Release Date: October 24, 2024
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 Q3 2024 revenue of $423 million, which was within their guidance range.
- The company achieved a year-over-year revenue increase of 14%, marking the strongest Q3 revenue since the Expro Frank's merger in Q4 2021.
- Expro's backlog remains healthy at approximately $2.3 billion, indicating strong future demand.
- The company has been recognized with industry awards for innovation, highlighting its commitment to technological advancement.
- Expro is actively pursuing cost rationalization initiatives to improve operating leverage and support future growth.
Negative Points
- Q3 2024 adjusted EBITA was at the low end of guidance due to a $7 million negative impact from the Congo production solutions project.
- Sequential revenue declined by 10% due to the wrap-up of the Congo project and lower activity in certain regions.
- Commodity prices have been under pressure, leading to cautious customer spending and project delays.
- The company revised its full-year 2024 guidance downward, reflecting moderated growth expectations.
- Expro anticipates a slow start to 2025 due to cautious customer budgets and potential project delays.
Q & A Highlights
Q: Can you discuss the revision to the 2024 outlook and the path to achieving a 25% adjusted EBITDA margin and $2 billion in revenue?
A: Quinn Fanning, CFO, explained that the midpoint of their current guidance is about 5.5% below the previous guidance due to performance in the North and Latin America markets and temporary hiatus in certain activities. They expect a slow start in 2025 but remain optimistic about international offshore markets. Achieving the higher end of guidance requires favorable resolution of the Congo project variation orders. They anticipate reaching the $2 billion revenue and 25% EBITDA margin target by 2026, focusing on activity mix, operating leverage, and pricing.
Q: What is the status of the Congo project, and how will it impact Q4 guidance?
A: Michael Jardon, CEO, stated that the Congo project is transitioning to the O&M phase, with the facility already operational. The resolution of variation orders will determine if they are part of the build phase or O&M phase, impacting Q4 results. Quinn Fanning added that the high end of Q4 guidance assumes some margin recovery from the Congo project.
Q: How are you addressing the potential white space concerns in offshore drilling for 2025?
A: Michael Jardon noted that while there are concerns about white space, they are not seeing it translate into their activity. They expect two different slopes of activity growth in 2025, with a stronger second half. They are focusing on operational efficiencies and leveraging technology to reduce operating time and costs.
Q: Can you elaborate on the impact of recent M&A activities, particularly with Coretrax?
A: Michael Jardon expressed excitement about Coretrax, noting no surprises post-acquisition. They are prioritizing countries to expand into and see significant revenue synergies, especially in underrepresented markets like Latin America. The acquisition was more about cost avoidance than cost synergies, focusing on back-office support and engineering efforts.
Q: What are your plans for cost management and margin expansion in 2025?
A: Michael Jardon mentioned initiatives to improve operational efficiency and drive cost reductions, focusing on doing more with less. Quinn Fanning added that they are reviewing business processes and looking for opportunities to centralize and rationalize support functions. The goal is to create operating leverage with growth, emphasizing cost management in a potentially lower growth environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
