Earnings Call Transcript - XPRO Q2 2025

Operator, Operator

Hello, everybody, and welcome to the Expro Q2 2025 Earnings Presentation. My name is Elliot, and I will be your coordinator for today. I would now like to hand over to Chad Stephenson, Director of Investor Relations. Please go ahead.

Chad Stephenson, Director of Investor Relations

Welcome to Expro's Second Quarter 2025 Conference Call. I am joined today by Expro's CEO, Mike Jardon; and Expro's CFO, Sergio Maiworm. First, Mike and Sergio will have some prepared remarks. Then we will open up for questions. We have an accompanied presentation on our second quarter results that is posted on the Expro website, expro.com, under the Investors section. In addition, supplemental financial information for the second quarter results is downloadable on the Expro website, likewise under the Investors section. I'd like to remind everyone that some of today's comments may refer to, or contain, forward-looking statements. Such remarks are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statements. Such statements speak only as of today's date, and the company assumes no responsibility to update forward-looking statements as of any future date. The company has included in its SEC filings, cautionary language identifying important factors that could cause actual results to be materially different from those set forth in any forward-looking statements. A more complete discussion of these risks included in the SEC filings, which may be accessed on the SEC's website, sec.gov, or on our website, again at expro.com. Please note that any non-GAAP financial measures discussed during this call are defined and reconciled to the most directly comparable GAAP financial measure in our second quarter 2025 earnings release, which can also be found on our website. With that, I'd like to turn the call over to Mike.

Michael Jardon, CEO

Good morning, everyone. I'm happy to welcome Sergio Maiworm, Expro's new Chief Financial Officer, to discuss our financial results today. Sergio has more than 20 years of experience in financial roles in the energy industry and brings a proven track record of driving financial performance and operational excellence. I look forward to working closely with Sergio as we continue to advance our strategic initiatives and build on our strong financial foundation. Now I'd like to start off by reviewing the second quarter 2025 financial results as summarized in today's earnings press release. I am proud to announce very strong quarterly results. This marks the third sequential record-setting quarterly EBITDA margin and robust free cash flow generation. I will then discuss the broader revolving macro environment, which we believe the underinvestment in traditional hydrocarbons in both the international and offshore markets supports a positive multiyear outlook for energy services companies like Expro, who have technology-enabled services supporting long-cycle development projects. We will move on to our operational highlights for the second quarter, discuss our outlook, and then turn the call over to Sergio to share additional financial information. For a recap of consolidated results, and quarterly results by region, I'll direct you to Slides 2 through 9 of the presentation that we posted to expro.com. On Slide 2, Expro reported an excellent quarter, reporting increased revenue to $423 million. EBITDA growth to $94 million and expanded EBITDA margin, representing 22% of revenue. Expro also generated a robust $36 million in free cash flow on an adjusted basis, or 9% of revenue. This marks the third consecutive quarter of financial results above expectations. In fact, Expro has reported financial results above expectations in 6 of the last 7 quarters, evidencing Expro's continued focus on operational execution despite market headwinds. Our second quarter financial results also represent a record-setting second quarter EBITDA margin. Our EBITDA margin ranks among the top in our peer group and is a continuation of a multiyear trend of margin improvement. Our results demonstrate we're on the right track to deliver the robust free cash flow generation to our shareholders and the success of the organic and inorganic investments that we have made to drive growth and expand margins. It's also the result of permanent structural cost savings through our Drive25 initiatives, improved business activity mix, and operational leverage. Additionally, we are capitalizing and continue to see meaningful benefits on our diverse geographic footprint, which is mainly focused on the international and offshore markets. As discussed in other calls, Expro has very limited exposure in regions such as U.S. land, Mexico, and offshore Saudi. Markets that will continue to be soft in 2025. Commercial activity and tenders remain robust in our main markets with new order awards of $595 million in the second quarter, marking the second highest quarter of new order intakes in our company's history. These awards were spread across key markets and product lines, highlighting the diversity of our portfolio and setting a new benchmark for our core business performance. Our results and success in the marketplace reflect the confidence our customers have in us and our focus on safety, service quality, and delivering cost-effective technology-driven solutions across the well life cycle. To highlight the more significant awards, we had contract wins in Guyana, covering well construction services with revenues in excess of $120 million and two contracts in North Africa for gas compression services and Production Solutions, with revenues of approximately $100 million and $60 million, respectively. Our backlog has increased to approximately $2.3 billion at the end of the second quarter, remaining both healthy and in line with our expectations. All in all, this quarter presented a challenging market backdrop, yet we continue to deliver operationally and financially. From a continuous innovation point, we deployed three new industry-first technologies. Those innovations at industry first are a direct result of Expro understanding the challenges that our customers face, and their operations day in and day out, and finding new creative solutions to address those challenges. This is what we refer to as innovation with a purpose. That is how we continue to provide differentiated services to our customers, and that is why we continue to get repeat business from our customer base. With that, we continue to drive efficient and safe operations to our customers in every single one of our global operations. Turning to the market outlook. The second quarter of 2025 presented a dynamic operating environment marked by commodity price fluctuations, driven by ongoing trade negotiations, OPEC+ production increases, and geopolitical conflicts. As a result, Brent crude traded within a $20 per barrel range over this period, peaking at $80 per barrel in June. As geopolitical tensions recede in certain areas, the market's focus has returned to fundamentals, particularly on supply dynamics and seasonal demand. OPEC+ has accelerated the phaseout of production cuts and a strategy pivot from output constraint to regain market share. Although ongoing increases in production may exert downward pressure on commodity prices, the elimination of OPEC + voluntary cuts provides more clarity and is anticipated to support longer-term market stability. Barring any significant shifts in the current commodity price range, the industry is expected to demonstrate continued resilience. Though the market has experienced challenges in the recent quarters, the oil and gas industry demonstrated fortitude and set operational expectations with limited impact on upstream spending in our key geomarkets year-to-date, which highlights the positive within the cycle for Expro. Despite current customer caution, new project approvals are expected to return to growth in 2026 with offshore approvals accounting for 80% of all 2025 and 2026 sanctioning. This provides plenty of opportunity for growth in Expro's well construction, well flow management, and subsea product lines. With subdued greenfield activity and the current volatility, operators are focusing on optimizing production from existing assets to generate revenue, driving sustained OpEx spending and subsequent brownfield activity. The strategic focus aligns with Expro strengths, and well intervention production optimization and digital services. Overall, in the current market environment, we will continue to focus on maintaining cost and capital discipline and otherwise controlling what we can control. With disciplined execution, a strong international and offshore presence, and a focus on operational efficiency, Expro remains well positioned to navigate the current market. We expect our differentiated service lines and resilient business model to allow us to continue to expand margins year-over-year. Stabilizing commodity prices at current levels, steady demand growth, and continued project sanctioning will drive demand for Expro services and solutions. We maintained a positive multiyear perspective on the overall opportunity set and Expro's relative market position. Moving to our operational performance for the quarter. Safety and innovation with a purpose are both central to who we are as a company. Just as safety is embedded in everything we do, so too is our drive to innovate with purpose. In the second quarter, we achieved industry first through the deployment of our innovative technologies each designed to reduce operational risk and increase efficiencies for our customers with artificial intelligence, machine learning, automation, and digitalization playing key roles. First, we introduced the BRUTE Armor Packer, our most advanced high-pressure high-tensile packer system. It's built for the extreme conditions of deepwater wells with a leading differential rating and retrievability that ensures sealing integrity in harsh environments. This allows operators to work more efficiently and with more confidence in the extreme conditions of deepwater wells. We expect customers to rapidly deploy this technology as two supermajors have already successfully deployed the system in the Gulf of America. Second, we completed the first full deployment of Expro's Remote Clamp Installation System, or RCIS. This technology was developed with and partially sponsored by a supermajor, with a focus on providing a unique industry solution that fully automates the installation of control line clamps on the tubing during the completions operations. It eliminates manual steps, speeds up the process, and most importantly, removes people from the red zone. The RCIS technology was deployed in the North Sea where Expro successfully ran a fully hands-free upper completion and reduced each clamp installation time by approximately 2 minutes or 50% per clamp. Based on the success of the operation, the customer has awarded additional work scopes for future deployments of the technology. And finally, we delivered the world's first fully remote five-plug cementing operation using Expro's Generation-X, Remote Plug Launcher, and SkyHook cement-line make-up device. It's designed for safety, control, and field adaptability, removing the need for anyone to enter the red zone while giving operators more operational control. The deployment marks a major step forward in the company's expansion of cementing services in the Middle East offshore and reflects the progress of the strategic initiatives for the region. These are not just technical wins. They are real-world examples of how we bring innovation, efficiency, and safety together to move the industry forward. Further, these technologies give Expro competitive advantages, highly specialized service offerings, and create future revenue opportunities by enabling scalable technology applications with improved margins. We are also demonstrating that innovation can be both effective and efficient, and that focus is evident in our regional activity this quarter. Beginning with the North and Latin America region, as we anticipated in the first quarter, activity in Brazil and Guyana has remained stable due to the development plans stemming from high volumes of FIDs in recent years. We capitalize on this improving environment as we secured a five-year multi-rig contract with revenue in excess of $120 million to provide completion and tubular running services in Guyana. We similarly continue to drive activity in Brazil, securing contracts with revenue of more than $50 million across production optimization and well decommissioning related activities, highlighting the breadth of capability across the life cycle of the well. As referenced in our July 14 press release, Expro secured a significant three-year contract award with Woodside Energy to support the Trion deepwater oil and gas development in offshore Mexico. This project marks Mexico's first deepwater field development and underscores our long-standing partnership with Woodside and the trust they have placed in Expro. We will provide TRS and cementing services with a focus to optimize well performance, drive cost efficiencies, and enhance operational reliability throughout the project life cycle. Moving to Europe and Sub-Saharan Africa. We successfully completed a multi-well campaign for a major operator in Angola conducting 11 clean-up and 12 well intervention operations over approximately 5,000 man hours, with a 98% job performance rating. In the U.K. and North Sea, our 30-year partnership with a major operator remains strong as we recently secured a three-year contract extension with revenue of approximately $30 million for well intervention, well services, and well testing operations. This is a testament to our exceptional service delivery and strong client relationships. In North Africa, we have further expanded our production optimization business. We secured a significant seven-year, approximately $100 million contract, to deliver a gas compression system on low-pressure gas wells in order to maintain throughput at the processing facility. Additionally, as a result of the high service quality delivered to the customer, the team has secured a six-month contract extension with revenue of approximately $60 million for early production facilities and gas compression services. Shifting focus to Asia Pacific, particularly Indonesia, we won four contracts from a single customer with revenue totaling approximately $15 million. This covers well intervention and integrity services, which play a critical role in brownfield production optimization by enhancing reservoir access, restoring well integrity, and maximizing hydrocarbon recovery. These new awards demonstrate the ongoing strategic focus on production optimization in these mature basins. And finally, in Australia, within TRS, Expro performed the first rigless conductor driving operation on a customer's platform in over a decade underscoring our commitment to reintroducing and delivering solutions to the region. The team successfully completed a six-slot conductor installation safely and ahead of schedule. Before we move to our financial performance, I'll comment on the guidance for the full year 2025 that was included in our press release. The macro environment has created challenges for the entire industry, and we also see that several pockets in the market are softening and will remain challenging for the next 12 to 18 months. We are still assessing what that means to Expro in 2026; however, we firmly believe the international and offshore segments of the market will generally perform better than other segments. Those are markets with longer duration development plans and primarily dominated by the supermajors, large IOCs, and the NOCs. Those customers tend to be less susceptible to short-term market volatility and tend to focus more on the longer-term fundamentals of their business. If we combine our presence weighted to the international and offshore markets, with our strong relationships with customers, leading market positions, and key services, we still see relative stability and a relatively constructive outlook for the business. In the near term, for 2025, we are reaffirming our full-year outlook. And as stated during the Q1 earnings call, we continue to expect at least mid-single-digit revenue growth in the second half of 2025 compared to the first half of the year. This is supported by our line of sight and the customer scheduled activities and delivery of products and services for the next two quarters. More specifically, we are not relying on binary outcomes of large individual projects to meet our guidance. Our anticipated annual revenue is circa $1.7 billion and EBITDA of at least $350 million. We continue to anticipate our free cash flow on an adjusted basis to be approximately 7% of revenue for the full year 2025, despite the definitional change we announced this morning in the earnings release. Sergio will go into more detail on that shortly. Consistent with historical trends, we expect the free cash flow generation to be more weighted to the second half of the year. Overall, we have seen customers prioritize key projects, and it is expected that our customers' upstream investments will be largely unaffected by short-term commodity price movements through 2025, and several of our geo markets are proving to be more resilient in the current market's perception. In our NLA region, activity should be stable in Brazil and Guyana as a result of a continuation of existing development plans. In the Gulf of America, we anticipate steady to slightly increasing activity in the second half of 2025. Similarly, we see growth from LatAm countries such as Brazil and Colombia. Overall, for the second half of the year, we anticipate NLA revenue to demonstrate growth over the first half of the year. In ESSA, the outlook is constructive for the North Sea and parts of Europe, with a stable outlook on revenue and improving margins based on activity mix in the region for the remainder of the year. In the Middle East and North Africa, we are anticipating stability between Saudi Arabia and Algeria, two of our largest markets in the region. And as a reminder, in Saudi, our business is levered to onshore and unconventional gas, more so than offshore oil. In Algeria, our business is levered to production optimization activity, which provides more predictability. In Asia Pacific, the remainder of 2025, we are expecting an increase in activity for Southeast Asia, specifically in Indonesia, Brunei, and Thailand related to well construction and well intervention services. Additionally, in Australia, we see incremental activity in subsea well access related to project timing and the onshore Coretrax expandable business. For these reasons, we believe the region will see revenue growth with improved margins in the second half of 2025 compared to the first half of the year. With that, I'll turn the call to Sergio to review our financial results in detail.

Sergio L. Maiworm, CFO

Thank you, Mike, and good morning to everyone on the call. First of all, it's a great pleasure to be here. I'm very excited to have joined Expro, and I wanted to take a brief moment to thank every Expro team member for the warm welcome that I've received from all parts of the organization, and from every region and product line. Tomorrow marks my first 30 days with Expro, and I wanted to share some initial observations. As Mike noted, we reported very strong financial results in the second quarter. And this wasn't an isolated occurrence. The team has been consistently delivering results above expectations. That is due to the talent and dedication of our almost 9,000 coworkers in all parts of the globe. And that is my first observation, the quality and passion of the team to solve our customers' most complex challenges. My second observation is the depth of our conversations with our customers. That understanding of our customers' needs, and our passion to provide solutions that lead to our innovation with a purpose DNA. And that innovation mindset materializes in every way possible. From the new AI-driven tool to utilizing day-to-day creativity to improve our own processes. These are my own initial observations, but they were somewhat confirmed by many of my former peers and colleagues in upstream companies that reached out to me to praise Expro and the team. Now moving on to the quarterly results. We reported revenue of $423 million for the second quarter, as compared to the guidance range of $400 million to $410 million. Revenue was up $32 million, or about 8%, relative to the first quarter of 2025, reflecting a seasonal recovery in the Northern Hemisphere and increased activity globally, more specifically in ESSA. EBITDA for the second quarter was $94 million, where guidance was between $80 million and $90 million. This quarter's EBITDA represents a sequential increase of approximately $18 million, or 24%, relative to the first quarter. EBITDA margin for the second quarter was 22%, and was up about 200 basis points quarter-over-quarter. Similarly, as compared to Q2 of last year, EBITDA margin increased about 200 basis points as well. As Mike noted, Q2 2025 was the best EBITDA margin quarterly results in the company's history and builds on Expro's established track record of margin expansion. We also generated over $36 million of free cash flow on an adjusted basis in the second quarter and repurchased $5 million in shares in the open market. We're extremely proud of the cash flow performance of the company for the quarter, and we will remain focused on improving the capital efficiency of the business. To expand on this morning's earnings release, I'd like to take a moment to discuss free cash flow and share buybacks. Generating significant free cash flow and growing our free cash flow is of the utmost importance to us. Therefore, we have taken another look at our own free cash flow definition and decided to make it more aligned with industry peers. Beginning in the current period, or second quarter of 2025, and going forward, free cash flow will be our reported CFFO minus CapEx, both numbers straight from our statement of cash flows. We also intend to further adjust it for truly one-time items, either positive or negative, to come up with an adjusted free cash flow that is more reflective of the steady state business performance and therefore, better aligned with corporate finance principles. Those adjustments will also be very transparent and sourced straight from the income statement on a quarterly and year-to-date basis. We intend to report both free cash flow and adjusted free cash flow with their respective reconciliations. With that said, we will mainly refer to the adjusted number as we believe it better represents the operational performance of the company. On share buybacks, we remain committed to repurchasing the same one-third of free cash flow, or circa $40 million, as previously guided. The previous guidance was framed in the form of percentages. But given the changes in the definition of free cash flow, we concluded that it will be clear to guide the dollar amount, but nothing has changed in that regard. Year-to-date, Expro has repurchased $15 million in stock, with $5 million of that in the second quarter. We still have approximately $61 million available under our current $100 million authorization and expect to catch up on our annual repurchases in the second half of the year. As Mike mentioned before, we are reaffirming our annual financial guidance with revenues of circa $1.7 billion and EBITDA of at least $350 million. Our general expectation of the revenue progression is that third quarter will be flattish relative to the second quarter with expected revenue growth in the fourth quarter. We expect free cash flow as adjusted to be plus or minus $110 million for the full year. We acknowledge there's an element of market uncertainty, but based on the team's ongoing dialogue with customers we expect the demand for Expro services to continue as guided, with line of sight on projects in 2025, particularly in international and offshore markets. In other words, our guidance numbers represent our best view of the business performance today, but to be sure the numbers have both downside risks and upside opportunities. As it relates to the second half of the year, we expect our results to reflect a moderate increase in activity across NLA and APAC, while the MENA and ESSA regions are expected to be relatively stable. As we've highlighted, we continue to optimize costs and streamline processes through our Drive25 operating efficiency campaign. With that, if operators' plans change, we expect to adjust cost and CapEx accordingly to preserve our ability to generate and maximize free cash flow, and maintain our commitments to share buybacks. My general philosophy around guidance is that no one benefits from aggressive targets. It often leads to future disappointments. But I'm not a sandbagger either. Neither one of those two extremes create credibility in my opinion. My belief is that credibility is built around having an honest view of the business, the associated downsides and upsides, and ultimately working tirelessly to execute on the operational front to meet or exceed those expectations, and do that consistently. I believe our guidance this year reflects our philosophy. Turning to our regional results. For North and Latin America, or NLA, second quarter revenue was $143 million, or up $8 million quarter-over-quarter, reflecting higher activity in well construction, while well flow management activity was down in Mexico and Brazil. Note that revenue generated from U.S. land and Mexico markets was about 4% and 2% of consolidated 2024 annual revenue respectively, and continues to be a very small part of the global Expro business. For Europe and Sub-Saharan Africa, or ESSA, second quarter revenue increased $20 million to $132 million sequentially, primarily driven by activity in the North Sea from well flow management and subsea well access. Activity in Angola from well flow management and well construction product lines. Segment EBITDA margin of 30% was up 400 basis points sequentially, reflecting higher activity and a favorable product mix. The Middle East and North Africa, or MENA, delivered another solid quarter, but slightly lower compared to Q1 with revenue at $91 million, driven by lower well construction revenue in Saudi Arabia and the UAE, partially offset by well flow management revenue in North Africa. MENA segment EBITDA margin was 36% of revenues, a decrease of 70 basis points from the prior quarter, reflecting the lower well construction activity. Finally, in Asia Pacific, or APAC, second quarter revenue was $57 million, an increase of $6 million relative to the first quarter, primarily reflecting higher well flow management activity in Malaysia, Indonesia, and Brunei. The Asia Pacific segment's EBITDA margin was 26% of revenues, increased about 500 basis points from the prior quarter, reflecting increased activity and mix. To provide an update on the Drive25 initiative, Expro is well into the implementation phase of this cost optimization program. On the first quarter earnings conference call, Expro announced an updated target of $30 million in run rate cost savings. We continue to anticipate capturing at least 50% of that run rate target during the current year. Turning to liquidity. Expro has total available liquidity at the end of Q2 of approximately $343 million, with available cash and cash equivalents of approximately $207 million, and availability under our revolving credit facility of approximately $136 million. Subsequent to the June 30 quarter end, Expro entered into an amended credit facility to, among other things, extend the maturity and increase the bank commitments. The new facility has a four-year maturity and matures in July 2029. Additionally, it increases the total RCF commitments from $340 million to $400 million. Concurrently, we entered into a $100 million 364-day bridge facility. In aggregate, these facilities provide up to $500 million in available liquidity, further strengthening our balance sheet and providing plenty of flexibility to execute on future M&A opportunities, while continuing to return capital to shareholders. With that, I'll turn the call back to Mike for a few closing comments.

Michael Jardon, CEO

Thank you, Sergio. We believe Expro is well positioned with our market-leading core product lines and good exposure to international and offshore markets that will support ongoing activity, not only for the remainder of 2025 but for a multiyear growth cycle expected to start in the back half of 2026. We will continue to focus on free cash flow generation by continuing to expand our EBITDA margins, and looking for ways to reduce the capital intensity of our business. We work hard every day to continue to earn our customers' trust, create value for our shareholders and deliver solid financial results every quarter. Despite the uncertain market backdrop, we continue to focus on what we can control while being ready for every scenario. That being said, we remain confident that our main international and offshore markets will perform better than other sectors. With our strong balance sheet and liquidity positions, Expro is equipped to manage anticipated market fluctuations and deliver sustained free cash flow and value to its stakeholders. With that, we can open up the call for questions.

Operator, Operator

Operator Instructions. First question comes from David Smith with Pickering Energy Partners.

David Christopher Smith, Analyst

Congratulations on a very strong quarter. I wanted to say also just really impressive Q2 orders. I wanted to ask if that was mostly timing, just large multiyear projects coincidentally booking in the quarter? Or good commercial discussions suggest 2025 orders that could be up 20% or more versus '24?

Michael Jardon, CEO

Yes, David, it's really a combination of factors. Several of the contract awards were from places like Guyana and North Africa, primarily consisting of contract renewals and extensions. It was largely a matter of timing. We continue to experience strong levels of bidding and tendering activity, which contributed to a robust quarter for order intakes.

David Christopher Smith, Analyst

Great. I appreciate that. I know it's early to discuss 2026, but following up on Sergio's remarks, if activity growth were to flatten or stall, could you share any opportunities you see for improved free cash flow conversion compared to the last few years? Is there potential for flexibility in CapEx spending, thoughts on working capital improvement, or potentially fewer merger integration and severance charges?

Michael Jardon, CEO

Yes, that's a great question. To address that, first, I want to highlight that we have shown throughout the year that even if 2025 turns out to be a relatively flat year in terms of top-line growth, we will still manage to expand our margins. This will be due to our internal engineering initiatives and the successful launch of new technologies that are gaining traction in the market. Additionally, we are realizing synergies from our recent acquisitions in terms of both cost and revenue. Last summer, we initiated a cost efficiency program that has proven to be timely. While we did not predict events like Liberation Day in April, our ongoing focus on continuous improvement and cost reduction is yielding benefits. We anticipate ending this year with $30 million in run-rate cost savings, with about half of that impacting our 2025 figures. We have some flexibility with our CapEx spending, which is always project-based rather than speculative. Overall, our emphasis on margin expansion and increasing free cash flow generation is central to our strategy. These elements work together intentionally. Sergio, do you have anything to add?

Sergio L. Maiworm, CFO

No, Mike, that's it. I think the focus is on generating an increase in the free cash flow of the business. There are many levers, and Mike already touched on all of them, but expanding the margins further and perhaps adjusting the capital intensity of the business are the main drivers we see at this point.

Operator, Operator

We now turn to Ati Modak with Goldman Sachs.

Atidrip Modak, Analyst

I guess, Sergio and Mike, on the quarterly EBITDA margin cadence, is there anything that you can provide us in terms of how to think about the segments for the remainder of the year?

Michael Jardon, CEO

Thank you for joining us, Ati. We usually start the first quarter of the year, which tends to be our slowest quarter due to the winter season in the Northern Hemisphere, particularly in the North Sea. Our National Oil Company customers are often slower to ramp up, so the first quarter typically reflects that. However, we had a solid revenue performance in the second quarter, and we were able to convert that into good margins. We expect to expand our margins in 2025 compared to 2024, and we currently do not see any issues that would hinder that expectation. The second quarter was marked by strong execution, without any unusual factors boosting our margins. Based on extensive discussions with customers, we remain optimistic about the second half of the year, which is why we have projected an outlook of approximately $1.7 billion for the second half of the year, grounded in that customer feedback. Therefore, I do not foresee any changes concerning margins at this point.

Atidrip Modak, Analyst

That's very helpful, Mike. And then it seems like M&A in the market is heating up. I know we've spoken about this a few times before, but I'm just curious if you're seeing anything that will suggest increased opportunities or any thoughts you can provide there?

Michael Jardon, CEO

Yes, we remain very active in exploring M&A opportunities. We have had success in identifying acquisitions that are accretive and enhance our relevance while expanding our portfolio. We have a strong playbook for conducting due diligence, executing M&A transactions, and integrating new assets effectively. This integration is crucial for driving synergies and achieving our goals. We are continuously evaluating potential opportunities that align with our strategy, particularly those dislocated assets that lack a strong owner. We have a proven track record of successfully bringing these assets in-house and leveraging them for improved customer relationships and synergies. This focus on M&A will continue as we look to execute on these opportunities.

Operator, Operator

Our next question comes from Eddie Kim with Barclays.

Sungeun Kim, Analyst

I apologize in advance, but I have to ask the offshore rig white space question. It's been a theme, as you well know, for over a year now. But the reason I ask is more recently, we started to hear more mentions of it from the larger service companies, and actually another offshore company recently lowered their ROV utilization expectations for the full year. So it seems like we're starting to see some expected impact of this in the second half of the year from companies that are not offshore drillers. So all that to ask, is there any part of your business where you expect to see some impact from offshore rig white space in the second half? Just any thoughts around that would be great.

Michael Jardon, CEO

No, Eddie, that's a good question. I can say that it's something we continue to evaluate. As I mentioned earlier, we've had a significant amount of customer engagement to understand how the rest of the year will unfold. We're meeting with customers to discuss their drilling and completion programs, and we're assessing when they plan to drill well X and complete it, which helps us translate that into our next set of activities. There are some factors, like rigs undergoing maintenance, that we’ve integrated into our forecast for the second half of the year. This is why we can confidently state that our best information suggests we will be in the $1.7 billion range, with over $350 million in EBITDA. Currently, an interesting trend we’re observing is around short cycle activities, particularly intervention and OpEx-related work. In my 30-plus years of experience, that typically sees an increase. However, right now, we are noticing that customers are being quite cautious about this area. We are continuously monitoring this situation and trying to better understand the customer plans. Fundamentally, our forecasting and outlook have been grounded in detailed customer engagement, involving a thorough, bottom-up analysis of each rig and completion.

Sungeun Kim, Analyst

Got it. That's very helpful. There was one blemish in the quarter. And obviously, you guys posted very strong results, but if there's one blemish, it was in the subsea well access segment where your revenue declined 16% sequentially after kind of a similar double-digit decline in the first quarter. In your release, you mentioned lower subsea well access revenue in Malaysia. But could you provide some more color on the recent softness in this segment? And is that likely to sort of remain stable at these levels in the back half of the year? Or should we expect a rebound from second quarter levels?

Michael Jardon, CEO

Yes, it's not a one-time occurrence, but we don't expect it to continue. We believe the fourth quarter will be particularly strong in that area. In 2024, we had some subsea projects that delivered more in terms of equipment. As mentioned, we referenced some activity in Angola, where we experienced strong operational execution that generated significant revenue. So, this situation doesn't raise any particular concerns for me. It primarily relates to project timing and similar factors at this moment.

Operator, Operator

We now turn to Derek Podhaizer with Piper Sandler.

Derek John Podhaizer, Analyst

I would like to ask about the Middle East segment. Revenues have decreased slightly, and margins are down a bit, although they remain historically strong. Can you explain some of the challenges and strengths in this region? What factors contributed to the 60% decline? I would appreciate more insight into the dynamics within your MENA region.

Michael Jardon, CEO

Yes, MENA remains our most profitable region with strong activity levels, resulting in significant margin delivery. The slight decline we're seeing is due to project timing. Our growth is primarily driven by Saudi Arabia and Algeria. In Saudi Arabia, our focus is on unconventional gas, which continues to be strong, especially following recent discussions about data centers and AI in the region. Natural gas will be crucial for power generation in the Middle East, particularly in Saudi Arabia, which is why Aramco is focusing on expanding their gas production capabilities, and we are well positioned to take advantage of this. In Algeria, we are seeing robust activity mainly related to production optimization and compression, which are solid projects. Overall, MENA is consistently delivering at a high level, and the slight quarter-on-quarter margin decline is not a major concern for us.

Derek John Podhaizer, Analyst

Yes. I just was curious. And then just my second question, it was nice to see three quarters of shareholder returns here on the buyback. Maybe just your latest thoughts on how we should think about cadence or percentage of free cash flow or even potentially a dividend coming into the picture?

Sergio L. Maiworm, CFO

Derek, this is Sergio. Yes, so I think we communicated that through our press release and in our prepared remarks. We expect to repurchase roughly $40 million in stock this year. We've done already $15 million in the first half of the year. Mike alluded to some of this in his prepared remarks and saying that free cash flow generation tends to be kind of weighted towards the back half of the year. And as that being the case, we expect to accelerate those repurchases in the second half here. So I think to us, a strong free cash flow generation and returning capital to shareholders. These are things that are very important to us, and we're going to continue to do that. So that should be a feature of Expro in 2025 and beyond.

Derek John Podhaizer, Analyst

Also on the dividend?

Sergio L. Maiworm, CFO

I mean, as of now, we still think that share repurchases are the best avenue to return capital to shareholders, but we're continuously evaluating what that means. And if things change in the future, we'll pivot as well. But as of now, share repurchase, we still think it's the best avenue for us to return capital to shareholders.

Michael Jardon, CEO

And I think it's really an ongoing discussion we have with the Board. That's clearly a board-level type decision. But what I will say is that I believe this is something that any company generally needs to achieve. They're aiming for a point where they're not roughly one-third of free cash flow return but rather in the 40%, 50%, 60% range. I think when you reach that point and you have visibility for an extended period of time, that’s when it starts to make good strategic sense to consider dividends. This is why we focus heavily on free cash flow generation, to get to a place where we can start to increase that percentage. We are determining how to balance our returns, whether it continues to be share repurchases or a mix between that and dividends. That's very much our priority, and that's why free cash flow generation is such a critical driver for us.

Operator, Operator

Operator Instructions. We now turn to Josh Jayne with Daniel Energy Partners.

Joshua W. Jayne, Analyst

First question, Mike, in your prepared remarks, you highlighted a lot of the volatility that we've seen in crude over the course of Q2. Could you just speak to how you would characterize the overall sense of urgency of your customer base today? There have been some notable contract wins and additions to the backlog this quarter. However, given the volatility we've experienced, how do today's conversations compare to those from 90 days ago? Do customers feel more at ease with our current position from a macro standpoint?

Michael Jardon, CEO

No. Josh, thanks for joining. It's a great question. My view today is that particularly for deepwater and ultra-deepwater projects, which we are heavily focused on, our customers are currently in the execution and implementation phase. Their sentiment hasn't changed. We need to start translating that into what the activity will look like for 2026. I believe the ongoing projects will continue to be executed and implemented. We've noticed that the pace of new FID approvals for deepwater and ultra-deepwater has slowed down a bit. However, we will see how that develops. Right now, I am observing more caution from customers regarding short-cycle activities. They are not pursuing some of the incremental oil production opportunities that we would normally see. Part of this caution is due to their efforts to understand what will happen with commodity prices, the behavior of OPEC+, and the geopolitical situation. There's hesitation towards anything new, but there is a strong commitment to continue executing existing projects.

Sergio L. Maiworm, CFO

I appreciate that and thank you for your insights. You're absolutely right. The organization's focus is on increasing free cash flow conversion. There are several ways to achieve this, and we plan to pursue all of them. As Mike mentioned earlier, this has allowed us to expand our EBITDA margins. We are also looking for more effective ways to deploy our capital and find opportunities to collect from our customers more quickly. There are numerous strategies in play, and I will be fully dedicated to implementing them. Expro is a remarkable organization, and I aim to help it improve by examining every aspect with a fresh perspective. We will fine-tune our strategic objectives and seek accretive acquisitions. The company is in excellent shape, and the operational execution is outstanding. My goal is to enable the company to become even better than it currently is.

Operator, Operator

Ladies and gentlemen, we have no further questions. So this concludes our Q&A and today's conference call. We'd like to thank you for your participation. You may now disconnect your lines.