Forum Energy Technologies(FET) - 2025 Q2 - Quarterly Report

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