Forum Energy Technologies, Inc. Stock

Thank you. Good morning, ladies and gentlemen, and welcome to the Forum Energy Technologies second quarter 2026 earnings conference call. My name is Lateef, and I will be your coordinator for today's call. There is a process for entering the question and answer queue. To ask a question during the session, you will need to press star 1 1 on your telephone. We hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. A link with instructions can be found on the company's investor relations website under the events section.

At this time, all participants are in listen-only mode, and all lines have been placed on mute to prevent any background noise. This conference call is being recorded for replay purposes and will be available on the company's website. I will now turn the conference over to Rob Kukla, Director of Investor Relations. Please proceed, sir.

Thank you, Lateef. Good morning, everyone, and welcome to FEP's second quarter 2026 earnings conference call. With me today are Neil Lux, our President and Chief Executive Officer, and Lyle Williams, our Chief Financial Officer. Yesterday, we issued our earnings release, which is available on our website. We are relying on federal safe harbor protections for forward-looking statements. Listeners are cautioned that our remarks today will contain information other than historical information. These remarks should be considered in the context of all factors that affect our business, including those disclosed in FET's Form 10-K and other SEC filings. Finally, management statements may include non-GAAP financial measures.

For reconciliation of these measures, please refer to our earnings release and website. During today's call, all statements related to EBITDA refer to adjusted EBITDA, and net income refers to adjusted net income, and unless otherwise noted, all comparisons our second quarter of 2026 to first quarter of 2026. I will now turn the call over to Neil.

Thank you, Rob, and good morning, everyone. FET's financial results showcase incredible earnings power. During the quarter, we executed our strategy and demonstrated the leverage in our business model. We delivered sequential and year-over-year growth in revenue and profitability, expanding margins across the board. We generated free cash flow, strengthened the balance sheet, and returned capital to shareholders. Also, we continued to gain market share through product innovation, international expansion, and exceptional execution for our customers. And while oil prices moved higher during the quarter, our customers remained disciplined and focused on cash generation.

In North America, stronger completions drove frac utilization, benefiting our wireline, coil tubing, and downhole products. We also saw strong demand in the Canadian oil sands, where technology and reliability remain important differentiators. Outside North America, regional activity was impacted by the Middle East conflict. However, investment for offshore and unconventional developments remained robust. Customers continue to prioritize technologies that improve uptime, safety, efficiency, and production performance. These priorities align directly with FET strengths, leading to our international revenue growth. Going forward, we expect industry activity to remain broadly stable with modest improvement in selected areas during the second half of the year.

More important, we expect FET to outperform through market share gains, new products, geographic expansion, and operating discipline. Looking out further, long-term fundamentals remain supportive for FET's 2030 growth vision. We expect oil and natural gas demand to rise with global GDP, increased urbanization, expanding LNG exports, and AI-driven power consumption. On the supply side, our customers will need to add capacity and increase operating efficiency to offset steep production declines. In addition to traditional supply and demand drivers, the Middle East conflict has made reliable oil and gas supply a strategic initiative. We expect new investment decisions to be driven by the need for increased energy security and replenishment of inventory reserves. We project these fundamentals to expand FET's addressable markets by more than 50% over the next five years.

This growth, combined with our targeted share gains, creates a clear path to doubling our revenue by 2030. With our operating leverage and capital-like business model, we would expect revenue growth to drive significantly greater EBITDA and free cash flow. Capturing this opportunity, however, takes more than a favorable market. It requires a strategy and disciplined execution. Market share gains are a clear indication of successful execution. Since launching our Beat the Market strategy in 2022, we have increased revenue per global rig by 34%. We are winning through differentiated technology and commercial execution.

Also, our global footprint allows us to export the technologies developed for U.S. unconventional basins to customers around the world. Our goal is to double share in targeted markets by 2030. We believe the steps we are taking today are putting us on the path to achieve that goal. Let me cover a few good examples. In the Middle East, field trials with one of the world's largest oil companies are progressing for Sandguard, our artificial lift protection solution. This product has been remarkably successful in the U.S. and has significant potential in the region. Another example is Venezuela. After receiving regulatory approval, we have delivered a significant number of coil tubing strings into the country.

This success has expanded demand for other products, including pressure control and coiled line pipe. We are in the early stages for these opportunities, but expect long-term growth here. Also, our innovation pipeline continues to drive share gains. Following the substantial DuraLine order for Argentina announced last quarter, we are now seeing increased inquiries and proposal activity in the United States. Our technology significantly increases the efficiency and safety of frac operations. We are also seeing expanded demand for Unity, our software and control platform for operating ROVs from shore. During the quarter, we received substantial aftermarket orders to upgrade ROVs built by FET, as well as systems built by competitors.

This is a substantial opportunity for our subsea product line. Finally, in our heat transfer product family, we achieved two critical milestones for long-term growth. First, after several years of product development, We received an order from a major service company for a high temperature frac application. This product operates at 140 degrees Fahrenheit, ideally suited for harsh Middle East environments. And in power generation, our stationary cooling solution, which I first mentioned last quarter, has quickly progressed from commercial interest to an initial order. This solution complements our existing Powertron offering, where we also received a meaningful order this quarter. With these developments, we are taking great steps forward in the expansion of our data center and mobile power product portfolio.

While these examples provided demonstrate progress towards our FET 2030 vision, we are We also remain focused on delivering results today. Our strong first-hand performance and elevated backlog gives us confidence to meaningfully raise financial guidance for the remainder of 2026. We now expect full year revenue between $870 and $910 million and EBITDA between $115 and $125 million. Compared to last year, revenue in EBITDA would increase 13 and 40% respectively. with incremental margins of 34%. This is incredible growth. Also, we now expect net income between $42 and $52 million and full-year free cash flow between $57 and $77 million. This improved outlook reflects the proactive changes we have made to the business, not simply a better market. Our priorities for the remainder of the year are clear.

Convert backlog to sales, gain share, and generate cash. Now, to provide more detail on our second core results and near-term financial outlooks,.

I will turn the call over to Lyle. Thank you, Neal. Revenue, EBITDA, and net income all exceeded the high end of guidance as our beat the market strategy continued to deliver. Revenue increased 8% to $226 million. EBITDA increased 39% to $32 million. And net income increased 148% to $14 million. Orders totaled $236 million during the quarter, resulting in an overall book-to-bill of 104%, exceeding revenue for five of the last six quarters. This performance reflects continued market share gains, growing customer adoption of our technologies, increasing contribution from international markets.

Three primary drivers propelled our year-over-year second quarter performance. First, we continued to perform well in the Canadian oil sands market, where customer activity levels remained robust. Our downhole product line saw increased demand for sand and flow control products, delivering meaningful year-over- year and sequential growth. combination of improving market activity and penetration of our high-value technologies contributed significantly to profit growth within the artificial lift and downhole segment. For the second driver, our drilling product line delivered a meaningful turnaround following the operational restructuring and cost reduction actions we implemented. We are seeing the benefits of those efforts through improved margins, stronger operating leverage, and increased competitiveness. In addition, our innovative drilling capital equipment continues to gain traction in international markets, particularly in the Middle East, where customer adoption and project activity are creating new growth opportunities. And for the third driver, our subsea business executed exceptionally well as we converted backlog into revenue.

Deliveries of ROV systems, aftermarket products, and related technologies drove improvement in both revenue and earnings. More importantly, the delivery of our backlog demonstrates the benefits of operational discipline and project management across the organization. These three drivers, Canadian oil sands growth, the turnaround in drilling, and continued subsea backlog delivery are representative of the success of our beat the market strategy and demonstrate our ability to grow through market share gains, technology differentiation, and operations. execution. Both of our operating segments contributed to the quarter's strong results. Drilling and completions revenue increased 10% to $139 million. Growth was driven by higher demand for coiled tubing products, wireline cables, and capital equipment, particularly iron roughnecks and radiators. EBITDA increased 29% to approximately 16 million, and EBITDA margins expanded 180 basis points to 12%.

Growing orders resulted in a book-to-bill ratio of 104% during the quarter. Artificial lift and downhole also delivered an impressive quarter. Revenue increased 6% to $87 million, driven primarily by high demand for sand and flow control products. artificial lift products, and casing hardware. EBITDA increased 30% to approximately 22 million, and EBITDA margins expanded to nearly 25%. Favorable mix drove an outsized incremental EBITDA margin of 95% as growth in our high-value downhole product line was partially offset by a decrease in shipments of our mechanical production equipment. Orders remain strong, resulting in a book-to-bill ratio of 105% during the quarter. Turning to cash flow and capital allocation, we generated $10 million of free cash flow during the quarter, consistent with our expectation of increasing free cash flow through the year.

While accounts receivable increased with revenue, inventory remained well managed and overall working capital performance continued to support cash generation. A significant accomplishment during the quarter was the continuing deleveraging of our balance sheet. Net debt declined to $115 million. At the same time, trailing 12-month EBITDA increased to $189 million. As a result, our net leverage ratio improved dramatically from 1.4 times to 1.1 times. The combination of higher earnings, improved margins, and free cash flow generation allows us to simultaneously reduce leverage while continuing to return capital to shareholders. Consistent with our capital allocation framework, we repurchased approximately 8 million of shares during the first half of 2026 and returned 42 million to shareholders over the past two years.

We finished the quarter with total liquidity of $96 million, and our balance sheet remains well positioned to support both organic growth and strategic opportunities as they arise. We believe acquisitions can augment our performance and evaluate potential opportunities based on earnings accretion and the target's ability to grow free cash flow. We seek acquisitions that align with our beat-the-market strategy and advance our FET 2030 vision. As we enter the second half of the year, we remain focused on profitable growth, margin expansion, and cash generation with disciplined capital allocation. We expect continued growth with third quarter revenue between $225 and $245 million and EBITDA between $31 and $35 million. and $37 million. At the midpoint, these represent approximately 20% revenue growth and 48% EBITDA growth compared to the third quarter of 2025. In line with this profitability guidance, we expect net income of between $12 and $18 million and free cash flow between $15 and $25 million for the third quarter.

With that, I will turn the call back to Neil for closing remarks. Neil St. Thank you, Lyle. Our second quarter results are another example of FET delivering on its commitments. Through disciplined execution, innovation, and commercial excellence, we are converting targeted opportunities into higher earnings, strong cash flow, and increased shareholder value. Just as importantly, we are strengthening the foundation of the business and making meaningful progress towards the objectives outlined in our FET 2030 Strategic Vision. Looking ahead, we remain confident in our outlook. Sustained offshore demand, growing international opportunities, broader adoption of our differentiated and improving industry fundamentals continue to support our business. With strong first half momentum, FET is well positioned to deliver a successful 2026 and create long-term value as we advance towards FET 2030.

Before turning the call over for questions, I want to congratulate our employees on their stellar safety performance this year. Thank you for living up to our number one core value. Well done and keep it up. Thank you for joining us today. Lateef, please take the first question.

As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Our first question comes from the line of Steve Ferrazani of Sudoti. Your line is open, Steve.

Morning, everyone. Appreciate the detailed review of the quarter, obviously executing in a volatile market. Neil, obviously you exceeded even the high end of your guidance. What can you point to for the outperformance? Where did you see things coming in better than maybe you expected when you guided three months ago? Yes.

Yes, thanks, Steve. First off, I'm sure you recall for sure, our Q2 guidance was up from Q1, so we did expect better results. You know, our team stepped up to the faster cadence with really great execution, you know, I'm confident they can increase that pace again here in Q3. And then as Lyle outlined in his prepared remarks, Canadian oil sands, market penetration, adoption of our new technology there. The turnaround in our drilling product line has been really fantastic. And then we have a lot of big projects. and our subsea product line, and that team there is executing and delivering and converting that backlog into revenue really well. So those three drivers and then, again, just a strong execution by our teams. Couldn't be more proud.

Excellent. When we think about the revenue this quarter and also what's in the significant orders, are you seeing any kind of a geographic shift from your traditional pattern?.

I think it's pretty broad-based, Steve. We saw completions in North America pick up. That's helping our consumables, coil tubing, wireline. We are still in the Middle East. We're still delivering on products there, even with the the conflict. But ultimately, Canada has been strong and the team up there has been delivering for their customers well. And so again, that's a big driver there.

Great. When I think about the margin lift this quarter, obviously greater throughput at your plants, but that margin seems even better than just a throughput. performance. Are we seeing efficiency gains? Is that mixed? Can you talk a little bit about the margin lift?.

Yes, Steve, let me jump on that one. Definitely, you're right about operating leverage. Remember, as a manufacturing products company, operating leverage is a big deal for us. So when we see incremental growth, we get nice uplift. We also in the quarter had the benefit from our cost reduction initiatives. We started those last year. We talked a lot about them and really wrapped that up in Q&A. but saw a nice sequential pop and sustainable pop from reducing those costs out of our system. I think the third part in the quarter was mix.

We talked about that. Downhole product line did extremely well. That high-value, high-margin product lines really grew a lot in the quarter, so that's favorable. But at the same time, we had a decrease in revenue in our production equipment product line, really tied to timing of shipment. So that change in mix was really favorable in the quarter. So if you put all those things together, very solid, very positive, but also I think important to talk about sustainability of those. So the market continues to do well, and as we continue to grow, we see that more operating leverage will flow through. Cost savings are in, they're done, and that's locked in.

And then it's really about mix, as we continue to take share in these targeted high-margin products, we should continue to expect the kind of margins we saw here in Q2.

Very helpful. I did want to turn to capital allocation. Any update or changes to your targets? I mean, when I think about, I don't think you can be under levered, but you're moving in that direction when we think about how you're thinking about one, you're guiding for better EBIT on the second half. Two, second half is typically much, much stronger free cash for flow, where you're headed, what you're thinking about, do you have a leveraged target, and any change to percentage of cash flow you would devote to share buybacks?.

Steve, as we mentioned in our first quarter call, we think further debt reduction is really building dry powder for potential acquisitions or other strategic objectives. So we'll continue to do that. You know, we are always evaluating acquisitions that could meet our criteria, get differentiated products, targeted markets, accretive financial measures, and could we get the deal done without increasing our leverage. And ultimately, we want to grow free cash flow per share. And if we can find a way to...

that with acquisitions will do so. Helpful. And then on the repurchase side, any change in how you would allocate cash flow to repurchases?.

No, we mentioned in the first call, and I think you just noted, our cash flow is definitely weighted to the back half of the year. And so we'll align our purchases with our cash flow generation. Okay.

Fantastic. Thanks, everyone. Thanks, Steve. Thank you. Our next question comes from the line of Richard Tullis of Watertower Research. Your line is open, Richard.

Thank you. Good morning, everyone. I'm sitting in for Jeff Robertson today. wanted to touch a little bit on the mention during the prepared remarks, the exciting percent potential increase in the addressable market. What would be the rough geographic allocation you might be looking at there? I know the Middle East must be playing a part. I certainly agree with your energy security concerns globally. That seems to be a hot topic now.

Yes, good morning, Richard. Good to have you on the call. As we think about our market share or as we define it as our revenue per rig, in the U.S., we're over $700,000 per rig annually. Internationally, that number is lower. Let's call it $300,000 and change. So as we think about our opportunities for growth, exporting the technologies, the solutions that we've developed for US unconventional shale, bring those solutions to the Middle East, bring those solutions to Latin America, other key regions. That's a great growth driver for us. So I would expect over time that our international revenue will continue to grow. Not giving up on U.S. and North American technology by any stretch of the imagination, but I think that's a great, great growth opportunity for us there.

Thank you. That's helpful. And, you know, the SG&A was down nicely year over year. total dollars and despite the significant uptick in revenue, it actually was about 1.5% below our 2Q estimate on a percentage basis. How do you see SG&A trending in the third quarter and throughout the rest of the year, particularly with the outlook for higher revenue at the.

midpoint in the third quarter, quarter over quarter. Yes, going back to last year, you know, we started taking structural costs out of the business, you know, as Shane was part of that. We also want to leverage technology, leverage software tools where we can to be more efficient. So we've begun to do that. So as we think about on a go-forward basis, we don't expect a large increase in SG&A as we progress through the year.

Well, that's all from me. Thanks a bunch. Thanks, Richard.

Thank you. Our next question comes from the line of Jim Rolison of Raymond James. Your line is open, Jim.

Hey, good morning, gents. Morning, Q. Neil, if I look at kind of revenue growth in the quarter, high teens, 3Q guide, high teens, just kind of curious, for one, you know, how much of that is market activity improvement versus share gains, given your kind of, you know, targeted expansion of market share through 2030?.

Yes, I think a good portion of that is share gains. I think our, if you look at the first half of the year, rig count globally hasn't increased. flat-ish. So as we think about going forward, we see a modest activity increase, but much of that share gains. You know, we mentioned the Canadian oil sands, you know, adoption of key technology there has been great. As we think about our consumables and consumption, again, as more frack fleets are working, you know, to see more demand for wire line, coil tubing, other drilling consumables. So as long as that activity is churning, we think we're going to gain a bigger part of that share.

Makes sense. And if I think about that and translate it into your 2030 view, you know, your updated guidance is now almost 900 million in revenues. And if I remember that chart, you kind of had a billion to 1.6 billion as kind of your path. Are we just accelerating down that path or is the path out? actually, you know, the end point getting bigger, do you think? Jim, you're going to get me in trouble.

I think that path makes sense. I think we're finding ourselves to be on that path. You know, again, internally, we want to always push for more. But that path that we laid out, you know, whether it's a flat market, we want to be a billion-dollar company. Or, you know, again, if our, as we expect, you know, that our markets grow and then we continue to gain share, I could see the $1.6 billion over the next five years. So maybe one change to that is with the conflict, with energy security, I think we've brought forward some of the... some activity, you know, we had expected 2026 to be a roughly flat year on activity, and I think it's going to be up slightly. So I think that's maybe an acceleration there.

Yes, that's kind of what I was looking for. And then last one for me, just you mentioned Middle East on multiple occasions in some of your different kind of products and testing and opportunities.

Obviously, we're sitting here with the conflict still having some impact. you know, in the region right now. I'm just kind of curious how to think about that or how you think about, you know, when that opportunity set you're kind of laying out actually starts to kick in. Is it kind of once we get past this conflict and things normalize a bit better that that actually contributes to maybe better 27 growth or just maybe how you think about that? Yes.

I think that's a pretty fair assumption. We're still active. Middle East is still roughly 10, 11% of our overall revenue. Depends where you're working and what part of the region. It's not, it varies a bit. But as we look ahead, I think once we are past the conflict and we can resume to normal growth. I see a lot of great opportunities with the oil companies in the region wanting to expand and expand their activity. And they want to adopt the technologies that their U.S. and North American counterparts have used to become more efficient.

And that's the kit that we provide. Perfect. Appreciate your time. Great to have you, Jim. Thanks for joining.

Thank you. Our next question comes from the line of Don Christ of Johnson Rice. Please go ahead, Don.

Good morning, guys. Thanks for letting me in. I wanted to ask about the pressure pumping market here in the US first. You know, the pressure pumpers are holding the line and trying to boost margins here and really haven't talked about new equipment ads or anything of that sort yet. But are you seeing things in the background where they're kicking the tires to see what lead times would be and that sort of stuff? Because as we see it, the, the market looks really tight on the pressure pump. We saw it in the US and we could see the need for a lot more equipment in 27. Are you seeing that as well?.

We are. I think it's a background. We don't see a lot of what's called big fleet additions, but upgrades to existing fleets or upgrades to existing equipment I think has been the focus so far. It may be one differentiator out there is we're generally a shorter part of that lead time, so the components we provide can be provided in a quarter or two versus, let's say, an engine where you have to get out there early. and get in the queue. So we're starting to see that pick up on the replacement side. But I agree with you that there is a lot of tightness in the frac market, but we still saw activity increase in the quarter. And again, we think that our customers are still finding more and more efficiencies to continue to increase and use our consumables.

Okay, and one on the international side for me, and I don't necessarily want you to have FRAC specific on this, but we're hearing a lot more. oil companies and EMPs move into the kind of North Africa region and Turkey and Pakistan and other places outside of the traditional Middle Easter. Are you seeing people start to come across your transom that that want new equipment, not recycled equipment from the US to start expanding?.

in those areas as well? We are. You mentioned more, let's call it frontier areas, but as an example, we sold our Duraline manifold, brand new Duraline, probably the highest spec, not even really used in the U.S. yet because the guys here are still using the older technology, but the newest technology, we sold that into Argentina earlier this year. We're starting to see more and more inquiries like that. And again, I think that's a great advantage for us. We have the global footprint, we have the worldwide sales, and then our technology, we can ship it around the world. And so we're seeing more and more customers interested in how do we be as efficient as the guys in the US. And so that, yes, we're excited about that. we'll sell the big kit, but then behind that comes the consumables where, you know, that's where we really get excited.

I appreciate all the color. Thanks for letting me in. I'll turn it back. Thanks, Tom.

Thank you. Our next question comes from the line of John Daniel of Daniel Energy Partners. Your line is open, John.

Hey, guys. Just one for me, and it's a follow-on to Dawn's question. Neil, you mentioned that you're a shorter part of the lead times for the frack market, but I'm curious, you know, Could your lead times extend if all of a sudden the US frack market gets that pricing signal to say push forward with 20 to 25? new fleets early next year. How do your lead times change in that scenario?.

Yes, if we have a massive, massive increase in demand, we would do everything we could do to adapt to it. And so, yes, our teams are nimble. And we're talking to our customers, right? So I think we wouldn't necessarily be surprised if they came hard. And, you know, I think also we've built up the supply chain. We still, you know, while frack has been relatively quiet, you know, over the last couple of years, we are, you know, getting the power, the power demand story has been there. And I know you cover it really well. You know, we noted a couple key orders here on our heat transfer side that I think put us in good position, but as you think about the opportunity that we have on the data and mobile power up, you know, product portfolio, you know, every engine that, you know, supplied for that application needs a radiator.

And, you know, there's 5,000 or 6,000 engines that could be delivered over the next five or six years. That is a massive. opportunity for us. So we want to get our fair share. We started making progress in Q2 with our stationary radiator order, but I think we're building a reasonable backlog in that business and look to continue to grow it. Okay. Thank you. And not to be perceived as a troublemaker here, but again, falling in the line of Don's question.

questions, but do the inquiries from those companies, the frack players, does it sync with their guidance?.

I would think so because, again, we're not seeing the big ad. We're not getting those 15 or 20 fleet inquiries, John. We're seeing more.

one-off. Okay. Fair enough. Thank you guys. Great quarter. Thanks, John. Appreciate it.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone. Our next question comes from the line of Richard Tullis of Water Tower Research. Richard, your line is open.

Thank you, Neil. One more from me, please. Touching on Venezuela and the potential market there or the size of that potential market, do you see that presenting some additional upside to your strategy.

FET 2030 goals? It can be a huge market, right? You know, we've pretty much been out of that market, you know, since, what, 2007 or so. You know, I can remember visiting the country around that time and seeing the infrastructure then needing work, and I can only imagine what it stands now. So I think that could be a great driver of our vision. where we stand out or where we want to stay focused, we want to remain nimble and go where the activity is. We don't always know where the oil is going to be produced, but we can get our products there to support its production. And so that's where we want to be. If it's Venezuela or Argentina or the Middle East, you know, we're going to be there and we're going to have our products there. Very good. Thanks, everyone.

Thank you, Richard. Thank you. I would now like to turn the conference back to Neil Lux for closing remarks. Sir?.

Well, thank you for your support and participation on today's call. We look forward to our next meeting in October to discuss FET's third quarter 2026.

This concludes today's conference call. Thank you for participating. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good morning, ladies and gentlemen, and welcome to the Forum Energy Technologies First Quarter 2026 Earnings Conference Call. My name is Daniel, and I will be your coordinator for today's call. [Operator Instructions] This conference call is being recorded for replay purposes and will be available on the company's website.

I will now turn the conference over to Rob Kukla, Director of Investor Relations. Please proceed, sir.

Thank you, Daniel. Good morning, everyone, and welcome to FET's First Quarter 2026 Earnings Conference Call. With me today are Neal Lux, our President and Chief Executive Officer; and Lyle Williams, our Chief Financial Officer. Yesterday, we issued our earnings release, which is available on our website.

Today we are relying on federal safe harbor protections for forward-looking statements. Listeners are cautioned that our remarks today will contain information other than historical information. These remarks should be considered in the context of all factors that affect our business including those disclosed in FET's Form 10-K and other SEC filings.

Finally, management's statements may include non-GAAP financial measures. For a reconciliation of these measures, please refer to our earnings release and website.

During today's call, all statements related to EBITDA refer to adjusted EBITDA. And unless otherwise noted, all comparisons are first quarter 2026 to fourth quarter 2025.

I will now turn the call over to Neal.

Thank you, Rob, and good morning, everyone. Our first quarter results reinforced our confidence in the path we presented with SET F030. Year-over-year we increased revenue 8%, EBITDA 14% and net income 300%. The execution of our Beat the Market strategy drove these results.

Impressively, we grew revenue per global rig 12% from a year ago and positioned our company for future games with strong bookings. Orders were up 10% year-over-year with a book-to-bill of 106%.

We entered the year with our highest backlog in 11 years, and we grew that backlog again. Compared to the first quarter of last year, our backlog is up 44%.

Also following the completion of our structural cost-saving initiatives, we are now a more efficient organization. These efforts have achieved $15 million of annualized savings. In addition, we continued our share repurchase program and strengthened the balance sheet by extending our credit facility's maturity to 2031.

Overall this was the kind of start we wanted to see, providing momentum into the second quarter and beyond.

Looking ahead, our results should increase substantially, driven by market share gains, backlog conversion and cost savings. We are forecasting second quarter EBITDA of between $24 million and $30 million, which at the midpoint is up 32% from a year ago. These results would deliver incremental margins of 51% with EBITDA margin approaching 13%. This sequential improvement is driven solely by the execution of our plan.

Turning to the full year. We are raising the midpoint of our EBITDA guidance to $103 million, up 20% compared with 2025. Importantly, while we are seeing signs of increased activity, which is consistent with some analyst expectations, our forecast conservatively assumes a flat market. Should the market pick up, I would expect to see further upside to our forecast.

During the first quarter, we continued gaining market share through innovation and new customer adoption. This is a key part of our strategy. So let me provide an update on a few products we have recently commercialized.

First, DURACOIL 95 coiled tubing for sour service environments is continuing to gain traction and is now active on 3 continents. This is an ideal product for Venezuela and the Middle East, especially if workover activity accelerates to bring production back online.

Another innovation I want to mention is Unity, our next-generation operating system for remote ROV operations. We recently had the opportunity to showcase this technology at a large international trade show. In a real-time demonstration, our customers were able to control an ROV positioned hundreds of miles away from a terminal in our booth. It was a powerful demonstration of Unity's capabilities and has ignited interest in our product.

The next product I want to highlight is DuraLine, our manifold system for multi-well frac applications. Compared to our competition, DuraLine is significantly safer and more efficient. Also it is a great example of technology developed for U.S. shale applications that can be exported to international locations. In the first quarter, we received a significant order for multiple systems to be deployed in Argentina this year.

Another innovative area for FET is rig floor automation. We have developed patent-pending software for the FR120 iron roughneck that automates the drill pipe makeup and breakout process with the push of a button. Our solution dramatically simplifies rig floor operations, reduces nonproductive time and increases drilling efficiency by 30%. This software will be packaged with new iron roughnecks and sold as an upgrade to existing ones. I am very excited about this development.

Shifting to the power generation and data center markets. We have seen increased interest in the cooling solutions offered by our global heat transfer product family. Based on customer feedback, we have developed a stationary power cooling solution. This new design gives us an opportunity to address a bigger part of the market. And since its introduction, we have developed a strong commercial funnel. These innovations are great examples of how our product pipeline is supporting both near-term share gains and the long-term ambitions of FET 2030.

Shifting to the Middle East conflict and its impact. First and foremost, I am thankful all our employees in the region are safe. That is our primary concern. Also operationally, we have not suffered any facility damage. We have experienced some disruptions that are having a slight impact on our business, particularly around logistics and freight costs. However, our teams did an excellent job finding creative solutions to these challenges and we were able to increase revenue in the Middle East during the quarter.

While uncertainty remains high, we are not forecasting any material negative impact from the conflict. For context, Middle East revenue is only 10% of our total, limiting the company's exposure.

At the same time, this conflict is creating medium to longer-term tailwinds for our industry. A significant portion of the world's oil and gas supply has been disrupted for 62 days and counting. Even if oil shipments through the Strait of Hormuz resume quickly, global oil inventories will be meaningfully reduced. Barring a material downturn in global demand, we expect investment in oil and gas production to increase over time to replace depleted inventories and support energy security.

Some analysts have suggested that our industry will experience a prolonged up cycle beginning later this year or early 2027. This up cycle aligns with the growth market scenario of our FET 2030 vision. Under this scenario, our addressable markets grow at a rate of 9% annually and we expand our market share to 22% by 2030.

The combination of market expansion and share gains doubles revenue to $1.6 billion, quadruples EBITDA and nearly triples free cash flow in that time frame. This scenario underscores our strategy's long-term value creation potential, while our near-term focus remains on disciplined execution and cash flow generation.

Now to provide more detail on our first quarter results and near-term financial outlook, I will turn the call over to Lyle.

Thank you, Neal. Good morning. I will begin with first quarter results and our guidance, then shift to a discussion of cash flow and our capital allocation strategy.

First quarter revenue of $209 million came in near the top end of our guidance. Growth in offshore and international markets led the revenue increase of 3%, outpacing global rig count. Our international revenue was up 7%, with Canada, Europe and Latin America each delivering double-digit gains. This is the third consecutive quarter when international exceeded U.S. revenue. And offshore revenue expanded 10%, driven by a 20% increase in our subsea product line. as the team begins to execute orders secured last year.

Adjusted EBITDA for the quarter was $23 million, in line with our guidance as cost savings benefits were largely offset by product mix. Adjusted net income of $6 million increased 11% on favorable income tax expense rate that benefited from geographic income mix.

We grew backlog again in the first quarter even after very strong bookings in 2025. Both segments posted a book-to-bill ratio greater than 100%. We saw higher demand for capital equipment in the stimulation and intervention and the drilling product lines and increased demand for wireline cables. Valve orders increased nicely, bouncing back from tariff-related impacts throughout 2025.

Let me continue with additional color on our segment results. Drilling and Completions revenue was $127 million, flat with the previous quarter. The subsea product line increased 20% as we recognized revenue on ROVs and the rescue submarine project. The stimulation and intervention product line increased 7%, supported by power end and wireline cable demand. And to note, our quality wireline product family set a new record this quarter in revenue and in greaseless cable sales. Coiled tubing revenue was down 17%, coming off strong U.S. sales last quarter and due to customer-requested delivery pushouts into the second quarter.

Despite flat revenue, segment EBITDA was up 6%, benefiting from cost savings and improved plant utilization related to our facility consolidations.

Artificial Lift and Downhole revenue was $82 million, up 9%, with increased sales volumes across all 3 product lines. EBITDA was roughly flat, reflecting a combination of product mix, timing of incentive expense and lower absorption at 1 facility, which we expect to improve in the coming quarters.

Consolidated free cash flow was $1 million, consistent with our guidance. As a reminder, our free cash flow is typically back-half weighted. For example, roughly 2/3 of our free cash flow was generated in the second half of 2025.

Despite the seasonally lower free cash flow, we still remained active on share buybacks. We repurchased almost 93,000 shares for approximately $5 million under our share repurchase authorization. These purchases averaged $49 per share, about 20% lower than our stock price at yesterday's close.

In addition, we paid $9 million for withholding taxes associated with our stock-based compensation program, avoiding the issuance of roughly 180,000 shares and ultimately benefiting our shareholders. These payments, along with transaction costs associated with the credit facility amendment, resulted in a modest and temporary increase in net debt.

We ended the quarter with net debt of $121 million with a net leverage ratio still at a comfortable level of under 1.4x. While this is higher than where we ended last year, we expect net leverage to decline to under 1x by the end of the year.

Liquidity of $91 million remains strong with $54 million available under our revolving credit facility. During the quarter, we extended our credit facility maturity to February 2031 with improved pricing and greater letters of credit capacity. This amendment, combined with our strong balance sheet, provides significant flexibility for FET to fund strategic initiatives, including long-term debt retirement, organic growth and acquisitions.

Now turning to our guidance. For the second quarter, as Neal mentioned earlier, our results should increase substantially driven primarily by backlog conversion, cost savings and market share gains. We are forecasting revenue between $200 million and $225 million and EBITDA between $24 million to $30 million, which at the midpoints are up 6% and 32% from a year ago. Adjusted net income expected for the second quarter is between $6 million and $11 million.

Our free cash flow -- sorry. Our full year guidance issued in February assumed relative flat market activity compared to the back half of 2025. Now with strong first quarter results and increased expectations for the second quarter, we are raising the bottom end of our EBITDA guidance range from $90 million to $95 million. We are maintaining our revenue guidance of $800 million to $880 million. And for adjusted net income, we are guiding between $21 million and $38 million.

In addition, we reaffirm our full year free cash flow guidance of $55 million to $75 million as we remain confident in our ability to convert approximately 65% of EBITDA into free cash flow.

Let me conclude with our capital allocation expectations. As we discussed last quarter, our balance sheet is in great shape. We consider any further net leverage reduction as dry powder for incremental strategic investments, including acquisitions and share repurchases. With our M&A framework, we seek to acquire companies with differentiated products, competing in targeted markets at valuations that would be accretive to FET per share metrics.

And we compare these acquisitions with repurchasing FET shares. This year, our bonds allow total repurchases of around $30 million, as long as our net leverage remains below 1.5x. We believe FET remains a compelling investment.

With that, I'll turn the call back to Neal for closing remarks.

Thank you, Lyle. Over the last few years, we have implemented a strategy to make FET a better and stronger company. We are gaining share through commercial excellence and innovation. We are leveraging our global footprint, delivering our solutions to customers around the world. We are creating significant value for our shareholders, and we have been successful despite market headwinds. Now we may be closer to finally having a market tailwind that could supercharge our efforts going forward.

Thank you for joining us today. Daniel, please take the first question.

[Operator Instructions] Our first question comes from Jeff Robertson with Water Tower Research.

Neal, with respect to the Unity ROV system and the trade show, are you seeing demand for that product outside of traditional energy? And then secondly, if we think about Unity and the cooling systems you all have, are there orders for those systems that are within -- that are in the backlog? Or are you working on that?

Yes. Good question. So starting with Unity first, Jeff. It's still a fairly new system. We're gathering more and more field data as well as understanding how much it benefits our customers. So that's still early stages there. I do think it would have an application outside oil and gas for control as an ROV. But yes, I think the interest is high.

And so we do have a number of Unity systems already in the backlog that we'll continue to add to what we've already delivered. And again, I think as we build that field experience, I think we'll then look at other applications outside oil and gas. And again, I think defense would be a great application for it as well.

On our cooling systems, we didn't mention in the call, but we formerly had a -- we do have a cooling system that's mobile for data centers, that we called Power Tron. The system I mentioned in the script is a new design that's actually a permanent. So it's not mobile. So this is brand new, one that we are quoting actively, and we are, again, building up a nice opportunity queue. So we don't have orders for that system yet, but I think all indications are we have a great product and would expect that going forward.

Can you comment, Neal or Lyle, on what the margin profile looks like in the backlog?

I think, again -- let me start with the new products and innovations. I think generally, our innovative products have higher margins than our standard overall margin. Again, I think the innovations we developed, we're addressing specific customer needs and so we're able to get more value out of that. And I think as we talked about our backlog coming into the year, about 11% was new innovations or new products that we developed recently. So I would think overall our average margin would be on higher because of that.

Yes. Jeff, maybe a little color to add to that. Last year we booked a large amount of orders for subsea. Their book-to-bill was basically off the charts, the combination of defense and traditional oil and gas, ROVs and rescue submarine. Typically we see our subsea business with slightly lower contribution margins. There's a lot of pass-through material in electronics, et cetera, that go through on those subsea orders that tends to pull the average margin down.

So I'd say the subsea portion of that backlog, which is meaningful, is a little bit lower. But as Neal mentioned, our other products we're putting through are coming in at higher margins.

And then if I can have one more. With respect to the Middle East and like Qatar's LNG that's part of it's gone offline, are there conversations underway with customers in the Middle East that would increase demand for FET's business as the oil producers and gas producers maybe look to diversify their production capacity and maybe put a bigger emphasis on developing their own natural gas for internal consumption?

Yes. I think it's maybe early on that rebuilding discussion, Jeff. We're still staying close with our customers. I think as we mentioned, we are seeing -- we did increase revenue in the Middle East during the quarter.

One area that we didn't cover specifically was Venezuela. So we are seeing an increase there in demand, especially for our short-cycle activity base like coiled tubing, wireline, things like that. So I think as we maybe get farther from the conflict, I think there will absolutely be an opportunity in the Middle East. But I think interestingly, we are finding some nice opportunities already in Venezuela.

Our next question comes from Steve Ferazani with Sidoti.

I appreciate all the detail on the call. in terms of the guidance raise this early in the year, obviously, you wouldn't do it without confidence, just trying to get a better sense of the components that led you to that decision. You covered it a little bit. But to me, the surprise here was the strength in orders, given the fact that we haven't seen a pickup in North America yet given the conflict in the Middle East, given you would assume a lot more uncertainty on that on behalf of customers. Were you surprised by the -- we're certainly surprised by the strength in the order book for Q1. Was that the major contributor? Were there other factors in the guidance raise?

Yes. I think having a book-to-bill over 100% does give you a lot of confidence when you look out a quarter for sure. So I think that helped. Some of the orders that we booked, I mentioned in the call DuraLine for Argentina, that's one we've worked on for a long time and got to the finish line in Q1. So that helped increase.

Another area where we're seeing some great strength is in Canada, with our Variperm product line. They're delivering great results. I think the -- with oil prices up, I think that's an area where we're going to see more and more investments. So that's been a big part of it. So I think Variperm being strong as well as some of our more [indiscernible] our backlog coming into the quarter I think gave us a lot of confidence in increasing that.

Again, we're not assuming yet an increase in activity. We're keeping our assumptions. But I do have to say we are getting initial, let's call it, indications of some increase in activity. It's uneven so far, so I don't want to call it a trend. But if it does -- if the activity does increase, I think we'll be aggressive in following it up.

And then in terms of the strength in Q1, it sounds like you were also impacted by some delivery pushouts given the higher 2Q guidance. Fair to assume those deliveries were either completed or will, for sure, complete in 2Q?

Yes, yes. I think we're specifically talking about coiled tubing, which we had customers a little unsure at the end of the quarter and just waited. But that is actually an area where we're seeing customers now kind of accelerate. So that's one of the initial indications that we've received.

Got it. Have we seen the full benefit of your cost reductions now with the plant consolidation? Or can we expect more to contribute to margins as the year goes on?

I think that -- the Q2 guidance fully assumes all of our cost reductions, where I think we'd still have some being taken care of in Q1. And we also had some -- just operationally, when you consolidate facilities, we -- you always have some challenges there. But going forward in Q2, we feel really good about the cost savings and our ability to execute there.

Got it. That's helpful. And Lyle, I do have to circle around on operating cash flow. Clearly, Q1 is always the lowest, and you had pointed it out going into this quarter. That being said, operating cash flow was lower than the previous 2 years. When I'm looking through the numbers, it looks like it's a timing issue with receivables collection. Is the delta between the last 2 years, is that fair, and it's reasonable to think it's more timing than anything, and there's no reason to think you're not still on track for full year cash flow?

Yes, Steve, the way I would answer is, first, the seasonality is driven by incentive comp payments and property tax payments that go out in Q1. So that's the big drag on -- from a working capital perspective. Think of that as really timing.

And then quarter-to-quarter, we'll see pretty good movements in DSOs, for example, and those can go swing up and down based on projects, project timing for our bigger projects, and kind of just what's happening with shipments and when those flow in. So we did see a little bump up in DSOs in the first quarter. But again, we think that will unwind in the second and third quarter.

So yes, maybe a little bit of movement in receivables and payables. But really the big driver for Q1 are those annual payments that we make every year.

But we feel like we are on track for the full year, Steve.

And in terms of the use of it, any change to your buyback strategy?

Yes. No, we like the buyback plan. We highlighted that about $5 million back this year. Total capacity for the year would be about $30 million. Just like we talked on last quarter's call, we do expect that to be back-end weighted. We want to keep that somewhat in line with how our free cash flow flows in. So we've got a little bit of time on how that plays out. But definitely feel like with our free cash flow yield as high as it is, over 10%, it definitely is an attractive investment for us to consider.

Our next question comes from Dan Pickering with Pickering Energy Partners.

I think, Lyle, you mentioned, or maybe it was Neal, I can't remember, you talked about FET 2030, and you threw out some numbers. I just want to confirm what I heard. I think I heard doubling of revenues to $1.6 billion, and EBITDA I think was quadrupling, so that's, call it, $400 million. I just want to confirm that. It kind of implies an EBITDA margin of about 25%.

I was hoping you could just kind of give us some perspective, I realize that is aspirational, it's forward-looking, et cetera, but how do you think in there around pricing improvements? And can you put that 25% margin level in context with prior sort of strong cycle periods?

Yes, Dan. So I think those numbers are based compared to 2025. So we were, just call it, around $85 million of EBITDA in 2025. But yes -- revenue to $1.6 billion.

So we see that really as 2 drivers there: are market gains -- market growth, excuse me, and share gains driving the revenue. And then with our operating leverage, we see, let's call it, 30% incremental margins on that revenue increase. So I think that's where we get the increase in overall margin.

So I think if you play it out to that period, let's call it around 20% even margins once we have that kind of revenue growth on our fixed -- kind of the fixed cost that we have here. So I think we have a good platform.

And also as we look at it, if you look at our revenue per rig in the U.S. of around $700,000 per rig annually, internationally it's closer to $300,000. So the ability for us to export the technology, whether it's DuraLine manifolds, our Multilift solution, ESP life extenders or protectors going into the Middle East, we see that as a great opportunity. So if we could have the international revenue per rig, international rig get closer to the U.S., that $1.6 billion target is aspirational, but it feels like a great target for us to achieve.

Okay. You mentioned Venezuela. Are you seeing -- what are you seeing in Venezuela? Is it inquiries about what you could do if companies go in there? Are you seeing companies that are already there asking for more stuff? Is this a Q2 revenue impact? Is it later in the year, into '27 revenue impact?

It's both. So we are receiving orders and delivering material for customers who are already in country looking for our products so they can get back to work. And then we're also early stages looking at maybe more infrastructure-type sales, again, coiled line pipe, things like that, potentially valves going into Venezuela to help rebuild that infrastructure. I think that would be a longer term.

But historically, before, let's call it, maybe it's 2007, I got to get my memory going, it's been a while, Venezuela is a great market for a lot of our products. So I think getting back in there, opening that market again, creates a lot of opportunity for us.

Okay. And then you talked about Argentina and the DuraLine order that you've been working on for a while. Is that to go -- is that going in with a pressure pumper that has equipment there already? Or is it new capacity, new equipment moving in that you're going along with?

I'm not positive if the pumps are in country yet or not, but I believe that's an additional fleets that are being added to get the work done. Yes.

Yes. Yes, that's a market we see a lot of opportunity. Last question for me is we bring it back to generally in the U.S. Can you talk a little bit about sort of pricing behavior? When we see your results in Q1 and you're talking about Q2, is there really -- is that a flat pricing environment that you're discussing? Are we seeing any upward bias anywhere? Is it kind of a steady market right now?

I'd say it's steady right now, Dan. We're getting interest. We're hearing the phones ringing, the inquiries are coming. We've had a few customers asked to maybe receive material earlier than they had originally planned. But it's not, let's call it, a boom yet. So I don't see a pricing impact here necessarily, other than we have passed on any freight increases, if there's a diesel surcharge or any other sort of -- in the past, we've passed on tariffs, for example. So if there's cost pressures like that, we'll push those through.

But let's call it real pricing increase. We haven't approached that yet. So I think we have some capacity. I think some of our competitors have some capacity, at least initially. But as we go along in the cycle, that's absolutely something we're looking for.

Our next question comes from John Daniel with Daniel Energy Partners.

Neal, my first question is with the GHT product line, can you speak to what you're seeing from the sort of the North American frac companies, replacement orders and inquiries?

Yes. We have seen an uptick here in inquiries. I would say nothing -- not a trend yet, John, but something that we're monitoring. I still think it's higher. We're still seeing more demand right now for our data center cooling opportunities than we are for frac.

That said, even going into the year, we were a little bit surprised with a few capital orders on the drilling side, even on the pressure pumping side, where customers are -- were pulling the trigger even before this price increase. So I'm kind of cautiously optimistic that as we get further in the cycle and activity picks up, I think you know just better than most, how old some of that equipment is out in the field, that we could have an opportunity to add some new capital there for our customers.

Okay. And then my follow-up, and not to get technical, but on the DuraLine, it was characterized as more efficient. Can you elaborate on what makes it more efficient?

Yes. It's our DuraLine connection, so we're able to rig up and rig down significantly faster. We also utilize high-pressure hoses and cranes to move those hoses. So if you need to pull out a pump, you can do that in a much faster time than you could with a traditional manifold.

So it's something that we're seeing a lot of interest from the pressure pumpers there who, large ones, who want to be best-in-class. And so we're seeing good take-up there.

And once you sell those systems, what type of consumables are going along with it? What's the repeat revenue opportunity, if you will?

Yes. The whole system, obviously, is a pretty big order initially. But we'll -- whether it's check valves, hose replacements, different types of bearings, different types of iron that we would also add. So I think that would be some of the pull-through with that. So I think, let's call it 80-20 on capital versus recurring there.

Okay. And then a final question. I don't know how many like of the bearings and valves and fittings and all that is sourced from international markets. But assuming some of it is, do you see any potential supply constraints as an eventual Middle East rebuild comes, like could you -- supply that you might have thought you could get gets diverted to a higher priced market, if you will, is that a risk?

Yes. We haven't seen anything like that. We feel good about our supply chain. But it's obviously something we'll watch, John.

Our next question comes from Eric Carlson.

Good quarter again. And maybe just in the -- I think last time when we talked, oil prices were probably in the mid-60s, and now you see, obviously, what's happened in the last few months and obviously a lot of headline volatility there as well. When you think about the 2030 plan you presented and, I mean, from a physical perspective, an oil market that is likely to lose really over 1 billion barrels of supply, and when you think about kind of the base case you've presented in that plan has been like a no-growth scenario and then the 2030 growth scenario, can you just provide a little bit more context as to kind of your confidence in outcomes kind of given we probably need to build a lot of supply back into the market at some point here?

Yes. I think with the -- as we look at it, and I think I agree with you, Eric, the idea that we're going to take 1 billion barrels of oil out of inventory, that has to be replaced. And I think countries around the world, I think they're going to have to ask themselves how much inventory should they have. I would imagine it's going to be more than what they had coming into the conflict. So I think that is even more demand on oil production.

So that fits really well with our growth scenario. And again, we think that as the buildup comes both on oil, and again, data centers are still out there, natural gas demand, I think, is still going to grow, I think that biases up towards our growth outlook, where we could double revenue because we're going to have our markets growing and we're going to be taking share. And again, we listed off a number of key innovations, that's really driving growth, and you add on to it the need to rebuild and refill, I think that's a great opportunity for us.

Great. And then maybe just in that context of kind of headline volatility, obviously, the commodity volatility has been high. I mean your own equity volatility is relatively high too. I mean pretty good results today, equity market reaction is what it is, for whatever reason. But in the context of your capital returns, when you look at volatility as an opportunity to buy more of what you already own and you know very well and a potential to kind of accelerate the growth plan given what's happened in the broader market, does that change how you think about buybacks versus acquisitions, what's more attractive? I mean the organic opportunity is obviously massive if it even plays out close to the 2030 growth scenario.

And then maybe the last part of that would be just from an M&A market perspective, obviously, this volatility is quite high, I'm just curious what your thoughts are on potential targets. Maybe if you could cover kind of the size of target again. And then I would presume the bid-ask spread has kind of widened here, but I'm just kind of curious as to the kind of organic growth opportunity, how you allocate capital and then the M&A market. So that would be helpful.

Right. Maybe I'll start and then hand it to Lyle. Think about our free cash flow yield is still around 10%, right? So I think there's a -- it's higher than our peers and it's higher than the average small cap. So I think we still are a great value there, especially with our growth outlook.

As we think about acquisitions, we have a criteria that's very -- that we hold to that they got to be differentiated products, got to have a few competitors, got to have great financial metrics. And we want something that would be accretive, right? We want to be able to grow free cash flow per share, and I think that's really important. So we kind of have all that together.

That said, Lyle and his team have developed a really interesting pipeline and something we continue to look at. And there's opportunities out there, but we're going to be incredibly selective, especially with our free cash flow yield.

Eric, thanks for the question. The thing I would add to Neal's comments, because they were spot on, is because of the breadth of our product portfolio, it gives us, we've said it before, a lot of shots on goal around what kinds of products we could add that would be strategically beneficial to our business.

But in every case, the criteria is the same. We want businesses that have differentiated technology, that compete in targeted markets, and that we could acquire as something that is going to be accretive to our per share metrics. So we can be conservative and we can be -- we can take our time because we do have a good alternative investment in our own shares that we could buy.

So definitely an interesting market out there, a lot of opportunities to look at. But as you mentioned, we've got a compelling base case if we can't find something that is even more compelling.

Right. And then maybe just valuations, obviously -- the Variperm deal was done, I mean, under 4x EBITDA and a really impressive free cash flow multiple. I mean, what does the market look like, I mean, today? I mean, I think from a trailing perspective when -- if we would have maybe had this conversation in February, it goes, well, the activity has continued to come down, oil commodity prices are so-so, that feels like you're almost bottom-taking the market. And then in the context of where we sit today on a go-forward basis, it feels like you need more activity.

It's kind of hard to judge how much, ultimately, but it feels like the need is there. The extent can be debated, I suppose. But just like seller expectations in today versus maybe a quarter ago would be just interesting to hear.

Yes. I think you're right. And if you look at public company valuations, multiples have increased year-to-date, pretty meaningfully, ours included. And what you would expect, just as you mentioned, is sellers to try to take advantage of that with their own expectations.

I think that being said, we've seen deals getting done still in the range of where we acquired Variperm. So our expectation is that those deals' values haven't changed a lot meaningfully in the last 90 days. And as you mentioned, volatility in valuations around public company equities can be pretty high. So we'll be appropriately conservative in any moves that we make there, making sure that we're very accretive to our story.

Great. Yes. So basically, all things equal, if something gets done, it's significantly accretive. And then the last point would be like what is the target? I mean Variperm was a very large acquisition that kind of transformed the business and really kind of set you up for where you are now. I mean -- but that was a pretty large transaction. I mean what is the general range you guys have been thinking about if you can get something for the right price, it kind of looks like another homerun like Variperm was?

Yes. As I mentioned, we do have a lot of shots on goal, and that means the dispersion of what those could look like is pretty broad as well. Key things that we're going to do financially is keep our balance sheet very strong. So we're not going to risk the balance sheet by doing some bigger deal that stretches us out. That's not in our playbook.

Obviously, we've talked about our stock being a very good value. So I think that puts kind of some brackets around the size of deal we might do, but they are pretty broad as far as what we're seeing that are interesting. And it's just a matter if we bring something across the line, what might that be.

Okay. That's helpful. And then last one, that seller type, is that kind of like the Variperm deal where privately-held companies? Or are there carve-outs from other publics or, I mean, what does that generally look like?

We're kind of seeing it all. There are quite a few private equity held businesses that are long in the tooth in portfolios that are out there. That data is that data is available. Also we've seen smaller deals that are owned by families, that are looking at how do they plan for the next generation and estate planning kind of question.

So we've seen a broad mix. And over our history at FET, we participated in a lot of different kinds of deals. So definitely an interesting time right now.

I'm showing no further questions at this time. I would now like to turn it back to Neal Lux for closing remarks.

Thank you for your support and participation on today's call. And we look forward to our next meeting in July to discuss FET's second quarter 2026 results. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to the Forum Energy Technologies Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Gigi, and I'll be your coordinator for today's call. [Operator Instructions] This conference call is being recorded for replay purposes and will be available on the company's website.

I will now turn the conference over to Rob Kukla, Director of Investor Relations. Please proceed, sir.

Thank you, Gigi. Good morning, everyone, and welcome to FET's Fourth Quarter and Full Year 2025 Earnings Conference Call. With me today are Neal Lux, our President and Chief Executive Officer; and Lyle Williams, our Chief Financial Officer. Yesterday, we issued our earnings release, which is available on our website. We are relying on federal safe harbor protections for forward-looking statements. Listeners are cautioned that our remarks today will contain information other than historical information.

These remarks should be considered in the context of all factors that affect our business, including those disclosed in FET's Form 10-K and other SEC filings. Finally, management's statements may include non-GAAP financial measures. For reconciliations of these measures, please refer to our earnings release and website. During today's call, all statements related to EBITDA refer to adjusted EBITDA. And unless otherwise noted, all comparisons are fourth quarter 2025 to third quarter 2025.

I will now turn the call over to Neal.

Thank you, Rob, and good morning, everyone. Our fourth quarter and full year results once again display why FET is a great business and a compelling long-term investment. Despite a challenging backdrop, including lower global drilling activity, tariffs and geopolitical uncertainty, our teams executed with discipline and focus. I am extremely proud of what we achieved in 2025, and we are on the right track to realize our strategic vision, FET 2030.

Let me discuss some of the highlights from last year, starting with market share gains. We continued to execute our Beat the Market strategy through customer engagement, product innovation and geographic expansion. Since the strategy's inception in 2022, revenue per global rig has grown 20%. In 2025, we increased it again despite a sizable decline in global rig count. These gains reflect disciplined commercial execution, a product portfolio that continues to resonate with customers and the benefits of our global footprint.

Our commercial teams delivered a full year book-to-bill of 113%, with orders well diversified across products, end markets and geographies. The subsea product line performed exceptionally well with a nearly 190% book-to-bill, supported by awards in the energy and defense markets. Also, capital equipment orders for drilling products increased internationally, while we saw continued strength in wireline, coiled tubing and sand and flow control products.

As a result, we enter 2026 with our highest year-end backlog in 11 years, up 46% since the start of 2025, providing both visibility and resilience. A key driver of our market share gains and backlog growth is innovation. New product development remains central to our ability to Beat the Market and expand our addressable markets. During 2025, we commercialized 10 new products by collaborating with our customers to address specific operational challenges and improve their efficiencies.

One innovative example is our Secura series stage collars, which helped us rapidly grow share in the Middle East with one of the largest oil companies in the world. We are expanding on that line with SecuraSlim, the smallest diameter stage collar in the industry designed for complex wells. With SecuraSlim, our customers can eliminate a casing string, significantly reducing costs and improving efficiency while maintaining well integrity.

Another important product launch was DURACOIL 95, a differentiated coiled tubing solution for improved performance in corrosive environments. Developed with Middle East applications in mind, DURACOIL 95 expands our portfolio and supports continued international share gains. The last example I will provide is our DuraLine Manifold System, which allows operators and service companies to rig up significantly faster and more safely with far fewer man hours. This is made possible by our proprietary DuraLock connectors, high-pressure hoses and patent-pending crane systems.

We recently commissioned a system for shale development in Argentina and have line of sight for additional sales. Collectively, these innovations strengthen our technology pipeline and support future growth. In addition to our focus on growth, we are maintaining our margin and cost discipline. During the year, our teams mitigated trade and tariff policy impacts through pricing actions, supply chain optimization and leveraging our global manufacturing footprint.

In parallel, we executed significant structural cost reductions and consolidated 4 manufacturing plants into 2. These actions deliver approximately $15 million of ongoing annualized savings. The combination of market share gains, innovation and cost discipline have translated directly into strong financial results. Free cash flow generation was a defining strength in 2025. Over the course of the year, we delivered $80 million of free cash flow, the top end of our increased guidance range. This performance enabled disciplined execution of our capital returns framework.

We reduced net debt by 28% and repurchased approximately 11% of our shares outstanding. This is an incredible result for our investors. Looking to the future, we remain confident in our bullish long-term outlook. Over the next 5 years, oil demand is expected to increase along with global economic growth and natural gas demand is forecast to grow rapidly through LNG exports and AI-driven electricity demand. The energy industry must supply these needs while also overcoming rapid declines in existing production.

To meet this enormous challenge, our customers need to be significantly more efficient while also adding new capacity. Under this scenario, FET's addressable markets would expand by more than 50% -- this expansion, combined with our targeted market share gains, could double revenue in 5 years. And with our strong operating leverage and capital-light business model, our EBITDA and free cash flow would grow significantly. The next step in this exciting journey starts now. While the general consensus for our industry is relatively flat activity, we expect to Beat the Market through share gains, strong backlog conversion and benefits from structural cost reductions.

We are forecasting revenue growth of 6% and EBITDA to increase by 16%. For full year 2026, we are guiding revenue between $800 million and $880 million and EBITDA of $90 million to $110 million. For adjusted net income, we are guiding between $18 million and $38 million. In addition, we expect to convert 65% of EBITDA into free cash flow or between $55 million and $75 million. This is a great start to executing FET 2030. To provide more detail on our fourth quarter results and near-term outlook, I will now turn the call over to Lyle.

Thank you, Neal. I will begin today with a review of our fourth quarter results and first quarter guidance, then shift to a discussion of cash flow and our capital allocation strategy. Fourth quarter revenue of $202 million exceeded the top end of our guidance range and increased 3% sequentially. This performance outpaced a flat global rig count and reflects continued strength in offshore and international markets, where our revenue increased 7% and 8%, respectively.

This is the second consecutive quarter when international exceeded U.S. revenue, which declined 2% due to project timing and softer demand for valves and artificial lift products. Adjusted EBITDA for the quarter reached the top end of our guidance range at $23 million. Higher revenue and cost reduction overcame less favorable product mix and modest increases in health care costs and professional fees. Also, income tax expense in the quarter includes a $3 million of a foreign tax settlement related to tax years 2017 through 2020.

The majority of the expense is from a noncash reduction in deferred tax assets. Fourth quarter book-to-bill was 93%, primarily reflecting order timing in the Drilling and Completions segment following 2 exceptionally strong quarters for subsea and international drilling-related equipment. Let me continue with additional color on our segment results. Drilling and completion revenue was $127 million, up 8%. The subsea product line increased 25% as we recognize revenue on ROV projects and the sizable rescue submarine order announced in June.

Coiled tubing revenue was up 13% with strong tubing sales in North America as well as continued momentum for coiled line pipe. Drilling product line revenue increased 11%, supported by international capital equipment demand. Segment EBITDA was essentially flat as cost savings offset unfavorable product mix. Artificial Lift and Downhole delivered a fourth quarter book-to-bill of 107%, driven by large orders for natural gas processing units. And segment revenue was $75 million, down 4% sequentially on lower shipments by the production equipment product line.

Downhole and Valve Solutions revenues were relatively stable and segment EBITDA was flat, with margin improvement of approximately 90 basis points, supported by favorable mix and cost reductions. Free cash flow remained strong in the fourth quarter, totaling $22 million and resulting in full year free cash flow of $80 million. Through the year, our teams generated cash of nearly $34 million from net working capital efficiencies. We also completed 2 real estate sale-leaseback transactions that generated another $15 million in net cash proceeds.

Excluding this $15 million, our 2025 free cash flow conversion would have been an impressive 76% and a yield of nearly 15% on our year-ending market capitalization. We ended the year with net debt of $107 million and a net leverage ratio of 1.2x. Liquidity of $108 million remains strong with $73 million available under our revolving credit facility. Subsequent to quarter end, we extended our credit facility maturity to February 2031 with improved pricing and increased letters of credit capacity. The credit facility tenor plus commitments totaling $250 million provides significant flexibility for FET to fund strategic initiatives, including long-term debt retirement, organic growth and acquisitions. We appreciate the long and continued support of our bank group.

With this flexible financing structure and our fortified balance sheet, we are well positioned for the future. Looking ahead to the first quarter, we expect activity to remain relatively stable with the fourth quarter. Therefore, our guidance for revenue is $190 million to $210 million and EBITDA is $21 million to $25 million. The midpoint of our EBITDA guidance is up about 15% on a year-over-year basis despite a projected 5% decline in global rig count. We are also guiding adjusted net income of between $5 million and $9 million. We expect to generate positive free cash flow this quarter. I would like to remind investors that our first quarter is seasonally lower due to annual incentive compensation and property tax payments.

Now let me turn to 2026 free cash flow and capital allocation expectations. Our 2026 free cash flow guidance is consistent with our FET 2030 target and reflective of our capital-light operating model. We forecast interest and cash taxes of $35 million, capital expenditures of $10 million and a further net working capital reduction of $10 million for full year free cash flow of $55 million to $75 million. On a comparable basis to 2025, excluding net working capital and sale leaseback proceeds, the midpoint of our 2026 cash flow guidance is about 75% higher.

Let me provide a bit more color on uses of our free cash flow. The capital returns framework followed in 2025 was incredibly successful. During the year, we returned $35 million to shareholders by repurchasing nearly 1.4 million shares, 11% of shares outstanding at the beginning of the year. We repurchased these shares at an average price under $25, less than half of the current FET share price. And we reduced our net debt by $42 million or 28% through the year. Because our balance sheet is in such great shape, we believe any further net leverage reduction should be viewed as dry powder for incremental strategic investments.

In fact, with our balance sheet flexibility and capacity, we have the ability to increase net leverage modestly to fund the right acquisition. FET has a long history of increasing our addressable market through acquisitions. Our criteria identifies company with differentiated products that compete in targeted markets and it would be accretive to FET per share metrics. We evaluate these investments in comparison to repurchasing FET shares. This year, our bonds allow repurchases of around $30 million as long as our net leverage remains below 1.5x.

We believe FET with a forward free cash flow yield around 10% remains a compelling investment. In summary, 2026 builds upon the success we demonstrated in 2025, market share gains supporting EBITDA and meaningful free cash flow, enabling exciting opportunities for outsized returns.

With that, I will now turn the call back to Neal for closing remarks.

Thank you, Lyle. To conclude, I want to reiterate how proud I am of the team's execution in 2025. They delivered strong operational performance, meaningful free cash flow and disciplined capital allocation, positioning FET with momentum as we enter 2026. While near-term market conditions remain dynamic, our backlog, market share gains and structural cost savings give us confidence in the year ahead. More importantly, our long-term vision remains unchanged.

With our Beat the Market strategy and FET 2030 as our North Star, the next 5 years have the potential to be truly special for FET and its investors. Thank you for joining us today. Gigi, please take the first question.

[Operator Instructions] Our first question comes from the line of Jeff Robertson from Water Tower Research.

Neal can you talk about the trajectory that you see in 2026 and '27 in the Subsea business? And then secondly, in terms of products, if you see more unconventional oil or gas development globally, where do you see the biggest benefit for FET?

Yes. Great question. So with subsea, we've had great bookings here the last year. So I think in 2025, we had 190% book-to-bill, and we're executing on our multiyear submarine program. This is a strategic growth area for us, and we expect strong demand in energy and defense. So as we look ahead, 2026 will be a year where we're going to convert a lot of our backlog and look to add on for '27 and beyond. Thinking about international unconventionals we mentioned in our call, the delivery of our DuraLine system to Argentina. So this is unconventional work, where they're adopting really the latest technology that, quite frankly, even the U.S. guys haven't quite gotten yet. So we're delivering the newest and greatest to Argentina. I think another area will be Saudi Arabia for the unconventional gas projects there, both areas where we have continued to export our technology. And as we think ultimately about the trajectory of 2030, where we're going to get the most gains is by attacking our growth markets and getting the adoption of the solutions that we've had in the U.S. and have those adopted internationally.

I've talked about this example a lot, but I think it just -- it means so much that we think about our artificial lift product line, we have a high share in the U.S. and the value proposition is more oil at lower cost. Well, I think that value proposition resonates internationally as well. And it's going to be a time to get there, but I think that's probably a fantastic opportunity and one we'll continue to push.

With respect to acquisitions, are there any product lines or just maybe any other areas that have industrial logic to FET currently that make the most sense to target from an acquisition? Or maybe even an adjacent industry?

Our last acquisition was Variperm, great buy, right? We were able to acquire it at under 4x with high margins, incredibly accretive. So I think another downhole type business would be interesting. I think for us, the main criteria though is, is it a great business? Are we adding something to us that has differentiated solutions -- it's a targeted market will be accretive to FET without stressing the balance sheet, right? So that's where our focus is. If we can find that adjacent where there's good industrial logic or if we can expand an existing product line, if it hits those criteria, we're really interested.

Our next question comes from the line of Steve Ferazani from Sidoti.

Appreciate all the detail on the call this morning. Neal, I just wanted to ask, you came in at the very high end of the guidance range. Where the pluses and the minuses in the quarter? What came in better than you were expecting?

I think it was just -- I mean I'll start and let Lyle add in. I think the team has just really executed solidly. Coming into Q4, we're always concerned about just the holidays and a slowdown. And we really didn't have that impact this year. So I don't think it's kind of the plus or minuses of what came in. I think it was really -- we just didn't have that end of the year slowdown around Christmas. We call it frac holiday in years past, and we didn't see that.

Yes, Steve, I agree with Neal on that comment and really good revenue growth in the subsea product line that we saw that 25% increase. So executing on backlog. And remember that most of our subsea revenue is percentage of completion accounting. So based on how much we can execute during the quarter, that can move that number around a bit. So a little bit of maybe ahead of the game on subsea projects, which was positive. And we had really good flow-through in terms of profitability in artificial lift with Artificial Lift and Downhole segment with good favorable mix really benefited us. So I think as Neal mentioned, we didn't see quite the activity drop off that we might have been afraid of, but also did see some good execution by all of our teams.

That's great. In terms of the Q1 guide, very strong given probably Q1 is probably going to be the worst year-over-year change in rig count, maybe 2Q is a little bit worse. Where is the 15% growth? We're so far into the quarter. You already know the timing of deliveries. How are you outperforming by this much, the change in rig count in Q1 specifically?

I think it's a continuation, right, of our Beat the Market strategy. We are gaining share and expanding on that. And thinking about the overall guide for '26, right, we have backlog coming into the year. So that gives us benefit. We also have the structural cost savings that we executed in the back half of last year. And so that's helpful as well.

Have you fully realized that at this point? Have we seen the full realizations more...

Not quite, Steve, but I think the back half of the year, we'll have 100%, but we're about 2/3 of the way.

Got it. On the strong free cash flow guidance, clearly, part of the benefit you've had the last 2 years has been your really significant actions on working capital, easier to do in a declining or flat market in a growth market, maintain constraining working capital is a lot more challenging. I'm just trying to think about the pieces because that's pretty strong free cash flow guidance for next year. I'm assuming CapEx remains around this level. Can you just walk through a little bit of how you get to that really good number?

I appreciate the comments on the number, but also on the working capital challenge as we grow. So maybe key components that we talked about in the script, just as a reminder, walking from EBITDA down $35 million of cash taxes and interest, then $10 million of CapEx, so really in line with what we've done in the last few years and a $10 million release or source of cash from working capital.

So good job by our teams to continue to do that with revenue growth. I think a lot of that focus is around the area of inventory. If you look at last year, we released about $34 million of cash from working capital, great moves in the area of DSOs and receivables, also good on inventory. So I think next year is a continuation of that. And really, as we think about that cash flow, One of the ways that we've done that is by looking at year-over-year comparison, excluding the sale leasebacks that we had in '25 and also excluding net working capital benefit in both years. If you do that, then on a comparable basis, the '26 number is 75% more cash flow than the 2025 number. So as you mentioned, pretty strong growth there and confident in our team's ability to squeeze some more value out of working capital.

If I can get one last quick one in. We look at the average share count didn't really move much in 4Q. Can you talk about the timing of the buyback in 4Q? And then how we're thinking about timing in 2026? Typically, your cash flow is better in the second half, reasonable to think that's the more likely period you might execute?

Steve, I think you're on there. We did repurchase about 400,000 shares, just over 400,000 shares in the fourth quarter, and we did that. I think as we think about our buyback strategy and how we have that in place, if you remember last year, we were trying to buy about -- use about half of our cash for share repurchases, and we wanted to see that cash flow come in. So while we're really confident in this '26 number, I think a more back-end weighted like we did in 2025 might be appropriate.

One of the things that's different this year than last is the 1.5x net leverage ratio constraint. So at the beginning of '25, we were limited on share buybacks because we had leverage. We've effectively pulled that down to 1.2 at the end of 2025. So a little more of an open window there. But yes, I would think that I would think that buybacks may be a little more back-end loaded this year.

Our next question comes from the line of Keith Beckmann from Pickering Energy Partners.

What do you expect kind of your largest growth avenues to be here over the next few years inside of your D&C business and kind of artificial lift in your downhole tools as well?

Yes. I think over several quarters, right, we've talked about subsea. I think that's been -- as part of our Drilling and Completion segment. Again, we've had meaningful bookings. It has a little bit more diversity outside of oil and gas, too. We had our large defense booking last year. So I think there's some good runway there. Then you also mentioned the artificial lift. Again, what's exciting for us is these products extend the life of downhole pumps and reducing costs and increasing production. So our strong share in the U.S., where we have a solid value proposition, solid market share. I think that also resonates internationally.

So we think we have a bigger opportunity international. So it's taking that value prop, taking our equipment, our products and utilizing our global footprint to really get national oil companies to adopt the technology that has proven itself in the U.S. So I think that's a big part of where we want to go. We also -- just kind of finish that thought too. In our last couple of calls, we talked about our kind of our -- the aggregation of our markets. So we have -- we've looked at our growth markets. We've identified areas where, again, bigger than our leadership markets, but one where we have lower share. Again, this is maybe newer adoption or regional. We think over that time, we can double our share in our growth markets, and that's going to be a big driver of future revenue growth and ultimately free cash flow and EBITDA.

That's awesome. Very helpful. And then my follow-up on that is just you guys have had some pretty significant orders here over the last year. Are you still seeing margin improvement on those new orders that are coming in? And then kind of in relation to orders as well, what's kind of the average lead time for different orders that you receive. Like what's the time from when you get an order to kind of whenever it shows up in the business and revenue?

Yes. It really split it out. I think in our -- about 75% of our revenue is activity-based consumables. So that -- when we receive that order, we're going to turn that pretty -- we're going to turn that very quickly. So that could be a day to, call it, 3 to 4 months. That's a quick turn. On the capital side, which is the other 1/4 of our revenue, that will vary. In general, I would say it's a 6 months from book to deliver on that. I think as we get more volume generally, that is going to -- that we are going to see -- we're going to get more incremental margins.

So our goal is at 30% incremental EBITDA margins. One, let's just a clarification there on the subsea side, as we've grown that, their mix isn't quite as strong on the margin side because of some of the pass-through items. However, by the -- I think the amount of bookings that we have received in subsea, we already get some good economies of scale in our facilities and hopefully overcome that a little bit. So again, manufacturing, we have good operating leverage. So the more volume we get through our plants overall, the better. And again, our goal is to have a 30% incremental EBITDA margin on the revenue we add.

Our next question comes from the line of John Daniel from Daniel Energy Partners.

First, just congratulations on the tremendous improvement in the stock price, impressive. I was hoping you could elaborate a little bit on just the opportunity set you guys are seeing for M&A opportunities and maybe valuation expectations on the part of sellers today.

John, Lyle, thanks for calling in, and thanks for that question. Really, over the past few quarters, we've seen an increase in the number of companies being marketed for sale. So the opportunity set is getting larger. And several of those are really interesting and fit the acquisition criteria that we talked about and Neal elaborated on earlier. So we're looking at those and evaluating those. I think as we look for those great investments, we want to make sure that they fit with our strategy and with our forward free cash flow yield that we talked about, that's a compelling alternative to M&A. Maybe thinking about expectations. As you mentioned, we have seen some lift in seller expectations. Primarily, they've seen public company stock multiples increase. And so that's increased some expectation there as well. So I wouldn't be surprised to see some deals get done at a little bit of a higher margin. For us, I think discipline around our balance sheet is really key. So we'll keep looking at what is a pretty good opportunity set and be cautious and targeted in what we move on.

Okay. And that preference offshore versus land, international, North America? Any color there would be...

Yes. I think, again, earlier, just find the best business possible, John, whether that's land offshore or it really fits our mix.

Our next question comes from the line of Eric Carlson.

I guess maybe start, I didn't spend a lot of time on U.S. But when you think about -- I mean, you've basically proven to the market that you've diversified and kind of rightsized the business to be a very good performer kind of despite what we've seen in the rig count over the past few years. So I think U.S. rig count down 30%, frac spreads down about 50% from kind of peaks late 2022, early 2023. I mean can you just maybe describe the torque in kind of available in just if the U.S. rebounds even marginally, I mean, the -- what is the significance of that to kind of the business?

Yes. I think in the U.S., our revenue per rig is significantly higher than international. So if there's a rebound in U.S. rig count, it will be a tremendous torque for us. Obviously, high service intensity. And I think as you were laying out kind of the historical trend there, Eric, I think it's interesting to know that rig count is down, frac fleet is down, but I think total footage drilled, let's call it, the length of the wells is maybe up. I mean stages completed is up. So I think that's the service intensity.

And as we think about that, we view that increased service intensity as more demand for our activity-based consumables. So I think that's a bonus there. I think maybe the other part that adds on to that for U.S. land is the equipment is getting older, right? Lyle and I were talking the other day about when is the last time we've delivered a catwalk for U.S. land, he's been here longer than me, and he had to scratch his head to try to remember. So it's been probably over 10 years. So what we are starting to see from our customers, though, is interest in upgrading their capital, whether it's drilling rigs or frac fleets.

I think for those who aren't as familiar with our story, we don't build entire drilling rigs or build entire frac fleets. We provide kind of the key components for them. So as the customer base in the U.S. continues to increase the intensity of the assets they have, they're going to need to upgrade and add our equipment. A great example is our FR120, the iron roughneck, which for those that follow the show Landman, they were able to see it on the Season 2 Episode 6, the roughnecks of M-Tex Oil called our product the future. So that was good to see.

Yes. I appreciate that. And yes, I did catch that episode, very interesting. And then maybe just when you think about kind of the core OFS equipment business versus kind of some of these newer opportunities, whether it's kind of subsea not directly related to oil and gas or maybe kind of one of the recent conversations I had was with kind of a large data center real estate investor and they said, I mean, people are moving and just trying to find mobile power generation to kind of bridge the gap. Kind of as they wait for kind of firm baseload to be delivered by the utility.

And I know you guys offer like some -- whether it's kind of the radiators or whatever it might be, can you talk about some of maybe just the markets that are non-oil and gas related and kind of are those early stages? Is there a really big opportunity there? Is it, I mean, marginally better? Just provide some feedback there would be interesting.

Yes. You mentioned subsea. I'll just -- I'll start there, but I think the data center one is obviously very interesting, too. But on subsea defense, we think that is a long-term growth opportunity, right? We provide key equipment. We're already in that business. I think as world economies rearm, as other countries around the world, excuse me, rearm and look to avoid satellite detection working under water is incredible. So it's a key part of their defense capabilities.

So I think that's a long-term growth area, and I think it's a great opportunity. On the data center side, you mentioned mobile power. So we do provide key heat exchangers, radiators for that market. Again, we've taken the lead or the great product we had for heat exchangers and mobile frac, and those customers are now adopting that for mobile power generation. We also see the fixed radiator possibility as a huge market. And it's one that we're looking at developing products for. I think it's early on. We want to see if it fits our engineering and supply chain manufacturing wheelhouse.

So that would be a key area for us as well. And then maybe last area, we -- a good example is coil line pipe. We've talked about that in prior calls, but we are providing that product into non-oil and gas applications, let's call it, renewable natural gas opportunities like that. So that's been a good add to, let's call it, our nontraditional base. But overall, if you think about the data center opportunity, I kind of view it as more of a second derivative growth for us that I think the increase in gas demand overall, whether it's LNG, data centers, that's going to drive U.S. drilling completion activity. And I think that's where we're going to really see the benefit as well.

Agreed. And then maybe shift to the kind of the capital returns framework which you kind of laid out. I mean, when you guys look at acquisitions, I mean, are things still trading around that 3 to 5x EBITDA multiple, like if someone is holding something privately or you could carve something out of someone else who is public that wants to shed a legacy business or private equity firm that's been holding a business for the last dozen years that needs an exit. I mean do you have any sense of like where -- like what are multiples looking like that on either EBITDA or cash flow or both? I'm just curious if you're kind of looking at your pipeline.

No, Eric, great question. And like I mentioned earlier, we've seen deals getting done with a little bit more of an elevated enterprise value to EBITDA multiple. And we're seeing that. I think relative to public company comps, those are still lower, but we've seen some move up from where they are. I think it's very situational as to what that deal is. And you mentioned some of the kinds of sellers that are out there, whether it's family-owned businesses, whether it's some carve-outs or it's private equity owners that have been long in the tooth making the sale. So definitely a good opportunity set out there as far as technology that fit well within our portfolio and that we think we could leverage and would be incremental to our story. And that's what we're looking for. But we're also going to be careful and make sure we don't get out over our skis on any deal.

Great. And then maybe in that lens is, I mean, I've looked at -- and I've heard you present kind of the FET 2030 story, and, I mean, the potential there. mean, obviously, buying stock back today is not the same as buying it at $25, and we can argue if you should ever have that opportunity or not. But when you think about I can buy my stock today, invest in my own organic growth and just let the story play out through 2030. If I'm buying today, that looks like a pretty damn good investment longer term. I mean, like is there a hurdle rate where you say like, I mean, buying our own stock, we know our own business, that costs us nothing to integrate.

We don't have the risk of getting overlevered versus going out and trying to buy somebody. Like how do you guys think about kind of the risk reward there? Like how much better does acquiring somebody have to be versus just saying, we'll just buy our own stock and we could return cash in a multitude of ways in the future as we kind of build this base towards kind of the 2030 growth plan?

Yes. Again, we started that FET 2030 growth plan really from the bottoms up, right, looking at all of our businesses, what could we do organically. I think about an acquisition and adding on to that as a way to really to supercharge that as well. So can we add somebody that we have revenue synergies? Could we have some cost synergies? And by having this type of product, could we then grow faster our existing organic story.

So I think there's definitely opportunities out there like that. And I think you got to look at them on an individual basis. There's -- we have our criteria that I think we've talked about a lot, got to be differentiated. It's got to be a targeted market, and we want to have it accretive to our financial metrics. So -- you're right, though, the story, buying our own stock has played out really well. It's been a good use of capital and our investors have taken notice. But I think it's one part of our capital allocation strategy. I think M&A is another. And I think overall, as long as the acquisition hits the criteria and adds to our FET 2030 story, we will take a serious look at it.

Great. That's helpful. I have 2 more questions, and I'll shut up. So when you think about -- I mean, so Variperm heavy oil sands in Canada primarily. There's obviously international implications for that. I mean this is very early stages, but like is Variperm a product that can be used in Venezuela eventually or something like that if a market like that would open up?

Yes. It's a great question. They have -- Variperm has sold their products into Latin America for heavy oil applications in the past. So I think there is an application. I think as we -- as Venezuela develops, we'll learn more about whether they will go more towards a product development like we would have. I think maybe on a bigger picture, Venezuela, there's been a lot of public company commentary. Some of our biggest customers have been saying how enthusiastic they are. When they deploy equipment down there, they're going to need our consumables to run. Again, that's coiled tubing, wireline casing hardware, artificial lift products. Want to say even just this week, we received legal approval to book a coiled tubing order for Venezuela. So I think that opportunity is starting to move and a great way for us to participate in it is with our customer base who's going to deploy their equipment down there.

Interesting. And then last question would be 2 parts. So just, I mean, think about the tariff ruling today, what do you think is kind of net impact to that? And then also kind of on the financial side, I mean, projecting positive net income in a pretty meaningful way this year and obviously, large deferred tax assets. I am no expert in that. But when you think about those on a go-forward basis? I mean what's the incremental benefit of some of those if you can either write them up? Or maybe explain to me that a little bit as well.

I'll start with the tariffs and let Lyle take the tax part. So the ruling today, so we really kind of, let's call it, 3 categories of tariffs. We have the Section 232, Section 301 and what's referred to the IEEPA tariffs. The Supreme Court decision this morning just struck down the IEEPA tariffs. So the 232 and 301s are going to remain in place. So for us, that's -- those are the more impactful ones. We've had those in place though, since, I think, 2017, and they've impacted more of our steel -- steel supply. So we still have a good amount of tariffs still in place. Again, we've done what we can to mitigate those.

Yes. Let me talk about taxes a little bit, Eric. It's definitely something that we're focused on as we've grown our profitability, especially outside the U.S., that's where we pay taxes. And so our tax bill is getting bigger as we do that and have that success. A lot of our tax assets, deferred tax assets sit in the U.S. And so we have a lot of tax shield here. Kind of put all that together, it makes a really wonky tax rate and you think about our tax. We're paying tax outside the U.S., and we're not here in the U.S. So as we look to the future and look at increasing our taxable income in different countries, then it's about how could we optimize where that comes from, whether that's in the U.S., which would be more of an advantage for us or in other countries as we grow.

So something that's on our radar screen and definitely focused on as we look ahead and make sure we're doing appropriate execution, but also now that we are paying taxes in countries, making sure that we're maintaining good compliance and keeping up with all the rules that they change around the world.

Thank you. At this time, I would now like to turn the conference back over to Neal Lux for closing remarks.

All right. Well, thank you for your support and participation on today's call. We look forward to our next meeting in May to discuss FET's first quarter 2026 results.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to the Forum Energy Technologies Third Quarter 2025 Earnings Conference Call. My name is Daniel, and I will be your coordinator for today's call. [Operator Instructions] This conference call is being recorded for replay purposes and will be available on the company's website.

I will now turn the conference over to Rob Kukla, Director of Investor Relations. Please proceed, sir.

Thank you, Daniel. Good morning, everyone, and welcome to FET's Third Quarter 2025 Earnings Conference Call. With me today are Neal Lux, our President and Chief Executive Officer; and Lyle Williams, our Chief Financial Officer. Yesterday, we issued our earnings release, and it is available on our website.

We are relying on federal safe harbor protections for forward-looking statements. Listeners are cautioned that our remarks today will contain information other than historical information. These remarks should be considered in the context of all factors that affect our business, including those disclosed in FET's Form 10-K and other SEC filings.

Finally, management's statements may include non-GAAP financial measures. For a reconciliation of these measures, please refer to our earnings release and website. During today's call, all statements related to EBITDA refer to adjusted EBITDA. And unless otherwise noted, all comparisons are third quarter 2025 to second quarter 2025.

I will now turn the call over to Neal.

Thank you, Rob, and good morning, everyone. Our team executed another solid quarter, demonstrating why FET is a great company and even better investment. We extended our track record of outperformance, delivered significant capital returns, and we believe FET remains an incredible value while poised for long-term growth. Over the past 3 years, we have outpaced the Russell 2000, our small-cap Index, in revenue and free cash flow growth. And with our third quarter results, we continued this trend. Our Beat the Market strategy, which centers on new product development and targeted commercial efforts, drove strong bookings and meaningful backlog growth.

During the quarter, we captured several offshore and international awards. This success increased our backlog by 21%, its highest level since 2015. Our commercial teams are generating market share gains. They successfully pushed third quarter revenue to the top end of our guidance. In addition, our operating teams are driving increased efficiency, higher utilization and structural cost reductions. This combination allowed us to exceed the top end of our EBITDA guidance.

FET's free cash flow performance is another area of strength. Year-to-date, we are up 21% and have achieved our ninth consecutive quarter of positive free cash flow. Over that period, our operations have generated almost $200 million in cash. Looking ahead to the fourth quarter, we anticipate another good quarter of free cash flow. Therefore, we are once again raising our full year guidance to between $70 million and $80 million. This free cash flow performance allows us to execute our capital returns framework through further net debt reductions and share repurchases.

Last quarter, we discussed reducing net leverage to 1.3x by year-end. I am pleased to report we are now at that level, 1 quarter ahead of schedule. Also, in the third quarter, we repurchased 5% of our shares outstanding, bringing the total for this year to 8% through September. We have seen a strong run in FET's stock performance. However, even after this remarkable gain, our free cash flow yield is around 20%, and share buybacks remain a compelling use of capital.

In addition, we believe that FET's share outlook remains incredibly attractive, given our long-term forecast. The key driver there is our Beat the Market strategy. By competing in targeted markets, utilizing our competitive advantages, developing differentiated technologies and leveraging our global footprint, we continue to grow profitable market share. For the first 9 months of 2025, our annualized revenue per rig is up 3% despite subdued market activity. And since the strategy's implementation in 2022, we have increased this metric by 20%.

Last quarter, we outlined a refinement to the strategy by aggregating our addressable markets into 2 broad categories: leadership markets and growth markets. For our new investors, let me quickly summarize our discussion from last quarter's call. Our leadership markets are where FET solutions are fully adopted by the industry, where we have meaningful share, strong competitive positions and broad geographic reach. We estimate the size of our leadership markets to be $1.5 billion, with FET maintaining a 36% share. A few examples from our portfolio include Global Tubing, Quality Wireline, Variperm and Perry ROVs. FET derives about 2/3 of its revenue from the leadership markets, and we will continue to invest in product development to maintain and expand our position.

The growth markets are about twice the size of our leadership markets, or roughly $3 billion. Here, our products and solutions are differentiated, proven and have fewer competitors. However, they may be in the early stages of industry adoption. They may have a narrower customer base, or they may be more geographically limited. As a result, our aggregate market share here is relatively low, around 8%. This creates an exciting opportunity to increase revenue rapidly through wider industry adoption, new customer acquisition and expanded global utilization.

Let me provide a couple of examples and share some insights. One example is coiled line pipe, a product that saves operators' time and money. The market opportunity is immense and has very few direct competitors. However, broad customer adoption has been limited by our industry's conservative approach to new technology. Recently, our team's relentless commercial efforts have added a number of key accounts. Demand is expanding in the U.S., the Middle East and offshore. Sequentially, coiled line pipe revenue grew 28%. We expect this product to be a meaningful contributor to our long-term growth.

The second example I want to highlight is from our artificial lift product family, where demand is generally more stable because it is tied to existing production. Our technically differentiated products extend the life of downhole pumps, allowing more production at significantly lower cost. Execution of this value proposition has made us the market leader in the United States. The exciting part for FET is that the international market is more than 4x larger than our home market. We are making headway there as our revenue has grown 12% since last year. By leveraging our global footprint to address these markets efficiently, we have a significant opportunity to grow revenue.

These are 2 of many products that compete in the growth markets. Our goal over time is to double our share from 8% to 16%, which would increase FET's revenue by $250 million in a flat market. However, our base case is not a flat market. We see the possibility of our addressable markets expanding by 50% or more over the next 5 years. Here's how we get there.

The 2 main drivers of energy demand are economic activity and demographics. By 2030, world GDP is forecasted to increase by nearly $30 trillion and the global population is expected to increase by 400 million. With this growth, it is reasonable to forecast an oil demand increase of at least 5 million barrels per day in that period. In addition, our industry will need to replace 30 million barrels of daily supply that will be lost to natural production declines. Finally, on top of that, demand for natural gas is forecasted to grow rapidly to power AI data centers and supply LNG exports. With this outlook, today's supply will not come close to meeting this level of demand. We believe that means significant investment is required. To meet these challenges, our customers need to be significantly more efficient, while adding a modest amount of new capacity. Under this scenario, FET's addressable markets would expand by more than 50%. This expansion, combined with our targeted market share gains, would organically double revenue in 5 years. And with our strong operating leverage and capital-light business model, our free cash flow would grow significantly. By 2030, this would give us meaningful firepower to execute strategic investments, including accretive acquisitions and additional shareholder returns. We call this Plan FET 2030, and its execution is our North Star.

Now, while we are excited about our long-term vision, we also remain focused on executing today. So to provide an update on our quarterly results and outlook, I am now going to turn the call over to Lyle.

Thank you, Neal. Good morning, everyone. FET delivered revenue of $196 million, approaching the top end of our guidance range as offshore and international revenue grew in the quarter. Revenue increases for our drilling and subsea product line drove offshore revenue to 22% of our total. And as Middle East and Canadian revenue each increased by over 10%, international revenue surpassed U.S. sales. U.S. rig count declined by 5% in the quarter, and revenue from most of our product lines averaged a 5% decrease as well. One product line, however, was more impacted as their customers took a conservative position and pushed deliveries into the fourth quarter. Overall, this led U.S. revenue to decline 10%.

As Neal highlighted, we had another great quarter of bookings. Our book-to-bill was 122%, showing the benefits of FET's diverse product offering. Both segments achieved greater than 100% book-to-bills at 129% and 112%, respectively. Booking strength for the Drilling and Completions segment was again led by subsea. The strong quoting activity we highlighted last quarter led to new orders for ROVs and pushed the book-to-bill ratio over 200%. In addition, drilling bookings increased by 45% as the team secured capital equipment orders for new-build land drilling rigs in the Middle East. Also, orders grew 24% in our stimulation and intervention product line with strong demand for many of our products.

In the Artificial Lift and Downhole segment, a large Canadian customer ordered sand control products in support of an extended drilling program. Valves had its largest bookings in almost 2 years, and our process technologies product family achieved its second highest bookings quarter over the same time frame.

Our large backlog and higher revenue, combined with healthy incremental margins, helped us exceed our EBITDA expectations. Consolidated EBITDA was $23 million, up 13% and above the top end of our guidance. Margins improved by 150 basis points to nearly 12% due to favorable product mix, ongoing cost reductions and tariff mitigation efforts.

Now, let me provide a bit more color on our segment results. Drilling and Completions segment revenue was flat for the quarter. Momentum continued for coiled line pipe as sales increased 28% with market share gains and revenue recognition on a Middle East project. The subsea product line was up 5% with revenue recognized for ROV projects. And strong sales of wireline products and heat transfer units drove an increase in our stimulation and intervention product line. Offsetting these increases were lower sales for consumable items tied to softer market activity. Despite flat segment revenue, EBITDA was up 3%, driven by product mix and benefits from cost savings initiatives.

Our Artificial Lift and Downhole segment revenue decreased 4%. Lower downhole casing hardware and processing equipment technology revenue was partially offset by increased sales volumes for valve and sand control products. Similar to the Drilling and Completions segment, EBITDA increased 2% despite lower revenue. Favorable product mix and cost savings drove the increase with margins improving 130 basis points.

In the third quarter, increased tariffs on steel imports and targeted tariffs on imports from India surprised the markets. Our teams evaluated pricing adjustments to counteract these policies. In addition to our strategy of passing along tariffs through pricing, we continue to leverage our global footprint to avoid tariffs altogether. For example, early in the fourth quarter, we leveraged our Saudi Arabia manufacturing facility to assemble and ship heat transfer units to a Latin American customer. This successful supply chain adjustment protects the competitiveness of these products in the global market. While our teams effectively mitigated negative tariff impacts this quarter, tariff rate volatility continues to be a challenge for our operations.

To further counter tariff costs and in support of our solid operating results, we accelerated progress toward our $10 million structural cost reduction goal. As of the end of the third quarter, we are close to achieving that original goal. Additionally, in the third quarter, we made the strategic decision to consolidate 4 of our manufacturing plants into 2. Combining facilities allows us to reduce overhead costs, improve direct labor and asset utilization, and enhance the efficiency of our operations. To achieve these consolidation benefits, we are discontinuing a few low-volume, low-margin products. Our results include $21 million of noncash inventory and other asset impairments and $1 million of cash charges for severance and relocation costs. By the second quarter of 2026, we expect these facility consolidations to contribute over $5 million of additional annualized cost savings, taking our total structural savings to approximately $15 million, 50% more than our original goal. These efforts have supported our EBITDA this year and will provide additional tailwind going into 2026.

Shifting to cash flow and shareholder returns. I am pleased to report that our $28 million of free cash flow, a 23% increase, enabled meaningful shareholder returns. Consolidated free cash flow benefited from increased EBITDA, reductions in net working capital and the sale-leaseback transaction. Our success in these areas enables us to confidently raise our full year 2025 guidance to between $70 million and $80 million. Also, with this continued free cash flow strength, we accelerated our share buyback program. In the third quarter, we repurchased 635,000 shares for $15 million, bringing the full year total to 966,000 shares, or 8% of the shares outstanding. Our expected fourth quarter free cash flow supports continued execution of our capital returns framework, and we have already begun additional buybacks.

While executing our third quarter repurchases, we reduced net debt by $12 million, or nearly 10%, to $114 million, resulting in a net leverage ratio of 1.3x. Our liquidity position remains solid. We ended the quarter with $32 million of cash on hand and $86 million of availability under our revolving credit facility with total liquidity of $118 million.

Before turning to our financial guidance, let me provide a little more detail on our income tax expense and corporate items for modeling purposes. In the quarter, we increased the valuation allowance reserves we hold for the U.K. and recorded $5 million of additional income tax expense. Net of this charge, income tax in the quarter was roughly $5 million, slightly below the second quarter. As our sourcing strategies shift income across jurisdictions, we expect our effective tax rate to shift as well. For example, for the fourth quarter, we expect income tax expense of $2 million to $3 million. For the fourth quarter, we estimate corporate costs and depreciation and amortization expense of around $8 million each and interest expense of $5 million.

Now, turning to the market and our financial guidance for the remainder of the year. We are forecasting a gradual decline in activity through the fourth quarter. However, at current commodity prices, our elevated backlog, continued market share gains and further cost savings should help keep our results relatively steady with the third quarter. Therefore, for the fourth quarter, we forecast revenue of $180 million to $200 million and EBITDA of $19 million to $23 million; and for the full year, revenue of $770 million to $790 million and EBITDA of $83 million to $87 million.

Let me turn the call back to Neal for closing remarks. Neal?

Thank you, Lyle. To conclude, I want to first reiterate how proud I am of the team's execution. They delivered strong safety results, bookings, revenue, EBITDA and free cash flow. Their efforts and performance are also positioning FET to finish the year with momentum.

Looking ahead to 2026, we've begun initial discussions with our customers about their plans for the year. It is too early to call a bottom in activity. However, with our strong backlog, planned market share gains and structural cost-saving efforts, we are well positioned for 2026.

More importantly, we must continue to focus on the long-term vision. With our Beat the Market strategy, we are striving to double revenue. The next 5 years have the potential to be truly special for FET and its investors. That is FET 2030.

Thank you for joining us today. Daniel, please take the first question.

[Operator Instructions] Our first question comes from Joshua Jayne with Daniel Energy Partners.

Our next question comes from Daniel Pickering with Pickering Energy Partners.

Can you hear me?

Yes. Thanks, Dan.

Great. Just checking to make sure the system is working here. A couple of questions. I mean, bookings is obviously quite strong. Neal or Lyle, can you talk a little bit about -- I'm just wondering, have you changed your incentive system for your sales guys? Are you tackling things in a different way? I mean, bookings have obviously accelerated, and the world looks a little bit worse. And so you're doing something right. I'm just wondering if there's a redesign of the way you're attacking things or if it's just all the efforts finally resulted in a bunch of orders.

Yes. We -- Dan, we've looked at our markets, our sales process. This has been an ongoing -- something we've been working on for many years. And I think we're starting to really see the fruits of that. It goes back to our Beat the Market strategy, looking at the markets we're playing in and really having the right products and then having the teams go after it. So I do want to say the subsea bookings, which have been really strong, that is part of a -- a structural part of the cycle that we're a part of. And so, that's been good. But our teams really are aligned with that Beat the Market strategy and are focused on generating sales.

Okay. And as we look at that backlog, you're showing strong margins because of the reasons you talked about, Lyle. But how do we think about margins in the backlog, better than what we print in 2025, the same? Are you seeing any improvement in margins on the new orders?

Great question, Dan, there. I think one of the biggest factors that we need to look ahead to is going to be mix in our bookings. So, as Neal mentioned, subsea has been a big driver of those backlogs. And traditionally for us, contribution margin from subsea is a little bit lower than our average on the basis of the volume of pass-through items that we have in that business. So technology is good, but there's more pass-through there. So, that would put a little bit of downward pressure of mix with subsea being a higher piece of our revenue next year. That being said, we -- the team has done a great job this year with these cost savings initiatives that we've seen a lot of that cost this year, but there's more to come that will benefit us going into 2026.

Okay. Second question would be the discussion around the facility consolidation. Kind of a big picture question. You're obviously talking about targeting substantial revenue growth. If we're going to fewer facilities, I mean, how do you think about the revenue-generating potential of your manufacturing base? So if we're going to run $800 million in revenues this year, what can your manufacturing capacity do? Is it $1 billion? Is it $1.2 billion? Is it $900 million? How much utilization are we really looking at now versus the future?

Yes. So I think we still have a substantial roofline and footprint, Dan, that we can add people and material to grow revenue. I think over the last few years, we've talked about having the capacity to increase our revenue 50%. That still remains in place today. So with the -- even with the consolidation, we still have plenty of space to expand and pull product through. So I'm not worried about that growth with these consolidations. I think it's going to make us much more efficient in the near term. And I think there's benefits on the cost side, but also benefits for the customer, right? We're going to have better deliveries, be on time and just having that right structure in place. So we're looking forward to it. I think it's the right decision to make, and the timing here allowed us to do it and position for 2026.

Final question. Lyle, given the constraints that you have on share repurchase and leverage levels, et cetera, what's our capacity to repurchase shares over the next couple of quarters, given where the balance sheet is today?

Great question there, Dan. And maybe just to remind everyone of the context there, our share purchase capability is really limited by 2 factors, one of them being our net leverage of 1.5x, and we're below that level now. So we're in good shape. The other being the amount of free cash flow we generated in the last fiscal year. So that's really our cap. That puts about $36 million worth of total buyback capacity. And if we look at what we've repurchased through the end of the third quarter, it's about $21 million worth of repurchases. That would leave us another $15 million or so of capacity that we could use here in the third quarter -- I'm sorry, in the fourth quarter. And as mentioned on the call, we've done some of that already here in the month of October. So we've got quite a bit of dry powder left in the ability to buy back shares.

And Lyle, what does -- how does that look in '26 then? Does that reset? Or is it $15 million until we get to the end of '26?

Great. Thanks, Dan. It does reset every year. So the 2026 number will be roughly, call it, half of our 2025 free cash flow number. As we just said, we've raised that volume again. So we'll have a lot of dry power going into 2026.

So call it kind of $40 million-ish or something like that?

Yes.

Our next question comes from Joshua Jayne with Daniel Energy Partners.

Okay. I don't know what happened. Sorry about that. So first question for me, just given the diversified nature of your business, could you speak to where you think we are in the cycle in each geography? And I'll sort of break them down into U.S. land, international and offshore. And based on where you think we are in each of those geographies, sort of how does that [indiscernible] about the spending moving forward in the next 12 to 24 months, allocating resources and capital? Maybe just as the first question.

Yes. I think we're always looking for -- at our markets individually, rather. I hate to categorize it by geography necessarily. So going back to our Beat the Market strategy, we have our leadership markets and our growth markets. I think there's opportunities in each regardless of the geography. I think we mentioned a few examples on the call where we do see ability to grow quickly is to take successful products that we've had in the United States and export those around the world. The example we mentioned was artificial lift. We've also seen that in our stimulation and intervention product line, where we've shipped our products to shale development in Argentina, in the Middle East. Again, we're well positioned in each region. So I think we closed with some comments that I think it's still too early to call a bottom. We're talking with our customers. But looking ahead to next year, we feel pretty good with the backlog we have, with the plans we have in place to have some -- to have a good year and really set ourselves up for the longer term. Again, the 5-year vision for us is to double our revenue organically.

And when -- I think you mentioned coiled line pipe on the call. So that was a product, for example, I think, grew 28% quarter-over-quarter. When I hear about growth like that, is that a business that you think heading into 2026 could roughly double as an example?

I think, over time, for sure. In 2026, I think that would be a pretty good -- a pretty big leap. It goes back to awards and timing. But our goal for our growth products, the growth markets that we have, yes, in 5 years, we do want it to double. If we can do it sooner, great. And I think coiled line pipe has had some great wins. The team has done well. But I hate to tell them they got to double within 1 year. But I think they have the opportunity to have some nice growth for sure.

And then, last question, maybe just to [ give you ] the floor on. As you're constantly introducing new products to the market, I mean, is there anything else just when we think about on the new product side heading into '26 that you're especially excited about that ultimately help E&Ps become more efficient? What are the things that you're thinking about introducing in '26 that could really drive some of this growth you're seeing sort of even if the market doesn't improve much going forward? Maybe talk about some of those products.

Yes. We have a really good pipeline now of new product development we're pushing through. Exciting area for us is, again, in the artificial lift to take the success we've had with protecting downhole ESP pumps and expand that to other artificial lift applications like rod lift. So we've got good progress there. Another one is our -- for subsea is our Unity operating system for ROVs. We've introduced that in 2025. We're expanding delivery. Again, with a lot of the new bookings we've had with ROVs and subsea, we have the Unity system on there. So that's exciting. And then, on the power side, we provide a key heat transfer unit for many of the mobile power units that are being deployed, both in the U.S. and hopefully internationally here shortly.

Our next question comes from Jeff Robertson with Water Tower Research.

Neal, if we think about the growth markets, you talked about coiled line pipe and some of the downhole pump products that FET supplies. Does a period of lower oil prices increase adoption of some of those technologies by customers? Or is it more just industry trends as people -- as companies or countries around the world move toward more unconventional resource development?

Yes. I think the -- in a tighter market with, let's call it, more challenging oil price, products like that, where we can save operators' time and money, you get a very solid look. So I think that's open door. And then, by having that door open, it's allowed us to really show off really the technical capability. I think a good expectation, again, with lower oil prices is, service companies are going to have to be more efficient as well and do more with less and increase the service intensity. And again, that's where we see our consumable products -- while rigs may not be going up a lot, they're going to be working harder and longer, same with frac crews. And I think we're going to see more consumable usage that way.

Do you have -- can you just remind me what the capacity at your Dayton pipe facility is? And when you talk about growing share in coiled tubing and coiled line pipe, how much you can accommodate before you would have to consider any kind of capital investment?

We've never really had that capacity outlined. But I can tell you from having been there since the building was constructed, we could put a lot more pipe through that facility. Again, it's going to extra shifts, utilizing mills -- both mills more efficiently. So I see the bottleneck for growth there is our commercial teams and getting the bookings. So once we get the bookings, I think we have a good runway to push more revenue through that facility.

And then, as you think about the 2030 goals, does the growth in -- or does the goal to double revenue in growth markets, does that just -- is that just traditional oil and gas? Or do you see opportunities for any of your product lines or the flexibility to make any acquisitions that could expose FET to any kind of adjacent markets?

Yes. I think oil and gas will be a big part of that. The other adjacent market would be defense. We talked about our rescue submarine booking. We see a good, let's call it, opportunity pipeline there to add on. We're also selling our remote-operated vehicles to defense contractors and really to the navies around the world. So I think that's another opportunity. So I think oil and gas, organic, as well as defense. And our teams are always looking for new markets that we can expand our addressable ones. So part of our goal, right, is to double our revenue in the markets we participate. If we can identify new ones that are adjacent, where we have a differentiated offering, where customers value the products and solutions that we deliver, that would be another way to expand our addressable markets, and we are constantly looking for that.

[Operator Instructions] Our next question comes from Steve Ferazani with Sidoti.

Appreciate all the detail on the call. You introduced sort of how you're thinking about 2026. I think it's fair to ask, given the sort of consensus developing around the potential for sub-$50 WTI in the first part of the year, how well you're positioned for that and how you can offset what that could do on pressure at least on U.S. consumables?

Yes. Again, in the call, we said it was probably a little too early to talk about 2026. If we do get a low oil price, one of the things that we're looking at is, does production in the U.S. roll over? And as we -- as I'm sure you've read and you kind of look around the industry, it appears that most operators are trying to hold production at least flat year-over-year. And so, I think that would be a higher level of production than maybe we're modeling going into that. But overall, I think it's -- we're going to stay close to our customers. We think even in a sub -- prices go below where they are today, those get into the 50s, there's going to have to be more efficiency. And so, we're going to put ourselves as we're going to be the enabler of that efficiency. And so, we're well positioned for that, and that's part of our strategy.

Okay. And when we think about this multiyear high on backlog, timing of conversion, I know a lot of this is percentage of completion. How much of that backlog is multiyear? And how much of that do you think you work through over the next 5 quarters?

Yes, Steve, that's a really good question. And typically, when we think about our backlog over time, that backlog is going to typically run out in 2 or 3 quarters. I think now, with a bigger backlog build that we have in subsea, that's where we're going to see that run all the way into 2027. So the rescue submarine we announced last quarter, for example, we will recognize a decent amount of revenue on that in 2026, but we won't deliver that until late 2027. So we'll have revenue running all the way through there. But the bulk of our backlog probably bleeds out in 2026 with some subsea lasting all the way into '27.

Perfect. That's helpful. The uptick on both valves and sand control products, the sequential improvement, I know there's 2 different dynamics going in there. Can you walk through what you're seeing on the valve side? I know there was some destocking going on related to tariffs. Are we seeing that easing now? Are we getting through the destocking? And then, on the sand control products, what you're seeing in Canada?

Steve, the valves, I think you hit the nail on the head. We talked for the last 2 quarters about what we call the buyers' strike as buyers, with the uncertainty in what tariffs were going to do, basically pulled the pin on ordering patterns. So we have seen some needed increases there for our distribution customers who needed to restock some shelves. My comments about tariff rate volatility continue to be there. And despite the recent news about maybe lowering tariffs on Chinese imports, where that would most affect valves, we definitely see that volatility continue. So we're keeping our eyes close on the valves business, but it was nice to see the increase there.

Yes. And Steve, I think in Canada, I believe it was maybe our first or second quarter call, we thought the back half would be stronger based on some of the customer discussions we've had. So I think that's really been part of the activity or the growth in Canada as we've had that. And our team has been really successful on maintaining and getting key bookings up there as well.

And if I could get one more in because I heard you mention maybe once or even twice the potential in the -- serving the rod lift market. Have you served that market before? Would that be a new addressable market?

That's a really new market. We've had, let's call it, some sales into that market, Steve. So it's not completely from scratch. So we're already into it. But we're doubling down our efforts and expanding with our products. We've talked about in the earlier calls, we have a really neat piece of -- really neat product called Pump Saver Plus. It helps really in a very similar way that we have for ESPs. It prevents rod pumps from getting destroyed through -- breaking down, excuse me, through sand and gas management. So we think the product has a lot of legs. We've refined it, and we're working really closely with both operators and rod lift pump companies to really get that product out in the market.

I'm showing no further questions at this time. I would now like to turn it back to Neal Lux for closing remarks.

Thank you, Daniel, and thank you for your support and participation on today's call. We look forward to our next call in February to discuss FET's fourth quarter and full year 2025 results.

This concludes today's conference call. Thank you for participating. You may now disconnect.