Arun Mitra: So Ati, our priorities haven’t really changed. As you noticed, we have made meaningful progress in getting to where we need to. We have about $97 million of the senior notes which are still open, and we have to eliminate that before we engage in a shareholder return discussion. And as we have maintained in the past, we expect to be there by the mid of this calendar year. And beyond that, having a framework and discussing specifics of the framework in terms of what shape it takes, the how, what, when is something we will give you guys more clarity on maybe another three to four months later.
Ati Modak: Okay. So…
Girish Saligram: Yes. If I could just add to that. Look, we have said this, I know there is a lot of interest in specifics on this, all the options on the table. Our focus is going to be creating something that is sustainable over the long term and that we have line of sight to. We are not really looking to do something that is just going to get us a quick set of announcement, interest, et cetera. We just want to make sure we are really thinking through not just the long duration of the company, but also on a multi-year basis, on a through cycle basis, to make sure it’s really sustainable.
Ati Modak: Makes sense. And then on the CapEx, you guys mentioned 5% of revenue. Can you provide color on where that CapEx is going to be directed across your service lines for that organic growth component and help us understand the long-term objective in terms of the revenue and margin impact you expect from that?
Girish Saligram: Yes. So, hi, Ati, a couple of things. So typically, our DRE segment tends to be the biggest recipient of CapEx, just given the service nature. We have got a lot of demand for drilling tools. We have got obviously a lot of demand for MPD. And then there is also a fair amount, across the segments of replenishment and maintenance CapEx requirement. The other thing though, that I think is important to point out this year, is we announced a couple of very significant contracts with Petrobras in the offshore space. So these fall into our PRI, because they are intervention services space. So that is a very significant driver. And from an increased standpoint, is probably the most significant increase. So, in terms of the returns, though, Arun talked about our return on invested capital.
It is a very, very solid number at this point in time. So our goal is to continue to keep driving that in the upward direction. But look, a big part of the margin expansion that you see is the result of these CapEx investments. Not only are we able to get increased revenue with higher fall throughs, but we are also looking to see how do, we increase the efficiency of our operations with improvements in the technologies that we deploy.
Ati Modak: Great. Thank you.
Girish Saligram: Sure.
Operator: Thank you. And our next question today comes from Jim Rollyson with Raymond James. Please go ahead.
Jim Rollyson: Hi. Good morning, guys, and echo the same thing others have said, which is great quarter and especially on the free cash flow side. But maybe just a little bit picking on 2024, you exited the year with 23.6% EBITDA margins, obviously guiding higher sequentially kind of gets you closer to 24%. And it sounds like as the year progresses, we are going to be inching closer to 25%. How are you thinking about that average progression throughout the year, from a margin perspective? It sounds like we are going to probably end up somewhere north of 24% for the full year this year, as we transition towards that 25% in ‘25. Is that a reasonable read?
Girish Saligram: Yes. Look, north is all kinds of stuff, Jim. So, look. I think a couple of things, one is as Arun pointed out in his prepared remarks we will exit the year. We believe at a 25%. There will be a progression over the course of the year, but it’s not going to be sort of big jumps. It’s probably going to be a little bit smaller increments. And look, it’s not necessarily going to be evenly spaced across the quarters. We have got typically a third quarter that, tends to be a service-oriented quarter if second and fourth quarter they tend to be more mix-driven through products, so there is a little bit more — like that. So, look I think overall, as we have said. We will see meaningful progress towards the 25%, but you all, we have been very clear that 25%, it’s sort of 25/25.
Kind of targets. So that’s where we will expect to land. I think the other thing to point out, as I said in my prepared remarks. Our philosophy has always been, we set a target. We provide a line-of-sight to it, we achieve it. We make sure we are sustainable. And then we raised it up, but we did point out, look, we don’t think that that is necessarily a defining limit. So, we are constantly looking for other ways to raise the bar as well.
Jim Rollyson: Absolutely. And then obviously you clearly detailed, there’s a lot of things going on, that seem to extend beyond well beyond 2025. Switching gears on a follow-up. Obviously, you talked about CapEx and you. Were a little more active on the M&A front this quarter. And it sounds like that could be part of. Opportunistically part of your incremental growth strategy. Just curious as you think about M&A. Pretty strategic in your directive on what you are focused on. But, are they mostly things that you are looking at, mostly on the smaller side, like the transactions you announced today. Are there any larger transactions that you would contemplate as you go-forward in your balance sheet continues to improve?
Arun Mitra: Yes. Look, Jim, we would certainly contemplated the criteria. I don’t really changed, right. So that’s the important thing for us. We are not interested in driving scale for the sake of scale. We want to drive scale for value-creation. That’s the most important thing and we believe that first of all, there has to be a strategic thesis. We have got to do things that will improve the overall margin profile of the company. We will increase our ability to generate cash. So as we do all of that and then we look at our valuation envelope for it to make sense. That’s how we look at it. So, yes, we would certainly entertain larger transactions. We have looked at several. But it’s taken us look since I have been in the company has taken a three and a half years to get to this point, because, we set a pretty high bar and especially given our history I think that’s warranted.
We want to make sure that everything that we do on the M&A space is exceedingly well-thought-out and has integration plans that will actually deliver the value that we have committed to.
Jim Rollyson: That’s a great answer thanks Girish.
Girish Saligram: Thanks Jim.
Operator: And our next question today comes from Doug Becker at Capital One. Please go ahead.
Doug Becker: Thank you. So the revenue growth guidance a little bit higher than some of the competitors. I just wanted to get a sense for how much of that was driven. By the acquisitions announced versus, just maybe the smaller base, or some of the unique opportunities that — that Weatherford has?
Girish Saligram: Yes. Hi, Doug. So that’s why I tried to stress the word small, a couple of times in my prepared remarks. Look — we have been talking since sort of the late summer last year about double-digit revenue growth. So, it wasn’t overly influenced by our acquisitions. And we have been sort of thinking through this. We have also had some things that have pressured us on the downside. I talked about Russia. We obviously know the situation in North America. So I think, look, in terms of the smaller number, yes, you are right. It’s a smaller base for sure. But for now, a couple of years, we have been clocking up numbers that are in excess on the international side. And I think that’s a combination, again, of the opportunity to grow.
So, the portfolio that we have, which is really broad spectrum, full scale services, coupled with these specialty services, give us an opportunity to really increase the value proposition that we can offer customers. And that’s what we really think is driving the growth.
Doug Becker: Got it. And will these primarily be in the DRE segment?
Girish Saligram: So it’s a mix, Doug. So the two wireline technology companies will be in the DRE segment, and Ardyne, which is in decommissioning will be in the PRI segment.
Doug Becker: Okay. And then just real quickly on the net working capital, the 25.8% this year benefited from the financial transaction you highlighted. Just — maybe, just what was the normalized net working capital there, and what’s a reasonable target for this year as the company is moving toward that 25% of revenue over time?
Arun Mitra: Hi, Doug. And this is something I have maintained, the idea is to keep improving the metrics. So while we were helped by this transaction at year end, we did make meaningful progress on a few of these metrics this year, even if I were to carve out the year end transaction. So, the idea is to improve on a normalized basis, at least 100 basis points every year, and with the long-term goal being on a sustainable 25% investment in working capital in the next couple of years.
Doug Becker: Thanks, Arun. Thank you very much.
Arun Mitra: Sure, Doug.
Operator: Thank you. And our next question today comes from Saurabh Pant with Bank of America. Please go ahead.
Saurabh Pant: Hi, Girish, Arun. Good morning.
Girish Saligram: Good morning.
Saurabh Pant: I guess, if we can spend a little time on offshore, Girish, if you don’t mind. I know, I think you said in your prepared remarks, Gulf of Mexico revenues for you grew, I think you said, more than 25% in 2023. I know, Girish, you haven’t given specifics on your offshore exposure, but to the extent you can talk about that opportunity, for you over the next couple of years, or maybe more than a couple of years, elaborate on that a little bit. And maybe give us a little more color, on TRS and MPD from that perspective?
Girish Saligram: Sure. Saurabh, I think, look, it continues to be a really exciting space. We traditionally talk about MPD and TRS first when we talk about offshore. But there’s several other things that contribute to our offshore exposure. First of all, there’s intervention services. We do a lot there. These two contracts I talked about with Petrobras, for example, again, part of our PRI segment. And we do a lot of more conventional intervention services across the board. A lot of work around now decommissioning and plug-in abandonment. So, we think that will be an area of tremendous growth for us, both in the Gulf of Mexico, as well as in the North Sea. So, we think that’s a huge opportunity. We also provide significant amount of product sales into this, some of our cementing products, some completion.
So that’s an area especially on the completion side, as we look to expand our presence and get more penetration. At the same time, I would be remiss if I didn’t point out, we do a lot of other activity, including drilling. We have talked about our wins in the Gulf of Thailand, which is a high temperature basin, where we do drilling services for PTTEP. We also do that in the North Sea for different operators. So it’s a fairly broad spectrum set of offerings. Look, on the MPD side, I am tremendously excited about Modus. This is the platform that we launched. As we get more packages and we scale up, it will actually give us an opportunity to get into the jackup market. So that’s something that we are looking forward to. So all of that to say, look, bottom line, is we still see offshore as a significant area of growth for us.
