Forum Energy (FET) 4 Aug 232023 Q2 Earnings call transcript

Good morning, ladies and gentlemen. Welcome to the Forum Energy Technologies Second Quarter 2023 Earnings Conference Call. My name is Giji, and I will be your coordinator for today's call. There is a process for entering the question-and-answer queue. A link with instructions can be found on the company's Investor Relations website under the Events section. time, lines are mute have any noise. this mode a to At background all and been Instructions] all in participants listen-only prevent [Operator placed on will being replay This company's recorded call on the is purposes conference and be available website. for

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

our our earnings With me Williams, today you, morning, welcome Financial and and call. Thank Chief Chief to FET's Officer; Neal conference Lux, President Giji. Good second and Executive quarter XXXX Officer. are Lyle

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

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

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

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

turn now over to the Neal. call will I

Thank morning, Rob, good everyone. and you,

I'm market for price today, share start the on have throughout the year. of declines the been XXXX. to volatility recent To view and conditions our remainder going outlook and Commodity consistent theme

oil quarter, of Further, a during between XX% significantly the quarter. days range and fluctuated barrel, during were prices oil barrel. the prices below USDXX trading USDXX example, per second $XX For the about of per

after spending above of prices remained below For during $X. the second XXXX $X complex, all natural quarter the almost gas

was and rig exploration dampened and declined. As a count consequence, the for production company appetite investment

and remain service pricing. levels, demand, disciplined Despite by achieved U.S. U.S. with lower idling pressure equipment. decreasing pumpers drillers This was relatively investment

pressure short this industry. were good U.S. for means in robust the drilling and this equipment. tubing and wireline coiled rates high-spec term, units But result, is for a utilized our rigs, completion pumping activity. day and Ultimately, As generally discipline lower

operators, count particularly on Last all trend by combination prices The then some. they rig lower year, dropped operators, they back the commodity year, This and of held activity. increased added rigs privately service pricing last reversed. private their have operators XX%. That to drove completely has pull and year firm drilling

While tend public have focus, to has this longer-term their year. operators activity a declined even

XX This In their spending also down expected. rigs the activity. fracturing few to pumpers led hydraulic and calendars or very service additions quarter, of white related Pressure from observers of elevated total, on the end U.S. count more rate has of and to and softening rig XX% fleet providers an first their reduced began decline, is industry a space upgrades. for see

U.S. market outperforming. and conditions, teams FET our weaker these is are Despite executing

products solutions. quarter our flat quarterly market We with continue and XXXX, to X% to rig second U.S. gain the winning revenue our a was average count. relatively up share Compared versus

and May. for As look we in remainder count than out weaker anticipated this we year, activity rig frac will U.S. early of be the

later idled products units. or and discipline, will some environment a our This capital for this our uptick in In anticipate this given defer we into customers' demand slight XXXX. year

bottom However, has in outlook in U.S. the some have the commodity within month, levels with count rig third quarter. industry rebounded the the last improved prices to expecting to and close current

inflection upward increase next. or activity an of timing is we early occurring year later the this uncertain, Although anticipate an

inquiry be efficient to are U.S. And drilling portion a drilling lower It remains looking the we intensity remember that best-performing budding large than very is drilling activity. recently, expect service in in of previous have activity now Despite They to a need capital upgrade equipment optimism, that American frac is be the fleet North this for to a rigs stronger their we from market. our XXXX anticipation this sizable contractor, who and to fleets received forecast. of completion important high. and working, equipment

result, a we guidance. generate end around million expect low to our As which $XX now of original in is the EBITDA,

I are year, goal achieving that FET's market conditions us cycle. $XXX for EBITDA during pleased million preventing am of our disappointed I from performance the am While the with of

would the XX% guidance, be global meaningfully With updated our year-over-year, revenue EBITDA with up the market. outperforming

growth Our and assumes guidance the international U.S. decline. offset updated revenue offshore will partially

quarter just as While opposite. the challenging, been in the are U.S. count evident revenue international international markets XX% growth. was sequentially, rig increased the outpacing FET's market the has international This second

large Looking development, production ahead, international field projects approved. being are LNG and

through winning and work giving our footprint facilities, global demand momentum this by heading This year as as us gives global FET's continues. and is With customers strategic up-cycle backlog. XXXX manufacturing into our demonstrated this result, beyond. a are next visibility As we growing

upgrading call, their leads in building last quarter's and about the I seen international growth To increase efficiencies opportunities and existing During growing markets. rigs. and have talked in the demand, international are we new drillers meet

rigs and opportunities build two Middle For of East. new full tools. want iron including handling for the catwalks, have we roughnecks, in XX cranes example, equipment, They on suite FET's customers capital

building roughnecks we internationally the more of all our on sold from are than iron last year's. wins We second when quarter

On is well. the offshore customer activity increasing as side,

In quarter, booked the refurbished we ROVs. new and second

in production the traditional These offshore announce utilized be energy ROV In quarter. are addition, and several we to third construction. wind of vehicles builds expect the award expected both for to new

phases ramps expected during offshore investment wind is the be all energy in installations. to new decade, our portfolio As of vehicles utilized future up of

drive helps market international lower value safety addition new FET our new also gaining and development. benefits. of while efficiencies operating through product commercial growth, to environmental In and and through and creating The development and is efforts costs customers offshore share products solutions

roughneck new success will good significantly. in for efforts market our Also, making of in product iron this based XX% are next-generation our are FRXXX, and revenue off products expand quarter. our our almost progress accounted We the as of these stimulation we developing family addressable we

their system, of example One the many a our lead differentiate product version competition. in In ones. month solution. addition to over popular preferred record sit June customers. in had continuously the is the is by where technology we our cable we solutions Envirolite products, changing of winning more new latest to our developing greaseless FET Envirolite more new and update our innovative a and delivering as customers sales and as landscape adopted

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

Neal. you, Good Thank morning, everyone.

million, For points. XX within increased and XXXX, with quarter, Compared $XXX were respectively, of by million the and the EBITDA X% quarter and at and second EBITDA guidance revenue basis of revenue respectively. our second about to range XX%, improvement margin $XX

X%. revenue consolidated our was Sequentially, down

international softer offset sales. FET's detailed As Neal earlier, and almost offshore U.S. conditions market were by

$XX by increased overall Despite million. decreased modest by U.S. while flat. million, the EBITDA Specifically, essentially revenue international revenue was $X decline, revenue

year backlog Once increase. last Bookings rebounded second quarter in of the respectively. international a this and Product our increased of increased $X backlog drilling have larger that downhole base up ago. XXth the technologies in XX% lines quarters. for growth is quarter, XX% backlogs with The the revenue. second At from sales the a XX% XX year-over-year, million drove again, the technologies end and

support as our equipment this as is In benefit booked last for is year full to from with equipment Year-over-year, general, international In product deliver production backlog project quarter. scheduled for had bookings forecast. the Saudi our backlog quarter build. desalter we XXXX, and this nice technology a through year Arabia providing backlog line and well into U.S.-based up sales large ForuMix XX%, addition, our production

equipment Let was by book-to-bill share ratio growth Segment segment additional mix. drilling down lines. some product our favorable led subsea The $X.X for less bearings. XX% me segment revenue downhole had and demand subsea drilling technologies increased the was about increased drilling to capital of and due EBITDA and ROVs, details. sequential bookings million, X%, product the sequentially. driven note, by technologies Of XXX%, subsea

wind outlook gas as the farm customers strengthening about and capacity for excited oil add drilling upgrade and opportunities future equipment development. are production and to international We and support subsea offshore

impacted this frac-related Completions segment and end sales radiator on power pause by and capacity pumpers upgrades. and EBITDA revenue as slowing pressure expansion hit quarter were

did tubing and in wireline quarter. control see East the nice manifolds, America. for equipment increased for with awards higher pressure hoses, demand Latin However, coiled Middle also high-pressure and this Orders we

The quarter. completions records several segment this set

it Our quality grew X%, set the quarter. product family again, record beating last wireline revenue

Our of two in build at three-eight’s a record of XX,XXX record and coming a new feet. world stimulation this string tubing closes global the And tubing high-pressure team inch quarter. number team sold

EBITDA our last production solutions large several the Finally, from equipment a Production Production orders with quarter XX% line coming for product off segment delivery. up with U.S. strong had Valve keep over quarter book-to-bill XX% but stronger relatively XXXX revenue XXX few strong of orders, of technology Revenue approximately included that decreased levels a XXX%. strong our and based awards orders we the very of another international sequentially, basis with posted ForuMix team. quarter Arabia past first have Sequentially, $X year-over-year, orders seen Forum down, won at steady was increased able quarters. we EBITDA were margins to up by points. the million margins

me third forward. let this XX% expected. you we were share comments, severe markets Neal summarize Now discussed than we with going how declines To of forecast. the rig quarter had U.S. quarter see count our Neal's more

We to to expect declines. U.S. subsequent Hence, to rig white third to begin also on we continue quarter international expansion. these activity saw have steady decrease our expect and activity frac we slightly, customers space calendars their

and to Our to third revenue $XX respectively. on forecasted million million second and $XXX with EBITDA million, with the quarter is par of quarter forecast million ranges $XXX $XX

purposes. depreciation to In quarter, modeling expense interest be the the expense from down corporate corporate the we million In to costs and second of $X costs second amortization million. in are roughly slightly anticipate the few Here and details a quarter, third line first with for $X were quarter, be quarter. generally

are For to cash around due be income. taxes million, $X to the expected full-year, Canadian primarily income

driven than a increased cash sheet. negative purchases capital. XXXX to stronger quarter, this as million for supply our Similar balance an Also, to revenue. quarter cash drove flow in well inventory anticipated $X a was and to as working accounts meet of last earlier Free net the higher. increase chain decrease in despite receivable Turning balance outlook deliveries previously by

to continue their financials. customers stretch reported payments cash reflect stronger flow on Our to

ensure our flow. U.S. cash softness in the adjustments plans have made strong Given the markets, we to to

For hold capital non-critical decided to the one, expenditures back on through this off of year. we half have

six spent This we the to $X of and XXXX, build our products million, our full-year par have customers. now to XXXX. expenditures first just ability will of $XX million of deliver the capital In XXXX, For $X approximately approximately we to previous reduction guidance impact capital to expenditures from not million. go under in expect with months design, on our

capital more to Through lower flow appropriate cash capital. activity This outlook we working our inbound tightening reducing collection enhanced outlook modifying and working we working down second-half of we our of are to approximately our the driving chain management and for capital with cash we collection addition reduced our year, customers efforts teams raw inventory our for full-year the with our free flow implies confident our deliver XXXX million. of progress the In achieve the free to $XX softer Despite are supply are expenditures, capital approximately make and will timing. material, by million. of $XX in improving customers, flow expenditures, remainder expect

quarter $XXX million. hand We revolving $XXX with of ended our of $XX total credit cash facility under and on of million availability with the million liquidity

XX, growth a net was and liquidity opportunities leverage exploit million, of to and fund strategic June of well corresponding $XXX ratio As remains our balance FET ample operations X.X with debt and sheet. positioned with times. strong a organic

the remarks. Neal? me closing for back turn call to Neal Let

global to equipment in around companies their invest in world, must existing the costs. growing living and remain from efficiency belief and supply invest must increase and We capital to their lower spending new our new energy To must in standards for production optimize the steadfast industry increase operators components Service fields demand. that ones. increase

excited run And a the are demand All FET's upgrade innovation, us, the have the teams point opportunities a to we rebound of for I a through strong in cycle. activity the capture growing future. and acceleration and for in about in resumption place in am offshore capital with market U.S. of market of dynamics The share and international the sides to place FET. in equipment front

question. first the take please Gigi,

line Our Partners. Instructions] Energy of from Daniel John comes question first from [Operator the Daniel

Hi, guys.

questions. two Just

opportunities made about orders maintenance or ongoing comment those cycle you the a rising for manifolds? I'm walk replacement are discussed through curious, can for the the you You've on manifolds. the and just And us what

Yes.

kind they're manifold in, our think that. their seeing of stages that We're of orders. I'd that generally, say, of manifold manifold systems adding is customers to the going But inquiries we're I through number We're electric. to year, early turning the into the key technology. I a continuing fleets see side, their really And the think on towards upgrade also upgrading complete upgrade. we're

So high-pressure some longer hoses. new operating and our valves costs, we've well flexible added lower check the as that last as

the that as go that the well small pump the manifold go the to manifold our diameter that's as from wellhead. for the to diameter So large

about sounds fluid it wrong opportunities like Is we ends on are But the multiple or year. Right. am that? that to replacement per I think

starting and are with to cycle. we for still So consumable replacing the hose, and valves X.X as we're just old excited are or with and ones we go kits the see manifolds two the fleets along maintain it's to that hoses the folks their what that's easier using we But XXXX, us, From replacing better think a iron years. that last replacement about with what's our the really check setup. about The is delivered consumables. in those technology on are to faster their

do in a just North time Things or BD more it's with out the onshore with of curious, team, good, international time dicey bit there America are little spending land. doing management When I'm a right? And to and the international North look you America just final look localized has international. here market, Okay. spending as pitches? versus more question into dealing out sort you headaches

Yes.

the I or our efficiently come in carried John, one And roughly having think from we infrastructure place, having sacrifice international. of address over think, I that's of half to other. can think I we from that have So history our the both, revenue without

commodity or we're see prices, are mentioned improvement. see oils And really U.S. are comments in had XX% it signs up drilling with I run Inventories customers. the July, our low. our starting to And side, On starts so. to nice confidence that think right? I from And in we a early an starting of

positive right the a in that's view, of kind That's rig now. think we're But but our when. -- count I if so it's So increases, side. in the spot not

including for Okay, that’s Thanks all I me. had.

John. Thanks, Yes.

Take guys. care, Alright.

our One you. Thank for moment question. next

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

Good morning, gentlemen.

morning, Good Dan.

Williams Lyle - A

Dan. morning, Good

don't a America. North for in your So by couple if inquiry the comment, intrigued of you I upgrades was Neal, of mind. questions, the

bit a that standard You sort one-off the is a booking just drilling it rigs, the not made a you just package size type segment? was us of be would inquiry. you're sort where little it more sound tell bigger of like systematic ticket a bunch Or it opportunity? in about Can Is a a of of than more typically that? of order

the existing be We're as would lower. probably it's year capability. don't thinking found is rigs I operating into upgrade It they're get and intriguing an to sign what multiple I a But and get of much next want their for too discussion. me, details. about positive costs and still early wanting their in that to

think was I in for it again, iron So is the which industry. the our leading roughneck FRXXX,

the base installed big Customers benefit. a are have seeing We now.

being In what avoid are are so-called driving still also are fact, to high-spec is that the on used Dan, operators older I think iron rigs. want what's They the for downtime it, they're seeing with it. that roughnecks pushing even

rig. have to a true So high-spec

like need our a tool FRXXX. think I you

came asking, really did kind of recently, of a it quarter And inquiry down count so though activity is rig of come rolled? the even the little pressure? there's count beginning and Or rig they're that bit before at

This much recent, of information, have Yes. is but of is kind out too is I this very really why line. the which don't

And then international you encouraging. talked the opportunity. that's about Yes,

awarded? Middle opportunity? to bidding those takes there get the East. months you of a 'XX it of be work contracts in opportunities the Is typically it system? or be may you through Do XX tracking you're second-half six type for said are indication you and think first-half I How those something, 'XX do the

Sure.

see six up a down fast they're equipment. compared But parts the revenue is their which unless and time, not is for because of delays to there's everything. This new example, has should more other longer, for you say, a process slow in quick. rig What get type can rig be example, three handle subsea, process. order maybe to manufacturer is think let's a to relatively for I can delivery to, pieces the these generally, and build much month held our part pretty recognition, ready our

Great. Okay.

you the quarter? can While the what for mentioned of end at backlog second you is us quantify aggregate the backlog,

up Dan, backlog, last is but Yes, it quantified year. we that nicely typically haven't over

I ship two-thirds than cycle kind the business that our Typically, think and XXXX, that's back that consumable, like and in is build capital major XX% look all back in of way key more backlog. things the capital was which think the our XX%. of If we point. piece book is greater more last more capital, to business of what's

delivery, and push backlog more mix that see I consumable lead better capital to a think to we'll revenue versus higher growing, business. visibility we as long So in our a see

seeing that really over that I the indication the and and backlog to three years. we're give continued last So is in want to has grow that, hand

Yes. Great.

the today. ROVs I buildout our well cycle for us, combination some the kind think we're maybe positioned [Multiple nice that the a in demand grow, energy that already And the and that think seeing of the what's Speakers] And same well we build-out, which offshore of installed base And really with to subsea we're exciting too, of Dan, wind needs need. is and part. where for as offshore fill later is offshore pickup, to

a got Great. off kick I've big of a me if couple got questioners. more, you've backlog

XX% I'm it with, baked what us think take, or expectations if you you that and further as and in cash just U.S. does Or it bit your to little count worry trying guidance rig range? weakness rig about forecast? about second-half your stabilizes guidance, to it a guidance, count try free help rig would expectations? QX we calibrate Is EBITDA that Just more? $XX imply, have here? another of your you of incorporated took drops into dive, kind your could the While, Is properly of think give you count about million, that sort want

But as almost count X%. Yes. we the U.S., in down thought Great if look about that at was versus QX QX, and question. it's you $XX,XXX rig think question, QX, I Dan, the in

I If rig count, you quarter. as look X% current count of last from rig second more guess, levels at down the of was week,

bottom view count is So here. hearing we're in a we're that our nearing everything is rig

are count, U.S. do on range as So as down I today That's that we the as of there. been side, to going kind see for we softening in when rig the pumping pressure where be slightly. some that that hanging of beginning think to we indication well think indicated, is but there's white space also of on

a flat the from end some maybe beginning So pickup. back the with counter to here of seasonal see year,

do back Does Okay, CapEx scaled dynamic I making find the to acquisitions. make of every two, excited your or harder one, about less the okay. trying back half quarter to easier you, you you year. to about for Neal, is bolt-ons? Thank the do? ask things it And current

Great question, Dan.

I like valuations think does much what's seem closer. getting ask deals bid it done encouraging are is that now is that reasonable the at and

encouraging. I that's think So

would While to great looking full-bore on growth for acquisitions. a mode be it be to be

opportunity sheet long-term I about could be opportunistic, We is good our balance our we'll feel at debt. liquidity. out a to and is as how on think and we the this where handle there. great well we're evaluate Key continue to what's really

try mode, fit think I going want to FET. that businesses nice to a all margin, makes deal for to sense high a to and So together, that be great and we're opportunistic to industrial find have that continue continue putting for we us, find

taking Great. guys. you questions. Appreciate Fantastic, thank you my

Dan. Thanks,

you, Thank Dan.

our you. moment for next One question. Thank

[Eric from line comes question next of Our Carlson] (ph). the

morning. Good guys. Hey,

Eric. morning, good Hey,

Good morning.

of kind the in the hopefully, just at of the my then activity the just almost does and mean at year-over-year, question we mean, seem, and I of the of least pullback growth gains. in that, XXXX it there for free look back cash encouraging potential triggers issue year And at XX% activity EBITDA half I activity. looking thoughts. flow center price guess kind growth into the when given inventories as more kind around probably force is we're some I

added what mean, here kind if Just that of if have to see thinking turn bit little balance and free you QX a we sheet thought, I corner to as we guys things year. in the flow a of in start million do little It the of the activity but back bit do with you about cash bottoms rebound. looks half the cash promising, $XX

going XXXX. into You probably have some momentum

do we peers of acquisitions, valuation we that of been debt of Just you kind point, steps of doing kind of capital this of cash? levels of do interest the the return to a there's to flow now the attractive way I'm are stock I pre-pandemic have return of the talk or know greater down mean broken free about look to type a doing obviously, but in a and very that? had obviously record XX% when being one-thirds that kind the expense I going considerably. is debt they're the to and at things what and I it's with at reiterated of current but look kind lot mean, the of large of like cash number

cycle how to mean it think to in and some of paint mean, lay on like? terms probably and you could you the if thoughts. debt being if have you options do we picture buybacks does a to year But if one looking anything acquisitions. other that what the continues look obviously share return think just any you just two plus guys capital play at you could soft opportunistic if a out will. that If could I like basis out I

Sure, at and Eric. that, a take question. Why don't I the crack appreciate

a we meaning think is the is to net business around the will capital. make build and sure we free FET's over portion unwind. But to of of could then one to business, CapEx natures key business a a as first that softens, ought convert And be manufacturing set light. our capital-light cash maybe we capital EBITDA into is the as company, flow. working of I working good able time, context

permanent investment. a that's So not

flow strong our So in what full seeing numbers. we year up free cash we're That's a guidance. end with

the in of and with generation. lot early year seasonality half, next a reversal free build flow in clearly, of the some we'll have the a cash And

to and sheet. talked right, see that and on balance earlier do flow cash roll our you're we very similar-looking a and about with to what Obviously, happening calls forward XXXX. So we trend. that could We've are have cash we about do excited free

in We with a position that. good are

in Our XXXX. notes mature

So we've and a long cash with lot got deal time to a runway. flow that free of

for So dealing that an path. one is organic option with

see something The business. and for that other in opportunity advantage is or a their look opportunity some the in for are are lot in companies that of business. more to wanting M&A try to liquidity grow of that of deals. in and take alluded for a at There our opportunities private of or of all and plugging portion find of that a the debt a lot to opportunity Neal of to to We a market retaining some space. position long-term an better

those that opportunities. of position in So of could to take put advantage a kind us

business the sheet fact balance the a got kind real opportunities there. transform deal, looking of with now but strong that out the and considering we're right to we've So a

per Yes. to free sense. We share, and and where inorganically flow organically grow it want makes that's cash our

like able And remove seems that the be Great. Yes, of where just cash debt free priority, per buying and there. at restrictions can if find I cash at into on can stock, kind return you to kind in of seems growth year-over-year your own down, cash the also flow I my per a while yourself by you of in mean a my bit organically growing you kind I grow flow the the return number the find about, little guess, then kind it one to, if least the opportunities the now, scenario to invest and when goal being continue EBITDA mean kind thoughts that's you in is stock if you of to mean, get that growing might of And head. of shareholders. despite valuation way can then inorganically. to of like the I actually activity free share, of look that you some ultimately ultimately, to share think

appreciate Yes. I Eric. that,

going or a a we you market a I EBITDA of relatively year. really for results we XX% the of projection think great do think we forward. options down I mentioned, think we in more. achieved, result. are can the again, this lot And as have proud flat And to That's right, I grow of

continue going to that. so we're support And you. question. We appreciate Thank the your and do to

Thank this time, like back to Neal you. At Executive would the remarks. turn I Chief now Lux, closing to for over Officer, conference

Thank talking you We look you, Thank third support everyone your you. thank today. forward participation call, Gigi. And on in you the quarter for and results. to to again, to again November discuss our

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

disconnect. now may You