XPRO - NYSE

[abrupt start] Q1 2025 Earnings Presentation. My name is Elliot, and I'll be your coordinator today. [Operator Instructions] I'd now like to hand over to Chad Stephenson, Director, Investor Relations. Please go ahead.

Welcome to Expro's first quarter 2025 conference call. I'm joined today by Expro's CEO, Mike Jardon; and Expro's CFO, Quinn Fanning. First, Mike and Quinn will have some prepared remarks. Then we will open up for questions. We have an accompanying presentation on our first quarter results that is posted on the Expro website, expro.com, under the Investors section. In addition, supplemental financial information for the first quarter results is downloadable on the Expro website, likewise under the Investors section. I'd like to remind everybody that 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 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 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. 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.

Good morning, good afternoon everyone. I'd like to start off by reviewing the first quarter 2025 financial results as 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 multiyear outlook for energy services companies like Expro that have a material exposure to the international and offshore markets. Quinn will supplement my commentary on the first quarter and outlook and share some additional financial information. For a recap of consolidated results and quarterly results by region, I'll direct you to Slides 2 through 9 of the presentation we posted to our website, expro.com. On Slide 2, Expro's Q1 2025 revenue was $391 million with an adjusted EBITDA of $76 million or 20% of revenue. This marks our highest first quarter performance in adjusted EBITDA and margin since merging with Frank in October 2021, continuing a multiyear trend of margin improvement. 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. Organic investment and a successful M&A strategy continue to enable margin expansion, improve relevancy to our customers and better position the company for 2025 and beyond. In sum, we believe Expro is well prepared to handle expected market volatility and create long-term value for stakeholders. In terms of commercial activity, we secured $272 million in new contract awards in the first quarter. 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. More specifically, we had contract awards in the U.S. covering well construction services valued at approximately $50 million in Brazil for drilling completions, workover and abandonment services valued at more than $30 million and in Indonesia for electric line and slickline services valued at approximately $15 million. 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. Turning to the macro outlook, following the conclusion of the first quarter, tariff announcements and the pull forward of production increases by OPEC+ 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 growth expectations. Consequently, there is no clear near-term path for global liquids demand, which before Liberation Day had been rising. Despite changing trade policies, a modestly oversupplied oil market and evolving economic conditions, the long-term outlook for the international onshore and offshore markets to which Expro is most levered remains very positive. Regarding long-term demand, natural gas will be a critical clean fuel to meet global energy needs with tailwinds 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. 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. Regarding long-term supply, as Veriten highlighted in its recent super-spiked 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. 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. 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, customers will likely remain cautious with discretionary spending and new project sanctioning. In our view, 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 in other markets, and we expect this to persist until there's better clarity on the macro outlook. While policy choice may ultimately lead to a global recession, a more likely scenario as the sector weakness will reverse once trade policies are clarified and other macro indicators improve, similar to the recovery seen after the 90-day pause on planned tariffs. In this context, according to the U.S. Energy Information Administration, global oil consumption is forecasted to increase by 0.9 million barrels per day in 2025, with demand reaching an average of 103.6 million barrels per day. A further increase of 1.1 million barrels per day is anticipated in 2026. In short, despite softer near-term growth, demand is expected to remain resilient, supporting a long-term upcycle for the energy sector. A potentially protracted trade war between the U.S. and China, however, would pose a risk to China's long-term oil demand. On the supply side, the EIA projects 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. Further growth of 1.2 million barrels per day is forecast for 2026. That said, supply risk remains high due to the uncertainty surrounding the sustainability of sanctions on Russia, Iran and Venezuelan exports. While the EIA currently forecasts average Brent price of $68 per barrel in 2025 and $61 per barrel in 2026, oil prices are expected to remain volatile in the near term as markets digest new tariff policies, geopolitical tensions and sanctions. 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 for continued activity across Expro's largest product lines. 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 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 breakevens and are a natural fit for Expro's core strengths. Compared to our Q4 earnings call outlook, this indicates a delay in activity yet maintains a positive multiyear perspective, both on the overall opportunity set and Expro's relative market position. 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. In our NLA region, activity should be stable in Brazil and Guyana as a result of the development plans emanating from the high volume of FIDs in recent years as well as in Argentina and Colombia because of an abundance of oil and gas resources and pro-growth policies. Similarly, in ESSA, the outlook is constructive for Norway and parts of West Africa. In the Middle East and North Africa, we are 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 has levered the production optimization more so than new development activity. 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 and 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. In addition to the anticipated contraction 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 Expro. Overall, it is expected that customers' 2025 work programs will be largely unaffected by short-term commodity price movements and market uncertainty. However, non-committed exploration and appraisal wells and the final investment decision approvals may be delayed as customers reevaluate project economics in light of current conditions. Consequently, the approval of offshore projects in areas such as West Africa may be postponed to 2026 or even early 2027. Expected project approval slide to the right, the 2026 activity outlook may be impacted but we believe this will also extend the upcycle given the reduced spending levels over the last 10 years. If 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. While Expro 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. With a more uncertain backdrop, we remain focused on maintaining cost 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. We will also size the business based on revenue realities and we will adjust CapEx spend on the projects that customer sanctions and a business that is awarded to Expro. In addition, our zero net debt balance sheet also provides a company with strategic and financial flexibility. Operational performance has been strong, and we have a head start on cost optimization with our Drive 25 efficiency campaign that we launched several quarters ago. This should help us protect margins as activity softens and allow us to improve margins if activity stabilizes or improves. Again, on a relative basis, we are less exposed to the markets most likely to contract in 2025 including the Lower 48, Mexico and offshore Saudi. Regarding our ability to offer differentiated services and solutions, we continue to provide cost-effective technology to the markets as evidenced by several of the contract awards that we highlighted in our press release. In the Gulf of America, we've remained a market leader in well construction by investing in technologies that enable operating efficiencies and cost savings, improve 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 four rigs. The contract for approximately $50 million integrates our most advanced digital technology, including CENTRI-FI and iCAM. PRT Offshore, which we acquired in 2023 continues to perform well, highlighting how Expro 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 leveraging Expro's global operating footprint to improve asset utilization and increase revenue, having secured new awards for surface handling equipment in Asia-Pacific and Sub-Saharan Africa. In ESSA, we successfully completed the system integration of our open water intervention riser system, the first of its kind to be built by Expro. Equipment was delivered under a six-year contract and is currently mobilized for the deployment in the U.K. sector of the North Sea. The current campaign is abandonment, but Expro's 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. 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. Within the MENA region, our QPulse technology was successfully piloted in the Jafurah field in Saudi, demonstrating excellent correlation and multiphase flow data across three phases compared to the traditional test separator. This success allows the technology to be used for production testing as a stand-alone technology, eliminating the need for a conventional separator. This nonintrusive solution offers rapid and cost-efficient data essential for field production allocation and well performance monitoring. In Asia-Pacific, we successfully deployed our CENTRI-FI consolidated control console for major international oil company in Indonesia, marking its maiden international deployment. We are seeing an increased demand for the market for our CENTRI-FI systems, reflecting the value and efficiencies they bring to our clients' operations. This system exemplifies our commitment to automation and operational excellence. Also in Indonesia, we secured a three-year contract for well intervention services across 315 wells. 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. For Q2, assuming no additional tariff-driven uncertainty and 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-quarter adjusted EBITDA margin expansion. Q2 revenue will be down on a year-over-year basis due to a nonrepeat of subsea projects delivered in the second quarter of 2024. 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 start-up of new projects. For full year 2025, with the same tariff and commodity price caveats, 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. 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. While there is currently a lot of uncertainty in the market, we have experienced extended down cycles as well as transient troughs and activity in the past. The 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. 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. Nonetheless, we will quickly adjust our costs and capital expenditures as market conditions warrant. We are also in a good position with the balance sheet that we have, the quality of the customers that we support and the geo markets to which we are more exposed. 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.

Thank you, Mike. Good morning to everyone on the call. As Mike noted, we reported revenue of $391 million for the quarter ended March 31st 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. As anticipated, revenue down $46 million or about 11% relative to the fourth quarter of 2024, reflecting a combination of the winter season in the Northern Hemisphere, and the nonrepeat of large subsea projects in the fourth quarter of 2024. Year-over-year, revenue was up $7 million or approximately 2% relative to the first quarter of 2024. As Mike noted, Q1 2025 was the best first quarter performance since we completed the Expro Frank's merger. Adjusted EBITDA for the first quarter of 2025 was $76 million as compared to Q1 guidance of $65 million to $75 million, representing a sequential decrease of approximately $24 million or 24% relative to the fourth quarter of 2024. Compared to Q1 2024, adjusted EBITDA increased $9 million or 13%. Adjusted EBITDA margin for the first quarter was 20% and was down about 300 basis points quarter-over-quarter. As compared to Q1 2024, adjusted EBITDA margin increased about 200 basis points. Turning to regional results. For Northern Latin America or NLA, fourth quarter revenue was $134 million or down $5 million quarter-over-quarter, reflecting lower activity in well construction and well flow management, while subsea well access activity was higher in the U.S. and well intervention and integrity was higher in Argentina. NLA segment EBITDA margin improved to 23% from 22% in Q4 2024, reflecting increased subsea activity and resulting favorable activity mix in the region. Note that revenue generated from the U.S. land and Mexico markets was about 4% and 1% of consolidated 2024 revenue respectively, and continues to be a small part of the global Expro business. For Europe and Sub-Saharan Africa or ESSA, first quarter revenue was $112 million, a sequential decrease of $30 million or 21%, primarily driven by a non-repeat of Q4 subsea projects in Angola, partially offset by increased production solutions revenue in Congo. Segment EBITDA margin at 26% was down 11 percentage points sequentially, reflecting a decrease in high-margin subsea activity. The Middle East and North Africa or MENA team delivered another excellent quarter. Q1 revenue in MENA was $94 million or up 1% sequentially, driven by higher well intervention integrity revenue in Qatar, higher production solutions revenue in Algeria and higher revenue from the acquired Coretrax business, which is largely captured within well construction, partially offset by lower well construction revenue in Egypt. MENA segment EBITDA margin at 37% was up 1% quarter-over-quarter and up approximately 220 basis points year-over-year. 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 decreased subsea well access activity offshore Australia, and lower well flow management, well construction activity in Brunei and Malaysia, partially offset by increased Coretrax activity onshore Australia, which, in this case, is captured within the well intervention integrity product line. Asia-Pacific segment EBITDA margin at 21% was down from the prior quarter, reflecting mix was up about 340 basis points compared to Q1 2024. Total support costs for Q1 2025 were $85 million compared to $88 million in Q4. Support costs as a percentage of revenue was approximately 22% compared to approximately 20% in Q4 due to sequentially lower revenue. Corporate G&A is a subset of total support costs, and was approximately 3.9% of revenue in Q1 2025. To provide an update on our Drive 25 initiative, we are well into the implementation phase of our cost optimization program. On our Q4 earnings conference call, we highlighted an initial target of $25 million in run rate support cost savings that would be achieved by the fourth quarter of 2025. This will allow us to establish a new baseline for support costs at around 19% of revenue and price cope for improved operating leverage and further margin expansion with growth. 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. On our Q4 call, we indicated about 50% of the overall target would be reflected in 2025 results, and we are planning to capture not less than 50% of the higher run rate target during the current year. 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. During Q1 2025, working capital decreased $2 million quarter-over-quarter and cash taxes were approximately $15 million. Additionally, cash conversion for adjusted cash flow from operations as a percentage of adjusted EBITDA was 69%. Adjusted EBITDA less capital expenditures was approximately $43 million, and free cash flow or adjusted cash flow from operations less CapEx, was approximately $20 million. 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 $10.08. Acquired shares were approximately 1% of total shares outstanding. Following the Q1 stock repurchases, approximately $66 million was available under our current $100 million program. We still intend to use about one-third of our annual free cash flow to acquire Expro shares. Expro 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. Turning to our outlook, Page 9 of our accompanying slide summarizes our guidance for Q2 and for full year 2025. 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. 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. As it relates to Q2, we expect our results for the second quarter to reflect a moderate increase in activity across NLA, ESSA, and APAC, while MENA is expected to be relatively stable quarter-over-quarter. We currently expect Q2 revenue of $400 million to $410 million or up about 4% sequentially based on the midpoint of guidance. Based on Q2 adjusted EBITDA guidance, of $80 million to $90 million. Q2 2025 adjusted EBITDA margin is expected to be up sequentially and year-over-year by about 100 basis points. We continue to expect a further uptick in H2 based on planned project startups, including in Mexico and on the U.S. side of the Gulf of America, where we expect a pickup in drilling activity following a completions heavy first half of the year. This should benefit the TRS dispensing technologies businesses within well construction. We also plan to commence work on new contracts were awarded in Q4 and Q1 in several countries in both NLA and APAC. As discussed, there is an element of market uncertainty created by tariff announcements, additional OPEC+ supply and a variety of geopolitical issues that will inform customer activity in 2025. However, this will likely not be settled until the second half of the year. We expect the demand for our services to continue with line of sight on projects in Q2, particularly international and offshore markets. As the year progresses and more clarity is provided by the operators, we'll have more visibility on project timing for the second half of the year and the medium-term activity set We are currently planning to deliver 2025 financial results within our original guidance ranges, based on our understanding of customer work plans, but we acknowledge such work plans may continue to evolve throughout the year. As I've highlighted, we are already taking action to optimize costs and streamline processes through our Drive 25 operating efficiency campaign. If operators plans change, we will adjust cost and CapEx accordingly to preserve margins and generate cash. With that, I'll turn the call back to Mike for a few closing comments.

Thank you, Quinn. As we evaluate the business, we believe Expro is positioned well with leading positions in our core product lines and good exposure to markets that will support the underlying activity for a multiyear growth cycle. 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. 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 Expro global platform. 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 Expro's top line revenue to be relatively flat compared to 2024, improved activity mix and operating efficiency gains should translate into margins at or above 2024 levels. The current geopolitical and oil supply disruptions have introduced market uncertainty, and we will navigate the international and offshore markets as the year progresses. 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 the global energy slate for the foreseeable future. Expro is poised for long-term growth, success, and value creation. With that, we can open up the call for questions.

Thank you. [Operator Instructions] First question comes from Arun Jayaram with JPMorgan. Your line is open, please go ahead.

Yes, good morning gentlemen.

Hey Arun.

Mike, I was wondering if you could elaborate on what you're seeing kind of in the MENA geographical segment seems to be a really strong growth here. Thoughts on maybe the sustainability of the margins that you clip at 37% margin. And maybe talk a little bit about the contribution you're seeing from Coretrax?

Sure. Good morning Arun and 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 -- it typically is -- the good thing about the operators there, our customers there, the NOCs, they tend to be -- they're more like an aircraft carrier. When they make adjustments and changes, it takes a while for them to start the course correct. So, it tends to be more stable for a longer period of time. we have really, really strong anchor contracts in Saudi and in Algeria in particular. And we've had great market penetration with Coretrax in particular, in Saudi. Most of our activity in Saudi is really focused around land, unconventional gas. And we've actually observed a rig count increase in unconventional gas last year, and we'll 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 bolt-on acquisitions. Just allows us to continue to provide services and solutions to our customers that drive efficiency or help them reduce the number of days drilling or increased speed of completion, those type of things. So, MENA continues to be a real strong growth engine for us. And generally, I believe we'll continue to be more stable here over the -- certainly over the short term and medium term and long term as well.

Great. And just Coretrax?

I mean Coretrax specifically, we continue to be really pleased at how the integration has went, how we're getting market penetration, both in the Middle East, but also in other jurisdictions. We didn't highlight it here in today's call, but we're having some really good market activity in Australia, in particular, for expendables services from Coretrax, really allows us to go into coal bed methane wells, reline those wells where they've had corrosion issues and put a large number of wells back on to production. So, 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 expand from eight or 10 countries that we were -- Coretrax was offering in initially, we don't try to run too quickly and move it into all 60 countries, the broader Expro 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 Coretrax.

Great. Maybe my follow-up, Mike, just thinking about the depressed valuation of the equity, you get a net cash, a balance sheet. Your guidance would imply probably $200 million plus of free cash flow this year. So, you're trading at over 20% free cash flow at least on our math. How are you, Quinn, the rest of management thinking about buybacks in this kind of environment? And how do you characterize buybacks versus some of the appeal of buybacks versus other kind of, call it, inorganic opportunities that you see in the marketplace today?

Sure. No, it's a great question. I think just to clarify, what we tried to say on the call was a free cash flow margin of about $120 million this year, circa 7%. So, I'll just pause with that on your comment around the $200 million number. But I think more importantly, it's -- yes, we are trading as many and all of our peers are trading at depressed values today, we continue to -- we've got some headroom available in our existing share repurchase authorization. And we look at all the capital across, we look at how it competes, whether it's CapEx or it's 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 in 2025 with this kind of continued market choppiness, so to speak.

Maybe just a bit of definitions here, Arun, but we do expect something north of $200 million in adjusted cash flow from operations, but net of CapEx would be the previous numbers that we provided.

Okay. Sounds good. I was just looking at the EBITDA, taking out CapEx and a little bit of income tax, but we can follow up offline, but thanks a lot, Quinn.

Thanks Arun.

Thanks Arun.

We now turn to Atidrip Modak with Goldman Sachs. Your line is open, please go ahead.

Hi, good morning team. Mike, you kind of gave us a second half versus first half expectation. That was very helpful. Can you talk to us about what factors you are watching as you think about the full year guide and the revision there? And anything you can share in terms of the sensitivity that you are thinking of to help us understand the potential outcomes?

No. And again, thanks for joining. I think it's a really relevant question. It's -- we have had a -- really over the course of the last -- in particular, the last, I guess, 28 days since the second of April, we've had a tremendous level of engagement with our customers globally to go back and kind of look at 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 -- the best information we have from our customer engagements. And I guess how I would kind of characterize those today is there's -- they're cautious especially for the projects that have already been sanctioned. They're going to continue moving those projects forward. We're not seeing -- or having any discussions about project 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. And I think there's just a little bit of a wait-and-see kind of mentality from our customers. I think more robustly, if you look at -- just look at the commentary from the subsea tree guys about orders and backlog and all those type things, our operators and our customers are not going out and buying expensive trees and putting them on a shelf because they just want to spend dollars unnecessarily. I think preparing themselves for activity that's going to happen in the medium term. So, we continue to see that level of activity, and that's what we've tried to give guidance to with you guys is kind of how we're seeing things lay out 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 -- maybe they're going to have some more softness i.e., Mexico, especially the Pemex activity in Mexico. So, that's really kind of what we were trying to steer towards.

That's very helpful. And then you kind of talked about MENA 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? And then maybe give us a perspective on how you think about the well management and well construction businesses as you walk through that?

Sure. I guess probably a couple that I would highlight is, I think that Latin America is going to have -- it's going to be such a tremendous platform for strong activity and strong growth. We tried to highlight, obviously, Guyana is strong. Medium term, we'll see some Suriname-type activity, those type of things. Brazil continues to be robust with Petrobras and even some of the rig contracting, Petrobras is having conversations around. We're really positive on Argentina, 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. 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. Middle East, we commented earlier, it's always going to be more resilient than others. Europe is still going to be somewhat suppressed with the U.K. sector of the North Sea, but I think Norway, we'll have some strong activity. And across Asia-Pacific, we highlighted in the 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 of things, we were already anticipating some softness in Australia in 2025, and I don't think that's been affected at all by what's happened since this Liberation Day. So, I think there's just some good strong levels of activity that can have some strong -- you can have some strong service related. We did a highlight with Mexico. I think the Pemex activity for Mexico. You've 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 just kind of some of the market share we have, we're seeing 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.

That’s super helpful. Thank you.

Good to speak. Thank you for the questions.

We now turn to Eddie Kim with Barclays. Your line is open, please go ahead.

Hey good morning. Just wanted to stay on the theme of recent customer conversations. You mentioned in your release that you're waiting for more clarity around timing of offshore FIDs 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 actually hearing from your customers and getting early indications that project FIDs are likely to get pushed out? Or if this is more what you expect will happen just based on recent market volatility? Any color there would be great.

No. And Eddie, good to speak. I guess what I would -- this is not from our customers saying, hey, we're going to slow down FIDs sanctioning, this is just more our interpretation of the tea leaves, so to speak. And let's keep in mind the 2025 activity that's ongoing today is from already preapproved sanctioned FIDs. They've already moved into operational phases. So this is just more kind of an anticipation of given some of the caution from our customers, they may very well delay awarding FIDs here for some period of time. So, it's more of an anticipation than it is for any specific data points, but if I've learned nothing over my 30-plus years in the industry, sometimes I try to rely on what my -- what the history has been to try to predict how we think is going to be in the future. So, that's as much of it as anything, Eddie.

Understood. Understood. Thanks for that clarification. My follow-up is just on the potential tariff impact on your business. I realize it's very early days, and the situation seems to change by the day. But if the current tariff regime during this 90-day pause 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 this would already be reflected in your guidance for the full year, but -- and that if the tariff situation gets worse, it could represent further downside, but if you could confirm that also, that would be great.

Quinn, do you want to address that one?

I can take that, Eddie. 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 than other companies because we're primarily a services company rather than a manufacturing. And I guess also 80% of our revenue is derived from activities outside of the United States. Those are probably two important context points. Nevertheless, Steve Russell, our Chief Technology Officer and his team have recently made an initial assessment of U.S. tariffs highlighting two primary elements of the business that could result in higher costs. Number one, we do import large OD pipe as a production input to our tubular products business. Domestic sales for that product line would clearly attract U.S. tariffs. However, pipe that's imported, and we add value to is that ultimately, reexport is generally not subject to U.S. tariffs because we work through free trade zones and free trading -- free trade zone regulations, excuse me, would exempt that activity, but we do import a bit of equipment and upgrade it that is not going to ultimately have free trade to some exemptions. We also import a small amount of services equipment that may be subject to tariffs. 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 higher cost for Expro and at least our preliminary estimate based on the current announces so we probably have something less than a $5 million impact of U.S. tariffs, some of which could obviously be impacted by supply chain adjustments and some of which could be recovered from customers either through existing contract terms, contract adjustments or ultimately price increases. So, at least based on our current assessment, we don't think it's going to be a material driver to results for 2025.

Okay, got it. Thanks for that. Very helpful color. Thank you. I'll turn it back.

Thank you.

[Operator Instructions] Now, turning to Blake McLean with Daniel Energy Partners. Your line is open, please go ahead.

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

Blake, thanks for joining.

Yes. So, look, you guys highlighted automation and safety as driving a number of the recent contract awards. And I'm just wondering, are products like CENTRI-FI where you remove people from the rig floor, are they just less impacted by some of this volatility because of the safety component, and maybe just talk about the runway for that product and for products like that today versus where current market penetration might be?

No, it's a really good question. I guess, how I would characterize it as technologies like CENTRI-FI and iCAM, it really allows us to do two things. Number one, the personnel you do have on the rig floor, there's less amount of time if they have hands on pipe or they're in the red zone. So, you massively reduce the opportunity for there to be an HSE incident which is very critical, and red zone management is something that's very, very important to -- especially to our big IOC customers. This is something they're very, very focused on. And so this is a technology that's really helpful for that. But secondarily, it allows us to reduce the number of personnel that we actually have placed on the rig floor. So from a -- from our cost standpoint, it reduces the number of personnel, allows us to cover more rigs with the same headcount. So, it's really kind of -- it allows us to kind of -- have that kind of multiplicative effect of technologies, improving safety and also for us to kind of repurpose our personnel. And frankly, it's been one of those where we're going to introduce it at an appropriate rate because we have expectations around what kind of revenues and what kind of value we add to those operations. So, we're going to introduce these 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 throughout the pandemic and those types of things. So, that's where we're really trying to get to it and really using machine learning, automation, those type things, not only as a differentiator but also as a way for us to make operations safer and more repeatable. All of a sudden now you're torqueing up to a fixed torque every time you're recording it and are not relying on somebody on the rig floor, who's literally historically was going by sound or going by field as you're torqueing up connections, we've now kind of moved beyond that. So, it's been a tremendous advancement from an operational standpoint.

Good. That's helpful. Thank you. I guess my next question, I would ask you guys a little bit about the M&A market. I mean you guys have been active there and grown through M&A, it's -- I think you characterized as a dynamic operating environment, which I thought was great. Is that volatility, bringing people to the table? Is it pushing people away due to movements in bid-ask spreads. So any color you could give on the M&A market today and what that looks like for you all?

Yes. No, Blake, that's a hard one to -- that's harder for me to quantify. What I can tell you is we continue to work really hard on things that we believe will fit well under the Expro umbrella that will help us be more relevant to our customers, help us generate accretive margins and accretive cash generation, those type of things. We continue to look at them and there's still opportunities out there. And it just depends on -- you have to have some patience with these kind of things, you know. Several of the recent acquisitions that we completed those were multiyear endeavors. It was two years in the process from the time that we started it until we actually close them. So, we still have opportunities. We still have things we want to go out and do and how successful we can be in getting those closed only time will tell. But I think we've demonstrated that we're a good platform, we're a good portfolio to bring those things into. And we start looking at some of the smaller-type acquisitions. One of 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, and those kind of things. I think it's a good home and a good destination and we'll continue to work hard on those. And I still believe we'll be able to consummate some other bolt-ons, what that looks like and when we'll get them done is a little bit to be determined, but we're still working hard on those kind of things.

I think the only thing I would supplement, Blake, is the current balance sheet does give us some flexibility. 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 also probably gives us some broader alternative sets in terms of funding alternatives. So, we have balance sheet capacity to take on a bit of leverage, but as Mike has said in a number of occasions in the past, M&A is going to be evaluated relative to where Expro trades. We'll invest our capital and we think it will have the most impact. We can do both.

Understood. Thanks very much color you all.

Great. Thank you. Appreciate it.