Expro(XPRO) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Expro reported Q3 2024 revenue of $423 million and adjusted EBITDA of$85 million, both within guidance ranges [5][25] - Sequential revenue declined by $47 million or 10$53 million or 14%, driven by PRT Offshore and Coretrax, despite lower Congo project revenue [6][25] - Adjusted EBITDA decreased by $10 million or 10$35 million or 69% compared to Q3 2023 [6][25] Business Line Data and Key Metrics Changes - North and Latin America (NLA) revenue was $139 million, down 11$131 million, a sequential decrease of 22%, impacted by a large subsea project in Q2 and Congo project losses [11] - Middle East and North Africa (MENA) revenue increased by 7% to $87 million, driven by Coretrax contributions [14] - Asia Pacific revenue was$65 million, up 4% due to increased activity in Thailand and Australia [14] Market Data and Key Metrics Changes - Commodity prices have been under pressure, leading to cautious customer spending and moderated growth in certain regions, particularly NLA [7][17] - Brent crude prices declined from $80 per barrel in January 2024 to an average of$74 per barrel in September [17][19] - Despite anticipated modest price declines in 2025, Brent is expected to average $78 per barrel, supporting continued upstream investment [19][20] Company Strategy and Development Direction - Expro aims to leverage long-cycle development opportunities in international and offshore markets, anticipating a multiyear up cycle for energy services [6][8] - The company is focusing on cost rationalization initiatives to improve operating leverage and margins [9][31] - Expro has been recognized for innovation in engineering and sustainability, enhancing its market position [9] Management's Comments on Operating Environment and Future Outlook - Management noted that while near-term headwinds exist, the long-term outlook for energy services remains solid, particularly in international and offshore markets [4][8] - The company expects a slow start to 2025 due to potential project delays but remains confident in sustained business momentum [8][31] - Management highlighted ongoing dialogues with customers regarding project timing and scope across all markets [7][8] Other Important Information - Expro's backlog remains healthy at approximately$2.3 billion, including Coretrax and PRT backlog [15] - The company is integrating Coretrax and focusing on maximizing revenue synergies from the acquisition [16][62] Q&A Session All Questions and Answers Question: Can you talk about the revision to the 2024 outlook in detail? - Management explained that the revision was primarily due to performance expectations in NLA and weaker well construction activity in the Gulf of Mexico, with a temporary hiatus in DST activity impacting results [34][35] Question: What are the building blocks to achieve the $2 billion revenue and 25% EBITDA margin? - Management identified activity set, operating leverage, and pricing as key components, noting that a slower ramp-up in drilling completions could shift timelines [42][43] Question: What is the current status of the Congo project and its impact on profitability? - Management confirmed that the Congo project is moving into the O&M phase, with outstanding variation orders being resolved, which could impact Q4 results [45][46] Question: What are the trends in Mexico and Expro's exposure to Pemex? - Management noted governmental transitions in Mexico affecting activity but indicated a return to more historic patterns in exploration [49][50] Question: How do you view the outlook for next year and the impact of offshore drillers' concerns? - Management acknowledged early budgeting processes for 2025 and indicated that sentiment and customer feedback are being closely monitored [52][53]