Revenue Performance - For the three months ended September 30, 2025, total revenue was $196.2 million, a decrease of $11.6 million, or 5.6%, compared to the same period in 2024[105]. - The Drilling and Completions segment generated revenue of $117.5 million, down $6.1 million, or 5.0%, from the prior year, primarily due to a decline in global drilling activity[105]. - The Artificial Lift and Downhole segment reported revenue of $79.0 million, a decrease of $5.2 million, or 6.2%, attributed to tariff impacts and lower market activity[106]. - Revenue for the nine months ended September 30, 2025 was $589.3 million, a decrease of $26.1 million, or 4.2%, compared to $615.4 million for the same period in 2024[115]. - Drilling and Completions segment revenue was $350.3 million for the nine months ended September 30, 2025, a decrease of $9.4 million, or 2.6%, compared to $359.7 million for the same period in 2024[115]. - Artificial Lift and Downhole segment revenue was $239.3 million for the nine months ended September 30, 2025, a decrease of $16.4 million, or 6.4%, compared to $255.7 million for the same period in 2024[116]. Operating Performance - The operating loss for the Drilling and Completions segment was $13.55 million, compared to an operating income of $7.03 million in Q3 2024, reflecting a significant decline[104]. - Segment operating loss for the three months ended September 30, 2025 was $10.2 million, a decrease of $19.6 million compared to income of $9.4 million for the same period in 2024, resulting in an operating margin percentage of (5.2)% compared to 4.5%[107]. - Segment operating income for the nine months ended September 30, 2025 was $6.9 million, a decrease of $20.9 million compared to $27.9 million for the same period in 2024, with an operating margin percentage of 1.2% compared to 4.5%[117]. Net Loss and Financial Position - The company reported a net loss of $20.55 million for the three months ended September 30, 2025, compared to a net loss of $14.82 million in the same period last year, representing a 38.7% increase in losses[104]. - Net cash provided by operating activities decreased to $48.0 million for the nine months ended September 30, 2025, down from $53.7 million in the same period of 2024, reflecting a decline of approximately 13%[130]. - Net working capital provided cash of $18.6 million in 2025, compared to $30.8 million in 2024, indicating a decrease of about 40%[130]. - The net decrease in cash, cash equivalents, and restricted cash was $12.97 million in 2025, slightly higher than the decrease of $12.85 million in 2024[129]. Orders and Market Activity - Total inbound orders for the three months ended September 30, 2025, were $239.99 million, a decrease from $263.13 million in the previous quarter[103]. - The global active rig count decreased by 7.7% in Q3 2025 compared to Q3 2024, driven by lower oil prices and increased production efficiencies[99]. - The average number of active drilling rigs in the U.S. was 540 in Q3 2025, down from 586 in Q3 2024[103]. - Average global oil prices for WTI were $65.78 per barrel in Q3 2025, down from $76.43 in Q3 2024, while average natural gas prices at Henry Hub increased to $3.03 per Mcf from $2.11[100]. Capital Expenditures and Share Repurchase - The company expects total capital expenditures for 2025 to be below $10.0 million, primarily for replacement of end-of-life machinery and equipment[126]. - The company repurchased 966 thousand shares of common stock for approximately $21.3 million during the nine months ended September 30, 2025, with remaining authorization under the repurchase program of $53.7 million[128]. - The company repurchased $21.1 million in stock during the nine months ended September 30, 2025, compared to $73.0 million in repurchases of 9.00% Senior Convertible Secured Notes in 2024[132]. Tax and Interest Expenses - Interest expense for the nine months ended September 30, 2025 was $14.1 million, a decrease of $11.0 million compared to $25.1 million for the same period in 2024, due to decreased borrowings[121]. - Tax expense for the nine months ended September 30, 2025 was $20.1 million, an increase of $9.4 million compared to $10.6 million for the same period in 2024[123]. Cash Flow Activities - Net cash provided by investing activities was $10.3 million in 2025, primarily from $14.6 million in sale-leaseback transactions, contrasting sharply with a net cash outflow of $155.9 million in 2024 due to the Variperm acquisition[131]. - Net cash used in financing activities was $72.4 million in 2025, a significant change from the $89.4 million cash inflow in 2024, primarily due to $47.6 million in net repayments of the revolving Credit Facility[132]. Accounting and Controls - There were no material changes in critical accounting policies and estimates during the nine months ended September 30, 2025[133]. - The company's disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of September 30, 2025[135]. - No changes in internal control over financial reporting were reported that materially affected the company's financial reporting during the quarter ended September 30, 2025[136].

Core Insights - Forum Energy Technologies, Inc. demonstrated strong performance in Q3 2025, achieving significant capital returns and maintaining a positive outlook for long-term growth [1][5][28] - The company outperformed the 2,000 small cap index in revenue and free cash flow growth over the past three years, with a notable increase in backlog by 21%, the highest since 2015 [1][5][6] - The "beat the market" strategy, focusing on new product development and targeted commercial efforts, has driven strong bookings and backlog growth [1][7] Financial Performance - Q3 2025 revenue reached $196 million, nearing the top end of guidance, with offshore revenue contributing 22% of total revenue [16][19] - Free cash flow increased by 23% to $28 million, marking the ninth consecutive quarter of positive free cash flow, with a year-to-date increase of 21% [5][24] - The company raised its full-year free cash flow guidance to between $70 million and $80 million, with net debt reduced by nearly 10% to $114 million [6][25] Market Strategy - Forum Energy Technologies, Inc. categorizes its markets into leadership and growth markets, with leadership markets valued at $1.5 billion and a 36% market share [8][10] - The growth markets, approximately $3 billion in size, present opportunities for rapid revenue increase, with a current market share of around 8% [10][12] - The company aims to double its market share in growth markets from 8% to 16%, potentially increasing revenue by $250 million in a flat market scenario [13] Product Development and Innovation - Key products such as coiled line pipe and artificial lift technologies are expected to drive future growth, with coiled line pipe revenue growing 28% sequentially [11][12] - The company is focused on expanding its product offerings, including advancements in artificial lift applications and new technologies for ROVs [43][48] - Forum Energy Technologies, Inc. is also exploring adjacent markets, including defense, to further diversify its revenue streams [48][49] Operational Efficiency - The company is consolidating manufacturing facilities to reduce overhead costs and improve efficiency, with expected annualized cost savings of approximately $15 million by 2026 [23][24] - Ongoing cost reduction initiatives and favorable product mix contributed to an increase in EBITDA margins, which improved by 150 basis points to nearly 12% [19][21] - The company is actively managing tariff impacts through pricing adjustments and leveraging its global footprint to maintain competitiveness [22][21]

Financial Data and Key Metrics Changes - Company reported revenue of $196 million for Q3 2025, approaching the top end of guidance, with a 13% increase in consolidated EBITDA to $23 million, exceeding expectations [13][16] - Free cash flow increased by 23% to $28 million, enabling significant shareholder returns and raising full-year guidance to $70 million to $80 million [19][20] - Net leverage ratio improved to 1.3 times, one quarter ahead of schedule, with net debt reduced by nearly 10% to $114 million [20] Business Line Data and Key Metrics Changes - Offshore revenue grew to 22% of total revenue, driven by increases in drilling and subsea product lines, while U.S. revenue declined by 10% due to a 5% drop in rig count [13][14] - Coiled Line Pipe sales increased by 28%, contributing to market share gains, while the subsea product line revenue rose by 5% [16][9] - Artificial lift and down-hole segment revenue decreased by 4%, but EBITDA increased by 2% due to favorable product mix and cost savings [17] Market Data and Key Metrics Changes - International revenue surpassed U.S. sales, with Middle East and Canadian revenue each increasing by over 10% [13] - Book-to-bill ratio was 122%, indicating strong demand across segments, with subsea bookings exceeding 200% [14][15] - U.S. rig count decline impacted overall revenue, but international markets showed resilience [13] Company Strategy and Development Direction - Company aims to double revenue by 2030 through a "beat-the-market" strategy, focusing on targeted markets and differentiated technologies [10][11] - Leadership markets estimated at $1.5 billion with a 36% market share, while growth markets are approximately $3 billion with an 8% market share [7][8] - Strategic consolidation of manufacturing facilities is expected to enhance efficiency and reduce costs, with anticipated annualized savings of $15 million [18][19] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about long-term growth despite current market challenges, emphasizing the need for efficiency in a potentially lower oil price environment [60][62] - The company is well-positioned for 2026 with a strong backlog and ongoing market share gains [12][46] - Management highlighted the importance of new product development to drive future growth, particularly in artificial lift and subsea technologies [49][56] Other Important Information - Company repurchased 635,000 shares for $15 million in Q3, totaling 8% of shares outstanding for the year [20] - Increased tariffs on steel imports have been a challenge, but the company is implementing strategies to mitigate these impacts [17][18] Q&A Session Summary Question: Changes in sales incentive systems - Management indicated ongoing improvements in sales processes and alignment with the beat-the-market strategy have contributed to increased bookings [30] Question: Margins in backlog and new orders - Management noted that the mix of bookings, particularly from subsea, may exert downward pressure on margins, but cost-saving initiatives will provide benefits [31] Question: Revenue-generating potential of manufacturing base post-consolidation - Management expressed confidence in the ability to grow revenue significantly despite facility consolidations, maintaining capacity for a 50% revenue increase [32] Question: Share repurchase capacity - Management confirmed that share repurchase capacity is limited by net leverage and free cash flow, with approximately $15 million available for Q4 [34] Question: Cycle status in different geographies - Management emphasized opportunities exist across all markets, with a focus on leveraging successful products globally [43] Question: Growth potential of Coiled Line Pipe - Management acknowledged the potential for significant growth in Coiled Line Pipe, with a goal to double market share over time [47] Question: New product introductions for 2026 - Management highlighted ongoing development in artificial lift and subsea technologies, with promising new products expected to drive growth [49] Question: Impact of lower oil prices on technology adoption - Management indicated that lower oil prices could increase demand for efficiency-enhancing products, positioning the company favorably [53] Question: Backlog timing and revenue recognition - Management noted that a significant portion of the backlog will be recognized over the next few quarters, with some projects extending into 2027 [63]

Financial Performance - Third quarter 2025 revenue was $196 million, a 2% decrease sequentially, with a net loss of $21 million or $1.76 per diluted share[2][4] - Adjusted net income for the quarter was $3 million, approximately $0.27 per diluted share, after accounting for $22 million in asset impairments and restructuring costs[4] - Adjusted EBITDA for the quarter was $23 million, reflecting a 13% increase sequentially[4] - Total revenue for the three months ended September 30, 2025, was $196,231,000, a decrease of 5.6% compared to $207,806,000 for the same period in 2024[23] - EBITDA for the total company was $1,748,000 for the three months ended September 30, 2025, significantly lower than $11,133,000 for the same period in 2024[23] - The operating margin for the total company was -3.1% for the three months ended September 30, 2025, compared to 4.3% in the same period of 2024[23] - Total revenue for the nine months ended September 30, 2025, was $589,274,000, a decrease of 4.3% from $615,407,000 in the same period of 2024[25] - The total EBITDA margin for the nine months ended September 30, 2025, was 8.2%, compared to 7.4% in the same period of 2024[25] - The net income (loss) for the nine months ended September 30, 2025, was $(11,732,000), an improvement from $(31,826,000) for the same period in 2024[31] Revenue Segments - The Drilling and Completions segment generated revenue of $117 million, remaining flat sequentially, with a book-to-bill ratio of 129%[6] - The Artificial Lift and Downhole segment reported revenue of $79 million, a 4% decrease, with a book-to-bill ratio of 112%[7] - Revenue from the Artificial Lift and Downhole segment was $78,981,000 for the three months ended September 30, 2025, down from $84,226,000 in the same period of 2024[23] - Drilling revenue was $32,234,000, representing 16.4% of total revenue, down from $35,741,000 (17.2%) in the prior year[44] - Subsea revenue increased to $23,582,000, accounting for 12.0% of total revenue, compared to $20,903,000 (10.1%) in the same quarter last year[44] - Stimulation and Intervention revenue was $34,271,000, or 17.5% of total revenue, down from $38,037,000 (18.3%) year-over-year[44] - Downhole revenue was $48,073,000, making up 24.5% of total revenue, compared to $50,562,000 (24.3%) in the same quarter last year[44] - Production Equipment revenue increased to $18,647,000, representing 9.5% of total revenue, up from $17,968,000 (8.6%) year-over-year[44] - Valve Solutions revenue decreased to $12,261,000, accounting for 6.2% of total revenue, down from $15,696,000 (7.6%) in the prior year[44] Orders and Backlog - The company reported a book-to-bill ratio of 122% with orders totaling $240 million, marking the highest backlog in over ten years[4] - Total orders for the three months ended September 30, 2025, reached $239,990,000, representing an increase of 16.5% from $205,839,000 in the prior year[27] - The book-to-bill ratio for total orders was 1.22 for the three months ended September 30, 2025, indicating improving market demand compared to 0.99 in the same period last year[27] - Backlog increased by 21% due to strong bookings in offshore and international markets, with anticipated market share gains expected to provide a tailwind in 2026[5] Cash Flow and Capital Management - Free cash flow for the quarter was $28 million, and the full year 2025 free cash flow guidance was raised to between $70 million and $80 million[3][4] - The company achieved a year-end net leverage ratio of 1.3 times ahead of schedule, having repurchased 8% of its outstanding shares year-to-date[6] - The company achieved free cash flow before acquisitions of $28,126,000 for the three months ended September 30, 2025, compared to $24,493,000 for the same period in 2024[38] - The free cash flow yield as of October 29, 2025, was 20%, calculated using the midpoint of $75 million of guided full-year free cash flow[38] - The company incurred restructuring and other costs of $1,501,000 for the three months ended September 30, 2025, compared to $342,000 for the same period in 2024[29] - The company reported capital expenditures for property and equipment of $(1,392,000) for the three months ended September 30, 2025[38] - The company recognized a gain on sale-leaseback transactions of $(4,279,000) for the three months ended September 30, 2025[29] Operational Efficiency - The company accelerated cost savings efforts, extending the annualized target by 50% to $15 million[5] - The trailing twelve months adjusted EBITDA was $85,936,000, indicating the company's operational performance[42] - The company continues to focus on market expansion and new product development strategies to enhance revenue streams[44]

Core Insights - Forum Energy Technologies, Inc. reported third quarter 2025 revenue of $196 million and a net loss of $21 million, equating to $1.76 per diluted share [1] - After adjustments for $22 million in asset impairments, restructuring costs, and a $5 million tax valuation allowance reserve, the adjusted net income was $3 million, or approximately $0.27 per diluted share [1] Financial Performance - Revenue for the third quarter of 2025 was $196 million [1] - The company experienced a net loss of $21 million, translating to a loss of $1.76 per diluted share [1] - Adjusted net income, after accounting for impairments and other costs, was $3 million, or about $0.27 per diluted share [1]

Summary of FET Conference Call Company Overview - **Company**: Forum Energy Technologies (FET) - **Industry**: Oil, natural gas, industrial, and renewable energy sectors - **Segments**: - Drilling and completions - Artificial lift and downhole [1][2] Core Points and Arguments - **Market Share**: FET holds a **36% market share** in leadership markets, which include coil tubing, cased hole wireline, subsea, and sand and flow control systems for thermal oil sands [4][5] - **Innovation**: FET emphasizes innovation as a key driver for growth, with recent product introductions such as high-strength coil tubing suitable for corrosive environments and the Unity operating system for remotely operated vehicles (ROVs) [6][9] - **Operational Efficiency**: The company focuses on enhancing operational efficiency for customers, which has led to increased demand for its products. For instance, the number of frac stages per rig in the U.S. has increased by **9% annually** [9][10] - **International Growth**: FET sees significant growth potential in international markets, particularly in the Middle East and Argentina, where unconventional resource development is gaining traction [12][13] - **Vision 2030 Strategy**: The company aims to grow its market share in growth markets from **8% to 16%** over the next five years, potentially increasing revenue by nearly **$250 million** [27][28] Financial Performance - **Adjusted EBITDA Guidance**: FET's full-year 2025 adjusted EBITDA guidance is set at **$85 million**, reflecting a decrease from earlier projections due to reduced industry activity [43][44] - **Free Cash Flow**: The free cash flow outlook was raised to **$60 to $80 million**, attributed to improved working capital management and cost-saving initiatives [53][54] - **Share Repurchase Program**: The company has authorized a **$75 million share repurchase plan**, with approximately **579,000 shares** repurchased for about **$11 million** [55][56] Market Dynamics - **Pricing Sensitivity**: FET has faced challenges with pricing due to tariffs impacting raw materials, but has successfully passed some costs onto customers [22][49] - **Customer Demand**: There is a growing demand for FET's products as service companies seek to enhance efficiency and reduce costs, particularly in a constrained capital expenditure environment [21][23] Additional Insights - **Coil Line Pipe**: FET is optimistic about the growth potential of coil line pipe, which offers significant installation time savings compared to traditional steel pipe [32][33] - **Defense Market**: The company has a long history of supplying military and naval applications, with recent contracts indicating a growing interest in underwater technology [39][41] - **Incremental Margin Opportunities**: FET's leadership revenue constitutes about two-thirds of total revenue, providing strong incremental margin opportunities through innovation and market growth [7][36] Conclusion FET is strategically positioned to leverage its innovative products and strong market presence to capture growth opportunities in both leadership and growth markets. The company's Vision 2030 strategy aims to double revenue by 2030, supported by a capital-light business model and a focus on free cash flow generation.

Core Insights - Forum Energy Technologies, Inc. announced a fireside chat featuring Neal Lux, President and CEO, and Lyle Williams, Executive Vice President and CFO [1] Company Participation - The event is scheduled for Thursday, September 18, 2025, at 10:00 a.m. Central Time [1] - The fireside chat will be accessible to interested parties who can register via a provided link [1]

Company Overview - Forum Energy Technologies (NYSE: FET) is a provider of equipment for offshore and onshore drilling, well completion, and production, serving oil companies and large oilfield service providers [1]. Business Strategy - The company's main strategy focuses on targeting high-margin niches with limited competition [1].

```markdown PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Unaudited H1 2025 financials show a shift to net income, stable assets, decreased liabilities, and positive operating cash flow [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Q2 2025 net income of **$7.7 million** marks a turnaround from prior-year loss, driven by lower expenses despite slightly decreased revenue Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $199,764 | $205,209 | $393,043 | $407,601 | | **Gross Profit** | $59,356 | $63,073 | $117,717 | $126,832 | | **Operating Income** | $14,683 | $7,934 | $23,487 | $11,134 | | **Net Income (Loss)** | $7,700 | $(6,696) | $8,822 | $(17,011) | | **Diluted EPS** | $0.61 | $(0.54) | $0.70 | $(1.39) | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets slightly decreased, while total liabilities fell due to reduced debt, increasing total equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $487,732 | $495,637 | | **Total Assets** | $810,133 | $815,954 | | **Total Current Liabilities** | $202,264 | $201,856 | | **Long-term Debt, net** | $157,664 | $186,525 | | **Total Liabilities** | $475,913 | $496,054 | | **Total Equity** | $334,220 | $319,900 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 operating cash flow decreased, investing activities provided cash from a sale-leaseback, and financing used cash for debt and repurchases Six Months Ended June 30, Cash Flow Summary (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $25,099 | $28,073 | | **Net cash provided by (used in) investing activities** | $5,024 | $(154,476) | | **Net cash provided by (used in) financing activities** | $(37,296) | $114,908 | | **Net decrease in cash** | $(5,694) | $(14,339) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Total equity increased to **$334.2 million** by June 30, 2025, driven by net income and currency translation, partially offset by stock repurchases - Key drivers for the change in equity during the first six months of 2025 include net income, stock-based compensation, treasury stock purchases, and currency translation adjustments[17](index=17&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies and financial items, including increased authorized common stock, revenue breakdown, debt, segment performance, and a sale-leaseback - On May 9, 2025, stockholders approved an increase in authorized common stock from **14.8 million** to **29.6 million** shares[26](index=26&type=chunk) - Contract liabilities increased by **$10.9 million (83%)** in the first six months of 2025, primarily due to the timing of milestone billings for projects in the Subsea product line[34](index=34&type=chunk) - In June 2025, the company completed a sale-leaseback of land and buildings, receiving net proceeds of **$8.8 million** and recognizing a gain, resulting in the recording of operating lease assets and liabilities of approximately **$7.6 million**[87](index=87&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=19&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20%28MD%26A%29) Management attributes H1 2025 revenue decline to reduced drilling and tariffs, while operating income increased due to a sale-leaseback gain and lower expenses [Overview](index=19&type=section&id=Overview) FET is a global manufacturer for oil, natural gas, defense, and renewable energy, with **80%** of H1 2025 revenue from consumable products - The company provides engineered capital equipment and consumable products to customers including oil and gas operators, service companies, defense contractors, and renewable energy firms[90](index=90&type=chunk) - For the six months ended June 30, 2025, approximately **80%** of revenue was from consumable products and activity-based equipment, with the remainder from capital products and services[90](index=90&type=chunk) [Market Conditions](index=20&type=section&id=Market%20Conditions) Q2 2025 market conditions saw lower oil prices, higher natural gas prices, and a **6.2%** decrease in global drilling rig count year-over-year Average Commodity Prices | Commodity | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **WTI ($/bbl)** | $64.57 | $82.79 | | **Brent ($/bbl)** | $68.07 | $84.68 | | **Henry Hub ($/Mcf)** | $3.19 | $2.07 | Average Active Drilling Rigs | Location | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **United States** | 571 | 603 | | **Canada** | 128 | 136 | | **International** | 897 | 962 | | **Global Total** | 1,596 | 1,701 | - Total inbound orders increased to **$263.1 million** in Q2 2025 from **$180.1 million** in Q2 2024, indicating potential future revenue growth[99](index=99&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Q2 2025 total revenue decreased **2.7%**, with Drilling and Completions operating income surging, while Artificial Lift and Downhole revenue and income declined Q2 2025 vs Q2 2024 Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | Change % | | :--- | :--- | :--- | :--- | | **Total Revenue** | $199,764 | $205,209 | (2.7)% | | **Operating Income** | $14,683 | $7,934 | 85.1% | | **Net Income (Loss)** | $7,700 | $(6,696) | 215.0% | - **Drilling and Completions (Q2):** Revenue increased **0.2%** due to higher ROV project revenue, offset by declines in drilling and completion products. Operating income increased by **$4.4 million**, primarily due to reduced amortization expense[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) - **Artificial Lift and Downhole (Q2):** Revenue decreased **6.4%** due to tariff impacts on valve products. Operating income fell by **$3.1 million** due to lower market activity and unfavorable mix[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) H1 2025 vs H1 2024 Performance (in thousands) | Metric | H1 2025 | H1 2024 | Change % | | :--- | :--- | :--- | :--- | | **Total Revenue** | $393,043 | $407,601 | (3.6)% | | **Operating Income** | $23,487 | $11,134 | 110.9% | | **Net Income (Loss)** | $8,822 | $(17,011) | 151.9% | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company had **$132.1 million** in total liquidity, utilizing capital for inventory, expenditures, debt repayment, and stock repurchases - As of June 30, 2025, the company had total liquidity of **$132.1 million**, consisting of **$39.0 million** in cash and **$93.1 million** in availability under the Credit Facility[122](index=122&type=chunk) - The company has a stock repurchase program with an aggregate authorization of **$75.0 million**. During the first six months of 2025, **331 thousand** shares were repurchased for approximately **$6.3 million**, leaving **$68.7 million** authorized[124](index=124&type=chunk) Cash Flow Summary - Six Months Ended June 30 (in millions) | Category | 2025 | 2024 | | :--- | :--- | :--- | | **Operating Activities** | $25.1 | $28.1 | | **Investing Activities** | $5.0 | $(154.5) | | **Financing Activities** | $(37.3) | $114.9 | [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20qualitative%20disclosures%20about%20market%20risk) This disclosure is not required as the company qualifies as a "smaller reporting company" under Regulation S-K - The company is not required to provide this information as it is a "smaller reporting company"[130](index=130&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20procedures) Management concluded the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[131](index=131&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[132](index=132&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20proceedings) Legal proceedings are referenced in Note 10, with management not expecting any material adverse effect on financial position - The company is involved in various legal actions in the ordinary course of business, but management believes the ultimate liability will not have a material adverse effect[77](index=77&type=chunk)[133](index=133&type=chunk) [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20factors) No new risk factors are disclosed in this report, referring to the 2024 Annual Report on Form 10-K for details - For information on risk factors, the report refers to Item 1A of the company's 2024 Annual Report on Form 10-K[134](index=134&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20sales%20of%20equity%20securities%20and%20use%20of%20proceeds) The company has a **$75.0 million** stock repurchase program, repurchasing **$4.3 million** in Q2 2025, with **$68.7 million** remaining - The Board of Directors approved a **$75.0 million** stock repurchase program in December 2024[135](index=135&type=chunk) Share Repurchases - Q2 2025 | Period | Total Shares Purchased | Average Price Paid | Remaining Authorization (in thousands) | | :--- | :--- | :--- | :--- | | **June 1-30, 2025** | 225,470 | $19.06 | $68,705 | - Subsequent to the quarter end, the company repurchased an additional **249 thousand** shares for **$5.0 million**[137](index=137&type=chunk) [Defaults Upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[138](index=138&type=chunk) [Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[139](index=139&type=chunk) [Other Information](index=29&type=section&id=Item%205.%20Other%20Information) No director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements during the quarter - No director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements during the quarter[140](index=140&type=chunk) [Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and XBRL data files - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and Inline XBRL documents[141](index=141&type=chunk) Signatures ```

Financial Data and Key Metrics Changes - Company achieved strong results with sequential growth in bookings, revenue, EBITDA, and free cash flow, with revenue of $200 million at the top end of guidance range [6][18] - Free cash flow for Q2 was $23 million, totaling $30 million for the first half of the year, marking a 27% year-over-year increase [7][26] - Full year 2025 free cash flow guidance raised to between $60 million and $80 million, a $20 million increase [8][27] Business Line Data and Key Metrics Changes - Subsea product lines saw significant bookings, particularly for ROVs and a large submersible rescue vehicle system [6][19] - Artificial lift and downhole segment revenue increased by 6%, driven by demand for higher margin products [26] - Drilling and Completion segment revenue increased by 1%, with growth in coiled line pipe offerings [24] Market Data and Key Metrics Changes - U.S. revenue was up 3% despite a 3% decline in rig count, while international revenue (excluding Canada) increased by 6% [19] - Bookings were up 31% from the previous quarter, with a book-to-bill ratio of 132% [20] - Company expects commodity prices to remain stable, anticipating a gradual decline in industry activity [29] Company Strategy and Development Direction - Company has refined its strategy into leadership and growth markets, with leadership markets accounting for two-thirds of revenue and a 36% market share [10][11] - Growth markets, estimated to be twice the size of leadership markets, present significant opportunities for revenue increase [12][13] - The "Beat the Market" strategy aims to grow profitable market share through targeted competition and leveraging competitive advantages [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining momentum despite a declining rig count, supported by a strong backlog and cost reduction efforts [29][80] - The company anticipates continued strong free cash flow and plans to reduce net leverage to 1.3 times by year-end [28][29] - Management highlighted the potential for significant growth in the defense market and the importance of their operating systems in driving sales [66][69] Other Important Information - Company repurchased approximately 5% of shares outstanding in 2025, with plans to repurchase an additional 10% based on current stock price levels [8][28] - The company aims to balance capital returns with strategic investments, focusing on organic growth opportunities while remaining open to acquisitions [106] Q&A Session Summary Question: Timeframe for Doubling Market Share in Growth Markets - Management indicated that achieving this goal would take three to five years, focusing on customer acquisition and geographic expansion [37][38] Question: Details on Offshore Defense Orders - Management noted a mix of short-term and long-term products, with some orders expected to deliver over the next two years [39][40] Question: Expectations for Shares Outstanding in Q3 and Q4 - Management expects to repurchase an additional 1.2 million shares, potentially reducing shares outstanding by nearly 15% by December [48] Question: Factors Contributing to Increased Free Cash Flow Guidance - The primary driver for increased cash flow is expected to be working capital reduction, with improvements in operational efficiency [50][90] Question: Competitive Positioning and Market Outlook - Management emphasized a strong balance sheet and the ability to invest in growth, positioning the company favorably against competitors [110][111]