Expro International Earnings: Elevated Offshore Investment Drives Profitable Revenue Growth

Expro International XPRO performed very well in the second quarter, posting sequential revenue growth of 17% (up 27% year over year) while expanding the firmwide adjusted EBITDA margin nearly 600 basis points (up 175 basis points year over year) quarter over quarter to 18%. We maintain our $22 per share fair value estimate and no-moat rating following results.

The firm’s strong performance reflects accelerating global offshore investment as well operators around the world seek to expand offshore production following several years of minimal activity. Latin America and the Middle East were two particularly strong regions this quarter, and we expect they’ll continue driving industry expansion as they progress through numerous large projects scheduled to commence over the next decade.

Over two thirds of Expro’s business relies on global drilling and completions activity, and global offshore rig capacity will likely remain near full utilization through at least 2025. Elevated industry demand will support revenue growth and margin expansion for Expro over the next five years, averaging 9% and 18.5%, respectively. Favorable pricing dynamics and internal cost reduction initiatives will be key profit drivers, but we also see opportunities for Expro to add value through newly developed, productivity-enhancing service offerings. For example, Expro’s recently debuted Light Well Intervention, or LWI, offers subsea intervention services without a rig. LWI provides a compelling value proposition, in our view, considering offshore rig rates currently average well above $400,000 per day. Eliminating the need for a rig can cut intervention costs and completions times in half compared with traditional methods. As offshore operators increasingly seek lower-cost, shorter-duration projects, we expect the LWI solution will be well received by the industry.