FORUM ENERGY TECHNOLOGIES, INC. Q2 FY2025 earnings call

• FET delivered sequential growth in bookings, revenue, EBITDA, and free cash flow, with revenue and EBITDA in the top half of guidance ranges. - Subsea product lines had strong bookings, including for ROVs and a submersible rescue vehicle system. - Implemented beat the market strategy, with annualized revenue per global rig up 20% since 2022. - Identified leadership markets (2/3 of revenue, $1.5B aggregate market, 36% share) and growth markets ($3B aggregate market, 8% share). - Achieved $23 million in free cash flow in Q2, $30 million for first 6 months, a 27% Y/Y increase. - Raised full-year 2025 free cash flow guidance to $60M-$80M, a $20M increase. - Recognized about $1.5M of $10M cost reduction goal in Q2, with more benefit expected. - Tariff impacts managed through price increases and global footprint, though valves product line was affected by buyer strike.

The FET team achieved strong results this quarter with sequential growth in bookings, revenue, EBITDA, and free cash flow. Revenue was $200 million, at the top end of guidance. Subsea product lines had impressive performance with significant bookings for ROVs and a large submersible rescue vehicle system. Drilling and Completions segment revenue increased 1%, with coiled line pipe growing but stimulation and intervention declining. Artificial Lift and Downhole segment revenue increased 6%. FET derives about 2/3 of its revenue from leadership markets and 1/3 from growth markets.

• Raised full-year 2025 free cash flow guidance to $60 million to $80 million. - Q3 revenue forecast: $180 million to $200 million; Q3 EBITDA forecast: $19 million to $23 million. - Full-year 2025 revenue expected to be between $760 million and $800 million; EBITDA around $85 million. - Anticipate continued reduction in net working capital and net capital expenditures around 0.

• Valve business remains depressed due to distributor inventory depletion and uncertainty around tariffs on Chinese imports. - Soft U.S. completions activity impacted stimulation and intervention product line, negatively affecting segment EBITDA margins. - Uncertainty around tariff announcements impacting consolidated EBITDA margin.

Q: What's the time frame to double market share in growth markets?

A: Neal A. Lux said it would happen over time, with expansion to new customers and markets expected in 3 to 5 years.

Q: Details on offshore defense orders and timing?

A: Neal A. Lux said some are shorter-term, while the rescue submarine system is longer-term, delivering over 2 years. ROV systems are being adopted by other navies globally.

Q: Expectation for shares outstanding in Q3 and Q4?

A: David Lyle Williams said year-to-date 5% of shares repurchased, with another $25 million potentially deployable for repurchases, expecting significant year-end decline including stock compensation.

Q: What drives the $20M increase in free cash flow guidance for second half?

A: David Lyle Williams said majority is from working capital reduction as teams redirected supply chains and slowed raw material purchases earlier in the year.

Q: Tactical acquisitions fit in with strategy?

A: Neal A. Lux said they aim to focus on organic growth first but will look for accretive acquisitions that increase cash flow per share.

Q: Defense market opportunity for FET?

A: Neal A. Lux mentioned submarine rescue vehicles, undetected underwater vehicles, and application of offshore products in defense, with revenue from sales and service over useful lives.

Q: How guidance reflects valve business issues?

A: David Lyle Williams said valves stay consistent with current tariff noise as distributors aren't replenishing inventories, likely remaining depressed until inventories run out.

Q: Confidence in full-year EBITDA guide?

A: David Lyle Williams said they expect to pick up share, have cost savings coming, and high backlog, guiding for flat to slightly up in second half despite U.S. decline and pricing impacts.

Q: Position vs competition?

A: Neal A. Lux said with strong balance sheet, global footprint, and ability to invest in people, they expect to outcompete smaller, less capitalized competitors; focus on generating cash differentiates them from publicly traded peers.

Q: Bottom of stimulation and intervention business?

A: Neal A. Lux said not at the bottom yet, with time needed for stage count to grow, but international demand for related products provides growth opportunities.