PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Expro Group Holdings N.V.

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except share data)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Expro Group Holdings N.V.

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

(in thousands)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Expro Group Holdings N.V.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

Expro Group Holdings N.V.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Expro Group Holdings N.V.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(in thousands)

With roots dating to 1938, Expro Group Holdings N.V. (the “Company,” “Expro,” “we,” “our” or “us”) is a global provider of energy services with operations in approximately 60 countries. The Company’s portfolio of capabilities includes products and services related to well construction, well flow management, subsea well access, and well intervention and integrity which enhance production and improve recovery across the well lifecycle, from exploration through abandonment.

On March 10, 2021, Frank’s International N.V. (“Frank’s”)the Company and New Eagle Holdings Limited, an exempted company limited by shares incorporated under the laws of the Cayman Islands and a direct wholly owned subsidiary of Frank’sthe Company (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Expro Group Holdings International Limited (“Legacy Expro”), an exempted company limited by shares incorporated under the laws of the Cayman Islands, providing for the merger of Legacy Expro with and into Merger Sub in an all-stock transaction, with Merger Sub surviving the merger as a direct, wholly owned subsidiary of Frank’sthe Company (the “Merger”). The Merger closed on October 1, 2021, (and the “Closing Date”Company, previously known as Frank’s International N.V. (“Frank’s”), and Frank’s was renamed Expro Group Holdings N.V. The Merger was accounted for using the acquisition method of accounting with Legacy Expro being identified as the accounting acquirer. The condensed consolidated financial statements of the Company reflect the condensed financial position, results of operations and cash flows of only Legacy Expro for all periods prior to the Merger and of the combined company (including activities of Frank’s) for all periods subsequent to the Merger.

Pursuant to the Merger Agreement, as of the effective time of the Merger (the “Effective Time”), each outstanding ordinary share of common stock, par value $0.01 per share, of Legacy Expro was converted into the right to receive 1.2120 shares of common stock, nominal value €0.06 per share, of the Company (“Company Common Stock”). The number of shares of Company Common Stock received by the Legacy Expro shareholders was equal to 7.2720 (the “Exchange Ratio” as provided in the Merger Agreement) multiplied by the 1-for-6 reverse stock split ratio.

Further, the supervisory board of directors of Frank’s unanimously approved a 1-for-6 reverse stock split of Frank’s common stock, which was effected on October 1, 2021. All of the outstanding share numbers, nominal value, share prices and per share amounts in these condensed consolidated financial statements have been retroactively adjusted to reflect the Exchange Ratio and the 1-for-6 reverse stock split for all periods presented, as applicable.

On June 16, 2022, the Company’s Board of Directors (the “Board”) approved a new stock repurchase program, under which the Company is authorized to acquire up to $50.0 million of its outstanding common stock through November 24, 2023 (2023. the “Stock Repurchase Program”). Under the Stock Repurchase Program,stock repurchase program, the Company may repurchase shares of the Company’s common stock in open market purchases, in privately negotiated transactions or otherwise. The Stock Repurchase Program will bestock repurchase program is being utilized at management’s discretion and in accordance with U.S. federal securities laws. The timing and actual numbers of shares repurchased, if any, will depend on a variety of factors including price, corporate requirements, the constraints specified in the Stock Repurchase Programstock repurchase program along with general business and market conditions. The Stock Repurchase Programstock repurchase program does not obligate the Company to repurchase any particular amount of common stock, and it could be modified, suspended or discontinued at any time. TheUnder the stock repurchase plan, the Company has repurchased a total of 1.1approximately 0.6 million shares at an average price of $11.81$17.99 per share, for a total cost of $13.0approximately $10.0 million asduring the three months ended March 31, 2023. Since the inception of September 30, 2022 under the Stock Repurchase Program.stock repurchase program, the Company has repurchased total of approximately 1.7 million shares at an average price of $13.89 per share, for a total cost of $23.0 million through March 31, 2023.

Basis of presentation

The unaudited condensed consolidated financial statements reflect the accounts of the Company and its subsidiaries. All intercompany balances and transactions, including unrealized profits arising from them, have been eliminated for purposes of preparing these unaudited condensed consolidated financial statements. Investments in which we do not have a controlling interest, but over which we do exercise significant influence, are accounted for under the equity method of accounting.

The accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim consolidated financial information. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for annual consolidated financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 20212022, included in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 8, 2022.February 23, 2023.

In the opinion of management, these unaudited condensed consolidated financial statements, which are prepared in accordance with the rules of the SEC and U.S. GAAP for interim financial reporting, included herein contain all adjustments necessary to present fairly our financial position as of September 30, 2022, March 31, 2023, the results of our operationsoperations for the three and ninemonths ended September 30, 2022 March 31, 2023and 2021,2022 and our cash flows for the ninethree months ended September 30, 2022 March 31, 2023and 20212022. 

Such adjustments are of a normal recurring nature. Operating resultsfor the three and ninemonths ended September 30, 2022 March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 2023, or for any other period.

The unaudited condensed consolidated financial statements have been prepared on an historical cost basis using the United States dollar (“$” or “U.S. dollar”) as the reporting currency.

Significant accounting policies

Refer to Note 2 “Basis of presentation and significant accounting policies” of our consolidated financial statements as of and for the year ended December 31, 20212022, , which are included in our most recent Annual Report on Form 10-K filed with the SEC on March 8, 2022,February 23, 2023, for a discussion of our significant accounting policies. There have been no material changes in our significant accounting policies as compared to the significant accounting policies described in our consolidated financial statements as of and for the year ended December 31, 20212022.

Recent accounting pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) generally in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.

We consider the applicability and impact of all accounting pronouncements. Recently issued ASUs were assessed and were either determined to be not applicable or are expected to have immaterial impact on our consolidated financial position, results of operations and cash flows.

Frank’s International N.V.DeltaTek Oil Tools Limited

As discussedOn February 8, 2023 (“Closing Date”), DeltaTek Oil Tools Limited, a limited liability company registered in Note 1 “Business description,” the MergerUnited Kingdom, and its subsidiary (“DeltaTek”), was acquired (“the Acquisition”) by our wholly owned subsidiary Exploration and Production Services (Holdings) Limited, a limited liability company registered in the United Kingdom (“EPSH”). DeltaTek has developed a number of Frank’s with Legacy Expro pursuant toinnovative technologies and solutions and their range of low-risk open water cementing solutions increases clients’ operational efficiency, delivers rig time and cost savings, and improves the Merger Agreement was completed on October 1, 2021. U.S. GAAP requires the determinationquality of the accounting acquirer, the acquisition date,cementing operations of clients. We estimated the fair value of assetsconsideration for the Acquisition to be $17.5 million, including cash consideration paid at closing of $9.0 million, subject to a true-up for net of customary working capital adjustments, and liabilitiescontingent consideration which is estimated to be $8.5 million. 

The contingent consideration arrangement requires the Company to pay the former owners of DeltaTek a percentage of future revenues generated specifically from the acquired technology over a period of seven years. The fair value of the acquired businesscontingent consideration arrangement of $8.5 million was estimated by applying the income approach and is reflected in “Other liabilities” on the resultingconsolidated balance sheets. That measure is based on significant inputs that are not observable in the market, referred to as Level 3 inputs in accordance with ASC 820. To the extent our estimates and assumptions change during the measurement period and such changes are based on facts and circumstances that existed as of the Closing Date, an adjustment to the contingent consideration liability would be recorded with an offsetting adjustment to goodwill. To the extent our estimates and assumptions change based on facts and circumstances subsequent to the Closing Date or after the measurement period, an adjustment to the contingent consideration liability would be recorded with an offsetting adjustment to earnings during the applicable period.

The MergerAcquisition is accounted for as a reverse mergerbusiness combination and Legacy Expro has been identified as the acquirer for accounting purposes. As a result, the Company has in accordance with ASC 805, Business Combinations, applied the acquisition method of accounting to account for Frank’sDeltaTek’s assets acquired and liabilities assumed. Applying the acquisition method of accounting includes recording the identifiable assets acquired and liabilities assumed at their fair values and recording goodwill for the excess of the consideration transferred over the net aggregate fair value of the identifiable assets acquired and liabilities assumed.

The Merger consideration was based on Frank’s closing share price on the Closing Date. In a reverse merger involving only the exchange of equity, the fair value of the equity of the accounting acquiree may be used to measure consideration transferred if the value of the accounting acquiree’s equity interests are more reliably measurable than the value of the accounting acquirer’s equity interest. As Legacy Expro was a private company and Frank’s was a public company with a quoted and reliable market price, the fair value of Frank’s equity interests was deemed to be more reliable. Under the acquisition method of accounting, total consideration exchanged was as follows:

Expro Group Holdings N.V.

Notes to Unaudited Condensed Consolidated Financial Statements

The following table sets forth the preliminary allocation of the mergerAcquisition consideration exchanged to the fair value of identifiable tangible and intangible assets acquired and liabilities assumed as of the Closing Date, with the recording of goodwill for the excess of the consideration transferred over the net aggregate fair value of the identifiable assets acquired and liabilities assumed (in thousands):

The preliminary valuationDue to the recency of the assets acquiredAcquisition, these amounts, including the estimated fair values, are based on preliminary calculations and liabilities assumed, including other current liabilities,subject to change as our fair value estimates and assumptions are finalized during the measurement period. The final fair value determination could result in material adjustments to the values presented in the Merger initially resulted in goodwill of $154.4 million. During the third quarter of 2022, the Company finalized the valuation and recorded measurement period adjustments to its preliminary estimates due to additional information received primarily related to accounts payable and accrued liabilities, other current liabilities (please see Note 17 “Commitments and contingencies” for additional information), other non-current liabilities and income taxes. The measurement period adjustments resulted in an increase in goodwill of $41.1 million, for final total goodwill associated with the Merger of $195.5 million.purchase price allocation table above. The fair values of identifiable intangible assets were prepared using an income valuation approach, which requires a forecast of expected future cash flows either throughusing the use of the relief-from-royaltyrelief-from royalty method or the multi-period excess earnings method, which are discounted to approximate their current value. The estimated useful lives are based on management’s historical experience and expectations as to the duration of time that benefits from these assets are expected to be realized.

The intangible assets will be amortized on a straight-line basis over an estimated 105 to 15 yearyears life. We expect annual amortization to be approximately $7.7$1.0 million associated with these intangible assets. An associated deferred tax liability has been recorded in regards to these intangible assets. Refer to Note 14– Intangible assets, net for additional information regarding the various acquired intangible assets.

Goodwill

The goodwill consists largely of the synergies and economies of scale expected from the technology providing more efficient services and expected future developments resulting from the assembled workforce. The goodwill is not amortized but rather subject to an annualamortization but will be evaluated at least annually for impairment test, absent anyor more frequently if impairment indicators of impairment prior to the annual testing date. Goodwill is attributable to planned synergies expected to be achieved from the combined operations of Legacy Expro and Frank’s.are present. Goodwill recorded in the MergerAcquisition is not expected to be deductible for tax purposes.

Expro Group Holdings N.V.

Notes to Unaudited Condensed Consolidated Financial Statements

Unaudited Pro Forma Financial Information

The followingCompany has determined the estimated unaudited pro forma consolidated results of operationsinformation to be insignificant for the three and ninemonths ended September 30, 2021March 31, 2023, assumeand 2022, assuming the Merger wasAcquisition were to have been completed as of January 1, 2020 (2023 in thousands):

Estimated unaudited pro forma informationand 2022, respectively. This is not necessarily indicative of the results that actually would have occurred had the MergerAcquisition been completed on theeither date indicated or of future operating results.

Merger and integration expense

During the three months ended September 30, 2022 and 2021, the Company incurred $1.6 million and $9.6 million, respectively, of merger and integration expense which consist primarily of legal fees, professional fees, integration, severance and other costs directly attributable to the Merger. During the nine months ended September 30, 2022 and 2021, the Company incurred $8.6 million and $19.1 million, respectively, of merger and integration expense which consist primarily of legal fees, professional fees, integration, severance and other costs directly attributable to the Merger.

Below is a reconciliation of our liability balance associated with our severance plan initiated during 2021 related to the integration in connection with the Merger, which is included in “Other current liabilities” on the condensed consolidated balance sheets (in thousands):

Expro Group Holdings N.V.

Notes to Unaudited Condensed Consolidated Financial Statements

4.         Fair value measurements

Recurring Basis

A summary of financial assets and liabilities that are measured at fair value on a recurring basis, as of September 30, 2022March 31, 2023 and December 31, 20212022, were as follows (in thousands):

Our investments associated with our executive deferred compensation plan as of December 31, 2021 consist primarily of the cash surrender value of life insurance policies and is included in “Other non-current assets” on the condensed consolidated balance sheets. The liability associated with our executive deferred compensation plan as of December 31, 2021 is included in “Other non-current liabilities” on the condensed consolidated balance sheets. During the third quarter of 2022, the Company terminated the executive deferred compensation benefit plan. Please see Note 18 “Post-retirement benefits” for additional information. Our investments changed as a result of contributions, payments, and fluctuations in the market. Assets and liabilities, measured using significant observable inputs, are reported at fair value based on third-party broker statements, which are derived from the fair value of the funds’ underlying investments. They are reported at fair value based on the price of the stock and are included in “Other non-current assets” on the condensed consolidated balance sheets.

Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s Chief Operating Decision Maker (“CODM”), which is our Chief Executive Officer, in deciding how to allocate resources and assess performance. Our CODM manages our operational segments that are aligned with our geographical regions as below:

The following table presents our revenue disaggregated by our operating segments (in thousands):

Segment EBITDA

Our CODM regularly evaluates the performance of our operating segments using Segment EBITDA, which we define as income (loss) before income taxes adjusted for corporate costs, equity in income of joint ventures, depreciation and amortization expense, impairment expense, gain on disposal of assets, merger and integration expense, severance and other expense, gain (loss) on disposal of assets,stock-based compensation expense, foreign exchange gains (losses), merger and integration expense, other income (expense), net, and interest and finance income (expense), net and stock-based compensation expense.net.

The following table presents our Segment EBITDA disaggregated by our operating segments and a reconciliation to loss before income taxes (in thousands):

Corporate costs include the costs of running our corporate head office and other central functions that support the operating segments, including research, engineering and development, logistics, sales and marketing and health and safety and are not attributable to a particular operating segment.

Disaggregation of revenue

We disaggregate our revenue from contracts with customers by geography, as disclosed in Note 5 “Business segment reporting,” as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Additionally, we disaggregate our revenue into main areas of capabilities.

The following table sets forth the total amount of revenue by main area of capabilities as follows (in thousands):

Contract balances

We perform our obligations under contracts with our customers by transferring services and products in exchange for consideration. The timing of our performance often differs from the timing of our customer’s payment, which results in the recognition of unbilled receivables and deferred revenue.

Unbilled receivables are initially recognized for revenue earned on completion of the performance obligation which are not yet invoiced to the customer. The amounts recognized as unbilled receivables are reclassified to trade receivable upon billing. Deferred revenue represents the Company’s obligations to transfer goods or services to customers for which the Company has received consideration, in full or part, from the customer.

Contract balances consisted of the following as of September 30, 2022March 31, 2023, and December 31, 20212022 (in thousands):

The Company recognized revenue during the three and nine months ended September 30, 2022 of $6.0$25.2 million and $14.9$7.9 million respectively, and for the three and ninemonths ended September 30, 2021March 31, 2023 of $10.3 million and $14.6 million,2022, respectively, out of the deferred revenue balance as of the beginning of the applicable year.

As of September 30, 2022,March 31, 2023, $20.762.6 million of our deferred revenue was classified as current and is included in “Other current liabilities” on the condensed consolidated balance sheets, with the remainder classified as non-current and included in “Other non-current liabilities” on the condensed consolidated balance sheets.

Transaction price allocated to remaining performance obligations

Remaining performance obligations represent firm contracts for which work has not been performed or has been partially performed and future revenue recognition is expected. We have elected the practical expedient permitting the exclusion of disclosing remaining performance obligations for contracts that have an original expected duration of one year or less and for our long-term contracts we have a right to consideration from customers in an amount that corresponds directly with the value to the customer of the performance completed to date. With respect to our construction contracts, revenue allocated to remaining performance obligations is $116.1 million.

For interim financial reporting, we estimate the annual tax rate is based on projected pre-tax income (loss) before equity in income of joint ventures forventures. We have historically calculated the income tax expense/(benefit) during interim reporting periods by applying a full year and record a quarterly income tax expense (benefit) in accordance with accounting guidance for income taxes. As the year progresses, we refine the estimate of the year’s pre-taxestimated Annual Effective Tax Rate ("AETR") to income (loss) before equity in income taxes, excluding infrequent or unusual discrete items, for the reporting period. For the three months ended March 31, 2023, we determined that using an AETR would not provide a reliable estimate of joint ventures as new information becomes available. The continual estimation process often results in a changeincome taxes due to the expectedforecasting methodology used to project income (loss) before income taxes, resulting in significant changes in the estimated AETR. Thus, we concluded to use a discrete effective tax rate, which treats the year-to-date period as an annual period, to calculate income taxes for the year. When this occurs, we adjust the income tax expense (benefit) during the quarter in which the change in estimate occurs so that the year-to-date expense reflects the most current expected annual tax rate.three months ended March 31, 2023.

Our effective tax rates were (270.3)(137.4)% and (216.2)(42.2)% for the three ended March 31, 2023, and nine2022, months ended September 30, 2022, respectively, and were (48.9)% and (19.0)% for the three and nine months ended September 30, 2021, respectively.

Our effective tax rate was impacted primarily due to changes in the mix of taxable profits between jurisdictions with different tax regimes, in particular increased taxable profits in Latin AmericaEurope and Sub-Saharan Africaand an increase in withholding taxes in various jurisdictions.the Middle East.

We have investments in two joint venture companies, which together provide us access to certain Asian markets that otherwise would be challenging for us to penetrate or develop effectively on our own. COSL-Expro Testing Services (Tianjin) Co. Ltd (“CETS”), in which we have a 50% equity interest, has extensive offshore well testing and completions capabilities and a reputation for providing technology-driven solutions in China. Similarly, PV Drilling Expro International Co. Ltd. (“PVD-Expro”) in which we have a 49% equity interest, offers the full suite of Expro products and services, including well testing and completions, in Vietnam. Both of these are strategic to our activities and offer the full capabilities and technology of Expro, but each company is independently managed.

The carrying value of our investment in joint ventures as of September 30, 2022March 31, 2023, and December 31, 20212022, was as follows (in thousands):

Accounts receivable, net consisted of the following as of September 30, 2022March 31, 2023, and December 31, 20212022 (in thousands):

Inventories consisted of the following as of September 30, 2022March 31, 2023, and December 31, 20212022 (in thousands):

Other assets consisted of the following as of September 30, 2022March 31, 2023,and December 31, 20212022 (in thousands):