Expro(XPRO) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2025, the company's revenue was $391 million, with adjusted EBITDA of $76 million, representing 20% of revenue, marking the highest first-quarter performance since merging with Frank's in October 2021 [6][32] - Revenue decreased by $46 million or approximately 11% compared to Q4 2024, but increased by $7 million or approximately 2% year-over-year compared to Q1 2024 [31][32] - Adjusted EBITDA decreased by $24 million or 24% sequentially from Q4 2024, but increased by $9 million or 13% year-over-year compared to Q1 2024 [32] Business Line Data and Key Metrics Changes - The North and Latin America (NLA) segment reported revenue of $134 million, down $5 million quarter-over-quarter, with an EBITDA margin improvement to 23% from 22% in Q4 2024 [33][34] - The Europe and Sub-Saharan Africa (ESA) segment saw revenue of $112 million, a sequential decrease of $30 million or 21%, with an EBITDA margin at 26%, down 11 percentage points sequentially [35] - The Middle East and North Africa (MENA) segment delivered revenue of $94 million, up 1% sequentially, with an EBITDA margin of 37%, up 1% quarter-over-quarter [36] - The Asia Pacific (APAC) segment reported revenue of $51 million, a decrease of $12 million, with an EBITDA margin at 21%, down from the prior quarter [36] Market Data and Key Metrics Changes - The company secured $272 million in new contract awards in Q1 2025, with a backlog of approximately $2.2 billion at the end of the quarter [7][8] - The macro outlook indicates significant near-term uncertainty and volatility in global oil markets due to tariff announcements and OPEC+ production increases [9][10] - Global oil consumption is forecasted to increase by 900,000 barrels per day in 2025, with demand reaching an average of 103.6 million barrels per day [14] Company Strategy and Development Direction - The company is focused on organic investment and a successful M&A strategy to enable margin expansion and improve customer relevance [7][22] - The long-term outlook for international onshore and offshore markets remains positive, with a shift towards offshore activities expected due to cost and carbon advantages [12][16] - The company plans to maintain cost and capital discipline while adjusting CapEx based on customer-sanctioned projects [22][30] Management's Comments on Operating Environment and Future Outlook - Management anticipates a transition year in 2025, with expectations for revenue to be generally flat compared to 2024, but with improved activity mix and operating efficiency gains [45][46] - The geopolitical and oil supply disruptions have introduced market uncertainty, but the company remains bullish on long-cycle development driven by economic growth and energy security considerations [46] - Management acknowledges that while there is uncertainty in the market, they believe 2025 will be a better year than many investors currently assume [29][30] Other Important Information - The company has a zero net debt balance sheet, providing strategic and financial flexibility [22] - The Drive 25 efficiency campaign is expected to help protect margins and improve operating leverage [37][38] - The company plans to use about one-third of its annual free cash flow for share repurchases, with approximately $66 million available under the current repurchase program [39] Q&A Session Summary Question: Insights on MENA segment growth and margin sustainability - Management highlighted strong anchor contracts in Saudi Arabia and Algeria, indicating stability and growth potential in the MENA region [50][52] Question: Thoughts on buybacks versus inorganic opportunities - Management is considering share repurchases due to depressed valuations but remains open to exploring inorganic growth opportunities [56][58] Question: Factors influencing full-year guidance and sensitivity - Management noted cautious customer sentiment and ongoing engagement to assess project timelines, indicating a wait-and-see approach [63][64] Question: Potential delays in offshore FIDs - Management clarified that anticipated delays in FID sanctioning are based on customer caution rather than explicit indications from clients [78][79] Question: Impact of tariffs on business - Management believes the potential impact of U.S. tariffs will likely affect activity more than costs, estimating a less than $5 million impact from tariffs [85]