Q1 2025 Expro Group Holdings NV Earnings Call

Yeah.

Speaker Change: Hello, everybody and welcome to the extra Q1, 'twenty 25 earnings presentation My.

Elliott: My name is elliott's and I'll be your coordinator today.

Elliott: If you would like to register your question Jen stage event. Please press star one on your telephone keypad.

Chad Stevenson: I'd now like to hand over to Chad Stevenson director of Investor Relations. Please go ahead.

Speaker Change: Welcome to <unk> first quarter 2025 conference call I'm joined today by extra CEO, Mike charted and express CFO Quinn Fanning first Mike and Gwen we'll have some prepared remarks, then we will open it up for questions. We have an accompanying presentation on our first quarter results that is posted.

Speaker Change: On the extra website extra dot com under the investors section. In addition, supplemental financial information for the first quarter result is downloadable on an extra website likewise.

Speaker Change: Under the investors section.

Speaker Change: All right everybody.

Speaker Change: Some of today's comments may refer to or contain forward looking statements such remarks are subject to risks and uncertainties that could cause actual results to differ materially.

Speaker Change: From those results 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 in any forward looking.

Speaker Change: 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.

Mike Charted: Where our website again at extra Dot com. Please note that any non-GAAP financial measures discussed during this call are defined and reconciled to the most directly comparable GAAP financial measure in our first quarter 2025 earnings release, which can also be found on our website with that I'd like to turn the call over to Mike.

Mike Charted: Good morning, good afternoon, everyone I'd like to start off by reviewing the first quarter 2025 financial results are summarized in today's earnings press release, I will then discuss what I would characterize as a dynamic operating environment, which despite our expectation that upstream investment will likely moderate in the near term we believe supports a positive.

Mike Charted: <unk> multiyear outlook for energy services companies like <unk> that have a material exposure to the international and offshore markets.

Mike Charted: Quinn will supplement my commentary on the first quarter and outlook and share some additional financial information.

Mike Charted: For a recap of consolidated results and quarterly results by region I'll direct you to slides two through nine of the presentation, we posted to our website extra dot com.

Quinn Fanning: On slide to express Q1, 2025 revenue was $391 million with an adjusted EBITDA of $76 million or 20% revenue.

Quinn Fanning: This marks our highest first quarter performance in adjusted EBITDA and margin since merging with <unk> in October 2021, continuing a multiyear trend of margin improvement.

Quinn Fanning: Our performance demonstrates the robustness of our business model the benefits of having a comprehensive portfolio of services and solutions and a global presence, but modest exposure to markets such as U S land, Mexico and offshore Saudi that are expected to contract in 2025.

Quinn Fanning: Organic investment and our successful M&A strategy continued to enable margin expansion improve relevancy to our customers and better position the company for 2025 and beyond.

Quinn Fanning: We believe <unk> is well prepared to handle expected market volatility and create long term value for stakeholders.

Quinn Fanning: In terms of commercial activity, we secured $272 million in new contract awards in the first quarter.

Quinn Fanning: Safety service delivery and cost effective technology enabled services and solutions have all contributed to these successes, which have included contracts across the lifecycle of the well.

Quinn Fanning: Specifically, we had contract awards in the U S covering well construction services.

Quinn Fanning: <unk> $50 million in Brazil for drilling and completions, Workover and abandonment services valued at more than $30 million and in Indonesia for electric line Slick line services valued at approximately $15 million.

Quinn Fanning: Our backlog at approximately $2 2 billion at the end of the first quarter remains both healthy and in line with expectations given the typical seasonal patterns of contract awards.

Quinn Fanning: Turning to the macro outlook following the conclusion of the first quarter tariff announcements and a pull forward of production increases by OPEC plus introduced significant near term uncertainty and volatility across the global oil markets fears of a tariff induced global trade war have lowered macroeconomic visibility and GDP.

Quinn Fanning: Expectations.

Quinn Fanning: Consequently, there is no clear near term path for global liquids demand, which before liberation day had been rising.

Quinn Fanning: Despite changing trade policies are modestly oversupplied oil market and evolving economic conditions, our long term outlook for the international onshore and offshore markets to which extra as most levered remains very positive.

Quinn Fanning: Regarding long term demand natural gas will be a critical clean fuels to meet global energy needs with tailwind stemming from AI data center and digital infrastructure related demand and from energy security considerations, particularly in Europe. This is why LNG is in the midst of a major expansion phase.

Quinn Fanning: Similarly liquids demand is expected to remain above 100 million barrels per day throughout at least 2030 and more than half of that daily demand will be met with barrels from fields that have not yet been developed.

Speaker Change: Regarding long term supply as <unk> highlighted in its recent Super Spike newsletter U S shale oil, which has been the overarching engine of oil supply growth over the past decade is showing signs of maturation with a growing list of companies contemplating plans for what comes after U S oil shale.

Speaker Change: We believe operators will increasingly focus on offshore activities. This shift is due to the accessibility of deepwater barrels, which also offer cost and carbon advantages.

Speaker Change: After a decade of restrained upstream investment we remain bullish on the business over the longer term. However, the energy services industry is also navigating global economic uncertainty and supply demand imbalances, the collective effect of which has been weaker and more volatile commodity prices until prices stabilize cusp.

Speaker Change: <unk> will likely remain cautious with discretionary spending and new project sanctioning.

Speaker Change: And I'll review current macro conditions are influenced more by global trade issues and geopolitics than the energy industry fundamentals, which remain very strong. Meanwhile, volatility has increased across commodities equities and other markets and we expect this to persist until there is better clarity on the macro outlook.

Speaker Change: While policy choice may ultimately lead to a global recession, a more likely scenario at this sector weakness will reverse once trade policies are clarified and other macro indicators improve similar to the recovery seen after the 90 day pause unplanned tariffs.

Speaker Change: In this context according to the U S Energy information administration global oil consumption is forecast to increase by <unk> 9 million barrels per day in 2025 with demand, reaching an average of $103 6 million barrels per day a.

Speaker Change: Further increase of $1 1 million barrels per day is anticipated in 2026.

Speaker Change: In short despite softer near term growth demand is expected to remain resilient supporting our long term up cycle for the energy sector are potentially protracted trade war between the U S and China, However would pose a risk to China's long term oil demand.

Speaker Change: On the supply side the EIA.

Speaker Change: <unk> global liquids production to grow by $1 3 million barrels per day in 2025, reaching $104 1 million barrels per day led by non OPEC plus producers, including the United States, Canada, Brazil and Guyana.

Speaker Change: Further growth of $1 2 million barrels per day is forecast for 2026.

Speaker Change: That said supply risk remains high due to the uncertainty surrounding the sustainability of sanctions on Russia, Iran, and Venezuela and exports.

Speaker Change: While the EIA currently forecast average Brent price of $68 per barrel in 2025 and $61 per barrel in 2026 oil prices are expect to remain volatile in the near term as market digests, new tariff policies geopolitical tensions and sanctions.

Speaker Change: Despite downside risk commodity prices are expected to remain at levels that will support continued upstream investment with most international and offshore operators, maintaining good profitability above that 60 to $65 per barrel range. This should provide a constructive environment.

Speaker Change: For continued activity across <unk> largest product lines.

Speaker Change: If a more constructive macro backdrop develops over the next several quarters. We continue to believe that 2025 will be a transition year with a return to a healthy level of sanctioning activity in 2026 and beyond to meet long term demand for oil and gas offshore.

Speaker Change: Offshore project sanctioning should continue to gain momentum with about two thirds of Greenfield capex over the next two years expected to be allocated to offshore developments again. These projects benefit from lower emissions intensity and have competitive break evens and are a natural fit for <unk> core strengths.

Speaker Change: Compared to our Q4 earnings call outlook. This indicates a delay in activity yet maintained a positive multiyear perspective, both on the overall opportunity set and extra is relative market position.

Speaker Change: Years of industry wide capital discipline have prepared operators to continue development activities through a more volatile near term market scenario and as such upstream investment is expected through 2025 with several geo markets likely proving to be more resilient than the equity markets currently seem to believe.

Speaker Change: And our MLA region activity should be stable in Brazil in Guyana as a result of the development plans emanating from the high volume <unk> in recent years as well as in Argentina, and Colombia, because of an abundance of oil and gas resources and pro growth policies.

Speaker Change: Similarly in Isa the outlook is constructive for Norway and parts of West Africa.

Speaker Change: In the Middle East North Africa, we're expecting stability in our two largest markets, which are Saudi and Algeria in Saudi our business is more levered to onshore unconventional gas more so than offshore oil in Algeria, our business is levered to production optimization more so the new development activity.

Speaker Change: In Asia Pacific, We were expecting a 2025 slowdown offshore Australia prior to April 2nd due to the timing of projects, but markets such as Brunei in India should have a post monsoon season rebound in the second quarter of 2025, and we have new activity commencing in both Indonesia and Vietnam.

Speaker Change: In addition to the anticipated contractions in U S land, Mexico, and offshore Saudi that I mentioned earlier, a prolonged trade war and weaker commodity prices could result in reduced activity in the Gulf of America, which historically responds relatively quickly to changes in commodity prices and is an important market for extra.

Speaker Change: Overall as expected our customers 2025 work programs will be largely unaffected by short term commodity price movements and market uncertainty.

Speaker Change: However, non committed exploration appraisal wells and the final investment decision approvals may be delayed as customers reevaluate project economics in light of current conditions.

Speaker Change: Consequently, the approval of offshore projects in areas, such as West Africa may be postponed to 2026 or even early 2027.

Speaker Change: The project approval slide to the right that 2026 activity outlook may be impacted but we believe this will also extend the up cycle given the reduced spending levels over the last 10 years.

Speaker Change: Development activity slows customers will continue to focus on improving efficiency and reducing the carbon intensity of their operations, resulting in increased brownfield activity and sustained opex spending.

Speaker Change: While <unk> is currently more levered to drilling and completions activity, the company's well intervention and integrity production optimization and digital solutions businesses should remain resilient.

Speaker Change: With a more uncertain backdrop, we remain focused on maintaining costs and capital discipline and otherwise controlling what we can control we will continue to execute our strategy and offer differentiated services and solutions to our customers.

Speaker Change: We will also size the business based on revenue realities, and we will adjust capex spend on the projects that were sanctioned in a business that is awarded to <unk>.

Speaker Change: In addition, our zero net debt balance sheet also provides the company with strategic and financial flexibility.

Speaker Change: Operational performance has been strong and we have a head start on cost optimization with our drive twenty-five efficiency campaign that we launched several quarters ago.

Speaker Change: This should help us protect margins have activity softened and allow us to improve margins of activity stabilizes or improves.

Speaker Change: On a relative basis, we are less exposed to the market's most likely to contract in 2025, including the lower 48, Mexico and offshore Saudi.

Speaker Change: Regarding our ability to offer differentiated services and solutions, we continue to provide cost effective technology to the market as evidenced by several of the contract awards that we highlighted in our press release.

Speaker Change: In the Gulf of America, we have remained a market leader in well construction by investing in technologies that enable operating efficiencies and cost savings improved safety outcomes by removing personnel from the Red zone, and enhanced well integrity through more reliable tubular connections. Most recently securing a three year tubular running services contract over.

Speaker Change: For risks.

Speaker Change: Contract for approximately $50 million integrates our most advanced digital technology, including Centrify than I can.

Speaker Change: PRT offshore, which we acquired in 2023 continues to perform well highlighting how EXPAREL has opportunistically used M&A to complement organic investments in the business in the first quarter. The PRT team simultaneously executed operations for seven subsea customers in the Gulf of America. The team is also leverage.

Speaker Change: <unk> global operating footprint to improve asset utilization and increased revenue, having secured new awards for surface handling equipment in Asia Pacific and sub Sahara Africa.

Speaker Change: And Isa we successfully completed the system integration of our open water intervention riser system. The first of its kind to be built by extra equipment was delivered under a six year contract and is currently mobilized for deployment in the U K sector of the North Sea.

Speaker Change: Our current campaign as abandonment, but extra is open water IRS solution ensure safe and reliable subsea well access and can be used across development intervention and abandonment ultimately unlocking production gains while minimizing operational costs.

Speaker Change: In the eastern Mediterranean, we continue to see robust momentum and have successfully completed deepwater well construction operations for two major clients for Trs services across two exploration wells.

Speaker Change: Within the Mena region, our Q pulse technology was successfully piloted in the <unk> field in Saudi demonstrating excellent correlation and multiphase flow data across three phases compared to the traditional test separator. The success allows the technology to be used for production testing as a standalone technology and.

Speaker Change: Eliminating the need for a conventional separator.

Speaker Change: This non intrusive solution offers rapid cost efficient data essential for field production allocation and well performance monitoring.

Speaker Change: In Asia Pacific, We successfully deployed our Centrify consolidated control console for a major international oil company in Indonesia market gets maiden international deployment.

Speaker Change: We are seeing an increased demand for the market for our centrify systems, reflecting the value and efficiency that they bring to our clients operations. This system exemplifies our commitment to automation and operational excellence.

Speaker Change: Also in Indonesia, we secured a three year contract for well intervention services across 315 wells.

Speaker Change: Before I hand over to Quinn I'll comment on the guidance for the second quarter and full year 2025 that was included in our earnings press release.

Quinn Fanning: For Q2, assuming no additional tariff driven uncertainty in that commodity prices remain at or near current levels. We expect a seasonal rebound in Europe and a return to normal operations cadence in Asia Pacific After an extended monsoon season with low to mid single digit sequential revenue growth overall and modest quarter over.

Speaker Change: Quarter, adjusted EBIT margin expansion.

Speaker Change: Q2 revenue will be down on a year over year basis due to a non repeat of subsea projects delivered in the second quarter of 2024.

Speaker Change: We currently expect at least mid single digit revenue growth in the second half of the year compared to the first half of the year largely supported by the scheduled startup of new projects.

Speaker Change: For full year 2025, with the same tariff and commodity price caveat, we expect revenue to be generally flat relative to 2024 and that margins will be stable, if not up modestly year over year due to activity mix and operating efficiency gains.

Speaker Change: For now we remain comfortable that full year revenue will exceed $1 7 billion. We also expect adjusted EBITDA for the full year will meet or exceed 2024 results, but clearly visibility is less precise today, given the uncertain macroeconomic and geopolitical backdrop.

Speaker Change: While there is currently a lot of uncertainty in the market, we have experienced extended down cycles as well as transient trough in activity in the past.

Speaker Change: Current market feels more like a transient trough to me and in retrospect 2025 will be a better year than many investors currently assume but only time will tell.

Speaker Change: Our business is more levered to long cycle, rather than short cycle development. So we should be somewhat insulated from short term movements in commodity prices.

Speaker Change: Nonetheless, we will quickly adjust our costs and capital expenditures as market conditions warrant.

Speaker Change: We are also in a good position with a balance sheet that we have.

Speaker Change: Quality of the customers that we support and the Geo markets to which we are more exposed.

Speaker Change: Importantly, we are focusing on profitability and cash generation more than growth with that I'll hand, the call over to Quinn to further discuss our financial results.

Quinn Fanning: Thank you Mike good morning to everyone on the call.

Quinn Fanning: As Mike noted, we reported revenue of $391 million for the quarter ended March 31.

Quinn Fanning: As compared to the guidance range for Q1, 2025 revenue of $370 million to $380 million that was provided on our Q4 earnings conference call.

Quinn Fanning: As anticipated revenue was down $46 million for about 11% relative to the fourth quarter of 2024.

Reflecting a combination of the winter season in the northern hemisphere, and the non repeat of large subsea projects in the fourth quarter of 2024.

Quinn Fanning: Year over year revenue was up $7 million or approximately 2% relative to the first quarter of 2024.

Quinn Fanning: As Mike noted Q1 2025 was the best first quarter performance since we completed the extra Frank's merger.

Quinn Fanning: Adjusted EBITDA for the first quarter of 2025 was $76 million as compared to Q1 guidance of $65 million to $75 million.

Quinn Fanning: Representing a sequential decrease of approximately $24 million or 24% relative to the fourth quarter of 2024.

Quinn Fanning: Compared to Q1, 2024, adjusted EBITDA increased $9 million or 13%.

Quinn Fanning: Adjusted EBITDA margin for the first quarter was 20% and it was down about 300 basis points quarter over quarter.

Quinn Fanning: As compared to Q1 2024, adjusted EBITA margin increased about 200 basis points.

Quinn Fanning: Turning to regional results for North and Latin America are MLA.

Quinn Fanning: Fourth quarter revenue was $134 million were down $5 million quarter over quarter.

Reflecting lower activity in well construction and wealth management, all subsea well access activity was higher in the U S and well intervention and integrity was higher in Argentina.

Quinn Fanning: MLA segment EBITA margin improved 23% from 22% in Q4 2024.

Quinn Fanning: Reflecting the increased subsea activity and resulting favorable activity mix for the region.

Quinn Fanning: Note that revenue generated from the U S land in Mexico markets was about 4% and 1% of consolidated 2024 revenue, respectively and continues to be a small part of the global extra business.

Quinn Fanning: For Europe, and sub Saharan Africa are Isa first quarter revenue was $112 million, a sequential decrease of $30 million or 21%, primarily driven by a non repeat of Q4 subsea projects and Angola, partially offset by increased production solutions revenue in the Congo.

Quinn Fanning: Segment EBITDA margin at 26% was down 11 percentage points sequentially.

Quinn Fanning: Selecting a decrease in high margin subsea activity.

Quinn Fanning: The middle East and North Africa, Mena team delivered another excellent quarter Q1 revenue in Mena was $94 million or up 1% sequentially.

Quinn Fanning: Driven by higher well intervention integrity revenue in Qatar.

Quinn Fanning: Production solutions revenue in Algeria.

Quinn Fanning: And higher revenue from the acquired <unk> business, which is largely captured within well construction.

Quinn Fanning: Partially offset by lower well construction revenue in Egypt.

Quinn Fanning: Mena segment EBITA margin at 37% was up 1% quarter over quarter and up approximately 220 basis points year over year.

Quinn Fanning: Finally in Asia Pacific or APAC first quarter revenue was $51 million, a decrease of $12 million relative to the December quarter, primarily reflecting the expected decrease in subsea well excess activity offshore, Australia, and lower wealth management, while construction activity in Brunei, and Malaysia, partially offset by <unk>.

Quinn Fanning: <unk> core tracks activity onshore, Australia, which in this case is captured within the world eventually integrity product line.

Quinn Fanning: Asia Pacific segment, EBITA margin at 21% was down from the prior quarter, reflecting mix was up about 340 basis points compared with Q1 2024.

Quinn Fanning: Total support costs for Q1, $2025 to $85 million compared to $88 million in Q4.

Quinn Fanning: Support costs as a percentage of revenue was approximately 22% compared to approximately 20% in Q4 to the sequentially lower revenue.

Quinn Fanning: Corporate G&A is a subset of total support costs was approximately three 9% of revenue in Q1 2025.

Quinn Fanning: To provide an update on our drive 25 initiatives, we are well into the implementation phase of our cost optimization program.

Quinn Fanning: On our Q4 earnings conference call, we highlighted initial target of $25 million and run rate support cost savings that would be achieved by the fourth quarter of 2025.

Quinn Fanning: This will allow us to establish a new baseline for support costs at around 19% of revenue and provide scope for improved operating leverage and further margin expansion with growth.

Quinn Fanning: We have now identified a bit over $30 million of run rate support cost savings and where possible. We are looking to pull forward the realization of such savings.

Quinn Fanning: On our Q4 call, we indicated about 50% of the overall target would be reflected in 2025 results.

Quinn Fanning: We are planning to capture not less than 50% with a higher run rate target during the current year.

Quinn Fanning: Turning to liquidity first quarter 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 $53 million a year over year increase of $14 million.

Quinn Fanning: During Q1, 2025, working capital decreased $2 million quarter over quarter and cash taxes were approximately $15 million.

Quinn Fanning: Additionally, cash conversion for adjusted cash flow from operations as a percentage of adjusted EBITDA was 69%.

Quinn Fanning: Adjusted EBITDA less capital expenditures was approximately $43 million and free cash flow, our adjusted cash flow from operations less capex was approximately $20 million.

Quinn Fanning: Non operating uses of cash included capital expenditures of $33 million and $10 million for the repurchase of 1 million extra shares at an average price per share of $10 eight.

Quinn Fanning: Acquired shares were approximately 1% of total shares outstanding.

Quinn Fanning: Following the Q1 stock repurchases approximately $66 million was available under our current $100 million program.

Quinn Fanning: We still intend to use about one third of our annual free cash flow to acquire X pro shares.

Quinn Fanning: Extra had total available liquidity at the end of Q1 of approximately $315 million with cash and cash equivalents, including restricted cash of approximately $180 million and availability under our revolving credit facility of approximately $135 million.

Quinn Fanning: Turning to our outlook page nine of our accompanying slide summarizes our guidance for Q2 and for full year 2025.

Mike Charted: As Mike noted we are currently expecting full year 2025 revenue to be comparable year on year and that adjusted EBITDA will meet or exceed 2024 results.

Mike Charted: Within a reasonable 2025 revenue range free cash flow margin or free cash flow as a percentage of revenue should be in the 7% area or approximately $120 million.

Mike Charted: As it relates to Q2, we expect our results for the second quarter to reflect a moderate increase in activity across MLA Isa and APAC, while <unk> is expected to be relatively stable quarter over quarter.

Mike Charted: We currently expect Q2 revenue of $400 million to $410 million.

Mike Charted: We're up about 4% sequentially based on the midpoint of guidance.

Mike Charted: Based on Q2, adjusted EBITDA guidance of $80 million to $90 million Q2, 2025, adjusted EBITA margin is expected to be up sequentially and year over year by about 100 basis points.

Mike Charted: We continue to expect a further uptick in H two based on planned project startups, including in Mexico and on the U S side of the Gulf of America, where we expect to pick up in drilling activity and completions heavy first half of the year.

Mike Charted: This should benefit the Trs cementing technologies businesses within well construction.

Mike Charted: We also plan to commence work on new contracts were awarded in Q4, and Q1 and several countries in both MLA in APAC.

Mike Charted: As discussed there is an element of market uncertainty created by tariff announcements additional OPEC plus supply in a variety of geopolitical issues that will inform customer activity in 2025.

Mike Charted: However, this will likely not be settled until the second half of the year.

Mike Charted: We expect the demand for our services to continue with line of sight on projects in Q2, particularly international and offshore markets.

Mike Charted: As the year progresses, and more clarity is provided by the operators will have more visibility on project timing for the second half of the year and the medium term activity set.

Mike Charted: We are currently planning to deliver 2025 financial results within our original guidance ranges based on our understanding of customer work plans, but we acknowledged such work plans may continue to evolve throughout the year.

Mike Charted: As I have highlighted we are already taking action to optimize costs and streamline processes throughout drive 25 operating efficiency campaign.

Mike Charted: If operators plans change, we will adjust costs and capex accordingly to preserve margins and generate cash.

Mike Charted: With that I will turn the call back to Mike for a few closing comments.

Mike Charted: Thank you Quinn.

Mike Charted: As we evaluate the business, we believe extra is positioned well with leading positions in our core product lines and good exposure to markets that will support the underlying activity for multi year growth cycle.

Mike Charted: Our organic investments allow us to maintain our position at the forefront of the energy services industry as we continue to evolve and expand our portfolio of differentiated solutions, while maintaining our high service quality.

Mike Charted: Our M&A strategy has facilitated accretive growth and allowed us to acquire and integrate high quality businesses with excellent margins and to acquire high quality talent and integrate business builders into the extra global platform.

Mike Charted: We continue to believe the macro backdrop sets up 2025 to be a transition year for the energy services industry as such while we expect <unk> top line revenue to be relatively flat compared to 2020 for improved activity mix and operating efficiency gains should translate into margins at or above 2024 levels.

Mike Charted: The current geopolitical and oil supply disruptions have introduced market uncertainty and we will navigate the international and offshore markets as the year progresses.

Mike Charted: Beyond 2025, we remain very bullish on the outlook for long cycle development, driven by economic growth security of supply considerations and policymakers accepting that hydrocarbons and particularly natural gas will remain a key element of our global energy slate for the foreseeable future.

Mike Charted: <unk> is poised for long term growth success and value creation.

Mike Charted: With that we can open up the call for questions.

Mike Charted: Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad.

Mike Charted: If you would like to withdraw your question. Please press star followed by two.

Mike Charted: To ask a question. Please ensure your device is on mute.

First question comes from Arun <unk> with JP Morgan. Your line is open. Please go ahead.

Arun: Yes, good morning, gentlemen.

Speaker Change: Mike I was wondering if you could elaborate on what youre seeing kind of in the Mena.

Speaker Change: Geographical segment seems to be really strong growth here.

Speaker Change: Yes.

Speaker Change: Thoughts on maybe the sustainability of the margins that you go up to 37% margin and maybe talk a little bit about the contribution you're seeing from core tracks.

Speaker Change: Sure.

Speaker Change: Morning.

Speaker Change: Great question. Thanks for joining I guess, it's one of the and for myself, having lived and worked in the middle East earlier in my career it's.

Speaker Change: It typically is the good thing about the operators there are customers that are the NOC. They tend to be more like an aircraft carrier when they make adjustments and changes it takes a while for them to start to course, correct. So it tends to be more stable for a longer period of time, we have.

Speaker Change: Really really strong anchor contracts in Saudi and in Algeria in particular.

Speaker Change: And we've had great market penetration with core traction in particular in Saudi most of our activity in Saudi is really focused around.

Speaker Change: Land unconventional gas and we've actually observed a rig count increase.

Speaker Change: Unconventional gas last year, and we will continue to see some this year. So we continue to see some real strength there and it's part of the reason why we continue to invest both in our own engineering efforts, but also some of the things we've done with our recently acquired.

Speaker Change: Bolt on acquisitions, just allows us to continue to provide services and solutions to our customers that drive efficiency or help them.

Speaker Change: <unk> reduced the number of days drilling or increase the speed of completions those type things. So <unk> continues to be a real strong growth engine for us and generally I believe will continue to be more stable here over the certainly over the short term and medium term and long term as well.

Speaker Change: Okay.

Speaker Change: Great.

Speaker Change: And just a quick tracks.

Speaker Change: I mean contract specifically we continue to.

Speaker Change: I continue to be really pleased with how the integration has went how we're getting market penetration.

Speaker Change: Both are in the middle East, but also in other jurisdictions.

Speaker Change: Highlighted here on today's call, but we're having some really good.

Speaker Change: Market activity in Australia in particular for our expandable services from contracts.

Speaker Change: It really allows us to go into.

Speaker Change: Coalbed methane wells re line those wells, where they've had corrosion issues and put a large number of wells back onto production. So.

Speaker Change: It's been a it's been a great acquisition for us really really strong team and the challenge for US is to make sure that we don't try to.

Speaker Change: Expand from eight or 10 countries that we work with.

Speaker Change: <unk> offering in initially because we don't try to run too quickly and move it into the all 60 countries. The broader Expo is so we're trying to be very methodical, but I've been extremely pleased with the technology. The team the customer feedback has been great with contracts.

Mike Charted: Great maybe my follow up Mike just thinking.

Mike Charted: About the depressed valuation of the equity you got a net cash balance.

Mike Charted: Balance sheet your guidance would imply.

Mike Charted: Probably 200 million plus.

Mike Charted: Free cash flow this year, so youre trading at over 20% free cash flow Youll eastern.

Mike Charted: How are you keeping the rest of the management thinking about.

Mike Charted: Backs in this kind of environment and how do you characterize.

Mike Charted: Buybacks versus some of the.

Mike Charted: The appeal of buybacks versus other kind of call. It inorganic opportunities that you see in the marketplace today.

Mike Charted: Sure. It's a great question I think just to clarify what we tried to say on the call was our free cash flow margin of.

Mike Charted: About 120 million this year circa 7% so.

Mike Charted: I'll just I'll just pause without on your comment around.

Mike Charted: The 200 million number, but I think more importantly, it's yes, we are trading as many.

Mike Charted: And all of our peers are trading at depressed values today, we continue to <unk>.

Mike Charted: We've got some headroom available in our existing share repurchase authorization and.

Mike Charted: We look at all the capital across we look at how it competes whether it's capex or its share repurchases or those types of things. We look at that and I think it's a good opportunity for us to continue to lean into that here as we go into as we continue to 2025 with this.

Mike Charted: Kind of continued market choppiness so to speak.

Speaker Change: Maybe just a bit of a definitions here.

Speaker Change: We do expect something north of $200 million and adjusted cash flow from operations net of Capex. It would be the the previous numbers that we provided.

Speaker Change: Okay sounds good I was just looking at the EBITDA, taking out capex and a little bit.

Speaker Change: Income tax, but we can follow up offline, but.

Speaker Change: Thanks, a lot.

Ron: Thanks, Ron Thanks for.

Speaker Change: We now turn to <unk> <unk> with Goldman Sachs. Your line is open. Please go ahead.

Speaker Change: Hi, good morning team.

Speaker Change: Mike you kind of gave us the second half versus first half expectation that was very helpful. But can you talk to us about what factors you are watching as you think about the full year guide and the Division then.

Speaker Change: And anything you can share in terms of the sensitivity that you are thinking of.

Speaker Change: So understand the potential outcomes.

Speaker Change: And again, thanks for thanks for joining I think it's a really relevant question. Its we have had a really over the course of the last in particular the last.

Speaker Change: I guess 28 days since the second of April we've had a tremendous level of engagement with our customers.

Speaker Change: Globally to go back and kind of look at.

Speaker Change: Projects and activity and kind of how they see things playing out the rest of the year and what we've tried to highlight is our best.

Speaker Change: The best information, we have from our customer engagements and I guess, how I would kind of.

Speaker Change: Characterize those today as theirs, they're cautious, especially for the projects that have already been sanctioned they're going to continue moving this project forward, we're not seeing.

Speaker Change: Or are you, having any discussions about projects stopping or activity stopping or those kind of things. So we've kind of gone through a bottoms up effort to look at that activity set for the rest of the year.

Speaker Change: And I think there's just.

Speaker Change: A little bit of a wait and see kind of mentality from our customers.

Speaker Change: I think more more robustly if you look at.

Speaker Change: Just look at the commentary from the from the subsea tree guys about orders and backlog and all those type things.

Speaker Change: Our operators and our customers are not going out and buying expensive trees and putting them on the shelf because they just want to spend dollars unnecessarily Victor preparing themselves for activity that's going to happen.

Speaker Change: In the in the medium term. So we continue to see that level of activity and that's what we've tried to give give give guidance to you guys as kind of how we're seeing things lay out from a from a global standpoint, we tried to highlight a couple of the markets in a couple of the countries where they seem to have some.

Speaker Change: Maybe they're going to have some more softness.

Speaker Change: Mexico, especially the Pemex activity in Mexico.

Speaker Change: So that's really kind of what we were trying to steer towards.

Speaker Change: That's very helpful. And then you kind of talked about.

Speaker Change: And you just mentioned, Mexico, but do you mind elaborating on the other geographies as you see activity expectations anything that you would want to point out and highlight.

Speaker Change: And then maybe give us your perspective on how you think about the wealth management and welcome Struction businesses as you walk through that.

Speaker Change: Sure.

Speaker Change: I guess, probably a couple that I would highlight is.

Speaker Change: I think that Latin America is going to have.

Speaker Change: It's going to be such a tremendous.

Speaker Change: Platform for act for strong activity strong growth, we tried to highlight obviously Guyana is strong.

Speaker Change: Sure.

Speaker Change: Medium term, we will see some <unk> type of that type of activity those type things, Brazil continues to be robust with.

Speaker Change: Petrobras and even some of the.

Speaker Change: Rig re contracting at Petrobras is having conversations around.

Speaker Change: We're really we're really positive on Argentina, I mean, it's a much more positive and constructive climate in Argentina today than what it has been over the course of the last several years.

Speaker Change: Inflation is more stable more stable when it comes to the unions and those type things and I certainly believe that that's going to give some stability within the country. So Latin America I think will continue to be strong.

Speaker Change: Middle East we commented earlier, it's always going to be more resilient than others.

Speaker Change: Europe is still going to be somewhat suppressed with the U K sector of the North sea, but I think Norway will have some strong activity and.

Speaker Change: Asia Pacific, we highlighted in our previous call and kind of reiterated today that we continue to believe Australia is just because of the timing of some of the projects and those type things we were already anticipating some softness in Australia in 2025, and I don't think thats been affected at all by what's happened since.

Speaker Change: This liberation day. So I think there is just some good strong levels of activity that can have some strong.

Speaker Change: Can have some some strong service related.

Speaker Change: We did we did highlight with Mexico, I think the Pemex activity for Mexico.

Speaker Change: <unk> heard from some talk about down 50% to 60% year on year, we don't have a massive amount of exposure in Mexico overall, but what we're starting to see here right now is non pemex related activity.

Speaker Change: Just kind of some of the the market share we have we are seeing some.

Speaker Change: Some strong activity here in the second half of the year. So that gives you a little bit of a walk across my views on it kind of geographically.

Speaker Change: That's super helpful. Thank you.

Speaker Change: Could you speak thank you for the questions.

Speaker Change: We now turn to Etsy, Kim with Barclays. Your line is open. Please go ahead.

Kim: Hey, good morning, just wanted to stay on the theme of recent customer conversations you mentioned in your release that you are waiting for more clarity around timing of offshore <unk> and.

Kim: And in your remarks, you highlighted West Africa is one of the regions you expect projects could get pushed out. So just curious if you're if you're actually hearing from your customers and getting early indications that project.

Kim: To get pushed out or or if this is more what would you expect will happen just based on recent market volatility any any color there would be great.

Kim: No.

Kim: Good good to speak I guess, what I would.

Kim: This is not from our customers, saying, hey, we're going to slow down.

Kim: This is just more.

Kim: Our interpretation of the tea leaves so to speak.

Kim: Let's keep in mind, the 2025 activity that's ongoing today is from already preapproved.

Kim: <unk>.

Kim: They've already moved into operational phases. So this is just more kind of.

Kim: Of an anticipation of given some of the caution from our customers they may very well.

Kim: <unk> awarding.

Kim: Yes.

Kim: Therefore for some period of time, so it's more of an anticipation that it is for many specific data points, but.

Kim: If I've learned nothing over my 30 plus years in the industry.

Kim: Sometimes I try to rely on what my what the history has been to try to predict how we think things are going to be in the future. So that's as much of it is anything any.

Kim: Understood understood. Thanks, Thanks for that clarification.

Kim: My follow up is just on the pitch.

Kim: Paris impact on your business I realize it's very early days and the situation seems to change by.

Kim: But.

Kim: If the current tariff regime during this.

Kim: 90 day past period holds do you have an estimate or a range on what type of EBITDA impact we should expect on your business this year and it sounded like.

Kim: This would already be reflected in your guidance for the full year, but.

Kim: And that if the tariff situation gets worse it could represent further downside, but if you could confirm that also that that would be great.

Speaker Change: When do you want to address that one I can take that.

Speaker Change: I guess consistent with some of our peers comments I think it's fair to say that the evolving landscape makes precise estimates of the impact of U S tariffs both in operations and financial results somewhat challenging, but I guess generally we would be less impacted by tariffs and other companies because we're primarily a services company.

Speaker Change: Our revenue manufacturer and I guess also 80% of our revenue is drive from activities outside of the United States. So those are probably two important context points.

Speaker Change: Nevertheless, Steve Russell, our Chief Technology Officer, and his team have recently made an.

Speaker Change: An initial assessment of U S tariffs highlighting two primary elements of the business that could result in higher costs.

Speaker Change: Number one we do import large.

Speaker Change: Oh D pipe is our production input to our tubular products business.

Speaker Change: Domestic sales for that product line would clearly attract U S tariffs.

Speaker Change: However, pipe, that's imported and we add value to us.

Speaker Change: Re export is generally not subject to U S tariffs, because we worked through free trade zones and pre trading.

Speaker Change: Trade zone regulations, excuse me would exempt that activity that we do import a bit of activity or a bit of equipment.

Speaker Change: And upgraded.

Speaker Change: That is not going to ultimately have free trade facilities options.

Import a small amount of services equipment that may be subject to tariffs.

Speaker Change: So I guess the bottom line is our current view is that the potential impact of U S tariffs will likely affect activity more so than a higher cost for X pro and at least our preliminary estimate based on the current announcements it would probably have something less than a $5 million impact.

Speaker Change: The U S tariffs some of which could obviously be impacted by supply chain adjustments and some of which can be recovered from customers either through existing contract terms contract adjustments or are ultimately price increases at least based on our current assessment. We don't think it can be a material driver of results for 2025.

Speaker Change: Okay got it thanks for that very helpful color.

Speaker Change: I'll turn it back.

Speaker Change: Thank you Ed.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad now.

Speaker Change: Now to answer Blake Mclean with Daniel Energy Partners. Your line is open. Please go ahead.

Blake McLean: Hey, good morning, Thank you all for taking my call.

Speaker Change: Thank you Julien.

Speaker Change: Yes, So you guys highlighted automation and safety is driving a number of.

Speaker Change: Recent contract awards and I'm, just wondering are products like Centrify, where you remove people from the rig floor or they just less impacted by some of this volatility because of the safety component and maybe just.

Speaker Change: Let's talk about the runway for for that product and for products like that today versus where current market penetration might be.

Speaker Change: No.

Speaker Change: It's a real good question and I guess, how I would characterize it is.

Speaker Change: Technologies like Centrify Ni Tang it really allows us to do two things.

Speaker Change: Number one the.

Speaker Change: Personnel you do have on the rig floor.

Speaker Change: Theres less amount of time that they have hands on Piper there in the Red zone, so massively reduce the opportunity for there to be an HFC incident.

Speaker Change: Which is very critical and Redzone management is something that's very very important to us.

Speaker Change: Especially to our big IOC customers. This is something they are very very focused on and so this is a technology that is really helpful for that but secondarily.

Speaker Change: It allows us to reduce the number of personnel that we actually have to place on the rig floor. So from a from our cost standpoint.

Speaker Change: The number of personnel allows us to cover more.

Speaker Change: More rigs with the same head count so it's really kind of.

Speaker Change: It allows us to kind of have that kind of a multiplicative effect of.

Speaker Change: Technology, improving safety and also for us to kind of repurpose, our personnel and frankly, it's been one of those where.

Speaker Change: We're going to introduce it at a at an appropriate rate because we have expectations around what kind of revenues and what kind of value we add to those operations.

Speaker Change: We're going to introduce this technologies and make sure that we're sharing in the benefit and sharing in the value with our customers as well as we are because we invested heavily in those type technologies.

Speaker Change: Throughout the pandemic and those types of things, so that's where we're really trying to get to it.

Speaker Change: And really using.

Speaker Change: Machine learning automation those type things not only is a differentiator, but also as a way for us to make operations safer and more repeatable all set now.

Speaker Change: Working up to a fixed torque every time, you're recording it and theyre not relying on somebody on the rig floor who's literally historically was going by sound are going by feel as youre talking about connections. We've now kind of move beyond that so it's been a tremendous advancement from from an operational standpoint.

Speaker Change: Okay. That's helpful. Thank you.

Mike Charted: Yes, Mike.

Speaker Change: My next question.

Speaker Change: I would ask you guys a little bit about the M&A market. I mean, you guys have been active there and grown.

Speaker Change: Through M&A.

Speaker Change: I think you characterized it as a dynamic operating environment, which I thought was great.

Speaker Change: Is that volatility, bringing people to the table is it pushing people.

Speaker Change: Away due to movements in bid ask spreads so any color you could give on on the M&A market today, and what that looks like right.

Speaker Change: Yes Blake.

Speaker Change: Hard one too.

Speaker Change: That's a hardware for me to quantify what I can tell you is we continue to work really hard on.

Speaker Change: On things that we believe will fit well under the X pro umbrella that will help us.

Speaker Change: Be more relevant to our customers help us.

Speaker Change: Generate accretive margins and accretive cash generation those type things, we continue to look at them and theres still opportunities out there.

Speaker Change: And.

Speaker Change: It just depends on you have to have some patients with these kind of things you know several of the recent acquisitions that we completed those were multi year endeavors. It was two years in the process from the time that we started this we actually closed them. So we still have.

Speaker Change: Opportunities, we still have things, we want to go out and do and.

How successful we can be and getting those closed only time will tell but I.

Speaker Change: I think we've demonstrated that we're a good platform, where a good portfolio to bring those things into.

Speaker Change: And when you start looking at some of the smaller type acquisitions. What are the key elements is we've had a really really good ability to retain the management and the operational teams from the acquisitions. We've made we've got a good platform and I think we have a pretty good approach when it comes to integration those kind of things I think it's a good.

Speaker Change: Home on a good destination and we will continue to work hard on those and.

Speaker Change: I still believe we'll be able to consummate some other bolt ons, what that looks like and when we'll get them done as a little bit to be determined, but we're still working hard on those kind of things.

Speaker Change: The only thing I would supplement lake is the current balance sheet does give us some flexibility.

Speaker Change: We think we can do bolt on M&A as well as acquire shares. So we can walk and chew gum at the same time scale.

Speaker Change: So probably gives us.

Speaker Change: Broader alternative sets in terms of funding alternatives. So we have balance sheet capacity, because it's taken a bit of leverage.

Speaker Change: But as Michael said in a number of occasions in the past M&A is going to be evaluated relative to where X pro trades.

Speaker Change: We will invest our capital.

Speaker Change: That will have the most impact, but we can do both.

Speaker Change: Understood. Thanks, very much for the color.

Speaker Change: Great. Thank you. Thank you appreciate it.

Speaker Change: Ladies and gentlemen, we have no further questions. So this concludes our Q&A.

Speaker Change: Today's conference call, we'd like to thank you for your participation you may now disconnect your lines.

Speaker Change: [music].