UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

___________________________________



☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, ~~2022~~2023



☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-35504

FORUM ENERGY TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)




Delaware									61-1488595
(State or other jurisdiction of									(I.R.S. Employer Identification No.)
incorporation or organization)

10344 Sam Houston Park Drive

Suite 300

Houston

Texas

77064

(Address of Principal Executive Offices)

(Zip Code)


(281)			949-2500

(Registrant’s telephone number, including area code)


______________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	FET	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☑

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of ~~May 2, 2022~~April 28, 2023, there were ~~5,720,957~~10,149,539 common shares outstanding.

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Forum Energy Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss)

(Unaudited)


		Three Months Ended March 31,						Three Months Ended March 31,
(in thousands, except per share information)	(in thousands, except per share information)		2022		2021		(in thousands, except per share information)		2023		2022
Revenue	Revenue		$	155,174	$	114,517	Revenue		$	188,957	$	155,174
Cost of sales	Cost of sales		116,555		88,332		Cost of sales		136,855		116,555
Gross profit	Gross profit		38,619		26,185		Gross profit		52,102		38,619
Operating expenses	Operating expenses						Operating expenses
Selling, general and administrative expenses	Selling, general and administrative expenses		44,305		41,474		Selling, general and administrative expenses		45,511		44,305
Loss (gain) on disposal of assets and other	Loss (gain) on disposal of assets and other		22		(909)		Loss (gain) on disposal of assets and other		(260)		22
Total operating expenses	Total operating expenses		44,327		40,565		Total operating expenses		45,251		44,327
Operating loss			(5,708)		(14,380)
Operating income (loss)							Operating income (loss)		6,851		(5,708)
Other expense (income)	Other expense (income)						Other expense (income)
Interest expense	Interest expense		7,624		9,162		Interest expense		4,549		7,624
Foreign exchange and other losses (gains), net	Foreign exchange and other losses (gains), net		(5,986)		3,470		Foreign exchange and other losses (gains), net		2,972		(5,986)
Loss on extinguishment of debt			—		933

Total other expense	Total other expense		1,638		13,565		Total other expense		7,521		1,638
Loss before income taxes	Loss before income taxes		(7,346)		(27,945)		Loss before income taxes		(670)		(7,346)
Income tax expense	Income tax expense		1,853		1,718		Income tax expense		2,816		1,853
Net loss	Net loss		(9,199)		(29,663)		Net loss		$	(3,486)	$	(9,199)

Weighted average shares outstanding	Weighted average shares outstanding						Weighted average shares outstanding
Basic	Basic		5,683		5,613		Basic		10,179		5,683
Diluted	Diluted		5,683		5,613		Diluted		10,179		5,683
Loss per share	Loss per share						Loss per share
Basic	Basic		$	(1.62)	$	(5.28)	Basic		$	(0.34)	$	(1.62)
Diluted	Diluted		(1.62)		(5.28)		Diluted		$	(0.34)	$	(1.62)

Other comprehensive income (loss), net of tax:
Other comprehensive income (loss), net of tax of $0:							Other comprehensive income (loss), net of tax of $0:
Net loss	Net loss		(9,199)		(29,663)		Net loss		$	(3,486)	$	(9,199)
Change in foreign currency translation, net of tax of $0			(6,992)		3,152
Change in foreign currency translation							Change in foreign currency translation		4,158		(6,992)
Gain on pension liability	Gain on pension liability		30		77		Gain on pension liability		15		30
Comprehensive loss			$	(16,161)	$	(26,434)
Comprehensive income (loss)							Comprehensive income (loss)		$	687	$	(16,161)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forum Energy Technologies, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except share information)	(in thousands, except share information)	March 31, 2022		December 31, 2021		(in thousands, except share information)	March 31, 2023		December 31, 2022
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	20,602	$	46,858	Cash and cash equivalents	$	46,764	$	51,029
Accounts receivable—trade, net of allowances of $9,965 and $11,114		132,211		123,903
Accounts receivable—trade, net of allowances of $11,102 and $10,690						Accounts receivable—trade, net of allowances of $11,102 and $10,690	164,033		154,247
Inventories, net	Inventories, net	263,779		241,740		Inventories, net	287,614		269,828
Prepaid expenses and other current assets	Prepaid expenses and other current assets	23,417		23,702		Prepaid expenses and other current assets	23,196		21,957
Accrued revenue	Accrued revenue	1,240		2,245		Accrued revenue	671		665
Costs and estimated profits in excess of billings	Costs and estimated profits in excess of billings	15,020		8,285		Costs and estimated profits in excess of billings	14,538		15,139
Total current assets	Total current assets	456,269		446,733		Total current assets	536,816		512,865
Property and equipment, net of accumulated depreciation	Property and equipment, net of accumulated depreciation	91,162		94,005		Property and equipment, net of accumulated depreciation	62,596		62,963
Operating lease assets	Operating lease assets	24,733		25,431		Operating lease assets	57,039		57,270
Deferred financing costs, net	Deferred financing costs, net	1,404		1,484		Deferred financing costs, net	1,086		1,166
Intangible assets, net	Intangible assets, net	210,874		217,405		Intangible assets, net	185,629		191,481
Deferred income taxes, net	Deferred income taxes, net	460		203		Deferred income taxes, net	99		184
Other long-term assets	Other long-term assets	6,027		6,075		Other long-term assets	6,691		8,828
Total assets	Total assets	$	790,929	$	791,336	Total assets	$	849,956	$	834,757
Liabilities and equity	Liabilities and equity					Liabilities and equity
Current liabilities	Current liabilities					Current liabilities
Current portion of long-term debt	Current portion of long-term debt	$	751	$	860	Current portion of long-term debt	$	988	$	782
Accounts payable—trade	Accounts payable—trade	115,177		99,379		Accounts payable—trade	129,934		118,261
Accrued liabilities	Accrued liabilities	62,426		58,436		Accrued liabilities	58,839		76,544
Deferred revenue	Deferred revenue	7,904		7,276		Deferred revenue	13,420		14,401
Billings in excess of costs and profits recognized	Billings in excess of costs and profits recognized	5,851		9,705		Billings in excess of costs and profits recognized	421		305
Total current liabilities	Total current liabilities	192,109		175,656		Total current liabilities	203,602		210,293
Long-term debt, net of current portion	Long-term debt, net of current portion	233,742		232,370		Long-term debt, net of current portion	151,999		239,128
Deferred income taxes, net	Deferred income taxes, net	1,188		834		Deferred income taxes, net	1,051		902
Operating lease liabilities	Operating lease liabilities	32,763		34,745		Operating lease liabilities	64,299		64,626
Other long-term liabilities	Other long-term liabilities	16,371		18,605		Other long-term liabilities	12,162		12,773
Total liabilities	Total liabilities	476,173		462,210		Total liabilities	433,113		527,722
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies
Equity	Equity					Equity
Common stock, $0.01 par value, 14,800,000 shares authorized, 6,188,106 and 6,100,886 shares issued		62		61
Common stock, $0.01 par value, 14,800,000 shares authorized, 10,858,424 and 6,223,454 shares issued						Common stock, $0.01 par value, 14,800,000 shares authorized, 10,858,424 and 6,223,454 shares issued	109		62
Additional paid-in capital	Additional paid-in capital	1,251,752		1,249,962		Additional paid-in capital	1,366,184		1,253,613
Treasury stock at cost, 467,153 shares		(135,562)		(135,562)
Treasury stock at cost, 708,885 and 570,247 shares						Treasury stock at cost, 708,885 and 570,247 shares	(142,057)		(138,560)
Retained deficit	Retained deficit	(693,506)		(684,307)		Retained deficit	(684,081)		(680,595)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(107,990)		(101,028)		Accumulated other comprehensive loss	(123,312)		(127,485)
Total equity	Total equity	314,756		329,126		Total equity	416,843		307,035
Total liabilities and equity	Total liabilities and equity	$	790,929	$	791,336	Total liabilities and equity	$	849,956	$	834,757

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forum Energy Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net loss	Net loss	$	(9,199)	$	(29,663)	Net loss	$	(3,486)	$	(9,199)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	Depreciation expense	3,423		4,953		Depreciation expense	2,570		3,423
Amortization of intangible assets	Amortization of intangible assets	6,218		6,357		Amortization of intangible assets	6,016		6,218
Inventory write down	Inventory write down	194		1,410		Inventory write down	892		194
Stock-based compensation expense	Stock-based compensation expense	2,151		1,896		Stock-based compensation expense	841		2,151
Loss on extinguishment of debt		—		933

Deferred income taxes	Deferred income taxes	(266)		265		Deferred income taxes	421		(266)
Noncash losses and other, net	Noncash losses and other, net	2,283		2,065		Noncash losses and other, net	1,398		2,283
Changes in operating assets and liabilities	Changes in operating assets and liabilities					Changes in operating assets and liabilities
Accounts receivable—trade	Accounts receivable—trade	(9,168)		(8,999)		Accounts receivable—trade	(10,047)		(9,168)
Inventories	Inventories	(23,031)		13,726		Inventories	(18,123)		(23,031)
Prepaid expenses and other assets	Prepaid expenses and other assets	1,298		(2,458)		Prepaid expenses and other assets	1,037		1,298
Cost and estimated profit in excess of billings	Cost and estimated profit in excess of billings	(6,871)		(281)		Cost and estimated profit in excess of billings	769		(6,871)
Accounts payable, deferred revenue and other accrued liabilities	Accounts payable, deferred revenue and other accrued liabilities	11,851		7,692		Accounts payable, deferred revenue and other accrued liabilities	(5,527)		11,851
Billings in excess of costs and estimated profits earned	Billings in excess of costs and estimated profits earned	(3,758)		766		Billings in excess of costs and estimated profits earned	111		(3,758)
Net cash used in operating activities	Net cash used in operating activities	$	(24,875)	$	(1,338)	Net cash used in operating activities	$	(23,128)	$	(24,875)
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Capital expenditures for property and equipment	Capital expenditures for property and equipment	(860)		(389)		Capital expenditures for property and equipment	(1,083)		(860)
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	118		1,499		Proceeds from sale of property and equipment	264		118
Net cash provided by (used in) investing activities		$	(742)	$	1,110

Net cash used in investing activities						Net cash used in investing activities	$	(819)	$	(742)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Borrowings on revolving Credit Facility		95,883		—
Repayments on revolving Credit Facility		(95,883)		(13,126)
Cash paid to repurchase 2025 Notes		—		(13,711)
Borrowings on Credit Facility						Borrowings on Credit Facility	119,426		95,883
Repayments on Credit Facility						Repayments on Credit Facility	(94,426)		(95,883)

Payment of capital lease obligations	Payment of capital lease obligations	(239)		(482)		Payment of capital lease obligations	(273)		(239)
Repurchases of stock	Repurchases of stock	(360)		(139)		Repurchases of stock	(5,370)		(360)
Net cash used in financing activities		$	(599)	$	(27,458)

Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	$	19,357	$	(599)

Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(40)		(121)		Effect of exchange rate changes on cash	325		(40)

Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(26,256)		(27,807)		Net decrease in cash, cash equivalents and restricted cash	(4,265)		(26,256)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	46,858		128,617		Cash, cash equivalents and restricted cash at beginning of period	51,029		46,858
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	20,602	$	100,810	Cash, cash equivalents and restricted cash at end of period	$	46,764	$	20,602

Noncash activities	Noncash activities					Noncash activities
Operating lease right of use assets obtained in exchange for lease obligations	Operating lease right of use assets obtained in exchange for lease obligations	1,320		284		Operating lease right of use assets obtained in exchange for lease obligations	$	1,835	$	1,320
Finance lease right of use assets obtained in exchange for lease obligations	Finance lease right of use assets obtained in exchange for lease obligations	100		47		Finance lease right of use assets obtained in exchange for lease obligations	926		100
Conversion of debt to common stock						Conversion of debt to common stock	113,650		—

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forum Energy Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)


Three Months Ended March 31, 2022
Three Months Ended March 31, 2023														Three Months Ended March 31, 2023
(in thousands)	(in thousands)	Common stock		Additional paid-in capital		Treasury stock		Retained deficit		Accumulated other comprehensive income / (loss)		Total equity		(in thousands)	Common stock		Additional paid-in capital		Treasury stock		Retained deficit		Accumulated other comprehensive income / (loss)		Total equity
Balance at December 31, 2021		$	61	$	1,249,962	$	(135,562)	$	(684,307)	$	(101,028)	$	329,126
Balance at December 31, 2022														Balance at December 31, 2022	$	62	$	1,253,613	$	(138,560)	$	(680,595)	$	(127,485)	$	307,035
Stock-based compensation expense	Stock-based compensation expense	—		2,151		—		—		—		2,151		Stock-based compensation expense	—		841		—		—		—		841
Restricted stock issuance, net of forfeitures	Restricted stock issuance, net of forfeitures	1		(361)		—		—		—		(360)		Restricted stock issuance, net of forfeitures	1		(1,874)		—		—		—		(1,873)
Conversion of debt to common stock														Conversion of debt to common stock	46		113,604		—		—		—		113,650
Treasury stock														Treasury stock	—		—		(3,497)		—		—		(3,497)
Currency translation adjustment	Currency translation adjustment	—		—		—		—		(6,992)		(6,992)		Currency translation adjustment	—		—		—		—		4,158		4,158
Change in pension liability	Change in pension liability	—		—		—		—		30		30		Change in pension liability	—		—		—		—		15		15
Net loss	Net loss	—		—		—		(9,199)		—		(9,199)		Net loss	—		—		—		(3,486)		—		(3,486)
Balance at March 31, 2022		$	62	$	1,251,752	$	(135,562)	$	(693,506)	$	(107,990)	$	314,756
Balance at March 31, 2023														Balance at March 31, 2023	$	109	$	1,366,184	$	(142,057)	$	(684,081)	$	(123,312)	$	416,843

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forum Energy Technologies, Inc. and subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)


Three Months Ended March 31, 2021
Three Months Ended March 31, 2022														Three Months Ended March 31, 2022
(in thousands)	(in thousands)	Common stock		Additional paid-in capital		Treasury stock		Retained deficit		Accumulated other comprehensive income / (loss)		Total equity		(in thousands)	Common stock		Additional paid-in capital		Treasury stock		Retained deficit		Accumulated other comprehensive income / (loss)		Total equity
Balance at December 31, 2020		$	60	$	1,242,720	$	(134,499)	$	(601,656)	$	(100,389)	$	406,236
Balance at December 31, 2021														Balance at December 31, 2021	$	61	$	1,249,962	$	(135,562)	$	(684,307)	$	(101,028)	$	329,126
Stock-based compensation expense	Stock-based compensation expense	—		1,896		—		—		—		1,896		Stock-based compensation expense	—		2,151		—		—		—		2,151
Restricted stock issuance, net of forfeitures	Restricted stock issuance, net of forfeitures	—		(139)		—		—		—		(139)		Restricted stock issuance, net of forfeitures	1		(361)		—		—		—		(360)
Currency translation adjustment	Currency translation adjustment	—		—		—		—		3,152		3,152		Currency translation adjustment	—		—		—		—		(6,992)		(6,992)
Change in pension liability	Change in pension liability	—		—		—		—		77		77		Change in pension liability	—		—		—		—		30		30
Net loss	Net loss	—		—		—		(29,663)		—		(29,663)		Net loss	—		—		—		(9,199)		—		(9,199)
Balance at March 31, 2021		$	60	$	1,244,477	$	(134,499)	$	(631,319)	$	(97,160)	$	381,559
Balance at March 31, 2022														Balance at March 31, 2022	$	62	$	1,251,752	$	(135,562)	$	(693,506)	$	(107,990)	$	314,756

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Forum Energy Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

1. Organization and Basis of Presentation

Forum Energy Technologies, Inc. (the “Company,” ~~"FET,"~~“FET,” “we,” “our,” or “us”), a Delaware corporation, is a global company serving the oil, natural gas, industrial and renewable energy industries. With headquarters located in Houston, Texas, FET provides value added solutions that increase the safety and efficiency of energy exploration and production. ~~We are an environmentally and socially responsible company headquartered in Houston, Texas with manufacturing, distribution and service facilities strategically located throughout the world.~~

Basis of Presentation

The Company's accompanying unaudited condensed consolidated financial statements ~~of the Company~~ include the accounts of the Company and its subsidiaries. All intercompany transactions have been eliminated in consolidation.

In ~~the~~management's opinion, ~~of management,~~ all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the Company’s financial position, results of operations and cash flows have been included. Operating results for the three months ended March 31, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022~~2023 or any other interim period.

These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ~~(the “SEC”~~(“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America ~~(“GAAP”)~~ for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, ~~2021,~~2022, which are included in the Company’s ~~2021~~2022 Annual Report on Form 10-K filed with the SEC on ~~March 4, 2022.~~

~~COVID-19 Impacts~~

The outbreak of COVID-19 in 2020 caused significant disruptions in the U.S. and world economies which led to significant reductions in demand for crude oil. During 2021, distribution of vaccines resulted in reopening of certain economies and increasing demand for oil and natural gas. However, ongoing COVID-19 outbreaks and related work restrictions continue to contribute to disruptions in global supply chains which have led to inflationary pressures for certain goods and services. We anticipate that our liquidity, financial condition and future results of operations will continue to be impacted by ongoing developments from the COVID-19 pandemic.February 28, 2023.

2. Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, ~~(“FASB”),~~ which ~~we adopt~~the Company adopts as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on ~~our~~the Company's consolidated financial statements upon adoption.

Accounting ~~Standards~~Standard Adopted in ~~2022~~2023

~~Convertible Debt.~~Inflation Reduction Act of 2022. In August ~~2020,~~2022, the ~~FASB issued ASU No. 2020-06 Accounting~~Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA, among other provisions, imposes a 15% corporate alternative minimum tax on the adjusted financial statement income of certain large corporations effective for ~~Convertible Instruments~~tax years beginning after December 31, 2022 and Contracts in an Entity's Own Equity. This update reduces the number of accounting models for convertible debt instruments resulting in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. In addition, this update also makes targeted changes to the disclosures for convertible instruments and earnings-per-share guidance. ~~We adopted this new standard as of January 1,~~a 1% excise tax on stock repurchases made by publicly traded U.S. corporations after December 31, 2022. The adoption of this ~~new~~ standard did not have a material impact on our ~~unaudited condensed~~consolidated financial statements.

Reference Rate Reform (Topic 848). In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, which provides temporary, optional practical expedients and exceptions to enable a smoother transition to the new reference rates which will replace the London Interbank Offered Rate (“LIBOR”) and other reference rates expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, which expanded the scope to include derivative instruments impacted by the discounting transition. In December 2022, the FASB issued ASU 2022-06, which extended the temporary accounting rules from December 31, 2022 to December 31, 2024. Effective April 2023, the Company transitioned its Credit Facility from LIBOR to the Secured Overnight Financing Rate. The Company plans to adopt the guidance prospectively in second quarter 2023 and does not expect it to have a material impact on the Company's consolidated financial statements.

3. Revenue

Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services. For a detailed discussion of our revenue recognition policies, refer to the Company’s ~~2021~~2022 Annual Report on Form 10-K.

Disaggregated Revenue

Refer to Note 109 Business Segments for disaggregated revenue by product line and geography.

Table of Contents

Forum Energy Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

Contract Balances

Contract balances are determined on a contract by contract basis. Contract assets represent revenue recognized for goods and services provided to our customers when payment is conditioned on something other than the passage of time. Similarly, ~~we record~~the Company records a contract liability when we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract. Such contract liabilities typically result from billings in excess of costs incurred on construction contracts and advance payments received on product sales.

The following table reflects the changes in our contract assets and contract liabilities balances for the three months ended March 31, ~~2022~~2023 (in thousands):


		March 31, 2022				December 31, 2021				Increase / (Decrease)						March 31, 2023				December 31, 2022			Decrease
								$				%						$					%
Accrued revenue	Accrued revenue			$	1,240			$	2,245									Accrued revenue	$	671		$	665
Costs and estimated profits in excess of billings	Costs and estimated profits in excess of billings	15,020				8,285									Costs and estimated profits in excess of billings		14,538				15,139
Contract assets - current															Contract assets - current	15,209				15,804
Contract assets - noncurrent															Contract assets - noncurrent	2,413				2,638
Contract assets	Contract assets	$	16,260			$	10,530			$	5,730		54	%	Contract assets	$	17,622			$	18,442		$	(820)	(4)	%

Deferred revenue	Deferred revenue	$	7,904			$	7,276								Deferred revenue	$	13,420			$	14,401
Billings in excess of costs and profits recognized	Billings in excess of costs and profits recognized	5,851				9,705									Billings in excess of costs and profits recognized	421				305
Contract liabilities	Contract liabilities	$	13,755			$	16,981			$	(3,226)		(19)	%	Contract liabilities	$	13,841			$	14,706		$	(865)	(6)	%

During the three months ended March 31, ~~2022,~~2023, our contract assets ~~increased~~decreased by ~~$5.7~~$0.8 million ~~due to increasing project activity for process oil treatment equipment in our Production Equipment product line~~ and our contract liabilities decreased by ~~$3.2~~$0.9 million primarily due to ~~lower customer advance payments~~the timing of milestone billings for projects in our Subsea Technologies product line.

During the three months ended March 31, ~~2022,~~2023, we recognized ~~$10.8~~$7.3 million of revenue that was included in the contract liability balance at the beginning of the period.

AsSubstantially all of our contracts are less than one year in ~~duration,~~duration. As such, we have elected to apply the practical expedient which allows an entity to exclude disclosures about its remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

4. ~~Acquisitions~~Inventories

~~2021 Acquisition~~The Company's significant components of ~~Hawker Equipment Solutions~~inventory at March 31, 2023 and December 31, 2022 were as follows (in thousands):

On December 20, 2021, we acquired certain assets of Hawker Equipment Solutions, LLC (“Hawker”) for total cash consideration of $5.1 million, of which, $3.4 million was paid in the fourth quarter of 2021 with the balance expected to be paid over the next five years. Hawker is a manufacturer of hydraulic pickup and laydown units. This acquisition is included in the Drilling product line within the Drilling and Downhole segment. The fair values of the assets acquired and liabilities assumed, as well as the pro forma results of operations for this acquisition, have not been presented because they are not material to the consolidated financial statements.


	March 31, 2023		December 31, 2022
Raw materials and parts	$	95,435	$	94,182
Work in process	34,240		27,489
Finished goods	197,566		187,448
Total inventories	327,241		309,119
Less: inventory reserve	(39,627)		(39,291)
Inventories, net	$	287,614	$	269,828

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Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

5. ~~Inventories~~

~~Our significant components of inventory at March 31, 2022 and December 31, 2021 were as follows (in thousands):~~

March 31, 2022 December 31, 2021
Raw materials and parts $ 103,917 $ 97,053
Work in process 30,045 24,618
Finished goods 189,523 182,954
Gross inventories 323,485 304,625
Inventory reserve (59,706) (62,885)
Inventories $ 263,779 $ 241,740

6. Intangible Assets

Intangible assets consisted of the following as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively (in thousands):


		March 31, 2022								March 31, 2023
		Gross Carrying Amount		Accumulated Amortization		Net Intangibles		Amortization Period (In Years)		Gross Carrying Amount		Accumulated Amortization		Net Intangibles		Amortization Period (In Years)
Customer relationships	Customer relationships	$	268,946	$	(137,072)	$	131,874	10 - 15	Customer relationships	$	266,996	$	(151,891)	$	115,105	10 - 35
Patents and technology	Patents and technology	89,213		(31,129)		58,084		5 - 19	Patents and technology	88,984		(36,794)		52,190		5 - 19
Non-compete agreements	Non-compete agreements	190		(181)		9		2 - 6	Non-compete agreements	188		(188)		—		5
Trade names	Trade names	43,027		(25,682)		17,345		7 - 19	Trade names	42,710		(27,599)		15,111		7 - 19
Trademarks	Trademarks	5,089		(1,527)		3,562		15	Trademarks	5,089		(1,866)		3,223		15
Intangible Assets Total		$	406,465	$	(195,591)	$	210,874
Total intangible assets									Total intangible assets	$	403,967	$	(218,338)	$	185,629

December 31, 2021
Gross Carrying Amount Accumulated Amortization Net Intangibles Amortization Period (In Years)
Customer relationships $ 269,589 $ (133,451) $ 136,138 10 - 15
Patents and technology 89,449 (29,785) 59,664 5 - 19
Non-compete agreements 191 (173) 18 2 - 6
Trade names 43,125 (25,187) 17,938 7 - 19
Trademarks 5,089 (1,442) 3,647 15
Intangible Assets Total $ 407,443 $ (190,038) $ 217,405


	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Intangibles		Amortization Period (In Years)
Customer relationships	$	266,537	$	(147,496)	$	119,041	10 - 35
Patents and technology	88,863		(35,298)		53,565		5 - 19
Non-compete agreements	188		(188)		—		5
Trade names	42,638		(27,071)		15,567		7 - 19
Trademarks	5,089		(1,781)		3,308		15
Total intangible assets	$	403,315	$	(211,834)	$	191,481

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~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

7.6. Debt

Notes payable and lines of credit as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of the following (in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
2025 Notes	2025 Notes	256,970		256,970		2025 Notes	$	134,208	$	256,970
Unamortized debt discount	Unamortized debt discount	(18,909)		(20,035)		Unamortized debt discount	(7,143)		(15,314)
Debt issuance cost	Debt issuance cost	(4,641)		(4,918)		Debt issuance cost	(1,753)		(3,759)
Credit Facility	Credit Facility	—		—		Credit Facility	25,000		—
Other debt	Other debt	1,073		1,213		Other debt	2,675		2,013
Total debt	Total debt	234,493		233,230		Total debt	152,987		239,910
Less: current maturities		(751)		(860)
Long-term debt		$	233,742	$	232,370
Less: current portion						Less: current portion	(988)		(782)
Long-term debt, net of current portion						Long-term debt, net of current portion	$	151,999	$	239,128

2025 Notes

In August 2020, we exchanged $315.5 million principal amount of our previous 6.25% unsecured notes due 2021 ~~(“2021 Notes”)~~ for new 9.00% convertible secured notes due August 2025 (the “2025 Notes”). This transaction was accounted for as an extinguishment of the 2021 Notes with the new 2025 Notes recorded at fair value on the transaction date. We estimated the fair value of the 2025 Notes to be $282.6 million at the issuance date, resulting in a $32.9 million discount (“Debt Discount”) at issuance. As a result, we recognized a $28.7 million gain on extinguishment of debt that reflects the difference in the $314.8 million net carrying value of the 2021 Notes exchanged, including debt issuance costs and unamortized debt premium, less the $282.6 million estimated fair value of 2025 Notes and a $3.5 million early participation fee paid to bondholders that participated in the exchange. The Debt Discount is being amortized as non-cash interest expense over the term of the 2025 Notes using the effective interest method.

The 2025 Notes pay interest at the rate of 9.00%, of which 6.25% is payable in cash and 2.75% is payable in cash or additional notes, at the Company’s option. The 2025 Notes are secured by a first lien on substantially all of the Company’s assets, except for Credit Facility priority collateral, which secures the 2025 Notes on a second lien basis. ~~As of~~During the quarter ended March 31, ~~2022, approximately $116.0~~2023, $122.8 million or 48% of the principal amount of the 2025 Notes is mandatorily ~~convertible~~converted into approximately 4.5 million shares of ~~our~~ common ~~stock at a conversion rate~~stock.

Table of ~~37.0370 shares per $1,000 principal amount of 2025~~ Contents

Forum Energy Technologies, Inc. and Subsidiaries

Notes ~~converted, equivalent~~ to a conversion price of $27.00 per share, subject, however, to the condition that the average of the daily trading prices for the common stock over the preceding 20-trading day period is at least $30.00 per share. Holders of the 2025 Notes also have optional conversion rights in the event that the Company elects to redeem the 2025 Notes in cash and at the final maturity of the new notes. Any interest that the Company elects to pay in additional notes is also subject to the mandatory and optional conversion rights.Condensed Consolidated Financial Statements (Continued)

During the three months ended March 31, 2021, we repurchased an aggregate $16.5 million of principal amount of our 2025 Notes for $15.6 million. The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $14.7 million, resulting in a $0.9 million loss on extinguishment of debt.(Unaudited)

Credit Facility

In September 2021, we amended our senior secured revolving credit facility ("(“Credit ~~Facility"~~Facility”) to, among other things, extend the maturity date to September 2026, reduce the aggregate amount of the commitment under the Credit Facility, and change the interest rate applicable to outstanding loans. Following such amendment, our Credit Facility provides revolving credit commitments of $179.0 million (with a sublimit of up to $45.0 million available for the issuance of letters of credit for the account of the Company and certain of its domestic subsidiaries) (the “U.S. Line”), of which up to $20.0 million is available to certain of our Canadian subsidiaries for loans in U.S. or Canadian dollars (with a sublimit of up to $3.0 million available for the issuance of letters of credit for the account of our Canadian subsidiaries) (the “Canadian Line”).

Availability under the Credit Facility is subject to a borrowing base calculated by reference to eligible accounts receivable in the U.S., Canada and certain other jurisdictions (subject to a cap) and eligible inventory in the U.S. and Canada. Such eligible accounts receivable and eligible inventory serve as priority collateral for the Credit

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~~Forum Energy Technologies, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

Facility, which is also secured on a second lien basis by substantially all of the Company's other assets. The amount of eligible inventory included in the borrowing base is restricted to the lesser of ~~$127.0~~$125.0 million (subject to a quarterly reduction of $0.5 million) and 80.0% of the total borrowing base. Our borrowing capacity under the Credit Facility could be reduced or eliminated, depending on future fluctuations in our receivables and inventory. As of March 31, ~~2022,~~2023, our total borrowing base was ~~$158.8~~$178.3 million, of which ~~no amounts were~~$25.0 million was drawn and ~~$17.6~~$24.0 million was used for security of outstanding letters of credit, resulting in remaining availability of ~~$141.2~~$129.3 million.

~~Borrowings~~Prior to the amendment discussed below, borrowings under the U.S. Line ~~bear~~were subject to an interest ~~at a~~ rate equal to, at ~~our~~the Company's option, either (a) the LIBOR, ~~rate,~~ subject to a floor of 0.00%, plus a margin of 2.25% to 2.75%, or (b) a base rate plus a margin of 1.25% to 1.75%, in each case based upon the Company's quarterly total net leverage ~~ratio. The~~ratio, with the U.S. Line base rate is determined by reference to the greatest of (i) the federal funds rate plus 0.50% per annum, (ii) the one-month adjusted LIBOR plus 1.00% per annum, and (iii) the rate of interest announced, from time to time, by Wells Fargo at its principal office in San Francisco as its prime rate, subject to a floor of 0.00%.

Borrowings under the Canadian Line ~~bear~~were subject to an interest ~~at a~~ rate during the reporting period equal to, ~~at Forum Canada’s~~our subsidiary's option, either (a) the ~~CDOR rate,~~Canadian Dollar Offered Rate (“CDOR”), subject to a floor of 0.00%, plus a margin of 2.25% to 2.75%, or (b) a base rate plus a margin of 1.25% to 1.75%, in each case based upon the Company's quarterly net leverage ratio. The Canadian line base rate is determined by reference to the greater of (i) the one-month CDOR ~~rate~~ plus 1.00% and (ii) the prime rate for Canadian dollar commercial loans made in Canada as reported by Thomson Reuters, subject to a floor of 0.00%. The weighted average interest rate under the Credit Facility was approximately 7.96% for the three months ended March 31, 2023.

The Credit Facility also provides for a commitment fee in the amount of (a) 0.375% on the unused portion of commitments if average usage of the Credit Facility is greater than 50% and (b) 0.500% on the unused portion of commitments if average usage of the Credit Facility is less than or equal to 50%.

If excess availability under the Credit Facility falls below the greater of 12.5% of the borrowing base and $22.4 million, we will be required to maintain a fixed charge coverage ratio of at least 1.00:1.00 as of the end of each fiscal quarter until excess availability under the Credit Facility exceeds such thresholds for at least 60 consecutive days. Furthermore, the Credit Facility includes an obligation to prepay outstanding loans with cash on hand in excess of certain thresholds and includes a cross-default to the 2025 Notes.

In April 2023, the Credit Facility was amended to, among other things, (a) replace the interest rate benchmark for borrowings denominated in U.S. dollars from LIBOR to the Secured Overnight Financing Rate; (b) reset existing capacity under the general "Permitted Dispositions" basket; and (c) increase the domestic letter of credit sublimit from $45.0 million to $70.0 million.

Deferred Loan Costs

We have incurred loan costs that have been deferred and are amortized to interest expense over the term of the 2025 Notes and the Credit Facility. In connection with the September 2021 Credit Facility amendment, we deferred approximately $1.6 million of loan costs that will be amortized over the facility's remaining life.

Other Debt

Other debt consists primarily of various finance leases of equipment.

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Forum Energy Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

Letters of Credit and Guarantees

We execute letters of credit in the normal course of business to secure the delivery of product from specific vendors and also to guarantee our fulfillment of performance obligations relating to certain large contracts. We had ~~$17.6~~$24.0 million and ~~$18.7~~$21.8 million in total outstanding letters of credit as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

8.7. Income Taxes

For interim periods, our income tax expense or benefit is computed based on our estimated annual effective tax rate and any discrete items that impact the interim periods. For the three months ended March 31, 2023 and 2022, ~~and March 31, 2021, we~~the Company recorded a tax expense of ~~$1.9~~$2.8 million and ~~$1.7~~$1.9 million, respectively. The estimated annual effective tax rates for ~~the three months ended March 31, 2022 and 2021~~all periods were impacted by losses in jurisdictions where the recording of a tax benefit is not available. Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction.

We have deferred tax assets related to net operating loss and other tax carryforwards in the U.S. and in certain states and foreign jurisdictions. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning and recent operating results. As of March 31, ~~2022,~~2023, we do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions: the U.S., the U.K., Germany, Singapore, China and

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~~Forum Energy Technologies, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

Saudi Arabia. As a result, we have certain valuation allowances against our deferred tax assets as of March 31, ~~2022.~~2023.

9.8. Fair Value Measurements

The Company had no$25.0 million of borrowings outstanding under the Credit Facility as of March 31, ~~2022 and December 31, 2021.~~2023. The Credit Facility incurs interest at a variable interest rate, and therefore, the carrying amount approximates fair value. The fair value of the debt is classified as a Level 2 measurement because interest rates charged are similar to other financial instruments with similar terms and maturities.

The fair value of our 2025 Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for those or similar instruments. At March 31, 2023, the fair value and the carrying value of our 2025 Notes approximated $130.3 million and $125.3 million, respectively. At December 31, 2022, the fair value and the carrying value of our 2025 Notes approximated ~~$250.5~~$272.8 million and ~~$233.4 million, respectively. At December 31, 2021, the fair value and the carrying value of our 2025 Notes approximated $225.0 million and $232.0~~$237.9 million, respectively.

There were no other significant outstanding financial instruments as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 that required measuring the amounts at fair value on a recurring basis. We did not change our valuation techniques associated with recurring fair value measurements from prior periods, and there were no transfers between levels of the fair value hierarchy during the three months ended March 31, ~~2022.~~2023.

~~10.~~

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Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Business Segments

The Company reports results of operations in the following 3three reporting segments: Drilling & Downhole, Completions, and Production. The amounts indicated below as “Corporate” relate to costs and assets not allocated to the reportable segments. Summary financial data by segment follows (in thousands):


		Three Months Ended March 31,						Three Months Ended March 31,
			2022		2021				2023		2022
Revenue:
Revenue							Revenue
Drilling & Downhole	Drilling & Downhole		71,260		48,656		Drilling & Downhole		$	76,794	$	71,260
Completions	Completions		52,542		37,843		Completions		73,667		52,542
Production	Production		31,505		28,031		Production		38,995		31,505
Eliminations	Eliminations		(133)		(13)		Eliminations		(499)		(133)
Total revenue	Total revenue		$	155,174	$	114,517	Total revenue		$	188,957	$	155,174

Operating income (loss):
Segment operating income (loss)							Segment operating income (loss)
Drilling & Downhole	Drilling & Downhole		$	5,986	$	(4,506)	Drilling & Downhole		$	8,438	$	5,986
Completions	Completions		(715)		68		Completions		3,556		(715)
Production	Production		(1,752)		(3,841)		Production		1,629		(1,752)
Corporate	Corporate		(9,205)		(7,010)		Corporate		(7,032)		(9,205)
Segment operating loss			(5,686)		(15,289)
Total segment operating income (loss)							Total segment operating income (loss)		6,591		(5,686)
Loss (gain) on disposal of assets and other	Loss (gain) on disposal of assets and other		22		(909)		Loss (gain) on disposal of assets and other		(260)		22
Operating loss			$	(5,708)	$	(14,380)
Operating income (loss)							Operating income (loss)		$	6,851	$	(5,708)

A summary of consolidated assets by reportable segment is as follows (in thousands):


	March 31, 2023		December 31, 2022
Drilling & Downhole	$	348,581	$	340,819
Completions	373,222		366,771
Production	98,427		95,089
Corporate	29,726		32,078
Total assets	$	849,956	$	834,757

Corporate assets primarily include cash, certain prepaid assets and deferred loan costs.

The following table presents our revenues disaggregated by product line (in thousands):


	Three Months Ended March 31,
		2023		2022
Drilling Technologies		$	40,777	$	29,235
Downhole Technologies		23,211		19,564
Subsea Technologies		12,806		22,461
Stimulation and Intervention		47,326		30,159
Coiled Tubing		26,341		22,383
Production Equipment		19,896		15,167
Valve Solutions		19,099		16,338
Eliminations		(499)		(133)
Total revenue		$	188,957	$	155,174

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Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

~~A summary of consolidated assets by reportable segment is as follows (in thousands):~~

March 31, 2022 December 31, 2021
Drilling & Downhole $ 313,151 $ 313,493
Completions 365,450 351,908
Production 88,011 83,150
Corporate 24,317 42,785
Total assets $ 790,929 $ 791,336

~~Corporate assets primarily include cash and certain prepaid assets.~~

~~The following table presents our revenues disaggregated by product line (in thousands):~~

Three Months Ended March 31,
2022 2021
Drilling Technologies $ 29,235 $ 18,520
Downhole Technologies 19,564 15,093
Subsea Technologies 22,461 15,043
Stimulation and Intervention 30,159 18,702
Coiled Tubing 22,383 19,141
Production Equipment 15,167 14,394
Valve Solutions 16,338 13,637
Eliminations (133) (13)
Total revenue $ 155,174 $ 114,517

The following table presents our revenues disaggregated by geography (in thousands):

Three Months Ended March 31,
2022 2021
United States $ 97,232 $ 68,314
Canada 11,389 8,961
Europe & Africa 15,377 12,664
Middle East 11,153 10,341
Asia-Pacific 9,059 8,880
Latin America 10,964 5,357
Total Revenue $ 155,174 $ 114,517


	Three Months Ended March 31,
		2023		2022
United States		$	129,186	$	97,232
Middle East		17,982		11,153
Canada		13,668		11,389
Europe & Africa		11,672		15,377
Latin America		8,768		10,964
Asia-Pacific		7,681		9,059
Total revenue		$	188,957	$	155,174

~~11.~~10. Commitments and Contingencies

In the ordinary course of business, the Company is, and in the future could be, involved in various pending or threatened legal actions, some of which may or may not be covered by insurance. Management has reviewed such pending judicial and legal proceedings, the reasonably anticipated costs and expenses in connection with such proceedings, and the availability and limits of insurance coverage, and has established reserves that are believed to be appropriate in light of those outcomes that are believed to be probable and can be estimated. The reserves accrued at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, are immaterial. In the opinion of management, the Company’s ultimate liability, if any, with respect to these actions is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

In October of 2017, one of our subsidiaries, Global Tubing LLC (“Global Tubing”), filed suit against Tenaris Coiled Tubes, LLC and Tenaris, S.A. (together “Tenaris”) in the United States District Court for the Southern District of Texas seeking a declaration that its DURACOILTM products do not infringe certain Tenaris patents related to coiled tubing. Tenaris filed counterclaims against Global Tubing alleging DURACOILTM products infringe three patents. Tenaris sought unspecified damages and a permanent injunction. In response, Global Tubing alleged that its products do not infringe and the Tenaris patents are invalid and unenforceable. On March 20, 2023, the court agreed with Global Tubing, finding all patents unenforceable and dismissing all Tenaris infringement claims. Global Tubing intends to seek an award of its attorneys’ fees and costs incurred as a result of the litigation.

For further disclosure regarding certain litigation matters, refer to Note 12 of the notes to the consolidated financial statements included in Item 8 of the Company’s 2022 Annual Report on Form 10-K filed with the SEC on February 28, 2023.

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Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

For further disclosure regarding certain litigation matters, refer to Note 13 of the notes to the consolidated financial statements included in Item 8 of the Company’s 2021 Annual Report on Form 10-K filed with the SEC on March 4, 2022. There have been no material changes related to these matters during the three months ended March 31, 2022.

~~12. Loss~~11. Earnings (Loss) Per Share

The calculation of basic and diluted earnings per share for each period presented was as follows (dollars and shares in thousands, except per share amounts):


								Three Months Ended March 31,
									2023		2022
		Three Months Ended March 31,
			2022		2021
Net loss	Net loss		(9,199)		(29,663)		Net loss		$	(3,486)	$	(9,199)

Basic - weighted average shares outstanding			5,683		5,613
Weighted average shares outstanding - basic							Weighted average shares outstanding - basic		10,179		5,683
Dilutive effect of stock options and restricted stock	Dilutive effect of stock options and restricted stock		—		—		Dilutive effect of stock options and restricted stock		—		—
Dilutive effect of convertible notes due 2025	Dilutive effect of convertible notes due 2025		—		—		Dilutive effect of convertible notes due 2025		—		—
Diluted - weighted average shares outstanding			5,683		5,613
Weighted average shares outstanding - diluted							Weighted average shares outstanding - diluted		10,179		5,683

Loss per share	Loss per share						Loss per share
Basic	Basic		$	(1.62)	$	(5.28)	Basic		$	(0.34)	$	(1.62)
Diluted	Diluted		$	(1.62)	$	(5.28)	Diluted		$	(0.34)	$	(1.62)

For ~~all periods presented,~~the three months ended March 31, 2023 and 2022, we excluded all potentially dilutive restricted shares and stock options ~~and the assumed conversion of the 2025 Notes~~ in calculating diluted earnings per share as the effect was anti-dilutive due to net losses incurred for these periods.

~~13.~~12. Stockholders' Equity

Stock-based compensation

During the three months ended March 31, ~~2022,~~2023, the Company granted ~~101,111~~86,912 time-based restricted stock units to employees that vest ratably over three years.

~~Liability-classified awards~~

~~During~~In addition, during the three months ended March 31, ~~2022,~~2023, the Company granted ~~101,111 cash-settled contingent~~86,912 performance restricted stock units to employees (assuming target performance) that vest ~~ratably~~based upon the total shareholder return of the Company's common stock as compared to a group of peer companies over three ~~years dependent upon achieving a minimum stock price~~different performance periods. The performance periods run from January 1, 2023 through December 31, 2023, January 1, 2023 through December 31, 2024 and January 1, 2023 through December 31, 2025, and 1/3 of ~~$23.68 for 20 trading days during~~each award is allocated to each performance period. The performance restricted stock units may settle for between 0% and 200% of the target units granted in shares of the Company’s common stock.

~~14.~~13. Related Party Transactions

The Company has sold and purchased inventory, services and fixed assets to and from ~~certain~~ affiliates of ~~certain directors.~~a former director. The dollar amounts of these related party activities are not significant to the Company’s unaudited condensed consolidated financial statements.

Item 2. Management’s discussion and analysis of financial condition and results of operations

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’s control. All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q regarding our strategy, future operations, financial position, estimated revenues and

losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words “will,” “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.

All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We disclaim any obligation to update or revise these statements unless required by law, and you should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report on Form 10-Q are reasonable, ~~we can give no assurance~~forward-looking statements are not guarantees of future performance and involve risks and uncertainties that ~~these plans, intentions or expectations will be achieved. We disclose important factors that could~~may cause ~~our~~ actual results to differ materially from our ~~expectations~~plans, intentions or expectations. This may be the result of various factors, including, but not limited to, those factors discussed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on ~~March 4, 2022,~~February 28, 2023, and elsewhere in this Quarterly Report on Form 10-Q. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

Overview

We are a global company serving the oil, natural gas, industrial and renewable energy industries. With headquarters located in Houston, Texas, FET provides value added solutions aimed at improving the safety, efficiency, and environmental impact of our customers' operations. ~~We are an environmentally and socially responsible company headquartered in Houston, Texas with manufacturing, distribution and service facilities strategically located throughout the world.~~ Our highly engineered products include ~~highly engineered~~ capital equipment ~~as well as~~and consumable products. ~~These consumable~~FET’s customers include oil and natural gas operators, land and offshore drilling contractors, oilfield service companies, pipeline and refinery operators, and renewable energy and new energy companies. Consumable products are used by our customers in drilling, well construction and completions activities ~~within the supporting infrastructure,~~ and at processing centers and refineries. Our ~~engineered~~ capital products are directed at drilling rig equipment for constructing new ~~rigs, upgrades~~ and ~~refurbishment projects,~~upgrading existing rigs, subsea construction and development projects, pressure pumping equipment, the placement of production equipment on new producing wells, downstream capital projects and capital equipment for renewable energy projects. For the three months ended March 31, ~~2022,~~2023, approximately ~~76%~~65% of our revenue was derived from consumable products and activity-based equipment, while the balance was primarily derived from capital products with a small amount from rental and other services.

We design, manufacture and supply high quality reliable products that create value for our diverse customer base, which includes, among others, oil and natural gas operators, land and offshore drilling contractors, oilfield service companies, subsea construction and service companies, and pipeline and refinery operators. In addition, we offer some of our products to renewable energy and new energy companies.

We expect that the world's long-term energy demand will continue to rise. We also expect hydrocarbons will continue to play a vital role in meeting the world's long-term energy needs while renewable energy sources continue to develop. As such, we remain focused on serving our customers in both oil and natural gas as well as renewable energy applications. We are also continuing to develop products to help oil and natural gas operators lower their current emissions while also deploying our existing product technologies in renewable energy applications and seeking to develop innovative equipment.

A summary of the products and services offered by each segment is as follows:

•Drilling & Downhole. This segment designs, manufactures and supplies products and provides related services to the drilling, well construction, artificial lift and subsea energy construction markets, including applications in oil and natural gas, renewable energy, defense, and communications. The products and related services consist primarily of: (i) capital equipment and a broad line of expendable products consumed in the drilling process; (ii) well construction casing and cementing equipment and protection products for artificial lift equipment and cables; and (iii) subsea remotely operated vehicles (“ROVs”) and trenchers, submarine rescue vehicles, specialty components and tooling, and complementary subsea technical services.

•Completions. This segment designs, manufactures and supplies products and provides related services to the coiled tubing, well stimulation and intervention markets. The products and related services consist primarily of: (i) capital and consumable products sold to the pressure pumping, hydraulic fracturing and flowback services markets, including hydraulic fracturing pumps, cooling systems, high-pressure flexible

hoses and flow iron as well as wireline cable and pressure control equipment used in the well completion and intervention service markets; and (ii) coiled tubing strings and coiled line pipe and related services.

•Production. This segment designs, manufactures and supplies products and provides related equipment and services for production and infrastructure markets. The products and related services consist primarily of: (i) engineered process systems, production equipment, as well as specialty separation equipment; and (ii) a wide range of industrial valves focused on serving oil and natural gas customers as well as power generation, renewable energy and other general industrial applications.

Market Conditions

~~The level of demand~~Demand for our products and services is directly related to ~~the activity levels and the~~our customers' capital and operating budgets. These budgets ~~of our customers, which in turn~~ are heavily influenced by current and expected energy ~~prices and expectations as to future price trends.~~prices. In addition, ~~the availability of existing capital equipment adequate to serve exploration and production requirements, or lack thereof, drives~~ demand for our capital products is driven by the utilization of service company equipment. Utilization is a function of equipment ~~products.~~capacity and durability in demanding environments.

In 2021, distribution of vaccines and reopening of certain economies led to an increase in demand for oil and natural gas following the unprecedented decline in demand that resulted from the COVID-19 pandemic. At the same time, the supply of oil and natural gas was impacted by ongoing capacity constraints by OPEC+ and North American exploration and production companies. As a result of these supply and demand factors, commodity prices increased substantially in 2021. During the first quarter of 2022, the supply of oil and natural gas was further impacted by political and social responses to the Russia and Ukraine war resulting in further increases in energy prices, especially in Europe. In addition, ongoing COVID-19 related shutdowns in China and worldwide labor constraints continue to cause disruptions in global supply chains, which have led toRecent inflationary pressures, ~~for certain goods~~rising interest rates and ~~services.~~

~~Our revenues are highly correlated to~~volatility in the ~~U.S. drilling rig count, which has increased to 670 rigs as~~banking sector have created a heightened concern of ~~the end of the first quarter 2022 from~~ a low of 244 rigs in August 2020. The level of active hydraulic fracturing fleets has also increased substantially in order to meet increasing oil demand. Despite these improvements, drilling and completions activity remains below pre-pandemic levels. In addition, publicly owned exploration and production companies in North America remain under pressure by investors to generate positive cash flows and constrain capital expenditures. In contrast, privately owned exploration and production companies in North America have increased their drilling and completions activity in response to the higher oil and natural gas price environment.

~~Activity levels have also increased in international markets, as well as in~~ global ~~offshore and subsea activity. As a result, demand for our drilling and subsea equipment offerings has increased due to an improved outlook for our international drilling and subsea customers.~~

~~The table below shows average crude oil~~recession. Oil and natural gas prices ~~for West Texas Intermediate crude~~softened in the first quarter 2023 in part as a result of such recessionary fears. Despite these macroeconomic challenges, we expect that the world's long-term energy demand will continue to rise and may outpace global supply as China's economy recovers from the COVID-19 pandemic shutdowns and OPEC+ remains committed to maintaining stable oil ~~(“WTI”), United Kingdom Brent crude oil (“Brent”), and Henry Hub natural gas:~~

Three Months Ended
March 31, December 31, March 31,
2022 2021 2021
Average global oil, $/bbl
West Texas Intermediate $ 95.18 $ 77.33 $ 58.09
United Kingdom Brent $ 100.87 $ 79.61 $ 61.04
Average North American Natural Gas, $/Mcf
Henry Hub $ 4.67 $ 4.75 $ 3.50
prices. We expect that hydrocarbons will continue to play a vital role in meeting the world's energy needs while renewable energy sources continue to develop.

The price of oil has varied dramatically over the last several years. The spot prices for WTI and Brent fell from $61.14 and $67.77 per barrel, respectively, as of December 31, 2019 to lows below $15.00 per barrel in April 2020. Since that time, oil prices rebounded to highs above $120.00 per barrel in March 2022 but have ~~rebounded~~softened in the first quarter 2023 to an average of ~~$95.18~~$75.93 and ~~$100.87~~$81.07, for WTI and Brent, ~~respectively, in the first quarter of 2022.~~respectively. In addition, natural gas prices have ~~increased more than 30%~~decreased by 43.5% comparing the first quarter ~~2022~~2023 to the first quarter ~~2021.~~2022.

Our revenues, over the long-term, are highly correlated to the global drilling rig count, which has increased to 1,896 rigs as of the end of the first quarter 2023 from a low of 1,030 rigs in the third quarter 2020. The average U.S. rig count for the first quarter 2023 was 2.1% lower and 20.1% higher compared to the fourth quarter 2022 and first quarter 2022, respectively. The international rig count for the first quarter 2023 was 0.9% higher and 11.2% higher compared to the fourth quarter 2022 and first quarter 2022, respectively.

Global drilling and completions activity remains below pre-pandemic levels. However, international markets are expected to grow throughout 2023 and outpace the U.S. In the U.S., publicly owned exploration and production companies are expected to continue to exercise disciplined capital spending while privately owned exploration and production companies fluctuate their activity in response to changes in oil and natural gas prices.

The table below shows average crude oil and natural gas prices for West Texas Intermediate crude oil (“WTI”), United Kingdom Brent crude oil (“Brent”), and Henry Hub natural gas:


	Three Months Ended
	March 31,		December 31,		March 31,
	2023		2022		2022
Average global oil, $/bbl
West Texas Intermediate	$	75.93	$	82.79	$	95.18
United Kingdom Brent	$	81.07	$	88.72	$	100.87

Average North American Natural Gas, $/Mcf
Henry Hub	$	2.64	$	5.55	$	4.67

The table below shows the average number of active drilling rigs ~~based on the weekly Baker Hughes Incorporated rig count,~~ operating by geographic area and drilling for different ~~purposes.~~

Three Months Ended
March 31, December 31, March 31,
2022 2021 2021
Active Rigs by Location
United States 633 559 393
Canada 198 160 145
International 823 817 698
Global Active Rigs 1,654 1,536 1,236
Land vs. Offshore Rigs
Land 1,446 1,337 1,052
Offshore 208 199 184
Global Active Rigs 1,654 1,536 1,236
U.S. Commodity Target
Oil/Gas 510 457 302
Gas 122 102 90
Unclassified 1 — 1
Total U.S. Active Rigs 633 559 393
U.S. Well Path
Horizontal 575 502 353
Vertical 24 26 22
Directional 34 31 18
Total U.S. Active Rigs 633 559 393

~~A substantial portion of our revenue is impacted by~~purposes, based on the ~~level of rig activity and the number of wells completed. The average U.S.~~weekly rig count for the first quarter 2022 was 13% and 61% higher compared to the fourth quarter of 2021 and first quarter of 2021, respectively. The U.S. rig count started 2020 at 805 working rigs and fell 70% to a low of 244 rigs in August 2020. Since that time, the number of active rigs has partially recovered, ending the first quarter 2022 at 670 rigs. Despite this improvement, the U.S. drilling rig count remains below pre-pandemic levels.information published by Baker Hughes Company.


	Three Months Ended
	March 31,	December 31,	March 31,
	2023	2022	2022
Active Rigs by Location
United States	760	776	633
Canada	221	187	198
International	915	907	823
Global Active Rigs	1,896	1,870	1,654

Land vs. Offshore Rigs
Land	1,655	1,634	1,446
Offshore	241	236	208
Global Active Rigs	1,896	1,870	1,654

U.S. Commodity Target
Oil/Gas	603	618	510
Gas	155	156	122
Unclassified	2	2	1
Total U.S. Active Rigs	760	776	633

U.S. Well Path
Horizontal	697	708	575
Vertical	18	24	24
Directional	45	44	34
Total U.S. Active Rigs	760	776	633

The table below shows the amount of total inbound orders by segment:

(in millions of dollars) Three Months Ended
March 31, December 31, March 31,
2022 2021 2021
Drilling & Downhole $ 70.9 $ 60.8 $ 57.9
Completions 53.7 52.8 47.2
Production 40.4 46.1 32.9
Total Orders $ 165.0 $ 159.7 $ 138.0


(in millions of dollars)	Three Months Ended
	March 31,		December 31,		March 31,
	2023		2022		2022
Drilling & Downhole	$	81.0	$	87.2	$	70.9
Completions	66.0		81.4		53.7
Production	31.9		46.5		40.4
Total Orders	$	178.9	$	215.1	$	165.0

Results of operations

Three months ended March 31, ~~2022~~2023 compared with three months ended March 31, ~~2021~~2022


		Three Months Ended March 31,						Change					Three Months Ended March 31,						Change
(in thousands of dollars, except per share information)	(in thousands of dollars, except per share information)	2022			2021			$		%		(in thousands of dollars, except per share information)	2023			2022			$		%
Revenue:
Revenue												Revenue
Drilling & Downhole	Drilling & Downhole	$	71,260		$	48,656		$	22,604	46.5	%	Drilling & Downhole	$	76,794		$	71,260		$	5,534	7.8	%
Completions	Completions	52,542			37,843			14,699		38.8	%	Completions	73,667			52,542			21,125		40.2	%
Production	Production	31,505			28,031			3,474		12.4	%	Production	38,995			31,505			7,490		23.8	%
Eliminations	Eliminations	(133)			(13)			(120)		*		Eliminations	(499)			(133)			(366)		*
Total revenue	Total revenue	155,174			114,517			40,657		35.5	%	Total revenue	188,957			155,174			33,783		21.8	%
Operating income (loss):
Segment operating income (loss)												Segment operating income (loss)
Drilling & Downhole	Drilling & Downhole	$	5,986		$	(4,506)		$	10,492	232.8	%	Drilling & Downhole	8,438			5,986			2,452		41.0	%
Operating margin %	Operating margin %	8.4		%	(9.3)		%					Operating margin %	11.0		%	8.4		%
Completions	Completions	(715)			68			(783)		(1,151.5)	%	Completions	3,556			(715)			4,271		*
Operating margin %	Operating margin %	(1.4)		%	0.2		%					Operating margin %	4.8		%	(1.4)		%
Production	Production	(1,752)			(3,841)			2,089		54.4	%	Production	1,629			(1,752)			3,381		193.0	%
Operating margin %	Operating margin %	(5.6)		%	(13.7)		%					Operating margin %	4.2		%	(5.6)		%
Corporate	Corporate	(9,205)			(7,010)			(2,195)		(31.3)	%	Corporate	(7,032)			(9,205)			2,173		23.6	%
Total segment operating loss		(5,686)			(15,289)			9,603		62.8	%
Total segment operating income (loss)												Total segment operating income (loss)	6,591			(5,686)			12,277		215.9	%
Operating margin %	Operating margin %	(3.7)		%	(13.4)		%					Operating margin %	3.5		%	(3.7)		%
Loss (gain) on disposal of assets and other	Loss (gain) on disposal of assets and other	22			(909)			931		*		Loss (gain) on disposal of assets and other	(260)			22			(282)		*
Operating loss		(5,708)			(14,380)			8,672		60.3	%
Operating income (loss)												Operating income (loss)	6,851			(5,708)			12,559		220.0	%
Interest expense	Interest expense	7,624			9,162			(1,538)		(16.8)	%	Interest expense	4,549			7,624			(3,075)		(40.3)	%
Foreign exchange losses (gains) and other, net	Foreign exchange losses (gains) and other, net	(5,986)			3,470			(9,456)		*		Foreign exchange losses (gains) and other, net	2,972			(5,986)			8,958		*
Loss on extinguishment of debt		—			933			(933)		*

Total other expense	Total other expense	1,638			13,565			(11,927)		(87.9)	%	Total other expense	7,521			1,638			5,883		359.2	%
Loss before income taxes	Loss before income taxes	(7,346)			(27,945)			20,599		73.7	%	Loss before income taxes	(670)			(7,346)			6,676		90.9	%
Income tax expense	Income tax expense	1,853			1,718			135		7.9	%	Income tax expense	2,816			1,853			963		52.0	%
Net loss	Net loss	$	(9,199)		$	(29,663)		$	20,464	69.0	%	Net loss	$	(3,486)		$	(9,199)		$	5,713	62.1	%

Weighted average shares outstanding	Weighted average shares outstanding											Weighted average shares outstanding
Basic	Basic	5,683			5,613							Basic	10,179			5,683
Diluted	Diluted	5,683			5,613							Diluted	10,179			5,683
Loss per share	Loss per share											Loss per share
Basic	Basic	$	(1.62)		$	(5.28)						Basic	$	(0.34)		$	(1.62)
Diluted	Diluted	$	(1.62)		$	(5.28)						Diluted	$	(0.34)		$	(1.62)
* not meaningful	* not meaningful											* not meaningful

Revenue

Our revenue for the three months ended March 31, ~~2022~~2023 was ~~$155.2~~$189.0 million, an increase of ~~$40.7~~$33.8 million, or ~~35.5%~~21.8%, compared to the three months ended March 31, ~~2021.~~2022. For the three months ended March 31, ~~2022,~~2023, our Drilling & Downhole, Completions, and Production segments comprised ~~45.9%~~40.6%, ~~33.8%~~38.8%, and ~~20.3%~~20.6% of our total revenue, respectively, which compared to ~~42.5%~~45.9%, ~~33.0%~~33.8%, and ~~24.5%~~20.3% of our total revenue, respectively, for the three months ended March 31, ~~2021.~~2022. The overall increase in revenue is primarily related to ~~higher sales volumes due to higher drilling~~increases in market activity and ~~completions activity levels~~global rig count in the first quarter ~~2022~~2023 compared to the first quarter ~~2021.~~2022. The changes in revenue by operating segment consisted of the following:

Drilling & Downhole segment — Revenue was ~~$71.3~~$76.8 million for the three months ended March 31, ~~2022,~~2023, an increase of ~~$22.6~~$5.5 million, or ~~46.5%~~7.8%, compared to the three months ended March 31, ~~2021.~~2022. This increase was led by a ~~$10.7~~$11.5 million, or ~~57.9%~~39.5%, increase in revenue for our Drilling Technologies product line due to higher sales volumes of both consumable products and capital equipment ~~from the 34% year-over-year increase in~~driven by increased market activity and global rig count. ~~Revenue for our Subsea Technologies product line increased by $7.4 million, or 49.3%, due to higher sales of ROVs and related support systems into international markets.~~ Revenue for our Downhole Technologies product line increased by ~~$4.5~~$3.6 million, or ~~29.6%~~18.6%, primarily due to higher sales volumes of artificial lift products ~~due to the increase in the number of well completions~~ and ~~workover activity~~casing equipment in the first quarter ~~2022~~2023 compared to the first quarter ~~2021.~~2022. Revenue for our Subsea Technologies product line decreased by $9.7 million, or 43.0%, from lower volumes of ROVs partially offset by an increase in after-market part sales and service.

Completions segment — Revenue was ~~$52.5~~$73.7 million for the three months ended March 31, ~~2022,~~2023, an increase of ~~$14.7~~$21.1 million, or ~~38.8%~~40.2%, compared to the three months ended March 31, ~~2021.~~2022. This significant improvement includes a revenue increase of ~~$11.5~~$17.2 million, or ~~61.3%~~56.9%, for our Stimulation & Intervention product line primarily due to higher ~~capital equipment sales to pressure pumping customers to support increasing~~ demand ~~for hydraulic fracturing services.~~of power ends, radiators and wireline cable. Revenue for our Coiled Tubing product line increased by ~~$3.2~~$4.0 million, or ~~16.9%, driven by increasing U.S. hydraulic fracturing activity levels~~17.7% in the first quarter ~~2022~~2023 compared to the first quarter ~~2021.~~2022. These higher revenue levels were driven by increased hydraulic fracturing and well intervention service activity levels.

Production segment — Revenue was ~~$31.5~~$39.0 million for the three months ended March 31, ~~2022,~~2023, an increase of ~~$3.5~~$7.5 million, or ~~12.4%~~23.8%, compared to the three months ended March 31, ~~2021. This~~2022. The increase ~~includes~~was driven by a ~~$2.7~~$4.7 million, or ~~19.8%~~31.2%, primarily due to increased demand for our processing equipment and technologies within our Production Equipment product line, and a $2.8 million, or 16.9%, increase in sales of our valve products ~~primarily due to higher sales volumes into the North America downstream market, and a $0.8 million, or 5.4%, increase in revenue for~~within our ~~Production Equipment~~Valve Solutions product ~~line from higher sales volumes of surface production equipment for new producing wells.~~line.

Segment operating income (loss) and segment operating margin percentage

Segment operating ~~loss~~income for the three months ended March 31, ~~2022~~2023 was ~~$5.7~~$6.6 million, a ~~$9.6~~$12.3 million improvement compared to a loss of ~~$15.3~~$5.7 million for the three months ended March 31, ~~2021.~~2022. For the three months ended March 31, ~~2022,~~2023, segment operating margin percentage was ~~(3.7)%~~3.5% compared to ~~(13.4)~~(3.7)% for the three months ended March 31, ~~2021.~~2022. Segment operating margin percentage is calculated by dividing segment operating income (loss) by revenue for the period. The change in operating income (loss) for each segment is explained as follows:

Drilling & Downhole segment — Segment operating income was $8.4 million, or 11.0%, for the three months ended March 31, 2023 compared to operating income of $6.0 million, or 8.4%, for the three months ended March 31, ~~2022 compared to a loss of $4.5 million, or (9.3)%, for the three months ended March 31, 2021.~~2022. The ~~$10.5~~$2.5 million improvement in segment operating results is primarily attributable to higher gross profit from the ~~46.5%~~7.8% increase in segment ~~revenues. In addition, segment~~revenues, favorable product mix and improved operating ~~income increased due to a $2.8 reduction in inventory write-downs.~~leverage. These gains were partially offset by higher freight and employee related costs.

Completions segment — Segment operating income was $3.6 million, or 4.8%, for the three months ended March 31, 2023 compared to segment operating loss ~~was~~of $0.7 million, or (1.4)%, for the three months ended March 31, ~~2022 compared to~~2022. The $4.3 million improvement in segment operating ~~income of $0.1 million, or 0.2%, for the three months ended March 31, 2021. Results were flat year-over-year as~~results was primarily due to higher gross profit from the ~~38.8%~~40.2% increase in revenues discussed above ~~was~~and from favorable product mix. These gains were partially offset by ~~increases in raw material,~~higher steel, freight and employee related costs.

Production segment — Segment operating income was $1.6 million, or 4.2%, for the three months ended March 31, 2023 compared to a loss ~~was~~of $1.8 million, or (5.6)%, for the three months ended March 31, ~~2022 compared to a loss of $3.8 million, or (13.7)%, for the three months ended March 31, 2021.~~2022. The ~~$2.1~~$3.4 million improvement in segment operating results was driven by the ~~12.4%~~23.8% increase in revenues discussed above as well as lower ~~compensation,~~ depreciation and ~~other facility costs in connection with cost reductions implemented in 2021. These improvements were partially offset by higher~~ freight ~~and material costs as a result of inflationary pressures from global supply chains.~~costs.

Corporate — Selling, general and administrative expenses for Corporate were $7.0 million for the three months ended March 31, 2023 compared to $9.2 million for the three months ended March 31, 2022, a $2.2 million increase compared to the three months ended March 31, 2021. This increase was primarily related to a $2.7 million charge recognized in the three months ended March 31, 2022 related to a modification of long-term incentive awards associated with the recent executive leadership transition.2022. Corporate costs include, among other items, payroll related costs for management, administration, finance, legal, and human resources personnel; professional fees for legal, accounting and related services; and marketing costs. This decline was primarily due to a $2.7 million charge recognized in the three months ended March 31, 2022 related to a modification of long-term incentive awards associated with the executive leadership transition.

Other items not included in segment operating ~~loss~~income (loss)

~~Loss (gain)~~Gain on the disposal of assets and other is not included in segment operating ~~loss,~~income (loss), but is included in total operating loss.

Other income and expense

Other income and expense includes interest expense and foreign exchange ~~losses (gains)~~gains (losses) and ~~other, and loss (gain) on extinguishment of debt.~~other. We incurred ~~$7.6~~$4.5 million of interest expense during the three months ended March 31, ~~2022,~~2023, a decrease of ~~$1.5~~$3.1 million compared to the three months ended March 31, ~~2021~~2022, mainly due to ~~lower debt balances outstanding~~the decline in the ~~three months ended March 31, 2022 compared~~balance of 2025 Notes upon conversion of $122.8 million aggregate principal amount of our 2025 Notes to common stock in January 2023. See Note 6 Debt for further details related to the ~~three months outstanding March 31, 2021.~~our 2025 Notes and Credit Facility.

The foreign exchange ~~losses (gains)~~gains (losses) are primarily the result of movements in the British pound, Euro and Canadian dollar relative to the U.S. dollar. These movements in exchange rates create foreign exchange gains or losses when applied to monetary assets or liabilities denominated in currencies other than the location’s functional currency, primarily U.S. dollar denominated cash, trade account receivables and net intercompany receivable balances for our entities using a functional currency other than the U.S. dollar.

Taxes

We recorded tax expense of ~~$1.9~~$2.8 million and ~~$1.7~~tax expense of $1.9 million for the three months ended March 31, ~~2022~~2023 and ~~March 31, 2021,~~2022, respectively. The estimated annual effective tax rates for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 were impacted by losses in jurisdictions where the recording of a tax benefit is not available. Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction.

Liquidity and capital resources

Sources and uses of liquidity

Our internal sources of liquidity are cash on hand and cash flows from operations, while our primary external sources include trade credit, the Credit Facility and the 2025 Notes. Our primary uses of capital have been for inventory, sales on credit to our customers, maintenance and growth capital expenditures, and debt repayments. We continually monitor other potential capital sources, including equity and debt financing, to meet our investment and target liquidity requirements. Our future success and growth will be highly dependent on our ability to generate positive operating cash flow and access outside sources of capital.

As of March 31, ~~2022,~~2023, we had ~~$257.0~~$134.2 million principal amount of 2025 Notes outstanding and no$25.0 million of borrowings outstanding under our revolving Credit Facility. The 2025 Notes mature in August 2025 and, subject to certain exceptions, the Credit Facility matures in September 2026. See Note 76 Debt for further details related to the terms for our 2025 Notes and Credit Facility.

As of March 31, ~~2022,~~2023, we had cash and cash equivalents of ~~$20.6~~$46.8 million and ~~$141.2~~$129.3 million of availability under the Credit Facility. We anticipate that our future working capital requirements for our operations will fluctuate directionally with revenues. Furthermore, availability under the Credit Facility will fluctuate directionally based on the level of our eligible accounts receivable and inventory subject to applicable sublimits. In addition, we continue to expect total ~~2022~~2023 capital expenditures to be less than ~~$10.0~~$15.0 million, consisting of, among other items, replacing end of life machinery and equipment.

We expect our available cash on-hand, cash generated by operations, and estimated availability under the Credit Facility to be adequate to fund current operations during the next 12 months. In addition, based on existing market conditions and our expected liquidity needs, among other factors, we may use a portion of our cash flows from operations, proceeds from divestitures, securities offerings or other eligible capital to reduce the principal amount of our 2025 Notes ~~outstanding.~~outstanding or repurchase shares of our common stock under our repurchase program.

In November 2021, our board of directors approved a program for the repurchase of outstanding shares of our common stock with an aggregate purchase amount of up to $10.0 million. Shares may be repurchased under the program from time to time, in amounts and at prices that the company deems appropriate, subject to market and business conditions, applicable legal requirements and other considerations. ~~To date,~~During the first quarter 2023, we ~~have~~ repurchased approximately ~~56,000~~139 thousand shares of our common stock for aggregate consideration of approximately ~~$1.1 million. Remaining~~$3.5 million with remaining authorization under this program ~~is $8.9~~of $2.4 million.

In the fourth quarter of 2021, we completed the acquisition of Hawker for total cash consideration of $5.1 million, of which, $3.4 million was paid in the fourth quarter of 2021 with the balance expected to be paid over the next five years. For additional information, see Note 4 Acquisitions. We may pursue other acquisitions in the future, which may be funded with cash and/or equity. Our ability to make significant acquisitions for cash may require us to pursue additional equity or debt financing, which we may not be able to obtain on terms acceptable to us or at all.

Our cash flows for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 are presented below (in millions):

Three Months Ended March 31,
2022 2021
Net cash used in operating activities $ (24.9) $ (1.3)
Net cash provided by (used in) investing activities (0.7) 1.1
Net cash used in financing activities (0.6) (27.5)
Effect of exchange rate changes on cash (0.1) (0.1)
Net decrease in cash, cash equivalents and restricted cash $ (26.3) $ (27.8)


	Three Months Ended March 31,
	2023		2022
Net cash used in operating activities	$	(23.1)	$	(24.9)
Net cash used in investing activities	(0.8)		(0.7)
Net cash provided by (used in) financing activities	19.3		(0.6)
Effect of exchange rate changes on cash	0.3		(0.1)
Net decrease in cash, cash equivalents and restricted cash	$	(4.3)	$	(26.3)

Net cash used in operating activities

Net cash used in operating activities was ~~$24.9 million and $1.3~~$23.1 million for the three months ended March 31, ~~2022 and~~2023 compared to $24.9 million for the three months ended March 31, ~~2021, respectively.~~2022. This ~~decline~~increase in operating cash flows is primarily attributable to ~~net increases in working capital, primarily inventory and accounts receivable, which used cash of $29.7 million for~~ the ~~three months endedMarch 31, 2022 compared to providing cash of $10.4 million for the three months ended March 31, 2021. This decline was partially offset by an~~ improvement in net income adjusted for non-cash items, which provided ~~$4.8~~$8.7 million of cash for the three months ended March 31, ~~2022~~2023 compared to ~~using $11.8~~provided $4.8 million for the three months ended March 31, ~~2021.~~2022.

Net cash ~~provided by (used in)~~used in investing activities

Net cash used in investing activities was $0.8 million for the three months ended March 31, 2023, including $1.1 million of capital expenditures, partially offset by $0.3 million of proceeds from the sale of property and equipment. Net cash used in investing activities was $0.7 million for the three months ended March 31, 2022, including $0.9 million of capital expenditures, partially offset by $0.1 million of proceeds from the sale of property and equipment.

Net cash provided by ~~investing~~(used in) financing activities

Net cash provided by financing activities was ~~$1.1~~$19.4 million for the three months ended March 31, ~~2021 including $1.5~~2023 compared to $0.6 million of ~~proceeds from the sale of property and equipment, partially offset by $0.4 million of capital expenditures for property and equipment.~~

~~Net~~ cash used in financing activities

~~Net cash used in financing activities was $0.6 million and $27.5 million~~ for the three months ended March 31, 2022, ~~and March 31, 2021,~~ respectively. The ~~decrease~~change in net cash ~~used in~~provided by (used in) financing activities primarily resulted from ~~$13.7~~$25.0 million of ~~cash used to repurchase 2025 Notes and $13.1 million of repayments~~net borrowings on the revolving Credit Facility, offset by $5.4 million of repurchases of common stock under our share repurchase program and long-term incentive awards during the three months ended March 31, ~~2021.~~2023.

Supplemental Guarantor Financial Information

The Company’s 2025 Notes are guaranteed by our domestic subsidiaries which are 100% owned, directly or indirectly, by the Company. The guarantees are full and unconditional, joint and several.

The guarantees of the 2025 Notes are (i) pari passu in right of payment with all existing and future senior indebtedness of such guarantor, including all obligations under our Credit Facility; (ii) secured by certain collateral of such guarantor, subject to permitted liens under the indenture governing the 2025 Notes; (iii) effectively senior to all unsecured indebtedness of that guarantor, to the extent of the value of the collateral securing the 2025 Notes (after giving effect to the liens securing our Credit Facility and any other senior liens on the collateral); and ~~(v)~~(iv) senior in right of payment to any future subordinated indebtedness of that guarantor.

In the event of a bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries of the 2025 Notes, the non-guarantor subsidiaries of such notes will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Company or to any guarantors.

The 2025 Notes guarantees shall each be released upon (i) any sale or other disposition of all or substantially all of the assets of such guarantor (by merger, consolidation or otherwise) to a person that is not (either before or after giving effect to such transaction) the Company or a subsidiary, if the sale or other disposition does not violate the applicable provisions of the indenture governing such notes; (ii) any sale, exchange or transfer (by merger, consolidation or otherwise) of the equity interests of such guarantor after which the applicable guarantor is no longer a subsidiary, which sale, exchange or transfer does not violate the applicable provisions of the indenture governing such notes; (iii) legal or covenant defeasance or satisfaction and discharge of the indenture governing such notes; or (iv) dissolution of such guarantor, provided no default or event of default has occurred that is continuing.

The obligations of each guarantor of the 2025 Notes under its guarantee will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such guarantor (including, without limitation, any guarantees under the Credit Facility) and any collections from or payments made by or on behalf of any other guarantor in respect of the obligations of such other guarantor under its guarantee or pursuant to its contribution obligations under the applicable indenture, result in the obligations of such guarantor under its guarantee not constituting a fraudulent conveyance, fraudulent preference or fraudulent transfer or otherwise reviewable transaction under applicable law. Nonetheless, in the event of the bankruptcy, insolvency or financial difficulty of a guarantor, such guarantor’s obligations under its guarantee may be subject to review and avoidance under applicable fraudulent conveyance, fraudulent preference, fraudulent transfer and insolvency laws.

We are presenting the following summarized financial information for the Company and the subsidiary guarantors (collectively referred to as the ~~"Obligated Group"~~“Obligated Group”) pursuant to Rule 13-01 of Regulation S-X, Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. For purposes of the following summarized financial information, transactions between the Company and the subsidiary guarantors, presented on a combined basis, have been eliminated and information for the non-guarantor subsidiaries have been excluded. Amounts due to the

non-guarantor subsidiaries and other related parties, as applicable, have been separately presented within the summarized financial information below.

Summarized financial information for the year-to-date interim period and the most recent annual period was as follows (in thousands):


		Three Months Ended March 31,						Three Months Ended March 31,
Summarized Statements of Operations	Summarized Statements of Operations		2022		2021		Summarized Statements of Operations		2023		2022
Revenue	Revenue		$	116,360	$	82,197	Revenue		$	151,263	$	116,360
Cost of sales	Cost of sales		90,525		66,041		Cost of sales		116,471		90,525
Operating loss			(2,643)		(18,734)
Operating income (loss)							Operating income (loss)		2,667		(2,643)
Net loss	Net loss		(9,199)		(29,663)		Net loss		(3,486)		(9,199)


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Summarized Balance Sheet	Summarized Balance Sheet					Summarized Balance Sheet
Current assets	Current assets	$	342,073	$	327,281	Current assets	$	397,664	$	378,812
Non-current assets	Non-current assets	290,616		298,172		Non-current assets	271,288		279,389

Current liabilities	Current liabilities	$	162,606	$	144,487	Current liabilities	$	160,534	$	175,155
Payables to non-guarantor subsidiaries	Payables to non-guarantor subsidiaries	131,956		125,281		Payables to non-guarantor subsidiaries	145,730		132,839
Non-current liabilities	Non-current liabilities	257,315		259,622		Non-current liabilities	204,644		293,150

Critical accounting policies and estimates

There have been no material changes in our critical accounting policies and procedures during the three months ended March 31, ~~2022.~~2023. For a detailed discussion of our critical accounting policies and estimates, refer to our ~~2021~~2022 Annual Report on Form 10-K. For recent accounting pronouncements, refer to Note 2 Recent Accounting Pronouncements.

Item 3. Quantitative and qualitative disclosures about market risk

Not required under Regulation S-K for “smaller reporting companies.”

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures have been designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Our disclosure controls and procedures include controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of March 31, ~~2022.~~2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, ~~2022.~~2023.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended March 31, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Information related to Item 1. Legal Proceedings is included in Note 1110 Commitments and Contingencies, which is incorporated herein by reference.

Item 1A. Risk Factors

For additional information about our risk factors, see “Risk Factors” in Item 1A of our ~~2021~~2022 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table is a summary of our repurchases of our common stock during the three months ended March 31, 2023.


Period	Total number of shares purchased (a)	Average price paid per share		Total number of shares purchased as part of publicly announced plan or programs (a)	Maximum value of shares that may yet be purchased under the plan or program (in thousands) (a)
January 1, 2023 - January 31, 2023	—	$	—	—	$	5,941
February 1, 2023 - February 28, 2023	—	$	—	—	5,941
March 1, 2023 - March 31, 2023	138,638	$	25.22	138,638	2,444
Total	138,638	$	25.22	138,638

(a) In November 2021, our board of directors approved a program for the repurchase of outstanding shares of our common stock with an aggregate purchase amount of up to ~~$10~~$10.0 million. Shares may be repurchased under the program from time to time, in amounts and at prices that the ~~company~~Company deems appropriate, subject to market and business conditions, applicable legal requirements and other considerations. The program may be executed using open market purchases pursuant to Rule 10b-18 under the Exchange Act, in privately negotiated agreements, or by way of issuer tender offers, Rule 10b5-1 plans or other transactions. From the inception of the program through March 31, ~~2022,~~2023, we have repurchased approximately 56298 thousand shares of our common stock for aggregate consideration of approximately ~~$1.1 million at an average price of $18.87 per share.~~$7.6 million. Remaining authorization under this program is ~~$8.9~~$2.4 million. ~~There is no expiration date for the program.~~

~~No shares were purchased during the three months ended March 31, 2022.~~

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

Item 6. Exhibits


Exhibit
Number		DESCRIPTION

10.1**#	—	~~For~~mForm of ~~2022~~2023 Performance Restricted S ~~tock~~ Stock Unit ~~Agreement (Executive Management).~~Agreement.

10.2**#	—	Form of ~~2022 Performance~~2023 Restricted Stock Unit ~~Agreement (Executive Management).~~

~~10.3*#~~	—	~~Letter Agreement between Mr. C. Christopher Gaut and the Company (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 2, 2022).~~

~~10.4**#~~	—	~~Forum Energy Technologies, Inc. Amended and Restated 2021 Phantom Unit Agreement between Mr. C. Christopher Gaut and the Company.~~

~~10.5**#~~	—	~~Forum Energy Technologies, Inc. 2022 Phantom Unit Agreement between Mr. C. Christopher Gaut and the Company.~~Agreement.

22.1*	—	Subsidiary guarantors of the Company's Convertible Secured Notes due 2025.

31.1**	—	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2**	—	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**	—	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**	—	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**	—	Inline XBRL Instance Document

101.SCH**	—	Inline XBRL Taxonomy Extension Schema Document.

101.CAL**	—	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB**	—	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE**	—	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF**	—	Inline XBRL Taxonomy Extension Definition Linkbase Document.

104**	—	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Previously filed.

**Filed herewith.

#Identifies management contracts and compensatory plans or arrangements.

SIGNATURES

As required by Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has authorized this report to be signed on its behalf by the undersigned authorized individuals.

FORUM ENERGY TECHNOLOGIES, INC.

Date:

May ~~6, 2022~~5, 2023

By:

/s/ D. Lyle Williams, Jr.

D. Lyle Williams, Jr.

Executive Vice President and Chief Financial Officer

(As Duly Authorized Officer and Principal Financial Officer)

By:

/s/ ~~John McElroy~~Katherine C. Keller

~~John McElroy~~Katherine C. Keller

Vice President and ~~Chief~~Principal Accounting Officer

(As Duly Authorized Officer and Principal Accounting Officer)


PART I - FINANCIAL INFORMATION			3
Item 1. Financial Statements (Unaudited)			3
Condensed consolidated statements of comprehensive loss			3
Condensed consolidated balance sheets			4
Condensed consolidated statements of cash flows			5
Condensed consolidated statements of changes in stockholders’ equity			6
Notes to condensed consolidated financial statements			8
Item 2. Management's discussion and analysis of financial condition and results of operations			1516
Item 3. Quantitative and qualitative disclosures about market risk			24
Item 4. Controls and procedures			24
PART II - OTHER INFORMATION			25
Item 1. Legal proceedings			25
Item 1A. Risk factors			25
Item 2. Unregistered sales of equity securities and use of proceeds			25
Item 3. Defaults Upon Senior Securities			2625
Item 4. Mine Safety Disclosures			2625
Item 5. Other Information			2625
Item 6. Exhibits			26
SIGNATURES			27