FET - Earnings call transcript Q2 2020 | Forum Energy Technologies, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Forum Energy Technologies Second Quarter 2020 Earnings Conference Call. My name is Shanteller and I will be your coordinator for today's call. [Operator Instructions] I will now turn the conference over to Lyle Williams, Chief Financial Officer. Please proceed sir.

Lyle Williams

Thank you, Shanteller. welcome Call. Energy and XXXX Second everyone, Conference Earnings morning, to Technologies Forum Quarter Good today Cris Vice me and With are Neal Executive and Lux, Officer; Chief our Executive President Operations. Gaut, of Forum's Chairman our is on it issued yesterday available earnings market our the We closed after and website. release answers statements the call, made may questions, conference this your The include during including to forward-looking statements. materially in and uncertainties results to differ actual such that or implied or cause risks from may involve expressed statements These statements. those events other among our in filings Exchange include, Those that in with matters and risks have described things, earnings we Securities release our Commission. and the We after update other than or this call. do or reflect that publicly forward-looking ongoing any information to to statements law not undertake revise future any arise imposed that obligation events, by circumstances

information call. may Management's the management's contains this judgment best call as statements live In addition, measures. date conference the financial that reflects of non-GAAP time-sensitive include only

to of pleased these Gaut, a will Executive two the This replay Chief A website now the our refer reconciliation weeks to over call call turn of Officer. our recorded. for following our call. For the available earnings on I'm being release. to measures, be Cris call is

Cris Gaut

good devastation second morning. not Thanks, Lyle in the quarter. economic will and on that dwell I the occurred

heard than You have all by that more enough now. about

replace piece upgrade their our For Forum products completion sustain, business companies a specifically, and to to of drilling primary is selling service short-cycle operations. and

the completion the services, to October maturity areas important. which gives but spending exploit and This was these equipment that is their sharply inevitable as need first equipment dollar debt drilling why for back debt due customers back our That Forum's uncertain. Our under was of we reduced half the runway $X.XX so exchange, million in on at exchange of and announced is demand in rolled debt upturn of in XXX of as XXXX security. into our extended in our option is timing another the of was the our new will Eventually, additional at notes. or to work, about company's bonds plus activity. kind extended in the debt this of utilization $XX a their have million payable in XXXX, will the XXXX our to recently go X.XX% us drive This a products the evaporated. new buying much After cash the X.XX%, that million $XXX cash old same has debt, coupon

new a long-term as partially And $X.XX our there of addition, the legacy cash burden maintenance company and required convertible around are holders price automatically the number while XX% success with sustainable financial sheet. is higher debt In is for path of a Forum. company $XXX and company. a mandatorily at business exchange it that financing would stock the recovery, the benefits, at $XXX our principal or share million does of per cost through de-lever of price clear form a for are than more into conversion of $X.XX for the debt and once path about debt of trades current for a structure time new are convertible million price new restrictive the capital It to a This a interest notes shareholders, covenants. provides price The of equity. de-lever conversion stockholders dilution represent balance for the necessary days. not of ensuring the to business strong aligns to and times conversion a X.X XX the stock convertible current notes amount the clear

to significantly Forum's XXXX Lyle a provide minute. restructure and catalysts in purchased But that for it are most of cash to our quarter. review for year quarter, our equipment. in was the of resolve or second excluding to costs, XX%, costs difficult, success will savings ago costs, happening recent quarter the with Compared down in materials The a of did world structure the results and second about most lower oilfield quarter our exceptionally our demand long-term issues $XXX million capital

the So a competitive cost structure very we now have market for environment. current

As I EBITDA. our believe the we bottom and I look in ahead, our orders seen have

and will For order the rebuild third book quarter, quarter as with comparable domestic second construction we an to in activity. the we completions be expect international revenues well increase the

We positive seeing in signs regard. some already this are

in We modest improvement by a also driven expect EBITDA reductions. cost

capital renewed products. and structures, further new with dedicated success for our our Forum Looking of and is employees cost portfolio winning ahead, positioned Lyle?

Lyle Williams

pleased on Thank you, and the our this with by the activity for due prices oil customers completion in resulting the exciting team from company. and had decrease drilling low in The results. inflection second a and represent Cris. quarter impact at point pandemic the spending to COVID-XX Forum activity am Cris dramatic and financial I Neal significant reduction to our

quarter the $XXX the down for first XX% revenue total quarter. from was Our million,

an cost savings have materials. of focused purchased on first quarter, the and the SG&A basis. we Our except book-to-bill We total, actions $XXX in most goods same costs consumable identified the cost were in severely our cost in to annualized in forecasted reduction. In from revenue, we a occurred cost our second sold, March, as since initiated the our reduction XX% orders and completed many ratio These of plans for million period, which costs $XX and In by typically our March impacted. quarter. which are XX% to shipped reductions, the all plan reduction declines in in booked a early approximately compared was to reduced significant cash amount products, included on response total these million

in headcount costs. for production Our and across reductions, actions the US; and at company; included organization; the salary closures, retirement facility especially significant plans; US suspension in cost the senior and levels located reduction of distribution reductions our facilities Canadian including other variable reductions

negative savings, the for EBITDA second sequential decremental adjusted resulting cost margins these $XX were EBITDA million XX%, of quarter. to result direct a limited As of in

margins. direct this pleased particularly on impact are weak of COVID-related pricing We had costs environment given our the the and with a that under gross absorption fixed result

For clarity, of change the periods the peers, a million adjusted expense second our we our Forum, stock applied is aligns this in noncash results presentation quarter. exclude of for have which compensation to with earnings comparable and roughly for This now $X release. treatment the change EBITDA

the to the mostly in capital as and working But of management. reductions $XXX past Included positive cash inventory quarters. $X.X period, Our by million and we earnings free positive costs the restructuring free expenditures the Forum and Forum capital by of generated million excess monetization net diluted the other or were share. $X.XX in in flow $X negative from offset lower seven $X strong inventory continue the position In after cash severance approximately was cash $XX free flow generated has Net quarter these receivables second was inventory million of cash of was expect in flow costs, collections paid restructuring beyond. for Over this loss for in million per the of quarter, quarter. and for result in impact free net decreased cash our this XXXX quarter quarter and the flow. was million

level. & a quarter net million foreign reconciliation of Excluding special the of the the the adjusted will handling drilling the orders line To $X related segment reference. additional across our quarter award items $X of anticipated inventory XX% the tools decrease Segment from in reductions several a for Completions million of was price a significant release shipments environment Segment a segment, low these mentioned of product $X multiyear special drilling on sequential million Orders decrease on of million, by halt increase build production on reductions. sequential The segment $XX valves. construction the a activity the earlier I year. by to capital $XX activity our segment. customer North resulting under $XX completion XX% orders quarter, pre-tax a million revenue or $XX within new customer in million, our facilities unabsorbed Adjusted for for the segment, million. In Downhole with quarter, of on our gas $XX the for negative slight also second COVID-XX. our impacted revenue due severance market. of lockdowns COVID-XX to $XX discuss of diluted surface a on United revenue to magnitude well Segment or decrease despite million destocking. due loss a for for sequential provided and international results your costs, in the in working loss. by our Asia was $XX ship $X will million, $XX decrease were partially and Forum per and a contract segment segment, had outsized quarter, in to $X awarded this EBITDA include decreased costs a million customers a one the activity activity I impacted the Production activity the $XX million, earnings second was production revenue activity the sequentially international furloughs to million $XX natural $XX operating our due standstill to from decrease the other equipment were as at million gain bookings offset was included million, half share. to up our due in well in pandemic million significant in EBITDA to was an million significant some commodity XX% Drilling Adjusted well pandemic-related was million, of financial now a by exposure of this line $X $X to negative Adjusted the sequential sequential levels in of now in segment delays was $X.XX In overhead America. leverage to details due EBITDA. loss of for from equipment that the lower decline to restructuring for Northeastern and the Despite other distributor EBITDA additional the impairments decrease for due was quarter. segment States. was items, extinguishment expenses This primarily ground Special second due about declines impacts resulting the million. valves million of rig and supply our and our $X program for Completions was segment the $XX and additional This sequential book in of in cost a lockdowns results lower sales in million, award put basis orders debt in segment XX% in fixed lower virtual position context, first shipping orders XX% and significant We've mitigated our of the items exchange segment table was XX-rig and decrease and product summarize decline from a was due a from and the as second as impact as customers a focused XX%, cost decrease. basis. decrease the and pandemic.

in capital Our million. were $X second less expenditures quarter the than

$XXX expect than discount. a availability second We $XX million due total million million, $X sheet principal at repurchase revolving amount of million. by notes In we $XXX We of to quarter, credit for capital-light $XX the the of we with debt and be facility cash primarily our balance ended and liquidity on XXXX in our resulting of of are a net under June less the senior expenditures total to reduced million, $XX business, capital million.

the of notes at of million on debt and $XXX our credit revolving XXXX. included Our end June million outstanding due facility $XX unsecured

on revolving been our new this $XXX the in of exchange October of the small from amount be from $XXX and margin, unsecured liquidity on we increase million, amended a rate due to commitments will end the XXXX remaining have facility. million connection collateral the with for with in expense of was The and at our debt of the in notes. Following also an amendment, the a the have we credit million the notes. resolution reduction administrative XXXX credit $XX interest debt size quarter. quarter changes. the $XXX stub $X facility exchange, week, limit of our the Interest changes include: The maturity million would now availability In completed forma of the Pro certain the all second notes old million earlier remaining the secured $XXX million. in second credit derived inventory of other revolving facility

In consistent were While million, second exchange, new convertible debt is we the amortization expense previous notes. quarter, with on interest do and on of expect following million the cash and $XX notes interest interest X.XX% higher and compensation our the depreciation cash stock-based respectively. $X the

these quarter, and similar the the in at expect be We Adjusted second as we in them in to third corporate third remain to quarter the were similar $X expenses levels expenses quarter. well. million expect

to continue we net recognizing operating losses. net loss low tax are we with benefits an overall as some we we rate continue jurisdictions, expect expense use in income. will not we in a despite begin but the to tax have Once We tax international recognize expense some our for jurisdictions, relatively jurisdictions to loss-making have tax turn to profitable loss-making as

on our For more about our please information release results, the earnings website. financial review

some key call turn me discuss of let Now our to to initiatives. Neal operating over the

Neal Lux

everyone. Good Lyle. you, morning, Thank

off, incredibly costs times. Together, will sacrifices the differentiator to our our market remarkable made to thank employees want the during in when position future. Forum difficult and First success. The reduce dramatically will key for be the I it we these our employees does, recover, for resilience and

to the while cash have modest with have committed activity Cris decline to produce drilling completions inventory. rebound. of many our reduced a due from demand mentioned, generating products. In EBITDA for positive in significantly unprecedented we businesses remain market costs COVID-XX flow As Lyle response, and our We to controlling only sized and

challenging The in second most conditions quarter the a presented market generation.

market increase improves. will execute to ability the Our as

cost. their Forum's customers productivity their reduce products our to increase rely and on

are solutions life in and within online. as Multi-lift out the bottoming we witnessed our ESPs. expect to product or an example, back we in for Forum we demand plants monthly These electric tools cable submersible provide that wells of and management portfolio, continue extend as pumps, May, demand these increase more sand after For products brought products

customer multiyear Forum's product role rig of premium handling build award tight, large play a rig very tools limited to tool our of are this products key earlier. referenced handling selected winning is In and example industry Another our capital was an the new Lyle where we and program. the excited in

were post seven. with meltdown, one midst last working. proud the components provide more of key by in of the In example. their to a customer service frac picture, was media supplied of me Among company one Let fleets one picture Forum, quarter's social seven that

AMT our Our ICBM wireline Assemblies radiators, product our Latch JumboTron flow our equipment, wireline our X,XXX and high-pressure control horsepower pressure our newest and Hydraulic pumps, from manifold, single-line wireline wire, our quality cables.

to months completed, may back me products, used I'll closing the In space. installation. with was artificial the when used valve win. the and the addition, market clamps from it positioned DURACOIL after tubing our now our lines. Cris This take Tubing to does, picture has desire for the we was leading coiled Global name in the frac a out the product are equipment that drilling and reinforced many plugs subsea work Forum Cannon for examples, our are The the turn people our was and with These lift rebound and to provider many be solutions from SandGuard occur, call over to more to few remarks. his solutions, just I can but production Forum

Cris Gaut

Neal. Thanks,

pleased leaves with second am cost in navigated lower-for-longer of am the to The and us proud sheet way exchange, environment. market positioned structure the significant our We reductions. have challenging of the our presented cost also for the I future quarter but has debt a prosper through balance an team I extremely the outcome now growth. which environment, well

at much a completions will level lower you questions. lift our your products, in much And interest this name new construction for in and of a at this potential accessories our drilling point, structure, excellent the well-positioned let's for than past. Thank we the line cost earnings more has realize products, well we open activity take can and With question. Forum potential with earnings few. of efficient the artificial Shanteller, to stable completions first power Forum.

Operator

come Pickering with your of first line will the Energy question And from Partners. Dan Okay. Pickering

Dan Pickering

here definitely A exchange guess, I which I couple runway, critical. guys. the extends Cris, Morning, the is offer of mean, questions,

for we mean, for I play for quo? given look status acquisitions? a Given we about got can the what's Do divestitures? bit kind perspective? of And a of how in the runway an Do claw look hole from you you've look industry strategic little balance talk do is shape? we from how out we're sheet in that do you perspective, back here we from the better now now offense

Cris Gaut

strong Yes. I that be, again, and getting organic I we're pleased will The talked as capability putting can and forms. where those. good offense very that have be will and the number market off defense side for our and we most resources potential we're have that Dan, a offense playing our of see near-term that solutions emphasizing share, power in Neal we're products and position, about, behind good earnings customers

our at potential have our can near been have here, term. operations those and the We our emphasize product greatest offering we in so thinning the that and medium facilities out

company and strength back, looking the for of that's we with at the to look and the have I One do structure that benefits and a to the have up think, is debt the new liquidity exchange that we're flexibility, getting again not sure. But debt lever do condition we acquisitions to the from once have flexibility of the we the company. historic do

of advantage the were level lower still to runway our completions returns we lower that good but on talking can much advantage be deliver we activity good taking and market environment, that structure, portfolio, potential be and at taking the will so our deleveraging rig level power a path earnings shareholders really successful new the about. of focus of have out rounding for our So activity, of that products and in cost lower

Dan Pickering

the just numbers. And a there follow-up on

flattish EBITDA third to want EBITDA the to just revenues some I for you quarter, for kind math the of here, dynamic make test about talked negative. quarter the improved. adjusted You sure with million and I understand $XX.X

I quarter expecting to million mean I Is You sort realizing million, about in think, of implies quarter. cost should the savings, ballpark? alone. in close but million about cost another savings $XXX of anything? talked would to come, million $XXX which I breakeven we EBITDA from about, say a be $XX the cost right of third Am my math $XX savings which get missing math that back just

Cris Gaut

Yes.

Let me to of QX year-over-year said of $XXX second its XXXX QX. from savings million. course cost did we during savings actually. not it's quarter annualized. What million entirely Sequentially, quarter clarify XXXX, we was correct, second that it. That's $XXX to of the But implement of some those QX,

will as have the well. that plans we more QX benefit So savings, from and ongoing have cost and will

And so to third the improvement the we EBITDA. do drive lower, cost be which will quarter in expect

to On was the We're QX came deterioration revenue as side, June frac obviously, of back work, example. to the during from activity some April May improvement, look at course going to down. already seeing the for there fleets

reverse and a from better the at the quarter during run third be occur standpoint. rate out to a expect revenue to the coming we of quarter third So

So better although structure. cost we're flat out rate the quarter-to-quarter, a we'll be lower with QX and of coming run

Dan Pickering

back a ask Got it, you. I've thank I'll more. queue others you, questions. couple end. I'll of let Thank got

Cris Gaut

you. thank Okay,

Operator

line have you And Maggie. question from Aaron Instructions] [Operator of a the

Unidentified Analyst

Hi, good a shareholder. morning. I'm

a we date for Just any $X drop-off that drop-dead per six had extension Stock we the into months of Did about minimum York getting a to get that? or have compliance question do New share. Exchange back with

Cris Gaut

Yes.

we have reverse in with a that. back shareholder get split do approval compliance to to So do

or move exchange, stock that on XX% we have with of no stock yes, of we waiting the that approved a know, will is ahead the split and expect on have and occurred. still stock still a has But move and reverse just in it back time arithmetic, on in to debt the should appliance. do matter We shareholders until It been you as impact is our a success XX% math. the in which some the stock put We shareholder reverse the now just had that. be move And split split transparent stock. a a

year. And so that, that should this expect will you occur

Unidentified Analyst

Okay, you. thank

Operator

And have Partners. of line we the Dan question from Energy a do with follow-up Pickering Pickering

Dan Pickering

become low So about lot you've about how the inventories? of got Is I second primary think number? you I'm do this of you talk a inventories improvement. source it in curious inventory targeting how we but dollar we? kind a around working capital about it working monetization of think capital now, how Can right and assume quarter. there turns Is the do that pretty is just are

Cris Gaut

Yes.

activity cash. inventory, to level So to turn we we aggressively and looking that excess given have that move have and now, the we're of

on is in about our talk that's bank, you liquidity or our our that we from addition to about So we facility cash bank talk will, if what liquidity when hand.

And on some Maybe, aggressively of examples direction. so in movement. we we where we give areas you focus moving can think are inventory that Neal, can

Neal Lux

to Dan, our many and I portfolio think markets to across go so with wide reach, our Sure. product able world. we're the

move As stimulation utilizing United other network our East. inventory on been product to we've We Middle lot markets the in a product an has that and begun in other into the Asia States. example, historically our of across line lines, focused sales

we a on lot forward options that, and that. So we have to to move continue do of do

Dan Pickering

were still in activity bottom watching do are How to between How field? then Yes. orders you think time and should out find the Or Good. equipment? seeing be your and we counts the revenues? on of - improvement cannibalizing what the From the a lag what here? side is kind orders frac obviously, we watch quite and low. Completions they Do guys you

Neal Lux

again. Dan, Neal Sure.

days need sitting realize on I calls, for least going think months, lot are having run and that And to readiness. at looking it or do equipment inbound It's of there. do they a a XX equipment. row. We a out to starting XXX, the car are equipment it to customers significant customers on see is Indy we're challenge a in newer expecting I service that. a six guess I shelf to to would race for There compare frac get

calls some seeing of initial that. So from orders and we are types those

count bottoming our rig a the is think segment. definitely good for indicator Completions I So

Cris Gaut

very operators for they mean be stages I Yes. be to have patience these the days. and working equipment They are want picky downtime. that no to done, and

it's associated its service sell wireline we coiled on or with tubing which pickup take strings, companies not in then, they're confident So that hard other for that cable products don't And store that of in. whether real course, to equipment risk completions, well. are

there that So a this on see positive number are to of signs. short-cycle areas space completions beginning we're in some

Dan Pickering

Good. COVID think up valves it And do view the as as you kind In related? downturn the Or related? off? slowdown energy of is more valve stuff back more we eases other words, that pandemic do pick

Lyle Williams

Yes, Dan, good question.

as spread is midstream, business, only also applications. valves not Our but know, industrial you even and into upstream, downstream through

smaller portion So a our The of valves downstream piece lockdown our represents and related. business, were industrial was energy COVID the related. slowdown, in of really portions upstream upstream

plants, impact. any facilities, of chance or minimize essential emergency many of really doing the personnel-only to those whether down only move So to were kind locked basis, chemical covet be an refineries copiers they to and

lockdown expect So coronavirus. definitely, of to economy as would piece tied to back we in for starts open activity big And a rebound the that well. up those things sales is to see, you as

Dan Pickering

when revenues you like When do hard, to you've adjustments the think and profitability, at you, all of of to what make I structure? in to think level stay this you to this the of about business changing we adding revenues kind been Last it's capacity? up commend know structure what's revenue-generating with time I happened the cost XX%? had things that about start question, think back getting costs place that got when in point double - What's right better, our the can go we what's you capacity to now? do you've without at have Can revenues

Cris Gaut

Yes.

The have a lot I'd SG&A, we overhead capacity they're buckets, put the that I in probably. think of two growth. for cost,

Although significantly are costs they than lower our SG&A were.

related of On would we inventory cost, many that of our the working directly product volume. back. in folks side, to we need have our goes so it's course, facilities, folks be and into goods But to sold, hire sold cost directly cost to how that

benefit be facilities but terms would sold, in to the some our and cost, we cost needing think costs I is will. is So of add of fixed if that the brings SG&A and that is But our fixed you from our earnings so brings up our cost costs any completions and drilling improvement for activity is than down and it structure here. potential lower and in goods significantly

Dan Pickering

I One guys, more, fibbed. Yes. sorry.

feels of isn't we've kind of telling terms much it etc. So giving revenue without guidance cost now us Rig you're bottom going hit and probably in cutting, probably COVID profitability. worse, lower. essentially formal much not like the count what getting is is

So a little you've half at environment, lot cash, when revenue you a it's bit generating even guys the second in of the here, been flattish maybe better, year free look a of even off in downturn. assuming second coming year these should of like of half it at the balance you sheet. sounds revenue cash the But that's generate free the levels, no incremental

Lyle Williams

the major the focus that's free been Yes, Dan, exactly on of generation business. cash a spot us. respect to guidance for flow I And with perspective, from a think right. That's

in cash the balance half and down in to remarks, to free able further. flow I inventories as positive be sheet cash As flow, the back year we we're mentioned even the free bring do we quarters expect the of seven in of

Dan Pickering

guys. you. done, Thank Well

Cris Gaut

Dan. you, Thank

this and thank We to And much. talk call all up Shanteller, we'll will at shareholders wrap our point. Thank the very good of much. you you next very friends quarter.

Operator

Thank today's you conclude conference call. everyone. does This

You may now disconnect.

Forum Energy (FET) 9 Aug 202020 Q2 Earnings call transcript