Forum Energy Technologies, Inc. Q3 FY2025 earnings call

• FET extended outperformance, with backlog up 21% to highest since 2015. - Beat the Market strategy drove strong bookings and revenue. - Free cash flow up 21% YTD, ninth consecutive quarter of positive free cash flow. - Raised full-year free cash flow guidance to $70-80 million. - Net leverage at 1.3x, ahead of schedule. - Repurchased 8% of shares YTD. - Divided addressable markets into leadership (1.5B, 36% share, ~2/3 revenue) and growth (3B, 8% share). - Coiled line pipe revenue grew 28% QoQ; artificial lift market growing internationally. - Plan FET 2030 aims to double revenue by 2030 via market expansion and share gains. - Accelerated facility consolidations to save $15M annually, discontinuing low-volume products.

FET delivered revenue of $196 million, approaching the top end of guidance. Offshore revenue grew with drilling and subsea product line driving 22% of total. International revenue surpassed U.S. sales as Middle East and Canadian revenue increased. U.S. revenue declined 10% due to rig count and customer conservatism. Book-to-bill was 122%, with Drilling and Completions at 129% and Artificial Lift and Downhole at 112%. Drilling and Completions segment had flat revenue but EBITDA up 3% due to product mix and cost savings. Artificial Lift and Downhole segment revenue decreased 4% but EBITDA increased 2% due to favorable mix and cost savings.

• Raised full-year free cash flow guidance to $70-80 million. - Forecasted fourth quarter revenue $180-200 million, EBITDA $19-23 million. - Full-year 2025 revenue $770-790 million, EBITDA $83-87 million. - Expect continued free cash flow strength for share repurchases and debt reduction.

• Tariff rate volatility remains a challenge. - Market activity decline could impact future results.

Q: Can you talk about changes to sales incentive system and booking strength?

A: Neal Lux mentioned Beat the Market strategy alignment and focus on generating sales, with subsea bookings a key driver.

Q: How about margins in backlog and new orders?

A: David Williams noted subsea has lower contribution margin due to pass-through items, but cost savings initiatives will help.

Q: Discussion on facility consolidation and revenue potential?

A: Neal Lux stated consolidation has capacity to expand revenue, with 50% more savings than original goal.

Q: Share repurchase capacity?

A: David Williams said capacity resets annually, with ~$40M available for 2026 based on free cash flow.

Q: Geography cycle and coiled line pipe growth?

A: Neal Lux said well-positioned in all geographies, coiled line pipe has potential to grow but doubling in 2026 is a big leap.

Q: New products for 2026?

A: Neal Lux mentioned artificial lift expansion to rod lift, Unity operating system for ROVs, and heat transfer units for mobile power units.

Q: Oil price impact on product adoption?

A: Neal Lux said lower oil prices increase adoption of efficiency products as service companies need to be more efficient.

Q: Backlog conversion and multiyear projects?

A: David Williams said backlog runs 2-3 quarters typically, with subsea backlog lasting into 2027.

Q: Valve and sand control product trends?

A: David Williams said valves saw increase due to restocking after buyers' strike, sand control in Canada strong from customer discussions.

Q: Rod lift market and new products?

A: Neal Lux said rod lift is a new market with existing sales, focusing on Pump Saver Plus product.