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,July 24, 2023, there were 223,107,260108,749,146 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 Income (Loss) (Unaudited) for the Three and | ||
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, 2023 and 2022 | ||
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 | Other Information | |
Item | Exhibits | |
Signatures | ||
Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except share data) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 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 (expense) income, net Interest and finance (expense) income, 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 income (loss) Income (loss) per common share: Basic Diluted Weighted average common shares outstanding: Basic Diluted The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net income (loss) Other comprehensive income (loss): Amortization of prior service credit Other comprehensive loss Comprehensive income (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, 2023 2022 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, 111,405,621 and 110,710,188 shares issued and 108,703,977 and 108,743,761 shares outstanding Treasury stock (at cost) 2,701,644 and 1,966,427 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, 2023 2022 Cash flows from operating activities: Net income (loss) Adjustments to reconcile net income (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 losses (gains) Changes in assets and liabilities: Accounts receivable, net Inventories Other assets Accounts payable and accrued liabilities Other liabilities Income taxes, net Dividends from joint ventures Other Net cash provided by (used in) operating activities Cash flows from investing activities: Capital expenditures Payment for acquisition of business, net of cash acquired 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: Release of (Cash pledged for) collateral deposits, net 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 Repayment 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, 2022 Accumulated Additional other Total Common Treasury paid-in comprehensive Accumulated stockholders’ stock Stock capital income deficit equity Balance at January 1, 2022 Net loss Other comprehensive loss Stock-based compensation expense Common shares issued upon vesting of share-based awards Treasury shares withheld Balance at March 31, 2022 Net loss Other comprehensive loss Stock-based compensation expense Common shares issued upon vesting of share-based awards Acquisition of common stock Treasury shares withheld Balance at June 30, 2022 Six Months Ended June 30, 2023 Accumulated Additional other Total Common Treasury paid-in comprehensive Accumulated stockholders’ stock Stock capital income deficit equity Balance at January 1, 2023 Net loss Other comprehensive loss Stock-based compensation expense Common stock issued upon vesting of share-based awards Treasury shares withheld Acquisition of common stock Balance at March 31, 2023 Net income Other comprehensive loss Stock-based compensation expense Common stock issued upon vesting of share-based awards Treasury shares refunded Balance at June 30, 2023 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Business description With roots dating to 1938, Expro Group Holdings N.V. On March 10, 2021, the Company and New Eagle Holdings Limited, an exempted company limited by shares incorporated under the laws of the Cayman Islands and a direct wholly owned subsidiary of the Company (“Merger Sub”), entered into an Agreement and Plan of Merger with Expro Group Holdings International Limited (“Legacy Expro”) providing for the merger of Legacy Expro with and into Merger Sub in an all-stock transaction, with Merger Sub surviving the merger as a direct, wholly owned subsidiary of the Company (the “Merger”). The Merger closed on October 1, 2021, and the Company, previously known as Frank’s International N.V. (“Frank’s”), was renamed Expro Group Holdings N.V. 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 $50.0 million of its outstanding common stock through November 24, 2023. Under the 2. Basis of presentation and significant accounting policies Basis of The unaudited condensed consolidated financial statements reflect the accounts of The accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. The unaudited condensed consolidated In the opinion of management, these unaudited condensed consolidated financial statements, which are prepared in accordance with the rules of the SEC and U.S. GAAP for interim financial reporting, included herein contain all adjustments necessary to present fairly our financial position as of June 30, 2023, the results of our operations for the three and six months ended June 30, 2023 and 2022 and our cash flows for the six months ended June 30, 2023 and 2022. Such adjustments are of a normal recurring nature. Operating resultsfor the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other period. The unaudited condensed consolidated financial statements have been prepared on an historical cost basis using the United States dollar (“$” or “U.S. dollar”) as the reporting currency. Significant accounting policies Refer to Note 2 “Basis of presentation and significant accounting policies” of our consolidated financial statements as of and for the year ended December 31, 2022, which are included in our most recent Annual Report on Form Recent accounting pronouncements Changes to We consider the applicability and impact of all 3. Business combinations and dispositions DeltaTek Oil Tools Limited On February 8, 2023 (“Closing Date”), DeltaTek Oil Tools Limited, a limited liability company registered in the The contingent consideration arrangement requires the Company to pay the former owners of DeltaTek a percentage of future revenues generated specifically from the acquired technology over a period of seven years. The fair value of the contingent consideration arrangement of $8.5 million was estimated by applying the income approach and is reflected in The Acquisition is The Amount Cash and cash equivalents Accounts receivables, net Inventories Property, plant and equipment Goodwill Intangible assets Other assets Total assets Accounts payable and accrued liabilities Deferred tax liabilities Other liabilities Total Liabilities Fair value of net assets acquired These amounts, including the The intangible assets will be amortized on a straight-line basis over an estimated 5 to 15 years life. We expect annual amortization to be approximately $1.0 million associated with these intangible assets. An associated deferred tax liability has been recorded in regards to these intangible assets. Refer to Note 14– Intangible assets, net for additional information regarding the various acquired intangible assets. The goodwill consists largely of the synergies and economies of scale expected from the technology providing more efficient services and expected future developments resulting from the assembled workforce. The goodwill is not subject to amortization but will be evaluated at least annually for impairment or more frequently if impairment indicators are present. Goodwill recorded in the Acquisition is not expected to be deductible for tax purposes. The Company has determined the estimated unaudited pro forma information to be insignificant for the three and six months ended June 30, 2023 and 2022, assuming the Acquisition were to have been completed as of January 1, 2023 and 2022, respectively. This is not necessarily indicative of the results that would have occurred had the Acquisition been completed on either date indicated or of future operating results. 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 June 30, 2023 Level 1 Level 2 Level 3 Total Assets: Non-current accounts receivable, net Liabilities: Finance lease liabilities Contingent consideration liabilities December 31, 2022 Level 1 Level 2 Level 3 Total Assets: Non-current accounts receivable, net Liabilities: Finance lease liabilities 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 assess performance. Our ● North and Latin America (“NLA”), ● Europe and Sub-Saharan Africa (“ESSA”), ● Middle East and North Africa (“MENA”), and ● Asia-Pacific (“APAC”). The Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 NLA ESSA MENA APAC Total Segment EBITDA Our CODM regularly evaluates the performance of our The Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 NLA ESSA MENA APAC Total Segment EBITDA Corporate costs Equity in income of joint ventures Depreciation and amortization expense Merger and integration expense Severance and other expense Stock-based compensation expense Foreign exchange loss Other (expense) income, net Interest and finance (expense) income, net Income (loss) before income taxes 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, 2023 2022 2023 2022 Well construction Well management Total Contract balances We perform our obligations under contracts with our customers by transferring services and products in exchange for consideration. The timing of our performance often differs from the timing of our customer’s payment, which results in the recognition of unbilled receivables and deferred revenue. Unbilled receivables are initially recognized for revenue earned on completion of the performance obligation which are not yet invoiced to the customer. The amounts recognized as unbilled receivables are reclassified to trade receivable upon billing. Deferred revenue represents the Company’s obligations to transfer goods or services to customers for which the Company has received consideration, in full or part, from the customer. Contract balances consisted of the following as of June 30, 2023, and December 31, 2022 (in thousands): June 30, December 31, 2023 2022 Trade receivable, net Unbilled receivables (included within accounts receivable, net) Deferred revenue (included within other liabilities) The Company recognized revenue during the three and six months ended June 30, 2023 of $17.1 million and $42.3 million, respectively, and for the three and six months ended June 30, 2022 of $1.0 million and $8.9 million, respectively, out of the deferred revenue balance as of the beginning of the applicable year. As of June 30, 2023, $28.5 million of our deferred revenue was classified as current and is Transaction price allocated to remaining performance obligations Remaining performance obligations represent firm contracts for which work has not been performed and 7. Income taxes For interim financial reporting, the Our effective tax rates were 65.9% and 115.0% for the three and six months ended June 30, 2023, respectively, and were 340.6% and (177.5)% for the three and six months ended June 30, 2022, respectively. Our effective tax rate was impacted primarily due to changes in the mix of taxable profits between jurisdictions with different tax regimes, in particular in Europe and Sub-Saharan Africaand the Middle East. 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, 2023, and December 31, 2022, was as follows (in thousands): June 30, December 31, 2023 2022 CETS PVD-Expro Total 9. Accounts receivable, net Accounts receivable, net consisted of the June 30, December 31, 2023 2022 Accounts receivable Less: Expected credit losses Total Current Non – current Total 10. Inventories Inventories consisted of the following as of June 30, 2023, and December 31, 2022 (in thousands): June 30, December 31, 2023 2022 Finished goods Raw materials, equipment spares and consumables Work-in-progress Total 11. Other assets and liabilities Other assets consisted of the following as of June 30, 2023, and December 31, 2022 (in thousands): June 30, December 31, 2023 2022 Prepayments Value-added tax receivables Collateral deposits Deposits Other Total Current Non – current Total Other liabilities consisted of the following as of June 30, 2023, and December 31, 2022 (in thousands): June 30, December 31, 2023 2022 Deferred revenue Other tax and social security Income tax liabilities – non-current portion Provisions Contingent consideration liabilities Other Total Current Non – current Total 12. Accounts payable and accrued liabilities Accounts payable and accrued liabilities consisted of the following as of June 30, 2023, and December 31, 2022 (in thousands): June 30, December 31, 2023 2022 Accounts payable – trade Payroll, vacation and other employee benefits Accruals for goods received not invoiced Other accrued liabilities Total 13. Property, plant and equipment, net Property, plant and equipment, net consisted of the following as of June 30, 2023, and December 31, 2022 (in thousands): June 30, December 31, 2023 2022 Cost: Land Land improvements Buildings and lease hold improvements Plant and equipment Less: accumulated depreciation Total The carrying amount of our property, plant and equipment recognized in respect of assets held under finance leases as of June 30, 2023 and December 31, 2022 and included in amounts above is as follows (in thousands): June 30, December 31, 2023 2022 Cost: Buildings Plant and equipment Total Less: accumulated amortization Total Depreciation expense relating to property, plant and equipment, including assets under finance leases, was $27.8 million and $53.3 million for the three and six months ended June 30, 2023, respectively, and $25.6 million and $51.6 million for the three and six months ended June 30, 2022, respectively. During the six months ended June 30, 2023 and 2022, assets held for sale were sold for net proceeds of $2.0 million and $6.3 million, respectively. 14. Intangible assets, net The following table summarizes our June 30, 2023 December 31, 2022 June 30, 2023 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 Trademarks Technology Software Total Amortization expense for intangible assets was $9.4 million and $18.6 million for the three and six months ended June 30, 2023, respectively, and $9.8 million and $18.8 million for the three and six months ended June 30, 2022, respectively. The following table summarizes the Acquired Fair Value Weighted average life (years) CR&C Trademarks Technology Total 15. Goodwill Our reporting units are our operating segments which are NLA, ESSA, MENA and The allocation of June 30, December 31, 2023 2022 NLA ESSA MENA APAC Total The following table summarizes the June 30, 2023 NLA ESSA MENA APAC Total As of June 30, 2023, we did not identify any triggering events that would represent an indicator of impairment of our goodwill. Accordingly, no impairment charges related to goodwill have been recorded during the three and 16. Interest bearing loans On October 1, 2021, 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 was available for drawdowns as loans and $70.0 million was available for letters of credit. On July 21, 2022, the Company increased the facility available for letters of credit to $92.5 million and total commitments to $222.5 million. Proceeds of the All obligations under the New Facility are guaranteed jointly and Borrowings under the New Facility bear interest at a rate 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 finance 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, subject 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 The New Facility remained undrawn on a cash basis (i.e., no loans were outstanding), as of June 30, 2023 and December 31, 2022. We utilized $49.1 million and $53.8 million as of June 30, 2023 and December 31, 2022, respectively, for bonds and guarantees. 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 $51.4 million and $45.5 million as of June 30, 2023 and December 31, 2022, 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 If the assessment of a Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the We On April 26, 2023, the SEC issued a cease-and-desist order against the Company pursuant to section 21C of the Securities Exchange Act of 1934 (“Exchange Act”). Under this Order, the Company neither admitted nor denied any of the SEC’s findings and agreed to cease and desist from committing or causing any violations and any future violations of the anti-bribery, books and records and internal accounting controls requirements of the FCPA and the Exchange Act. In accepting the Company’s settlement offer, the SEC noted the Company’s self-reporting, co-operation afforded to the SEC staff and remedial action including improving the Company’s internal controls and further enhancements to its internal controls environment and compliance program following the Merger. The Company paid $8.0 million to the SEC in respect of disgorgement, prejudgment interest and civil penalty during the current quarter. Other than discussed above, we had noother 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, 2023 2022 2023 2022 Amortization of prior service credit Interest cost Expected return on plan assets Total The Company contributed $1.3 million and $2.5 million for the three and six months ended June 30, 2023, respectively, and $1.2 million and $2.5 million for the three and six months ended June 30, 2022, 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. 19. Earnings per share Basic earnings per share attributable to Company stockholders is calculated by dividing net income attributable to the Company by the weighted-average number of common shares outstanding for the period. Diluted earnings per share attributable to Company stockholders is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding, assuming all potentially dilutive shares were issued. We apply the treasury stock method to determine the dilutive weighted average common shares represented by unvested restricted stock units, stock options and Employee Stock Purchase Program (“ESPP”) shares. The calculation of basic and diluted earnings per share attributable to Company stockholders for the three and six months ended June 30, 2023 and 2022, respectively, are as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net income (loss) Basic weighted average number of shares outstanding Effect of dilutive securities: Unvested restricted stock units ESPP shares Stock options Diluted weighted average number of shares outstanding Total basic earnings (loss) per share Total diluted earnings (loss) per share 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 owned by various members of the Mosing family. During the three and six months ended June 30, 2023, we provided goods and services to related parties totaling $2.0 million and $4.1 million, respectively and $1.4 million and $2.3 million respectively, during the three and six months ended June 30, 2022. During the three and six months ended June 30, 2023, we received goods and services from related parties totaling $0.1 million and $0.4 million, respectively and received no goods or services during both the three and six months ended June 30, 2022. Additionally, we entered into various operating lease agreements to lease facilities with affiliated companies. Rent expense associated with our related party leases was $0.2 million and $0.3 million, respectively, for the three and six months ended June 30, 2023. As of June 30, 2023 and December 31, 2022 amounts receivable from related parties were $4.3 million and $2.4 million, respectively, and amounts payable to related parties were $1.1 million and $0.8 million, respectively. As of June 30, 2023, $0.4 million of our operating lease right-of-use assets and $0.4 million of our lease liabilities were associated with related party leases. As of December 31, 2022, $0.7 million of our operating lease right-of-use assets and $0.7 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 The tax receivable agreement (the “Original TRA”) that 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. The A&R TRA also provides for other contingent payments to be made by the Company to Mosing Holdings in the future in the event the Company realizes cash tax savings from tax attributes covered under the Original TRA during the ten-year period following October 1, 2021 in excess of $18.1 million. 21. Stock-based compensation The Company recognized $0.2 million and $0.7 million of stock-based compensation expense attributable to the Management Incentive Plan (“MIP”) stock options during the three and six months ended June 30, 2023, respectively. The Company recognized expense of $0.5 million and $3.2 million attributable to the MIP stock options during the three and six months ended June 30, 2022, respectively. 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, 2023 was $5.3 million and $8.8 million, respectively. Stock-based compensation expense relating to LTIP RSUs and PRSUs for the three and six months ended June 30, 2022 was $3.6 million and $6.7 million, respectively. During the six months ended June 30, 2023, 784,391 RSUs and 260,762 PRSUs were granted to employees and directors at a weighted average grant date fair value of $18.45 per RSU and $33.76 per PRSU. During the three and six months ended June 30, 2023 we recognized $0.1 million and $0.2 million of compensation expense related to stock purchased under the ESPP. The Company recognized ESPP expense for the three and six months ended June 30, 2022 of $0.1 million and $0.3 million, respectively. 22. Supplemental cash flow Six Months Ended June 30, 2023 2022 Supplemental disclosure of cash flow information: Cash paid for income taxes, net of refunds Cash paid for interest, net Change in accounts payable and accrued expenses related to capital expenditures Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our This section contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations, and involve risks and uncertainties. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements 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 and our Annual Report. Overview of Business Working for clients across the entire well life cycle, we are a leading provider of energy services, offering cost-effective, innovative solutions and what we consider to be best-in-class safety and service quality. The Company’s extensive portfolio of capabilities spans well construction, well flow management, subsea well access, and well intervention and integrity solutions. With roots dating to 1938, we have 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 • Well Management Our well management offerings consist of well flow management, subsea well access and well intervention and integrity services: • • • 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 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 2023 has seen continued growth and increased activity as the market rebounds from the effects of the pandemic and Russia’s invasion of Ukraine. There are a number of market factors that have had, and may continue to have, an effect on our business, including: • • • • • Outlook Global liquids demand continued to grow through the second quarter of 2023 following pre-pandemic levels being surpassed in the first quarter of 2023, and is forecast to continue to increase over the remainder of the year while supply remains constrained, supported by continued OPEC+ and Saudi Arabia supply restraint. These factors continue to support a stabilizing oil price. The U.S. In addition to the continued positive oil market outlook, global natural gas prices are expected to remain elevated as the market remains fundamentally tight. The EIA anticipates Henry Hub spot prices to decrease from the 2022 highs to average $2.62 per million British thermal unit (“MMBtu”) in 2023 mainly as a result of high inventory levels. The Henry Hub spot price is then forecast to rise to average $3.29/MMBtu in 2024, an increase of over 25% compared to 2023. Rystad Energy estimates the European Title Transfer Facility and Consequently, the outlook for 2023 shows signs of continuing recovery in exploration and production expenditures, with upstream investments expected to surpass pre-pandemic levels. Strong growth is expected in deepwater and offshore shelf investments supported by large projects in Latin America, Norway and the Middle East. As a result, we expect demand for our services and solutions to continue trending positively through 2023 and into 2024. 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 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 (used in) operating activities, the most directly comparable liquidity measure calculated and presented in accordance with GAAP. Executive Overview Three months ended June 30, 2023, compared to three months ended March 31, 2023 Certain highlights of our financial results and other key developments include: • Revenue for the three months ended June 30, 2023, increased by $57.6 million, or 17.0%, to $396.9 million, compared to $339.3 million for the three months ended March 31, 2023. The increase in revenue was driven by higher activity across all segments, most notably ESSA and APAC. Revenue for our segments is discussed separately below under the heading “Operating Segment Results.” • • • Six months ended June 30, 2023, compared to six months ended June 30, 2022 Certain highlights of our financial results and other key developments include: • Revenue for the six months ended June 30, 2023, increased by $142.1 million, or 23.9%, to $736.2 million, compared to $594.1 million for the six months ended June 30, 2022. The increase in revenue was driven by higher activity across all segments, most notably ESSA. Revenue for our segments is discussed separately below under the heading “Operating Segment Results.” • We reported net income for the six months ended June 30, 2023, of $2.9 million, compared to a net loss of $15.5 million for the six months ended June 30, 2022, primarily reflecting higher Adjusted EBITDA (which was up $25.6 million) and lower merger and integration expense (down $3.5 million), partially offset by higher income tax expense (up $3.5 million), higher interest and finance expense (up $3.0 million) and higher other expense (up $3.7 million sequentially). • Adjusted EBITDA for the six months ended June 30, 2023, increased by $25.6 million, or 29.1%, to $113.5 million from $87.9 million for the six months ended June 30, 2022. Adjusted EBITDA margin increased to 15.4% during the six months ended June 30, 2023, as compared to 14.8% during the six months ended June 30, 2022. The increase in Adjusted EBITDA and Adjusted EBITDA margin is primarily attributable to higher revenue, better product mix and the LWI project becoming operational towards the end of the first quarter of 2023. Adjusted EBITDA for the six months ended June 30, 2023 includes unrecoverable mobilization costs and start-up and commissioning costs on subsea projects in APAC of $10.6 million and LWI-related non-reimbursable costs for NPT of $5.7 million. • Net cash provided by operating activities for the six months ended June 30, 2023, was $46.7 million, compared to net cash used in operating activities of $12.1 million for the six months ended June 30, 2022, with the change primarily driven by favorable movement in net working capital of $40.3 million, and an increase in Adjusted EBITDA of $25.6 million, partially offset by higher payments for income taxes of $6.1 million for the six months ended June 30, 2023. Adjusted Cash Flow from Operations and Cash Conversion for the six months ended June 30, 2023, were $63.2 million and 56%, respectively, compared to $8.1 million and 9%, respectively, for the six months ended June 30, 2022. 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 income (loss), 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 We define Adjusted EBITDA as net income (loss) We define Adjusted Cash Flow from Operations as net cash provided by (used in) operating activities adjusted for cash (received) paid during the Adjusted EBITDA, The following table presents a reconciliation of Three Months Ended Six Months Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Net income (loss) Income tax expense Depreciation and amortization expense Severance and other expense Merger and integration expense Other expense (income), net (1) Stock-based compensation expense Foreign exchange losses Interest and finance expense (income), net Adjusted EBITDA Adjusted EBITDA Margin (1) The following table provides a reconciliation of net cash provided by (used in) operating activities to Adjusted Cash Flow from Operations for each of the three and six months presented (in thousands): June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Net cash provided by (used in) operating activities Cash (received) paid for interest, net Cash paid for merger and integration expense Cash paid for severance and other expense Adjusted Cash Flow from Operations Adjusted EBITDA Cash Conversion Results of Operations Operating Segment Results We evaluate our business segment operating performance using segment revenue and Segment EBITDA, as described in Note 5 “Business segment reporting” in our consolidated financial statements. We believe Segment EBITDA is a useful operating performance measure as it excludes non-cash charges and other transactions not related to our core operating activities and corporate costs, and Segment EBITDA allows management to more meaningfully analyze the trends and performance of our core operations by segment as well as to make decisions regarding the allocation of resources to our segments. The following table shows revenue by segment and revenue as a percentage of total revenue by segment for the three months ended June 30, 2023 and March 31, 2023: Three Months Ended Percentage (in thousands) June 30, 2023 March 31, 2023 June 30, 2023 March 31, 2023 NLA 34.0% ESSA 34.8% MENA 14.9% APAC 16.3% Total Revenue 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, 2023 and June 30, 2022: Six Months Ended Percentage (in thousands) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 NLA 35.5% ESSA 34.2% MENA 15.0% APAC 15.3% Total Revenue 100.0% The following Three Months Ended Segment EBITDA Margin (in thousands) June 30, 2023 March 31, 2023 June 30, 2023 March 31, 2023 NLA 27.2% ESSA 25.3% MENA 31.3% APAC 5.3% Total Segment EBITDA Corporate costs (1) Equity in income of joint ventures Depreciation and amortization expense Merger and integration expense Severance and other expense Stock-based compensation expense Foreign exchange (losses) gain Other expense, net Interest and finance (expense) income, net Income (loss) before income taxes 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, 2023 and June 30, 2022: Six Months Ended Segment EBITDA Margin (in thousands) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 NLA 26.3% ESSA 22.1% MENA 30.0% APAC 0.7% Total Segment EBITDA Corporate costs (1) Equity in income of joint ventures Depreciation and amortization expense Merger and integration expense Severance and other expense Stock-based compensation expense Foreign exchange losses Other (expenses) income, net Interest and finance (expense) income, net Income (loss) before income taxes (1) Three months ended June 30, 2023 compared to three months ended March 31, 2023 NLA Revenue for the NLA segment was $134.8 million for the three months ended June 30, 2023, an increase of $8.6 million, or 6.8%, compared to $126.2 million for the three months ended March 31, 2023. The increase was primarily due to higher well construction revenue in the U.S. offshore, Canada and Brazil, offset by lower well construction activity in Guyana and U.S. land. The increase in revenue was also contributed to by higher well flow management revenue in U.S., offset by lower activity in Brazil and Mexico, as well as higher well intervention and integrity activity in Argentina. Segment EBITDA for the NLA segment was $36.7 million, or 27.2% of revenues, during the three months ended June 30, 2023, an increase of $4.8 million, or 15.0%, compared to $31.9 million or 25.3% of revenues during the three months ended March 31, 2023. The increase in Segment EBITDA and Segment EBITDA margin was attributable to higher activity and more favorable product mix during the three months ended June 30, 2023. ESSA Revenue for the ESSA segment was $138.1 million for the three months ended June 30, 2023, an increase of $24.5 million, or 21.6%, compared to $113.6 million for the three months ended March 31, 2023. The increase in revenues was primarily driven by higher well flow management revenue, particularly in Congo, higher well construction revenue in UK and western Europe and higher subsea well access activity resulting from increased customer activities. Segment EBITDA for the ESSA segment was $35.0 million, or 25.3% of revenues, for the three months ended June 30, 2023, an increase of $14.2 million, or 68.3%, compared to $20.8 million, or 18.3% of revenues, for the three months ended March 31, 2023. The increase in segment EBITDA was attributable to higher revenue and activity levels; the increase in Segment EBITDA margin was attributable to a combination of a more favorable activity mix and increased activities on higher margin jobs during the three months ended June 30, 2023. MENA Revenue for the MENA segment was $59.2 million for the three months ended June 30, 2023, an increase of $8.3 million, or 16.3%, compared to $50.9 million for the three months ended March 31, 2023. The increase in revenue was driven by higher well flow management activity primarily in Saudi Arabia, offset by lower activity in United Arab Emirates and Egypt. Segment EBITDA for the MENA segment was $18.5 million, or 31.3% of revenues, for the three months ended June 30, 2023, an increase of $3.9 million, or 26.7%, compared to $14.6 million, or 28.6% of revenues, for the three months ended March 31, 2023. The increase in Segment EBITDA and Segment EBITDA margin was primarily due to higher activity during the three months ended June 30, 2023. APAC Revenue for the APAC segment was $64.9 million for the three months ended June 30, 2023, an increase of $16.4 million, or 33.8%, compared to $48.5 million for the three months ended March 31, 2023. The increase in revenue was primarily due to higher activity across all product lines, in particular, higher subsea well access revenue in Australia and China. Segment EBITDA for the APAC segment was $3.5 million, or 5.3% of revenues, for the three months ended June 30, 2023, an increase of $6.2 million compared to $(2.7) million, or (5.6)% of revenues, for the three months ended March 31, 2023. The increase in Segment EBITDA is attributable primarily to the LWI project becoming operational towards the end of the first quarter, as well as increased activity on other projects. Equity in income of joint ventures Equity in income of joint ventures for the three months ended June 30, 2023, increased by $0.4 million, or 16.7%, to $2.8 million as compared to $2.4 million for the three months ended March 31, 2023. The increase reflects higher income from our joint venture in China during the three months ended June 30, 2023. Merger and integration expense Merger and integration expense for the three months ended June 30, 2023, decreased by $0.7 million, to $1.4 million as compared to $2.1 million for the three months ended March 31, 2023. The decrease was primarily attributable to lower integration related expenses incurred during the three months ended June 30, 2023, as compared to the three months ended March 31, 2023. Income tax expense Income tax expense for the three months ended June 30, 2023, increased by $7.4 million to $12.5 million from $5.1 million for the three months ended March 31, 2023, primarily due to changes in the mix of taxable profits between jurisdictions, and non-recurring discrete items in the three months ended March 31, 2023, arising from the Acquisition. Six months ended June 30, 2023 compared to six months ended June 30, 2022 NLA Revenue for the NLA segment was $261.1 million for the six months ended June 30, 2023, an increase of $27.5 million, or 11.8%, compared to $233.6 million for the six months ended June 30, 2022. The increase was primarily due to higher well construction revenue in offshore U.S. and higher well intervention and integrity revenue in South America, offset by lower well flow management activity in Mexico. Segment EBITDA for the NLA segment was $68.6 million, or 26.3% of revenues, during the six months ended June 30, 2023, compared to $60.3 million or 25.8% of revenues during the six months ended June 30, 2022. The increase of $8.3 million in Segment EBITDA was attributable to higher activity and favorable product mix during the six months ended June 30, 2023. ESSA Revenue for the ESSA segment was $251.7 million for the six months ended June 30, 2023, an increase of $79.5 million, or 46.2%, compared to $172.2 million for the six months ended June 30, 2022. The increase in revenues was primarily driven by higher well flow management revenue in Congo, supplemented by higher well intervention and integrity revenue in the U.K. and higher well construction revenue in Senegal and Azerbaijan. Segment EBITDA for the ESSA segment was $55.7 million, or 22.1% of revenues, for the six months ended June 30, 2023, an increase of $29.0 million, or 108.6%, compared to $26.7 million, or 15.5% of revenues, for the six months ended June 30, 2022. The increase was primarily attributable to higher activity levels and a more favorable activity mix during the six months ended June 30, 2023. MENA Revenue for the MENA segment was $110.1 million for the six months ended June 30, 2023, an increase of $14.0 million, or 14.6%, compared to $96.1 million for the six months ended June 30, 2022. The increase in revenue was driven by increased well flow management and well construction activity in Saudi Arabia and increased well flow management revenue in Algeria. Segment EBITDA for the MENA segment was $33.1 million, or 30.0% of revenues, for the six months ended June 30, 2023, an increase of $3.9 million, or 13.4%, compared to $29.2 million, or 30.4% of revenues, for the six months ended June 30, 2022. The increase in Segment EBITDA was primarily due to higher activity during the six months ended June 30, 2023. APAC Revenue for the APAC segment was $113.3 million for the six months ended June 30, 2023, an increase of $21.0 million, or 22.8%, compared to $92.3 million for the six months ended June 30, 2022. The increase in revenue was primarily due to higher subsea well access revenue in Australia and China and higher well construction revenue in Southeast Asia. Segment EBITDA for the APAC segment was $0.8 million, or 0.7% of revenues, for the six months ended June 30, 2023, a decrease of $9.0 million compared to $9.8 million, or 10.6% of revenues, for the six months ended June 30, 2022. The decrease in Segment EBITDA despite the increase in revenues was primarily due to $10.6 million of unrecoverable subsea mobilization costs, and higher start-up and commissioning costs incurred during the first quarter of 2023 on subsea projects in APAC, which became operational towards the end of the first quarter of 2023, partially offset by increase in contribution from higher revenues during the six months ended June 30, 2023. Equity in income of joint ventures Equity in income of joint ventures for the six months ended June 30, 2023, decreased by $1.4 million, or 21.2%, to $5.2 million as compared to $6.6 million for the six months ended June 30, 2022. The decrease reflects lower income from our joint venture in China during the six months ended June 30, 2023. Merger and integration expense Merger and integration expense for the six months ended June 30, 2023, decreased by $3.5 million, to $3.5 million as compared to $7.0 million for the six months ended June 30, 2022. The decrease was primarily attributable to lower integration related expenses incurred during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022. Income tax expense Income tax expense for the six months ended June 30, 2023, increased by $3.5 million to $17.6 million from $14.1 million for the six months ended June 30, 2022, primarily due to changes in the mix of taxable profits between jurisdictions with different tax regimes, in particular in Sub-Saharan Africa and Latin America. Liquidity and Capital Resources Liquidity Our financial Our total capital expenditures are estimated to range between $60 million and $70 million for the last two quarters of 2023. Our total capital expenditures were $58.0 million for the six months ended June 30, 2023, 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 net cash of approximately $7.5 million during the three months ended March 31, 2023, for the acquisition of DeltaTek. 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, 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. 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 is being utilized at management’s discretion and in accordance with U.S. federal securities laws. The timing and actual numbers of shares repurchased, if any, will depend on a variety of factors including price, corporate requirements, the constraints specified in the stock repurchase 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. Under the stock repurchase plan, the Company has repurchased approximately 0.6 million shares at an average price of $17.99 per share, for a total cost of approximately $10.0 million during the six months ended June 30, 2023. Since the inception of the stock repurchase program, the Company has repurchased total of approximately 1.7 million shares at an average price of $13.89 per share, for a total cost of $23.0 million through June 30, 2023. Credit Facility Revolving Credit Facility On October 1, 2021, 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 was available for drawdowns as loans and $70.0 million was available for letters of credit. 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 21, 2022, the Company increased the facility available for letters of credit to $92.5 million and total commitments to $222.5 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): Six Months Ended June 30, 2023 June 30, 2022 Net cash provided by (used in) operating activities Net cash used in investing activities Net cash used in financing activities Effect of exchange rate changes on cash activities Net decrease to cash and cash equivalents and restricted cash Analysis of cash flow changes between the six months ended June 30, 2023 and June 30, 2022 Net cash provided by (used in) operating activities Net cash provided by operating activities was $46.7 million during the six months ended June 30, 2023 as compared to net cash used in operating activities of $12.1 million during the six months ended June 30, 2022. The increase in net cash provided by operating activities of $58.8 million for the six months ended June 30, 2023, was primarily due to a favorable movement in net working capital of $40.3 million and an increase in Adjusted EBITDA of $25.6 million, partially offset by higher payments for income taxes of $6.1 million for the six months ended June 30, 2023. Adjusted Cash Flows from Operations during the six months ended June 30, 2023, was $63.2 million as compared to Adjusted Cash Flows from Operations of $8.1 million during the six months ended June 30, 2022. Our primary uses of cash from operating activities were capital expenditures and funding obligations related to our Net cash used in investing activities Net cash used in investing activities was $63.5 million during the six months ended June 30, 2023, as compared to $24.7 million during the six months ended June 30, 2022, an increase of $38.8 million. Our principal recurring investing activity is our capital expenditures. The increase in net cash used in investing activities was primarily due to an increase in capital expenditures of $26.4 million, lower proceeds from disposal of assets of $4.6 million and nonrecurring proceeds from sale of investments of $8.2 million. Net cash used infinancing activities Net cash used in financing activities was $17.8 million during the six months ended June 30, 2023, as compared to $20.2 million during the six months ended June 30, 2022. The decrease of $2.4 million in net cash used in financing activities is primarily due to lower cash used for acquisition of common stock of $2.3 million during the six months ended June 30, 2022 as compared to the six months ended June 30, 2023. 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. 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; ● These forward-looking statements are generally accompanied by words such as “anticipate,” “believe,” “estimate,” “expect,” “goal,” “plan,” “intend,” “potential,” “predict,” “project,” ● ● ● ● our ability to develop new technologies and products and 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); ● 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. These and other important factors that could affect our operating results and performance are described in (1) “Risk Factors” in Part II, Item For quantitative and qualitative disclosures about market risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in 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 b) Change in Internal Control Over Financial As of June 30, 2023, management has concluded that there have been no changes in our internal control over financial reporting that occurred during the quarter ended Please see Note 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, 2023. 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 May 1 - May 31 June 1 - June 30 Total 1) This table excludes shares withheld from employees to satisfy tax withholding requirements on equity-based transactions. We administer cashless settlements and generally 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 $27.0 million remained authorized for repurchases as of June 30, 2023, subject to the limitation set in our shareholder authorization for repurchases of our common stock, which is approximately 10% of the common stock issued as of March 21, 2022. Securities Trading Arrangements with Officers and Directors On June 15, 2023, Eileen G. Whelley, non-executive director, adopted a trading plan intended to satisfy Rule 10b5-1(c) to sell sufficient shares of the Company’s common stock between June 3, 2024and June 24, 2024, subject to certain conditions, to cover tax obligations related to the vesting of restricted stock units on June 1, 2024. On June 16, 2023, Lisa L. Troe, non-executive director, adopted a trading plan intended to satisfy Rule 10b5-1(c) to sell sufficient shares of the Company’s common stock between June 3, 2024and June 24, 2024, subject to certain conditions, to cover tax obligations related to the vesting of restricted stock units on June 1, 2024. The exhibits required to be filed by Item 6 are set forth in the Exhibit Index EXHIBIT INDEX Exhibit Number Description Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350. Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350. *101.1 The following materials from Expro Group Holdings N.V.’s Quarterly Report on Form 10-Q for the period ended June 30, 2023 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive Income (Loss); (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Stockholders’ Equity; and (vi) Notes to Unaudited Condensed Consolidated Financial Statements. *104 Cover Page Interactive Data File (embedded within the Inline XBRL document). 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: July 27, 2023 By: /s/ Quinn P. Fanning Chief Financial Officer (Principal Financial Officer) $ 396,917 $ 313,624 $ 736,196 $ 594,101 (318,948 ) (256,583 ) (608,595 ) (496,113 ) (16,186 ) (17,840 ) (29,471 ) (29,350 ) (37,235 ) (35,392 ) (71,972 ) (70,404 ) (1,377 ) (2,270 ) (3,515 ) (6,995 ) (2,663 ) (678 ) (3,590 ) (2,172 ) (376,409 ) (312,763 ) (717,143 ) (605,034 ) 20,508 861 19,053 (10,933 ) (1,462 ) 244 (2,411 ) 1,240 (17 ) 1,712 (1,315 ) 1,725 19,029 2,817 15,327 (7,968 ) 2,805 2,429 5,241 6,631 21,834 5,246 20,568 (1,337 ) (12,539 ) (9,596 ) (17,624 ) (14,145 ) $ 9,295 $ (4,350 ) $ 2,944 $ (15,482 ) $ 0.09 $ (0.04 ) $ 0.03 $ (0.14 ) $ 0.08 $ (0.04 ) $ 0.03 $ (0.14 ) 108,662,509 109,582,086 108,758,078 109,425,407 109,381,977 109,582,086 109,975,739 109,425,407 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 $ 9,295 $ (4,350 ) $ 2,944 $ (15,482 ) (61 ) (61 ) (122 ) (122 ) (61 ) (61 ) (122 ) (122 ) $ 9,234 $ (4,411 ) $ 2,822 $ (15,604 ) 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) $ 178,908 $ 214,788 1,963 3,672 435,619 419,237 155,341 153,718 - 2,179 26,878 26,938 59,665 44,975 858,374 865,507 464,521 462,316 68,075 66,038 222,313 229,504 228,137 220,980 72,671 74,856 10,933 9,688 8,003 8,263 $ 1,933,027 $ 1,937,152 $ 298,308 $ 272,704 41,552 37,151 1,053 1,047 17,824 19,057 82,160 107,750 440,897 437,709 26,296 30,419 10,187 11,344 13,042 13,773 56,395 60,847 100,595 97,165 647,412 651,257 7,949 7,911 (54,318 ) (40,870 ) 1,857,386 1,847,078 27,427 27,549 (552,829 ) (555,773 ) 1,285,615 1,285,895 $ 1,933,027 $ 1,937,152 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 $ 2,944 $ (15,482 ) 71,972 70,404 (5,241 ) (6,631 ) 9,748 10,248 - 1,538 450 - (6,823 ) (1,929 ) (1,820 ) 2,647 (17,004 ) (52,971 ) (1,440 ) (15,441 ) (14,878 ) 1,012 31,919 11,217 (25,722 ) (12,840 ) 2,994 568 2,754 2,985 (3,172 ) (7,432 ) 46,681 (12,107 ) (57,968 ) (31,526 ) (7,536 ) - - (7,967 ) 2,013 6,579 - 8,169 (63,491 ) (24,745 ) 494 (256 ) - (132 ) (10,011 ) (12,309 ) (2,835 ) (4,291 ) (4,277 ) (2,805 ) (1,164 ) (409 ) (17,793 ) (20,202 ) (2,986 ) (3,382 ) (37,589 ) (60,436 ) 218,460 239,847 $ 180,871 $ 179,411 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.46 109,143 $ 7,844 $ (22,785 ) $ 1,827,782 $ 20,358 $ (535,628 ) $ 1,297,571 - - - - - (11,132 ) (11,132 ) - - - - (61 ) - (61 ) - - - 6,018 - - 6,018 336 24 - 378 - - 402 (100 ) - (1,506 ) - - - (1,506 ) 109,379 $ 7,868 $ (24,291 ) $ 1,834,178 $ 20,297 $ (546,760 ) $ 1,291,292 - - - - - (4,350 ) (4,350 ) - - - - (61 ) - (61 ) - - - 4,230 - - 4,230 542 35 - (35 ) - - - (1,100 ) - (12,995 ) - - - (12,995 ) (184 ) - (3,187 ) - - - (3,187 ) 108,637 $ 7,903 $ (40,473 ) $ 1,838,373 $ 20,236 $ (551,110 ) $ 1,274,929 108,744 $ 7,911 $ (40,870 ) $ 1,847,078 $ 27,549 $ (555,773 ) $ 1,285,895 - - - - - (6,351 ) (6,351 ) - - - - (61 ) - (61 ) - - - 4,171 - - 4,171 582 32 - 566 - - 598 (185 ) - (3,556 ) - - - (3,556 ) (557 ) - (10,011 ) - - - (10,011 ) 108,584 7,943 $ (54,437 ) $ 1,851,815 $ 27,488 $ (562,124 ) $ 1,270,685 - - - - - 9,295 9,295 - - - - (61 ) - (61 ) - - - 5,577 - - 5,577 113 6 - (6 ) - - - 7 - 119 - - - 119 108,704 $ 7,949 $ (54,318 ) $ 1,857,386 $ 27,427 $ (552,829 ) $ 1,285,615 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 INTERNATIONALExpro Group Holdings 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 solutionsand integrity which enhance production and improve recovery across the well lifecycle, from exploration through abandonment.oilstock 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 is being utilized at management’s discretion and gas industry. FINV provides servicesin accordance with U.S. federal securities laws. The timing and actual numbers of shares repurchased, if any, will depend on a variety of factors including price, corporate requirements, the constraints specified in the stock repurchase program along with general business and market conditions. The stock repurchase program does not obligate the Company to leading explorationrepurchase any particular amount of common stock, and production companies in both offshore and onshore environments withit could be modified, suspended or discontinued at any time. Under the stock repurchase plan, the Company has repurchased approximately 0.6 million shares at an average price of $17.99 per share, for a focus on complex and technically demanding wells.total cost of approximately $10.0 million during the six months ended June 30, 2023. Since the inception of the stock repurchase program, the Company has repurchased total of approximately 1.7 million shares at an average price of $13.89 per share, for a total cost of $23.0 million through June 30, 2023.PresentationFINV for the three and nine months ended September 30, 2017 and 2016 include the activities of Frank's International C.V. ("FICV")Company and its 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, 2022, included in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023.10-K10-K filed with the Securities and Exchange Commission ("SEC")SEC on February 24, 2017 ("Annual Report"). In23, 2023, 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 related2022.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.In May 2017,FASB issued guidanceUnited Kingdom, and its subsidiary (“DeltaTek”), was acquired (“the Acquisition”) by our wholly owned subsidiary Exploration and Production Services (Holdings) Limited, a limited liability company registered in the United Kingdom (“EPSH”). DeltaTek has developed a number of innovative technologies and solutions and their range of low-risk open water cementing solutions increases clients’ operational efficiency, delivers rig time and cost savings, and improves the quality of cementing operations of clients. We estimated the fair value of consideration for the Acquisition to clarifybe $17.5 million, including cash consideration paid at closing of $9.0 million, subject to a true-up for net of customary working capital adjustments, and reduce both (i) diversitycontingent consideration which is estimated to be $8.5 million. practice“Other liabilities” on the consolidated balance sheets. That measure is based on significant inputs that are not observable in the market, referred to as Level 3 inputs in accordance with ASC 820. To the extent our estimates and (ii) costassumptions change during the measurement period and complexity when accounting for a changesuch changes are based on facts and circumstances that existed as of the Closing Date, an adjustment to the termscontingent consideration liability would be recorded with an offsetting adjustment to goodwill. To the extent our estimates and conditions of a share-based payment award. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted. The amendments in this guidance should be applied prospectivelyassumptions change based on facts and circumstances subsequent to an award modified onthe Closing Date or after the adoption date. Management is evaluating the provisions of this new accounting guidance, including whichmeasurement period, to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.In January 2017, the FASB issued guidance that simplifies the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. The new standard will be applied prospectively, and is effective for public companies for their annual or any interim goodwill impairment tests for fiscal years beginning after December 15, 2019. Early adoption is permitted for any impairment tests performed after January 1, 2017. The Company has adopted the provisions of this new accounting guidance for the Company's annual goodwill impairment analysis for the year ended December 31, 2017.In January 2017, the FASB issued new accounting guidance for business combinations clarifying the definition of a business. The objective of the guidance is to help companies and other organizations which have acquired or sold a business to evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. For public entities, the guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted under certain circumstances. Management is evaluating the provisions of this new accounting guidance.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 objective of the guidance is to eliminate the exception for an intra-entity transfer of an asset other than inventory and requires an entity to recognize the income tax consequences at the time of transfer rather than when the asset is sold to a third party. For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not yet been issued. Management is evaluating the provisions of this new accounting guidance, including which period to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.In August 2016, the FASB issued new accounting guidance for classification of certain cash receipts and cash payments in the statement of cash flows. The objective of the guidance is to reduce the existing diversity in practice relatedadjustment 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 fromliability would be recorded with an offsetting adjustment to earnings during the settlement of insurance claims and proceeds from the settlement of corporate-owned life insurance policies. For public entities, the guidanceapplicable period. effective for financial statements issued for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and is retrospective for all periods presented. Early adoption is permitted including for interim periods. Management is evaluating the provisions of this new accounting guidance, including which period to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.In June 2016, the FASB issued new accounting guidance for credit losses on financial instruments. The guidance includes the replacement of the “incurred loss” approach for recognizing credit losses on financial assets, including trade receivables, with a methodology that reflects expected credit losses, which considers historical and current information as well as reasonable and supportable forecasts. For public entities, the guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is evaluating the provisions of this new accounting guidance, including which period to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.In March 2016, the FASB issued accounting guidance on equity compensation, which simplifies the accounting for the taxes related to equity-based compensation, including adjustments to how excess tax benefits and a company's payments for tax withholdings should be classified. The ASU also gives an option to recognize actual forfeitures when they occur and clarifies the statement of cash flow presentation for certain components of share-based awards. We adopted this guidance on January 1, 2017 and have elected to recognize actual forfeitures when they occur. The adoption did not have an impact on our consolidated financial statements.In February 2016, the FASB issued accounting guidance for leases. The main objective of the accounting guidance is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference between previous GAAP and the new guidance is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. The new guidance requires lessees to recognize assets and liabilities arising from leases on the balance sheet and further defines a lease as a contract that conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Control over the use of the identified asset means that the customer has both (1) the right to obtain substantially all of the economic benefit from the use of the asset and (2) the right to direct the use of the asset. The accounting guidance requires disclosures by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. For public entities, the guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; early application is permitted. We are currently evaluating the impact of this accounting standard update on our consolidated financial statements and plan to adopt the new standard effective January 1, 2019.10FRANK’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 merger consideration was comprised of a combination of $150.4 million of cash on hand and 12.8 million shares of our common stock, on a cash-free, debt-free basis, for total consideration of $294.6 million (based on our closing share price on October 31, 2016 of $11.25 and including working capital adjustments).The unaudited pro forma financial information presented below includes adjustments for amortization expense for identified intangible assets and depreciation expense based on the fair value and estimated lives of acquired property, plant and equipment. In addition, acquisition related costs are excluded from the unaudited pro forma financial information.The following table shows our unaudited pro forma financial information assuming the transaction occurred on January 1, 2015 (in thousands, except per share amounts): Three Months Ended Nine Months Ended September 30, 2016 Revenue $ 120,902 $ 431,962 Net loss applicable to common shares (41,686 ) (82,650 ) Loss per common share: Basic and diluted $ (0.22 ) $ (0.47 ) 12FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSThe Blackhawk acquisition was accounted for as a business combination. combination and 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 DeltaTek’s assets acquired and liabilities assumed. Applying the acquisition method of accounting includes recording the identifiable assets acquired and liabilities assumed at their fair values and recording goodwill for the excess of the consideration transferred over the net aggregate fair value of the identifiable assets acquired and liabilities assumed.purchase price is allocatedfollowing table sets forth the preliminary allocation of the Acquisition consideration exchanged to the fair value of assets acquiredidentifiable tangible and liabilities assumed based on a discounted cash flow model and goodwill is recognized for the excess consideration transferred over the fair value of the net assets.The preliminary purchase price allocation was prepared in connection with our annual financial statements filed on our Annual Report. In 2017, we adjusted the purchase price allocation for a litigation settlement and the final valuation report. The following table summarizes the preliminary and the final purchase price allocations of the fair values of theintangible assets acquired and liabilities assumed as part of the Blackhawk acquisition asClosing Date, with the recording of November 1, 2016 as determined in accordance with business combination accounting guidancegoodwill for the excess of the consideration transferred over the net aggregate fair value of the identifiable assets acquired and liabilities assumed (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 $ 1,464 723 183 642 7,157 11,063 27 21,259 245 2,700 831 3,776 $ 17,483 merger, we created a fourth segment, Blackhawk,estimated fair values, are based on preliminary calculations and have recorded goodwill of $192.4 millionsubject to change as our fair value estimates and assumptions are finalized during the measurement period. The final fair value determination could result 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 buildingmaterial adjustments to the values presented in the Middle East region for a net salespreliminary purchase 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 followingallocation table presents the depreciation and amortization associated with each line for the periods ended September 30, 2017 and 2016 (in thousands): 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 INTERNATIONAL N.V.NOTES 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 (1)See Note 10 – Fair Value MeasurementsNote 8—Accrued and Other Current LiabilitiesAccrued and other current liabilities at September 30, 2017 and December 31, 2016 consisted of the following (in thousands): 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 Note 9—DebtCredit FacilityWe have a $100.0 million revolving credit facility with certain financial institutions, including up to $20.0 million in letters of credit and up to $10.0 million in swingline loans, which matures in August 2018 (the “Credit Facility”). Subject to the terms of the Credit Facility, we have the ability to increase the commitments to $150.0 million. At September 30, 2017 and December 31, 2016, we had $2.8 million and $3.7 million, respectively, in letters of credit outstanding and no outstanding borrowings under this facility. As of September 30, 2017, our ability to borrow under the Credit Facility has been reduced to approximately $30 million as a result of our decreased Adjusted EBITDA. Our borrowing capacity under the Credit Facility could be further reduced or eliminated depending on our future Adjusted EBITDA. As a result of this, our overall liquidity would be diminished.Borrowings under the Credit Facility bear interest, at our option, at either a base rate or an adjusted Eurodollar rate. Base rate loans under the Credit Facility bear interest at a rate equal to the higher of (i) the prime rate as published in the Wall Street Journal, (ii) the Federal Funds Effective Rate plus 0.50% or (iii) the adjusted Eurodollar rate plus 1.00%, plus an applicable margin ranging from 0.50% to 1.50%, subject to adjustment based on a leverage ratio. Interest is in each case payable quarterly for base-rate loans. Eurodollar loans under the Credit Facility bear interest at an adjusted Eurodollar rate equal to the Eurodollar rate for such interest period multiplied by the statutory reserves, plus an applicable margin ranging from 1.50% to 2.50%. Interest is payable at the end of applicable interest periods for Eurodollar loans, except that if the interest period for a Eurodollar loan is longer than three months, interest is paid at16FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSthe end of each three-month period.above. The unused portion of the Credit Facility is subject to a commitment fee ranging from 0.250% to 0.375% based on certain leverage ratios.The Credit Facility contains various covenants that, among other things, limit our ability to grant certain liens, make certain loans and investments, enter into mergers or acquisitions, enter into hedging transactions, change our lines of business, prepay certain indebtedness, enter into certain affiliate transactions, incur additional indebtedness or engage in certain asset dispositions.The Credit Facility also contains financial covenants, which, among other things, require us, on a consolidated basis, to maintain: (i) a ratio of total consolidated funded debt to adjusted EBITDA (as defined in our Credit Agreement) of not more than 2.5 to 1.0 and (ii) a ratio of EBITDA to interest expense of not less than 3.0 to 1.0.In addition, the Credit Facility contains customary events of default, including, among others, the failure to make required payments, the failure to comply with certain covenants or other agreements, breach of the representations and covenants contained in the agreements, default of certain other indebtedness, certain events of bankruptcy or insolvency and the occurrence of a change in control.On April 28, 2017, the Company obtained a limited waiver under its Revolving Credit Agreement, dated August 14, 2013, by and among FICV (as borrower), Amegy Bank National Association (as administrative agent), Capital One, National Association (as syndication agent) and the other lenders party thereto (the "Credit Agreement"), of its leverage ratio and interest coverage ratio for the fiscal quarters ending March 31, 2017 and June 30, 2017 (the “Waiver”) in order to not be in default for first quarter of 2017 testing. The Company agreed to comply with the following conditions during the period from the effective date of the Waiver until the delivery of its compliance certificate with respect to the fiscal quarter ending September 30, 2017: (i) maintain no less than $250.0 million in liquidity; (ii) abide by certain restrictions regarding the issuance of senior unsecured debt; and (iii) pay interest and commitment fees based on the highest “Applicable Margin” (as defined in the Credit Agreement) level. In connection with the Waiver, the Company paid a waiver fee to each lender that executed the Waiver equal to five basis points of the respective lender’s commitment under the Credit Agreement. As of September 30, 2017, we were in compliance with the covenants included in the Credit Agreement.Citibank Credit FacilityIn 2016, we entered into a three-year credit facility with Citibank N.A., UAE Branch in the amount of $6.0 million for the issuance of standby letters of credit and guarantees. The credit facility also allows for open ended guarantees. Outstanding amounts under the credit facility bear interest of 1.25% per annum for amounts outstanding up to one year. Amounts outstanding more than one year bear interest at 1.5% per annum. As of September 30, 2017 and December 31, 2016, we had $2.5 million and $2.2 million, respectively, in letters of credit outstanding.Note 10—Fair Value MeasurementsWe follow fair value measurement authoritative accounting guidance for measuring fair values of identifiable intangible assets were prepared using an income valuation approach, which requires a forecast of expected future cash flows either using 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 liabilities in financial statements. We have consistently usedexpectations as to the same valuation techniques for all periods presented. Please see Note 10 - Fair Value Measurements in our Annual Report for further discussion.17FRANK’S INTERNATIONALNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSSeptemberJune 30, 20172023 and December 31, 20162022, were as follows (in thousands): $ - $ 10,933 $ - $ 10,933 - 14,095 - 14,095 - - 8,483 8,483 $ - $ 9,688 $ - $ 9,688 - 14,820 - 14,820 (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 derivative financial instruments consist of short-duration foreign currency forward contracts. CODM manages our operational segments that are aligned with our geographical regions as below:fair valuefollowing table presents our revenue disaggregated by our operating segments (in thousands): $ 134,830 $ 129,694 $ 261,058 $ 233,555 138,062 90,118 251,710 172,189 59,163 45,363 110,108 96,078 64,862 48,449 113,320 92,279 $ 396,917 $ 313,624 $ 736,196 $ 594,101 derivative financial instruments is basedoperating segments using Segment EBITDA, which we define as income (loss) before income taxes adjusted for corporate costs, equity in income of joint ventures, depreciation and amortization expense, impairment expense, gain on quoted market values includingdisposal of assets, merger and integration expense, severance and other expense, stock-based compensation expense, foreign exchange forward ratesgains (losses), other income (expense), net, and interest rates. and finance income (expense), net.fair valuefollowing table presents our Segment EBITDA disaggregated by our operating segments and a reconciliation to income (loss) before income taxes (in thousands): $ 36,703 $ 38,513 $ 68,577 $ 60,340 34,964 14,868 55,749 26,742 18,491 13,750 33,059 29,215 3,452 4,356 754 9,794 93,610 71,487 158,139 126,091 (24,810 ) (22,812 ) (49,891 ) (44,777 ) 2,805 2,429 5,241 6,631 (37,235 ) (35,392 ) (71,972 ) (70,404 ) (1,377 ) (2,270 ) (3,515 ) (6,995 ) (2,663 ) (678 ) (3,590 ) (2,172 ) (5,577 ) (4,230 ) (9,748 ) (10,248 ) (1,440 ) (5,244 ) (370 ) (2,428 ) (1,462 ) 244 (2,411 ) 1,240 (17 ) 1,712 (1,315 ) 1,725 $ 21,834 $ 5,246 $ 20,568 $ (1,337 ) $ 143,719 $ 121,794 $ 271,984 $ 233,229 253,198 191,830 464,212 360,872 $ 396,917 $ 313,624 $ 736,196 $ 594,101 $ 307,005 $ 289,235 $ 139,547 $ 139,690 $ 29,378 $ 51,192 computed by discounting the projected future cash flow amounts to present value. Derivative financial instruments are included in our condensed consolidated balance sheets in accounts receivable, net and accrued and other“Other current liabilities at September 30, 2017 and in accounts receivable, net, at December 31, 2016.Our investments associated with our deferred compensation plan consist primarily of the cash surrender value of life insurance policies and are included in other assetsliabilities” on the condensed consolidated balance sheets. Our investments changesheets, with the remainder classified as a result of contributions, payments,non-current and fluctuations in the market. Assets and liabilities, measured using significant observable inputs, are reported at fair value based on third-party broker statements, which are derived from the fair value of the funds' underlying investments. 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 liabilities” on the condensed consolidated balance sheets.AssetsLiabilities Measured at Fair Value onfuture revenue recognition is expected. We have elected the practical expedient permitting the exclusion of disclosing remaining performance obligations for contracts that have an original expected duration of one year or less and for our long-term contracts we have a Non-recurring BasisWe applyright to consideration from customers in an amount that corresponds directly with the provisionsvalue to the customer of the fair value measurement standardperformance completed to date. With respect to our non-recurring, non-financial measurements including business combinations as well as impairment related to goodwill and other long-lived assets. For business combinations (see Note 3 - Acquisition and Divestitures), the purchase price isconstruction contracts, revenue allocated to remaining performance obligations is $88.6 million.assets acquired and liabilities assumedannual tax rate is based on pre-tax income (loss) before equity in income of joint ventures. We have historically calculated the income tax expense/(benefit) during interim reporting periods by applying a discounted cash flow model for most intangibles as well as market assumptionsfull year estimated Annual Effective Tax Rate (“AETR”) to income (loss) before income taxes, excluding infrequent or unusual discrete items, for the valuationreporting period. For the three and six months ended June 30, 2023, we determined that using an AETR would not provide a reliable estimate of equipment and other fixed assets. We utilize a discounted cash flow model in evaluating impairment18FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSconsiderations related to goodwill and long-lived assets. Given the unobservable nature of the inputs, the discounted cash flow models are deemed to use Level 3 inputs.Other Fair Value ConsiderationsThe carrying values on our condensed consolidated balance sheet of our cash and cash equivalents, short-term investments, trade accounts receivable, other current assets, accounts payable, accrued and other current liabilities and lines of credit approximate fair valuesincome taxes due to their short maturities.Note 11— DerivativesWe enter into short-duration foreign currency forward derivative contractsthe forecasting methodology used to reduce the risk of foreign currency fluctuations. We use these instruments to mitigate our exposure to non-local currency operating working capital. We record these contracts at fair value on our condensed consolidated balance sheets. Although the derivative contracts will serve as an economic hedge of the cash flow of our currency exchange risk exposure, they are not formally designated as hedge contracts for hedge accounting treatment. Accordingly, anyproject income (loss) before income taxes, resulting in significant changes in the fairestimated AETR. Thus, we concluded to use a discrete effective tax rate, which treats the year-to-date period as an annual period, to calculate income taxes for the three and six months ended June 30, 2023. $ 64,586 $ 62,471 3,489 3,567 $ 68,075 $ 66,038 derivative instruments during a period will befollowing as of June 30, 2023, and December 31, 2022 (in thousands): $ 460,507 $ 441,605 (13,955 ) (12,680 ) $ 446,552 $ 428,925 435,619 419,237 10,933 9,688 $ 446,552 $ 428,925 $ 22,757 $ 26,810 108,547 102,395 24,037 24,513 $ 155,341 $ 153,718 $ 27,051 18,084 24,763 20,727 1,175 1,669 7,859 7,245 6,820 5,513 $ 67,668 $ 53,238 59,665 44,975 8,003 8,263 $ 67,668 $ 53,238 $ 29,378 $ 51,192 31,456 28,557 56,569 58,036 38,922 45,248 11,655 3,227 14,775 18,655 $ 182,755 $ 204,915 82,160 107,750 100,595 97,165 $ 182,755 $ 204,915 $ 125,985 $ 100,951 39,291 46,935 22,637 32,102 110,395 92,716 $ 298,308 $ 272,704 $ 22,261 $ 22,261 3,054 3,054 99,010 98,490 843,510 789,910 967,835 913,715 (503,314 ) (451,399 ) $ 464,521 $ 462,316 $ 18,623 $ 18,623 589 1,275 19,212 19,898 (9,031 ) (9,085 ) $ 10,181 $ 10,813 condensed consolidated statementsintangible assets comprising of operations.AsCustomer Relationships & Contracts (“CR&C”), Trademarks, Technology and Software as of SeptemberJune 30, 20172023 and December 31, 2016, we had the following foreign currency derivative contracts outstanding in U.S. dollars2022 (in thousands): September 30, 2017 Derivative Contracts Notional Amount Contractual Exchange Rate Settlement Date Canadian dollar $ 5,740 1.2194 12/15/2017 Euro 5,982 1.1963 12/15/2017 Euro 2,399 1.1993 10/13/2017 Norwegian krone 5,338 7.8675 12/15/2017 Pound sterling 7,961 1.3268 12/15/2017 December 31, 2016 Derivative Contracts Notional Amount Contractual Exchange Rate Settlement Date Canadian dollar $ 4,553 1.3179 3/14/2017 Euro 4,753 1.0563 3/14/2017 Euro 2,558 1.0659 1/13/2017 Norwegian krone 3,643 8.5101 3/14/2017 Pound sterling 3,908 1.2607 3/14/2017 $ 224,776 $ (128,366 ) $ 96,410 $ 222,200 $ (118,221 ) $ 103,979 4.8 57,350 (34,706 ) 22,644 57,100 (32,921 ) 24,179 7.0 178,889 (76,694 ) 102,195 170,652 (71,191 ) 99,461 11.6 11,952 (10,888 ) 1,064 11,556 (9,671 ) 1,885 0.5 $ 472,967 $ (250,654 ) $ 222,313 $ 461,508 $ (232,004 ) $ 229,504 8.1 locationintangible assets which were acquired pursuant to the Acquisition (in thousands): 2,576 6.0 250 5.0 8,237 15.0 $ 11,063 12.7 fair value amountsAPAC.all derivative contracts in the condensed consolidated balance sheetsgoodwill by operating segment as of SeptemberJune 30, 20172023 and December 31, 20162022 is as follows (in thousands): $ 120,658 $ 118,511 82,921 80,058 5,292 4,218 19,266 18,193 $ 228,137 $ 220,980 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 ) — 19FRANK’S INTERNATIONALNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSlocationgoodwill by operating segment which were acquired pursuant to the Acquisition (in thousands): $ 2,147 2,863 1,074 1,073 $ 7,157 amountssix months ended June 30, 2023.realizedNew Facility may be used for general corporate and unrealized gainsworking capital purposes.losses on derivative contractsseverally by the Company and certain of the Company’s subsidiaries incorporated in the condensed consolidated statementsU.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 operations (in thousands): Three Months Ended Nine Months Ended September 30, September 30, Derivatives not Designated as Hedging Instruments Location of Gain (Loss) Recognized in Income on Derivative Contracts 2017 2016 2017 2016 Unrealized gain (loss) on foreign currency contracts Other income (expense), net $ 681 $ (615 ) $ (49 ) $ (296 ) Realized gain (loss) on foreign currency contracts Other income (expense), net (1,794 ) 511 (2,346 ) (1,068 ) Total net loss on foreign currency contracts $ (1,113 ) $ (104 ) $ (2,395 ) $ (1,364 ) Our derivative transactions are governed through International Swaps and Derivatives Association master agreements. These agreements include stipulations regarding the right of offsetEBITDA (as defined in the event that weNew Facility) and 70% of the consolidated assets of the Company and its subsidiaries, as well as subsidiaries individually representing 5% or our counterparty defaultmore 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 our performance obligations. If a default were to occur, both parties havecertain assets of the right to net amounts payableborrowers and receivable into a single net settlement between parties. Our accounting policy is to offset derivative assets and liabilities executed with the same counterparty when a master netting arrangement exists.The following table presents the gross and net fair valuesguarantors, including pledges of our derivatives at September 30, 2017 and December 31, 2016 (in thousands): Derivative Asset Positions Derivative Liability Positions September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016 Gross position - asset / (liability) $ 239 $ 181 $ (142 ) $ (35 ) Netting adjustment (107 ) (35 ) 107 35 Net position - asset / (liability) $ 132 $ 146 $ (35 ) $ — Note 12—Related Party TransactionsWe have engagedequity interests in certain transactions with other companies related to us by common ownership. We have entered into various operating leases to lease facilities from these affiliated companies. The majority of these lease obligations expire in 2018 and, at our discretion, may be extended for an additional 36 months subject to agreement on pricing of the extension. These leases may be extended or allowed to expire by us depending on operational needs, market pricesCompany’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 ability for us to negotiate and secure, at our discretion, alternative leases or replacement locations. Rent expense associated with our related party leases was $1.8 million for eachCayman Islands, substantially all of the three months ended September 30, 2017assets and 2016, and $5.3 million and $6.2 million for the nine months ended September 30, 2017 and 2016, respectively.In certain cases, we have made improvements to properties subject to related party leases referenced above, including the construction of buildings. As of September 30, 2017, the net book value associated with buildings we constructed on properties subject to related party leases was $62.7 million. We are depreciating the costs associated with these buildings over their estimated useful lives of approximately 39 years, which exceeds the remaining lease terms that primarily expire in 2018. Upon expiration of the leases, leasehold improvements could be construed as becoming the property of the related party lessors. As of September 30, 2017, the net book value associated with leaseholdborrowers and land improvements we constructed on properties subject to related party leases was $13.4 million, a portion of which isguarantors incorporated in constructionsuch jurisdictions, in progress. It is our intent to extend, renew, or replace the related party property leases such that we have unrestricted use of the buildings and improvements throughout their estimated useful lives. Extension, renewal or replacement of the related party property leases is dependent on negotiations with related parties, the failure of which could result in material disputes with the related parties. In the event we do not extend, renew, or20FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSreplace these related party property leases, we will revise the remaining estimated useful lives of the buildings accordingly.We are a party to certain agreements relating to the rental of aircraft to Western Airways ("WA"), an entity owned by the Mosing family. The WA agreements reflect both dry lease and wet lease rental, whereby we are charged a flat monthly fee primarily for crew, hangar, maintenance and administration costs in addition to other variable costs for fuel and maintenance. We also earn charter income from third party usage through a revenue sharing agreement. We recorded $0.4 million and $0.3 million of net charter expense for the three months ended September 30, 2017 and 2016, respectively, and $1.0 million and $0.8 million of net charter expense for nine months ended September 30, 2017 and 2016, respectively.Tax Receivable AgreementMosing Holdings and its permitted transferees converted all their Preferred Stock into shares of our common stock on a one-for-one basis on August 26, 2016,each case subject to customary conversionexceptions and exclusions.adjustmentsper annum of LIBOR, subject to a 0.00% floor, plus an applicable margin of 3.75% for stock splits, stock dividendscash borrowings or 3.00% for letters of credit. A 0.75% per annum fronting fee applies to letters of credit, and reclassifications and other similar transactions,an additional 0.25% or 0.50% per annum utilization fee is payable on drawdowns as loans to the extent one-third or two-thirds, respectively, or more of commitments are drawn. From June 30, 2023 onwards, LIBOR will be replaced by deliverythe lender's cost of an equivalentfunds. The unused portion of their interests in FICVthe New Facility is subject to us (the “Conversion”). FICV will make an election under Section 754a commitment fee of 30% per annum of the Internal Revenue Code.applicable margin. Interest on loans is payable at the end of the selected interest period, but no less frequently than semi-annually.Section 754 election,Consent, the Conversion will 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.adjustmentexercise 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 tax basisperceived merits of any legal proceedings or unasserted claims as well as the tangible and intangible assets of FICV with respect to the portion of FICV now held by FINV. These adjustments will be allocated to FINV. The adjustments to the tax basis of the tangible and intangible assets of FICV described above would not have been available absent this Conversion. The basis adjustments may reduce the amount of tax that FINV would otherwise be required to pay in the future. These basis adjustments may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.The tax receivable agreement (the "TRA") that we entered into with FICV and Mosing Holdings in connection with our initial public offering ("IPO") generally provides for the payment by FINV of 85%perceived merits of the amount of the actual reductions, if any, in payments of U.S. federal, state and local income taxrelief sought or franchise tax (which reductions we refer to as “cash savings”) in periods after our IPO as a result of (i) the tax basis increases resulting from the Conversion and (ii) imputed interest deemedexpected to be paid by us assought therein.result of,contingency indicates it is probable a material loss has been incurred and additional tax basis arising from, payments under the TRA. In addition, the TRA provides for payment by us of interest earned from the due date (without extensions) of the corresponding tax return to the date of payment specified by the TRA. The payments under the TRA will not be conditioned upon a holder of rights under the TRA having a continued ownership interest in either FICV or FINV. We will retain the remaining 15% of cash savings, if any.The estimation of the liability under the TRA is by its nature imprecise and subject to significant assumptions regarding the amount and timing of future taxable income. As of September 30, 2017, FINV has a cumulative loss over the prior 36-month period. Based on this history of losses, as well as uncertainty regarding the timing and amount of future taxable income, we are no longer able to conclude that there will be future cash savings that will lead to additional payouts under the TRA beyond the estimated $2.1 million as of September 30, 2017 that represents 85% of the cash tax savings estimated to be realized in the 2016 federal income tax return of FINV. Additional TRA liability may be recognized in the future based on changes in expectations regarding the timing and likelihood of future cash savings.The payment obligations under the TRA are our obligations and are not obligations of FICV. The term of the TRA will continue until all such tax benefits have been utilized or expired, unless FINV elects to exercise its sole right to terminate the TRA early. If FINV elects to terminate the TRA early, which it may do so in its sole discretion, it would be required to make an immediate payment equal to the present value of the anticipated future tax benefits subject to the TRA (based upon certain assumptions and deemed events set forth in the TRA, including the assumption that it has sufficient taxable income to fully utilize such benefits and that any FICV interests that Mosing Holdings or its transferees own on the termination date are deemed to be exchanged on the termination date). Any early termination payment may be made significantly in advance of the actual realization, if any, of such future benefits. In addition, payments due under the TRA will be similarly accelerated following certain mergers or other changes of control. In these situations, FINV’s obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes21FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSof control. For example, if the TRA were terminated on September 30, 2017, the estimated termination payment would be approximately $102.0 million (calculated using a discount rate of 5.63%). The foregoing number is merely an estimate and the actual payment could differ materially.Because FINV is a holding company with no operations of its own, its ability to make payments under the TRA is dependent on the ability of FICV to make distributions to it in an amount sufficient to cover FINV’s obligations under such agreements; this ability, in turn, may depend on the ability of FICV’s subsidiaries to provide payments to it. The ability of FICV and its subsidiaries to make such distributions will be subject to, among other things, the applicable provisions of Dutch law that may limit the amount of funds available for distribution and restrictionsliability can be reasonably estimated, then the estimated liability would be accrued in our debt instruments. Tounaudited condensed consolidated financial statements. If the extent that FINVassessment indicates a potentially material loss contingency is unable to make payments undernot probable but is reasonably possible, or is probable but cannot be estimated, then the TRA for any reason, except in the case of an acceleration of payments thereunder occurring in connection with an early terminationnature of the TRA or certain mergers or change of control, such payments will be deferred and will accrue interest until paid, and FINV will be prohibited from paying dividends on its common stock.Note 13 - Income (Loss) Per Common ShareBasic income (loss) per common share is determined by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is determined by dividing income (loss) attributable to common stockholders by the weighted average number of common shares outstanding, assuming all potentially dilutive shares were issued.We apply the treasury stock method to determine the dilutive weighted average common shares represented by the unvested restricted stock units and ESPP shares. Through August 26, 2016, the date of the conversion of all of Mosing Holdings' Preferred Stock and Mosing Holdings' transfer of interest in FICV to us, the diluted income (loss) per share calculation assumed the conversion of 100% of our outstanding Preferred Stock oncontingent liability, together with an as if converted basis. Accordingly, the numerator was also adjusted to include the earnings allocated to the noncontrolling interest after taking into account the tax effect of such exchange.22FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSThe following table summarizes the basic and diluted income (loss) per share calculations (in thousands, except per share amounts): 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 223,056 177,125 222,847 162,656 525 — — — 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 ) Approximate number of shares of potentially convertible preferred stock to common stock up until the time of conversion on August 26, 2016, unvested restricted stock units and stock to be issued pursuant to the ESPP have been excluded from the computation of diluted income (loss) per share as the effect would be anti-dilutive when the results from operations are at a net loss position. — 32,977 624 47,273 Note 14—Income TaxesFor interim financial reporting, we estimate the annual tax rate based on projected pre-tax income (loss) for the full year and record a quarterly income tax provision (benefit) in accordance with accounting guidance for income taxes. As the year progresses, we refine the estimate of the year's pre-tax income (loss) as new information becomes available. The continual estimation process often results in a change to the expected effective tax rate for the year. When this occurs, we adjust the income tax provision (benefit) during the quarterrange of possible loss if determinable and material, is disclosed.change in estimate occurs so that the year-to-date provision reflects the expected annual tax rate.Our effective tax rate on income (loss) before income taxes was 97.4% and 13.9% for the three months ended September 30, 2017 and 2016, respectively, and 327.7% and 14.6% for the nine months ended September 30, 2017 and 2016, respectively. The higher rate is due primarily to recording valuation allowances against our net deferred tax assets. The deferred tax assets relate to net operating losses, outside basis differences in our partnership investment and other timing differences primarily associated with our U.S. operations.In determining that a valuation allowance must be recorded in 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.As of September 30, 2017, there were no significant changes to our unrecognized tax benefits as reported in our audited financial statements for the year ended December 31, 2016.23FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNote 15—Commitments and ContingenciesSeptemberJune 30, 2017 2023 and December 31, 2016. 2022. 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.are conductinghave conducted an internal investigation of the operations of certain of ourthe Company’s foreign subsidiaries in West Africa including possible violations of the U.S. Foreign Corrupt Practices Act, our policies and other applicable laws. In June 2016, we voluntarily disclosed the existence of our extensive internal review to the SEC and the United StatesU.S. Department of Justice (“DOJ”). The DOJ has provided a declination, subject to the Company and other governmental entities. It isthe SEC reaching a satisfactory settlement of civil claims. On the basis of discussions with the SEC up to the end of the first quarter of 2023, we believed that a final resolution of this matter was likely to include a civil penalty in the amount of approximately $8.0 million and, accordingly, we had recorded a loss contingency in that amount within “Other current liabilities” on our intentcondensed consolidated balance sheet, with the offset taken as an increase to fully cooperategoodwill as a measurement period adjustment associated with these agenciesthe Merger.applicable authorities material legal accruals for loss contingencies, individually or in the aggregate, as of June 30, 2023 and December 31, 2022. $ 61 $ 61 $ 122 $ 122 (1,551 ) (991 ) (3,084 ) (2,045 ) 1,007 1,375 1,993 2,803 $ (483 ) $ 445 $ (969 ) $ 880 $ 9,295 $ (4,350 ) $ 2,944 $ (15,482 ) 108,663 109,582 108,758 109,425 386 - 612 - 7 - 5 - 326 - 601 - 109,382 109,582 109,976 109,425 $ 0.09 $ (0.04 ) $ 0.03 $ (0.14 ) $ 0.08 $ (0.04 ) $ 0.03 $ (0.14 ) any further investigationits delivery to Frank’s of all of its interests in Frank’s International C.V. (“FICV”) (the “Conversion”).may be conductedFrank’s entered into with FICV and Mosing Holdings in connection with this matter. WhileFrank’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. $ 21,644 $ 15,505 $ 546 $ 1,999 $ 2,809 $ 3,924 review has not indicated that there has been any material impact on our previously filedfinancial 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.continuedapproximately 7,600 employees and provide services and solutions 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 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.Note 16—Segment InformationReporting SegmentsOperating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the CODM in deciding how to allocate resources and assess performance. We are comprised of four reportable segments: International Services, U.S. Services, Tubular Sales and Blackhawk.The International Services segment provides tubular services in international offshore markets and in several onshore international regions. Our customers in these international markets are primarily largeleading exploration and production companies including integrated oilin both onshore and gas companiesoffshore environments in approximately 60 countries.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 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 ("IRS") and a vessel-deployed, wire-through-water Riserless Well Intervention System ("RWIS"). We also provide systems integration and project management services. (Note that IRS and RWIS services and solutions are collectively referred to as our light well intervention, or LWI, business.) 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. gas companies.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.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. Average daily oil demand in the second quarter of 2023 exceeded average daily demand levels in 2022, with liquid demand estimated to exceed annualized 2019 levels in 2023. Brent crude oil prices remained broadly flat with fluctuations generally within the $75 - $80/bbl price range during the second quarter of 2023, as a result of growing demand and constrained supply due to recent voluntary production cuts by the Organization of Petroleum Exporting Countries and certain other oil producing nations (“OPEC+”), counter-balanced by the threat of further geopolitical tensions and the ongoing macro-economic constraints, including inflation. Activity related to gas and liquified natural gas (“LNG”) production (and associated asset development) continues to grow within our ESSA and MENA regions in support Europe’s ongoing drive to diversify away from its reliance on Russian pipeline gas supplies over the long term. More broadly, the energy security and transition imperatives of policymakers in the U.S. and Europe are expected to result in increased investment in global gas development. International, offshore and deepwater activity has continued to strengthen in 2023 as operator upstream investments increase to pre-pandemic levels. We are also experiencing increased demand for services related to brownfield and production enhancement and infield development programs as operators strive to maximize their previous investments and maintain production with a lower carbon footprint. In addition, we have seen an increase in demand for early production facilities and production optimization technologies, especially in support of gas and LNG developments. The clean energy transition continues to gain momentum. We believe, however, that hydrocarbons, and natural gas in particular, 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 develop more sustainable energy solutions. Services segment provides tubular servicesEnergy Information Administration (“EIA”) forecasts that global liquid fuels consumption will reach an average of 101.2 million b/d in 2023 (surpassing pre-pandemic consumption levels of 100.8 million b/d), an increase of 1.8 million b/d from 2022, increasing to 102.8 million b/d in 2024. The EIA expects that global liquid fuels production will increase by 1.3 million b/d to reach 101.1 million b/d in 2023, growing a further 1.5 million b/d to reach 102.6 million b/d in 2024, primarily due to growth from non-OPEC producer such as the United States, Norway, Canada, Brazil and Guyana. The overall supply growth is expected to offset a near-term reduction in production by OPEC+. The EIA forecasts that OPEC+ crude oil production will fall by 0.7 million b/d to 33.4 million b/d before rising by 0.5 million in 2024. As a result, the EIA anticipates further global inventory draws, which should support higher crude oil prices compared to their previous forecast, mainly into 2024. The EIA forecasts that Brent crude oil will average $79/bbl in the active onshoresecond half of 2023, resulting in an average of $79/bbl for 2023, increasing to $84/bbl for 2024.gas drilling regionsNortheast Asian LNG spot price to trade at $13.7/MMBtu and $14.3/MMBtu respectively for 2023, a downward revision from its previous forecast as robust European storage levels and a slower LNG rebound in Asia have eased the previous upward pricing pressure. The market is forecast to remain tight in 2023 as it remains in a fundamental deficit until 2026 and, at current price levels, demand is set to rise in the U.S.power and industrial sectors.We reported net income for the three months ended June 30, 2023, of $9.3 million, compared to a net loss of $6.4 million for the three months ended March 31, 2023, primarily reflecting higher Adjusted EBITDA (up $29.7 million) as discussed below, and lower interest and finance expense (down $1.3 million), partially offset by higher income tax expense (up $7.4 million). Adjusted EBITDA for the three months ended June 30, 2023, increased by $29.7 million, or 70.9%, to $71.6 million from $41.9 million for the three months ended March 31, 2023. Adjusted EBITDA margin increased to 18.0% during the three months ended June 30, 2023, as compared to 12.3% during the three months ended March 31, 2023. The increase in Adjusted EBITDA and Adjusted EBITDA margin is primarily attributable to higher revenue, better business mix and the light well intervention (“LWI”) project becoming operational towards the end of the first quarter. Adjusted EBITDA for the three months ended March 31, 2023 includes unrecoverable mobilization costs and start-up and commissioning costs on LWI-related projects in APAC of $10.6 million. Adjusted EBITDA for the three months ended June 30, 2023 include LWI-related non-reimbursable costs for NPT (“non-productive time”) of $5.7 million (these costs were incurred after the system became operational and, therefore, are not considered start-up and commissioning costs). Net cash provided by operating activities for the three months ended June 30, 2023, was $25.4 million, compared to net cash provided by operating activities of $21.3 million for the three months ended March 31, 2023, with the change primarily driven by an increase in Adjusted EBITDA of $29.7 million, partially offset by an unfavorable movement in net working capital of $15.3 million and cash paid for income taxes, net of refunds, of $8.9 million during the three months ended June 30, 2023. Adjusted Cash Flow from Operations and Cash Conversion for the three months ended June 30, 2023, were $36.0 million and 50%, respectively, compared to $27.2 million and 65%, respectively, for the three months ended March 31, 2023. including the Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale, DJ Basinmost directly comparable financial performance measure calculated and Utica Shale, as well aspresented in the U.S. Gulf of Mexico.The Tubular Sales segment designs, manufactures and distributes large outside diameter ("OD") pipe, connectors and casing attachments and sells large OD pipe originally manufactured by various pipe mills.accordance with GAAP, to Adjusted EBITDA. We also provide specialized fabricationa reconciliation of Adjusted Cash Flow from Operations to net cash provided by (used in) operating activities, the most directly comparable liquidity measure calculated and welding servicespresented in supportaccordance with GAAP.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.The Blackhawk segment provides well construction and well intervention rental equipment, services and products, in additionindustry, without regard to cementing tool expertise, in the U.S. and Mexican Gulfeffects of Mexico, onshore U.S.our capital structure, asset base, items outside the control of management and other select international locations.Adjusted EBITDAbefore interestadjusted for (a) 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 (expense), net, (i) interest and finance (income) expense, net and (j) foreign currency gain or loss, equity-24FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSbased compensation, unrealized and realized gain or loss,exchange (gain) loss. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of revenues.effects of the TRA, other non-cash adjustmentsperiod for interest, net, severance and other charges. review define Cash Conversion as Adjusted Cash Flow from Operations divided by 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 nine months ended September 30, 2016 has been adjusted for investigation-related mattersCash Conversion may be defined differently by $1.8 million and $5.1 million, respectively, as management believes removing the effectother companies in our industry, our presentation of these items allows for better comparability across periods.Our CODM uses Adjusted EBITDA, as the primary measureAdjusted Cash Flow from Operations and Cash Conversion may not be comparable to similarly titled measures of segment reporting performance.other companies, thereby diminishing their utility.Segmentnet loss to Adjusted EBITDA to net income (loss)for each of the three and six months presented (in thousands): $ 9,295 $ (4,350 ) $ 2,944 $ (15,482 ) $ 12,539 $ 9,596 $ 17,624 $ 14,145 37,235 35,392 71,972 70,404 2,663 678 3,590 2,172 1,377 2,270 3,515 6,995 1,462 (244 ) 2,411 (1,240 ) 5,577 4,230 9,748 10,248 1,440 5,244 370 2,428 17 (1,712 ) 1,315 (1,725 ) $ 71,605 $ 51,104 $ 113,489 $ 87,945 18.0 % 16.3 % 15.4 % 14.8 % Other expense (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. Three Months Ended Six Months Ended $ 25,358 $ 2,055 $ 46,681 $ (12,107 ) (420 ) 1,096 546 1,999 9,076 5,837 11,400 17,469 1,999 565 4,571 772 $ 36,013 $ 9,553 $ 63,198 $ 8,133 $ 71,605 $ 51,104 $ 113,489 $ 87,945 50 % 19 % 56 % 9 % 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 (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 ) 122,515 — 122,515 — (7,616 ) (20,151 ) (22,231 ) (37,241 ) Net income (loss) $ 2,296 $ (42,198 ) $ (50,317 ) $ (89,893 ) $ 134,830 $ 126,228 37.2 % 138,062 113,648 33.5 % 59,163 50,945 15.0 % 64,862 48,458 14.3 % $ 396,917 $ 339,279 100.0 % $ 261,058 $ 233,555 39.3 % 251,710 172,189 29.0 % 110,108 96,078 16.2 % 113,320 92,279 15.5 % $ 736,196 $ 594,101 100.0 % (1)Amounts previously reported as Corporate and other of $159 and $361 for the three and nine months ended September 30, 2016, respectively, have been reclassified to U.S. Services to conform to the current presentation.(2)Please see Note 12 - Related Party Transactions for further discussion.(3)Comprised of Equity-based compensation expense (for the three months ended September 30, 2017 and 2016: $2,342 and $3,828, respectively, and for the nine months ended September 30, 2017 and 2016: $11,458 and $12,356, respectively), Mergers and acquisition expense (for the three months ended September 30, 2017 and 2016: none and none, respectively, and for the nine months ended September 30, 2017 and 2016: $459 and none, respectively), Severance and other charges (for the three months ended September 30, 2017 and 2016: $1,648 and $14,534, respectively, and for the nine months ended September 30, 2017 and 2016: $2,386 and $18,858, respectively), Unrealized and realized (losses) (for the three months ended September 30, 2017 and 2016: $(1,123) and $(10), respectively, and for the nine months ended September 30, 2017 and 2016: $(2,819) and $(973), respectively) and Investigation-related matters (for the three months ended September 30, 2017 and 2016: $2,503 and $1,779, respectively, and for the nine months ended September 30, 2017 and 2016: $5,109 and $5,054, respectively).
3025FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSTable of Contentstables set forth certaintable 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, 2023 and March 31, 2023: $ 36,703 $ 31,874 25.3 % 34,964 20,785 18.3 % 18,491 14,568 28.6 % 3,452 (2,698 ) (5.6 )% 93,610 64,529 (24,810 ) (25,081 ) 2,805 2,436 (37,235 ) (34,737 ) (1,377 ) (2,138 ) (2,663 ) (927 ) (5,577 ) (4,171 ) (1,440 ) 1,070 (1,462 ) (949 ) (17 ) (1,298 ) $ 21,834 $ (1,266 ) $ 68,577 $ 60,340 25.8 % 55,749 26,742 15.5 % 33,059 29,215 30.4 % 754 9,794 10.6 % 158,139 126,091 (49,891 ) (44,777 ) 5,241 6,631 (71,972 ) (70,404 ) (3,515 ) (6,995 ) (3,590 ) (2,172 ) (9,748 ) (10,248 ) (370 ) (2,428 ) (2,411 ) 1,240 (1,315 ) 1,725 $ 20,568 $ (1,337 ) 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. informationobjectives include the maintenance of sufficient liquidity, adequate financial resources and financial flexibility to fund our business. As of June 30, 2023, total available liquidity was $310.9 million, including cash and cash equivalents and restricted cash of $180.9 million and $130.0 million available for borrowings under our New Facility. Expro believes these amounts, along with respectcash generated by ongoing operations, will be sufficient to meet future business requirements for the next 12 months and beyond. 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. $ 46,681 $ (12,107 ) (63,491 ) (24,745 ) (17,793 ) (20,202 ) (2,986 ) (3,382 ) $ (37,589 ) $ (60,436 ) reportable segments (in thousands): 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 ) 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 ) 31,752 (13,018 ) 1,343 — — * (1)Amounts previously reported as Corporate and other of $159 and $361 for the three and nine months ended September 30, 2016, respectively, have been reclassified to U.S. Services to conform to the current presentation.* Non-GAAP financial measure not disclosed.Note 17—Supplemental Cash Flow InformationSupplemental cash flows and non-cash transactions were as follows for the periods indicated (in thousands): 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 26our business strategy and prospects for growth;our cash flows and liquidity;our financial strategy, budget, projections and operating results;the amount, nature and timing of capital expenditures;the availability and terms of capital;competition and government regulations; andgeneral economic conditions.Ourgeneral economic conditions (such as recent instability in certain financial institutions); and ● general political conditions, including political tensions, conflicts and war (such as the ongoing conflict in Ukraine). “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:continuing uncertainty relating to global crude oil demand and crude oil prices that correspondingly may lead to further significant reductions in domestic oil and gas activity, which in turn could result in further significant declines in demand for our products and services; ● uncertainty regarding the extent and duration of the remaining restrictions in the U.S. and globally on various commercial and economic activities due to global pandemics and epidemics (including COVID-19), including uncertainty regarding the re-imposition of restrictions due to resurgences in infection rates; 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 the OPEC+ and non-OPEC+ nations with respect to production levels and the effects thereof; ● policy or regulatory changes; the levelfurther or sustained declines in oil and gas prices, including those resulting from weak global demand;the timing, magnitude, probability and/or sustainability of any oil and gas price recovery;unique risks associated with our offshore operations;political, economic and regulatory uncertainties in our international operations;our ability to develop new technologies and products;our ability to protect our intellectual property rights;our ability to employ and retain skilled and qualified workers;the level of competition in our industry;operational safety laws and regulations; andweather conditions and natural disasters.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, 2016,2022, filed with the SEC on February 24, 201723, 2023 (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.27Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe 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.Overview of BusinessWe are a global provider of highly engineered tubular services, tubular fabrication and specialty well construction and well intervention solutions to the oil and gas industry and have been in business for over 75 years. We provide our services to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells.We conduct our business through four operating segments:International Services. We currently provide our services in approximately 60 countries on six continents. Our customers in these international markets are primarily large exploration and production companies, including integrated oil and gas companies and national oil and gas companies.U.S. Services. We service customers in the offshore areas of the U.S. Gulf of Mexico. In addition, we have a presence in the active onshore oil and gas drilling regions in the U.S., including the Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale, DJ Basin and Utica Shale.Tubular Sales. We design, manufacture and distribute large OD pipe, connectors and casing attachments and sell large OD pipe originally manufactured by various pipe mills. We also provide specialized fabrication and welding services in support of offshore projects, including drilling and production risers, flowlines and pipeline end terminations, as well as long-length tubulars (up to 300 feet in length) for use as caissons or pilings. This segment also designs and manufactures proprietary equipment for use in our International and U.S. Services segments.Blackhawk. We provide well construction and well intervention rental equipment, services and products, in addition to cementing tool expertise, in the U.S. and Mexican Gulf of Mexico, onshore U.S. and other select international locations.Market OutlookThe market for our products and services continues to be challenged by depressed oil and gas commodity prices and reduced customer spending on offshore exploration and development projects. Despite some stabilization in commodity prices and increases in U.S. onshore activity and profitability, commodity prices remain below levels necessary for meaningful increases in offshore activity, particularly in the markets of West Africa and the U.S. Gulf of Mexico. For the remainder of 2017, we expect to see further deterioration of pricing and activity in the U.S. Gulf of Mexico and, consequently, our Tubular Sales business segment. International markets are beginning to show signs of stabilization and the potential for reaching an activity bottom in the next twelve months. We expect to see growth in our Blackhawk segment both in the U.S. onshore and in select international markets during the next several quarters as we expand its operational footprint. In order to offset some of the declines in activity and pricing, we continue to look for ways to improve our operational efficiency and grow share in markets in which we have historically been underrepresented, including international land and shelf opportunities. We also continue to evaluate potential28acquisitions to broaden our well construction offering and position the Company for revenue growth in a market recovery.How We Evaluate Our OperationsWe use a number of financial and operational measures to routinely analyze and evaluate the performance of our business, including revenue, Adjusted EBITDA, Adjusted EBITDA margin and safety performance.RevenueWe analyze our revenue growth by comparing actual monthly revenue to our internal projections for each month to assess our performance. We also assess incremental changes in our monthly revenue across our operating segments to identify potential areas for improvement.Adjusted EBITDA and Adjusted EBITDA MarginWe define Adjusted EBITDA as net income (loss) before interest income, net, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on sale of assets, foreign currency gain or loss, equity-based compensation, unrealized gain or loss, the effects of the tax receivable agreement ("TRA"), other non-cash adjustments and other charges or credits. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of our revenues. We review Adjusted EBITDA and Adjusted EBITDA margin on both a consolidated basis and on a segment basis. We use Adjusted EBITDA and Adjusted EBITDA margin 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 depreciation and amortization), items outside the control of our management team (such as income tax and foreign currency exchange rates) and other charges outside the normal course of business. Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities or any other measure of financial performance presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"). Previously reported Adjusted EBITDA for the three and nine months ended September 30, 2016 has been adjusted for investigation-related matters by $1.8 million and $5.1 million, respectively, as management believes removing the effect of these items allows for better comparability across periods.The following table presents a reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to net income (loss) for each of the periods presented (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Net income (loss) $ 2,296 $ (42,198 ) $ (50,317 ) $ (89,893 ) Interest income, net (1,019 ) (646 ) (2,170 ) (1,050 ) Depreciation and 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 (122,515 ) — (122,515 ) — 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 % (1)Please see Note 12 - Related Party Transactions in the Notes to the Unaudited Condensed Consolidated Financial Statements for further discussion.29(2)Comprised of Equity-based compensation expense (for the three months ended September 30, 2017 and 2016: $2,342 and $3,828, respectively, and for the nine months ended September 30, 2017 and 2016: $11,458 and $12,356, respectively), Mergers and acquisition expense (for the three months ended September 30, 2017 and 2016: none and none, respectively, and for the nine months ended September 30, 2017 and 2016: $459 and none, respectively), Severance and other charges (for the three months ended September 30, 2017 and 2016: $1,648 and $14,534, respectively, and for the nine months ended September 30, 2017 and 2016: $2,386 and $18,858, respectively), Unrealized and realized losses (for the three months ended September 30, 2017 and 2016: $1,123 and $10, respectively, and for the nine months ended September 30, 2017 and 2016: $2,819 and $973, respectively) and Investigation-related matters (for the three months ended September 30, 2017 and 2016: $2,503 and $1,779, respectively, and for the nine months ended September 30, 2017 and 2016: $5,109 and $5,054, respectively).For a reconciliation of our Adjusted EBITDA on a segment basis to the most comparable measure calculated in accordance with GAAP, see “Operating Segment Results.”Safety and Quality PerformanceMaintaining a strong safety record is a critical component of our operational success. Many of our customers have safety standards we must satisfy before we can perform services. As a result, we continually monitor and improve our safety performance through the evaluation of safety observations, job and customer surveys, and safety data. The primary measure for our safety performance is the tracking of the Total Recordable Incident Rate in addition to the Lost Time Incident Rate, which are reviewed on both a monthly and rolling twelve-month basis.Our business is dependent on our ability to provide highly reliable and safe equipment. If our equipment does not meet statutory regulations and/or our clients do not accept the quality of our equipment, we could encounter loss of contracts and/or loss of reputation, which could materially impact our operations and profitability. Further, the failure of our equipment could subject us to litigation, regulatory fines and/or adverse customer reaction. In addition, equipment certification requirements vary by region and changes in these requirements could impact our ability to operate in certain markets if our tools do not comply with these requirements.30Consolidated Results of OperationsThe following table presents our consolidated results for the periods presented (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (Unaudited) Revenues: Equipment rentals and services $ 92,547 $ 85,698 $ 272,402 $ 312,132 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 60,981 57,307 178,865 189,965 10,750 16,029 45,162 51,446 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): 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 ) (1)For the three months ended September 30, 2016, $10,305 and $2,792 have been reclassified from general and administrative expenses to equipment rentals and services and products, respectively, and $34,598 and $8,852, respectively, for the nine months ended September 30, 2016. See Note 1 - Basis of Presentation in the Notes to Unaudited Condensed Consolidated Financial Statements.(2)Please see Note 12 - Related Party Transactions in the Notes to the Unaudited Condensed Consolidated Financial Statements for further discussion.Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016Revenues. Revenues from external customers, excluding intersegment sales, for the three months ended September 30, 2017 increased by $3.0 million, or 2.8%, to $108.1 million from $105.1 million for the three months ended September 30, 2016. The revenue increase was primarily attributable to our recently acquired Blackhawk segment and our International Services segment, partially offset by a decrease in our U.S. Services and Tubular Sales segments. Revenues for our segments are discussed separately below under the heading "Operating Segment Results."31Cost of revenues, exclusive of depreciation and amortization. Cost of revenues for the three months ended September 30, 2017 decreased by $1.6 million, or 2.2%, to $71.7 million from $73.3 million for the three months ended September 30, 2016 due to our cost cutting initiatives.Depreciation and amortization. Depreciation and amortization for the three months ended September 30, 2017 increased by $4.1 million, or 15.5%, to $30.7 million from $26.5 million for the three months ended September 30, 2016, primarily due to our recently acquired Blackhawk segment.Severance and other charges. Severance and other charges for the three months ended September 30, 2017 decreased by $12.9 million, or 88.7%, to $1.6 million from $14.5 million for the three months ended September 30, 2016 due to higher workforce reductions in the third quarter of 2016 compared to 2017 as we took steps to adjust our workforce to meet the depressed demand in the industry.Foreign currency gain (loss). Foreign currency gain for the three months ended September 30, 2017 was $1.8 million as compared to a foreign currency loss for the three months ended September 30, 2016 of $1.7 million. The change in foreign currency gain (loss) year-over-year was primarily driven by the weakening of the U.S. dollar against other currencies.Income tax expense (benefit). Income tax expense for the three months ended September 30, 2017 increased by $94.4 million to $87.6 million from a benefit of $6.8 million for the three months ended September 30, 2016, primarily as a result of recording valuation allowances against our net deferred tax assets. The deferred tax assets relate to net operating losses, outside basis differences in our partnership investment and other timing differences primarily associated with our U.S. operations.Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016Revenues. Revenues from external customers, excluding intersegment sales, for the nine months ended September 30, 2017 decreased by $43.1 million, or 11.3%, to $336.5 million from $379.5 million for the nine months ended September 30, 2016. The decrease was primarily attributable to lower revenues in the majority of our segments due to declining activity as depressed oil and gas prices resulted in reduced rig count, downward pricing pressures, rig cancellations and delays as well as deferred work scopes in the International and offshore U.S. Services regions while revenues for Tubular Sales decreased due to lower international demand and decreased deepwater fabrication revenue. The decrease in total revenues was partially offset by revenues from our recently acquired Blackhawk segment of $51.9 million. Revenues for our segments are discussed separately below under the heading "Operating Segment Results."Cost of revenues, exclusive of depreciation and amortization. Cost of revenues for the nine months ended September 30, 2017 decreased by $17.4 million, or 7.2%, to $224.0 million from $241.4 million for the nine months ended September 30, 2016. Our cost of revenues decline was consistent with our lower revenue and cost cutting initiative.General and administrative expenses. General and administrative expenses for the nine months ended September 30, 2017 decreased by $13.5 million, or 9.7%, to $125.1 million from $138.6 million for the nine months ended September 30, 2016 primarily due to bad debt expense recognized in 2016 related to difficulty in collecting certain receivables in Venezuela and cost cutting initiatives.Depreciation and amortization. Depreciation and amortization for the nine months ended September 30, 2017 increased by $8.4 million, or 10.0%, to $92.7 million from $84.3 million for the nine months ended September 30, 2016, primarily due to our recently acquired Blackhawk segment, partially offset by a lower depreciable base related to our legacy assets.Severance and other charges. Severance and other charges for the nine months ended September 30, 2017 decreased by $16.5 million, or 87.3%, to $2.4 million from $18.9 million for the nine months ended September 30, 2016 as a result of a higher workforce reduction in 2016 compared to 2017 as we took steps to adjust our workforce to meet the depressed demand in the industry.32Foreign currency gain (loss). Foreign currency gain for the nine months ended September 30, 2017 was $3.2 million as compared to a foreign currency loss for the nine months ended September 30, 2016 of $5.9 million. The improvement in foreign currency gain (loss) year-over-year was primarily driven by the weakening of the U.S. dollar against other currencies which positively impacted foreign currency gain (loss) for the nine months ended September 30, 2017 and the absence of the devaluation of the Nigerian Naira which negatively impacted foreign currency gain (loss) for the nine months ended September 30, 2016.Income tax expense (benefit). Income tax expense for the nine months ended September 30, 2017 increased by $87.7 million to $72.4 million from a benefit of $15.3 million for the nine months ended September 30, 2016, primarily as a result of recording valuation allowances against our net deferred tax assets. The deferred tax assets relate to net operating losses, outside basis differences in our partnership investment and other timing differences primarily associated with our U.S. operations.Operating Segment ResultsThe following table presents revenues and Adjusted EBITDA by segment (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Revenue: International Services $ 53,742 $ 51,028 $ 153,851 $ 191,440 U.S. 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 International Services $ 11,151 $ 4,532 $ 25,459 $ 31,752 (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 (1)Amounts previously reported as Corporate and other of $159 and $361 for the three and nine months ended September 30, 2016, respectively, have been reclassified to U.S. Services to conform to the current presentation.(2)Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. (For a reconciliation of our Adjusted EBITDA, see "Adjusted EBITDA and Adjusted EBITDA Margin").Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016International ServicesRevenue for the International Services segment increased by $2.7 million for the three months ended September 30, 2017, or 5.3%, compared to the same period in 2016, primarily due to an increase in Middle East onshore activity, European offshore shelf activity, and increased offshore activity in Latin America and Canada, partially offset by declines in revenue attributable to the Africa and Asia Pacific regions.Adjusted EBITDA for the International Services segment increased by $6.6 million for the three months ended September 30, 2017, or 146.1%, compared to the same period in 2016, primarily driven by increased revenue as well as lower expenses in 2017 due to cost cutting measures.33U.S. ServicesRevenue for the U.S. Services segment decreased by $5.0 million for the three months ended September 30, 2017, or 14.7%, compared to the same period in 2016. Onshore services revenue increased by $6.3 million as a result of improved activity from increased rig counts. The offshore business saw a decrease in revenue of $11.3 million as a result of overall lower activity due to rig cancellations and delays in the Gulf of Mexico, coupled with downward pricing pressures.Adjusted EBITDA for the U.S. Services segment decreased by $5.3 million for the three months ended September 30, 2017, or 88.9%, compared to the same period in 2016 due to overall lower offshore activity and increased pricing pressures partially offset by higher activity in our onshore services.Tubular SalesRevenue for the Tubular Sales segment decreased by $12.3 million for the three months ended September 30, 2017, or 61.6%, compared to the same period in 2016 primarily due to lower deepwater activity in the Gulf of Mexico and delays in projects.Adjusted EBITDA for the Tubular Sales segment decreased by $1.5 million for the three months ended September 30, 2017, compared to the same period in 2016 primarily due to the decrease in revenue, which was partially offset by lower expenses due to reduced activity and cost cutting measures.BlackhawkThe Blackhawk segment is comprised solely of the assets we acquired on November 1, 2016. Revenues and Adjusted EBITDA for the segment were $17.6 million and $3.5 million for the three months ended September 30, 2017. See Note 3 - Acquisition and Divestitures in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information on our Blackhawk acquisition.Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016International ServicesRevenue for the International Services segment decreased by $37.6 million for the nine months ended September 30, 2017, or 19.6%, compared to the same period in 2016, primarily due to depressed oil and gas prices which have challenged the economics of our customers' development projects, particularly in Europe and Africa where complex deepwater wells had previously been large revenue drivers. This was partially offset by improved revenue in the Middle East due to increased onshore activity.Adjusted EBITDA for the International Services segment decreased by $6.3 million for the nine months ended September 30, 2017, or 19.8%, compared to the same period in 2016 primarily due to the decrease in revenue, which was partially offset by the absence of non-recurring charges recognized in 2016 of $9.7 million for bad debt primarily related to difficulty in collecting certain receivables in Venezuela and $2.5 million of additional payroll related costs for Nigeria and Mexico, as well as lower expenses in 2017 due to reduced activity and cost cutting measures.U.S. ServicesRevenue for the U.S. Services segment decreased by $30.0 million for the nine months ended September 30, 2017, or 25.0%, compared to the same period in 2016. Onshore services revenue increased by $12.0 million as a result of improved activity from increased rig counts. The offshore business saw a decrease in revenue of $42.0 million as a result of overall lower activity due to rig cancellations and delays in the Gulf of Mexico, coupled with downward pricing pressures.34Adjusted EBITDA for the U.S. Services segment decreased by $14.8 million for the nine months ended September 30, 2017 compared to the same period in 2016 primarily due to lower activity in our offshore services, partially offset by an increase in onshore services activity.Tubular SalesRevenue for the Tubular Sales segment decreased by $27.4 million for the nine months ended September 30, 2017, or 40.2%, compared to the same period in 2016 primarily as a result of lower deepwater activity in the Gulf of Mexico, which more than offset higher revenue in our international markets.Adjusted EBITDA for the Tubular Sales segment increased by $0.4 million for the nine months ended September 30, 2017 compared to the same period in 2016 as it was positively impacted by cost cutting measures undertaken during 2016.BlackhawkThe Blackhawk segment is comprised solely of the assets we acquired on November 1, 2016. Revenues and Adjusted EBITDA for the segment were $51.9 million and $7.7 million for the nine months ended September 30, 2017. See Note 3 - Acquisition and Divestitures in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information on our Blackhawk acquisition.Liquidity and Capital ResourcesLiquidityAt September 30, 2017, we had cash and cash equivalents and short-term investments of $293.9 million and debt of $0.1 million. Our primary sources of liquidity to date have been cash flows from operations. Our primary uses of capital have been for organic growth capital expenditures. We continually monitor potential capital sources, including equity and debt financing, in order to meet our investment and target liquidity requirements.Our total capital expenditures are estimated at $40.0 million for 2017. We expect to spend approximately $22.0 million for the purchase and manufacture of equipment and $18.0 million for other property, plant and equipment, inclusive of the purchase or construction of facilities. The actual amount of capital expenditures for the manufacture of equipment may fluctuate based on market conditions. During the nine months ended September 30, 2017 and 2016, capital expenditures were $18.6 million and $29.8 million, respectively, all of which were funded from internally generated funds. We believe our cash on hand and cash flows from operations should be sufficient to fund our capital expenditure and liquidity requirements for the remainder of 2017.We paid dividends on our common stock of $50.4 million, or $0.225 per common share during the nine months ended September 30, 2017. On October 27, 2017, the Board of Managing Directors of the Company, with the approval from the Board of Supervisory Directors of the Company, approved a plan to suspend the Company’s quarterly dividend in order to preserve capital for various purposes, including to invest in growth opportunities.Credit FacilityWe have a $100.0 million revolving credit facility with certain financial institutions, including up to $20.0 million in letters of credit and up to $10.0 million in swingline loans, which matures in August 2018 (the “Credit Facility”). Subject to the terms of the Credit Facility, we have the ability to increase the commitments to $150.0 million. At September 30, 2017 and December 31, 2016, we had $2.8 million and $3.7 million, respectively, in letters of credit outstanding and no outstanding borrowings under this facility. As of September 30, 2017, our ability to borrow under the Credit Facility has been reduced to approximately $30 million as a result of our decreased Adjusted EBITDA. Our borrowing capacity under the Credit Facility could be further reduced or eliminated depending on our future Adjusted EBITDA. As a result of this, our overall liquidity would be diminished.35Borrowings under the Credit Facility bear interest, at our option, at either a base rate or an adjusted Eurodollar rate. Base rate loans under the Credit Facility bear interest at a rate equal to the higher of (i) the prime rate as published in the Wall Street Journal, (ii) the Federal Funds Effective Rate plus 0.50% or (iii) the adjusted Eurodollar rate plus 1.00%, plus an applicable margin ranging from 0.50% to 1.50%, subject to adjustment based on a leverage ratio. Interest is in each case payable quarterly for base-rate loans. Eurodollar loans under the Credit Facility bear interest at an adjusted Eurodollar rate equal to the Eurodollar rate for such interest period multiplied by the statutory reserves, plus an applicable margin ranging from 1.50% to 2.50%. Interest is payable at the end of applicable interest periods for Eurodollar loans, except that if the interest period for a Eurodollar loan is longer than three months, interest is paid at the end of each three-month period. The unused portion of the Credit Facility is subject to a commitment fee ranging from 0.250% to 0.375% based on certain leverage ratios.The Credit Facility contains various covenants that, among other things, limit our ability to grant certain liens, make certain loans and investments, enter into mergers or acquisitions, enter into hedging transactions, change our lines of business, prepay certain indebtedness, enter into certain affiliate transactions, incur additional indebtedness or engage in certain asset dispositions.The Credit Facility also contains financial covenants, which, among other things, require us, on a consolidated basis, to maintain: (i) a ratio of total consolidated funded debt to adjusted EBITDA (as defined in the Credit Agreement) of not more than 2.5 to 1.0 and (ii) a ratio of EBITDA to interest expense of not less than 3.0 to 1.0.In addition, the Credit Facility contains customary events of default, including, among others, the failure to make required payments, failure to comply with certain covenants or other agreements, breach of the representations and covenants contained in the agreements, default of certain other indebtedness, certain events of bankruptcy or insolvency and the occurrence of a change in control.On April 28, 2017, the Company obtained a limited waiver under its Revolving Credit Agreement, dated August 14, 2013, by and among FICV (as borrower), Amegy Bank National Association (as administrative agent), Capital One, National Association (as syndication agent) and the other lenders party thereto (the "Credit Agreement"), of its leverage ratio and interest coverage ratio for the fiscal quarters ending March 31, 2017 and June 30, 2017 (the “Waiver”) in order to not be in default for first quarter of 2017 testing. The Company agreed to comply with the following conditions during the period from the effective date of the Waiver until the delivery of its compliance certificate with respect to the fiscal quarter ending September 30, 2017: (i) maintain no less than $250.0 million in liquidity; (ii) abide by certain restrictions regarding the issuance of senior unsecured debt; and (iii) pay interest and commitment fees based on the highest “Applicable Margin” (as defined in the Credit Agreement) level. In connection with the Waiver, the Company paid a waiver fee to each lender that executed the Waiver equal to five basis points of the respective lender’s commitment under the Credit Agreement. As of September 30, 2017, we were in compliance with the covenants included in the Credit Agreement.Citibank Credit FacilityIn 2016, we entered into a three-year credit facility with Citibank N.A., UAE Branch in the amount of $6.0 million for issuance of standby letters of credit and guarantees. The credit facility also allows for open ended guarantees. Outstanding amounts under the credit facility bear interest of 1.25% per annum for amounts outstanding up to one year. Amounts outstanding more than one year bear interest at 1.5% per annum. As of September 30, 2017 and December 31, 2016, we had $2.5 million and $2.2 million in letters of credit outstanding.Tax Receivable AgreementWe entered into a tax receivable agreement (the “TRA”) with Frank's International C.V. ("FICV") and Mosing Holdings, LLC ("Mosing Holdings") in connection with our initial public offering ("IPO"). The TRA generally provides for the payment by us to Mosing Holdings of 85% of the amount of the actual reductions, if any, in payments of U.S. federal, state and local income tax or franchise tax in periods after our IPO (which reductions we refer to as "cash savings") as a result of (i) the tax basis increases resulting from the transfer of FICV interests to us in connection with the conversion of shares of Preferred Stock into shares of our common stock on August 26, 2016 and (ii) imputed36interest deemed to be paid by us as a result of, and additional tax basis arising from, payments under the TRA. In addition, the TRA provides for interest earned from the due date (without extensions) of the corresponding tax return to the date of payment specified by the TRA. We will retain the remaining 15% of cash savings, if any. The payment obligations under the TRA are our obligations and not obligations of FICV. The term of the TRA continues until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the TRA.If we elect to execute our sole right to terminate the TRA early, we would be required to make an immediate payment equal to the present value of the anticipated future tax benefits subject to the TRA (based upon certain assumptions and deemed events set forth in the TRA, including the assumption that it has sufficient taxable income to fully utilize such benefits and that any FICV interests that Mosing Holdings or its transferees own on the termination date are deemed to be exchanged on the termination date). In addition, payments due under the TRA will be similarly accelerated following certain mergers or other changes of control.In certain circumstances, we may be required to make payments under the TRA that we have entered into with Mosing Holdings. In most circumstances, these payments will be associated with the actual cash savings that we recognize in connection with the conversion of Preferred Stock, which would reduce the actual tax benefit to us. If we were to elect to exercise our sole right to terminate the TRA early or enter into certain change of control transactions, we may incur payment obligations prior to the time we actually incur any tax benefit. In those circumstances, we would need to pay the amounts out of cash on hand, finance the payments or refrain from triggering the obligation. Though we do not have any present intention of triggering an advance payment under the TRA, based on our current liquidity and our expected ability to access debt and equity financing, we believe we would be able to make such a payment if necessary. Any such payment could reduce our cash on hand and our borrowing availability, however, which would also reduce the amount of cash available to operate our business, to fund capital expenditures and to be paid as dividends to our stockholders, among other things. Please see Note 12 - Related Party Transactions in the Notes to Unaudited Condensed Consolidated Financial Statements.Cash Flows from Operating, Investing and Financing ActivitiesCash flows provided by (used in) our operations, investing and financing activities are summarized below (in thousands): Nine Months Ended September 30, 2017 2016 Operating activities $ 24,585 $ 27,846 Investing activities (57,243 ) (17,362 ) Financing activities (51,634 ) (79,831 ) (84,292 ) (69,347 ) Effect of exchange rate changes on cash (1,896 ) (3,162 ) Net decrease in cash and cash equivalents $ (86,188 ) $ (72,509 ) Statements of cash flows for entities with international operations that use the local currency as the functional currency exclude the effects of the changes in foreign currency exchange rates that occur during any given year, as these are noncash changes. As a result, changes reflected in certain accounts on the condensed consolidated statements of cash flows may not reflect the changes in corresponding accounts on the condensed consolidated balance sheets.Operating ActivitiesCash flow provided by operating activities was $24.6 million for the nine months ended September 30, 2017 compared to cash flow provided by operating activities of $27.8 million for the same period in 2016. The decrease in cash flow provided by operating activities was primarily due to lower activity as a result of depressed oil and gas prices, which resulted in a decrease in accounts receivable of $58.1 million and inventories of $13.9 million, partially offset37by a decrease in accrued expenses and other current liabilities of $37.8 million, deferred revenue of $20.4 million and other non-current liabilities of $8.7 million.Investing ActivitiesCash flow used in investing activities was $57.2 million for the nine months ended September 30, 2017 compared to $17.4 million in the same period in 2016. The increase in cash flow used in investing activities was primarily related to the purchase of investments of $59.8 million, partially offset by lower purchases of property, plant and equipment of $11.2 million and higher proceeds from the sale of assets of $8.5 million during the nine months ended September 30, 2017.Financing ActivitiesCash flow used in financing activities was $51.6 million for the nine months ended September 30, 2017 compared to $79.8 million in the same period in 2016. The decrease in cash flow used in financing activities was primarily due to lower dividend payments of $11.9 million, the absence of a payment to our noncontrolling interest of $8.0 million made in the nine months ended September 30, 2016, and lower repayments on borrowings of $6.9 million.Off-Balance Sheet ArrangementsWe do not have any off-balance sheet arrangements with the exception of operating leases.Critical Accounting PoliciesThere were no changes to our significant accounting policies from those disclosed in our Annual Report.Impact of Recent Accounting PronouncementsRefer to Note 1 - Basis of Presentation in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of accounting standards we recently adopted or will be required to adopt.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.We account for our derivative activities under the accounting guidance for derivatives and hedging. Derivatives are recognized on the condensed consolidated balance sheets at fair value. Although the derivative contracts will serve as an economic hedge of the cash flow of our currency exchange risk exposure, they are not formally designated as hedge contracts for hedge accounting treatment. Accordingly, any changes in the fair value of the derivative instruments during a period will be included in our condensed consolidated statements of operations. Based on the derivative contracts that were in place as of September 30, 2017, a 10% weakening of the U.S. dollar as compared to the Canadian dollar, Euro, Norwegian krone, and Pound sterling would result in a $2.4 million decrease in the market value of our forward contracts. Please see Item 1. Financial Statements - Note 11 - Derivatives for additional information regarding our foreign currency derivative contracts outstanding in U.S. dollars as of September 30, 2017.38(a)Procedures.Proceduresprincipal executive officerChief Executive Officer (“CEO”) and principal financial officer,Chief Financial Officer (“CFO”), 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 officerCEO and principal financial officer,CFO, 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 officerCEO and principal financial officerCFO have concluded that our disclosure controls and procedures were effective as of SeptemberJune 30, 20172023 at the reasonable assurance level.(b)Reporting.ReportingThereSeptemberJune 30, 2017,2023 that have materially affected, or are reasonably likely to materially affect, our 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 September 30, 2017 and December 31, 2016. 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. 15 - 17 “Commitments and Contingenciescontingencies” in the Statements.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, our policies and other applicable laws. In June 2016, we voluntarily disclosed the existence of our extensive internal review to the U.S. Securities and Exchange Commission, the United States Department of Justice and other governmental entities. It is our intent 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 entities (including those involved in our ongoing investigation), but at this time are unable to predict the ultimate resolution of these matters with these agencies, including any financial impact to us. Our board and management are committed to continuously enhancing our internal controls that support improved compliance and transparency throughout our global operations. -- $ -- -- $ 26,996,269 -- $ -- -- $ 26,996,269 -- $ -- -- $ 26,996,269 -- $ -- -- which follows the signature page to this report and is incorporated by reference herein, sets forth a list of exhibits to this report.3.1 Deed of Amendment to Articles of Association of Expro Group Holdings N.V., dated October 1, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-36053), filed on October 1, 2021). † Represents management contract or compensatory plan or arrangement. * Filed herewith. ** Furnished herewith. FRANK'S INTERNATIONAL November 2, 2017Kyle McClureQuinn P. Fanning Kyle McClure Senior Vice President and 41EXHIBIT INDEXExhibitNumberDescription3.1Deed of Amendment to Articles of Association of Frank's International N.V., dated May 19, 2016 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-36053), filed on May 25, 2017).Frank's International N.V. 2013 Long-Term Incentive Plan Employee Restricted Stock Unit Agreement (Supplemental Grant Form).Employment Offer Letter for Michael C. Kearney effective as of September 26, 2017.Separation Agreement by and between Douglas G. Stephens, Frank’s International, LLC and Frank’s International N.V., dated October 5, 2017.Certification of Chief Executive Officer pursuant to Rule 13a-14 (a) under the Securities Exchange Act of 1934.Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.*101.INSXBRL Instance Document.*101.SCHXBRL Taxonomy Extension Schema Document.*101.CALXBRL Taxonomy Calculation Linkbase Document.*101.DEFXBRL Taxonomy Definition Linkbase Document.*101.LABXBRL Taxonomy Extension Label Linkbase Document.*101.PREXBRL Taxonomy Extension Presentation Linkbase Document.†Represents management contract or compensatory plan or arrangement.*Filed herewith.**Furnished herewith.