Forum Energy Technologies(FET) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $202 million, exceeding the top end of guidance and increasing 3% sequentially, driven by strength in offshore and international markets [12] - Adjusted EBITDA for the quarter was $23 million, at the top end of guidance, with free cash flow generation totaling $80 million for the year [9][12] - Net debt was reduced by 28% to $107 million, with a net leverage ratio of 1.2x, indicating improved financial health [16] Business Line Data and Key Metrics Changes - Drilling and completion revenue increased by 8% to $127 million, while the subsea product line revenue rose by 25% due to strong project execution [13] - Coiled tubing revenue was up 13%, and drilling product line revenue increased by 11%, supported by international demand [13] - The artificial lift and downhole segment saw a book-to-bill of 107%, although revenue decreased by 4% sequentially [14] Market Data and Key Metrics Changes - International revenue increased by 8%, while U.S. revenue declined by 2% due to project timing and softer demand [12] - The company reported a full year book-to-bill of 113%, with a particularly strong performance in the subsea product line, achieving a nearly 190% book-to-bill [6] Company Strategy and Development Direction - The company is focused on its strategic vision, FET 2030, aiming for market share gains through customer engagement, product innovation, and geographic expansion [5] - New product development is central to growth, with 10 new products commercialized in 2025, including innovations like the Secura Series stage collars and DuraCoil 95 [7][8] - The company anticipates a 50% expansion in addressable markets over the next five years, potentially doubling revenue [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a bullish long-term outlook, expecting oil and natural gas demand to grow significantly [9] - Despite a challenging environment, the company aims to achieve revenue growth of 6% and EBITDA growth of 16% in 2026 [10] - The management highlighted the importance of maintaining margin and cost discipline while executing on strategic initiatives [8][9] Other Important Information - The company completed two real estate sale-leaseback transactions generating $15 million in net cash proceeds [15] - The credit facility was extended to February 2031, providing significant flexibility for funding strategic initiatives [16] Q&A Session Summary Question: Trajectory in subsea business for 2026 and 2027 - Management expects strong demand in the subsea business, with a focus on converting backlog and expanding into international unconventional markets [26] Question: Acquisition targets and areas of interest - The company is interested in downhole businesses that offer differentiated solutions and are accretive to financial metrics [29] Question: Factors contributing to exceeding guidance in Q4 - Strong execution by teams and no significant end-of-year slowdown contributed to better-than-expected results [33] Question: Guidance for Q1 and revenue growth despite rig count decline - The company anticipates revenue growth due to backlog and structural cost savings, despite a projected decline in global rig count [37] Question: Free cash flow guidance and working capital management - The company expects strong free cash flow driven by effective working capital management and revenue growth [40] Question: Timing of share buybacks in 2026 - Management indicated that share buybacks may be back-end loaded in 2026, similar to the previous year [46] Question: Growth avenues in DNC business and artificial lift - The subsea and artificial lift segments are expected to drive significant growth, particularly in international markets [54] Question: M&A opportunities and seller expectations - The company is seeing an increase in companies for sale, with seller expectations rising due to improved public company stock multiples [63] Question: Impact of tariffs and deferred tax assets - The company is focused on mitigating tariff impacts and optimizing tax strategies as profitability grows [95][100]