NESR Earnings Call: Strategic Wins Amid Challenges

National Energy Services Reunited ((NESR)) has held its Q1 earnings call. Read on for the main highlights of the call.

The latest earnings call for National Energy Services Reunited (NESR) reflected a cautiously optimistic sentiment. The company is strategically positioned for growth, with significant contract wins in key regions like Kuwait and Oman, and advancements in technology. However, challenges such as revenue and EBITDA margin declines, particularly in Saudi Arabia, were acknowledged. Despite these hurdles, NESR sees significant growth potential, even amidst current market softness.

Quarterly Revenue Growth

NESR reported a Q1 2025 revenue of $303.1 million, marking a 2.1% increase year-over-year, which outpaced the broader market. This growth underscores the company’s resilience and ability to perform in a challenging economic environment.

Strong Market Positioning and Contract Wins

The company has secured multiple key contracts in Oman, UAE, and Kuwait, which are expected to drive growth in 2025 and 2026. These wins highlight NESR’s strong market positioning and strategic focus on high-growth regions.

Strategic Growth in Kuwait

Kuwait has emerged as a significant growth area for NESR. The company is tendering for several billion dollars in multiyear contracts and investing in initiatives like the Ahmadi Innovation Valley, which are expected to bolster its presence and performance in the region.

Technological Advancements

NESR is making strides in frontier technologies, such as rotary steerable systems and mineral recovery. Successful pilot projects in these areas demonstrate the company’s commitment to enhancing its technological capabilities and service offerings.

Sequential Revenue Decline

Despite the year-over-year growth, NESR experienced an 11.7% sequential revenue decline from the previous quarter. This was primarily due to a slowdown in Saudi Arabia during Ramadan, impacting overall performance.

Adjusted EBITDA Margin Decline

The adjusted EBITDA margin for Q1 2025 was 20.6%, down 100 basis points year-over-year. This decline was attributed to project slowdowns in Saudi Arabia, reflecting the challenges in maintaining profitability amid market fluctuations.

Saudi Arabia Market Softness

The Saudi Arabian market is experiencing a slowdown in oil-related projects, which has impacted NESR’s growth expectations. The company is navigating this softness by leveraging its strategic positioning in other regions.

Negative Free Cash Flow

NESR reported a negative free cash flow of $9.6 million for Q1 2025. This was influenced by increased Days Sales Outstanding (DSO) due to Ramadan, highlighting the cash flow challenges faced during this period.

Forward-Looking Guidance

Looking ahead, NESR remains optimistic about its growth prospects in 2025 and 2026, driven by recent contract wins and strategic investments in technology. Despite geopolitical tensions and trade uncertainties affecting economic growth and oil demand, the company is focusing on expanding its contracts in Oman, UAE, and Kuwait, where it sees substantial growth opportunities. NESR is confident in its ability to outperform due to its strategic positioning in the Middle East and North Africa region.

In summary, the NESR earnings call conveyed a cautiously optimistic outlook. While the company faces challenges such as revenue declines and market softness in Saudi Arabia, its strategic positioning, contract wins, and technological advancements position it well for future growth. Investors and stakeholders can look forward to NESR’s continued focus on expanding its market presence and enhancing its service offerings.