Weatherford International plc (NASDAQ:WFRD) Q4 2022 Earnings Call Transcript

Middle East is probably the area we’re the most excited about, as I’ve referenced multiple times on the call. We think the Middle East growth will be head and shoulders above all of the other regions, and will really spearhead the overall company growth and should be high teens to 20-plus percent just on a stand-alone basis. And then you’ve got Europe and Russia, and especially Russia, as we mentioned, will be a little bit of a drag. Look Russia continues to be a complex environment. There’s a lot of volatility on currency. So it’s a little bit hard to predict exactly where that will go. We think Europe will grow outside of that, but probably not to the level of any of these other regions. So hopefully, that gives you a little bit more of a perspective.

Luke Lemoine: Yes, absolutely. And then on the margin side, you talked about your goal to get to the low to mid-20% EBITDA range over the next few years. Of course, you get the low 20% range on a quarterly basis in 4Q. Can you talk a little bit about what it takes and maybe bridge the gap to get to the mid-20% margin level?

Girishchandra Saligram: Yes. So I think, look, a couple of things, Luke, that are important, as Arun pointed out and Desmond referenced, right? In our Q4 numbers, we had a little bit of a pricing catch up. The total year numbers, everything sort of still fits within that envelope. But there was a little bit of a catch-up that really should be attributed to Q3. So net-net, it’s probably about 50 to 100 basis points. If you look at it from that perspective, I think we will continue to see very strong and solid margin expansion this year on an operational basis, and we’ll continue to drive that. Having said that, we have this year a couple of things going on. The first piece is we have a few investments that we have talked about all over the course of last year in systems, in our processes, that we are going to be very, very diligent about, very conscious and we’ll do it in a metered fashion, but we have to get this company ready for the next decade or 2.

So that’s going to come in a little bit over the course of the year. And the second is our new contracts have some start-up costs, especially in the second and maybe a little bit in the third quarter. So we’ve got a little bit of that. But I think once we are sort of passed that as we get our fulfillment network and our overall platform around repair and maintenance fully established, and it should be in a much better state by the end of this year, as we are able to bring out more new technology, I think we will be able to then look at ’24 as really the year where we transition into that sort of a realm on a consistent basis.

Operator: And our next question today comes from Ati Modak with Goldman Sachs.

Atidrip Modak: You talked about a lot of improvements in working capital in 2022. Are you now in a position to talk about normalized free cash flow conversion from EBITDA just yet? And if not, what else do you need to see happen before you get there?