Forum Energy Technologies(US:FET)2019-07-26 20:13Financial Data and Key Metrics Changes - Free cash flow for Q2 2019 was $18 million, an increase of $3 million from Q1 2019, marking the third consecutive quarter of strong free cash flow [7][21] - Revenue for Q2 2019 was $246 million, a decrease of $26 million sequentially due to a slowdown in U.S. drilling and completions activity [13][10] - Adjusted EBITDA for Q2 2019 was $18 million, representing 7.5% of revenue, with a sequential decrease of $3 million [13][10] - Net loss for the quarter was $14 million, or $0.12 per diluted share, with adjusted net loss of $0.08 per diluted share excluding special items [14][15] Business Line Data and Key Metrics Changes - Drilling & Downhole segment revenue was $82 million, a decrease of $4 million or 4%, with orders down 4.5% to $78 million [16] - Completions segment revenue was $82 million, a decrease of $13 million, with orders down 12% to $71 million [17] - Production segment revenue was $83 million, a decrease of 9%, with orders down 5% to $76 million [19] Market Data and Key Metrics Changes - The company noted a significant reduction in sales of short-cycle products, particularly in the Completion segment, due to low maintenance spending by customers [9] - The international and offshore markets are showing improvement, with increased inquiries expected to convert into orders in the second half of 2019 [11][12] Company Strategy and Development Direction - The primary focus is on generating significant free cash flow to reduce net debt, with a goal to improve liquidity and reduce costs [6][8] - The company is implementing additional cost reductions, with SG&A costs down $6 million sequentially [10] - The strategy includes driving growth with winning products, particularly in artificial lifts, which are gaining market share [11][33] Management's Comments on Operating Environment and Future Outlook - Management highlighted that the low level of maintenance spending by customers is not sustainable in the long run, impacting results [9] - The company expects flat revenue in Q3 2019, with EBITDA expected to be flat to slightly up compared to Q2 [12] - Management expressed optimism about improving international and offshore markets, which are expected to drive future growth [37][53] Other Important Information - The liquidity position improved to approximately $242 million, with net debt at $442 million and a net debt-to-total capitalization ratio of 30% [23] - The company is aggressively reducing excess inventory, which is expected to contribute to cash flow generation in the second half of the year [21][29] Q&A Session Summary Question: Discussion on cannibalization among frac providers versus drilling contractors - Management noted that cannibalization is more significant among pressure pumpers, as they defer maintenance spending and utilize available equipment [41][42] Question: Impact of service companies managing their balance sheets on collections - Management acknowledged that while customers are slow to pay, they are generally strong companies, and efforts are being made to reduce days sales outstanding [45][46] Question: Details on expected uplift in free cash flow for Q3 - Management indicated that the uplift is due to improved working capital management, reduced interest payments, and expected deferred orders [68] Question: Specific products affected by softness in completion activity - Management clarified that all stimulation products are affected, but intervention products are performing well, particularly wireline cables [70][71] Question: Further initiatives to decrease SG&A - Management stated that major international consolidations have been achieved, and further efficiency improvements are being pursued [73]