Forum Energy (FET) 5 May 232023 Q1 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Forum Energy Technologies' First Quarter 2023 Earnings Conference Call. My name is Gigi, and I'll be your core leader for today's call. [Operator Instructions].

I will now turn the conference over to Rob Kukla, Director of Investor Relations. Please proceed, sir.

Gigi. you, Thank welcome Call. and First XXXX Quarter Good to Conference Earnings morning, FET's With President Lux, Officer; Neal me are today our Williams, Chief and our and Financial Officer. Lyle Executive Chief is earnings yesterday, our our issued We and it website. available release on

our in on factors historical Please safe including afforded XX-K should information. business, are that These harbor Listeners that contain may considered the our note remarks law. are SEC remarks in federal the information disclosed protections all FET's we our cautioned that and affect context filings. relying of by other those be than Form other

Finally, management's include measures. financial statements may non-GAAP

of For reconciliation earnings release. may these a refer to our measures, you

During Unless quarter to today's to fourth related all refer quarter EBITDA adjusted otherwise XXXX call, XXXX. EBITDA. all comparisons statements to noted, are first

turn call will to Neal. I over the now

good and key X everyone. morning, by like I points. call today's to Rob, you, Thank begin emphasizing would

we foremost, within as and our EBITDA and range. the to or meeting make free delivered during First first we that investors. guidance focused commitments flow to cash plan are accomplished and employees executed the and exceeding customers our revenue, on We our quarter

EBITDA Our margins sequentially increased relatively revenue. EBITDA both flat on and

Second, FET's highlights first reach. global the quarter

opportunities EBITDA products our million million. we of in previous $XXX $XX million guidance and We cash have remain in $XX earlier I the confident to high to XXXX to of free Demand million for of drive our this is XXXX international abundant expectations flow markets growth and offshore our set beyond. the $XX third, rest through and And of year. strong. Today,

in X ratio Coming in briefly talk the years me with bookings at first below market, XXX%. quarter. is book-to-bill the this addressing let Before a XX%, this over quarter about

with our East typically $XX book particularly book-to-bill lead ship were quarterly addition cause award. product ratio. in lumpiness time of capital project orders very million longer fourth strong, Also, Middle equipment. the bookings a This can quarter Our or are and

XXXX, of expected through sufficient we our should the be meet As our remainder to bookings expectations. and current out look revenue backlog year full

our see. the through walk me to markets let we continue opportunities and Now

During international was in and rig prices, markets. divergence a operators. by the than This less leading expected. lower rates private States U.S. and United to count commodity completion activity first quarter, between was originally we driven the softer saw The growth from drilling

equipment in However, rebound XX a redeployed utilization half customers in of service forecasting equipment and be the XXXX. count, the second Lower with even and quickly, remain can Also, moderating high. are rig intensity a our

for upgraded our less customers, state-of-the-art For company service pricing older, less demand. equipment. capable equipment They're demand is very strong seeing remains and

clearly, help can maintained, their solutions. and So want our they equipment well our this increasingly high-spec products bifurcated achieve customers market. upgraded customers to equipment goal diverse want with ensure have in-demand our to more is this in and FET

In investments bit summary, XXXX. these planning, energy a of less which market shifting these customer are and of commitments, longer is short-term and have and U.S. towards needs. are supplying half the This the back build-out up world's contractual expected offshore soft, while markets. Investment to In The conditions are equipment in in and volatility. runways. results international currently current pick activity susceptible deployment are markets strong more important becoming the to are in contrast,

several have past extensive our global FET's In quarterly reach. updates, we stressed

land-based more are company. We a U.S. than much

provide of XX% in to international and past FET's access our global markets. fact, total In us footprint revenue. cycles, brand sales approached

international substantially and to seen As a XX months. the grow result, over we past have X leads our opportunities

opportunities which International efficiencies upgrading new has strong to Middle for family demand. seen product have increase rigs and global building a already handling drillers equipment threefold their doubled. to capital its drilling East our compared presence, increase almost our opportunities And business, X existing months example, For ago. and tool are meet has

more of generates which line, its the product outside tubing of revenue coiled our than U.S. within XX% is example Another

team saw Middle America, Latin East. Our and the across significant in activity Europe commercial increase a

Subsea line markets, aftermarket Within to Technologies increase demand product back our is the installed XX% seeing work. offshore base as goes our

inquiries from several up months ROV inquiry as The are can and big-ticket sales take award cycle well. to New for items. trencher build, these

So forecasting year later the year. and into we next are occur bookings to this

we lift that finally, have And successful such the lines extremely been some primarily on our product focused have family. markets, as artificial U.S. product

success with of important new we in entered and Latin proven their lever and They beyond. are exporting new East recently process qualifications several will growth are national the services and in Middle oil with products and Asia American an be regions. Geographic companies expanding markets. Now expansion countries have technical to in the Pacific XXXX

International investment production. a be larger will and of energy portion for offshore spending

of That FET day As Automated for a industry. The our I zones, value safety all XX zipper our FASTConnect also frac the customers pounds If by manifolds clear. replaced gains manufacturer products. could were We zipper system direct completing customers personnel an FASTConnect environmental from from Frac FASTConnect, for the stages increases more win eliminating share market improves well benefit million introduction replacement critical danger is Technology efficiency The proposition we of will the The outpace Switch and grease. the with technology, can and per by new grease quarter, through introduced site new is a is manifold. eliminate trend. high-pressure of this eliminating of global drives very footprint ESG annually. by our system. Last with

potential this adopt to we first this is want around unit are conversations are key am to technology. having delivering who customer solution our building, report and we a this I that month. to Excitement with happy customers constructive

transition the including capture, and biogas. energy portfolio look aligns geothermal supports product future, into we offshore our markets, and submissions wind, with further As

the FET today, activity coming acceleration story years. efforts of engineering Although in seeing are expect part and small of signs commercial in a early we an and the

conclude, FET's opportunities. excited remain about I To growth

the needs industry FET's the stages cycle. and To an energy and innovative early the needs living increase energy, in are standards, products We of investment energy services. global world

it product pipeline has the will is While share. of in opportunity. the growth the growth U.S. pick new FET's is up revenue half market back driving International to further slowly, expected support robust, And by year. taking activity offshore and market started

I'll results now on quarter and for Lyle XXXX quarter outlook. over to call the second more detail turn our the first

you, Neal. Thank morning, Good everyone.

a XX%, first by first and million increased executed and to EBITDA of revenue Revenue was million, guidance basis quarter result. impressive $XXX respectively. X%. a improvement employees margin Sequentially, posted were plan $XX down solid XXX and delivered XX% consolidated the and at revenue our and Our within XXXX, Compared our and respectively, to EBITDA quarter an of range points.

offshore were FET's and market Softer U.S. conditions sales. in almost by offset growth international

Technologies, project basis. our on timing, increased revenue to XX% declined sequentially and Importantly, which international due XX% excluding Subsea a year-over-year

EBITDA driving up indicated, margin X% all Neal growth As with market X segments. is sequentially, flat improvement revenue, international revenue Despite roughly across FET. for was additional

would first Saudi I equipment X domestic orders the upgrades. Stimulation and Arabia up intervention quarter is out up for the Production Safaniya to is order quarter. in large rig is XX% XX%, number backlog Project lines. a for like with as JumboTron drilling orders XX% highlight backlog and year-over-year, radiators. product bookings backlog announced last of last from such international strong with up year. for Technologies of GHT, including And The is FET's up our backlog XX%, large which is of backlog, up X Drilling

increasing XXXX. offshore backlog This to we for backlog is in in through scheduled outlook. year the our into year international our provide the have this and our opportunity and confidence deliver in markets hand Generally, products and full

drilling driven were XXX%, Segment by the Let Downhole in & book-to-bill product ratio consumable builds some segment was tools lift, results share and me encouraging. highlights. our families. artificial Overall, handling Drilling backlog drilling

bookings Our XX% lift artificial sequentially. increased

We up. of Mexico as are seeing West Gulf our African protectors demand increasing Cannon work recompletion and picks for

were but down due sequentially, on mix. slightly project Segment bookings EBITDA timing. sales to order increased rebounded and sequentially, and to and improved the EBITDA year-over-year, revenue margins mid-teens up

well the plug-and-perf Our quarter, line, roughly in fourth stable challenges has largely improved Segment Completions U.S., EBITDA fourth of revenue was cost the reflect in our in Revenue the EBITDA with the coiled which following is with this since been segment trend. profitability while quarter. year. product project flat tubing completion activity the driven experienced increased last middle and by

equipment revenue of the returned X%, recognized $X include beating quarter, receiving line pipe segment for Tubing to revenue record a for in the family, coil X Global and of quality quarters. it grew set highlights team Other approximately orders quarter. subsea installation And product the radiators bookings last this pressure our in revenue rate This X the wireline to relates for After Middle East. previous pipeline million which control large run the the fourth order.

approximately margin Finally, Revenue is as execute basis increased move deliver XX% to year-over-year, partially compared Arabia points won decreased continue segment bookings $XX last up Segment strategy quarter and valve large million sequentially and $X first we X% orders of our was team. XXX revenue as the profitability the of by received Forum EBITDA our quarter order backlog. and teams to Production XXXX. million, the offset our by and higher

the that a large our see is as team established Now qualified supplier, these awards. fully facility has encouraging to it

key customers of as from opportunities will supplier. our and strategic through this having facility that FET's in-country provide products pull expect We variety to an a benefit seek equipment to

we second see our and discussed guidance. how going EBITDA Neal reaffirmed forecast. our you XXXX with quarter the share me markets let Now forward

and between expect EBITDA overall For revenue continued Therefore, the consistent $XXX softness. activity million. U.S. we in flat expect the quarter, second between $XX to offsetting with million we $XXX $XX acceleration, million international global of million with quarter, second and results

we taxes are and interest few We in $X second $XX of million down year quarter, expected. quarter, $X fourth first be million. roughly the to Here details depreciation costs in income the million amortization quarter, expenditure a In quarter, with were full around approximately corporate slightly line capital cash from where purposes. costs of $X and we In expense be the for first million. to expense forecast coming the at and corporate anticipate modeling

of of at $XX flow was range. million Free midpoint we in annual negative and as accrued forecasted cash totaled related quarter. the last quarter's taxes We payments guidance in million incentives, converted $XX our interest notes -- of property the call, to cash the first

from XXXX. for in delivery inventory built to also shipments We fulfill scheduled backlog,

due While supply instances disruptions logistical experiencing some to In we performance. some we supplier this expected from time, material and time is improved to chain area improving. are earlier arrived this than quarter, still

inventory our challenges we higher behind means are pleased us. largely than this While supply that chain slightly appear planned, was

the is in a balance confident work base. our accounts Our in progress. of receivable We're creditworthiness elevated customer

cash their meet ample payments despite flow continue to balance cash their goals. on own customers sheets, stretch to our However,

a X example, shifted customer million publicly large March promised For payment from traded $X April. to

have action with are payment customers and improve to without achieve working processes shipments. to withholding resorting timely to our taken critical our internal We constructively

quarter the flow cash full of year million million free between our We of $XXX noted, Neal and, cash with of $XX total facility and ahead, on the million million. free expect Looking $XX $XX we hand availability credit positive $XXX X million. of as ended with for quarters positive next flow and liquidity under revolving cash

financial dramatically As statements a our now our debt a reflect by reduced conversion debt that $XXX mandatory million. reminder,

As and a down liquidity was a market March to operations financial opportunities. position. net fund strengthened positioned balance take is significantly giving growth improved XX, well ample advantage to of us our FET and $XXX of With debt million, sheet,

our We of I of strategic deployment to available opportunities on continue these some touching close evaluate alternatives. will to by for the us cash.

is or repurchase option debt to repay One additional long-term our shares.

first the This about our stock XXX,XXX approximately for authorization we shareholders, program. shares to repurchasing common quarter, under $X.X approximately leaves our million cash of During million. $X.X returned

repurchases additional reminder, from a are authorization. by this our we As beyond indenture limited current

funding our free cash for XXXX already growth, our is healthy and option forecast. which Another for flow in organic included plan is

be option Any transactions that logic, be industrial we further make to another maintain transaction must net our such transform accretive portfolio. and product structured leverage. accretive to earnings good M&A could Finally, be conservative our

manufacturer with opportunities original quarter this for of first delivered our in the international guidance. turning call we questions, the with results. markets we through reflected high global early we the reaffirm you drive we a One, leave said deliver, year want and XXXX. some to ample and rest expectations in Three, Before growth offshore are set Two, we would what these to as points. over I the

first question. Gigi, please take the

Instructions]. [Operator

first Partners. Energy comes Our Daniel Daniel the of from question from John line

my as a deliveries, you and something opportunities, from hitting folks? you brought competition any where just sounds perspective, is which is growing some instead impressive, guess on something people have up as Just it I opportunities curious, well-connected color done Or just you now a other calling at behind sales be international speaking? Neal, broadly as of first tied the to is and it the you? sales question would simple are step the Or the change, just function helpful. waking international not look growth just it, demand drivers I'm

We've brands. it's whether tools No, where question. historically capital appreciate especially side, or Yes. I seeing really of we're the John. lot our some drilling it's handling activity a on a today, internationally, great had our that, good equipment.

in participated to seeing the been ago. back think work, to us cycle now sidelined that some we reactivation rigs a so And is so are build years those we and I and the for what efficiency And back long. putting And deliver. had equipment coming that last and the customers we're

opportunities So we're today. seeing those exciting. That's

I starting think earlier, and line. another our is export I had success part in really mentioned globally. the we're think at, it It's United we've States, you look something within if script product good multi-list that the of solutions to we

packager? you sense follow-up would on the equipment? equipment to M&A my potential the just rather manufacture an you is straight-up just for Okay. make Does down opportunities Or buy And road. ever it all then

look industrial logic. the We it all We opportunities. most at makes where evaluate

I the we we as whole fleet, efficiency build a think the increases where differentiates and we our for technology don't or key but frac supply manufacturer, the rig key that ourselves customers. set component up we've don't build do

line from the Eric next Carlson. of question Our comes

year. just that's into the Can in comments of million be about million would and flow that to we clarify the kind $XX so to $XX last another kind your basically, to how just $XX thought from probably Congrats, that terms of right think have capital $XX me, to the of to that. free get of quarter. million way -- cash for about that? QX full Might to returning QX you you to million lead think Is good shareholders

$XX get of here, the to just our That need range about would right from midpoint, to be million, about it. guide cash think that Eric. right, That's to way that $XX to we'd If is yes. million

Great.

be I I could significant given about at that debt would point every mean cheap looking basically, Xx you restriction, can is if think the XX/XX that to think where float remove compared just to at be we kind -- in just trade return I've of to X on to in this restrictions if didn't could I flow. do time, want -- we debt somewhere is And on looking about to value there been phenomenal. which like there very the if down results. EBITDA I'm appropriate the obviously, something level, of if I about paying debt, amount trailing adamant the from XX-month and year, that just that, trading pretty So mean, of pretended a remove to are seems of that that there. for But market exist, not we're that perspective, phenomenal, this, that capital that any the it a to there's dollar would that of a equity put you incredibly And amount level there's isn't, concern that just the cash and peers. of enterprise but we

not if stock opportunities you now, able I -- on very at advantage want X of Xx that's to that year, interest right your in mean I where is EBITDA buy that to -- this can like trailing we're appropriate. own thoughts something of as expense XX-month I yes, really. take of that, XX/XX is your just like restriction being the that But think think I

script about and one spent you we the with in talking time it thoughts, feels and think the reasons which just we're peers the where have, a love of agreement I stock as Eric, lot lot do on very our No, it's our of that. of we outlook the a versus cheap what Yes. is that trading very given is, We much shared.

next advantage So that we're out. we really cash deploy buckets going and quarters falls over that our that the have, to the earn how X we do we take of revolver laid the into

our in So able conservative, there to not to opportunities that reduce to you be punch for our We driver thoughts to reiterate If at flexibility on but of to there. being The to I our hit leverage. looking shareholders. us to necessarily return be a provide retire lot were cash want definitely those, and additional debt. is

the And we do cash a of front doing, be the shareholder use then even I that part M&A to is good with that the what we're restrictions use piece returns around is think other really cash. And how find could of we on have that's returns.

couple strategy, looking right next So and all of options, quarters show when over those the our those and at hard, time. to execute results very our considering reward plan is us let it's now the market game the

of on second I do increases thought like own increases because share, wants of opportunistic. Great. cash very mean, then huge to flow the return per your something my per the And decade, ability can me I'm which next kind that free to mean someone you question basis I being to that turn supportive a a is, stock was capital for like of the I who that. if do higher in share here. there's XXX% tailwind

think next we're this of happens zone of such just right volatility, that where there's it a years take I anything the advantage because like to up ourselves few phenomenal. market would to be opportunity in set broader phenomenal seems in like that can anything we now do

just that. appreciate So I

areas comments FET. We've questions a appreciate -- because, your Eric, long we there again, see the views. Great. here run share outlined way and well growth and the the term, we more make we advantage take baseline But energy. of Thank We really beyond. around and is the the us that. are you. need need to do see grow world, Again, positioned I long where we the to for for above we to investment

the from Energy question Pickering of Partners. comes Pickering line Daniel next from Our

X me. bear with So questions, I've X or got

talked Can indenture. at. the us of to the remind debt have you way -- the about kind debt? market call to down is up purchases of there can where free you debt do do right me Let of Eric paying start talk about He now? open to was any Or features

Great, of became debt year. through that do great we years because question. mechanism. last debt some And couple in purchases. market of is We ago, a did retire August callable open and The can callable

current point. steps the , callable and that August call this in down I believe, to, So premium the at Dan, is point. debt today, that is the at on

do or market bigger number we've or open that on call get make got So down. to that option the move a debt something to

revolver I rate the XXX revolver rough $XXX-something number, that the your -- can't point? million. today, this said And What's at remember you interest on

It's $XXX is million LIBOR rate, we so now -- just to to SOFR, that switch of Dan, Interest availability under and the is SOFR plus. revolver. from amended it's that

And now. but X%-ish have that feels the I right is top off the -- that trading we're so rate I that range my believe in of about somewhere head, right. don't

Okay.

call it, So plus or X%, minus.

math share about numbers? the difference and the side, $X.X million X and share the or repurchase this $X.X -- question, detail. today that Was $X.X between how on -- just $X.X apologize a On Or do versus the But those talked Is there stock the like what's call is -- million? the release, you I there press you repurchase, that. reconcile million the I something on I was some repurchases? internal show of for then million

for Yes. question. there incentives -- tax to that And the and were is repurchased shares Great tied we delta purposes. employee

it. Got

Okay.

a -- some firepower under our million. of on couple So have indenture, you still

Okay.

Yes. million of Call there, yes. Yes. ability it, $X.X

we kind so of converted exited. have ties -- to off to stock performance. of you some on point? guys swap? equity you Do color your this with associated around kind at this holders made there? the overhang question have still of debt debt-to-equity do of Last the I've do pretty that hard. those Are -- We assumption you. sold the Got just feel they the about any stock out have How the

of group, you everybody's in a a our a Yes, about debt. a And still quite the And they Dan, that bit think much a few where have weeks, got holders, own also great we've we'll question. but now group shares, own that quite few view conversations stand. on if with better holding

larger so time spent lot getting a those holders And there. well of be to and we've know

got understand see some that value. we've holders longer-term supportive think that group I in and the

our of the see price came the up think at looking at the is I we other the market the little in right pretty did of bit jump a part stock than that, in dropping middle in volume our trading time quarter. a there. that material faster the And equation with

don't level that have that our of quarter probably seen means, current another is think, trading was there couple down of -- high selling to or isn't activity their that. some holders at or another a assumption any I really move enough, Our quite good this through -- just a Volume but point. at sold of by holdings. X we've

Okay. Great.

me Your the upside. margins beat to

about margin they of And is or forward do remainder here? would perspective, of margins pricing trickle so from of year? expect change anything kind about think kind when there a we mix Or that the you that look the the from during up

I continue Yes. leverage. the expect margins our think we to with year to through Dan, increase operating the

with cost We that come are products improvement our see in products, higher as some supply those chain, we new Also, introducing we for and standard. margins getting are that through. we expect are to seeing

we're good our guidance about customers. the our sat we've We've with -- sat all the We look ahead. our year. Again, the teams. feel rest down excited reaffirmed So with we about of because

quarterly give basis. you on disclosure 'XX, you XX% good and a on revenues Neal, annual were about international. Sure. your

fourth in XX% quarter. You're the

you discussion mix and 'XX versus international? obviously on looks maybe we bullish think do you 'XX that what basis, Where around Your think the even is -- international outlook. then do like U.S.

Yes.

continue well capital think I -- United with positioned think I international see to equipment in growth we the seen States. we're the cycle. the We've again,

level internationally. bigger going it at we're see think obviously I to a

that's think to So going continue increase. I to

have see revenue. don't XX% were sales remarks direction. international that of in can our a I the number, earlier past as said trending in that we total our but approximately I us in cycle, So

know you environment? that but really look to Great. businesses sort into And give know of that pacing life, -- more private things Do are like asked there reaching then lot can a a type of expectations back seller the the of or equity-owned you are that question. John I are the of kind question, that. M&A -- asked a at qualitative end-of-fund coming just reality I kind around of us sense M&A reality? kind It's

I so don't think yet.

think And traded the has multiples publicly again, I to private companies. for in through compression I has that work -- yet. way, slight a quite And been I its think think, side. don't it there's the

I or think there's some anchoring last still before that to even. back year

I think some so need in more see to we get And just time sellers the to it to back -- line.

the don't Sure. bolt news there. want got anything, Well, to is I your It is. this would mean crazy or to guess nice if environment. as get to in doing I urgent numbers pay you've businesses good you be be fine do have to And on you

So...

with business XXX% -- that I we've I agree Dan. that. love we our right, set mean That's up. I

we to I markets. Lyle to our really it don't situation gas continue margins. world want has we want add to willing rigs the leverage handle bolt-on need significant organic finally, industrial as in natural we be to transformative growth balanced I think we oil like and and And upside, what in can think We're up. forward. now, us as step that that fit, going increase around our to could the love right to with, are also that even we where or do a acquisitions mentioned, some But get the we internationally especially I'd and add continue to

year guidance. question, for the terms $XX CapEx is number the of Last in Sure. million

gets the kind are rate into run markets, building below you leeway are facilities? quarter. there just that to them? see giving $XX you to You're million that yourself there you -- first in spending a Or is you number? some if project accelerate Or Is strong of specific a notably specific that

Yes.

So there's Dan. in those numbers, large no specific project or

have flexibility do spend we opportunity. when So we a to see lot the CapEx do of that

very it, and spend So be with have we when sure spend we make an line opportunity. to sight diligent smart clear to a that do of I think we'll

closing Lux to turn would conference over for back Neal Thank you. to like I remarks. the now Mr.

Thank you, Gigi.

opportunities confident the FET We to for I we expectations for our have discuss to am of that are in going in you am dedication, your forward share of Thank work support, win high results. hard growth you on August and about year. forward. ability again FET's excited will and we front our set the the us look to second that and are than the we I quarter proud deliver and to talking more to fair extremely enable team's

conference concludes you today's This for call. Thank participating.

may now You disconnect.