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 3, 2025, 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, defense 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, oilfield service companies, pipeline and refinery operators, defense contractors and renewable 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 six months ended June 30, 2025, 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. The Company operates in the following two reportable segments: (1) Drilling and Completions and (2) Artificial Lift and Downhole. Refer to Note 9 Business Segments for the product lines making up each segment. 19 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. Average oil prices were lower in the second quarter 2025 compared to the second quarter 2024, while average natural gas prices were higher. The decline in average oil prices is attributable to a faster than expected return of the Organization of Petroleum Exporting Countries and its allies ("OPEC+") production combined with global recessionary fears triggered by the expected imposition of broad based trade policy changes by the Trump Administration. The increase in average natural gas prices is attributable to strong demand, tightening supply and geopolitical uncertainty. Our revenues, over the long-term, are highly correlated to the global drilling rig count, which decreased 6.2% during the second quarter 2025 compared to average global rig count during second quarter 2024. The decrease in rig count is driven by the lower average oil prices, increased production efficiencies and continued capital spending discipline by publicly owned exploration and production companies. We expect rig count in the second half of 2025 to remain below the 2024 rig count with some areas of resilience in certain international markets. Given the current macroeconomic uncertainty, trade policy fluctuations, oil price volatility, and changing regulations we are monitoring market conditions and assessing potential impacts on our business. The table below shows average crude oil and natural gas prices for Average West Texas Intermediate (“WTI”), Brent, and Henry Hub: Three Months Ended June 30, March 31, June 30, 2025 2025 2024 Average global oil, $/bbl WTI $ 64.57 $ 71.78 $ 82.79 Brent $ 68.07 $ 75.87 $ 84.68 Average North American Natural Gas, $/Mcf Henry Hub $ 3.19 $ 4.14 $ 2.07 20 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 June 30, March 31, June 30, 2025 2025 2024 Active Rigs by Location United States 571 588 603 Canada 128 216 136 International 897 902 962 Global Active Rigs 1,596 1,706 1,701 Land vs. Offshore Rigs Land 1,397 1,498 1,458 Offshore 199 208 243 Global Active Rigs 1,596 1,706 1,701 U.S. Commodity Target Oil 459 482 497 Gas 108 101 102 Unclassified 4 5 4 Total U.S. Active Rigs 571 588 603 U.S. Well Path Horizontal 515 525 541 Vertical 13 13 17 Directional 43 50 45 Total U.S. Active Rigs 571 588 603 The table below shows the amount of total inbound orders by segment: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (in millions of dollars) 2025 2025 2024 2025 2024 Drilling and Completions $ 177.8 $ 132.1 $ 110.1 $ 309.9 $ 226.7 Artificial Lift and Downhole 85.3 68.6 70.0 153.9 157.8 Total Orders $ 263.1 $ 200.7 $ 180.1 $ 463.8 $ 384.5 21 Results of operations Three months ended June 30, 2025 compared with three months ended June 30, 2024 Three Months Ended June 30, Change (in thousands of dollars, except per share information) 2025 2024 $ % Revenue Drilling and Completions $ 117,237 $ 117,025 $ 212 0.2 % Artificial Lift and Downhole 82,547 88,169 (5,622) (6.4) % Eliminations (20) 15 (35) * Total revenue 199,764 205,209 (5,445) (2.7) % Segment operating income Drilling and Completions 7,271 2,875 4,396 152.9 % Operating margin % 6.2 % 2.5 % Artificial Lift and Downhole 10,391 13,461 (3,070) (22.8) % Operating margin % 12.6 % 15.3 % Corporate (9,491) (6,954) (2,537) (36.5) % Total segment operating income 8,171 9,382 (1,211) (12.9) % Operating margin % 4.1 % 4.6 % Transaction expenses 184 1,228 (1,044) * Gain on sale-leaseback transactions (6,903) — (6,903) * Loss on disposal of assets and other 207 220 (13) * Operating income 14,683 7,934 6,749 85.1 % Interest expense 4,706 8,659 (3,953) (45.7) % Foreign exchange losses (gains) and other, net (3,942) 3,006 (6,948) * Loss on extinguishment of debt — 463 (463) * Total other expense 764 12,128 (11,364) (93.7) % Income (loss) before income taxes 13,919 (4,194) 18,113 431.9 % Income tax expense 6,219 2,502 3,717 148.6 % Net income (loss) $ 7,700 $ (6,696) $ 14,396 215.0 % Weighted average shares outstanding Basic 12,350 12,330 Diluted 12,554 12,330 Earnings (loss) per share Basic $ 0.62 $ (0.54) Diluted $ 0.61 $ (0.54) * not meaningful 22 Revenue Our revenue for the three months ended June 30, 2025 was $199.8 million, a decrease of $5.4 million, or 2.7%, compared to the three months ended June 30, 2024. For the three months ended June 30, 2025, our Drilling and Completions and our Artificial Lift and Downhole segments comprised 58.7% and 41.3% of our total revenue, respectively, compared to 57.0% and 43.0% of our total revenue, respectively, for the three months ended June 30, 2024. The overall decrease was primarily related to the decline in global drilling and completions activity, as well as tariff impacts mainly in our Valve Solutions product line, in the second quarter 2025 compared to the second quarter 2024. The changes in revenue by operating segment consisted of the following: Drilling and Completions segment — Revenue was $117.2 million for the three months ended June 30, 2025, an increase of $0.2 million, or 0.2%, compared to the three months ended June 30, 2024. The increase was primarily due to higher project revenue recognized for ROVs and Launch and Recovery Systems ("LARS"), and increased coiled line pipe sales due to growing demand in the U.S. and a large offshore project. Offsetting these increases were lower sales of capital and consumable products due to the decline in global drilling and completion activity. Artificial Lift and Downhole segment — Revenue was $82.5 million for the three months ended June 30, 2025, a decrease of $5.6 million, or 6.4%, compared to the three months ended June 30, 2024. The decline in revenue was driven by tariff-related impacts on sales volumes for valve products. Partially offsetting this decline were higher sales of downstream processing equipment and technologies. Segment operating income (loss) and segment operating margin percentage Segment operating income for the three months ended June 30, 2025 was $8.2 million, a $1.2 million decrease compared to $9.4 million for the three months ended June 30, 2024. For the three months ended June 30, 2025, segment operating margin percentage was 4.1% compared to 4.6% for the three months ended June 30, 2024. 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 $7.3 million, or 6.2%, for the three months ended June 30, 2025 compared to $2.9 million, or 2.5%, for the three months ended June 30, 2024. The $4.4 million increase in segment operating results was primarily due to reduction in amortization expense following intangible asset impairments recognized in the fourth quarter of 2024. Artificial Lift and Downhole segment — Segment operating income was $10.4 million, or 12.6%, for the three months ended June 30, 2025 compared to $13.5 million, or 15.3%, for the three months ended June 30, 2024. The $3.1 million decrease was primarily driven by lower market activity and unfavorable customer and product mix. Corporate — Selling, general and administrative expenses for Corporate were $9.5 million for the three months ended June 30, 2025 compared to $7.0 million for the three months ended June 30, 2024. This increase was primarily related to higher performance-based incentive compensation costs and one-time professional fees. Other items not included in segment operating income (loss) Transaction expenses, gain on sale-leaseback transactions, and 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 $4.7 million of interest expense during the three months ended June 30, 2025, a decrease of $4.0 million compared to the three months ended June 30, 2024, due to decreased borrowings. See Note 6 Debt for further details related to debt. The foreign exchange gains and losses are primarily the result of movements in the British pound, Canadian dollar and Euro 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. 23 Taxes We recorded tax expense of $6.2 million and $2.5 million for the three months ended June 30, 2025 and 2024, respectively. The estimated annual effective tax rates for the three months ended June 30, 2025 and 2024 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. 24 Results of operations Six months ended June 30, 2025 compared with six months ended June 30, 2024 Six Months Ended June 30, Change (in thousands of dollars, except per share information) 2025 2024 $ % Revenue Drilling and Completions $ 232,806 $ 236,096 $ (3,290) (1.4) % Artificial Lift and Downhole 160,343 171,511 (11,168) (6.5) % Eliminations (106) (6) (100) * Total revenue 393,043 407,601 (14,558) (3.6) % Segment operating income Drilling and Completions 16,650 7,434 9,216 124.0 % Operating margin % 7.2 % 3.1 % Artificial Lift and Downhole 17,688 25,247 (7,559) (29.9) % Operating margin % 11.0 % 14.7 % Corporate (17,189) (14,206) (2,983) (21.0) % Total segment operating income 17,149 18,475 (1,326) (7.2) % Operating margin % 4.4 % 4.5 % Transaction expenses 235 7,149 (6,914) * Gain on sale-leaseback transactions (6,903) — (6,903) * Loss on disposal of assets and other 330 192 138 * Operating income 23,487 11,134 12,353 110.9 % Interest expense 9,689 17,419 (7,730) (44.4) % Foreign exchange losses (gains) and other, net (5,010) 4,233 (9,243) * Loss on extinguishment of debt — 463 (463) * Total other expense 4,679 22,115 (17,436) (78.8) % Income (loss) before income taxes 18,808 (10,981) 29,789 271.3 % Income tax expense 9,986 6,030 3,956 65.6 % Net income (loss) $ 8,822 $ (17,011) $ 25,833 151.9 % Weighted average shares outstanding Basic 12,327 12,266 Diluted 12,542 12,266 Earnings (loss) per share Basic $ 0.72 $ (1.39) Diluted $ 0.70 $ (1.39) * not meaningful 25 Revenue Our revenue for the six months ended June 30, 2025 was $393.0 million, a decrease of $14.6 million, or 3.6%, compared to the six months ended June 30, 2024. For the six months ended June 30, 2025, our Drilling and Completions and our Artificial Lift and Downhole segments comprised 59.2% and 40.8% of our total revenue, respectively, compared to 57.9% and 42.1% of our total revenue, respectively, for the six months ended June 30, 2024. The overall decrease in revenue is primarily related to the decline in global drilling and completions activity, as well as tariff impacts mainly in our Valve Solutions product line, in 2025 compared to 2024. The changes in revenue by operating segment consisted of the following: Drilling and Completions segment — Revenue was $232.8 million for the six months ended June 30, 2025, a decrease of $3.3 million, or 1.4%, compared to the six months ended June 30, 2024. The decrease was primarily due to lower sales of capital and consumable products due to the decline in global drilling and completion activity. Partially offsetting the decrease was higher project revenue recognized for ROVs and LARS, and increased coiled line pipe sales due to growing demand in the U.S. and a large offshore project. Artificial Lift and Downhole segment — Revenue was $160.3 million for the six months ended June 30, 2025, a decrease of $11.2 million, or 6.5%, compared to the six months ended June 30, 2024. The decline in revenue was driven by tariff-related impacts on sales volumes for valve products and overall lower market activity. Partially offsetting this decline were higher sales of casing equipment and, downstream processing equipment and technologies. Segment operating income (loss) and segment operating margin percentage Segment operating income for the six months ended June 30, 2025 was $17.1 million, a $1.3 million decrease, compared to $18.5 million for the six months ended June 30, 2024. For the six months ended June 30, 2025, segment operating margin percentage was 4.4%, compared to 4.5%, for the six months ended June 30, 2024. 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 $16.7 million, or 7.2%, for the six months ended June 30, 2025 compared to $7.4 million, or 3.1%, for the six months ended June 30, 2024. The $9.2 million increase in segment operating results was primarily due to reduction in amortization expense following intangible asset impairments recognized in the fourth quarter of 2024. Artificial Lift and Downhole segment — Segment operating income was $17.7 million, or 11.0%, for the six months ended June 30, 2025 compared to $25.2 million, or 14.7%, for the six months ended June 30, 2024. The $7.6 million decrease in segment operating results was primarily driven by lower market activity and unfavorable customer and product mix. Corporate — Selling, general and administrative expenses for Corporate were $17.2 million for the six months ended June 30, 2025 compared to $14.2 million for the six months ended June 30, 2024. This increase was primarily related to higher performance-based incentive compensation costs and one-time professional fees. Other items not included in segment operating income (loss) Transaction expenses, gain on sale-leaseback transactions, and 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 $9.7 million of interest expense during the six months ended June 30, 2025, a decrease of $7.7 million compared to the six months ended June 30, 2024, due to decreased borrowings. See Note 6 Debt for further details related to debt. The foreign exchange gains and losses are primarily the result of movements in the British pound, Canadian dollar and Euro 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. 26 Taxes We recorded tax expense of $10.0 million and $6.0 million for the six months ended June 30, 2025 and 2024, respectively. The estimated annual effective tax rates for the six months ended June 30, 2025 and 2024 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, and 2029 Bonds. Our primary uses of capital have been for inventory, sales on credit to our customers, maintenance and growth capital expenditures, repurchases of stock and debt repayments. 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 June 30, 2025, we had $62.4 million of borrowings under our revolving Credit Facility and $100.0 million principal amount of the 2029 Bonds outstanding. See Note 6 Debt for further details related to the terms for our debt arrangements. As of June 30, 2025, we had cash and cash equivalents of $39.0 million and $93.1 million of availability under the Credit Facility. 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 2025 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 December 2024, 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 $75.0 million. Shares may be repurchased under the 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 six months ended June 30, 2025 , we repurchased 331 thousand shares of our common stock for approximately $6.3 million and the remaining authorization under this program is $68.7 million. Subsequent to June 30, 2025, we repurchased approximately 249 thousand shares of our common stock for aggregate consideration of $5.0 million. Our cash flows for the six months ended June 30, 2025 and 2024 are presented below (in millions): Six Months Ended June 30, 2025 2024 Net cash provided by operating activities $ 25.1 $ 28.1 Net cash provided by (used in) investing activities 5.0 (154.5) Net cash provided by (used in) financing activities (37.3) 114.9 Effect of exchange rate changes on cash 1.5 (2.8) Net decrease in cash, cash equivalents and restricted cash $ (5.7) $ (14.3) 27 Net cash provided by operating activities Net cash provided by operating activities was $25.1 million for the six months ended June 30, 2025 compared to net cash provided by operating activities of $28.1 million for the six months ended June 30, 2024. During the six months ended June 30, 2025, net working capital provided cash of $3.4 million, compared to providing cash of $10.7 million during the six months ended June 30, 2024. This decline in operating cash flow was offset by the increase in net income adjusted for non-cash items which provided $21.7 million of cash for the six months ended June 30, 2025 compared to $17.4 million for the six months ended June 30, 2024. Net cash provided by (used in) investing activities Net cash provided by investing activities was $5.0 million for the six months ended June 30, 2025, primarily from $8.0 million proceeds from a sale-leaseback, offset by capital expenditures of $3.1 million. Net cash used in investing activities was $154.5 million for the six months ended June 30, 2024, mainly related to the acquisition of Variperm Holdings Ltd. (“Variperm”) of $150.1 million and $4.4 million of capital expenditures. Net cash provided by (used in) financing activities Net cash used in financing activities was $37.3 million for the six months ended June 30, 2025 compared to $114.9 million of cash provided by financing activities for the six months ended June 30, 2024. The change in net cash used in financing activities primarily resulted from $28.0 million in net repayments of the revolving Credit Facility and repurchases of stock of $6.3 million during the six months ended June 30, 2025. This is compared to $72.8 million in net borrowings on the revolving Credit Facility and $59.7 million proceeds from the second lien seller term loan related to the Variperm acquisition, partially offset by repurchases of our 9.00% Senior Convertible Secured Notes due 2025 (“2025 Notes”) of $13.0 million, during the six months ended June 30, 2024. Critical accounting policies and estimates There have been no material changes in our critical accounting policies and estimates during the six months ended June 30, 2025. For a detailed discussion of our critical accounting policies and estimates, refer to our 2024 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.”