Release Date: February 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Expro Group Holdings NV (XPRO, Financial) reported a solid Q4 2024 with revenue of $437 million and adjusted EBITDA of $100 million, marking their best financial performance since the Expro Frans merger in 2021.
- The company achieved a 13% year-over-year increase in full-year 2024 revenue, reaching $1.7 billion, with significant contributions from North and Latin America, Europe, Sub-Saharan Africa, and the Middle East North Africa regions.
- Expro Group Holdings NV (XPRO) successfully resolved outstanding variation orders related to the Congo project, allowing for the completion of the construction and commissioning phase and an adjustment to the contract rate for the operations and maintenance phase.
- The company captured approximately $314 million in new contract awards, including significant extensions and new contracts in Argentina, Norway, and the UK, maintaining a healthy backlog of $2.3 billion.
- Expro Group Holdings NV (XPRO) initiated the Drive 25 operating efficiency campaign, targeting a 7% to 8% reduction in run rate support costs over the next 12 to 18 months, with half of the savings expected in 2025.
Negative Points
- Expro Group Holdings NV (XPRO) anticipates a slow start to 2025 due to near-term concerns about an oversupplied oil market, with a sequential revenue decline of about 15% expected in Q1 2025.
- The company faces challenges in the North and Latin America region, with lower-than-expected well construction activity and tubular sales in the Gulf of America impacting Q4 2024 results.
- Expro Group Holdings NV (XPRO) expects a 10% year-over-year revenue decline in the Europe and Sub-Saharan Africa region for 2025, largely due to the completion of the Congo project's construction and commissioning phase.
- The Asia Pacific region experienced a 5% sequential revenue decrease in Q4 2024, primarily due to decreased well flow management activity in Malaysia and Australia.
- Expro Group Holdings NV (XPRO) is cautious about the near-term outlook, with expectations for stable to modest growth in 2025, reflecting a transition year for the energy services industry.
Q & A Highlights
Q: Can you provide more details on the full-year 2025 revenue guidance, which is expected to be stable to modestly up year over year?
A: Michael Jardon, CEO, explained that the guidance reflects Expro's exposure to specific markets, such as US land and Saudi Arabia, where they expect minimal impact from market fluctuations. The company also anticipates benefits from strategic acquisitions and investments in technology, which are expected to drive growth.
Q: Why is the first quarter 2025 revenue expected to decline more steeply than in previous years?
A: Quinn Fanning, CFO, noted that the decline is due to a strong Q4 2024 with significant subsea project deliveries that won't repeat in Q1 2025, along with typical seasonal impacts in the northern hemisphere. The absence of Congo project-related revenue, which previously cushioned declines, also contributes to the steeper drop.
Q: Can you elaborate on the Drive 25 initiative and its impact on free cash flow progression?
A: Michael Jardon, CEO, highlighted that Drive 25 focuses on improving efficiency and reducing support costs by expanding shared service operations and standardizing practices. Quinn Fanning, CFO, added that the initiative aims to achieve a 7-8% reduction in support costs, contributing to improved free cash flow margins over time.
Q: What are Expro's capital allocation priorities, and is there an appetite for M&A?
A: Quinn Fanning, CFO, stated that Expro is open to M&A opportunities that align with industrial logic and create shareholder value. The company maintains a balanced approach to capital allocation, including investments in CapEx, potential buybacks, and strategic acquisitions.
Q: Could you provide more details on the resolution of the Congo project and its impact on margins?
A: Michael Jardon, CEO, explained that the Congo project has transitioned to the operations and maintenance phase, with improved contract terms that should enhance margins. The project economics remain intact despite previous challenges, and the company expects positive contributions from this phase.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
