Expro Group Holdings N.V. Q3 FY2021 Earnings Call

Hello and welcome to the Expro Third Quarterly Earnings Conference Call. My name is Elliot and I will be coordinating your call today. If you would like to register a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I'll now hand over to our host, Karen David-Green. Karen, please go ahead when you're ready.

Welcome, everyone, to the Expro Group Third from Quinn Fanning, CFO. We'll open it up for questions. I'd like to remind everyone that such remarks are SEC filings, cautionary language identifying on the SEC or the investor section. In addition, the third quarter financials are downloadable on the X-Pro, the downloadable

financial services company, X-Pro began trading on the New York Stock Exchange on October 4th under the ticker symbol XPRO. I would like to thank everyone at X-Pro and Franks for their great work in completing the transaction. We have hit the ground running and are positioning the combined company for long-term success. We believe that we have created a truly exciting platform and a strong financial profile that will allow the combined company to accelerate growth, improve profitability, and enhance value for shareholders, employees, customers, and partners. We have a resilient business model with greater scale and a broader set of product offerings across the well life cycle that position us well to perform through market cycles. We have an expansive geographic footprint that diversifies our exposure and cash flows and improves us with platforms for continued growth in key markets. Notably, for example, on a pro forma basis in 2020, 35% of our revenue is generated in North and Latin America, 28% came from Europe and Sub-Saharan Africa, 21% from Middle East, North Africa, and 16% from Asia Pacific. Our diversified customer base of international and national oil companies gives us opportunities to expand our relationships as we introduce new solutions. With our combined portfolio of services and products, we now offer our clients a broader range of early well lifecycle solutions. Together we have enhanced early visibility into customer projects, which enables us to better anticipate their future needs and expand our market penetration. We have a balanced business with leading capabilities across four product lines. Well construction, well flow management, subsea well access, and well intervention and integrity. Our top priority across each business is ensuring safety, integrity, and efficiency. I would like to spend a few minutes introducing you to each of our product lines and talk to you about the drivers of our business. First, well construction. This product line accounted for 37 percent of our 2020 proform revenue. Frank's has been a leader in well construction for over 80 years. We have a comprehensive well construction portfolio including being a trusted provider of casing and tubular running services, completion cementing and drilling technologies, downhole service tools, and large diameter tubular products. Today in the areas in which we participate we have one of the most expansive well construction portfolios in the industry. We specialize in complex and technically demanding wells with solutions that transform how these wells are constructed to enhance efficiency and production. Well construction represents a great growth area for us with a rebound in global rig counts, a leading market share position, and over 4,000 wells constructed each year. The leverage in this business is significant with incremental margins above 50% in the offshore domain. I've been exceptionally impressed with the level of technology and the level of engineering that FRANKS brings to the table. Differentiating and proprietary technology such as ICAM, ITONG, Centrify focus on automation, digitization, and artificial intelligence to help reduce risk and increase the safety and efficiency of operations. Next on well flow management. This product line accounts for 38% of our 2020 pro forma revenue. We have an experienced team and the largest fleet of well flow management equipment. Our broad range of capabilities span well cleanup, exploration and appraisal services to support the full life of field for our customers. Our portfolio includes real-time data acquisition and metering, fluid sampling and analysis, efficient sand solids and water management capabilities, extended well test and early production facilities, and modular production enhancement solutions. Well flow management represents another area of strength for us with more than 200 global well test packages and more than 10,000 successful well test operations to date. We gather valuable well and reservoir data. We are specialists in high rate gas developments and we help customers accelerate their cash flow by both expediting production from new discoveries and by maximizing recovery from existing well stock. We are well positioned to benefit from a recovery and the business has tremendous leverage to more complex wells. Looking forward, well flow management has a critical role to play in the energy transition in terms of measuring, analyzing, optimizing emissions. We're focused on helping our customers reduce operational emissions through introduction of innovative data, engineered solutions, and applied technologies. Now let's move on to subsea well access. This product line accounted for 12% of our 2020 pro forma revenue. We are a market leader in subsea well access and provide the most reliable, efficient, and cost effective well access systems in the industry with capabilities across the complete well life cycle from ENA through to well abandonment with a new increased focus on optimizing production. We are the global leader in the supply of industry leading subsea test tree assemblies with a fleet of over 75 strings and more than 3,000 operations performed to date. Subsea well access is a strong stable business for us with the latest introduction of our RWIS product allowing us to now offer our customer base the complete subsea toolbox offering the correct intervention solutions through BOP, open water riser systems, and now open water wire through water type systems. This of course is dependent upon a type of operation being carried out by the operator. And now that brings us to Well Intervention Integrity. This product line accounted for 13% of our 2020 pro forma revenue. Our Well Intervention Integrity business provides deployment, insight, and enhancement solutions to advance production optimization, well surveillance, and asset integrity assurance. Our Well Intervention solutions span across well integrity, EOR, production monitoring, perforation and unconventional, pipe recovery, and slickline mechanical services. We are confident there is a significant opportunity for us to continue to expand our well-intervention integrity business through our existing relationships with our customer base and also to expand with new customers and new geographies. Well integrity, reduction of greenhouse gas emissions by old wells, and cost-effective decommissioning is a priority for many of our customers. We recently launched an integrated workflow using existing technologies within our portfolio to help customers cost-efficiently diagnose, solve, and assure integrity of their well stock, guarantee safe and flawless production, or detailed preparation for rapid and low-cost decommissioning. Combining with Franks gives us an extended footprint, allowing us to expand our existing portfolio of well-intervention technologies to previously inaccessible geographies such as Guyana, Ecuador, and others. One of our key strategic priorities is capitalizing on our technology platform to provide customers with more precise, efficient solutions. Our portfolio is built on innovation and technology that we believe will define the next chapter of our industry. With leading solutions across the well life cycles, we now support customers from exploration and well planning through to abandonment. Let me give you a few examples of our innovation at work during the third quarter. Our Octopoda annulus intervention system successfully reached a depth of 300 meters in a Colombian well while restoring annulus pressure integrity and return the well to production. This step was a world record for annulus intervention. Another example of our innovation at work was during Hurricane Ida, which rapidly intensified in the Gulf of Mexico. We were able to deploy Frank's recently launched 22-inch brute high-pressure high tensile service packer. This was a finalist in the World Oil Awards in the category of well integrity, but this was used to quickly safely and safely isolate the customer's wealth. Moving forward, we remain committed to continuing to invest in our innovation platform with a focus on solutions that support our customers' carbon reduction goals as part of the energy transition. ESG is integral to our DNA at Expro. This includes our commitment to achieve net zero CO2 emissions by 2050 and our focus on continued innovation to create a future-facing technology platform that helps Expro and our customers participate in energy transition. Forty percent of our research and development spending in 2021 was targeted to help our customers achieve these carbon reduction objectives. Our customers are being driven by lower cost, lower carbon, as well as faster and more concise decisions. Through technology and innovation, we offer production optimization focused on gas, reduced physical and carbon footprint of operations, flare-less and flare reduction analytics and energy market evolution. For example, EXPRO delivered a gas compression solution in North Africa, enabling our customer to reduce greenhouse gases and minimize their footprint. The customer reduced greenhouse gas emissions across 10 sites by roughly 10,000 tons of carbon dioxide per day. Now let me turn to the market and our outlook. Light supply and global demand recovery, the activity and investment environment are continuing to look positive, especially in production development phases of the oil field life cycle. While many of our customers near-term focus will likely remain on maximizing their investments in existing well stock, we believe the significant under-investment in new oil supply in recent years will result in new final investment decisions or FIDs and that we will see sustained growth in all of our businesses and across all geomarkets. Continuing recovery in 2022 and as oil and gas demand returns to pre-COVID levels, we believe operators will shift their focus to reserves replacement. Internationally, the supermajors are increasingly focused on lower cost, lower risk phase developments. In addition, efforts to reduce emissions and more broadly to position themselves for the energy transition continues to gather pace as a priority for IOC customers. In parallel to this, national oil companies are poised to accelerate their field development efforts to maximize their economic recovery. International drilling activity is forecasted to improve from its low point in Q4 of 2020 with the largest increases in Central and South America, followed by the Middle East and Asia Pacific. The company's current outlook for the fourth quarter of 2021 is for flat to mid-single-digit revenue growth and adjusted EBITDA margin consistent with the definition used by Legacy expo of 15 to 17 percent of consolidated revenue driven by an improved business mix and continued cost management discipline. Our forecast assumes a continuing recovery in EMP expenditures, albeit at different rates in individual countries. Near term, operators are expected to maximize the investments that they have made previously. Consistent with past recoveries, incremental OPEX spending and brownfield enhancement programs are expected to be an initial area of customer focus and in select markets we are seeing some signs of recovering and intervention and well integrity projects, execution of which is a traditional strength of Expro. We expect the favorable indicators of recovery that we are currently experiencing will gain momentum as 2021 closes and as we progress into 2022. For 2022 and beyond, a pipeline of projects continues to build that will support multi-year growth with a particular focus on a number of the geomarkets within the Middle East, North Africa, Latin America, Africa, and Asia. More broadly, we believe offshore exploration and development and tidal oil projects will attract a disproportionate share of incremental investment dollars given the relative size of the prize in terms of resource potential. This should support sustained growth for the combined Expro given our capabilities in subsea well access services and complex well flow management and well construction services. We expect to provide additional color on our 2022 expectations in connection with our fourth quarter financial results early next year. Outlined previously and prior to the closing of the transaction, we are targeting cost and revenue synergies between 80 to 100 million dollars within 24 to 36 months. We've undertaken significant work planning for the integration and are confident in our ability to achieve the targeted synergies and we have begun to execute in our plans immediately upon closing the transaction. Throughout the third quarter, our integration planning has confirmed our expectations that we will strengthen our operating model, lower our cost structure, and significantly expand margins. We are confident in our ability to deliver $55 million in annual run rate cost synergies within the first 12 months following close with the opportunity to deliver $70 million of total cost savings in 24 to 36 months. We expect to achieve these synergies largely through indirect cost consolidation and optimization of business processes. We also expect to realize revenue synergies of 10 to 30 million in EBITDA through our expanded customer relationships and operating footprints, increased time on rig, and greater exposure to the full life of field. In addition to realizing the near-term synergies drive the transaction, a multi-year industry and global economic recovery of which we are seeing signs, together with improving market fundamentals, uniquely positions Expro to capture the full synergies plus deliver on incremental revenue and margin expansion opportunities. And longer term, there's a significant potential upside relative to prior periods of the cycle, especially given the years of underinvestment in the sector that I discussed a bit earlier. Before I pass over to Quinn, I'd like to reiterate how excited I am about what the future holds for our new company and look forward to working to deliver on our tremendous opportunities. We are well positioned to capture income and revenue and margin expansion opportunities that come with a market upturn. We have a strong financial profile that provides flexibility to drive growth. With that, I'll hand the call over to Quinn to discuss the financial results. Thanks, Mike.

As was noted in our press release, the merger of X-Pro and Franks closed on October 1st, or just after the quarter's end. As a result, we have separately reported results for Legacy X-Pro and Franks consistent with respect to past practices of Legacy X-Pro and Franks. The Franks 10Q will be filed this afternoon. The Legacy X-Pro results are of course available in the press release, and we will also file an 8K, including the Legacy X-Pro results. We reported in the fiscal fourth quarter of 2021, meant to be the accounting acquirer and go-forward financial reporting will include Frank's net assets at fair value as of the date of the acquisition. Legacy Act Pro's accounting policy will continue to report results based on four geography-based segments, geography-based indirect costs, but exclude corporate and other central costs not related to core operating activities. supplemental disclosures to include revenue by four product line groups, which are well construction, well flow management, subsea well access, new pro forma historical data related to contribution, and contribution margin, which is essentially the legacy Franks business, and for our well flow management, subsea well access, and centric legacy Expro business, which tend to be driven by overall activity levels, contribution, cost of revenue. Contribution margin, finish of revenue. And then the Q3 conference call slides, both of which are available through our website. According to Q3 2021 results, the combined company generated pro forma revenue of approximately $313 million in the quarter, which is up $29 million in activity across most regions. Frank's revenue was up 36%. Q3 2020 was negative, so fall through on higher revenue and continued cost discipline has resulted in materially better financial performance year-over-year. As defined by Legacy Expro, Legacy Expro's adjusted EBITDA for the third quarter of 2021 was $30.9 million, a sequential increase of 18% driven by higher revenue to EBITDA, a sequential improvement of approximately 150 basis points. Rose revenue and adjusted EBITDA were up 33% and 36% respectively. Nine company basis, 9% quarter over quarter, in part reflecting the recognition of a sale of an early production system during the just completed quarter.

APAC revenue was up approximately 8% quarter over quarter. Mainer revenue is down approximately 7% quarter over quarter.

and NLA revenue was generally flat relative to the year-over-year. Proforma combined company revenue was up approximately 34%, with particularly strong gains in ESA and NLA, trending in a positive of four regions. Slide number nine, very good margins, largely due to the geographically concentrated nature of the activity. COVID-related challenges have particular concerns relating to the collectability of outstanding accounts receivable, and we expect that the working capital issue will sort itself out over the next quarter or two. As to general levels of activity, we expect that our MENA business will begin to pick up in Q2 2022. Given the desire of key operators to increase production, add to spare capacity, and reduce emissions, we expect that MENA will be an engine of growth for both the industry and for Expro. On a relative profitability basis, as defined by Expro, segment-adjusted EBITDA margin in Q3 for ESA, APAC, 22%, geography-based support and beyond, should work itself out. We need to try to mitigate the other issues in MENA with cost discipline to added services and solutions, including production debottlenecking, as well as intervention and integrity solutions, which include compression and metering, and our coil hose and our Octopoda annual intervention solution. Turning to the balance sheet, the combined company had no interest-bearing debt at the end of Q3 2021 and has no interest-bearing debt today. Proforma combined company liquidity at quarter-end was approximately $400 million. Combined company at September 30th was approximately $270 million. And in the $240 million area, support functions and scope for improved product equipment totaled $3.1 million in the third quarter and year-to-date totaled $7.6 million. dollars. Franks continues to plan for overall capital expenditures during 2021 of approximately 15 million dollars. Capital expenditures related to property, plant, and equipment totals 15.8 million dollars in the third quarter of 2021, and year-to-date totals 53.5 million dollars. Expenditures during 2021 in the range of 70 to 75 million dollars. Assisting assets, operational, and financial performance. Fourth quarter of 2021 is for flat to mid-single-digit revenue growth and an adjusted EBITDA margin consistent with the definition used by Legacy Expro of 15% to 17% of consolidated revenue. For press release, seasonally weaker quarters due to reduced activity in the northern hemisphere. Historically, a number of our NOC customers also tend to be slower out of the gate in starting projects, pending the approval of their budgets, momentum, and well-intervention integrity product lines. We also expect to see a strong recovery and offshore development beyond the next few quarters for which our well construction and subsea well access business market with additional color on our 2022 expectations. Plus investors to recovery the Franks organizations together we expect to recognize severance and other costs related to the rationalization of support functions and the consolidation of facilities. We're expecting a couple of noisy quarters. Overall we are expecting plus 10% year-over-year revenue growth in 2022 and adjusted EBITDA margins in the high teens. The revenue run rate to approach 2019 pre-pandemic levels for the combined company. With the benefit of fall through on incremental revenue and cost synergies, adjusted EBITDA

margins in the second half of 2022 should be in the plus or minus 20% range. Safety filed to accelerate growth and provide true cycle resiliency. Second, at the core of our business and instrumental to our future success is our strong financial profile with a healthy balance sheet and ample liquidity, significant synergy opportunities, and a strong and sustainable cash flow profile. There's a lot of opportunities in front of us both internally and externally and I am excited for our future as one company and confident in our ability to deliver as we progress through a multi-year cyclical recovery. Thank you again. Operator, let's go ahead and open it up for questions.

Thank you. For our Q&A, if you would like to ask a question, please press star followed by one on your telephone keypad. When preparing to ask your question, please ensure your device is unmuted locally. Today, we'll first begin our Q&A session with a few questions that we have received from our pre-registered callers. The first question, would you please share with us how you think about your capital allocation strategy?

We invest in future-facing technologies that are ultimately required to participate in a more meaningful way in the energy transition and help and additionally still really still be able to generate good free cash flow. There are also portfolio benefits of the Expro and Franks merger in that we are better exposed to the entire well life cycle. The breadth of our services and solutions really provides us with a more frequent opportunity to engage with customers and ultimately to consider integration or bundling of our services. I'm highly confident that we will timely capture these costs and revenue synergies that have been communicated to the market and I believe that we will benefit ultimately from a tailwind that will be associated with recovery in both onshore and offshore drilling activity and as a result I think we'll have significant free cash flow upside. Ultimately what we do with that cash will be a function of what opportunities are available to us and of course investor expectations will be a significant element of the decision-making process. So the near-term focus is on generating cash and we'll go through a disciplined process with the board in terms of how we allocate any excess free cash flow. Ultimately, addressing dividends and buybacks is a bit premature for us at this moment, but know that we have good prospects for revenue growth to be able to expand margins and ultimately generate additional free cash flow. I think it's also worth noting that our zero debt balance sheet and our currently strong liquidity position also provides us with a fair amount of strategic flexibility so ultimately um you know the through cycle profitability and the free cash flow will allow us to thoughtfully invest in the business we can better position the company for long-term success and have a constructive dialogue and next steps to enhance shareholder value when that's

really appropriate the second question can you please provide some detail around the capital

intensity on the combined business services within TRS business to generate revenue at or in excess of pre-pandemic levels with very modest incremental capex investment and really that's going to happen through better utilization of the existing asset base um you know ultimately that said due to the complexity of the equipment you know sometimes with long lead times for specialized equipment and the call-out nature of some of the activity we have in well construction in some markets You know, CAPEX commitments from the traditional well construction business are typically driven more by expectations for growth and demand, you know, more so than work that we know that's already been awarded. Ultimately, you know, most of the CAPEX related requirements in the legacy Expro business, it tends to not be bespoke. It's more project specific and not speculative. So we do require some CapEx requirements there. But generally with the Legacy Expro business, it's committed with a contract award in hand and we have reasonable visibility on payback timing and those type things. So as a general matter, the Legacy Franks business will tend to be more build to market and for the Legacy Expro business, it'll be more build to contract. And as we think about the combined business, as we've kind of indicated previously, we expect our capex will run somewhere in the kind of seven to eight percent of revenue range these levels of investment will allow us to build ultimately a sustainable business generate good free cash flow with the expected increase in overall activity and really all things being equal with a degree of pricing traction capex as a percentage of revenue should come down a couple of percentage points in the future as well. Our next question will

come from the line of Taylor Zurcher from Tudor Pickering Holt. Taylor, your line is now open.

Hey, thanks, Mike and Quinn. Good morning. My first question is on the 2022 outlook. Can you guys hear me? Sorry. Yeah, so first question just on the 2022 outlook that you're talking about roughly 10% year-over-year revenue growth on a pro forma basis. And if I think about just the four geographic reporting segments that you talked about some of the near-term issues you're dealing with in the MENA region so likely a stronger back half type environment for MENA than the first half in 2022 but if you could just help us think about which geographic segments that you're seeing the most revenue growth opportunities for 2022 relative to that 10% target you put out there I suspect a lot of them will be second half weighted but I'm just curious how do you rank the four geographic reporting segments for 2022 in terms of growth opportunities on the come?

Customer engagements together. So it's really been a good, you know, some of the world is starting to open back up for travel. Those kind of things allows us to have more kind of, you know, in-person, you know, dialogue and engagement. Today in terms of their, you know, their kind of future planning, it's much more positive discussions. You know, we're having more technical inquiries, all those type things. So it's really it's kind of I think setting up well for that. The difference in a normal year and in kind of a normal time by you know early November those would be we would be starting to see more and more of us translate into actual projects and actual awards and those type things. It's a little bit slower right now and I think it's still the some of the overhang of the pandemic and folks going back to you know working in the office and those type things. But I can tell you from North America, especially offshore, we're starting to see some positive signs. You know, Latin America, Brazil in particular, I think that in the back end of 22 going into 23, we're going to see some growth. You know, we alluded to in the numbers we have here, we've had some impact of COVID-related type things in the Middle East and North Africa. You know, hopefully as we start to see more and more signs that the worst of the pandemic is kind of behind us, I think we're starting to see more things kind of start to frame up there. And let's keep in mind that Asia has been really dramatically affected by the pandemic, probably more so in our experience than a lot of other global markets, just because of the timeliness of vaccine rollouts and some of those kind of things. So I think all those set up well, whether it's Latin America for some growth in the near term, the Middle East, Asia, and we're seeing some strengthening in ECIS. The one that I think is going to continue to be probably a little bit more behind the curve, so to speak, is really going to be sub-Saharan Africa. A lot of that tends to be because those are bigger projects. Those are much stronger capital investments from our customers. But with that said, we've seen a large number of technical inquiries and those types of things. So I think there's some positive opportunities in sub-Saharan Africa. I just think they're going to be, you know, a little bit slower to mature than what we're seeing in

some of the other markets. I think the only thing I would have to handle is we are on a pre-budget basis and, you know, our customers are also finalizing their budgets. So the interim guidance I was giving is plus 10% year-over-year and as you point out our expectation is is largely back-end weighted you know I guess as we sit here today long markets for us we were giving was for over a

year and yeah understood there thanks for that and follow-up just on a free cash flow so you already explained sort of the pro forma capital allocation strategy so no real follow-ups there I'm just thinking about the cadence of free cash flow for the pro forma business it feels to me like in the near term you'll probably have some elevated merger and integration type transaction cash cost that that'll eat up a lot of the free cash flow potential of the business at least in the near term and probably more of a second second half 2022 story when it comes to meaningful positive free cash flow but just wondering if you could help us think about when the business you know once you get past some of these integration related items when the business should turn return to a positive free cash flow type business on a quarterly basis thank you

Taylor our next question comes from James West from ever core ISI James your

line is now open thanks good morning Mike and Quinn Mike morning Mike you've had a you mentioned you had a good amount of travel recently as things started to to reopen um and i'd love to hear your characterization of your customer interactions as as we've gotten off uh you know zoom and you're meeting people in person again and they're talking about their plans for 22 and 23 i mean your business is a little bit longer cycle so that they need to talk about longer term trends um how are those conversations gone how are they thinking about the next several years and how are they thinking about the

merger of Expro at Frank's? It's been very well received they want to understand a little bit more about you know why does this make sense and we can talk more about you know through cycle and the fact that we can add some more resources and we can continue to leverage you know some of the some of the engineering investment that we've done in both companies it's gonna be transportable to the other so we've had really really good positive discussions around the transaction. Overall, with their level of activity, especially internationally, we still have customers who have not gone back to work in the office full-time, or if they have, they're not working in the office full-time, it's part-time. So I think there's still some caution. I think everybody's getting more and more confident that maybe we've got the worst that's behind us. And then I think for them, they're fundamentally trying to really understand the continued commentary from OPEC and what's going to happen from supply there, what's going to happen with commodity pricing. I'm hopeful that what's going to happen here over the course of the next, you know, four, five, six weeks is we start to see more, not just positive discussion from customers, we also start to see that translate into, okay, we're going to sanction Project X or we're going to pick up this additional rig. I'm hopeful that here the planning phase over the course of the next four to six weeks will help us have a little bit more clarity around that. but it's certainly all the fundamentals seem to be translating into that but is it is it translating yet into a dramatic increase in the contracts being signed and contracts being committed frankly no but i think as all of the uh as you're hearing commentary from lots of service guys in the sector the fundamentals seem to be setting up and and there's there's it's a more constructive conversation more constructive dialogue right okay okay that makes sense um

And then with respect to pricing, I think Quinn mentioned pricing wasn't included in kind of the expectations for 22. Is that an issue of spare capacity in your product lines? Is that just being conservative? How are you thinking about pricing for your products and services at this point as we move into what should be a pretty healthy upturn?

With tightening of services or more of an activity set, we'll start moving pricing as soon as we can. We're just not going to count on that to give us some margin improvement because we've got a lot of wood to chop, so to speak, on taking costs out, and we want to make sure we stay focused on that.

I think Mike's exactly right. More equipment will certainly bring more equipment online, but we're not going to go out and build a bunch of capacity in hopes that the market's going to bail us out.

Our next question comes from David Anderson from Barclays. David, your line is now open.

Good morning, Mike. We're just a question about the well-testing business. Not a business we've had a lot of kind of exposure to over the years, so maybe just kind of help us understand kind of some of the drivers in there. I think we understand kind of the well construction, how that's kind of levered to more on kind of really the deep water rigs activity and the subsea part, we get all that. but how does well testing work particularly when they're as it relates to upstream spending because i guess people are we're probably a lot of trying to figure out that that 10 number that sounds a little bit lighter and you're probably hearing kind of about international spending next year is going to be up kind of that mid-team so what we're hearing so is it just a function it's a little bit later cycle and it just takes a little bit longer and therefore it should kind of last longer but it's just going to take a little bit let just help us understand the dynamics of that

business would be very helpful. Thank you. It's a little bit more of a mid-cycle revenue generation, and that's the reason why you're probably going to see us on the wealth management side be a little bit more later cycle just in terms of recovery, because you kind of have the wealth testing, wealth management business really in two elements. One is more of that initial expiration and appraisal, and we're starting to see some early indications of expiration projects start to pick up. Seismic activity, those type things are starting to increase, and that's a really good leading indicator for seismic happens, and then you start to have E&A activity beyond that. And then for us, really the second element is around more of the production optimization, production enhancement, which is really the existing well stock that you start to see. So that kind of stays stable, and that tends to be more of an inflationary change and improvement in that portion of well testing. The strong growth activity comes with that kind of early cycle, post-drilling, post-completion, then you start to test wells and bring them online.

So is it fair to say that the bread and butter part of your revenue is in that production side, though, on the well testing?

Activity and investment in E&A type web activity. see we've got a good base level of well flow management we still have the resources the expertise the knowledge to be able to go out and provide those strong services as the ENA type activity starts to ramp back up gotcha and the

other my other question is kind of looking at legacy Expro and if I just kind of look this kind of bigger picture kind of where your overall margins have trended since 14 kind of the peak of offshore and kind of there to kind of we've sort of hit kind of a kind of level last few years, help us understand a little bit about kind of normalized margins. I mean, outside of, I totally understand all the cost synergies you're taking out, but aside from the cost synergies, how should we think about kind of legacy Expro and kind of where you think that business should be, let's say in kind of two to three years when things kind of start picking up? I'm just trying to understand the differences between the business, because I know a lot's changed. I know you move more onshore in that business, but just a little help just in some perspective i guess in terms of where margins should go

on a normalized basis movements and adjustments absolutely when the market is ready for it and it's a little bit unknown based on when is there customer increase in activity and type of supply those kind of things but the here and now that we have is very much around the cost synergies and that's why we are absolutely fundamentally leaning hard into we've said we'll take out 55 million of, you know, run rate cost synergies at the, you know, four quarters following closing. We absolutely will be able to do that. We can control that. We have really good line of visibility of the costs and the facility consolidations and all those type things. We've really been able to put together a really solid execution plan, and that right there is going to give us some controllable, so to speak, margin expansion. By the time we get into the fourth quarter of 22 and we start to see customer activity pick up, we're not going to be focused internally on cost synergies, those kind of things. We're going to be focused on customers and projects and how do we go out and execute and how do we capitalize on an opportunity

that's more robust. This concludes today's conference call. Thank you for participating. You may now disconnect.