Forum Energy Technologies Inc (FET) 2025 Q4 法說會逐字稿

(audio in progress) fourth quarter and full year 2025 earnings conference call. My name is Gigi, and I'll be your coordinator for today's call. (Operator Instructions) This conference call is being recorded for replay purposes and will be available on the company's website. I will now turn the conference over to Rob Kukla, Director of Investor Relations. Please proceed, sir.

Thank you, Gigi. Good morning, everyone, and welcome to FET's fourth quarter and full year 2025 earnings conference call. With me today are Neal Lux, our President and Chief Executive Officer; and Lyle Williams, our Chief Financial Officer. Yesterday, we issued our earnings release, which is available on our website. We are relying on federal safe harbor protections for forward-looking statements. Listeners are cautioned that our remarks today will contain information other than historical information.

These remarks should be considered in the context of all factors that affect our business including those disclosed in FET's Form 10-K and other SEC filings. Finally, management's statements may include non-GAAP financial measures.

For reconciliations of these measures, please refer to our earnings release and website. During today's call, all statements related to EBITDA refer to adjusted EBITDA. And unless otherwise noted, all comparisons are fourth quarter 2025 to third quarter 2025.

I will now turn the call over to Neil.

Thank you, Rob, and good morning, everyone. Our fourth quarter and full year results, once again, despite why FET is a great business and a compelling long-term investment. Despite a challenging backdrop, including lower global drilling activity, tariffs and geopolitical uncertainty. Our teams executed with discipline and focus. I am extremely proud of what we achieved in 2025, and we are on the right track to realize our strategic vision, FET 2030.

Let me discuss some of the highlights from last year, starting with market share gains. We continued to execute our beat the market strategy through customer engagement, product innovation and geographic expansion.

Since the strategy's inception in 2022, revenue per global rig has grown 20%. In 2025, we increased it again despite a sizable decline in global rig count. These gains reflect disciplined commercial execution, a product portfolio that continues to resonate with customers and the benefits of our global footprint.

Our commercial teams delivered a full year book-to-bill of 113%, with orders well diversified across products, end markets and geographies. The subsea product line performed exceptionally well with a nearly 190% book-to-bill, supported by awards in the energy and defense markets.

Also, capital equipment orders for drilling products increased internationally, while we saw continued strength in wireline, coiled tubing and sand and flow control products. As a result, we enter 2026 with our highest year-end backlog in 11 years, up 46% since the start of 2025, providing both visibility and resilience.

A key driver of our market share gains and backlog growth is innovation. New product development remains central to our ability to beat the market and expand our addressable markets. During 2025, we commercialized 10 new products by collaborating with our customers to address specific operational challenges and improve their efficiencies.

One innovative example is our Secure Series stage collars, which helped us rapidly grow share in the Middle East with one of the largest oil companies in the world. We are expanding on that line with SecuraSeal, the smallest diameter stage collar in the industry designed for complex wells.

With SecuraSeal, our customers can eliminate a casing strength, significantly reducing costs and improving efficiency while maintaining well integrity. Another important product launch was DURACOIL-95, a differentiated coiled tubing solution for improved performance in corrosive environments developed with Middle East applications in mind. DURACOIL-95 expands our portfolio and support continued international share gains.

The last example I will provide is our Dura-Line manifold system, which allows operators and service companies, significantly faster and more safely with far fewer man hours. This is made possible by a proprietary Duralock connectors, high-pressure hoses and patent-pending crane systems.

We recently commissioned a system for shale development in Argentina and have line of sight for additional sales. Collectively, these innovations strengthen our technology pipeline and support future growth. In addition to our focus on growth, we are maintaining our margin and cost discipline.

During the year, our teams mitigated trade and tariff policy impacts through pricing actions, supply chain optimization and leveraging our global manufacturing footprint. In parallel, we executed significant structural cost reductions and consolidated four manufacturing plants into two.

These actions deliver approximately $15 million of ongoing annualized savings. The combination of market share gains, innovation and cost discipline have translated directly into strong financial results. Free cash flow generation was a defining strength in 2025.

Over the course of the year, we delivered $80 million of free cash flow the top end of our increased guidance range. This performance enabled disciplined execution of our capital return framework. We reduced net debt by 28% and repurchased approximately 11% of our shares outstanding. This is an incredible result for our investors.

Looking to the future, we remain confident in our bullish long-term outlook. Over the next five years, Oil demand is expected to increase along with global economic growth and natural gas demand is forecast to grow rapidly through LNG exports and AI-driven electricity demand.

The energy industry must supply these needs while also overcoming rapid declines in existing production. To meet this enormous challenge, our customers need to be significantly more efficient while also adding new capacity. Under this scenario, FET's addressable markets would expand by more than 50%. This expansion combined with our targeted market share gains could double revenue in five years.

And with our strong operating leverage, and capital-light business model, our EBITDA and free cash flow would grow significantly. The next step in this exciting journey starts now. While the general consensus for our industry is relatively flat activity, we expect to beat the market through share gains, strong backlog conversion and benefits from structural cost reductions. We are forecasting revenue growth of 6% and and EBITDA to increase by 16%.

Full year 2026, we are guiding revenue between $800 million and $880 million and EBITDA of $90 million to $110 million. For adjusted net income, we are guiding between $18 million and $38 million. In addition, we expect to convert 65% of EBITDA into free cash flow or between $55 million and $75 million. This is a great start to executing FET 2030. To provide more detail on our fourth quarter results and near-term outlook, I will now turn the call over to Lyle.

Thank you, Neal. I will begin today with a review of our fourth quarter results and first quarter guidance. then shift to a discussion of cash flow and our capital allocation strategy. Fourth quarter revenue of $202 million exceeded the top end of our guidance range and increased 3% sequentially. This performance outpaced a flat global rig count and reflects continued strength in offshore and international markets where our revenue increased 7% and 8%, respectively.

This is the second consecutive quarter when international exceeded US revenue, which declined 2% due to project timing and softer demand for valves and artificial lift products. Adjusted EBITDA for the quarter reached the top end of our guidance range at $23 million.

Higher revenue and cost reduction overcame less favorable product mix and modest increases in health care costs and professional fees. Also, income tax expense in the quarter includes a $3 million of a foreign tax settlement related to tax years 2017 through 2020.

The majority of the expense is from a noncash reduction in deferred tax assets. Fourth quarter book-to-bill was 93%, primarily reflecting order timing in the Drilling and Completions segment following two exceptionally strong quarters, for subsea and international drilling-related equipment.

Let me continue with additional color on our segment results. Drilling and completion revenue was $127 million, up 8%. The Subsea product line increased 25% as we recognize revenue on ROV projects and the sizable rescue submarine order announced in June.

Coiled tubing revenue was up 13%, with strong tubing sales in North America as well as continued momentum for coiled line pipe. Drilling product line revenue increased 11% supported by international capital equipment demand. Segment EBITDA was essentially flat as cost savings offset unfavorable product mix.

Artificial lift and downhole delivered a fourth quarter book-to-bill of 107%, driven by large orders for natural gas processing units. And segment revenue was $75 million, down 4% sequentially on lower shipments by the production equipment product line.

Downhole and Valve Solutions revenues were relatively stable and segment EBITDA was flat, with margin improvement of approximately 90 basis points, supported by favorable mix and cost reductions. Free cash flow remained strong in the fourth quarter, totaling $22 million and resulting in full year free cash flow of $80 million.

Through the year, our teams generated cash of nearly $34 million from net working capital efficiencies. We also completed two real estate sale leaseback transactions that generated another $15 million in net cash proceeds. Excluding this $15 million, our 2025 free cash flow conversion would have been an impressive 76% and a yield of nearly 15% on our year-ending market capitalization.

We ended the year with net debt of $107 million and a net leverage ratio of 1.2 times. Liquidity of $108 million remains strong was $73 million available under our revolving credit facility. Subsequent to quarter end, we extended our credit facility maturity to February 2031 and with improved pricing and increased letters of credit capacity.

The credit facility tenor plus commitments totaling $250 million provides significant flexibility for FET to fund strategic initiatives, including long-term debt retirement, organic growth and acquisitions. We appreciate the long and continued support of our bank group.

With this flexible financing structure and our fortified balance sheet, we are well positioned for the future. Looking ahead to the first quarter, we expect activity to remain relatively stable with the fourth quarter. Therefore, our guidance for revenue is $190 million to $210 million and EBITDA is $21 million to $25 million.

The midpoint of our EBITDA guidance is up about 15% on a year-over-year basis despite a projected 5% decline in global rig count. We are also guiding adjusted net income of between $5 million and $9 million. We expect to generate positive free cash flow this quarter. I would like to remind investors that our first quarter is seasonally lower due to annual incentive compensation and property tax payments.

Now let me turn to 2026 free cash flow and capital allocation expectations. Our 2026 free cash flow guidance is consistent with our FET 2030 target and reflective of our capital-light operating model. We forecast interest and cash taxes of $35 million, capital expenditures of $10 million and a further net working capital reduction of $10 million. For full year free cash flow of $55 million to $75 million.

On a comparable basis to 2025, excluding net working capital and sale leaseback proceeds, the midpoint of our 2026 cash flow guidance is about 75% higher. Let me provide a bit more color on uses of our free cash flow.

The capital returns framework followed in 2025 was incredibly successful. During the year, we returned $35 million to shareholders by repurchasing nearly 1.4 million shares, 11% of shares outstanding at the beginning of the year. We repurchased these shares at an average price under $25 less than half of the current FET share price. And we reduced our net debt by $42 million or 28% through the year.

Because our balance sheet is in such great shape, we believe any further net leverage reduction should be viewed as dry powder for incremental strategic investments. In fact, with our balance sheet flexibility and capacity we have the ability to increase net leverage modestly to fund the right acquisition.

FET has a long history of increasing our addressable market through acquisitions. Our criteria identifies company with differentiated products that compete in targeted markets and it would be accretive to FET per share metrics. We evaluate these investments in comparison to repurchasing FET shares.

This year, our bonds allow repurchases of around $30 million as long as our net leverage remains below 1.5 times. We believe FET with a forward free cash flow yield around 10% remains a compelling investment. In summary, 2026 builds upon the success we demonstrated in 2025. Market share gains supporting EBITDA and meaningful free cash flow, enabling exciting opportunities for outsized returns.

With that, I will now turn the call back to Neal for closing remarks. .

Thank you, Lyle. To conclude, I want to reiterate how proud I am of the team's execution in 2025. They delivered strong operational performance, meaningful free cash flow and disciplined capital allocation, positioning FET with momentum as we enter 2026.

While near-term market conditions remain dynamic, our backlog, market share gains and structural cost savings give us confidence in the year ahead. More importantly, our long-term vision remains unchanged. With our beat to market strategy and FET 2030 as our North Star. The next five years has the potential to be truly special for FET and its investors. Thank you for joining us today. Gigi, please take the first question.

(Operator Instructions)

Jeff Robertson, Water Tower Research.

Hey, good morning. Thank you. Good morning. Can you talk about the trajectory that you see in 2026 and '27 in the Subsea business? And then secondly, on in terms of products, if you see more unconventional oil or gas development globally, where do you see the biggest benefit for FET?

Yeah. Great question. So with Subsea, we've had great bookings here in the last year. So I think in 2025, we had 190% book-to-bill, and we're executing on our multiyear submarine program. This is a strategic growth area for us, and we expect strong demand energy and defense.

So as we look ahead, 2026 will be a year where we're going to convert a lot of our backlog and look to add on for '27 and beyond. Thinking about international unconventionals, we mentioned in our call, the delivery of our DURALINE system to Argentina. So this is unconventional work. where they're adopting really the latest technology that, quite frankly, even the US guys haven't quite gotten yet. So we're delivering the newest and greatest to Argentina.

I think another area will be Saudi Arabia for the unconventional gas projects there, both areas where we have continued to export our technology -- and as we think ultimately about the trajectory of 2030, where we're going to get the most gains is by attacking our growth markets and getting the adoption of the solutions that we've had in the US and you have those adopted internationally.

I've talked about this example a lot, but I think it just -- it means so much that we think about our artificial lift product line, we have high share in the US and the value proposition is more oil at lower cost. Well, I think that value proposition resonates internationally as well, and it's going to be a time to get there. But I think that's probably a fantastic opportunity and one will continue to push.

With respect to acquisitions, are there any product lines or just maybe any other areas that have industrial logic to FET currently that make the most sense to target from an acquisition or maybe even an adjacent industry?

Our last acquisition was Veraperm, great buy, right? We were able to acquire it at under 4 times with high margins, incredibly accretive. So I think another downhole type business would be interesting. I think for us, the main criteria though is, is it a great business? Are we adding something to us that has differentiated solutions.

It's a targeted market will be accretive to FET without stressing the balance sheet, right? So that's where our focus is. If we can find that adjacent where there's good industrial logic or hope we can expand an existing product line. If it hits those criteria, we're really interested.

Thank you.

Steve Ferazani, Sidoti.

Good morning, everyone. I appreciate all the detail on the call this morning. Neal, I just wanted to ask you came in at the very high end of the guidance range, where the pluses and the minuses in the quarter, what came in better than you were expecting.

I think it was just maybe I'll start and let I'll add in. I think the teams just really executed solidly -- coming into Q4, we're always concerned about just the holidays and a slowdown. And we really didn't have that impact this year. So I don't think it's kind of the plus or minus as of what came in. I think it was really we just didn't have that end of the year slowdown around Christmas. We call it frac holiday in years past, we didn't see that.

Yeah, Steve, that I agree with Neal on that comment and really good revenue growth in the Subsea product line that we saw, that 25% increase. So executing on backlog -- and remember that most of our Subsea revenue as a percentage of completion accounting. So based on how much we can execute during the quarter, that can move that number around a bit.

So a little bit of maybe ahead of the game on subsea projects, which was positive. And we had really good flow-through in terms of profitability and artificial lift with artificial lift and download segment with good favorable mix really benefited us. So I think as Neal mentioned, we didn't see quite the activity drop off that we might have been afraid of, but also did see some good execution by all of our teams.

That's great. In terms of the Q1 guide, very strong, given probably Q1 is probably going to be the worst year-over-year change in rig count, maybe 2Q is a little bit worse. Where is the 15% growth? We're so far into the quarter, you already know timing of deliveries how are you outperforming by this much, the change in rig count in Q1 specifically?

I think it's a continuation, right, of our beat to market strategy. We are gaining share and expanding on that. And thinking about the overall guide for '26, right? We have backlog coming into the year. So that gives us a benefit. We also have the structural cost savings that we executed at the back half of last year. And so that's helpful as well.

Have you fully realize that at this point -- have we seen the full realization is more.

Not quite, not quite, Steve, but I think the back half of the year, we'll have 100%, but we're about 2/3 of the way.

Got it. On the strong free cash flow guidance, clearly, part of the benefit you've had the last two years has been your really significant actions on working capital. Easier to do in a declining or flat market in a growth market, maintain constraining working capital is a lot more challenging.

I'm just trying to think about the pieces because that's pretty strong free cash flow guidance for next year, I'm assuming CapEx remains around this level. Can you just walk through a little bit of how you get to that really good number.

I appreciate the comments on the number, but also on the working capital challenge as we grow. So maybe key components that we talked about in the script, just as a reminder, walking from EBITDA down $35 million of cash taxes and interest, then $10 million of CapEx, so really in line with what we've done in the last few years and a $10 million release or source of cash from working capital.

So good job by our teams to continue to do that with revenue growth. I think a lot of that focus is around the area of inventory. If you look at last year, we released about $34 million of cash from working capital, great moves in the area of DSOs and receivables, also good on inventory.

So I think next year is a continuation of that. And really, as we think about that cash flow, one of the ways that we've done that is by looking at year-over-year comparison, excluding the sale leasebacks that we had in '25 and also excluding net working capital benefit in both years.

If you do that, then on a comparable basis, the 26% number is 75% more cash flow than the 2025 number. So as you mentioned, pretty strong growth there and confident in our team's ability to squeeze some more value out of working capital.

If I can get one last quick one in. We looked at the average share count didn't really move much in 4Q. Can you talk about the timing of the buyback in 4Q? And then how we're thinking about timing in 2026. Typically, your cash flow is better in the second half, reasonable to think that's the more likely period you might execute.

Steve, I think you're on there. We did repurchase about 400,000 shares just over 400,000 shares in the fourth quarter, and we did that. I think as we think about our buyback strategy and how we have that in place. If you remember last year, we were trying to buy about -- use about half of our cash for share repurchases. We wanted to see that cash flow come in.

So while we're really confident in this '26 number, I think a more back-end weighted like we did in 2025 might be appropriate. One of the things that's different this year than last is the 1.5 times net leverage ratio constraint.

So at the beginning of '25, we were limited on share buybacks because we had leverage. We've effectively pulled that down to $1.2 million at the end of 2025. So a little more of an open window there. But yes, I would think that buybacks may be a little more back-end loaded this year.

Got it. Thanks, everyone.

Thank you.

Keith Bachman, Pickering Energy Partners.

hey, thanks for taking my questions.

Good morning, Keith.

What do you expect kind of your largest growth avenues to be here over the next few years inside of your D&C business and kind of artificial lift in your downhole tools as well?

Yes. I think over several quarters, right, we've talked about Subsea. I think that's been -- as part of our drilling completion segment. Again, we've had meaningful bookings has a little bit more diversity outside of oil and gas, too. We had a large defense booking last year.

So I think there's some good runway there. They also mentioned the artificial lift. Again, what's exciting for us is these products extend the life of downhole pumps and reducing costs and increasing production. So our strong share in the US where we have a solid value proposition, solid market share. I think that also resonates internationally. So we think we have a bigger opportunity international.

So it's taking taking that value prop, taking our equipment, our products and then utilizing our global footprint to really get national oil companies to adopt the technology that has proven itself in the U.S. So I think that's a big big part of where we want to go. We also just kind of finish that thought, too. In our last couple of calls, we talked about our kind of our the aggregation of our market. So we have -- we've looked at our growth markets.

We've identified areas where, again, bigger than our leadership markets, but one, where we have lower share. Again, this is maybe newer adoption or regional. We think over that time, we can double our share in our growth markets, and that's going to be a big driver of future revenue growth and ultimately free cash flow and EBITDA.

That's awesome. Very helpful. And then my follow-up on that is just you guys have had some pretty significant orders here over the last year. Are you still seeing margin improvement on those new orders that are coming in? And then kind of in relation to orders as well. What's just kind of the average lead time for different orders that you received, like what's the time from when you get an order to kind of whenever it shows up in the business and revenue.

Yes. It really, really split it out. So I think our -- about 75% of our revenue is activity-based consumables. So that -- when we receive that order, we're going to turn that pretty quick, we're going to turn that very quickly. So that could be a day, let's call it, three months to four months.

That's a quick turn. On the capital side, which is the other quarter of our revenue that will vary. In general, I would say it's a six month from build to deliver on that. I think as we get more volume generally that is going to -- that we are going to -- we're going to get more incremental margins. So our goal is at 30% incremental EBITDA margins.

One, let's just a clarification there on the subsea side as we've grown that their mix isn't quite as strong on the margin side because of some of the pass-through items. However, by the -- I think the amount of bookings that we have received in Subsea we are ready to get some good economies of scale in our facilities and hopefully overcome that a little bit.

So again, manufacturing, we have we have good operating leverage. So the more volume we get through our plants over all the better. And again, our goal is to have a 30% incremental EBITDA margin on revenue we add.

I'll turn it back. That's very helpful. Thanks for taking my questions.

Thank you, Keith.

John Daniel, Daniel Energy Partners.

Guys, thanks for [including] me. First, just a congratulations on the tremendous improvement in the stock price impressive. I was hoping you could elaborate a little bit on just the opportunities that you guys are seeing more M&A opportunities and maybe valuation expectations on the part of sellers today.

Hey, John, Lyle, thanks for calling in, and thanks for that question. Really, over the past few quarters, we've seen an increase in the number of companies being marketed for sale. So the opportunity set is getting larger. And several of those are really interesting and fit the acquisition criteria that we talked about and Neal elaborated on earlier. So we're looking at those and evaluating those.

I think as we look for those great investments. We want to make sure that they fit with our strategy and with our forward free cash flow yield that we talked about, that's a compelling alternative to M&A. Maybe think about expectations. As you mentioned, we have seen some lift in seller expectations. Primarily, they've seen public company stock multiples increase, so that's increased some expectation there as well.

So I wouldn't be surprised to see some deals get done at a little bit of a higher margin for us. I think discipline around our balance sheet is really key. So we'll keep looking at what is a pretty good opportunity set and be cautious and targeted in what we move on.

Okay. And that preference offshore versus land, international North America? Any color there would be -- that's all for me. Thank you.n

Yeah. No, I think, again, earlier, just find the best business possible, John, and whether it's land, offshore or it really fits our mix.

Great. Thanks for clearing me, guys.

Thanks, John.

Erik Carlson.

Hey, guys. Good morning.

Good morning.

I guess, maybe start, I didn't spend a lot of time on US, but when you think about -- I mean, you've basically proven to the market that you've diversified and kind of rightsize the business to be a very good performer kind of despite what we've seen in the rig count over the past few years.

I think US rig count down 30%, frac spreads down about 50% from kind of peaks late 2022, early 2023. I mean can you just maybe describe the torque in kind of available in just if the US rebounds even marginally -- I mean the -- what is the significance of that kind of the business?

Yeah. Yeah. I think in the US, our revenue per rig is significantly higher than international. So if there's a rebound in US rig count, it will be a tremendous torque for us, obviously, high service intensity. And I think as you were laying out kind of the historical trend there, Erik. I think it's interesting to know that rig count down frac fleets down, but I think total footage drilled, it's called the length of the wells is maybe up stages, stages completed is up.

So I think that's the service intensity. And as we think about that, we view that increased services as more demand for our activity-based consumable -- so I think that's a bonus there. I think maybe the other part that adds on to that for US land is the equipment is getting older right?

Lyle now we're talking the other day about when is the last time we've delivered a catwalk for US land, and he's been here longer than me, and he and his scratch has had to try to remember. So it's been probably over 10 years.

So -- what we are starting to see from our customers, though, is interest in upgrading their capital, whether it's drilling rigs or frac fleets. I think for those who aren't as familiar with our story, we don't build entire drilling rigs or build entire frac fleets we provide kind of the key components from them.

So as the customer base in the US continues to increase the intensity of the assets they have, they're going to upgrade and add our equipment. A great example is our FR 120, the higher roughneck, which for those that follow the show land man, they were able to see it on the Season two episode six. The rough neck the rough mix of Antech oil called our product, the future. So that was good to see.

Yeah. I appreciate that. Yeah, I did catch that up. So very interesting. And then maybe just when you think about kind of the core OFS equipment business versus kind of some of these newer opportunities, whether it's kind of subsea not directly related to oil and gas or maybe kind of one of the recent conversations I had with kind of a large data center real estate investor, and they said, I mean, people are moving and just trying to find mobile power generation to kind of bridge the gap kind of as they wait for kind of firm baseload to be delivered by the utility.

And I know you guys offer like some -- whether it's kind of the radiators or whatever it might be. Can you talk about some of the -- maybe just the the markets that are non-oil and gas related and kind of -- are those early stages? Is there a really big opportunity there? Is it, I mean, marginally better? Just provide some feedback there would be interesting.

Yeah. You mentioned subsidy, just I'll start there, but I think the data center one is obviously very interesting, too. But on subsea, defense, we think that is a long-term growth opportunity, right? We provide key equipment. We're already in that business.

I think as world economies rearm as other countries around the world, excuse me, rear and look to avoid satellite detection working underwater is incredible. So it's a key part of their defense capabilities. So I think that's a long-term growth area, and I think it's a great opportunity.

The data center side, you mentioned mobile power. So we do provide key heat exchangers, radiators for that market again. We take -- you've taken the lead or the great product we had for heat exchangers and mobile frac.

And those customers are now adopting that for mobile power generation. We also see the fixed radiator possibility as a huge market, and it's one that we're looking at developing products for. I think it's early on. We want to see if it fits our engineering and supply chain manufacturing wheelhouse, but that would be a key area for us as well.

And then maybe a last area good example is pipe -- we've talked about that in prior calls. But we are providing that product into non-oil and gas applications, let's call it renewable, renewable natural gas opportunities like that. So that's been a good add to, let's call it, our nontraditional base.

But overall, if you think about the data center opportunity, I kind of view it as more of a second derivative growth for us that I think the increase in gas demand overall, whether it's LNG, data centers, that's going to drive US.drilling completion activity. And I think that's where we're going to really see the benefit as well.

Great. And then maybe shift to the kind of the capital returns framework which you kind of laid out. I mean when you guys look at acquisitions, I mean, are things still trading around that 3 times to 5 times EBITDA multiple, like if someone is holding something privately or you could carve something out of someone else who is public that wants to shed a legacy business or private equity for a firm that's been holding a business for the last dozen years that needs an exit. I mean do you have any sense of like where like what are multiples looking like that on either EBITDA or cash flow or both? I'm just curious if you're kind of looking at your pipeline.

No, Erik. Great question. And like I mentioned earlier, we've seen deals getting done with a little bit more of an elevated enterprise value to EBITDA multiple -- and we're seeing that. I think relative to public company comps, those are still lower. But we've seen some move up from where they are.

I think it's very situational as to what that deal is. And you mentioned some of the kinds of sellers that are out there, whether it's family-owned businesses, whether it's some carve-outs or it's private equity owners that have been long in the tooth, making the sale.

So definitely a good opportunity set out there as far as technology that fit well within our portfolio, and that we think we could leverage and would be incremental to our story. And that's what we're looking for. but we're also going to be careful and make sure we don't get out over our skis on any deal.

Great. And then maybe on that lenses, I mean I've looked at it and I've heard you present kind of the FET 2030 story and I mean, the potential there. I mean, obviously, buying stock back today and not the same as buying at $25, and we can argue you should ever had the opportunity or not. But when you think about -- I can buy my stock today, invest in my own organic growth and just let the story play out through 2030.

If I'm buying today, that looks like a pretty damn good investment longer term. I mean like -- is there a hurdle rate where you say like -- I mean, buying our own stock, we know our own business. We -- that cost us nothing to integrate. We don't have the risk of getting over levered versus going on and trying to buy somebody -- like how do you guys think about kind of the risk reward there?

Like how much better does acquiring somebody has to be versus just say, well, just buy our own stock and we can return cash and a multitude of waves in the future as we kind of build this base towards kind of the 2030 growth plan?

Yeah. Again, we we've started that FET 2030 growth plan really from the bottoms up, right, looking at all of our businesses, what could we do organically. I think about an acquisition and adding on to that as a way to really to supercharge that as well. So can we add somebody that we have revenue synergies? Can we have some cost synergies.

And by having this type of product could we then grow faster our existing organic story. So I think there's definitely opportunities out there like that. And I think you got to look at them on an individual basis. There's -- we have our criteria that I think we've talked about a lot, got to be differentiated. It's got to be a targeted market and we want to have it accretive to our financial metrics.

So you're right though, the story buying our own stock has played out really well. It's been a good use of capital and our investors have taken notice. But I think it's one part of our capital allocation strategy. I think M&A is another. And I think overall, as long as the acquisition hits the criteria and adds to our FET 2030 story, we will take a serious look at it.

Great. That's helpful. I have two more questions and I'll set up. So when you think about -- I mean so Verafin heavy oil sands in Canada, primarily. There's obviously international indications to that. I mean this is very early stages, but like is Verifirm product that can be used in Venezuela eventually or something like that if a market like that would open up?

Yeah, that's a great question. They have their pro has sold their products into Latin America for heavy oil applications in the past. So I think there is an application. I think as we is Venezuela develops, we'll learn more about whether they will go more towards a product development like we would have I think maybe on a bigger picture, Venezuela. There's been a lot of public company commentary.

Some of our biggest customers have been saying how enthusiastic they are when they deploy equipment down there, they're going to need our consumables to run. Again, that's coiled tubing, wireline casing hardware, artificial lift products.

I want to say even just this week, we received legal approval to book a coiled tubing order for Venezuela. So I think that opportunity is starting to move and a great way for us to participate in it is with our customer base who's going to deploy their equipment down there.

Interesting. And then last question would be two parts. So just I mean think about the tariff ruling today, what do you think is kind of a net impact to that? And then also kind of on the financial side, I mean, projecting positive net income in a pretty meaningful way this year and obviously, large deferred tax assets, I am no expert in that. But when you think about those on a go-forward basis, I mean, what's the incremental benefit of some of those, if you can either write them up or maybe explain to me that a little bit as well.

I'll start with the tariffs and Lyle take the tax part. So the ruling today -- so we really kind of, let's call it, three categories of tariffs. We have the Section 232, Section 301 and what's referred to as the IEEPA tariffs. The Supreme Court decision this morning just struck down the IEEPA tariff. So the 232 and 301s are going to remain in place.

So -- for us, that's -- those are the more impactful ones. We've had those in place though since, I think, 2017, and they've impacted more of our steel so steel supply. So -- we still have a good amount of tariffs in place. Again, we've done what we can to mitigate those.

Yeah. Let me talk about taxes a little bit, Erik. It's definitely something that we're we're focused on, as we've grown our profitability, especially outside the US, that's where we pay taxes. And so our tax bill is getting bigger as we do that. and have that success.

A lot of our tax assets, deferred tax assets sit in the US. And so we have a lot of tax shield here kind of put all that together, it makes a really wonky tax rate and you think about our tax. We're paying tax outside the US and we're not here in the US.

So as we look to the future and look at increasing our our taxable income in different countries, then it's about how could we optimize where that comes from, whether that's in the US, which would be more of an advantage for us or in other countries as we grow.

So something that's on our radar screen and definitely focused on as we look ahead and make sure we're doing appropriate execution, but also now that we are paying taxes in countries, making sure that we're maintaining good compliance and keeping up with all the rules as they change around the world.

That's helpful. Alright. Great. Thanks.

Thank you. At this time, I would now like to turn the conference back over to Neal Lux for closing remarks.

Alright. Well, thank you for your support and participation on today's call. We look forward to our next meeting in May to discuss FET's first quarter 2026 results.miling

This concludes today's conference call. Thank you for participating. You may now disconnect.