Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ

☑ Quarterly Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2017

2021

OR

¨

☐ Transition Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the transition period from ______ to ______

Commission file number: 001-36053


Frank’s International

EXPRO GROUP HOLDINGS N.V.

(Exact name of registrant as specified in its charter)

 

The Netherlands

 

98-1107145

 
 

(State or other jurisdiction of


incorporation or organization)

 

(IRS Employer


Identification number)

 

     
 Mastenmakersweg 11311 Broadfield Boulevard, Suite 400   
 1786 PB Den Helder, The NetherlandsHouston, Texas Not Applicable

77084

 
 

(Address of principal executive offices)

 

(Zip Code)


Registrant’s

Registrant’s telephone number, including area code: +31 (0)22 367 0000

(713) 463-9776

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, €0.06 nominal value

XPRO

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ☑ No ¨

☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ☑ No ¨

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

þ

☐

Accelerated filer

¨

☑

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

☐

Smaller reporting company

¨

☐

Emerging growth company

¨

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes¨☐ No þ
☑

As of October 27, 2017,November 1, 2021, there were 223,107,260109,107,256 shares of common stock, €0.01 par€0.06 nominal value per share, outstanding.

Table of Contents


TABLE OF CONTENTS

  

Page

PART I. FINANCIAL INFORMATION

   

Item 1.

Financial Statements

 
 

Condensed Consolidated Balance Sheets (Unaudited) at September 30, 20172021 and December 31, 20162020

3

 

Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 20172021 and 20162020

4

 

Condensed Consolidated Statements of Comprehensive Income (Loss)Loss (Unaudited) for the Three and Nine Months Ended September 30, 20172021 and 20162020

5

 

Condensed Consolidated Statements of Stockholders'Stockholders’ Equity (Unaudited) for the Three and Nine Months Ended September 30, 20172021 and 20162020

6

 

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three and Nine Months Ended September 30, 20172021 and 20162020

78

 

Notes to the Unaudited Condensed Consolidated Financial Statements

89

   

Item 2.

Management’s

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

2824
   

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

3834

   

Item 4.

Controls and Procedures

3934

   

PART II. OTHER INFORMATION

   

Item 1.

Legal Proceedings

4035

   

Item 1A.

Risk Factors

4035

   

Item 6.2.

Exhibits

Unregistered Sales of Equity Securities and Use of Proceeds

4038

   
Signatures

Item 6.

Exhibits

39

 
41

Signatures

40



In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Expro,” the "combined company" and the “Company” refer to Expro Group Holdings N.V. and its consolidated subsidiaries, the successor reporting entity following the consummation of the Merger (as defined below). The terms “Frank's,” "FINV" or the “Predecessor Registrant” refer to Frank's International N.V. and its consolidated subsidiaries, the predecessor reporting entity. References to “Legacy Expro” refer to Expro Group Holdings International Limited, the entity acquired by the Company in the Merger.


2
Table of Contents


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

  

September 30,

  

December 31,

 
  

2021

  

2020

 

Assets

 

(Unaudited)

     

Current assets:

        

Cash and cash equivalents

 $202,997  $209,575 

Restricted cash

  1,742   1,672 

Short-term investments

  1,882   2,252 

Accounts receivables, net

  130,585   110,607 

Inventories, net

  91,776   81,718 

Assets held for sale

  7,998   2,939 

Other current assets

  6,554   7,744 

Total current assets

  443,534   416,507 

Property, plant and equipment, net

  228,994   272,707 

Goodwill

  42,785   42,785 

Intangible assets, net

  8,756   7,897 

Deferred tax assets, net

  15,008   18,030 

Operating lease right-of-use assets

  26,646   28,116 

Other assets

  21,409   30,859 

Total assets

 $787,132  $816,901 
         

Liabilities and Equity

        

Current liabilities:

        

Accounts payable and accrued liabilities

 $114,962  $99,986 

Current portion of operating lease liabilities

  8,215   7,832 

Deferred revenue

  89   586 

Other current liabilities

  0   1,674 

Total current liabilities

  123,266   110,078 

Deferred tax liabilities

  0   1,548 

Non-current operating lease liabilities

  19,303   21,208 

Other non-current liabilities

  23,123   22,818 

Total liabilities

  165,692   155,652 
         

Commitments and contingencies (Note 14)

          
         

Stockholders’ equity:

        

Common stock, €0.06 nominal value, 200,000,000 shares authorized, 38,575,948 and 38,134,383 shares issued and 38,066,216 and 37,720,760 shares outstanding

  2,900   2,866 

Additional paid-in capital

  1,098,236   1,087,733 

Accumulated deficit

  (428,930)  (377,346)

Accumulated other comprehensive loss

  (28,798)  (31,966)

Treasury stock (at cost), 509,732 and 413,623 shares

  (21,968)  (20,038)

Total stockholders’ equity

  621,440   661,249 

Total liabilities and equity

 $787,132  $816,901 
FRANK'S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
    
 September 30, December 31,
 2017 2016
Assets(Unaudited)  
Current assets:   
Cash and cash equivalents$233,338
 $319,526
Short-term investments60,598
 —
Accounts receivables, net140,906
 167,417
Inventories132,961
 139,079
Assets held for sale3,792
 —
Other current assets6,893
 14,027
Total current assets578,488
 640,049
    
Property, plant and equipment, net497,784
 567,024
Goodwill and intangible assets, net247,699
 256,146
Deferred tax assets—
 79,309
Other assets33,344
 45,533
Total assets$1,357,315
 $1,588,061
    
Liabilities and Equity   
Current liabilities:   
Short-term debt$87
 $276
Accounts payable21,172
 16,081
Deferred revenue9,035
 18,072
Accrued and other current liabilities75,094
 64,950
Total current liabilities105,388
 99,379
    
Deferred tax liabilities254
 20,951
Other non-current liabilities28,190
 156,412
Total liabilities133,832
 276,742
    
Commitments and contingencies (Note 15)

 

    
Stockholders' equity:   
Common stock, €0.01 par value, 798,096,000 shares authorized, 223,906,195 and 223,161,356 shares issued and 223,061,559 and 222,401,427 shares outstanding2,810
 2,802
Additional paid-in capital1,048,498
 1,036,786
Retained earnings215,793
 317,270
Accumulated other comprehensive loss(30,510) (32,977)
Treasury stock (at cost), 844,636 and 759,929 shares(13,108) (12,562)
Total equity1,223,483
 1,311,319
Total liabilities and equity$1,357,315
 $1,588,061

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

3

Table of Contents

FRANK'S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
        
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Revenues:       
Equipment rentals and services$92,547
 $85,698
 $272,402
 $312,132
Products15,536
 19,416
 64,071
 67,414
Total revenue108,083
 105,114
 336,473
 379,546
        
Operating expenses:       
Cost of revenues, exclusive of depreciation and amortization       
Equipment rentals and services60,981
 57,307
 178,865
 189,965
Products10,750
 16,029
 45,162
 51,446
General and administrative expenses39,963
 39,677
 125,107
 138,586
Depreciation and amortization30,650
 26,545
 92,700
 84,278
Severance and other charges1,648
 14,534
 2,386
 18,858
Gain on sale of assets(829) (46) (2,091) (1,095)
Operating loss(35,080) (48,932) (105,656) (102,492)
        
Other income (expense):       
Derecognition of the tax receivable agreement liability122,515
 —
 122,515
 —
Other income (expense), net(384) 984
 348
 2,145
Interest income, net1,019
 646
 2,170
 1,050
Mergers and acquisition expense—
 —
 (459) —
Foreign currency gain (loss)1,839
 (1,696) 3,184
 (5,907)
Total other income (expense)124,989
 (66) 127,758
 (2,712)
        
Income (loss) before income tax expense (benefit)89,909
 (48,998) 22,102
 (105,204)
Income tax expense (benefit)87,613
 (6,800) 72,419
 (15,311)
Net income (loss)2,296
 (42,198) (50,317) (89,893)
Net loss attributable to noncontrolling interest—
 (5,216) —
 (20,741)
Net income (loss) attributable to Frank's International N.V.2,296
 (36,982) (50,317) (69,152)
Preferred stock dividends—
 —
 —
 (1)
Net income (loss) available to Frank's International N.V.
common shareholders		$2,296
 $(36,982) $(50,317) $(69,153)
        
Dividends per common share$0.075
 $0.075
 $0.225
 $0.375
        
Income (loss) per common share:       
Basic$0.01
 $(0.21) $(0.23) $(0.43)
Diluted$0.01
 $(0.21) $(0.23) $(0.43)
        
Weighted average common shares outstanding:       
Basic223,056
 177,125
 222,847
 162,656
Diluted223,581
 177,125
 222,847
 162,656

EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2021

  

2020

  

2021

  

2020

 

Revenue:

                

Services

 $95,821  $66,418  $267,864  $246,084 

Products

  19,120   17,999   49,729   47,926 

Total revenue

  114,941   84,417   317,593   294,010 
                 

Operating expenses:

                

Cost of revenue, exclusive of depreciation and amortization

                

Services

  70,627   56,574   203,181   197,005 

Products

  15,489   13,733   40,811   36,007 

General and administrative expenses

  18,591   18,665   51,465   67,634 

Depreciation and amortization

  14,092   15,950   45,531   52,920 

Goodwill impairment

  0   0   0   57,146 

Severance and other charges, net

  2,958   3,549   13,733   29,436 

Gain on disposal of assets

  (72)  (308)  (1,733)  (898)

Operating loss

  (6,744)  (23,746)  (35,395)  (145,240)
                 

Other income (expense):

                

Other income, net

  347   109   877   2,291 

Interest income (expense), net

  (167)  (93)  (555)  618 

Foreign currency gain (loss)

  (4,548)  2,334   (4,698)  (5,865)

Total other income (expense)

  (4,368)  2,350   (4,376)  (2,956)

Loss before income taxes

  (11,112)  (21,396)  (39,771)  (148,196)

Income tax expense (benefit)

  3,969   6,395   11,812   (182)

Net loss

 $(15,081) $(27,791) $(51,583) $(148,014)
                 

Loss per common share:

                

Basic and diluted

 $(0.40) $(0.74) $(1.36) $(3.93)
                 

Weighted average common shares outstanding:

                

Basic and diluted

  38,066   37,691   37,957   37,659 

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

4

Table of Contents

FRANK'S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
        
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
        
Net income (loss)$2,296
 $(42,198) $(50,317) $(89,893)
Other comprehensive income (loss):       
Foreign currency translation adjustments1,488
 74
 2,809
 1,824
Marketable securities:       
Unrealized gain (loss) on marketable securities(101) (50) (105) 1,066
Reclassification to net income—
 —
 (395) —
Deferred tax asset / liability change—
 (5) 158
 (465)
Unrealized gain (loss) on marketable securities, net of tax(101) (55) (342) 601
Total other comprehensive income1,387
 19
 2,467
 2,425
Comprehensive income (loss)3,683
 (42,179) (47,850) (87,468)
Less: Comprehensive loss attributable to noncontrolling interest—
 (5,264) —
 (20,180)
Add: Transfer of Mosing Holdings, LLC ("Mosing Holdings") interest to FINV attributable to comprehensive loss—
 (8,203) —
 (8,203)
Comprehensive income (loss) attributable to Frank's International N.V.$3,683
 $(45,118) $(47,850) $(75,491)

EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2021

  

2020

  

2021

  

2020

 
                 

Net loss

 $(15,081) $(27,791) $(51,583) $(148,014)

Other comprehensive income (loss):

                

Foreign currency translation adjustments

  1,586   (547)  3,169   (262)

Total other comprehensive income (loss)

  1,586   (547)  3,169   (262)

Comprehensive loss

 $(13,495) $(28,338) $(48,414) $(148,276)

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

5

Table of Contents

FRANK'S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
                
 Nine Months Ended September 30, 2016
         Accumulated      
     Additional   Other   Non- Total
 Common Stock Paid-In Retained Comprehensive Treasury controlling Stockholders'
 Shares Value Capital Earnings Income (Loss) Stock Interest Equity
Balances at December 31, 2015155,146
 $2,045
 $712,486
 $531,621
 $(25,555) $(9,298) $240,127
 $1,451,426
Net loss—
 —
 —
 (69,152) —
 —
 (20,741) (89,893)
Foreign currency translation adjustments—
 —
 —
 —
 1,443
 —
 381
 1,824
Change in marketable securities—
 —
 —
 —
 421
 —
 180
 601
Equity-based compensation expense—
 —
 12,356
 —
 —
 —
 —
 12,356
Distributions to noncontrolling interest—
 —
 —
 —
 —
 —
 (8,027) (8,027)
Common stock dividends ($0.375 per share)—
 —
 —
 (62,333) —
 —
 —
 (62,333)
Preferred stock dividends—
 —
 —
 (1) —
 —
 —
 (1)
Transfer of Mosing Holdings interest to FINV—
 —
 238,367
 —
 (8,203) —
 (211,920) 18,244
Common shares issued on conversion of Series A preferred stock ("Preferred Stock")52,976
 597
 —
 —
 —
 —
 —
 597
Common shares issued upon vesting of restricted stock units1,569
 18
 (18) —
 —
 —
 —
 —
Tax receivable agreement ("TRA") and associated deferred taxes—
 —
 (74,788) —
 —
 —
 —
 (74,788)
Common shares issued for employee stock purchase plan ("ESPP")76
 1
 972
 —
 —
 —
 —
 973
Treasury shares withheld(225) —
 —
 —
 —
 (3,046) —
 (3,046)
Balances at September 30, 2016209,542
 $2,661
 $889,375
 $400,135
 $(31,894) $(12,344) $—
 $1,247,933
                
 Nine Months Ended September 30, 2017
         Accumulated      
     Additional   Other   Non- Total
 Common Stock Paid-In Retained Comprehensive Treasury controlling Stockholders'
 Shares Value Capital Earnings Income (Loss) Stock Interest Equity
Balances at December 31, 2016222,401
 $2,802
 $1,036,786
 $317,270
 $(32,977) $(12,562) $—
 $1,311,319
Net loss—
 —
 —
 (50,317) —
 —
 —
 (50,317)
Foreign currency translation adjustments—
 —
 —
 —
 2,809
 —
 —
 2,809
Change in marketable securities—
 —
 —
 —
 (342) —
 —
 (342)
Equity-based compensation expense—
 —
 11,458
 —
 —
 —
 —
 11,458
Common stock dividends ($0.225 per share)—
 —
 —
 (50,424) —
 —
 —
 (50,424)
Common shares issued upon vesting of restricted stock units694
 7
 (7) —
 —
 —
 —
 —
Common shares issued for ESPP50
 1
 511
 —
 —
 —
 —
 512
Treasury shares issued upon vesting of restricted stock units4
 —
 (84) —
 —
 66
 —
 (18)
Treasury shares issued for ESPP106
 —
 (166) (736) —
 1,642
 —
 740
Treasury shares withheld(193) —
 —
 —
 —
 (2,254) —
 (2,254)
Balances at September 30, 2017223,062
 $2,810
 $1,048,498
 $215,793
 $(30,510) $(13,108) $—
 $1,223,483

EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


  

Nine Months Ended September 30, 2020

 
                  

Accumulated

         
          

Additional

      

Other

      

Total

 
  

Common Stock

  

Paid-In

  

Accumulated

  

Comprehensive

  

Treasury

  

Stockholders’

 
  

Shares

  

Value

  

Capital

  

Deficit

  

Income (Loss)

  

Stock

  

Equity

 

Balances at December 31, 2019

  37,585  $2,846  $1,075,809  $(220,805) $(30,298) $(17,258) $810,294 

Cumulative effect of accounting change

  0   0   0   (321)  0   0   (321)

Net loss

  —   0   0   (85,978)  0   0   (85,978)

Foreign currency translation adjustments

  —   0   0   0   424   0   424 

Equity-based compensation expense

  —   0   2,146   0   0   0   2,146 

Common shares issued upon vesting of share-based awards

  156   10   (10)  0   0   0   0 

Common shares issued for employee stock purchase plan

  21   1   551   0   0   0   552 

Treasury shares withheld

  (49)  0   0   0   0   (1,056)  (1,056)

Share repurchase program

  (62)  0   0   0   0   (1,017)  (1,017)

Balances at March 31, 2020

  37,651  $2,857  $1,078,496  $(307,104) $(29,874) $(19,331) $725,044 

Net loss

  —   0   0   (34,245)  0   0   (34,245)

Foreign currency translation adjustments

  —   0   0   0   (139)  0   (139)

Equity-based compensation expense

  —   0   3,515   0   0   0   3,515 

Common shares issued upon vesting of share-based awards

  38   3   (3)  0   0   0   0 

Treasury shares withheld

  (2)  0   0   0   0   (31)  (31)

Share repurchase program

  (32)  0   0   0   0   (480)  (480)

Balances at June 30, 2020

  37,655  $2,860  $1,082,008  $(341,349) $(30,013) $(19,842) $693,664 

Net loss

  —   0   0   (27,791)  0   0   (27,791)

Foreign currency translation adjustments

  —   0   0   0   (547)  0   (547)

Equity-based compensation expense

  —   0   2,773   0   0   0   2,773 

Common shares issued upon vesting of share-based awards

  9   1   (1)  0   0   0   0 

Common shares issued for employee stock purchase plan

  35   2   380   0   0   0   382 

Treasury shares withheld

  (3)  0   0   0   0   (38)  (38)

Balances at September 30, 2020

  37,696  $2,863  $1,085,160  $(369,140) $(30,560) $(19,880) $668,443 

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

6

Table of Contents

EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

FRANK'S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months Ended
 September 30,
 2017 2016
Cash flows from operating activities   
Net loss$(50,317) $(89,893)
Adjustments to reconcile net loss to cash provided by operating activities   
Derecognition of the TRA liability(122,515) —
Depreciation and amortization92,700
 84,278
Equity-based compensation expense11,458
 12,356
Amortization of deferred financing costs267
 123
Deferred tax provision (benefit)12,824
 (25,772)
Reversal of deferred tax assets associated with the TRA49,775
 —
Provision for bad debts358
 10,410
Gain on sale of assets(2,091) (1,095)
Changes in fair value of investments(2,009) (1,061)
Realized loss on sale of investment478
 —
Unrealized loss on derivatives49
 296
Other(1,187) —
Changes in operating assets and liabilities   
Accounts receivable23,917
 82,042
Inventories6,146
 20,032
Other current assets7,097
 5,990
Other assets1,948
 (4)
Accounts payable(962) 474
Deferred revenue(9,039) (29,479)
Accrued and other current liabilities9,272
 (28,556)
Other non-current liabilities(3,584) (12,295)
Net cash provided by operating activities24,585
 27,846

   
Cash flows from investing activities   
Purchases of property, plant and equipment(18,604) (29,777)
Proceeds from sale of assets10,690
 2,235
Proceeds from sale of investments11,499
 11,101
Purchase of investments(60,764) (921)
Other(64) —
Net cash used in investing activities(57,243) (17,362)
    
Cash flows from financing activities   
Repayments of borrowings(190) (7,120)
Proceeds from borrowings—
 318
Costs of Preferred Stock conversion to common stock—
 (595)
Dividends paid on common stock(50,424) (62,333)
Dividends paid on Preferred Stock—
 (1)
Distribution to noncontrolling interest—
 (8,027)
Net treasury shares withheld for taxes(2,272) (3,046)
Proceeds from the issuance of ESPP shares1,252
 973
Net cash used in financing activities(51,634) (79,831)
Effect of exchange rate changes on cash(1,896) (3,162)
Net decrease in cash and cash equivalents(86,188) (72,509)
Cash and cash equivalents at beginning of period319,526
 602,359
Cash and cash equivalents at end of period$233,338
 $529,850
  

Nine Months Ended September 30, 2021

 
                  

Accumulated

         
          

Additional

      

Other

      

Total

 
  

Common Stock

  

Paid-In

  

Accumulated

  

Comprehensive

  

Treasury

  

Stockholders’

 
  

Shares

  

Value

  

Capital

  

Deficit

  

Income (Loss)

  

Stock

  

Equity

 

Balances at December 31, 2020

  37,721  $2,866  $1,087,733  $(377,346) $(31,966) $(20,038) $661,249 

Net loss

  —   0   0   (23,886)  0   0   (23,886)

Foreign currency translation adjustments

  —   0   0   0   1,716   0   1,716 

Equity-based compensation expense

  —   0   2,872   0   0   0   2,872 

Common shares issued upon vesting of share-based awards

  286   21   (21)  0   0   0   0 

Common shares issued for employee stock purchase plan

  39   3   444   0   0   0   447 

Treasury shares withheld

  (94)  0   0   0   0   (1,900)  (1,900)

Balances at March 31, 2021

  37,952  $2,890  $1,091,028  $(401,232) $(30,250) $(21,938) $640,498 

Net loss

  —   0   0   (12,617)  0   0   (12,617)

Foreign currency translation adjustments

  —   0   0   0   (134)  0   (134)

Equity-based compensation expense

  —   0   3,425   0   0   0   3,425 

Common shares issued upon vesting of share-based awards

  80   6   (6)  0   0   0   0 

Treasury shares withheld

  (1)  0   0   0   0   (30)  (30)

Balances at June 30, 2021

  38,031  $2,896  $1,094,447  $(413,849) $(30,384) $(21,968) $631,142 

Net loss

  —   0   0   (15,081)  0   0   (15,081)

Foreign currency translation adjustments

  —   0   0   0   1,586   0   1,586 

Equity-based compensation expense

  —   0   3,307   0   0   0   3,307 

Common shares issued for employee stock purchase plan

  35   4   482   0   0   0   486 

Balances at September 30, 2021

  38,066  $2,900  $1,098,236  $(428,930) $(28,798) $(21,968) $621,440 

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

7

Table of Contents

EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

  

For the Nine Months Ended

 
  

September 30,

 
  

2021

  

2020

 

Cash flows from operating activities

        

Net loss

 $(51,583) $(148,014)

Adjustments to reconcile net loss to cash from operating activities

        

Depreciation and amortization

  45,531   52,920 

Equity-based compensation expense

  9,604   8,434 

Goodwill impairment

  0   57,146 

Loss on asset impairments and retirements

  307   20,532 

Amortization of deferred financing costs

  291   291 

Deferred tax provision (benefit)

  1,474   (1,783)

Provision for bad debts

  852   980 

Gain on disposal of assets

  (1,733)  (898)

Changes in fair value of investments

  (863)  218 

Other

  0   (380)

Changes in operating assets and liabilities

        

Accounts receivable

  (23,149)  63,307 

Inventories

  (7,969)  (3,625)

Other current assets

  1,137   2,567 

Other assets

  756   667 

Accounts payable and accrued liabilities

  15,910   (22,486)

Deferred revenue

  (498)  (513)

Other non-current liabilities

  (2,263)  (4,048)

Net cash provided by (used in) operating activities

  (12,196)  25,315 
         

Cash flows from investing activities

        

Purchases of property, plant and equipment and intangibles

  (7,613)  (25,722)

Proceeds from sale of assets

  4,300   7,037 

Proceeds from sale of investments

  11,603   2,832 

Purchase of investments

  (1,294)  0 

Investment in intellectual property

  (1,608)  0 

Other

  (799)  (356)

Net cash provided by (used in) investing activities

  4,589   (16,209)
         

Cash flows from financing activities

        

Repayments of borrowings

  (1,674)  0 

Treasury shares withheld for taxes

  (1,930)  (1,125)

Treasury share repurchase

  0   (1,498)

Proceeds from the issuance of ESPP shares

  933   934 

Net cash used in financing activities

  (2,671)  (1,689)

Effect of exchange rate changes on cash

  3,770   3,267 

Net increase (decrease) in cash, cash equivalents and restricted cash

  (6,508)  10,684 

Cash, cash equivalents and restricted cash at beginning of period

  211,247   196,740 

Cash, cash equivalents and restricted cash at end of period

 $204,739  $207,424 

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

8
Table of Contents

FRANK’S INTERNATIONAL

EXPRO GROUP HOLDINGS N.V.

(formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Note 1—1—Basis of Presentation


Nature of Business

Merger

On March 10, 2021, Frank’s International N.V. ("FINV"(“FINV” or “Frank’s”), a and New Eagle Holdings Limited, an exempted company limited liability company organizedby shares incorporated under the laws of the Cayman Islands and a direct wholly owned subsidiary of FINV (“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 the Frank’s (the “Merger”). The Netherlands, isMerger closed on October 1, 2021, and Frank's was renamed “Expro Group Holdings N.V.”  The Merger will be accounted for using the acquisition method of accounting with Legacy Expro being identified as the accounting acquirer. As the Merger did not close until after the quarter ended September 30, 2021, the historical financial statements presented in this Quarterly Report on Form 10-Q reflect the financial position, results of operations and cash flows of Frank's, the Predecessor Registrant. 

Unless otherwise indicated, references to the terms “Frank’s” or the “Predecessor Registrant” refers to Frank’s International N.V., the predecessor reporting entity prior to the Merger, references to “Legacy Expro” refer to Expro Group Holdings International Limited, the entity acquired by the Company, and references to the “combined company,” the “Company,” “we,” “our,” and “us” refer to Expro Group Holdings N.V., the successor reporting entity following the consummation of the Merger.

Nature of Business

Prior to the Merger, Frank’s was a global provider of highly engineered tubular services, tubular fabrication and specialty well construction and well intervention solutions to the oil and gas industry. FINV providesFrank’s provided services and products to leading exploration and production companies in both offshore and onshore environments with a focus on complex and technically demanding wells.


Following completion of the Merger, the business conducted by Legacy Expro became the majority of the business conducted by the Company. Working for clients across the entire well life cycle, the Company is a leading provider of energy services, offering cost-effective, innovative solutions and what the Company considers to be best-in-class safety and service quality.  The Company’s extensive portfolio of capabilities spans well construction, well flow management, subsea well access, and well integrity and intervention.  The Company provides services in many of the world’s major offshore and onshore energy basins, with over 100 locations and operations in approximately 60 countries. Expro’s broad portfolio of products and services provides solutions to enhance production and improve recovery across the well lifecycle, from exploration through abandonment.

Basis of Presentation


The condensed consolidated financial statements of FINV for the three and nine months ended September 30, 2017 2021 and 20162020 include the activities of FINV, Frank's International C.V. ("FICV"), Blackhawk Group Holdings, LLC (“Blackhawk”) and itstheir wholly owned subsidiaries (collectively,(either individually or together, as context requires, "Frank's" or "FINV") prior to the "Company," "we," "us" or "our").Merger. All intercompany accounts and transactions have been eliminated for purposes of preparing these condensed consolidated financial statements.


Our

The accompanying condensed consolidated financial statements have not been audited by ourFrank's independent registered public accounting firm. The consolidated balance sheet at December 31, 20162020, is derived from audited financial statements. However, certain information and footnote disclosures required by generally accepted accounting principles in the United States of America ("GAAP"(“GAAP”) for complete annual financial statements have been omitted and, therefore, these interim financial statements should be read in conjunction with ourthe audited consolidated financial statements and notes thereto for the year ended December 31, 2016,2020, which are included in ourFrank's most recent Annual Report on Form 10-K10-K filed with the Securities and Exchange Commission ("SEC"(“SEC”) on February 24, 2017 ("March 1, 2021 (“Annual Report"Report”). In the opinion of management, these condensed consolidated financial statements, which have been prepared pursuant to the rules of the SEC and GAAP for interim financial reporting, reflect all adjustments, which consisted only of normal recurring adjustments that were necessary for a fair statement of the interim periods presented. The results of operations for interim periods are not necessarily indicative of those for a full year.


 Additionally, operating results for the three and nine months ended September 30, 2021 reflect the results of operations of Frank’s prior to the Merger and are therefore not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2021.

Further, on September 30, 2021, Frank’s board of directors (the “Prior Board”) 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 Company Common Stock (as defined below) share numbers, nominal value, share prices and per share amounts in these condensed consolidated financial statements have been retroactively adjusted to reflect a 1-for-6 reverse stock split for all periods presented. Refer to Note 17—Subsequent Events for further information.

The condensed consolidated financial statements have been prepared on a historical cost basis using the United States dollar as the reporting currency. OurFrank's functional currency is primarily the United States dollar.


Reclassifications

Historically, and through December 31, 2016, certain direct and indirect costs related to operations and manufacturing were classified and reported as general and administrative expenses ("G&A"). The historical classification was consistent with the information used by the Company’s chief operating decision maker ("CODM") to assess performance of the Company’s segments and make resource allocation decisions, and the classification of such costs within the condensed consolidated statements of operations was aligned with the segment presentation. Effective January 1, 2017, the Company changed the classification of certain of these costs in its segment reporting disclosures and within the condensed consolidated statements of operations to reflect a change in the presentation of the information used by the Company’s CODM.

This reclassification of costs between cost of revenue and G&A has no net impact to the condensed consolidated statements of operations or to total segment reporting. The change will better reflect the CODM's philosophy on assessing performance and allocating resources, as well as improve comparability to the Company's peer group. This is a change in costs classification and has been reflected retrospectively for all periods presented.



9
8
FRANK’S INTERNATIONAL
Table of Contents

EXPRO GROUP HOLDINGS N.V.

(formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The following is a summary of

Reclassifications

Certain prior-period amounts have been reclassified to conform to the current period’s presentation. These reclassifications tohad no impact on Frank's operating income (loss), net income (loss), working capital, cash flows or total equity previously reported amounts (in thousands):

 Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
 As previously reported Reclassifications As currently reported As previously reported Reclassifications As currently reported
Condensed Consolidated Statements of Operations           
Cost of revenues, exclusive of depreciation and amortization           
Equipment rentals and services$47,002
 $10,305
 $57,307
 $155,367
 $34,598
 $189,965
Products13,237
 2,792
 16,029
 42,594
 8,852
 51,446
General and administrative expenses52,774
 (13,097) 39,677
 182,036
 (43,450) 138,586

Significant Accounting Policies

Short‑term investments

Short‑term investments consist of commercial paper. These investments have original maturities of greater than three months but less than twelve months. They are classified as held-to-maturity investments, which are recorded at amortized cost.

reported.

Recent Accounting Pronouncements


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


We consider the applicability and impact of all ASUs.accounting pronouncements. ASUs not listed below were assessed and were either determined to be not applicable or are expected to have immaterial impact on ourFrank's consolidated financial position, or results of operations.


In May 2017, the FASB issued guidance to clarify and reduce both (i) diversity in practice and (ii) cost and complexity when accounting for a change to the terms and conditions of a share-based payment award. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted. The amendments in this guidance should be applied prospectively to an award modified on or after the adoption date. Management is evaluating the provisions of this new accounting guidance, including which period to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.

In January 2017, the FASB issued guidance that simplifies the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. The new standard will be applied prospectively, and is effective for public companies for their annual or any interim goodwill impairment tests for fiscal years beginning after December 15, 2019. Early adoption is permitted for any impairment tests performed after January 1, 2017. The Company has adopted the provisions of this new accounting guidance for the Company's annual goodwill impairment analysis for the year ended December 31, 2017.

In January 2017, the FASB issued new accounting guidance for business combinations clarifying the definition of a business. The objective of the guidance is to help companies and other organizations which have acquired or sold a business to evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. For public entities, the guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted under certain circumstances. Management is evaluating the provisions of this new accounting guidance.



9
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In October 2016, the FASB issued new accounting guidance for recognition of income tax consequences of an intra-entity transfer of an asset other than inventory. The objective of the guidance is to eliminate the exception for an intra-entity transfer of an asset other than inventory and requires an entity to recognize the income tax consequences at the time of transfer rather than when the asset is sold to a third party. For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not yet been issued. Management is evaluating the provisions of this new accounting guidance, including which period to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.

In August 2016, the FASB issued new accounting guidance for classification of certain cash receiptsoperations and cash payments in the statement of cash flows. The objective of the guidance is to reduce the existing diversity in practice related to the presentation and classification of certain cash receipts and cash payments. The guidance addresses eight specific cash flow issues including but not limited to, debt prepayment or extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims and proceeds from the settlement of corporate-owned life insurance policies. For public entities, the guidance is effective for financial statements issued for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and is retrospective for all periods presented. Early adoption is permitted including for interim periods. Management is evaluating the provisions of this new accounting guidance, including which period to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.

In June 2016, the FASB issued new accounting guidance for credit losses on financial instruments. The guidance includes the replacement of the “incurred loss” approach for recognizing credit losses on financial assets, including trade receivables, with a methodology that reflects expected credit losses, which considers historical and current information as well as reasonable and supportable forecasts. For public entities,Frank's adopted the guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is evaluating the provisions of this new accounting guidance, including which period to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.


In March 2016, the FASB issued accounting guidance on equity compensation, which simplifies the accounting for the taxes related to equity-based compensation, including adjustments to how excess tax benefits and a company's payments for tax withholdings should be classified. The ASU also gives an option to recognize actual forfeitures when they occur and clarifies the statement of cash flow presentation for certain components of share-based awards. We adopted this guidance on January 1, 2017 and have elected to recognize actual forfeitures when they occur. The adoption did not have an impact on our consolidated financial statements.

In February 2016, the FASB issued accounting guidance for leases. The main objective of the accounting guidance is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference between previous GAAP and the new guidance is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. The new guidance requires lessees to recognize assets and liabilities arising from leases on the balance sheet and further defines a lease as a contract that conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Control over the use of the identified asset means that the customer has both (1) the right to obtain substantially all of the economic benefit from the use of the asset and (2) the right to direct the use of the asset. The accounting guidance requires disclosures by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. For public entities, the guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; early application is permitted. We are currently evaluating the impact of this accounting standard update on our consolidated financial statements and plan to adopt the new standard effective January 1, 2019.


10
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


In July 2015, the FASB issued accounting guidance on simplifying the measurement of inventory. Under this guidance, inventory will be measured at the lower of cost and net realizable value. Options that currently exist for market value will be eliminated. The guidance defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. No other changes were made to the current guidance on inventory measurement. We adopted this guidance on January 1, 2017, 2020, and the adoption did not have a material impact on ourits consolidated financial statements.

In May 2014, the FASB issued amendments The new credit loss standard is expected to guidance on theaccelerate recognition of revenue based upon the entity’s contracts with customers to transfer goods or services. Under the new standard, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchangecredit losses on accounts receivable. See Note 3—Accounts Receivable, net for those goods or services. The standard creates a five step model that requires companies to exercise judgment when considering the terms of a contractadditional information regarding allowance for credit losses on Frank's accounts receivable.

Note 2—Cash, Cash Equivalents and all relevant facts and circumstances. The standard allows for several transition methods: (a) a full retrospective adoption in which the standard is applied to all of the periods presented, or (b) a modified retrospective adoption in which the standard is applied only to the most current period presentedRestricted Cash

Amounts reported in the financial statements, including additional disclosures of the standard’s application impact to individual financial statement line items. In July 2015, the FASB deferred the effective date by one year to December 15, 2017 for annual periods, and interim reporting periods within those fiscal years, beginning after that date.


We are currently determining the impacts of the new standard on our contract portfolio. Our implementation efforts to date include the identification of revenue streams with similar contract structures, performing a detailed review of key contracts by revenue stream and comparing historical policies and practices to the new standard. Our evaluation of the impact of the new guidance on our consolidated financial statements is ongoing and we continue to evaluate the quantitative and qualitative impacts of the standard on timing of recognition for various revenues. While we are continuing to perform our analysis, at the present time, we anticipate the adoption of the new standard will have an immaterial impact on revenues from contracts for equipment rentals and services. However, revenues from product sales with bill-and-hold arrangements may be accelerated once we adopt the new standard. We will adopt the new standard effective January 1, 2018 using the modified retrospective method.

Note 2—Noncontrolling Interest

We hold an economic interest in FICV and are responsible for all operational, management and administrative decisions relating to FICV’s business. Effective with the August 2016 conversion of all of Mosing Holdings' Preferred Stock, Mosing Holdings transferred all its interest in FICV to us and the noncontrolling interest associated with Mosing Holdings was eliminated.

Historically we recorded a noncontrolling interest on our condensed consolidated balance sheet with respect to the remaining economic interest in FICV held by Mosing Holdings. Net loss attributable to noncontrolling interest on thesheets and condensed consolidated statements of operations represented the portion of earnings or losses attributable to the economic interest in FICV held by Mosing Holdings. The allocable domestic loss from FICV to FINV was subject to U.S. taxation.



11
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of net loss attributable to noncontrolling interest is detailedcash flows as follows (in thousands):
  Three Months Ended Nine Months Ended
  September 30, 2016
Net loss $(42,198) $(89,893)
Add: Net loss after Mosing Holdings contributed interest to FINV (1)
 18,355
 18,355
Add: Provision (benefit) for U.S. income taxes of FINV (2)
 3,078
 (10,414)
Less: Loss of FINV (3)
 97
 23
Net loss subject to noncontrolling interest (20,668) (81,929)
Noncontrolling interest percentage (4)
 25.2% 25.2%
Net loss attributable to noncontrolling interest $(5,216) $(20,741)
(1)
Represents net loss after August 26, 2016, when Mosing Holdings transferred its interest to FINV.
(2)
Represents income tax expense (benefit) of entities outside of FICV, as well as income tax attributable to our proportionate share of the U.S. operations of our partnership interests in FICV as of August 26, 2016.
(3)
Represents results of operations for entities outside of FICV as of August 26, 2016.
(4)
Represents the economic interest in FICV held by Mosing Holdings before the preferred stock conversion on August 26, 2016. This percentage changed as additional shares of FINV common stock were issued. Effective August 26, 2016, Mosing Holdings delivered its economic interest in FICV to us.

Note 3—Acquisitioncash, cash equivalents and Divestitures

Blackhawk Acquisition

On November 1, 2016, we completed a transaction to acquire all outstanding shares in Blackhawk Group Holdings, Inc., the ultimate parent company of Blackhawk Specialty Tools LLC, ("Blackhawk") pursuant to the terms of a definitive merger agreement dated October 6, 2016. Blackhawk is a leading provider of well construction and well intervention services and products and the acquisition will allow us to combine Blackhawk’s cementing tool expertise and well intervention services with our global tubular running services. In conjunction with the acquisition, FI Tools Holdings, LLC, our newly formed subsidiary, merged with and into Blackhawk, with Blackhawk surviving the merger as our wholly-owned subsidiary. The merger consideration was comprised of a combination of $150.4 million ofrestricted cash on hand and 12.8 million shares of our common stock, on a cash-free, debt-free basis, for total consideration of $294.6 million (based on our closing share price on October 31, 2016 of $11.25 and including working capital adjustments).

The unaudited pro forma financial information presented below includes adjustments for amortization expense for identified intangible assets and depreciation expense based on the fair value and estimated lives of acquired property, plant and equipment. In addition, acquisition related costs are excluded from the unaudited pro forma financial information.

The following table shows our unaudited pro forma financial information assuming the transaction occurred on January 1, 2015 (in thousands, except per share amounts):
 Three Months Ended Nine Months Ended
 September 30, 2016
Revenue$120,902
 $431,962
Net loss applicable to common shares(41,686) (82,650)
Loss per common share:   
Basic and diluted$(0.22) $(0.47)



12
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Blackhawk acquisition was accounted for as a business combination. The purchase price is allocated to the fair value of assets acquired and liabilities assumed based on a discounted cash flow model and goodwill is recognized for the excess consideration transferred over the fair value of the net assets.

The preliminary purchase price allocation was prepared in connection with our annual financial statements filed on our Annual Report. In 2017, we adjusted the purchase price allocation for a litigation settlement and the final valuation report. The following table summarizes the preliminary and the final purchase price allocations of the fair values of the assets acquired and liabilities assumed as part of the Blackhawk acquisition as of November 1, 2016 as determined in accordance with business combination accounting guidance (in thousands):
 Preliminary purchase price allocation Purchase price adjustments  Final purchase price allocation
Current assets, excluding cash$23,626
 $—
 $23,626
Property, plant and equipment45,091
 55
 45,146
Other long-term assets3,139
 —
 3,139
Intangible assets41,972
 153
 42,125
Assets acquired$113,828
 $208
 $114,036
Current liabilities assumed11,132
 185
 11,317
Other long-term liabilities542
 —
 542
Liabilities assumed$11,674
 $185
 $11,859
Fair value of net assets acquired102,154
 23
 102,177
Total consideration transferred294,563
 —
 294,563
Goodwill$192,409
 $(23) $192,386

In conjunction with the merger, we created a fourth segment, Blackhawk, and have recorded goodwill of $192.4 million in that segment.

Divestitures

In March 2017, we sold a fully depreciated aircraft for a total sales price of $1.3 million and recorded a gain on sale of $1.3 million.

In August 2017, we sold an additional aircraft for a net sales price of $4.9 million and recorded an immaterial loss.

In September 2017, we sold a building in the Middle East region for a net sales price of $2.7 million and recorded a gain on sale of $0.6 million.



13
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4—Accounts Receivable, net

Accounts receivable at September 30, 20172021, and December 31, 20162020, were as follows (in thousands):

  

September 30,

  

December 31,

 
  

2021

  

2020

 

Cash and cash equivalents

 $202,997  $209,575 

Restricted cash

  1,742   1,672 

Total cash, cash equivalents and restricted cash shown in the statements of cash flows

 $204,739  $211,247 

Restricted cash primarily consists of cash deposits that collateralize Frank's credit card program. Cash paid (received) for income taxes, net, was $6.2 million and $(5.5) million for the nine months ended September 30, 2021 and 2020, respectively.

 September 30, December 31,
 2017 2016
Trade accounts receivable, net of allowance of $13,907 and $14,337, respectively$96,034
 $89,096
Unbilled revenue24,464
 30,882
Taxes receivable13,987
 42,870
Affiliated (1)
895
 717
Other receivables5,526
 3,852
Total accounts receivable$140,906
 $167,417

Note 3—Accounts Receivable, net

Accounts receivable at September 30, 2021, and December 31, 2020, were as follows (in thousands):

  

September 30,

  

December 31,

 
  

2021

  

2020

 

Trade accounts receivable, net of allowance for credit losses of $3,718 and $3,857, respectively

 $71,680  $65,684 

Unbilled receivables

  40,125   26,215 

Taxes receivable

  15,974   14,292 

Affiliated (1)

  24   549 

Other receivables

  2,782   3,867 

Total accounts receivable, net

 $130,585  $110,607 

(1)


(1)

Amounts represent expenditures on behalf of non-consolidated affiliates and receivables for aircraft charter income.affiliates.


Note 5—Inventories

Inventories at September 30, 2017 and December 31, 2016 were as follows (in thousands):

10
 September 30, December 31,
 2017 2016
Pipe and connectors$88,982
 $102,360
Finished goods16,063
 14,257
Work in progress8,644
 7,099
Raw materials, components and supplies19,272
 15,363
Total inventories$132,961
 $139,079



14
Table of Contents
FRANK’S INTERNATIONAL

EXPRO GROUP HOLDINGS N.V.

(formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 6—4—Inventories, net

Inventories at September 30, 2021, and December 31, 2020, were as follows (in thousands):

  

September 30,

  

December 31,

 
  

2021

  

2020

 

Pipe and connectors, net of allowance of $14,630 and $16,819, respectively

 $22,896  $22,642 

Finished goods, net of allowance of $84 and $84, respectively

  20,767   22,715 

Work in progress

  1,240   1,730 

Raw materials, components and supplies, net of allowance of $181 and none, respectively

  46,873   34,631 

Total inventories, net

 $91,776  $81,718 

The increase in inventories was driven by higher activity levels, particularly in the Western Hemisphere.

Note 5—Property, Plant and Equipment


The following is a summary of property, plant and equipment at September 30, 20172021, and December 31, 20162020, (in thousands):

 
Estimated
Useful Lives
in Years
 September 30,
2017		 December 31,
2016
Land— $16,491
 $15,730
Land improvements8-15 9,346
 9,379
Buildings and improvements (1)
39 119,971
 73,211
Rental machinery and equipment7 930,443
 933,667
Machinery and equipment - other7 56,321
 60,182
Furniture, fixtures and computers5 26,280
 19,073
Automobiles and other vehicles5 32,621
 36,796
Aircraft7 —
 16,267
Leasehold improvements (1)
7-15, or lease term if shorter 9,870
 8,027
Construction in progress - machinery
     and equipment and buildings (1)
— 68,066
 120,937
   1,269,409
 1,293,269
Less: Accumulated depreciation  (771,625) (726,245)
Total property, plant and equipment, net  $497,784
 $567,024

(1)
See Note 12 - Related Party Transactions for additional information.

  

Estimated

         
  

Useful Lives

  

September 30,

  

December 31,

 
  

in Years

  

2021

  

2020

 

Land

 —  $30,892  $30,869 

Land improvements

 8 - 15   7,621   7,620 

Buildings and improvements

 13 - 39   113,196   121,105 

Rental machinery and equipment

 2 - 7   906,859   897,398 

Machinery and equipment - other

 7   51,961   54,842 

Furniture, fixtures and computers

 3 - 5   20,040   16,928 

Automobiles and other vehicles

 5   25,704   25,948 

Leasehold improvements

 

7 - 15, or lease term if shorter

   12,536   12,773 

Construction in progress - machinery and equipment

 —   10,755   24,381 
      1,179,564   1,191,864 

Less: Accumulated depreciation

     (950,570)  (919,157)

Total property, plant and equipment, net

    $228,994  $272,707 

During the thirdnine months ended September 30, 2020, Frank's recorded fixed asset impairment charges of $15.6 million primarily associated with construction in progress in the Cementing Equipment segment, which is included in severance and other charges, net on the condensed consolidated statements of operations. During the first quarter of 2017, we committed to sell certain2020, the results of our buildingsFrank's test for impairment of goodwill in the Middle East regionCementing Equipment segment as a result of negative market indicators was a triggering event that indicated that Frank's long-lived tangible assets in this segment were impaired. Impairment testing performed in the first quarter of 2020 resulted in the determination that certain long-lived assets were not recoverable and determined thosethat the estimated fair value was below the carrying value. Please see Note 15—Severance and Other Charges, net for additional details. No impairments associated with held for use assets were recognized during the three and nine months ended September 30, 2021.

11
Table of Contents

EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the first quarter of 2021, a building with a net book value of $1.9 million was sold, resulting in a gain of $0.2 million. In addition, a building with a net book value of $2.6 million met the criteria to be classified as held for sale in our unaudited condensed consolidated balance sheet. As a result, weand was reclassified the buildings, with a net book value of $4.1 million, from property, plant and equipment to assets held for sale on Frank's condensed consolidated balance sheet. During the second quarter of 2021, Frank's sold a building classified as held for sale for $1.8 million and recognizedrecorded a $0.3gain of $1.3 million. During the third quarter of 2021, a building with a net book value of $5.0 million loss.


met the criteria to be classified as held for sale and was reclassified from property, plant and equipment to assets held for sale on Frank's condensed consolidated balance sheet.

During the second quarter of 2020, Frank's sold a building classified as held for sale for $5.4 million and recorded a gain of $0.6 million.

The following table presents the depreciation and amortization expense associated with each line item for the periodsthree and nine months ended September 30, 2017 2021 and 20162020 (in thousands):

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2021

  

2020

  

2021

  

2020

 

Services

 $12,471  $14,582  $40,626  $47,616 

Products

  114   144   378   567 

General and administrative expenses

  1,507   1,224   4,527   4,737 

Total

 $14,092  $15,950  $45,531  $52,920 

Note 6—Goodwill and Intangible Assets

Goodwill

Goodwill is not subject to amortization and is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. A qualitative assessment is allowed to determine if goodwill is potentially impaired. Frank's has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test. The qualitative assessment determines whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. If it is more likely than not that the fair value of the reporting unit is less than the carrying amount, then a quantitative impairment test is performed. The quantitative goodwill impairment test is used to identify both the existence of impairment and the amount of impairment loss. The test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded based on that difference. Frank's has historically completed its assessment of goodwill impairment as of October 31 each year.

As a result of the decline in oil prices due to the ongoing Coronavirus Disease 2019 ("COVID-19") pandemic and the failure by the Organization of Petroleum Exporting Countries (“OPEC”) and Russia to reach an agreement on lowering production quotas during the first quarter of 2020, Frank's identified that it was more likely than not that the fair value of goodwill within its Cementing Equipment reporting unit was less than its carrying value. Based on the result of the goodwill impairment test as of March 31, 2020, Frank's recorded a $57.1 million impairment charge to goodwill, which is included in goodwill impairment on the condensed consolidated statements of operations.

Frank's used the income approach to estimate the fair value of the Cementing Equipment reporting unit, but also considered the market approach to validate the results. The income approach estimates the fair value by discounting the reporting unit’s estimated future cash flows using an estimated discount rate, or expected return, that a marketplace participant would have required as of the valuation date. The market approach includes the use of comparative multiples to corroborate the discounted cash flow results and involves significant judgment in the selection of the appropriate peer group companies and valuation multiples. The inputs used in the determination of fair value are generally level 3 inputs.

12
  Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Equipment rentals and services $25,663
 $23,870
 $78,558
 $76,023
Products 1,278
 989
 3,838
 3,081
General and administrative expenses 3,709
 1,686
 10,304
 5,174
Total $30,650
 $26,545
 $92,700
 $84,278




15
FRANK’S INTERNATIONAL
Table of Contents

EXPRO GROUP HOLDINGS N.V.

(formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Some of the more significant assumptions inherent in the income approach include the estimated future net annual cash flows for the reporting unit and the discount rate. Management of Frank's selected the assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions and estimated growth rates. These estimates are based upon assumptions believed to be reasonable. However, given the inherent uncertainty in determining the assumptions underlying a discounted cash flow analysis, actual results may differ from those used in management's valuation which could result in additional impairment charges in the future. Assuming all other assumptions and inputs used in the discounted cash flow analysis were held constant, a 50 basis point increase in the discount rate assumption would have increased the Cementing Equipment reporting unit goodwill impairment charge described above by approximately $4.3 million.

NaN goodwill impairment was recorded during the three and nine months ended September 30, 2021. At September 30, 2021, goodwill is allocated to Frank's reportable segments as follows: Cementing Equipment - approximately $24.1 million; Tubular Running Services - approximately $18.7 million.

Intangible Assets

Identifiable intangible assets are amortized using the straight-line method over the estimated useful lives of the assets. Frank's has historically evaluated impairment of Frank's intangible assets on an asset group basis whenever circumstances indicate that the carrying value may not be recoverable. Intangible assets deemed to be impaired are written down to their fair value using a discounted cash flow model and, if available, comparable market values.

The following table provides information related to Frank's intangible assets as of September 30, 2021, and December 31, 2020 (in thousands):

  

September 30, 2021

  

December 31, 2020

 
  

Gross Carrying Amount

  

Accumulated Amortization

  

Total

  

Gross Carrying Amount

  

Accumulated Amortization

  

Total

 

Customer Relationships

 $28,300  $(28,103) $197  $28,300  $(26,324) $1,976 

Intellectual Property

  18,135   (9,576)  8,559   13,860   (7,939)  5,921 

Total intangible assets

 $46,435  $(37,679) $8,756  $42,160  $(34,263) $7,897 

Frank's intangible assets are primarily associated with its Cementing Equipment and Tubular Running Services segments. Amortization expense for intangible assets was $1.2 million and $0.9 million for the three months ended September 30, 2021 and 2020, respectively and $3.4 million and $3.5 million for the nine months ended September 30, 2021 and 2020, respectively. During the first quarter of 2020, the results of Frank's test for impairment of goodwill in the Cementing Equipment segment as a result of the negative market indicators described above was a triggering event that indicated that the intangible assets in this segment were impaired. Impairment testing performed in the first quarter resulted in the determination that certain intangible assets were not recoverable and that the estimated fair value was below the carrying value. As a result, during the nine months ended September 30, 2020, impairment charges of $4.7 million were recorded associated with certain customer relationships and intellectual property intangible assets in the Cementing Equipment segment, which are included in severance and other charges, net on the condensed consolidated statements of operations. No intangible asset impairments were recorded during the three or nine months ended September 30, 2021. Please see Note 7—15—Severance and Other Charges, net for additional details.

Note 7—Other Assets


Other assets at September 30, 20172021, and December 31, 20162020, consisted of the following (in thousands):

 September 30, December 31,
 2017 2016
Cash surrender value of life insurance policies (1)
$29,671
 $36,269
Deposits2,193
 2,343
Other1,480
 6,921
Total other assets$33,344
 $45,533

  

September 30,

  

December 31,

 
  

2021

  

2020

 

Cash surrender value of life insurance policies (1)

 $17,773  $26,167 

Deposits

  1,937   2,182 

Other

  1,699   2,510 

Total other assets

 $21,409  $30,859 

(1)


(1)

See Note 10 – 10—Fair Value Measurements for additional information.


13
Table of Contents

EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 8—8—Accounts Payable and Accrued Liabilities

Accounts payable and Other Current Liabilities


Accrued and other currentaccrued liabilities at September 30, 20172021, and December 31, 20162020, consisted of the following (in thousands):

  

September 30,

  

December 31,

 
  

2021

  

2020

 

Accounts payable

 $30,917  $22,277 

Accrued compensation

  22,302   23,212 

Accrued property and other taxes

  19,371   14,420 

Accrued severance and other charges

  1,288   2,666 

Income taxes

  13,560   16,029 

Affiliated (1)

  2,305   2,513 

Accrued purchase orders and other

  25,219   18,869 

Total accounts payable and accrued liabilities

 $114,962  $99,986 

(1)

Represents amounts owed to non-consolidated affiliates.

 September 30, December 31,
 2017 2016
    
Accrued compensation$18,758
 $10,854
Accrued property and other taxes19,781
 19,740
Accrued severance and other charges2,040
 6,150
Income taxes11,012
 6,857
Accrued purchase orders8,174
 2,083
Other15,329
 19,266
Total accrued and other current liabilities$75,094
 $64,950

Note 9—9—Debt


Credit Facility


We have

Asset Based Revolving Credit Facility

On November 5, 2018, FICV, Frank’s International, LLC and Blackhawk, as borrowers, and FINV, certain of FINV’s subsidiaries, including FICV, Frank’s International, LLC, Blackhawk, Frank’s International GP, LLC, Frank’s International, LP, Frank’s International LP B.V., Frank’s International Partners B.V., Frank’s International Management B.V., Blackhawk Intermediate Holdings, LLC, Blackhawk Specialty Tools, LLC, and Trinity Tool Rentals, L.L.C., as guarantors, entered into a $100.0 million5-year senior secured revolving credit facility (the “ABL Credit Facility”) with certainJPMorgan Chase Bank, N.A., as administrative agent, and other financial institutions as lenders with total commitments of $100.0 million including up to $20.0$15.0 million in available for letters of credit.

As of September 30, 2021, FINV had 0 borrowings outstanding under the ABL Credit Facility.

On October 1, 2021, in connection with the Merger, the Company terminated the ABL Credit Facility and entered into a senior secured revolving credit facility by and among the Company and certain of its subsidiaries, including Exploration and Production Services (Holdings) Limited and Expro Holdings US Inc., as borrowers (the "New Credit Facility"), with DNB Bank ASA, London Branch, as agent, and other financial institutions as lenders with an aggregate commitment of $200.0 million with up to $130.0 million available for drawdowns as loans and up to $10.0$70.0 million in swingline loans, which matures in August 2018 (the “Credit Facility”). Subject to the terms of the Credit Facility, we have the ability to increase the commitments to $150.0 million. At September 30, 2017 for bonds and December 31, 2016, we had $2.8 million and $3.7 million, respectively, in letters of credit outstanding and no outstanding borrowings under this facility. As of September 30, 2017, our ability to borrow under the Credit Facility has been reduced to approximately $30 million as a result of our decreased Adjusted EBITDA. Our borrowing capacity under the Credit Facility could beguarantees. Please see Note 17—Subsequent Events for further reduced or eliminated depending on our future Adjusted EBITDA. As a result of this, our overall liquidity would be diminished.


Borrowings under the Credit Facility bear interest, at our option, at either a base rate or an adjusted Eurodollar rate. Base rate loans under the Credit Facility bear interest at a rate equal to the higher of (i) the prime rate as published in the Wall Street Journal, (ii) the Federal Funds Effective Rate plus 0.50% or (iii) the adjusted Eurodollar rate plus 1.00%, plus an applicable margin ranging from 0.50% to 1.50%, subject to adjustment based on a leverage ratio. Interest is in each case payable quarterly for base-rate loans. Eurodollar loans under the Credit Facility bear interest at an adjusted Eurodollar rate equal to the Eurodollar rate for such interest period multiplied by the statutory reserves, plus an applicable margin ranging from 1.50% to 2.50%. Interest is payable at the end of applicable interest periods for Eurodollar loans, except that if the interest period for a Eurodollar loan is longer than three months, interest is paid at

discussion.


14
16
FRANK’S INTERNATIONAL
Table of Contents

EXPRO GROUP HOLDINGS N.V.

(formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


the end of each three-month period. The unused portion of the Credit Facility is subject to a commitment fee ranging from 0.250% to 0.375% based on certain leverage ratios.

The Credit Facility contains various covenants that, among other things, limit our ability to grant certain liens, make certain loans and investments, enter into mergers or acquisitions, enter into hedging transactions, change our lines of business, prepay certain indebtedness, enter into certain affiliate transactions, incur additional indebtedness or engage in certain asset dispositions.

The Credit Facility also contains financial covenants, which, among other things, require us, on a consolidated basis, to maintain: (i) a ratio of total consolidated funded debt to adjusted EBITDA (as defined in our Credit Agreement) of not more than 2.5 to 1.0 and (ii) a ratio of EBITDA to interest expense of not less than 3.0 to 1.0.

In addition, the Credit Facility contains customary events of default, including, among others, the failure to make required payments, the failure to comply with certain covenants or other agreements, breach of the representations and covenants contained in the agreements, default of certain other indebtedness, certain events of bankruptcy or insolvency and the occurrence of a change in control.

On April 28, 2017, the Company obtained a limited waiver under its Revolving Credit Agreement, dated August 14, 2013, by and among FICV (as borrower), Amegy Bank National Association (as administrative agent), Capital One, National Association (as syndication agent) and the other lenders party thereto (the "Credit Agreement"), of its leverage ratio and interest coverage ratio for the fiscal quarters ending March 31, 2017 and June 30, 2017 (the “Waiver”) in order to not be in default for first quarter of 2017 testing. The Company agreed to comply with the following conditions during the period from the effective date of the Waiver until the delivery of its compliance certificate with respect to the fiscal quarter ending September 30, 2017: (i) maintain no less than $250.0 million in liquidity; (ii) abide by certain restrictions regarding the issuance of senior unsecured debt; and (iii) pay interest and commitment fees based on the highest “Applicable Margin” (as defined in the Credit Agreement) level. In connection with the Waiver, the Company paid a waiver fee to each lender that executed the Waiver equal to five basis points of the respective lender’s commitment under the Credit Agreement. As of September 30, 2017, we were in compliance with the covenants included in the Credit Agreement.

Citibank Credit Facility

In 2016, we entered into a three-year credit facility with Citibank N.A., UAE Branch in the amount of $6.0 million for the issuance of standby letters of credit and guarantees. The credit facility also allows for open ended guarantees. Outstanding amounts under the credit facility bear interest of 1.25% per annum for amounts outstanding up to one year. Amounts outstanding more than one year bear interest at 1.5% per annum. As of September 30, 2017 and December 31, 2016, we had $2.5 million and $2.2 million, respectively, in letters of credit outstanding.

Note 10—10—Fair Value Measurements


We follow fair value measurement authoritative accounting guidance for measuring fair values of assets and liabilities in financial statements. We have consistently used theThe same valuation techniques have been used consistently for all periods presented. Please see Note 10 - 10—Fair Value Measurements in ourthe Annual Report for further discussion.



17
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


A summary of financial assets and liabilities that are measured at fair value on a recurring basis, as of September 30, 20172021 and December 31, 20162020, were as follows (in thousands):

 
Quoted Prices
in Active
Markets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
  
 (Level 1) (Level 2) (Level 3) Total
September 30, 2017       
Assets:       
Derivative financial instruments$—
 $132
 $—
 $132
Investments:       
Cash surrender value of life insurance policies - deferred compensation plan—
 29,671
 —
 29,671
Marketable securities - other131
 —
 —
 131
Liabilities:       
Derivative financial instruments—
 35
 —
 35
Deferred compensation plan—
 27,659
 —
 27,659
        
December 31, 2016       
Assets:       
Derivative financial instruments$—
 $146
 $—
 $146
Investments:       
Cash surrender value of life insurance policies - deferred compensation plan—
 36,269
 —
 36,269
Marketable securities - other3,692
 —
 —
 3,692
Liabilities:       
Deferred compensation plan—
 30,307
 —
 30,307

Our derivative financial instruments consist of short-duration foreign currency forward contracts. The fair value of our derivative financial instruments is based on quoted market values including foreign exchange forward rates and interest rates. The fair value is computed by discounting the projected future cash flow amounts to present value. Derivative financial instruments are included in our condensed consolidated balance sheets in accounts receivable, net and accrued and other current liabilities at September 30, 2017 and in accounts receivable, net, at December 31, 2016.

Our

      

Significant

         
  

Quoted Prices

  

Other

  

Significant

     
  

in Active

  

Observable

  

Unobservable

     
  

Markets

  

Inputs

  

Inputs

     
  

(Level 1)

  

(Level 2)

  

(Level 3)

  

Total

 

September 30, 2021

                

Assets:

                

Investments:

                

Cash surrender value of life insurance policies - deferred compensation plan

 $0  $17,773  $0  $17,773 

Marketable securities - other

  2   0   0   2 

Liabilities:

                

Deferred compensation plan

  0   18,144   0   18,144 

December 31, 2020

                

Assets:

                

Investments:

                

Cash surrender value of life insurance policies - deferred compensation plan

 $0  $26,167  $0  $26,167 

Marketable securities - other

  3   0   0   3 

Liabilities:

                

Deferred compensation plan

  0   20,271   0   20,271 

Frank's investments associated with ourits deferred compensation plan consist primarily of the cash surrender value of life insurance policies and are included in other assets on the condensed consolidated balance sheets. OurFrank's investments change as a result of contributions, payments, and fluctuations in the market. Frank's liabilities associated with its deferred compensation plan are included in other non-current liabilities on the condensed consolidated balance sheets. Assets and liabilities, measured using significant observable inputs, are reported at fair value based on third-partythird-party broker statements, which are derived from the fair value of the funds'funds’ underlying investments. WeFrank's also havehas marketable securities in publicly traded equity securities as an indirect result of strategic investments. They are reported at fair value based on the price of the stock and are included in other assets on the condensed consolidated balance sheets.


Assets and Liabilities Measured at Fair Value on a Non-recurring Basis


We apply

The Company applies the provisions of the fair value measurement standard to our non-recurring, non-financial measurements including business combinations and assets identified as held for sale, as well as impairment related to goodwill and other long-lived assets. For business combinations (see Note 3 - Acquisition and Divestitures),

Management of the purchase price is allocatedCompany performs goodwill impairment assessments for each reporting unit by comparing the estimated fair value of each reporting unit to the assets acquired and liabilities assumed based onreporting unit’s carrying value, including goodwill. Management estimates the fair value for each reporting unit using a discounted cash flow model for most intangibles as well asanalysis based on management’s short-term and long-term forecast of operating performance. This analysis includes significant assumptions regarding discount rates, revenue growth rates, expected profitability margins, forecasted capital expenditures and the timing of expected future cash flows based on market assumptions forconditions. If the valuationestimated fair value of equipmenta reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is measured and recorded.

When conducting an impairment test on long-lived assets, other fixed assets. We utilizethan goodwill, the estimated future undiscounted cash flows associated with the asset are first compared to the asset’s carrying amount. If the undiscounted cash flows are less than the asset’s carrying amount, the asset’s fair value is then determined by using a discounted cash flow modelanalysis. These analyses are based on estimates such as management’s short-term and long-term forecast of operating performance, including revenue growth rates and expected profitability margins, estimates of the remaining useful life and service potential of the asset, and a discount rate based on our weighted average cost of capital.

The impairment assessments discussed above incorporate inherent uncertainties, including projected commodity pricing, supply and demand for Frank's services and future market conditions, which are difficult to predict in evaluatingvolatile economic environments and could result in impairment



18
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

considerations related charges in future periods if actual results materially differ from the estimated assumptions utilized in management's forecasts. If crude oil prices decline significantly and remain at low levels for a sustained period of time, the Company could be required to goodwill andrecord an impairment of the carrying value of its long-lived assets.assets in the future which could have a material adverse impact on its operating results. Given the unobservable nature of the inputs, the discounted cash flow models are deemed to use Level 3 inputs.

15
Table of Contents

EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Other Fair Value Considerations


The carrying values on ourthe condensed consolidated balance sheetsheets of ourFrank's cash and cash equivalents, restricted cash, short-term investments, trade accounts receivable, other current assets, accounts payable accrued and other currentaccrued liabilities and lines of credit approximate fair values due to their short maturities.


Note 11— Derivatives


We enter into short-duration foreign currency forward derivative contracts to reduce the risk of foreign currency fluctuations. We use these instruments to mitigate our exposure to non-local currency operating working capital. We record these contracts at fair value on our condensed consolidated balance sheets. Although the derivative contracts will serve as an economic hedge of the cash flow of our currency exchange risk exposure, they are not formally designated as hedge contracts for hedge accounting treatment. Accordingly, any changes in the fair value of the derivative instruments during a period will be included in our condensed consolidated statements of operations.

As of September 30, 2017 and December 31, 2016, we had the following foreign currency derivative contracts outstanding in U.S. dollars (in thousands):
  September 30, 2017
Derivative Contracts Notional Amount Contractual Exchange Rate Settlement Date
Canadian dollar $5,740
 1.2194 12/15/2017
Euro 5,982
 1.1963 12/15/2017
Euro 2,399
 1.1993 10/13/2017
Norwegian krone 5,338
 7.8675 12/15/2017
Pound sterling 7,961
 1.3268 12/15/2017
  December 31, 2016
Derivative Contracts Notional Amount Contractual Exchange Rate Settlement Date
Canadian dollar $4,553
 1.3179 3/14/2017
Euro 4,753
 1.0563 3/14/2017
Euro 2,558
 1.0659 1/13/2017
Norwegian krone 3,643
 8.5101 3/14/2017
Pound sterling 3,908
 1.2607 3/14/2017

The following table summarizes the location and fair value amounts of all derivative contracts in the condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016 (in thousands):
Derivatives not Designated as Hedging Instruments Consolidated Balance Sheet Location September 30, 2017 December 31, 2016
Foreign currency contracts Accounts receivable, net $132
 $146
Foreign currency contracts Accrued and other current liabilities (35) —



19
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the location and amounts of the realized and unrealized gains and losses on derivative contracts in the condensed consolidated statements of operations (in thousands):
    Three Months Ended Nine Months Ended
    September 30, September 30,
Derivatives not Designated as Hedging Instruments Location of Gain (Loss) Recognized in Income on Derivative Contracts 2017 2016 2017 2016
Unrealized gain (loss) on foreign currency contracts Other income (expense), net $681
 $(615) $(49) $(296)
Realized gain (loss) on foreign currency contracts Other income (expense), net (1,794) 511
 (2,346) (1,068)
Total net loss on foreign currency contracts   $(1,113) $(104) $(2,395) $(1,364)

Our derivative transactions are governed through International Swaps and Derivatives Association master agreements. These agreements include stipulations regarding the right of offset in the event that we or our counterparty default on our performance obligations. If a default were to occur, both parties have the right to net amounts payable and receivable into a single net settlement between parties. Our accounting policy is to offset derivative assets and liabilities executed with the same counterparty when a master netting arrangement exists.

The following table presents the gross and net fair values of our derivatives at September 30, 2017 and December 31, 2016 (in thousands):
  Derivative Asset Positions Derivative Liability Positions
  September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
Gross position - asset / (liability) $239
 $181
 $(142) $(35)
Netting adjustment (107) (35) 107
 35
Net position - asset / (liability) $132
 $146
 $(35) $—

Note 12—11—Related Party Transactions

We have

Frank's has engaged in certain transactions with other companies related to usit by common ownership. We haveFrank's has entered into various operating leases to lease facilities from these affiliated companies. The majority of these lease obligations expire in 2018 and, at our discretion, may be extended for an additional 36 months subject to agreement on pricing of the extension. These leases may be extended or allowed to expire by us depending on operational needs, market prices and the ability for us to negotiate and secure, at our discretion, alternative leases or replacement locations. Rent expense associated with our related party leases was $1.8 million for each of the three months ended September 30, 2017 and 2016, and $5.3$0.7 million and $6.2$0.9 million for the ninethree months ended September 30, 2017 2021 and 2016,2020, respectively, and $2.1 million and $2.3 million for the nine months ended September 30, 2021 and 2020, respectively.


In certain cases, we have made improvements to properties subject to As of September 30, 2021, $3.8 million of Frank's operating lease right-of-use assets and $4.9 million of its lease liabilities were associated with related party leases referenced above, includingleases.

Prior to the constructioninitial public offering of buildings. AsFrank’s in 2013, a limited number of employees of a certain Mosing affiliated company were admitted as participants in the Frank’s deferred compensation plan.  The relevant Mosing affiliated company was responsible for payment of all benefits related to its employees.  During the quarter ended September 30, 2017,2021, all such participants received final payment of all sums owed under the net book value associated with buildings we constructed on properties subject to related party leases was $62.7 million. We are depreciatingdeferred compensation plan, and no participants remain in the costs associated with these buildings over their estimated useful lives of approximately 39 years, which exceeds the remaining lease terms that primarily expire in 2018. Upon expiration of the leases, leasehold improvements could be construed as becoming the property of the related party lessors. As of September 30, 2017, the net book value associated with leasehold and land improvements we constructed on properties subject to related party leases was $13.4 million, a portion of which is in construction in progress. It is our intent to extend, renew, or replace the related party property leases such that we have unrestricted use of the buildings and improvements throughout their estimated useful lives. Extension, renewal or replacement of the related party property leases is dependent on negotiations with related parties, the failure of which could result in material disputes with the related parties. In the event we do plan who were not extend, renew, or



20
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

replace these related party property leases, we will revise the remaining estimated useful lives of the buildings accordingly.

We are a party to certain agreements relating to the rental of aircraft to Western Airways ("WA"), an entity owned by the Mosing family. The WA agreements reflect both dry lease and wet lease rental, whereby we are charged a flat monthly fee primarily for crew, hangar, maintenance and administration costs in addition to other variable costs for fuel and maintenance. We also earn charter income from third party usage through a revenue sharing agreement. We recorded $0.4 million and $0.3 million of net charter expense for the three months ended September 30, 2017 and 2016, respectively, and $1.0 million and $0.8 million of net charter expense for nine months ended September 30, 2017 and 2016, respectively.

Frank’s employees.

Tax Receivable Agreement


and Amended & Restated Tax Receivable Agreement

Mosing Holdings, and its permitted transfereesLLC, a Delaware limited liability company (“Mosing Holdings”), converted all their Preferred Stockof its shares of our Series A convertible preferred stock into shares of ourFrank's common stock on a one-for-one basis on August 26, 2016, subjectin connection with its delivery to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions, by deliveryFINV of an equivalent portionall of theirits interests in FICV to us (the “Conversion”). FICV will makeAs a result of an election under Section 754 of the Internal Revenue Code. Pursuant to the Section 754 election,Code made by FICV, the Conversion will resultresulted in an adjustment to the tax basis of the tangible and intangible assets of FICV with respect to the portion of FICV now heldtransferred to FINV by FINV.Mosing Holdings. These adjustments will be allocatedare solely allocable to FINV. The adjustments to the tax basis of the tangible and intangible assets of FICV described above would not have been available absent thisthe Conversion. The basis adjustments may reduce the amount of tax that FINV would otherwise be required to pay in the future. These basis adjustments may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.


The tax receivable agreement (the "TRA"“Original TRA”) that weFINV entered into with FICV and Mosing Holdings in connection with ourFINV's initial public offering ("IPO"(“IPO”) generally providesprovided for the payment by FINV to Mosing Holdings of 85% of the amount of the actual reductions,net cash savings, if any, in payments of U.S. federal, state and local income tax orand franchise tax (which reductions we referthat FINV actually realize (or are deemed to as “cash savings”)realize in certain circumstances) in periods after ourFINV's IPO as a result of (i) the tax basis increases resulting from the Conversion and (ii) imputed interest deemed to be paid by usFINV as a result of, and additional tax basis arising from, payments under the Original TRA. In addition,Frank's retained the TRA provides for payment by us of interest earned from the due date (without extensions)benefit of the corresponding tax return to the dateremaining 15% of payment specified by the TRA. The payments under the TRA will not be conditioned upon a holder of rights under the TRA having a continued ownership interest in either FICV or FINV. We will retain the remaining 15% ofthese cash savings, if any.


The estimation

In connection with the Merger Agreement, FINV, FICV and Mosing Holdings entered into that certain Amended and Restated Tax Receivable Agreement, dated as of March 10, 2021 (the “A&R TRA”). Pursuant to the A&R TRA, on October 1, 2021, the Company made a payment of $15 million cash to settle the early termination payment obligations that would otherwise be owed to Mosing Holdings under the Original TRA as a result of the liability underMerger. The A&R TRA also provides for other contingent payments to be made by the TRA is by its nature imprecise and subjectCompany to significant assumptions regardingMosing Holdings in the amount and timing of future taxable income. As of September 30, 2017, FINV has a cumulative loss overin the prior 36-month period. Based on this history of losses, as well as uncertainty regardingevent the timing and amount of future taxable income, we are no longer able to conclude that there will be future cash savings that will lead to additional payouts under the TRA beyond the estimated $2.1 million as of September 30, 2017 that represents 85% of theCompany realizes cash tax savings estimated to be realized in the 2016 federal incomefrom tax return of FINV. Additional TRA liability may be recognized in the future based on changes in expectations regarding the timing and likelihood of future cash savings.


The payment obligationsattributes covered under the Original TRA are our obligations and are not obligationsduring the ten year period following October 1, 2021 in excess of FICV. The term of the TRA will continue until all such tax benefits have been utilized or expired, unless FINV elects to exercise its sole right to terminate the TRA early. If FINV elects to terminate the TRA early, which it may do so in its sole discretion, it would be required to make an immediate payment equal to the present value of the anticipated future tax benefits subject to the TRA (based upon certain assumptions and deemed events set forth in the TRA, including the assumption that it has sufficient taxable income to fully utilize such benefits and that any FICV interests that Mosing Holdings or its transferees own on the termination date are deemed to be exchanged on the termination date). Any early termination payment may be made significantly in advance of the actual realization, if any, of such future benefits. In addition, payments due under the TRA will be similarly accelerated following certain mergers or other changes of control. In these situations, FINV’s obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes

$18,057,000. Please see Note 17—Subsequent Events for additional details.


16
21
FRANK’S INTERNATIONAL
Table of Contents

EXPRO GROUP HOLDINGS N.V.

(formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


of control. For example, if the TRA were terminated on September 30, 2017, the estimated termination payment would be approximately $102.0 million (calculated using a discount rate of 5.63%). The foregoing number is merely an estimate and the actual payment could differ materially.

Because FINV is a holding company with no operations of its own, its ability to make payments under the TRA is dependent on the ability of FICV to make distributions to it in an amount sufficient to cover FINV’s obligations under such agreements; this ability, in turn, may depend on the ability of FICV’s subsidiaries to provide payments to it. The ability of FICV and its subsidiaries to make such distributions will be subject to, among other things, the applicable provisions of Dutch law that may limit the amount of funds available for distribution and restrictions in our debt instruments. To the extent that FINV is unable to make payments under the TRA for any reason, except in the case of an acceleration of payments thereunder occurring in connection with an early termination of the TRA or certain mergers or change of control, such payments will be deferred and will accrue interest until paid, and FINV will be prohibited from paying dividends on its common stock.

Note 13 - Income (Loss)12—Loss Per Common Share


Basic income (loss)loss per common share is determined by dividing net income (loss)loss by the weighted average number of common shares outstanding during the period. Diluted income (loss)loss per share is determined by dividing income (loss) attributable to common stockholdersnet loss by the weighted average number of common shares outstanding, assuming all potentially dilutive shares were issued.


We apply the treasury stock method to determine the dilutive weighted average common shares represented by the unvested restricted stock units and ESPPemployee stock purchase plan (“ESPP”) shares. Through August 26, 2016, the date of the conversion of all of Mosing Holdings' Preferred Stock and Mosing Holdings' transfer of interest in FICV to us, the diluted income (loss) per share calculation assumed the conversion of 100% of our outstanding Preferred Stock on an as if converted basis. Accordingly, the numerator was also adjusted to include the earnings allocated to the noncontrolling interest after taking into account the tax effect of such exchange.



22
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the basic and diluted income (loss)loss per share calculations (in thousands, except per share amounts):

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2021

  

2020

  

2021

  

2020

 

Numerator

                

Net loss

 $(15,081) $(27,791) $(51,583) $(148,014)

Denominator

                

Basic and diluted weighted average common shares (1)

  38,066   37,691   37,957   37,659 

Loss per common share:

                

Basic and diluted

 $(0.40) $(0.74) $(1.36) $(3.93)

(1) Approximate number of unvested restricted stock units and stock to be issued pursuant to the ESPP that have been excluded from the computation of diluted loss per share as the effect would be anti-dilutive when results from operations are at a net loss position.

  259   184   239   175 
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Numerator       
Net income (loss)$2,296
 $(42,198) $(50,317) $(89,893)
Less: Net loss attributable to noncontrolling interest—
 5,216
 —
 20,741
Less: Preferred stock dividends—
 —
 —
 (1)
Net income (loss) available to common shareholders$2,296
 $(36,982) $(50,317) $(69,153)
Denominator       
Basic weighted average common shares223,056
 177,125
 222,847
 162,656
Restricted stock units (1)
525
 —
 —
 —
Diluted weighted average common shares (1)
223,581
 177,125
 222,847
 162,656
Income (loss) per common share:       
Basic$0.01
 $(0.21) $(0.23) $(0.43)
Diluted$0.01
 $(0.21) $(0.23) $(0.43)
         
(1) 
Approximate number of shares of potentially convertible preferred stock to common stock up until the time of conversion on August 26, 2016, unvested restricted stock units and stock to be issued pursuant to the ESPP have been excluded from the computation of diluted income (loss) per share as the effect would be anti-dilutive when the results from operations are at a net loss position.—
 32,977
 624
 47,273

Note 14—13—Income Taxes


For interim financial reporting, we estimatemanagement estimates the annual tax rate based on projected pre-tax income (loss) for the full year and recordrecords a quarterly income tax provision (benefit) in accordance with accounting guidance for income taxes. As the year progresses, we refine the estimate of the year'syear’s pre-tax income (loss) is refined as new information becomes available. The continual estimation process often results in a change to the expected effective tax rate for the year. When this occurs, we adjust the income tax provision (benefit) is adjusted during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the most current expected annual tax rate.


Our

Frank's effective tax rate on income (loss) before income taxes was 97.4%(35.7)% and 13.9%(29.9)% for the three months ended September 30, 2017 2021 and 2016,2020, respectively and 327.7%(29.7)% and 14.6%0.1% for the nine months ended September 30, 2017 2021 and 2016,2020, respectively. The higher ratequarterly sequential variance in effective tax rates is due to a change in the geographical mix of income. The year over year variance in effective tax rates is primarily due to recording valuation allowances against ourthe beneficial impact in the prior year period from the five-year net deferredoperating loss carryback provision included in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as well as a change in the geographical mix of income. Frank's is subject to tax assets. The deferredin many U.S. and non-U.S. jurisdictions. In many non-U.S. jurisdictions Frank's is taxed on bases such as deemed profits or withholding taxes based on revenue. Consequently, the level of correlation between pre-tax income and income tax assets relateprovision varies from period to period.

As a consequence of the Merger, Frank's underwent an ownership change as defined in Internal Revenue Code Section 382, which, based on information currently available, will trigger a substantial limitation on the combined company’s ability to utilize historic net operating losses outside basis differences in our partnership investment("NOLs") and other timing differences primarily associated with our U.S. operations.


In determining that a valuation allowance mustwill cause some of Frank’s NOLs incurred prior to January 1, 2018 to expire before the combined company will be recordedable to utilize them.

Frank's is under audit by certain non-U.S. jurisdictions for the years 2008 - 2019. Frank's does not expect the results of these audits to have any material effect on its financial statements.

An analysis of Frank's uncertain tax positions in the current period, we assessed the available positivevarious jurisdictions in which it operates has been performed and negative evidence andmanagement has concluded that it is not more likely than not that sufficient future taxable income would be generated to permit the usepositions are adequately provided for. Frank's provision for uncertain tax positions as of our deferred tax assets. This conclusion is primarily the result of cumulative losses incurred in the most recent three year period, and uncertainty regarding when we will return to profitability. The amount of deferred tax asset considered realizable and the related need for a valuation allowance may be adjusted in future periods as the available evidence changes.


As of September 30, 2017, there were no significant changes to our unrecognized tax benefits as reported in our audited financial statements for the year ended 2021 and December 31, 2016.


2020 included in “Other non-current liabilities” on the condensed consolidated balance sheets was $5.0 million and $3.1 million, respectively. 


17
23
Table of Contents
FRANK’S INTERNATIONAL

EXPRO GROUP HOLDINGS N.V.

(formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 15—14—Commitments and Contingencies


We are the subject of lawsuits and claims arising in the ordinary course of business from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. WeFrank's had no material accruals for loss contingencies, individually or in the aggregate, as of September 30, 2017 and 2021 or December 31, 2016. We believe2020. Company management believes the probability is remote that the ultimate outcome of these matters would have a material adverse effect on our financial position, results of operations or cash flows.


We are

Frank's has been conducting, and the combined company will continue to conduct, an internal investigation of the operations of certain of ourits foreign subsidiaries in West Africa including possible violations of the U.S. Foreign Corrupt Practices Act our(“FCPA”), its policies and other applicable laws. In June 2016, weFrank's voluntarily disclosed the existence of ourits extensive internal review to the SEC, the United StatesU.S. Department of Justice (“DOJ”) and other governmental entities. It is ourthe Company's intent to continue to fully cooperate with these agencies and any other applicable authorities in connection with any further investigation that may be conducted in connection with this matter. While ourthe review has not indicated that there has been any material impact on ourFrank's previously filed financial statements, we haveFrank's has continued to collect information and cooperate with the authorities, but atauthorities.

As disclosed above, the investigation into possible violations of the FCPA remains ongoing, and the Company will continue to cooperate with the SEC, DOJ and other relevant governmental entities in connection therewith. At this time, are unable to predict the ultimate resolution of these matters with these agencies. In addition, during the course of the investigation, we discovered historical business transactions (and bids to enter into business transactions) in certain countries that may have been subject to U.S. and other international sanctions. We have disclosed this information to various governmental entities (including those involved in our ongoing investigation), but at this time are unable to predict the ultimate resolution of these matters with these agencies, including any financial impact to us.the Company. The Company's Board of Directors (the "Board") and management are committed to continuously enhancing the Company's internal controls that support improved compliance and transparency throughout the Company's global operations.


Note 16—15—Severance and Other Charges, net

Frank's recognizes severance and other charges for costs associated with workforce reductions, facility closures, exiting or reducing its footprint in certain countries, asset impairments and the retirement of excess machinery and equipment based on economic utility. As a result of the downturn in the industry and its impact on Frank's business outlook, management continued to take actions to adjust Frank's operations and cost structure to reflect current and expected activity levels.

Severance and other charges, net are summarized below (in thousands):

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2021

  

2020

  

2021

  

2020

 

Severance and other costs

 $195  $3,444  $1,305  $8,776 

Mergers and acquisition expense

  2,763   0   12,121   0 

Fixed asset impairments and retirements

  0   105   171   15,584 

Inventory write-offs

  0   0   136   368 

Intangible asset impairments

  0   0   0   4,708 
  $2,958  $3,549  $13,733  $29,436 

Severance and other costs: Frank's incurred costs due to a continued effort to adjust its cost base, including reducing its workforce to meet the depressed demand in the industry.

Mergers and acquisition expense: During the three and nine months ended September 30, 2021, Frank's incurred $2.8 million and $12.1 million of costs, respectively, primarily related to legal and consulting services associated with the Merger.

Fixed asset impairments and retirements: During the nine months ended September 30, 2020, Frank's recognized $15.6 million primarily associated with construction in progress in the Cementing Equipment segment. During the nine months ended September 30, 2021, Frank's recognized a $0.2 million impairment associated with construction in progress in the Tubular Running Services segment. Please see Note 5—Property, Plant and Equipment for additional details.

Inventory write-offs: During the nine months ended September 30, 2020, certain inventories in the Cementing Equipment segment were determined to have costs that exceeded their net realizable values, resulting in a charge of $0.4 million. During the nine months ended September 30, 2021, certain inventories in the Tubular Running Services segment were determined to have costs that exceeded their net realizable values, resulting in a charge of $0.1 million.

Intangible asset impairments: During the nine months ended September 30, 2020, certain intangible assets were identified where the carrying value exceeded the fair value in the Cementing Equipment segment, resulting in an impairment charge of $4.7 million. No impairment was recorded during the three and nine months ended September 30, 2021. Please see Note 6—Goodwill and Intangible Assets for additional details.

Note 16—Segment Information


Reporting Segments


Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the CODMCompany’s chief operating decision maker ("CODM"), which is our Chief Executive Officer, in deciding how to allocate resources and assess performance. We areFrank's is comprised of fourthree reportable segments: InternationalTubular Running Services U.S. Services, Tubular Sales(“TRS”) segment, Tubulars segment and Blackhawk.


Cementing Equipment (“CE”) segment. Post-Merger, the combined company is comprised of four regional-based segments.

The International ServicesTRS segment provides tubular running services globally. Internationally, the TRS segment operates in internationalthe majority of the offshore oil and gas markets and also in several onshore international regions. Our customersregions with operations in these international markets are primarily large exploration and production companies, including integrated oil and gas companies and national oil and gas companies.


Theapproximately 40 countries on six continents. In the U.S. Services, the TRS segment provides tubular services in the active onshore oil and gas drilling regions, in the U.S., including the Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale DJ Basin and Utica Shale, as well asand in the U.S. Gulf of Mexico. As the Merger did not close until after the quarter ended September 30, 2021, the historical financial statements presented in this Quarterly Report on Form 10-Q reflect the reporting segments of Frank's, the Predecessor Registrant. The Company's customers are primarily large exploration and production companies, including international oil and gas companies, national oil and gas companies, major independents and other oilfield service companies.

18
Table of Contents

EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Tubular SalesTubulars segment designs, manufactures and distributes large outside diameter ("OD") pipe, connectors and casing attachments andfor large outside diameter (“OD”) heavy wall pipe. Additionally, the Tubulars segment sells large OD pipe originally manufactured by various pipe mills. We also providemills, as plain end or fully fabricated with proprietary welded or thread-direct connector solutions and provides specialized fabrication and welding services in support of offshore deepwater projects, including drilling and production risers, flowlines and pipeline end terminations, as well as long length tubulars (uplong-length tubular assemblies up to 300400 feet in length) for use as caissons or pilings. Thislength. The Tubulars segment also designsspecializes in the development, manufacture and manufacturessupply of proprietary equipment for use in our International and U.S. Services segments.


drilling tool solutions that focus on improving drilling productivity through eliminating or mitigating traditional drilling operational risks.

The BlackhawkCE segment provides well constructionspecialty equipment to enhance the safety and well intervention rentalefficiency of rig operations. It provides specialized equipment, services and products in addition to cementing tool expertise,utilized in the U.S.construction of the wellbore in both onshore and Mexican Gulfoffshore environments. The product portfolio includes casing accessories that serve to improve the installation of Mexico, onshore U.S.casing, centralization and wellbore zonal isolation, as well as enhance cementing operations through advance wiper plug and float equipment technology. The CE segment also provides services and products utilized in the construction, completion or abandonment of the wellbore. These solutions are primarily used to isolate portions of the wellbore through the setting of barriers downhole to allow for rig evacuation in case of inclement weather, maintenance work on other select international locations.rig equipment, squeeze cementing, pressure testing within the wellbore and temporary and permanent abandonments. These offerings improve operational efficiencies and limit non-productive time if unscheduled events are encountered at the wellsite.

Revenue

Revenue from contracts with customers is disaggregated by geography for each of Frank's segments, as management believes this best depicts how the nature, amount, timing and uncertainty of Frank's revenue and cash flows are affected by economic factors. Intersegment revenue is immaterial.

The following tables presents Frank's revenue disaggregated by geography, based on the location where services were provided and products sold (in thousands):

  

Three Months Ended September 30, 2021

 
  

Tubular Running Services

  

Tubulars

  

Cementing Equipment

  

Consolidated

 

United States

 $20,250  $13,701  $10,438  $44,389 

International

  57,375   5,083   8,094   70,552 

Total Revenue

 $77,625  $18,784  $18,532  $114,941 

  

Three Months Ended September 30, 2020

 
  

Tubular Running Services

  

Tubulars

  

Cementing Equipment

  

Consolidated

 

United States

 $15,213  $12,483  $7,430  $35,126 

International

  37,713   4,000   7,578   49,291 

Total Revenue

 $52,926  $16,483  $15,008  $84,417 

  

Nine Months Ended September 30, 2021

 
  

Tubular Running Services

  

Tubulars

  

Cementing Equipment

  

Consolidated

 

United States

 $58,863  $31,995  $30,996  $121,854 

International

  156,942   15,024   23,773   195,739 

Total Revenue

 $215,805  $47,019  $54,769  $317,593 

  

Nine Months Ended September 30, 2020

 
  

Tubular Running Services

  

Tubulars

  

Cementing Equipment

  

Consolidated

 

United States

 $64,256  $27,270  $28,245  $119,771 

International

  140,494   10,496   23,249   174,239 

Total Revenue

 $204,750  $37,766  $51,494  $294,010 

19
Table of Contents

EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue by geographic area were as follows (in thousands):

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2021

  

2020

  

2021

  

2020

 

United States

 $44,389  $35,126  $121,854  $119,771 

Europe/Middle East/Africa

  33,902   20,082   91,727   77,402 

Latin America

  25,195   20,001   72,894   61,003 

Asia Pacific

  10,039   6,928   26,280   25,231 

Other countries

  1,416   2,280   4,838   10,603 

Total Revenue

 $114,941  $84,417  $317,593  $294,010 

Adjusted EBITDA


We define

Frank's defines Adjusted EBITDA as net income (loss) before interest income, net, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on saledisposal of assets, foreign currency gain or loss, equity-



24
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

basedequity-based compensation, unrealized and realized gain or loss, the effects of the TRA,net severance and other charges, other non-cash adjustments and other charges. We reviewCompany management reviews Adjusted EBITDA on both a consolidated basis and on a segment basis. We useManagement uses Adjusted EBITDA to assess ourFrank's financial performance because it allows usmanagement to compare ourFrank's operating performance on a consistent basis across periods by removing the effects of ourFrank's capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization), income tax, foreign currency exchange rates and other charges and credits. Adjusted EBITDA has limitations as an analytical tool and should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities or any other measure of financial performance presented in accordance with GAAP. Previously reported Adjusted EBITDA for the three and nine months ended September 30, 2016 has been adjusted for investigation-related matters by $1.8 million and $5.1 million, respectively, as management believes removing the effect of these items allows for better comparability across periods.

Our

Frank's CODM uses Adjusted EBITDA as the primary measure of segment reporting performance.

20
Table of Contents

EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents a reconciliation of Segment Adjusted EBITDA to net income (loss)loss (in thousands):

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Segment Adjusted EBITDA:       
International Services$11,151
 $4,532
 $25,459
 $31,752
U.S. Services (1)
(11,322) (5,995) (27,775) (13,018)
Tubular Sales(1,333) 165
 1,736
 1,343
Blackhawk3,477
 —
 7,653
 —
 1,973
 (1,298) 7,073
 20,077
Interest income, net1,019
 646
 2,170
 1,050
Depreciation and amortization(30,650) (26,545) (92,700) (84,278)
Income tax (expense) benefit(87,613) 6,800
 (72,419) 15,311
Gain on sale of assets829
 46
 2,091
 1,095
Foreign currency gain (loss)1,839
 (1,696) 3,184
 (5,907)
Derecognition of the TRA liability (2)
122,515
 —
 122,515
 —
Charges and credits (3)
(7,616) (20,151) (22,231) (37,241)
Net income (loss)$2,296
 $(42,198) $(50,317) $(89,893)

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2021

  

2020

  

2021

  

2020

 

Segment Adjusted EBITDA:

                

Tubular Running Services

 $11,912  $982  $29,790  $18,336 

Tubulars

  2,735   1,806   7,481   3,883 

Cementing Equipment

  6,389   3,376   16,036   6,806 

Corporate (1)

  (7,258)  (7,151)  (20,464)  (24,645)
   13,778   (987)  32,843   4,380 

Goodwill impairment

  0   0   0   (57,146)

Severance and other charges, net

  (2,958)  (3,549)  (13,733)  (29,436)

Interest income (expense), net

  (167)  (93)  (555)  618 

Depreciation and amortization

  (14,092)  (15,950)  (45,531)  (52,920)

Income tax (expense) benefit

  (3,969)  (6,395)  (11,812)  182 

Gain on disposal of assets

  72   308   1,733   898 

Foreign currency gain (loss)

  (4,548)  2,334   (4,698)  (5,865)

Charges and credits (2)

  (3,197)  (3,459)  (9,830)  (8,725)

Net loss

 $(15,081) $(27,791) $(51,583) $(148,014)

(1)

Includes certain expenses not attributable to a particular segment, such as costs related to support functions and corporate executives.

(1)(2)

Amounts previously reported as Corporate and other of $159 and $361 for the three and nine months ended September 30, 2016, respectively, have been reclassified to U.S. Services to conform to the current presentation.
(2)
Please see Note 12 - Related Party Transactions for further discussion.
(3)

Comprised of Equity-based compensation expense (for the three months ended September 30, 2017 2021 and 2016: $2,3422020: $3,307 and $3,828,$2,773, respectively, and for the nine months ended September 30, 2017 2021 and 2016: $11,4582020: $9,604 and $12,356, respectively), Mergers and acquisition expense (for the three months ended September 30, 2017 and 2016: none and none, respectively, and for the nine months ended September 30, 2017 and 2016: $459 and none, respectively), Severance and other charges (for the three months ended September 30, 2017 and 2016: $1,648 and $14,534, respectively, and for the nine months ended September 30, 2017 and 2016: $2,386 and $18,858,$8,434, respectively), Unrealized and realized gains (losses) (for the three months ended September 30, 2017 2021 and 2016: $(1,123)2020: $199 and $(10)$(113), respectively, and for the nine months ended September 30, 2017 2021 and 2016: $(2,819)2020: $(7) and $(973),$1,480, respectively) and Investigation-related matters (for the three months ended September 30, 2017 2021 and 2016: $2,5032020: $89 and $1,779,$573, respectively, and for the nine months ended September 30, 2017 2021 and 2016: $5,1092020: $219 and $5,054,$1,771, respectively).



21
25
FRANK’S INTERNATIONAL
Table of Contents

EXPRO GROUP HOLDINGS N.V.

(formerly named Frank's International N.V.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The following tables set forth certain financial information with respect to ourFrank's reportable segments (in thousands):

 
International
Services
 
U.S.
Services
 Tubular Sales Blackhawk Eliminations Total
Three Months Ended September 30, 2017           
Revenue from external customers$53,742
 $29,065
 $7,701
 $17,575
 $—
 $108,083
Inter-segment revenue3
 4,062
 3,111
 33
 (7,209) —
Operating loss(2,647) (25,453) (3,967) (3,013) —
 (35,080)
Adjusted EBITDA11,151
 (11,322) (1,333) 3,477
 —
 *
            
Three Months Ended September 30, 2016           
Revenue from external customers$51,028
 $34,057
 $20,029
 $—
 $—
 $105,114
Inter-segment revenue(1) 3,641
 5,036
 —
 (8,676) —
Operating loss(17,697) (30,415) (820) —
 —
 (48,932)
Adjusted EBITDA (1)
4,532
 (5,995) 165
 —
 —
 *
            
Nine Months Ended September 30, 2017           
Revenue from external customers$153,851
 $89,936
 $40,787
 $51,899
 $—
 $336,473
Inter-segment revenue18
 12,890
 10,350
 105
 (23,363) —
Operating loss(19,140) (73,092) (782) (12,642) —
 (105,656)
Adjusted EBITDA25,459
 (27,775) 1,736
 7,653
 —
 *
            
Nine Months Ended September 30, 2016           
Revenue from external customers$191,440
 $119,955
 $68,151
 $—
 $—
 $379,546
Inter-segment revenue45
 11,691
 15,053
 —
 (26,789) —
Operating loss(25,834) (74,722) (1,936) —
 —
 (102,492)
Adjusted EBITDA (1)
31,752
 (13,018) 1,343
 —
 —
 *
(1)
Amounts previously reported as Corporate and other of $159 and $361 for the three and nine months ended September 30, 2016, respectively, have been reclassified to U.S. Services to conform to the current presentation.

  

Tubular Running Services

  

Tubulars

  

Cementing Equipment

  

Corporate

  

Total

 

Three Months Ended September 30, 2021

                    

Revenue from external customers

 $77,625  $18,784  $18,532  $0  $114,941 

Operating income (loss)

  902   837   3,680   (12,163)  (6,744)

Adjusted EBITDA

  11,912   2,735   6,389   (7,258)  * 

Three Months Ended September 30, 2020

                    

Revenue from external customers

 $52,926  $16,483  $15,008  $0  $84,417 

Operating income (loss)

  (13,717)  860   1,160   (12,049)  (23,746)

Adjusted EBITDA

  982   1,806   3,376   (7,151)  * 

Nine Months Ended September 30, 2021

                    

Revenue from external customers

 $215,805  $47,019  $54,769  $0  $317,593 

Operating income (loss)

  (7,148)  2,368   8,010   (38,625)  (35,395)

Adjusted EBITDA

  29,790   7,481   16,036   (20,464)  * 

Nine Months Ended September 30, 2020

                    

Revenue from external customers

 $204,750  $37,766  $51,494  $0  $294,010 

Operating income (loss)

  (28,284)  1,327   (78,824)  (39,459)  (145,240)

Adjusted EBITDA

  18,336   3,883   6,806   (24,645)  * 

* Non-GAAP financial measure not disclosed.


Note 17—Supplemental Cash Flow Information


Supplemental17—Subsequent Events

On October 1,2021, the Company (formerly named Frank’s International N.V.) completed its previously announced Merger with Legacy Expro pursuant to the Merger Agreement. Further, on September 30, 2021, the Prior Board unanimously approved a 1-for-6 reverse stock split of Frank’s common stock, which was effected on October 1, 2021. On October 4,2021, the first trading day following the closing of the Merger, the Company Common Stock began trading on a post-reverse split basis on the New York Stock Exchange under the new name and new ticker symbol “XPRO.”

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, pursuant to the Merger Agreement, at the Effective Time, the articles of association of the Company (the “Company Articles”) were amended to increase the total authorized capital stock of the Company from 798,096,000 shares of Company Common Stock to 1,200,000,000 shares of Company Common Stock (200,000,000 shares of Company Common Stock on a post-reverse split basis) and to effect certain other amendments to the Company Articles contemplated by the Merger Agreement. All of the outstanding Company Common Stock share numbers, nominal value, share prices and per share amounts in these condensed consolidated financial statements have been retroactively adjusted to reflect a 1-for-6 reverse stock split for all periods presented.

In connection with the Merger, on October 1,2021, the Company and certain of its subsidiaries, including Exploration and Production Services (Holdings) Limited and Expro Holdings US Inc., as borrowers, entered into the New Credit Facility with DNB Bank ASA, London Branch, as agent, and other financial institutions as lenders with an aggregate commitment of $200.0 million with up to $130.0 million available for drawdowns as loans and up to $70.0 million for bonds and guarantees. Subject to the terms of the New Credit Facility, the Company has the ability to increase the commitments to $250.0 million. Proceeds of the New Credit Facility may be used for general corporate and working capital purposes. The New Credit Facility replaces the ABL Credit Facility and the senior secured revolving facility of Legacy Expro, which both terminated on October 1,2021 in connection with the Merger.

In connection with the Merger Agreement, the Company, FICV, and Mosing Holdings entered into the A&R TRA that amended and restated the Original TRA. Pursuant to the A&R TRA, on October 1,2021, the Company made a payment of $15 million cash flowsto settle the early termination payment obligations that would otherwise be owed to Mosing Holdings under the Original TRA as a result of the Merger. The A&R TRA also provides for other contingent payments to be made by the Company to Mosing Holdings in the future in the event the Company realizes cash tax savings from tax attributes covered under the Original TRA during the ten year period following October 1,2021 in excess of $18,057,000.

Please refer to the Company's Current Report on Form 8-K filed on October 1, 2021 for further details regarding the completion of the Merger, the New Credit Facility and non-cash transactions were as follows for the periods indicated (in thousands):

A&R TRA.

22
 For the Nine Months Ended September 30,
 2017 2016
    
Non-cash transactions:   
Change in accounts payable and accrued expenses related to capital expenditures$3,983
 $1,086
Conversion of Preferred Stock—
 56,056
Tax receivable agreement liability—
 (124,646)
Deferred tax impact of tax receivable agreement—
 68,590



26
Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-Q (this “Form 10-Q”) includes certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include those that express a belief, expectation or intention, as well as those that are not statements of historical fact. Forward-looking statements include information regarding our future plans and goals and our current expectations with respect to, among other things:


our business strategy and prospects for growth;
our cash flows and liquidity;
our financial strategy, budget, projections and operating results;
the amount, nature and timing of capital expenditures;
the availability and terms of capital;
competition and government regulations; and
general economic conditions.

Our

•

business strategy and prospects for growth;

•

post-Merger integration;

•

cash flows and liquidity;

•

financial strategy, budget, projections and operating results;

•

the amount, nature and timing of capital expenditures;

•

the availability and terms of capital;

•

competition and government regulations; and

•

general economic conditions.

These forward-looking statements are generally accompanied by words such as “anticipate,” “believe,” “estimate,” “project,“expect,” “goal,” “plan,” “potential,” “predict,” “believe,“project,” “expect,” “anticipate,” “potential,” “plan,” “goal” or other terms that convey the uncertainty of future events or outcomes, although not all forward-looking statements contain such identifying words. The forward-looking statements in this Form 10-Q speak only as of the date of this report; we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. Forward-looking statements are not assurances of future performance and involve risks and uncertainties. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties include, but are not limited to, the following:


•

continuing uncertainty relating to global crude oil demand and crude oil prices that correspondingly may lead to further significant reductions in domestic oil and gas activity, which in turn could result in further significant declines in demand for our products and services;

•

uncertainty regarding the extent and duration of the remaining restrictions in the United States and globally on various commercial and economic activities due to the COVID-19 virus, including uncertainty regarding the re-imposition of restrictions due to resurgences in infection rates and the emergence of new, more contagious or virulent strains of COVID-19; such restrictions are designed to protect public health but also have the effect of significantly reducing demand for oil and gas, which may correspondingly decrease demand for our products and services;

•

uncertainty regarding the timing, pace and extent of an economic recovery in the United States and elsewhere, which in turn will likely affect demand for crude oil and therefore the demand for the products and services we provide and the commercial opportunities available to us;

•

the impact of current and future laws, rulings, governmental regulations, accounting standards and statements, and related interpretations;

•

unique risks associated with our offshore operations;

•

political, economic and regulatory uncertainties in our international operations;

•

our ability to develop new technologies and products;

•

our ability to protect our intellectual property rights;

•

our ability to employ and retain skilled and qualified workers;

•

the level of competition in our industry;

•

operational safety laws and regulations;

•

international trade laws and sanctions;

•

weather conditions and natural disasters;

•

global or national health concerns, including health epidemics, including COVID-19;

•

policy or regulatory changes domestically in the United States;

•unforeseen consequences of the Merger;
•

uncertainty with respect to integration and realization of expected cost synergies following completion of the Merger; and

•

litigation risk associated with the Merger.

The impact of the levelCOVID-19 pandemic and related economic, business and market disruptions continue to evolve, and its future effects are uncertain. The continued impact of activity inCOVID-19 on the oilCompany’s business will depend on many factors, many of which are beyond management's control and gas industry;

knowledge. It is therefore difficult for management to assess or predict with accuracy the broad future effects of this health crisis on the global economy, the energy industry or the Company’s business. As additional information becomes available, events or circumstances change and strategic operational decisions are made by management, further or sustained declines in oiladjustments may be required which could have a material adverse impact on the Company’s consolidated financial position, results of operations and gas prices, including those resulting from weak global demand;
the timing, magnitude, probability and/or sustainability of any oil and gas price recovery;
unique risks associated with our offshore operations;
political, economic and regulatory uncertainties in our international operations;
our ability to develop new technologies and products;
our ability to protect our intellectual property rights;
our ability to employ and retain skilled and qualified workers;
the level of competition in our industry;
operational safety laws and regulations; and
weather conditions and natural disasters.

cash flows.

These and other important factors that could affect our operating results and performance are described in (1) “Risk Factors” in Part II, Item IA1A of this Form 10-Q, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Form 10-Q, and elsewhere within this Form 10-Q, (2) ourFrank's Annual Report on Form 10-K for the year ended December 31, 2016,2020, filed with the SEC on February 24, 2017 (our "Annual Report"March 1, 2021 (the “Annual Report”), (3) ourFrank’s proxy statement/prospectus dated August 5, 2021 filed by with the SEC on August 6, 2021, (4) other reports and filings we make with the SEC from time to time and (4)(5) other announcements we make from time to time. Should one or more of the risks or uncertainties described in the documents above or in this Form 10-Q occur, or should underlying assumptions prove incorrect, our actual results, performance, achievements or plans could differ materially from those expressed or implied in any forward-looking statements. All such forward-looking statements in this Form 10-Q are expressly qualified in their entirety by the cautionary statements in this section.




23
27
Table of Contents


Item 2. Management’s Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of ourFrank's financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q and the audited consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in ourFrank's Annual Report.


 The following discusses Frank’s results of operations prior to the Merger, and is not indicative of the Company’s prospective results of operations following the Merger.

This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors, including those described in the sections titled “Cautionary“Cautionary Note Regarding Forward-Looking Statements”Statements” and “Risk Factors”“Risk Factors” of this Form 10-Q.


Overview Unless the context indicates otherwise, in this Quarterly Report on Form 10-Q, the terms “Expro,” “Company,” “we,” “us” and “our” refer to Expro Group Holdings N.V. and, where appropriate, its consolidated subsidiaries following the reverse merger described below. References to the terms “Frank's” or the “Predecessor Registrant” refer to Frank's International N.V., the predecessor reporting entity prior to the reverse merger described below, and references to “Legacy Expro” refer to Expro Group Holdings International Limited, the entity acquired by the Predecessor Registrant in the reverse merger.

Merger Agreement

On March 10, 2021, Frank’s and New Eagle Holdings Limited, an exempted company limited by shares incorporated under the laws of Business


We arethe Cayman Islands and a direct wholly owned subsidiary of Frank’s (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Legacy Expro 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’s (the “Merger”). The Merger closed on October 1, 2021, and Frank's was renamed “Expro Group Holdings N.V.”  Further, pursuant to the Merger Agreement, at the Effective Time, the articles of association of the Company (the “Company Articles”) were amended to increase the total authorized capital stock of the Company from 798,096,000 shares of Company Common Stock to 1,200,000,000 shares of Company Common Stock (200,000,000 shares of Company Common Stock on a post-reverse split basis) and to effect certain other amendments to the Company Articles contemplated by the Merger Agreement. The Company issued approximately 71 million shares of Company Common Stock in the Merger to Legacy Expro shareholders. On September 30, 2021, Frank’s pre-Merger board of directors (the “Prior Board”) unanimously approved a 1-for-6 reverse stock split of Frank’s common stock, which was effected on October 1, 2021. As the Merger did not close until after the end of the quarter ended September 30, 2021, the historical financial statements presented in this Quarterly Report on Form 10-Q reflect the financial position, results of operations and cash flows of Frank's, the Predecessor Registrant. All of the outstanding Company Common Stock share numbers, nominal value, share prices and per share amounts in this discussion and analysis have been retroactively adjusted to reflect a 1-for-6 reverse stock split for all periods presented.

Frank's Prior to the Merger

Prior to the Merger, Frank's was a global provider of highly engineered tubular services, tubular fabrication and specialty well construction and well intervention solutions to the oil and gas industry and havehad been in business for over 7580 years. We provide ourFrank's provided its services and products to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells.


We conduct our

Frank's conducted its business through fourthree operating segments:


International Services. We currently provide our services in approximately 60 countries on six continents. Our customers

•

Tubular Running Services. The Tubular Running Services (“TRS”) segment provided tubular running services globally. Internationally, the TRS segment operated in the majority of the offshore oil and gas markets and also in several onshore regions with operations in approximately 40 countries on six continents. In the U.S., the TRS segment provided services in the active onshore oil and gas drilling regions, including the Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale and Utica Shale, as well as in the U.S. Gulf of Mexico. Customers in these international markets are primarily large exploration and production companies, including international oil and gas companies, national oil and gas companies, major independents and other oilfield service companies.

•

Tubulars. The Tubulars segment designed, manufactured and distributed connectors and casing attachments for large outside diameter (“OD”) heavy wall pipe. Additionally, the Tubulars segment sold large OD pipe originally manufactured by various pipe mills, as plain end or fully fabricated with proprietary welded or thread-direct connector solutions and provided specialized fabrication and welding services in support of offshore deepwater projects, including drilling and production risers, flowlines and pipeline end terminations, as well as long-length tubular assemblies up to 400 feet in length. The Tubulars segment also specialized in the development, manufacture and supply of proprietary drilling tool solutions that focused on improving drilling productivity through eliminating or mitigating traditional drilling operational risks.

•

Cementing Equipment. The Cementing Equipment (“CE”) segment provided specialty equipment to enhance the safety and efficiency of rig operations. It provided specialized equipment, services and products utilized in the construction of the wellbore in both onshore and offshore environments. The product portfolio of this segment included casing accessories that served to improve the installation of casing, centralization and wellbore zonal isolation, as well as enhance cementing operations through advance wiper plug and float equipment technology. The CE segment also provided services and products utilized in the construction, completion or abandonment of the wellbore. These solutions are primarily used to isolate portions of the wellbore through the setting of barriers downhole to allow for rig evacuation in case of inclement weather, maintenance work on other rig equipment, squeeze cementing, pressure testing within the wellbore, hydraulic fracturing and temporary and permanent abandonments. These offerings improve operational efficiencies and limit non-productive time if unscheduled events are encountered at the wellsite.

Expro after the Merger

Following completion of the Merger, the business conducted by Legacy Expro became the majority of the business conducted by the Company. Working for clients across the entire well life cycle, the Company is a leading provider of energy services, offering cost-effective, innovative solutions and what the Company considered to be best-in-class safety and service quality.  The Company’s extensive portfolio of capabilities spans well construction, well flow management, subsea well access, and well integrity and intervention.

24
Table of Contents

Outlook

The outlook for the last quarter of 2021 and through 2022 indicates a continuing modest recovery in exploration and production companies,expenditures, albeit at different rates in individual countries depending on a range of factors, including integratedthe slow but steady drawdown on global oil inventories and gas companiesincreasing oil production offset by a slower rate of demand growth, uncertainty about COVID-19 recovery, the impact of governmental restrictions and nationalany new variants or a resurgence over the winter period.

We expect that crude oil demand and gas companies.


U.S. Services. We service customersassociated customer activity will continue to increase in the offshore areas ofmid to long term toward pre-pandemic levels. We remain vigilant to the U.S. Gulf of Mexico. In addition, we have a presence in the active onshore oil and gas drilling regions in the U.S., including the Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale, DJ Basin and Utica Shale.

Tubular Sales. We design, manufacture and distribute large OD pipe, connectors and casing attachments and sell large OD pipe originally manufactured by various pipe mills. We also provide specialized fabrication and welding services in support of offshore projects, including drilling and production risers, flowlines and pipeline end terminations, as well as long-length tubulars (up to 300 feet in length) for use as caissons or pilings. This segment also designs and manufactures proprietary equipment for use in our Internationaluncertainty that OPEC-controlled supply and U.S. Services segments.

Blackhawk. We provide well construction and well intervention rental equipment, services and products, in addition to cementing tool expertise, ininternational activity levels can have on the U.S. and Mexicanmarket.  

While the Gulf of Mexico onshore U.S.is expected to remain relatively flat through 2022, operators will continue to look to the Company’s digital and other select international locations.


Market Outlook

automated technologies to drive operational efficiencies with reduced personnel. The Company has had recent success in bolstering its market for our products and services continues to be challenged by depressed oil and gas commodity prices and reduced customer spending on offshore exploration and development projects. Despite some stabilization in commodity prices and increases in U.S. onshore activity and profitability, commodity prices remain below levels necessary for meaningful increases in offshore activity, particularlyshare in the markets of West Africa and the U.S. Gulf of Mexico. For the remainder of 2017, we expect to see further deterioration of pricing and activity in the U.S. Gulf of Mexico with digital and consequently, our Tubular Salesautomated technology that remove personnel from the rig site, and as we see increased activity levels in the international markets, we are well positioned to adopt this same technology blueprint to these markets.

We anticipate the Company’s U.S. land business segment. Internationalwill continue to improve through at least 2022, supported by recent commercialization of performance drilling technologies and digital solutions that increase operational efficiency. In international markets, we expect exploration activity to become more near-field and infrastructure led in the near- to intermediate-term, with field developments also accelerated to maximize the economic recovery. Consistent with past recoveries, incremental operational expenditures and brownfield enhancement programs are beginningexpected to showbe an initial area of customer focus and, in select markets, we are seeing some signs of stabilizationa recovery in intervention and the potential for reaching an activity bottom in the next twelve months.well integrity projects, execution of which is a traditional strength of Legacy Expro supported by its subsea well access and well assurance technologies. We expect to see moderate growth in our Blackhawk segment both inof these service lines over the U.S. onshore and in select international markets duringfollowing periods.

Evaluation of Operations

Prior to the next several quarters as we expand its operational footprint. In order to offset some of the declines in activity and pricing, we continue to look for ways to improve our operational efficiency and grow share in markets in which we have historically been underrepresented, including international land and shelf opportunities. We also continue to evaluate potential



28

acquisitions to broaden our well construction offering and position the Company for revenue growth in a market recovery.

How We Evaluate Our Operations

We useMerger, management used a number of financial and operational measures to routinely analyze and evaluate the performance of our business,the Frank's businesses, including revenue, Adjusted EBITDA, Adjusted EBITDA margin and safety performance.

Revenue


We analyze our

Company management analyzes revenue growth by comparing actual monthly revenue to our internal projections for each month to assess ourbusiness performance. WeManagement also assessassesses incremental changes in our monthly revenue across our operating segments to identify potential areas for improvement.

25

Table of Contents

Adjusted EBITDA and Adjusted EBITDA Margin


We define

Frank's defines Adjusted EBITDA as net income (loss) before interest income, net, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on saledisposal of assets, foreign currency gain or loss, equity-based compensation, unrealized gainand realized gains or loss, the effects of the tax receivable agreement ("TRA"),losses, other non-cash adjustments and other charges or credits. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of our revenues. We reviewrevenue. Management reviews Adjusted EBITDA and Adjusted EBITDA margin on both a consolidated basis and on a segment basis. We useFrank's uses Adjusted EBITDA and Adjusted EBITDA margin to assess ourits financial performance because it allows usmanagement to compare our operating performance on a consistent basis across periods by removing the effects of ourFrank's capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization), items outside the control of our management team (such as income tax, and foreign currency exchange rates)rates and other charges outside the normal course of business.and credits. Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities or any other measure of financial performance presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"(“GAAP”). Previously reported Adjusted EBITDA for the three and nine months ended September 30, 2016 has been adjusted for investigation-related matters by $1.8 million and $5.1 million, respectively, as management believes removing the effect of these items allows for better comparability across periods.


The following table presents a reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA margin to net income (loss) for each of the periods presented (in thousands):

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
        
Net income (loss)$2,296
 $(42,198) $(50,317) $(89,893)
Interest income, net(1,019) (646) (2,170) (1,050)
Depreciation and amortization30,650
 26,545
 92,700
 84,278
Income tax expense (benefit)87,613
 (6,800) 72,419
 (15,311)
Gain on sale of assets(829) (46) (2,091) (1,095)
Foreign currency (gain) loss(1,839) 1,696
 (3,184) 5,907
Derecognition of the TRA liability (1)
(122,515) —
 (122,515) —
Charges and credits (2)
7,616
 20,151
 22,231
 37,241
Adjusted EBITDA$1,973
 $(1,298) $7,073
 $20,077
Adjusted EBITDA margin1.8% (1.2)% 2.1% 5.3%

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2021

  

2020

  

2021

  

2020

 
                 

Net loss

 $(15,081) $(27,791) $(51,583) $(148,014)

Goodwill impairment

  —   —   —   57,146 

Severance and other charges, net

  2,958   3,549   13,733   29,436 

Interest (income) expense, net

  167   93   555   (618)

Depreciation and amortization

  14,092   15,950   45,531   52,920 

Income tax expense (benefit)

  3,969   6,395   11,812   (182)

Gain on disposal of assets

  (72)  (308)  (1,733)  (898)

Foreign currency (gain) loss

  4,548   (2,334)  4,698   5,865 

Charges and credits (1)

  3,197   3,459   9,830   8,725 

Adjusted EBITDA

 $13,778  $(987) $32,843  $4,380 

Adjusted EBITDA margin

  12.0%  (1.2)%  10.3%  1.5%

(1)

Please see Note 12 - Related Party Transactions in the Notes to the Unaudited Condensed Consolidated Financial Statements for further discussion.



29

(2)

Comprised of Equity-based compensation expense (for the three months ended September 30, 20172021 and 2016: $2,3422020: $3,307 and $3,828,$2,773, respectively, and for the nine months ended September 30, 20172021 and 2016: $11,4582020: $9,604 and $12,356,$8,434, respectively), MergersUnrealized and acquisition expenserealized (gains) losses (for the three months ended September 30, 20172021 and 2016: none2020: $(199) and none,$113, respectively, and for the nine months ended September 30, 20172021 and 2016: $4592020: $7 and none, respectively)$(1,480), Severance and other charges (for the three months ended September 30, 2017 and 2016: $1,648 and $14,534, respectively, and for the nine months ended September 30, 2017 and 2016: $2,386 and $18,858, respectively), Unrealized and realized losses (for the three months ended September 30, 2017 and 2016: $1,123 and $10, respectively, and for the nine months ended September 30, 2017 and 2016: $2,819 and $973, respectively) and Investigation-related matters (for the three months ended September 30, 20172021 and 2016: $2,5032020: $89 and $1,779,$573, respectively, and for the nine months ended September 30, 20172021 and 2016: $5,1092020: $219 and $5,054,$1,771, respectively).

For a reconciliation of our Adjusted EBITDA on a segment basis to the most comparable measure calculated in accordance with GAAP, see “Operating Segment Results.”


Safety and Quality Performance


Safety is one of our primary core values. Maintaining a strong safety record is a critical component of our operational success. Many of our customers have safety standards we must satisfy before we can perform services. As a result, we continually monitor and improve our safety performance through the evaluation of safety observations, job and customer surveys, and safety data. The primary measure for ourFrank's safety performance is the tracking of the Total Recordable Incident Rate in addition to the Lost Time Incident Rate, which areis reviewed on both a monthly and rolling twelve-month basis.


Our business is dependent on our ability to provide highly reliable and safe equipment. If our equipment does not meet statutory regulations and/or our clients do not accept the quality of our equipment, we could encounter loss of contracts and/or loss of reputation, which could materially impact our operations and profitability. Further, the failure of our equipment could subject us to litigation, regulatory fines and/or adverse customer reaction. In addition, equipment certification requirements vary by region and changes in these requirements could impact our ability to operate in certain markets if our tools do not comply with these requirements.



26
30
Table of Contents

Consolidated Results of Operations


The following table presents ourFrank's consolidated results for the periods presented (in thousands):

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
 (Unaudited)
Revenues:       
Equipment rentals and services$92,547
 $85,698
 $272,402
 $312,132
Products 
15,536
 19,416
 64,071
 67,414
Total revenue108,083
 105,114
 336,473
 379,546
        
Operating expenses:       
Cost of revenues, exclusive of depreciation and amortization       
Equipment rentals and services (1)
60,981
 57,307
 178,865
 189,965
Products (1)
10,750
 16,029
 45,162
 51,446
General and administrative expenses (1)
39,963
 39,677
 125,107
 138,586
Depreciation and amortization30,650
 26,545
 92,700
 84,278
Severance and other charges1,648
 14,534
 2,386
 18,858
Gain on sale of assets(829) (46) (2,091) (1,095)
Operating loss(35,080) (48,932) (105,656) (102,492)
 
Other income (expense):       
Derecognition of the TRA liability (2)
122,515
 —
 122,515
 —
Other income (expense), net(384) 984
 348
 2,145
Interest income, net1,019
 646
 2,170
 1,050
Mergers and acquisition expense—
 —
 (459) —
Foreign currency gain (loss)1,839
 (1,696) 3,184
 (5,907)
Total other income (expense)124,989
 (66) 127,758
 (2,712)
        
Income (loss) before income tax expense (benefit)89,909
 (48,998) 22,102
 (105,204)
Income tax expense (benefit)87,613
 (6,800) 72,419
 (15,311)
Net income (loss)2,296
 (42,198) (50,317) (89,893)
Less: Net loss attributable to noncontrolling interest—
 (5,216) —
 (20,741)
        
Net income (loss) attributable to Frank's International N.V.$2,296
 $(36,982) $(50,317) $(69,152)
(1)
For the three months ended September 30, 2016, $10,305 and $2,792 have been reclassified from general and administrative expenses to equipment rentals and services and products, respectively, and $34,598 and $8,852, respectively, for the nine months ended September 30, 2016. See Note 1 - Basis of Presentation in the Notes to Unaudited Condensed Consolidated Financial Statements.
(2)
Please see Note 12 - Related Party Transactions in the Notes to the Unaudited Condensed Consolidated Financial Statements for further discussion.

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2021

  

2020

  

2021

  

2020

 
  

(Unaudited)

 

Revenue:

                

Services

 $95,821  $66,418  $267,864  $246,084 

Products

  19,120   17,999   49,729   47,926 

Total revenue

  114,941   84,417   317,593   294,010 
                 

Operating expenses:

                

Cost of revenue, exclusive of depreciation and amortization

                

Services

  70,627   56,574   203,181   197,005 

Products

  15,489   13,733   40,811   36,007 

General and administrative expenses

  18,591   18,665   51,465   67,634 

Depreciation and amortization

  14,092   15,950   45,531   52,920 

Goodwill impairment

  —   —   —   57,146 

Severance and other charges, net

  2,958   3,549   13,733   29,436 

Gain on disposal of assets

  (72)  (308)  (1,733)  (898)

Operating loss

  (6,744)  (23,746)  (35,395)  (145,240)
                 

Other income (expense):

                

Other income, net

  347   109   877   2,291 

Interest income (expense), net

  (167)  (93)  (555)  618 

Foreign currency gain (loss)

  (4,548)  2,334   (4,698)  (5,865)

Total other income (expense)

  (4,368)  2,350   (4,376)  (2,956)
                 

Loss before income taxes

  (11,112)  (21,396)  (39,771)  (148,196)

Income tax expense (benefit)

  3,969   6,395   11,812   (182)

Net loss

 $(15,081) $(27,791) $(51,583) $(148,014)

Three Months Ended September 30, 20172021 Compared to Three Months Ended September 30, 2016


Revenues. Revenues2020

Revenue. Revenue from external customers, excluding intersegment sales, for the three months ended September 30, 20172021 increased by $3.0$30.5 million, or 2.8%36.2%, to $108.1$114.9 million from $105.1$84.4 million for the three months ended September 30, 2016. The revenue increase2020. Revenue increased across all segments as the prior year was primarily attributable to our recently acquired Blackhawk segmentsignificantly impacted by the onset of the COVID-19 pandemic and our International Services segment, partially offset by a decreaseresulting decline in our U.S. Services and Tubular Sales segments. Revenuesoil prices. Revenue for our segments areis discussed separately below under the heading "Operating“Operating Segment Results."




31

”

Cost of revenues,revenue, exclusive of depreciation and amortization. Cost of revenuesrevenue for the three months ended September 30, 2017 decreased2021 increased by $1.6$15.8 million, or 2.2%22.5%, to $71.7$86.1 million from $73.3$70.3 million for the three months ended September 30, 20162020. The increase was driven by improved activity levels as compared to the prior year.

General and administrative expenses. General and administrative expenses for the three months ended September 30, 2021 were flat as compared to the three months ended September 30, 2020 due to ourpreviously implemented restructuring and cost cutting initiatives.


measures.

Depreciation and amortization.Depreciation and amortization for the three months ended September 30, 2017 increased2021 decreased by $4.1$1.9 million, or 15.5%11.6%, to $30.7$14.1 million from $26.5$16.0 million for the three months ended September 30, 2016, primarily due to our recently acquired Blackhawk segment.


2020, as a result of a lower depreciable base.

Severance and other charges, net. Severance and other charges, net for the three months ended September 30, 20172021 decreased by $12.9$0.6 million, or 88.7%16.7%, to $1.6$2.9 million from $14.5$3.5 million for the three months ended September 30, 2016 due to higher workforce reductions in the third quarter of 2016 compared to 2017 as we took steps to adjust our workforce to meet the depressed demand in the industry.


Foreign currency gain (loss). Foreign currency gain2020. Severance and other charges, net for the three months ended September 30, 20172021 benefited from lower severance costs as the prior year was $1.8 million as comparednegatively impacted by the effects of COVID-19. See Note 15—Severance and Other Charges, net in the Notes to a foreignUnaudited Condensed Consolidated Financial Statements for additional information.

Foreign currency lossgain (loss). Foreign currency gain (loss) for the three months ended September 30, 20162021 changed by $6.9 million, to a loss of $1.7 million.$4.5 million from a gain of $2.3 million for the three months ended September 30, 2020. The change in foreign currency gain (loss)results year-over-year was primarily driven by the weakening of the U.S. dollar in the current period as compared to the prior year period against other currencies.


the Norwegian Krone and Pound Sterling.

Income tax expense (benefit). expense. Income tax expense for the three months ended September 30, 2017 increased2021 decreased by $94.4$2.4 million to $87.6$4.0 million from a benefit of $6.8$6.4 million for the three months ended September 30, 2016, 2020, primarily as a result of recording valuation allowances againsta change in the jurisdictional sources of income, namely a decrease in revenue in certain regions that apply withholding or revenue based taxes. We are subject to many U.S. and foreign tax jurisdictions and many tax agreements and treaties among the various taxing authorities. Our operations in these jurisdictions are taxed on various bases such as income before taxes, deemed profits (which is generally determined using a percentage of revenue rather than profits) and withholding taxes based on revenue; consequently, the relationship between our net deferredpre-tax income from operations and our income tax assets. The deferredprovision varies from period to period based on the overall effective tax assets relate to net operating losses, outside basis differencesrate for all jurisdictions in our partnership investment and other timing differences primarily associated with our U.S. operations.which we operate.

27

Table of Contents

Nine Months Ended September 30, 20172021 Compared to Nine Months Ended September 30, 2016


Revenues. Revenues2020

Revenue. Revenue from external customers, excluding intersegment sales, for the nine months ended September 30, 2017 decreased2021 increased by $43.1$23.6 million, or 11.3%8.0%, to $336.5$317.6 million from $379.5$294.0 million for the nine months ended September 30, 2016. The decrease2020. Revenue increased across all segments as the prior year was primarily attributable to lower revenuessignificantly impacted by the onset of the COVID-19 pandemic and resulting decline in the majority of our segments due to declining activity as depressed oil and gas prices resulted in reduced rig count, downward pricing pressures, rig cancellations and delays as well as deferred work scopes in the International and offshore U.S. Services regions while revenues for Tubular Sales decreased due to lower international demand and decreased deepwater fabrication revenue. The decrease in total revenues was partially offset by revenues from our recently acquired Blackhawk segment of $51.9 million. Revenuesprices. Revenue for our segments areis discussed separately below under the heading "Operating“Operating Segment Results."


”

Cost of revenues,revenue, exclusive of depreciation and amortization. Cost of revenuesrevenue for the nine months ended September 30, 2017 decreased2021 increased by $17.4$11.0 million, or 7.2%4.7%, to $224.0$244.0 million from $241.4$233.0 million for the nine months ended September 30, 2016. Our cost of revenues decline2020. The increase was consistent with our lower revenue and cost cutting initiative.


driven by improved activity levels as compared to the prior year period in Frank's TRS segment.

General and administrative expenses. expenses. General and administrative expenses for the nine months ended September 30, 20172021 decreased by $13.5$16.2 million, or 9.7%23.9%, to $125.1$51.4 million from $138.6$67.6 million for the nine months ended September 30, 2016 primarily2020 due to bad debt expense recognized in 2016 related to difficulty in collecting certain receivables in Venezuelapreviously implemented restructuring and cost cutting initiatives.


measures.

Depreciation and amortization. Depreciation and amortization for the nine months ended September 30, 2017 increased2021 decreased by $8.4$7.4 million,, or 10.0%14.0%, to $92.7 million from $84.3 million for the nine months ended September 30, 2016, primarily due to our recently acquired Blackhawk segment, partially offset by a lower depreciable base related to our legacy assets.


Severance and other charges. Severance and other charges for the nine months ended September 30, 2017 decreased by $16.5 million, or 87.3%, to $2.4$45.5 million from $18.9$52.9 million for the nine months ended September 30, 20162020, as a result of a higher workforce reduction in 2016 compared to 2017 as we took steps to adjust our workforce to meetlower depreciable base and less intangible asset amortization.

Goodwill impairment. We recognized a goodwill impairment of $57.1 million during the depressed demandnine months ended September 30, 2020. No goodwill impairment was recognized during the nine months ended September 30, 2021. See Note 6—Goodwill and Intangible Assets in the industry.




32

Foreign currency gain (loss)Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

Severance and other charges, net. Foreign currency gainSeverance and other charges, net for the nine months ended September 30, 20172021 decreased by $15.7 million to $13.7 million from $29.4 million for the nine months ended September 30, 2020. Severance and other charges, net for the nine months ended September 30, 2020 was $3.2unfavorably impacted by fixed asset impairment charges of $15.5 million as comparedand intangible asset impairments of $4.7 million, primarily driven by COVID-19-related activity disruptions and customer spending cuts in response to a foreignfalling oil prices. See Note 15—Severance and Other Charges, net in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

Foreign currency gain (loss). Foreign currency loss for the nine months ended September 30, 2016 of2021 decreased by $1.2 million, or 19.9%, to $4.7 million compared to $5.9 million. The improvement in foreign currency gain (loss) year-over-year was primarily driven by the weakening of the U.S. dollar against other currencies which positively impacted foreign currency gain (loss) for the nine months ended September 30, 2017 and the absence of the devaluation of the Nigerian Naira which negatively impacted foreign currency gain (loss) for the nine months ended September 30, 2016.


Income tax expense (benefit). Income tax expense for the nine months ended September 30, 2017 increased by $87.7 million to $72.4 million from a benefit of $15.3 million for the nine months ended September 30, 2016, primarily as2020. Current year results were negatively impacted by weakening of the U.S. dollar against the Norwegian Krone and Pound Sterling. Prior year results were negatively impacted by the effects of COVID-19.

Income tax expense (benefit). Income tax expense (benefit) for the nine months ended September 30, 2021 changed by $12.0 million to an expense of $11.8 million from a resultbenefit of recording valuation allowances against our net deferred tax assets.$0.2 million for the nine months ended September 30, 2020. The deferred tax assets relate toprior year period benefited from the 5-year net operating losses, outside basis differencesloss carryback provision included in our partnership investment and other timing differences primarily associated with our U.S. operations.the CARES Act.

28

Table of Contents

Operating Segment Results


The following table presents revenuesrevenue and Adjusted EBITDA by segment (in thousands):

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Revenue:       
International Services$53,742
 $51,028
 $153,851
 $191,440
U.S. Services29,065
 34,057
 89,936
 119,955
Tubular Sales7,701
 20,029
 40,787
 68,151
Blackhawk17,575
 —
 51,899
 —
Total$108,083
 $105,114
 $336,473
 $379,546
        
Segment Adjusted EBITDA (2):
       
International Services$11,151
 $4,532
 $25,459
 $31,752
U.S. Services (1)
(11,322) (5,995) (27,775) (13,018)
Tubular Sales(1,333) 165
 1,736
 1,343
Blackhawk3,477
 —
 7,653
 —
 $1,973
 $(1,298) $7,073
 $20,077

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2021

  

2020

  

2021

  

2020

 

Revenue:

                

Tubular Running Services

 $77,625  $52,926  $215,805  $204,750 

Tubulars

  18,784   16,483   47,019   37,766 

Cementing Equipment

  18,532   15,008   54,769   51,494 

Total

 $114,941  $84,417  $317,593  $294,010 
                 

Segment Adjusted EBITDA (1):

                

Tubular Running Services

 $11,912  $982  $29,790  $18,336 

Tubulars

  2,735   1,806   7,481   3,883 

Cementing Equipment

  6,389   3,376   16,036   6,806 

Corporate (2)

  (7,258)  (7,151)  (20,464)  (24,645)
  $13,778  $(987) $32,843  $4,380 

(1)

Amounts previously reported as Corporate and other of $159 and $361 for the three and nine months ended September 30, 2016, respectively, have been reclassified to U.S. Services to conform to the current presentation.
(2)

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. (For a reconciliation of our Adjusted EBITDA, see "Adjusted“Adjusted EBITDA and Adjusted EBITDA Margin"Margin”).

(2)

Includes certain expenses not attributable to a particular segment, such as costs related to support functions and corporate executives.


29
Table of Contents

Three Months Ended September 30, 20172021 Compared to Three Months Ended September 30, 2016


International2020

Tubular Running Services


Revenue for the International ServicesTRS segment was $77.6 million for the three months ended September 30, 2021, an increase of $24.7 million, or 46.7%, compared to $52.9 million for the same period in 2020. The increase was driven by improved activity levels across most regions as the prior year was significantly impacted by COVID-19-related activity disruptions and customer spending cuts in response to falling oil prices, primarily in Africa, Europe, and the U.S. land and offshore markets.

Adjusted EBITDA for the TRS segment was $11.9 million for the three months ended September 30, 2021, an increase of $10.9 million, compared to $1.0 million for the same period in 2020. Improved activity levels in Africa, Europe, and the U.S. land and offshore markets contributed to the increase.

Tubulars

Revenue for the Tubulars segment was $18.8 million for the three months ended September 30, 2021, an increase of $2.3 million, or 14.0%, compared to $16.5 million for the same period in 2020, primarily as a result of improved activity levels and increased tubular product sales as compared to the prior year, which was impacted by COVID-19-related activity disruptions and customer spending cuts in response to falling oil prices. 

Adjusted EBITDA for the Tubulars segment was $2.7 million for the three months ended September 30, 2017,2021, an increase of $0.9 million, or 5.3%51.4%, compared to $1.8 million for the same period in 2016,2020, primarily due to anthe increase in Middle East onshore activity, European offshore shelf activity, and increased offshore activity in Latin America and Canada, partially offset by declines in revenue attributable to the Africa and Asia Pacific regions.


Adjusted EBITDArevenue.

Cementing Equipment

Revenue for the International ServicesCE segment increased by $6.6was $18.5 million for the three months ended September 30, 2017,2021, an increase of $3.5 million, or 146.1%23.5%, compared to $15.0 million for the same period in 2016, primarily2020, driven by improved drilling activity and increased revenueproduct sales in the U.S. as well as lower expensesa result of the recovery in 2017 due to cost cutting measures.



33


U.S. Services

Revenueoil prices.

Adjusted EBITDA for the U.S. ServicesCE segment decreased by $5.0was $6.4 million for the three months ended September 30, 2017,2021, an increase of $3.0 million, or 14.7%89.2%, compared to $3.4 million for the same period in 2016. Onshore services revenue increased by $6.3 million as a result of improved activity from increased rig counts. The offshore business saw a decrease in revenue of $11.3 million as a result of overall lower activity2020, due to rig cancellations and delaysincreased revenue, particularly in the Gulf of Mexico, coupled with downward pricing pressures.


U.S. offshore market and ongoing cost management.

Corporate

Adjusted EBITDA for the U.S. Services segment decreased by $5.3Corporate was a loss of $7.3 million for the three months ended September 30, 2017, or 88.9%,2021, and was flat compared to the same period in 2016 due to overall lower offshore activity and increased pricing pressures partially offset by higher activity in our onshore services.


Tubular Sales

Revenue for the Tubular Sales segment decreased by $12.3 million for the three months ended September 30, 2017, or 61.6%, compared to the same period in 20162020 primarily due to lower deepwater activity in the Gulf of Mexicorestructuring and delays in projects.

Adjusted EBITDA for the Tubular Sales segment decreased by $1.5 million for the three months ended September 30, 2017, compared to the same period in 2016 primarily due to the decrease in revenue, which was partially offset by lower expenses due to reduced activity andpreviously implemented cost cutting measures.

Blackhawk

The Blackhawk segment is comprised solely of the assets we acquired on November 1, 2016. Revenues and Adjusted EBITDA for the segment were $17.6 million and $3.5 million for the three months ended September 30, 2017. See Note 3 - Acquisition and Divestitures in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information on our Blackhawk acquisition.

Nine Months Ended September 30, 20172021 Compared to Nine Months Ended September 30, 2016


International2020

Tubular Running Services


Revenue for the International ServicesTRS segment decreased by $37.6was $215.8 million for the nine months ended September 30, 2017,2021, an increase of $11.0 million, or 19.6%5.4%, compared to $204.8 million for the same period in 2016, primarily due to depressed oil and gas prices which have challenged the economics of our customers' development projects, particularly in Europe and Africa where complex deepwater wells had previously been large revenue drivers. This2020. The increase was partially offsetdriven by improved revenueactivity levels across Africa and Europe as the prior year was significantly impacted by COVID-19-related activity disruptions and customer spending cuts in the Middle East dueresponse to increased onshore activity.


falling oil prices.

Adjusted EBITDA for the International ServicesTRS segment decreased by $6.3was $29.8 million for the nine months ended September 30, 2017,2021, an increase of $11.5 million, or 19.8%62.5%, compared to $18.3 million for the same period in 2016 primarily due to the decrease in revenue, which was partially offset2020. Segment results for 2021 were positively impacted by the absence of non-recurring charges recognized in 2016 of $9.7 million for bad debt primarily related to difficulty in collecting certain receivables in Venezuela and $2.5 million of additional payroll related costs for Nigeria and Mexico, as well as lower expenses in 2017 due to reducedimproved activity levels and cost cutting measures.measures implemented after the onset of the pandemic.

30

Table of Contents
U.S. Services

Tubulars

Revenue for the U.S. ServicesTubulars segment decreased by $30.0was $47.0 million for the nine months ended September 30, 2017,2021, an increase of $9.2 million, or 25.0%24.5%, compared to $37.8 million for the same period in 2016. Onshore services revenue increased by $12.0 million2020, primarily as a result of improved activity from increased rig counts. The offshore business saw a decreasean increase in revenue of $42.0 million as a result of overall lower activity due to rig cancellations and delays in the Gulf of Mexico coupled with downward pricing pressures.




34

and international tubular products sales.

Adjusted EBITDA for the U.S. ServicesTubulars segment decreased by $14.8was $7.5 million for the nine months ended September 30, 20172021, an increase of $3.6 million, or 92.7%, compared to $3.9 million for the same period in 2016 primarily due to lower activity in our offshore services, partially offset by an2020. An increase in onshore services activity.


Tubular Sales

high margin Gulf of Mexico and international tubular products sales contributed to the improvement. 

Cementing Equipment

Revenue for the Tubular SalesCE segment decreased by $27.4was $54.8 million for the nine months ended September 30, 2017,2021, an increase of $3.3 million, or 40.2%6.4%, compared to $51.5 million for the same period in 2016 primarily2020, driven by improved drilling activity and increased product sales in the U.S. land and offshore markets as a result of lower deepwater activitythe recovery in the Gulf of Mexico, which more than offset higher revenue in our international markets.


oil prices.

Adjusted EBITDA for the Tubular SalesCE segment increased by $0.4was $16.0 million for the nine months ended September 30, 20172021, an increase of $9.2 million, or 135.6%, compared to $6.8 million for the same period in 2016 as it was positively impacted by2020, primarily due to improved activity levels and cost cutting measures undertaken during 2016.


Blackhawk

The Blackhawk segment is comprised solelyimplemented after the onset of the assets we acquired on November 1, 2016. Revenues and pandemic.

Corporate

Adjusted EBITDA for the segment were $51.9 million and $7.7Corporate was a loss of $20.5 million for the nine months ended September 30, 2017. See Note 3 - Acquisition2021, an improvement of $4.2 million, or 17.0%, compared to a loss of $24.6 million for the same period in 2020, primarily due to lower costs as a result of restructuring and Divestitures in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information on our Blackhawk acquisition.


cost cutting measures.

Liquidity and Capital Resources


Liquidity


At September 30, 2017, we2021, Frank's had cash and cash equivalents and short-term investments of $293.9$203.0 million and debt of $0.1 million. Ourno debt. Frank's primary sources of liquidity to date have been cash flows from operations. Ouroperations and its primary uses of capital have been for organic growth capital expenditures. WeManagement continually monitormonitors potential capital sources, including equity and debt financing, in order to meet our investment and target liquidity requirements.


Our

The Prior Board authorized a program to repurchase Company Common Stock from time to time. Approximately $38.5 million remained authorized for repurchases as of September 30, 2021, subject to the limitation set in the shareholder authorization for repurchases of Company Common Stock, which is currently 10% of the common stock outstanding as of August 3, 2021. From the inception of this program in February 2020, 95,007 shares of common stock were repurchased for a total cost of approximately $1.5 million. This program was suspended during the second quarter of 2020 due to the impacts of COVID-19 and commodity price declines.

Total capital expenditures associated with Frank's product lines are estimated at $40.0to be approximately $15 million for 2017. We expectin 2021, of which approximately 90% are expected to spend approximately $22.0 millionbe used for the purchase and manufacture of equipment and $18.0 million10% for other property, plant and equipment, inclusive of the purchase or construction of facilities.equipment. The actual amount of capital expenditures for the manufacture of equipment may fluctuate based on market conditions.conditions and timing of deliveries. During the nine months ended September 30, 20172021 and 2016, capital2020, cash expenditures related to property, plant and equipment were $18.6$7.6 million and $29.8$25.7 million, respectively, all of which were funded from internally generated funds. We believe ourManagement believes cash on hand and cash flows from operations should be sufficient to fund our capital expenditure and liquidity requirements for the remainder of 2017.


2021.

We paid dividendsreview from time to time possible acquisition opportunities as an important element of our long-term business strategy. The timing, size or success of any acquisition efforts and the associated potential capital commitments are unpredictable and uncertain. We may seek to fund all or part of any such efforts with cash on hand and proceeds from debt and/or equity issuances and may issue equity directly to the sellers. Our ability to obtain capital for additional projects to implement our growth strategy over the longer term will depend on our common stockfuture operating performance, financial condition and, more broadly, on the availability of $50.4 million, or $0.225 per common share duringequity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the nine months ended September 30, 2017. On October 27, 2017,global economy, the Boardglobal financial markets and other factors, many of Managing Directorswhich are beyond our control. In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the Company, with the approval from the Boardissuance of Supervisory Directors of the Company, approved a planadditional equity securities could result in significant dilution to suspend the Company’s quarterly dividend in order to preserve capital for various purposes, including to invest in growth opportunities.


shareholders.

Credit Facility


We have

On November 5, 2018, FICV, Frank’s International, LLC and Blackhawk, as borrowers, and FINV, certain of FINV’s subsidiaries, including FICV, Frank’s International, LLC, Blackhawk, Frank’s International GP, LLC, Frank’s International, LP, Frank’s International LP B.V., Frank’s International Partners B.V., Frank’s International Management B.V., Blackhawk Intermediate Holdings, LLC, Blackhawk Specialty Tools, LLC, and Trinity Tool Rentals, L.L.C., as guarantors, entered into a $100.0 million5-year senior secured revolving credit facility (the “ABL Credit Facility”) with certainJPMorgan Chase Bank, N.A., as administrative agent, and other financial institutions as lenders with total commitments of $100.0 million including up to $20.0$15.0 million inavailable for letters of credit. As of September 30, 2021, FINV had no borrowings outstanding under the ABL Credit Facility.

In connection with the Merger, on October 1, 2021, the Company terminated the ABL Credit Facility and entered into the New Credit Facility (defined below).

On October 1, 2021, the Company and certain of its subsidiaries, including Exploration and Production Services (Holdings) Limited and Expro Holdings US Inc., as borrowers, entered into a senior secured revolving credit facility (the “New Credit Facility”) with DNB Bank ASA, London Branch, as agent, and other financial institutions as lenders with an aggregate commitment of $200.0 million with up to $130.0 million available for drawdowns as loans and up to $10.0$70.0 million in swingline loans, which matures in August 2018 (the “Credit Facility”).for bonds and guarantees. Subject to the terms of the New Credit Facility, we havethe Company has the ability to increase the commitments to $150.0$250.0 million. At September 30, 2017 and December 31, 2016, we had $2.8 million and $3.7 million, respectively, in lettersProceeds of credit outstanding and no outstanding borrowings under this facility. As of September 30, 2017, our ability to borrow under the New Credit Facility has been reducedmay be used for general corporate and working capital purposes.

31
Table of Contents

Tax Receivable Agreement and Amended and Restated Tax Receivable Agreement

Mosing Holdings, LLC, a Delaware limited liability company (“Mosing Holdings”), converted all of its shares of Frank's Series A convertible preferred stock into shares of Frank’s common stock on August 26, 2016, in connection with its delivery to approximately $30 million as a resultFINV of our decreased Adjusted EBITDA. Our borrowing capacity under the Credit Facility could be further reduced or eliminated depending on our future Adjusted EBITDA.all of its interests in FICV (the “Conversion”). As a result of this, our overall liquidity would be diminished.




35

Borrowingsan election under Section 754 of the Credit Facility bear interest, at our option, at either a base rate orInternal Revenue Code made by FICV, the Conversion resulted in an adjusted Eurodollar rate. Base rate loans under the Credit Facility bear interest at a rate equaladjustment to the higher of (i) the prime rate as published in the Wall Street Journal, (ii) the Federal Funds Effective Rate plus 0.50% or (iii) the adjusted Eurodollar rate plus 1.00%, plus an applicable margin ranging from 0.50% to 1.50%, subject to adjustment based on a leverage ratio. Interest is in each case payable quarterly for base-rate loans. Eurodollar loans under the Credit Facility bear interest at an adjusted Eurodollar rate equal to the Eurodollar rate for such interest period multiplied by the statutory reserves, plus an applicable margin ranging from 1.50% to 2.50%. Interest is payable at the end of applicable interest periods for Eurodollar loans, except that if the interest period for a Eurodollar loan is longer than three months, interest is paid at the end of each three-month period. The unused portiontax basis of the Credit Facility is subject to a commitment fee ranging from 0.250% to 0.375% based on certain leverage ratios.

The Credit Facility contains various covenants that, among other things, limit our ability to grant certain liens, make certain loanstangible and investments, enter into mergers or acquisitions, enter into hedging transactions, change our linesintangible assets of business, prepay certain indebtedness, enter into certain affiliate transactions, incur additional indebtedness or engage in certain asset dispositions.

The Credit Facility also contains financial covenants, which, among other things, require us, on a consolidated basis, to maintain: (i) a ratio of total consolidated funded debt to adjusted EBITDA (as defined in the Credit Agreement) of not more than 2.5 to 1.0 and (ii) a ratio of EBITDA to interest expense of not less than 3.0 to 1.0.

In addition, the Credit Facility contains customary events of default, including, among others, the failure to make required payments, failure to comply with certain covenants or other agreements, breach of the representations and covenants contained in the agreements, default of certain other indebtedness, certain events of bankruptcy or insolvency and the occurrence of a change in control.

On April 28, 2017, the Company obtained a limited waiver under its Revolving Credit Agreement, dated August 14, 2013, by and among FICV (as borrower), Amegy Bank National Association (as administrative agent), Capital One, National Association (as syndication agent) and the other lenders party thereto (the "Credit Agreement"), of its leverage ratio and interest coverage ratio for the fiscal quarters ending March 31, 2017 and June 30, 2017 (the “Waiver”) in order to not be in default for first quarter of 2017 testing. The Company agreed to comply with the following conditions during the period from the effective date of the Waiver until the delivery of its compliance certificate with respect to the fiscal quarter ending September 30, 2017: (i) maintain no less than $250.0 million in liquidity; (ii) abideportion of FICV transferred to FINV by certain restrictions regardingMosing Holdings. These adjustments are solely allocable to FINV. The adjustments to the issuance of senior unsecured debt; and (iii) pay interest and commitment fees based on the highest “Applicable Margin” (as defined in the Credit Agreement) level. In connection with the Waiver, the Company paid a waiver fee to each lender that executed the Waiver equal to fivetax basis points of the respective lender’s commitment undertangible and intangible assets of FICV described above would not have been available absent the Credit Agreement. As of September 30, 2017, we were in compliance with the covenants included in the Credit Agreement.

Citibank Credit Facility

In 2016, we entered into a three-year credit facility with Citibank N.A., UAE Branch inConversion. The basis adjustments may reduce the amount of $6.0 million for issuancetax that FINV would otherwise be required to pay in the future. These basis adjustments may also decrease gains (or increase losses) on future dispositions of standby letters of credit and guarantees. The credit facility also allows for open ended guarantees. Outstanding amounts undercertain capital assets to the credit facility bear interest of 1.25% per annum for amounts outstanding upextent tax basis is allocated to one year. Amounts outstanding more than one year bear interest at 1.5% per annum. As of September 30, 2017 and December 31, 2016, we had $2.5 million and $2.2 million in letters of credit outstanding.

Tax Receivable Agreement

We entered into athose capital assets.

The tax receivable agreement (the “TRA”“Original TRA”) that FINV entered into with Frank's International C.V. ("FICV")FICV and Mosing Holdings LLC ("Mosing Holdings") in connection with ourFINV’s initial public offering ("IPO"(“IPO”). The TRA generally providesprovided for the payment by usFINV to Mosing Holdings of 85% of the amount of the actual reductions,net cash savings, if any, in payments of U.S. federal, state and local income tax orand franchise tax that FINV actually realize (or are deemed to realize in certain circumstances) in periods after ourFINV’s IPO (which reductions we refer to as "cash savings") as a result of (i) the tax basis increases resulting from the transfer of FICV interests to us in connection with the conversion of shares of Preferred Stock into shares of our common stock on August 26, 2016Conversion and (ii) imputed



36

interest deemed to be paid by usFINV as a result of, and additional tax basis arising from, payments under the Original TRA. In addition,Frank's retained the TRA provides for interest earned from the due date (without extensions)benefit of the corresponding tax return to the date of payment specified by the TRA. We will retain the remaining 15% of these cash savings, if any. The payment obligations under the TRA are our obligations and not obligations of FICV. The term of the TRA continues until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the TRA.

If we elect to execute our sole right to terminate the TRA early, we would be required to make an immediate payment equal to the present value of the anticipated future tax benefits subject to the TRA (based upon certain assumptions and deemed events set forth in the TRA, including the assumption that it has sufficient taxable income to fully utilize such benefits and that any FICV interests that Mosing Holdings or its transferees own on the termination date are deemed to be exchanged on the termination date).

In addition, payments due under the TRA will be similarly accelerated following certain mergers or other changes of control.


In certain circumstances, we may be required to make payments under the TRA that we have entered into with Mosing Holdings. In most circumstances, these payments will be associated with the actual cash savings that we recognize in connection with the conversionMerger Agreement, FINV, FICV and Mosing Holdings entered into that certain Amended and Restated Tax Receivable Agreement, dated as of Preferred Stock, which would reduceMarch 10, 2021 (the “A&R TRA”). Pursuant to the actual tax benefitA&R TRA, on October 1, 2021, the Company made a payment of $15 million cash to us. If we were to elect to exercise our sole right to terminatesettle the TRA early or enter into certain change of control transactions, we may incurtermination payment obligations priorthat would otherwise be owed to the time we actually incur any tax benefit. In those circumstances, we would need to pay the amounts out of cash on hand, finance the payments or refrain from triggering the obligation. Though we do not have any present intention of triggering an advance paymentMosing Holdings under the Original TRA based on our current liquidity and our expected ability to access debt and equity financing, we believe we would be able to make suchas a payment if necessary. Any such payment could reduce our cash on hand and our borrowing availability, however, which wouldresult of the Merger. The A&R TRA also reduce the amount of cash available to operate our business, to fund capital expenditures andprovides for other contingent payments to be paid as dividendsmade by the Company to our stockholders, among other things.Mosing Holdings in the future in the event the Company realizes cash tax savings from tax attributes covered under the Original TRA during the ten year period following October 1, 2021 in excess of $18,057,000. Please see Note 12 - Related Party Transactions17—Subsequent Events in the Notes to Unaudited Condensed Consolidated Financial Statements. for additional details.

32

Table of Contents

Cash Flows from Operating, Investing and Financing Activities


Cash flows provided by (used in) ourfrom Frank's operations, investing and financing activities are summarized below (in thousands):

 Nine Months Ended
 September 30,
 2017 2016
Operating activities$24,585
 $27,846
Investing activities(57,243) (17,362)
Financing activities(51,634) (79,831)
 (84,292) (69,347)
Effect of exchange rate changes on cash(1,896) (3,162)
Net decrease in cash and cash equivalents$(86,188) $(72,509)

  

Nine Months Ended

 
  

September 30,

 
  

2021

  

2020

 

Operating activities

 $(12,196) $25,315 

Investing activities

  4,589   (16,209)

Financing activities

  (2,671)  (1,689)
   (10,278)  7,417 

Effect of exchange rate changes on cash

  3,770   3,267 

Net increase (decrease) in cash, cash equivalents and restricted cash

 $(6,508) $10,684 

Statements of cash flows for entities with international operations that use the local currency as the functional currency exclude the effects of the changes in foreign currency exchange rates that occur during any given year, as these are noncash changes. As a result, changes reflected in certain accounts on the condensed consolidated statements of cash flows may not reflect the changes in corresponding accounts on the condensed consolidated balance sheets.


Operating Activities


Cash flow provided by (used in) operating activities was $24.6$(12.2) million for the nine months ended September 30, 20172021, compared to cash flow provided by operating activities of $27.8$25.3 million for the same period in 2016.2020. The decreasechange in cash flow provided byfrom operating activities of $37.5 million was primarily due to lower activity as a result of depressed oilunfavorable changes in accounts receivable and gas prices, whichinventories, partially offset by favorable changes in accounts payable and accrued liabilities. Overall, changes in accounts receivable and inventories, net of accounts payable and accrued liabilities resulted in a decrease in accounts receivableuse of $58.1 million and inventories of $13.9 million, partially offset



37

by a decrease in accrued expenses and other current liabilities of $37.8 million, deferred revenue of $20.4 million and other non-current liabilities of $8.7 million.

Investing Activities

Cash flow used in investing activities was $57.2 millioncash for the nine months ended September 30, 20172021 of $15.2 million and a source of cash for the nine months ended September 30, 2020 of $37.2 million.

Investing Activities

Cash flow provided by (used in) investing activities was $4.6 million for the nine months ended September 30, 2021, compared to $17.4$(16.2) million in the same period in 2016.2020, a year-over-year change of $20.8 million primarily due to a decrease of $18.1 million in the purchases of property, plant, and equipment and an increase in net proceeds from investments of $7.5 million.

Financing Activities

Cash flow used in financing activities was $2.7 million for the nine months ended September 30, 2021, compared to $1.7 million in the same period in 2020. The increase in cash flow used in investingfinancing activities of $1.0 million was primarily relateddue to the purchaseincreased repayment of investmentsborrowings of $59.8$1.6 million and an increase of $0.8 million of treasury shares withheld for taxes, partially offset by lower purchasesrepurchases under our publicly announced share repurchase program of property, plant and equipment of $11.2 million and higher proceeds from the sale of assets of $8.5$1.5 million during the nine months ended September 30, 2017.2020.

33

Financing Activities

Cash flow used in financing activities was $51.6 million for the nine months ended September 30, 2017 compared to $79.8 million in the same period in 2016. The decrease in cash flow used in financing activities was primarily due to lower dividend paymentsTable of $11.9 million, the absence of a payment to our noncontrolling interest of $8.0 million made in the nine months ended September 30, 2016, and lower repayments on borrowings of $6.9 million.Contents

Off-Balance Sheet Arrangements


We do

Frank's did not have any material off-balance sheet arrangements as of September 30, 2021, with the exception of operating leases.


purchase obligations.

Critical Accounting Policies


There were no changes to ourFrank's significant accounting policies from those disclosed in ourthe Annual Report.


Impact of Recent Accounting Pronouncements


Refer to Note 1 - 1—Basis of Presentation in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of accounting standards we recently adopted or that will be required to adopt.


be adopted.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our 2016the Annual Report on Form 10-K. Except for the change below, ourReport. Frank's exposure to market risk has not changed materially since December 31, 2016.


We account for our derivative activities under the accounting guidance for derivatives and hedging. Derivatives are recognized on the condensed consolidated balance sheets at fair value. Although the derivative contracts will serve as an economic hedge of the cash flow of our currency exchange risk exposure, they are not formally designated as hedge contracts for hedge accounting treatment. Accordingly, any changes in the fair value of the derivative instruments during a period will be included in our condensed consolidated statements of operations. Based on the derivative contracts that were in place as of September 30, 2017, a 10% weakening of the U.S. dollar as compared to the Canadian dollar, Euro, Norwegian krone, and Pound sterling would result in a $2.4 million decrease in the market value of our forward contracts. Please see Item 1. Financial Statements - Note 11 - Derivatives for additional information regarding our foreign currency derivative contracts outstanding in U.S. dollars as of September 30, 2017.



38
2020.



Item 4. Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures.


As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of ourFrank's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. OurFrank's disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure, and such information is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that ourFrank's disclosure controls and procedures were effective as of September 30, 20172021 at the reasonable assurance level.


(b)

Change in Internal Control Over Financial Reporting.


There have been

Except as described below, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has determined that there were no changes in ourFrank's internal control over financial reporting that occurred during the quarter ended September 30, 2017, that have materially affected, or are reasonably likely to materially affect, ourthese internal controls over financial reporting during the period covered by this quarterly report. 

With the closing of the Merger on October 1, 2021, there was a change in management and a process was initiated to integrate Frank's and Legacy Expro. We expect these changes to have a significant impact on internal control over financial reporting going forward. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business post-Merger, but cannot assure you that such actions will be sufficient to provide us with effective internal control over financial reporting.


During the first quarter of 2021, Frank's implemented a new enterprise resource planning (“ERP”) system. In connection with this ERP system, updates were made to internal controls over financial reporting to accommodate modifications to business processes and accounting procedures. As with all new information systems, this ERP system and the related internal controls over financial reporting will require testing for effectiveness. We do not believe that the transition to this ERP system will have an adverse effect on the Company's internal control over financial reporting. 


34
39
Table of Contents


PART II. OTHER INFORMATION

Item 1.Legal Proceedings

We are the subject of lawsuits and claims arising in the ordinary course of business from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. WeFrank's had no material accruals for loss contingencies, individually or in the aggregate, as of September 30, 2017 and2021 or December 31, 2016. We believe2020. Company management believes the probability is remote that the ultimate outcome of these matters would have a material adverse effect on our financial position, results of operations or cash flows. Please see Note 15 - Commitments

Frank’s has been conducting, and Contingencies in the Notescombined company will continue to Unaudited Condensed Consolidated Financial Statements.


We are conductingconduct, an internal investigation of the operations of certain of ourits foreign subsidiaries in West Africa including possible violations of the U.S. Foreign Corrupt Practices Act our(“FCPA”), its policies and other applicable laws. In June 2016, weFrank's voluntarily disclosed the existence of ourits extensive internal review to the U.S. Securities and Exchange Commission,SEC, the United StatesU.S. Department of Justice (“DOJ”) and other governmental entities. It is ourthe Company’s intent to continue to fully cooperate with these agencies and any other applicable authorities in connection with any further investigation that may be conducted in connection with this matter. While ourthe review has not indicated that there has been any material impact on ourFrank's previously filed financial statements, we haveFrank's has continued to collect information and cooperate with the authorities, but atauthorities.

As disclosed above, the investigation into possible violations of the FCPA remains ongoing, and the Company will continue to cooperate with the SEC, DOJ and other relevant governmental entities in connection therewith. At this time, are unable to predict the ultimate resolution of these matters with these agencies. In addition, during the course of the investigation, we discovered historical business transactions (and bids to enter into business transactions) in certain countries that may have been subject to U.S. and other international sanctions. We have disclosed this information to various governmental entities (including those involved in our ongoing investigation), but at this time are unable to predict the ultimate resolution of these matters with these agencies, including any financial impact to us. Our boardthe Company. The Company’s Board of Directors (the “Board”) and management are committed to continuously enhancing ourthe Company’s internal controls that support improved compliance and transparency throughout ourthe Company’s global operations.


Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risks discussed below and under the heading “Risk Factors” in ourthe Annual Report, Frank’s subsequently filed quarterly reports on Form 10-Q and Frank’s proxy statement/prospectus dated August 5, 2021 filed by with the SEC on August 6, 2021, which risks could materially affect our business, financial condition or future results. These risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations. The “Company,” “we,” “our,” and “us” refer to Expro Group Holdings N.V., the successor reporting entity following the consummation of the Merger.

Risk Factors Relating to the Merger

The failure to integrate successfully the businesses of Frank’s and Legacy Expro in the expected timeframe could adversely affect the combined company’s future results.

The Merger involves the integration of two companies that prior to October 1, 2021, operated independently. The success of the Merger will depend—in large part—on the ability of the combined company to realize the anticipated benefits, including cost savings, among others, from combining the businesses of Frank’s and Legacy Expro. To realize these anticipated benefits, the businesses of Frank’s and Legacy Expro must be successfully integrated. This integration will be complex and time-consuming. The failure to integrate successfully and to manage successfully the challenges presented by the integration process may result in the combined company not achieving the anticipated benefits of the Merger.

Potential difficulties that may be encountered in the integration process include the following:

•

integrating the businesses of Frank’s and Legacy Expro in a manner that permits the combined company to achieve the full benefit of cost savings that are anticipated to result from the Merger;

•

complexities associated with managing the larger, more complex combined business;

•

complexities associated with integrating the workforces of the two companies;

•

potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the post-Merger integration, including one-time cash costs to integrate the two companies that may exceed the anticipated range of such one-time cash costs that Frank’s and Legacy Expro estimated as of the date of execution of the Merger Agreement; and

•

performance shortfalls of the combined company as a result of the diversion of management’s attention caused by completing the Merger and integrating the companies’ operations.

Any of these difficulties in successfully integrating the businesses of Frank’s and Legacy Expro, or any delays in the integration process, could adversely affect the combined company’s ability to achieve the anticipated benefits of the Merger and could adversely affect the combined company’s business, financial results, financial condition and stock price. Even if the combined company is able to integrate the business operations of Frank’s and Legacy Expro successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, cost savings, innovation and operational efficiencies that the Company management currently expects from this integration or that these benefits will be achieved within the anticipated time frame.

35

Table of Contents

The synergies attributable to the Merger may vary from expectations.

The Company may fail to realize the anticipated benefits and synergies expected from the Merger, which could adversely affect its business, financial condition and operating results. The success of the Merger will depend, in significant part, on the combined company’s ability to successfully integrate the acquired business and realize the anticipated strategic benefits and synergies from the combination. Company management believes that the Merger will provide operational and financial scale, increasing free cash flow, and enhancing the combined company’s corporate rate of return. However, achieving these goals requires, among other things, realization of the targeted cost synergies expected from the Merger. The anticipated benefits of the Merger and actual operating, technological, strategic and revenue opportunities may not be realized fully or at all, or may take longer to realize than expected. If the Company is not able to achieve these objectives and realize the anticipated benefits and synergies expected from the Merger within the anticipated timing or at all, the combined company’s business, financial condition and operating results may be adversely affected.

The Company will incur integration-related costs in the integration of the two businesses.

The Company will incur significant integration-related costs. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. These expenses could, particularly in the near term, reduce the expected pre-tax synergies related to the integration of the businesses, and accordingly, any net synergies may not be achieved in the near term or at all. Additionally, there are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including accounting and finance, asset management, benefits, billing, health, safety and environment, human resources, maintenance, marketing, payroll and purchasing. The expenses of integrating these systems could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings. These integration expenses may result in the combined company taking significant charges against earnings.

The future results of the Company will suffer if the Company does not effectively manage its expanded operations.

The size of the business of the Company has increased significantly beyond the size of either Frank’s or Legacy Expro’s business. The combined company’s future success depends, in part, upon its ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, cost savings, revenue enhancements and other benefits currently anticipated from the Merger.

36
Table of Contents

The market price of the Company Common Stock may be volatile, and holders of the Company Common Stock could lose a significant portion of their investment due to drops in the market price of the Company Common Stock.

The market price of the Company Common Stock may be volatile. Specific factors that may have a significant effect on the market price for the Company Common Stock include, among others, the following:

•

changes in stock market analyst recommendations or earnings estimates regarding the Company, other companies comparable to it or companies in the industries they serve;

•

actual or anticipated fluctuations in the Company’s operating results or future prospects;

•

reaction to public announcements by the Company;

•

strategic actions taken by the Company or its competitors, such as acquisitions, divestitures or restructurings;

•

failure of the Company to achieve the perceived benefits of the Merger, including financial results and anticipated synergies, as rapidly as or to the extent anticipated by financial or industry analysts;

•

adverse conditions in the financial market or general U.S. or international economic conditions, including those resulting from war, incidents of terrorism and response to such events; and

•

sales of the Company Common Stock by members of its management team or significant shareholders.

Additionally, Company shareholders may reduce or eliminate their investment in the Company for various reasons, including in order to comply with institutional investing guidelines, to increase diversification, to track any rebalancing of stock indices in which the Company Common Stock is included, to respond to the risk profile of the combined company or to realize a gain. If large amounts of the Company Common Stock are sold, the price could decline.

Diversion of management and integration related uncertainty could harm the Company and may result in the loss of key employees, which could adversely affect the future business and operations of the Company.

The Company’s success is dependent upon the experience and industry knowledge of its officers and other key employees. The post-Merger integration could result in current and prospective employees’ experiencing uncertainty about their future with the Company. These uncertainties may impair the ability of the Company to retain, recruit or motivate key personnel. In addition, integrating the companies’ operations will require a significant amount of time and attention from management of the two companies. The diversion of management’s attention away from ongoing operations could adversely affect business relationships of the combined company.

The combined company’s ability to utilize the historic U.S. net operating loss carryforwards of Frank’s and of Legacy Expro may be limited.

As of December 31, 2020, Frank’s and Legacy Expro had U.S. federal net operating loss carryforwards (“NOLs”) of approximately $377.9 million and $261.1 million, respectively, $168.2 million and $206.4 million, respectively, of which were incurred prior to January 1, 2018 and will begin to expire, if unused, in 2036 and 2030, respectively, and $209.7 million and $54.7 million, respectively, of which were incurred on or after January 1, 2018 and will not expire and will be carried forward indefinitely. The combined company’s ability to utilize these NOLs and other tax attributes to reduce future taxable income following the consummation of the Merger depends on many factors, including its future income, which cannot be assured. Section 382 of the Code (“Section 382”) generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone an “ownership change” (as determined under Section 382). An ownership change generally occurs if one or more stockholders (or groups of stockholders) who are each deemed to own at least 5% of such corporation’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. In the event that an ownership change occurs, utilization of the relevant corporation’s NOLs would be subject to an annual limitation under Section 382, generally determined, subject to certain adjustments, by multiplying (i) the fair market value of such corporation’s stock at the time of the ownership change by (ii) a percentage approximately equivalent to the yield on long-term tax-exempt bonds during the month in which the ownership change occurs. Any unused annual limitation may be carried over to later years.

Frank’s underwent an ownership change under Section 382 as a result of the Merger, which, based on information currently available, may trigger a limitation (calculated as described above) on the combined company’s ability to utilize any historic Frank’s NOLs and could cause some of Frank’s NOLs incurred prior to January 1, 2018 to expire before the combined company would be able to utilize them to reduce taxable income in future periods. While the exchange of ordinary shares of Expro for Company Common Stock in the Merger was, standing alone, insufficient to result in an ownership change with respect to Legacy Expro, we cannot assure you that the Company will not undergo an ownership change as a result of the Merger taking into account other changes in ownership of Company stock occurring within the relevant three year period described above. If there were to be an ownership change with respect to Legacy Expro as a result of the Merger, the combined company may be prevented from fully utilizing Legacy Expro’s historic NOLs incurred prior to January 1, 2018 prior to their expiration.

Certain of the shareholders of the Company have the ability to exercise significant influence over certain corporate actions.

Affiliates of Oak Hill Advisors, L.P. and members of the Mosing family and entities they control could have significant influence over the outcome of matters requiring a shareholder vote, including the election of directors, the adoption of any amendment to the Company’s Articles and the approval of mergers and other significant corporate transactions. Their influence over the Company may have the effect of delaying or preventing a change of control or may adversely affect the voting and other rights of other shareholders. In addition, affiliates of Oak Hill Advisors, L.P. have the right to designate two nominees for election to the combined company’s nine member Board and members of the Mosing family have the right to designate one nominee for election to such Board. Finally, if these shareholders were in the future to sell all or a material number of shares of Company Common Stock, the market price of Company’s Common Stock could be negatively impacted.

37
Table of Contents

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Following is a summary of repurchases of Company Common Stock during the three months ended September 30, 2021, as adjusted for the reverse stock split.

          

Total Number of

  

Maximum Number (or

 
          

Shares Purchased as

  

Approximate Dollar Value)

 
          

Part of Publicly

  

of Shares that may yet

 
  

Total Number

  

Average

  

Announced Plans or

  

be Purchased Under the

 

Period

 

of Shares Purchased (1)

  

Price Paid per Share

  

Programs (2)

  

Program (2)

 

July 1 - July 31

  —  $—   —  $38,502,322 

August 1 - August 31

  —  $—   —  $38,502,322 

September 1 - September 30

  —  $—   —  $38,502,322 

Total

  —  $—   —     

(1) This table excludes shares withheld from employees to satisfy tax withholding requirements on equity-based transactions. The Company administers cashless settlements and does not repurchase stock in connection with cashless settlements.

(2) Our Prior Board authorized a program to repurchase our Company Common Stock from time to time. Approximately $38.5 million remained authorized for repurchases as of September 30, 2021, subject to the limitation set in our shareholder authorization for repurchases of our Company Common Stock, which is currently 10% of the common stock outstanding as of August 3, 2021. From the inception of this program in February 2020 to date, Frank's repurchased 95,007 shares of our common stock for a total cost of approximately $1.5 million. This program was suspended during the second quarter of 2020.

38
Table of Contents

Item 6. Exhibits


The exhibits required to be filed by Item 6 are set forth in the Exhibit Index which follows the signature page to this report and is incorporated by reference herein, sets forth a list of exhibits to this report.


included below.

EXHIBIT INDEX

Exhibit

Number

Description

3.1

Deed of Amendment to Articles of Association of Expro Group Holdings N.V., dated October 1, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-36053), filed on October 1, 2021).

10.1Closing Agreement, dated as of September 10, 2021, by and among Frank’s International N.V., New Eagle Holdings Limited and Expro Group Holdings International Limited (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-36053), filed on September 15, 2021).
10.2Letter agreement, dated September 20, 2021, with Quinn Fanning (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K (File No. 001-36053), filed on October 1, 2021).
10.3Letter agreement, dated September 20, 2021, with Michael Bentham (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K (File No. 001-36053), filed on October 1, 2021).
10.4Service Agreement, dated as of September 30, 2021, by and between Expro North Sea Ltd and Alistair George Sinclair Geddes (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K (File No. 001-36053), filed on October 1, 2021).
10.5Employment Assignment Letter, dated September 20, 2021, with Steven Russell (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K (File No. 001-36053), filed on October 1, 2021).
10.6Employment Assignment Letter, dated September 20, 2021, with Nigel Lakey, and Letter Agreement, dated September 20, 2021, with Nigel Lakey (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K (File No. 001-36053), filed on October 1, 2021).

*31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14 (a) under the Securities Exchange Act of 1934.

*31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

**32.1

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.

**32.2

Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

*101.1

The following materials from Frank’s International N.V.’s Quarterly Report on Form 10-Q for the period ended September 30, 2021 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Loss; (iv) Condensed Consolidated Statements of Stockholders’ Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Unaudited Condensed Consolidated Financial Statements.

*104

Cover Page Interactive Data File (embedded within the Inline XBRL document).

†      Represents management contract or compensatory plan or arrangement.

*      Filed herewith.

**    Furnished herewith.


39
40
Table of Contents


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



   FRANK'S INTERNATIONAL

EXPRO GROUP HOLDINGS N.V.

    

Date:

November 2, 20178, 2021

By:

By:

/s/ Kyle McClureQuinn P. Fanning

   Kyle McClure

Quinn P. Fanning

   Senior Vice President and

Chief Financial Officer

   

(Principal Financial Officer)





























41
40

EXHIBIT INDEX

Exhibit
Number
Description
3.1Deed of Amendment to Articles of Association of Frank's International N.V., dated May 19, 2016 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-36053), filed on May 25, 2017).
*†10.1
Frank's International N.V. 2013 Long-Term Incentive Plan Employee Restricted Stock Unit Agreement (Supplemental Grant Form).
*†10.2
Employment Offer Letter for Michael C. Kearney effective as of September 26, 2017.
*†10.3
Separation Agreement by and between Douglas G. Stephens, Frank’s International, LLC and Frank’s International N.V., dated October 5, 2017.

*31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14 (a) under the Securities Exchange Act of 1934.
*31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
**32.1
Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
**32.2
Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
*101.INSXBRL Instance Document.
*101.SCHXBRL Taxonomy Extension Schema Document.
*101.CALXBRL Taxonomy Calculation Linkbase Document.
*101.DEFXBRL Taxonomy Definition Linkbase Document.
*101.LABXBRL Taxonomy Extension Label Linkbase Document.
*101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
†Represents management contract or compensatory plan or arrangement.
*Filed herewith.
**Furnished herewith.



42