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FE

FORUM ENERGY TECHNOLOGIES, INC. (FET)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue of $200.0M rose 3% QoQ and beat Wall Street consensus by $9.4M; adjusted EBITDA of ~$21.0M was up ~2% QoQ; adjusted diluted EPS was -$0.10 due to non-GAAP exclusions, while GAAP diluted EPS was $0.61 .
  • The quarter featured a strong orders intake ($263.1M) and a 132% book-to-bill, driving the highest backlog in over a decade; momentum was supported by offshore defense wins and subsea demand .
  • Management raised FY2025 free cash flow guidance to $60–$80M (from $40–$60M) and guided Q3 adjusted EBITDA to $19–$23M, while indicating a full-year adjusted EBITDA of approximately $85M amid expected industry activity declines and tariff mitigation efforts .
  • Capital returns accelerated: 579k shares repurchased for $11M through July; management indicated potential to repurchase another ~10% of shares and reduce net leverage to ~1.3x by year-end, positioning buybacks as a key stock catalyst given ~30% FCF yield .

What Went Well and What Went Wrong

What Went Well

  • Orders strength and backlog: “Strong bookings, including for offshore defense, pushed FET’s backlog to its highest level in over ten years” supporting the outlook for ~$85M adjusted EBITDA .
  • Cash generation: Eighth consecutive quarter of positive FCF; Q2 operating cash flow $15.8M and free cash flow before acquisitions $22.9M; FY2025 FCF guidance raised to $60–$80M .
  • Segment mix improvement: Artificial Lift & Downhole revenue up 6% QoQ with adjusted EBITDA +24% QoQ, driven by processing equipment, casing, sand control, and cable protection demand .

What Went Wrong

  • YoY topline softness: Q2 revenue declined -2.6% YoY to $199.8M, and consolidated adjusted EBITDA margin fell to 10.3% from 12.6% in Q2 2024 amid tariff headwinds and mix shifts .
  • Drilling & Completions margin pressure: Segment adjusted EBITDA fell 8% QoQ on unfavorable product mix (lower sales of higher-margin products) despite revenue +1% QoQ; this weighed on consolidated profitability .
  • Valve Solutions weakness tied to tariffs: Management flagged a “buyer strike” and demand delays from tariff volatility, pressuring orders and near-term deliveries (Q1 call context) .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$205.2 $201.0 $193.3 $199.8
Diluted EPS ($USD)$(0.54) $(8.39) $0.09 $0.61
Adjusted EBITDA ($USD Millions)$25.8 $22.2 $20.1 $20.5
Adjusted EBITDA Margin %12.6% 11.0% 10.4% 10.3%
Operating Income ($USD Millions)$10.1 $8.1 $9.6 $9.6

Segment breakdown (Revenue and Adjusted EBITDA):

SegmentQ2 2024 RevenueQ1 2025 RevenueQ2 2025 RevenueQ2 2024 Adj. EBITDAQ1 2025 Adj. EBITDAQ2 2025 Adj. EBITDA
Drilling & Completions$117.0 $115.6 $117.2 $11.5 $12.4 $11.4
Artificial Lift & Downhole$88.2 $77.8 $82.5 $19.7 $13.5 $16.7

Key KPIs:

KPIQ2 2024Q1 2025Q2 2025
Total Orders ($USD Millions)$180.1 $200.7 $263.1
Total Book-to-Bill0.88 1.04 1.32
Operating Cash Flow ($USD Millions)$23.1 $9.3 $15.8
Free Cash Flow before Acquisitions ($USD Millions)$21.4 $7.2 $22.9
Diluted Shares (Millions)12.3 12.6 12.6
Share Repurchases (YTD 2025)—~$2M in Q1 579k shares; $11M through July

Estimate comparison (Q2 2025):

MetricConsensus*ActualSurprise
Revenue ($USD Millions)$190.35*$199.76 +$9.41M (beat)
Primary EPS (Adjusted) ($USD)$0.19*$(0.10) -$0.29 (miss)
EBITDA ($USD Millions)$20.55*$17.25*-$3.30M (miss)

Values with asterisks retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Free Cash FlowFY2025$40–$60M $60–$80M Raised
Adjusted EBITDAFY2025$85–$105M ~$85M (supported by backlog, cost savings, tariff mitigation) Maintained at low end / narrowed
Adjusted EBITDAQ3 2025$18–$22M (Q1 call) $19–$23M Raised
Net Leverage TargetYE2025—~1.3x New
Share Repurchases2025~1% repurchased in Q1 ($2M) 579k shares; $11M through July; “on track to repurchase another 10%” Increased execution
Cost Savings2025$10M annualized actions initiated ~$1M recognized in Q2; further $1–$2M expected in Q3 (call) Progressing

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
Tariffs/macroCautious near-term; FCF/EBITDA guide set Tariff shock; price increases; supply-chain mitigation; buyer strike in valves Tariff mitigation ongoing; guidance supported by cost savings; industry activity to trend down From defensive actions to controlled execution
Subsea/DefenseSubsea mixed QoQ Subsea bookings +~60%; Unity system traction Indonesian Navy SRV award; subsea/ROV orders drive D&C orders Strengthens across quarters
Capital returns$75M buyback authorization announced; early 2025 repurchases ~1% repurchased; leverage covenant timing explained 579k shares/$11M YTD; targeting ~10% further; YE leverage ~1.3x Accelerating
Cost structurePlant/inventory discipline discussed $10M fixed-cost reductions initiated; variable cost base flexibility ~$1M realized; more benefits in Q3 (call) Savings flowing
End-market activityU.S. land softer; ALD strong Stable near-term; risk to H2; gas shift could help consumables “Industry activity expected to trend down” but backlog cushions Softer activity offset by backlog

Management Commentary

  • “We achieved the eighth consecutive quarter of positive free cash flow… we are raising 2025 guidance to between $60 and $80 million… we will use this free cash flow to further reduce net debt and execute share repurchases.” — Neal Lux (CEO) .
  • “Strong bookings, including for offshore defense, pushed FET’s backlog to its highest level in over ten years… supports our full year adjusted EBITDA forecast of approximately $85 million.” — Neal Lux (CEO) .
  • “Given this uncertainty, we are proactively mitigating tariffs, optimizing our supply chain and reducing costs and inventory… we initiated actions to eliminate $10 million of annualized cost.” — Neal Lux (Q1 call) .
  • “Windows will open [intra-quarter] for us to buy shares… based on the timing of how our cash flows.” — Lyle Williams (CFO) .

Q&A Highlights

  • Subsea strength and product adoption: management emphasized ROV demand and Unity OS traction; subsea bookings and additional April orders highlighted the offshore opportunity set (Q1 context) .
  • Stimulation-related consumables: power ends and wireline cables seeing faster replacement cycles as crews pump more stages/day, sustaining demand even with fewer fleets (Q1 context) .
  • Tariff and valve “buyer strike”: near-term demand delay with customers waiting out volatility; FET pursuing alternative sourcing and assembly in Saudi/Canada to mitigate cost/tariff impact (Q1 context) .
  • Cost savings realization: ~$1M of fixed-cost reductions recognized in Q2, with $1–$2M more expected in Q3 (Q2 call) .
  • Share repurchase mechanics: intra-quarter leverage test allows opportunistic buybacks within covenant windows (Q1 context) .

Estimates Context

  • Revenue beat: Actual $199.76M vs consensus $190.35M*; positive surprise of +$9.41M; strong orders/book-to-bill and subsea/defense supported top-line outperformance .
  • EPS miss: Consensus $0.19* vs adjusted EPS $(0.10); miss of -$0.29; driven by exclusion of $6.9M sale-leaseback gain and $3.8M FX gain, plus restructuring/transaction costs in adjusted figure .
  • EBITDA miss (SPGI standard): Consensus $20.55M* vs SPGI actual $17.25M*; note company-reported adjusted EBITDA was $20.5M, reflecting non-GAAP adjustments .

Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue outperformance and exceptional orders/book-to-bill underscore resilience; subsea/defense demand is becoming a durable offset to softer U.S. land activity .
  • EPS and EBITDA (SPGI standard) misses reflect non-GAAP normalization; company-reported adjusted EBITDA rose sequentially, and margins held near 10% despite mix/tariff pressure .
  • Guidance reset is constructive: FY2025 FCF raised to $60–$80M and Q3 adjusted EBITDA guided to $19–$23M; backlog and cost actions de-risk the year even as activity trends down .
  • Share repurchases are a near-term trading catalyst: $11M YTD, on track for ~10% additional repurchases, with YE net leverage targeted at ~1.3x—supportive for valuation and upside skew .
  • Watch segment mix: Artificial Lift & Downhole is improving; Drilling & Completions margins face mix headwinds—subsea and coiled tubing demand help, but higher-margin product sales are key .
  • Tariff policy remains a swing factor: Valve Solutions demand is sensitive to tariff volatility; sourcing/assembly shifts and pricing actions aim to stabilize margins .
  • Near-term: trade the backlog/FCF narrative and buyback cadence; medium-term: thesis hinges on subsea/defense growth, disciplined capital allocation, and tariff mitigation sustaining double-digit adjusted EBITDA margins .