The following discussion and analysis of Frank's financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q and the audited consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Frank's Annual Report. The following discusses Frank's results of operations prior to the Merger, and is not indicative of the Company's prospective results of operations following the Merger.

This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors, including those described in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" of this Form 10-Q. Unless the context indicates otherwise, in this Quarterly Report on Form 10-Q, the terms "Expro," "Company," "we," "us" and "our" refer to Expro Group Holdings N.V. and, where appropriate, its consolidated subsidiaries following the reverse merger described below. References to the terms "Frank's" or the "Predecessor Registrant" refer to Frank's International N.V., the predecessor reporting entity prior to the reverse merger described below, and references to "Legacy Expro" refer to Expro Group Holdings International Limited, the entity acquired by the Predecessor Registrant in the reverse merger.





Merger Agreement

On March 10, 2021, Frank's 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 Frank's ("Merger Sub"), entered into an Agreement and Plan of Merger (the "Merger Agreement") with 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 Frank's (the "Merger"). The Merger closed on October 1, 2021, and Frank's was renamed "Expro Group Holdings N.V." Further, pursuant to the Merger Agreement, at the Effective Time, the articles of association of the Company (the "Company Articles") were amended to increase the total authorized capital stock of the Company from 798,096,000 shares of Company Common Stock to 1,200,000,000 shares of Company Common Stock (200,000,000 shares of Company Common Stock on a post-reverse split basis) and to effect certain other amendments to the Company Articles contemplated by the Merger Agreement. The Company issued approximately 71 million shares of Company Common Stock in the Merger to Legacy Expro shareholders. On September 30, 2021, Frank's pre-Merger board of directors (the "Prior Board") unanimously approved a 1-for-6 reverse stock split of Frank's common stock, which was effected on October 1, 2021. As the Merger did not close until after the end of the quarter ended September 30, 2021, the historical financial statements presented in this Quarterly Report on Form 10-Q reflect the financial position, results of operations and cash flows of Frank's, the Predecessor Registrant. All of the outstanding Company Common Stock share numbers, nominal value, share prices and per share amounts in this discussion and analysis have been retroactively adjusted to reflect a 1-for-6 reverse stock split for all periods presented.





Frank's Prior to the Merger

Prior to the Merger, Frank's was a global provider of highly engineered tubular services, tubular fabrication and specialty well construction and well intervention solutions to the oil and gas industry and had been in business for over 80 years. Frank's provided its services and products to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells.

Frank's conducted its business through three operating segments:





  • Tubular Running Services. The Tubular Running Services ("TRS") segment
    provided tubular running services globally. Internationally, the TRS segment
    operated in the majority of the offshore oil and gas markets and also in
    several onshore regions with operations in approximately 40 countries on six
    continents. In the U.S., the TRS segment provided services in the active
    onshore oil and gas drilling regions, including the Permian Basin, Eagle Ford
    Shale, Haynesville Shale, Marcellus Shale and Utica Shale, as well as in the
    U.S. Gulf of Mexico. Customers in these markets are primarily large
    exploration and production companies, including international oil and gas
    companies, national oil and gas companies, major independents and other
    oilfield service companies.




  • Tubulars. The Tubulars segment designed, manufactured and
    distributed connectors and casing attachments for large outside diameter
    ("OD") heavy wall pipe. Additionally, the Tubulars segment sold large OD pipe
    originally manufactured by various pipe mills, as plain end or fully
    fabricated with proprietary welded or thread-direct connector solutions and
    provided specialized fabrication and welding services in support of offshore
    deepwater projects, including drilling and production risers, flowlines and
    pipeline end terminations, as well as long-length tubular assemblies up to 400
    feet in length. The Tubulars segment also specialized in the development,
    manufacture and supply of proprietary drilling tool solutions that focused on
    improving drilling productivity through eliminating or mitigating traditional
    drilling operational risks.




  • Cementing Equipment. The Cementing Equipment ("CE") segment provided specialty
    equipment to enhance the safety and efficiency of rig operations. It
    provided specialized equipment, services and products utilized in the
    construction of the wellbore in both onshore and offshore environments. The
    product portfolio of this segment included casing accessories that served to
    improve the installation of casing, centralization and wellbore zonal
    isolation, as well as enhance cementing operations through advance wiper plug
    and float equipment technology. The CE segment also provided services and
    products utilized in the construction, completion or abandonment of the
    wellbore. These solutions are primarily used to isolate portions of the
    wellbore through the setting of barriers downhole to allow for rig evacuation
    in case of inclement weather, maintenance work on other rig equipment, squeeze
    cementing, pressure testing within the wellbore, hydraulic fracturing and
    temporary and permanent abandonments. These offerings improve operational
    efficiencies and limit non-productive time if unscheduled events are
    encountered at the wellsite.




Expro after the Merger

Following completion of the Merger, the business conducted by Legacy Expro became the majority of the business conducted by the Company. Working for clients across the entire well life cycle, the Company is a leading provider of energy services, offering cost-effective, innovative solutions and what the Company considered to be best-in-class safety and service quality. The Company's extensive portfolio of capabilities spans well construction, well flow management, subsea well access, and well integrity and intervention.





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Outlook

The outlook for the last quarter of 2021 and through 2022 indicates a continuing modest recovery in exploration and production expenditures, albeit at different rates in individual countries depending on a range of factors, including the slow but steady drawdown on global oil inventories and increasing oil production offset by a slower rate of demand growth, uncertainty about COVID-19 recovery, the impact of governmental restrictions and any new variants or a resurgence over the winter period.

We expect that crude oil demand and associated customer activity will continue to increase in the mid to long term toward pre-pandemic levels. We remain vigilant to the uncertainty that OPEC-controlled supply and U.S. and international activity levels can have on the market.

While the Gulf of Mexico is expected to remain relatively flat through 2022, operators will continue to look to the Company's digital and automated technologies to drive operational efficiencies with reduced personnel. The Company has had recent success in bolstering its market share in the Gulf of Mexico with digital and automated technology that remove personnel from the rig site, and as we see increased activity levels in the international markets, we are well positioned to adopt this same technology blueprint to these markets.

We anticipate the Company's U.S. land business will continue to improve through at least 2022, supported by recent commercialization of performance drilling technologies and digital solutions that increase operational efficiency. In international markets, we expect exploration activity to become more near-field and infrastructure led in the near- to intermediate-term, with field developments also accelerated to maximize the economic recovery. Consistent with past recoveries, incremental operational expenditures and brownfield enhancement programs are expected to be an initial area of customer focus and, in select markets, we are seeing some signs of a recovery in intervention and well integrity projects, execution of which is a traditional strength of Legacy Expro supported by its subsea well access and well assurance technologies. We expect to see moderate growth of these service lines over the following periods.





Evaluation of Operations

Prior to the Merger, management used a number of financial and operational measures to routinely analyze and evaluate the performance of the Frank's businesses, including revenue, Adjusted EBITDA, Adjusted EBITDA margin and safety performance.





Revenue

Company management analyzes revenue growth by comparing actual monthly revenue to internal projections for each month to assess business performance. Management also assesses incremental changes in monthly revenue across operating segments to identify potential areas for improvement.





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Adjusted EBITDA and Adjusted EBITDA Margin

Frank's defines Adjusted EBITDA as net income (loss) before interest income, net, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on disposal of assets, foreign currency gain or loss, equity-based compensation, unrealized and realized gains or losses, other non-cash adjustments and other charges or credits. Adjusted EBITDA margin reflects Adjusted EBITDA as a percentage of revenue. Management reviews Adjusted EBITDA and Adjusted EBITDA margin on both a consolidated basis and on a segment basis. Frank's uses Adjusted EBITDA and Adjusted EBITDA margin to assess its financial performance because it allows management to compare operating performance on a consistent basis across periods by removing the effects of Frank's capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization), income tax, foreign currency exchange rates and other charges and credits. Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities or any other measure of financial performance presented in accordance with generally accepted accounting principles in the U.S. ("GAAP").

The following table presents a reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA margin for each of the periods presented (in thousands):





                                     Three Months Ended            Nine Months Ended
                                        September 30,                September 30,
                                     2021          2020           2021           2020

Net loss                           $ (15,081 )   $ (27,791 )    $ (51,583 )   $ (148,014 )
Goodwill impairment                        -             -              -         57,146

Severance and other charges, net 2,958 3,549 13,733 29,436 Interest (income) expense, net

           167            93            555           (618 )

Depreciation and amortization 14,092 15,950 45,531 52,920 Income tax expense (benefit)

           3,969         6,395         11,812           (182 )
Gain on disposal of assets               (72 )        (308 )       (1,733 )         (898 )
Foreign currency (gain) loss           4,548        (2,334 )        4,698          5,865
Charges and credits (1)                3,197         3,459          9,830          8,725
Adjusted EBITDA                    $  13,778     $    (987 )    $  32,843     $    4,380
Adjusted EBITDA margin                  12.0 %        (1.2 )%        10.3 %          1.5 %

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(1) Comprised of Equity-based compensation expense (for the three months ended

September 30, 2021 and 2020: $3,307 and $2,773, respectively, and for the
    nine months ended September 30, 2021 and 2020: $9,604 and $8,434,
    respectively), Unrealized and realized (gains) losses (for the three months
    ended September 30, 2021 and 2020: $(199) and $113, respectively, and for the
    nine months ended September 30, 2021 and 2020: $7 and $(1,480), respectively)
    and Investigation-related matters (for the three months ended September 30,
    2021 and 2020: $89 and $573, respectively, and for the nine months ended
    September 30, 2021 and 2020: $219 and $1,771, respectively).

For a reconciliation of Adjusted EBITDA on a segment basis to the most comparable measure calculated in accordance with GAAP, see "Operating Segment Results."

Safety and Quality Performance

Safety is one of our primary core values. Maintaining a strong safety record is a critical component of our operational success. Many of our customers have safety standards we must satisfy before we can perform services. As a result, we continually monitor our safety performance through the evaluation of safety observations, job and customer surveys, and safety data. The primary measure for Frank's safety performance is the tracking of the Total Recordable Incident Rate which is reviewed on both a monthly and rolling twelve-month basis.





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