Forum Energy’s Earnings Call: Growth Amid Challenges

Forum Energy Technologies (FET) recently held its earnings call, revealing a mixed sentiment among investors and analysts. The company reported impressive growth in backlog and free cash flow, alongside efficiency improvements and significant shareholder returns through buybacks. However, these positive developments were somewhat overshadowed by a decline in U.S. revenue and challenges arising from tariff volatility.

Significant Backlog Growth

Forum Energy Technologies announced a remarkable 21% increase in its backlog, reaching its highest level since 2015. This growth was primarily driven by several offshore and international awards, highlighting the company’s strong market position and demand for its products.

Strong Free Cash Flow and Share Repurchases

The company achieved its ninth consecutive quarter of positive free cash flow, up 21% year-to-date. In addition, FET repurchased 5% of its outstanding shares in the third quarter, bringing the total to 8% for the year, demonstrating its commitment to returning value to shareholders.

Record Book-to-Bill Ratio

FET reported a book-to-bill ratio of 122%, with individual segments achieving ratios of 129% and 112%. This indicates robust demand across its product lines and underscores the company’s successful sales strategies.

Cost Savings and Efficiency Improvements

The company reported $23 million in EBITDA, marking a 13% increase. This was attributed to margin improvements from cost reductions and efficiency gains. FET is on track to achieve $15 million in structural savings by 2026, further enhancing its profitability.

Decline in U.S. Revenue

Despite the positive developments, U.S. revenue declined by 10%, primarily due to a 5% decrease in the U.S. rig count and market softness affecting consumable items. This remains a concern for the company as it navigates domestic market challenges.

Impact of Tariff Volatility

Increased tariffs on steel imports and targeted tariffs on imports from India posed significant challenges for FET. However, the company has made strategic adjustments to mitigate these impacts, showcasing its resilience in a volatile trade environment.

Income Tax Expense Increase

FET recorded an additional $5 million in income tax expenses due to increased valuation allowance reserves for the U.K., which impacted its financial results.

Forward-Looking Guidance

Looking ahead, Forum Energy Technologies provided robust guidance, reflecting a solid performance and optimistic outlook. The company reported third-quarter revenue of $196 million, with a book-to-bill ratio of 122%, and EBITDA up 13% to $23 million, exceeding guidance. FET’s backlog increased by 21%, driven by strong bookings and international awards, particularly in the subsea segment. The company raised its full-year guidance to $70-$80 million in free cash flow and aims to double its revenue in five years through its “Beat the Market” strategy.

In conclusion, Forum Energy Technologies’ earnings call highlighted a mix of strong financial performance and strategic challenges. While the company demonstrated impressive growth in backlog and free cash flow, it faces hurdles in the U.S. market and from tariff volatility. Nevertheless, FET’s forward-looking guidance suggests a promising future, with ambitious plans to expand its market presence and double its revenue in the coming years.