UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑
Quarterly Report Pursuant to Section 13 or 15(d) ofFor the quarterly period ended March 31,September 30, 2021
OR
☐
Transition Report Pursuant to Section 13 or 15(d) ofFor the transition period from ______ to ______
Commission file number: 001-36053
EXPRO GROUP HOLDINGS N.V.
(Exact name of registrant as specified in its charter)
The Netherlands | 98-1107145 | ||||||||||||||||||||||||||||||||||||||
(State or other jurisdiction of | (IRS Employer |
1311 Broadfield Boulevard, Suite 400 | |||||||||||||||||||||||||||||||||||
Houston, Texas | 77084 | ||||||||||||||||||||||||||||||||||
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: +31 (0)22 367 0000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||
Common Stock, | XPRO | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☑ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☑ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☑ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of April 29,November 1, 2021, there were 227,712,419109,107,256 shares of common stock, €0.01 par€0.06 nominal value per share, outstanding.
Page | ||||||||||||||||
PART I. FINANCIAL INFORMATION | ||||||||||||||||
Item 1. | Financial Statements | |||||||||||||||
Condensed Consolidated Balance Sheets (Unaudited) at | ||||||||||||||||
Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended | ||||||||||||||||
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the Three and Nine Months Ended | ||||||||||||||||
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Nine Months Ended | ||||||||||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three and Nine Months Ended | ||||||||||||||||
Notes to the Unaudited Condensed Consolidated Financial Statements | ||||||||||||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and | |||||||||||||||
Results of Operations | ||||||||||||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |||||||||||||||
Item 4. | Controls and Procedures | |||||||||||||||
PART II. OTHER INFORMATION | ||||||||||||||||
Item 1. | Legal Proceedings | |||||||||||||||
Item 1A. | Risk Factors | |||||||||||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||||||||||||
Item 6. | Exhibits | |||||||||||||||
Signatures |
In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Expro,” the "combined company" and the “Company” refer to Expro Group Holdings N.V. and its consolidated subsidiaries, the successor reporting entity following the consummation of the Merger (as defined below). The terms “Frank's,” "FINV" or the “Predecessor Registrant” refer to Frank's International N.V. and its consolidated subsidiaries, the predecessor reporting entity. References to “Legacy Expro” refer to Expro Group Holdings International Limited, the entity acquired by the Company in the Merger.
PART I. FINANCIAL INFORMATION Item 1. EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) September 30, December 31, 2021 2020 Assets (Unaudited) Current assets: Cash and cash equivalents Restricted cash Short-term investments Accounts receivables, net Inventories, net Assets held for sale Other current assets Total current assets Property, plant and equipment, net Goodwill Intangible assets, net Deferred tax assets, net Operating lease right-of-use assets Other assets Total assets Liabilities and Equity Current liabilities: Accounts payable and accrued liabilities Current portion of operating lease liabilities Deferred revenue Other current liabilities Total current liabilities Deferred tax liabilities Non-current operating lease liabilities Other non-current liabilities Total liabilities Commitments and contingencies (Note 14) Stockholders’ equity: Common stock, €0.06 nominal value, 200,000,000 shares authorized, 38,575,948 and 38,134,383 shares issued and 38,066,216 and 37,720,760 shares outstanding Additional paid-in capital Accumulated deficit Accumulated other comprehensive loss Treasury stock (at cost), 509,732 and 413,623 shares Total stockholders’ equity Total liabilities and equity The accompanying notes are an integral part of these condensed consolidated financial statements. EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Revenue: Services Products Total revenue Operating expenses: Cost of revenue, exclusive of depreciation and amortization Services Products General and administrative expenses Depreciation and amortization Goodwill impairment Severance and other charges, net Gain on disposal of assets Operating loss Other income (expense): Other income, net Interest income (expense), net Foreign currency gain (loss) Total other income (expense) Loss before income taxes Income tax expense (benefit) Net loss Loss per common share: Basic and diluted Weighted average common shares outstanding: Basic and diluted The accompanying notes are an integral part of these condensed consolidated financial statements. EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Net loss Other comprehensive income (loss): Foreign currency translation adjustments Total other comprehensive income (loss) Comprehensive loss The accompanying notes are an integral part of these condensed consolidated financial statements. EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) (Unaudited) Nine Months Ended September 30, 2020 Accumulated Additional Other Total Common Stock Paid-In Accumulated Comprehensive Treasury Stockholders’ Shares Value Capital Deficit Income (Loss) Stock Equity Balances at December 31, 2019 Cumulative effect of accounting change Net loss Foreign currency translation adjustments Equity-based compensation expense Common shares issued upon vesting of share-based awards Common shares issued for employee stock purchase plan Treasury shares withheld Share repurchase program Balances at March 31, 2020 Net loss Foreign currency translation adjustments Equity-based compensation expense Common shares issued upon vesting of share-based awards Treasury shares withheld Share repurchase program Balances at June 30, 2020 Net loss Foreign currency translation adjustments Equity-based compensation expense Common shares issued upon vesting of share-based awards Common shares issued for employee stock purchase plan Treasury shares withheld Balances at September 30, 2020 The accompanying notes are an integral part of these condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) (Unaudited) Nine Months Ended September 30, 2021 Accumulated Additional Other Total Common Stock Paid-In Accumulated Comprehensive Treasury Stockholders’ Shares Value Capital Deficit Income (Loss) Stock Equity Balances at December 31, 2020 Net loss Foreign currency translation adjustments Equity-based compensation expense Common shares issued upon vesting of share-based awards Common shares issued for employee stock purchase plan Treasury shares withheld Balances at March 31, 2021 Net loss Foreign currency translation adjustments Equity-based compensation expense Common shares issued upon vesting of share-based awards Treasury shares withheld Balances at June 30, 2021 Net loss Foreign currency translation adjustments Equity-based compensation expense Common shares issued for employee stock purchase plan Balances at September 30, 2021 The accompanying notes are an integral part of these condensed consolidated financial statements. EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) For the Nine Months Ended September 30, 2021 2020 Cash flows from operating activities Net loss Adjustments to reconcile net loss to cash from operating activities Depreciation and amortization Equity-based compensation expense Goodwill impairment Loss on asset impairments and retirements Amortization of deferred financing costs Deferred tax provision (benefit) Provision for bad debts Gain on disposal of assets Changes in fair value of investments Other Changes in operating assets and liabilities Accounts receivable Inventories Other current assets Other assets Accounts payable and accrued liabilities Deferred revenue Other non-current liabilities Net cash provided by (used in) operating activities Cash flows from investing activities Purchases of property, plant and equipment and intangibles Proceeds from sale of assets Proceeds from sale of investments Purchase of investments Investment in intellectual property Other Net cash provided by (used in) investing activities Cash flows from financing activities Repayments of borrowings Treasury shares withheld for taxes Treasury share repurchase Proceeds from the issuance of ESPP shares Net cash used in financing activities Effect of exchange rate changes on cash Net increase (decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash at beginning of period Cash, cash equivalents and restricted cash at end of period The accompanying notes are an integral part of these condensed consolidated financial statements. EXPRO GROUP HOLDINGS N.V. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note Merger On March 10, 2021, Frank’s International N.V. (“FINV” Unless otherwise indicated, references to the terms Nature of Business Prior to Following completion of the Merger, Basis of Presentation The condensed consolidated financial statements of FINV for the three and nine months ended The accompanying condensed consolidated financial statements have not been audited by Further, on September 30, 2021, Frank’s board of directors (the “Prior Board”) unanimously approved a 1-for-6 reverse stock split of Frank’s common stock, which was effected on October 1, 2021. All of the outstanding Company Common Stock (as defined below) share numbers, nominal value, share prices and per share amounts in these condensed consolidated financial statements have been retroactively adjusted to reflect a 1-for-6 reverse stock split for all periods presented. Refer to Note 17—Subsequent Events for further information. The condensed consolidated financial statements have been prepared on a historical cost basis using the United States dollar as the reporting currency. EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Reclassifications Certain prior-period amounts have been reclassified to conform to the current period’s presentation. These reclassifications had no impact on Recent Accounting Pronouncements Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) generally in the form of accounting standards updates (“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 In June 2016, the FASB issued new accounting guidance for credit losses on financial instruments. The guidance includes the replacement of the “incurred loss” approach for recognizing credit losses on financial assets, including trade receivables, with a methodology that reflects expected credit losses, which considers historical and Note Amounts reported in the condensed consolidated balance sheets and condensed consolidated statements of cash flows as cash, cash equivalents and restricted cash at September 30, December 31, 2021 2020 Cash and cash equivalents Restricted cash Total cash, cash equivalents and restricted cash shown in the statements of cash flows Restricted cash primarily consists of cash deposits that collateralize Note Accounts receivable at September 30, December 31, 2021 2020 Trade accounts receivable, net of allowance for credit losses of $3,718 and $3,857, respectively Unbilled receivables Taxes receivable Affiliated (1) Other receivables Total accounts receivable, net (1) Amounts represent expenditures on behalf of non-consolidated affiliates. EXPRO GROUP HOLDINGS N.V. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note Inventories at September 30, 2021, and December 31, 2020, were as follows (in thousands): September 30, December 31, 2021 2020 Pipe and connectors, net of allowance of $14,630 and $16,819, respectively Finished goods, net of allowance of $84 and $84, respectively Work in progress Raw materials, components and supplies, net of allowance of $181 and none, respectively Total inventories, net The increase in inventories was driven by higher activity levels, particularly in the Western Hemisphere. Note 5—Property, Plant and Equipment The following is a summary of property, plant and equipment at Estimated Useful Lives September 30, December 31, in Years 2021 2020 Land Land improvements Buildings and improvements Rental machinery and equipment Machinery and equipment - other Furniture, fixtures and computers Automobiles and other vehicles Leasehold improvements 7 - 15, or lease term if shorter Construction in progress - machinery and equipment Less: Accumulated depreciation Total property, plant and equipment, net During the EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS During the first quarter of 2021, a building with a net book value of $1.9 million was sold, resulting in a gain of $0.2 million. In addition, a building with a net book value of $2.6 million met the criteria to be classified as held for sale and was reclassified from property, plant and equipment to assets held for sale on During the second quarter of 2020, Frank's sold a building classified as held for sale for $5.4 million and recorded a gain of $0.6 million. The following table presents the depreciation and amortization expense associated with each line item for the three and nine months ended Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Services Products General and administrative expenses Total Note 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. As a result of the decline in oil prices due to the ongoing Frank's used the income approach to estimate the fair value of the Cementing Equipment reporting unit, 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 estimated discount rate, or expected return, that a marketplace participant would have required as of the valuation date. 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. EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Some of the more significant assumptions inherent in the income approach include the estimated future net annual cash flows for the reporting unit and the discount rate. NaN goodwill impairment was recorded during the three and nine months ended Intangible Assets Identifiable intangible assets are amortized using the straight-line method over the estimated useful lives of the assets. The following table provides information related to September 30, 2021 December 31, 2020 Gross Carrying Amount Accumulated Amortization Total Gross Carrying Amount Accumulated Amortization Total Customer Relationships Intellectual Property Total intangible assets Frank's intangible assets are primarily associated with Note Other assets at September 30, December 31, 2021 2020 Cash surrender value of life insurance policies (1) Deposits Other Total other assets (1) See Note 10—Fair Value Measurements for additional information. EXPRO GROUP HOLDINGS N.V. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note Accounts payable and accrued liabilities at September 30, December 31, 2021 2020 Accounts payable Accrued compensation Accrued property and other taxes Accrued severance and other charges Income taxes Affiliated (1) Accrued purchase orders and other Total accounts payable and accrued liabilities (1) Represents amounts owed to non-consolidated affiliates. Note Credit Facility Asset Based Revolving Credit Facility On November 5, 2018, FICV, Frank’s International, LLC and Blackhawk, as borrowers, and FINV, certain of FINV’s subsidiaries, including FICV, Frank’s International, LLC, Blackhawk, Frank’s International GP, LLC, Frank’s International, LP, Frank’s International LP B.V., Frank’s International Partners B.V., Frank’s International Management B.V., Blackhawk Intermediate Holdings, LLC, Blackhawk Specialty Tools, LLC, and Trinity Tool Rentals, L.L.C., as guarantors, entered into a 5-year senior secured revolving credit facility (the “ABL Credit Facility”) with JPMorgan Chase Bank, N.A., as administrative agent, As of On October 1, 2021, in connection with the EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note We follow fair value measurement authoritative accounting guidance for measuring fair values of assets and liabilities in financial statements. A summary of financial assets and liabilities that are measured at fair value on a recurring basis, as of Significant Quoted Prices Other Significant in Active Observable Unobservable Markets Inputs Inputs (Level 1) (Level 2) (Level 3) Total September 30, 2021 Assets: Investments: Cash surrender value of life insurance policies - deferred compensation plan Marketable securities - other Liabilities: Deferred compensation plan December 31, 2020 Assets: Investments: Cash surrender value of life insurance policies - deferred compensation plan Marketable securities - other Liabilities: Deferred compensation plan Frank's investments associated with Assets and Liabilities Measured at Fair Value on a Non-recurring Basis The Company applies the provisions of the fair value measurement standard to Management of the Company performs goodwill impairment When conducting an impairment test on long-lived assets, other than goodwill, The impairment assessments discussed above incorporate inherent uncertainties, including projected commodity pricing, supply and demand for EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Other Fair Value Considerations The carrying values on Note Frank's has engaged in certain transactions with other companies related to Prior to the initial public offering of Frank’s in 2013, a limited number of employees of a certain Mosing affiliated company were admitted as participants in the Frank’s deferred compensation plan. The relevant Mosing affiliated company was responsible for payment of all benefits related to its employees. During the quarter ended September 30, 2021, all such participants received final payment of all sums owed under the deferred compensation plan, and no participants remain in the plan who were not Frank’s employees. Tax Receivable Agreement and Amended & Restated Tax Receivable Agreement Mosing Holdings, LLC, a Delaware limited liability company (“Mosing Holdings”), converted all of its shares of our Series A convertible preferred stock into shares of The tax receivable agreement (the In connection with the Merger Agreement, FINV, FICV and Mosing Holdings entered into that certain Amended and Restated Tax Receivable Agreement, dated as of March 10, 2021 (the “A&R TRA”). Pursuant to the A&R TRA, EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note Basic loss per common share is determined by The following table summarizes the basic and diluted loss per share calculations (in thousands, except per share amounts): Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Numerator Net loss Denominator Basic and diluted weighted average common shares (1) Loss per common share: Basic and diluted (1) Approximate number of unvested restricted stock units and stock to be issued pursuant to the ESPP that have been excluded from the computation of diluted loss per share as the effect would be anti-dilutive when results from operations are at a net loss position. Note For interim financial reporting, Frank's effective tax rate was As a consequence of the Merger, Frank's underwent an ownership change as defined in Internal Revenue Code Section 382, which, based on information currently available, will trigger a substantial limitation on the combined company’s ability to utilize historic net operating losses ("NOLs") and will cause some of Frank’s NOLs incurred prior to January 1, 2018 to expire before the combined company will be able to utilize them. Frank's is under audit by certain non-U.S. jurisdictions for the years 2008 - 2019. An analysis of EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note We are the subject of lawsuits and claims arising in the ordinary course of business from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. Frank's has been conducting, and the combined company will continue to conduct, an internal investigation of the operations of certain of As disclosed above, Note Frank's recognizes severance and other charges for costs associated with workforce reductions, facility closures, exiting or reducing Severance and other charges, net are summarized below (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Severance and other costs Mergers and acquisition expense Fixed asset impairments and retirements Inventory write-offs Intangible asset impairments Severance and other costs Mergers and acquisition expense: Fixed asset impairments and retirements Inventory write-offs: Intangible asset impairments: Note Reporting Segments Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker (" The TRS segment provides tubular running services globally. Internationally, the TRS segment operates in the majority of the offshore oil and gas markets and also in several onshore regions with operations in approximately 40 countries on EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The Tubulars segment designs, manufactures and distributes connectors and casing attachments for large outside diameter (“OD”) heavy wall pipe. Additionally, the Tubulars segment sells large OD pipe originally manufactured by various pipe mills, as plain end or fully fabricated with proprietary welded or thread-direct connector solutions and provides specialized fabrication and welding services in support of offshore deepwater projects, including drilling and production risers, flowlines and pipeline end terminations, as well as long-length tubular assemblies up to 400 feet in length. The Tubulars segment also specializes in the development, manufacture and supply of proprietary drilling tool solutions that focus on improving drilling productivity through eliminating or mitigating traditional drilling operational risks. The CE segment provides specialty equipment to enhance the safety and efficiency of rig operations. It provides specialized equipment, services and products utilized in the construction of the wellbore in both onshore and offshore environments. The product portfolio includes casing accessories that serve to improve the installation of casing, centralization and wellbore zonal isolation, as well as enhance cementing operations through advance wiper plug and float equipment technology. The CE segment also provides services and products utilized in the construction, completion or abandonment of the wellbore. These solutions are primarily used to isolate portions of the wellbore through the setting of barriers downhole to allow for rig evacuation in case of inclement weather, maintenance work on other rig equipment, squeeze cementing, pressure testing within the wellbore and temporary and permanent abandonments. These offerings improve operational efficiencies and limit non-productive time if unscheduled events are encountered at the wellsite. Revenue Revenue from contracts with customers is disaggregated by geography for each of The following tables presents Three Months Ended September 30, 2021 Tubular Running Services Tubulars Cementing Equipment Consolidated United States International Total Revenue Three Months Ended September 30, 2020 Tubular Running Services Tubulars Cementing Equipment Consolidated United States International Total Revenue Nine Months Ended September 30, 2021 Tubular Running Services Tubulars Cementing Equipment Consolidated United States International Total Revenue Nine Months Ended September 30, 2020 Tubular Running Services Tubulars Cementing Equipment Consolidated United States International Total Revenue EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Revenue by geographic area were as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 United States Europe/Middle East/Africa Latin America Asia Pacific Other countries Total Revenue Adjusted EBITDA Frank's defines Adjusted EBITDA as net income (loss) before interest income, net, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on disposal of assets, foreign currency gain or loss, equity-based compensation, unrealized and realized gain or loss, net severance and other charges, other non-cash adjustments and other charges. Frank's CODM uses Adjusted EBITDA as the primary measure of segment reporting performance. EXPRO GROUP HOLDINGS N.V. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table presents a reconciliation of Segment Adjusted EBITDA to net loss (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Segment Adjusted EBITDA: Tubular Running Services Tubulars Cementing Equipment Corporate (1) Goodwill impairment Severance and other charges, net Interest income (expense), net Depreciation and amortization Income tax (expense) benefit Gain on disposal of assets Foreign currency gain (loss) Charges and credits (2) Net loss (1) Includes certain expenses not attributable to a particular segment, such as costs related to support functions and corporate executives. (2) EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following tables set forth certain financial information with respect to Tubular Running Services Tubulars Cementing Equipment Corporate Total Three Months Ended September 30, 2021 Revenue from external customers Operating income (loss) Adjusted EBITDA Three Months Ended September 30, 2020 Revenue from external customers Operating income (loss) Adjusted EBITDA Nine Months Ended September 30, 2021 Revenue from external customers Operating income (loss) Adjusted EBITDA Nine Months Ended September 30, 2020 Revenue from external customers Operating income (loss) Adjusted EBITDA * Non-GAAP financial measure not disclosed. Note 17—Subsequent Events On October 1,2021, the Company (formerly named Frank’s International N.V.) completed its previously announced Merger with Legacy Expro pursuant to the Merger Agreement. Further, on September 30, 2021, the Prior Board unanimously approved a 1-for-6 reverse stock split of Frank’s common stock, which was effected on October 1, 2021. 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.” 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. All of the outstanding Company Common Stock share numbers, nominal value, share prices and per share amounts in these condensed consolidated financial statements have been retroactively adjusted to reflect a 1-for-6 reverse stock split for all periods presented. In connection with the Merger, on October 1,2021, the Company and certain of its subsidiaries, including Exploration and Production Services (Holdings) Limited and Expro Holdings US Inc., as borrowers, entered into the New Credit Facility with DNB Bank ASA, London Branch, as agent, and other financial institutions as lenders with an aggregate commitment of $200.0 million with up to $130.0 million available for drawdowns as loans and up to $70.0 million for bonds and guarantees. Subject to the terms of the New Credit Facility, the Company has the ability to increase the commitments to $250.0 million. Proceeds of the New Credit Facility may be used for general corporate and working capital purposes. The New Credit Facility replaces the ABL Credit Facility and the senior secured revolving facility of Legacy Expro, which both terminated on October 1,2021 in connection with the Merger. In connection with the Merger Agreement, the Company, FICV, and Mosing Holdings entered into the A&R TRA that amended and restated the Original TRA. Pursuant to the A&R TRA, on October 1,2021, the Company made a payment of $15 million cash to settle the early termination payment obligations that would otherwise be owed to Mosing Holdings under the Original TRA as a result of the Merger. The A&R TRA also provides for other contingent payments to be made by the Company to Mosing Holdings in the future in the event the Company realizes cash tax savings from tax attributes covered under the Original TRA during the ten year period following October 1,2021 in excess of $18,057,000. Please refer to the Company's Current Report on Form 8-K filed on October 1, 2021 for further details regarding the completion of the Merger, the New Credit Facility and the A&R TRA. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (this “Form 10-Q”) includes certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include those that express a belief, expectation or intention, as well as those that are not statements of historical fact. Forward-looking statements include information regarding our future plans and goals and our current expectations with respect to, among other things: • business strategy and prospects for growth; post-Merger integration; cash flows and liquidity; financial strategy, budget, projections and operating results; the amount, nature and timing of capital expenditures; the availability and terms of capital; competition and government regulations; and general economic conditions. These forward-looking statements are generally accompanied by words such as “anticipate,” “believe,” “estimate,” “expect,” “goal,” “plan,” “potential,” “predict,” “project,” or other terms that convey the uncertainty of future events or outcomes, although not all forward-looking statements contain such identifying words. The forward-looking statements in this Form 10-Q speak only as of the date of this report; we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. Forward-looking statements are not assurances of future performance and involve risks and uncertainties. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties include, but are not limited to, the following: continuing uncertainty relating to global crude oil demand and crude oil prices that correspondingly may lead to further significant reductions in domestic oil and gas activity, which in turn could result in further significant declines in demand for our products and services; uncertainty regarding the extent and duration of the remaining restrictions in the United States and globally on various commercial and economic activities due to the COVID-19 virus, including uncertainty regarding the re-imposition of restrictions due to resurgences in infection rates and the emergence of new, more contagious or virulent strains of COVID-19; such restrictions are designed to protect public health but also have the effect of significantly reducing demand for oil and gas, which may correspondingly decrease demand for our products and services; uncertainty regarding the timing, pace and extent of an economic recovery in the United States and elsewhere, which in turn will likely affect demand for crude oil and therefore the demand for the products and services we provide and the commercial opportunities available to us; the impact of current and future laws, rulings, governmental regulations, accounting standards and statements, and related interpretations; unique risks associated with our offshore operations; political, economic and regulatory uncertainties in our international operations; our ability to develop new technologies and products; our ability to protect our intellectual property rights; our ability to employ and retain skilled and qualified workers; the level of competition in our industry; operational safety laws and regulations; international trade laws and sanctions; weather conditions and natural disasters; global or national health concerns, including health epidemics, including COVID-19; policy or regulatory changes domestically in the United States; uncertainty with respect to integration and realization of expected cost synergies following completion of the Merger; and litigation risk associated with the Merger. The impact of the These and other important factors that could affect our operating results and performance are described in (1) “Risk Factors” in Part II, Item 1A of this Form 10-Q, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Form 10-Q, and elsewhere within this Form 10-Q, (2) Item 2. The following discussion and analysis of This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors, including those described in the sections titled Merger Agreement On March 10, 2021, Frank’s and New Eagle Holdings Limited, an exempted company limited by shares incorporated under the laws of Frank's Prior to the Merger Prior to the Merger, Frank's was a global provider of highly engineered tubular services, tubular fabrication and specialty well construction and well intervention solutions to the oil and gas industry and Frank's conducted its business through three operating segments: • Tubular Running Services. The Tubular Running Services (“TRS”) segment provided tubular running services globally. Internationally, the TRS segment operated in the majority of the offshore oil and gas markets and also in several onshore regions with operations in approximately 40 countries on six continents. In the U.S., the TRS segment provided services in the active onshore oil and gas drilling regions, including the Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale and Utica Shale, as well as in the U.S. Gulf of Mexico. Customers in these markets are primarily large exploration and production companies, including international oil and gas companies, national oil and gas companies, major independents and other oilfield service companies. Tubulars. The Tubulars segment designed, manufactured and distributed connectors and casing attachments for large outside diameter (“OD”) heavy wall pipe. Additionally, the Tubulars segment sold large OD pipe originally manufactured by various pipe mills, as plain end or fully fabricated with proprietary welded or thread-direct connector solutions and provided specialized fabrication and welding services in support of offshore deepwater projects, including drilling and production risers, flowlines and pipeline end terminations, as well as long-length tubular assemblies up to 400 feet in length. The Tubulars segment also specialized in the development, manufacture and supply of proprietary drilling tool solutions that focused on improving drilling productivity through eliminating or mitigating traditional drilling operational risks. Cementing Equipment. The Cementing Equipment (“CE”) segment provided specialty equipment to enhance the safety and efficiency of rig operations. It provided specialized equipment, services and products utilized in the construction of the wellbore in both onshore and offshore environments. The product portfolio of this segment included casing accessories that served to improve the installation of casing, centralization and wellbore zonal isolation, as well as enhance cementing operations through advance wiper plug and float equipment technology. The CE segment also provided services and products utilized in the construction, completion or abandonment of the wellbore. These solutions are primarily used to isolate portions of the wellbore through the setting of barriers downhole to allow for rig evacuation in case of inclement weather, maintenance work on other rig equipment, squeeze cementing, pressure testing within the wellbore, hydraulic fracturing and temporary and permanent abandonments. These offerings improve operational efficiencies and limit non-productive time if unscheduled events are encountered at the wellsite. Expro after the Following completion of the Merger, the business conducted by Legacy Expro became the majority of the Outlook The outlook for the last quarter of 2021 and through 2022 indicates a continuing modest recovery in We expect that crude oil demand and associated customer activity will continue to While the Gulf of Mexico is expected to remain relatively flat through 2022, operators will continue to look to We anticipate Evaluation of Operations Prior to the Merger, management used a number of financial and operational measures to routinely analyze and evaluate the performance of Revenue Company management analyzes revenue growth by comparing actual monthly revenue to Adjusted EBITDA and Adjusted EBITDA Margin Frank's defines Adjusted EBITDA as net income (loss) before interest income, net, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on disposal of assets, foreign currency gain or loss, equity-based compensation, unrealized and realized gains or losses, The following table presents a reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA margin for each of the periods presented (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Net loss Goodwill impairment Severance and other charges, net Interest (income) expense, net Depreciation and amortization Income tax expense (benefit) Gain on disposal of assets Foreign currency (gain) loss Charges and credits (1) Adjusted EBITDA Adjusted EBITDA margin (1) For a reconciliation of Safety and Quality Performance Safety is one of our primary core values. Maintaining a strong safety record is a critical component of our operational success. Many of our customers have safety standards we must satisfy before we can perform services. As a result, we continually monitor our safety performance through the evaluation of safety observations, job and customer surveys, and safety data. The primary measure for Consolidated Results of Operations The following table presents Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 (Unaudited) Revenue: Services Products Total revenue Operating expenses: Cost of revenue, exclusive of depreciation and amortization Services Products General and administrative expenses Depreciation and amortization Goodwill impairment Severance and other charges, net Gain on disposal of assets Operating loss Other income (expense): Other income, net Interest income (expense), net Foreign currency gain (loss) Total other income (expense) Loss before income taxes Income tax expense (benefit) Net loss Three Months Ended Revenue. Cost of revenue, exclusive of depreciation and amortization. General and administrative expenses. Depreciation and amortization. Severance and other charges, net. Severance and other charges, net for the three months ended September 30, 2021 decreased by $0.6 million, or 16.7%, to $2.9 million from $3.5 million for the three months ended September 30, 2020. Severance and other charges, net for the three months ended September 30, 2021 benefited from lower severance costs as the prior year was negatively impacted by the effects of COVID-19. See Note 15—Severance and Other Charges, net in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information. Foreign currency gain (loss). Foreign currency gain (loss) for the three months ended September 30, 2021 changed by $6.9 million, to a loss of $4.5 million from a gain of $2.3 million for the three months ended September 30, 2020. The change in foreign currency results year-over-year was primarily driven by weakening of the U.S. dollar in the current period as compared to the prior year period against the Norwegian Krone and Pound Sterling. Income tax expense. Income tax expense for the three months ended September 30, 2021 decreased by $2.4 million to $4.0 million from $6.4 million for the three months ended September 30, 2020, primarily as a result of a change in the jurisdictional sources of income, namely a decrease in revenue in certain regions that apply withholding or revenue based taxes. We are subject to many U.S. and foreign tax jurisdictions and many tax agreements and treaties among the various taxing authorities. Our operations in these jurisdictions are taxed on various bases such as income before taxes, deemed profits (which is generally determined using a percentage of revenue rather than profits) and withholding taxes based on revenue; consequently, the relationship between our pre-tax income from operations and our income tax provision varies from period to period based on the overall effective tax rate for all jurisdictions in which we operate. Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020 Revenue. Revenue from external customers, excluding intersegment sales, for the nine months ended September 30, 2021 increased by $23.6 million, or 8.0%, to $317.6 million from $294.0 million for the nine months ended September 30, 2020. Revenue increased across all segments as the prior year was significantly impacted by the onset of the COVID-19 pandemic and resulting decline in oil prices. Revenue for our segments is discussed separately below under the heading “Operating Segment Results.” Cost of revenue, exclusive of depreciation and amortization. Cost of revenue for the nine months ended September 30, 2021 increased by $11.0 million, or 4.7%, to $244.0 million from $233.0 million for the nine months ended September 30, 2020. The increase was driven by improved activity levels as compared to the prior year period in Frank's TRS segment. General and administrative expenses. General and administrative expenses for the nine months ended September 30, 2021 decreased by $16.2 million, or 23.9%, to $51.4 million from $67.6 million for the nine months ended September 30, 2020 due to previously implemented restructuring and cost cutting measures. Depreciation and amortization. Depreciation and amortization for the nine months ended September 30, 2021 decreased by $7.4 million, or 14.0%, to $45.5 million from $52.9 million for the nine months ended September 30, 2020, as a result of a lower depreciable base and less intangible asset amortization. Goodwill impairment. Severance and other charges, net Foreign currency Income tax expense (benefit). The following table presents revenue and Adjusted EBITDA by segment (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Revenue: Tubular Running Services Tubulars Cementing Equipment Total Segment Adjusted EBITDA (1): Tubular Running Services Tubulars Cementing Equipment Corporate (2) (1) Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. (For a reconciliation of Adjusted EBITDA, see “Adjusted EBITDA and Adjusted EBITDA Margin”). (2) Includes certain expenses not attributable to a particular segment, such as costs related to support functions and corporate executives. Three Months Ended Tubular Running Services Revenue for the TRS segment was Adjusted EBITDA for the TRS segment was Tubulars Revenue for the Tubulars segment was Adjusted EBITDA for the Tubulars segment was Cementing Equipment Revenue for the CE segment was $18.5 million for the three months ended September 30, 2021, an increase of $3.5 million, or 23.5%, compared to $15.0 million for the same period in 2020, driven by improved drilling activity and increased product sales in the U.S. as a result of the recovery in oil prices. Adjusted EBITDA for the CE segment was $6.4 million for the three months ended September 30, 2021, an increase of $3.0 million, or 89.2%, compared to $3.4 million for the same period in 2020, due to increased revenue, particularly in the U.S. offshore market and ongoing cost Corporate Adjusted EBITDA for Corporate was a loss of Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020 Tubular Running Services Revenue for the TRS segment was $215.8 million for the nine months ended September 30, 2021, an increase of $11.0 million, or 5.4%, compared to $204.8 million for the same period in 2020. The increase was driven by improved activity levels across Africa and Europe as the prior year was significantly impacted by COVID-19-related activity disruptions and customer spending cuts in response to falling oil prices. Adjusted EBITDA for the TRS segment was $29.8 million for the nine months ended September 30, 2021, an Tubulars Revenue for the Tubulars segment was $47.0 million for the nine months ended September 30, 2021, an increase of $9.2 million, or 24.5%, compared to $37.8 million for the same period in 2020, primarily as a result of an increase in Gulf of Mexico and international tubular products sales. Adjusted EBITDA for the Tubulars segment was $7.5 million for the nine months ended September 30, 2021, an increase of $3.6 million, or 92.7%, compared to $3.9 million for the same period in 2020. An increase in high margin Gulf of Mexico and international tubular products sales contributed to the improvement. Cementing Equipment Revenue for the CE segment was $54.8 million for the nine months ended September 30, 2021, an increase of $3.3 million, or Adjusted EBITDA for the CE segment was $16.0 million for the nine months ended September 30, 2021, an increase of $9.2 million, or 135.6%, compared to $6.8 million for the same period in 2020, primarily due to improved activity levels and cost cutting measures implemented after the onset of the pandemic. Corporate Adjusted EBITDA for Corporate was a loss of $20.5 million for the nine months ended September 30, 2021, an improvement of $4.2 million, or 17.0%, compared to a loss of Liquidity and Capital Resources Liquidity At The Total capital expenditures associated with Frank's product lines are estimated to be approximately We Credit Facility On November 5, 2018, FICV, Frank’s International, LLC and Blackhawk, as borrowers, and FINV, certain of FINV’s subsidiaries, including FICV, Frank’s International, LLC, Blackhawk, Frank’s International GP, LLC, Frank’s International, LP, Frank’s International LP B.V., Frank’s International Partners B.V., Frank’s International Management B.V., Blackhawk Intermediate Holdings, LLC, Blackhawk Specialty Tools, LLC, and Trinity Tool Rentals, L.L.C., as guarantors, entered into a In connection with the Merger, on On October 1, 2021, the Company and certain of Mosing Holdings, LLC, a Delaware limited liability company (“Mosing Holdings”), converted all of its shares of Frank's Series A convertible preferred stock into shares of Frank’s common stock on August 26, 2016, in connection with its delivery to FINV of all of its interests in FICV (the “Conversion”). As a result of an election under Section 754 of the Internal Revenue Code made by FICV, the Conversion resulted in an adjustment to the tax basis of the tangible and intangible assets of FICV with respect to the portion of FICV transferred to FINV by Mosing Holdings. These adjustments are solely allocable to FINV. The adjustments to the tax basis of the tangible and intangible assets of FICV described above would not have been available absent the Conversion. The basis adjustments may reduce the amount of tax that FINV would otherwise be required to pay in the future. These basis adjustments may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets. The tax receivable agreement (the “Original TRA”) that FINV entered into In connection with the Merger Agreement, FINV, FICV and Mosing Holdings Cash flows from Nine Months Ended September 30, 2021 2020 Operating activities Investing activities Financing activities Effect of exchange rate changes on cash Net increase (decrease) in cash, cash equivalents and restricted cash Statements of cash flows for entities with international operations that use the local currency as the functional currency exclude the effects of the changes in foreign currency exchange rates that occur during any given year, as these are noncash changes. As a result, changes reflected in certain accounts on the condensed consolidated Operating Activities Cash flow Investing Activities Cash flow Financing Activities Cash flow used in financing activities was Frank's did not have any material off-balance sheet arrangements as of September 30, 2021, with the exception of purchase obligations. Critical Accounting Policies There were no changes to Impact of Recent Accounting Pronouncements Refer to Note 1—Basis of Presentation in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of accounting standards For quantitative and qualitative disclosures about market risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in (a) Evaluation of Disclosure Controls and Procedures. As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of (b) Change in Internal Control Over Financial Reporting. Except as described below, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has determined that there were no changes in With the closing of the Merger on October 1, 2021, there was a change in management and a process was initiated to integrate Frank's and Legacy Expro. We expect these changes to have a significant impact on internal control over financial reporting going forward. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business post-Merger, but cannot assure you that such actions will be sufficient to provide us with effective internal control over financial reporting. During the first quarter of 2021, We are Frank’s has been conducting, and As disclosed above, In addition to the other information set forth in this report, you should carefully consider the risks discussed below and under the heading “Risk Factors” in Risk Factors Relating to the Merger The The Merger involves the integration of two companies that prior to October 1, 2021, operated independently. The success of the Merger will depend—in large part—on the ability of the combined company to realize the anticipated benefits, including cost savings, among others, from combining the businesses of Frank’s and Legacy Expro. To realize these anticipated benefits, the businesses of Frank’s and Legacy Expro must be successfully integrated. This integration will be complex and time-consuming. The failure to integrate successfully and to manage successfully the challenges presented by the integration process may result in the combined company not achieving the anticipated benefits of the Merger. Potential difficulties that may be encountered in the integration process include the following: • integrating the businesses of Frank’s and Legacy Expro in a manner that permits the combined company to achieve the full benefit of cost savings that are anticipated to result from the Merger; • complexities associated with managing the larger, more complex combined business; • complexities associated with integrating the workforces of the two companies; • potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the post-Merger integration, including one-time cash costs to integrate the two companies that may exceed the anticipated range of such one-time cash costs that Frank’s and Legacy Expro estimated as of the date of execution of the Merger Agreement; and • performance shortfalls of the combined company as a result of the diversion of management’s attention caused by completing the Merger and integrating the companies’ operations. Any of these difficulties in successfully integrating the businesses of Frank’s and Legacy Expro, or any delays in the integration process, could adversely affect the combined company’s ability to achieve the anticipated benefits of the Merger and could adversely affect the combined company’s business, financial results, financial condition and stock price. Even if the combined company is able to integrate the business operations of Frank’s and Legacy Expro successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, cost savings, innovation and operational efficiencies that the Company management currently expects from this integration or that these benefits will be achieved within the anticipated time frame. The synergies attributable to the Merger may vary from expectations. The Company may fail to realize the anticipated benefits and synergies expected from the Merger, which could adversely affect its business, financial condition and operating results. The success of the Merger will depend, in significant part, on the combined company’s ability to successfully integrate the acquired business and realize the anticipated strategic benefits and synergies from the combination. Company management believes that the Merger will provide operational and financial scale, increasing free cash flow, and enhancing the combined company’s corporate rate of return. However, achieving these goals requires, among other things, realization of the targeted cost synergies expected from the Merger. The anticipated benefits of the Merger and actual operating, technological, strategic and revenue opportunities may not be The Company will incur integration-related costs in the The Company will incur significant integration-related costs. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. These expenses could, particularly in the The future results of the Company will suffer if the Company does not effectively manage its expanded operations. The size of the business of the Company has increased significantly beyond the size of either Frank’s or Legacy Expro’s business. The combined company’s future success depends, in part, upon its ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, cost savings, revenue enhancements and other benefits currently anticipated from the Merger. The market price of The market price of the Company Common Stock may be volatile. Specific factors that may have a significant effect on the market price for the Company Common Stock include, among others, the following: • changes in stock market analyst recommendations or earnings estimates regarding the Company, other companies comparable to it or companies in the industries they serve; • actual or anticipated fluctuations in the Company’s operating results or future prospects; • reaction to public announcements by the Company; • strategic actions taken by the Company or its competitors, such as acquisitions, divestitures or restructurings; • failure of the Company to achieve the perceived benefits of the Merger, including financial results and anticipated synergies, as rapidly as or to the extent anticipated by financial or industry analysts; • adverse conditions in the financial market or general U.S. or international economic conditions, including those resulting from war, incidents of terrorism and response to such events; and • sales of the Company Common Stock by members of its management team or significant shareholders. Additionally, Company shareholders may reduce or eliminate their investment in the Company for various reasons, including in order to comply with institutional investing guidelines, to increase diversification, to track any rebalancing of stock Diversion of management and integration related uncertainty could harm the Company and may result in the loss of key employees, which could adversely affect the future business and operations of the Company. The Company’s success is dependent upon the experience and industry knowledge of its officers and other key employees. The post-Merger integration could result in current and prospective employees’ experiencing uncertainty about their future with the Company. These uncertainties may impair the ability of the Company to retain, recruit or motivate key personnel. In addition, integrating the companies’ operations will require a significant amount of time and attention from management of the two companies. The diversion of management’s attention away from ongoing operations could adversely affect business relationships of the combined company. The combined company’s ability to utilize the historic U.S. net operating loss carryforwards of Frank’s and of Legacy Expro may be limited. As of December 31, 2020, Frank’s and Legacy Expro had U.S. federal net operating loss carryforwards (“NOLs”) of approximately $377.9 million and $261.1 million, respectively, $168.2 million and $206.4 million, respectively, of which were incurred prior to January 1, 2018 and will begin to expire, if unused, in 2036 and 2030, respectively, and $209.7 million and $54.7 million, respectively, of which were incurred on or after January 1, 2018 and will not expire and will be carried forward indefinitely. The combined company’s ability to utilize these NOLs and other tax attributes to reduce future taxable income following the consummation of the Merger Frank’s Certain of the shareholders of the Company have the ability to exercise significant influence over certain corporate actions. Affiliates of Oak Hill Advisors, L.P. and members of the Mosing family and entities they control could have significant influence over the outcome of matters requiring a shareholder vote, including the election of directors, the adoption of any amendment to the Company’s Articles and the approval of mergers and other significant corporate transactions. Their influence over the Company may have the effect of delaying or preventing a change of control or may adversely affect the voting and other rights of other shareholders. In addition, affiliates of Oak Hill Advisors, L.P. have the right to designate two nominees for election to the combined company’s nine member Board and members of the Mosing family have the right to designate one nominee for election to such Board. Finally, if these shareholders were in the Following is a summary of Total Number of Maximum Number (or Shares Purchased as Approximate Dollar Value) Part of Publicly of Shares that may yet Total Number Average Announced Plans or be Purchased Under the Period of Shares Purchased (1) Price Paid per Share Programs (2) Program (2) July 1 - July 31 August 1 - August 31 September 1 - September 30 Total (1) (2) The exhibits required to be filed by Item 6 are set forth in the Exhibit Index included below. EXHIBIT INDEX † Represents management contract or compensatory plan or arrangement. * Filed herewith. ** Furnished herewith. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EXPRO GROUP HOLDINGS N.V. Date: November 8, 2021 By: /s/ Quinn P. Fanning Quinn P. Fanning Chief Financial Officer (Principal Financial Officer) $ 202,997 $ 209,575 1,742 1,672 1,882 2,252 130,585 110,607 91,776 81,718 7,998 2,939 6,554 7,744 443,534 416,507 228,994 272,707 42,785 42,785 8,756 7,897 15,008 18,030 26,646 28,116 21,409 30,859 $ 787,132 $ 816,901 $ 114,962 $ 99,986 8,215 7,832 89 586 0 1,674 123,266 110,078 0 1,548 19,303 21,208 23,123 22,818 165,692 155,652 2,900 2,866 1,098,236 1,087,733 (428,930 ) (377,346 ) (28,798 ) (31,966 ) (21,968 ) (20,038 ) 621,440 661,249 $ 787,132 $ 816,901 CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) March 31, December 31, 2021 2020 Assets (Unaudited) Current assets: Cash and cash equivalents $ 191,339 $ 209,575 Restricted cash 1,656 1,672 Short-term investments 2,252 2,252 Accounts receivables, net 116,581 110,607 Inventories, net 94,738 81,718 Assets held for sale 3,681 2,939 Other current assets 8,416 7,744 Total current assets 418,663 416,507 Property, plant and equipment, net 255,401 272,707 Goodwill 42,785 42,785 Intangible assets, net 11,062 7,897 Deferred tax assets, net 16,482 18,030 Operating lease right-of-use assets 27,972 28,116 Other assets 30,907 30,859 Total assets $ 803,272 $ 816,901 Liabilities and Equity Current liabilities: Accounts payable and accrued liabilities $ 107,085 $ 99,986 Current portion of operating lease liabilities 8,066 7,832 Deferred revenue 640 586 Other current liabilities 960 1,674 Total current liabilities 116,751 110,078 Deferred tax liabilities 0 1,548 Non-current operating lease liabilities 20,766 21,208 Other non-current liabilities 25,257 22,818 Total liabilities 162,774 155,652 Commitments and contingencies (Note 14) 0 0 Stockholders’ equity: Common stock, €0.01 par value, 798,096,000 shares authorized, 230,761,910 and 228,806,301 shares issued and 227,712,419 and 226,324,559 shares outstanding 2,890 2,866 Additional paid-in capital 1,091,028 1,087,733 Accumulated deficit (401,232) (377,346) Accumulated other comprehensive loss (30,250) (31,966) Treasury stock (at cost), 3,049,491 and 2,481,742 shares (21,938) (20,038) Total stockholders’ equity 640,498 661,249 Total liabilities and equity $ 803,272 $ 816,901 $ 95,821 $ 66,418 $ 267,864 $ 246,084 19,120 17,999 49,729 47,926 114,941 84,417 317,593 294,010 70,627 56,574 203,181 197,005 15,489 13,733 40,811 36,007 18,591 18,665 51,465 67,634 14,092 15,950 45,531 52,920 0 0 0 57,146 2,958 3,549 13,733 29,436 (72 ) (308 ) (1,733 ) (898 ) (6,744 ) (23,746 ) (35,395 ) (145,240 ) 347 109 877 2,291 (167 ) (93 ) (555 ) 618 (4,548 ) 2,334 (4,698 ) (5,865 ) (4,368 ) 2,350 (4,376 ) (2,956 ) (11,112 ) (21,396 ) (39,771 ) (148,196 ) 3,969 6,395 11,812 (182 ) $ (15,081 ) $ (27,791 ) $ (51,583 ) $ (148,014 ) $ (0.40 ) $ (0.74 ) $ (1.36 ) $ (3.93 ) 38,066 37,691 37,957 37,659 FRANK’S INTERNATIONAL N.V. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended March 31, 2021 2020 Revenue: Services $ 81,523 $ 105,083 Products 13,288 18,409 Total revenue 94,811 123,492 Operating expenses: Cost of revenue, exclusive of depreciation and amortization Services 63,935 79,380 Products 10,914 13,988 General and administrative expenses 16,447 26,683 Depreciation and amortization 16,107 19,718 Goodwill impairment 0 57,146 Severance and other charges, net 7,376 20,725 (Gain) loss on disposal of assets (182) 60 Operating loss (19,786) (94,208) Other income (expense): Other income, net 125 2,026 Interest income (expense), net (287) 533 Foreign currency loss (2,868) (9,892) Total other expense (3,030) (7,333) Loss before income taxes (22,816) (101,541) Income tax expense (benefit) 1,070 (15,563) Net loss $ (23,886) $ (85,978) Loss per common share: Basic and diluted $ (0.11) $ (0.38) Weighted average common shares outstanding: Basic and diluted 227,019 225,505 $ (15,081 ) $ (27,791 ) $ (51,583 ) $ (148,014 ) 1,586 (547 ) 3,169 (262 ) 1,586 (547 ) 3,169 (262 ) $ (13,495 ) $ (28,338 ) $ (48,414 ) $ (148,276 ) FRANK’S INTERNATIONAL N.V. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) (Unaudited) Three Months Ended March 31, 2021 2020 Net loss $ (23,886) $ (85,978) Other comprehensive income: Foreign currency translation adjustments 1,716 424 Total other comprehensive income 1,716 424 Comprehensive loss $ (22,170) $ (85,554) 37,585 $ 2,846 $ 1,075,809 $ (220,805 ) $ (30,298 ) $ (17,258 ) $ 810,294 0 0 0 (321 ) 0 0 (321 ) — 0 0 (85,978 ) 0 0 (85,978 ) — 0 0 0 424 0 424 — 0 2,146 0 0 0 2,146 156 10 (10 ) 0 0 0 0 21 1 551 0 0 0 552 (49 ) 0 0 0 0 (1,056 ) (1,056 ) (62 ) 0 0 0 0 (1,017 ) (1,017 ) 37,651 $ 2,857 $ 1,078,496 $ (307,104 ) $ (29,874 ) $ (19,331 ) $ 725,044 — 0 0 (34,245 ) 0 0 (34,245 ) — 0 0 0 (139 ) 0 (139 ) — 0 3,515 0 0 0 3,515 38 3 (3 ) 0 0 0 0 (2 ) 0 0 0 0 (31 ) (31 ) (32 ) 0 0 0 0 (480 ) (480 ) 37,655 $ 2,860 $ 1,082,008 $ (341,349 ) $ (30,013 ) $ (19,842 ) $ 693,664 — 0 0 (27,791 ) 0 0 (27,791 ) — 0 0 0 (547 ) 0 (547 ) — 0 2,773 0 0 0 2,773 9 1 (1 ) 0 0 0 0 35 2 380 0 0 0 382 (3 ) 0 0 0 0 (38 ) (38 ) 37,696 $ 2,863 $ 1,085,160 $ (369,140 ) $ (30,560 ) $ (19,880 ) $ 668,443 FRANK’S INTERNATIONAL N.V. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) (Unaudited) Three Months Ended March 31, 2020 Accumulated Additional Other Total Common Stock Paid-In Accumulated Comprehensive Treasury Stockholders’ Shares Value Capital Deficit Income (Loss) Stock Equity Balances at December 31, 2019 225,511 $ 2,846 $ 1,075,809 $ (220,805) $ (30,298) $ (17,258) $ 810,294 Cumulative effect of accounting change — — — (321) — — (321) Net loss — — — (85,978) — — (85,978) Foreign currency translation adjustments — — — — 424 — 424 Equity-based compensation expense — — 2,146 — — — 2,146 Common shares issued upon vesting of share-based awards 937 10 (10) — — — 0 Common shares issued for employee stock purchase plan 126 1 551 — — — 552 Treasury shares withheld (293) — — — — (1,056) (1,056) Share repurchase program (373) — — — — (1,017) (1,017) Balances at March 31, 2020 225,908 $ 2,857 $ 1,078,496 $ (307,104) $ (29,874) $ (19,331) $ 725,044 Three Months Ended March 31, 2021 Accumulated Additional Other Total Common Stock Paid-In Accumulated Comprehensive Treasury Stockholders’ Shares Value Capital Deficit Income (Loss) Stock Equity Balances at December 31, 2020 226,325 $ 2,866 $ 1,087,733 $ (377,346) $ (31,966) $ (20,038) $ 661,249 Net loss — — — (23,886) — — (23,886) Foreign currency translation adjustments — — — — 1,716 — 1,716 Equity-based compensation expense — — 2,872 — — — 2,872 Common shares issued upon vesting of share-based awards 1,717 21 (21) — — — 0 Common shares issued for employee stock purchase plan 238 3 444 — — — 447 Treasury shares withheld (568) — — — — (1,900) (1,900) Balances at March 31, 2021 227,712 $ 2,890 $ 1,091,028 $ (401,232) $ (30,250) $ (21,938) $ 640,498 EXPRO GROUP HOLDINGS N.V. (formerly named Frank's International N.V.) FRANK’S INTERNATIONAL N.V. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 2021 2020 Cash flows from operating activities Net loss $ (23,886) $ (85,978) Adjustments to reconcile net loss to cash from operating activities Depreciation and amortization 16,107 19,718 Equity-based compensation expense 2,872 2,146 Goodwill impairment 0 57,146 Loss on asset impairments and retirements 307 20,187 Amortization of deferred financing costs 97 97 Deferred tax provision (benefit) 0 (1,690) Provision for bad debts 209 1,280 (Gain) loss on disposal of assets (182) 60 Changes in fair value of investments (395) 2,411 Other 0 (381) Changes in operating assets and liabilities Accounts receivable (6,806) (16,129) Inventories (12,463) (1,855) Other current assets (675) (814) Other assets 267 139 Accounts payable and accrued liabilities 9,192 (14,860) Deferred revenue 53 67 Other non-current liabilities (178) (3,796) Net cash used in operating activities (15,481) (22,252) Cash flows from investing activities Purchases of property, plant and equipment (2,346) (9,968) Proceeds from sale of assets 2,073 70 Investment in intellectual property (1,608) 0 Other (75) (141) Net cash used in investing activities (1,956) (10,039) Cash flows from financing activities Repayments of borrowings (712) 0 Treasury shares withheld for taxes (1,900) (1,056) Treasury share repurchase 0 (1,017) Proceeds from the issuance of ESPP shares 447 552 Net cash used in financing activities (2,165) (1,521) Effect of exchange rate changes on cash 1,350 9,327 Net decrease in cash, cash equivalents and restricted cash (18,252) (24,485) Cash, cash equivalents and restricted cash at beginning of period 211,247 196,740 Cash, cash equivalents and restricted cash at end of period $ 192,995 $ 172,255 37,721 $ 2,866 $ 1,087,733 $ (377,346 ) $ (31,966 ) $ (20,038 ) $ 661,249 — 0 0 (23,886 ) 0 0 (23,886 ) — 0 0 0 1,716 0 1,716 — 0 2,872 0 0 0 2,872 286 21 (21 ) 0 0 0 0 39 3 444 0 0 0 447 (94 ) 0 0 0 0 (1,900 ) (1,900 ) 37,952 $ 2,890 $ 1,091,028 $ (401,232 ) $ (30,250 ) $ (21,938 ) $ 640,498 — 0 0 (12,617 ) 0 0 (12,617 ) — 0 0 0 (134 ) 0 (134 ) — 0 3,425 0 0 0 3,425 80 6 (6 ) 0 0 0 0 (1 ) 0 0 0 0 (30 ) (30 ) 38,031 $ 2,896 $ 1,094,447 $ (413,849 ) $ (30,384 ) $ (21,968 ) $ 631,142 — 0 0 (15,081 ) 0 0 (15,081 ) — 0 0 0 1,586 0 1,586 — 0 3,307 0 0 0 3,307 35 4 482 0 0 0 486 38,066 $ 2,900 $ 1,098,236 $ (428,930 ) $ (28,798 ) $ (21,968 ) $ 621,440 $ (51,583 ) $ (148,014 ) 45,531 52,920 9,604 8,434 0 57,146 307 20,532 291 291 1,474 (1,783 ) 852 980 (1,733 ) (898 ) (863 ) 218 0 (380 ) (23,149 ) 63,307 (7,969 ) (3,625 ) 1,137 2,567 756 667 15,910 (22,486 ) (498 ) (513 ) (2,263 ) (4,048 ) (12,196 ) 25,315 (7,613 ) (25,722 ) 4,300 7,037 11,603 2,832 (1,294 ) 0 (1,608 ) 0 (799 ) (356 ) 4,589 (16,209 ) (1,674 ) 0 (1,930 ) (1,125 ) 0 (1,498 ) 933 934 (2,671 ) (1,689 ) 3,770 3,267 (6,508 ) 10,684 211,247 196,740 $ 204,739 $ 207,424 1—1—Basis of PresentationNature of Business, “Frank's” or the “Company”, as the context requires), a limited liability company organized under the laws of the Netherlands, is a global provider of highly engineered tubular services, tubular fabrication and specialty well construction and well intervention solutions to the oil and gas industry. FINV provides services and products to leading exploration and production companies in both offshore and onshore environments with a focus on complex and technically demanding wells. The impact of the Coronavirus Disease 2019 (“COVID-19”“Frank’s”) pandemic and related economic, business and market disruptions is evolving rapidly, and its future effects are uncertain. The actual impact of these recent developments on our business will depend on many factors, many of which are beyond management's control and knowledge. It is therefore difficult for management to assess or predict with accuracy the broad future effects of this health crisis on the global economy, the energy industry or the Company. As additional information becomes available, events or circumstances change and strategic operational decisions are made by management, further adjustments may be required which could have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows.Pending Merger with Expro Group Holdings International LimitedOn March 10, 2021, FINV 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 FINV (“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, (“Expro”), pursuant to whichproviding for the merger of Legacy Expro will merge with and into Merger Sub in an all-stock transaction, with Merger Sub surviving the merger as a direct, wholly owned subsidiary of FINVthe Frank’s (the “Merger”). If theThe Merger is completed, each ordinary share of Expro common stock, par value $0.01 per share (“Expro Ordinary Shares”), issued closed on October 1, 2021, and outstanding immediately prior to the effective time of the Merger (the “Effective Time”), will be converted into the right to receive a number of shares of Frank’s common stock equal to 7.2720 (subject to certain adjustments under the Merger Agreement, the “Exchange Ratio”). Upon consummation of the transactions contemplated by the Merger Agreement and the Plan of Merger (as defined in the Merger Agreement) (collectively, the “Transactions”), FINV expects that its current shareholders will own approximately 35% of the Company after completion of the Merger and related transactions (such entity, the “Combined Company”), and current Expro shareholders will own approximately 65% of the Combined Company. Following the Merger, the name of FINV will be changed toFrank's was renamed “Expro Group Holdings N.V.” The closingMerger will be accounted for using the acquisition method of accounting with Legacy Expro being identified as the Transactions, which is expected to occur duringaccounting acquirer. As the thirdMerger did not close until after the quarter ended September 30, 2021, the historical financial statements presented in this Quarterly Report on Form 10-Q reflect the financial position, results of 2021, is subject tooperations and cash flows of Frank's, the satisfaction or waiver of closing conditions, including, among others, the requisite approval of the shareholders of each of FINV and Expro pursuantPredecessor Registrant. of“Frank’s” or the “Predecessor Registrant” refers to Frank’s International N.V., the predecessor reporting entity prior to the Merger, Agreement.The Merger Agreement contains termination rights for each of FINVreferences to “Legacy Expro” refer to Expro Group Holdings International Limited, the entity acquired by the Company, and references to the “combined company,” the “Company,” “we,” “our,” and “us” refer to Expro including, among others, a termination right for each party ifGroup Holdings N.V., the successor reporting entity following the consummation of the Merger does not occur on or before 5:00 p.m. Houston, Texas time on October 31, 2021 (the “End Date”), subjectMerger. certain exceptions; provided, that if as of the End Date, all of the conditions precedent to closing of the Transactions under the Merger, Agreement, other than certain specified conditions, have been satisfied,Frank’s was a global provider of highly engineered tubular services, tubular fabrication and specialty well construction and well intervention solutions to the End Date will automatically be extendedoil and gas industry. Frank’s provided services and products to January 31, 2022. Upon terminationleading exploration and production companies in both offshore and onshore environments with a focus on complex and technically demanding wells.Agreement under specified circumstances, including, generally, the terminationbusiness conducted by Legacy Expro inbecame the eventmajority of FINV's entry into an agreement with respect to an alternative acquisition proposal, or a change of recommendationthe business conducted by the FINV boardCompany. Working for clients across the entire well life cycle, the Company is a leading provider of supervisory directorsenergy services, offering cost-effective, innovative solutions and what the boardCompany considers to be best-in-class safety and service quality. The Company’s extensive portfolio of managing directors of FINV (collectively, the “Board”)capabilities spans well construction, well flow management, subsea well access, and well integrity and intervention. The Company provides services in each case, prior to the time the FINV shareholder approval is obtained, FINV would be required to pay Expro a termination fee of $37.5 million. Upon terminationmany of the Merger Agreement under specified circumstances, including, generally,world’s major offshore and onshore energy basins, with over 100 locations and operations in approximately 60 countries. Expro’s broad portfolio of products and services provides solutions to enhance production and improve recovery across the termination by FINV in the event of Expro’s entry into an agreement with respect to an alternative acquisition proposal, or a change of recommendation by Expro’s board of directors (the “Expro Board”), in each case, prior to the time the Expro shareholder approval is obtained, Expro would be required to pay FINV a termination fee of $71.5 million.8FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSIn connection with the Merger Agreement, FINV, Frank’s International C.V. (“FICV”) and Mosing Holdings, LLC (“Mosing Holdings”) entered into an Amended and Restated Tax Receivable Agreement (the “A&R TRA”). Pursuant to the A&R TRA, FINV, FICV and Mosing Holdings have agreed, among other things to settle the early termination payment obligation that would otherwise be owed to Mosing Holdings under the TRA as a result of the Merger by the payment by FINV to Mosing Holdings of (i) $15 million cash at the closing of the Transactions and (ii) certain other contingent payments in the future in the event the Combined Company realizes cash tax savingswell lifecycle, from tax attributes covered under the TRA during the ten year period following the Closing Date in excess of $18,057,000, as more fully described in the A&R TRA. The terms of the A&R TRA are conditioned upon and subject to the closing of the Transactions and the payment to Mosing Holdings of the $15 million cash payment at the closing of the Transactions. If such conditions do not occur, the A&R TRA will be terminated and will be null and void and the TRA will remain in effect in accordance with its terms.March 31,September 30, 2021 and 2020 include the activities of FINV, FICV,Frank's International C.V. ("FICV"), Blackhawk Group Holdings, LLC (“Blackhawk”) and their wholly owned subsidiaries (either individually or together, as context requires, "Frank's" or "FINV") prior to the “Company,” “we,” “us” or “our”).Merger. All intercompany accounts and transactions have been eliminated for purposes of preparing these condensed consolidated financial statements.OurourFrank's independent registered public accounting firm. The consolidated balance sheet at December 31,2020, is derived from audited financial statements. However, certain information and footnote disclosures required by generally accepted accounting principles in the United States of America (“GAAP”) for complete annual financial statements have been omitted and, therefore, these interim financial statements should be read in conjunction with ourthe audited consolidated financial statements and notes thereto for the year ended December 31,2020, which are included in ourFrank's most recent Annual Report on Form 10-K10-K filed with the Securities and Exchange Commission (“SEC”) on March 1, 2021 (“(“Annual Report”). In the opinion of management, these condensed consolidated financial statements, which have been prepared pursuant to the rules of the SEC and GAAP for interim financial reporting, reflect all adjustments, which consisted only of normal recurring adjustments that were necessary for a fair statement of the interim periods presented. The results of operations for interim periods are not necessarily indicative of those for a full year.OurFrank's functional currency is primarily the United States dollar.ourFrank's operating income (loss), net income (loss), working capital, cash flows or total equity previously reported.ourFrank's consolidated financial position, results of operations and cash flows.9FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSWeFrank's adopted the guidance on January 1, 2020, and the adoption did not have a material impact on ourits consolidated financial statements. The new credit loss standard is expected to accelerate recognition of credit losses on our accounts receivable. See Note 3—Accounts Receivable, net for additional information regarding allowance for credit losses on ourFrank's accounts receivable.2—2—Cash, Cash Equivalents and Restricted CashMarch 31,September 30, 2021, and December 31, 2020, were as follows (in thousands):March 31, December 31, 2021 2020 Cash and cash equivalents $ 191,339 $ 209,575 Restricted cash 1,656 1,672 Total cash, cash equivalents and restricted cash shown in the statements of cash flows $ 192,995 $ 211,247 $ 202,997 $ 209,575 1,742 1,672 $ 204,739 $ 211,247 ourFrank's credit card program. Cash paid (received) for income taxes, net, was $2.5$6.2 million and $1.1$(5.5) million for the threenine months ended March 31,September 30, 2021 and 2020, respectively.3—3—Accounts Receivable, netMarch 31,September 30, 2021, and December 31, 2020, were as follows (in thousands):March 31, December 31, 2021 2020 Trade accounts receivable, net of allowance for credit losses of $4,112 and $3,857, respectively $ 67,171 $ 65,684 Unbilled receivables 29,923 26,215 Taxes receivable 15,392 14,292 549 549 Other receivables 3,546 3,867 Total accounts receivable, net $ 116,581 $ 110,607 $ 71,680 $ 65,684 40,125 26,215 15,974 14,292 24 549 2,782 3,867 $ 130,585 $ 110,607 (1)Amounts represent expenditures on behalf of non-consolidated affiliates.Note 4—Inventories, net Inventories at March 31, 2021 and December 31, 2020 were as follows (in thousands):March 31, December 31, 2021 2020 Pipe and connectors, net of allowance of $16,561 and $16,819, respectively $ 32,690 $ 22,642 Finished goods, net of allowance of $84 and $84, respectively 20,999 22,715 Work in progress 1,954 1,730 Raw materials, components and supplies 39,095 34,631 Total inventories, net $ 94,738 $ 81,718 FRANK’S INTERNATIONAL5—4—Inventories, net $ 22,896 $ 22,642 20,767 22,715 1,240 1,730 46,873 34,631 $ 91,776 $ 81,718 March 31,September 30, 2021, and December 31, 2020, (in thousands):Estimated
Useful Lives
in YearsMarch 31,
2021December 31,
2020Land — $ 31,080 $ 30,869 Land improvements 8-15 7,688 7,620 Buildings and improvements 13-39 118,592 121,105 Rental machinery and equipment 2-7 906,117 897,398 Machinery and equipment - other 7 54,869 54,842 Furniture, fixtures and computers 3-5 19,756 16,928 Automobiles and other vehicles 5 25,894 25,948 Leasehold improvements 7-15, or lease term if shorter 12,754 12,773 Construction in progress - machinery and equipment — 12,412 24,381 1,189,162 1,191,864 Less: Accumulated depreciation (933,761) (919,157) Total property, plant and equipment, net $ 255,401 $ 272,707 — $ 30,892 $ 30,869 8 - 15 7,621 7,620 13 - 39 113,196 121,105 2 - 7 906,859 897,398 7 51,961 54,842 3 - 5 20,040 16,928 5 25,704 25,948 12,536 12,773 — 10,755 24,381 1,179,564 1,191,864 (950,570 ) (919,157 ) $ 228,994 $ 272,707 threenine months ended March 31,September 30, 2020, weFrank's recorded fixed asset impairment charges of $15.5$15.6 million primarily associated with construction in progress in ourthe Cementing Equipment segment, which is included in severance and other charges, net on ourthe condensed consolidated statements of operations. During the first quarter of 2020, the results of the Company'sFrank's test for impairment of goodwill in the Cementing Equipment segment as a result of negative market indicators was a triggering event that indicated that ourFrank's long-lived tangible assets in this segment were impaired. Impairment testing performed in the first quarter of 2020 resulted in the determination that certain long-lived assets were not recoverable and that the estimated fair value was below the carrying value. Please see Note 15—Severance and Other Charges, net for additional details. NaNNo impairments associated with held for use assets were recognized during the three and nine months ended March 31,September 30, 2021.ourFrank's condensed consolidated balance sheet.March 31,September 30, 2021 and 2020 (in thousands): $ 12,471 $ 14,582 $ 40,626 $ 47,616 114 144 378 567 1,507 1,224 4,527 4,737 $ 14,092 $ 15,950 $ 45,531 $ 52,920 Three Months Ended March 31, 2021 2020 Services $ 14,472 $ 17,263 Products 138 239 General and administrative expenses 1,497 2,216 Total $ 16,107 $ 19,718 11FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS6—6—Goodwill and Intangible AssetsWe haveFrank's has 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. We complete ourFrank's has historically completed its assessment of goodwill impairment as of October 31 each year.COVID-19Coronavirus Disease 2019 ("COVID-19") pandemic and the failure by the Organization of Petroleum Exporting Countries (“OPEC”) and Russia price war in early to reach an agreement on lowering production quotas during the first quarter of 2020, we Frank's identified that it was more likely than not that the fair value of goodwill within ourits Cementing Equipment reporting unit was less than its carrying value. Based on the result of ourthe goodwill impairment test as of March 31, 2020, weFrank's recorded a $57.1 million impairment charge to goodwill, which is included in goodwill impairment on the condensed consolidated statements of operations. WeWeManagement of Frank's selected the assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions and estimated growth rates. OurThese estimates are based upon assumptions believed to be reasonable. However, given the inherent uncertainty in determining the assumptions underlying a discounted cash flow analysis, actual results may differ from those used in ourmanagement's valuation which could result in additional impairment charges in the future. Assuming all other assumptions and inputs used in the discounted cash flow analysis were held constant, a 50 basis point increase in the discount rate assumption would have increased the Cementing Equipment reporting unit goodwill impairment charge described above by approximately $4.3 million.March 31, 2021.September 30, 2021. At March 31,September 30, 2021, goodwill is allocated to ourFrank's reportable segments as follows: Cementing Equipment - approximately $24.1 million; Tubular Running Services - approximately $18.7 million.We evaluateFrank's has historically evaluated impairment of ourFrank's 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.12FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSourFrank's intangible assets as of March 31,September 30, 2021, and December 31, 2020 (in thousands):March 31, 2021 December 31, 2020 Gross Carrying Amount Accumulated Amortization Total Gross Carrying Amount Accumulated Amortization Total Customer Relationships $ 28,300 $ (26,917) $ 1,383 $ 28,300 $ (26,324) $ 1,976 Intellectual Property 18,136 (8,457) 9,679 13,860 (7,939) 5,921 Total intangible assets $ 46,436 $ (35,374) $ 11,062 $ 42,160 $ (34,263) $ 7,897 Our $ 28,300 $ (28,103 ) $ 197 $ 28,300 $ (26,324 ) $ 1,976 18,135 (9,576 ) 8,559 13,860 (7,939 ) 5,921 $ 46,435 $ (37,679 ) $ 8,756 $ 42,160 $ (34,263 ) $ 7,897 ourits Cementing Equipment and Tubular Running Services segments. Amortization expense for intangible assets was $1.1$1.2 million and $1.7$0.9 million for the three months ended March 31,September 30, 2021 and 2020, respectively and $3.4 million and $3.5 million for the nine months ended September 30, 2021 and 2020, respectively. During the first quarter of 2020, the results of the Company'sFrank's test for impairment of goodwill in the Cementing Equipment segment as a result of the negative market indicators described above was a triggering event that indicated that ourthe intangible assets in this segment were impaired. Impairment testing performed in the first quarter resulted in the determination that certain intangible assets were not recoverable and that the estimated fair value was below the carrying value. As a result, during the threenine months ended March 31,September 30, 2020, impairment charges of $4.7 million were recorded associated with certain customer relationships and intellectual property intangible assets in ourthe Cementing Equipment segment, which are included in severance and other charges, net on the condensed consolidated statements of operations. NaNNo intangible asset impairment wasimpairments were recorded during the three or nine months ended March 31, 2021.September 30, 2021. Please see Note 15—Severance and Other Charges, net for additional details.7—7—Other AssetsMarch 31,September 30, 2021, and December 31, 2020, consisted of the following (in thousands):March 31, December 31, 2021 2020 $ 26,586 $ 26,167 Deposits 2,023 2,182 Other 2,298 2,510 Total other assets $ 30,907 $ 30,859 $ 17,773 $ 26,167 1,937 2,182 1,699 2,510 $ 21,409 $ 30,859 (1)See Note 10—Fair Value Measurements for additional information.FRANK’S INTERNATIONAL8—8—Accounts Payable and Accrued LiabilitiesMarch 31,September 30, 2021, and December 31, 2020, consisted of the following (in thousands):March 31, December 31, 2021 2020 Accounts payable $ 30,999 $ 22,277 Accrued compensation 22,884 23,212 Accrued property and other taxes 13,294 14,420 Accrued severance and other charges 97 2,666 Income taxes 14,364 16,029 2,238 2,513 Accrued purchase orders and other 23,209 18,869 Total accounts payable and accrued liabilities $ 107,085 $ 99,986 $ 30,917 $ 22,277 22,302 23,212 19,371 14,420 1,288 2,666 13,560 16,029 2,305 2,513 25,219 18,869 $ 114,962 $ 99,986 (1)Represents amounts owed to non-consolidated affiliates.9—9—Debt(the “ABL Agent”), and other financial institutions as lenders with total commitments of $100.0 million including up to $15.0 million available for letters of credit. Subject to the terms of the ABL Credit Facility, we have the ability to increase the commitments to $200.0 million. The maximum amount that the Company may borrow under the ABL Credit Facility is subject to a borrowing base, which is based on a percentage of certain eligible accounts receivable and eligible inventory, subject to customary reserves and other adjustments.All obligations under the ABL Credit Facility are fully and unconditionally guaranteed jointly and severally by FINV’s subsidiaries, including FICV, Frank’s International, LLC, Blackhawk, Frank’s International GP, LLC, Frank’s International, LP, Frank’s International LP B.V., Frank’s International Partners B.V., Frank’s International Management B.V., Blackhawk Intermediate Holdings, LLC, Blackhawk Specialty Tools, LLC, and Trinity Tool Rentals, L.L.C., subject to customary exceptions and exclusions. In addition, the obligations under the ABL Credit Facility are secured by first priority liens on substantially all of the assets and property of the borrowers and guarantors, including pledges of equity interests in certain of FINV’s subsidiaries, subject to certain exceptions. Borrowings under the ABL Credit Facility bear interest at FINV’s option at either (a) the Alternate Base Rate (“ABR”) (as defined therein), calculated as the greatest of (i) the rate of interest publicly quoted by the Wall Street Journal, as the “prime rate,” subject to each increase or decrease in such prime rate effective as of the date such change occurs, (ii) the federal funds effective rate that is subject to a 0.00% interest rate floor plus 0.50%, and (iii) the one-month Adjusted LIBO Rate (as defined therein) plus 1.00%, or (b) the Adjusted LIBO Rate, plus, in each case, an applicable margin. The applicable interest rate margin ranges from 1.00% to 1.50% per annum for ABR loans and 2.00% to 2.50% per annum for Eurodollar loans and, in each case, is based on FINV’s leverage ratio. The unused portion of the ABL Credit Facility is subject to a commitment fee that varies from 0.250% to 0.375% per14FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSannum, according to average daily unused commitments under the ABL Credit Facility. Interest on Eurodollar loans is payable at the end of the selected interest period, but no less frequently than quarterly. Interest on ABR loans is payable monthly in arrears.The ABL Credit Facility contains various covenants and restrictive provisions which limit, subject to certain customary exceptions and thresholds, FINV’s ability to, among other things, (1) enter into asset sales; (2) incur additional indebtedness; (3) make investments, acquisitions, or loans and create or incur liens; (4) pay certain dividends or make other distributions and (5) engage in transactions with affiliates. The ABL Credit Facility also requires FINV to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0 based on the ratio of (a) consolidated EBITDA (as defined therein) minus unfinanced capital expenditures to (b) Fixed Charges (as defined therein), when either (i) an event of default occurs under the ABL Credit Facility or (ii) availability under the ABL Credit Facility falls for at least 2 consecutive calendar days below the greater of (A) $12.5 million and (B) 15% of the lesser of the borrowing base and aggregate commitments (a “FCCR Trigger Event”). Accounts receivable received by FINV’s U.S. subsidiaries that are parties to the ABL Credit Facility will be deposited into deposit accounts subject to deposit control agreements in favor of the ABL Agent. After a FCCR Trigger Event, these deposit accounts would be subject to “springing” cash dominion. After a FCCR Trigger Event, the Company will be subject to compliance with the fixed charge coverage ratio and “springing” cash dominion until no default exists under the ABL Credit Facility and availability under the facility for the preceding 30 consecutive days has been equal to at least the greater of (x) $12.5 million and (y) 15% of the lesser of the borrowing base and the aggregate commitments. If FINV fails to perform its obligations under the agreement that results in an event of default, the commitments under the ABL Credit Facility could be terminated and any outstanding borrowings under the ABL Credit Facility may be declared immediately due and payable. The ABL Credit Facility also contains cross default provisions that apply to FINV’s other indebtedness.March 31,September 30, 2021, FINV had 0 borrowings outstanding under the ABL Credit Facility, letters of credit outstanding of $10.3 million and availability of $23.5 million.InFacility.closing ofMerger, the Merger, Frank’s expects thatCompany terminated the Combined Company will enterABL Credit Facility and entered into a newsenior secured revolving credit facility by and terminate or otherwise replaceamong the existing Frank’sCompany and certain of its subsidiaries, including Exploration and Production Services (Holdings) Limited and Expro credit facilities.Holdings US Inc., as borrowers (the "New Credit Facility"), with DNB Bank ASA, London Branch, as agent, and other financial institutions as lenders with an aggregate commitment of $200.0 million with up to $130.0 million available for drawdowns as loans and up to $70.0 million for bonds and guarantees. Please see Note 17—Subsequent Events for further discussion.10—10—Fair Value MeasurementsWe have consistently used theThe same valuation techniques have been used consistently for all periods presented. Please see Note 9—10—Fair Value Measurements in ourthe Annual Report for further discussion.15FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMarch 31,September 30, 2021 and December 31, 2020, were as follows (in thousands):Quoted Prices
in Active
MarketsSignificant
Other
Observable
InputsSignificant
Unobservable
Inputs(Level 1) (Level 2) (Level 3) Total March 31, 2021 Assets: Investments: Cash surrender value of life insurance policies - deferred compensation plan $ 0 $ 26,586 $ 0 $ 26,586 Marketable securities - other 2 0 0 2 Liabilities: Deferred compensation plan 0 20,125 0 20,125 December 31, 2020 Assets: Investments: Cash surrender value of life insurance policies - deferred compensation plan $ 0 $ 26,167 $ 0 $ 26,167 Marketable securities - other 3 0 0 3 Liabilities: Deferred compensation plan 0 20,271 0 20,271 Our $ 0 $ 17,773 $ 0 $ 17,773 2 0 0 2 0 18,144 0 18,144 $ 0 $ 26,167 $ 0 $ 26,167 3 0 0 3 0 20,271 0 20,271 ourits deferred compensation plan consist primarily of the cash surrender value of life insurance policies and are included in other assets on the condensed consolidated balance sheets. OurFrank's investments change as a result of contributions, payments, and fluctuations in the market. OurFrank's liabilities associated with ourits deferred compensation plan are included in otherother non-current liabilities on the condensed consolidated balance sheets. Assets and liabilities, measured using significant observable inputs, are reported at fair value based on third-partythird-party broker statements, which are derived from the fair value of the funds’ underlying investments. WeFrank's also havehas marketable securities in publicly traded equity securities as an indirect result of strategic investments. They are reported at fair value based on the price of the stock and are included in other assets on the condensed consolidated balance sheets.We apply our non-recurring, non-financial measurements including business combinations and assets identified as held for sale, as well as impairment related to goodwill and other long-lived assets. We perform ourassessmentassessments for each reporting unit by comparing the estimated fair value of each reporting unit to the reporting unit’s carrying value, including goodwill. We estimateManagement estimates the fair value for each reporting unit using a discounted cash flow analysis based on management’s short-term and long-term forecast of operating performance. This analysis includes significant assumptions regarding discount rates, revenue growth rates, expected profitability margins, forecasted capital expenditures and the timing of expected future cash flows based on market conditions. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is measured and recorded.16FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSwe first comparethe estimated future undiscounted cash flows associated with the asset are first compared to the asset’s carrying amount. If the undiscounted cash flows are less than the asset’s carrying amount, we then determine the asset’s fair value is then determined by using a discounted cash flow analysis. These analyses are based on estimates such as management’s short-term and long-term forecast of operating performance, including revenue growth rates and expected profitability margins, estimates of the remaining useful life and service potential of the asset, and a discount rate based on our weighted average cost of capital.ourFrank's services and future market conditions, which are difficult to predict in volatile economic environments and could result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in ourmanagement's forecasts. If crude oil prices decline significantly and remain at low levels for a sustained period of time, wethe Company could be required to record an impairment of the carrying value of ourits long-lived assets in the future which could have a material adverse impact on ourits operating results. Given the unobservable nature of the inputs, the discounted cash flow models are deemed to use Level 3 inputs.ourthe condensed consolidated balance sheets of ourFrank's cash and cash equivalents, restricted cash, short-term investments, trade accounts receivable, other current assets, accounts payable and accrued liabilities and lines of credit approximate fair values due to their short maturities.11—11—Related Party Transactions We haveusit by common ownership. We haveFrank's has entered into various operating leases to lease facilities from these affiliated companies. Rent expense associated with our related party leases was $0.7 million and $0.7$0.9 million for the three months ended March 31,September 30, 2021 and 2020, respectively, and $2.1 million and $2.3 million for the nine months ended September 30, 2021 and 2020, respectively. As of March 31,September 30, 2021 $3.1, $3.8 million of ourFrank's operating lease right-of-use assets and $4.5$4.9 million of ourits lease liabilities were associated with related party leases.ourFrank's common stock on August 26, 2016, in connection with its delivery to FINV of all of its interests in FICV (the “Conversion”). As a result of an election under Section 754 of the Internal Revenue Code made by FICV, the Conversion resulted in an adjustment to the tax basis of the tangible and intangible assets of FICV with respect to the portion of FICV transferred to FINV by Mosing Holdings. These adjustments are solely allocable to FINV. The adjustments to the tax basis of the tangible and intangible assets of FICV described above would not have been available absent the Conversion. The basis adjustments may reduce the amount of tax that FINV would otherwise be required to pay in the future. These basis adjustments may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.“TRA”“Original TRA”) that weFINV entered into with FICV and Mosing Holdings in connection with ourFINV's initial public offering (“IPO”) generally providesprovided for the payment by FINV to Mosing Holdings of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that weFINV actually realize (or are deemed to realize in certain circumstances) in periods after ourFINV's IPO as a result of (i) tax basis increases resulting from the Conversion and (ii) imputed interest deemed to be paid by FINV as a result of, and additional tax basis arising from, payments under the Original TRA. We will retainFrank's retained the benefit of the remaining 15% of these cash savings, if any. Payments FINV makes under the TRA will be increased by any interest accrued from the due date (without extensions) of the corresponding tax return to the date of payment specified by the TRA. The payments under the TRA will not be conditioned upon a holder of rights under the TRA having a continued ownership interest in FINV. The estimation of the amount and timing of payments under the TRA is by its nature imprecise. For purposes of the TRA, cash savings in tax generally are calculated by comparing FINV’s actual tax liability to the amount FINV would have been required to pay had it not been able to utilize any of the tax benefits subject to the TRA. The17FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSamounts payable, as well as the timing of any payments, under the TRA are dependent upon significant future events and assumptions, including the amount and timing of the taxable income FINV generates in the future. As of March 31, 2021, FINV has had a cumulative loss over the prior 36-month period. Based on this history of losses, as well as uncertainty regarding the timing and amount of future taxable income, we are no longer able to conclude that there will be future cash savings that will lead to additional payouts under the TRA. Additional TRA liability may be recognized in the future based on changes in expectations regarding the timing and likelihood of future cash savings.The payment obligations under the TRA are FINV’s obligations and are not obligations of FICV. The term of the TRA commenced upon the completion of the IPO and will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless FINV elects to exercise its right to terminate the TRA (or the TRA is terminated due to other circumstances, including our breach of a material obligation thereunder or certain mergers or other changes of control), and FINV makes the termination payment specified by the TRA, or FINV otherwise settles its obligations under the TRA. If FINV elects to terminate the TRA early, which it may do in its sole discretion (or if it terminates early as a result of our breach), it would be required to make a substantial, immediate lump-sum payment equal to the present value of the hypothetical future payments that could be required to be paid under the TRA (based upon certain assumptions and deemed events set forth in the TRA, including the assumption that it has sufficient taxable income to fully utilize such benefits), determined by applying a discount rate equal to the long-term Treasury rate in effect on the applicable date plus 300 basis points. Any early termination payment may be made significantly in advance of the actual realization, if any, of such future benefits. In addition, payments due under the TRA will be similarly accelerated following certain mergers or other changes of control. In these situations, FINV’s obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. For example, if the TRA were terminated on March 31, 2021, the estimated termination payment would be approximately $70.0 million (calculated using a discount rate of 4.15%). The foregoing number is merely an estimate and the actual payment could differ materially. Because FINV is a holding company with no operations of its own, its ability to make payments under the TRA is dependent on the ability of our operating subsidiaries to make distributions to it in an amount sufficient to cover FINV’s obligations under such agreement. The ability of certain of our operating subsidiaries to make such distributions will be subject to, among other things, the applicable provisions of Dutch law that may limit the amount of funds available for distribution and restrictions in our debt instruments. To the extent that FINV is unable to make payments under the TRA for any reason (except in the case of an acceleration of payments thereunder occurring in connection with an early termination of the TRA or certain mergers or change of control) such payments will be deferred and will accrue interest until paid, and FINV will be prohibited from paying dividends on its common stock.pursuant to which FINV, FICV and Mosing Holdings have agreed, among other things,on October 1, 2021, the Company made a payment of $15 million cash to settle the early termination payment obligationobligations that would otherwise be owed to Mosing Holdings under the Original TRA as a result of the MergerMerger. The A&R TRA also provides for other contingent payments to be made by the payment by FINVCompany to Mosing Holdings of (i) $15 million cash at the closing of the Transactions and (ii) certain other contingent payments in the future in the event the Combined Company realizes cash tax savings from tax attributes covered under the Original TRA during the ten year period following the Closing Date (as defined in the Merger Agreement) October 1, 2021 in excess of $18,057,000, as more fully described in the A&R TRA. The terms of the A&R TRA are conditioned upon and subject to the closing of the Transactions and the payment to Mosing Holdings of the $15 million cash payment at the closing of the Transactions. If such conditions do not occur, the A&R TRA will be terminated and will be null and void, and the TRA will remain in effect in accordance with its terms.$18,057,000. Please see Note 1—Basis of Presentation in the Notes to the Unaudited Condensed Consolidated Financial Statements17—Subsequent Events for additional details regarding the Merger, the Merger Agreement and the Transactions.details.12—12—Loss Per Common Share18FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS $ (15,081 ) $ (27,791 ) $ (51,583 ) $ (148,014 ) 38,066 37,691 37,957 37,659 $ (0.40 ) $ (0.74 ) $ (1.36 ) $ (3.93 ) 259 184 239 175 Three Months Ended March 31, 2021 2020 Numerator Net loss $ (23,886) $ (85,978) Denominator 227,019 225,505 Loss per common share: Basic and diluted $ (0.11) $ (0.38) (1) Approximate number of unvested restricted stock units and stock to be issued pursuant to the ESPP that have been excluded from the computation of diluted loss per share as the effect would be anti-dilutive when results from operations are at a net loss position. 2,252 2,015 13—13—Income Taxeswe estimatemanagement estimates the annual tax rate based on projected pre-tax income (loss) for the full year and recordrecords a quarterly income tax provision (benefit) in accordance with accounting guidance for income taxes. As the year progresses, we refine the estimate of the year’s pre-tax income (loss) is refined as new information becomes available. The continual estimation process often results in a change to the expected effective tax rate for the year. When this occurs, we adjust the income tax provision (benefit) is adjusted during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the most current expected annual tax rate. Our(4.7)(35.7)% and 15.3%(29.9)% for the three months ended March 31,September 30, 2021 and 2020, respectively and (29.7)% and 0.1% for nine months ended September 30, 2021 and 2020, respectively. The quarterly sequential variance in effective tax rates is due to a change in the geographical mix of income. The year over year variance in effective tax rates is primarily due to the beneficial impact in the prior year period from the five-yearfive-year net operating loss carryback provision included in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as well as a change in the geographical mix of income. We areFrank's is subject to tax in many U.S. and non-U.S. jurisdictions. In many non-U.S. jurisdictions we areFrank's is taxed on bases such as deemed profits or withholding taxes based on revenue. Consequently, the level of correlation between our pre-tax income and our income tax provision varies from period to period. �� We are We do Frank's does not expect the results of these audits to have any material effect on ourits financial statements. AsMarch 31, 2021, there were no significant changes to ourFrank's uncertain tax positions in the various jurisdictions in which it operates has been performed and management has concluded that the positions are adequately provided for. Frank's provision for uncertain tax positions as reported in our audited financial statements for the year ended of September 30, 2021 and December 31, 2020.2020 included in “Other non-current liabilities” on the condensed consolidated balance sheets was $5.0 million and $3.1 million, respectively. 14—14—Commitments and ContingenciesWeFrank's had no material accruals for loss contingencies, individually or in the aggregate, as of March 31,September 30, 2021 and or December 31, 2020. We believe2020. Company management believes the probability is remote that the ultimate outcome of these matters would have a material adverse effect on our financial position, results of operations or cash flows. We areourits foreign subsidiaries in West Africa including possible violations of the U.S. Foreign Corrupt Practices Act (“FCPA”), ourits policies and other19FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSweFrank's voluntarily disclosed the existence of ourits extensive internal review to the SEC, the U.S. Department of Justice (“DOJ”) and other governmental entities. It is ourthe Company's intent to continue to fully cooperate with these agencies and any other applicable authorities in connection with any further investigation that may be conducted in connection with this matter. While ourthe review has not indicated that there has been any material impact on ourFrank's previously filed financial statements, we haveFrank's has continued to collect information and cooperate with the authorities, but at this time are unable to predict the ultimate resolution of these matters with these agencies.ourthe investigation into possible violations of the FCPA remains ongoing, and wethe Company will continue to cooperate with the SEC, DOJ and other relevant governmental entities in connection therewith. At this time, we are unable to predict the ultimate resolution of these matters with these agencies, including any financial impact to us. Ourthe Company. The Company's Board of Directors (the "Board") and management are committed to continuously enhancing ourthe Company's internal controls that support improved compliance and transparency throughout ourthe Company's global operations.15—15—Severance and Other Charges, net We recognizeourits footprint in certain countries, asset impairments and the retirement of excess machinery and equipment based on economic utility. As a result of the downturn in the industry and its impact on ourFrank's business outlook, we continuemanagement continued to take actions to adjust ourFrank's operations and cost structure to reflect current and expected activity levels. Depending on future market conditions, further actions may be necessary to adjust our operations, which may result in additional charges.Our severanceThree Months Ended March 31, 2021 2020 Severance and other costs $ 265 $ 538 Mergers and acquisition expense 6,804 0 Fixed asset impairments and retirements 171 15,479 Inventory write-offs 136 0 Intangible asset impairments 0 4,708 $ 7,376 $ 20,725 $ 195 $ 3,444 $ 1,305 $ 8,776 2,763 0 12,121 0 0 105 171 15,584 0 0 136 368 0 0 0 4,708 $ 2,958 $ 3,549 $ 13,733 $ 29,436 WeFrank's incurred costs due to a continued effort to adjust ourits cost base, including reducing ourits workforce to meet the depressed demand in the industry.March 31,September 30, 2021 we, Frank's incurred $6.8$2.8 million and $12.1 million of costs, respectively, primarily related to legal and consulting services associated with the pending merger with Expro.threenine months ended March 31,September 30, 2020 we, Frank's recognized $15.5$15.6 million primarily associated with construction in progress in ourthe Cementing Equipment segment. During the threenine months ended March 31,September 30, 2021 we, Frank's recognized a $0.2 million impairment associated our with construction in progress in ourthe Tubular Running Services segment. Please see Note 5—Property, Plant and Equipment for additional details.threenine months ended March 31, 2021,September 30, 2020, certain inventories in ourthe Cementing Equipment segment were determined to have costs that exceeded their net realizable values, resulting in a charge of $0.4 million. During the nine months ended September 30, 2021, certain inventories in the Tubular Running Services segment were determined to have costs that exceeded their net realizable values, resulting in a charge of $0.1 million.threenine months ended March 31,September 30, 2020 we identified, certain intangible assets were identified where the carrying value exceeded the fair value in the Cementing Equipment segment, resulting in an20FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNaNNo impairment was recorded during the three and nine months ended March 31, 2021.September 30, 2021. Please see Note 6—Goodwill and Intangible Assets for additional details.16—16—Segment InformationWe areFrank's is comprised of 3 threereportable segments: Tubular Running Services (“TRS”) segment, Tubulars segment and Cementing Equipment (“CE”) segment.6six continents. In the U.S., the TRS segment provides services in the active onshore oil and gas drilling regions, including the Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale and Utica Shale, and in the U.S. Gulf of Mexico. OurAs the Merger did not close until after the quarter ended September 30, 2021, the historical financial statements presented in this Quarterly Report on Form 10-Q reflect the reporting segments of Frank's, the Predecessor Registrant. The Company's customers are primarily large exploration and production companies, including international oil and gas companies, national oil and gas companies, major independents and other oilfield service companies.We disaggregate our revenueourFrank's segments, as we believemanagement believes this best depicts how the nature, amount, timing and uncertainty of ourFrank's revenue and cash flows are affected by economic factors. Intersegment revenue is immaterial.21FRANK’S INTERNATIONAL N.V.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSourFrank's revenue disaggregated by geography, based on the location where our services were provided and products sold (in thousands): $ 20,250 $ 13,701 $ 10,438 $ 44,389 57,375 5,083 8,094 70,552 $ 77,625 $ 18,784 $ 18,532 $ 114,941 $ 15,213 $ 12,483 $ 7,430 $ 35,126 37,713 4,000 7,578 49,291 $ 52,926 $ 16,483 $ 15,008 $ 84,417 $ 58,863 $ 31,995 $ 30,996 $ 121,854 156,942 15,024 23,773 195,739 $ 215,805 $ 47,019 $ 54,769 $ 317,593 $ 64,256 $ 27,270 $ 28,245 $ 119,771 140,494 10,496 23,249 174,239 $ 204,750 $ 37,766 $ 51,494 $ 294,010 Three Months Ended March 31, 2021 Tubular Running Services Tubulars Cementing Equipment Consolidated United States $ 18,367 $ 7,993 $ 9,345 $ 35,705 International 47,918 3,676 7,512 59,106 Total Revenue $ 66,285 $ 11,669 $ 16,857 $ 94,811 Three Months Ended March 31, 2020 Tubular Running Services Tubulars Cementing Equipment Consolidated United States $ 30,169 $ 9,797 $ 13,531 $ 53,497 International 59,328 2,745 7,922 69,995 Total Revenue $ 89,497 $ 12,542 $ 21,453 $ 123,492 Three Months Ended March 31, 2021 2020 United States $ 35,705 $ 53,497 Europe/Middle East/Africa 28,254 35,434 Latin America 21,934 20,925 Asia Pacific 7,653 9,569 Other countries 1,265 4,067 Total Revenue $ 94,811 $ 123,492 $ 44,389 $ 35,126 $ 121,854 $ 119,771 33,902 20,082 91,727 77,402 25,195 20,001 72,894 61,003 10,039 6,928 26,280 25,231 1,416 2,280 4,838 10,603 $ 114,941 $ 84,417 $ 317,593 $ 294,010 We defineWe reviewCompany management reviews Adjusted EBITDA on both a consolidated basis and on a segment basis. We useManagement uses Adjusted EBITDA to assess ourFrank's financial performance because it allows usmanagement to compare ourFrank's operating performance on a consistent basis across periods by removing the effects of ourFrank's capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization), income tax, foreign currency exchange rates and other charges and credits. Adjusted EBITDA has limitations as an analytical tool and should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities or any other measure of financial performance presented in accordance with GAAP. Our2220FRANK’S INTERNATIONAL $ 11,912 $ 982 $ 29,790 $ 18,336 2,735 1,806 7,481 3,883 6,389 3,376 16,036 6,806 (7,258 ) (7,151 ) (20,464 ) (24,645 ) 13,778 (987 ) 32,843 4,380 0 0 0 (57,146 ) (2,958 ) (3,549 ) (13,733 ) (29,436 ) (167 ) (93 ) (555 ) 618 (14,092 ) (15,950 ) (45,531 ) (52,920 ) (3,969 ) (6,395 ) (11,812 ) 182 72 308 1,733 898 (4,548 ) 2,334 (4,698 ) (5,865 ) (3,197 ) (3,459 ) (9,830 ) (8,725 ) $ (15,081 ) $ (27,791 ) $ (51,583 ) $ (148,014 ) Comprised of Equity-based compensation expense (for the three months ended September 30, 2021 and 2020: $3,307 and $2,773, respectively, and for the nine months ended September 30, 2021 and 2020: $9,604 and $8,434, respectively), Unrealized and realized gains (losses) (for the three months ended September 30, 2021 and 2020: $199 and $(113), respectively, and for the nine months ended September 30, 2021 and 2020: $(7) and $1,480, respectively) and Investigation-related matters (for the three months ended September 30, 2021 and 2020: $89 and $573, respectively, and for the nine months ended September 30, 2021 and 2020: $219 and $1,771, respectively). Three Months Ended March 31, 2021 2020 Segment Adjusted EBITDA: Tubular Running Services $ 8,128 $ 13,305 Tubulars 639 1,396 Cementing Equipment 4,795 2,544 (6,909) (10,186) 6,653 7,059 Goodwill impairment 0 (57,146) Severance and other charges, net (7,376) (20,725) Interest income (expense), net (287) 533 Depreciation and amortization (16,107) (19,718) Income tax (expense) benefit (1,070) 15,563 Gain (loss) on disposal of assets 182 (60) Foreign currency loss (2,868) (9,892) (3,013) (1,592) Net loss $ (23,886) $ (85,978) (1) Includes certain expenses not attributable to a particular segment, such as costs related to support functions and corporate executives.(2) Comprised of Equity-based compensation expense (for the three months ended March 31, 2021 and 2020: $2,872 and $2,146, respectively), Unrealized and realized gains (losses) (for the three months ended March 31, 2021 and 2020: $(99) and $1,704, respectively) and Investigation-related matters (for the three months ended March 31, 2021 and 2020: $42 and $1,150, respectively).ourFrank's reportable segments (in thousands):Tubular Running Services Tubulars Cementing Equipment Corporate Total Three Months Ended March 31, 2021 Revenue from external customers $ 66,285 $ 11,669 $ 16,857 $ 0 $ 94,811 Operating income (loss) (5,452) (875) 1,993 (15,452) (19,786) Adjusted EBITDA 8,128 639 4,795 (6,909) * Three Months Ended March 31, 2020 Revenue from external customers $ 89,497 $ 12,542 $ 21,453 $ 0 $ 123,492 Operating income (loss) (1,315) 651 (77,498) (16,046) (94,208) Adjusted EBITDA 13,305 1,396 2,544 (10,186) * $ 77,625 $ 18,784 $ 18,532 $ 0 $ 114,941 902 837 3,680 (12,163 ) (6,744 ) 11,912 2,735 6,389 (7,258 ) * $ 52,926 $ 16,483 $ 15,008 $ 0 $ 84,417 (13,717 ) 860 1,160 (12,049 ) (23,746 ) 982 1,806 3,376 (7,151 ) * $ 215,805 $ 47,019 $ 54,769 $ 0 $ 317,593 (7,148 ) 2,368 8,010 (38,625 ) (35,395 ) 29,790 7,481 16,036 (20,464 ) * $ 204,750 $ 37,766 $ 51,494 $ 0 $ 294,010 (28,284 ) 1,327 (78,824 ) (39,459 ) (145,240 ) 18,336 3,883 6,806 (24,645 ) * 23•our business strategy and prospects for growth;•The merger with Expro Group Holdings International Limited (“Expro”), (the “Merger”);•our cash flows and liquidity;•our financial strategy, budget, projections and operating results;•the amount, nature and timing of capital expenditures;•the availability and terms of capital;•competition and government regulations; and•general economic conditions. Our• • • • • • • •continuing uncertainty relating to global crude oil demand and crude oil prices that correspondingly may lead to further significant reductions in domestic oil and gas activity, which in turn could result in further significant declines in demand for our products and services;•• • • • • • • • • • • • • • • • unforeseen consequences of the Merger; • • remaining restrictions in the United StatesCOVID-19 pandemic and globally on various commercialrelated economic, business and economic activities duemarket disruptions continue to the COVID-19 virus, including uncertainty regarding the re-imposition of restrictions due to resurgences in infection rates; such restrictionsevolve, and its future effects are designed to protect public health but also have the effect of significantly reducing demand for oil and gas, which may correspondingly decrease demand for our products and services;•uncertainty regarding the timing, pace and extent of an economic recovery in the United States and elsewhere, which in turn will likely affect demand for crude oil and therefore the demand for the products and services we provide and the commercial opportunities available to us;•theuncertain. The continued impact of currentCOVID-19 on the Company’s business will depend on many factors, many of which are beyond management's control and knowledge. It is therefore difficult for management to assess or predict with accuracy the broad future laws, rulings, governmental regulations, accounting standardseffects of this health crisis on the global economy, the energy industry or the Company’s business. As additional information becomes available, events or circumstances change and statements, and related interpretations;•unique risks associated with our offshore operations;•political, economic and regulatory uncertainties in our international operations;•our ability to develop new technologies and products;•our ability to protect our intellectual property rights;•our ability to employ and retain skilled and qualified workers;•the level of competition in our industry;•strategic operational safety laws and regulations;•international trade laws and sanctions;•weather conditions and natural disasters;•global or national health concerns, including health epidemics, including COVID-19;•policy or regulatory changes domestically in the United States;24•risks and conditions that apply to Expro, whichdecisions are made by management, further adjustments may be different from risks that apply to us;•unforeseen consequencesrequired which could have a material adverse impact on the Company’s consolidated financial position, results of the Merger;•failure to complete the Merger or changes in the expected timing of the completion of the Merger;•completion of the Merger following unforeseen changes in circumstance;•uncertainty with respect to integrationoperations and realization of expected cost synergies following completion of the Merger; and•litigation risk associated with the Merger.ourFrank's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021 (our(the “Annual Report”), (3) ourFrank’s proxy statement/prospectus dated August 5, 2021 filed by with the SEC on August 6, 2021, (4) other reports and filings we make with the SEC from time to time and (4)(5) other announcements we make from time to time. Should one or more of the risks or uncertainties described in the documents above or in this Form 10-Q occur, or should underlying assumptions prove incorrect, our actual results, performance, achievements or plans could differ materially from those expressed or implied in any forward-looking statements. All such forward-looking statements in this Form 10-Q are expressly qualified in their entirety by the cautionary statements in this section.2523 Management’s Management’s Discussion and Analysis of Financial Condition and Results of OperationsourFrank's financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q and the audited consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in ourFrank's Annual Report.“Cautionary“Cautionary Note Regarding Forward-Looking Statements”Statements” and “Risk Factors”“Risk Factors” of this Form 10-Q.Overview Unless the context indicates otherwise, in this Quarterly Report on Form 10-Q, the terms “Expro,” “Company,” “we,” “us” and “our” refer to Expro Group Holdings N.V. and, where appropriate, its consolidated subsidiaries following the reverse merger described below. References to the terms “Frank's” or the “Predecessor Registrant” refer to Frank's International N.V., the predecessor reporting entity prior to the reverse merger described below, and references to “Legacy Expro” refer to Expro Group Holdings International Limited, the entity acquired by the Predecessor Registrant in the reverse merger.BusinessCompany Articles We are”) were amended to increase the total authorized capital stock of the Company from 798,096,000 shares of Company Common Stock to 1,200,000,000 shares of Company Common Stock (200,000,000 shares of Company Common Stock on a post-reverse split basis) and to effect certain other amendments to the Company Articles contemplated by the Merger Agreement. The Company issued approximately 71 million shares of Company Common Stock in the Merger to Legacy Expro shareholders. On September 30, 2021, Frank’s pre-Merger board of directors (the “Prior Board”) unanimously approved a 1-for-6 reverse stock split of Frank’s common stock, which was effected on October 1, 2021. As the Merger did not close until after the end of the quarter ended September 30, 2021, the historical financial statements presented in this Quarterly Report on Form 10-Q reflect the financial position, results of operations and cash flows of Frank's, the Predecessor Registrant. All of the outstanding Company Common Stock share numbers, nominal value, share prices and per share amounts in this discussion and analysis have been retroactively adjusted to reflect a 1-for-6 reverse stock split for all periods presented.havehad been in business for over 80 years. We provide ourFrank's provided its services and products to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells.We conduct our•Tubular Running Services. The Tubular Running Services (“TRS”) segment provides• • TRS segment operates inMergeroffshore oilbusiness conducted by the Company. Working for clients across the entire well life cycle, the Company is a leading provider of energy services, offering cost-effective, innovative solutions and gas marketswhat the Company considered to be best-in-class safety and alsoservice quality. The Company’s extensive portfolio of capabilities spans well construction, well flow management, subsea well access, and well integrity and intervention. several onshore regions with operations in approximately 40 countries on six continents. In the U.S., the TRS segment provides services in the active onshore oil and gas drilling regions, including the Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale and Utica Shale, as well as in the U.S. Gulf of Mexico. Our customers in these markets are primarily large exploration and production companies,expenditures, albeit at different rates in individual countries depending on a range of factors, including international oil and gas companies, national oil and gas companies, major independents and other oilfield service companies.•Tubulars. The Tubulars segment designs, manufactures and distributes connectors and casing attachments for large outside diameter (“OD”) heavy wall pipe. Additionally, the Tubulars segment sells large OD pipe originally manufactured by various pipe mills, as plain end or fully fabricated with proprietary welded or thread-direct connector solutions and provides specialized fabrication and welding services in support of offshore deepwater projects, including drilling and production risers, flowlines and pipeline end terminations, as well as long-length tubular assemblies up to 400 feet in length. The Tubulars segment also specializes in the development, manufacture and supply of proprietary drilling tool solutions that focus on improving drilling productivity through eliminating or mitigating traditional drilling operational risks.•Cementing Equipment. The Cementing Equipment (“CE”) segment provides specialty equipment to enhance the safety and efficiency of rig operations. It provides specialized equipment, services and products utilized in the construction of the wellbore in both onshore and offshore environments. The product portfolio includes casing accessories that serve to improve the installation of casing, centralization and wellbore zonal isolation, as well as enhance cementing operations through advance wiper plug and float equipment technology. The CE segment also provides services and products utilized in the construction, completion or abandonment of the wellbore. These solutions are primarily used to isolate portions of the wellbore through the setting of barriers downhole to allow for rig evacuation in case of inclement weather, maintenance work on other rig equipment, squeeze cementing, pressure testing within the wellbore, hydraulic fracturing and temporary and permanent abandonments. These offerings improve operational efficiencies and limit non-productive time if unscheduled events are encountered at the wellsite.26Merger Agreement with ExproOn March 10, 2021, FINV and Merger Sub, a direct wholly owned subsidiary of FINV, entered into the Merger Agreement with Expro, pursuant to which Expro will merge with and into Merger Sub, with Merger Sub surviving the merger as a direct, wholly owned subsidiary of FINV. If the Merger is completed, each of the Expro Ordinary Shares, issued and outstanding immediately prior to the Effective Time, will be converted into the right to receive a number of shares of Frank’s common stock equal to the Exchange Ratio. Upon consummation of the transactions contemplated by the Merger Agreement and the Plan of Merger (as defined in the Merger Agreement), FINV expects that its current shareholders will own approximately 35% of the Combined Company after the completion of the Merger and related transactions, and current Expro shareholders will own approximately 65% of the Combined Company. Following the Merger, the name of FINV will be changed to “Expro Group Holdings N.V.” The closing of the Transactions, which is expected to occur during the third quarter of 2021, is subject to the satisfaction or waiver of closing conditions, including, among others, the requisite approval of the shareholders of each of FINV and Expro pursuant to the terms of the Merger Agreement.In connection with the Merger Agreement, FINV, FICV and Mosing Holdings have entered into an Amended and Restated Tax Receivable Agreement (the “A&R TRA”), that amends and restates the TRA. See Note 1—Basis of Presentation in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information regarding the Merger Agreement and the A&R TRA.OutlookAs we look toward recovery from the COVID-19 pandemic and balancing of OPEC-driven oversupply, we believe there may be a slow but steady drawdown on global oil inventories and increasing oil production offset by a slower rate of supply stockpilesdemand growth, uncertainty about COVID-19 recovery, the impact of governmental restrictions and any new variants or a resurgence over the next 18 months, driven by increasing demand as lockdown measures loosen with vaccine rollouts.In the short term, uncertainty around further lockdowns may temper continued activity improvement. However, current indicators are supportive of improved market conditions for the remainder of 2021 as compared to the same period in 2020. winter period.ramp upincrease in the mid to long term toward pre-pandemic levels. However, weWe remain vigilant to the uncertainty that OPEC-controlled supply and U.S. and international activity levels can have on the market.Frank’sthe Company’s digital and automated technologies to drive operational efficiencies with reduced personnel. OurThe Company has had recent successessuccess in bolstering ourits market share in the Gulf of Mexico with digital and automated technology that removesremove personnel from the rig site, sets aand as we see increased activity levels in the international markets, we are well positioned to adopt this same technology blueprint for duplicating this success in international offshoreto these markets.ourthe Company’s U.S. land business will continue to improve through at least 2022, supported by recent commercialization of performance drilling technologies and digital solutions that increase operationoperational efficiency. In international markets, we expect offshoreexploration activity to become more near-field and infrastructure led in the near- to intermediate-term, with field developments also accelerated to maximize the economic recovery. Consistent with past recoveries, incremental operational expenditures and brownfield enhancement programs are expected to be an initial area of customer focus and, in select markets, we are seeing some signs of a recovery in intervention and well integrity projects, execution of which is a traditional strength of Legacy Expro supported by its subsea well access and well assurance technologies. We expect to see continued moderate growth in line with market trends.How We Evaluate Ourof these service lines over the following periods. We useour business,the Frank's businesses, including revenue, Adjusted EBITDA, Adjusted EBITDA margin and safety performance. We analyze ourour internal projections for each month to assess ourbusiness performance. WeManagement also assessassesses incremental changes in our monthly revenue across our operating segments to identify potential areas for improvement.2725 We definethe effects of the tax receivable agreement (“TRA”), other non-cash adjustments and other charges or credits. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of our revenue. We reviewManagement reviews Adjusted EBITDA and Adjusted EBITDA margin on both a consolidated basis and on a segment basis. We useFrank's uses Adjusted EBITDA and Adjusted EBITDA margin to assess ourits financial performance because it allows usmanagement to compare our operating performance on a consistent basis across periods by removing the effects of ourFrank's capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization), income tax, foreign currency exchange rates and other charges and credits. Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities or any other measure of financial performance presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”).Three Months Ended March 31, 2021 2020 Net loss $ (23,886) $ (85,978) Goodwill impairment — 57,146 Severance and other charges, net 7,376 20,725 Interest (income) expense, net 287 (533) Depreciation and amortization 16,107 19,718 Income tax expense (benefit) 1,070 (15,563) (Gain) loss on disposal of assets (182) 60 Foreign currency loss 2,868 9,892 3,013 1,592 Adjusted EBITDA $ 6,653 $ 7,059 Adjusted EBITDA margin 7.0 % 5.7 % $ (15,081 ) $ (27,791 ) $ (51,583 ) $ (148,014 ) — — — 57,146 2,958 3,549 13,733 29,436 167 93 555 (618 ) 14,092 15,950 45,531 52,920 3,969 6,395 11,812 (182 ) (72 ) (308 ) (1,733 ) (898 ) 4,548 (2,334 ) 4,698 5,865 3,197 3,459 9,830 8,725 $ 13,778 $ (987 ) $ 32,843 $ 4,380 12.0 % (1.2 )% 10.3 % 1.5 % Comprised of Equity-based compensation expense (for the three months ended September 30, 2021 and 2020: $3,307 and $2,773, respectively, and for the nine months ended September 30, 2021 and 2020: $9,604 and $8,434, respectively), Unrealized and realized (gains) losses (for the three months ended September 30, 2021 and 2020: $(199) and $113, respectively, and for the nine months ended September 30, 2021 and 2020: $7 and $(1,480), respectively) and Investigation-related matters (for the three months ended September 30, 2021 and 2020: $89 and $573, respectively, and for the nine months ended September 30, 2021 and 2020: $219 and $1,771, respectively). (1) Comprised of Equity-based compensation expense (for the three months ended March 31, 2021 and 2020: $2,872 and $2,146, respectively), Unrealized and realized (gains) losses (for the three months ended March 31, 2021 and 2020: $99 and $(1,704), respectively), and Investigation-related matters (for the three months ended March 31, 2021 and 2020: $42 and $1,150, respectively). our Adjusted EBITDA on a segment basis to the most comparable measure calculated in accordance with GAAP, see “Operating Segment Results.”ourFrank's safety performance is the tracking of the Total Recordable Incident Rate which is reviewed on both a monthly and rolling twelve-month basis.2826ourFrank's consolidated results for the periods presented (in thousands):Three Months Ended March 31, 2021 2020 (Unaudited) Revenue: Services $ 81,523 $ 105,083 13,288 18,409 Total revenue 94,811 123,492 Operating expenses: Cost of revenue, exclusive of depreciation and amortization Services 63,935 79,380 10,914 13,988 General and administrative expenses 16,447 26,683 Depreciation and amortization 16,107 19,718 Goodwill impairment — 57,146 Severance and other charges, net 7,376 20,725 (Gain) loss on disposal of assets (182) 60 Operating loss (19,786) (94,208) Other income (expense): Other income, net 125 2,026 Interest income (expense), net (287) 533 Foreign currency loss (2,868) (9,892) Total other expense (3,030) (7,333) Loss before income taxes (22,816) (101,541) Income tax expense (benefit) 1,070 (15,563) Net loss $ (23,886) $ (85,978) $ 95,821 $ 66,418 $ 267,864 $ 246,084 19,120 17,999 49,729 47,926 114,941 84,417 317,593 294,010 70,627 56,574 203,181 197,005 15,489 13,733 40,811 36,007 18,591 18,665 51,465 67,634 14,092 15,950 45,531 52,920 — — — 57,146 2,958 3,549 13,733 29,436 (72 ) (308 ) (1,733 ) (898 ) (6,744 ) (23,746 ) (35,395 ) (145,240 ) 347 109 877 2,291 (167 ) (93 ) (555 ) 618 (4,548 ) 2,334 (4,698 ) (5,865 ) (4,368 ) 2,350 (4,376 ) (2,956 ) (11,112 ) (21,396 ) (39,771 ) (148,196 ) 3,969 6,395 11,812 (182 ) $ (15,081 ) $ (27,791 ) $ (51,583 ) $ (148,014 ) March 31,September 30, 2021 Compared to Three Months Ended March 31,September 30, 2020March 31,September 30, 2021 decreasedincreased by $28.7$30.5 million, or 23.2%36.2%, to $94.8$114.9 million from $123.5$84.4 million for the three months ended March 31,September 30, 2020. Revenue decreasedincreased across all segments due toas the prior year was significantly impacted by the onset of the COVID-19 pandemic and the sharpresulting decline in oil prices. Revenue for our segments is discussed separately below under the heading “Operating“Operating Segment Results.”March 31,September 30, 2021 decreasedincreased by $18.6$15.8 million, or 19.9%22.5%, to $74.8$86.1 million from $93.4$70.3 million for the three months ended March 31,September 30, 2020. The decreaseincrease was driven by lowerimproved activity levels and mix of work inas compared to the TRS, Tubulars and CE segments.March 31,September 30, 2021 decreased by $10.3 million, or 38.6%,were flat as compared to $16.4 million from $26.7 million for the three months ended March 31,September 30, 2020 due to thepreviously implemented restructuring and cost cutting measures we implemented during 2020.29March 31,September 30, 2021 decreased by $3.6$1.9 million, or 18.3%11.6%, to $16.1$14.1 million from $19.7$16.0 million for the three months ended March 31,September 30, 2020, as a result of a lower depreciable base.There was no goodwill impairment charge during the three months ended March 31, 2021. We recognized a goodwill impairment of $57.1 million during the threenine months ended March 31, 2020.September 30, 2020. No goodwill impairment was recognized during the nine months ended September 30, 2021. See Note 6—Goodwill and Intangible Assets in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information.threenine months ended March 31,September 30, 2021 decreased by $13.3$15.7 million to $7.4$13.7 million from $20.7$29.4 million for the threenine months ended March 31,September 30, 2020. Severance and other charges, net for the threenine months endedMarch 31, September 30, 2020 was unfavorably impacted by fixed asset impairment charges of $15.5 million and intangible asset impairments of $4.7 million, primarily driven by COVID-19-related activity disruptions and customer spending cuts in response to falling oil prices. Severance and other charges, net for the three months ended March 31, 2021 includes $6.8 million of mergers and acquisition costs associated with the pending merger with Expro.See Note 15—Severance and Other Charges, net in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information.lossthreenine months ended March 31,September 30, 2021 decreased by $7.0$1.2 million, or 19.9%, to $2.9$4.7 million compared to $9.9$5.9 million for the threenine months ended March 31,September 30, 2020. The change in foreign currencyCurrent year results year-over-year was primarily drivenwere negatively impacted by reduced strengtheningweakening of the U.S. dollar inagainst the current period as compared toNorwegian Krone and Pound Sterling. Prior year results were negatively impacted by the prior year period.threenine months ended March 31,September 30, 2021 changed by $16.7$12.0 million to an expense of $1.1$11.8 million from a benefit of $15.6$0.2 million for the threenine months ended March 31,September 30, 2020. The variance in effective tax rates compared to the same period last year is due to the beneficial impact in the prior year period benefited from the 5-year net operating loss carryback provision included in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) as well as a change in the geographical mixCARES Act.Three Months Ended March 31, 2021 2020 Revenue: Tubular Running Services $ 66,285 $ 89,497 Tubulars 11,669 12,542 Cementing Equipment 16,857 21,453 Total $ 94,811 $ 123,492 Tubular Running Services $ 8,128 $ 13,305 Tubulars 639 1,396 Cementing Equipment 4,795 2,544 (6,909) (10,186) $ 6,653 $ 7,059 $ 77,625 $ 52,926 $ 215,805 $ 204,750 18,784 16,483 47,019 37,766 18,532 15,008 54,769 51,494 $ 114,941 $ 84,417 $ 317,593 $ 294,010 $ 11,912 $ 982 $ 29,790 $ 18,336 2,735 1,806 7,481 3,883 6,389 3,376 16,036 6,806 (7,258 ) (7,151 ) (20,464 ) (24,645 ) $ 13,778 $ (987 ) $ 32,843 $ 4,380 (1)Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. (For a reconciliation of our Adjusted EBITDA, see “Adjusted EBITDA and Adjusted EBITDA Margin”).3029(2)Includes certain expenses not attributable to a particular segment, such as costs related to support functions and corporate executives.March 31,September 30, 2021 Compared to Three Months Ended March 31,September 30, 2020$66.3$77.6 million for the March 31,September 30, 2021,, a decrease an increase of $23.2$24.7 million, or 25.9%46.7%, compared to $89.5$52.9 million for the same period in 2020. The decreaseincrease was driven by improved activity levels across most regions as the prior year was significantly impacted by COVID-19-related activity disruptions and customer spending cuts in most offshore marketsresponse to falling oil prices, primarily in Africa, Europe, and the U.S. land market.$8.1$11.9 million for the March 31,September 30, 2021,, a decrease an increase of $5.2$10.9 million, or 39.1%, compared to $13.3$1.0 million for the same period in 2020. Segment results were negatively impacted byImproved activity declines across most offshore marketslevels in Africa, Europe, and the U.S. land market.$11.7$18.8 million for the March 31,September 30, 2021,, a decrease an increase of $0.8$2.3 million, or 6.4%14.0%, compared to $12.5$16.5 million for the same period in 2020, primarily as a result of lower drilling toolsimproved activity levels and lowerincreased tubular product sales duringas compared to the current period.$0.6$2.7 million for the March 31,September 30, 2021,, a decrease an increase of $0.8$0.9 million, or 57.1%51.4%, compared to $1.4 million for the same period in 2020. A decrease in high margin drilling tools activity and lower tubular sales impacted the current period.Cementing EquipmentRevenue for the CE segment was $16.9 million for the three months ended March 31, 2021, a decrease of $4.6 million, or 21.4%, compared to $21.5 million for the same period in 2020, driven by lower drilling activity and product sales in the U.S.Adjusted EBITDA for the CE segment was $4.8 million for the three months ended March 31, 2021, an increase of $2.3 million, or 92.0%, compared to $2.5$1.8 million for the same period in 2020, primarily due to the increase in revenue.cutting measures that more than offset lower revenue.$6.9$7.3 million for the March 31,September 30, 2021, and was flat compared to the same period in 2020 primarily due to restructuring and previously implemented cost cutting measures.improvementincrease of $11.5 million, or 62.5%, compared to $18.3 million for the same period in 2020. Segment results for 2021 were positively impacted by improved activity levels and cost cutting measures implemented after the onset of the pandemic.32.4%6.4%, compared to $51.5 million for the same period in 2020, driven by improved drilling activity and increased product sales in the U.S. land and offshore markets as a result of the recovery in oil prices.$10.2$24.6 million for the same period in 2020, primarily due to lower costs as a result of restructuring and cost cutting measures.March 31,September 30, 2021, weFrank's had cash and cash equivalents and and short-term investments of $193.6$203.0 million and no debt. OurFrank's primary sources of liquidity to date have been cash flows from operations. Ouroperations and its primary uses of capital have been for organic growth capital expenditures. WeManagement continually monitormonitors potential capital sources, including equity and debt financing, in order to meet our investment and target liquidity requirements. COVID-19 pandemic has significantly reduced economic activity levels across the globe, which has resulted in lower demand for oil and natural gas, as well as for our services and products. The reduced demand for our services and products has had, and may continue to have, a material adverse impact on our business, results of operations and financial condition. In consideration of these risks, we are undertaking additional measures to protect liquidity. These31measures include increased focus on collection of receivables, enhanced customer credit review, special measures to reduce risks of high-cost inventory items, and enhanced cash reporting requirements.OurPrior Board has authorized a program to repurchase our common stockCompany Common Stock from time to time. Approximately $38,502,322$38.5 million remained authorized for repurchases as of March 31, 2021;September 30, 2021, subject to the limitation set in ourthe shareholder authorization for repurchases of our common stock,Company Common Stock, which is currently 10% of the common stock outstanding as of April 30, 2020.August 3, 2021. From the inception of this program in February 2020, to date, we repurchased 570,04495,007 shares of our common stock were repurchased for a total cost of approximately $1.5 million. This program was suspended during the second quarter of 2020 due to the impacts of COVID-19 and commodity price declines and will be revisited when market conditions stabilize sufficiently to provide greater clarity to anticipated business results. We expect that following the Merger, the board of directors of the Combined Company will reevaluate this program. Our totaldeclines.$25.0$15 million in 2021, of which we expect approximately 90% willare expected to be used for the purchase and manufacture of equipment and 10% for other property, plant and equipment. The actual amount of capital expenditures for the manufacture of equipment may fluctuate based on market conditions and timing of deliveries. During the threenine months ended March 31,September 30, 2021 and 2020, cash expenditures related to property, plant and equipment were $2.3$7.6 million and $10.0$25.7 million, respectively, all of which were funded from internally generated funds. We believe ourManagement believes cash on hand should be sufficient to fund our capital expenditure and liquidity requirements for the remainder of 2021.expect that followingreview from time to time possible acquisition opportunities as an important element of our long-term business strategy. The timing, size or success of any acquisition efforts and the Merger,associated potential capital commitments are unpredictable and uncertain. We may seek to fund all or part of any such efforts with cash on hand and proceeds from debt and/or equity issuances and may issue equity directly to the boardsellers. Our ability to obtain capital for additional projects to implement our growth strategy over the longer term will depend on our future operating performance, financial condition and, more broadly, on the availability of directorsequity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets and other factors, many of which are beyond our control. In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the Combined Company will reevaluate our capital expenditures plan.Asset Based Revolving Credit Facilityfive-year5-year senior secured revolving credit facility (the “ABL Credit Facility”) with JPMorgan Chase Bank, N.A., as administrative agent, (the “ABL Agent”), and other financial institutions as lenders with total commitments of $100.0 million including up to $15.0 million available for letters of credit. Subject to the terms of the ABL Credit Facility, we have the ability to increase the commitments to $200.0 million. The maximum amount that the Company may borrow under the ABL Credit Facility is subject to a borrowing base, which is based on a percentage of certain eligible accounts receivable and eligible inventory, subject to customary reserves and other adjustments.All obligations under the ABL Credit Facility are fully and unconditionally guaranteed jointly and severally by FINV’s subsidiaries, including FICV, Frank’s International, LLC, Blackhawk, Frank’s International GP, LLC, Frank’s International, LP, Frank’s International LP B.V., Frank’s International Partners B.V., Frank’s International Management B.V., Blackhawk Intermediate Holdings, LLC, Blackhawk Specialty Tools, LLC, and Trinity Tool Rentals, L.L.C., subject to customary exceptions and exclusions. In addition, the obligations under the ABL Credit Facility are secured by first priority liens on substantially all of the assets and property of the borrowers and guarantors, including pledges of equity interests in certain of FINV’s subsidiaries, subject to certain exceptions. Borrowings under the ABL Credit Facility bear interest at FINV’s option at either (a) the Alternate Base Rate (“ABR”) (as defined therein), calculated as the greatest of (i) the rate of interest publicly quoted by the Wall Street Journal, as the “prime rate,” subject to each increase or decrease in such prime rate effective as of the date such change occurs, (ii) the federal funds effective rate that is subject to a 0.00% interest rate floor plus 0.50%, and (iii) the one-month Adjusted LIBO Rate (as defined therein) plus 1.00%, or (b) the Adjusted LIBO Rate, plus, in each case, an applicable margin. The applicable interest rate margin ranges from 1.00% to 1.50% per annum for ABR loans and 2.00% to 2.50% per annum for Eurodollar loans and, in each case, is based on FINV’s leverage ratio. The unused portion of the ABL Credit Facility is subject to a commitment fee that varies from 0.250% to 0.375% per32annum, according to average daily unused commitments under the ABL Credit Facility. Interest on Eurodollar loans is payable at the end of the selected interest period, but no less frequently than quarterly. Interest on ABR loans is payable monthly in arrears.The ABL Credit Facility contains various covenants and restrictive provisions which limit, subject to certain customary exceptions and thresholds, FINV’s ability to, among other things, (1) enter into asset sales; (2) incur additional indebtedness; (3) make investments, acquisitions, or loans and create or incur liens; (4) pay certain dividends or make other distributions and (5) engage in transactions with affiliates. The ABL Credit Facility also requires FINV to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0 based on the ratio of (a) consolidated EBITDA (as defined therein) minus unfinanced capital expenditures to (b) Fixed Charges (as defined therein), when either (i) an event of default occurs under the ABL Credit Facility or (ii) availability under the ABL Credit Facility falls for at least two consecutive calendar days below the greater of (A) $12.5 million and (B) 15% of the lesser of the borrowing base and aggregate commitments (a “FCCR Trigger Event”). Accounts receivable received by FINV’s U.S. subsidiaries that are parties to the ABL Credit Facility will be deposited into deposit accounts subject to deposit control agreements in favor of the ABL Agent. After a FCCR Trigger Event, these deposit accounts would be subject to “springing” cash dominion. After a FCCR Trigger Event, the Company will be subject to compliance with the fixed charge coverage ratio and “springing” cash dominion until no default exists under the ABL Credit Facility and availability under the facility for the preceding thirty consecutive days has been equal to at least the greater of (x) $12.5 million and (y) 15% of the lesser of the borrowing base and the aggregate commitments. If FINV fails to perform its obligations under the agreement that results in an event of default, the commitments under the ABL Credit Facility could be terminated and any outstanding borrowings under the ABL Credit Facility may be declared immediately due and payable. The ABL Credit Facility also contains cross default provisions that apply to FINV’s other indebtedness.March 31,September 30, 2021, FINV had no borrowings outstanding under the ABL Credit Facility, letters of credit outstanding of $10.3 million and availability of $23.5 million. At this time, due to our expected abilityto fund our capital expenditure and liquidity requirements from cashFacility.hand, we do not anticipate a need to borrow underOctober 1, 2021, the Company terminated the ABL Credit Facility duringand entered into the remainderNew Credit Facility (defined below).2021. Further, we do not believe that an FCCR Trigger Event will occur in the remainder of 2021.In connection with the closing of the Merger, Frank’s expects that the Combined Company will enterits subsidiaries, including Exploration and Production Services (Holdings) Limited and Expro Holdings US Inc., as borrowers, entered into a newsenior secured revolving credit facility (the “New Credit Facility”) with DNB Bank ASA, London Branch, as agent, and terminate or otherwise replaceother financial institutions as lenders with an aggregate commitment of $200.0 million with up to $130.0 million available for drawdowns as loans and up to $70.0 million for bonds and guarantees. Subject to the existing Frank’sterms of the New Credit Facility, the Company has the ability to increase the commitments to $250.0 million. Proceeds of the New Credit Facility may be used for general corporate and Expro credit facilities.working capital purposes.We the TRA with FICV and Mosing Holdings in connection with our IPO. The TRAFINV’s initial public offering (“IPO”) generally providesprovided for the payment by FINV to Mosing Holdings of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that FINV actually realizesrealize (or isare deemed to realize in certain circumstances) in periods after ourFINV’s IPO as a result of (i) tax basis increases resulting from the Conversion and (ii) imputed interest deemed to be paid by FINV as a result of, and additional tax basis arising from, payments under the Original TRA. We will retainFrank's retained the benefit of the remaining 15% of these cash savings, if any. Payments FINV makes under the TRA will be increased by any interest accrued from the due date (without extensions) of the corresponding tax return to the date of payment specified by the TRA. The payments under the TRA will not be conditioned upon a holder of rights under the TRA having a continued ownership interest in FINV. As of April 29, 2021, based on the best information available to us, the Mosing family collectively owns approximately 47% of our common shares.The payment obligations under the TRA are FINV’s obligations and are not obligations of FICV. The term of the TRA commenced upon the completion of the IPO and will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless FINV elects to exercise its right to terminate the TRA (or the TRA is terminated due to other circumstances, including our breach of a material obligation thereunder or certain mergers or other changes of control), and FINV makes the termination payment specified by the TRA or FINV otherwise settles its obligations under the TRA.33If FINV elects to terminate the TRA early, which it may do in its sole discretion (or if it terminates early as a result of our breach), it would be required to make a substantial, immediate lump-sum payment equal to the present value of the hypothetical future payments that could be required to be paid under the TRA (based upon certain assumptions and deemed events set forth in the TRA, including the assumption that it has sufficient taxable income to fully utilize such benefits), determined by applying a discount rate equal to the long-term Treasury rate in effect on the applicable date plus 300 basis points. Any early termination payment may be made significantly in advance of the actual realization, if any, of such future benefits. In addition, payments due under the TRA will be similarly accelerated following certain mergers or other changes of control.In certain circumstances, FINV may be required to make payments under the TRA that it has entered into with Mosing Holdings. In most circumstances, these payments will be associated with the actual cash savings that FINV recognizes from tax benefits resulting from the Conversion, which would reduce the actual tax benefit to FINV. If FINV was to elect to exercise its sole right to terminate the TRA early or enter into certain change of control transactions, FINV may incur payment obligations prior to the time it actually incurs any tax benefit. In those circumstances, FINV would need to pay the amounts out of cash on hand, finance the payments or refrain from incurring the obligation (including by not entering into a change of control transaction). Though we do not have any present intention of incurring an advance payment under the TRA (other than as described below with respect to theA&R TRA), based on our current liquidity and our expected ability to access debt and equity financing, we believe FINV would be able to make such a payment if necessary. Any such payment could reduce our cash on hand and our borrowing availability, however, which would also reduce the amount of cash available to operate our business, to fund capital expenditures and to be paid as dividends to our stockholders, among other things.have entered into the Athat certain Amended and Restated Tax Receivable Agreement, dated as of March 10, 2021 (the “A&R TRA.TRA”). Pursuant to the A&R TRA, FINV, FICV and Mosing Holdings have agreed, among other thingson October 1, 2021, the Company made a payment of $15 million cash to settle the early termination payment obligationobligations that would otherwise be owed to Mosing Holdings under the Original TRA as a result of the MergerMerger. The A&R TRA also provides for other contingent payments to be made by the payment by FINVCompany to Mosing Holdings of (i) $15 million cash at the closing of the Transactions and (ii) certain other contingent payments in the future in the event the Combined Company realizes cash tax savings from tax attributes covered under the Original TRA during the ten year period following the Closing DateOctober 1, 2021 in excess of $18,057,000, as more fully described in the A&R TRA. The terms of the A&R TRA are conditioned upon and subject to the closing of the Transactions and the payment to Mosing Holdings of the $15 million cash payment at the closing of the Transactions. If such conditions do not occur, the A&R TRA will be terminated and will be null and void, and the TRA will remain in effect in accordance with its terms.$18,057,000. Please see Note 11—Related Party Transactions17—Subsequent Events in the Notes to Unaudited Condensed Consolidated Financial Statements.Statements for additional details.ourFrank's operations, investing and financing activities are summarized below (in thousands):Three Months Ended March 31, 2021 2020 Operating activities $ (15,481) $ (22,252) Investing activities (1,956) (10,039) Financing activities (2,165) (1,521) (19,602) (33,812) Effect of exchange rate changes on cash 1,350 9,327 Net decrease in cash, cash equivalents and restricted cash $ (18,252) $ (24,485) $ (12,196 ) $ 25,315 4,589 (16,209 ) (2,671 ) (1,689 ) (10,278 ) 7,417 3,770 3,267 $ (6,508 ) $ 10,684 34used inprovided by (used in) operating activities was $15.5$(12.2) million for the threenine months ended March 31,September 30, 2021, compared to $22.3$25.3 million for the same period in 2020. The change in cash flow from operating activities of $6.8$37.5 million was primarily a result of unfavorable changes in accounts receivable and inventories, partially offset by favorable changes in accounts payable and accrued liabilities. Overall, changes in accounts receivable and inventories, net of $9.3 million and accounts payable and accrued liabilities resulted in a use of $24.1cash for the nine months ended September 30, 2021 of $15.2 million partially offset by unfavorable changes in inventoriesand a source of $10.6cash for the nine months ended September 30, 2020 of $37.2 million.used inprovided by (used in) investing activities was $2.0$4.6 million for the threenine months ended March 31,September 30, 2021, compared to $10.0$(16.2) million in the same period in 2020, a year-over-year decreasechange of $8.0$20.8 million primarily due to a $7.6decrease of $18.1 million decrease in the purchases of property, plant, equipment.$2.2$2.7 million for the threenine months ended March 31,September 30, 2021, compared to $1.5$1.7 million in the same period in 2020. The increase in cash flow used in financing activities of $0.7$1.0 million was due to increased repayment of borrowings of $1.6 million and an increase of $0.8 million of treasury shares withheld for employee taxes, of $0.8 million and increased repayment of borrowings of $0.7 million, partially offset by repurchases under our publicly announced share repurchase program of $1.0$1.5 million during the threenine months ended March 31, 2020 that did not reoccur during 2021.September 30, 2020.We doourFrank's significant accounting policies from those disclosed in ourthe Annual Report.we recently adopted or that will be required to adopt.ourthe Annual Report. OurFrank's exposure to market risk has not changed materially since December 31, 2020.35(a) Evaluation of Disclosure Controls and Procedures.ourFrank's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. OurFrank's disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure, and such information is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that ourFrank's disclosure controls and procedures were effective as of March 31,September 30, 2021 at the reasonable assurance level.(b) Change in Internal Control Over Financial Reporting.the Company’sFrank's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting during the period covered by this quarterly report.the CompanyFrank's implemented a new enterprise resource planning (“ERP”) system. In connection with this ERP system, we have updated ourupdates were made to internal controls over financial reporting to accommodate modifications to our business processes and accounting procedures. As with all new information systems, this ERP system and the related internal controls over financial reporting will require testing for effectiveness. We do not believe that the transition to this ERP system will have an adverse effect on ourthe Company's internal control over financial reporting.3634 the subject of lawsuits and claims arising in the ordinary course of business from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. WeFrank's had no material accruals for loss contingencies, individually or in the aggregate, as of March 31,September 30, 2021 andor December 31, 2020. We believeCompany management believes the probability is remote that the ultimate outcome of these matters would have a material adverse effect on our financial position, results of operations or cash flows. Please see Note 14—CommitmentsContingencies in the Notescombined company will continue to Unaudited Condensed Consolidated Financial Statements. We are conductingconduct, an internal investigation of the operations of certain of ourits foreign subsidiaries in West Africa including possible violations of the U.S. Foreign Corrupt Practices Act (“FCPA”), ourits policies and other applicable laws. In June 2016, weFrank's voluntarily disclosed the existence of ourits extensive internal review to the U.S. Securities and Exchange Commission (“SEC”),SEC, the U.S. Department of Justice (“DOJ”) and other governmental entities. It is ourthe Company’s intent to continue to fully cooperate with these agencies and any other applicable authorities in connection with any further investigation that may be conducted in connection with this matter. While ourthe review has not indicated that there has been any material impact on ourFrank's previously filed financial statements, we haveFrank's has continued to collect information and cooperate with the authorities, but at this time are unable to predict the ultimate resolution of these matters with these agencies.ourthe investigation into possible violations of the FCPA remains ongoing, and wethe Company will continue to cooperate with the SEC, DOJ and other relevant governmental entities in connection therewith. At this time, we are unable to predict the ultimate resolution of these matters with these agencies, including any financial impact to us. Ourthe Company. The Company’s Board of Directors (the “Board”) and management are committed to continuously enhancing ourthe Company’s internal controls that support improved compliance and transparency throughout ourthe Company’s global operations.ourthe Annual Report, Frank’s subsequently filed quarterly reports on Form 10-Q and Frank’s proxy statement/prospectus dated August 5, 2021 filed by with the SEC on August 6, 2021, which risks could materially affect our business, financial condition or future results. These risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.Exchange Ratiofailure to integrate successfully the businesses of Frank’s and Legacy Expro in the expected timeframe could adversely affect the combined company’s future results.adjustedrealized fully or at all, or may take longer to realize than expected. If the Company is not able to achieve these objectives and realize the anticipated benefits and synergies expected from the Merger within the anticipated timing or at all, the combined company’s business, financial condition and operating results may be adversely affected.eventintegration of any changethe two businesses.stocknear term, reduce the expected pre-tax synergies related to the integration of the businesses, and accordingly, any net synergies may not be achieved in the near term or at all. Additionally, there are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including accounting and finance, asset management, benefits, billing, health, safety and environment, human resources, maintenance, marketing, payroll and purchasing. The expenses of integrating these systems could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings. These integration expenses may result in the combined company taking significant charges against earnings.Frank’s.At the Effective Time, each Expro Ordinary Share outstanding immediately priorCompany Common Stock may be volatile, and holders of the Company Common Stock could lose a significant portion of their investment due to the Effective Time, other than shares owned by Expro, Frank’s, Merger Sub or any subsidiary of Frank’s (but including, for the avoidance of doubt, any such shares held by any wholly-owned subsidiary of Expro), will be converted into the right to receive a number of shares of our common stock equal to the Exchange Ratio. The Exchange Ratio will not be adjusted for changesdrops in the market price of our commonthe Company Common Stock.betweenindices in which the dateCompany Common Stock is included, to respond to the risk profile of signingthe combined company or to realize a gain. If large amounts of the Company Common Stock are sold, the price could decline.Agreement and completiondepends on many factors, including its future income, which cannot be assured. Section 382 of the Merger. Changes inCode (“Section 382”) generally imposes an annual limitation on the priceamount of our commonNOLs that may be used to offset taxable income when a corporation has undergone an “ownership change” (as determined under Section 382). An ownership change generally occurs if one or more stockholders (or groups of stockholders) who are each deemed to own at least 5% of such corporation’s stock priorincrease their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. In the event that an ownership change occurs, utilization of the relevant corporation’s NOLs would be subject to an annual limitation under Section 382, generally determined, subject to certain adjustments, by multiplying (i) the Merger will affect thefair market value of our commonsuch corporation’s stock that Expro shareholders will receive on the date of the Merger. Stock price changes may result from a variety of factors (many of which are out of our control), including the following:•changes in the respective businesses, operations and prospects of Frank’s and Expro;•changes in market assessments of the business, operations and prospects of Frank’s and Expro;•investor behavior and strategies, including market assessments of the likelihood that the Merger will be completed;•interest rates, general market and economic conditions and other factors generally affecting the price of our common stock; and37•legislation, governmental regulation and legal developments in the businesses in which Frank’s and Expro operate.The price of our common stock on the Closing Date may vary from its price on the date the Merger Agreement was executed, on the date of the proxy statement/prospectus and on the date of the 2021 annual general meeting of our shareholders (the “Annual Meeting”). As a result, the value represented by the Exchange Ratio will also vary, and you will not know or be able to calculate at the time of the Annual Meetingownership change by (ii) a percentage approximately equivalent to the market value ofyield on long-term tax-exempt bonds during the merger consideration Expro shareholders will receive upon completion ofmonth in which the Merger.In addition, the Merger might not be completed until a significant period of time has passed after the Annual Meeting. Because the Exchange Ratio will not be adjusted to reflect any changes in the market value of our common stock, the market value of the our common stock issued in connection with the Mergerownership change occurs. Any unused annual limitation may be higher or lower than the value of those shares on earlier dates. Stock price changes may result from, among other things, changes in the business, operations or prospects of carried over to later years.and Expro prior to or following the Merger, litigation or regulatory considerations, general business, market, industry or economic conditions and other factors both within and beyond the control of Frank’s. Neither Frank’s nor Expro is permitted to terminate the Merger Agreement solely because of changes in the market price or value of either company’s equity securities.Current Frank’s shareholders will have a reducedunderwent an ownership and voting interest in the Combined Company after the Merger, and such reduced ownership could have negative Dutch tax consequences.Frank’s will issue approximately 426,146,247 shares of our common stock to Expro shareholders in the Merger. Aschange under Section 382 as a result of these issuances, Expro shareholders are expectedthe Merger, which, based on information currently available, may trigger a limitation (calculated as described above) on the combined company’s ability to hold up to approximately 65% of the Combined Company’s outstanding common stock immediately following completion of the Merger.shareholders currently have the right to vote for its directorsNOLs and on other matters affecting Frank’s. Each Frank’s shareholder will remain a shareholdercould cause some of Frank’s with a percentage ownership of the Combined Company that will be smaller than the shareholder’s percentage of Frank’sNOLs incurred prior to January 1, 2018 to expire before the Merger. Ascombined company would be able to utilize them to reduce taxable income in future periods. While the exchange of ordinary shares of Expro for Company Common Stock in the Merger was, standing alone, insufficient to result in an ownership change with respect to Legacy Expro, we cannot assure you that the Company will not undergo an ownership change as a result of these reducedthe Merger taking into account other changes in ownership percentages, Frank’s shareholders will have less voting power inof Company stock occurring within the Combined Company than they now haverelevant three year period described above. If there were to be an ownership change with respect to Frank’s.AsLegacy Expro as a result of the Merger, the interest held by current Frank’scombined company may be prevented from fully utilizing Legacy Expro’s historic NOLs incurred prior to January 1, 2018 prior to their expiration.Combined Company could fall below certain thresholds relevant for Dutch tax purposes, such as the threshold relevant in respect of the Dutch substantial interest rules, which could give risefuture to Dutch taxes on income and capital gains. In addition, the Merger will impact the average paid-in capital of Frank’s common stock held by current Frank’s shareholders as recognized for purposes of Dutch dividend withholding tax, which may have tax consequences in relation to future liquidation proceeds of redemption of Frank’s common stocksell all or proceeds of repurchases of Frank’s common stock derived by current Frank’s shareholders. For further information, see the “Material Dutch Tax Consequences” section of the Registration Statement on Form S-4 filed with the SEC on April 26, 2021. Each Frank’s shareholder should seek tax advice from his own tax advisors about the potential tax consequences to it of holding and disposinga material number of shares of our common stock (someCompany Common Stock, the market price of whichCompany’s Common Stock could be material) following the merger.The Merger is subject to conditions, including certain conditions that may not be satisfied, or completed on a timely basis, if at all.The Merger is subject to a number of conditions beyond the control of Frank’s and Expro that may prevent, delay or otherwise materially adversely affect its completion. We cannot predict whether and when these conditions will be satisfied. Any delay in completing the Merger could cause the Combined Company not to realize some or all of the benefits that we expect to achieve if the Merger is successfully completed within its expected time frame.Failure to complete the Merger could negatively impact the future business and financial results of Frank’s.3837Neither Frank’s nor Expro can make any assurances that it will be able to satisfy allTable of the conditions to the Merger or succeed in any litigation brought in connection with the Merger. If the Merger is not completed, the financial results of Frank’s may be adversely affected and Frank’s will be subject to several risks, including but not limited to:•Frank’s being required to pay Expro a termination fee of $37.5 million or Expro being required to pay Frank’s a termination fee of $71.5 million, in each case under certain circumstances provided in the Merger Agreement;•payment of costs relating to the Merger, such as legal, accounting, financial advisor and printing fees, regardless of whether the Merger is completed;•the focus of our management team on the Merger instead of the pursuit of other opportunities that could have been beneficial to Frank’s; and•the potential occurrence of litigation related to any failure to complete the Merger.In addition, if the Merger is not completed, Frank’s may experience negative reactions from the financial markets and from its customers and employees. If the Merger is not completed, Frank’s cannot assure its shareholders that these risks will not materialize and will not materially and adversely affect the business, financial results of Frank’s or the stock price of our common stock.The Merger Agreement contains provisions that limit each party’s ability to pursue alternatives to the Merger, could discourage a potential competing acquiror of either Frank’s or Expro from making a favorable alternative transaction proposal and, in specified circumstances, could require either party to pay a termination fee to the other party.The Merger Agreement contains “non-solicitation” provisions that, subject to limited exceptions, restrict Frank’s or Expro’s ability to, among other things, directly or indirectly initiate, solicit, knowingly encourage or knowingly facilitate or take any action designed to lead to the inquiry, making, or submission of a proposal competing with the transactions contemplated by the Merger Agreement. In addition, while each of the Frank’s Board and the Expro Board has the ability, in certain circumstances, to change its recommendation of the transaction to its shareholders, neither party can terminate the Merger Agreement to accept an alternative proposal, and the other party generally has an opportunity to modify the terms of the Merger and Merger Agreement in response to any alternative proposals that may be made before such board of directors may withdraw or modify its recommendation. Moreover, in certain circumstances, Frank’s or Expro may be required to pay up to $5.5 million of the other party’s expenses, respectively, or a termination fee of $37.5 million or $71.5 million, respectively.These provisions could discourage a potential third party that might have an interest in acquiring all or a significant portion of Frank’s or Expro from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the market value proposed to be received or realized in the Merger. In addition, these provisions might result in a potential third party acquirer proposing to pay a lower price to the shareholders than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.If the Merger Agreement is terminated and either Frank’s or Expro determines to seek another business combination, it may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Merger.Members of Frank’s management and the Frank’s Board have interests in the Transactions that are different from, or in addition to, those of other Frank’s shareholders.In considering whether to approve the Transactions, holders of our common stock should recognize that members of Frank’s management and the Frank’s Board have interests in the Transactions that differ from, or are in addition to, their interests as shareholders of Frank’s.39ContentsFrank’s and Expro may be unable to obtain the regulatory clearances and approvals required to complete the Merger or, in order to do so, Frank’s and Expro may be required to comply with material restrictions or conditions.Consummation of the Merger is subject to obtaining approval under certain antitrust and foreign investment laws. Regulatory entities may impose certain requirements or obligations as conditions for their approval or in connection with their review. The Merger Agreement may require Frank’s or Expro to accept conditions from these regulators that could adversely impact the Combined Company without either of them having the right to refuse to close the Merger on the basis of those regulatory conditions. Neither Frank’s nor Expro can provide any assurance that they will obtain the necessary clearances or approvals, or that any required conditions will not have a material adverse effect on the Combined Company following the Merger or result in the abandonment of the Merger.Additionally, even after completion of the Merger, governmental authorities could seek to challenge the Merger. Frank’s or Expro may not prevail and may incur significant costs in defending or settling any action under the antitrust laws.The pendency of the Merger could adversely affect the business and operations of Frank’s.In connection with the pending Merger, some customers or vendors of Frank’s may delay or defer decisions, which could negatively affect the revenues, earnings, cash flows and expenses of Frank’s, regardless of whether the Merger is completed. Similarly, current and prospective employees of Frank’s may experience uncertainty about their future roles with the Combined Company following the Merger, which may materially adversely affect the ability of Frank’s to attract, retain and motivate key personnel during the pendency of the Merger and which may materially adversely divert attention from the daily activities of Frank’s existing employees.In addition, due to operating covenants in the Merger Agreement, Frank’s may be unable, during the pendency of the Merger, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions that are not in the ordinary course of business, even if such actions would prove beneficial to Frank’s. Further, the process of seeking to accomplish the Merger could also divert the focus of management of Frank’s from pursuing other opportunities that could be beneficial to it, without realizing any of the benefits which might have resulted had the Merger been completed.The COVID-19 outbreak may adversely affect Frank’s and Expro’s ability to timely consummate the Merger.COVID-19 and the various precautionary measures attempting to limit its spread taken by many governmental authorities worldwide has had a severe effect on global markets and the global economy. The extent to which the COVID-19 pandemic impacts Frank’s and Expro’s respective business operations will depend on future developments, which are highly uncertain and cannot be predicted, including but not limited to new information which may emerge concerning the severity of COVID-19 and the nature and extent of governmental actions taken to contain it or treat its impact, the availability of effective treatments and vaccines, the ultimate duration of the pandemic, and how quickly and to what extent normal economic and operating conditions can resume. COVID-19 and official actions in response to it have made it more challenging for Frank’s, Expro and relevant third parties to adequately staff their respective businesses and operations, and may cause delay in the companies’ ability to obtain the relevant approvals for the consummation of the Merger.The Merger may be completed even though material adverse changes subsequent to the announcement of the Merger, such as industry-wide changes or other events, may occur.In general, either party can refuse to complete the Merger if there is a material adverse change affecting the other party. However, some types of changes do not permit either party to refuse to complete the Merger, even if such changes would have a material adverse effect on either of the parties. For example, a worsening of Frank’s or Expro’s financial condition or results of operations due to a decrease in commodity prices or general economic conditions would not give the other party the right to refuse to complete the Merger. If adverse changes occur that40affect either party but the parties are still required to complete the Merger, Frank’s share price, business and financial results after the Merger may suffer.The opinion obtained by Frank’s Board from Moelis does not and will not reflect changes in circumstances after the date of such opinion.On March 10, 2021, Moelis & Company LLC (“Moelis”), Frank’s financial advisor in connection with the Merger, delivered an opinion to Frank’s Board as to the fairness, as of the date of the opinion and subject to the assumptions made, procedures followed, matters considered and other limitations set forth in the opinion, of the Exchange Ratio in the Merger to Frank’s. Changes in the operations and prospects of Frank’s or Expro, general market and economic conditions and other factors that may be beyond the control of Frank’s or Expro, and on which the opinion of Moelis was based, may alter the value of Frank’s or Expro or the price of our common stock by the time the Merger is completed. Frank’s has not obtained, and does not expect to request, an updated opinion from Moelis. Moelis’s opinion does not speak to the time when the Merger will be completed or to any date other than the date of such opinion. As a result, the opinion does not and will not address the fairness, from a financial point of view, of the Exchange Ratio at the time the Merger is completed or at any time other than March 10, 2021.our repurchases of our common stockCompany Common Stock during the three months ended March 31, 2021. — $ — — $ 38,502,322 — $ — — $ 38,502,322 — $ — — $ 38,502,322 — $ — — PeriodTotal Numberof Shares Purchased (1)Average
Price Paid per ShareTotal Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms (2)Maximum Number (orApproximate Dollar Value)of Shares that may yetbe Purchased Under theProgram (2)January 1 - January 31— $— — $38,502,322 February 1 - February 28— $— — $38,502,322 March 1 - March 31— $— — $38,502,322 Total— $— — has authorized a program to repurchase our common stockCompany Common Stock from time to time. Approximately $38,502,322$38.5 million remained authorized for repurchases as of March 31, 2021;September 30, 2021, subject to the limitation set in our shareholder authorization for repurchases of our common stock,Company Common Stock, which is currently 10% of the common stock outstanding as of April 30, 2020.August 3, 2021. From the inception of this program in February 2020 to date, weFrank's repurchased 570,04495,007 shares of our common stock for a total cost of approximately $1.5 million. This program was suspended during the second quarter of 2020.414239FRANK’S INTERNATIONAL N.V.Date:May 4, 2021By:/s/ Melissa CougleMelissa CougleSenior Vice President and 4340