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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data” included in this Form 10-K.

This section contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations, and involve risks and uncertainties. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements because of various factors, including those described in the sections titled “Cautionary Note Regarding Forward-Looking Statements,” Part I, Item 1A, “Risk Factors” and elsewhere in this Form 10-K.

Unless otherwise indicated, references to the terms “Frank’s”refers to Frank’s International N.V., the predecessor reporting entity prior to the Merger, references to “Legacy Expro” refer to Expro Group Holdings International Limited, the entity acquired by the Company, and references to “Expro,” the “Company,”“we,”“our,” and “us” refer to Expro Group Holdings N.V., following the consummation of the Merger and unless the context otherwise required, Frank’s prior to the consummation of the Merger.

Overview of Business

Working for clients across the entire well life cycle, we are a leading provider of energy services, offering cost-effective, innovative solutions and what we consider 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 intervention and integrity solutions.

With roots dating to 1938, we have approximately 7,200 employees and provide services and solutions to leading exploration and production companies in both onshore and offshore environments in approximately 60 countries with over 100 locations.

Our broad portfolio of products and services are designed to enhance production and improve recovery across the well lifecycle from exploration through abandonment, including:

Well Construction

Well Management

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We operate a global business and have a diverse and stable customer base that is comprised of national oil companies (“NOC”), international oil companies (“IOC”), independent exploration and production companies (“Independents”) and service partners. We have strong relationships with a number of the world’s largest NOCs and IOCs, some of which have been our customers for decades. We are dedicated to safely and sustainably delivering maximum value to our customers.

We organize and manage our operations on a geographical basis. Our reporting structure and the key financial information used by our management team is organized around our four operating segments: (i) NLA, (ii) ESSA, (iii) MENA and (iv) APAC.

How We Generate Our Revenue

Our revenue is derived primarily from providing services in well construction, well flow management, subsea well access and well intervention and integrity services to operators globally. Our revenue includes equipment service charges, personnel charges, run charges and consumables. Some of our contracts allow us to charge for additional deliverables, such as the costs of mobilization of people and equipment and customer specific engineering costs associated with a project. We also procure products and services on behalf of our customers that are provided by third parties for which we are reimbursed with a mark-up or in connection with an integrated services contract. We also design, manufacture and sell equipment, which is typically done in connection with a related operations and maintenance arrangement with a particular customer. In addition, we also generate revenue from the sale of certain well construction products.

For the year ended December 31, 2021, approximately 71% of our revenue was generated by activities related to offshore oil and gas operations and approximately 41% of our revenue was generated by production optimization activities, which are generally funded by customers’ operating expenditures rather than capital expenditures.

Market Conditions and Price of Oil and Gas

As a full-cycle energy services company, our services span the full life of an oil and gas field from appraisal, development, completion and production through eventual abandonment. While 2021 presented challenges due to ongoing COVID-19 constraints, the market showed positive signs of recovery beginning in late 2021 and continuing into the first quarter of 2022. There are a number of market factors that have had, and may continue to have, an effect on our business, including:

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A major factor that affects our business activity is the price of oil and, to a lesser extent, the regional price of natural gas, which are both driven by market supply and demand. Changes in oil and gas prices impact our customers' spending on exploration and appraisal, development, production and abandonment activities. The extent of the impact of a change in oil and gas prices on these activities varies extensively between geographic regions, types of customers, types of activities and the financial returns of individual projects. In response to this uncertain industry outlook, we continue to evaluate additional cost saving opportunities in order to reduce service delivery costs, increase productivity and improve profitability; however, our commitment to safety, service quality and innovation remains steadfast.

Outlook

Demand continues to improve with stabilizing Brent oil prices, and activity in 2022 is forecast to be higher than in 2021, with oil demand forecast to return to or exceed pre-pandemic levels before year end.

As discussed above, the EIA estimates that global liquid fuels consumption will grow to 100.5 million b/d in 2022, up from 96.9 million b/d in 2021 (which would surpass 2019 levels), rising to 102.3 million b/d in 2023. Counterbalancing consumption growth, the EIA expect continuing production increases from OPEC (2.5 million b/d) and an acceleration in U.S. crude oil production in 2022 (rising from 11.2 million b/d in 2021 to 11.8 million b/d in 2022 and 12.4 million b/d in 2023, the highest annual average U.S. crude oil production on record) that along with other supply increases, is expected to outpace global oil consumption growth and contribute to declining oil prices in the mid-term. As a result, the EIA forecasts Brent crude oil spot prices to average $75 per barrel in 2022 and $68 per barrel in 2023 compared to an average $71 per barrel in 2021.

In addition to the stabilized oil market outlook, global natural gas demand is continuing its recovery due to a combination of rising economic activity, lower inventory in storage, recent extreme weather events and a predicted long winter in Europe. The EIA expects Henry Hub spot prices will average $3.82/Metric Million British Thermal Unit (“MMBtu”) in the first quarter of 2022 and average $3.79/MMBtu for all of 2022 and $3.63/MMBtu in 2023 as U.S. dry gas production recovers. Rystad forecasts the European and Asian liquefied natural gas spot price to average $16.70 and $18.60 in 2022, respectively, maintaining the higher rates achieved in 2021 with slight downward pricing pressure in 2023 as liquefied natural gas production ramps up.

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The outlook for 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 increasing crude production offset by a slower rate of demand growth with slower jet fuel recovery and uncertainty regarding COVID-19 and the impact of any new variants or a resurgence over the winter period.

We expect demand for our services and solutions to trend positively throughout 2022. The following provides an outlook for 2022 by our reporting segments based on data from Spears and Associates, Inc.

NLA: In North America, activity is projected to increase in 2022 by 23% in drilling and 10% in hydraulic fracturing activity. Operator focus remains on capital discipline, although with further drilled but uncompleted drawdowns becoming limited, new well drilling will need to continue increasing in order to maintain output. In Latin America, drilling activity is now forecast to increase 20% in 2022, driven mainly by increased activity in Guyana, Suriname and Argentina.

ESSA: In Europe, drilling activity is projected to rise in 2022 by 2%, with an average of 82 active rigs and approximately 725 new wells. Onshore and offshore activity are both projected to increase by 2% in 2022. In Sub-Saharan Africa, drilling activity is forecasted to increase by 17% overall, to an average of 109 active rigs in 2022, following the resumption of activity in the fourth quarter of 2021 and the progression of further development programs for a number of large offshore projects.

MENA: In the Middle East and North Africa, drilling activity is projected to rise by 10% in 2022, to an average of 271 active rigs, as Iraq plans to increase their production capacity and Saudi Arabia responds to increased demand for its oil. The increased focus on infield development and production optimization and enhancement projects to maintain production rates continues, with future expansion of carbon capture and storage projects, for example in the UAE, also adding to a growing future activity outlook.

APAC: In Asia Pacific, drilling activity is projected to increase by 12%, to 179 active rigs, including an increase offshore following weaker activity in 2021, especially in India where future deepwater exploration is now forecast to increase driven by the government’s ambition to reduce dependence on oil imports. Activity is driven by both new projects and expansion of existing developments through production optimization in Australia, Malaysia, Indonesia and Thailand. Indonesia and Malaysia are also progressing plans for carbon capture and storage projects.

How We Evaluate Our Operations

We use a number of financial and operational measures to routinely analyze and evaluate the performance of our business, including Revenue, Adjusted EBITDA, Adjusted Cash Flow from Operations and Cash Conversion.

Revenue: We analyze our performance by comparing actual monthly revenue by operating segments and areas of capabilities to our internal projections for each month. Our revenue is primarily derived from well construction, well flow management, subsea well access and well intervention and integrity solutions.

Adjusted EBITDA: We regularly evaluate our financial performance using Adjusted EBITDA. Our management believes Adjusted EBITDA is a useful financial performance measure as it excludes non-cash charges and other transactions not related to our core operating activities and allows more meaningful analysis of the trends and performance of our core operations.

Adjusted Cash Flow from Operations: We regularly evaluate our operating cash flow performance using Adjusted Cash Flow from Operations. Our management believes Adjusted Cash Flow from Operations is a useful tool to measure the operating cash performance of the Company as it excludes exceptional payments, interest payments and non-cash charges not related to our core operating activities and allows more meaningful analysis of the trends and performance of our core operations.

Cash Conversion: We regularly evaluate our efficiency of generating cash from operations using Cash Conversion which provides a useful tool to measure Adjusted Cash Flow from Operations as a percentage of Adjusted EBITDA.

Adjusted EBITDA, Adjusted Cash Flow from Operations and Cash Conversion are non-GAAP financial measures. Please refer to the section titled “Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable financial performance measure calculated and presented in accordance with GAAP and a reconciliation of Adjusted Cash Flow from Operations to net cash provided by operating activities, the most directly comparable liquidity measure calculated and presented in accordance with GAAP.

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Executive Overview

Year ended December 31, 2021 compared to year ended December 31, 2020

Certain highlights of our financial results and other key developments include:

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Selected Unaudited Financial Information for the Three Months Ended December 31, 2021

Unaudited segment revenue and Segment EBITDA for the three months ended December 31, 2021, which includes the results of Legacy Expro and Frank’s, was as follows:

Three Months Ended December 31,

Revenue:

Segment EBITDA:

Unaudited revenue by main area of capability for the three months ended December 31, 2021, which includes the results of Legacy Expro and Frank’s, was as follows:

Three Months Ended December 31,

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Year ended December 31, 2020 compared to year ended December 31, 2019

Certain highlights of our financial results, which only reflect results of Legacy Expro, and other key developments include:

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Non-GAAPFinancial Measures

We include in this Form 10-K the non-GAAP financial measures Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Cash Flow from Operations and Cash Conversion. We provide reconciliations of net loss, the most directly comparable financial performance measure calculated and presented in accordance with GAAP, to Adjusted EBITDA. We also provide a reconciliation of Adjusted Cash Flow from Operations to net cash provided by operating activities, the most directly comparable liquidity measure calculated and presented in accordance with GAAP.

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Cash Flow from Operations and Cash Conversion are used as supplemental financial measures by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others. These non-GAAP financial measures allow our management and others to assess our financial and operating performance as compared to those of other companies in our industry, without regard to the effects of our capital structure, asset base, items outside the control of management and other charges outside the normal course of business.

We define Adjusted EBITDA as net loss adjusted for (a) income tax expense (benefit), (b) depreciation and amortization expense, (c) impairment expense, (d) severance and other expense, net, (e) stock-based compensation expense, (f) merger and integration expense, (g) gain on disposal of assets, (h) other income, net, (i) interest and finance expense, net and (j) foreign exchange losses. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of revenues.

We define Adjusted Cash Flow from Operations as net cash provided by operating activities adjusted for cash paid during the period for interest, net, severance and other expense and merger and integration expense. We define Cash Conversion as Adjusted Cash Flow from Operations divided by Adjusted EBITDA.

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Cash Flow from Operations and Cash Conversion have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. As Adjusted EBITDA, Adjusted Cash Flow from Operations and Cash Conversion may be defined differently by other companies in our industry, our presentation of Adjusted EBITDA, Adjusted Cash Flow from Operations and Cash Conversion may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

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

Year ended

December 31,

Gain on disposal of assets (1,000 ) (10,085 ) —

Stock-based compensation expense (3) 54,162 — —

The following table provides a reconciliation of net cash provided by operating activities to Adjusted Cash Flow from Operations for each of the periods presented (in thousands):

Year Ended

December 31,

Cash paid during the period for interest, net 4,192 2,630 1,490

Cash paid during the period for severance and other expense 8,052 15,602 3,811

Cash paid during the period for merger and integration expense 36,921 — —

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Results of Operations

Year ended December 31, 2021 compared to year ended December 31, 2020

Year Ended

December 31, Change

Operating costs and expenses:

Revenue

Revenue for the year ended December 31, 2021 increased by $150.8 million, or 22.3%, to $825.8 million, compared to $675.0 million for the year ended December 31, 2020. Of the total increase of $150.8 million for the year ended December 31, 2021, $112.1 million is related to the Merger, and the balance of the increase was driven by higher activity across NLA, ESSA and APAC, partially offset by a reduction in activity in the MENA segment. Revenue for our segments is discussed separately below under the heading “Operating Segment Results”.

Revenue for our well flow management and well intervention and integrity offerings increased by $15.6 million (3.8%) and $39.6 million (29.4%), respectively, partially offset by a decrease in subsea well access revenue by $16.7 million (-12.6%) for the year ended December 31, 2021. Additionally, the Merger resulted in well construction revenue of $112.1 million for the year ended December 31, 2021.

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Cost of revenue, excluding depreciation and amortization

Cost of revenue, excluding depreciation and amortization, for the year ended December 31, 2021 was $701.2 million (84.9% of revenue), an increase of $134.3 million, or 23.7%, compared to $566.9 million (84.0% of revenue) for the year ended December 31, 2020. Of the total increase of $134.3 million for the year ended December 31, 2021, $92.1 million relates to the Merger, and the remaining increase of $42.2 million was due to higher personnel costs for operational and support staff, equipment rentals, facility costs, materials, sub-contractor costs, and research, engineering and development costs, which is in line with the higher activity, and recognition of stock-based compensation expense for Legacy Expro’s Management Incentive Plan of $10.5 million during the year ended December 31, 2021 as a result of the Merger.

General and administrative, excluding depreciation and amortization

General and administrative expenses, excluding depreciation and amortization, is comprised of costs associated with sales and marketing, costs of running the corporate head office and other central functions that support the reporting segments. General and administrative expenses for the year ended December 31, 2021 increased by $50.1 million, or 210.2%, to $73.9 million, as compared to $23.8 million for the year ended December 31, 2020. Of the total increase of $50.1 million for the year ended December 31, 2021, $15.4 million relates to the Merger, and the remaining increase was primarily driven by recognition of stock-based compensation expense for Legacy Expro’s Management Incentive Plan of $31.6 million as a result of the Merger.

Depreciation and amortization expense

Depreciation and amortization expense for the year ended December 31, 2021 increased by $10.2 million, or 8.9%, to $123.9 million, as compared to $113.7 million for the year ended December 31, 2020. The increase in depreciation and amortization expense for the year ended December 31, 2021 is primarily related to the Merger.

Gain on disposal of assets

Gain on disposal of assets of $1.0 million for the year ended December 31, 2021 represents the earn-out consideration recognized as the conditions upon which the consideration was contingent were met during the year ended December 31, 2021 related to a sale of assets which occurred in 2020.

Impairment expense

No impairment expense was recorded for the year ended December 31, 2021 as compared to $287.5 million for the year ended December 31, 2020. Impairment expense for the year ended December 31, 2020 mainly relates to impairment of goodwill of $191.9 million, intangible assets of $60.4 million, property, plant and equipment of $20.0 million and operating lease right-of-use assets of $15.2 million. For further information, refer to Note 4 “Fair value measurements” in the accompanying consolidated financial statements.

Merger and integration expense

Merger and integration expense for the year ended December 31, 2021 increased by $46.0 million, to $47.6 million as compared to $1.6 million for the year ended December 31, 2020. The increase for the year ended December 31, 2021 primarily consists of professional fees, integration, and other costs related to the Merger.

Severance and other expense

Severance and other expense for the year ended December 31, 2021 decreased by $6.1 million, or 43.8%, to $7.8 million as compared to $13.9 million for the year ended December 31, 2020. The decrease was primarily driven by higher headcount reductions and facility rationalization undertaken in the previous year to restructure and resize our business to match reduced activity levels due to COVID-19 and economic conditions in the oil and gas industry for the year ended December 31, 2020.

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Interest and finance expense, net

Interest and finance expense, net for the year ended December 31, 2021, was $8.8 million, an increase of $3.1 million, or 55.5%, compared to $5.7 million for the year ended December 31, 2020. The increase in interest and finance expense was primarily driven by fees incurred with respect to the New Facility established following the Merger.

Equity in income of joint ventures

Equity in income of joint ventures for the year ended December 31, 2021 increased by $3.2 million, or 23.2%, to $16.7 million as compared to $13.6 million for the year ended December 31, 2020. The increase reflects higher income from our joint ventures compared to the previous year.

Income tax (expense) benefit

Income tax expense for the year ended December 31, 2021 was $16.3 million, compared to an income tax benefit of $3.4 million for the year ended December 31, 2020. Following the closing of the Merger on October 1, 2021, as a result of our change in domicile from the U.K. to the Netherlands, our statutory tax rate changed to 25% for the year ended December 31, 2021. The statutory rate for the year ended December 31, 2020 was 19%. The effective tax rate was (12.3%) and 1.0% for the years ended December 31, 2021 and 2020, respectively. Our effective tax rate was impacted by the Merger in 2021, impairments of goodwill in 2020, and the geographic mix of profits and losses between deemed profit and taxable profit jurisdictions.

Our effective income tax rate fluctuates from the statutory tax rate based on, among other factors, changes in pretax income in jurisdictions with varying statutory tax rates along with jurisdictions utilizing a deemed profit taxation regime, the impact of valuation allowances, foreign inclusions and other permanent differences related to the recognition of income and expense.

Year ended December 31, 2020 compared to year ended December 31, 2019

Year Ended December 31, Change

(in thousands)

Operating costs and expenses:

Merger and integration expense (1,630 ) — (1,630 )

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Revenue

Revenue for the year ended December 31, 2020, which only includes revenue of Legacy Expro, decreased by $135.0 million, or 16.7%, to $675.0 million from $810.1 million for the year ended December 31, 2019. The decrease in total revenue for the year ended December 31, 2020 compared to the year ended December 31, 2019 was driven by lower activity across all of our product and service offerings in all of our reporting segments other than the APAC segment, due to a combination of factors, including a substantial decline in global demand for oil caused by the COVID-19 pandemic and disagreements between the members of OPEC+ regarding limits on production of oil, resulting in surplus supply and reduction in crude oil prices. For reference, Brent oil price averaged $42 per barrel in 2020 as compared to an average of $64 per barrel in 2019. As a result of reduced activity, revenue for the NLA segment decreased by $58.3 million (33.5%), the MENA segment by $43.0 million (18.2%) and the ESSA segment by $37.3 million (14.5%), partially offset by a modest increase in revenue in the APAC segment of $3.6 million (2.5%). Revenue for our segments is discussed in further detail separately below under the heading “Operating Segment Results.”

Revenue for our well flow management, well intervention and integrity and subsea well access offerings decreased by $75.8 million (15.7%), $35.1 million (20.7%) and $24.1 million (15.4%), respectively, for the year ended December 31, 2019 compared to December 31, 2020.

Cost of revenue, excluding depreciation and amortization

Cost of revenue, excluding depreciation and amortization, for the year ended December 31, 2020 was $566.9 million (84.0% of revenue), a decrease of $110.3 million, or 16.3%, compared to $677.1 million (83.6% of revenue) for the year ended December 31, 2019. The decrease in the cost of revenue, which includes personnel costs for operational and support staff, equipment rentals, facility costs, materials, sub-contractor costs, and research, engineering and development costs, was in line with the lower activity. In addition, we reduced our support staff by approximately 9.1% for the year ended December 31, 2020 compared to the year ended December 31, 2019.

General and administrative, excluding depreciation and amortization

General and administrative expenses, excluding depreciation and amortization, include the costs associated with sales and marketing, costs of running our corporate head office and other central functions that support the operating segments and include foreign currency gains (losses). General and administrative expenses for the year ended December 31, 2020 decreased by $5.5 million, or 18.9%, to $23.8 million, from $29.4 million for the year ended December 31, 2019. The decrease in general and administrative expenses during the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily driven by a reduction in our corporate support staff by approximately 9.3% for the year ended December 31, 2020 compared to the year ended December 31, 2019. This contributed to lower personnel costs, lower corporate overhead costs, and lower travel costs. Additionally, we benefited from lower foreign exchange losses of $1.9 million from the revaluation of monetary assets and liabilities denominated in foreign currencies during the year ended December 31, 2020 compared to the year ended December 31, 2019.

Depreciation and amortization expense

Depreciation and amortization expense for the year ended December 31, 2020 was $113.7 million, a decrease of $8.8 million, or 7.2% compared to $122.5 million for the year ended December 31, 2019, primarily as a result of a lower depreciable asset base.

Impairment expense

Impairment expense for the year ended December 31, 2020 was $287.5 million, an increase of $238.4 million, or 486.2%, compared to $49.0 million for the year ended December 31, 2019. During the year ended December 31, 2020, we recorded impairment expense relating to our goodwill of $191.9 million, intangible assets of $60.4 million, property, plant and equipment of $20.0 million and operating lease right-of-use assets of $15.2 million. For further information, refer to Note 4 “Fair value measurements” in the accompanying consolidated financial statements.

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Merger and integration expense

During the year ended December 31, 2020, we incurred $1.6 million of merger and integration expense, which consists primarily of professional fees and other costs with respect to the Merger. No such expense was incurred during the year ended December 31, 2019.

Gain on disposal of assets

Gain on disposal of assets of $10.1 million represents profit recognized on the sale of certain identified tangible and intangible assets and liabilities relating to the disposition of our pressure-control chokes product line during 2020 for a total cash consideration of $15.5 million. The carrying value of net assets transferred was $4.4 million and we incurred costs directly attributable to the sale of $1.0 million.

Severance and other expense

Severance and other expense for the year ended December 31, 2020 increased by $9.5 million, or 213.5%, to $13.9 million from $4.4 million for the year ended December 31, 2019. The increase was primarily driven by headcount reductions and facility rationalization to restructure and resize our business to match reduced activity levels due to COVID-19 and economic conditions in the oil and gas industry.

Depending on how the market evolves, further actions may be necessary, which could result in additional expense in future periods.

Interest and finance expense, net

Interest and finance expense, net for the year ended December 31, 2020, was $5.7 million, an increase of $2.4 million, or 71.4%, compared to $3.3 million for the year ended December 31, 2019. The increase in interest and finance expense was due to lower interest income earned in 2020 primarily due to lower interest rates. We earned interest income of $1.0 million during the year ended December 31, 2020 as compared to $3.3 million during the previous year.

Equity in income of joint ventures

Equity in income of joint ventures for the year ended December 31, 2020 increased by $4.0 million, or 41.0%, to $13.6 million from $9.6 million for the year ended December 31, 2019. The increase reflects higher income from our joint ventures compared to the previous year.

Income tax benefit

Income tax benefit for the year ended December 31, 2020 was $3.4 million, an increase of $2.3 million, or 199.0%, compared to $1.1 million for the year ended December 31, 2019. The statutory tax rate was 19% for both the years ended December 31, 2020 and 2019. The effective tax rate was 1.0% and 1.5% for the years ended December 31, 2020 and 2019 respectively. Our effective tax rate was impacted due to the impairment on goodwill along with the geographic mix of profits and losses between deemed profit and taxable profit jurisdictions.

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Operating Segment Results

We evaluate our business segment operating performance using segment revenue and Segment EBITDA, as described in Note 5 “Business segment reporting” in our consolidated financial statements. We believe Segment EBITDA is a useful operating performance measure as it excludes non-cash charges and other transactions not related to our core operating activities and corporate costs and allows management to more meaningfully analyze the trends and performance of our core operations by segment as well as to make decisions regarding the allocation of resources to our segments.

The following table shows revenue by segment and revenue as percentage of total revenue by segment for the years ended December 31, 2021, 2020 and 2019:

Revenues Percentage

The following table shows Segment EBITDA and Segment EBITDA margin by segment for the years ended December 31, 2021, 2020 and 2019:

Segment EBITDA (1) Segment EBITDA Margin

Yearended December31, 2021 compared to the year endedDecember 31, 2020

NLA

Revenue for the NLA segment was $193.2 million for the year ended December 31, 2021, an increase of $77.4 million, or 66.9%, compared to $115.7 million for the year ended December 31, 2020. Of the total increase of $77.4 million for the year ended December 31, 2021, $67.0 million relates to the Merger, and the balance of the increase of $10.4 million was primarily driven by an increase in well flow management and well intervention and integrity services in Mexico, Argentina, Brazil, Colombia, and Trinidad and Tobago driven by higher customer activity. The increase in revenues was partially offset by non-recurring power chokes equipment sales as a result of disposition of our power chokes product line in 2020 and lower well flow management and subsea well access revenues in Canada due to completion of a contract in 2020.

Segment EBITDA for the NLA segment was $32.2 million, or 16.7% of revenues, during the year ended December 31, 2021, compared to $0.1 million during year ended December 31, 2020. Out of the total increase of $32.1 million during the year ended December 31, 2021, $16.1 million relates to the Merger, and the balance of the increase of $16.0 million is attributable to higher activity on higher margin contracts and a more favorable activity mix during 2021.

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ESSA

Revenue for the ESSA segment was $300.6 million for the year ended December 31, 2021, an increase of $81.0 million, or 36.9%, compared to $219.5 million for the year ended December 31, 2020. Out of the total increase of $81.0 million for the year ended December 31, 2021, $28.5 million is attributable to the Merger. The remaining increase of $52.5 million in revenues was primarily driven by an early production equipment sale in Nigeria and higher well flow management and subsea well access revenues in Norway, Mozambique, United Kingdom, Ghana, and Angola due to an increase in overall customer activities and new projects. The overall increase in revenues was partially offset by a decrease in revenue in Mauritania upon completion of a subsea well access contract.

Segment EBITDA for the ESSA segment was $53.3 million, or 17.7% of revenues, for the year ended December 31, 2021, an increase of $17.9 million, or 50.7%, compared to $33.4 million, or 16.1% of revenues, for the year ended December 31, 2020. Of the total increase of $17.9 million during the year ended December 31, 2021, $8.9 million relates to the Merger, and the balance of the increase of $9.1 million is attributable to higher activity and a more favorable activity mix during 2021.

MENA

Revenue for the MENA segment decreased by $22.9 million, or 11.8%, to $171.1 million for the year ended December 31, 2021, as compared to $194.0 million for the year ended December 31, 2020. The lower revenues in the region were driven by a reduction in well flow management revenues in Algeria, Egypt, Saudi Arabia and the United Arab Emirates reflecting lower customer activities partially offset by an increase in well construction revenues of $8.3 million due to the Merger.

Segment EBITDA for the MENA segment was $56.3 million, or 32.9% of revenues, for the year ended December 31, 2021, a reduction of $20.9 million, or 27.1%, compared to $77.3 million, or 39.8% of revenues, for the year ended December 31, 2020. The reduction in Segment EBITDA was primarily due to a decrease in revenues during 2021 and lower activity on higher margin contracts, partially offset by an increase in Segment EBITDA of $1.2 million related to the Merger.

APAC

Revenue for the APAC segment was $160.9 million for the year ended December 31, 2021, an increase of $15.2 million, or 10.4%, compared to $145.7 million for the year ended December 31, 2020. Of the total, $8.4 million relates to the Merger, and the balance of the increase of $6.8 million was primarily driven by increased well flow management and well intervention and integrity revenue in Australia, Brunei, Thailand and Indonesia from new contracts or higher activity on existing contracts. This increase was partially offset by lower subsea well access revenues in China and Malaysia due to a combination of lower spare sales, completion of a contract and lower customer activities during the year ended December 31, 2021.

Segment EBITDA for the APAC segment was $33.4 million for the year ended December 31, 2021, a decrease of $1.5 million, or 4.4%, compared to $35.0 million for the year ended December 31, 2020. The reduction was primarily due to a less favorable activity mix and lower activity on higher margin contracts, partially offset by an increase in Segment EBITDA of $1.1 million related to the Merger.

Year ended December 31, 2020 compared to the year ended December 31, 2019

NLA

Revenue for the NLA segment was $115.7 million for the year ended December 31, 2020, a decrease of $58.3 million, or 33.5%, compared to $174.1 million for the year ended December 31, 2019. The decrease in revenue was mainly driven by a reduction in well flow management and subsea well access revenues in North America offshore where activity levels continued to show weakness, reflecting a combination of COVID-19 and hurricane-related project deferrals. The lower revenues in NLA also reflect reduced customer activity levels in our relatively small, pre-Merger North America land operations, resulting in lower well flow management revenues as well as lower sales within our then-owned power chokes product line. Additionally, the reduction in revenues in NLA was also driven by lower subsea well access and well flow management revenues in Canada and lower wireline intervention and integrity services revenue in Argentina during the year ended December 31, 2020, compared to the year ended December 31, 2019.

Segment EBITDA for the NLA segment was $0.1 million during the year ended December 31, 2020, compared to $15.0 million, or 8.6% of revenues, during the year ended December 31, 2019. The reduction in NLA Segment EBITDA was mainly driven by a combination of lower activity on higher margin contracts and a less favorable activity mix during 2020.

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ESSA

Revenue for the ESSA segment decreased by $37.3 million, or 14.5%, to $219.5 million during the year ended December 31, 2020 from $256.8 million during the year ended December 31, 2019. The decrease in revenue was primarily due to a reduction in well flow management and subsea well access revenues, driven by a combination of lower activity, suspension of activities by customers and non-recurring projects in the U.K., Azerbaijan and several countries in the Sub-Sahara African region, including Nigeria, Ghana, Cote D’Ivoire, Mozambique and Equatorial Guinea, partially offset by an increase in revenues in Mauritania from a new subsea well access contract.

Segment EBITDA for the ESSA segment was $35.4 million, or 16.1% of revenues, for the year ended December 31, 2020, a reduction of $10.0 million, or 22.0%, compared to $45.4 million, or 17.7% of revenues, for the same period in 2019. The reduction in Segment EBITDA for ESSA was primarily due to lower revenues during 2020 combined with a less favorable activity mix, which negatively impacted the Segment EBITDA margin.

MENA

Revenue for the MENA segment decreased by $43.0 million, or 18.2%, to $194.0 million during the year ended December 31, 2020 from $237.1 million during the year ended December 31, 2019. The lower revenues in the region were driven by a reduction in well flow management revenues in Algeria, Saudi Arabia and the United Arab Emirates reflecting lower customer activities. Additionally, revenues in Egypt decreased during the year ended December 31, 2020 compared to the same period in 2019 due to non-recurring equipment sales.

Segment EBITDA for the MENA segment was $77.3 million, or 39.8% of revenues, for the year ended December 31, 2020, a reduction of $8.7 million, or 10.2%, compared to $86.0 million, or 36.3% of revenues, for the year ended December 31, 2019. The reduction in Segment EBITDA for MENA was primarily due to a decrease in revenues during 2020; however, MENA Segment EBITDA margin improved during 2020 as compared to 2019 due to various cost savings measures undertaken in the region and a modestly more favorable activity mix.

APAC

Revenue for the APAC segment was $145.7 million for the year ended December 31, 2020, an increase of $3.6 million, or 2.5%, compared to $142.2 million for the year ended December 31, 2019. The increase in revenue in APAC was primarily driven by increased well flow management and subsea well access revenue in Malaysia from new contracts and higher activity on existing contracts, and increased revenue in Australia, primarily from higher subsea well access services. This increase was partially offset by lower well flow management revenues in India due to non-recurring equipment sales and lower activity levels on continuing projects in Thailand.

Segment EBITDA for the APAC segment was $35.0 million for the year ended December 31, 2020, an increase of $6.2 million, or 21.6%, compared to $28.8 million for the year ended December 31, 2019. APAC Segment EBITDA margin was 24.0%, up from 20.2% for the year ended December 31, 2019. The improvement in APAC Segment EBITDA margin was due to increased activity combined with a more favorable activity mix and cost control measures.

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Liquidity and Capital Resources

Liquidity

Our financial objectives include the maintenance of sufficient liquidity, adequate financial resources and financial flexibility to fund our business. At December 31, 2021, total available liquidity was $369.9 million, including cash and cash equivalents and restricted cash of $239.9 million and $130.0 million available for borrowings under our New Facility. Our primary sources of liquidity have been cash flows from operations. Our primary uses of capital have been for capital expenditures and acquisitions. We monitor potential capital sources, including equity and debt financing, in order to meet our investment and liquidity requirements.

Our total capital expenditures are estimated to range between $90 million and $100 million for 2022. Our total capital expenditures (exclusive of the Merger) were $81.5 million for year ended December 31, 2021, out of which approximately 90% were used for the purchase and manufacture of equipment to directly support customer-related activities and approximately 10% for other property, plant and equipment, inclusive of software costs. The actual amount of capital expenditures for the purchase and manufacture of equipment may fluctuate based on market conditions. Our total capital expenditures were $112.4 million for the year ended December 31, 2020, which were generally used for equipment required to provide services in connection with awarded contracts. We continue to focus on preserving and protecting our strong balance sheet, optimizing utilization of our existing assets and, where practical, limiting new capital expenditures.

Credit Facility

Revolving Credit Facility

On November 5, 2018, certain subsidiaries of Frank’s entered into an asset-based revolving credit facility (the “ABL Credit Facility”) with aggregate commitments of $100.0 million secured by certain assets of the subsidiary guarantors.

On December 20, 2018, subsidiaries of Legacy Expro entered into a revolving credit facility (the “2018 RCF”) with aggregate commitments of $150.0 million with up to $100.0 million available for drawdowns as loans and up to $50 million for bonds and guarantees. The 2018 RCF bore interest at U.S. dollar LIBOR plus 3.75% and was secured by a fixed and floating charge on certain assets of some of our wholly owned subsidiaries. On October 1, 2021, following the closing of the Merger, the ABL Credit Facility and 2018 RCF were cancelled.

Concurrently with the cancelation of the ABL Credit Facility and the 2018 RCF, we entered into the New Facility with DNB Bank ASA, London Branch, as agent, with total commitments of $200.0 million, of which $130.0 million is available for drawdowns as loans and $70.0 million is available for letters of credit. Subject to the terms of the New Facility, the Company has the ability to increase the commitments to $250.0 million. Proceeds of the New Facility may be used for general corporate and working capital purposes. Please see Note 16 “Interest bearing loans” in the Notes to the Consolidated Financial Statements for additional information.

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Cash flow from operating, investing and financing activities

Cash flows provided by (used in) our operations, investing and financing activities are summarized below (in thousands):

Year Ended December 31,

Net cash provided by (used in) financing activities (7,176 ) (625 ) 21,922

Effect of exchange rate changes on cash activities (1,876 ) 631 566

Analysis of cash flow changes between the years ended December 31, 2021 and 2020

Net cash provided by operating activities

Net cash provided by operating activities was $16.1 million during the year ended December 31, 2021 as compared to $70.4 million during the year ended December 31, 2020. The decrease of $54.3 million in net cash provided by operating activities for the year ended December 31, 2021 was primarily due to payment of merger and integration expenses related to the Merger of $36.9 million, unfavorable movements in working capital of $31.8 million and reimbursable payments made in connection with Frank's executive deferred compensation plan of $8.9 million, partially offset by improvements in Adjusted EBITDA of $25.7 million during the year ended December 31, 2021.

Adjusted Cash Flow from Operations during the year ended December 31, 2021 was $65.3 million compared to $88.6 million during the year ended December 31, 2020. Our primary uses of net cash provided by operating activities were capital expenditures and funding obligations related to our financing arrangements.

Net cash provided by (used in) investing activities

Net cash provided by investing activities was $112.0 million during the year ended December 31, 2021 as compared to net cash used in investing activities of $96.8 million during the year ended December 31, 2020. Our principal recurring investing activity is our capital expenditures. The increase in net cash provided by investing activities was primarily due to net cash of $189.7 million acquired as part of the Merger and a decrease in capital expenditures of $30.9 million, partially offset by a reduction in proceeds from disposal of assets of $11.8 million.

Net cash provided by (used in) financing activities

Net cash used in financing activities was $7.2 million during the year ended December 31, 2021 as compared to $0.6 million during the year ended December 31, 2020. The increase of $6.6 million in cash used by financing activities primarily related to payment of higher loan issuance and other transaction costs of $4.0 million with respect to the New Facility, payment of withholding taxes in connection with the vesting of shares underlying stock-based compensation plans of $0.8 million and lower proceeds from the release of collateral deposits of $2.1 million, partially offset by $0.6 million of lower payments on finance leases during 2021.

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Analysis of cash flow changes between the years ended December 31, 2020 and 2019

Net cash provided by operating activities

Net cash provided by operating activities was $70.4 million during the year ended December 31, 2020 as compared to $81.2 million during the year ended December 31, 2019. The decrease of $10.8 million in net cash provided by operating activities for the year ended December 31, 2020 was primarily due to a decrease in Adjusted EBITDA of $17.1 million, an increase in net cash paid for income taxes of $7.8 million, and higher severance and other expense paid of $9.5 million, partially offset by improvements in working capital and favorable movements in other assets and liabilities of $21.7 million.

Adjusted Cash Flow from Operations during the year ended December 31, 2020 was $88.6 million compared to $86.5 million during the year ended December 31, 2019. Our primary uses of net cash provided by operating activities were capital expenditures and acquisitions and funding obligations related to our financing arrangements.

Net cash provided by (used in) investing activities

Net cash used in investing activities was $96.8 million during the year ended December 31, 2020 as compared to $151.9 million during the year ended December 31, 2019. Our principal recurring investing activity is our capital expenditures. The decrease in net cash used in investing activities was primarily due to a $47.9 million payment for an acquisition during the previous year and proceeds of $15.6 million from the disposal of assets in 2020. This decrease was partially offset by an increase of $8.3 million in capital expenditures during the year ended December 31, 2020, including $29.2 million of capital expenditures related to new technologies, including our coil hose, annular intervention and riserless light well intervention capabilities.

Net cash provided by (used in) financing activities

Net cash used in financing activities was $0.6 million during the year ended December 31, 2020 as compared to net cash provided by financing activities of $21.9 million during the year ended December 31, 2019. The decrease in cash provided by financing activities primarily related to lower proceeds from the release of collateral deposits of $26.0 million during the year ended December 31, 2020 as compared to the year ended December 31, 2019, partially offset by $3.5 million of lower payments of loan transaction costs and finance leases during 2020.

Off-balancesheet arrangements

We have outstanding letters of credit/guarantees that relate to performance bonds, custom/excise tax guaranties and facility lease/rental obligations. These were entered into in the ordinary course of business and are customary practices in the various countries where we operate. It is not practicable to estimate the fair value of these financial instruments. None of the off-balance sheet arrangements either has, or is likely to have, a material effect on our consolidated financial statements. As of December 31, 2021, we had no material off-balance sheet financing arrangements other than those discussed above.

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Critical accounting policies and estimates

The preparation of consolidated financial statements and related disclosures in conformity with U.S. GAAP requires Expro to make estimates and assumptions that affect the reported amounts of revenues and associated costs as well as reported amounts of assets and liabilities and related disclosures of contingent liabilities. Certain accounting policies involve judgments and uncertainties. We evaluate estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We consider the following policies to be the most critical to understanding the judgments that are involved and the uncertainties that could impact our results of operations, financial condition and cash flows.

Revenue recognition

Service revenue is recognized over time as services are performed or rendered and the customer simultaneously consumes the benefit of the service while it is being rendered, and, therefore, reflects the amount of consideration to which we have a right to invoice. We generally perform services either under direct service purchase orders or master service agreements which are supplemented by individual call-out provisions. For customers contracted under such arrangements, an accrual is recorded in unbilled receivable for revenue earned but not yet invoiced. Revenue from the sale of goods is generally recognized at the point in time when the control has passed onto the customer which generally coincides with delivery and, where applicable, installation. We also regularly assess customer credit risk inherent in the carrying amounts of receivables, contract costs and estimated earnings, including the risk that contractual penalties may not be sufficient to offset our accumulated investment in the event of customer termination.

We also recognize revenue for “bill and hold” sales, once the following criteria have been met: (1) there is a substantive reason for the arrangement, (2) the product is identified as the customer’s asset, (3) the product is ready for delivery to the customer, and (4) we cannot use the product or direct it to another customer.

Where contractual arrangements contain multiple performance obligations, judgment is involved to analyze each performance obligation within the sales arrangement to determine whether they are distinct. The revenue for contracts involving multiple performance obligations is allocated to each distinct performance obligation based on relative selling prices and is recognized on satisfaction of each of the distinct performance obligations.

We are required to determine the transaction price in respect of each of our contracts with customers. In making such judgment, we assess the impact of any variable consideration in the contract, due to discounts or penalties, the existence of any significant financing component and any non-cash consideration in the contract. In determining the impact of variable consideration, we use the “most-likely amount” method whereby the transaction price is determined by reference to the single most likely amount in a range of possible consideration amounts.

Business Combinations

We record business combinations using the acquisition method of accounting. All of the assets acquired and liabilities assumed are recorded at fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill.

The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed, in order to properly allocate purchase price consideration between assets that are depreciated and amortized from goodwill. The fair value assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Significant assumptions and estimates include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted-average cost of capital.

If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the consolidated financial statements may be exposed to potential impairment of long-lived assets, including intangible assets and goodwill. The Merger of Frank’s with Legacy Expro pursuant to the Merger Agreement was completed on October 1, 2021. Refer to Note 3 “Business combinations and dispositions” of our consolidated financial statements for further details.

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Goodwill and identified intangible assets

We record the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as goodwill. Goodwill is not subject to amortization and is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. A qualitative assessment is allowed to determine if goodwill is potentially impaired. We have the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test. The qualitative assessment determines whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. If it is more likely than not that the fair value of the reporting unit is less than the carrying amount, then a quantitative impairment test is performed. The quantitative goodwill impairment test is used to identify both the existence of impairment and the amount of impairment loss. The test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded based on that difference.

No impairment expense was recorded for goodwill during the year ended December 31, 2021. During the years ended December 31, 2020 and 2019, we recorded impairment expense of $191.9 million and $26.4 million, respectively, relating to our goodwill. Refer to Note 4 “Fair value measurements” of our consolidated financial statements for details regarding the facts and circumstances that led to this impairment and other details. We used the income approach to estimate the fair value of our reporting units, but also considered the market approach to validate the results. The income approach estimates the fair value by discounting the reporting unit’s estimated future cash flows using an appropriate risk-adjusted rate. The market approach includes the use of comparative multiples to corroborate the discounted cash flow results and involves significant judgment in the selection of the appropriate peer group companies and valuation multiples. The inputs used in the determination of fair value are generally level 3 inputs.

We review our identified intangible assets for impairment whenever events or changes in business circumstances arise that may indicate that the carrying amount of its intangible assets may not be recoverable. These events and changes can include significant current period operating losses or negative cash flows associated with the use of an intangible asset, or group of assets, combined with a history of such factors, significant changes in the manner of use of the assets, and current expectations that it is more likely than not that an intangible asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. When impairment indicators are present, we compare undiscounted future cash flows, including the eventual disposition of the asset group at market value, to the asset group’s carrying value to determine if the asset group is recoverable. If the carrying values are in excess of undiscounted expected future cash flows, we measure any impairment by comparing the fair value of the asset or asset group to its carrying value. Estimating future cash flows requires significant judgment, and projections may vary from the cash flows eventually realized, which could impact our ability to accurately assess whether an asset has been impaired.

No impairment expense was recorded for identified intangible assets during the year ended December 31, 2021. During the year ended December 31, 2020 and 2019, we recorded impairment expense relating to our identified intangible assets of $60.4 million and $17.9 million, respectively. Refer to Note 4 “Fair value measurements” of our consolidated financial statements for further details.

Defined benefit plans

Our post-retirement benefit obligations are described in detail in Note 19 “Post-retirement benefits” of our consolidated financial statements. Defined pension benefits are calculated using significant inputs to the actuarial models that measure pension benefit obligations and related effects on operations. Two assumptions, discount rate and expected return on assets, are important elements of plan asset/liability measurement and are updated on an annual basis, or more frequently if events or changes in circumstances so indicate.

We evaluate these critical assumptions at least annually on a plan and country specific basis. We periodically evaluate other assumptions involving demographic factors such as retirement age, mortality and turnover, and update them to reflect our experience and expectations for the future. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors.

The discount rate that we use reflects the market rate of a portfolio of high-quality corporate bonds with maturities matching the expected timing of payment of the related benefit obligations. The discount rates used to determine the benefit obligations for our principal pension plans were 1.8% in 2021, 1.3% in 2020 and 2.0% in 2019, reflecting market interest rates. As of December 31, 2021, we estimate that a 1% appreciation or depreciation in the discount rate would result in an impact of approximately $39.4 million to our present value of defined benefit obligations as at December 31, 2021. The weighted average expected rate of return on plan assets for the pension plans was 3.2% in 2021, 2.7% in 2020 and 3.4% in 2019. A change in the expected rate of return of 1% would impact our net periodic pension expense by $2.1 million.

Income Taxes

We use the asset and liability method to account for income taxes whereby we calculate the deferred tax asset or liability account balances using tax laws and rates in effect at that time. Under this method, the balances of deferred tax liabilities and assets at the end of each period are determined using the tax rate expected to be in effect when taxes are actually paid or recovered. Valuation allowances are recorded to reduce gross deferred tax assets when it is more likely than not that all or some portion of the gross deferred tax assets will not be realized. In determining the need for valuation allowances, we have made judgments and considered estimates regarding estimated future taxable income and available tax planning strategies. These estimates and judgments include some degree of uncertainty, therefore changes in these estimates and assumptions could require us to adjust the valuation allowances for our deferred tax assets accordingly. The ultimate realization of the deferred tax assets depends on the generation of sufficient taxable income in the applicable taxing jurisdictions.

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We operate in more than 60 countries. As a result, we are subject to numerous domestic and foreign taxing jurisdictions and tax agreements and treaties among various governments. Determination of taxable income in any jurisdiction requires the interpretation of the related tax laws and regulations and the use of estimates and assumptions regarding future events, including the amount, timing and character of income, deductions, and tax credits. Changes in tax laws, regulations or agreements in each taxing jurisdiction could have an impact on the amount of income taxes that we provide during any given year.

Our tax filings for various periods are subject to audit by the tax authorities in most jurisdictions in which we operate, and these assessments can result in additional taxes. Estimating the outcome of audits and assessments by the tax authorities involves uncertainty. We review the facts of each case and apply judgments and assumptions to determine the most likely outcome and provide for taxes, interest and penalties on this basis. In line with U.S. GAAP, we recognize the effects of a tax position in the consolidated financial statements when it is more likely than not that, based on the technical merits, some level of tax benefit related to a tax position will be sustained upon audit by tax authorities. Our experience has been that the estimates and assumptions used to provide for future tax assessments have proven to be appropriate. However, past experience is only a guide, and the potential exists that tax resulting from the resolution of current and potential future tax disputes may differ materially from the amount accrued. In such an event, we will record additional tax expense or tax benefit in the period in which such resolution occurs.

New accounting pronouncements

See Note 2 “Basis of presentation and significant accounting policies” in our consolidated financial statements under the heading “Recent accounting pronouncements.”

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Financial risk factors

Our operations expose us to several financial risks, principally market risk (foreign currency risk and interest rate risk) and credit risk.

Foreign currency risk

Cash flow exposure

We expect many of the subsidiaries of our business to have future cash flows that will be denominated in currencies other than USD. Our primary cash flow exposures are revenues and expenses. Changes in the exchange rates between USD and other currencies in which our subsidiaries transact will cause fluctuations in the cash flows we expect to receive or pay when these cash flows are realized or settled. We generally attempt to minimize our currency exchange risk by seeking to naturally hedge our exposure by offsetting non-USD inflows with non-USD denominated local expenses. We generally do not enter into forward hedging agreements, and our largest exposures are to the British pound and Norwegian kroner, mainly driven by facility costs and employee compensation and benefits.

Transaction exposure

Many of our subsidiaries have assets and liabilities that are denominated in currencies other than the USD. Changes in the exchange rates between USD and the other currencies in which such liabilities are denominated can create fluctuations in our reported consolidated statements of operations and cash flows.

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As of December 31, 2021, we estimate that a 5% appreciation (depreciation) in USD would result in a change in our net loss of approximately $1.9 million.

Interest rate risk

We currently have no outstanding variable interest rate bearing debt and accordingly, we are not exposed to variability in interest expense and cash flows due to interest rate changes.

Credit risk

Our exposure to credit risk is primarily through cash and cash equivalents, restricted cash and accounts receivable, including unbilled balances. Our liquid assets are invested in cash, with a mix of local and international banks, and highly rated, short-term money market deposits generally with original maturities of less than 90 days. We monitor the ratings of such investments and mitigate counterparty risks as appropriate.

We extend credit to customers and other parties in the normal course of business and are thus subject to concentrations of customer credit risk. We have established various procedures to manage our credit exposure, including credit evaluations and maintaining an allowance for credit losses. We are also exposed to credit risk because our customers are concentrated in the oil and natural gas industry. This concentration of customers impacts overall exposure to credit risk because our customers may be similarly affected by changes in economic and industry conditions, including changes in oil and gas prices. We operate in more than 60 countries and as such, our receivables are spread over many countries and customers. Accounts receivable in Algeria and the U.S. represented approximately 23% and 12%, respectively, of our net accounts receivable balance at December 31, 2021. No other country accounted for greater than 10% of our accounts receivable balance. Our customer base is comprised of a large number of IOC, NOC, Independents and service partners from all major oil and gas locations around the world. The majority of our accounts receivable are due for payment in less than 90 days and largely comprise amounts receivable from IOCs and NOCs. We closely monitor accounts receivable and raise provisions for expected credit losses where it is deemed appropriate.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Consolidated Balance Sheets as of December 31, 2021 and 2020 65

Notes to the Consolidated Financial Statements 68

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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To the stockholders and the Board of Directors of Expro Group Holdings N.V.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Expro Group Holdings N.V. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows, for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the 2021 and 2020 financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The consolidated financial statements of the Company for the year ended December 31, 2019, before the effects of the adjustments to retrospectively apply the change in accounting related to the reverse stock split discussed in Note 1 to the financial statements, were audited by other auditors whose report, dated March 17, 2020, except for Notes 2 and 5, as to which the date was March 26, 2021, expressed an unqualified opinion on those statements. We have also audited the adjustments to the 2019 consolidated financial statements to retrospectively apply the change in accounting for the reverse stock split in 2021, as discussed in Note 1 to the financial statements. Our procedures included (1) comparing the amounts shown in the per share disclosures for 2019 to the Company’s underlying accounting analysis, (2) comparing the previously reported shares outstanding and the related balance sheet and income statement amounts per the Company’s accounting analysis to the previously issued consolidated financial statements, and (3) recalculating the decrease of shares to give effect to the reverse stock split and testing the mathematical accuracy of the underlying analysis. In our opinion, such retrospective adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any other procedures to the 2019 consolidated financial statements of the Company other than with respect to the retrospective adjustments, and accordingly, we do not express an opinion or any other form of assurance on the 2019 consolidated financial statements taken as a whole.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 8, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Business combinations and dispositions – Frank’s International N.V. — Refer to Notes 1 and 3 to the financial statements

Critical Audit Matter Description

The Company completed the merger of Frank’s International N.V. (“Frank’s”) with Expro Group Holdings International Limited (“Legacy Expro”) for a total purchase price of $742.3 million on October 1, 2021 (the “Merger”). The purchase price was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values. The largest asset classes acquired include Property, plant and equipment (“PP&E”) and Intangible assets, for which fair value was determined based on the cost approach for buildings and improvements, leasehold improvements, air and gas compressors, bucking/torque machines, casing/tubular running tools, cementing tools, downhole drilling tools, hydraulic hammers, oil & gas equipment, power generator assembly, power tongs, slip assembly, stabbing guides, thread protectors, training rigs, welding & soldering equipment, tooling, furniture & fixtures, office equipment, computer hardware/software, forklifts, and light duty vehicles (collectively, “Real & Personal Property”); the market approach for land; and the income approach for trademarks, trade name Frank’s International, patented technology (casing running, completions, drilling tech, and cementing), IPR&D (casing running, completions, drilling tech, tubulars, cementing, and service tools), customer relationships, and assembled workforce (collectively, “Intangible Assets”).

We identified the valuation of Real & Personal Property and Intangible Assets arising out of the Merger as a critical audit matter because of the estimates made by management to determine the fair value of these assets for purposes of recording the Merger. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our valuation specialists when performing audit procedures to determine the fair value of acquired Real & Personal Property under the cost approach, including estimating cost to replace or reproduce comparable assets adjusted for the remaining useful lives, land under the market approach, and Intangible Assets under the income approach, including forecasting of expected future cash flows either through the use of the relief-from-royalty method or the multi-period excess earnings method, estimating the discount rates used to approximate their current value, and estimating the useful lives based on management’s historical experience and expectations as to the duration of time that benefits from these assets are expected to be realized.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the fair value of Real & Personal Property and Intangible Assets acquired as part of the Merger included the following, among others:

● With the assistance of our fair value specialists:

/s/ Deloitte & Touche LLP

Houston, Texas

March 8, 2022

We have served as the Company's auditor since 2020.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Expro Group Holdings N.V.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Expro Group Holdings N.V. and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021 of the Company and our report dated March 8, 2022, expressed an unqualified opinion on those financial statements.

As described in Management’s Report on Internal Control Over Financial Reporting, appearing under Part II, Item 9A, management excluded from its assessment the internal control over financial reporting at Expro Group Holdings International Limited (“Legacy Expro”); rather it focused exclusively on the internal control over financial reporting related to ongoing Frank's International N.V. (“Legacy Frank’s”) operations. Accordingly, our audit did not include the internal control over financial reporting at Legacy Expro; rather it focused on the internal control over financial reporting related to ongoing Legacy Frank’s operations.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, appearing under Part II, Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Houston, Texas

March 8, 2022

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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To the stockholders and the Board of Directors of Expro Group Holdings N.V.

Opinion on the Financial Statements

We have audited, before the retrospective adjustments to the basic and diluted loss per share disclosure in Note 22 as a result of the reverse stock split disclosed in Note 1, the consolidated balance sheet of Expro Group Holdings International Limited (the “Company”) as of December 31, 2019, the related consolidated statement of operations, comprehensive loss, stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements, before the effects of the retrospective adjustments to the basic and diluted loss per share in Note 22 as a result of the reverse stock split disclosed in Note 1, referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

We were not engaged to audit, review or apply any procedures to the retrospective adjustments related to the basic and diluted loss per share in Note 22 as a result of the reverse stock split disclosure in Note 1 and, accordingly, we do not express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied. Those retrospective adjustments were audited by other auditors.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2009. In 2020 we became the predecessor auditor.

Reading, United Kingdom

March 17, 2020, except for Notes 2 and 5, as to which the date is March 26, 2021.

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EXPRO GROUP HOLDINGS N.V.

Consolidated Statements of Operations

(in thousands)

Year Ended December 31,

Operating costs and expenses:

Merger and integration expense (47,593 ) (1,630 ) -

Loss per common share:

Basic and diluted $ (1.64 ) $ (4.33 ) $ (0.91 )

Weighted average common shares outstanding:

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EXPRO GROUP HOLDINGS N.V.

Consolidated Statements of Comprehensive Loss

(in thousands)

Year Ended December 31,

Other comprehensive income (loss):

Actuarial gain (loss) on defined benefit plans 22,345 (9,356 ) (3,521 )

Plan curtailment / amendment credit recognized - 5,510 -

Reclassified net remeasurement (loss) gains (244 ) 104 -

Amortization of prior service credit (249 ) - -

Income taxes on pension - (926 ) -

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EXPRO GROUP HOLDINGS N.V.

Consolidated Balance Sheets

(in thousands, except share data)

December 31,

Assets

Current assets

Assets held for sale 6,386 -

Liabilities and stockholders’ equity

Current liabilities

Non-current finance lease liabilities 15,772 16,974

Non-current operating lease liabilities 73,688 58,585

Commitments and contingencies (Note 18)

Stockholders’ equity:

Accumulated other comprehensive income (loss) 20,358 (1,494 )

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EXPRO GROUP HOLDINGS N.V.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Adjustments to reconcile net loss to net cash provided by operating activities:

Stock-based compensation expense 54,162 - -

Changes in fair value of investments (511 ) - -

Elimination of unrealized profit on sales to joint ventures 174 2,085 3,558

Debt issuance expense 5,166 - -

Gain on disposal of assets (1,000 ) (10,085 ) -

Changes in assets and liabilities:

Cash flows from investing activities:

Cash and cash equivalents and restricted cash acquired in the Merger 189,739 - -

Payment for acquisition of business, net of cash acquired - - (47,882 )

Cash flows from financing activities:

Proceeds from release of collateral deposits 162 2,271 28,280

Repayment of financed insurance premium (227 ) - -

Payments of loan issuance and other transaction costs (5,123 ) (1,095 ) (3,036 )

Payment of withholding taxes on stock-based compensation plans (818 ) - -

Net cash provided by (used in) financing activities (7,176 ) (625 ) 21,922

Effect of exchange rate changes on cash and cash equivalents (1,876 ) 631 566

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EXPRO GROUP HOLDINGS N.V.

Consolidated Statements of Stockholders’ Equity

(in thousands)

Accumulated

Additional other Total

Common stock Treasury paid-in comprehensive Accumulated Stockholders’

Shares Value Stock Warrants capital income (loss) deficit Equity

Other comprehensive loss - - - - - (3,521 ) - (3,521 )

Other comprehensive loss - - - - - (4,668 ) - (4,668 )

Other comprehensive income - - - - - 21,852 - 21,852

Stock-based compensation expense - - - - 54,162 - - 54,162

Common shares issued upon vesting of share-based awards 741 16 - - (16 ) - - -

Treasury shares withheld (554 ) - (818 ) - - - - (818 )

Cancellation of Legacy Expro common stock - (585 ) - - 585 - - -

Cancellation of warrants - - - (10,530 ) 10,530 - - -

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EXPRO GROUP HOLDINGS N.V.

Notes to the Consolidated Financial Statements

1.Business description

On March 10, 2021, Frank’s International N.V. (“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 Expro Group Holdings International Limited (“Legacy Expro”), an exempted company limited by shares incorporated under the laws of the Cayman Islands, 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 (the “Closing Date”), and Frank's was renamed to Expro Group Holdings N.V. (the “Company”). The Merger was accounted for using the acquisition method of accounting with Legacy Expro being identified as the accounting acquirer. The consolidated financial statements of the Company reflect the financial position, results of operations and cash flows of only Legacy Expro for all periods prior to the Merger and of the combined company (including activities of Frank’s) for all periods subsequent to the Merger.

Further, the supervisory board of directors of Frank’s unanimously approved a 1-for-6 reverse stock split of Frank’s common stock, which was affected on October 1, 2021. All of the outstanding share numbers, nominal value, share prices and per share amounts in these consolidated financial statements have been retroactively adjusted to reflect the Exchange Ratio (as defined below) and the 1-for-6 reverse stock split for all periods presented, as applicable.

Pursuant to the Merger Agreement, as of the effective time of the Merger (the “Effective Time”), each outstanding ordinary share of common stock, par value $0.01 per share, of Legacy Expro was converted into the right to receive 1.2120 shares of common stock, nominal value €0.06 per share, of the Company (“Company Common Stock”). The number of shares of Company Common Stock received by the Legacy Expro shareholders was equal to 7.2720 (the “Exchange Ratio” as provided in the Merger Agreement) multiplied by the 1-for-6 reverse stock split ratio. 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. On October 4, 2021, the first trading day following the closing of the Merger, the Company Common Stock began trading on a post-reverse split basis on the New York Stock Exchange under the new name and new ticker symbol “XPRO.”

With roots dating to 1938, the Company is a global provider of energy services with operations in approximately 60 countries. The Company’s portfolio of capabilities include products and services related to well construction, well flow management, subsea well access, and well intervention and integrity. The Company's portfolio of products and services enhance production and improve recovery across the well lifecycle, from exploration through abandonment.

2.Basis of presentation and significant accounting policies

Basis of presentation

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The consolidated financial statements have been prepared using the U.S. dollar (“$” or “USD”) as the reporting currency.

Basis of consolidation

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

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EXPRO GROUP HOLDINGS N.V.

Notes to the Consolidated Financial Statements

Use of estimates

Preparation of the consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Estimates and assumptions are used for, but are not limited to, determining the following: purchase price allocation on business combinations, valuation of intangible assets, expected credit losses, inventory valuation reserves, valuation of share warrants, impairment assessment of goodwill, income tax provisions, recovery of deferred taxes, actuarial assumptions to determine costs and liabilities related to employee benefit plans and revenue recognition. While we believe that the estimates and assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from these estimates.

Revenue recognition

We recognize revenue from rendering of services over a period of time as the customer simultaneously consumes the benefit of the service while it is being rendered reflecting the amount of consideration to which the Company has a right to invoice. As part of rendering of services, the Company also provides rental equipment and personnel. Using practical expedients under Accounting Standards Update (“ASU”) 2014-09, the Company has elected not to separate non-lease components from the associated lease components and account for the combined component in accordance with the ASU 2014-09 with recognition over time.

Revenue from the sale of goods is generally recognized at the point in time when the control has passed onto the customer which generally coincides with delivery and installation, where applicable.

We also recognize revenue for “bill and hold” sales, associated with certain product sales, once the following criteria have been met: (1) there is a substantive reason for the arrangement, (2) the product is identified as the customer’s asset, (3) the product is ready for delivery to the customer, and (4) we cannot use the product or direct it to another customer.

Where contractual arrangements contain multiple performance obligations, we analyze each performance obligation within the sales arrangement to determine whether they are distinct. The revenue for contracts involving multiple performance obligations is allocated to each distinct performance obligation based on relative selling prices and is recognized on satisfaction of each distinct performance obligation. Further, a small number of our contracts contain penalty provisions for late delivery and installation of equipment, downtime or other equipment functionality. These penalties are typically percentage reductions in the total arrangement consideration, capped at a certain amount, or a reduction in the on-going service fee and are assessed as variable consideration in the contract.

Revenue is recognized to depict the transfer of promised services or goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services or goods. We do not include tax amounts collected from customers in sales transactions as a component of revenue.

Foreign currency transactions

The functional currency of all our subsidiaries is the USD. Gains and losses resulting from remeasurement of foreign currency denominated monetary assets and liabilities are included in the consolidated statements of operations as incurred. Gains and losses resulting from transactions denominated in a foreign currency are also included in the consolidated statements of operations as incurred.

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EXPRO GROUP HOLDINGS N.V.

Notes to the Consolidated Financial Statements

Interest and finance expense, net

Our interest and finance expense primarily consists of interest and other costs that we incur in connection with our revolving credit facility and finance lease liabilities. Costs incurred that are directly related to the raising of debt financing, together with any original issue discount or premium, are capitalized and recognized over the term of the loan or facility, using the effective interest method other than for those debt instruments that we elect to account for under the fair value option, in which case such costs are expensed in the period incurred. All other finance costs are expensed in the period they are incurred.

Income taxes

We use the asset and liability method to account for income taxes whereby we calculate the deferred tax asset or liability account balances using tax laws and rates in effect at that time. Under this method, the balances of deferred tax liabilities and assets at the end of each period are determined using the tax rate expected to be in effect when taxes are actually paid or recovered. Valuation allowances are recorded to reduce gross deferred tax assets when it is more likely than not that some portion or all of the gross deferred tax assets will not be realized. In determining the need for valuation allowances, we have made judgments and considered estimates regarding estimated future taxable income and ongoing achievable tax planning strategies. These estimates and judgments include some degree of uncertainty therefore changes in these estimates and assumptions could require us to adjust the valuation allowances for our deferred tax assets accordingly. The ultimate realization of the deferred tax assets depends on the generation of sufficient taxable income in the applicable taxing jurisdictions.

We operate in more than 60 countries and are subject to domestic and numerous foreign taxing jurisdictions. Determination of taxable income in any jurisdiction requires the interpretation of the related tax laws and regulations and the use of estimates and assumptions regarding significant future events such as the amount, timing and character of income, deductions, and tax credits. Changes in tax laws, regulations or agreements in each taxing jurisdiction could have an impact on the amount of income taxes that we provide during any given year.

In line with U.S. GAAP, we recognize the effects of a tax position in the consolidated financial statements when it is more likely than not that, based on the technical merits, some level of tax benefit related to a tax position will be sustained upon audit by tax authorities.

Cash, cash equivalents and restricted cash

We consider all highly liquid instruments with original maturities of three months or less at the time of purchase to be cash equivalents. Restricted cash primarily relates to bank deposits which have been pledged as cash collateral for certain guarantees issued by various banks or minimum cash balances which must be maintained in accordance with contractual arrangements.

Accounts receivable, net

Accounts receivable represents customer transactions that have been invoiced as of the balance sheet date and unbilled receivables relating to customer transactions that have not yet been invoiced as of the balance sheet date. The carrying value of our receivables, net of expected credit losses, represents the estimated net realizable value. We have an extensive global customer base comprised of a large number of international oil companies, national oil companies, independent exploration and production companies and service partners that operate in all major oil and gas locations around the world. We estimate reserves for expected credit losses using information about past events, current conditions and risk characteristics of customers, and reasonable and supportable forecasts relevant to assessing risk associated with the collectability of accounts and unbilled receivables. Past-due receivables are written off when our internal collection efforts have been unsuccessful.

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EXPRO GROUP HOLDINGS N.V.

Notes to the Consolidated Financial Statements

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost comprises direct materials and where applicable, direct labor costs and overheads that have been incurred in bringing the inventories to their current location and condition which are calculated using the average cost method.

We regularly evaluate the quantities and values of our inventories in light of current market conditions, market trends and other factors, and record inventory write-downs as appropriate. This evaluation considers historical usage, expected demand, product obsolescence and other factors. Market conditions are subject to change, and actual consumption of our inventory could differ from expected demand.

Impairment of long-lived assets

We assess long-lived assets, including our property, plant and equipment, for impairment whenever events or changes in business circumstances arise that may indicate that the carrying amount of our long-lived assets may not be recoverable. These events and changes can include significant current period operating losses or negative cash flows associated with the use of a long-lived asset, or group of assets, combined with a history of such factors, significant changes in the manner of use of the assets, and current expectations that it is more likely than not that a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. For purposes of recognition and measurement of an impairment loss, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. When impairment indicators are present, we compare undiscounted future cash flows, including the eventual disposition of the asset group at market value, to the asset group’s carrying value to determine if the asset group is recoverable. If the carrying values are in excess of undiscounted expected future cash flows, we measure any impairment by comparing the fair value of the asset or asset group to its carrying value. Fair value is generally determined by considering (i) internally developed discounted projected cash flow analysis of the asset or asset group, (ii) third-party valuations, and/or (iii) information available regarding the current market for similar assets. If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, an impairment equal to the difference is recorded in the period that the impairment indicator occurs. Estimating future cash flows requires significant judgment, and projections may vary from the cash flows eventually realized, which could impact our ability to accurately assess whether an asset has been impaired.

We consider a long-lived asset to be abandoned after we have ceased use of such asset and we have no intent to use or re-purpose the asset in the future.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Cost includes the price paid to acquire or construct the asset, required installation costs, interest capitalized during the construction period and any expenditure that substantially adds to the value of the asset, substantially upgrades the assets for an enhanced use or substantially extends the useful life of an existing asset. We expense costs related to the routine repair and maintenance of property, plant and equipment at the time we incur them. We capitalize interest as part of the cost of acquiring or constructing certain assets, to the extent incurred, during the period of time required to place the property, plant and equipment into service.

When properties or equipment are sold, retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the books and the resulting gain or loss is recognized on the consolidated statements of operations.

We begin depreciation for such assets, including any related capitalized interest, once an asset is placed into operational service. We consider an asset to be placed into operational service when the asset is both in the location and condition for its intended use. We compute depreciation expense, with the exception of land, using the straight-line method on a net cost basis over the estimated useful lives of the assets, as presented in the table below.

Land improvement - 12 years

Buildings - Up to 40 years

Plant and equipment - 2 to 12 years

Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.

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EXPRO GROUP HOLDINGS N.V.

Notes to the Consolidated Financial Statements

For property, plant and equipment that has been placed into service, but is subsequently idled, we continue to record depreciation expense during the idle period. We adjust the estimated useful lives of the idled assets if the estimated useful lives have changed.

Goodwill

Goodwill is not subject to amortization and is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. A qualitative assessment is allowed to determine if goodwill is potentially impaired. We have the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test. The qualitative assessment determines whether it is more likely than not that a reporting unit’s fair value is less than it’s carrying amount. If it is more likely than not that the fair value of the reporting unit is less than the carrying amount, then a quantitative impairment test is performed. The quantitative goodwill impairment test is used to identify both the existence of impairment and the amount of impairment loss. The test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than it’s carrying value, an impairment loss is recorded based on that difference. We complete our assessment of goodwill impairment as of October 31 each year.

Intangible assets, net

Identifiable intangible assets are amortized using the straight-line method over the estimated useful lives of the assets, ranging from one year to fifteen years. We evaluate impairment of our intangible assets on an asset group basis whenever circumstances indicate that the carrying value may not be recoverable. Intangible assets deemed to be impaired are written down to their fair value using a discounted cash flow model and, if available, comparable market values. Our intangible assets are primarily associated with trademarks, customer relationships and contracts (“CR&C”), technology, and software.

Investments in joint ventures

We use the equity method of accounting for our equity investments where we hold more than 20% of the ownership interests of an investee that does not constitute a controlling interest or where we have the ability to significantly influence the operations or financial decision of the investee. Such equity investments are carried on the consolidated balance sheets at cost plus post-acquisition changes in our share of net income, less dividends received and less any impairments. Our consolidated statements of operations reflect our share of income from the joint ventures’ results after tax. Any goodwill arising on the acquisition of a joint venture, representing the excess of the cost of the investment compared to the Company’s share of the net fair value of the acquired identifiable net assets, is included in the carrying amount of the joint venture and is not amortized.

The Company evaluates its investments in joint ventures for potential impairment whenever events or changes in circumstances indicate that there may be a loss in the value of each investment that is other than temporary.

The results of the joint ventures are prepared for the same reporting period as the Company. Where necessary, adjustments are made to bring the accounting policies used in line with those of the Company, to take into account fair values assigned at the date of acquisition; and to reflect impairment losses where appropriate. Adjustments are also made in our consolidated financial statements to eliminate our share of unrealized gains and losses on transactions between us and our joint ventures.

Fair value measurements

We measure certain financial assets and liabilities at fair value at each balance sheet date and, for the purposes of impairment testing, use fair value to determine the recoverable amount of our non-financial assets.

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by us. Accounting standards include disclosure requirements around fair values used for certain financial instruments and establish a fair value hierarchy. The hierarchy prioritizes valuation inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value is reported in one of three levels:

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EXPRO GROUP HOLDINGS N.V.

Notes to the Consolidated Financial Statements

Level 1 – Valuation techniques in which all significant inputs are unadjusted quoted market prices from active markets for identical assets or liabilities being measured;

Level 2 – Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques; and

Level 3 – Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect our own assumptions about the assumptions that market participants would use to price an asset or liability.

When available, we use quoted market prices to determine the fair value of an asset or liability. We determine the policies and procedures for both recurring fair value measurements and non-recurring fair value measurements, such as impairment tests.

At each reporting date, we analyze the movements in the values of assets and liabilities which are required to be remeasured or reassessed as per our accounting policies.

For the purpose of fair value disclosures, we have determined classes of assets and liabilities based on the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

Leases

We have operating and finance leases primarily related to real estate, transportation and equipment. We determine if an arrangement is a lease at inception. Upon commencement of a lease, we recognize an operating lease right-of-use asset (“ROU Asset”) and corresponding operating lease liability based on the then present value of all lease payments over the lease term. ROU Assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligations to make lease payments arising from the lease. The accounting for some of our leases may require significant judgments, which includes determining the incremental borrowing rates to utilize in our net present value calculation of lease payments for lease agreements which do not provide an implicit rate, and assessing the likelihood of renewal or termination options, which are considered as part of assessing the lease term if the extension or termination is deemed to be reasonably certain.

Leases which meet the criteria of a finance lease in accordance with Accounting Standards Codification (“ASC”) 842Leases are capitalized and included in “Property, plant and equipment, net” and “Finance lease liabilities” on the consolidated balance sheets. Our lease contracts generally do not provide any guaranteed residual values. Payments related to finance leases are apportioned between the reduction of the lease liability and finance expense in the consolidated statement of operations so as to achieve a constant rate of interest on the remaining balance of the liability. Leases which do not meet the definition of a finance lease are classified as operating leases and are included in Operating lease right-of-use assets and operating lease liabilities on the consolidated balance sheets. Lease expense is recognized on a straight-line basis over the shorter of the estimated useful life of the underlying asset or the lease term.

We do not separate lease and non-lease components for all classes of leased assets. Also, leases with an initial term of one year or less are not recorded on the consolidated balance sheets.

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EXPRO GROUP HOLDINGS N.V.

Notes to the Consolidated Financial Statements

Post-retirement benefits

Defined Benefit Plans

The cost of providing benefits under defined benefit plans are determined separately for each plan using the projected unit credit method, which attributes entitlement to benefits to the current and prior periods. Both current and past service costs are recognized in net income (loss) as they arise.

The interest element of the defined benefit cost represents the change in present value of plan obligations resulting from the passage of time and is determined by applying a discount rate to the opening present value of the benefit obligation, taking into account material changes in the obligation during the year. The expected return on plan assets is based on an assessment made at the beginning of the year of long-term market returns on plan assets, adjusted for the effect on the fair value of plan assets of contributions received and benefits paid during the year.

We initially recognize actuarial gains and losses as other comprehensive income in the year they arise. Where the net cumulative actuarial gains or losses for a plan exceeds 10 percent of that plan’s gross pension liability, or asset if higher, the amount of gains or losses above the 10 percent threshold are recognized in the consolidated statement of operations as a component of net pension costs (over the expected remaining working lives of the plan’s active participants or the remaining lives of plan members in the event the plan is no longer active), which is included in “Cost of revenue, excluding depreciation and amortization.”

The defined benefit pension asset or liability on the consolidated balance sheets comprise the total for each plan of the present value of the defined benefit obligation using a discount rate based on high quality corporate bonds less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information and in the case of quoted securities is the published bid price.

Defined Contribution Plans

The costs of providing benefits under a defined contribution plan are expensed at the time contributions become payable to the respective plan.

Stock-based compensation

Effective as of October 1, 2021, the Expro Group Holdings N.V. Long-Term Incentive Plan, As Amended and Restated, provides for the granting of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance restricted stock units (“PRSUs”), dividend equivalent rights and other types of equity and cash incentive awards to employees, nonemployee directors and service providers.

Stock-based compensation expense is measured at the grant date of the share-based awards based on their fair value. Stock-based compensation expense is recognized on a straight-line basis over the vesting period and is included in cost of revenue and general and administrative expenses in the consolidated statements of operations. We do not estimate expected forfeitures, but recognize them as they occur.

The grant date fair value of the RSUs, which are not entitled to receive dividends until vested, is measured by reducing the share price at that date by the present value of the dividends expected to be paid during the requisite vesting period, discounted at the appropriate risk-free interest rate. The grant date fair value and compensation expense of PRSU grants is estimated based on a Monte Carlo simulation using the Company’s closing stock price as of the day before the grant date.

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EXPRO GROUP HOLDINGS N.V.

Notes to the Consolidated Financial Statements

In October 2018, Legacy Expro established the Expro Group Holdings International Limited 2018 Management Incentive Plan (the “Management Incentive Plan”) which was comprised of the following stock-based compensation awards: (a) stock options to non-executive directors and key management personnel and (b) restricted stock units, each of which were assumed by the Company in connection with the Merger. Due to the Merger, the Company recorded stock-based compensation expense based on the fair value on the Closing Date to the extent each award was fully vested. Compensation expense associated with those awards that have a requisite service period remaining as of the Closing Date will be recognized on a straight-line basis over the remaining requisite service period based on the Closing Date fair value.

Research and development

Research and development costs are expensed as incurred and relate to spending for new product development and innovation and includes internal engineering, materials and third-party costs. We incurred $6.7 million, $10.4 million and $14.4 million of research and development costs for the years ended December 31, 2021, 2020 and 2019, respectively, which are included in “Cost of revenue, excluding depreciation and amortization” in the consolidated statements of operations.

Income (loss) per share

Basic income (loss) per share excludes dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share reflects the potential dilution that could occur if securities to issue common stock were exercised or converted to common stock.

Recent accounting pronouncements

Accounting guidance adopted

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of ASUs to the FASB’s Accounting Standards Codification. We consider the applicability and impact of all accounting pronouncements. ASUs not listed below were assessed and were either determined to be not applicable or are expected to have immaterial impact on our consolidated financial position, results of operations and cash flows.

In August 2018, the FASB used ASU2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans, which required the following additional disclosures in the financial statements.

We adopted the guidance on January 1, 2021. The adoption of this guidance resulted in additional disclosures related to our defined benefit pension obligations, however it did not have any impact on our results of operations, financial condition or liquidity.

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EXPRO GROUP HOLDINGS N.V.

Notes to the Consolidated Financial Statements

3.Business combinations and dispositions

Frank’s International N.V.

As discussed in Note 1, the Merger of Frank’s with Legacy Expro pursuant to the Merger Agreement was completed on October 1, 2021. U.S. GAAP requires the determination of the accounting acquirer, the acquisition date, the fair value of assets and liabilities of the acquired and the resulting measurement of goodwill. The Merger is accounted for as a reverse merger and Legacy Expro has been identified as the acquirer for accounting purposes. As a result, the Company has in accordance with ASC 805,Business Combinations, applied the acquisition method of accounting to account for Frank’s assets acquired and liabilities assumed. Applying the acquisition method of accounting includes recording the identifiable assets acquired and liabilities assumed at their fair values and recording goodwill for the excess of the consideration transferred over the net aggregate fair value of the identifiable assets acquired and liabilities assumed.

The merger consideration was based on Frank’s closing share price on the Closing Date. In a reverse merger involving only the exchange of equity, the fair value of the equity of the accounting acquiree may be used to measure consideration transferred if the value of the accounting acquiree’s equity interests are more reliably measurable than the value of the accounting acquirer’s equity interest. As Legacy Expro was a private company and Frank’s was a public company with a quoted and reliable market price, the fair value of Frank’s equity interests was deemed to be more reliable. Under the acquisition method of accounting, total consideration exchanged was as follows:

Per share Amount

Shares issued Price (in thousands)

Replacement of Frank’s equity awards 7,830

Total Merger Consideration Exchanged $ 742,282

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EXPRO GROUP HOLDINGS N.V.

Notes to the Consolidated Financial Statements

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

Amount

Cash and cash equivalents $ 187,178

Restricted cash 2,561

Accounts receivables, net 112,234

Assets held for sale 10,061

Income tax receivables 2,030

Other current assets 23,908

Property, plant and equipment 212,639

Operating lease right-of-use assets 27,406

Accounts payable and accrued liabilities 81,959

Operating lease liabilities 8,344

Current income tax liabilities 8,932

Other current liabilities 19,918

Deferred tax liabilities 5,673

Non-current operating lease liabilities 19,607

Other non-current liabilities 40,553

Total Merger Consideration Exchanged $ 742,282

Due to the recency and complexity of the Merger, these amounts are preliminary and subject to change as our fair value assessments are finalized. The final fair value determination could result in material adjustments to the values presented in the preliminary purchase price allocation table above. The fair values of identifiable intangible assets were prepared using an income valuation approach, which requires a forecast of expected future cash flows either through the use of the relief-from-royalty method or the multi-period excess earnings method, which are discounted to approximate their current value. The estimated useful lives are based on management’s historical experience and expectations as to the duration of time that benefits from these assets are expected to be realized.

The intangible assets will be amortized on a straight-line basis over an estimated 10- to 15-year life. We expect annual amortization to be approximately $7.7 million associated with these intangible assets.

Goodwill will not be amortized but rather subject to an annual impairment test, absent any indicators of impairment. Goodwill is attributable to planned synergies expected to be achieved from the combined operations of Legacy Expro and Frank’s. Goodwill recorded in the Merger is not expected to be deductible for tax purposes.

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EXPRO GROUP HOLDINGS N.V.

Notes to the Consolidated Financial Statements

Results of Frank’s for the period October 1, 2021 through December 31, 2021

The Company’s operating results for the period October 1, 2021 through December 31, 2021 include $112.1 million of revenue and $32.9 million of net loss attributable to Frank’s.

Unaudited Pro Forma Financial Information

The following unaudited pro forma consolidated results of operations for the year ended December 31, 2021 and 2020 assume the Merger was completed as of January 1, 2020 (in thousands):

Year Ended December 31,

Estimated unaudited pro forma information is not necessarily indicative of the results that actually would have occurred had the Merger been completed on the date indicated or of future operating results.

Merger and integration expense

During the year ended December 31, 2021 and 2020, the Company incurred $47.6 million and $1.6 million of merger and integration expense, which consist primarily of legal fees, professional fees, integration, severance and other costs directly attributable to the Merger.

Below is a reconciliation of our liability balance associated with our severance plan initiated during 2021 related to the integration in connection with the Merger, which is included in “Other current liabilities” on the consolidated balance sheets (in thousands):

NLA ESSA MENA APAC Central Total

Sale of assets

On November 13, 2020, Legacy Expro entered into an agreement to transfer, sell and assign all rights, title and interest in and to certain identified tangible and intangible assets and liabilities relating to its pressure-control chokes product line for total cash consideration of $15.5 million and an additional earn-out consideration of up to a maximum of $1.0 million, contingent upon certain criteria being met in the following year. No contingent consideration was recognized during the year ended December 31, 2020. Legacy Expro recognized a gain of $10.1 million for the year ended December 31, 2020 net of the carrying value of the assets transferred of $4.4 million and costs directly attributable to the sale of $1.0 million. As of December 31, 2021, the conditions upon which the earn-out consideration was contingent were met. As a result, the Company recognized a gain of $1.0 million for the year ended December 31, 2021.

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EXPRO GROUP HOLDINGS N.V.

Notes to the Consolidated Financial Statements

4.Fair value measurements

Recurring Basis

A summary of financial assets and liabilities that are measured at fair value on a recurring basis, as of December 31, 2021 and 2020, were as follows (in thousands):

XPRO US Equity

XPRO · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

XPRO US Equity☆

XPRO · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

XPRO US Equity