Forum Energy Technologies, Inc. 2026 Q3 Earnings Call

Good morning, everyone, and welcome to FET's Third 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. 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 our website. During today's call, all statements related to EBITDA refer to adjusted EBITDA, and net income refers to adjusted net income.

Unless otherwise noted, all comparisons are Third Quarter 2026 to Second Quarter 2026. I will now turn the call over to Neal.

Thank you, Rob, and good morning, everyone. Our third quarter results demonstrate another period of strong execution. Expectations entering the quarter were high, given our substantial increase in guidance, and our team delivered. We generated sequential and year-over-year growth in revenue, EBITDA, net income, and free cash flow. That performance improved our balance sheet and allowed us to complete a highly accretive acquisition. Our momentum through the first nine months, together with strong execution and healthy backlog levels, gives us confidence to raise our full year 2026 outlook. We now expect revenue between $900 million and $920 million, EBITDA between $123 million and $129 million, and net income between $52 million and $58 million. At the midpoint, revenue would be up 15%, EBITDA up 46%, and net income up 639%, all compared with 2025. Also, up from prior guidance, we expect full year free cash flow between $66 million and $71 million.

Our outlook is not only the result of an improving market. We believe it is disciplined execution of our beat-the-market strategy. Our strategy is straightforward: compete in targeted markets, use competitive advantages, innovate continuously, and leverage our global footprint. Each pillar reinforces the others and creates a repeatable framework for profitable growth. This strategy is critical to our investment thesis, so let me spend a few moments on each. As a starting point, we focus on mission-critical applications where customers value differentiated performance, reliability, and technical expertise. We choose to compete in targeted markets where we have limited competition and competitive advantages. These advantages include advanced manufacturing capabilities, intellectual property, and brands that have served customers for decades. Just as important, our industry experts work closely with customers to understand how our products are used in the field and how they can be improved.

The combination of product expertise and customer relationships turns specific operating needs into durable commercial opportunities. Continuous innovation is the next pillar. It fuels our growth engine. We develop differentiated technology that separates FET from the competition, improves customer outcomes, and expands our addressable markets. Our innovation machine is making significant progress on a wide range of applications, including hydraulic fracturing, the Canadian oil sands, and power generation. For hydraulic fracturing, we introduced a new high-tensile strength tube used in perforating gun housings and received our first order this month. This consumable product utilizes our pipe milling expertise to efficiently manufacture a cost-effective solution. The introduction of this product expands our addressable market by approximately $200 million. The Canadian oil sands is a resource play with significant long-term growth potential. We are penetrating this market with our innovative flow control technology.

Our products reduce steam and sand penetration in thermal oil wells, and most importantly, increase oil production. This is a winning value proposition. In power generation for data centers, we continue to build momentum for our stationary cooling products. Our teams are utilizing patented technology to provide customized solutions that increase uptime and lower the total cost of ownership. Ongoing collaboration with key customers is resulting in several advanced-stage RFQs. This addressable market has significant growth potential. These are a few examples of how we translate engineering capability into market share gains, new revenue streams, and profitable growth. Finally, our global footprint allows us to take technologies developed for U.S. unconventional basins and bring them to customers around the world. International revenue year-to-date is up 31% compared to last year, reflecting both healthy customer demand and strong execution by our regional teams.

In the Middle East, we navigated ongoing volatility and increased revenue 32%. Importantly, while we have experienced some disruptions, we have not had meaningful order cancellations related to the conflict. Customer priorities remain centered on uptime, efficiency, and production performance, which align closely with FET's capabilities. The opening of Venezuela for U.S. companies is another developing opportunity. Historically, this country has been a good market for our products. It is encouraging to see our customers making capital commitments and entering into contracts. The opportunity remains in its early stages, but the level of activity is moving in a constructive direction. FET has already delivered coil tubing, pressure control equipment, and Coiled Line Pipe into the country. Staying in Latin America, Argentina is emerging as an attractive international growth market where operators are applying technologies proven in the North America shale.

Major oil field service companies have established significant positions in the basin to support multi-year unconventional development programs. FET's differentiated products, like quench and temper coil tubing and greaseless wireline cables, enable efficient drilling and completion operations. As activity scales, this should drive additional demand for our portfolio of consumable products. Now that we have reviewed the pillars of our strategy, let me touch on how we measure its effectiveness. The success of our beat-the-market strategy is measured by revenue per global rig. This metric evaluates whether FET is truly outperforming the broader market. On this measure, we are winning. Since the beginning of 2022, our revenue per global rig has increased 35%, and we have accelerated our outperformance through the first nine months of 2026. Not only have we beat the market, but we believe FET remains a compelling investment.

We have a proven track record, an attractive valuation, meaningful capital returns, and a clear growth path we call FET 2030. Our results demonstrate a consistent record of outperformance compared to the Russell 2000. Year-to-date, we have grown revenue 75% faster, and our operating leverage translates top-line growth into significantly greater earnings, with EBITDA increasing by over four times the index. Finally, that performance is even more pronounced on the bottom line, with adjusted net income increasing by more than 400 times the Russell. That strong financial performance is translating into significant equity appreciation. Through yesterday's close, FET shares are up 140% year-to-date, compared to a 15% increase for the Russell 2000. Even after this appreciation, we believe FET continues to offer attractive relative value, especially compared to other small-cap industrial companies.

Across several valuation and balance sheet metrics, including free cash flow yield, price to sales, enterprise value to EBITDA, and net leverage, we believe FET comes out ahead. Our cash generation gives us flexibility to deploy capital for the benefit of shareholders. We generated $41 million of free cash flow through the first nine months of 2026, returning $9 million through share repurchases and reducing net debt by almost 10%. During the quarter, we completed the acquisition of Premiere Torque Rings, a highly accretive deal within our downhole product line. The acquisition met our investment criteria with strong industrial logic, differentiated products, attractive EBITDA margins, and strong free cash flow conversion. As wells become longer and more complex, torque rings become an increasingly important solution, further supporting our FET 2030 growth plan.

We are excited to add this established brand to the portfolio, and I would like to welcome the employees of Premiere Torque Rings to the FET family. Looking ahead to 2027 and beyond, our FET 2030 plan targets doubling revenue, quadrupling EBITDA, and tripling free cash flow versus 2025. Those goals reflect a combination of addressable market growth, targeted share gains, operating leverage, and our capital-light business model. Thinking about next year, market indications favor a growth year. Elevated commodity prices are driving activity higher. Large service companies are expecting broad-based growth. For FET specifically, annualizing the midpoints of our fourth quarter guidance would result in revenue and EBITDA growth of 5% and 14% in 2027. I believe we will continue to perform at this level or higher. Putting it all together, we are on the path towards FET 2030.

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