Forum Energy Technologies(FET) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue increased by 51% over the last three years, with a 10% growth in 2024 [10][12] - EBITDA grew by 49% in 2024, resulting in a 42% incremental margin and over 300 basis points margin improvement [12] - Free cash flow reached $105 million, the highest since 2015, exceeding guidance by$35 million [28] - Net debt decreased by 30%, improving net leverage from 11 times to just under 1.5 times [11][36] Business Line Data and Key Metrics Changes - Drilling and Completion segment revenue decreased by 10% due to lower US completions activity, with EBITDA down 34% [40] - Artificial Lift and Downhole segment revenue increased by 7%, driven by higher sales of refinery desalting technology and artificial lift products, leading to an 11% EBITDA growth [41] Market Data and Key Metrics Changes - Global drilling and completion activity is expected to decline by 2% to 5% in 2025, with North America forecasted to soften in rig and frac fleet counts [19] - International revenue grew by almost 42%, indicating strong performance outside the US [16] Company Strategy and Development Direction - The company aims to capture profitable market share through a "beat the market" strategy, focusing on differentiated technologies and global footprint [15][18] - Continued investment in energy is anticipated, with a focus on long-term demand growth despite expected transitional challenges in 2025 [18] Management's Comments on Operating Environment and Future Outlook - Management expects 2025 to be a transitional year due to geopolitical and macroeconomic uncertainties, with a forecasted decline in market activity [18] - The company is monitoring natural gas demand and tariff impacts closely, indicating potential upside if commodity prices rise [21][22] Other Important Information - A $75 million share repurchase program was authorized, reflecting confidence in generating consistent free cash flow [14] - The company has no debt maturities until 2028, with total liquidity of$106 million [36] Q&A Session Summary Question: Inquiry about new product related to mobile power - Management confirmed the introduction of Powertron, a heat exchanger for the power generation market, with strong quotation activity [50] Question: Thoughts on future orders for wireline completion - Management indicated that consumables are being consumed well, with potential spikes in capital-type products expected in the coming quarters [54] Question: Guidance on EBITDA amidst market weakness - Management explained that EBITDA guidance reflects the ability to offset market declines through market share gains [62] Question: Areas for growth in market share - Focus on high-margin product lines such as artificial lift and downhole, with ongoing development of new products [70] Question: Impact of tariffs on Canadian operations - Management noted no current impact from tariffs in Canada, but acknowledged potential future adjustments if tariffs are implemented [81] Question: Plans for returning cash to shareholders - Management emphasized the focus on share repurchases over dividends due to the undervaluation of the company's stock [75] Question: Future acquisition opportunities - Management expressed openness to pursuing acquisitions if they present relative value compared to share buybacks [90]