Forum Energy Technologies, Inc.

Good morning, ladies and gentlemen, and welcome to the Forum Energy Technologies third quarter 2024 earnings conference call. My name is Gigi, and I'll 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. A link with instructions can also be found on the company's investor relations website under the events section. 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 third quarter 2024 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, and it is available on our website. Please note that we are relying on the safe harbor protections afforded by federal law. Listeners are cautioned that our remarks today may 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 a reconciliation of these measures, you may refer to our earnings release. During today's call, all statements related to EBITDA refer to adjusted EBITDA. And unless otherwise noted, All comparisons are third quarter 2024 to second quarter 2024. I will now turn the call over to Neil.

Thank you, Rob, and good morning, everyone. This quarter, our FET team delivered on multiple fronts. First, we dramatically strengthened our financial position on an accelerated timeline. Second, new products continue to reflect FET's reputation for innovation, and allow us to execute our beat the market strategy. Finally, our financial performance was down the fairway despite softening market activity. Let me expand on these key points. Earlier this year, we outlined a plan to organically pay off our 2025 notes and seller term loan by the middle of next year. In parallel, We explored refinancing options to accelerate that plan and meet our goals sooner. Our evaluation of alternatives included key transaction criteria. We wanted a solution that would allow us to return cash to shareholders and invest in strategic acquisitions. In addition, it was important to maintain our 250 million ABL facility for flexible growth financing. Finally, these criteria had to be met at a reasonable cost and with manageable covenants. After a patient and methodical search, we finalized a 100 million senior secured bond offering, which will allow us to pay off the 2025 notes and seller term loan when we close next week. In addition, This offering checks a lot of strategic boxes. First, it immediately eliminates the current portion of long-term debt and extends the maturity out to 2028 and 2029 for both the credit facility and our new bonds. Second, it enhances our liquidity position and by year end should give us an estimated 80 million of dry powder an amount that we expect to grow with free cash flow. Third, it provides flexibility for deployment of cash. We are committed to maintaining conservative net leverage and a meaningful portion of our free cash flow will be used for further debt reduction. In addition, we expect to have ample flexibility for strategic investments. This could be in the form of traditional M&A or investing in ourselves through share buybacks. With a cash flow yield over 30%, it will be hard to find a better investment than FET. These strategic investments will be possible because we continue to deliver a lot of free cash flow. For example, we generated $48 million in the first nine months of 2024. putting us nearly within the full year guidance range. Therefore, for the second time this year, we are raising our cash flow forecast to between 60 and 70 million. To put that into perspective, that's a range of $4.90 to $5.70 per share compared to yesterday's closing price of just under $14. Importantly, As Lyle will detail shortly, we believe this performance is repeatable over the long term. The FET team continues to execute our beat the market strategy. As a quick reminder, this consists of growing profitable market share, developing differentiated products and technologies, utilizing our optimized global footprint, and expanding our participation in energy transition, all to achieve our objective of creating shareholder value by growing faster than the market. One way to measure the performance of our beat-the-market strategy is to compare FET revenue with global rig count. For the first nine months of this year, our revenue per rig has increased 16% on a year-over-year basis as we integrated VeriPerm into FET. Let me provide a few highlights, starting with some exciting new products and technology we are delivering to the market. Permanent magnet motor ESPs are the most efficient pumps in the artificial lift industry today. However, their usage has been limited due to safety concerns. To help mitigate their risk, We recently added MagnaGuard to our extensive artificial lift portfolio. This tool provides reliable protection from possible electrocution, saves our customers money by eliminating third-party services, and removes a critical barrier for greater adoption of permanent magnet motors. Also, our tool can be used on all ESP brands. which expands our addressable market. This is a great advancement for our industry, and MagnaGuard can meaningfully enhance FET's profitability. Another area of innovation is within the offshore robotics market. The industry is driving towards fewer personnel and vessels to improve safety and reduce cost. To meet this demand, FET has designed Unity, an operating system for remotely controlling ROVs. This system can be installed on new ROVs and as an upgrade for existing fleets. This leading-edge technology utilizes cloud-based monitoring and supports AI tools for predictive maintenance. Initially, this technology would reduce personnel on vessels, but the end goal is to have ROVs operated fully remote from a central control station. For example, an operator in Norway could control an ROV in Brazil. We will deliver our first system before year end and four additional systems in the first quarter of next year. We are excited about this technology and for what it can do for our customers. Last quarter, I mentioned a growing global opportunity outside the traditional oil and gas market. Our industry-leading Jumbotron XL heat transfer units have found applications in the power generation sector. We expect the power gen market to grow rapidly over the coming years with energy transition. Recently, we received sizable orders for power generation applications that can be utilized in AI data centers. This is an exciting and fast-growing opportunity that expands FET's revenue potential. In addition to new product development, leveraging our global footprint is another pillar to our Beat the Market strategy. We can ship our products around the world to countries where our customers are investing. A good example is the shift to more unconventional activity in international markets, particularly in the Middle East and Argentina. Through our facility in Saudi Arabia, we distribute a wide range of products, including casing hardware, artificial lift, high pressure pumps, and coil tubing, all of which are critical to exploiting unconventional reservoirs. In addition, Last week, we showcased our leading unconventional products at a large oil show in Argentina. Economic stability, slowing inflation, and loosening currency controls are spurring investment and growth in the energy industry there. During our interaction with customers, some expected activity to increase 10% to 15% next year. Similar to shale plays in the U.S., Service intensity is increasing, and this will require equipment upgrades. Now, let me provide a few comments on our market outlook. For the fourth quarter, we believe the markets are going to be more cautious through the end of the year. Commodity prices remain volatile, driven by Middle East unrest, lower demand in China, and uncertainty around OPEC Plus supply. In the U.S., efficiencies in drilling and completions have brought activity forward. This will allow our customers to meet their production and spending plans prior to year end. Therefore, we expect U.S. demand to slow due to budget exhaustion and holiday disruptions. However, international and offshore activity, as well as our beat the market strategy, should help mitigate U.S. softness. For the fourth quarter, we expect revenue and adjusted EBITDA to be in the ranges of $190 to $210 million and $22 and $26 million, respectively. Our fourth quarter EBITDA forecast puts us within our previous full-year guidance range of $100 to $110 million. Turning to 2025, it is still too early to provide a specific financial outlook for FET. However, as we start the planning process, here are a few baseline points. Customer indications and industry commentary suggest U.S. drilling and completions activity could be down as much as 5% from 2024. Also, based on the spending cadence observed in the last two years, activity may be slightly weighted towards the first half of the year. Not contemplated in our planning process is a rebound in natural gas drilling and completions activity. If LNG or data center electricity demand triggers a meaningful commodity price increase, there may be some upside to activity. For Canada and the rest of the world, we currently believe demand will remain relatively flat to slightly up compared to 2024. Regardless of market conditions next year, our focus will remain on free cash flow and returning capital to shareholders. I'm going to turn the call over to Lyle for more details on FET's third quarter financial results and highlights.