DALLAS, TX -- May 5th, 2025 -- Forum Energy Technologies, Inc. (NYSE: FET) Stonegate Capital Partners updates their coverage on Forum Energy Technologies, Inc. (NYSE: FET). FET reported revenue, adj EBITDA, and adj net income of $193.3M, $20.1M, and $0.5M, respectively. This compares to our/consensus estimates of $196.3M/$196.5M, $22.9M/$23.0M, and $4.4M/$3.3M. It is noted that revenues were in-line with our expectations while GPM was slightly below expectations. Adj. EBITDA margins were also slightly below expectations at 10.4%. Adj. NI fell short of our expectations.
Company Updates:
Drilling and Completions: In 1Q25, FET's Drilling and Completions segment reported revenue of $115.6M, reflecting a 4.1% sequential increase due to a rebound in demand for completions equipment in the Stimulation and Intervention product line and higher revenue from Subsea projects, including remotely operated vehicles and parts. This growth was partially offset by lower demand for drilling-related capital equipment and coiled tubing. Segment adjusted EBITDA rose 31% to $12.0M, reflecting the improved revenue mix and higher-margin subsea activity. Orders surged 28% to $132.1M, led by increased demand for subsea equipment, wireline cables, and stimulation-related capital equipment, resulting in a book-to-bill ratio of 1.14x—up from 0.93x in 4Q24. FET’s strategic focus on higher-technology, shorter-cycle equipment, and consumables continues to position the segment to capitalize on both international growth and long-term upstream investment cycles.
Artificial Lift and Equipment: The Artificial Lift and Downhole segment delivered a weak quarter, with revenue decreasing by 13.5% sequentially to $77.8M. This decline was largely attributed to the timing of large international project shipments and a meaningful slowdown in demand for valve products—most notably within the Valve Solutions line, which has been negatively affected by U.S. tariff uncertainty. Total orders fell 21.1% sequentially to $68.6M, reflecting weaker bookings for sand control products and delayed purchasing activity for processing equipment. Adj. EBITDA for the segment fell by ~30.0% to $14.0M, impacted by an unfavorable product mix. Despite near-term headwinds, management remains confident through investments in engineering and supply chain capabilities.
Cash Flows & Capital Allocation: FET generated $7.2M in free cash flow before acquisitions in 1Q25, marking its seventh consecutive quarter of positive results. The Company remains focused on disciplined capital management and working capital efficiency, while executing strategic initiatives aimed at enhancing long-term value. These include targeted cost reductions, product innovation, and ongoing operational optimization.
Guidance: Despite ongoing macroeconomic uncertainty stemming from tariff shifts and OPEC+ supply changes, FET reported 1Q25 adjusted EBITDA of $20.1M, within the expected guidance range. Management reaffirmed full-year free cash flow guidance and expects 2Q25 adjusted EBITDA between $18.0M and $22.0M.
Valuation: We use a DCF model and EV/EBITDA comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $26.17 to $29.82 with a mid-point of $27.84. Our EV/EBITDA valuation results in a range of $26.96 to $31.00 with a mid-point of $28.98.
