National Energy Services Reunited Corp.(NESR) - 2024 Q4 - Earnings Call Transcript

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]