Financial Data and Key Metrics Changes - Overall first quarter revenue was $303.1 million, up 2.1% year over year but down 11.7% sequentially [21] - Adjusted EBITDA for Q1 2025 was $62.5 million with margins of 20.6%, down 100 basis points year over year [22] - Earnings per share adjusted for charges and credits was 14 cents for Q1 2025, with charges impacting adjusted EBITDA being the lowest for many periods [23] - Cash flow from operations during Q1 2025 was $20.5 million, with free cash flow being negative $9.6 million due to increased Days Sales Outstanding (DSO) [24] - Gross debt as of March 31 was $366 million, with net debt at $288 million, maintaining a net debt to adjusted EBITDA ratio of 0.93 [25] Business Line Data and Key Metrics Changes - Year-over-year growth was observed in Abu Dhabi, Algeria, Kuwait, Iraq, and Libya, partially offset by a slow start in Saudi Arabia [21] - The sequential decrease in Saudi Arabia was mainly due to slowdowns in main projects during Ramadan [22] - The company expects to grow in Oman and UAE due to strong contract bases and new contract wins [12][21] Market Data and Key Metrics Changes - The overall market in the Middle East is expected to remain stable to slightly up, with Saudi Arabia experiencing a decline [82] - Kuwait is projected to be the biggest growth market due to added rigs and capacity [84] - North Africa is expected to see stable growth, with opportunities for significant market share increase [70] Company Strategy and Development Direction - The company is adapting its long-term strategy to right-size its fixed cost structure and reallocate resources to areas of growth [11] - The focus remains on countercyclical investing, with plans to capitalize on downturn opportunities [19][75] - The company aims to be a top player in every segment within the countries it operates, leveraging its existing relationships and market footprint [76] Management's Comments on Operating Environment and Future Outlook - The management highlighted the geopolitical and economic uncertainties impacting oil demand and supply, with expectations of a market reset [5][7] - Despite the challenges, the company remains optimistic about growth opportunities in the MENA region, particularly in gas development [31] - The outlook for 2025 remains unchanged, with expectations of revenue growth driven by recent contract wins and technology deployments [26] Other Important Information - The company is undergoing a tender process to convert outstanding warrants into equity to improve its capital structure [28] - The company has reshaped its back office and implemented new processes and controls over the past two years [28] Q&A Session Summary Question: How does Saudi upstream spending interplay with OPEC's actions? - Management indicated that Saudi Arabia's unconventional projects will continue to grow, while conventional activity is expected to decline [39][40] Question: What are the expectations for margins recovery? - Management stated that margins are expected to improve but will not return to 25% by year-end, aiming for recovery in 2026 [47][48] Question: What are the pricing trends in the Middle East? - Management noted that pricing is expected to soften due to increased competition and the nature of long-term contracts [55] Question: What growth opportunities exist in Kuwait? - Management highlighted that Kuwait is tendering for various contracts, and the company is well-positioned to capture significant market share [59] Question: What is the status of contracts in North Africa? - Management expects many contracts to be awarded in the second half of the year, with potential for significant growth in Libya and Egypt [67][70] Question: How does the company view joint ventures in the region? - Management expressed confidence in their market position and plans to invest during downturns rather than pursue joint ventures [75]

Group 1 - National Energy Services Reunited (NESR) reported quarterly earnings of $0.14 per share, missing the Zacks Consensus Estimate of $0.20 per share, representing an earnings surprise of -30% [1] - The company posted revenues of $303.1 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 0.52%, compared to year-ago revenues of $296.85 million [2] - NESR shares have lost about 29.5% since the beginning of the year, while the S&P 500 has gained 0.9% [3] Group 2 - The current consensus EPS estimate for the coming quarter is $0.30 on $347.61 million in revenues, and $1.19 on $1.4 billion in revenues for the current fiscal year [7] - The Zacks Industry Rank for Oil and Gas - Mechanical and Equipment is currently in the bottom 20% of over 250 Zacks industries, indicating potential underperformance compared to higher-ranked industries [8]

PART I – FINANCIAL INFORMATION [Unaudited Condensed Consolidated Interim Financial Statements](index=3&type=section&id=ITEM%201.%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20INTERIM%20FINANCIAL%20STATEMENTS) The company's Q1 2025 financial performance shows increased revenues and net income, with a slight decrease in total assets and segment-specific revenue shifts [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Total assets slightly decreased to **$1.769 billion** as of March 31, 2025, while total liabilities decreased and total equity increased to **$920.5 million** Condensed Consolidated Balance Sheet Data (in US$ thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $554,848 | $540,516 | | **Total assets** | $1,769,323 | $1,773,678 | | **Total current liabilities** | $502,569 | $503,512 | | **Total liabilities** | $848,844 | $865,446 | | **Total equity** | $920,479 | $908,232 | [Unaudited Condensed Consolidated Interim Statements of Operations](index=6&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20INTERIM%20STATEMENTS%20OF%20OPERATIONS) Q1 2025 revenue increased to **$303.1 million**, but gross profit and operating income declined, while net income slightly rose to **$10.4 million** due to lower expenses Q1 2025 vs Q1 2024 Statement of Operations (in US$ thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Revenues** | $303,102 | $296,848 | | **Gross Profit** | $37,455 | $42,942 | | **Operating Income** | $20,941 | $24,558 | | **Net Income** | $10,391 | $9,982 | | **Diluted EPS** | $0.11 | $0.10 | [Unaudited Condensed Consolidated Interim Statements of Comprehensive Income](index=7&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20INTERIM%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Total comprehensive income for Q1 2025 was **$10.4 million**, aligning with net income, with no other comprehensive income items reported - Total comprehensive income was **$10.4 million** for Q1 2025 and **$10.0 million** for Q1 2024, with no other comprehensive income items reported in either period[14](index=14&type=chunk) [Unaudited Condensed Consolidated Interim Statements of Shareholders' Equity](index=8&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20INTERIM%20STATEMENTS%20OF%20SHAREHOLDERS%27%20EQUITY) Total equity increased to **$920.5 million** by March 31, 2025, primarily driven by net income and share-based compensation - Total equity grew to **$920.5 million** at March 31, 2025, up from **$908.2 million** at December 31, 2024, mainly due to net income of **$10.4 million**[16](index=16&type=chunk) [Unaudited Condensed Consolidated Interim Statements of Cash Flows](index=9&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20INTERIM%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash from operating activities significantly decreased to **$20.5 million** in Q1 2025, resulting in a net cash decrease of **$29.3 million** for the period Cash Flow Summary (in US$ thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $20,485 | $69,620 | | **Net cash used in investing activities** | ($31,487) | ($41,363) | | **Net cash used in financing activities** | ($18,259) | ($33,319) | | **Net (decrease) in cash** | ($29,261) | ($5,062) | | **Cash and cash equivalents, end of period** | $78,695 | $62,759 | [Notes to Unaudited Condensed Consolidated Interim Financial Statements](index=10&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20INTERIM%20FINANCIAL%20STATEMENTS) The notes detail accounting policies, debt compliance, tax rates, segment reporting, and a subsequent warrant exchange offer, with **99%** of revenue from the MENA region - The company's Integrated Production Management (IPM) projects, where compensation is based on cash flow from production, represented **0.8%** of revenues in Q1 2025[21](index=21&type=chunk) - Total long-term debt stood at **$306.0 million** and short-term debt was **$60.4 million** as of March 31, 2025, with the company in compliance with all financial covenants[33](index=33&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) - The effective tax rate for Q1 2025 was **24.2%**, a decrease from **31.5%** in Q1 2024, primarily due to fewer provisions for uncertain tax positions[42](index=42&type=chunk) - The company has two reportable segments: Production Services (**62%** of Q1 2025 revenue) and Drilling and Evaluation Services (**38%** of Q1 2025 revenue)[52](index=52&type=chunk)[57](index=57&type=chunk) - Subsequent to the quarter end, the company announced an intention to offer **0.10** ordinary shares in exchange for each outstanding warrant[64](index=64&type=chunk) [Operating and Financial Review](index=22&type=section&id=ITEM%202.%20OPERATING%20AND%20FINANCIAL%20REVIEW) Q1 2025 revenue grew **2.1%** to **$303.1 million**, driven by MENA E&P trends, with segment shifts and a contracted gross margin due to elevated costs - The company operates primarily in the MENA region, which contributed **99%** of revenue in Q1 2025, with demand linked to global commodity prices and regional E&P spending[70](index=70&type=chunk)[74](index=74&type=chunk) Q1 2025 vs Q1 2024 Revenue by Segment (in US$ thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Production Services** | $188,087 | $194,503 | | **Drilling and Evaluation Services** | $115,015 | $102,345 | | **Total revenue** | $303,102 | $296,848 | - Drilling and Evaluation Services revenue grew due to increased rig assignments in Saudi Arabia and contributions from the Roya™ advanced directional drilling technology platform[94](index=94&type=chunk) - Production Services revenue declined due to a seasonal slowdown related to the holy month of Ramadan[93](index=93&type=chunk) - Cost of services as a percentage of revenue increased from **85.5%** to **87.6%** YoY, attributed to an elevated cost structure to support expected higher activity levels in H2 2025[95](index=95&type=chunk) Cash Flow Summary (in US$ thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Operating Activities** | $20,485 | $69,620 | | **Investing Activities** | ($31,487) | ($41,363) | | **Financing Activities** | ($18,259) | ($33,319) | [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company faces market risks primarily from interest rate changes on variable-rate borrowings, while foreign currency and credit risks are managed and considered low - Foreign currency risk is limited as key currencies in the UAE, Saudi Arabia, Oman, Kuwait, and Qatar are pegged to the U.S. dollar[123](index=123&type=chunk) - Credit risk is concentrated with National Oil Companies (NOCs) in the MENA region, but the company has not experienced material losses from non-payment[124](index=124&type=chunk)[125](index=125&type=chunk) - The company is exposed to market risk from rising interest rates on its borrowings, with the interest rate on U.S. dollar-denominated term loans increased from **2.96%** at the end of 2021 to **7.19%** as of March 31, 2025[128](index=128&type=chunk)[129](index=129&type=chunk) [Internal Controls and Procedures](index=33&type=section&id=ITEM%204.%20INTERNAL%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were ineffective due to a material weakness in internal control over financial reporting, with a remediation plan partially implemented - Management concluded that disclosure controls and procedures were not effective as of the end of the reporting period due to a material weakness in internal control over financial reporting[131](index=131&type=chunk) - The material weakness is related to the control environment, specifically: lack of an effective organizational structure, ineffective communication protocols, and insufficient technical accounting resources[133](index=133&type=chunk)[142](index=142&type=chunk) - A remediation plan has been designed, and several steps have been implemented, such as executive training, adding new independent directors, and enhancing policies, though not yet fully remediated[134](index=134&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings.) The company is involved in ordinary course legal proceedings, which management does not expect to have a material impact on its financial condition - The company is involved in ordinary course legal proceedings, but management does not expect them to have a material impact on its business, financial condition, or liquidity[136](index=136&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors.) The most significant risk is the ongoing material weakness in internal control over financial reporting, with potential for adverse financial impact and penalties - A key risk is the continuing material weakness in internal control over financial reporting, which could adversely affect the company's ability to report financial results accurately and prevent fraud[138](index=138&type=chunk) - If the material weakness is not remediated by August 28, 2025, the company faces an additional SEC civil monetary penalty of **$1.2 million**[141](index=141&type=chunk)

Financial Performance - Total revenue for the year ended December 31, 2024, was $1,301,704 thousand, an increase of 13.6% from $1,145,915 thousand in 2023[159]. - Revenue for the year ended December 31, 2024, was $1,301.7 million, an increase of 13.6% from $1,145.9 million in 2023[205]. - Net income for 2024 was $76.3 million, significantly up from $12.6 million in 2023, showcasing strong financial performance[214]. - Total revenue for the year ended December 31, 2023, was $1,145.9 million, a 26% increase from $909.5 million in 2022[218]. - Net income for 2023 was $12.6 million, a significant recovery from a net loss of $36.4 million in 2022[218]. Revenue Sources and Customer Concentration - In 2024, revenues from four major customers accounted for 54%, 9%, 7%, and 4% of the company's consolidated revenues, indicating a high customer concentration risk[43]. - Four customers accounted for 54%, 9%, 7%, and 4% of consolidated revenues in 2024, showing a concentration of revenue sources[164]. Operational Risks - The company is experiencing a material weakness in internal control over financial reporting, which could adversely affect its ability to report financial results accurately[30]. - The geographic concentration of operations in the Middle East and North Africa exposes the company to regional economic and political risks, impacting financial stability[41]. - The company faces risks related to fluctuating exchange rates and currency control restrictions due to its operations in multiple countries[30]. - The company is subject to various legal and regulatory risks, including potential litigation and compliance with complex laws in different jurisdictions[31]. - The company is subject to risks from civil unrest, acts of terrorism, and other geopolitical factors that could adversely affect its operations and financial condition[46]. Capital Expenditures and Financial Needs - Significant capital expenditures are required for maintenance and upgrades of assets, which could strain the company's liquidity if not managed effectively[40]. - The company anticipates increased capital expenditure and financing needs due to upcoming gas field developments in the MENA region[190]. - NESR's total capital expenditures for the last three fiscal years amounted to $295.7 million, with $105.1 million in 2024, $68.2 million in 2023, and $122.4 million in 2022[143]. Environmental and Regulatory Compliance - Increased attention to ESG matters may adversely impact the oil and natural gas industry, affecting the company's operations and market position[37]. - The company is subject to various environmental regulations that could impose additional compliance costs and affect operations[168]. - Stricter regulations on greenhouse gas emissions could reduce demand for the company's services, impacting future financial performance[87]. Market Conditions and Industry Dynamics - Oil and natural gas prices have shown significant volatility, with Brent spot prices reaching a high of $133.18 per barrel in 2022 and a low of $76.02 per barrel in the same year[35]. - The oilfield services sector is highly cyclical, with operating results fluctuating based on global commodity prices and rig activity[188]. - Seasonal changes and significant weather events impact the demand for oil and oilfield services, with higher activity typically seen in Q4[160]. Strategic Initiatives and Investments - In 2024, NESR launched its NEDA service line, focusing on climate change mitigation and water management, and invested in Salttech BV for Zero Liquid Discharge technology[149][150]. - The company executed a second-phase Carbon Capture & Sequestration project in Indonesia in 2024, positioning NESR as a leader in CCS-related projects in the region[152]. - The company has established the NESR Oilfield Research & Innovation Center in Saudi Arabia to drive energy sector research and innovation[182]. Financial Liabilities and Risks - The company has $386.6 million in borrowings under various loan agreements, exposing it to interest rate risk due to floating interest rates[77]. - The company's subsidiaries may face default risks if they cannot generate sufficient cash flow to meet debt obligations, potentially leading to bankruptcy or liquidation[72]. - Collection of receivables may not meet projected cash requirements, impacting the ability to fulfill debt obligations[74]. Shareholder Considerations - As of December 31, 2024, there were 96,045,856 ordinary shares and 35,540,380 warrants outstanding, indicating potential dilution of ownership with future sales[113]. - The company currently has no plans to pay cash dividends on its ordinary shares, and any future dividend payments will depend on various factors including earnings and financial condition[116]. - There is a risk that the warrants may expire worthless as they are not "in the money" as of December 31, 2024[118]. Human Resources and Management - The loss of key employees could have a material adverse effect on the company's business operations and profitability[125]. - The company is in the process of remediating material weaknesses in internal control over financial reporting, which could divert management's attention and resources[56].

Company Overview - National Energy Services Reunited Corp. (NESR) is the largest publicly listed pure-play diversified oilfield service company focused on national oil company (NOC) and international oil company (IOC) customers in the Middle East and North Africa (MENA) region [2] - NESR operates in over 15 countries, with significant operations in Saudi Arabia, Oman, Kuwait, UAE, Iraq, Algeria, and Egypt, and is exploring new opportunities in Libya [2] - The MENA region is characterized as one of the most stable oilfield service markets globally, with NOCs focused on maintaining or increasing production capacity [2] Financial Performance - For FY24, NESR reported adjusted EBITDA of approximately $310 million on total revenue of $1.3 billion, with free cash flow totaling $124 million [5] - The company's FY25 and FY26 adjusted EBITDA estimates are $318 million and $338 million, respectively [5] - As of December 31, 2024, NESR had $108 million in cash and net debt of $279 million, trading at 2.7x and 2.2x FY25 and FY26 adjusted EBITDA estimates, with an 18.7% free cash flow yield based on FY25 estimates [5] Strategic Initiatives - NESR has expanded its oilfield service capabilities through strategic acquisitions and partnerships with technology innovators, focusing on complex drilling and production requirements [3] - The ROYA™ directional drilling platform, launched in February 2024, has secured contract awards in Saudi Arabia, Oman, and Kuwait, potentially generating up to $200 million in incremental revenue [3] - Through its NEDA platform, NESR is developing decarbonization technologies in the MENA region, including a closed-loop technology for recycling produced water in Saudi Arabia [4]

Financial Data and Key Metrics Changes - In Q4 2024, NESR achieved record revenue of $343.7 million, up 2.2% sequentially and 11.8% year-over-year. Full year revenue was $1.3 billion, up 13.6% year-over-year [32] - Adjusted EBITDA for Q4 2024 was a record $87.2 million with margins of 25.4%, up 157 basis points sequentially. Full year adjusted EBITDA was $310.1 million, up 18.2% year-over-year, with margins at 23.8% [33] - Earnings per share (EPS) for Q4 2024 was $0.30, and for the full year it was $1.04, reflecting a 96% year-over-year increase [35] - Cash flow from operations in Q4 2024 was $46.3 million, with full year cash flow at $229.3 million. Free cash flow for the full year was $124 million, with a conversion rate of 40.1% on adjusted EBITDA [36][37] - Net debt-to-adjusted EBITDA ratio was 0.89 times at year-end 2024, down from 2.8 times at the end of 2022 [38] Business Line Data and Key Metrics Changes - NESR's operational performance across its key countries remained strong, with significant growth in Saudi Arabia, Kuwait, and Oman. Saudi Arabia was the fastest-growing country in both percentage and absolute dollar terms [12][14] - In Kuwait, NESR has become the third largest player with high growth potential, having entered the market six years ago [13] - The company maintained steady performance in UAE, Algeria, and Iraq, closing the year with record revenue and strong margins across its MENA footprint [14] Market Data and Key Metrics Changes - The MENA region's rig count is at historical highs, surpassing North America for the first time, indicating robust activity growth despite global commodity price fluctuations [16] - The outlook for 2025 suggests moderate growth in the region, with NESR expecting to outpace the market due to its strategic positioning in gas development and unconventional resources [46][47] Company Strategy and Development Direction - NESR is focused on profitable growth opportunities, technology expansion, and maintaining a strong balance sheet. The company aims to leverage its ROYA direction drilling platform and NEDA decarbonization portfolio for future growth [9][29] - The company is also exploring innovative solutions in mineral recovery and direct lithium extraction, which could significantly enhance its revenue potential [29][77] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the MENA market's growth potential, particularly in unconventional gas development, despite a backdrop of low expectations for the sector [46] - The company anticipates a seasonal pattern in 2025 similar to 2024, with a slow start in Q1 followed by increased activity throughout the year [47] - Management highlighted the importance of maintaining operational efficiency and service quality to sustain margins amid competitive pressures [83] Other Important Information - NESR's gross debt at year-end 2024 was $383 million, a reduction of $153 million over the last two years [39] - The company has extended its warrants until June 2026, which was not included in the press release but will be detailed in the upcoming 20-F filing [117] Q&A Session Summary Question: Outlook on regional spending patterns and overall growth - Management expects moderate growth in the Middle East for 2025, with single-digit growth anticipated, particularly in Saudi Arabia and Kuwait [56][57] Question: Changes in NESR's mix and Jafurah's progress - NESR's exposure in Jafurah remains positive, with ongoing involvement in unconventional gas development and expectations for future tenders [66] Question: Margin performance and sustainability - Management is confident that margins will track similarly to 2024, with good execution and service quality expected to support this [83] Question: Commercial activities in Kuwait - Kuwait is experiencing strong activity with significant offshore discoveries, and NESR aims to expand its presence and contracts in the region [87][91] Question: Impact of unconventional resources on product mix and margins - NESR plans to maintain margins through efficiency improvements and technology advancements in unconventional resource development [99] Question: Valuation gap and potential strategies to close it - Management acknowledges the valuation gap and is exploring options to enhance visibility and appreciation in the market [112][114] Question: Base case for market growth and visibility - NESR anticipates 8% to 10% growth for itself in 2025, leveraging its smaller size and contract visibility to outperform the market [123]

Financial Data and Key Metrics Changes - The overall fourth quarter revenue reached a record $343.7 million, up 2.2% sequentially and 11.8% year over year, with full year revenue at $1.3 billion, up 13.6% year over year [24][25] - Adjusted EBITDA for Q4 was a record $87.2 million with margins of 25.4%, up 157 basis points sequentially; full year adjusted EBITDA was $310.1 million, up 18.2% year over year, with margins at 23.8% [25][26] - Earnings per share (EPS) for Q4 was $0.30, and $1.04 for the full year, reflecting a 96% year-over-year increase [25][26] - Free cash flow for the full year was $124 million, with a conversion rate on adjusted EBITDA of 40.1% [26][27] Business Line Data and Key Metrics Changes - The company secured new contracts and enhanced its core business, particularly in unconventional gas development, which is expected to drive future growth [8][12] - The Roia Direction Drilling Platform and NEDA decarbonization portfolio were highlighted as key technological advancements contributing to operational efficiency and revenue quality [19][20] Market Data and Key Metrics Changes - The MENA region's total rig count is at historical highs, surpassing North America for the first time, indicating robust activity growth despite global commodity price fluctuations [12][13] - Saudi Arabia is experiencing a shift towards unconventional gas development, with significant investments planned to increase gas power generation [14][15] Company Strategy and Development Direction - The company aims to capitalize on growth opportunities in the MENA region, particularly in Saudi Arabia, Kuwait, and Libya, while maintaining a focus on technology expansion and operational efficiency [8][12][32] - The strategic positioning in gas development and the introduction of innovative technologies like the Roia platform are expected to drive future growth [19][20][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sustained activity growth in core countries, despite a moderate growth outlook for 2025 compared to previous years [12][32] - The company is well-positioned to outperform the market due to its strategic exposure to gas development projects and its innovative technology portfolio [32][34] Other Important Information - The company has made significant progress in remediating internal control weaknesses and enhancing operational processes, contributing to improved working capital efficiency [28][29] - The company is exploring potential M&A opportunities but is primarily focused on internal growth and technology enhancement [50][51] Q&A Session Summary Question: Overview of regional spending patterns and growth expectations - Management anticipates moderate growth in the MENA region for 2025, with single-digit growth expected overall, while specific countries like Kuwait may see double-digit growth [36][37] Question: Changes in product mix and exposure in Saudi Arabia - The company noted a shift towards unconventional gas projects in Saudi Arabia, with ongoing involvement in the Jafura project expected to drive future growth [40][41] Question: Capital allocation strategy and potential M&A - The company plans to focus on internal growth and technology development rather than geographical expansion, with potential for M&A in technology partnerships [50][51] Question: Margin performance and sustainability - Management expressed confidence that margins in 2025 will track closely with 2024 levels, despite increased competition [54][55] Question: Developments in Kuwait and offshore discoveries - Kuwait is experiencing strong activity with significant offshore discoveries, and the company is well-positioned to capitalize on these developments [56][58]

Financial Data and Key Metrics Changes - The overall third quarter revenue reached a record $336.2 million, up 3.5% sequentially and 12% year-over-year [20] - Adjusted EBITDA for Q3 2024 was also a record at $80 million, with margins of 23.8%, remaining flat sequentially [21] - Earnings per share (EPS) excluding charges and credits was $0.31 for Q3 2024, representing a 164% year-over-year increase [22] - Cash flow from operations for Q3 2024 was strong at $70.8 million, contributing to a year-to-date total of $183.1 million [23] - Net debt to trailing 12 months adjusted EBITDA fell to 0.96, below the target of 1, compared to 2.8 at the end of 2022 [23] Business Line Data and Key Metrics Changes - The core business continues to outperform, with significant growth in direction drilling and hydraulic fracturing segments [12][13] - The ROYA direction drilling platform is expected to drive future outperformance, with a market size exceeding $2 billion annually [13] - The company announced an investment in SALTTECH BV for technology aimed at recovering minerals from produced water, indicating a new market opportunity [16][17] Market Data and Key Metrics Changes - The MENA market remains stable, with growth expected in countries like Kuwait, which is anticipated to lead MENA growth in the coming years [10][11] - North Africa is also showing steady growth, particularly in Libya and Algeria, with NESR positioned to capitalize on potential opportunities [11] Company Strategy and Development Direction - The company aims to continue outperforming the broader MENA market, focusing on core business expansion and technological advancements [29] - Strategic investments in decarbonization and water recovery technologies are being pursued to align with sustainability goals [15][29] - The company is committed to leveraging partnerships with North American technology providers to enhance service offerings in the MENA region [64][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the MENA market despite global uncertainties, with a positive outlook for NESR's core business and new technology rollouts [6][9] - The company anticipates continued growth in 2025, outpacing the market growth rate, driven by successful deployment of new technologies [50][56] Other Important Information - NESR was re-listed on NASDAQ on October 22, 2024, marking a significant milestone for the company [25] - The company has undergone substantial internal control improvements and is optimistic about demonstrating remediation of past weaknesses [26] Q&A Session Summary Question: Overview of Saudi Arabia's market activity - Management noted that Saudi Arabia has adjusted its oil production plans, focusing on gas and unconventional projects, particularly the Jafurah project, which remains a priority [33][36] Question: Future activity levels in Saudi Arabia - Management expects overall activity to remain stable, with growth in gas projects offsetting any declines in oil drilling [38][39] Question: Growth expectations in MENA and ROYA platform - Management anticipates MENA market growth of 5-6% in 2025, with NESR aiming to double that growth through the ROYA platform and other technologies [50] Question: Impact of potential OPEC production increases - Management believes that any increase in OPEC production would depend on market conditions, but NESR is positioned to grow regardless [55] Question: CAPEX investment cycle and equipment capacity - Management indicated that CAPEX for 2024 is expected to be around $120 million, with a focus on supporting growth in the ROYA platform [61]

Financial Performance - Total revenues for the three-month period ended September 30, 2024, increased to $336,205 thousand, up from $300,084 thousand in the same period last year, representing an increase of 12%[11] - Gross profit for the nine-month period ended September 30, 2024, was $149,492 thousand, compared to $104,235 thousand for the same period in 2023, reflecting a growth of 43%[11] - Net income for the three-month period ended September 30, 2024, was $20,618 thousand, compared to $14,731 thousand for the same period in 2023, marking an increase of 40%[11] - Operating income for the nine-month period ended September 30, 2024, was $94,122 thousand, compared to $53,138 thousand for the same period in 2023, reflecting a substantial increase of 77%[11] - Net income for the nine-month period ended September 30, 2024, was $49.473 million, a significant increase from $10.319 million in the same period of 2023, representing a growth of approximately 380%[19] - Net cash provided by operating activities increased to $183.069 million for the nine-month period ended September 30, 2024, compared to $140.439 million for the same period in 2023, reflecting a growth of about 30%[19] - Revenue for Q3 2024 was $336.2 million, up from $300.1 million in Q3 2023, representing an increase of 12.7%[94] - For the nine-month period ended September 30, 2024, revenue reached $958.0 million, compared to $838.4 million for the same period in 2023, reflecting a growth of 14.3%[94] - Production Services revenue for the three-month period ended September 30, 2024, was $230.521 million, compared to $208.890 million for the same period in 2023, reflecting an increase of about 10.3%[61] - Drilling and Evaluation Services revenue for the nine-month period ended September 30, 2024, reached $313.402 million, up from $261.996 million in the prior year, marking a growth of approximately 19.6%[61] Assets and Liabilities - Total current assets as of September 30, 2024, amounted to $577,154 thousand, an increase from $541,715 thousand as of December 31, 2023, representing a growth of 7%[8] - Total liabilities decreased to $929,300 thousand as of September 30, 2024, down from $976,246 thousand as of December 31, 2023, indicating a reduction of 5%[8] - The total equity of the company rose to $873,548 thousand as of September 30, 2024, compared to $821,494 thousand as of December 31, 2023, showing an increase of 6%[8] - The company’s accounts receivable, net, decreased to $132,549 thousand as of September 30, 2024, from $171,269 thousand as of December 31, 2023, indicating a decline of 23%[8] - Trade receivables decreased to $146.058 million as of September 30, 2024, from $180.989 million as of December 31, 2023, indicating a reduction of approximately 19%[31] - Long-lived assets as of September 30, 2024, totaled $425.133 million, a decrease from $442.666 million as of December 31, 2023[63] Cash Flow and Capital Expenditures - Cash and cash equivalents increased to $118,169 thousand as of September 30, 2024, up from $67,821 thousand as of December 31, 2023, representing a significant increase of 74%[8] - Capital expenditures for the nine-month period ended September 30, 2024, were $80.053 million, up from $65.824 million in the same period of 2023, representing an increase of approximately 21%[19] - The company anticipates increased capital expenditure and financing needs due to upcoming gas field developments in the MENA region[75] - Capital expenditure commitments were $64.4 million as of September 30, 2024, significantly higher than $15.4 million at the end of 2023[44] Earnings Per Share - The company reported a basic earnings per share of $0.22 for the three-month period ended September 30, 2024, compared to $0.16 for the same period in 2023, reflecting a growth of 38%[11] - The company reported a diluted EPS of $0.52 for the nine-month period ended September 30, 2024, compared to $0.11 for the same period in 2023, representing a significant increase of approximately 372.7%[54] Debt and Financing - As of September 30, 2024, the company's long-term debt, net of unamortized debt issuance costs, was $284.2 million, a decrease of 14.3% from $331.6 million as of December 31, 2023[34] - The company had total loans and borrowings of $354.7 million as of September 30, 2024, down from $403.3 million at the end of 2023, reflecting a reduction of 12.0%[34] - The net cash used in financing activities decreased to $48.563 million for the nine-month period ended September 30, 2024, compared to $75.494 million in the same period of 2023, indicating a reduction of approximately 36%[19] - Outstanding borrowings decreased to $409.3 million as of September 30, 2024, from $452.2 million as of December 31, 2023[107] Tax and Compliance - The effective tax rate for the quarter ended September 30, 2024, was 20.4%, compared to 15.7% for the same quarter in 2023, reflecting an increase of 4.7 percentage points[42] - The company recorded an income tax expense of $5.3 million for the quarter ended September 30, 2024, up from $2.7 million for the same quarter in 2023, representing a 96.3% increase[42] - The company was in compliance with all financial and non-financial covenants under the 2021 Secured Facilities Agreement as of September 30, 2024[38] Operational Insights - The company operates primarily in the MENA region, with total revenue from this area amounting to $949.884 million for the nine-month period ended September 30, 2024, compared to $830.338 million in 2023, reflecting an increase of approximately 14.4%[62] - The company has two reportable segments: Production Services and Drilling and Evaluation Services, with segment operating income for Production Services increasing to $104.205 million for the nine-month period ended September 30, 2024, from $77.327 million in 2023[62] - Production Services accounted for 69% of total revenue in Q3 2024, with revenue of $230.5 million, compared to $208.9 million in Q3 2023[89] - Drilling and Evaluation Services revenue increased to $105.7 million in Q3 2024 from $91.2 million in Q3 2023, marking a growth of 15.7%[97] Internal Controls and Governance - The company identified material weaknesses in its internal control over financial reporting as of December 31, 2023, which could result in future material misstatements if unremediated[135] - The company has implemented remedial steps to address identified material weaknesses, including appointing a Director of Internal Audit and engaging a third party for interim internal audit functions[139] - The company is in the process of remediating material weaknesses and must do so by August 28, 2025, to avoid an additional civil monetary penalty of $1.2 million from the SEC[148] - The company is committed to improving its internal control environment and has begun testing redesigned controls, expecting them to be fully effective by Q4 2024 or Q1 2025[139] Market Risks - The company is exposed to market risks primarily from changes in interest rates on borrowings, which have significantly increased since the end of 2021[131] - The company has not used derivatives for trading purposes or speculative activities[133]