FORUM ENERGY TECHNOLOGIES, INC. 10-Q

Item 2. Management’s discussion and analysis of financial condition and results of operations CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’s control. All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words “will,” “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We disclaim any obligation to update or revise these statements unless required by law, and you should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report on Form 10-Q are reasonable, forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause actual results to differ materially from our plans, intentions or expectations. This may be the result of various factors, including, but not limited to, those factors discussed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on March 5, 2024, and elsewhere in this Quarterly Report on Form 10-Q. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. Overview We are a global manufacturing company serving the oil, natural gas, industrial and renewable energy industries. With headquarters in Houston, Texas, FET provides value added solutions aimed at improving the safety, efficiency, and environmental impact of our customers’ operations. Our highly engineered products include capital equipment and consumable products. FET’s customers include oil and natural gas operators, land and offshore drilling contractors, oilfield service companies, pipeline and refinery operators, and renewable and new energy companies. Consumable products are used by our customers in drilling, well construction and completion activities and at processing centers and refineries. Our capital products are directed at drilling rig equipment for constructing new or upgrading existing rigs, subsea construction and development projects, pressure pumping equipment, the placement of production equipment on new producing wells, downstream capital projects and capital equipment for renewable energy projects. For the nine months ended September 30, 2024, approximately 80% of our revenue was derived from consumable products and activity-based equipment, while the balance was primarily derived from capital products with a small amount from rental and other services. We expect that the world’s long-term energy demand will continue to rise for many decades. We also expect hydrocarbons will continue to play a vital role in meeting the world’s long-term energy needs while renewable energy sources develop to scale. As such, we remain focused on serving our customers in both oil and natural gas as well as renewable energy applications. We are continuing to develop products to help oil and gas operators lower expenses, increase production and reduce their emissions while also deploying our technologies in renewable energy applications. In the first quarter 2024, following the Variperm Acquisition, we aligned our reportable segments with business activity drivers, our customer base, and the manner in which management reviews and evaluates operating performance. FET now operates in the following two reportable segments: (1) Drilling and Completions and (2) Artificial Lift and Downhole. Refer to Note 10 Business Segments for the product lines making up each segment. Our historical results of operations were recast retrospectively to reflect these changes in accordance with U.S. GAAP. 22 A summary of the products and services offered by each segment is as follows: • Drilling and Completions . This segment designs, manufactures and supplies products and solutions to the drilling, subsea, coiled tubing, well stimulation and intervention markets, including applications in the oil and natural gas, renewable energy, defense and communications industries. The products and solutions consist primarily of (i) capital equipment and consumable products used in the drilling process; (ii) capital equipment and aftermarket products including subsea remotely operated vehicles (“ROVs”) and trenchers, submarine rescue vehicles, specialty components and tooling, and technical services; (iii) capital equipment and consumable products sold to the pressure pumping market, including hydraulic fracturing pumps, cooling systems, and high-pressure flexible hoses and flow iron; (iv) wireline cable and pressure control equipment used in the well completion and intervention service markets; and (v) coiled tubing strings and pressure control equipment used in coiled tubing operations, as well as coiled line pipe and related services. • Artificial Lift and Downhole . This segment designs, manufactures and supplies products and solutions for the artificial lift, well construction, production and infrastructure markets. The products and solutions consist primarily of: (i) products designed to safeguard artificial lift equipment and downhole cables; (ii) well construction casing and cementing equipment; (iii) customized downhole technology solutions, providing sand and flow control products for heavy oil applications; (iv) engineered process systems, production equipment, as well as specialty separation equipment; and (v) a wide range of industrial valves focused on oil and natural gas as well as power generation, renewable energy and other general industrial applications. Market Conditions Generally, demand for our products and services is directly related to our customers’ capital and operating budgets. These budgets are heavily influenced by current and expected energy prices. In addition, demand for our capital products is driven by the utilization of service company equipment. Utilization is a function of equipment capacity and durability in demanding environments. Compared to 2023 full year average prices, oil and natural gas average prices have remained relatively flat despite tightened supply from the Organization of the Petroleum Exporting Countries ("OPEC+") production cuts and continued geopolitical tensions in Ukraine and the Middle East. These tensions could lead to a disruption to world energy markets and international supply chains. Although these near-term macroeconomic events have presented challenges, we expect that the world’s long-term energy demand will continue to rise and may outpace global supply. We expect that hydrocarbons will continue to play a vital role in meeting the world’s long-term energy needs while renewable energy sources become increasingly prominent. Average West Texas Intermediate (“WTI”) and Brent oil prices were lower in the third quarter 2024 compared to the third quarter 2023. In addition, average natural gas prices were lower in the third quarter 2024 compared to the third quarter 2023. The decline in average prices during the third quarter 2024 can be attributed to lower global demand outlook than previously projected and anticipated increases in production by OPEC+. Our revenues, over the long-term, are highly correlated to the global drilling rig count, which decreased 3.1% during the third quarter 2024 compared to average global rig count during third quarter 2023. The decrease was mainly driven by a decline in U.S. rig count of 9.7%. In the U.S., publicly owned exploration and production companies are expected to continue to exercise disciplined capital spending while privately owned exploration and production companies fluctuate their activity in response to changes in oil and natural gas prices. Activity levels in the U.S. are forecasted to remain depressed in the fourth quarter of 2024 and into 2025 while international growth is expected to decline. 23 The table below shows average crude oil and natural gas prices for WTI, Brent, and Henry Hub: Three Months Ended September 30, June 30, September 30, 2024 2024 2023 Average global oil, $/bbl West Texas Intermediate $ 76.43 $ 82.79 $ 82.25 Brent $ 80.01 $ 84.68 $ 86.65 Average North American Natural Gas, $/Mcf Henry Hub $ 2.11 $ 2.07 $ 2.59 The table below shows the average number of active drilling rigs operating by geographic area and drilling for different purposes, based on the weekly rig count information published by Baker Hughes Company. Three Months Ended September 30, June 30, September 30, 2024 2024 2023 Active Rigs by Location United States 586 603 649 Canada 210 136 188 International 937 962 951 Global Active Rigs 1,733 1,701 1,788 Land vs. Offshore Rigs Land 1,497 1,458 1,539 Offshore 236 243 249 Global Active Rigs 1,733 1,701 1,788 U.S. Commodity Target Oil/Gas 483 497 521 Gas 98 102 122 Unclassified 5 4 6 Total U.S. Active Rigs 586 603 649 U.S. Well Path Horizontal 521 541 578 Vertical 16 17 17 Directional 49 45 54 Total U.S. Active Rigs 586 603 649 The table below shows the amount of total inbound orders by segment: Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, (in millions of dollars) 2024 2024 2023 2024 2023 Drilling and Completions $ 129.5 $ 110.1 $ 139.9 $ 356.2 $ 383.1 Artificial Lift and Downhole 76.3 70.0 58.9 234.1 180.9 Total Orders $ 205.8 $ 180.1 $ 198.8 $ 590.3 $ 564.0 24 Results of operations Three months ended September 30, 2024 compared with three months ended September 30, 2023 Three Months Ended September 30, Change (in thousands of dollars, except per share information) 2024 2023 $ % Revenue Drilling and Completions $ 123,587 $ 118,920 $ 4,667 3.9 % Artificial Lift and Downhole 84,226 60,357 23,869 39.5 % Eliminations (7) (24) 17 * Total revenue 207,806 179,253 28,553 15.9 % Segment operating income Drilling and Completions 7,030 3,868 3,162 81.7 % Operating margin % 5.7 % 3.3 % Artificial Lift and Downhole 10,784 8,519 2,265 26.6 % Operating margin % 12.8 % 14.1 % Corporate (8,404) (6,861) (1,543) (22.5) % Total segment operating income 9,410 5,526 3,884 70.3 % Operating margin % 4.5 % 3.1 % Transaction expenses 579 — 579 * Gain on disposal of assets and other (85) (145) 60 * Operating income 8,916 5,671 3,245 57.2 % Interest expense 7,650 4,504 3,146 69.8 % Foreign exchange losses (gains) and other, net 9,631 (8,279) 17,910 * Loss on extinguishment of debt 1,839 — 1,839 * Total other (income) expense, net 19,120 (3,775) 22,895 606.5 % Income (loss) before income taxes (10,204) 9,446 (19,650) (208.0) % Income tax expense 4,611 1,477 3,134 212.2 % Net income (loss) $ (14,815) $ 7,969 $ (22,784) (285.9) % Weighted average shares outstanding Basic 12,330 10,235 Diluted 12,330 10,393 Earnings (loss) per share Basic $ (1.20) $ 0.78 Diluted $ (1.20) $ 0.77 * not meaningful 25 Revenue Our revenue for the three months ended September 30, 2024 was $207.8 million, an increase of $28.6 million, or 15.9%, compared to the three months ended September 30, 2023. For the three months ended September 30, 2024, our Drilling and Completions and our Artificial Lift and Downhole segments comprised 59.5% and 40.5% of our total revenue, respectively, compared to 66.3% and 33.7% of our total revenue, respectively, for the three months ended September 30, 2023. The overall increase in revenue is primarily related to the revenue contributed from the acquired Variperm business, and increased revenues in the Subsea and the Stimulation and Intervention product lines, partially offset by the decline in U.S. drilling activity and lower revenues in the Production Equipment product line in the third quarter 2024 compared to the third quarter 2023. The changes in revenue by operating segment consisted of the following: Drilling and Completions segment — Revenue was $123.6 million for the three months ended September 30, 2024, an increase of $4.7 million, or 3.9%, compared to the three months ended September 30, 2023. This increase was driven by an increase of $6.2 million, or 41.7%, in our Subsea product line from higher project revenue recognized from ROVs and Launch and Recovery Systems ("LARS"); and, a $5.5 million, or 16.9%, increase in our Stimulation and Intervention product line, primarily due to higher sales of power ends and wireline cable. Partially offsetting this increase were a $6.0 million, or 14.3%, decrease in our Drilling product line primarily due to the decline in U.S. drilling activity and a $1.0 million, or 3.4%, decrease in our Coiled Tubing product line from lower international activity. Artificial Lift and Downhole segment — Revenue was $84.2 million for the three months ended September 30, 2024, an increase of $23.9 million, or 39.5%, compared to the three months ended September 30, 2023. Revenue for our Downhole product line increased by $27.1 million, or 115.3%, primarily due to revenue contributed from the acquired Variperm business. Partially offsetting this increase was a $3.7 million, or 17.2% decrease, in the Production Equipment product line primarily due to a decline in demand for surface production equipment. Segment operating income (loss) and segment operating margin percentage Segment operating income for the three months ended September 30, 2024 was $9.4 million, a $3.9 million increase compared to an income of $5.5 million for the three months ended September 30, 2023. For the three months ended September 30, 2024, segment operating margin percentage was 4.5% compared to 3.1% for the three months ended September 30, 2023. Segment operating margin percentage is calculated by dividing segment operating income (loss) by revenue for the period. The change in operating income (loss) for each segment is explained as follows: Drilling and Completions segment — Segment operating income was $7.0 million, or 5.7%, for the three months ended September 30, 2024 compared to operating income of $3.9 million, or 3.3%, for the three months ended September 30, 2023. The $3.2 million increase in segment operating results is primarily attributable to higher volume and profitability in the Subsea and the Stimulation and Intervention product lines, partially offset by lower operating leverage on lower sales volumes of our drilling products. Artificial Lift and Downhole segment — Segment operating income was $10.8 million, or 12.8%, for the three months ended September 30, 2024 compared to an income of $8.5 million, or 14.1%, for the three months ended September 30, 2023. The $2.3 million increase was primarily driven by the acquisition of Variperm, partially offset by the decline in operating leverage on lower sales volumes of our surface production equipment. Corporate — Selling, general and administrative expenses for Corporate were $8.4 million for the three months ended September 30, 2024 compared to $6.9 million for the three months ended September 30, 2023. This increase was primarily related to higher variable compensation costs and professional fees. Corporate costs include, among other items, payroll related costs for management, administration, finance, legal, and human resources personnel; professional fees for legal, accounting and related services; and marketing costs. Other items not included in segment operating income (loss) Transaction expenses, gain (loss) on the disposal of assets and other are not included in segment operating income, but are included in total operating income. 26 Other income and expense Other income and expense includes interest expense, foreign exchange gains (losses) and other, and loss on extinguishment of debt. We incurred $7.7 million of interest expense during the three months ended September 30, 2024, an increase of $3.1 million compared to the three months ended September 30, 2023, due to the increased borrowings under our revolving Credit Facility and borrowings under the Seller Term Loan entered into in connection with the Variperm Acquisition. See Note 7 Debt for further details related to the Credit Facility and Seller Term Loan. The foreign exchange gains (losses) are primarily the result of movements in the British pound, Euro and Canadian dollar relative to the U.S. dollar. These movements in exchange rates create foreign exchange gains or losses when applied to monetary assets or liabilities denominated in currencies other than the location’s functional currency, primarily U.S. dollar denominated cash, trade account receivables and net intercompany receivable balances for our entities using a functional currency other than the U.S. dollar. During the three months ended September 30, 2024, we redeemed an aggregate $60.0 million of principal amount of our 9.00% convertible secured notes due August 2025 (“2025 Notes”) at par value. The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $58.2 million, resulting in a $1.8 million loss on extinguishment of debt. Taxes We recorded tax expense of $4.6 million and $1.5 million for the three months ended September 30, 2024 and 2023, respectively. The estimated annual effective tax rates for the three months ended September 30, 2024 and 2023 were impacted by losses in jurisdictions where the recording of a tax benefit is not available. Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction. 27 Results of operations Nine months ended September 30, 2024 compared with nine months ended September 30, 2023 Nine Months Ended September 30, Change (in thousands of dollars, except per share information) 2024 2023 $ % Revenue Drilling and Completions $ 359,683 $ 376,026 $ (16,343) (4.3) % Artificial Lift and Downhole 255,737 177,681 78,056 43.9 % Eliminations (13) (48) 35 * Total revenue 615,407 553,659 61,748 11.2 % Segment operating income Drilling and Completions 14,464 15,483 (1,019) (6.6) % Operating margin % 4.0 % 4.1 % Artificial Lift and Downhole 36,031 24,121 11,910 49.4 % Operating margin % 14.1 % 13.6 % Corporate (22,610) (20,538) (2,072) (10.1) % Total segment operating income 27,885 19,066 8,819 46.3 % Operating margin % 4.5 % 3.4 % Transaction expenses 7,728 — 7,728 * Loss on disposal of assets and other 107 137 (30) * Operating income 20,050 18,929 1,121 5.9 % Interest expense 25,069 13,742 11,327 82.4 % Foreign exchange losses and other, net 13,864 1,129 12,735 * Loss on extinguishment of debt 2,302 — 2,302 * Total other expense 41,235 14,871 26,364 177.3 % Income (loss) before income taxes (21,185) 4,058 (25,243) (622.1) % Income tax expense 10,641 6,154 4,487 72.9 % Net loss $ (31,826) $ (2,096) $ (29,730) (1,418.4) % Weighted average shares outstanding Basic 12,287 10,208 Diluted 12,287 10,208 Loss per share Basic $ (2.59) $ (0.21) Diluted $ (2.59) $ (0.21) * not meaningful 28 Revenue Our revenue for the nine months ended September 30, 2024 was $615.4 million, an increase of $61.7 million, or 11.2%, compared to the nine months ended September 30, 2023. For the nine months ended September 30, 2024, our Drilling and Completions and our Artificial Lift and Downhole segments comprised 58.4% and 41.6% of our total revenue, respectively, compared to 67.9% and 32.1% of our total revenue, respectively, for the nine months ended September 30, 2023. The overall increase in revenue is primarily related to the revenue contributed from the acquired Variperm business and increased revenues in the Subsea product line, partially offset by the decline in U.S. drilling and completions activity in 2024 compared to 2023. The changes in revenue by operating segment consisted of the following: Drilling and Completions segment — Revenue was $359.7 million for the nine months ended September 30, 2024, a decrease of $16.3 million, or 4.3%, compared to the nine months ended September 30, 2023. The decrease in segment revenue included a $19.2 million, or 15.1%, decrease from the Drilling product line, a $12.4 million, or 9.8%, decrease from the Stimulation and Intervention product line, and a $3.4 million, or 4.1%, decrease from the Coiled Tubing product line, primarily the result of declining U.S. drilling and completions activity. These decreases were partially offset by an increase of $18.6 million, or 45.6%, in our Subsea product line due to higher project revenue recognized from ROVs and LARS, and an increase in parts sales. Artificial Lift and Downhole segment — Revenue was $255.7 million for the nine months ended September 30, 2024, an increase of $78.1 million, or 43.9%, compared to the nine months ended September 30, 2023. Revenue for our Downhole product line increased by $87.1 million, or 126.7%, primarily due to revenue contributed from the acquired Variperm business and an increase in downhole equipment sales from increased international activity. This increase was partially offset by a $4.8 million, or 8.0%, decrease in surface production equipment and a $4.3 million, or 8.7%, decrease in sales of our valve products. Segment operating income (loss) and segment operating margin percentage Segment operating income for the nine months ended September 30, 2024 was $27.9 million, a $8.8 million increase compared to $19.1 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, segment operating margin percentage was 4.5% compared to 3.4% for the nine months ended September 30, 2023. Segment operating margin percentage is calculated by dividing segment operating income by revenue for the period. The change in operating income for each segment is explained as follows: Drilling and Completions segment — Segment operating income was $14.5 million, or 4.0%, for the nine months ended September 30, 2024 compared to $15.5 million, or 4.1%, for the nine months ended September 30, 2023. The $1.0 million decrease in segment operating results is primarily due to the overall decline in segment revenues. Artificial Lift and Downhole segment — Segment operating income was $36.0 million, or 14.1%, for the nine months ended September 30, 2024 compared to $24.1 million, or 13.6%, for the nine months ended September 30, 2023. The $11.9 million increase in segment operating results was primarily driven by the acquisition of Variperm, partially offset by the decline in operating leverage on lower sales volumes of our surface production equipment. Corporate — Selling, general and administrative expenses for Corporate were $22.6 million for the nine months ended September 30, 2024 compared to $20.5 million for the nine months ended September 30, 2023. This increase was primarily related to higher variable compensation costs. Corporate costs include, among other items, payroll related costs for management, administration, finance, legal, and human resources personnel; professional fees for legal, accounting and related services; and marketing costs. Other items not included in segment operating income (loss) Transaction expenses, gain (loss) on the disposal of assets and other are not included in segment operating income, but are included in total operating income. Other income and expense Other income and expense includes interest expense, foreign exchange gains (losses) and other, and loss on extinguishment of debt. We incurred $25.1 million of interest expense during the nine months ended September 30, 2024, an increase of $11.3 million compared to the nine months ended September 30, 2023, due to the increased borrowings under our revolving Credit Facility and borrowings under the Seller Term Loan entered into in connection with the Variperm Acquisition. See Note 7 Debt for further details related to the Credit Facility and Seller Term Loan. 29 The foreign exchange gains (losses) are primarily the result of movements in the British pound, Euro and Canadian dollar relative to the U.S. dollar. These movements in exchange rates create foreign exchange gains or losses when applied to monetary assets or liabilities denominated in currencies other than the location’s functional currency, primarily U.S. dollar denominated cash, trade account receivables and net intercompany receivable balances for our entities using a functional currency other than the U.S. dollar. During the nine months ended September 30, 2024, we retired an aggregate $73.0 million of principal amount of our 2025 Notes at approximately par value. The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $70.7 million , resulting in a $2.3 million loss on extinguishment of debt. Taxes We recorded tax expense of $10.6 million and $6.2 million for the nine months ended September 30, 2024 and 2023, respectively. The estimated annual effective tax rates for the nine months ended September 30, 2024 and 2023 were impacted by losses in jurisdictions where the recording of a tax benefit is not available. Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction. Liquidity and capital resources Sources and uses of liquidity Our internal sources of liquidity are cash on hand and cash flows from operations, while our primary external sources include trade credit, the Credit Facility, the 2025 Notes and the Seller Term Loan. Our primary uses of capital have been for inventory, sales on credit to our customers, maintenance and growth capital expenditures, debt repayments and the acquisition of Variperm. We continually monitor other potential capital sources, including equity and debt financing, to meet our investment and target liquidity requirements. Our future success and growth will be highly dependent on our ability to generate positive operating cash flow and access outside sources of capital. As of September 30, 2024, we had $61.2 million principal amount of 2025 Notes outstanding, $109.0 million of borrowings under our revolving Credit Facility and $58.4 million principal amount of the Seller Term Loan outstanding. During the nine months ended September 30, 2024, we retired an aggregate $73.0 million of principal amount of our 2025 Notes, including the $60.0 million in aggregate principal amount of our 2025 Notes that we redeemed in August 2024. The remaining 2025 Notes mature in August 2025. The Credit Facility matures on the earliest of (a) September 8, 2028, (b) the date that is 91 days prior to the maturity of 2025 Notes (which will not apply if the 2025 Notes are repaid prior to such 91st day) and (c) the date that is 91 days prior to the maturity of the Seller Term Loan if the outstanding aggregate principal amount thereunder is equal to or greater than $30 million. The Seller Term Loan matures in December 2026. See Note 7 Debt for further details related to the terms for our debt arrangements. On October 24, 2024, we priced an issuance of $100.0 million aggregate principal amount of the 2029 Bonds. We expect to use the net proceeds, together with cash on hand, to redeem in full all outstanding 2025 Notes and to repay all borrowings outstanding under the Seller Term Loan. The Offering is expected to close on November 7, 2024, subject to customary closing conditions. Refer to Note 7 Debt for additional information on the Offering. As of September 30, 2024, we had cash and cash equivalents of $33.3 million and $58.8 million of availability under the Credit Facility. We intend to use approximately $20 million of cash on hand and borrowings from our credit facility, together with the net proceeds from the issuance of the 2029 Bonds, to repay in full the 2025 Notes and the Seller Term Loan. We anticipate that our future working capital requirements for our operations will fluctuate directionally with revenues. Furthermore, availability under the Credit Facility will fluctuate directionally based on the level of our eligible accounts receivable and inventory subject to applicable sublimits. In addition, we expect total 2024 capital expenditures to be approximately $10.0 million, primarily for replacement of end of life machinery and equipment. We expect our available cash on-hand, cash generated by operations, and estimated availability under the Credit Facility to be adequate to fund current operations during the next 12 months. In addition, based on existing market conditions and our expected liquidity needs, among other factors, we may use a portion of our cash flows from operations, proceeds from divestitures, securities offerings or other eligible capital to reduce outstanding debt or repurchase shares of our common stock under our repurchase program. In November 2021, our board of directors approved a program for the repurchase of outstanding shares of our common stock with an aggregate purchase amount of up to $10.0 million. Shares may be repurchased under the 30 program from time to time, in amounts and at prices that the company deems appropriate, subject to market and business conditions, applicable legal requirements and other considerations. During the nine months ended September 30, 2024 , we did not repurchase shares of our common stock and the remaining authorization under this program is $2.4 million. In January 2024, we completed the Variperm Acquisition for consideration of approximately $150.0 million of cash (subject to customary purchase price adjustments) and 2.0 million shares of our common stock. We may pursue additional acquisitions in the future, which may be funded with cash and/or equity. Our cash flows for the nine months ended September 30, 2024 and 2023 are presented below (in millions): Nine Months Ended September 30, 2024 2023 Net cash provided by (used in) operating activities $ 53.7 $ (3.1) Net cash used in investing activities (155.9) (4.2) Net cash provided by (used in) financing activities 89.4 (6.9) Effect of exchange rate changes on cash (0.1) 0.3 Net decrease in cash, cash equivalents and restricted cash $ (12.9) $ (13.9) Net cash provided by (used in) operating activities Net cash provided by operating activities was $53.7 million for the nine months ended September 30, 2024 compared to net cash used in operating activities of $3.1 million for the nine months ended September 30, 2023. This improvement in operating cash flow usage is primarily attributable to changes in working capital which provided cash of $30.8 million for the nine months ended September 30, 2024 compared to a use of cash of $36.8 million for the nine months ended September 30, 2023. Net cash used in investing activities Net cash used in investing activities was $155.9 million for the nine months ended September 30, 2024, mainly related to the Variperm Acquisition of $150.4 million, and to $5.7 million of capital expenditures. Net cash used in investing activities was $4.2 million for the nine months ended September 30, 2023, including $5.5 million of capital expenditures, partially offset by $1.3 million of proceeds from the sale of property and equipment. Net cash provided by (used in) financing activities Net cash provided by financing activities was $89.4 million for the nine months ended September 30, 2024 compared to $6.9 million of cash used in financing activities for the nine months ended September 30, 2023. The change in net cash provided by financing activities primarily resulted from $109.0 million in borrowings from the revolving Credit Facility and $59.7 million from the Seller Term Loan, partially offset by the retirement of 2025 Notes of $73.0 million during the nine months ended September 30, 2024 compared to a net zero of borrowings on the revolving Credit Facility during the nine months ended September 30, 2023. Supplemental Guarantor Financial Information The Company’s 2025 Notes are guaranteed by our domestic subsidiaries which are 100% owned, directly or indirectly, by the Company. The guarantees are full and unconditional, joint and several. The guarantees of the 2025 Notes are (i) pari passu in right of payment with all existing and future senior indebtedness of such guarantor, including all obligations under our Credit Facility and the Seller Term Loan; (ii) secured by certain collateral of such guarantor, subject to permitted liens under the indenture governing the 2025 Notes; (iii) effectively senior to all unsecured indebtedness of that guarantor, to the extent of the value of the collateral securing the 2025 Notes (after giving effect to the liens securing our Credit Facility and any other senior liens on the collateral); and (iv) senior in right of payment to any future subordinated indebtedness of that guarantor. In the event of a bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries of the 2025 Notes, the non-guarantor subsidiaries of such notes will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Company or to any guarantors. The 2025 Notes guarantees shall each be released upon (i) any sale or other disposition of all or substantially all of the assets of such guarantor (by merger, consolidation or otherwise) to a person that is not (either before or after giving effect to such transaction) the Company or a subsidiary, if the sale or other disposition does not violate the applicable provisions of the indenture governing such notes; (ii) any sale, exchange or transfer (by merger, 31 consolidation or otherwise) of the equity interests of such guarantor after which the applicable guarantor is no longer a subsidiary, which sale, exchange or transfer does not violate the applicable provisions of the indenture governing such notes; (iii) legal or covenant defeasance or satisfaction and discharge of the indenture governing such notes; or (iv) dissolution of such guarantor, provided no default or event of default has occurred that is continuing. The obligations of each guarantor of the 2025 Notes under its guarantee will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such guarantor (including, without limitation, any guarantees under the Credit Facility) and any collections from or payments made by or on behalf of any other guarantor in respect of the obligations of such other guarantor under its guarantee or pursuant to its contribution obligations under the applicable indenture, result in the obligations of such guarantor under its guarantee not constituting a fraudulent conveyance, fraudulent preference or fraudulent transfer or otherwise reviewable transaction under applicable law. Nonetheless, in the event of the bankruptcy, insolvency or financial difficulty of a guarantor, such guarantor’s obligations under its guarantee may be subject to review and avoidance under applicable fraudulent conveyance, fraudulent preference, fraudulent transfer and insolvency laws. We are presenting the following summarized financial information for the Company and the subsidiary guarantors pursuant to Rule 13-01 of Regulation S-X, Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. For purposes of the following summarized financial information, transactions between the Company and the subsidiary guarantors, presented on a combined basis, have been eliminated and information for the non-guarantor subsidiaries have been excluded. Amounts due to the non-guarantor subsidiaries and other related parties, as applicable, have been separately presented within the summarized financial information below. Summarized financial information for the year-to-date interim period and the most recent annual period was as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, Summarized Statements of Operations 2024 2023 2024 2023 Revenue $ 126,694 $ 133,202 $ 389,426 $ 424,210 Cost of sales 98,891 100,361 300,301 324,421 Operating income (8,333) 6,034 (15,214) 14,910 Net income (loss) (14,815) 7,969 (31,826) (2,096) September 30, 2024 December 31, 2023 Summarized Balance Sheet Current assets $ 345,105 $ 388,817 Non-current assets 236,451 251,901 Current liabilities $ 201,414 $ 144,493 Payables to non-guarantor subsidiaries 38,690 190,816 Non-current liabilities 207,488 178,811 Critical accounting policies and estimates There have been no material changes in our critical accounting policies and procedures during the nine months ended September 30, 2024. For a detailed discussion of our critical accounting policies and estimates, refer to our 2023 Annual Report on Form 10-K. For recent accounting pronouncements, refer to Note 2 Recent Accounting Pronouncements . Item 3. Quantitative and qualitative disclosures about market risk Not required under Regulation S-K for “smaller reporting companies.” 32