10-K: Forum Energy Technologies Reports Increased Revenue Despite Net Loss in 2024

Forum Energy Technologies, Inc. reports a revenue increase of 10.5% for the year ended December 31, 2024, driven by the Variperm acquisition, but also announces a net loss of $135.3 million.

Summary

• Forum Energy Technologies, Inc. (FET) reported a revenue increase of 10.5% to $816.4 million for the year ended December 31, 2024, compared to $738.9 million in 2023.
• The revenue increase was primarily driven by the acquisition of Variperm and increased revenues in the Subsea product line.
• Approximately 80% of FET's 2024 revenue was derived from consumable products and activity-based equipment.
• The company reported a net loss of $135.3 million, or $11.00 per share, compared to a net loss of $18.9 million, or $1.85 per share, in the previous year.
• The Drilling and Completions segment saw a revenue decrease of 6.3%, while the Artificial Lift and Downhole segment experienced a revenue increase of 46.3%.
• The company's backlog was approximately $213.5 million at December 31, 2024, compared to $241.6 million at the end of 2023.
• Bookings for the years ended December 31, 2024 and 2023 were approximately $780.3 million and $724.3 million, respectively.
• The company completed the acquisition of Variperm Holdings Ltd. for $150.0 million in cash and 2.0 million shares of FET common stock.
• FET redeemed in full the $134.2 million aggregate principal amount outstanding of its 9.00% Senior Convertible Secured Notes due 2025 (2025 Notes) at par value.
• The company closed $100.0 million aggregate principal amount of 2029 Bonds, the net proceeds of which, together with cash on hand of $10.2 million and borrowings from our Credit Facility of $15.0 million, were used to repay in full the 2025 Notes and the Seller Term Loan.

Sentiment

Score: 4

Explanation: The document presents mixed signals. While revenue increased, the significant net loss and various risk factors temper the positive aspects. The overall outlook is cautiously negative.

Positives

• Revenue increased by 10.5% to $816.4 million.
• The Artificial Lift and Downhole segment experienced a significant revenue increase of 46.3%.
• The company successfully refinanced its debt by issuing 2029 Bonds and repaying the 2025 Notes and Seller Term Loan.
• Bookings increased from $724.3 million to $780.3 million.

Negatives

• The company reported a net loss of $135.3 million, a significant increase from the $18.9 million loss in the previous year.
• The Drilling and Completions segment saw a revenue decrease of 6.3%.
• Backlog decreased from $241.6 million to $213.5 million.
• The company recognized intangible asset impairment charges totaling $119.1 million.

Risks

• The success of the business largely depends on activity levels in the oil and natural gas industry, which can be affected by the amount and volatility of oil and natural gas prices.
• The markets in which the company operates are highly competitive.
• The company may not realize revenue on its current backlog due to customer order reductions, cancellations or acceptance delays.
• Potential legislation or regulations restricting the use of hydraulic fracturing could reduce demand for the company's products.
• The number and cost of current and future asbestos claims could be substantially higher than estimated.
• Climate change legislation or regulations restricting emissions of greenhouse gases (GHGs) and related divestment and other efforts could increase operating costs or reduce demand for the company's products.
• The company's common stock price has been volatile, and it is expected to continue to remain volatile in the future.
• The company's debt agreements contain operating and financial restrictions that restrict its business and financing activities.
• The company's variable rate indebtedness may subject it to interest rate risk, which could cause its debt service obligations to increase significantly.
• The company's ability to access the capital and credit markets to raise capital on favorable terms is limited by its debt level, industry conditions and credit rating.
• During the year ended December 31, 2024, the company incurred impairment charges and it may incur additional impairment charges in the future.

Future Outlook

The company expects that the world's long-term energy demand will continue to rise and that hydrocarbons will continue to play a vital role in meeting the world's long-term energy needs while renewable energy sources develop to scale.

Management Comments

• The company remains focused on serving customers in both oil and natural gas as well as renewable energy applications.
• The company is continuing to develop products to help oil and gas operators lower expenses, increase production, and reduce their emissions while also deploying technologies in renewable energy applications.

Industry Context

The report acknowledges the cyclical nature of the oil and gas industry and the impact of commodity prices on customer spending. It also mentions the increasing focus on renewable energy and the energy transition, which may impact the company's results of operations.

Comparison to Industry Standards

• The company competes with larger national and multinational companies such as NOV Inc., Tenaris S.A., SLB, TechnipFMC plc and Weatherford International PLC.
• The report mentions that competitors may be able to offer more attractive pricing, duplicate strategies, or develop enhancements to products that offer performance features that are superior to the company's products.

Legal Proceedings

• One of the company's subsidiaries is involved in asbestos-related product liability actions.
• One of the company's subsidiaries, Global Tubing LLC, is involved in litigation with Tenaris Coiled Tubes, LLC and Tenaris, S.A. regarding patent infringement.
• One of the company's dormant subsidiaries is one of several named defendants in a suit filed by the Port of Portland, Oregon related to the Portland Harbor Superfund Site.

Related Party Transactions

• The company has sold and purchased inventory, services and fixed assets to and from affiliates of certain directors.

Stakeholder Impact

• The company's performance and strategic decisions may impact shareholders, employees, customers, suppliers, and creditors.

Next Steps

• The company may use a portion of its cash flows from operations, proceeds from divestitures, securities offerings or other eligible capital to reduce outstanding debt or repurchase shares of its common stock under its repurchase program.
• The company may pursue additional acquisitions in the future, which may be funded with cash and/or equity.

Key Dates