Forum Energy Technologies (NYSE:FET) held its first-quarter earnings conference call on Friday. Below is the complete transcript from the call.
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Summary
Forum Energy Technologies reported a strong first quarter with an 8% increase in revenue, 14% rise in EBITDA, and a 300% boost in net income year-over-year, driven by their ‘beat the market’ strategy.
The company achieved a book-to-bill ratio of 106% and increased its backlog by 44% compared to the previous year, reaching the highest level in 11 years.
Future guidance is optimistic with a forecasted second-quarter EBITDA of $24 to $30 million, and the company has raised its full-year EBITDA guidance midpoint to $103 million, anticipating market share gains and backlog conversion.
Operational highlights included the commercialization of innovative products like Duracoil 95, Unity ROV operating system, and Duralide manifold system, along with advancements in rig floor automation with the FR120 iron roughneck.
Management emphasized the strategic execution of cost savings, achieving $15 million in annualized savings, and continued share repurchase activities, indicating a strong balance sheet with extended credit facilities.
Full Transcript
OPERATOR
Good morning ladies and gentlemen and welcome to the Forum Energy Technologies first quarter 2026 earnings conference call. My name is Daniel and I will be your coordinator. For today’s call, there is a process for entering the question and answer queue. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising. Your hand is raised to withdraw your question. Please press star 11 again. At this time, all participants are in a listen only mode and all lines have been placed on mute to prevent any background noise. This conference call is being recorded for replay purposes and will be available on the company’s website. I will now turn the conference over to Rob Kukla, Director of Investor Relations. Please proceed, sir.
Rob Kukla (Director of Investor Relations)
Thank you, Daniel. Good morning everyone and welcome to Forum Energy Technologies’ first quarter 2026 earnings conference call. With me today are Neil Lux, our President and Chief Executive Officer and Lyle Williams, our Chief Financial Officer. Yesterday we issued our earnings release which is available on our website. Today we are relying on federal safe harbor protections for forward looking statements. Listeners are cautioned that our remarks today will contain information other than historical information. These remarks should be considered in the context of all factors that affect our business, including Those disclosed in Forum Energy Technologies’ Form 10-K and other SEC filings. Finally, management’s statements may include non-GAAP financial measures. For reconciliation of these measures, please refer to our earnings release and website. During today’s call, all statements related to EBITDA refer to adjusted EBITDA and unless otherwise noted, all comparisons are first quarter 2026 to fourth quarter 2025. I will now turn the call over to Neil.
Neil Lux (President and Chief Executive Officer)
Thank you Rob and good morning everyone. Our first quarter results reinforced our confidence in the path we presented with FET 2030. Year over year we increased revenue 8%, EBITDA 14% and net income 300%. The execution of our Beat the Market strategy drove these results impressively. We grew revenue per global rig 12% from a year ago and positioned our company for future gains with strong bookings. Orders were up 10% year over year with a book to bill of 106%. We entered the year with our highest backlog in 11 years and we grew that backlog again. Compared to the first quarter of last year, our backlog is up 44%. Also, following the completion of our structural cost saving initiatives, we are now a more efficient organization. These efforts have achieved 15 million of annualized savings. In addition, we continued our share repurchase program and strengthened the balance sheet by extending our credit facilities maturity to 2031. Overall, this was the kind of start we wanted to see providing momentum into the second quarter and beyond. Looking ahead, our results should increase substantially driven by market share gains, backlog conversion and cost savings. We are forecasting second quarter EBITDA between 24 and 30 million, which at the midpoint is up 32% from a year ago. These results would deliver incremental margins of 51% with EBITDA margin approaching 13%. This sequential improvement is driven solely by the execution of our plan. Turning to the full year, we are raising the midpoint of our EBITDA guidance to 103 million, up 20% compared with 2025. Importantly, while we are seeing signs of increased activity which is consistent with some analysts expectations, our forecast conservatively assumes a flat market. Should the market pick up, I would expect to see further upside to our forecast. During the first quarter we continued gaining market share through innovation and new customer adoption. This is a key part of our strategy. So let me provide an update on a few products we have recently commercialized. First, Duracoil 95 coil tubing for sour service environments is continuing to gain traction and is now active on three continents. This is an ideal product for Venezuela and the Middle East, especially if workover activity accelerates to bring production back online. Another innovation I want to mention is Unity, our next generation operating system for remote ROV operations. We recently had the opportunity to showcase this technology at a large international trade show. In a real time demonstration, our customers were able to control an ROV positioned hundreds of miles away from a terminal in our booth. It was a powerful demonstration of Unity’s capabilities and and has ignited interest in our product. The next product I want to highlight is Duraline, our manifold system for multi well frac applications. Compared to our competition, Duraline is significantly safer and more efficient. Also, it is a great example of technology developed for US Shale applications that can be exported to international locations. In the first quarter we received a significant order for multiple systems to be deployed in Argentina this year. Another innovative area for FET is rig floor automation. We have developed patent pending software for the FR120 iron roughneck that automates the drill pipe makeup and breakout process with the push of a button. Our solution dramatically simplifies rig floor operations, reduces non productive time and increases drilling efficiency by 30%. This software will be packaged with new iron roughnecks and sold as an upgrade to existing ones. I am very excited about this development. Shifting to the power generation and data center markets, we have seen increased interest in the cooling solutions offered by our global heat transfer product family. Based on customer feedback, we have developed a stationary power cooling solution. This new design gives us an opportunity to address a bigger part of the market and since its introduction we have developed a strong commercial funnel. These innovations are great examples of how our product pipeline is supporting both near term share gains and the long term ambitions of FET 2030 Shifting to the Middle East Conflict and its Impact first and foremost, I am thankful all our employees in the region are safe. That is our primary concern. Also, operationally we have not suffered any facility damage. We have experienced some disruptions that are having a slight impact on our business, particularly around logistics and freight costs. However, our teams did an excellent job finding creative solutions to these challenges and we were able to increase revenue in the Middle East during the quarter. While uncertainty remains high, we are not forecasting any material negative impact from the conflict. For context, Middle East revenue is only 10% of our total, limiting the company’s exposure. At the same time, this conflict is creating medium to longer term tailwinds for our industry. A significant portion of the world’s oil and gas supply has been disrupted for 62 days and counting. Even if oil shipments through the Strait of Hormuz resume quickly, global oil inventories will be meaningfully reduced. Barring a material downturn in global demand, we expect investment in oil and gas production to increase over time to replace depleted inventories and support energy security. Some analysts have suggested that our industry will experience a prolonged upcycle beginning later this year or early 2027. This up cycle aligns with the growth market scenario of our Forum Energy Technologies 2030 vision. Under this scenario, our addressable markets grow at a rate of 9% annually and we expand our market share to 22% by 2030. The combination of market expansion and share gains doubles revenue to 1.6 billion, quadruples EBITDA and nearly triples free cash flow in that time frame. This scenario underscores our strategy’s long term value creation potential while our near term focus remains on disciplined execution and cash flow generation. Now, to provide more detail on our first quarter results and near term financial outlook, I will turn the call over to Lyle.
Lyle Williams (Chief Financial Officer)
Thank you Neil. Good morning. I will begin with first quarter results and our guidance, then shift to a discussion of cash flow and our capital allocation strategy. First quarter revenue of 209 million came in near the top end of our guidance. Growth in offshore and international markets led the revenue increase of 3%, outpacing global rig count. Our international revenue was up 7% with Canada, Europe and Latin America, each delivering double digit gains. This is the third consecutive quarter when international exceeded US revenue and offshore revenue expanded 10% driven by a 20% increase in our subsea product line as the team begins to execute orders secured last year. Adjusted EBITDA for the quarter was 23 million in line with our guidance as cost savings benefits were largely offset by product mix. Adjusted net income of 6 million increased 11% on favorable income tax expense rate that benefited from geographic income mix. We grew backlog again in the first quarter even after very strong bookings in 2025, both segments posted a book to bill ratio greater than 100%. We saw higher demand for capital equipment in the stimulation and intervention and the drilling product lines and increased demand for wireline cables. Valve orders increased nicely bouncing back from tariff related impacts throughout 2025. Let me continue with additional color on our segment results. Drilling and completions revenue was 127 million flat with the previous quarter. The subsea product line increased 20% as we recognized revenue on ROVs and the rescue submarine project. The stimulation and intervention product line increased 7% supported by power end and wireline cable demand. And to note, our Quality Wireline product family set a new record this quarter in revenue and in Greeceless cable sales. Coil tubing revenue was down 17% coming off strong US sales last quarter and due to customer requested delivery pushouts into the second quarter. Despite flat revenue segment EBITDA was up 6%, benefiting from cost savings and improved plant utilization related to our facility consolidations. Artificial lift and downhole revenue was 82 million, up 9% with increased sales volumes across all three product lines. EBITDA was roughly flat reflecting a combination of product mix, timing of incentive expense and lower absorption at one facility which we expect to improve in the coming quarters. Consolidated free cash flow was $1 million, consistent with our guidance. As a reminder, our free cash flow is typically back half weighted. For example, roughly 2/3 of our free cash flow was generated in the second half of 2025. Despite the seasonally lower free cash flow, we still remained active on share buybacks. We repurchased almost 93,000 shares for approximately $5 million under our share repurchase authorization. These purchases averaged $49 per share, about 20% lower than our stock price at yesterday’s close. In addition, we paid $9 million for withholding taxes associated with our stock based compensation program, avoiding the issuance of roughly 180,000 shares and ultimately benefiting our shareholders. These payments, along with transaction costs associated with the credit facility amendment resulted in a Modest and temporary increase in net debt. We ended the quarter with net debt of 121 million with a net leverage ratio still at a comfortable level of under 1.4 times. While this is higher than where we ended last year, we expect net leverage to decline to under 1 times by the end of the year. Liquidity of 91 million remains strong with 54 million available under our revolving credit facility. During the quarter, we extended our credit facility maturity to February 2031 with improved pricing and greater letters of credit capacity. This amendment combined with our strong balance sheet provides significant flexibility for FET to fund strategic initiatives including long term debt, retirement, organic growth and acquisitions. Now turning to our guidance for the second quarter. As Neil mentioned earlier, our our results should increase substantially, driven primarily by backlog conversion, cost savings and market share gains. We are forecasting revenue between 200 and 225 million and EBITDA between 24 to 30 million, which at the midpoints are up 6% and 32% from a year ago. Adjusted net income expected for the second quarter is between 6 and $11 million. Our free cash flow. Our full year guidance issued in February assumed relative flat market activity compared to the back half of 2025. Now, …
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