FET - Earnings call transcript Q2 2021 | Forum Energy Technologies, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Forum Energy Technologies' Second Quarter 2021 Earnings Conference Call. My name is Carmen and I will be your coordinator for today's call. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. I will now turn the conference over to Lyle Williams, Chief Financial Officer, please proceed, sir.

Lyle Williams

Thank you, Carmen. morning. Good Forum quarter to call. earnings Technologies’ Energy welcome XXXX second conference And me Forum’s, Lux, and Officer. Gaut, are our and Operating With Chris Officer; Chairman today Chief Executive Chief Neal and after market release our earnings our available on issued closed We yesterday it is website. the

would we caution to begin, statements. listeners we forward-looking like Before regarding

context Our considered historical All our the protections Please afforded those of financial federal contain law. note in the that measures. affect than may including Management with non-GAAP remarks on may Harbor other we statements remarks Form other Safe be should such the today information that include business, factors information. are relying along many filings. XX-K, by SEC our in disclosed

is be being call turn and of of the on will weeks. to replay available Chris. recorded a our refer For reconciliation call these a will website measures, call over now I This for our the two to earnings release.

Chris Gaut

morning. and Lyle. taking A as underway capital well well strong good drilling equipment, We're as activity for is and recovery announcing our placed our FET short consumable manufactured Thanks products. orders And customers cycle and is our advantage. full completions

as depleted portfolio domestic conditions continued products, inventory expect to quarter. in the completion replace flow equipment FET’s growing our levels trends positive through cannibalize increased drilling Our Market we successes market their spares. now increase to into international sequentially their our current revenue equipment, beginning customers’ their their backlog brands financial increased the by sequentially our With orders The our second business. and global need fundamentals have old of sets now stable, to favorable are results stacked this for restock XX% in and pre-pandemic back outstanding activity, are business customers growth are revenue coupled for up and and by as and in strong the with and inventories strong ability second sequentially year exhausted half quarterly nearly levels. The of our order fourth continuing XX%, inbound orders FET to XXXX. and have and largely for higher

non-oil areas defense transition businesses excellent the reduction, and our continue energy of in opportunities addition, to infrastructure. with GHG the for and future efficiency, In expand and energy gas

over will in our a liquidity in growth. this fund global economy of adequate increase we now positive to EBITDA our demand, that this up minutes. talk inflation current With chain rate million seeing and cash the changed, the in be excellent quickly through their supply our these be rapid growth assuming but as XXXX. We about QX, And chain have saying sharp will through have fully able improvement prospects raw end continues in and this And in $XX our offset Such at expect results. we as are few flowing logistics to generated what they its year, about as be cannot have We time. others we'll cash positive, rapid price than have things especially of supply growth in increases commented. By increases shown, we receivables. will be cash in the Neal, materials the We more constraints more our we industry of the increases. we our believe to on based make our as $XX in QX, and free price million continued costs but QX, more year. a nice quarter. customers run to our doubt flow We per it plans flow we be are by trajectory, for will second to despite and pass the resources expect half

me let back Now turn it Lyle. to

Lyle Williams

on report strong to this Thank by the quarter. results Chris. FET I'm delivered operating pleased team the you,

Our topline potential gas equipment we correlation from see with increasing The drilling sequentially XX% upside U.S., grow the our markets and our same by increasing and subsea by up second growth year. FET. was non large sustainable ship revenue oil U.S. businesses. outside and last as the revenue for revenue capital additional, revenue bookings in as U.S. we of the count the U.S. period XX%. we with compared with when and holding quarter, of provide and Revenue upside and XX% orders outside growth Total grid rig exceeded count of from XX% XX% is

and XX% drilling activity sequential in products order In Neal orders Our continued second including led driven Downhole increase demand and drilling quarter position our strong cycle for performance capital short the a bookings, subsea Segment in with that and reflect growth large consumable equipment. differentiated discuss. will our bookings our particular, strong

American increased revenue quarter. line, tools in growth drilling freight completion which with $X increased product million million, EBITDA million that are every almost project seeing. we to including even the of $X quarter, million Our grew our inflation in by $XXX have and North rig handling million XX% guidance quarter. was steel higher line in products. the to the generated but for in EBITDA Revenue would by shipments and the for sizeable to We $X $X impact of

between revenue and to $X be for be Looking $XXX is between and the to million third million quarter million $X guidance million. and ahead, EBITDA $XXX our

quarter. the shipped about $XX increased $X line revenues million. for for EBITDA information further the revenue our increase share Downhole a & our adjusted our large accounted segment the basis, segment. me million Several operating increased XX% technologies Drilling for significant international results in by quarter product for Let On that sequential and or projects the drilling second

Revenue our primarily lines Incremental material by the a that of Completion and also aforementioned benefit cost products for segment by size artificial and and bookings In lift and and respectively. be EBITDA to EBITDA for products. nice segment, million $X million segment margins typically grew our than market. orders. all the increase in to our Completion experienced increased the the lower pressure this to subsea freight our revenue were We levels saw product in Production in timing for revenue led and increases. continue adjusted lumpy activity from to pumping strong tend due segment the due individual revenue In we $X

sequentially called the cash exchange. second the We lower quarter. million of foreign debt, from up guidance interest increased in adjusted include our quarter of combined $X was were million in expectation, in restructuring interest a of the than payment orders and on million payment consequence, anticipate our As we and third lower unlevered a paid inflation items in $X free other small $X this expenses $XX to in for exceeded our of quarter in the $X segment a flow flow tied and our the the cash capital million semi-annual similar extinguishment million gain resulted additional equipment the the corporate $X second amount debt for while the Net $X.X segment interest we of release retired costs cost special million $XX decreased production of with revenues overall To for the more loss with line million. out quarter expected. quarter as and on mix Free decreased working segment. million The in of $XXX,XXX quarter. results margin results, first wrap EBITDA

a and the up I’ll this with on our million of to repurchased of benefits debt from would of the wrap we holders X.X share full availability to debt total the valves expenditures and sheet convertible XXXX mandatorily under the as year divestiture the excess days. end The would increase of cash within proceeds $XX from million transaction. stock the about has of half million related We in the cash and repurchase the of to the our and value that quarter notes $XXX equity. on XX of is a discussion year benefit significant full notes, capital the outstanding of $XX to these our undrawn. the of $XXX which leaving and on our with debt XXXX, Under the cash obligation our year. second basis ended share of one trade outstanding stock for credit us proceeds cash been We quarter, pro notes of the a for diluted quarter closing $XX be growth have the for of $XX sheet, second million. remains million net $XXX as balance an forma prices line, year to Of to a obligation what balance balance when of common conversion And be second of this initiatives. half liquidity cash million to occurred million million at indenture roughly on total XX. notes face approximately hand notes are deployment our end obligation defined million positive. we flow expect from satisfied. that of last reducing Based $XXX and count to This free that of long-term asset conversion XX divestiture the deployed would the of impact backed of to above pleased convertible million, at we FET for by our return In requires net is remainder to of to the notes comprised one convert available $XX now June the

mid FET small to enterprise leverage and capitalization be to currently would trade results this prospect of and EBITDA. with times significant our should market financial XX%. Other and the in value valuation. strong low debt oilfield equipment market stability of improve XX fundamentals equity leverage service X approximately of resulting reduction confidence improving cap ratio XXXX Our and ratios companies an The to provide

financial a improve. to conversion FET improved and continue debt of to significantly look markets forward the our and core our As balance results We sheet.

turn me to call Neal. let the Now over

Neal Lux

I’d morning, thank begin, FET Good Lyle. you, and everyone. To dedication professionalism. the for of Thank employees their to like

we more focused company a smaller, today. While are

big and strong deliver Our to employees continue they customer rapidly culture. demand have increasing maintaining a results safety while met

great best exciting our and the for aftermarket consumable FET’s of customers, industry and and have is products some be momentum of Shifting We employees Demand continues to in for to part to solutions a strong. is the increase. this very team. products

deliver high share in wireline on in our fast during businesses. term. three consumables, for These systems booked handling remotely The team quoting utilized We brands great use the or incremental will quotes grow are margins These either using booked operated capital market were subsea packaged count These a received orders ROVs over turned mentioned are outstanding environment I results upgrade engineered and rig use seven components. challenging use ROV businesses highly and at offshore In subsea for of components third deliver faster lift, or quarter, for this Brazil, mud tools, and artificial equipment coil the year. and and tubing, are as call, preferred long is orders. choice. to our second the capitalizing quarter, pump last challenging we assets And strong new more activity and two vehicles than in recovery under FET environments. including assets have total products the launch incredibly into on

that in Even handling program build the best In in for end tools price addition proposition. customer to were environment specifications solution. order new matters, technical to large still a the value great recognized where oil a challenging had Forum awarded BNZ users we Asia. and the [ph] The our win, are an XX team rig

the each solution great of stands competition. And talk a with about where of morning the lot time, FET This sake have I is FRXXX. of We for another I products. them. land above But could our all

everything Roughneck to meets lowest drill a winner of is and pipe and pipe. diameter in industry the go demand. ideal Iron straighter. surging cost ownership is FRXXX It deeper, a can clear drilling we're has market doing meet and Our the handling device contractor to tool requirements for the The larger in faster we

in many of impact ship year-over-year Well, with along start similar XXX% are these U.S. and the year. to have inflation, of we are cost seeing since range higher The lead are and positive others products. which the lane. our prices, product, As will to costs the we our XX% raw we up will relating have affect freight the a This likes Deliveries three a increases booked the not will in To from for key price have impact industry, delayed pushing impact couple book on business, a combination this costs been no certain a significantly. Shipping quarter. from time steel price quarter at one to already costs. increase. fixed backlog material but hydraulic price. million headwinds third on are dollars. most issues of second had sub-components have the Asia in a combat the These the issues times of of Depending

contracts Our the world our customers for What their prices given this price markets, able by mean backlog, considerable raise well. the understand demand their for our challenges results and materially will they to improve guidance increases FET? as and the competitive not strong supply provided have is economy conditions, existing chain a to does been With experiencing few services, customers our quarter and third above Lyle.

However, strong consumable Chris in the improvement mix, opening sales remarks. see meaningful given during our mentioned his aftermarket should in we and as fourth EBITDA quarter, a

field the is natural oil environment. for Looking course. we the gas ahead cannibalization by future, levels. is has and are its And the supply signaling World investment. towards macro GDP demand are equipment the outpacing run to encouraged and Oil cycle very need expanding pre-COVID prices

need to buy capitalize is environment well our more consumables trend their on customers operations. upgrade excellent this and for to equipment for brand completion and their and challenging service. positioned with more drilling Our today's FET to strong

to are coming also energy well participate We the transition. in positioned

submarines farm vehicles Our and wind support breadth and application. solutions processing engineered capture geothermal methane to of and experience from to

key be in a world. the We decarbonizing contributor will

a this vision, fact, not is but In just a reality.

We components project. are for carbon currently supplying sequestration critical

captured of will Over and the of source be millions tons COX many project's lifetime, industrialist sequestered.

reducing added an to call the contributor emissions. excited benefit, a product significantly competition. turn for and be Chris great to is will the This a I has start carbon footprint closing now As versus remarks. over a to we're key our smaller COX

Chris Gaut

Thanks, for a few highlight this to are like Neal. you I'd There points morning.

and fundamentals spend sustain significant more Over put work. avoid to and ways there to to from FET’s favor. in to attitude motivations been now to the money shift First, has finding moved back spending have recent needing months, equipment our money a in operations customer's

these shift continuing in grow material a temporarily overhead and costs leverage given margins. will revenue our we increasing business, our gross structure with and Second, see our significant spending although The our for revenue to fixed logistic raw by our unleash costs, customers. impacting orders momentum positive in variable our favorable are now operating our

taking price will our incrementals. that We actions restore are

and a leverage and higher course clear de-leveraging team. expansion multiple the increased to I to with on have EBITDA, which driving rerating let's Thank operating you. is stock on Third, we improving path revenue Carmen, the our excellent our the believe should EBITDA. sheet, the be and have balance a right first we an of FET the take question.

Operator

Dan Thank Pickering you. [Operator Instructions] We have a with question Pickering from Energy.

Your line is open.

Dan Pickering

couple about of guys. cost the the morning of you talked impact of the thank Good inflation. couple on questions. When and A for you color

is revenues $X.X to of I midpoint of cost million or be impacts? actually million do next that when thinking about So quarter, guidance EBITDA, the $XX the have cost the better in or EBITDA math a if incrementals incremental of kind x, million that'd $X a we that be you couple you're million be bucks hits how should your given didn't That's QX say, million $XX of the cost. would pricing up XX% up $X.X and sort level of million, of should

Lyle Williams

This is that a in Lyle. think Dan, as I'll have that. bit thanks. about do place prices. of our incremental see we with is have backlog take fixed And going is little today, forward, we our what we

that better a going impact bleeds are our and on increases short to have price backlog of cycle products Our after some through.

that's from see those expect that being improving in been here, little it net as we fourth some on of softer, the incrementals have QX, to booked see on a some backlog call new quarter. price bookings. do So But we therefore, we will bit backlog already

Dan Pickering

of that you impacts receivable second was on sort talking year? I've got they in million the these working but do And to while side on a think increase $XX pretty we pay. Lyle, the working quarter-to-quarter, was the capital the while projects about big And a capital shipping, big $XX that million in Okay. half increase revenues of are take how international

Lyle Williams

with end were how we day Dan, DSO or where at From first we're perspective, outstanding the Good question, at in a we quarter. roughly which line thanks. receivables, the sales of look is

XX those where or international a sort that XX that guarantee is. we mix. or our work hard timing. in customers, to of as some secure where it call to not from So, with of payment on little payment pushed Typically upfront. change in customers, that’s bit range us it And day receivables the industry But necessarily an that average the with of have generally as a mix can far impact

the So the have that comfortable increase with resulting we we were and AR. in therefore DSOs

Dan Pickering

QX, to you requirement And do increase and capital the revenue continue that QX working of in for Okay. if then – build? revenues how for the sort view yes,

Lyle Williams

Yes, us terms for pieces really, of really working two in big capital.

said receivables we revenue to grow So would grows. our as continue our that would and expect

other hand inventories. is On the

come And expect would inventory those that quarter, so the we do second to hold in inventories generally. it the down with we ability that have saw the nicely and

would the not that be to level. So inventory we’ll activity have come consistent picking able have maybe down roughly they those way up, hold

our So drag working with improvement receivables, capital net net to about but inventories. is be on going big similar

Dan Pickering

in we’re And further kind to a about XXXX midpoint at $XX you there. a the as Chris range, as million so fourth million growth $XX talked $XX year, the exiting million quarter of

for XXXX. at we about So least QX XXXX? of XXXX thinking average So it we’ve of And for growth think about about $XX the million is EBITDA are run a $XX got be from level? or a it the call from as million should rate growth, you thinking growth you

Chris Gaut

Dan. thanks, So

growth XXXX. the rate about from thinking We’re exit from

that ongoing that the improvement they restock customers update not we that to capital in that this equipment. to yet drilling on a and inventories quantification need at their but our finding with their activity completion reinvest putting need think We’re increasingly point,

in a and lead through good in at things to growth the in should XXXX XXXX margins of revenue All for higher rate that those from and us exit flowing XXXX.

Dan Pickering

incremental XX% from of and operating level, just that because some potentially And leverage. expanding Okay. some pricing then hopefully

Chris Gaut

Yes. had bit. very mixed high vary I a mean the a incrementals QX. do There they about is from quarter-to-quarter We thing is element there. in incremental

the if think And in our look as quarters, incrementals we’ll I well. fine. think good show you will over I year, XXXX over course incrementals of this be several

Dan Pickering

you’ve going second. on. given an now by I’m was monopolizing going what was awhile I’m perspective, like for just keep but encouraged right hard Q&A, that the the for too It a doing I comfortable visibility. seems guidance it know fact to Okay. industry, the I’m – it you’re order to was with some from

an So influence of the or are visibility, like folks arm struck or where just profitability at that, I’m Or sort our is that’s stock stock I’m to now? an weak. improving just here this is know the its stock improving oilfield debt? least on anything price might associated that the there long service right underperforming shorting trading something convert are And have by small – any curious, stocks way is is it performance? be debt there cap and folks is I the been there with or price

Chris Gaut

Well, owner a an element high there’s equity. yes, is going be is investor certainly an of converted the in converts the extent, who But to to the of yield ladder.

about that. thinking probably pre-positioning they’re think I for

the the that way conversion un-leveraging, a that balance we’ll I we’re something becomes clear have right. forcing stock. rule a but attention. work sheet And not So through, should that’ll And to as get on our fundamentals our driving should rewriting and EBITDA just un-leveraging day, it de-leveraging be of the up say as gets to the but

Dan Pickering

XX-day kind price that can when the there the first trigger? than push conversion there's me, is you other stock the remind conversion And, of $XX, – with over is stock Right. price or XX-day, mandatory time

Chris Gaut

days. would conversion opportunity for happens when unlikely $XX stock view Dan that a our above is an for $XX convert at our you're mandatory optional right. us trades holders, for There's The holder force a conversion, there to not would XX an convert. but be

conversion that at the happening at period. looking we're $XX probably So

Dan Pickering

it. Got

Chris Gaut

opens to that us going window alternatives about looking us for for are next year. The time call, at a be this which

Dan Pickering

Okay.

Lyle Williams

got you Hey Thank you, Dan. questions? any other

Dan Pickering

you. Thank

Lyle Williams

Carmen.

Operator

Merrett Peter ERS. Yes question comes from our with next

Peter Merrett

It's Hey, nice call for see it's and taking direction things great. quarter. such been moving right. But a great the time, a a Thanks long in terrific to now.

a being see your do Just we have sorted just about? I needs is now kind perspectively And think really CapEx things much, few should now? things, guess out here so of that what's little CapEx that a you the what

Lyle Williams

Thanks Peter. Yes.

still numbers going our And low our very be needs are So, low. forward. would really CapEx

that. As efforts facilities, our of an we and expenditures significantly equipment manufacturer, machine still with capacity – our have both have last year, significant capability terms capital that are going to big And in undertook like be late even things tools, we we of those. restructuring

we've lower we year million. rest is as the kind of the So look under that. guided that forecast our year, of full would for $XX than even be And forward, CapEx our

general need So, we see on a a pretty CapEx, go-forward for basis. a as low rule

Chris Gaut

not is This a [indiscernible].

Peter Merrett

Okay.

pick portion quick the of question you up extra a you that that are about, think Just in to cash? so going or pick you'll do coupon

Lyle Williams

the that to sheet. been we've paying that, Yes, balance do have that cash would would cash we given the that in on and expect we continue

Peter Merrett

Yes. just just wanted amount you what's would expect, would I then amount, that That's And but the mandatory that the see dollar as ask. the currently? follow to conversion, what

Neal Lux

of convert Peter, at conversion. somewhere that's the about that time $XXX indenture, would like Sure. data roughly looks million Using debt the the in mandatory outstanding that our of

Peter Merrett

$XXX. Okay, so

Neal Lux

[Indiscernible]. Yes.

Peter Merrett

M&A on few the And Okay. a comments overall just environment.

do see you out Just what there?

Lyle Williams

that I Peter companies, been the companies whether there things developing for interesting equity market, or kind the in of are have Yes, private think owned owned privately M&A stuck, that consolidation. is, opportunity it

that that view our clearest we up the equity is the and is of rewriting do de-leveraging stock. to value get Forums’ to would way and the like

there out an M&A less we're direction. priority So following landscape improving, we is competition. seeing with are available that our first and in But what's

Peter Merrett

Okay.

really next Okay, it. yes, quarter. But Thanks. again, that's

Lyle Williams

Peter. Thanks

Chris Gaut

Peter. Thanks

Operator

like his turn our I Session. to remarks. Chris Gaut it you. to Thank for And back Q&A this would final ends

Chris Gaut

work, the quarter. FET. we'll you the here And Carmen, Good interest. thank very going bye. talk up next appreciate And you we hard And at to you. we're much. keep Thank to

Operator

we your conclude participation. Thank for conference And our today. for you that, with

now disconnect. may You

Forum Energy (FET) 6 Aug 212021 Q2 Earnings call transcript