fi20230331_10q.htm

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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 the Securities Exchange Act of

1934

For the quarterly period ended March 31, 2023

☐ 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 HOLDINGS N.V.

(Exact name of registrant as specified in its charter)

	The Netherlands		98-1107145
	(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

	1311 Broadfield Boulevard, Suite 400
	Houston, Texas		77084
	(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (713) 463-9776

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, €0.06 nominal value	XPRO	New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth 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). Yes ☐ No ☑

As of May 1, 2023, there were 108,592,169 shares of common stock, €0.06 nominal value per share, outstanding.

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		Page
PART I. FINANCIAL INFORMATION

Item 1.	*Financial Statements*
	Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2023 and 2022	1
	Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the Three Months Ended March 31, 2023 and 2022	2
	Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2023 and 2022	4
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three Months Ended March 31, 2023 and 2022	5
	Notes to the Unaudited Condensed Consolidated Financial Statements	6

Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*	21

Item 3.	*Quantitative and Qualitative Disclosures About Market Risk*	36

Item 4.	*Controls and Procedures*	36

PART II. OTHER INFORMATION

Item 1.	*Legal Proceedings*	37

Item 1A.	*Risk Factors*	37

Item 2.	*Unregistered Sales of Equity Securities and Use of Proceeds*	37

Item 6.	*Exhibits*	38

*Signatures*		39

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Expro Group Holdings N.V.

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except share data)

	*Three Months Ended March 31,*
	*2023*			*2022*

Total revenue	$	339,279		$	280,477
Operating costs and expenses:
Cost of revenue, excluding depreciation and amortization expense		(289,647	)		(239,530	)
General and administrative expense, excluding depreciation and amortization expense		(13,285	)		(11,510	)
Depreciation and amortization expense		(34,737	)		(35,012	)
Merger and integration expense		(2,138	)		(4,725	)
Severance and other expense		(927	)		(1,494	)
Total operating cost and expenses		(340,734	)		(292,271	)
Operating loss		(1,455	)		(11,794	)
Other (expense) income, net		(949	)		996
Interest and finance (expense) income , net		(1,298	)		13
Loss before taxes and equity in income of joint ventures		(3,702	)		(10,785	)
Equity in income of joint ventures		2,436			4,202
Loss before income taxes		(1,266	)		(6,583	)
Income tax expense		(5,085	)		(4,549	)
Net loss	$	(6,351	)	$	(11,132	)

Loss per common share:
Basic and diluted	$	(0.06	)	$	(0.10	)
Weighted average common shares outstanding:
Basic and diluted		108,854,709			109,266,988

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

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Expro Group Holdings N.V.

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

(in thousands)

	*Three Months Ended March 31,*
	*2023*			*2022*
Net loss	$	(6,351	)	$	(11,132	)
Other comprehensive loss:
Amortization of prior service credit		(61	)		(61	)
Other comprehensive loss		(61	)		(61	)
Comprehensive loss	$	(6,412	)	$	(11,193	)

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

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Expro Group Holdings N.V.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

	*March 31,*			*December 31,*
	*2023*			*2022*
		(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	184,870		$	214,788
Restricted cash		1,428			3,672
Accounts receivable, net		425,410			419,237
Inventories		156,280			153,718
Assets held for sale		2,179			2,179
Income tax receivables		26,848			26,938
Other current assets		56,552			44,975
Total current assets		853,567			865,507

Property, plant and equipment, net		462,410			462,316
Investments in joint ventures		68,435			66,038
Intangible assets, net		231,529			229,504
Goodwill		228,137			220,980
Operating lease right-of-use assets		75,197			74,856
Non-current accounts receivable, net		9,177			9,688
Other non-current assets		8,045			8,263
Total assets	$	1,936,497		$	1,937,152

Liabilities and stockholders’ equity
Current liabilities
Accounts payable and accrued liabilities	$	272,159		$	272,704
Income tax liabilities		40,911			37,151
Finance lease liabilities		1,051			1,047
Operating lease liabilities		18,369			19,057
Other current liabilities		120,021			107,750
Total current liabilities		452,511			437,709

Deferred tax liabilities, net		27,893			30,419
Post-retirement benefits		10,695			11,344
Non-current finance lease liabilities		13,465			13,773
Non-current operating lease liabilities		58,554			60,847
Other non-current liabilities		102,694			97,165
Total liabilities		665,812			651,257

Commitments and contingencies (Note 17)

Stockholders’ equity:
Common stock, €0.06 nominal value, 200,000,000 shares authorized, 111,292,202 and 110,710,188 shares issued and 108,583,946 and 108,743,761 shares outstanding		7,943			7,911
Treasury stock (at cost) 2,708,256 and 1,966,427 shares		(54,437	)		(40,870	)
Additional paid-in capital		1,851,815			1,847,078
Accumulated other comprehensive income		27,488			27,549
Accumulated deficit		(562,124	)		(555,773	)
Total stockholders’ equity		1,270,685			1,285,895
Total liabilities and stockholders’ equity	$	1,936,497		$	1,937,152

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

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Expro Group Holdings N.V.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	*Three Months Ended March 31,*
	*2023*			*2022*
Cash flows from operating activities:
Net loss	$	(6,351	)	$	(11,132	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization expense		34,737			35,012
Equity in income of joint ventures		(2,436	)		(4,202	)
Stock-based compensation expense		4,171			6,018
Change in fair value of investments		-			1,502
Elimination of unrealized profit on sales to joint ventures		39			-
Deferred taxes		(5,225	)		(2,448	)
Unrealized foreign exchange		(1,753	)		(2,503	)
Changes in assets and liabilities:
Accounts receivable, net		(5,761	)		2,163
Inventories		(2,380	)		(6,232	)
Other assets		(11,320	)		(3,492	)
Accounts payable and accrued liabilities		5,362			(13,194	)
Other liabilities		11,306			(11,501	)
Income taxes, net		3,929			(719	)
Other		(2,995	)		(3,434	)
Net cash provided by (used in) operating activities		21,323			(14,162	)

Cash flows from investing activities:
Capital expenditures		(28,776	)		(10,577	)
Payment for acquisition of business, net of cash acquired		(7,536	)		-
Acquisition of technology		-			(7,973	)
Proceeds from disposal of assets		-			6,422
Proceeds from sale / maturity of investments		-			7,120
Net cash used in investing activities		(36,312	)		(5,008	)

Cash flows from financing activities:
Cash pledged for collateral deposits		(10	)		(61	)
Payments of loan issuance and other transaction costs		-			(95	)
Acquisition of common stock		(10,011	)		-
Payment of withholding taxes on stock-based compensation plans		(2,954	)		(1,104	)
Repayment of financed insurance premium		(2,899	)		(980	)
Repayments of finance leases		(499	)		(154	)
Net cash used in financing activities		(16,373	)		(2,394	)

Effect of exchange rate changes on cash and cash equivalents		(800	)		133
Net decrease to cash and cash equivalents and restricted cash		(32,162	)		(21,431	)
Cash and cash equivalents and restricted cash at beginning of period		218,460			239,847
Cash and cash equivalents and restricted cash at end of period	$	186,298		$	218,416

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

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Expro Group Holdings N.V.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(in thousands)

	Three Months Ended March 31, 2022
											Accumulated
									*Additional*		*other*						*Total*
	*Common*					*Treasury*			*paid-in*		*comprehensive*			*Accumulated*			*stockholders*’
	*stock*					*Stock*			*capital*		*loss*			*deficit*			*equity*
Balance at January 1, 2022		109,143		$	7,844	$	(22,785	)	$	1,827,782	$	20,358		$	(535,628	)	$	1,297,571
Net loss		-			-		-			-		-			(11,132	)		(11,132	)
Other comprehensive loss		-			-		-			-		(61	)		-			(61	)
Stock-based compensation expense		-			-		-			6,018		-			-			6,018
Common shares issued upon vesting of share-based awards		336			24		-			378		-			-			402
Treasury shares withheld		(100	)		-		(1,506	)		-		-			-			(1,506	)
Balance at March 31, 2022		109,379		$	7,868	$	(24,291	)	$	1,834,178	$	20,297		$	(546,760	)	$	1,291,292

	*Three Months Ended March 31, 2023*
											*Accumulated*
									*Additional*		*other*						*Total*
	*Common*					*Treasury*			*paid-in*		*comprehensive*			*Accumulated*			*stockholders’*
	*stock*					*Stock*			*capital*		*income*			*deficit*			*equity*
Balance at January 1, 2023		108,744		$	7,911	$	(40,870	)	$	1,847,078	$	27,549		$	(555,773	)	$	1,285,895
Net loss		-			-		-			-		-			(6,351	)		(6,351	)
Other comprehensive loss		-			-		-			-		(61	)		-			(61	)
Stock-based compensation expense		-			-		-			4,171		-			-			4,171
Common stock issued upon vesting of share-based awards		582			32		-			566		-			-			598
Treasury shares withheld		(185	)		-		(3,556	)		-		-			-			(3,556	)
Acquisition of common stock		(557	)		-		(10,011	)		-		-			-			(10,011	)
Balance at March 31, 2023		108,584			7,943	$	(54,437	)	$	1,851,815	$	27,488		$	(562,124	)	$	1,270,685

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

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Expro Group Holdings N.V.

Notes to Unaudited Condensed Consolidated Financial Statements

1.	Business description

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

On March 10, 2021, 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 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 three months ended March 31, 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 March 31, 2023.

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Expro Group Holdings N.V.

Notes to Unaudited Condensed Consolidated Financial Statements

2.	Basis of presentation and significant accounting policies

Basis of presentation

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

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

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

Such adjustments are of a normal recurring nature. Operating results for the three months ended March 31, 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 10-K filed with the SEC on February 23, 2023, for a discussion of our significant accounting policies. There have been no material changes in our significant accounting policies as compared to the significant accounting policies described in our consolidated financial statements as of and for the year ended December 31, 2022.

Recent accounting pronouncements

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

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

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Expro Group Holdings N.V.

Notes to Unaudited Condensed Consolidated Financial Statements

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 United 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 be $17.5 million, including cash consideration paid at closing of $9.0 million, subject to a true-up for net of customary working capital adjustments, and contingent consideration which is estimated to be $8.5 million.

The contingent consideration arrangement requires the Company to pay the former owners of DeltaTek a percentage of future revenues generated specifically from the acquired technology over a period of seven years. The fair value of the contingent consideration arrangement of $8.5 million was estimated by applying the income approach and is reflected in “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 assumptions change during the measurement period and such changes are based on facts and circumstances that existed as of the Closing Date, an adjustment to the contingent consideration liability would be recorded with an offsetting adjustment to goodwill. To the extent our estimates and assumptions change based on facts and circumstances subsequent to the Closing Date or after the measurement period, an adjustment to the contingent consideration liability would be recorded with an offsetting adjustment to earnings during the applicable period.

The Acquisition is accounted for as a business 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.

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

	*Amount*
Cash and cash equivalents	$	1,464
Accounts receivables, net		723
Inventories		183
Property, plant and equipment		642
Goodwill		7,157
Intangible assets		11,063
Other assets		27
Total assets		21,259

Accounts payable and accrued liabilities		245
Deferred tax liabilities		2,700
Other liabilities		831
Total Liabilities

SEC Form 10-Q filed by Expro Group Holdings N.V.