• Revenue Growth: Up 51% over the last three years.
• EBITDA Increase: Increased 5 times over the last three years.
• Margin Expansion: Expanded by 800 basis points over the last three years.
• Net Debt Reduction: Down 30% over the last three years.
• Free Cash Flow (2024): $105 million, the highest since 2015.
• Incremental Margin (2024): 42% with over 300 basis points improvement.
• Share Repurchase Program: $75 million announced in December.
• International Revenue Growth: Increased by almost 42% outside the US.
• Adjusted EBITDA Guidance (2025): $85 million to $105 million.
• Free Cash Flow Guidance (2025): $40 million to $60 million.
• Fourth Quarter Revenue (2024): $201 million.
• Fourth Quarter EBITDA (2024): $22 million.
• Net Leverage Ratio: Reduced to 1.49 times by year-end.
• Cash on Hand (Year-End): $45 million.
• Total Liquidity (Year-End): $106 million.
• First Quarter Revenue Guidance (2025): $185 million to $205 million.
• First Quarter EBITDA Guidance (2025): $20 million to $24 million.

• Warning! GuruFocus has detected 3 Warning Signs with FET.

Release Date: February 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Forum Energy Technologies Inc (NYSE:FET) reported a 51% increase in revenue over the past three years, demonstrating significant growth.
• The company achieved a 5x increase in EBITDA and expanded margins by 800 basis points, indicating improved profitability.
• FET successfully reduced net debt by 30% and improved net leverage from 11 to just under 1.5 times, strengthening its financial position.
• The company generated $105 million in free cash flow, the highest annual amount since 2015, showcasing strong cash generation capabilities.
• FET announced a $75 million share repurchase program, reflecting confidence in its ability to generate consistent free cash flow and return value to shareholders.

Negative Points

• FET anticipates a 2% to 5% decrease in global drilling and completion activity in 2025 due to geopolitical and macroeconomic uncertainties.
• The company recorded a $119 million charge to impair the intangible assets of its coil tubing product line, impacting net income.
• FET's fourth-quarter revenue decreased due to a slowdown in US completions activity, affecting sales volumes and EBITDA margins.
• The company faces potential challenges from tariffs, which could cause short-term impacts and variability in business results.
• FET's guidance for 2025 indicates a potential decrease in EBITDA, reflecting market uncertainties and the need to offset declining activity through market share gains.

Q & A Highlights

Q: Neal, can you elaborate on the new product tied to mobile power generation? A: Neal Lux, President and CEO, explained that the product is called Power Tron, a heat exchanger used in the Power Gen segment. It pairs with a gas reciprocating engine and builds on their market share in the frac industry. The product has seen robust quotations and is expected to close orders soon.

Q: With the market expected to decline by 2% to 5%, are there any areas where you still see room to grow market share? A: Neal Lux noted that they aim to grow profitable market share, focusing on high-margin product lines like artificial lift and downhole segments. They have introduced new products such as MagnaGuard and Pump Saver Plus, and see opportunities in international offshore projects.

Q: How do you plan to manage the potential impact of tariffs on your business? A: Lyle Williams, CFO, stated that while no tariff impacts are included in their guidance, they have experience from prior tariff regimes. They expect to pass on tariff increases to customers but acknowledge potential short-term volatility in results.

Q: Are you open to acquisitions if opportunities arise, given your strong balance sheet? A: Neal Lux confirmed that they are open to acquisitions if they find relative value compared to their shares. They would consider acquisitions with differentiated products in niche markets that are accretive to key multiples and cash flow per share.

Q: Can you provide more details on your share repurchase strategy and its limitations? A: Lyle Williams explained that their share repurchase strategy is limited by a 1.5 times net leverage ratio pro forma for buybacks. They plan to focus on open market purchases within Safe Harbors and expect repurchases to be weighted towards the second half of the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.