results were also negatively impacted by our suspension of vessel-deployed LWI operations. In sum, while Expro’s results for the third quarter fell short of expectations, we remain optimistic about the multi-year outlook for the energy services industry and Expro. 

1. A non-GAAP measure.

“As disclosed in our press release on September 27, 2023, we suspended vessel-deployed LWI operations during the quarter following a wire failure on the main crane of the third party-owned vessel working with Expro while the crane was suspending the subsea module (“SSM”) of Expro’s vessel-deployed LWI system. Results for the third quarter include the recognition of $15 million of unrecoverable operating costs. We are continuing to work with the relevant stakeholders and independent experts to assess the incident and plan the recovery operation, which we expect to be completed during the fourth quarter of 2023 or in early 2024. Third quarter results do not include an estimate for recovery and repair costs; however, based on the information that is currently available to us, we do not expect that such recovery and repair costs, net of insurance, will be material to Expro’s financial results. After we have recovered our equipment, we will be able to determine a path forward for our vessel-deployed LWI business, including when our LWI system will return to operational status, what alternative service delivery options and service partner options are available to the company, and the timing and cost (including potential damage claims) of completing customer work scopes for which our vessel-deployed LWI system was integral.

“In addition to LWI-related unrecoverable operating costs, third quarter financial results reflect lower activity and revenue in NLA within our well flow management and well construction product lines. Lower well test activity following a series of dry wells negatively impacted well flow management results and reduced drilling activity in the U.S. Gulf of Mexico and in the Caribbean negatively impacted offshore well construction results. We believe sequentially lower activity and revenue resulting from dry wells and rig schedules is transitory in nature and we are anticipating a rebound in NLA offshore activity in the coming quarters. In contrast, we believe the U.S. onshore market has structural challenges which will require structural solutions. To that end, we have begun to rationalize our U.S. onshore operating footprint and are beginning to re-deploy well construction equipment to select U.S. basins as well as international markets where we believe we can achieve better asset utilization, better pricing, and better returns.

“We also completed the previously announced acquisition of Houston-based, PRT Offshore at the beginning of October. This expansion to our portfolio will enable Expro to expand our offering of cost-effective, technology-enabled services and solutions within the subsea well access sector in NLA and accelerate the growth of PRT Offshore’s surface equipment offering in the Europe and Sub-Saharan Africa (“ESSA”) and Asia Pacific (“APAC”) regions.

“October 1, 2023, also marked the second anniversary of our completion of the business combination of Expro and Frank’s International through which we brought together two iconic brands and created one company focused on best-in-class safety and service delivery and sustainable value creation. While I am proud of our team and all that they have accomplished in the past two years, we still have work to do.”

Notable Awards and Achievements

Expro won three out of the four awards presented at the Offshore Technology Conference (“OTC”) Brasil Spotlight on New Technology Awards for our CentriFi™, Distributed Fiber Optic Sensing (“DFOS”) and QuikCure® technologies. The OTC Brazil Spotlight Awards program is an annual event celebrating the latest and most advanced technologies in offshore energy and showcases the company’s commitment to technological innovation and excellence in the offshore energy sector.

In addition, Expro has been shortlisted across four categories at the annual Global OWI Awards. Our DFOS and CoilHose™ technologies have been shortlisted for Best Example of Digital Innovation and Best Example of Platform Intervention, respectively. Expro has also been shortlisted for Intervention Champion of the Year and Energy Transition Pioneer of the Year.

Expro has also successfully delivered a well cementing project for a large international oil operator in the US Gulf of Mexico expanding our innovative Cure technology offering into the Western Hemisphere. Expro’s solution helped save approximately 18 hours of cement related drill-out, clean-out and waiting on cement (“WOC”) time compared to offset wells. By using our Cure technologies, the requirement for a shoetrack to be left in the casing string was eliminated, which helped the customer avoid previously experienced cement sheath-related challenges, while our QuickCure® solution materially reduced WOC time. This latest project highlights Expro’s commitment to provide cementing technology solutions that empower our clients to overcome operational challenges and reduce drilling time and cost.

In the Middle East and North Africa, one of our customers had a failed electric submersible pump on a production well in Oman for which Expro provided a non-explosive solution. Utilizing the Kinley check valve with non-explosive technology, together with gas lift stimulation, the non-producing well achieved 2,000 Bbls/Day of total production.

Finally, in the Asia Pacific region, Expro’s Octopoda™ annulus intervention technology is being utilized to assist with the remediation of sustained casing pressure for a major liquified natural gas (“LNG”) project. Following the success this project, Octopoda™ will be used on a two well trial project. Octopoda™ is the only certified annular intervention system in the world with a reduced environmental footprint that enables direct intervention of a live annulus without the expense of a heavy workover rig.

Segment Results

Unless otherwise noted, the following discussion compares the quarterly results for the third quarter of 2023 to the results for the second quarter of 2023.

North and Latin America (NLA)

Revenue for the NLA segment was $105 million for the three months ended September 30, 2023, a decrease of $30 million, or 22%, compared to $135 million for the three months ended June 30, 2023. The decrease was due to generally lower U.S. onshore activity, offshore rigs undergoing maintenance and undertaking non drilling operations, and a number of dry wells in the region, resulting in lower well construction revenue in the U.S., Canada and Guyana and lower well flow management revenue in Mexico.

Segment EBITDA for the NLA segment was $20 million, or 19% of revenues, during the three months ended September 30, 2023, a decrease of $17 million, or 46%, compared to $37 million or 27% of revenues during the three months ended June 30, 2023. The decrease in Segment EBITDA and Segment EBITDA margin was attributable to lower activity and less favorable activity mix during the three months ended September 30, 2023.

Europe and Sub-Saharan Africa (ESSA)

Revenue for the ESSA segment was $135 million for the three months ended September 30, 2023, a decrease of $3 million, or 2%, compared to $138 million for the three months ended June 30, 2023. The decrease in revenues was primarily driven by lower well construction revenue in Cyprus, Mozambique and Senegal and lower well flow management revenue due to a decrease in customer activity. The decrease in revenue was offset by increased subsea well access revenue, particularly in Congo and Angola. 

Segment EBITDA for the ESSA segment was $39 million, or 29% of revenues, for the three months ended September 30, 2023, an increase of $4 million, or 12%, compared to $35 million, or 25% of revenues, for the three months ended June 30, 2023. The increase in Segment EBITDA and Segment EBITDA margin was attributable to a combination of a more favorable activity mix and increased activities on higher margin services during the three months ended September 30, 2023.

Middle East and North Africa (MENA)

Revenue for the MENA segment was $58 million for the three months ended September 30, 2023, a decrease of $1 million, or 2%, compared to $59 million for the three months ended June 30, 2023. The decrease in revenue was driven by lower well flow management activity primarily in Saudi Arabia, partially offset by higher activity in Algeria.

Segment EBITDA for the MENA segment was $17 million, or 29% of revenues, for the three months ended September 30, 2023, a decrease of $2 million, or 9%, compared to $18 million, or 31% of revenues, for the three months ended June 30, 2023. The decrease in Segment EBITDA and Segment EBITDA margin was primarily due to lower activity and less favorable activity mix during the three months ended September 30, 2023.

Asia Pacific (APAC)

Revenue for the APAC segment was $71 million for the three months ended September 30, 2023, an increase of $6 million, or 10%, compared to $65 million for the three months ended June 30, 2023. The increase in revenue was primarily due to higher activity across all product lines, in particular, higher subsea well access revenue in China (product sales) and Australia (LWI activity).

Segment EBITDA for the APAC segment was ($4) million, or (6)% of revenues, for the three months ended September 30, 2023, a decrease of $8 million compared to $4 million, or 5% of revenues, for the three months ended June 30, 2023. The decrease in Segment EBITDA is attributable primarily to demobilization and other unrecoverable operating costs within our LWI business. For the three months ended September 30, 2023, Segment EBITDA includes LWI-related unrecoverable operating costs of $15 million. Segment EBITDA for the three months ended June 30, 2023 include LWI-related unrecoverable operating costs of $6 million. Excluding LWI-related unrecoverable operating costs, Segment EBITDA for the third and second quarter of 2023 would have been $11 million or 15% of revenue and $9 million or 14% of revenue, respectively.

Stock Repurchase Plan

On October 25, 2023, the Company’s Board of Directors (the “Board”) approved an extension to the stock repurchase program, which was set to expire on November 24, 2023.  Pursuant to the extended stock repurchase program, the Company is now authorized to acquire up to $100 million of its outstanding common stock through November 24, 2024 (the “Stock Repurchase Program”). Under the Stock Repurchase Program, the Company may repurchase shares of the Company’s common stock in open market purchases, in privately negotiated transactions or otherwise. The Stock Repurchase Program will be utilized at management’s discretion and in accordance with federal securities laws. The timing and actual numbers of shares repurchased will depend on a variety of factors including price, corporate requirements, the constraints specified in the Stock Repurchase Program along with general business and market conditions. The Stock Repurchase Program does not obligate the Company to repurchase any particular amount of common stock, and it could be modified, suspended or discontinued at any time.

Other Financial Information

The Company’s capital expenditures totaled $27 million in the third quarter of 2023, of which approximately 90% were used for the purchase and manufacture of equipment to directly support customer-related activities and approximately 10% for other property, plant and equipment, inclusive of software costs. Expro plans for capital expenditures in the range of approximately $30 million to $40 million for the remainder of 2023.

As of September 30, 2023, Expro’s consolidated cash and cash equivalents, including restricted cash, totaled $257 million. The Company had outstanding long-term borrowings of $50 million as of September 30, 2023. The Company’s total liquidity as of September 30, 2023 was $337 million. Total liquidity includes $80 million available for drawdowns as loans under the Company’s revolving credit facility.

Expro’s provision for income taxes for both the third quarter of 2023 and the second quarter of 2023 was approximately $13 million. 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, 2023, also reflects liability for taxes in certain jurisdictions that tax on an other than pre-tax profits basis, including so-called “deemed profits” regimes.

On October 6, 2023, the Company amended and restated its revolving credit facility (the “Amended and Restated Facility Agreement”) pursuant to an amendment and restatement agreement with DNB Bank ASA, London Branch, as agent, in order to extend the maturity of the facility for a further 36 months and increase the total commitments to $250 million, of which $167 million is available for drawdowns as loans and $83 million is available for letters of credit. The Company has the ability to increase the commitments to $350 million.

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 2023 results on Thursday, October 26, 2023, at 12:00 p.m. Central Time (1:00 p.m. Eastern Time).

Participants may also join the conference call by dialing:

U.S.: +1 (833) 470-1428

International: +1 (929) 526-1599

Access ID: 385159

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

The third quarter 2023 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 (866) 813-9403 or +44 (204) 525-0658

Access ID: 585102

Start Date: October 26, 2023, 3:00 p.m. CT

End Date: November 2, 2023, 11:59 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 considers 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 7,800 employees and provides services and solutions to leading exploration and production companies in both onshore and offshore environments in approximately 60 countries.

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

Contact:

[email protected]