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FE

FORUM ENERGY TECHNOLOGIES, INC. (FET)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 came in within company guidance but missed Street on all three: revenue $193.3M vs $196.5M consensus*, adjusted EPS $0.04 vs $0.15*, and adjusted EBITDA $20.1M vs $23.0M*; GAAP EPS improved to $0.09 from $(0.85) YoY on lower interest and no impairments .
  • Management maintained FY 2025 free cash flow guidance at $40–$60M and set Q2 2025 adjusted EBITDA guidance at $18–$22M, with Q2 revenue expected at $180–$200M .
  • Subsea strength offset tariff-driven headwinds: subsea bookings up nearly 60% QoQ; valve product demand hit by buyer strike amid tariff uncertainty; $10M annualized cost cuts underway .
  • Capital return/leverage remain central: seventh consecutive positive FCF ($7.2M before acquisitions), net debt $146M, liquidity $108M, and intra-quarter windows for buybacks subject to 1.5x leverage test .

What Went Well and What Went Wrong

What Went Well

  • Subsea bookings accelerated ~60% QoQ on new product adoption (including Unity remote ROV ops), adding backlog support: “we sold about 8 more of those systems since the beginning of the year” .
  • Drilling & Completions delivered revenue growth and margin mix improvement; segment adjusted EBITDA rose to $12.4M (+31% QoQ) with orders +28% to $132.1M .
  • Sustained cash generation: seventh consecutive quarter of positive FCF; company reiterated FY FCF $40–$60M and intends to allocate ~50% to net debt reduction and buybacks .

What Went Wrong

  • Tariff shock triggered a buyer strike in Valve Solutions, materially dampening orders/deliveries; management expects weakness “for a couple of quarters” until tariff levels wane or inventories deplete .
  • Artificial Lift & Downhole revenue fell 13% QoQ on timing of international project shipments and reduced valve demand; segment adjusted EBITDA down 30% .
  • Street misses across revenue, adjusted EPS, and adjusted EBITDA, reflecting tariff uncertainty and unfavorable mix in Variperm/Canada and valves .

Financial Results

MetricQ1 2024Q4 2024Q1 2025Consensus Q1 2025
Revenue ($USD Millions)202.4 201.0 193.3 196.45*
GAAP Diluted EPS ($USD)$(0.85) $(8.39) $0.09 —
Adjusted Diluted EPS ($USD)$(0.12) $(0.48) $0.04 0.15*
Operating Income ($USD Millions)3.2 (106.8) 8.8 —
EBITDA ($USD Millions, GAAP)15.8 (88.7) 18.9 —
Adjusted EBITDA ($USD Millions)26.1 22.2 20.1 23.0*
Operating Margin % (GAAP)1.6% (53.1)% 4.6% —
Operating Margin % (Adjusted)5.3% 4.0% 5.0% —

Note: Values marked with * retrieved from S&P Global.

Segment breakdown:

Segment MetricQ1 2024Q4 2024Q1 2025
Drilling & Completions Revenue ($M)119.1 111.1 115.6
Drilling & Completions Adjusted Operating Income ($M)5.8 3.8 9.8
Drilling & Completions Operating Margin % (Adjusted)4.9% 3.4% 8.5%
Drilling & Completions Adjusted EBITDA ($M)13.7 9.5 12.4
Artificial Lift & Downhole Revenue ($M)83.3 89.9 77.8
Artificial Lift & Downhole Adjusted Operating Income ($M)11.7 13.1 7.5
Artificial Lift & Downhole Operating Margin % (Adjusted)14.0% 14.6% 9.6%
Artificial Lift & Downhole Adjusted EBITDA ($M)18.0 19.3 13.5

KPIs:

KPIQ1 2024Q4 2024Q1 2025
Total Orders ($USD Millions)204.4 190.0 200.7
Book-to-Bill (Total)1.01 0.95 1.04
Free Cash Flow before acquisitions ($USD Millions)2.3 56.9 7.2
Net Cash from Operating Activities ($USD Millions)5.0 38.5 9.3
Liquidity ($USD Millions)—106 108
Net Debt ($USD Millions)—149 146

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($M)Q2 2025—$18–$22 New
Revenue ($M)Q2 2025—$180–$200 New
Corporate Costs ($M)Q2 2025—~$7 New
D&A ($M)Q2 2025—~$8 New
Interest Expense ($M)Q2 2025—~$5 New
Tax Expense ($M)Q2 2025—~$3 New
Free Cash Flow ($M)FY 2025$40–$60 $40–$60 Maintained
Adjusted EBITDA ($M)FY 2025$85–$105 Range reiterated; downside scenario “around $85” if prices stay low Maintained with downside scenario
Cost ReductionsRun-rate—$10M annualized New initiative

Earnings Call Themes & Trends

TopicQ3 2024 (Prior-2)Q4 2024 (Prior-1)Q1 2025 (Current)Trend
Tariffs/MacroDiversified supply chain; monitoring tariff risks 2025 activity down 2–5% expected; plan to pass through tariffs “Radical upheaval” in U.S. tariff policy; valve buyer strike; price actions and sourcing shifts Worsening near-term impact, especially valves
Subsea & UnityUnity remote ROV ops first deliveries; robust subsea pipeline Subsea backlog momentum Subsea bookings +~60%; 8 more Unity systems booked YTD Strengthening
Variperm/CanadaTMX-driven project timing delays pushing into 2025 Strong Q4 set high bar Canada softness; unfavorable customer/product mix; improvement expected H2 Soft now, improving later
Capital Returns/LeverageLeverage threshold 1.5x for buybacks $2M buyback capacity outlined; seasonality noted ~1% shares repurchased; intra-quarter leverage windows enable buys Continuing but constrained
Free Cash Flow DisciplineRaised FCF guide to $60–$70M Delivered $105M FY; 2025 FCF $40–$60M 7th straight positive FCF; reiterated $40–$60M Sustained
AI/Data Center PowerJumbotron XL for power gen; data center applications PowerTron launch; strong quoting Ongoing uptake in data centers (PowerTron) Growing contribution

Management Commentary

  • “We initiated actions to eliminate $10 million of annualized costs…we are tightly managing inventory levels to maximize cash flow and execute our backlog.” – Neal Lux, CEO .
  • “Therefore, we expect flat quarter-over-quarter results with second quarter revenue to be in the range of $180 million to $200 million and EBITDA to be between $18 million and $22 million.” – CFO remarks .
  • “Today, our forward free cash flow yield is north of 25%. Very few stocks trade at yields this high while also having FET's long-term growth potential…we will seek to buy as many shares as possible within our returns framework.” – Neal Lux .
  • “The magnitude of tariffs levied on Chinese imports has impacted demand for our valves…our customers began a buyer strike, significantly reducing orders and delaying near-term deliveries.” – CFO remarks .
  • “Approximately 80% to 85% of our cost base is variable…we initiated actions to eliminate $10 million of annualized cost.” – Neal Lux .

Q&A Highlights

  • Subsea strength: Bookings up ~60% on ROVs and Unity operating system; ~8 Unity systems sold YTD; offshore demand across oil & gas, wind, and defense .
  • Completion/stimulation consumables: Power-end replacement cycles shortening (12–18 months vs 3–4 years historically), supporting consumable demand even with flat crews .
  • Valve buyer strike and tariffs: Customers delaying purchases amid tariff volatility; company pursuing alternate sourcing and assembly shifts (Saudi/Canada) to mitigate costs .
  • Cost actions: $10M annualized fixed-cost reductions expected to benefit into Q2/Q3; high variable cost base enables quick flexing .
  • Capital returns: Intra-quarter leverage test enables opportunistic buybacks; half of FCF targeted to net debt reduction; buybacks constrained by <1.5x net leverage requirement .

Estimates Context

  • Q1 2025 vs Street: Revenue $193.3M vs $196.5M consensus*; adjusted EPS $0.04 vs $0.15*; adjusted EBITDA $20.1M vs $23.0M*, all misses .
  • Q2 2025 set-up: Company guides revenue $180–$200M and adjusted EBITDA $18–$22M; Street Q2 consensus at time showed revenue $190.4M* and adjusted EPS $0.19*, implying modest tightening against guidance .
MetricQ1 2025 ActualQ1 2025 Consensus*Q2 2025 Consensus*
Revenue ($USD Millions)193.3 196.45*190.35*
Adjusted Diluted EPS ($USD)0.04 0.15*0.19*
Adjusted EBITDA ($USD Millions)20.1 23.0*20.55*

Note: Values marked with * retrieved from S&P Global.

Where estimates may need to adjust:

  • Valve headwinds and buyer strike suggest near-term pressure on Artificial Lift & Downhole margins and volumes; consensus may need to reflect lower valve throughput for a “couple of quarters” .
  • Subsea momentum and Unity adoption provide offset in Drilling & Completions; backlog execution could support Q2/Q3 revenue resilience .
  • Cost actions ($10M annualized) and variable cost base may cushion EBITDA vs top-line softness in H2 if rig count lags commodity prices by 3–6 months .

Key Takeaways for Investors

  • Near-term setup: Expect Q2 revenue/EBITDA within company ranges ($180–$200M; $18–$22M) as subsea strength offsets tariff-driven valve softness; watch for delivery timing in Variperm (Canada) .
  • Tariff resolution is a key catalyst: Clarity on tariff levels could unlock deferred valve demand; management is actively shifting sourcing/assembly (Saudi/Canada) to mitigate cost inflation .
  • Cash discipline intact: Seventh straight positive FCF; FY 2025 FCF $40–$60M maintained; half targeted to net debt reduction with opportunistic buybacks subject to <1.5x leverage .
  • Segment mix matters: Drilling & Completions margins improving on favorable mix; Artificial Lift & Downhole pressured by valves and project timing—monitor mix recovery in H2 .
  • Subsea/Unity as growth vector: Strong bookings and software-driven remote operations provide structural support for revenue/margins through 2025 .
  • Risk radar: Potential H2 activity decline if commodity prices remain low (rig count lag 3–6 months); management scenario points to ~$85M FY EBITDA if prices don’t rebound .
  • Trading lens: Near-term volatility tied to tariffs and leverage test timing for buybacks; positive catalysts include subsea backlog conversion, cost-reduction flow-through, and any pickup in gas-directed activity (shorter consumable replacement cycles) .