8-K: Forum Energy Technologies Delays Earnings Release, Provides Preliminary 2023 Results and 2024 Guidance

Forum Energy Technologies has delayed its Q4 and full year 2023 earnings release due to a valuation allowance reserve review, while providing preliminary results and 2024 guidance.

Summary

• Forum Energy Technologies has announced a delay in the release of its fourth quarter and full year 2023 earnings due to the need to finalize a valuation allowance reserve.
• The company has provided preliminary results for 2023, including revenue of $739 million, a 6% year-over-year increase, and orders of $724 million with a book-to-bill ratio of 98%.
• Adjusted EBITDA for 2023 is estimated to be between $67 and $69 million.
• The company expects to release its full results around March 1, 2024.
• Fourth quarter 2023 revenue was $185 million, a $6 million increase from the third quarter, with adjusted EBITDA expected to be between $15 and $17 million and free cash flow of $9 million.
• For 2024, the company forecasts adjusted EBITDA of $100 to $120 million and free cash flow of $40 to $60 million.
• First quarter 2024 revenue is projected to be between $200 and $220 million, with adjusted EBITDA between $23 and $27 million.
• The company anticipates a flat global market for 2024, with a 5% decrease in average rig count in the U.S., a slight increase internationally, and flat activity in Canada.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to the delay in earnings release and potential negative impact from the valuation allowance reserve, offset by positive revenue growth and forward guidance.

Positives

• The company experienced a 6% year-over-year increase in revenue for 2023, reaching $739 million.
• The book-to-bill ratio of 98% indicates strong demand for the company's products and services.
• The company is forecasting positive adjusted EBITDA and free cash flow for 2024.
• The company expects increased oil sands activity in the second half of 2024 due to the Trans Mountain pipeline expansion.

Negatives

• The company has delayed the release of its fourth quarter and full year 2023 earnings.
• The delay is due to the need to finalize a valuation allowance reserve, which could potentially impact income tax and net income.
• The company anticipates a 5% decrease in average rig count in the U.S. for 2024.

Risks

• The company's results are subject to finalization of financial closing procedures and may vary materially from preliminary estimates.
• The company's performance is subject to the volatility of oil and natural gas prices.
• The company faces risks related to oilfield development activity levels, availability of raw materials, and competition.
• The company's future performance is subject to uncertainties regarding environmental regulations and other legal or regulatory developments.

Future Outlook

The company forecasts a flat global market for 2024, with a 5% decrease in average rig count in the U.S., a slight increase internationally, and flat activity in Canada. They anticipate increased oil sands activity in the second half of 2024 due to the Trans Mountain pipeline expansion. The company expects 2024 adjusted EBITDA of $100 to $120 million and free cash flow of $40 to $60 million.

Management Comments

• Management believes that non-GAAP measures are useful tools for evaluating the company's overall financial performance.
• Management views the excluded items to be outside of the company's normal operating results.
• Management believes EBITDA is an appropriate measure of evaluating the company's operating performance and liquidity.

Industry Context

The announcement comes amid a fluctuating oil and gas market, where companies are closely monitoring rig counts and project developments. The expected increase in oil sands activity due to the Trans Mountain pipeline expansion is a significant factor for the company's outlook.

Comparison to Industry Standards

• Forum Energy Technologies' 6% revenue growth for 2023 is a positive sign, but it's important to compare this to peers like Schlumberger, Halliburton, and Baker Hughes, who also operate in the oilfield services sector.
• The book-to-bill ratio of 98% suggests a healthy demand environment, but this should be benchmarked against industry averages to assess its relative strength.
• The forecasted adjusted EBITDA and free cash flow for 2024 need to be evaluated against the performance of similar companies to determine if they are competitive.
• The anticipated 5% decrease in average rig count in the U.S. is a concern and should be compared to industry forecasts to understand its potential impact.

Stakeholder Impact

• Shareholders may experience uncertainty due to the delay in the earnings release.
• Employees may be affected by the company's performance and future outlook.
• Customers may be impacted by the company's ability to deliver products and services.
• Suppliers may be affected by the company's financial performance and demand for materials.

Next Steps

• The company will finalize its financial closing procedures.
• The company will release its fourth quarter and full year 2023 results around March 1, 2024.
• The company will host an investor conference call around March 1, 2024.

Key Dates

Keywords

EBITDA, free cash flow, revenue, book-to-bill ratio, oil and gas, energy, financial results, earnings, guidance