Expro(US:XPRO)2025-10-23 16:00Financial Data and Key Metrics Changes - Expro reported quarterly revenue of $411 million and EBITDA of $94 million, representing a 22.8% margin, with adjusted free cash flow of $46 million, or 11% of revenue, marking the highest in the company's history [4][23][24] - The EBITDA margin increased by approximately 50 basis points from the previous quarter and 270 basis points year-over-year [23] - The company raised its annual guidance for EBITDA and free cash flow for 2025, expecting adjusted EBITDA between $350 million and $360 million and adjusted free cash flow between $110 million and $120 million [25][26] Business Line Data and Key Metrics Changes - North and Latin America (NLA) revenue was $151 million, up $8 million quarter-over-quarter, driven by higher well construction and flow management revenue [26] - Europe and Sub-Saharan Africa (ESA) revenue decreased by $7 million to $126 million, primarily due to lower well flow management and subsea well access revenue [27] - Middle East and North Africa (MENA) revenue was $86 million, slightly lower than Q2, with an EBITDA margin of 35% [28] - Asia-Pacific (APAC) revenue decreased by $8 million to $49 million, with an EBITDA margin of 21%, reflecting decreased activity [29] Market Data and Key Metrics Changes - The company has a $2.3 billion backlog, providing solid revenue visibility and demonstrating a diverse portfolio across regions [5][6] - Despite a softer commodity price environment, the outlook for Expro's core markets remains constructive, with expected recovery in upstream investments in 2026 and beyond, particularly in offshore projects in Latin America, the Middle East, and West Africa [8][10] Company Strategy and Development Direction - Expro's strategy focuses on maximizing free cash flow through operational efficiency, disciplined capital allocation, and targeted acquisitions [19][20] - The company aims to expand its wallet share with existing customers and enhance service offerings, leveraging technology to drive profitability [12][21] - Expro is committed to technology leadership, investing in digitalization and artificial intelligence to deliver innovative solutions [12][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in Expro's ability to deliver resilient performance despite softer market conditions, emphasizing a diversified business mix and strong customer relationships [33][34] - The company anticipates continued growth in free cash flow generation in 2026, supported by ongoing cost efficiencies and margin accretive growth [34] Other Important Information - Expro repurchased around 2 million shares for approximately $25 million, achieving its annual target of $40 million ahead of schedule [5][24] - The company received several industry awards for safety and technology innovation, reinforcing its commitment to operational excellence [14][15] Q&A Session Summary Question: What are the drivers for margin expansion in 2026 despite flat to slightly lower revenue? - Management highlighted the full-year effect of the Drive25 initiative, internationalization of recent acquisitions, and rollout of new technologies as key drivers for margin expansion [36] Question: What regions are expected to see activity increase in the second half of 2026? - Management indicated that West Africa and the Gulf of Mexico are expected to see increased activity, while Asia-Pacific may lag behind [38][39] Question: What does the share repurchase achievement mean for future repurchases? - Management stated that they will continue to evaluate opportunities for share repurchases in line with their capital allocation framework [40][41] Question: What is driving the expected softness in the first half of 2026? - Management noted cautious sentiment among customers due to commodity pricing and geopolitical factors, along with typical seasonal slowdowns in the northern hemisphere [46][48] Question: How will the production solutions business contribute to cash generation? - Management explained that projects transitioning from construction to operational phases will generate predictable cash flows, enhancing free cash flow generation [55][58] Question: What impact will the geographic mix have on margins in 2026? - Management emphasized that the mix of regions, particularly growth in the Middle East, will significantly influence margin expansion [66]