Expro Group Holdings N.V. Price & Performance (XPRO)

Under the Investors section, In addition, supplemental financial information for the fourth quarter results is downloadable on the Expro website. Likewise under the Investors section.

I'd like to remind everyone that some of today's comments may refer to or contain forward looking statements. Such remarks are subject to risks, and uncertainties could cause actual results to differ materially from those expressed or implied by such statements. Such statements speak only as of today's date. And the company assumes no responsibility to update forward looking statements as of any future date. The company has included in its SEC filings cautionary language identifying important factors that could cause actual results to be materially different from those set forth any forward looking statements. A more complete discussion of these risks is included in the company's SEC filings which may be accessed on the SEC's website sec.gov or our website, again at expro.com Expro.

Please note that any non GAAP financial measures discussed during this call are defined and reconciled to the most directly comparable [indiscernible] financial measure our fourth quarter twenty twenty four earnings release.

Which can also be found on our website, With that, I'd like to turn the call over to Mike. Good morning, everyone.

Like to start off by reviewing the fourth quarter and full year 2024 financial results as was summarized in today's earnings press release. I will then discuss what I would characterize as a dynamic macro environment which despite our expectation of a near term moderating upstream investment we believe supports a positive multiyear outlook for energy services companies with exposure to international and offshore markets. Finally, will provide some additional commentary on just completed quarter, the full year share some additional financial information. For a recap of consolidated results, and quarterly results by region, I'll direct you to Slides two through seven of the presentation we posted to expro.com Expro. Turning to Slide two, I am pleased to report a solid quarter for Expro with Q4 twenty twenty four revenue of $437,000,000 and adjusted EBITDA of $100,000,000 or 23% of revenue.

Q4 adjusted cash flow from operations and free cash flow $115,000,000 and $75,000,000 respectively. Of note, Q4 twenty twenty four results reflect our best financial performance in terms of adjusted EBITDA adjusted EBITDA margin, adjusted cash flow from operations and free cash flow since we closed the Expro Freaks merger in October of twenty twenty one. The sequential increase in revenue of $14,000,000 in the fourth quarter was primarily due to increased activity in Angola, within our Subsea Well Access business and higher well flow management services in Algeria, Iraq and Saudi Arabia. Compared to Q4 twenty twenty three, revenue was up $30,000,000 or 7% again reflecting a strong quarter for the Subsea Well Access business as well as results of the acquired CoreTrax business. Partially offset by lower revenue from our Congo Production Solutions project.

As highlighted in our press release, we've recently resolved outstanding variation orders related to the Congo project, allowing us to successfully close out the construction and commissioning phase of the project.

Our customer also approved an adjustment to the contract rate for the multiyear operations and maintenance or O and M phase of the project to incentivize higher throughput from the Expro built onshore pretreatment plant and our provision of additional services for the facility. Our customers continue to highlight their desire to optimize production from existing wells and ask and the Congo project is an excellent example of how we enable our customers achieve these objectives. I congratulate our Production Solutions team for developing and delivering a cost competitive differentiated solution for this important customer and doing so within a very ambitious timeline. With over 800 team members working at site, for over twenty two months, also achieved nearly 1,900,000 man hours without an HSE related lost time incident. This is a significant milestone achievement of which all my Expro colleagues can take pride. For full year 2024, EXPAREL delivered revenue of $1,700,000,000 up 13% year over year with performance led by the North And Latin America, Europe and Sub Saharan Africa and Middle EastNorth Africa regions, With the growth in MENA in particular, being bolstered by the CoreTrax acquisition. Full year adjusted EBITDA was $347,000,000 or 20% of revenue and was up 40% year over year in dollar terms.

Adjusted EBITDA margin was up approximately 400 basis points year over year and up approximately 800 basis points relative to combined results for legacy Expro and Frank's International over the four quarters prior to our completing the merger. In terms of commercial activity across the company, we have continued to build on our momentum capturing roughly $314,000,000 of new contract awards including contract extensions, worth more than $50,000,000 for plug and perforation solutions in Argentina dollars 35,000,000 for tubular running services in Norway and $25,000,000 for well test and TRS services in The UK. Our backlog remains healthy at approximately 2,300,000,000.0 at the end of the fourth quarter which is consistent with the end of the previous quarter. During the past year, our team managed the business through a dynamic macro environment and starting in the second half of twenty twenty four, a more subdued short term growth outlook for the sector as customers adopted a more cautious approach around mid year due to concerns about potentially oversupplied oil market. In fact, the oil market remained relatively balanced and prices were generally stable over the fourth quarter with continued production restraint and a focus on price stability from OPEC plus largely offsetting an apparent reduction geopolitical risk premium and a tepid demand growth particularly in China.

The U. S. Energy Information Administration, an currently forecasting global liquids demand to average 104,100,000 barrels per day in 2025 an increase of roughly 1,300,000 barrels over 2024.

Demand is further expected to grow by another 1,100,000 barrels in 2026 to average roughly 105,000,000 barrels per day. The EIA forecasts that global fuels production will grow by 1,800,000 barrels per day in 2025 to average 4,400,000 barrels per day.

Global liquid supply is then predicted to grow further 1,500,000 barrels per day in 2026 to average 105,900,000 barrels per day.

Production growth in 2025 is due to a combination of an expected relaxation of OPEC plus production cuts and further production growth from countries outside of OPEC including The U. S. Canada, Brazil and Guyana. OPEC plus countries are expected to contribute 200,000 barrels per day to global supply growth in 2025 as voluntary production cuts are expected to gradually unwind whereas countries outside of OPEC plus are expected to collectively increase production by roughly 1,600,000 barrels per day.

With a relatively well balanced outlook for demand and supply, oil prices are expected to see modest upward movement in early twenty twenty five amid global oil inventory withdrawals before beginning a modest decline from mid-twenty twenty five through to 2026, as expected global oil production modestly outpaces what is currently expected to be a relatively weak demand growth. EIA currently forecasts that the Brent price will average $74 per barrel in 2025 and $66 per barrel in 2026. However, several uncertainties are not factored into this outlook not the least of which is the impact of new sanctions on Iranian Expro, the go forward volume and destination of Russian exports if there is a negotiated peace deal between Russia and Ukraine. As a general matter, if customers have confidence that oil prices will remain above $65 to $70 per barrel, we believe the outlook for our business will be stable to positive largely due to what is expected to be steady to modestly increase in global liquids demand 02/1930, and the breakeven costs and carbon advantages of deepwater barrels. The global gas market remains fundamentally tight likely supporting prices and significant investment through the remainder of this decade. In the near to medium term, replacing lost Russian pipeline supplies growth in U. S. LNG export capacity energy security, diversification of supply will remain key themes in the industry.

Longer term, there is massive upstream and infrastructure investments required to support AI and data center driven demand and we believe gas will remain the most cost competitive transition fuel towards renewables if not a structural source of lower carbon electricity generation. Translating the commodity backdrop to what it means for our business a high cadence of sanctioning activity is forecast to continue in 2025 maintaining levels observed in 2024. The majority of new projects are expected to be in the lower cost lower carbon offshore segment.

Offshore project approvals are expected to account for 72% of Greenfield CapEx in twenty twenty five, growing further to 75% of all final investment decisions in '26.

Consequently, a sustained level of project sanctioning by operators should support growth and demand for the services and solutions energy services companies [indiscernible] We believe XPRO and other companies that are more levered to international and offshore markets will be better positioned on a relative basis. Customer OpEx spending is also set to continue growth in 2025 facilitating increased brownfield activity as operators remain focused on cost effectively increasing production, from existing assets and reducing their emissions. Like deepwater development, we believe cost effective and carbon advantaged production enhancement will be a secular theme and adding additional exposure to OpEx funded production optimization activity remains a strategic objective for the company.

Overall, we expect upstream investments to be stable to up modestly in 2025 as compared to '24, with several geomarkets including The U. S. Onshore Mexico, The UK, offshore Saudi Arabia Offshore Australia currently expected to contract. Other markets, including U. S. Offshore, Guyana and Norway should be relatively stable and still other markets such as Brazil, Argentina, onshore Saudi, The Emirates, and onshore Australia should provide scope for growth. For Expro, our 2025 outlook is for stable, if not modest growth in revenue and stable to improving margins. Reflecting one the relative size of our business in the markets that are expected to decelerate and the markets that we expect to be more resilient Secondly, our strong relationships with our blue chip global customers [indiscernible] third, an ability to offer differentiated services and solutions Fourth, our recently initiated operating efficiency campaign. And lastly, strategic and margin accretive acquisitions. We remain focused on building a business that is relevant and resilient and one that more consistently delivers strong financial results. We continue to invest in high return projects and opportunistically pursue smart synergies focused acquisitions to broaden our portfolio of cost effective technology enabled services and solutions enable margin expansion capture the opportunities that should come with global economic growth increasing demand for energy, and security of supply considerations.

Investments in our core businesses such as well construction have allowed us to remain on the forefront of the industry and we continue to offer leading edge technologies to the market which is demonstrated through several of the contract awards that were highlighted in our press release. Including the first deployment in West Africa of our AI enabled Itong, the industry's most advanced tubular makeup solution. Similarly, Offshore Saudi Arabia we successfully displaced conventional plug manifolds through our first deployment of the wireless dropping cement head and Skyhook. This follows the successful deployment by one of our super majors of our cement head with Skyhook in Trinidad. Like Itong, our cement head system with Skyhook creates operational efficiencies, while improving safety by removing personnel from the Red Zone. Performance is a differentiator in the markets like Saudi, while Aramco has announced the suspension of several jackups and the deferral of several offshore development projects in 2024, our operational success with cementing and other technologies has resulted in additional opportunities and revenue growth.

Within our Well Intervention and Integrity business, over the last several years, we have selectively invested in deployment solutions to facilitate the introduction of CaseDoll services and data acquisition and data interpretation capabilities. Compared to our traditional mechanical slickline business, this has resulted in a higher quality OpEx funded business better returns on invested capital.

For example, revenue generated from our Well Intervention and Integrity business in Brunei is about 50% larger than it was three years ago and margins have improved by about 10 percentage points over the same time frame. More value added intervention capabilities have also led to recent contract awards such [indiscernible] Where we achieved the first commercial deployment of our distributed fiber optic sensing capability. As well as a new multiyear wireline and case toll services contracts.

Overall, our well intervention integrity business is expected to be over $300,000,000 in 2025 with contribution margins in the low 30s. Which lags our drilling and completions levered businesses but is a stable production levered business.

Margins continue to move in the right direction as a result of the technology and overall cost discipline. Within Wellflow Management, Xpert recently partnered with Petrobras to develop a new flow meter technology which will provide flow rates, identify flow patterns generating online and real time data availability for remote monitoring and control to increase efficiency, and optimize the production of wells.

The key requirement in this technology development is the non intrusive aspect of the clamp on design as well as the absence of any radioactive sources. Our global operating footprint service delivery franchise also provide a platform to deploy value adding services and solutions added through technology and business acquisitions. You can see our global platform at work to the commercial success of CoreTrax in markets that are new to the CoreTrax business following our acquisition in May of twenty twenty four. A great example of this is offshore Qatar, where our client recently deployed CoreTrax's Hyperwholesaver hydraulic pipe recovery system In this case, the bottom hole assembly was severed efficiently allowing for a timely cementing operation and the deployment of the next drilling assembly within a single day.

This milestone underscores the technology's ability to support rapid decision making and minimize operational downtime in challenging drilling environments. Similarly, in December, CoreTrax team utilized the Relign MNS Expandable Casing Integrity Solution for the first well of an intended 15 well campaign onshore Australia. Successfully addressing corrosion issues and bringing production back online. With the remaining wells scheduled for completion in early twenty twenty five. Relign M and S is a new technical solution for the market positioning XPO as the only service company capable of delivering a full suite of remediation solutions including short, medium and long expandable patches.

With recent contract awards and ongoing pilot programs, in several markets, including the onshore U. S, onshore basins in Eastern Australia, in Brazil, we are excited about the growth potential for CoreTrax as expandable solutions, Markets with high well counts and systematic casing integrity or corrosion issues such as Argentina and Colombia also had land tax potential. Importantly, our expandable solutions are conveyance agnostic, meaning that we can deploy via cool tubing, wireline or drill pipe.

Regarding our operating efficiency campaign, what we are calling Drive 25, we have identified a 7% to 8% reduction in run rate support costs that we plan to realize over the next twelve to eighteen months. About half of which should be captured in 2025. As was highlighted in our press release, the Drive 25 campaign is focused on standardizing practices across geomarkets product lines and job functions, in order to improve operating leverage and facilitate margin expansion. Consistent with my comments on our third quarter earnings call, my view remains that 2025 will start slow again, primarily driven by near term concerns related to oversupplied oil market and then build momentum as the year progresses. We believe our business and revenue, which are largely levered to long cycle development, will be stable or grow modestly over the next year. Resulting in full year revenues that are stable to up modestly relative to 2024. Thus, our initial guidance is that full year revenue will be within the range of $1,700,000,000 to $1,750,000,000 While 2025 seems to be setting the outlook for oil and gas investment at Expro remains quite compelling for the rest of the decade.

So we are cautious about near term and more bullish over the medium to long term.

That said, our intent is to size our support structure and calibrate CapEx and other investments based on revenue realities rather than revenue aspirations. So cost and capital discipline will be key themes at Expro until we have better clarity around the direction of international and offshore markets. And the timing of deepwater projects that we expect will be sanctioned beginning in the second half of twenty twenty five. As highlighted in our press release, driven by an improved activity mix, which includes business and backlog and a full year contribution and pull through revenue efficiency gains we expect 2025 adjusted EBITDA margin will be up more than 100 basis points implying 2025 adjusted EBITDA within a range of $350,000,000 to $370,000,000 Please note that guidance assumes the conversion of backlog at contracted rates but does not embed material gains in net pricing. With that, I'll hand the call over to Quinn to further discuss our financial results. Thank you, Mike. Good morning. Good afternoon to everyone on the call. As Mike noted, we reported revenue of $437,000,000 for the quarter ended December 31, As compared to the guidance range for Q4 twenty twenty four, revenue of $440,000,000 to $470,000,000 that was provided on our Q3 earnings conference call.

Revenue was up sequentially $14,000,000 or 3% relative to third quarter of twenty twenty four.

Year over year, revenue was up $30,000,000 or approximately 7% relative to fourth quarter of twenty twenty three.

North And Latin America came in a bit below Q4 revenue expectations primarily reflecting lower than expected well construction activity and tubular sales in the Gulf Of America and lower CoreTrax revenue was largely driven by delivery delays within the expandables product line.

Additionally, lower well flow management revenue in Apex specifically in Malaysia and Australia, impacted Q4 results.

At the full year, revenue at $1,710,000,000 was up $200,000,000 or approximately 13% year over year. Activity and revenue across all of our regions increased during the year ended December 2024, most notably in NLA, Issa and MENA, As Mike noted, MENA in particular was bolstered by the CoreTrax acquisition.

Adjusted EBITDA for the fourth quarter of twenty twenty four was $100,000,000 as compared to Q4 guidance of $90,000,000 to $105,000,000 representing a sequential increase of approximately $15,000,000 or 18% relative to the third quarter of twenty twenty four. Adjusted EBITDA margin for the fourth quarter was 23% was up approximately 300 basis points quarter over quarter. [indiscernible] full year 2024 basis, adjusted EBITDA was $347,000,000 which represents an increase of almost $100,000,000 or approximately 40% relative to 2023.

Adjusted EBITDA margin for the full year was approximately 20% which represents an increase of approximately 400 basis points year over year. Turning to regional results for North And Latin America or NLA, fourth quarter revenue was $139,000,000 or flat quarter over quarter again reflecting lower activity in well construction, While full management activity was higher in The U. S, and in Brazil. NOI segment EBITDA margin at 22% was down from 24% in Q3 twenty twenty four, again reflecting a decrease in well construction activity and resulting less favorable activity mix in the region. [indiscernible] Full year NLA segment EBITDA margin was 25% We expect mid single digit revenue growth and relatively stable segment EBITDA margin for NLA in '25.

Following our rationalization of the lower 48 TRS business over the course of 2024, we are not particularly exposed to the expected continued contraction in The U. S. Onshore market. That said, we are excited about several U. S. Onshore applications to the expandables product line, which should provide scope for higher margin revenue within The U. S. Land business.

Without requiring additional base infrastructure or significant personnel additions. [indiscernible] While the average floater count in 2025 is to be flattish in the Gulf Of America, Guyana is expected to be down one rig year on year. On average, have secured several new multiyear awards within the well construction business which should allow us to sustain a high level of well construction activity LA twenty twenty five. [indiscernible] activity in Mexico will be tempered by decreased spending, we continue to see positive activity across South America.

Where we have secured several contracts in Brazil within our well construction and well flow management businesses as well as the contract extension in Argentina within the Well Intervention Integrity product line valued at more than $50,000,000 and highlighted in both our press release and Mike's prepared remarks. Note that revenue generated in The U. S. Land and Mexico markets was about 42% of consolidated 2024 revenue respectively. For Europe and Sub Saharan Africa or ESA, fourth quarter revenue was $143,000,000 a sequential increase of $11,000,000 or 9% primarily driven by higher Subsea Well Access revenue in Angola, Segment EBITDA margin at 37% was up 13 percentage points sequentially reflecting the increased subsea activity a positive contribution from the Congo Production Solutions project we close out the construction and commissioning phase of the project, Full year EASA segment EBITDA margin was 26%. Our ESA business sustained good momentum through 2024 as we continue to capitalize on increased activity in the region. As anticipated in The UK, we are seeing increased activity in P and A opportunities which is reflected in the December press release announcing our support of an operator's 52 well plug in abandonment campaign. As Mike highlighted, in Norway, Ekso secured a contract excess of $40,000,000 for TRS and well cleanup services during the startup phase covering eight wells for the largest gas fields on the Norwegian Continental Shelf. 2025, we expect Easter revenue will be down about 10% year over year.

Largely reflecting the completion of the construction and commissioning phase of the Congo project, and a non repeat of several Angola Subsea projects were delivered in 2024. East of segment EBITDA is expected to improve several hundred basis points year over year based on expected activity mix. Lease activity and revenue is currently assumed to be down year on year. Expected FIDs beginning in H2 twenty twenty five should support a strong rebound in 2026. For reference, for full year 2024, construction and commissioning phase related to our Congo, Production Solutions project contributed revenue of approximately $42,000,000 and negative margin of approximately $14,000,000 As Mike noted, variation orders that were pending when we reported Q3 results were recently resolved with a positive albeit modest impact on fourth quarter results. Based on the incentive structure, our provision of additional services during the multiyear operations and maintenance days of the project, we should have a bit of revenue and margin upside on a go forward basis. Relative to our initial assumptions for the O and M phase of the project. Middle East And North Africa or MENA team delivered another excellent quarter. Q4 revenue in MENA was $93,000,000 or up 7% sequentially.

Driven by higher wealth management services revenue in Algeria, Iraq Saudi Arabia. MENA segment EBITDA margin at 35% was flat quarter over quarter and up about five percentage points year over year. Full year MENA segment EBITDA margin was also 35%. For 2025, with a full year contribution from the acquired CoreTrax business, are expecting mid to high single digit revenue growth within MENA still strong but modestly lower segment EBITDA margin based on expected activity mix. [indiscernible] geomarkets generally driving the MENA region are Saudi Arabia, Algeria, The Emirates. Saudi and Algeria each accounted for about 37% of Vina revenue in twenty twenty four and the MRS accounted for about 8% of Bina revenue. Note also that the majority of our revenue generated in the KSA is from onshore activity, which is weighted to gas and unconventionals and is largely unaffected by Saudi's announcement of the suspension of offshore jackup rigs and the deferral of several offshore oil developments. Finally, in Asia Pacific or APAC, fourth quarter revenue was $62,000,000 a decrease of 5% relative to the September. Malaysia and Australia. Asia Pacific segment EBITDA margin at 25% was flat from the prior quarter and full year APAC segment EBITDA was 23%.

For 2025, we are expecting APAC revenue to be flat to down a couple of percentage points with declines in activity offshore Australia, largely offset by increased activity in Indonesia, Malaysia, Thailand and Brunei. APAC segment EBITDA margin should be relatively stable year on year. Total support costs for Q4 twenty twenty four full year 2024, we're $88,000,000 $340,000,000 respectively, And for both Q4 and full year 2024, total support costs were approximately 20% of revenue, Corporate G and A is a subset of total support costs. It was about 3.5% of revenue in '20 To expand on our Drive 25 initiative, and assuming full year 2025 revenue, relatively stable compared to 2024, the 7% to 8% reduction in support costs that Mike referenced implies an approximate $25,000,000 reduction in run rate support savings by Q4 twenty twenty five. Half of which we expect to capture in 2025 results. Will allow us to establish new baseline for support costs at around 19% of revenue. Which should provide scope for improved operating leverage and further margin expansion with growth. Full year adjusted cash flow from operations which excludes cash paid for interest net, Cash paid for severance and other expense and cash paid for merger and integration expense was $225,000,000 a year over year increase of $55,000,000 Working capital increased $55,000,000 year over year In 2024, cash taxes were approximately $39,000,000 2024 cash conversion or adjusted cash flow from operations as a percentage of adjusted EBITDA was 65%, expenditures approximately $210,000,000 and free cash flow or adjusted cash flow from operations less CapEx was approximately $87,000,000 Non operating uses of cash included CapEx of $144,000,000 $24,000,000 for the cash portion of the CoreTrax acquisition net of post closing adjustments which were Nexstar's favor, dollars 13,000,000 for the final segment of contingent consideration related to the 2023 PRT Offshore acquisition and $14,000,000 the repurchase of 1,200,000.0 Expro common shares at an average price per share of $11.8 Acquired shares were approximately 1% of total shares outstanding.

Expro had total available liquidity at year end of approximately $320,000,000 with cash and cash equivalents including restricted cash, approximately $185,000,000 availability under revolving credit facility of $136,000,000 We Turning to our outlook, Page nine of our accompanying slides, summarizes our guidance for Q1 and full year 2025.

As Mike noted, we are currently expecting full year 2025 revenue to be stable to up modestly year on year. And adjusted EBITDA margin is expected to be up more than 100 basis points year on year.

On this basis, our initial full year 2025 guidance for revenue to be within a range of $1,700,000,000 and $1,750,000,000 and for adjusted EBITDA to be within the range of $350,000,000 and $370,000,000 We Free cash flow margin or free cash flow as a percentage of revenue is expected to be about 7% Finally, full year guidance for 2025 is based on aggregate support costs and cash taxes of between 1920% of revenue and approximately 4% of revenue respectively. As is typical, Q1 is expected to reflect seasonal impacts of the winter season in the Northern Hemisphere and the budget cycles of our national oil company customers. With revenue expected to be in a range of $370,000,000 to $380,000,000 or down about 15% sequentially, from the strong Q4 results relatively flat year over year in both cases based on the midpoint of guidance. As highlighted in our press release, the year on year trend largely reflects the non repeat of first quarter twenty twenty four revenue associated with the construction commissioning phase of Congo Production Solutions project, largely offset by revenue from the acquired CoreTrax business. Based on Q1 adjusted EBITDA guidance of $65,000,000 to $75,000,000 Q1 twenty twenty five adjusted EBITDA margin is expected to be sequentially lower by about 400 basis points and up 50 basis points to 100 basis points year on year.

As Mike noted, we expect the traditionally weak first quarter to be followed by an activity rebound in the second quarter. In international markets and momentum building in international offshore markets as the year progresses. We are planning for 2025 capital expenditures $120,000,000 to $130,000,000 or approximately 7% of revenue at the midpoint of guidance. Note that our revenue and CapEx guidance does not contemplate significant new production solutions projects As we have highlighted in the past, larger production solutions projects can result in elevated capital expenditures, relative to what is required to sustain our business [indiscernible] more typical nonproduction solutions project related growth. However, our PS projects usually do provide for milestone payments. To the extent new production solutions project awards will have a material impact on our guidance, We'll highlight such projects in future earnings calls, or other investor communications. With that, I'll turn the call back to Mike for a few closing comments. Thank you, Quinn.

Exprobe accomplished a lot in 2024. With solid financial performance including year over year growth in revenue of 13% and year over year growth in adjusted EBITDA of 40%. Some key operational highlights include the acquisition of CoreTrax, which enhances our depth of talent capabilities of our product offerings the successful integration of the PRT Offshore team and the completion of the construction and commissioning phase of a large Congo production solutions project.

While we believe the macro backdrop sets up 2025 be a transition year for the energy services industry, XPO's outlook is for steady revenue, if not modest growth, relative to 2024.

Activity mix and operating efficiency gains should translate into adjusted EBITDA dollars and margins at or above 2024 levels.

Absent further geopolitical disruptions, we expect momentum to build in the international and offshore markets as the year progresses and concerns about oil supply abate. Beyond 2025, we remain very bullish on the outlook for long cycle development driven by economic growth security of supply considerations and market policymakers accepting that hydrocarbons and particularly natural gas will remain a key element of the global energy slate for the foreseeable future. With that, we can open up the call for questions.

Our first question comes from the line of Eddie Kim with Barclays.

Hi, good morning. Just wanted to ask about the the full year 2025 revenue guide of stable to modestly up year over year, which is a little bit higher than what others have indicated. More kind of in the maybe flat or maybe even flat to down kind of level. Is that more a function of maybe Expro gaining share or just a better than expected outlook than what others are saying or is it maybe a function of Expro specific differences. I know there are a lot of moving parts the CoreTrax acquisition last year and the Congo project moving into the O and M phase of the contract. So just more details around your full year revenue guidance would be great.

Sure. No, Eddie, good morning and thanks for the question. I guess I would frame it up like this. Part of it has to do with the markets that we have a lot of exposure to. To, whether it's U. S. Land, which I think is going to have some choppiness this year or the announced reduction in spend by Pemex in Mexico, we have very minimal And we're about 42% respectively revenue from those. It also has to do with our exposure to the Saudi market. As we try to highlight in a discussion, most of our exposure in Saudi is really unconventional land, gas So the jackup reduction and the offshore reduction is not going to have as much of an impact on us. And then the other one is really kind of what's going to happen in the offshore Australia market. So it's really kind of us, it's a combination of the market we're exposed to It also frankly is we very intentionally and strategically have done some accretive M and A in the last few years. We're going to see the benefit of those as we internationalize those businesses. And frankly, we're also going to see the benefit of some of the investments we've made in our in our own engineering efforts whether it's introduction of introduction of technology around cementation, or introduced a technology to reduce personnel in the red zone really starting to see the benefit of it.

So some of it's related to our business, the markets where we're in, and really continue to see some of the internationalization of our overall business.

Understood. Understood.

My follow-up is just on the first quarter guidance. The 15% kind of sequential decline in revenue, is a bit more steep than historically. If I look at past years, I think the sequential decline has been kind of in the mid single digits range. So just any more color on why this this first quarter is the decline is a little bit more steep than historically. And then I guess just your confidence level in the rebound in 2Q and the rest of the year, is that more your expectation for the market the overall market To kind of rebound or is it Based on kind of projects you're working on currently?

Hey, it's Quinn. I'll take that. So number one on the sequential decline in the first think a couple of things that I would highlight would be number one, we had a a very strong quarter in terms of subsea project deliveries in Q4 twenty twenty four. So we won't repeat that in the first quarter. Beyond that, it's really the kind of as expected and as has happened in the last number of years, the winter season in the Northern Hemisphere, which most significantly impacts the North Sea activity, And I guess if you look at it from a year over year perspective, we did have Congo project related revenue in last year, which somewhat insulated the step down was also true in 2023. So essentially when you remove the Congo benefit in the last two years, actually pretty consistent with the seasonality that we've experienced in the past. So again, the Q4 twenty twenty four subsea projects probably magnifies it a bit. Regarding the rebound, our internal forecasting and budgeting processes very much bottoms up Lot of it relates to expected project timing, in part benefiting from the of passing, so that is expected uptick But beyond that, we had some relative weakness in terms of NLA in the tubulars, deliveries and the expandables product line and at least based on the visibility that we have today that will somewhat reverse So it's really kind of as the team sees projects lining up in 2024, hopefully the macro situation improves a bit, but we have relatively good visibility on our activity.

And based on what we know today, we should see the typical recovery Okay, great.

All very clear. Thank you. I'll turn it back.

Thank you. And our next question comes from Adi Mohak with Goldman Sachs.

Hi, good morning team. I guess on the thanks for all the color on the DRIVE 25. I was just wondering if you can give us more color on the free cash flow progression as well from the 7% of revenue this year into the 10% target over time?

Yes. Bonnie, thanks for the question. I'll comment on the Drive 25 initiative This was something that we actually highlighted in our Q3 call that we had kicked off kind of at the the middle of summer last year, really felt like we had an opportunity to start to go through and look at opportunities and look at how we can drive more throughput through the organization And as much as anything that as we get out into twenty twenty six and beyond, as we see revenue step How do we drive more efficiency with with the business from a support cost standpoint. So we've spent a lot of time over the course of and we had some external health kind of in the late fall timeframe to really go through and look at how are the regions and how are the product lines and how are the support functions operating today how can we become more efficient, how can we drive additional cost out, And part of that has been to continue to expand our shared service center operations. We stood up a support center in Bogota and Colombia last year to support largely The Americas activity. But also how do we drive more of that more of the transactional kind of things, how do we drive more more operating efficiency, more operating leverage there.

So the good thing was we started that off back in the summertime not because we necessarily anticipated any market softness in 2025, but more around a we have a lot of focus on continuous improvement. That's really what that was around. So to some extent, we were kind of ahead of the curve, so to speak, so we could move into an implementation mode As we moved into 2025, we're able to embed many of us expectations at our 2025 budget process. So I think kind of as we try to highlight in the prepared remarks, it's about $25,000,000 of cost improvements about half of the which we think we'll see pop out the bottom of the P and L, so to speak, here in 2025. But it's very much part of our we really focus a lot on continuous improvement around our HSE performance and our service delivery performance.

And it's really applying that same kind of approach and efficiency expectation to our own kind of internal support efforts as well.

Yes. Now I'll just pick up on the free cash flow margin progression. And what are the key drivers. So activity mix is one. So the movement into the operations and maintenance phase of The Congo is one example where we where we know we've got a change in mix that's expected that should be beneficial. But more broadly, I think it's about cost and capital discipline. [indiscernible] We've provided guidance for CapEx, which is down year over year in a more flattish type environment. We're as Mike said, we'll be designing the cost structure and capital investments around revenue realities as opposed to revenue aspirations. So you'll see us restrained in terms of CapEx until we have a better sense of where the market is headed. And then finally, [indiscernible] [indiscernible] energy services industry has been challenged with working capital issues over the last [indiscernible] at least our expectations that will at least moderate in a more flat revenue environment and hopefully reverse at some point. But I think we're all sitting on higher AI or AR and higher inventory than we prefer as an industry and hopefully that will start to Again, moderate or reverse. But those are the key drivers.

That's very helpful. Thank you, Quinn. And maybe sticking with you, if you can give us a any color on capital allocation priorities throughout the year CoreTrax obviously has been very additive to MENA Thoughts around similar kind of M and A given where the market is spread becoming more interesting? What's the appetite for M and A there? And then overall, Well, the appetite is there for M and A. We've got a clean balance sheet that would allow us to execute on it without issuing shares within a certain size parameter But we don't believe in big for big sake.

As Mike says, we focus on three things, industrial logic, industrial logic and industrial logic. And and that will continue to be our North Star. But I guess the broader capital allocation, we've highlighted the 7% that we're intending to invest in CapEx M and A will be compared against effectively Expro trades. We've tried to be balanced in our approach targeting 1% to 2% of TSO in terms of buybacks per annum. I think that will continue to be our plan or expectation. We did buy some stock in the fourth quarter late in the fourth quarter. I would expect we'll continue to look hard at that on a go forward basis. So again, I think our approach is balanced. The name of the game is to create long term shareholder value. And if we can convince ourselves that we can do that through M and A, We'll do so. But it's got to be relative to where export trades ultimately, what's in the message for shareholders Is that responsive?

That's helpful. Thank you.

Thank you. And our next question comes from Grant Heinz with JPMorgan.

Good morning, Craig, Quinn and team. Just had one quick one here.

Could you provide us a little bit more color on the resolution of the Congo project? I think previously, you might have represented about $7,000,000 headwind or so kind of in 3Q Was this at the essentially reversed in 4Q? And then additionally, it sounds like you have an opportunity to maybe earn some better rates on the execution side within the O and M contract. Any more color there as well? [indiscernible] Great. Thank you, Grant. Appreciate the question. I guess, first off, what I really want to highlight is that I am very pleased that we delivered a world class facility in a very quick manner All of this while maintaining a very high level of HSE performance On top of that, the design that we had for the plant has allowed for some short term production rates to be above the nameplate capacity. I think gives us and the operator some operational flexibility. So fundamentally, subsequent to the close of the third quarter, we've been able to successfully resolve the outstanding variation orders. And this really this is a mix of kind of lump sum in the construction and commissioning phase, lump sum that's going to be in the O and M phase and some increase in the O and M rates.

Fundamentally, as we can as I alluded to, as we can increase the production throughput as well as provide some additional services and some additional support to them specifically around power generation capacity. The original ten year project economics will ultimately be delivered and fundamentally despite the choppiness that we had during the percentage of completion part of the project in 2024, These are the type of production solutions projects that we really want to have We now move into the operate and maintain phase and fundamentally for us that's when margins will be accretive to our overall business The lump sum impact in Q4 was not significant. It was a couple of million bucks. We are I am really pleased how we how we've concluded the conversations with the operator and it's really going to be a combination of small incremental revenues in the commission and construct phase, increased in the lump sum in some O and M rates, and then increased in the overall daily rate. So good conclusion and fundamentally overall we still maintain the original project economics that we had based the project when we sanctioned it a number of years ago, albeit a little bit more choppiness during the percentage of completion constructed commissioning phase, but overall very successful.

Appreciate the color. I'll hand it back. Thank you. I did want to follow-up on the answer to the previous question, Mike and Quinn. Obviously, you generated a really significant EASA margin in 4Q. If it was only a couple of million bucks from The Congo repayment, what else was driving that really significant margin? Besides obviously you had the drag in the previous two quarters? It's still well above what we might have expected. And I'm assuming that's not the type of margin you want us to assume even as you go into the O and M phase with Congo next year. Zalow had kind of right Yes, that's why I tried to walk through the regions in terms of our expectations terms of year over year progression. But as Mike highlighted, closeout of the construction commissioning phase on Congo I mean, it was a driver in terms of the sequential improvement because we essentially didn't repeat the losses that were recognized in Q3. That was obviously a positive. And then we had, as Mike mentioned, a couple of million dollars benefit on those recognized in Q4. I would say the primary driver beyond that is Subsea is one of our higher margin product lines.

We had significant subsea deliveries in terms of projects in Q2. Which was also a good margin quarter, though somewhat offset by the Congo project. And then 4Q, we had another large project delivery in Angola within the Subsea Well Access product line. So So Subsea can be a bit lumpy at times. But it is Great. High value added mission critical service and customers value that and we tend to generate better margins from it. Okay. That's helpful. When we think about your margin assumptions for 2025 guidance, you're talking about 10 basis points But when you put together all the pieces you walked through, the cost cuts related to Drive '25, the phasing into O and M and you won't have to drag from the cost overruns last year in Congo. We think about a full year of core track which is higher margin. A lot of this would bias towards higher margin What's offsetting it? Less Subsea well access projects this year Or what limits margin improvement as we just go through those three pieces, which clearly drive better margins next year even in a flat market.

Yes. I think you might have misspoke. So the margin benefit that we should get from operating efficiency campaign on a run rate basis should close in on 100 basis points itself obviously won't get the full benefit of that in 2025. A phased program. But again, the biggest drivers are going to be activity mix and as Mike mentioned, we've built in the pricing that's embedded in our backlog, but [indiscernible] assuming given the current market tone that we'll get incremental net pricing gains Though certainly within well construction subsea, we have high value added mission critical services that have limited sideline capacity. So as the market tightens up, we should see benefits from that, but we're not embedding it in our guidance today. So again, I think what we're focused on is where can we expand margins with the things that we can 100% control and that's really costs. So I would say that primarily costs and maybe a little bit of activity that's embedded in backlog is what drives the guidance. Hopefully as the year progresses and the market tightens up a little bit, we can improve upon that. But I think we and others are going into 25% cautious both in terms of expectations and the guidance that we're providing the market.

Okay. Fair. If I could get one more in just in terms of progress with CoreTrax and Delta TAC. Delta Tech, you just lapped two years in that acquisition. When you made it, you talked about potentially doubling the cementing business. How far are you towards that target? And CoreTrax, you won that Australia contract in terms of winning awards outside of the core markets where you are with that progress? No, Steve, it's a great question. I can tell you we continue to make good progress on the expansion of our cementation product line This helps us drive a lot of rig efficiency When you start dramatically reducing the waiting on cement cure time, for offshore deepwater rigs. That's eighteen to twenty four hours. It starts to become meaningful So we continue to make really good progress on that. At the same time, I can also tell you that we're going to be patient on our we have value creation and revenue generation expectations and we're not going to give them away. I can tell you, I was in Europe a week ago with with one of our international customers and they pressed me really hard on on why we don't have Itong on every one of their rigs globally.

And my answer was, as soon as you guys agree to the rates that we have expectations around, we'll continue deployment. So we're going to be patient. We're going to get those things out there, but we're making good progress with that. CoreTrax is another one that we're going to have an ability to expand our footprint in U. S. Land land Australia and some of the coal bed methane fields where they have a lot of corrosion issues and a lot of casing integrity issues.

Brazil land we tried to highlight Argentina and Colombia. There's a lot of places that expandable tubulars whether it's short section patches or it's full production string realigning, we think we're going to have some great opportunities there. So it's as much as anything making sure we focus on the right markets. We can't try to go to 60 countries tomorrow to operate Coretracks in. Want to make sure we go to the top five and then the next five and the next five. So it's really a matter of us trying to be methodical and patient to get the maximum benefit out of these things. That's great. Thanks Mike. Thanks Glenn.

Thanks Steve. Appreciate it. Our next question comes from Josh Jane with Daniel Energy Partners. Thanks. Good morning. Mike, in your last good morning. Mike, in your last question that you just responded to, you talked about Itong a little bit and you also highlighted in the presentation, first deployment in West Africa. Maybe you could just speak to the sense of urgency among customers to pay for this type of technology, especially when we think about rig safety and the ability to take fifteen rig hours out a month. How many of these systems are in the market today? And what is think the growth runway is for this over the next couple of years.

No, Josh, it's a great question. I can tell you it's Some of our customers, some of our IOAC customers are much more focused on the HSE importance of this and reducing the number of personnel in the red zone and those type of things I think we'll continue to gain momentum I mean, quite frankly, I was in Europe with an executive level meeting with the customer and I'll be honest, I was quite surprised that one of the key topics they want to talk about was Itong and introduction of it, how much value they see it bringing to them. It was a kind of specific technology importance that I wouldn't have thought would have kind of bubbled up to that level. But we've got good momentum behind it. We're going to put those into the marketplace at an appropriate rate because frankly, we have an expectation around what we're going to charge for that and we could probably double the market uptake if we would reduce the pricing on it and we're not going to because it brings such tremendous value And so we're going to push it out there at the right rate. Ideally, we today probably operate on somewhere north of 70 of the total floating assets in the well construction I would like to think that at some point in time down the road in the next couple of years, that we would have 75% plus Itong, Centrify uptake on those rigs.

Because it does drive efficiency and more importantly, it really reduces the exposure for personnel in the Red Zone. So I think we'll continue with that kind of uptake.

Okay. Thanks very much. I'll turn it back. Great. Thanks, Josh.

That was our final question. So this does conclude today's call. Thank you everyone for joining and thank you for your participation. Have a great day and you may now disconnect.