Core Viewpoint - Forum Energy Technologies (FET) reported a quarterly loss of $0.1 per share, which was worse than the Zacks Consensus Estimate of $0.15, and compared to a loss of $0.07 per share a year ago [1][2] Financial Performance - The company posted revenues of $199.8 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 4.88%, but down from $205.2 million in the same quarter last year [3] - Over the last four quarters, Forum Energy has not surpassed consensus EPS estimates and has only topped consensus revenue estimates once [2][3] Stock Performance - Forum Energy shares have increased by approximately 20.9% since the beginning of the year, outperforming the S&P 500's gain of 7.9% [4] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [7] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.48 on revenues of $195.47 million, and for the current fiscal year, it is $1.10 on revenues of $774.43 million [8] - The trend of estimate revisions for Forum Energy was unfavorable prior to the earnings release, which may impact future stock movements [6][7] Industry Context - Forum Energy operates within the Oil and Gas - Mechanical and Equipment industry, which is currently ranked in the top 41% of over 250 Zacks industries [9] - The performance of Forum Energy's stock may be influenced by the overall outlook for the industry [9]

[Second Quarter 2025 Performance and Outlook](index=1&type=section&id=Second%20Quarter%202025%20Performance%20and%20Outlook) [Q2 2025 Financial Highlights](index=1&type=section&id=Q2%202025%20Financial%20Highlights) Forum Energy Technologies reported Q2 2025 revenue of $200 million and GAAP net income of $8 million, achieving record backlog and raising free cash flow guidance Q2 2025 Key Financial Metrics (in millions) | Metric | Q2 2025 Value | | :--- | :--- | | Revenue | $200 million | | Net Income (GAAP) | $8 million | | Diluted EPS (GAAP) | $0.61 | | Net Loss (Adjusted) | $1 million | | Diluted EPS (Adjusted) | ($0.10) | | Adjusted EBITDA | $21 million | | Orders | $263 million | | Book-to-Bill Ratio | 132% | | Free Cash Flow | $23 million | - Full-year 2025 free cash flow guidance was increased to a range of **$60 - $80 million**, supported by strong performance and a positive outlook[2](index=2&type=chunk)[5](index=5&type=chunk) - The company achieved its **highest backlog in over ten years**, driven by strong bookings, particularly in offshore defense[4](index=4&type=chunk)[5](index=5&type=chunk) [Management Commentary and Capital Allocation](index=1&type=section&id=Management%20Commentary%20and%20Capital%20Allocation) Management highlighted strong sequential performance and positive free cash flow, prioritizing debt reduction and share repurchases to reduce net leverage - The company's capital returns framework prioritizes using free cash flow to reduce net debt and repurchase shares[2](index=2&type=chunk) - FET has repurchased **5% of its outstanding shares in 2025** and is on track to repurchase another **10%** based on updated guidance[3](index=3&type=chunk) - The company aims to reduce its net leverage to **1.3 times** by the end of 2025[3](index=3&type=chunk) [Financial Guidance](index=1&type=section&id=Financial%20Guidance) FET raised its full-year 2025 free cash flow guidance to between $60 and $80 million while maintaining its adjusted EBITDA forecast of approximately $85 million Financial Guidance Summary | Guidance Metric | Forecasted Range/Value | | :--- | :--- | | Full Year 2025 Free Cash Flow | $60 - $80 million | | Full Year 2025 Adjusted EBITDA | Approx. $85 million | | Q3 2025 Adjusted EBITDA | $19 - $23 million | [Segment Performance](index=2&type=section&id=Segment%20Performance) [Drilling and Completions](index=2&type=section&id=Drilling%20and%20Completions) Drilling and Completions revenue rose 1% to $117 million with orders up 35%, but adjusted EBITDA declined 8% due to an unfavorable product mix Drilling and Completions Segment Performance (in millions) | Metric (vs Q1 2025) | Q2 2025 Value | Sequential Change | | :--- | :--- | :--- | | Revenue | $117 million | +1% | | Adjusted EBITDA | $11 million | -8% | | Orders | $178 million | +35% | - Revenue growth was driven by coiled line pipe sales for the U.S and a large Middle East project, partially offset by lower demand for completions-related equipment[6](index=6&type=chunk) - The decrease in adjusted EBITDA was attributed to an unfavorable product mix from lower sales of higher-margin products[6](index=6&type=chunk) [Artificial Lift and Downhole](index=2&type=section&id=Artificial%20Lift%20and%20Downhole) Artificial Lift and Downhole revenue grew 6% to $83 million and adjusted EBITDA surged 24% to $17 million, driven by demand, favorable mix, and cost savings Artificial Lift and Downhole Segment Performance (in millions) | Metric (vs Q1 2025) | Q2 2025 Value | Sequential Change | | :--- | :--- | :--- | | Revenue | $83 million | +6% | | Adjusted EBITDA | $17 million | +24% | | Orders | $85 million | +24% | - Revenue growth was primarily due to higher demand for processing equipment technologies, downhole casing equipment, sand control products, and cable protection products[7](index=7&type=chunk) - The significant increase in adjusted EBITDA was a result of higher revenue, favorable product mix, and benefits from cost-saving initiatives[7](index=7&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) [Condensed Consolidated Statements of Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) For Q2 2025, FET reported revenue of $199.8 million and net income of $7.7 million, a significant turnaround from a net loss in Q2 2024 Quarterly Income Statement Highlights (in millions) | Account | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Revenue | $199.8 | $193.3 | $205.2 | | Gross Profit | $59.4 | $58.4 | $63.1 | | Operating Income | $14.7 | $8.8 | $7.9 | | Net Income (Loss) | $7.7 | $1.1 | $(6.7) | Six-Month Income Statement Highlights (in millions) | Account | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Revenue | $393.0 | $407.6 | | Gross Profit | $117.7 | $126.8 | | Operating Income | $23.5 | $11.1 | | Net Income (Loss) | $8.8 | $(17.0) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, FET's total assets were $810.1 million, with long-term debt reduced to $157.7 million and total equity increasing to $334.2 million Balance Sheet Highlights (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $39.0 | $44.7 | | Total current assets | $487.7 | $495.6 | | Total assets | $810.1 | $816.0 | | Long-term debt | $157.7 | $186.5 | | Total liabilities | $475.9 | $496.2 | | Total equity | $334.2 | $319.8 | [Condensed Consolidated Cash Flow Information](index=7&type=section&id=Condensed%20Consolidated%20Cash%20Flow%20Information) H1 2025 operating cash flow was $25.1 million, with a $37.3 million net outflow from financing activities driven by debt repayments and stock repurchases Six-Month Cash Flow Summary (in millions) | Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $25.1 | $28.1 | | Net cash provided by (used in) investing activities | $5.0 | $(154.5) | | Net cash provided by (used in) financing activities | $(37.3) | $114.9 | | Net decrease in cash | $(5.7) | $(14.3) | [Supplemental Financial Information](index=8&type=section&id=Supplemental%20Financial%20Information) [Detailed Segment and Orders Information](index=8&type=section&id=Detailed%20Segment%20and%20Orders%20Information) In Q2 2025, total orders reached $263.1 million, resulting in a strong company-wide book-to-bill ratio of 1.32, indicating robust demand growth Q2 2025 Orders and Book-to-Bill Ratio (in millions) | Segment | Orders (millions) | Revenue (millions) | Book-to-Bill Ratio | | :--- | :--- | :--- | :--- | | Drilling and Completions | $177.8 | $117.2 | 1.52 | | Artificial Lift and Downhole | $85.3 | $82.5 | 1.03 | | **Total** | **$263.1** | **$199.8** | **1.32** | - The company states that a book-to-bill ratio greater than one is indicative of improving market demand and provides insight into future revenues[27](index=27&type=chunk) [Reconciliation of GAAP to Non-GAAP Measures](index=11&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) The company provides non-GAAP reconciliations, adjusting Q2 2025 net income of $7.7 million to an adjusted net loss of $1.2 million after specific exclusions Q2 2025 GAAP to Non-GAAP Reconciliation (in millions) | Metric | As Reported (GAAP) | Adjustments | As Adjusted (Non-GAAP) | | :--- | :--- | :--- | :--- | | Operating Income | $14.7 | $(5.1) | $9.6 | | EBITDA | $27.7 | $(7.2) | $20.5 | | Net Income (Loss) | $7.7 | $(8.9) | $(1.2) | - Key adjustments in Q2 2025 included a **$6.9 million gain on sale-leaseback transactions**, a **$3.8 million foreign exchange gain**, and **$1.7 million in restructuring costs**[29](index=29&type=chunk) Q2 2025 Free Cash Flow Reconciliation (in millions) | Line Item | Amount | | :--- | :--- | | Net cash provided by operating activities | $15.8 | | Capital expenditures | $(1.0) | | Proceeds from sale-leaseback transactions | $8.0 | | **Free cash flow, before acquisitions** | **$22.9** | [Product Line Revenue Breakdown](index=15&type=section&id=Product%20Line%20Revenue%20Breakdown) In Q2 2025, Drilling and Completions accounted for 58.7% of total revenue, while Artificial Lift and Downhole made up the remaining 41.3% Q2 2025 Revenue by Product Line (in millions) | Segment / Product Line | Revenue | % of Total | | :--- | :--- | :--- | | **Drilling and Completions** | **$117.2** | **58.7%** | | - Stimulation and Intervention | $32.9 | 16.5% | | - Drilling | $32.8 | 16.4% | | - Coiled Tubing | $29.1 | 14.6% | | - Subsea | $22.4 | 11.2% | | **Artificial Lift and Downhole** | **$82.5** | **41.3%** | | - Downhole | $51.3 | 25.7% | | - Production Equipment | $20.7 | 10.4% | | - Valve Solutions | $10.5 | 5.2% | | **Total Revenue** | **$199.8** | **100.0%** |

Core Insights - Forum Energy Technologies (FET) experienced a significant share price increase of 32% in June due to securing a large contract with a military client [1] - The company announced a contract with the Indonesian Navy for a submarine rescue vehicle (SRV) system, which includes a custom-designed launch and recovery system and a decompression system [2][4] Contract Details - The SRV, named LR600, is designed for rescue operations, capable of operating at depths of up to 605 meters (1,985 feet) and can carry up to 20 people [4] - The LR600 will be integrated with a hyperbaric rescue facility, with construction taking place in England and Texas [4] Company Statements - CEO Neal Lux emphasized the company's advanced technologies and their importance in the subsea sector, highlighting the diverse product portfolio and technology capabilities [5] Financial Performance - Forum's annual sales have increased from just under $512.5 million in 2020 to over $816 million last year, indicating a strong growth trajectory [6][7] - The company has only reported a net profit once during this period, with a profit of $3.7 million in 2022, suggesting challenges in profitability despite revenue growth [7]

Summary of Forum Energy Technologies (FET) Conference Call Company Overview - **Company**: Forum Energy Technologies (FET) - **Ticker**: FET - **Industry**: Energy Equipment Manufacturing - **CEO**: Neil Lux - **Coverage Initiation**: Coverage launched with a $24 price target due to strong global presence and cash flow generation capabilities [2][10] Core Business and Financial Performance - FET does not drill wells or produce hydrocarbons but manufactures critical capital equipment and consumable products for energy production [6][7] - Revenue segments include: - **Artificial Lift and Downhole**: Products for maintaining production and increasing efficiency [8] - **Drilling and Completion**: Equipment for drilling rigs and well completion activities [9] - Financial performance highlights: - Revenue growth at a compound rate of 15% since 2021 [9] - EBITDA growth over 70% annually, with margins improving from under 4% in 2021 to over 12% in 2024 [10] - Approximately 50% of sales are outside the U.S. [9] Market Demand and Growth Drivers - Global energy demand is projected to increase by 30% over the next two decades, driven by population growth, energy security, and quality of life improvements [13][15] - Fossil fuels are expected to satisfy around two-thirds of energy demand by 2050, despite growth in alternative energy sources [16] - FET's revenue is closely correlated with global drilling rig counts, indicating that increased energy demand will drive revenue growth [17] Competitive Strategy - FET aims to grow market share through: - Developing differentiated products and technologies [20] - Competing in niche markets with limited competition [22] - Focusing on innovation to meet customer demands for efficiency and safety [24] - Examples of innovative products include: - EnviroLite greaseless cable for faster operations [25] - DuraCoil coil tubing for enhanced performance [26] - Veraperm Energy Services for customized sand and flow control solutions [27] Financial Guidance and Shareholder Returns - 2025 is expected to be a transitional year with a potential 2-5% decrease in global drilling activity [32] - Adjusted EBITDA guidance for 2025 is between $80 million to $105 million, with free cash flow guidance of $40 million to $60 million [32] - FET plans to utilize 50% of free cash flow for debt reduction and the remainder for strategic investments, including a $75 million share repurchase program [38][39] Risk Management and Market Conditions - The company is proactively managing risks related to geopolitical and macroeconomic uncertainties, including price increases to offset tariffs [34][35] - FET's low capital expenditure requirements (less than 1% of revenue) allow for better cash flow generation compared to traditional oilfield service companies [54][56] Conclusion - FET presents a compelling investment opportunity with a strong track record of performance, significant free cash flow yield, and a robust growth strategy [39][40] - The company is well-positioned to capitalize on increasing energy demand while maintaining a focus on innovation and shareholder returns [41][63]

Financial Performance & Growth - Forum Energy Technologies (FET) reported Q1 2025 revenue of $193 million[7] - The company's revenue has grown from $541 million in 2021 to $816 million in 2024[7] - Adjusted EBITDA increased from $20 million in 2021 to $100 million in 2024[7] - EBITDA margin has improved from 4% in 2021 to 12% in 2024[7] - The company anticipates 2025 EBITDA to be in the range of $85 million to $105 million and free cash flow between $40 million and $60 million[39] Strategy & Market Position - FET's geographical revenue split is 51% US and 49% international (TTM ended March 31, 2025)[7] - The company has a $75 million share repurchase program and repurchased $2 million of shares in Q1 2025[10, 42] - The company focuses on niche markets with competitive advantages and high barriers to entry[20, 22] - FET aims to allocate 50% of free cash flow to net debt reduction[41] Debt Reduction - The company has substantially deleveraged since 2019, with net debt decreasing from $344 million to $146 million as of March 31, 2025[44] - Net leverage ratio has decreased from 473x in December 31, 2019 to 156x in March 31, 2025[44]

Summary of FET Conference Call Company Overview - FET provides technological solutions to the oil, natural gas, industrial, and renewable energy industries, focusing on operational efficiency and environmental impact reduction [3][4][5] - The company operates in two segments: drilling and completions, and artificial lift and downhole [3] Macro Outlook - Current oil price outlook is uncertain due to global demand growth and OPEC supply adjustments, leading to potential curbing of activity by oil producers [4][6] - Customers are adapting to economic uncertainty, with expectations of stable drilling and completions activity in Q2 2025 [6][7] - Historical trends indicate that declining oil prices lead to reduced rig activity within three to six months [6][7] - If oil prices remain low, rig counts are expected to decrease in the latter half of the year, impacting EBITDA, projected at around $85 million for 2025 [7][8] Industry Dynamics - Natural gas prices remain strong, with a significant portion of drilling activity directed towards gas [13][15] - Increased gas-directed drilling could positively impact FET's business, as the company is agnostic to whether customers are drilling for oil or gas [15][16] - Tariff impacts are significant, particularly in the valve solutions product line, leading to price increases and potential buyer strikes [18][19][20] Strategic Positioning - FET's "beat the market" strategy aims to outperform market trends through innovation and market share growth [24][26] - The company has a strong market share in leadership markets (30-40%) and is expanding in growth markets [26][28] - Revenue per rig has grown at a 5% compound annual growth rate over the past five years, indicating effective market share gains [29][75] Financial Performance - FET's revenue per rig was approximately $455,000 in Q1 2025, reflecting a positive trend in market share [74][75] - The company expects to generate free cash flow between $40 million and $60 million in 2025, despite potential lower EBITDA [70][71] - FET has a share repurchase plan in place, allocating 50% of free cash flow towards debt reduction and strategic investments [80][82] Future Opportunities - The company is exploring opportunities in adjacent markets such as defense and offshore wind, which are expected to be margin accretive [64][66] - Demand for FET's products is anticipated to grow due to the increasing complexity of drilling operations and the need for higher pressure equipment [48][49] - The Middle East and Argentina are key markets for FET, with significant growth potential in unconventional oil and gas production [52][54] Conclusion - FET is well-positioned to navigate current market challenges while capitalizing on long-term growth opportunities through its strategic initiatives and innovative product offerings [96][97][98]

Core Insights - Forum Energy Technologies, Inc. (FET) reported Q1 2025 financial results with revenue of $193.3 million, adjusted EBITDA of $20.1 million, and adjusted net income of $0.5 million, which were slightly below consensus estimates [1][7] Financial Performance - Revenue of $193.3 million was in line with expectations, while gross profit margin (GPM) was slightly below expectations [1] - Adjusted EBITDA margins were reported at 10.4%, which also fell short of expectations [1] - Adjusted net income of $0.5 million was below the anticipated $4.4 million [1] Cash Flow and Cost Management - FET generated approximately $7.0 million in free cash flow (FCF) in Q1 2025, marking the seventh consecutive quarter of positive cash flow results [7] - The company initiated actions to eliminate approximately $10 million in annualized costs [7] Segment Performance - Drilling and Completions revenue increased by approximately 4% sequentially to $116.0 million [7]

Revenue Performance - For the three months ended March 31, 2025, total revenue was $193.3 million, a decrease of $9.1 million, or 4.5%, compared to the same period in 2024[98]. - The Drilling and Completions segment generated revenue of $115.6 million, down $3.5 million, or 2.9%, primarily due to a 12.0% decrease in the Drilling product line[98]. - The Artificial Lift and Downhole segment reported revenue of $77.8 million, a decrease of $5.5 million, or 6.7%, with a notable 8.8% decline in the Downhole product line[99]. Market Conditions - The global drilling rig count decreased by 5.0% in Q1 2025 compared to Q1 2024, driven by a 5.6% decline in the U.S. rig count[92]. - Average oil prices for WTI were $71.78 per barrel in Q1 2025, compared to $77.50 in Q1 2024, while average natural gas prices at Henry Hub increased to $4.14 per Mcf from $2.15[93]. Operating Income - The company’s operating income for Q1 2025 was $8.8 million, a significant increase of 175.1% compared to $3.2 million in Q1 2024[97]. - Segment operating income for Drilling and Completions rose to $9.4 million, with an operating margin of 8.1%, up from 3.8% in the previous year[97]. - Segment operating income for the three months ended March 31, 2025, was $9.0 million, a slight decrease from $9.1 million in the same period of 2024, with an operating margin percentage of 4.6% compared to 4.5%[100]. - The Drilling and Completions segment reported an operating income of $9.4 million, or 8.1%, for the three months ended March 31, 2025, up from $4.6 million, or 3.8%, in the prior year, attributed to reduced amortization expenses[100]. - The Artificial Lift and Downhole segment's operating income decreased to $7.3 million, or 9.4%, for the three months ended March 31, 2025, down from $11.8 million, or 14.1%, due to an unfavorable product mix[101]. Cash Flow and Investments - Net cash provided by operating activities improved to $9.3 million for the three months ended March 31, 2025, compared to $5.0 million in the same period of 2024, driven by an increase in net income adjusted for non-cash items[113]. - Net cash used in investing activities was $2.1 million for the three months ended March 31, 2025, significantly lower than $152.8 million in the prior year, which included a $150.1 million acquisition of Variperm Holdings Ltd.[114]. - Net cash used in financing activities was $21.0 million for the three months ended March 31, 2025, a shift from $151.8 million provided in the same period of 2024, primarily due to net repayments from the revolving Credit Facility[115]. Debt and Capital Expenditures - As of March 31, 2025, the company had $73.8 million in borrowings under its revolving Credit Facility and $100.0 million principal amount of 2029 Bonds outstanding[108]. - The company anticipates total capital expenditures for 2025 to be approximately $10.0 million, mainly for replacing end-of-life machinery and equipment[109]. Shareholder Returns - The board of directors approved a share repurchase program of up to $75.0 million, with $2.0 million spent to repurchase 105 thousand shares during the three months ended March 31, 2025[111]. Tax Expenses - The company recorded a tax expense of $3.8 million for the three months ended March 31, 2025, compared to $3.5 million in the same period of 2024[106]. Future Outlook - The company expects long-term energy demand to rise, with a focus on both hydrocarbons and renewable energy applications[87]. - The company plans to continue developing products aimed at reducing costs and emissions for oil and gas operators while expanding into renewable energy[87].

Financial Data and Key Metrics Changes - The company reported revenue of $193 million and EBITDA of $20 million for the first quarter, meeting expectations [16] - Orders increased by 6% to $201 million, resulting in a book-to-bill ratio of 104% [16] - Free cash flow generated in the first quarter was $7 million, three times higher than the same period last year, marking the seventh consecutive quarter of positive free cash flow generation [22] Business Line Data and Key Metrics Changes - The Drilling and Completion segment saw a revenue increase of $5 million, driven by a rebound in sales of consumables and capital equipment [17] - The artificial lift and downhole segment experienced a decline in revenues due to unfavorable product mix and timing of shipments [18] - The Valve Solutions product line faced negative headwinds due to tariffs impacting demand, leading to a buyer strike [20] Market Data and Key Metrics Changes - Oil prices have declined significantly, hovering near four-year lows, which may lead to a reduction in rig counts and revenue starting in the third quarter if prices do not rebound [8] - The company anticipates a modest 2% to 5% decline in global drilling and completions activity for the year, with North America rig count expected to soften [13] Company Strategy and Development Direction - The company is focusing on mitigating tariff impacts, optimizing the supply chain, and reducing costs and inventory [9] - Plans include increasing assembly activities in Saudi Arabia and Canada to serve global markets more efficiently [11] - The company aims to utilize 50% of free cash flow for debt reduction and the remaining for strategic investments, including share repurchases [24] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about economic uncertainty due to trade policies and commodity price pressures, indicating a potential decline in revenue if oil prices do not recover [7][8] - The company remains confident in its ability to generate free cash flow and maintain a strong balance sheet, with no debt maturities until 2028 [23] - Long-term growth is expected to be driven by increasing energy demand due to population growth and economic expansion [29] Other Important Information - The company has strategically de-risked its supply chain to minimize dependence on specific countries and provide sourcing flexibility [11] - The balance sheet has improved significantly, with a net debt of $146 million and a net leverage ratio of 1.56 times [23] Q&A Session Summary Question: Can you elaborate on the strength in the Subsea side despite a slowdown in rig counts? - Management highlighted strong bookings in Subsea due to customer adoption of new products and a significant market share in remote-operated vehicles [35][36] Question: What products saw strength in the drilling completion segment? - Management noted a rebound in sales of frac pump power ends and wireline products, indicating increased activity despite fewer crews [38][40] Question: How are share repurchases managed in relation to leverage ratios? - Management explained that share repurchases are timed based on net debt measurements within 30 days of buying back shares, allowing flexibility in execution [46][47] Question: What is the impact of tariffs on pricing and demand? - Management acknowledged that tariffs have led to a buyer strike in the valve product line, affecting demand and pricing strategies [54][82] Question: How does the company plan to manage cash and debt reduction? - The company plans to use half of its free cash flow for net debt reduction and will continue to monitor market conditions for share repurchases [84][85] Question: What is the outlook for the Veraperm product line in Canada? - Management indicated that the recent performance was temporary and attributed to customer and product mix, with expectations for improvement in the second half of the year [63][65]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $193 million, with EBITDA of $20 million, meeting expectations [16] - Orders increased by 6% to $201 million, resulting in a book-to-bill ratio of 104% [16] - Free cash flow generated in Q1 was $7 million, three times higher than the same quarter last year, marking the seventh consecutive quarter of positive free cash flow [21][22] Business Line Data and Key Metrics Changes - The Drilling and Completion segment saw a revenue increase of $5 million, driven by a rebound in sales of completions-related consumables and capital equipment [17] - The artificial lift and downhole segment experienced a revenue decline due to unfavorable product mix and softer demand for Veraperm products [18] - The Valve Solutions product line faced negative headwinds due to tariffs impacting demand, leading to a buyer strike and reduced orders [19] Market Data and Key Metrics Changes - Oil prices have declined significantly, hovering near four-year lows, which may lead to a reduction in global rig count in the second half of the year [8] - The company anticipates a modest 2% to 5% decline in global drilling and completions activity for the full year [13] - Despite market uncertainty, operators have not materially deviated from their plans, with expectations for flat quarter-over-quarter results in Q2 [20] Company Strategy and Development Direction - The company is focusing on mitigating tariff impacts, optimizing the supply chain, and reducing costs and inventory [9] - Plans include increasing assembly activities in Saudi Arabia and Canada to efficiently serve global markets [10] - The company aims to utilize 50% of free cash flow for debt reduction and the remaining for strategic investments, including share repurchases [24] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the economic uncertainty due to U.S. trade policies and OPEC's supply growth, which could pressure commodity prices [7] - The company remains confident in its ability to generate free cash flow and maintain a strong balance sheet, with no debt maturities until 2028 [23] - Long-term growth potential is viewed positively, driven by increasing energy demand due to population growth and economic expansion [28] Other Important Information - The company has strategically de-risked its supply chain to minimize dependence on specific countries [11] - A focus on expense and inventory management has led to the highest level of free cash flow in nearly a decade in 2024 [12] Q&A Session Summary Question: Subsea bookings and product adoption - Management highlighted a 60% quarter-over-quarter increase in subsea bookings due to customer adoption of new products, with strong demand for remote-operated vehicles [34][35] Question: Strength in drilling completion orders - The increase in orders for stimulation-related equipment was attributed to a rebound from low purchase levels at the end of the previous year, with crews working more efficiently [36][38] Question: Share repurchases and leverage ratio - Management clarified that share repurchases were executed despite ending the quarter slightly above the 1.5 leverage ratio, with plans to continue as cash flows allow [44][45] Question: Cost reduction efforts - The company is targeting $10 million in annualized cost reductions, with some benefits expected in Q2 and more in Q3 [46][47] Question: Customer behavior regarding pricing and tariffs - Management noted that customers are currently hesitant to purchase due to high prices and tariff uncertainty, leading to a buyer strike [51][52] Question: Seasonal impacts in Canada for Veraperm - Management indicated that the challenges faced by Veraperm in Canada are temporary and linked to customer and product mix, with expectations for improvement in the second half of the year [60][61] Question: Geographical diversification benefits - The company is leveraging its geographical diversification to mitigate tariff impacts and optimize manufacturing processes [74][75]