Forum Energy Technologies, Inc. Q1 FY2026 earnings call

• First quarter results reinforced confidence in FET 2030 path with revenue up 8%, EBITDA 14%, net income 300%. Orders up 10% with book to bill of 106%, backlog up 44% from first quarter last year. - Execution of beat the market strategy drove results, including 12% revenue per global rig growth. - Completed structural cost saving initiatives achieving $15 million annualized savings. - Continued share repurchase program and extended credit facility maturity to 2031. - Innovations like Duracoil 95, Unity ROV system, Duraline manifold system, rig floor automation software, and cooling solutions for power generation and data centers. - Middle East conflict had slight impact on logistics and freight costs but no material negative impact on business, with Middle East revenue 10% of total. - FET 2030 vision envisions addressable markets growing 9% annually, market share to 22% by 2030, doubling revenue to $1.6 billion, quadrupling EBITDA, and nearly tripling free cash flow.

Drilling and completions revenue was $127 million, flat with previous quarter. Subsea product line increased 20% due to ROVs and rescue submarine project. Stimulation and intervention product line increased 7% with power end and wireline cable demand. Coil tubing revenue was down 17% due to delivery pushouts, but segment EBITDA was up 6% from cost savings and improved plant utilization. Artificial lift and downhole revenue was $82 million, up 9%, with EBITDA roughly flat. International revenue was up 7% with Canada, Europe, and Latin America double-digit gains. Offshore revenue expanded 10% with subsea product line up 20%.

• Second quarter EBITDA forecast between $24 - $30 million, midpoint up 32% from year ago. - Full year EBITDA guidance midpoint raised to $103 million, up 20% from 2025. - Revenue guidance maintained at $800 - $880 million. - Adjusted net income guidance between $21 - $38 million. - Full year free cash flow guidance $55 - $75 million, confident in converting ~65% of EBITDA to free cash flow. - Reaffirm balance sheet in great shape, net leverage reduction as dry powder for strategic investments.

• Middle East conflict caused some disruptions in logistics and freight costs, though no material negative impact forecasted as Middle East revenue is 10% of total. - Uncertainty remains around the Middle East conflict and its long-term effects on the industry.

Q: With respect to the Unity ROV system and the trade show, are you seeing demand for that product outside of traditional energy? And then secondly, if we think about Unity and the cooling systems you all have, are there orders for those systems that are in the backlog, or are you working on that?

A: Starting with Unity first, it's still early stages, but has application outside oil and gas, with Unity systems already in backlog. On cooling systems, Powertron is a new design, no orders yet but great product.

Q: Can you comment on what the margin profile looks like in the backlog?

A: Innovative products have higher margins, new products/innovations made up 11% of backlog at start of year, subsea business has slightly lower contribution margins due to pass-through material, but overall average margin higher.

Q: With respect to the Middle East and like Qatar's LNG, that's part of it's gone offline. Are there conversations underway with customers in the Middle East that would increase demand for FET's business as the oil producers and gas producers maybe look to diversify their production capacity and maybe put a bigger emphasis on developing their own natural gas for internal consumption?

A: Early on rebuilding discussion, seeing increase in demand in Venezuela for short cycle activity, and opportunities in Middle East may develop as conflict subsides.

Q: In terms of the guidance raised this early in the year, what are the components that led you to that decision?

A: Strong orders, including Duraline for Argentina and VeraPerm in Canada, book to bill over 100%, initial indications of activity increase.

Q: Can you comment on the margin profile in the backlog and if the full benefit of cost reductions is seen?

A: Innovative products have higher margins, Q2 guidance assumes full cost reductions with Q1 having some challenges in facility consolidation.

Q: On operating cash flow, is it a timing issue?

A: Seasonality driven by incentive comp and property tax payments in Q1, DSOs may unwind in later quarters, on track for full-year cash flow.

Q: On FET 2030, can you confirm revenue and EBITDA numbers and margin context?

A: FET 2030 envisions doubling revenue to $1.6 billion and quadrupling EBITDA, with revenue growth and operating leverage driving margins.

Q: What's the situation in Venezuela and Argentina with FET's business?

A: Receiving orders from customers in Venezuela and working on Duraline order in Argentina.

Q: Talk about pricing behavior in the U.S.

A: Pricing environment steady, no real pricing increase yet, but will pass on cost pressures.

Q: On GHT product line and Duraline, etc.

A: GHT product line has uptick in inquiries, Duraline is more efficient with faster rig up/down and repeat revenue opportunities.

Q: On risks related to supply chain with Middle East rebuild?

A: Haven't seen supply constraints yet, but will watch.

Q: On 2030 plan and capital allocation, etc.

A: Confident in 2030 plan, free cash flow yield over 10% makes buybacks attractive, acquisitions need to be differentiated, accretive, and meet criteria.