National Energy Services Reunited Corp.(NESR) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Overall third quarter revenue was $295.3 million, down 9.8% sequentially and 12.2% year-over-year [16] - Adjusted EBITDA for Q3 2025 was $64 million, representing a margin of 21.7%, consistent with Q2 2025 levels despite lower revenues [17] - Adjusted EPS for Q3 2025 was $0.16, including adjustments totaling $2.3 million [18] - Gross debt totaled $332.9 million, and net debt was $263.3 million, with a net debt-to-adjusted EBITDA ratio of 0.93 [19] Business Line Data and Key Metrics Changes - Revenue decline was primarily due to the transition between major contracts in Saudi Arabia, partially offset by growth in Kuwait, Qatar, and Iraq [16][17] - Growth was noted in Kuwait, Oman, Egypt, Algeria, Iraq, and Libya, indicating a diversified performance across regions [17] Market Data and Key Metrics Changes - The company is experiencing a positive activity inflection in Kuwait and Saudi Arabia, with increased activities across most operational countries [5][6] - The Gulf Cooperation Council (GCC) is positioned as a leader in the AI revolution, which is expected to drive energy demand [6][7] Company Strategy and Development Direction - The company has secured a multi-billion dollar contract for the Jafurah project, which is a cornerstone achievement and part of a broader growth strategy [4][10] - NESR's countercyclical investment strategy allows it to capitalize on global market weaknesses, positioning the company for growth while others are cutting back [12][13] - The company aims to maintain operational readiness and efficiency while investing during downturns, which is expected to yield long-term benefits [14][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a $2 billion revenue run rate by the end of 2026, supported by awarded contracts and operational execution [20][72] - The outlook for 2026 and beyond remains positive, with expectations of continued growth driven by strategic investments and market opportunities [24][73] Other Important Information - The company is in the process of refinancing its debt facility, expected to enhance financial flexibility [23] - NESR is focused on maintaining disciplined debt reduction and improving working capital efficiency [24] Q&A Session Summary Question: Can you explain how NESR was able to price competitively for the Jafurah contract while maintaining margins? - Management highlighted their deep understanding of the local ecosystem and cost control measures that allowed them to maintain profitability [30][31] Question: What is the roadmap for development at Jafurah and expected activity levels? - Management indicated plans to ramp up to 1,500 stages per month by 2026, with flexibility to adjust based on client needs [34][35] Question: What is the expected incremental EBITDA from the Jafurah project? - Management confirmed an approximate incremental EBITDA of $100 million for 2026, based on current margins [38] Question: Can you provide updates on NEDA projects and water initiatives? - Management stated that several pilot projects are underway, with results expected to be shared in future calls [66][68] Question: What is the confidence level in achieving the $2 billion exit run rate for 2026? - Management expressed a 99% confidence level in achieving the $2 billion run rate, supported by signed contracts and ongoing work [72]