Release Date: May 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Forum Energy Technologies Inc (FET, Financial) reported a 9% sequential revenue growth and a 69% increase in EBITDA, with EBITDA margins improving by 460 basis points.
- The Variperm acquisition has been successfully integrated, enhancing FET's Artificial Lift and Downhole offerings and broadening the customer base in Canada.
- FET achieved a book-to-bill ratio of 101%, indicating healthy order intake relative to revenue.
- The company reaffirmed its full-year 2024 guidance with EBITDA of $100 million to $120 million and free cash flow of $40 million to $60 million.
- FET's innovation and new product development, such as the greaseless wireline cable system and FASTConnect manifold system, are laying the foundation for sustainable and profitable growth.
Negative Points
- Despite overall growth, the global rig count remained flat, with some seasonal softness in international markets as customers were slow to release budgets.
- Variperm's first quarter results were softer than the historical revenue run rate due to near-term headwinds, including uncertainty around the Trans Mountain Express Pipeline startup.
- The Drilling and Completions segment revenue decreased by 6% due to the completion of two ROV projects and lower demand for drilling capital equipment and international coiled tubing sales.
- The second quarter Canadian breakup, a seasonal impact, is expected to decrease Canadian rig count activity by around 50% from the first to second quarter, potentially impacting results.
- While Variperm's integration has been successful, achieving revenue synergies through collaboration between FET's traditional Downhole product line and Variperm will require further effort and time.
Q & A Highlights
Q: Could you walk us through your activity assumptions for this year regarding the U.S. land market, focusing on rig count and well count?
A: Neal A. Lux, President and CEO, explained that there is no change to the initial outlook for the year. The U.S. rig count is expected to decline, but international rig counts should grow, especially in the second half of the year. The global rig count is anticipated to remain roughly flat, with decreases in the U.S. offset by stability in Canada and growth internationally.
Q: Can you discuss the markets you are excited about internationally for the next 18 to 24 months, particularly in the Subsea business?
A: Neal A. Lux highlighted the Middle East, particularly the land and jackup market, as areas of acceleration. He also noted potential in offshore markets like Brazil, Guyana, West Africa, and the Gulf of Mexico, where there could be an increase in ROV awards.
Q: How much of the strong margins in Lift and Downhole are attributable to the Variperm acquisition?
A: David Lyle Williams, CFO, clarified that the significant margin improvement in the Artificial Lift and Downhole segment was largely due to the Variperm acquisition, complemented by a favorable sales mix in other product lines.
Q: What integration efforts are left for Variperm to fully realize potential synergies?
A: David Lyle Williams mentioned that while Variperm is well-integrated, the focus is now on achieving revenue synergies through collaborative efforts between the sales teams, which is expected to unfold over the next few quarters.
Q: Could you provide insights into the trends through Q1 and expectations moving into Q2?
A: David Lyle Williams observed a gradual increase in activity as Q1 progressed, particularly internationally, which was initially slow in releasing budgets. This trend bolsters confidence for sustained activity into Q2.
Q: Can you elaborate on the operational role and revenue dynamics of Variperm in the context of the recent developments in the oil sands market?
A: David Lyle Williams explained that Variperm's products are crucial during the drilling and completion phases in oil sands, with their performance closely tied to rig activity. Although not all rigs in Canada drill in oil sands, Variperm also has a significant international presence, contributing to its revenue.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
