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FE

FORUM ENERGY TECHNOLOGIES, INC. (FET)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $201.0M with orders of $190.0M (book-to-bill 0.95). GAAP results were dominated by a $119M non-cash coiled tubing intangible impairment; adjusted EBITDA was $22.2M (11.0% margin) versus $25.8M in Q3 (12.4%) and $15.4M in Q4’23 (8.3%) .
  • Full-year 2024 free cash flow reached $105.1M (highest since 2015) on $92.2M operating cash flow; management initiated a $75M buyback and repurchased ~$2M in January 2025, subject to a 1.5x net leverage threshold (year-end net leverage 1.49x) .
  • 2025 outlook: adjusted EBITDA $85–$105M and FCF $40–$60M; Q1’25 revenue $185–$205M and EBITDA $20–$24M. Management expects 2025 global drilling/completions activity to decline 2–5% but aims to offset with share gains; tariffs and nat gas upside are variables not in the guide .
  • Mix shift favored Artificial Lift & Downhole (AL&D) (segment EBITDA up 11% seq.), while Drilling & Completions (D&C) softened with lower U.S. completions activity (segment EBITDA down 34% seq.). International remained a relative bright spot (Canada start healthy; Middle East pipeline) .
  • Balance sheet fortified via $100M senior secured bonds due 2029 (10.5%); sale-leasebacks added ~$20M cash; management frames buybacks as best use of capital given FET’s FCF yield and valuation .

What Went Well and What Went Wrong

What Went Well

  • Free cash flow execution: “free cash flow of $105 million, the highest since 2015,” with $92M operating cash flow and sale-leaseback proceeds; management plans to allocate 50% of FCF to net debt reduction and the balance to strategic investments, including buybacks .
  • AL&D resilience: Q4 AL&D revenue +7% seq. to $89.9M; segment adjusted EBITDA +11% seq. to $19.3M on higher artificial lift and processing technologies demand .
  • Strategic positioning and innovation: New products (Unity remote ROV control; PowerTron heat transfer for mobile power/data centers; MagnaGuard for PMM-ESPs) underpin “Beat the Market” strategy and share gains (revenue per rig up ~15% in 2024) .

What Went Wrong

  • D&C softness: Revenue down 10% seq. to $111.1M on lower U.S. completions-related sales; segment adjusted EBITDA down 34% on volume and mix headwinds .
  • Non-cash impairment: $119.1M intangible impairment in coiled tubing drove a GAAP net loss of $103.5M; management notes amortization will decline ~$15M/year going forward .
  • Orders moderation: Total Q4 orders declined to $190.0M from $205.8M in Q3 (book-to-bill 0.95 vs 0.99), with D&C orders down to $103.0M (vs $129.5M in Q3) as large drilling equipment awards normalized .

Financial Results

Key financials vs prior periods and estimates

MetricQ4 2023Q3 2024Q4 2024Vs. S&P Consensus
Revenue ($M)$185.2 $207.8 $201.0 N/A – S&P Global consensus unavailable
GAAP Net Income (Loss) ($M)$(16.8) $(14.8) $(103.5) N/A – S&P Global consensus unavailable
Diluted EPS (GAAP)$(1.64) $(1.20) $(8.39) N/A – S&P Global consensus unavailable
Adjusted EBITDA ($M)$15.4 $25.8 $22.2 N/A – S&P Global consensus unavailable
Adjusted EBITDA Margin %8.3% 12.4% 11.0% N/A – S&P Global consensus unavailable
Operating Income (Loss) ($M)$1.8 $8.9 $(106.8) N/A – S&P Global consensus unavailable
Orders ($M)$160.3 $205.8 $190.0 —
Book-to-Bill0.87 0.99 0.95 —

Note: S&P Global consensus data could not be retrieved due to temporary access limits; we will update beat/miss context upon availability.

Segment breakdown

MetricQ4 2023Q3 2024Q4 2024
D&C Revenue ($M)$126.6 $123.6 $111.1
AL&D Revenue ($M)$58.6 $84.2 $89.9
D&C EBITDA – As Adjusted ($M)$12.1 $14.5 $9.5
AL&D EBITDA – As Adjusted ($M)$8.7 $17.4 $19.3

Product-line mix (revenue)

Product LineQ4 2023 ($M, %)Q3 2024 ($M, %)Q4 2024 ($M, %)
Drilling$41.6, 22.5% $35.8, 17.2%$35.5, 17.6%
Subsea$27.6, 14.9% $20.9, 10.1%$18.6, 9.3%
Stimulation & Intervention$32.1, 17.3% $38.0, 18.3%$31.1, 15.5%
Coiled Tubing$25.3, 13.7% $28.9, 13.9%$25.9, 12.9%
Downhole$21.7, 11.7% $50.6, 24.4%$51.5, 25.6%
Production Equipment$22.7, 12.3% $18.0, 8.7%$21.7, 10.8%
Valve Solutions$14.2, 7.6% $15.6, 7.4%$16.7, 8.3%
Total$185.2, 100.0% $207.8, 100.0%$201.0, 100.0%

Cash flow and balance-sheet KPIs

KPIQ4 2023Q3 2024Q4 2024
Operating Cash Flow ($M)$11.3 $25.6 $38.5
Free Cash Flow, pre-acq. ($M)$8.9 $24.5 $56.9
Cash & Equivalents ($M)$46.2 (YE) $33.3 (9/30) $44.7 (YE)
Net Debt ($M)—~$199 (9/30) ~$149 (YE)
Net Leverage (x)—1.9x (9/30, annualized) 1.49x (YE)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($M)FY 2025—$85 – $105New guide
Free Cash Flow ($M)FY 2025—$40 – $60New guide
Revenue ($M)Q1 2025—$185 – $205New guide
EBITDA ($M)Q1 2025—$20 – $24New guide
2024 Free Cash Flow ($M)FY 2024$50–$70 (Q2) → $60–$70 (Q3) Actual $105.1Beat
Corporate Costs ($M)FY 2025—~$30New metric
Depreciation & Amortization ($M)FY 2025—~$35 (post-impairment lower amort.)New metric; D&A lower by ~$15M/yr post impairment
Interest Expense ($M)FY 2025—~$17New metric
Tax Expense ($M)FY 2025—~$13New metric
Lease Expense (sale-leaseback)FY 2025—+$1.7M per yearNew item

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
AI/data center power-gen opportunityQ2: JumboTron XL pipelines growing globally; early orders tied to data centers . Q3: Robust opportunity set continues .PowerTron heat exchanger product; robust quotation activity in power gen; sees gas line pipe opportunity into data centers .Strengthening
Supply chain & tariffsQ3: Diversified supply chain; tariffs viewed more as supply risk; mitigations in place .Tariffs not in 2025 guide; expect to mitigate via pricing/supply chain; near-term choppiness possible .Watch risk; manageable
Product innovationQ2: Unity remote ROV control; 1 system by YE + 4 in Q1’25; MagnaGuard for PMM-ESPs . Q3: Subsea utilization high; ROV pipeline strong .Unity systems in testing; deliveries pushed into Q1; reduces vessel personnel; upgrade path for installed ROVs .Progressing; slight timing shift
Regional trendsQ2: Middle East revenue +16% 1H; Canada better than expected . Q3: ME/International pipeline robust; Canada projects deferred into 2025 .Healthy Canada start; International broadly flat to up; ME pipeline remains solid .Stable to positive
Capital returnsQ2: Intends to return cash mid-2025 . Q3: Bond covenants allow 50% of prior-year FCF at <1.5x leverage .$75M buyback authorized; ~$2M repurchased in Jan; leverage test remains gating factor; repurchases weighted to 2H25 .Accelerating as leverage improves
Safety & culture—“World-class” safety metrics achieved in 2024 .Improving

Management Commentary

  • Strategy and capital allocation: “We expect to allocate 50% of our free cash flow to net debt reduction, with the remainder to strategic investments, including share repurchases… we are unlikely to find a better investment than FET shares.”
  • 2025 macro and positioning: “We anticipate global drilling and completion activity in 2025 will decrease 2% to 5%… our Beat the Market strategy will partially or fully offset the impact.”
  • Impairment context: “We recorded a charge of $119 million to impair the intangible assets of our coiled tubing product line… going forward, this will reduce our annual amortization expense by $15 million.”
  • Cash returns cadence: “In January, we repurchased approximately 105,000 shares… $2 million… repurchases to be weighted to the second half of this year,” constrained by the 1.5x leverage test .
  • Innovation pipeline: “Unity… remotely controls ROVs to reduce personnel on vessels… delivering in Q1; MagnaGuard… enables adoption of permanent magnet motor ESPs; PowerTron heat transfer unit for mobile power generation.” .

Q&A Highlights

  • Mobile power/data center vector: Management highlighted robust quotes for PowerTron in power-gen tied to rising electricity demand; sees coiled line pipe demand to bring gas to data centers .
  • Mix dynamics: Consumables (wireline cable, coiled tubing) turning well; capital products likely to see a spike a few quarters out as fleets age .
  • 2025 EBITDA bridge: Guide range reflects success in offsetting a 2–5% market decline with share gains; upside if market flat and FET adds revenue .
  • International pockets: Canada strong start; ex-North America stable-to-up (Kuwait/Oman/Abu Dhabi strong) .
  • Buybacks vs M&A: With ~30–35% FCF yield, buybacks screen compelling; will weigh per-share FCF accretion versus potential acquisitions like Variperm .

Estimates Context

  • S&P Global consensus for Q4’24 EPS/Revenue/EBITDA was unavailable at time of analysis due to temporary access constraints. Accordingly, we do not present beat/miss vs consensus and will update when S&P data is accessible. Management’s Q1’25 and FY’25 guides are provided above for context .

Key Takeaways for Investors

  • The quarter’s GAAP loss is largely non-cash; core profitability remains intact with 11% adjusted EBITDA margins and strong FCF conversion, aided by working capital and sale-leasebacks .
  • 2025 guide implies flattish-to-down market backdrop but continued share gains; AL&D momentum and International exposure are offsets to U.S. completions softness .
  • Capital return is the key catalyst: buybacks likely weighted to 2H’25 as leverage falls; covenant math (≤1.5x net leverage pro forma) is the gating factor .
  • Watch product mix: growth in AL&D (higher-margin artificial lift/processing tech) supports margins; D&C recovery depends on a rebound in capital orders and U.S. completions activity .
  • Tariffs are an overhang but manageable via pricing and supply chain measures; any nat gas activity rebound would be an upside wildcard to consumables demand in 2H’25 .
  • Near-term trading: expect Q1 seasonality and customer budget resets to pressure revenue/EBITDA within guided ranges; intra-year improvement plus potential buyback ramp are setup positives into 2H .

Citations:

  • Q4’24 8-K press release and financials:
  • Q4’24 earnings call transcript:
  • Prior quarters for trend analysis: Q3’24 8-K and call ; Q2’24 8-K and call
  • Related press releases (Q4’24): Share repurchase authorization and sale-leasebacks ; Senior secured bonds pricing/closing .