UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ Quarterly Report Pursuant to Section 13 or 15(d) of
1934
For the quarterly period ended
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
EXPRO GROUP HOLDINGSN.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 | ||||
1311 Broadfield Boulevard, Suite 400 | |||||
Houston, Texas | 77084 | ||||
(Address of principal executive offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code: +31 (0)22 367 0000
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
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
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 | ☐ | Accelerated filer | ☑ |
Non-accelerated filer | ☐ | 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).
As of October 27, 2017,August 1, 2022, there were 223,107,260108,702,849 shares of common stock, €0.01 par€0.06 nominal value per share, outstanding.
Page | ||
Item 1. | Financial Statements | |
Condensed Consolidated Statements of Operations (Unaudited) for the Three and | ||
Condensed Consolidated Statements of Comprehensive | ||
Condensed Consolidated | ||
| Condensed Consolidated Statements of Cash Flows (Unaudited) for the | ||
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Six Months Ended June 30, 2022 and 2021 | ||
Notes to the Unaudited Condensed Consolidated Financial Statements | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4. | Controls and Procedures | |
PART II. OTHER INFORMATION | ||
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
| Item 2. | ||
Item | Exhibits | |
Signatures | ||
Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except share data) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Total revenue Operating costs and expenses: Cost of revenue, excluding depreciation and amortization expense General and administrative expense, excluding depreciation and amortization expense Depreciation and amortization expense Merger and integration expense Severance and other expense Total operating cost and expenses Operating income (loss) Other income, net Interest and finance income (expense), net Income (loss) before taxes and equity in income of joint ventures Equity in income of joint ventures Income (loss) before income taxes Income tax expense Net loss Loss per common share: Basic and diluted Weighted average common shares outstanding: Basic and diluted The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Net loss Other comprehensive loss: Amortization of prior service credit Other comprehensive loss Comprehensive loss The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Condensed Consolidated Balance Sheets (in thousands, except share data) June 30, December 31, 2022 2021 Assets Current assets Cash and cash equivalents Restricted cash Accounts receivable, net Inventories Assets held for sale Income tax receivables Other current assets Total current assets Property, plant and equipment, net Investments in joint ventures Intangible assets, net Goodwill Operating lease right-of-use assets Non-current accounts receivable, net Other non-current assets Total assets Liabilities and stockholders’ equity Current liabilities Accounts payable and accrued liabilities Income tax liabilities Finance lease liabilities Operating lease liabilities Other current liabilities Total current liabilities Deferred tax liabilities, net Post-retirement benefits Non-current finance lease liabilities Non-current operating lease liabilities Other non-current liabilities Total liabilities Commitments and contingencies (Note 17) Stockholders’ equity: Common stock, €0.06 nominal value, 200,000,000 shares authorized, 110,575,691 and 109,697,040 shares issued and 108,637,201 and 109,142,925 shares outstanding Treasury stock (at cost) 1,938,490 and 554,115 shares Additional paid-in capital Accumulated other comprehensive income Accumulated deficit Total stockholders’ equity Total liabilities and stockholders’ equity The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Six Months Ended June 30, 2022 2021 Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization expense Equity in income of joint ventures Stock-based compensation expense Change in fair value of investments Elimination of unrealized profit on sales to joint ventures Deferred taxes Unrealized foreign exchange Changes in assets and liabilities: Accounts receivable, net Inventories Other assets Accounts payable and accrued liabilities Other liabilities Income taxes, net Other Dividends from joint ventures Net cash (used in) provided by operating activities Cash flows from investing activities: Capital expenditures Acquisition of technology Proceeds from disposal of assets Proceeds from sale / maturity of investments Net cash used in investing activities Cash flows from financing activities: (Cash pledged for) release of collateral deposits Payments of loan issuance and other transaction costs Acquisition of common stock Payment of withholding taxes on stock-based compensation plans Repayment of financed insurance premium Repayments of finance leases Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net decrease to cash and cash equivalents and restricted cash Cash and cash equivalents and restricted cash at beginning of period Cash and cash equivalents and restricted cash at end of period The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (in thousands) Six Months Ended June 30, 2021 Additional other Total Common Treasury paid-in comprehensive Accumulated stockholders’ Balance at January 1, 2021 Net loss Other comprehensive loss Balance at March 31, 2021 Net loss Other comprehensive loss Balance at June 30, 2021 Six Months Ended June 30, 2022 Additional other Total Common Treasury paid-in comprehensive Accumulated stockholders’ Balance at January 1, 2022 Net loss Other comprehensive loss Stock-based compensation expense Common stock issued upon vesting of share-based awards Common stock withheld Balance at March 31, 2022 Net loss Other comprehensive loss Stock-based compensation expense Common stock issued upon vesting of share-based awards Acquisition of common stock Common stock withheld Balance at June 30, 2022 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Notes to Unaudited Condensed Consolidated Financial Statements 1. Business description With roots dating to 1938, Expro Group Holdings N.V. On March 10, 2021, Frank’s International N.V. (“Frank’s”) and Pursuant to the Merger Agreement, as of the effective time of the Merger (the “Effective Time”), each outstanding ordinary share of common stock, par value $0.01 per share, of Legacy Expro was converted into the right to receive 1.2120 shares of common stock, nominal value €0.06 per share, of the Company (“Company Common Stock”). The number of shares of Company Common Stock received by the Legacy Expro shareholders was equal to 7.2720 (the “Exchange Ratio” as provided in the Merger Agreement) multiplied by the 1-for-6 reverse stock split ratio. Further, the supervisory board of directors of Frank’s unanimously approved a 1-for-6 reverse stock split of Frank’s common stock, which was effected on October 1, 2021. All of the outstanding share numbers, nominal value, share prices and per share amounts in these condensed consolidated financial statements have been retroactively adjusted to reflect the Exchange Ratio and the 1-for-6 reverse stock split for all periods presented, as applicable. On June 16, 2022, the Company’s Board of Directors (the “Board”) approved a new stock repurchase program, under which the Company is authorized to acquire up to $50.0 million of its outstanding common stock through November 24, 2023 (the “Stock Repurchase Program”). Under the Stock Repurchase Program, the Company may repurchase shares of the Company’s common stock in open market purchases, in privately negotiated transactions or otherwise. The Stock Repurchase Program will be utilized at management’s discretion and in accordance with federal securities laws. The timing and actual numbers of shares repurchased will depend on a variety of factors including price, corporate requirements, the constraints specified in the Stock Repurchase Program along with general business and market conditions. The Stock Repurchase Program does not obligate the Company to repurchase any particular amount of common stock, and it could be modified, suspended or discontinued at any time. During the second quarter of 2022, the Company repurchased 1.1 million shares at an average price of $11.81 per share, for a total cost of $13.0 million under this $50.0 million program. Expro Group Holdings N.V. Notes to Unaudited Condensed Consolidated Financial Statements 2. Basis of presentation and significant accounting policies Basis of presentation The unaudited condensed consolidated financial statements reflect the accounts of the Company and its The accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. The unaudited condensed consolidated In the opinion of management, these unaudited condensed consolidated financial statements, which are prepared in accordance with the rules of the SEC and U.S. GAAP for interim financial reporting, included herein contain all adjustments necessary to present fairly our financial position as of June 30, 2022, the results of our operations for the three and six months ended June 30, 2022 and 2021, and our cash flows for the six months ended June 30, 2022 and 2021. Such adjustments are of a normal recurring nature. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or for any other period. The unaudited condensed consolidated financial statements have been prepared on an historical cost basis using the United States dollar (“$” or “U.S. dollar”) as the reporting currency. Significant accounting policies Refer to Note 2 “Basis of presentation and significant accounting policies” of our consolidated financial statements as of and for the year ended December 31, 2021, which are included in our most recent Annual Report on Form Recent accounting pronouncements Changes to We consider the applicability and impact of all Expro Group Holdings N.V. Notes to Unaudited Condensed Consolidated Financial Statements 3. Business combinations and dispositions Frank’s International N.V. As discussed in Note 1 “Business description,” the The Per share Amount Shares issued price (in thousands) Issuance of common stock attributable to Frank’s stockholders Replacement of Frank’s equity awards Cash payment to Mosing Holdings LLC pursuant to the amended and restated tax receivable agreement Total Merger Consideration Exchanged Expro Group Holdings N.V. Notes to Unaudited Condensed Consolidated Financial Statements The following table Amount Cash and cash equivalents Restricted cash Accounts receivables, net Inventories Assets held for sale Income tax receivables Other current assets Property, plant and equipment Goodwill Intangible assets Operating lease right-of-use assets Other assets Total assets Accounts payable and accrued liabilities Operating lease liabilities Current income tax liabilities Other current liabilities Deferred tax liabilities Non-current operating lease liabilities Other non-current liabilities Total Liabilities Total Merger Consideration Exchanged The fair values of assets acquired and liabilities assumed, The intangible assets will be amortized on a straight-line basis over an estimated 10 to 15 year life. We expect annual amortization to be approximately $7.7 million associated with these intangible assets. Goodwill will not be amortized but rather subject to an annual impairment test, absent any indicators of impairment. Goodwill is attributable to planned synergies expected to be achieved from the combined operations of Legacy Expro and Frank’s. Goodwill recorded in the Merger is not expected to be deductible for tax purposes. Expro Group Holdings N.V. Notes to Unaudited Condensed Consolidated Financial Statements Unaudited Pro Forma Financial Information The following unaudited pro forma consolidated results of operations for the three and six months ended June 30, 2021 assume the Merger was Three Months Ended June 30, 2021 Six Months Ended June 30, 2021 Unaudited pro forma revenues Unaudited pro forma net loss Estimated unaudited pro forma information is not necessarily indicative of the results that actually would have occurred had the Merger been completed on the date indicated or of future operating results. Merger and integration expense During the three months ended June 30, 2022 and 2021, the Company incurred $2.3 million and $4.7 million, respectively, of merger and integration expense which consist primarily of legal fees, professional fees, integration, severance and other costs directly attributable to the Merger. During the six months ended June 30, 2022 and 2021, the Company incurred $7.0 million and $9.5 million, respectively, of merger and integration expense which consist primarily of legal fees, professional fees, integration, severance and other costs directly attributable to the Merger. Below is a reconciliation of our liability balance associated with our severance plan initiated during 2021 related to the integration in connection with NLA ESSA MENA APAC Central Total Balance as of December 31, 2021 Expense (reversal) during the period (367 Payments made during the period Balance as of June 30, 2022 Expro Group Holdings N.V. $ 313,624 $ 176,251 $ 594,101 $ 332,546 (256,583 ) (147,718 ) (496,113 ) (284,789 ) (17,840 ) (6,197 ) (29,350 ) (12,835 ) (35,392 ) (26,390 ) (70,404 ) (54,149 ) (2,270 ) (4,703 ) (6,995 ) (9,526 ) (678 ) (1,637 ) (2,172 ) (2,192 ) (312,763 ) (186,645 ) (605,034 ) (363,491 ) 861 (10,394 ) (10,933 ) (30,945 ) 244 387 1,240 626 1,712 (1,604 ) 1,725 (3,231 ) 2,817 (11,611 ) (7,968 ) (33,550 ) 2,429 3,957 6,631 8,049 5,246 (7,654 ) (1,337 ) (25,501 ) (9,596 ) (727 ) (14,145 ) (3,272 ) $ (4,350 ) $ (8,381 ) $ (15,482 ) $ (28,773 ) $ (0.04 ) $ (0.12 ) $ (0.14 ) $ (0.41 ) 109,582,086 70,889,753 109,425,407 70,889,753 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 investments 60,598 — Accounts receivables, net 140,906 167,417 Inventories 132,961 139,079 Assets held for sale 3,792 — Other current assets 6,893 14,027 Total current assets 578,488 640,049 Property, plant and equipment, net 497,784 567,024 Goodwill and intangible assets, net 247,699 256,146 Deferred tax assets — 79,309 Other assets 33,344 45,533 Total assets $ 1,357,315 $ 1,588,061 Liabilities and Equity Current liabilities: Short-term debt $ 87 $ 276 Accounts payable 21,172 16,081 Deferred revenue 9,035 18,072 Accrued and other current liabilities 75,094 64,950 Total current liabilities 105,388 99,379 Deferred tax liabilities 254 20,951 Other non-current liabilities 28,190 156,412 Total liabilities 133,832 276,742 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 outstanding 2,810 2,802 Additional paid-in capital 1,048,498 1,036,786 Retained earnings 215,793 317,270 Accumulated other comprehensive loss (30,510 ) (32,977 ) Treasury stock (at cost), 844,636 and 759,929 shares (13,108 ) (12,562 ) Total equity 1,223,483 1,311,319 Total liabilities and equity $ 1,357,315 $ 1,588,061 3 $ (4,350 ) $ (8,381 ) $ (15,482 ) $ (28,773 ) (61 ) (61 ) (122 ) (122 ) (61 ) (61 ) (122 ) (122 ) $ (4,411 ) $ (8,442 ) $ (15,604 ) $ (28,895 ) 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 Products 15,536 19,416 64,071 67,414 Total revenue 108,083 105,114 336,473 379,546 Operating expenses: Cost of revenues, exclusive of depreciation and amortization Equipment rentals and services 60,981 57,307 178,865 189,965 Products 10,750 16,029 45,162 51,446 General and administrative expenses 39,963 39,677 125,107 138,586 Depreciation and amortization 30,650 26,545 92,700 84,278 Severance and other charges 1,648 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 liability 122,515 — 122,515 — Other income (expense), net (384 ) 984 348 2,145 Interest income, net 1,019 646 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: Basic 223,056 177,125 222,847 162,656 Diluted 223,581 177,125 222,847 162,656 (Unaudited) $ 175,112 $ 235,390 4,299 4,457 370,459 319,286 143,272 125,116 0 6,386 25,028 20,561 51,636 52,938 769,806 764,134 459,277 478,580 61,248 57,604 245,492 253,053 179,903 179,903 80,307 83,372 10,705 11,531 17,025 26,461 $ 1,823,763 $ 1,854,638 $ 228,763 $ 213,152 26,076 22,999 1,032 1,147 19,617 19,695 61,890 74,213 337,378 331,206 29,818 31,744 23,179 29,120 14,401 15,772 66,659 73,688 77,399 75,537 548,834 557,067 7,903 7,844 (40,473 ) (22,785 ) 1,838,373 1,827,782 20,236 20,358 (551,110 ) (535,628 ) 1,274,929 1,297,571 $ 1,823,763 $ 1,854,638 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 adjustments 1,488 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 income 1,387 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 ) The accompanying notes are an integral part of these condensed consolidated financial statements.35 $ (15,482 ) $ (28,773 ) 70,404 54,149 (6,631 ) (8,049 ) 10,248 0 1,538 0 0 5 (1,929 ) (2,463 ) 2,647 1,148 (52,971 ) (38,756 ) (15,441 ) (8,656 ) 1,012 3,442 11,217 15,146 (12,840 ) 16,122 568 1,657 (7,432 ) (2,577 ) 2,985 0 (12,107 ) 2,395 (31,526 ) (37,644 ) (7,967 ) 0 6,579 0 8,169 0 (24,745 ) (37,644 ) (256 ) 42 (132 ) (438 ) (12,309 ) 0 (4,291 ) 0 (2,805 ) 0 (409 ) (584 ) (20,202 ) (980 ) (3,382 ) (173 ) (60,436 ) (36,402 ) 239,847 120,709 $ 179,411 $ 84,307 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, 2015 155,146 $ 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 units 1,569 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, 2016 209,542 $ 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, 2016 222,401 $ 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 units 694 7 (7 ) — — — — — Common shares issued for ESPP 50 1 511 — — — — 512 Treasury shares issued upon vesting of restricted stock units 4 — (84 ) — — 66 — (18 ) Treasury shares issued for ESPP 106 — (166 ) (736 ) — 1,642 — 740 Treasury shares withheld (193 ) — — — — (2,254 ) — (2,254 ) Balances at September 30, 2017 223,062 $ 2,810 $ 1,048,498 $ 215,793 $ (30,510 ) $ (13,108 ) $ — $ 1,223,483 The accompanying notes are an integral part of these condensed consolidated financial statements.46 Accumulated stock Warrants Stock capital loss deficit equity 70,890 $ 585 $ 10,530 $ 0 $ 1,006,100 $ (1,494 ) $ (403,737 ) $ 611,984 - 0 0 0 0 0 (20,392 ) (20,392 ) - 0 0 0 0 (61 ) 0 (61 ) 70,890 $ 585 $ 10,530 $ 0 $ 1,006,100 $ (1,555 ) $ (424,129 ) $ 591,531 - 0 0 0 0 0 (8,381 ) (8,381 ) - 0 0 0 0 (61 ) 0 (61 ) 70,890 $ 585 $ 10,530 $ 0 $ 1,006,100 $ (1,616 ) $ (432,510 ) $ 583,089 Accumulated stock Warrants Stock capital income deficit equity 109,143 $ 7,844 $ 0 $ (22,785 ) $ 1,827,782 $ 20,358 $ (535,628 ) $ 1,297,571 - 0 0 0 0 0 (11,132 ) (11,132 ) - 0 0 0 0 (61 ) 0 (61 ) - 0 0 0 6,018 0 0 6,018 336 24 0 0 378 0 0 402 (100 ) 0 0 (1,506 ) 0 0 0 (1,506 ) 109,379 $ 7,868 $ 0 $ (24,291 ) $ 1,834,178 $ 20,297 $ (546,760 ) $ 1,291,292 - 0 0 0 0 0 (4,350 ) (4,350 ) - 0 0 0 0 (61 ) 0 (61 ) - 0 0 0 4,230 0 0 4,230 542 35 0 0 (35 ) 0 0 0 (1,100 ) 0 0 (12,995 ) 0 0 0 (12,995 ) (184 ) 0 0 (3,187 ) 0 0 0 (3,187 ) 108,637 $ 7,903 $ 0 $ (40,473 ) $ 1,838,373 $ 20,236 $ (551,110 ) $ 1,274,929 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 amortization 92,700 84,278 Equity-based compensation expense 11,458 12,356 Amortization of deferred financing costs 267 123 Deferred tax provision (benefit) 12,824 (25,772 ) Reversal of deferred tax assets associated with the TRA 49,775 — Provision for bad debts 358 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 investment 478 — Unrealized loss on derivatives 49 296 Other (1,187 ) — Changes in operating assets and liabilities Accounts receivable 23,917 82,042 Inventories 6,146 20,032 Other current assets 7,097 5,990 Other assets 1,948 (4 ) Accounts payable (962 ) 474 Deferred revenue (9,039 ) (29,479 ) Accrued and other current liabilities 9,272 (28,556 ) Other non-current liabilities (3,584 ) (12,295 ) Net cash provided by operating activities 24,585 27,846 Cash flows from investing activities Purchases of property, plant and equipment (18,604 ) (29,777 ) Proceeds from sale of assets 10,690 2,235 Proceeds from sale of investments 11,499 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 shares 1,252 973 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 period 319,526 602,359 Cash and cash equivalents at end of period $ 233,338 $ 529,850 The accompanying notes are an integral part of these condensed consolidated financial statements.57FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNote 1—Basis of PresentationNature of BusinessFrank’s International("FINV"(the “Company,” “Expro,” “we,” “our” or “us”), a limited liability company organized under the laws of The Netherlands, is a global provider of highly engineered tubularenergy services tubular fabricationwith operations in approximately 60 countries. The Company’s portfolio of capabilities includes products and specialtyservices related to well construction, well flow management, subsea well access, and well intervention solutions toand integrity that enhance production and improve recovery across the oilwell lifecycle, from exploration through abandonment.gas industry. FINV provides services to leading explorationNew Eagle Holdings Limited, an exempted company limited by shares incorporated under the laws of the Cayman Islands and production companiesa direct wholly owned subsidiary of Frank’s (“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 both offshorean 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 (the “Closing Date”), and onshore environmentsFrank’s was renamed Expro Group Holdings N.V. The Merger was accounted for using the acquisition method of accounting with a focus on complex and technically demanding wells.Basis of PresentationFINVthe Company reflect the condensed financial position, results of operations and cash flows of only Legacy Expro for all periods prior to the threeMerger and nine months ended September 30, 2017 and 2016 includeof the combined company (including activities of Frank's International C.V. ("FICV"Frank’s) for all periods subsequent to the Merger.wholly owned subsidiaries (collectively, the "Company," "we," "us" or "our").subsidiaries. All intercompany accountsbalances and transactions, including unrealized profits arising from them, have been eliminated for purposes of preparing these unaudited condensed consolidated financial statements.Our Investments in which we do not have a controlling interest, but over which we do exercise significant influence, are accounted for under the equity method of accounting.balance sheet at December 31, 2016 is derived from audited financial statements. However, certain information and footnote disclosures required bystatements have been prepared in accordance with accounting principles generally accepted accounting principles in the United States of America ("GAAP"(“U.S. GAAP”) for complete annualinterim consolidated financial information. Accordingly, these unaudited condensed consolidated financial statements have been omitteddo not include all of the information and therefore, these interimfootnotes required by U.S. GAAP for annual consolidated financial statements and should be read in conjunction with ourthe audited consolidated financial statements and notes thereto for the year ended December 31, 2016,2021 included in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 8, 2022.10-K10-K filed with the Securities and Exchange Commission ("SEC")SEC on February 24, 2017 ("Annual Report"). InMarch 8, 2022, for a discussion of our significant accounting policies. There have been no material changes in our significant accounting policies as compared to the opinion of management, these condensedsignificant accounting policies described in our consolidated financial statements which have been prepared pursuant toas of and for 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.The condensed consolidated financial statements have been prepared on a historical cost basis using the United States dollar as the reporting currency. Our functional currency is primarily the United States dollar.ReclassificationsHistorically, and through year ended December 31, 2016, certain direct and indirect costs related2021.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.8FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSThe following is a summary of reclassifications to 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 Products 13,237 2,792 16,029 42,594 8,852 51,446 General and administrative expenses 52,774 (13,097 ) 39,677 182,036 (43,450 ) 138,586 Significant Accounting PoliciesShort‑term investmentsShort‑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.Recent Accounting PronouncementsChanges toU.S. 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.ASUs.accounting pronouncements. Recently issued ASUs not listed below were assessed and were either determined to be not applicable or are expected to have immaterial impact on our consolidated financial position, or results of operations.operations and cash flows.FASB issued guidance to clarify and reduce both (i) diversity in practice and (ii) cost and complexity when accounting for a changeMerger of Frank’s with Legacy Expro pursuant to the terms and conditionsMerger Agreement was completed on October 1, 2021. U.S. GAAP requires the determination 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 2acquirer, the acquisition date, the fair value of assets and liabilities of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now beacquired business and the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amountresulting measurement of goodwill. All other goodwill impairment guidance will remain largely unchanged. The new standard will be applied prospectively, andMerger 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)a reverse merger and Legacy Expro has been identified as the acquirer for accounting purposes. As a result, the Company has in accordance with ASC 805, Business Combinations, applied the acquisition method of accounting to account for Frank’s assets or businesses. For public entities,acquired and liabilities assumed. Applying the guidance is effectiveacquisition method of accounting includes recording the identifiable assets acquired and liabilities assumed at their fair values and recording goodwill 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.9FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSIn 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 objectiveexcess of the guidance is to eliminateconsideration transferred over 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 asnet aggregate fair value 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 receipts 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 financialidentifiable 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, 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 assetsacquired 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. assumed.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, 2019.10FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSIn 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, and the adoption did not have a material impact on our consolidated financial statements.In May 2014, the FASB issued amendments to guidance on the 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 exchange for those goods or services. The standard creates a five step model that requires companies to exercise judgment when considering the terms of a contract 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 presented 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 InterestWe 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 the 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.11FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSA reconciliation of net loss attributable to noncontrolling interest is detailed as follows (in thousands): Three Months Ended Nine Months Ended September 30, 2016 Net loss $ (42,198 ) $ (89,893 ) 18,355 18,355 3,078 (10,414 ) 97 23 Net loss subject to noncontrolling interest (20,668 ) (81,929 ) 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—Acquisition and DivestituresBlackhawk AcquisitionOn 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 mergerMerger consideration was comprised of a combination of $150.4 million of cashbased 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 ourFrank’s closing share price on October 31, 2016the Closing Date. In a reverse merger involving only the exchange 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 onequity, the fair value of the equity of the accounting acquiree may be used to measure consideration transferred if the value of the accounting acquiree’s equity interests are more reliably measurable than the value of the accounting acquirer’s equity interest. As Legacy Expro was a private company and estimated livesFrank’s was a public company with a quoted and reliable market price, the fair value of acquired property, plant and equipment. In addition,Frank’s equity interests was deemed to be more reliable. Under the acquisition related costs are excluded from the unaudited pro forma financial information.method of accounting, total consideration exchanged was as follows: 38,066,216 $ 18.90 $ 719,452 7,830 15,000 $ 742,282 shows our unaudited pro forma financial information assumingsets forth 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 ) 12FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSThe Blackhawk acquisition was accounted for as a business combination. The purchase price is allocatedpreliminary allocation of the merger consideration exchanged to the fair value of identifiable tangible and intangible assets acquired and liabilities assumed as of the Closing Date, with the recording of goodwill for the excess of the consideration transferred over the net aggregate fair value of the identifiable assets acquired and liabilities assumed (in thousands): $ 187,178 2,561 112,234 69,567 10,061 2,030 23,908 212,639 154,399 104,791 27,406 20,494 927,268 81,959 8,344 8,932 19,918 5,673 19,607 40,553 184,986 $ 742,282 based on a discounted cash flow model and goodwillincluding other current liabilities, are subject to change as additional information is recognized forreceived. We expect to finalize the excess consideration transferred overvaluation as soon as practicable, but not later than one year from the acquisition date. The final fair value ofdetermination could result in material adjustments to the net assets.Thevalues presented in the preliminary purchase price allocation table above. The fair values of identifiable intangible assets were prepared using an income valuation approach, which requires a forecast of expected future cash flows either through the use of the relief-from-royalty method or the multi-period excess earnings method, which are discounted to approximate their current value. The estimated useful lives are based on management’s historical experience and expectations as to the duration of time that benefits from these assets are expected to be realized.preparedcompleted as of January 1, 2020 (in thousands): $ 284,092 $ 535,198 $ (16,648 ) $ (58,237 ) our annual financial statements filedthe Merger, which is included in “Other current liabilities” 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 equipment 45,091 55 45,146 Other long-term assets 3,139 — 3,139 Intangible assets 41,972 153 42,125 Assets acquired $ 113,828 $ 208 $ 114,036 Current liabilities assumed 11,132 185 11,317 Other long-term liabilities 542 — 542 Liabilities assumed $ 11,674 $ 185 $ 11,859 Fair value of net assets acquired 102,154 23 102,177 Total consideration transferred 294,563 — 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.DivestituresIn 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.13FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNote 4—Accounts Receivable, netAccounts receivable at September 30, 2017 and December 31, 2016 were as follows (in thousands): September 30, December 31, 2017 2016 Trade accounts receivable, net of allowance of $13,907 and $14,337, respectively $ 96,034 $ 89,096 Unbilled revenue 24,464 30,882 Taxes receivable 13,987 42,870 895 717 Other receivables 5,526 3,852 Total accounts receivable $ 140,906 $ 167,417 (1)Amounts represent expenditures on behalf of non-consolidated affiliates and receivables for aircraft charter income.Note 5—InventoriesInventories at September 30, 2017 and December 31, 2016 were as follows (in thousands): September 30, December 31, 2017 2016 Pipe and connectors $ 88,982 $ 102,360 Finished goods 16,063 14,257 Work in progress 8,644 7,099 Raw materials, components and supplies 19,272 15,363 Total inventories $ 132,961 $ 139,079 14FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNote 6—Property, Plant and EquipmentThe following is a summary of property, plant and equipment at September 30, 2017 and December 31, 2016 (in thousands): September 30,
2017 December 31,
2016Land — $ 16,491 $ 15,730 Land improvements 8-15 9,346 9,379 39 119,971 73,211 Rental machinery and equipment 7 930,443 933,667 Machinery and equipment - other 7 56,321 60,182 Furniture, fixtures and computers 5 26,280 19,073 Automobiles and other vehicles 5 32,621 36,796 Aircraft 7 — 16,267 7-15, or lease term if shorter 9,870 8,027 — 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.During the third quarter of 2017, we committed to sell certain of our buildings in the Middle East region and determined those assets met the criteria to be classified as held for sale in our unaudited condensed consolidated balance sheet. As a result, we reclassified the buildings, with a net book value of $4.1 million, from property, plant and equipment to assets held for sale and recognized a $0.3 million loss.The following table presents the depreciation and amortization associated with each line for the periods ended September 30, 2017 and 2016sheets (in thousands): $ 2,057 $ 2,502 $ 424 $ 617 $ 6,615 $ 12,215 ) (427 ) 0 401 1,452 1,059 (1,311 ) (1,331 ) (408 ) (516 ) (4,636 ) (8,202 ) $ 379 $ 744 $ 16 $ 502 $ 3,431 $ 5,072 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 15FRANK’S INTERNATIONALNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNote 7—Other AssetsOther assets at September 30, 2017 and December 31, 2016 consisted of the following (in thousands): September 30, December 31, 2017 2016 $ 29,671 $ 36,269 Deposits 2,193 2,343 Other 1,480 6,921 Total other assets $ 33,344 $ 45,533
Notes to Unaudited Condensed Consolidated Financial Statements
| September 30, | December 31, | ||||||
| 2017 | 2016 | ||||||
| Accrued compensation | $ | 18,758 | $ | 10,854 | |||
| Accrued property and other taxes | 19,781 | 19,740 | |||||
| Accrued severance and other charges | 2,040 | 6,150 | |||||
| Income taxes | 11,012 | 6,857 | |||||
| Accrued purchase orders | 8,174 | 2,083 | |||||
| Other | 15,329 | 19,266 | |||||
| Total accrued and other current liabilities | $ | 75,094 | $ | 64,950 | |||
4.Fair Value Measurements
Recurring Basis
A summary of financial assets and liabilities that are measured at fair value on a recurring basis, as of
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 - other | 131 | — | — | 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 - other | 3,692 | — | — | 3,692 | |||||||||||
| Liabilities: | |||||||||||||||
| Deferred compensation plan | — | 30,307 | — | 30,307 | |||||||||||
June 30, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments: | ||||||||||||||||
Cash surrender value of life insurance policies- | ||||||||||||||||
Deferred compensation plan | $ | 0 | $ | 10,199 | $ | 0 | $ | 10,199 | ||||||||
Non-current accounts receivable, net | 0 | 10,705 | 0 | 10,705 | ||||||||||||
Liabilities: | ||||||||||||||||
Deferred compensation plan | 0 | 7,234 | 0 | 7,234 | ||||||||||||
Finance lease liabilities | 0 | 15,433 | 0 | 15,433 | ||||||||||||
December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments: | ||||||||||||||||
Cash surrender value of life insurance policies- | ||||||||||||||||
Deferred compensation plan | $ | 0 | $ | 18,857 | $ | 0 | $ | 18,857 | ||||||||
Non-current accounts receivable, net | 0 | 11,531 | 0 | 11,531 | ||||||||||||
Liabilities: | ||||||||||||||||
Deferred compensation plan | 0 | 9,339 | 0 | 9,339 | ||||||||||||
Finance lease liabilities | 0 | 16,919 | 0 | 16,919 | ||||||||||||
Our investments associated with our deferred compensation plan as of June 30, 2022 consist primarily of the cash surrender value of life insurance policies and areis included in other assets“Other non-current assets” on the condensed consolidated balance sheets. The liability associated with our deferred compensation plan as of June 30, 2022 is included in “Other non-current liabilities” on the condensed consolidated balance sheets. Our investments change as a result of contributions, payments, and fluctuations in the market. Assets and liabilities, measured using significant observable inputs, are reported at fair value based on third-partythird-party broker statements, which are derived from the fair value of the funds'funds’ underlying investments. We also have 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“Other non-current assets” on the condensed consolidated balance sheets.
Expro Group Holdings N.V.
Notes to goodwillUnaudited Condensed Consolidated Financial Statements
5. | Business segment reporting |
Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s Chief Operating Decision Maker (“CODM”), which is our Chief Executive Officer, in deciding how to allocate resources and long-lived assets. Given the unobservable nature of the inputs, the discounted cash flow modelsassess performance. Our CODM manages our operational segments that are deemed to use Level 3 inputs.
| 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 | |||||
● | North and Latin America (“NLA”), |
● | Europe and Sub-Saharan Africa (“ESSA”), |
● | Middle East and North Africa (“MENA”), and |
● | Asia-Pacific (“APAC”). |
The following table summarizespresents our revenue disaggregated by our operating segments (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
NLA | $ | 129,694 | $ | 30,630 | $ | 233,555 | $ | 60,993 | ||||||||
ESSA | 90,118 | 65,177 | 172,189 | 118,807 | ||||||||||||
MENA | 45,363 | 42,485 | 96,078 | 83,640 | ||||||||||||
APAC | 48,449 | 37,959 | 92,279 | 69,106 | ||||||||||||
Total | $ | 313,624 | $ | 176,251 | $ | 594,101 | $ | 332,546 | ||||||||
Segment EBITDA
Our CODM regularly evaluates the locationperformance of our operating segments using Segment EBITDA, which we define as income (loss) before income taxes adjusted for corporate costs, equity in income of joint ventures, depreciation and fair valueamortization expense, impairment expense, severance and other expense, gain on disposal of assets, foreign exchange losses, merger and integration expense, other income, interest and finance income (expense), net and stock-based compensation expense.
The following table presents our Segment EBITDA disaggregated by our operating segments and a reconciliation to income (loss) before income taxes (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
NLA | $ | 38,513 | $ | 3,355 | $ | 60,340 | $ | 5,783 | ||||||||
ESSA | 14,868 | 10,315 | 26,742 | 15,681 | ||||||||||||
MENA | 13,750 | 14,079 | 29,215 | 29,137 | ||||||||||||
APAC | 4,356 | 8,317 | 9,794 | 13,483 | ||||||||||||
Total Segment EBITDA | 71,487 | 36,066 | 126,091 | 64,084 | ||||||||||||
Corporate costs | (22,812 | ) | (13,419 | ) | (44,777 | ) | (28,102 | ) | ||||||||
Equity in income of joint ventures | 2,429 | 3,957 | 6,631 | 8,049 | ||||||||||||
Depreciation and amortization expense | (35,392 | ) | (26,390 | ) | (70,404 | ) | (54,149 | ) | ||||||||
Merger and integration expense | (2,270 | ) | (4,703 | ) | (6,995 | ) | (9,526 | ) | ||||||||
Severance and other expense | (678 | ) | (1,637 | ) | (2,172 | ) | (2,192 | ) | ||||||||
Stock-based compensation expense | (4,230 | ) | 0 | (10,248 | ) | 0 | ||||||||||
Foreign exchange loss | (5,244 | ) | (311 | ) | (2,428 | ) | (1,060 | ) | ||||||||
Other income, net | 244 | 387 | 1,240 | 626 | ||||||||||||
Interest and finance income (expense), net | 1,712 | (1,604 | ) | 1,725 | (3,231 | ) | ||||||||||
Income (loss) before income taxes | $ | 5,246 | $ | (7,654 | ) | $ | (1,337 | ) | $ | (25,501 | ) | |||||
Expro Group Holdings N.V.
Notes to Unaudited Condensed Consolidated Financial Statements
Corporate costs include the costs of running our corporate head office and other central functions that support the operating segments, including research, engineering and development, logistics, sales and marketing and health and safety and are not attributable to a particular operating segment.
6. | Revenue |
Disaggregation of revenue
We disaggregate our revenue from contracts with customers by geography, as disclosed in Note 5 “Business segment reporting,” as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Additionally, we disaggregate our revenue into main areas of capabilities.
The following table sets forth the total amount of revenue by main area of capabilities as follows (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Well construction | $ | 121,794 | $ | 0 | $ | 233,229 | $ | 0 | ||||||||
Well management | 191,830 | 176,251 | 360,872 | 332,546 | ||||||||||||
Total | $ | 313,624 | $ | 176,251 | $ | 594,101 | $ | 332,546 | ||||||||
Contract balances
We perform our obligations under contracts with our customers by transferring services and products in exchange for consideration. The timing of our performance often differs from the timing of our customer’s payment, which results in the recognition of unbilled receivables and deferred revenue.
Unbilled receivables are initially recognized for revenue earned on completion of the performance obligation which are not yet invoiced to the customer. The amounts recognized as unbilled receivables are reclassified to accounts receivable upon billing. Deferred revenue represents the Company’s obligations to transfer goods or services to customers for which the Company has received consideration, in full or part, from the customer.
Contract balances consisted of all derivative contractsthe following as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Accounts receivable, net | $ | 244,150 | $ | 236,158 | ||||
Unbilled receivables | $ | 137,014 | $ | 94,659 | ||||
Deferred revenue | $ | 13,001 | $ | 17,038 | ||||
The Company recognized revenue during the three and six months ended June 30, 2022 of $1.0 million and $8.9 million, respectively, and for the three and six months ended June 30, 2021 of $3.2 million and $4.3 million, respectively, out of the deferred revenue balance as of the beginning of the applicable year.
As of June 30, 2022, $12.6 million of our deferred revenue was classified as current and is included in “Other current liabilities” on the condensed consolidated balance sheets, with the remainder classified as of September 30, 2017non-current 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 | ) | — | ||||||
Transaction price allocated to remaining performance obligations
Remaining performance obligations represent firm contracts for which work has not been performed or has been partially performed and future revenue recognition is expected. We have elected the practical expedient permitting the exclusion of 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 | ) | ||||||
| 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 | ) | $ | — | |||||||
Expro Group Holdings N.V.
Notes to Unaudited Condensed Consolidated Financial Statements
| 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 shares | 223,056 | 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 | |||||||
7. | Income taxes |
For interim financial reporting, we estimate the annual tax rate based on projected pre-tax income (loss) before equity in income of joint ventures for the full year and record a quarterly income tax provisionexpense (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) before equity in income of joint ventures 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 provisionexpense (benefit) during the quarter in which the change in estimate occurs so that the year-to-date provisionexpense reflects the most current expected annual tax rate.
Our effective tax rates were 341% and (178)% for the three and six months ended June 30, 2022, respectively, and were (6.3)% and (9.8)% for the three and six months ended June 30, 2021, respectively.
Our effective tax rate was impacted primarily by changes in the mix of taxable profits between jurisdictions, in particular increased taxable profits in Latin America, deferred tax credits recognized during the three months ended March 31, 2022, in particular in APAC, that did not recur during the three months ended June 30, 2022, and deferred tax charges recognized during the three months ended June 30, 2022, primarily in MENA.
8. | Investment in joint ventures |
We have investments in two joint venture companies, which together provide us access to certain Asian markets that otherwise would be challenging for us to penetrate or develop effectively on our own. COSL-Expro Testing Services (Tianjin) Co. Ltd (“CETS”), in which we have a 50% equity interest, has extensive offshore well testing and completions capabilities and a reputation for providing technology-driven solutions in China. Similarly, PV Drilling Expro International Co. Ltd. (“PVD-Expro”) in which we have a 49% equity interest, offers the full suite of Expro products and services, including well testing and completions, in Vietnam. Both of these are strategic to our activities and offer the full capabilities and technology of Expro, but each company is independently managed.
The carrying value of our investment in joint ventures as of June 30, 2022 and December 31, 2021 was as follows (in thousands):
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
CETS | $ | 57,721 | $ | 54,014 | ||||
PVD-Expro | 3,527 | 3,590 | ||||||
Total | $ | 61,248 | $ | 57,604 | ||||
Expro Group Holdings N.V.
Notes to Unaudited Condensed Consolidated Financial Statements
9. | Accounts receivable, net |
Accounts receivable, net consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Accounts receivable | $ | 392,270 | $ | 340,209 | ||||
Less: Expected credit losses | (11,106 | ) | (9,392 | ) | ||||
Total | $ | 381,164 | $ | 330,817 | ||||
Current | 370,459 | 319,286 | ||||||
Non – current | 10,705 | 11,531 | ||||||
Total | $ | 381,164 | $ | 330,817 | ||||
10. | Inventories |
Inventories consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Finished goods | $ | 34,306 | $ | 34,899 | ||||
Raw materials, equipment spares and consumables | 88,658 | 76,025 | ||||||
Work-in-progress | 20,308 | 14,192 | ||||||
Total | $ | 143,272 | $ | 125,116 | ||||
11. | Other assets and liabilities |
Other assets consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Cash surrender value of life insurance policies | $ | 10,199 | $ | 18,857 | ||||
Prepayments | 22,457 | 19,891 | ||||||
Value-added tax receivables | 22,523 | 22,524 | ||||||
Collateral deposits | 1,855 | 1,599 | ||||||
Deposits | 6,825 | 7,331 | ||||||
Other | 4,802 | 9,197 | ||||||
Total | $ | 68,661 | $ | 79,399 | ||||
Current | 51,636 | 52,938 | ||||||
Non – current | 17,025 | 26,461 | ||||||
Total | $ | 68,661 | $ | 79,399 | ||||
Expro Group Holdings N.V.
Notes to Unaudited Condensed Consolidated Financial Statements
Other liabilities consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Deferred revenue | $ | 13,001 | $ | 17,038 | ||||
Other tax and social security | 27,067 | 27,893 | ||||||
Income tax liabilities – non-current portion | 47,697 | 45,741 | ||||||
Deferred compensation plan | 7,234 | 9,339 | ||||||
Other | 44,290 | 49,739 | ||||||
Total | $ | 139,289 | $ | 149,750 | ||||
Current | 61,890 | 74,213 | ||||||
Non – current | 77,399 | 75,537 | ||||||
Total | $ | 139,289 | $ | 149,750 | ||||
Cash Surrender Value of Life Insurance Policies
We had $10.2 million and $18.9 million of cash surrender value of life insurance policies as of June 30, 2022 and December 31, 2021, respectively, that are held within a trust established to settle payment of future executive deferred compensation benefit obligations. The decrease in the cash surrender value of life insurance policies as of June 30, 2022 as compared to December 31, 2021 was primarily due to a cash distribution from the trust to reimburse the Company for benefits paid pursuant to the executive deferred compensation benefit plan, the impact of which is included in “Proceeds from sale / maturity of investments” on the condensed consolidated statements of cash flows. Loss associated with these policies is included in “Other income, (loss) before income taxesnet” on our condensed consolidated statements of operations. Loss on changes in the cash surrender value of life insurance policies was 97.4%$0.1 million and 13.9%$0.2 million for the three and six months ended June 30, 2022, respectively.
12. | Accounts payable and accrued liabilities |
Accounts payable and accrued liabilities consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Accounts payable – trade | $ | 92,594 | $ | 84,952 | ||||
Payroll, vacation and other employee benefits | 33,752 | 42,671 | ||||||
Accruals for goods received not invoiced | 20,681 | 18,666 | ||||||
Other accrued liabilities | 81,736 | 66,863 | ||||||
Total | $ | 228,763 | $ | 213,152 | ||||
Expro Group Holdings N.V.
Notes to Unaudited Condensed Consolidated Financial Statements
13. | Property, plant and equipment, net |
Property, plant and equipment, net consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Cost: | ||||||||
Land | $ | 21,580 | $ | 21,580 | ||||
Land improvements | 3,051 | 3,054 | ||||||
Buildings and lease hold improvements | 103,505 | 104,660 | ||||||
Plant and equipment | 734,160 | 701,400 | ||||||
| 862,296 | 830,694 | |||||||
Less: accumulated depreciation | (403,019 | ) | (352,114 | ) | ||||
Total | $ | 459,277 | $ | 478,580 | ||||
During the six months ended June 30, 2022, assets held for sale were sold for net proceeds of $6.3 million.
The carrying amount of our property, plant and equipment recognized in respect of assets held under finance leases as of June 30, 2022 and December 31, 2021 and included in amounts above is as follows (in thousands):
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Cost: | ||||||||
Buildings | $ | 18,623 | $ | 18,623 | ||||
Plant and equipment | 1,275 | 1,275 | ||||||
Total | 19,898 | 19,898 | ||||||
Less: accumulated amortization | (8,411 | ) | (7,733 | ) | ||||
Total | $ | 11,487 | $ | 12,165 | ||||
Depreciation expense relating to property, plant and equipment, including assets under finance leases, was $25.6 million and $51.6 million for the three and six months ended SeptemberJune 30, 2017 and 2016, 2022, respectively, and 327.7%$19.9 million and 14.6%$41.3 million for the ninethree and six months ended SeptemberJune 30, 20172021, respectively.
Expro Group Holdings N.V.
Notes to Unaudited Condensed Consolidated Financial Statements
14. | Intangible assets, net |
The following table summarizes our intangible assets comprising of Customer Relationships & Contracts (“CR&C”), Trademarks, Technology and 2016, Software as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022 | December 31, 2021 | June 30, 2022 | ||||||||||||||||||||||||||
Gross carrying amount | Accumulated impairment and amortization | Net book value | Gross carrying amount | Accumulated impairment and amortization | Net book value | Weighted average remaining life (years) | ||||||||||||||||||||||
CR&C | $ | 222,200 | $ | (108,246 | ) | $ | 113,954 | $ | 222,200 | $ | (98,271 | ) | $ | 123,929 | 5.8 | |||||||||||||
Trademarks | 57,100 | (31,157 | ) | 25,943 | 57,100 | (29,392 | ) | 27,708 | 8.0 | |||||||||||||||||||
Technology | 170,652 | (65,901 | ) | 104,751 | 159,458 | (60,979 | ) | 98,479 | 12.1 | |||||||||||||||||||
Software | 8,754 | (7,910 | ) | 844 | 8,754 | (5,817 | ) | 2,937 | 0.4 | |||||||||||||||||||
Total | $ | 458,706 | $ | (213,214 | ) | $ | 245,492 | $ | 447,512 | $ | (194,459 | ) | $ | 253,053 | ||||||||||||||
Amortization expense for intangible assets was $9.8 million and $18.8 million for the three and six months ended June 30, 2022, respectively, and $6.4 million and $12.9 million for the three and six months ended June 30, 2021, respectively.
During the first quarter of 2022, we acquired technology to bolster our well intervention and integrity product offering, resulting in an increase in intangible assets of $11.2 million which will be amortized over a five-year life. The higherimpact of this asset acquisition is included in “Acquisition of technology” on the condensed consolidated statements of cash flows.
15. | Goodwill |
Our reporting units are either our operating segments or components of our operating segments depending on the level at which segment management oversees the business. Prior to the Merger, Legacy Expro’s reporting units included Europe and the Commonwealth of Independent States, Sub-Saharan Africa, MENA, Asia, North America and Latin America. During 2021, due to the Merger we changed our internal organization and reporting structure and as a result, our operating segments, NLA, ESSA, MENA and APAC, are also our reporting units.
The allocation of goodwill by operating segment as of June 30, 2022 and December 31, 2021 is as follows (in thousands):
NLA | $ | 93,608 | ||
ESSA | 66,283 | |||
MENA | 3,331 | |||
APAC | 16,681 | |||
Total | $ | 179,903 |
As of June 30, 2022, we did not identify any triggering events that would represent an indicator of impairment of our goodwill. Accordingly, 0 impairment charges related to goodwill have been recorded during the three and six months ended June 30, 2022.
Expro Group Holdings N.V.
Notes to Unaudited Condensed Consolidated Financial Statements
16. | Interest bearing loans |
On October 1, 2021, in connection with the closing of the Merger, we entered into a new revolving credit facility (the “New Facility”) with DNB Bank ASA, London Branch, as agent (the “Agent”), with total commitments of $200.0 million, of which $130.0 million is available for drawdowns as loans and $70.0 million is available for letters of credit. Subject to the terms of the New Facility, the Company has the ability to increase the commitments to $250.0 million. Proceeds of the New Facility may be used for general corporate and working capital purposes.
All obligations under the New Facility are guaranteed jointly and severally by the Company and certain of the Company’s subsidiaries incorporated in the U.S., the U.K., the Netherlands, Norway, Hungary, Australia, Cyprus, the Cayman Islands and Guernsey. Going forward, the guarantors must comprise at least 80% of the EBITDA (as defined in the New Facility) and 70% of the consolidated assets of the Company and its subsidiaries, as well as subsidiaries individually representing 5% or more of the EBITDA or assets of the group, subject to customary exceptions and exclusions. In addition, the obligations under the New Facility are secured by first priority liens on certain assets of the borrowers and guarantors, including pledges of equity interests in certain of the Company’s subsidiaries, including all of the borrowers and subsidiary guarantors, material operating bank accounts, intercompany loans receivable and, in jurisdictions where customary, including the U.S., the U.K., Australia and the Cayman Islands, substantially all of the assets and property of the borrowers and guarantors incorporated in such jurisdictions, in each case subject to customary exceptions and exclusions.
Borrowings under the New Facility bear interest at a rate per annum of LIBOR, subject to a 0.00% floor, plus an applicable margin of 3.75% for cash borrowings or 3.00% for letters of credit. A 0.75% per annum fronting fee applies to letters of credit, and an additional 0.25% or 0.50% per annum utilization fee is due primarilypayable on drawdowns as loans to recording valuation allowances against our net deferred tax assets.the extent one-third or two-thirds, respectively, or more of commitments are drawn. The deferred tax assets relateunused portion of the New Facility is subject to a commitment fee of 30% per annum of the applicable margin. Interest on loans is payable at the end of the selected interest period, but no less frequently than semiannually.
The New Facility contains various undertakings and affirmative and negative covenants which limit, subject to certain customary exceptions and thresholds, the Company and its subsidiaries’ ability to, among other things, (1) enter into asset sales; (2) incur additional indebtedness; (3) make investments, acquisitions, or loans and create or incur liens; (4) pay certain dividends or make other distributions; and (5) engage in transactions with affiliates. The New Facility also requires the Company to maintain (i) a minimum cash flow cover ratio of 1.5 to 1.0 based on the ratio of cash flow to debt service; (ii) a minimum interest cover ratio of 4.0 to 1.0 based on the ratio of EBITDA to net operating losses, outsidefinance charges; and (iii) a maximum senior leverage ratio of 2.25 to 1.0 based on the ratio of total net debt to EBITDA, in each case tested quarterly on a last-twelve-months basis, differencessubject to certain exceptions. In addition, the aggregate capital expenditure of the Company and its subsidiaries cannot exceed 110% of the forecasted amount in the relevant annual budget, subject to certain exceptions. If the Company fails to perform its obligations under the agreement that results in an event of default, the commitments under the New Facility could be terminated and any outstanding borrowings under the New Facility may be declared immediately due and payable. The New Facility also contains cross-default provisions that apply to the Company and its subsidiaries’ other indebtedness.
On March 31, 2022, the Agent, on behalf of the consenting lenders, countersigned a Consent Request Letter dated March 10, 2022 to the New Facility (the “Consent”). Pursuant to the Consent, the lenders consented to, among other things, an amendment to the New Facility permitting dividends or distributions by the Company, or the repurchase or redemption of the Company’s shares in an aggregate amount of $50.0 million over the life of the New Facility, subject to pro forma compliance with the 2.25 to 1.0 maximum senior leverage ratio financial covenant.
On July 28, 2022, the Company and the lenders increased the total commitments available for letters of credit under the New Facility by $18.0 million.
The Facility remained undrawn on a cash basis (i.e., 0 loans were outstanding), as of June 30, 2022 and December 31, 2021. We utilized $31.8 million and $33.4 million as of June 30, 2022 and December 31, 2021, respectively, for bonds and guarantees.
Expro Group Holdings N.V.
Notes to Unaudited Condensed Consolidated Financial Statements
17. | Commitments and Contingencies |
Commercial Commitments
During the normal course of business, we enter into commercial commitments in the form of letters of credit and bank guarantees to provide financial and performance assurance to third parties.
We entered into contractual commitments for the acquisition of property, plant and equipment totaling $45.9 million and $26.3 million as of June 30, 2022 and December 31, 2021, respectively.
Contingencies
Certain conditions may exist as of the date our unaudited condensed consolidated financial statements are issued that may result in a loss to us, but which will only be resolved when one or more future events occur or fail to occur. Our management, with input from legal counsel, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings pending against us or unasserted claims that may result in proceedings, our management, with input from legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates it is probable a material loss has been incurred and the amount of liability can be reasonably estimated, then the estimated liability would be accrued in our partnership investmentunaudited condensed consolidated financial statements. If the assessment indicates a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and other timing differences primarily associated with our U.S. operations.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the current period, we assessed the available positive and negative evidence and concluded that it is not more likely than not that sufficient future taxable incomeguarantees would be generated to permit the use 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.
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. We had no0 material accruals for loss contingencies, individually or in the aggregate, as of SeptemberJune 30, 20172022 and December 31, 2016. 2021. We believe 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 conducting an internal investigation of the operations of certain of our foreign subsidiaries in West Africa including possible violations of the U.S. Foreign Corrupt Practices Act (“FCPA”), our policies and other applicable laws. In June 2016, we voluntarily disclosed the existence of our extensive internal review to the SEC, the United StatesU.S. Department of Justice (“DOJ”) and other governmental entities. It is our 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 our review has not indicated that there has been any material impact on our previously filed financial statements, we have continued to collect information and cooperate with the authorities, but 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 entitiesagencies (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 on us, which could be material).
As disclosed above, our investigation into possible violations of the FCPA remains ongoing, and we will continue to us.cooperate with the SEC, DOJ and other relevant governmental entities in connection therewith. Our board of directors and management are committed to continuously enhancing our internal controls that support improved compliance and transparency throughout our global operations.
Expro Group Holdings N.V.
Notes to Unaudited Condensed Consolidated Financial Statements
18. | Post-retirement benefits |
Amounts recognized in the unaudited condensed consolidated statements of operations in respect of the defined benefit schemes were as follows (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Amortization of prior service credit | $ | 61 | $ | 61 | $ | 122 | $ | 122 | ||||||||
Interest cost | (991 | ) | (840 | ) | (2,045 | ) | (1,677 | ) | ||||||||
Expected return on plan assets | 1,375 | 1,150 | 2,803 | 2,331 | ||||||||||||
Total | $ | 445 | $ | 371 | $ | 880 | $ | 776 | ||||||||
The Company contributed $1.2 million and $2.5 million for the three and six months ended June 30, 2022, respectively, and $0.9 million and $1.8 million for the three and six months ended June 30, 2021, respectively, to defined benefit schemes.
Amortization of prior service credit, interest cost and expected return on plan assets have been recognized in “Other income, net” in the unaudited condensed consolidated statements of operations.
Executive Deferred Compensation Plan
The Company maintains the Executive Deferred Compensation Plan (the “EDC Plan”) for certain current and former Frank’s employees. Effective during 2015, this plan was closed to new entrants. The purpose of the EDC Plan was to provide participants with an opportunity to defer receipt of a portion of their salary, bonus, and other specified cash compensation. Participant contributions were immediately vested. Company contributions vested after five years of service. Participant benefits under the EDC Plan are paid from the general funds of the Company or a grantor trust, commonly referred to as a Rabbi Trust, created for the purpose of informally funding the EDC Plan. The assets of the EDC Plan’s trust are invested in corporate-owned, split-dollar life insurance policies and mutual funds.
As of June 30, 2022, the total liability related to the EDC Plan was $7.2 million and was included in “Other non-current liabilities” on the unaudited condensed consolidated balance sheet. As of June 30, 2022, the cash surrender value of life insurance policies that are held within a Rabbi Trust for the purpose of paying future executive deferred compensation benefit obligations was $10.2 million.
Expro Group Holdings N.V.
Notes to Unaudited Condensed Consolidated Financial Statements
19. | Loss per share |
Basic loss per share attributable to Company stockholders is calculated by dividing net loss attributable to the Company by the weighted-average number of common shares outstanding for the period. Diluted loss per share attributable to Company stockholders is computed giving effect to all potential dilutive common stock, unless there is a net loss for the period. We apply the treasury stock method to determine the dilutive weighted average common shares represented by unvested restricted stock units and Employee Stock Purchase Program (“ESPP”) shares.
The calculation of basic and diluted loss per share attributable to Company stockholders for the three and six months ended June 30, 2022 and 2021, respectively, are defined as componentsfollows (in thousands, except shares outstanding and per share amounts):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net loss | $ | (4,350 | ) | $ | (8,381 | ) | $ | (15,482 | ) | $ | (28,773 | ) | ||||
Basic and diluted weighted average number of shares outstanding | 109,582,086 | 70,889,753 | 109,425,407 | 70,889,753 | ||||||||||||
Total basic and diluted loss per share | $ | (0.04 | ) | $ | (0.12 | ) | $ | (0.14 | ) | $ | (0.41 | ) | ||||
Approximately 0.2 million and 0.4 million shares of an enterpriseunvested restricted stock units and stock to be issued pursuant to the ESPP have been excluded from the computation of diluted loss per share as the effect would be anti-dilutive for the three and six months ended June 30, 2022, respectively.
Additionally, since the conditions upon which separate financial informationshares were issuable for our outstanding warrants and stock options were not satisfied as of June 30, 2021, assuming the balance sheet date is availablethe end of the contingency period. Accordingly, they have not been included in determining the number of anti-dilutive shares.
20. | Related party disclosures |
Our related parties consist primarily of CETS and PVD-Expro, the two companies in which we exert significant influence, and Mosing Holdings LLC, a company that is regularly evaluatedowned by various members of the Mosing family, including Erich Mosing, a member of our board of directors, and affiliates. During the three and six months ended June 30, 2022, we provided goods and services to related parties totaling $1.4 million and $2.3 million, respectively and $1.3 million and $4.0 million respectively, during the three and six months ended June 30, 2021. Additionally, we entered into various operating lease agreements to lease facilities with affiliated companies. Rent expense associated with our related party leases was $0.1 million and $0.3 million, respectively, for the three and six months ended June 30, 2022.
As of June 30, 2022 and December 31, 2021 amounts receivable from the related parties were $1.3 million and $1.6 million, respectively, and amounts payable to related parties were $2.1 million and $2.1 million as of June 30, 2022 and December 31, 2021, respectively.
As of June 30, 2022, $1.0 million of our operating lease right-of-use assets and $1.0 million of our lease liabilities were associated with related party leases. As of December 31, 2021, $1.3 million of our operating lease right-of-use assets and $1.3 million of our lease liabilities were associated with related party leases.
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 Frank’s of all of its interests in Frank’s International C.V. (“FICV”) (the “Conversion”).
Expro Group Holdings N.V.
Notes to Unaudited Condensed Consolidated Financial Statements
The tax receivable agreement (the “Original TRA”) that Frank’s entered into with FICV and Mosing Holdings in connection with Frank’s initial public offering (“IPO”) generally provided for the payment by Frank’s to Mosing Holdings of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that Frank’s actually realized (or were deemed to be realized in certain circumstances) in periods after the IPO as a result of (i) tax basis increases resulting from the Conversion and (ii) imputed interest deemed to be paid by Frank’s as a result of, and additional tax basis arising from, payments under the Original TRA. Frank’s retained the benefit of the remaining 15% of these cash savings, if any.
In connection with the Merger Agreement, Frank’s, FICV and Mosing Holdings entered into the 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 to settle the early termination payment obligations that would otherwise have been owed to Mosing Holdings under the Original TRA as a result of the Merger. As the payment was a condition precedent to effect the Merger, it was included in the determination of Merger consideration exchanged. Refer to Note 3 “Business combinations and dispositions” for more details. The A&R TRA also provides for other contingent payments to be made by the CODMCompany to Mosing Holdings in deciding howthe 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 $18.1 million.
21. | Stock-based compensation |
The Company recognized $0.5 million and $3.2 million of stock-based compensation expense attributable to allocate resourcesthe Management Incentive Plan (“MIP”) stock options during the three and assess performance. Wesix months ended June 30, 2022, respectively. NaN stock-based compensation expense attributable to the MIP stock options was recognized during the three and six months ended June 30, 2021 as the performance conditions within the stock option agreements were deemed to be improbable. Stock-based compensation expense relating to the Long-Term Incentive Plan (“LTIP”), including restricted stock units (“RSUs”) and performance restricted stock units (“PRSUs”) for the three and six months ended June 30, 2022 was $3.6 million and $6.7 million, respectively. NaN stock-based compensation expense relating to LTIP RSUs and PRSUs was recognized during the three and six months ended June 30, 2021.
During the six months ended June 30, 2022, 745,893 RSUs were granted to employees at a grant date fair value of $17.17 per RSU.
22. | Supplemental cash flow |
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for income taxes, net of refunds | $ | 15,505 | $ | 4,079 | ||||
Cash paid for interest, net | $ | 1,999 | $ | 1,997 | ||||
Change in accounts payable and accrued expenses related to capital expenditures | $ | 3,924 | $ | 3,265 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our 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 our Annual Report.
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 Note Regarding Forward-Looking Statements” and “Risk Factors” of this Form 10-Q.
Unless otherwise indicated, references to the terms “Frank’s” 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 in the Merger, and references to “Expro,” the “Company,”“we,”“our,” and “us” refer to Expro Group Holdings N.V., following the consummation of the Merger and unless the context otherwise required, Frank’s prior to the consummation of the Merger.
Overview of Business
Working for clients across the entire well life cycle, we are compriseda leading provider of
With roots dating to 1938, we have approximately 7,200 employees and provide services in international offshore markets and in several onshore international regions. Our customers in these international markets are primarily largesolutions to leading exploration and production companies including integrated oilin both onshore and gas companiesoffshore environments in approximately 60 countries.
Our broad portfolio of products and services are designed to enhance production and improve recovery across the well lifecycle from exploration through abandonment, including:
Well Construction |
• | Our well construction products and services support customers’ new wellbore drilling, wellbore completion and recompletion, and wellbore plug and abandonment requirements. In particular, we offer advanced technology solutions in drilling, tubular running services, cementing and tubulars. With a focus on innovation, we are continuing to advance the way wells are constructed by optimizing process efficiency on the rig floor, developing new methods to handle and install tubulars and mitigating well integrity risks. |
Well Management |
Our well management offerings consist of well flow management, subsea well access and well intervention and integrity services:
• | Well flow management: We gather valuable well and reservoir data, with a particular focus on well-site safety and environmental impact. We provide global, comprehensive well flow management systems for the safe production, measurement, and sampling of hydrocarbons from a well during the exploration and appraisal phase of a new field; the flowback and clean-up of a new well prior to production; and in-line testing of a well during its production life. We also provide early production facilities to accelerate production; production enhancement packages to enhance reservoir recovery rates through the realization of production that was previously locked within the reservoir; and metering and other well surveillance technologies to monitor and measure flow and other characteristics of wells. |
• | Subsea well access: With over 35 years of experience providing a wide range of fit-for-purpose subsea well access solutions, our technology aims to ensure safe well access and optimized production throughout the lifecycle of the well. We provide what we believe to be the most reliable, efficient, and cost-effective subsea well access systems for exploration and appraisal, development, intervention and abandonment, including an extensive portfolio of standard and bespoke Subsea Test Tree Assemblies, a rig-deployed Intervention Riser System and a vessel-deployed, wire through water Riserless Well Intervention System. We also provide systems integration and project management services. |
• | Well intervention and integrity: We provide well intervention solutions to acquire and interpret well data, ensure well bore integrity and improve production. In addition to our extensive fleet of mechanical and cased hole wireline units, we have recently introduced a number of cost-effective, innovative well intervention services, including CoilHose™, a lightweight, small-footprint solution for wellbore lifting, cleaning and chemical treatments; Octopoda™, for fluid treatments in wellbore annuli; and Galea™, an autonomous well intervention solution. We also possess several other distinct technical capabilities, including non-intrusive metering technologies and wireless telemetry systems for reservoir monitoring. |
We operate a global business and have a diverse and stable customer base that is comprised of national oil companies (“NOC”), international oil companies (“IOC”), independent exploration and production companies (“Independents”) and service partners. We have strong relationships with a number of the world’s largest NOCs and IOCs, some of which have been our customers for decades. We are dedicated to safely and sustainably delivering maximum value to our customers.
We organize and manage our operations on a geographical basis. Our reporting structure and the key financial information used by our management team is organized around our four operating segments: (i) North and Latin America (“NLA”), (ii) Europe and Sub-Saharan Africa (“ESSA”), (iii) Middle East and North Africa (“MENA”) and (iv) Asia-Pacific (“APAC”).
How We Generate OurRevenue
Our revenue is derived primarily from providing services in well construction, well flow management, subsea well access and well intervention and integrity services to operators globally. Our revenue includes equipment service charges, personnel charges, run charges and consumables. Some of our contracts allow us to charge for additional deliverables, such as the costs of mobilization of people and equipment and customer specific engineering costs associated with a project. We also procure products and services on behalf of our customers that are provided by third parties for which we are reimbursed with a mark-up or in connection with an integrated services contract. We also design, manufacture and sell equipment, which is typically done in connection with a related operations and maintenance arrangement with a particular customer. In addition, we also generate revenue from the sale of certain well construction products.
Market Conditions and Price of Oil and Gas
The second quarter of 2022 has continued to show positive signs of recovery in the market following the impact of COVID-19 and the Russian war in Ukraine. There are a number of market factors that have had, and may continue to have, an effect on our business, including:
• | The market for energy services and our business are substantially dependent on the price of oil and, to a lesser extent, the regional price of gas, which are both driven by market supply and demand. Changes in oil and gas prices impact customer willingness to spend on exploration and appraisal, development, production and abandonment activities. The extent of the impact of a change in oil and gas prices on these activities varies extensively between geographic regions, types of customers, types of activities and the financial returns of individual projects. |
• | Oil demand in 2022 is forecast to exceed 2021 as the overall economic backdrop improves with liquid demand estimated to surpass annualized 2019 levels in 2023. Brent prices remained volatile during the second quarter of 2022, with the average Brent oil price generally trending up as a result of an easing of lockdowns in China, increasing global activity and demand for travel, and continuing war-time premiums as sanctions disrupt Russian supply. In response, Organization of Petroleum Exporting Countries (“OPEC”) members announced in their June meeting a further production increase in July and August which, coupled with ongoing release of barrels from strategic petroleum reserves and the risk of an economic slowdown, is anticipated to trigger a softening in oil prices though the second half of 2022. |
• | Despite the multi-year underinvestment in new reserves, we expect that operators will maintain their fiscal discipline in the near-term. However, customer spending plans are increasingly visible and a further increase in activity levels is expected by Expro and other energy services companies. |
• | While increases in activity are not expected to be uniform across geo-markets or type of activity, international and deepwater activity is expected to continue to improve throughout 2022 and into 2023. We also expect that the demand for services related to brownfield and production enhancement and infield development programs will also show increased demand. |
• | The clean energy transition continues to gain momentum. Hydrocarbons, however, will continue to play a vital role in the transition towards more sustainable energy resources, and the existing expertise and future innovation within the energy services sector, both to reduce emissions and enhance efficiency, will be critical. We are already active in the early-stage carbon capture and storage segment and have expertise and established operations within the geothermal and flare reduction segments. We continue to develop technologies to enhance the sustainability of our customers’ operations which, along with our digital transformation initiatives, are expected to enable us to continue to support our customers’ commercial and environmental initiatives. As the industry changes, we continue to evolve our approach to adapt and help our customers address the critical energy transition. |
• | Increased expectations of host countries in regard to local content is another multi-year trend that gained additional momentum in recent years. Our commitment to developing local capabilities and in-country personnel has reduced our dependence on international staff and also allowed us to mitigate some of the operational challenges associated with travel restrictions related to COVID-19. These efforts have enabled us to continue to service our customers in their ongoing operations throughout the pandemic. |
Outlook
Demand continues to improve in the face of volatile oil prices, and activity in 2022 is forecast to be higher than in 2021, with oil demand forecast to return to pre-pandemic levels in late 2022 or 2023.
The U.S. Services segment provides tubular servicesEnergy Information Administration (“EIA”) estimates that global liquid fuels consumption will grow to 99.6 million barrels per day (“b/d”) in 2022, up from 97.4 million b/d in 2021, rising to 101.6 million b/d in 2023 (which would surpass 2019 levels of 100.8 million b/d). Counterbalancing consumption growth, the EIA expects continuing production increases from OPEC to average 29.1 million b/d in the active onshoresecond half of 2022 (up 0.8 million b/d from the first half of 2022 and 2.8 million b/d from 2021) and an acceleration in U.S. oil production in 2022 (rising to 11.9 million b/d in 2022 and gas drilling regions13.0 million b/d in 2023, the highest annual average U.S. crude oil production on record). Those production increases, along with other supply increases, are expected to outpace global oil consumption growth and contribute to declining oil prices in the U.S., includingmedium-term. The EIA forecasts Brent crude oil spot prices to average $104 per barrel in 2022 and $93.7 per barrel in 2023, compared to an average $71 per barrel in 2021.
In addition to the Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale, DJ Basinimproving oil market outlook, global natural gas demand continues to increase due to a combination of rising economic activity, energy security concerns in Europe, lower inventory in storage, and Utica Shale, as well asstrong demand for liquified natural gas (“LNG”) in Europe to replace Russian pipeline gas.
The EIA expects Henry Hub spot prices to further increase to an average $5.94 per million British thermal unit (“MMBtu”) in the third quarter of 2022, $6.02/MMBtu for all of 2022 and $4.76/MMBtu in 2023 as U.S. Gulfgas production recovers. Rystad forecasts the European and Asian LNG spot price to trade at approximately $28.9/MMBtu in 2022, maintaining the higher rates achieved in 2021 with slight downward pricing pressure expected in 2023 as new supplies to Europe materialize and LNG production ramps up.
The outlook for the second half of Mexico.
As a result, we expect demand for our services and solutions to continue to trend positively throughout 2022 and into 2023.
How We EvaluateOur Operations
We use a number of financial and operational measures to routinely analyze and evaluate the performance of our business, including Revenue, Adjusted EBITDA, Adjusted Cash Flow from Operations and Cash Conversion.
Revenue: We analyze our performance by various pipe mills.comparing actual monthly revenue by operating segments and areas of capabilities to our internal projections for each month. Our revenue is primarily derived from well construction, well flow management, subsea well access and well intervention and integrity solutions.
Adjusted EBITDA: We regularly evaluate our financial performance using Adjusted EBITDA. Our management believes Adjusted EBITDA is a useful financial performance measure as it excludes non-cash charges and other transactions not related to our core operating activities and allows more meaningful analysis of the trends and performance of our core operations.
Adjusted Cash Flow from Operations: We regularly evaluate our operating cash flow performance using Adjusted Cash Flow from Operations. Our management believes Adjusted Cash Flow from Operations is a useful tool to measure the operating cash performance of the Company as it excludes exceptional payments, interest payments and non-cash charges not related to our core operating activities and allows more meaningful analysis of the trends and performance of our core operations.
Cash Conversion: We regularly evaluate our efficiency of generating cash from operations using Cash Conversion which provides a useful tool to measure Adjusted Cash Flow from Operations as a percentage of Adjusted EBITDA.
Adjusted EBITDA, Adjusted Cash Flow from Operations and Cash Conversion are non-GAAP financial measures. Please refer to the section titled “Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable financial performance measure calculated and presented in accordance with GAAP and a reconciliation of Adjusted Cash Flow from Operations to net cash provided by operating activities, the most directly comparable liquidity measure calculated and presented in accordance with GAAP.
Executive Overview
Three months ended June 30, 2022 compared to three months ended March 31, 2022
Certain highlights of our financial results and other key developments include:
• | Revenue for the three months ended June 30, 2022 increased by $33.1 million, or 11.8%, to $313.6 million, compared to $280.5 million for the three months ended March 31, 2022. The increase in revenue was driven by higher activity across NLA, ESSA and APAC, partially offset by a decrease in activity in MENA. Revenue for our segments is discussed separately below under the heading “Operating Segment Results.” | |
• | We reported a net loss for the three months ended June 30, 2022 of $4.4 million, compared to a net loss of $11.1 million for the three months ended March 31, 2022. The overall decrease in net loss was primarily due to a combination of sequentially higher revenue, a more favorable product mix and lower merger and integration expense, partially offset by higher income tax expense of $5.1 million. | |
• | Adjusted EBITDA for the three months ended June 30, 2022 increased by $14.3 million, or 38.7%, to $51.1 million from $36.8 million for the three months ended March 31, 2022. The increase is primarily attributable to higher activity during the three months ended June 30, 2022. Adjusted EBITDA margin increased to 16.3% during the three months ended June 30, 2022, as compared to 13.1% during the three months ended March 31, 2022, due to a more favorable product mix and lower support cost as a result of merger related synergies. | |
• | Net cash provided by operating activities for the three months ended June 30, 2022 was $2.1 million, compared to net cash used in operating activities of $14.2 million for the three months ended March 31, 2022, primarily reflecting improvement in operating results and lower integration costs, partially offset by an increase in working capital. Adjusted Cash Flow from Operations and Cash Conversion for the three months ended June 30, 2022 was $9.6 million and 19%, respectively, compared to $(1.4) million and (4)%, respectively, for the three months ended March 31, 2022. The buildup in working capital in the first half of 2022 is consistent with historical patterns and is expected to reverse in the second half of the year. Consequently, Adjusted Cash Flow from Operations is expected to improve in the second half of 2022. |
Six months ended June 30, 2022 compared to six months ended June 30, 2021
Certain highlights of our financial results and other key developments include:
• | Revenue for the six months ended June 30, 2022 increased by $261.6 million, or 78.7%, to $594.1 million, compared to $332.5 million for the six months ended June 30, 2021. Of the total increase, $233.2 million is attributable to the Merger with the addition of well construction revenue during the six months ended June 30, 2022. The remaining increase in revenue was driven by higher well management revenue. We have observed higher activity across all our geography-based operating segments. Revenue for our segments is discussed separately below under the heading “Operating Segment Results.” | |
• | We reported a net loss for the six months ended June 30, 2022 of $15.5 million, compared to a net loss of $28.8 million for the six months ended June 30, 2021. The overall decrease in net loss was primarily driven by increased revenue due to a combination of the impact of the Merger and higher activity during the six months ended June 30, 2022, partially offset by an increase in depreciation of $16.3 million, an increase in stock-based compensation expense of $10.2 million and higher tax expense of $10.9 million. | |
• | Adjusted EBITDA for the six months ended June 30, 2022 increased by $43.9 million, or 99.7%, to $87.9 million from $44.0 million for the six months ended June 30, 2021. The overall increase in Adjusted EBITDA was due to a combination of the impact of the Merger and higher activity during the six months ended June 30, 2022. Adjusted EBITDA margin increased to 14.8% during the six months ended June 30, 2022, as compared to 13.2% during the six months ended June 30, 2021, due to favorable product mix and lower support cost as a result of merger related synergies. | |
• | Net cash used in operating activities for the six months ended June 30, 2022 was $12.1 million, compared to net cash provided by operating activities of $2.4 million for the six months ended June 30, 2021. The increase in net cash used in operating activities was primarily due to an increase in working capital and higher tax, merger, integration and severance payments during the current period as compared to the prior year period. Adjusted Cash Flow from Operations and Cash Conversion for the six months ended June 30, 2022 was $8.1 million and 9%, respectively, compared to $12.8 million and 29%, respectively, for the six months ended June 30, 2021. |
Non-GAAP Financial Measures
We include in this Form 10-Q the non-GAAP financial measures Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Cash Flow from Operations and Cash Conversion. We provide reconciliations of net loss, the most directly comparable financial performance measure calculated and presented in accordance with GAAP, to Adjusted EBITDA. We also provide specialized fabricationa reconciliation of Adjusted Cash Flow from Operations to net cash provided by operating activities, the most directly comparable liquidity measure calculated and welding servicespresented in supportaccordance with GAAP.
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Cash Flow from Operations and Cash Conversion are used as supplemental financial measures by our management and by external users of offshore projects, including drillingour financial statements, such as investors, commercial banks, research analysts and production risers, flowlinesothers. These non-GAAP financial measures allow our management and pipeline end terminations,others to assess our financial and operating performance as well as long length tubulars (upcompared to 300 feet in length) for use as caissons or pilings. This segment also designs and manufactures proprietary equipment for usethose of other companies in our International and U.S. Services segments.
We define Adjusted EBITDA as net loss adjusted for (a) income (loss) before interest income, net,tax expense (benefit), (b) depreciation and amortization income tax benefit or expense, asset impairments,(c) impairment expense, (d) severance and other expense, net, (e) stock-based compensation expense, (f) merger and integration expense, (g) gain or loss on saledisposal of assets, (h) other income, net, (i) interest and finance (income) expense, net and (j) foreign currency gain or loss, equity-
We define Adjusted Cash Flow from Operations as net cash provided by operating activities adjusted for cash paid during the effects of the TRA, other non-cash adjustmentsperiod for interest, net, severance and other charges.
Adjusted EBITDA, on both a consolidated basis and on a segment basis. We use Adjusted EBITDA to assess our financial performance because it allows us to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciationmargin, Adjusted Cash Flow from Operations and amortization), income tax, foreign currency exchange rates and other charges and credits. Adjusted EBITDA hasCash Conversion have limitations as an analytical tooltools and should not be considered in isolation or as an alternative to net income (loss), operating income (loss), cash flow from operating activities or any other measurea substitute for analysis of financial performance presented in accordance withour results as reported under GAAP. Previously reportedAs Adjusted EBITDA, for the threeAdjusted Cash Flow from Operations and
The following table presents a reconciliation of Segmentnet loss to Adjusted EBITDA to net income (loss)for each of the three and six months presented (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2022 | March 31, 2022 | June 30, 2022 | June 30, 2021 | |||||||||||||
Net loss | $ | (4,350 | ) | $ | (11,132 | ) | $ | (15,482 | ) | $ | (28,773 | ) | ||||
Income tax expense | $ | 9,596 | $ | 4,549 | $ | 14,145 | $ | 3,272 | ||||||||
Depreciation and amortization expense | 35,392 | 35,012 | 70,404 | 54,149 | ||||||||||||
Merger and integration expense | 2,270 | 4,725 | 6,995 | 9,526 | ||||||||||||
Severance and other expense | 678 | 1,494 | 2,172 | 2,192 | ||||||||||||
Other income, net (1) | (244 | ) | (996 | ) | (1,240 | ) | (626 | ) | ||||||||
Stock-based compensation expense | 4,230 | 6,018 | 10,248 | - | ||||||||||||
Foreign exchange loss (gain) | 5,244 | (2,816 | ) | 2,428 | 1,060 | |||||||||||
Interest and finance (income) expense, net | (1,712 | ) | (13 | ) | (1,725 | ) | 3,231 | |||||||||
Adjusted EBITDA | $ | 51,104 | $ | 36,841 | $ | 87,945 | $ | 44,031 | ||||||||
Adjusted EBITDA Margin | 16.3 | % | 13.1 | % | 14.8 | % | 13.2 | % | ||||||||
(1) | Other income, net, is comprised of immaterial, unusual or infrequently occurring transactions which, in management’s view, do not provide useful measures of the underlying operating performance of the business. |
The following table provides a reconciliation of net cash (used in) provided by operating activities to Adjusted Cash Flow from Operations for each of the three and six months presented (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2022 | March 31, 2022 | June 30, 2022 | June 30, 2021 | |||||||||||||
Net cash (used in) provided by operating activities | $ | 2,055 | $ | (14,162 | ) | $ | (12,107 | ) | $ | 2,395 | ||||||
Cash paid for interest, net | 1,096 | 903 | 1,999 | 1,997 | ||||||||||||
Cash paid for merger and integration expense | 5,837 | 11,632 | 17,469 | 6,178 | ||||||||||||
Cash paid for severance and other expense | 565 | 207 | 772 | 2,194 | ||||||||||||
Adjusted Cash Flow from Operations | $ | 9,553 | $ | (1,420 | ) | $ | 8,133 | $ | 12,764 | |||||||
Adjusted EBITDA | $ | 51,104 | $ | 36,841 | $ | 87,945 | $ | 44,031 | ||||||||
Cash Conversion | 19 | % | (4 | )% | 9 | % | 29 | % | ||||||||
| 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 | ||||||||||
| Blackhawk | 3,477 | — | 7,653 | — | |||||||||||
| 1,973 | (1,298 | ) | 7,073 | 20,077 | |||||||||||
| Interest income, net | 1,019 | 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 assets | 829 | 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 | ) | ||||
Results of Operations
Operating Segment Results
The following table shows revenue by segment and revenue as a percentage of total revenue by segment for the three months ended June 30, 2022 and March 31, 2022:
Three Months Ended | Percentage | |||||||||||||||
(in thousands) | June 30, 2022 | March 31, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||
NLA | $ | 129,694 | $ | 103,861 | 41.4 | % | 37.0 | % | ||||||||
ESSA | 90,118 | 82,071 | 28.7 | % | 29.3 | % | ||||||||||
MENA | 45,363 | 50,715 | 14.5 | % | 18.1 | % | ||||||||||
APAC | 48,449 | 43,830 | 15.4 | % | 15.6 | % | ||||||||||
Total Revenue | $ | 313,624 | $ | 280,477 | 100.0 | % | 100.0 | % | ||||||||
The following table shows revenue by segment and revenue as a percentage of total revenue by segment for the six months ended June 30, 2022 and June 30, 2021:
Six Months Ended | �� | Percentage | ||||||||||||||
(in thousands) | June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | ||||||||||||
NLA | $ | 233,555 | $ | 60,993 | 39.3 | % | 18.3 | % | ||||||||
ESSA | 172,189 | 118,807 | 29.0 | % | 35.7 | % | ||||||||||
MENA | 96,078 | 83,640 | 16.2 | % | 25.2 | % | ||||||||||
APAC | 92,279 | 69,106 | 15.5 | % | 20.8 | % | ||||||||||
Total Revenue | $ | 594,101 | $ | 332,546 | 100.0 | % | 100.0 | % | ||||||||
The following tables set forth certain financial informationtable shows Segment EBITDA and Segment EBITDA margin by segment and a reconciliation to income (loss) before income taxes for the three months ended June 30, 2022 and March 31, 2022:
Three Months Ended | Segment EBITDA Margin | |||||||||||||||
(in thousands) | June 30, 2022 | March 31, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||
NLA | $ | 38,513 | $ | 21,827 | 29.7 | % | 21.0 | % | ||||||||
ESSA | 14,868 | 11,874 | 16.5 | % | 14.5 | % | ||||||||||
MENA | 13,750 | 15,465 | 30.3 | % | 30.5 | % | ||||||||||
APAC | 4,356 | 5,438 | 9.0 | % | 12.4 | % | ||||||||||
Total Segment EBITDA | 71,487 | 54,604 | ||||||||||||||
Corporate costs (1) | (22,812 | ) | (21,965 | ) | ||||||||||||
Equity in income of joint ventures | 2,429 | 4,202 | ||||||||||||||
Depreciation and amortization expense | (35,392 | ) | (35,012 | ) | ||||||||||||
Merger and integration expense | (2,270 | ) | (4,725 | ) | ||||||||||||
Severance and other expense | (678 | ) | (1,494 | ) | ||||||||||||
Stock-based compensation expense | (4,230 | ) | (6,018 | ) | ||||||||||||
Foreign exchange (loss) gain | (5,244 | ) | 2,816 | |||||||||||||
Other income, net | 244 | 996 | ||||||||||||||
Interest and finance income, net | 1,712 | 13 | ||||||||||||||
Income (loss) before income taxes | $ | 5,246 | $ | (6,583 | ) | |||||||||||
The following table shows Segment EBITDA and Segment EBITDA margin by segment and a reconciliation to loss before income taxes for the six months ended June 30, 2022 and June 30, 2021:
Six Months Ended | Segment EBITDA Margin | |||||||||||||||
(in thousands) | June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | ||||||||||||
NLA | $ | 60,340 | $ | 5,783 | 25.8 | % | 9.5 | % | ||||||||
ESSA | 26,742 | 15,681 | 15.5 | % | 13.2 | % | ||||||||||
MENA | 29,215 | 29,137 | 30.4 | % | 34.8 | % | ||||||||||
APAC | 9,794 | 13,483 | 10.6 | % | 19.5 | % | ||||||||||
Total Segment EBITDA | 126,091 | 64,084 | ||||||||||||||
Corporate costs (1) | (44,777 | ) | (28,102 | ) | ||||||||||||
Equity in income of joint ventures | 6,631 | 8,049 | ||||||||||||||
Depreciation and amortization expense | (70,404 | ) | (54,149 | ) | ||||||||||||
Merger and integration expense | (6,995 | ) | (9,526 | ) | ||||||||||||
Severance and other expense | (2,172 | ) | (2,192 | ) | ||||||||||||
Stock-based compensation expense | (10,248 | ) | - | |||||||||||||
Foreign exchange loss | (2,428 | ) | (1,060 | ) | ||||||||||||
Other income, net | 1,240 | 626 | ||||||||||||||
Interest and finance income (expense), net | 1,725 | (3,231 | ) | |||||||||||||
Loss before income taxes | $ | (1,337 | ) | $ | (25,501 | ) | ||||||||||
(1) | Corporate costs include the costs of running our corporate head office and other central functions that support the operating segments, including research, engineering and development, logistics, sales and marketing and health and safety and are not attributable to a particular operating segment. |
Three months ended June 30, 2022 compared to three months ended March 31, 2022
NLA
Revenue for the NLA segment was $129.7 million for the three months ended June 30, 2022, an increase of $25.8 million, or 24.9%, compared to $103.9 million for the three months ended March 31, 2022. The increase was primarily due to higher revenues across all our product lines during the current quarter, with respecta significant increase in well flow management revenue in Mexico and higher well construction revenue in the U.S. and Guyana driven by higher customer activities during the current quarter.
Segment EBITDA for the NLA segment was $38.5 million, or 29.7% of revenues, during the three months ended June 30, 2022, compared to $21.8 million or 21.0% of revenues during the three months ended March 31, 2022. The increase of $16.7 million in Segment EBITDA and improvement in Segment EBITDA margin was attributable to higher activity and a more favorable activity mix during the three months ended June 30, 2022.
ESSA
Revenue for the ESSA segment was $90.1 million for the three months ended June 30, 2022, an increase of $8.0 million, or 9.8%, compared to $82.1 million for the three months ended March 31, 2022. The increase in revenues was primarily driven by higher well flow management revenue in Angola and Congo and higher well construction revenue in the United Kingdom due to increased customer activities. The increase in revenues was partially offset by lower well intervention and integrity revenue in Norway and Western Europe.
Segment EBITDA for the ESSA segment was $14.9 million, or 16.5% of revenues, for the three months ended June 30, 2022, an increase of $3.0 million, or 25.2%, compared to $11.9 million, or 14.5% of revenues, for the three months ended March 31, 2022. The increase of $3.0 million was primarily attributable to higher activity levels and a more favorable activity mix during the three months ended June 30, 2022.
MENA
Revenue for the MENA segment was $45.4 million for the three months ended June 30, 2022, a decrease of $5.3 million, or 10.6%, compared to $50.7 million for the three months ended March 31, 2022. The decrease in revenue was driven by lower equipment sales related to well flow management in Saudi Arabia and the United Arab Emirates, partially offset by increased well flow management activities in Algeria.
Segment EBITDA for the MENA segment was $13.8 million, or 30.3% of revenues, for the three months ended June 30, 2022, a reduction of $1.7 million, or 11.1 %, compared to $15.5 million, or 30.5% of revenues, for the three months ended March 31, 2022. The reduction in Segment EBITDA was primarily due to lower activity.
APAC
Revenue for the APAC segment was $48.4 million for the three months ended June 30, 2022, an increase of $4.6 million, or 10.5%, compared to $43.8 million for the three months ended March 31, 2022. The increase in revenue was primarily due to higher subsea well access revenue in Australia and Brunei and higher well construction revenue in Japan. The increase in revenue was partially offset by lower well flow management revenue in Thailand and India.
Segment EBITDA for the APAC segment was $4.4 million, or 9.0% of revenues, for the three months ended June 30, 2022, a decrease of $1.0 million, or 19.9%, compared to $5.4 million, or 12.4% of revenues, for the three months ended March 31, 2022. The reduction in Segment EBITDA despite the increase in revenues was primarily due to additional mobilization and commissioning costs incurred during the quarter as well as lower activity on higher margin contracts.
Merger and integration expense
Merger and integration expense for the three months ended June 30, 2022 decreased by $2.4 million, to $2.3 million as compared to $4.7 million for the three months ended March 31, 2022. The decrease was primarily attributable to lower legal and other professional fees related to the Merger incurred during the three months ended June 30, 2022 as compared to the three months ended March 31, 2022.
Stock-based compensation expense
Stock-based compensation expense for the three months ended June 30, 2022 decreased by $1.8 million, to $4.2 million as compared to $6.0 million for the three months ended March 31, 2022. The decrease was primarily driven by lower costs associated with the Legacy Expro stock options as a majority of the awards fully vested during the first quarter.
Income tax expense
Income tax expense for the three months ended June 30, 2022 increased by $5.1 million to $9.6 million from $4.5 million for the three months ended March 31, 2022, primarily due to changes in the mix of taxable profits between jurisdictions, in particular increased taxable profits in Latin America, deferred tax credits recognized during the three months ended March 31, 2022, particularly in APAC, that did not recur during the three months ended June 30, 2022, and deferred tax charges recognized during the three months ended June 30, 2022, primarily in MENA.
Six months ended June 30, 2022 compared to six months ended June 30, 2021
NLA
Revenue for the NLA segment was $233.6 million for the six months ended June 30, 2022, an increase of $172.6 million, or 282.9%, compared to $61.0 million for the six months ended June 30, 2021. Of the total increase of $172.6 million, $152.8 million was attributable to the Merger, reflecting well construction revenue during the six months ended June 30, 2022. The remaining increase of $19.8 million was attributable to the higher well intervention and integrity revenue in Argentina and Brazil and higher well flow management revenue in the U.S. and Brazil during the six months ended June 30, 2022.
Segment EBITDA for the NLA segment was $60.3 million, or 25.8% of revenues, during the six months ended June 30, 2022, compared to $5.8 million or 9.5% of revenues during the six months ended June 30, 2021, an increase of $54.5 million. The increase was primarily attributable to a combination of the impact of the Merger and higher activities during the six months ended June 30, 2022. Further, the Segment EBITDA margin increase was due to higher fall-through from increased activity, more favorable activity mix and lower support costs as a result of merger related synergies.
ESSA
Revenue for the ESSA segment was $172.2 million for the six months ended June 30, 2022, an increase of $53.4 million, or 44.9%, compared to $118.8 million for the six months ended June 30, 2021. The increase was primarily attributable to the Merger, which contributed to an increase of $52.5 million, reflecting well construction revenue during the six months ended June 30, 2022.
Segment EBITDA for the ESSA segment was $26.7 million, or 15.5% of revenues, during the six months ended June 30, 2022, compared to $15.7 million or 13.2% of revenues during the six months ended June 30, 2021, an increase of $11.0 million due to a combination of the impact of the Merger and higher activities during the six months ended June 30, 2022. The increase in Segment EBITDA margin was primarily due to a more favorable activity mix.
MENA
Revenue for the MENA segment was $96.1 million for the six months ended June 30, 2022, an increase of $12.5 million, or 14.9%, compared to $83.6 million for the six months ended June 30, 2021. Of the total increase of $12.5 million for the six months ended June 30, 2022, $12.0 million was attributable to the Merger with the addition of well construction revenue during the period, and the remaining increase was primarily driven by equipment sales related to well flow management in the United Arab Emirates and Saudi Arabia.
Segment EBITDA for the MENA segment was $29.2 million, or 30.4% of revenues, during the six months ended June 30, 2022, compared to $29.1 million or 34.8% of revenues during the six months ended June 30, 2021. The reduction in Segment EBITDA margin was primarily due to lower activity on higher margin contracts and a less favorable activity mix.
APAC
Revenue for the APAC segment was $92.3 million for the six months ended June 30, 2022, an increase of $23.2 million, or 33.5%, compared to $69.1 million for the six months ended June 30, 2021. Of the total increase of $23.2 million for the six months ended June 30, 2022, $16.0 million was attributable to the Merger with the addition of well construction revenue during the period, and the remaining increase was primarily attributable to higher subsea well access and well flow management revenue in Australia, Brunei and Malaysia.
Segment EBITDA for the APAC segment was $9.8 million, or 10.6% of revenues, during the six months ended June 30, 2022, compared to $13.5 million or 19.5% of revenues during the six months ended June 30, 2021. The reduction in Segment EBITDA and Segment EBITDA margin was primarily due to lower activity on higher margin contracts and a less favorable activity mix.
Stock-based compensation expense
Stock-based compensation expense for the six months ended June 30, 2022 was $10.2 million. No stock-based compensation expense was recognized during the six months ended June 30, 2021. The expense for the current period primarily relates to our reportable segmentsLong-Term Incentive Plan which was not present during the six months ended June 30, 2021. Additionally, the current period also includes expense related to stock options under the Legacy Expro’s Management Incentive Plan (“MIP”). No expense was recognized under the MIP during the six months ended June 30, 2021, as the performance conditions within the stock option agreements were deemed to be improbable.
Liquidity and Capital Resources
Liquidity
Our financial objectives include the maintenance of sufficient liquidity, adequate financial resources and financial flexibility to fund our business. As of June 30, 2022, total available liquidity was $309.4 million, including cash and cash equivalents and restricted cash of $179.4 million and $130.0 million available for borrowings under our New Facility. Our primary sources of liquidity have been cash flows from operations. Our primary uses of capital have been for capital expenditures and acquisitions. We monitor potential capital sources, including equity and debt financing, in order to meet our investment and liquidity requirements.
Our total capital expenditures are estimated to range between $60 million and $70 million for the remainder of 2022. Our total capital expenditures were $31.5 million for the six months ended June 30, 2022, of which approximately 90% were used for the purchase and manufacture of equipment to directly support customer-related activities and approximately 10% for other property, plant and equipment, inclusive of software costs. In addition, we used $8.0 million of cash during the first six months to acquire technology to enhance our well intervention and integrity business. Total capital expenditures were $37.6 million for the six months ended June 30, 2021, which were generally used for equipment required to provide services in connection with awarded contracts. We continue to focus on preserving and protecting our strong balance sheet, optimizing utilization of our existing assets and, where practical, limiting new capital expenditures.
On June 16, 2022, our Board of Directors (the “Board”) approved a new stock repurchase program, under which we are authorized to acquire up to $50.0 million of our outstanding common stock through November 24, 2023 (the “Stock Repurchase Program”). Under the Stock Repurchase Program, we may repurchase shares of our common stock in open market purchases, in privately negotiated transactions or otherwise. The Stock Repurchase Program will be utilized at management’s discretion and in accordance with U.S. federal securities laws. The timing and actual numbers of shares repurchased will depend on a variety of factors including price, corporate requirements, the constraints specified in the Stock Repurchase Program along with general business and market conditions. The Stock Repurchase Program does not obligate us to repurchase any particular amount of common stock, and it could be modified, suspended or discontinued at any time. During the second quarter of 2022, we repurchased 1.1 million shares at an average price of $11.81 per share, for a total cost of $13.0 million under this $50.0 million program.
Credit Facility
Revolving Credit Facility
On October 1, 2021, in connection with the closing of the Merger, we entered into a new revolving credit facility (the “New Facility”) with DNB Bank ASA, London Branch, as agent (the “Agent”), with total commitments of $200.0 million, of which $130.0 million is available for drawdowns as loans and $70.0 million is available for letters of credit. Subject to the terms of the New Facility, we have the ability to increase the commitments to $250.0 million. Proceeds of the New Facility may be used for general corporate and working capital purposes.
On March 31, 2022, the Agent, on behalf of the consenting lenders, countersigned a Consent Request Letter dated March 10, 2022 to the New Facility (the “Consent”). Pursuant to the Consent, the lenders consented to, among other things, an amendment to the New Facility permitting dividends or distributions by the Company, or the repurchase or redemption of the Company’s shares in an aggregate amount of $50.0 million over the life of the New Facility, subject to pro forma compliance with the 2.25 to 1.0 maximum senior leverage ratio financial covenant.
On July 28, 2022, the Company and the lenders increased the total commitments available for letters of credit under the New Facility by $18.0 million.
Please see Note 16 “Interest bearing loans” in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.
Cash flow from operating, investing and financing activities
Cash flows provided by (used in) our operations, investing and financing activities are summarized below (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 revenue | 3 | 4,062 | 3,111 | 33 | (7,209 | ) | — | ||||||||||||||||
| Operating loss | (2,647 | ) | (25,453 | ) | (3,967 | ) | (3,013 | ) | — | (35,080 | ) | ||||||||||||
| Adjusted EBITDA | 11,151 | (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 revenue | 18 | 12,890 | 10,350 | 105 | (23,363 | ) | — | ||||||||||||||||
| Operating loss | (19,140 | ) | (73,092 | ) | (782 | ) | (12,642 | ) | — | (105,656 | ) | ||||||||||||
| Adjusted EBITDA | 25,459 | (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 revenue | 45 | 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 | — | — | * | ||||||||||||||||
Six Months Ended | ||||||||
June 30, 2022 | June 30, 2021 | |||||||
Net cash (used in) provided by operating activities | $ | (12,107 | ) | $ | 2,395 | |||
Net cash used in investing activities | (24,745 | ) | (37,644 | ) | ||||
Net cash used in financing activities | (20,202 | ) | (980 | ) | ||||
Effect of exchange rate changes on cash activities | (3,382 | ) | (173 | ) | ||||
Net decrease to cash and cash equivalents and restricted cash | $ | (60,436 | ) | $ | (36,402 | ) | ||
Analysis of cash flow changes between the six months ended June 30, 2022 and June 30, 2021
Net cash (used in) provided by operating activities
Net cash used in operating activities was $12.1 million during the six months ended June 30, 2022 as compared to net cash provided by operating activities of $2.4 million during the six months ended June 30, 2021. The increase in net cash used in operating activities of $14.5 million for the six months ended June 30, 2022 was primarily due to an increase in net working capital of $42.1 million, higher tax payments of $11.4 million and higher payments for merger and integration and severance expenses of $9.9 million, partially offset by an increase in Adjusted EBITDA of $43.9 million for the six months ended June 30, 2022.
Adjusted cash flows from operation during the six months ended June 30, 2022 was $8.1 million as compared to adjusted cash flows from operation of $12.8 million during the six months ended June 30, 2021. Our primary uses of cash from operating activities were capital expenditures and non-cash transactions werefunding obligations related to our financing arrangements.
Net cash used in investing activities
Net cash used in investing activities was $24.7 million during the six months ended June 30, 2022 as followscompared to $37.6 million during the six months ended June 30, 2021, a decrease of $12.9 million. Our principal recurring investing activity is our capital expenditures. The decrease in net cash used in investing activities was primarily due to proceeds from sale / maturity of investments of $8.2 million, proceeds from disposal of assets of $6.6 million and reduction in capital expenditures of $6.1 million for the periods indicated (in thousands):
Net cash used infinancing activities
Net cash used in financing activities was $20.2 million during the six months ended June 30, 2022 as compared to $1.0 million during the six months ended June 30, 2021. The increase of $19.2 million in cash used in financing activities is primarily due to repurchase of common stock of $12.3 million, payments of payroll withholding taxes on stock-based compensation plans of $4.3 million and financed insurance premium of $2.8 million during the six months ended June 30, 2022.
New accounting pronouncements
See Note 2 “Basis of presentation and significant accounting policies” in our unaudited condensed consolidated financial statements under the heading “Recent accounting pronouncements.”
Critical accounting policies and estimates
There were no changes to our critical accounting policies and estimates from those disclosed in our Annual Report.
| 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 | |||||
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; |
● | post-Merger integration; |
● | our cash flows and liquidity; |
● | our financial strategy, budget, projections and operating results; |
● | the amount and timing of any future share repurchases; |
● | the amount, nature and timing of capital expenditures; |
● | the availability and terms of capital; |
● | the exploration, development and production activities of our customers; |
● | the market for our existing and future products and services; |
● | competition and government regulations; and |
● | general economic and political conditions, including political tensions, conflicts and war (such as the ongoing conflict in Ukraine). |
These forward-looking statements are generally accompanied by words such as “anticipate,” “believe,” “estimate,” “expect,” “goal,” “plan,” “intend,” “potential,” “predict,” “project,” “predict,“may,” “believe,“outlook,” “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:
● | uncertainty relating to global crude oil demand and crude oil prices that correspondingly may lead to significant reductions in oil and gas activity, which in turn could result in 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 COVID-19, including uncertainty regarding the re-imposition of restrictions due to resurgences in infection rates; |
● | 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, including the impact of actions taken by OPEC and certain non-OPEC nations with respect to production levels and the effects thereof; |
● | our ability to develop new technologies and products; |
● | our ability to protect our intellectual property rights; |
● | our ability to attract, train and retain key employees and other qualified personnel; |
● | operational safety laws and regulations; |
● | international trade laws and sanctions; |
● | severe weather conditions and natural disasters, and other operating interruptions (including explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, spills and releases and other environmental risks); |
● | policy or regulatory changes; |
● | the overall timing and level of transition of the global energy sector from fossil-based systems of energy production and consumption to more renewable energy sources; |
● | perception related to our environmental, social and governance (“ESG”) performance as well as current and future ESG reporting requirements; and |
● | uncertainty with respect to integration and realization of expected synergies following completion of 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;
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) our Annual Report on Form 10-K for the year ended December 31, 2016,2021, filed with the SEC on February 24, 2017March 8, 2022 (our "Annual Report"“Annual Report”), (3) our other reports and filings we make with the SEC from time to time and (4) 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.
| 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 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 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 margin | 1.8 | % | (1.2 | )% | 2.1 | % | 5.3 | % | |||||||
| 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 revenue | 108,083 | 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 amortization | 30,650 | 26,545 | 92,700 | 84,278 | |||||||||||
| Severance and other charges | 1,648 | 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, net | 1,019 | 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 | ) | ||||
| 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. Services | 29,065 | 34,057 | 89,936 | 119,955 | |||||||||||
| Tubular Sales | 7,701 | 20,029 | 40,787 | 68,151 | |||||||||||
| Blackhawk | 17,575 | — | 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 | ||||||||||
| Blackhawk | 3,477 | — | 7,653 | — | |||||||||||
| $ | 1,973 | $ | (1,298 | ) | $ | 7,073 | $ | 20,077 | |||||||
| 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 | ) | |
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. Our exposure to market risk has not changed materially since December 31, 2016.
a) | |
Evaluation of Disclosure Controls and |
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 our 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 periodthree months covered by this Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit 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 theour evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of SeptemberJune 30, 20172022 at the reasonable assurance level.
b) | |
Change in Internal Control Over Financial |
Except as described below, the Company’s management, has determined that there were no changes in our 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, these internal controls over financial reporting during the three months covered by this quarterly report.
As described in Part II, Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2021, the Merger was completed on October 1, 2021, and represented a change in internal control over financial reporting.
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. We had no material accruals for loss contingencies, individually or in the aggregate, as of SeptemberJune 30, 2017 and2022 or December 31, 2016. We believe2021. 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
We have been conducting, and Contingencies in the
As disclosed above, the investigation into possible violations of the FCPA remains ongoing, and we 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. Our boardBoard and management are committed to continuously enhancing our internal controls that support improved compliance and transparency throughout our global operations.
In addition to the other information set forth in this report, you should carefully consider the risks discussed under the heading “Risk Factors” in our Annual Report, 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.
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 June 30, 2022.
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Program (2) | ||||||||||||
April 1 - April 30 | -- | $ | -- | -- | $ | 50,000,000 | ||||||||||
May 1 - May 31 | -- | $ | -- | -- | $ | 50,000,000 | ||||||||||
June 1 - June 30 | 1,100,000 | $ | 11.81 | 1,100,000 | $ | 37,004,400 | ||||||||||
Total | 1,100,000 | $ | 11.81 | 1,100,000 | ||||||||||||
1) This table excludes shares withheld from employees to satisfy tax withholding requirements on equity-based transactions. We administer cashless settlements and do not repurchase stock in connection with cashless settlements.
2) Our Board authorized a program to repurchase our common stock from time to time. Approximately $37.0 million remained authorized for repurchases as of June 30, 2022, subject to the limitation set in our shareholder authorization for repurchases of our common stock, which is currently 10% of the common stock outstanding as of March 21, 2022.
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.
EXHIBIT INDEX
* Filed herewith.
** Furnished herewith.
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.
EXPRO GROUP HOLDINGS N.V. | |||
Date: | August 4, 2022 | By: | /s/ |
Quinn P. Fanning | |||
Chief Financial Officer | |||
(Principal Financial Officer) | |||