Earnings call transcript: Forum Energy Q2 2025 sees robust growth

Forum Energy Technologies Inc. (FET) reported its Q2 2025 earnings, showcasing robust financial performance with revenue reaching $200 million, hitting the top end of its guidance range. The company’s strategic initiatives and strong product bookings contributed to this growth, despite a declining global rig count. The stock has since climbed to $21.42, posting a strong 17.24% year-to-date return. According to InvestingPro analysis, FET maintains a GOOD financial health score of 2.72, supported by strong growth metrics and cash flow generation. The company appears slightly undervalued based on InvestingPro’s Fair Value model.

Key Takeaways

• Forum Energy achieved a revenue of $200 million for Q2 2025, at the high end of its guidance.
• The company reported a consolidated EBITDA of $21 million, marking a 2% increase.
• U.S. and international revenues grew by 3% and 6%, respectively.
• Free cash flow guidance for the full year was raised to $60-80 million.
• The company reduced its net debt by $20 million.

Company Performance

Forum Energy Technologies demonstrated strong performance in Q2 2025, with revenue reaching $200 million, a significant achievement given the global decline in rig counts. The company’s ability to grow both U.S. and international revenues by 3% and 6%, respectively, highlights its strategic positioning and market adaptability. With a market capitalization of $265 million and trailing twelve-month revenue growth of 7.31%, FET continues to show momentum. The increase in consolidated EBITDA by 2% further underscores its operational efficiency, contributing to an attractive EV/EBITDA ratio of 4.09x. For deeper insights into FET’s valuation metrics and growth potential, check out the comprehensive analysis available on InvestingPro.

Financial Highlights

• Revenue: $200 million (top end of guidance range)
• EBITDA: $21 million (up 2% sequentially)
• Free Cash Flow: $23 million in Q2, $30 million year-to-date
• Book-to-bill ratio: 132%
• Cost savings: $1.5 million recognized in Q2

Outlook & Guidance

Looking forward, Forum Energy has projected its full-year 2025 revenue to be between $760-800 million, with an EBITDA target of around $85 million. For Q3, the company forecasts revenue between $180-200 million and EBITDA in the range of $19-23 million. The company is also focusing on expanding its market share in growth markets, aiming to double its presence over time. FET maintains a healthy current ratio of 2.46, providing financial flexibility for its expansion plans. InvestingPro subscribers can access the detailed Pro Research Report, which provides comprehensive analysis of FET’s growth strategy and market position, along with over 30 key financial metrics and expert insights.

Executive Commentary

CEO Neil Lux emphasized the company’s growth trajectory, stating, "Since 2021, we have grown revenue and free cash flow by 1573% annually." He further highlighted the company’s commitment to shareholder value, noting, "We aim to return a prodigious amount of capital to shareholders." Lux also pointed to strategic market expansion, saying, "Our goal over time is to double our share in growth markets."

Risks and Challenges

• Declining global rig count presents a potential risk to revenue growth.
• Tariff impacts could affect cost structures and profit margins.
• Market saturation in established sectors may limit growth opportunities.
• Fluctuations in global oil demand could impact future performance.
• Competition in specialized product lines remains a challenge.

Q&A

During the earnings call, analysts inquired about Forum Energy’s defense market opportunities and working capital reduction strategies. The company addressed its approach to organic versus inorganic growth and discussed challenges in its stimulation and intervention business, highlighting its focus on strategic expansion and operational efficiency.

Full transcript - Forum Energy Technologies Inc (FET) Q2 2025:

Gigi, Conference Coordinator: Good morning, ladies and gentlemen, and welcome to the Forum Energy Technologies Second Quarter twenty twenty five Earnings Conference Call. My name is Gigi, and I’ll be your coordinator for today’s call. There is a process for entering the question and answer queue. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star, one, one again.

A link with instructions can be found on the company’s Investor Relations website under the Events section. At this time, all participants are in listen only mode and all lines have been placed on mute to prevent any background noise. This conference call is being recorded for replay purposes and will be available on the company’s website. I will now turn the conference over to Rob Kuukla, Director of Investor Relations. Please proceed, sir.

Rob Kuukla, Director of Investor Relations, Forum Energy Technologies (FET): Thank you, Gigi. Good morning, everyone, and welcome to FET’s second quarter twenty twenty five earnings conference call. With me today are Neil Lux, our President and Chief Executive Officer and Lyle Williams, our Chief Financial Officer. Yesterday, we issued our earnings release and it is available on our website. Please note that we are relying on the safe harbor protections afforded by federal law.

Listeners are cautioned that our remarks today may contain information other than historical information. These remarks should be considered in the context of all factors that affect our business, including those disclosed in FET’s Form 10 ks and other SEC filings. Finally, management’s statements may include non GAAP financial measures. For a reconciliation of these measures, please refer to our earnings release. During today’s call, all statements related to EBITDA refer to adjusted EBITDA.

And unless otherwise noted, all comparisons are second quarter twenty twenty five to first quarter twenty twenty five. I will now turn the call over to Neil.

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Thank you, Rob, and good morning, everyone. The FET team achieved strong results this quarter. We delivered sequential growth in bookings, revenue, EBITDA and free cash flow. Also, revenue and EBITDA were in the top half of our guidance ranges. Bookings this quarter were strong across most of our product lines and drove backlog to the highest level in over ten years.

Our Subsea product lines performance was impressive with significant bookings for ROVs and a large submersible rescue vehicle system. We continue to see strength in the offshore market across a wide array of industries, including oil and gas, wind and defense. Importantly, we generated $23,000,000 in free cash flow in the second quarter, putting us at $30,000,000 for the first six months of this year. That is a 27% year over year increase and marks our eighth consecutive quarter of positive free cash flow. Over that time, we have generated $168,000,000 of free cash flow.

Also, we believe this momentum will continue for the rest of the year. We are raising full year 2025 free cash flow guidance to between 60,000,000 and $80,000,000 a $20,000,000 increase. Applying our capital returns framework, we will use this free cash flow to further reduce net debt and execute share repurchases. This year, we repurchased approximately 5% of our shares outstanding. And based on our full year guidance and current stock price levels, we are on track to repurchase an additional 10%.

Concurrently, we plan to reduce net leverage to 1.3 times by year end. With a free cash flow yield around 30% and significant long term growth potential, continued buybacks are extremely compelling. The strong results I just outlined demonstrate the benefits of our Beat the Market strategy. Since its implementation in 2022, our annualized revenue per global RIG is up 20%. As a reminder, this strategy aims to grow profitable market share by competing in targeted markets, utilizing our competitive advantages, developing differentiated technologies and leveraging our global footprint.

Now, we’ve refined our strategy by aggregating our addressable markets into two broad categories, leadership markets and growth markets. This approach concentrates the impact of our technical and commercial resources. Today, FET derives about two thirds of our revenue from the leadership markets. These are markets where our solutions are fully adopted by the industry, where we have few competitors and broad geographic reach. We estimate that the leadership markets in aggregate total $1,500,000,000 and we have a meaningful 36% share.

A few examples from our portfolio are Global Tubing, Quality Wireline, Veraperm and Perry ROVs. In these markets, we will continue to invest in product development to maintain and expand our leadership position. These are great markets and I love our dominant products. In addition, we have identified substantial growth opportunities in markets that are about twice the size of our leadership markets, or roughly 3,000,000,000. We call these growth markets.

Our products and solutions here are differentiated, proven and have few competitors. However, they may be in the early stage of industry adoption or may have a narrower customer base or be geographically limited. As a result, our aggregate market share here is relatively low, around 8%. However, this creates an exciting opportunity to increase revenue rapidly through wider industry adoption, new customer acquisition and expanded global utilization. Since this opportunity is so meaningful to FET, let’s spend a few moments diving deeper with a few examples.

First, let’s begin with coiled line pipe, a product that saves time and money. This fantastic solution eliminates 95% of a pipeline’s welds and can be installed faster than traditional steel pipe. The last hurdle holding back wider customer adoption is inertia. As we move forward, I expect our customers to prioritize saving time and money over the status quo. The market opportunity for coiled line pipe is immense and has very few competitors.

Also, we employ one of the most efficient production methods for this product. With these factors in our favor, coiled line pipe should be a strong contributor to FET’s results. We saw a glimpse of this potential in the second quarter with growing demand in The U. S, The Middle East and offshore. The second example I want to highlight is from our artificial lift product family.

The value proposition to operators is very simple. Our patented products extend the life of downhole pumps, allowing more production at significantly lower cost. Execution of this value proposition has made us the market leader in The United States. The exciting part for us is that the international market is more than four times larger than a home market and demand is tied to production operating expense. By leveraging our global footprint to address these markets efficiently, we have a significant opportunity to grow revenue.

Our goal over time is to double our share in growth markets. To put that in perspective, eight points of market share gain could be an additional $240,000,000 in revenue. At a 30% incremental margin, that is $72,000,000 of additional EBITDA. This example illustrates the enormous revenue and EBITDA potential in just a flat market. This is exciting and demonstrates the value of FET’s beat the market strategy.

Now for more color on our quarterly results and outlook, I’m going

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): to turn the call over to Lyle. Thank you, Neil. Good morning. FET delivered solid second quarter results. Revenue of $200,000,000 was at the top end of our guidance range as we grew revenue in the face of declining global rig count.

U. S. Revenue was up 3% as our artificial lift and downhole segment rebounded from a softer first quarter despite a 3% decline in rig count. Revenue in Canada was down just slightly as the market experienced its usual second quarter breakup. And our international revenue, excluding Canada, increased by 6% as most of our product lines grew revenue with a decline in international activity.

As Neil highlighted, we had a great bookings quarter, up 31% from last quarter with a book to bill of 132%. While Subsea was the biggest contributor in the quarter, we had nice order flow from a number of other product lines. For perspective, excluding the Subsea product line, total bookings would have been up seven percent with a book to bill of 102%. Encouragingly, bookings and quote activity remained strong in the third quarter. Consolidated EBITDA was $21,000,000 up 2% and above the midpoint of our guidance range.

These consolidated results include improvement from higher revenue, sequential benefit from cost reductions and impacts from tariff mitigation efforts. Let me elaborate on these factors. During the quarter, we made significant progress toward our $10,000,000 cost reduction goal. We are 70 to 80% of the way and recognized about $1,500,000 of benefit in the second quarter. These savings come primarily through fixed cost reductions that we believe to be permanent in nature.

Based on our progress, we expect to achieve our savings goal this year. Tariff impacts played out in the quarter much as we expected despite the on again, off again nature of tariff announcements. As we mentioned on last quarter’s call, our tariff mitigation plan includes matching costs with price increases and leveraging our global footprint to avoid tariffs altogether. Beginning in the first quarter, we announced price increases to offset tariff expenses incurred in the second quarter. The impact was a slight 10 to 20 basis point reduction of our consolidated EBITDA margin.

And results of our valves product line were somewhat better than we feared, following a softening of trade rhetoric. However, the valves buyer strike continues as the uncertainty around the magnitude of tariffs on Chinese imports has dramatically reduced volumes. We expect this to continue until distributor inventories are depleted. Drilling and Completion segment revenue increased 1%. Our coiled line pipe offering grew with market share gains in The U.

S. And revenue recognition on a large Middle East project. We also saw an uptick in drilling related capital shipments, primarily for international markets. On the other hand, our stimulation and intervention product line declined with the headwinds of softer US completions activity. The resulting product mix negatively impacted segment EBITDA margins.

Our artificial lift and downhole segment performed well in the quarter with revenue increasing 6%. Demand increased for some of our higher margin products, downhole casing equipment, sand control solutions and cable protection products. This favorable product mix and cost reductions lifted segment EBITDA above 20%. Our consolidated free cash flow of 23,000,000 benefited from reductions in net working capital and another sale leaseback transaction. This transaction is the latest move in our drive to redeploy capital to higher value applications.

Net of this sale, the business generated $15,000,000 of free cash flow, a 71% conversion from EBITDA. And we expect strong free cash flow to continue. We are raising full year guidance by $20,000,000 implying another 30,000,000 to $50,000,000 of free cash flow in the second half of the year. We expect continued reduction in net working capital since we slowed raw material purchases in response to softening market expectations. Walking from EBITDA to the midpoint of this new cash flow guidance, we now expect cash interest and taxes of 40,000,000 working capital reductions of $25,000,000 and net capital expenditures to be around zero.

Thanks to the operation team’s diligent action to generate free cash flow, we reduced our net debt by $20,000,000 and accelerated our share repurchase program. In June, we repurchased 225,000 shares for $4,000,000 and in July, we repurchased another 249,000 shares for $5,000,000 In 2025, we have repurchased 579,000 shares or 5% of the shares outstanding at the beginning of the year. As of the end of the second quarter, our net debt outstanding was $126,000,000 with a leverage ratio of 1.4 times. Expected free cash flow should keep the incurrence threshold from being a limiting factor. Therefore, we believe we are in a position to continue executing significant shareholder returns while further reducing net debt.

Now, turning to the market and our financial guidance for the remainder of the year. We believe commodity prices will remain near current levels and therefore expect industry activity to continue a gradual downward trend through the remainder of the year. At this time, we are not forecasting a significant fourth quarter decline as spending and activity are already at subdued levels. Despite softening activity, our results for the back half of the year should remain relatively steady with support from elevated backlog, share gains from our beat the market strategy and further cost savings. Therefore, for the third quarter, we forecast revenue of 180,000,000 to $200,000,000 and EBITDA of 19,000,000 to $23,000,000 We expect our full year 2025 revenue to be between $760,000,000 and $800,000,000 and EBITDA to be around $85,000,000 Let me provide a little more detail for modeling purposes.

For the third quarter, we estimate corporate costs of $8,000,000 depreciation and amortization expense of $9,000,000 and interest and tax expense of $5,000,000 each. For the full year, we estimate corporate costs of $30,000,000 depreciation and amortization expense of 35,000,000 interest expense of approximately $19,000,000 and tax expense of $17,000,000 Let me turn the call back to Neal for closing remarks. Neal?

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Thank you, Lyle. Based on the guidance we just provided, the next few quarters require continued focused execution. However, the investment case for FET remains compelling for the following reasons. First, this management team has a track record of outperformance. Since 2021, we have grown revenue and free cash flow by 1573% annually.

Second, our stock remains an incredible value with a free cash flow yield around 30%. Third, we aim to return a prodigious amount of capital to shareholders. We have $64,000,000 remaining under our current share repurchase program. That represents approximately 28% of our current market cap. Finally, we are poised for growth and have a plan in place to increase free cash flow per share significantly.

We call this plan Vision 02/1930. Looking out five years, there’s general consensus that world GDP will increase by nearly $30,000,000,000,000 and the global population will add 400,000,000 people. These are staggering numbers. These staggering numbers will drive daily world oil demand up 5,000,000 barrels by 02/1930. And given the high decline rates of existing fields, the oil industry will need to replace 30,000,000 barrels of daily supply in that time.

In addition, demand for natural gas will grow rapidly to power AI data centers and supply worldwide LNG. Significant investment will be required to satisfy global oil and natural gas demand. To meet these challenges, our customers will need to be even more efficient while also adding a modest amount of capacity. Under this growth scenario, FET’s addressable market would expand by more than 50%. This expansion and our beat the market strategy could organically double revenue from current levels.

And with our strong operating leverage and capital light business model, our free cash flow per share would grow dramatically. By 02/1930, we would have significant cash on hand and the firepower to execute strategic investments, including accretive acquisitions and additional shareholder returns. Vision 2030 is our North Star. Thank you for joining us today. Gigi, please take the first question.

Gigi, Conference Coordinator: Thank Our first question comes from the line of Joshua Jane from Daniel Energy Partners.

Joshua Jane, Analyst, Daniel Energy Partners: Thanks. Good morning. First question, just in the prepared remarks, you talked about the opportunity to double the market share in your growth markets, which could potentially add the $240,000,000 in revenue and $70 plus million of EBITDA. What’s the timeframe that you would hope to do that? And how would you view sort of what would you view as sort of a success with respect to timing on that?

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Yeah, this is our part of our long term vision, Josh, I think that would happen over time. For many of these products, I think we talked about, they’re proven solutions. We have to get over, acquire the customers, we have to expand the geographic reach. So I think those steps take time. But what’s exciting to us is going back to the original part of the statement that these are proven.

We’ve seen the value that our solutions have in The US other markets. I think just expanding these to new customers, new markets over the next three to five years, that’s the kind of success we’re looking for.

Joshua Jane, Analyst, Daniel Energy Partners: Okay, thanks. And then could you go into a little bit more detail on you highlighted some orders for offshore defense in the commentary. Are those longer lead time or maybe just some additional color around there and how we should be thinking about the timing of them ultimately hitting your P and L?

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Yeah, there’s a combination of some shorter term, more standard products. The rescue submarine system is a longer term product that’ll deliver over the next two years or so. So that’s long gestation. That’s a unique product for us. But the other defense what we’re seeing is the application of our current you know, ROV systems.

We’re seeing the adoption of those for other navies around the world, so outside of just oil and gas.

Joshua Jane, Analyst, Daniel Energy Partners: Okay, thanks. I’ll hop back in the queue.

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Thanks, Josh.

Gigi, Conference Coordinator: Thank you. One moment for our next question. Our next question comes from the line of Dan Pickering from Pickering Energy Partners.

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): Morning, Vince.

Dan Pickering, Analyst, Pickering Energy Partners: Good morning. You know, I I always hate getting on earnings calls and hearing everybody say good quarter and congratulate a company on doing a good job when sometimes the results are mediocre. But I do have to say, you guys are really executing quite well and above expectations. So, tried and true. Good quarter.

Thanks. When I just kind of a couple of mechanical things and talk a little bit about kind of some of these growth markets and your targets. Lyle, you talked about the share repurchase. What’s your expectation for shares outstanding in Q3 and Q4 if we didn’t do anything from here? I’m just thinking about how the math rolls through on the share repurchase side.

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): Yeah, no, great question. Dan, like we mentioned, year to date, we’ve repurchased about 5% of the shares that were outstanding at the beginning of the year. So that number has moved down pretty well. And I think importantly, maybe just a reminder for context, we’ve been limited a bit in our share repurchases by kind of timing of our free cash flow, but also by limits that were in our bond indenture, primarily the one and a half times net leverage threshold. So with us being below that, we think that now the second half of the year that moves through a lot more quickly.

Kind of quick math is under the indenture, we’d have about another $25,000,000 worth cash that could be deployed for share repurchases. And Neil mentioned that another 10% of our shares, so kind of call it another 1,200,000.0 shares could get bought at current stock price levels. Meaningful if we can deploy that 25,000,000 and would pull us down nearly 15% from the start of the year level by December.

Dan Pickering, Analyst, Pickering Energy Partners: Okay. And on a net basis, I know there are typically shares issued for employee plans, etcetera. What’s your expectation there? How many shares we get an issue given we’re offsetting that we will be offsetting this repo?

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): Yeah, we do have stock comp that rolls through every year. It’s not a significant number relative to what we’re buying back. I don’t have that number right here on top of my head, I would expect a pretty meaningful year on decline, including the addition of shares from stock compensation.

Dan Pickering, Analyst, Pickering Energy Partners: Gotcha. On the free cash side, you highlighted a 20,000,000 increase in your range and sort of for the second half of the year, you know, that’s a 30 to $50,000,000 number. You did 30 in the first half, I follow. So, you know, second half equal to the first half, I get the 30, you know, an incremental 20, what would be the gears? Are there more sale leasebacks to do?

Is it a lot of working capital that you’d pull out? Would it be revenue upside? What’s the variability getting us from that 30 number to the upside 50 number?

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): Great question. The biggest movement for us is working capital reduction in the second half of the year. So when activity dropped on us earlier this year in March timeframe, our teams redirected supply chains and slowed down inbound raw material. It takes a little bit for that to work its way through the process. So really we didn’t see a lot of working capital reduction through the first six months of the year.

And that driver of cash flow is really going to kick in for us in the second half. So really the delta from our first half run rate to get to that second half run rate, dollars 30,000,000 to $50,000,000 is the majority of that’s going to be more working capital reduction.

Dan Pickering, Analyst, Pickering Energy Partners: Got it.

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): I think Dan, we’ve also improved, seen improvement on our operations in how fast we’re turning incremental working capital. Putting those measures in place, think our teams have done just a fantastic job of we’re only buying what we need and returning it quickly and yet still satisfying customer demand while also having strong revenue.

Dan Pickering, Analyst, Pickering Energy Partners: Well done. I’m going to sneak a couple more in here if I could. Talked about in your growth strategies, new markets. I’m just wondering, how do you do that with spending as little capital as you’re doing? Or do we have to think about more CapEx to attack some of the growth market opportunities?

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): No, really minimal CapEx, if not zero. Because we have the global footprint in place, we have the really the commercial teams that are in place. So it’s more about having the time to convince the customer. So me step back, give you maybe an example there. We supply a lot of systems to protect downhole pumps.

The alternative is to just not go without protection. And so across the world, many operators just choose to leave, for lack of a better term, leave their pumps naked and not protect them. What we got to do is go sit down, provide the technical background, convince the customer there’s trials, obviously, right, that you got to go through. And that’s what takes time, but that’s where we’re focusing our efforts. So that’s really not a capital draw for us.

And so it’s just it’s getting those markets penetrated and, and, you know, and just really convincing the customer to adopt our solutions that that’s what’s exciting to us.

Dan Pickering, Analyst, Pickering Energy Partners: So it’s saleable agrees, basically.

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Yes, yes. With the resources we have in place. Correct.

Dan Pickering, Analyst, Pickering Energy Partners: Final question for me vision 02/1930. I like that. I mean, we can talk about that for the next five years. But when, when you discussed that earlier, you basically, it sounded to me like put M and A, strategic acquisitions, things like, you know, what I would call Veraperm, the last big one that you did. It sounded like you were putting those toward the end of the queue.

Are they or can you talk about how tactical acquisitions fit in with your strategy as you look ahead?

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Yeah, I think what we want to do is lay out a first, I think what do we control as best as we can? And I think that’s a lot of organic, But I think there’s definitely acquisitions. We’ve talked about if we could find another Veraperm, we love to add it in. Acquisitions that are accretive, that have strong financial metrics that would increase our cash flow per share. We love those and we’ll continue to look for them.

So I think they absolutely play a part. I think too, we’ve also committed to again, return a lot of capital. So we’re going to balance that while also reducing debt. Finding a company that yields a 30% free cash flow, it’s hard to find that. So until our price doubles and we can

Joshua Jane, Analyst, Daniel Energy Partners: go find

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): some opportunities, our opportunity list gets bigger.

Dan Pickering, Analyst, Pickering Energy Partners: You.

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Thanks, Dan. Thank

Gigi, Conference Coordinator: you. One moment for our next question. Our next question comes from the line of Jeff Robertson from Water Tower Research.

Jeff Robertson, Analyst, Water Tower Research: Good morning. Can you talk a little bit about the defense market globally and what kind of opportunity that presents

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Yes. Great example is the submarine rescue vehicle that we just booked in Q2. We see more of those opportunities specifically around. We’re also seeing navies around the world want to have more, let’s call it undetected type underwater vehicles that can do whatever work that they don’t tell us that they do. So our vehicles play a role there.

A good example, we’ve been selling to the United Kingdom Ministry of Defense for some vehicles as well. So I think the applications that we’ve developed for oil and gas also play well on the defense side. And our teams have a long history of addressing both markets. So we’re excited. I think that the spend is swinging that way.

And we’re taking advantage of the opportunities as they come.

Jeff Robertson, Analyst, Water Tower Research: Is the revenue stream from that both selling or contracting ROVs, but also servicing them over their useful lives?

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Yes, absolutely. And in fact, most of our offshore subsea vehicles, so we’ll sell the vehicles. So don’t rent the vehicles, we’ll sell them to the end user. A lot of the value over time comes from spare parts service that we provide.

Jeff Robertson, Analyst, Water Tower Research: Does the operating system that you all have developed that allows someone to operate them remotely? Is that a big selling point for that market?

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Absolutely. So even on the offshore side where that market has been relatively hot, they want to take cost out. And our Unity operating system that removes personnel from the vessel in order to have operations done onshore in a controlled environment are incredibly interesting to our customers. So that is driving sales of existing and we expect that to drive upgrades over time as they upgrade existing vehicles with this new software, new operating system.

Jeff Robertson, Analyst, Water Tower Research: And if I could ask one on the growth markets that you have highlighted, are those is that growth actually kind of chunky? In other words, does an NOC approve a product for use and then there’s a quick adoption to create some earnings growth or revenue growth. And then can you talk about the margin mix in your growth markets compared to your leadership markets?

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Yeah, so I’ll start at end first and then work backwards. The margin will be comparable to our leadership markets. We want to go and sell high value products. So in many cases, the solutions that we have that we’re bringing to our customers, we’re creating a lot more value for them than they’re paying to us. So they see it as a value add.

So we’re able to generate nice margins on those products. So very, very similar. So growth would be very similar, potentially even better than our leadership markets. Because again, we have very few competitors in those spaces. On the kind of the chunkiness, most of the products we’re selling would be more of our consumable, they’d be consumables.

So they would buy so many per month. Yeah, getting NOC approval is a big deal, but you’d still have, I think still some sort of ramp time. And in terms of overall margin, would just need to build over time. So I wouldn’t expect any wild swings with an approval that way.

: Thank you.

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Thanks, Jeff.

Gigi, Conference Coordinator: Thank you. One moment for our next question. Our next question comes from the line of Steve Ferrizani from Sidoti.

Steve Ferrizani, Analyst, Sidoti: Morning, everyone. Happy Friday. I just want to ask actually just the easiest, most basic question, which is we’ve seen a couple of months of significant rig count declines in the Permian, global declines. We’ve gone through two weeks of earnings calls that haven’t been super happy. I mean, you guys had sequential revenue improvement, flat margins.

Can you walk through how you do it when clearly some of the demand for some of your drilling and completions replacement equipment should decline in this market?

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Maybe I’ll start and let Lal jump in. Yeah, it’s not been easy. I can tell you that. Think with your question, a couple of things come to mind. We have a broad portfolio where we touch a lot of the value chain.

While US land has weak, weaker and declining, offshore has done well, international stays strong. And we talk about expanding a geographic reach with products that we’ve done well in The US. America has been fantastic for us where we’re sending our products down there for part of their unconventional development. That’s been a key part of it. Cost reductions though, our team has gone in and been really diligent about cutting costs.

They’ve also remained focused on being more efficient with inventory and working capital. I think all that’s played a role in the results we had and finally, really our feet to market strategy. We want to gain share. So if the market’s up, we’re going grow faster. If the market’s down, we’re hoping that we don’t fall as fast as the market itself.

So that’s part of our outlook, part of our strategy.

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): Yes, Steve, I guess the things I would add and to put some color and maybe a little bit of numbers to that, we do talk about our beat the market strategy and one high level way that we want to measure that is our revenue per global rig that’s working and comparing the first six months of this year to the first six months of last year, we’re up almost 2%. So while that may not sound like a lot, over time those percentages compound and gets to be a lot of revenue. A little bit of market So on share a year over year basis. Then also we think about the cost actions that we’ve taken. We announced in our last call that based on the softer market, we were going to endeavor to take $10,000,000 on an annualized basis of cost out of our fixed cost structure, really efficiency gains and how do we do better.

We recognized about 1,000,000 point dollars of that in the second quarter already. And if you think of us being, we said 70%, 80% of the way, there’s another $1,000,000 to $2,000,000 coming benefit in the third quarter. So a little bit of self help here that’s helping us overcome softness in The US market.

Steve Ferrizani, Analyst, Sidoti: Is that your confidence for the full year EBITDA guide? Because I mean, you’re guiding for flat to even slightly up in the second half knowing that you’re going to feel probably a still further US decline and the impact on pricing.

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): That’s right, Steve. We do think we’re going to pick up a little bit more share. We’ve got some costs coming out. And then finally, we are sitting on the highest backlog we’ve had in ten years. While some of it, like our submarine rescue vehicle is going to play out in revenue over the next couple of years, there’s other backlog that will be shorter nature in churn for us.

So we’ve got that support and our guidance really expects a gradual continued decline, not some sort of year end holiday or drop off We in the fourth think activity has already seen a pretty meaningful drop and probably kind of muddles lower from here.

Steve Ferrizani, Analyst, Sidoti: How does your guidance reflect the continued issues around the valve business?

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): Yeah, I think we think valve stays pretty consistent with what it’s done given the current tariff noise and what we’re seeing is our distributors just aren’t replenishing their inventories. So at some point, they’ll run out of inventory and then we’ll see a change. But in the near term and until that happens, we think valves kind of stays at a depressed level.

Steve Ferrizani, Analyst, Sidoti: So we look at the strong EBITDA and revenue number, it’s really missing a key piece.

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): Yeah, I say that that is. And as Neil mentioned, out the comments here, we do have a very broad portfolio of products. And while that’s a challenge sometimes on the upswings, where not all of the pistons are firing at the same time, it also works for us here where we’ve got a piece that’s really struggling, but other parts of the business are able to pick it up.

Steve Ferrizani, Analyst, Sidoti: Great. That’s helpful. And I do want to ask about the raised cash flow guidance because you’re not really, for obvious reasons, not moving EBITDA. If you can just walk through as a manufacturer that often gets compared to traditional oilfield services, the levers you’re actually able to pull here to be able to generate that much stronger cash flow in a difficult market?

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): Sure. I think let me start and then Neil chime in please. Really the big lever for us in this year, Steve, is working capital and I’d say a bit of CapEx. So if we go back to our beginning of the year guidance, we thought we’d be at that 40,000,000 to $60,000,000 worth of cash flow with really no decrease in net working capital, right? So now as activities come down, we’re able to unwind some working capital.

That’s going to be a big addition to our cash flow more than offsetting the full year decline in our thoughts on EBITDA. And also with our CapEx, we are not a heavy CapEx user. As you mentioned comparing with other oil field services companies, for us to grow, we don’t need to add a lot of CapEx. Our budget wasn’t high this year and in a softer market, we’re even able to dial back what we would need to spend. So net of the sale leaseback, well, about zero CapEx on a full year basis.

So those two levers, working capital and CapEx really help us on cash.

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): I think maybe add last to that is it comes down to the teams and execution. A couple of years ago, we changed our annual incentives to make cash flow a big part, a meaningful part of that incentive. And our teams have really adopted it and engaged. And so we’re focused on generating free cash on everything we do. And I think as we go back to growth cycle at some point, again, we think the next few quarters we need focused execution.

But as we go back to grow, we’re to maintain that cash focus and we want to turn that working capital as quickly as possible as even as we grow. The team’s doing a fantastic job. So we really appreciate what they’ve done embracing this cash flow focus.

Steve Ferrizani, Analyst, Sidoti: Great. Appreciate the color. Thanks, everyone.

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Thanks, Steve. Thanks, Steve.

Gigi, Conference Coordinator: Thank you. One moment for our next question. Our next question comes from the line of Eric Carlson.

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): Good morning.

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Good morning, Eric.

: So you guys have kind of outlined what we look for kind of towards the end of the year in terms of net debt, I think. So just implying the $85,000,000 EBITDA target in the 1.3 times multiple, but a 110,000,000 net debt towards the end of the year and probably somewhere around 11,000,000 shares outstanding. So that kinda leaves us with $340,000,000 of enterprise value at year end and really kind of still trading in that 3.9 times or under four times EBITDA range if nothing changes from here, which I wouldn’t I would hope it does, but I guess to have that buyback in your pocket, there’s worse things than having a a low share price for a while. And maybe the question would be is regarding the prodigious return of capital, a word for which I had to look up the definition. When you look at the balance sheet at the end of the year, so you have 110 net debt, 100 of that is the the kind of the new notes you did last year.

How does that change as you get kind of the credit line down to zero when you think about return of capital? Does it increase buybacks? Does it allow you to actually return cash to shareholders in some way, shape or form? Maybe just talk me through that if you look beyond this year.

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): Yes, Eric. Great question for us. And we’ve laid out over the last few quarters our thoughts and our framework for returning cash to shareholders. So just to kind of walk through those to reiterate that is we want to use about 50% of our cash flow for net debt reduction, about 25% aimed at share repurchases and the last 25% for things that we view as more strategic and we put incremental share repurchases in that, especially at our current cash flow yield. So I think even as we roll through to nothing drawn on the revolver and effectively cash on the balance sheet, we would still be looking towards net debt reduction.

So I think we’ll hold that strategy as we roll through. Obviously, we could get a little more bullish with incremental liquidity as that plays out that way. But it wouldn’t hurt us at all to be in position in a couple more years to even look to retire those Nordic nodes early and get to a lower cost of debt on a go forward basis.

: Okay, that’s helpful. And then I guess just in that regard, I mean, I know it gets brought up every quarter in terms of acquisitions. Obviously, the Veraperm acquisition was about as good as you’re going to get, and you basically paid you’re going to basically have paid that off over a two year period just in cash flow. So obviously, nothing wrong with that. But when you think about organic versus inorganic growth and then balancing that return of capital, obviously, the only guarantee is cash.

I mean, you can buy something very well and still have it go wrong. So when you think about just organic versus inorganic and then, again, kind of hammer home on cash returns specifically as we kind of turn the corner here. I mean, I guess I would personally just highlight that some sort of just pure cash return is probably appropriate at the right net debt level because the organic opportunity is so good in terms of revenue on a longer term basis? Just some thoughts on that would be helpful.

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Yeah, we agree with you on the organic opportunities that, you know, we wanted to highlight it when we think about our beat the market strategy and, where our growth and leadership opportunities. And again, if we look out ahead five years, it’s hard to believe that we won’t have as an industry have to invest a lot of capital and that we’re going be a beneficiary of that more activity. So I think the organic opportunities there, market share gains, overall market size growth that all fits. And as a company, we don’t require a lot of capital, right? So we’re pushing to be even more efficient on our working capital, ideally, incremental working capital almost pay for itself in a year or less.

And so we’ll have that. And as we look at growth opportunities, inorganic growth opportunities, we want to have a strong lens. Want to have good criteria and it’s something that we’ll absolutely look at. And again, if we found something like Veraperm fine, but we’re not gonna push. We’re gonna take excessive risk there because we have so much good organic opportunity.

: Okay, yeah, that’s helpful. I guess the last thing from from me would be, obviously, from a competitive perspective, you guys sit in a very strong position given kind of the cash generation, what you’ve done to lower debt levels and kind of that accelerating even into year end here. I mean, just when you look at your peers or even some of your customers, I mean, where do you think that you sit versus kind of the competition? And also in terms of a competitive perspective, there’s obviously some OFS pressure, but I think everybody has their kind of head up and eyes on 2026 and beyond just as we’ve seen US production flatline a little. I think the large cap servicers have been not incredibly bullish on the rest of this year, but the outlook looks good.

So just how has that been in terms of conversations with them and kind of building what you think looks like hopefully a better 2026?

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Yeah, as we think about our, let’s call it commercial competition, we try it again, obviously focus on areas where we have very few competitors. Generally, most of those competitors are private or small, not even publicly traded. So they have a different view on, than our publicly traded peers. So I think for us the position is by having a strong balance sheet, by being able to invest in our people and have the right resources, also having a global footprint, we think we’re going to outcompete, out innovate those smaller, less capitalized competitors there. I think on our publicly traded peers, which we get lumped into, our focus is to generate a lot of cash and that’s where we’re going.

I’m not sure where they’re looking per se, but I think for us, the future I think is going to be strong in our industry and we’re going to be there to take advantage of it.

: Great, very helpful. Thanks guys. Good quarter.

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Thanks, Eric. Thanks, Eric.

Gigi, Conference Coordinator: Thank you. One moment for our next question. Our next question comes from the line of Joshua Jane from Daniel Energy Partners.

Joshua Jane, Analyst, Daniel Energy Partners: I just had one final follow-up, which was how do you or how close are we to a bottom do you think in your stimulation intervention business on a quarterly run rate basis based on where we are in the cycle today?

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): Yeah, think that we, you know, we outlined kind of a general gradual decline from here. I don’t think we’re quite at the bottom yet as we, you know, as I talked to our teams and talked to our customers, I think we got some time to go on the on the frac space, especially The US. Where we’ve tried to position ourselves, especially with our quality wireline product family is, we’re less frac fleet specific and it’s for us, it’s more stages. So that product line is consumed on a really on a per stage basis. So even with fewer frac fleets, what’s driving the bottom for that part of the business for us is, when do we get a bottom in stages when stage count start to grow.

So I think we could see that for our business sooner than the bottom of a frac fleet count.

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): The other thing I might add, Josh, there is the international aspect. So with unconventional development picking up in South America and The Middle East, we’re seeing demand for some of our more traditionally US land focused technology, quality wireline being one, but also stimulation products, our GHT heat exchangers, those products are all being demanded. And so seeing opportunities for growth with capital spend by our customers in those other regions.

Joshua Jane, Analyst, Daniel Energy Partners: Great. Thanks for taking all my questions. Appreciate it.

Lyle Williams, Chief Financial Officer, Forum Energy Technologies (FET): Thanks, Josh.

Gigi, Conference Coordinator: Thank you. At this time, I would now like to turn the conference back over to Neil Lux, CEO, for closing remarks.

Neil Lux, President and Chief Executive Officer, Forum Energy Technologies (FET): All right. Well, thank you, everyone, for your support and participation on today’s call. We look forward to our next meeting in early November to discuss our third quarter twenty twenty five results.

Gigi, Conference Coordinator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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