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, despite a flat global rig count [13] - Adjusted EBITDA for the quarter was $23 million, at the top end of guidance, driven by higher revenue and cost reductions [13] - Free cash flow generation was strong, totaling $80 million for the full year, with a free cash flow conversion rate of 76% when excluding sale-leaseback proceeds [16][19] Business Line Data and Key Metrics Changes - Drilling and completion revenue increased by 8% to $127 million, while subsea product line revenue rose by 25% due to ROV projects and a significant rescue submarine order [14] - Coiled tubing revenue was up 13%, supported by strong sales in North America [14] - The artificial lift and downhole segment had a book-to-bill ratio of 107%, with revenue of $75 million, down 4% sequentially [15] Market Data and Key Metrics Changes - International revenue increased by 8%, marking the second consecutive quarter where international revenue exceeded U.S. revenue, which declined by 2% [13] - The company reported a full year book-to-bill ratio of 113%, with a nearly 190% book-to-bill for the subsea product line [6][10] 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 the company's strategy, with 10 new products commercialized in 2025, including the Secura Series stage collars and DuraCoil 95 [8][9] - The company expects to double revenue in five years, driven by an expanding addressable market and targeted market share gains [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a bullish long-term outlook, anticipating increased oil and natural gas demand over the next five years [10] - The company expects revenue growth of 6% and EBITDA to increase by 16% for the full year 2026, with guidance for revenue between $800 million and $880 million [11][12] - Management highlighted the importance of maintaining margin and cost discipline while navigating a challenging operating environment [10] Other Important Information - The company ended the year with a net debt of $107 million and a net leverage ratio of 1.2x, with liquidity of $108 million [16] - The credit facility maturity was extended to February 2031, providing significant flexibility for strategic initiatives [16] Q&A Session Summary Question: Can you talk about the trajectory in the subsea business for 2026 and 2027? - Management indicated strong demand in energy and defense, with expectations to convert backlog in 2026 and add for 2027 and beyond [26] Question: Where do you see the biggest benefit for FET in unconventional oil or gas development globally? - Management highlighted opportunities in Argentina and Saudi Arabia, focusing on adopting advanced technology [27] Question: What were the pluses and minuses in the quarter that led to exceeding guidance? - Management noted solid execution and no significant end-of-year slowdown, particularly in the subsea product line [33][36] Question: How do you achieve strong free cash flow guidance in a growth market? - Management explained that cash flow guidance is based on effective working capital management and revenue growth [41][42] Question: What is the impact of the recent tariff ruling? - Management stated that while some tariffs were struck down, others remain in place and have impacted steel supply [95] Question: What are the expectations for M&A opportunities? - Management noted an increase in companies being marketed for sale, with a focus on finding businesses that fit their strategic criteria [63][64]