UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

___________________________________



☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~March 31,~~June 30, 2023



☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-35504

FORUM ENERGY TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)




Delaware									61-1488595
(State or other jurisdiction of									(I.R.S. Employer Identification No.)
incorporation or organization)

10344 Sam Houston Park Drive

Suite 300

Houston

Texas

77064

(Address of Principal Executive Offices)

(Zip Code)


(281)			949-2500

(Registrant’s telephone number, including area code)


______________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	FET	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☑

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of ~~April~~July 28, 2023, there were ~~10,149,539~~10,147,501 common shares outstanding.

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Forum Energy Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share information)	(in thousands, except per share information)		2023			2022		(in thousands, except per share information)	2023		2022		2023		2022
Revenue	Revenue		$	188,957		$	155,174	Revenue	$	185,449	$	172,246	$	374,406	$	327,420
Cost of sales	Cost of sales		136,855			116,555		Cost of sales	134,143		123,673		270,998		240,228
Gross profit	Gross profit		52,102			38,619		Gross profit	51,306		48,573		103,408		87,192
Operating expenses	Operating expenses							Operating expenses
Selling, general and administrative expenses	Selling, general and administrative expenses		45,511			44,305		Selling, general and administrative expenses	44,357		43,497		89,868		87,802
Loss (gain) on disposal of assets and other	Loss (gain) on disposal of assets and other		(260)			22		Loss (gain) on disposal of assets and other	542		(908)		282		(886)
Total operating expenses	Total operating expenses		45,251			44,327		Total operating expenses	44,899		42,589		90,150		86,916
Operating income (loss)			6,851			(5,708)
Operating income								Operating income	6,407		5,984		13,258		276
Other expense (income)	Other expense (income)							Other expense (income)
Interest expense	Interest expense		4,549			7,624		Interest expense	4,689		7,842		9,238		15,466
Foreign exchange and other losses (gains), net	Foreign exchange and other losses (gains), net		2,972			(5,986)		Foreign exchange and other losses (gains), net	6,436		(12,838)		9,408		(18,824)

Total other expense			7,521			1,638
Loss before income taxes			(670)			(7,346)
Total other expense (income), net								Total other expense (income), net	11,125		(4,996)		18,646		(3,358)
Income (loss) before income taxes								Income (loss) before income taxes	(4,718)		10,980		(5,388)		3,634
Income tax expense	Income tax expense		2,816			1,853		Income tax expense	1,861		1,716		4,677		3,569
Net loss			$	(3,486)		$	(9,199)
Net income (loss)								Net income (loss)	$	(6,579)	$	9,264	$	(10,065)	$	65

Weighted average shares outstanding	Weighted average shares outstanding							Weighted average shares outstanding
Basic	Basic		10,179			5,683		Basic	10,210		5,747		10,195		5,715
Diluted	Diluted		10,179			5,683		Diluted	10,210		10,481		10,195		5,910
Loss per share
Earnings (loss) per share								Earnings (loss) per share
Basic	Basic		$	(0.34)		$	(1.62)	Basic	$	(0.64)	$	1.61	$	(0.99)	$	0.01
Diluted	Diluted		$	(0.34)		$	(1.62)	Diluted	$	(0.64)	$	1.15	$	(0.99)	$	0.01

Other comprehensive income (loss), net of tax of $0:	Other comprehensive income (loss), net of tax of $0:							Other comprehensive income (loss), net of tax of $0:
Net loss			$	(3,486)		$	(9,199)
Net income (loss)								Net income (loss)	$	(6,579)	$	9,264	$	(10,065)	$	65
Change in foreign currency translation	Change in foreign currency translation		4,158			(6,992)		Change in foreign currency translation	7,749		(16,518)		11,907		(23,510)
Gain on pension liability	Gain on pension liability		15			30		Gain on pension liability	6		57		21		87
Comprehensive income (loss)	Comprehensive income (loss)		$	687		$	(16,161)	Comprehensive income (loss)	$	1,176	$	(7,197)	$	1,863	$	(23,358)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forum Energy Technologies, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except share information)	(in thousands, except share information)	March 31, 2023		December 31, 2022		(in thousands, except share information)	June 30, 2023		December 31, 2022
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	46,764	$	51,029	Cash and cash equivalents	$	24,756	$	51,029
Accounts receivable—trade, net of allowances of $11,102 and $10,690		164,033		154,247
Accounts receivable—trade, net of allowances of $11,221 and $10,690						Accounts receivable—trade, net of allowances of $11,221 and $10,690	169,047		154,247
Inventories, net	Inventories, net	287,614		269,828		Inventories, net	302,474		269,828
Prepaid expenses and other current assets	Prepaid expenses and other current assets	23,196		21,957		Prepaid expenses and other current assets	27,820		21,957
Accrued revenue	Accrued revenue	671		665		Accrued revenue	820		665
Costs and estimated profits in excess of billings	Costs and estimated profits in excess of billings	14,538		15,139		Costs and estimated profits in excess of billings	12,592		15,139
Total current assets	Total current assets	536,816		512,865		Total current assets	537,509		512,865
Property and equipment, net of accumulated depreciation	Property and equipment, net of accumulated depreciation	62,596		62,963		Property and equipment, net of accumulated depreciation	62,386		62,963
Operating lease assets	Operating lease assets	57,039		57,270		Operating lease assets	56,038		57,270
Deferred financing costs, net	Deferred financing costs, net	1,086		1,166		Deferred financing costs, net	1,007		1,166
Intangible assets, net	Intangible assets, net	185,629		191,481		Intangible assets, net	179,806		191,481
Deferred income taxes, net	Deferred income taxes, net	99		184		Deferred income taxes, net	917		184
Other long-term assets	Other long-term assets	6,691		8,828		Other long-term assets	6,047		8,828
Total assets	Total assets	$	849,956	$	834,757	Total assets	$	843,710	$	834,757
Liabilities and equity	Liabilities and equity					Liabilities and equity
Current liabilities	Current liabilities					Current liabilities
Current portion of long-term debt	Current portion of long-term debt	$	988	$	782	Current portion of long-term debt	$	1,053	$	782
Accounts payable—trade	Accounts payable—trade	129,934		118,261		Accounts payable—trade	136,534		118,261
Accrued liabilities	Accrued liabilities	58,839		76,544		Accrued liabilities	58,126		76,544
Deferred revenue	Deferred revenue	13,420		14,401		Deferred revenue	11,548		14,401
Billings in excess of costs and profits recognized	Billings in excess of costs and profits recognized	421		305		Billings in excess of costs and profits recognized	2,913		305
Total current liabilities	Total current liabilities	203,602		210,293		Total current liabilities	210,174		210,293
Long-term debt, net of current portion	Long-term debt, net of current portion	151,999		239,128		Long-term debt, net of current portion	137,826		239,128
Deferred income taxes, net	Deferred income taxes, net	1,051		902		Deferred income taxes, net	1,937		902
Operating lease liabilities	Operating lease liabilities	64,299		64,626		Operating lease liabilities	63,271		64,626
Other long-term liabilities	Other long-term liabilities	12,162		12,773		Other long-term liabilities	11,226		12,773
Total liabilities	Total liabilities	433,113		527,722		Total liabilities	424,434		527,722
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies
Equity	Equity					Equity
Common stock, $0.01 par value, 14,800,000 shares authorized, 10,858,424 and 6,223,454 shares issued		109		62
Common stock, $0.01 par value, 14,800,000 shares authorized, 10,856,401 and 6,223,454 shares issued						Common stock, $0.01 par value, 14,800,000 shares authorized, 10,856,401 and 6,223,454 shares issued	109		62
Additional paid-in capital	Additional paid-in capital	1,366,184		1,253,613		Additional paid-in capital	1,367,441		1,253,613
Treasury stock at cost, 708,885 and 570,247 shares		(142,057)		(138,560)
Treasury stock at cost, 708,900 and 570,247 shares						Treasury stock at cost, 708,900 and 570,247 shares	(142,057)		(138,560)
Retained deficit	Retained deficit	(684,081)		(680,595)		Retained deficit	(690,660)		(680,595)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(123,312)		(127,485)		Accumulated other comprehensive loss	(115,557)		(127,485)
Total equity	Total equity	416,843		307,035		Total equity	419,276		307,035
Total liabilities and equity	Total liabilities and equity	$	849,956	$	834,757	Total liabilities and equity	$	843,710	$	834,757

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forum Energy Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Three Months Ended March 31,					Six Months Ended June 30,
(in thousands)	(in thousands)	2023		2022		(in thousands)	2023		2022
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net loss		$	(3,486)	$	(9,199)
Adjustments to reconcile net loss to net cash used in operating activities:
Net income (loss)						Net income (loss)	$	(10,065)	$	65
Adjustments to reconcile net income (loss) to net cash used in operating activities:						Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation expense	Depreciation expense	2,570		3,423		Depreciation expense	5,027		6,742
Amortization of intangible assets	Amortization of intangible assets	6,016		6,218		Amortization of intangible assets	12,043		12,384
Inventory write down	Inventory write down	892		194		Inventory write down	1,564		827
Stock-based compensation expense	Stock-based compensation expense	841		2,151		Stock-based compensation expense	2,098		2,772

Deferred income taxes	Deferred income taxes	421		(266)		Deferred income taxes	695		(1,225)
Noncash losses and other, net	Noncash losses and other, net	1,398		2,283		Noncash losses and other, net	2,929		3,068
Changes in operating assets and liabilities	Changes in operating assets and liabilities					Changes in operating assets and liabilities
Accounts receivable—trade	Accounts receivable—trade	(10,047)		(9,168)		Accounts receivable—trade	(14,671)		(25,322)
Inventories	Inventories	(18,123)		(23,031)		Inventories	(33,772)		(33,595)
Prepaid expenses and other assets	Prepaid expenses and other assets	1,037		1,298		Prepaid expenses and other assets	(3,205)		1,589
Cost and estimated profit in excess of billings	Cost and estimated profit in excess of billings	769		(6,871)		Cost and estimated profit in excess of billings	2,845		(7,994)
Accounts payable, deferred revenue and other accrued liabilities	Accounts payable, deferred revenue and other accrued liabilities	(5,527)		11,851		Accounts payable, deferred revenue and other accrued liabilities	2,436		(1,846)
Billings in excess of costs and estimated profits earned	Billings in excess of costs and estimated profits earned	111		(3,758)		Billings in excess of costs and estimated profits earned	2,585		(8,024)
Net cash used in operating activities	Net cash used in operating activities	$	(23,128)	$	(24,875)	Net cash used in operating activities	(29,491)		(50,559)
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Capital expenditures for property and equipment	Capital expenditures for property and equipment	(1,083)		(860)		Capital expenditures for property and equipment	(2,809)		(3,570)
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	264		118		Proceeds from sale of property and equipment	1,106		2,608

Payments related to business acquisitions and dispositions						Payments related to business acquisitions and dispositions	—		(485)
Net cash used in investing activities	Net cash used in investing activities	$	(819)	$	(742)	Net cash used in investing activities	(1,703)		(1,447)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Borrowings on Credit Facility	Borrowings on Credit Facility	119,426		95,883		Borrowings on Credit Facility	216,843		274,472
Repayments on Credit Facility	Repayments on Credit Facility	(94,426)		(95,883)		Repayments on Credit Facility	(206,843)		(240,899)

Payment of capital lease obligations	Payment of capital lease obligations	(273)		(239)		Payment of capital lease obligations	(507)		(570)
Repurchases of stock	Repurchases of stock	(5,370)		(360)		Repurchases of stock	(5,370)		(361)

Net cash provided by (used in) financing activities		$	19,357	$	(599)
Net cash provided by financing activities						Net cash provided by financing activities	4,123		32,642

Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	325		(40)		Effect of exchange rate changes on cash	798		(590)

Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(4,265)		(26,256)		Net decrease in cash, cash equivalents and restricted cash	(26,273)		(19,954)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	51,029		46,858		Cash, cash equivalents and restricted cash at beginning of period	51,029		46,858
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	46,764	$	20,602	Cash, cash equivalents and restricted cash at end of period	$	24,756	$	26,904

Noncash activities	Noncash activities					Noncash activities
Operating lease right of use assets obtained in exchange for lease obligations	Operating lease right of use assets obtained in exchange for lease obligations	$	1,835	$	1,320	Operating lease right of use assets obtained in exchange for lease obligations	$	2,755	$	1,348
Finance lease right of use assets obtained in exchange for lease obligations	Finance lease right of use assets obtained in exchange for lease obligations	926		100		Finance lease right of use assets obtained in exchange for lease obligations	1,216		458
Conversion of debt to common stock	Conversion of debt to common stock	113,650		—		Conversion of debt to common stock	113,650		—

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forum Energy Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)


Three Months Ended March 31, 2023
Six Months Ended June 30, 2023														Six Months Ended June 30, 2023
(in thousands)	(in thousands)	Common stock		Additional paid-in capital		Treasury stock		Retained deficit		Accumulated other comprehensive income / (loss)		Total equity		(in thousands)	Common stock		Additional paid-in capital		Treasury stock		Retained deficit		Accumulated other comprehensive income / (loss)		Total equity
Balance at December 31, 2022	Balance at December 31, 2022	$	62	$	1,253,613	$	(138,560)	$	(680,595)	$	(127,485)	$	307,035	Balance at December 31, 2022	$	62	$	1,253,613	$	(138,560)	$	(680,595)	$	(127,485)	$	307,035
Stock-based compensation expense	Stock-based compensation expense	—		841		—		—		—		841		Stock-based compensation expense	—		841		—		—		—		841
Restricted stock issuance, net of forfeitures	Restricted stock issuance, net of forfeitures	1		(1,874)		—		—		—		(1,873)		Restricted stock issuance, net of forfeitures	1		(1,874)		—		—		—		(1,873)
Conversion of debt to common stock	Conversion of debt to common stock	46		113,604		—		—		—		113,650		Conversion of debt to common stock	46		113,604		—		—		—		113,650
Treasury stock	Treasury stock	—		—		(3,497)		—		—		(3,497)		Treasury stock	—		—		(3,497)		—		—		(3,497)
Currency translation adjustment	Currency translation adjustment	—		—		—		—		4,158		4,158		Currency translation adjustment	—		—		—		—		4,158		4,158
Change in pension liability	Change in pension liability	—		—		—		—		15		15		Change in pension liability	—		—		—		—		15		15
Net loss	Net loss	—		—		—		(3,486)		—		(3,486)		Net loss	—		—		—		(3,486)		—		(3,486)
Balance at March 31, 2023	Balance at March 31, 2023	$	109	$	1,366,184	$	(142,057)	$	(684,081)	$	(123,312)	$	416,843	Balance at March 31, 2023	$	109	$	1,366,184	$	(142,057)	$	(684,081)	$	(123,312)	$	416,843
Stock-based compensation expense														Stock-based compensation expense	—		1,257		—		—		—		1,257

Currency translation adjustment														Currency translation adjustment	—		—		—		—		7,749		7,749
Change in pension liability														Change in pension liability	—		—		—		—		6		6
Net loss														Net loss	—		—		—		(6,579)		—		(6,579)
Balance at June 30, 2023														Balance at June 30, 2023	$	109	$	1,367,441	$	(142,057)	$	(690,660)	$	(115,557)	$	419,276

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forum Energy Technologies, Inc. and subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)


Three Months Ended March 31, 2022
Six Months Ended June 30, 2022														Six Months Ended June 30, 2022
(in thousands)	(in thousands)	Common stock		Additional paid-in capital		Treasury stock		Retained deficit		Accumulated other comprehensive income / (loss)		Total equity		(in thousands)	Common stock		Additional paid-in capital		Treasury stock		Retained deficit		Accumulated other comprehensive income / (loss)		Total equity
Balance at December 31, 2021	Balance at December 31, 2021	$	61	$	1,249,962	$	(135,562)	$	(684,307)	$	(101,028)	$	329,126	Balance at December 31, 2021	$	61	$	1,249,962	$	(135,562)	$	(684,307)	$	(101,028)	$	329,126
Stock-based compensation expense	Stock-based compensation expense	—		2,151		—		—		—		2,151		Stock-based compensation expense	—		2,151		—		—		—		2,151
Restricted stock issuance, net of forfeitures	Restricted stock issuance, net of forfeitures	1		(361)		—		—		—		(360)		Restricted stock issuance, net of forfeitures	1		(361)		—		—		—		(360)
Currency translation adjustment	Currency translation adjustment	—		—		—		—		(6,992)		(6,992)		Currency translation adjustment	—		—		—		—		(6,992)		(6,992)
Change in pension liability	Change in pension liability	—		—		—		—		30		30		Change in pension liability	—		—		—		—		30		30
Net loss	Net loss	—		—		—		(9,199)		—		(9,199)		Net loss	—		—		—		(9,199)		—		(9,199)
Balance at March 31, 2022	Balance at March 31, 2022	$	62	$	1,251,752	$	(135,562)	$	(693,506)	$	(107,990)	$	314,756	Balance at March 31, 2022	$	62	$	1,251,752	$	(135,562)	$	(693,506)	$	(107,990)	$	314,756
Stock-based compensation expense														Stock-based compensation expense	—		621		—		—		—		621
Restricted stock issuance, net of forfeitures														Restricted stock issuance, net of forfeitures	—		(1)		—		—		—		(1)
Liability awards converted to share settled														Liability awards converted to share settled	—		275		—		—		—		275
Currency translation adjustment														Currency translation adjustment	—		—		—		—		(16,518)		(16,518)
Change in pension liability														Change in pension liability	—		—		—		—		57		57
Net income														Net income	—		—		—		9,264		—		9,264
Balance at June 30, 2022														Balance at June 30, 2022	$	62	$	1,252,647	$	(135,562)	$	(684,242)	$	(124,451)	$	308,454

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Forum Energy Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

1. Organization and Basis of Presentation

Forum Energy Technologies, Inc. (the “Company,” “FET,” “we,” “our,” or “us”), a Delaware corporation, is a global company serving the oil, natural gas, industrial and renewable energy industries. With headquarters located in Houston, Texas, FET provides value added solutions that increase the safety and efficiency of energy exploration and production.

Basis of Presentation

The Company's accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions have been eliminated in consolidation.

In management's opinion, all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the Company’s financial position, results of operations and cash flows have been included. Operating results for the three and six months ended ~~March 31,~~June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any other interim period.

These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022, which are included in the Company’s 2022 Annual Report on Form 10-K filed with the SEC on February 28, 2023.

2. Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, which the Company adopts as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company's consolidated financial statements upon adoption.

Accounting Standard Adopted in 2023

Inflation Reduction Act of 2022. In August 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA, among other provisions, imposes a 15% corporate alternative minimum tax on the adjusted financial statement income of certain large corporations effective for tax years beginning after December 31, 2022 and a 1% excise tax on stock repurchases made by publicly traded U.S. corporations after December 31, 2022. The adoption of this standard did not have a material impact on our consolidated financial statements.

Reference Rate Reform (Topic 848). In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, which provides temporary, optional practical expedients and exceptions to enable a smoother transition to the new reference rates which will replace the London Interbank Offered Rate (“LIBOR”) and other reference rates expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, which expanded the scope to include derivative instruments impacted by the discounting transition. In December 2022, the FASB issued ASU 2022-06, which extended the temporary accounting rules from December 31, 2022 to December 31, 2024. Effective April 2023, the Company transitioned its Credit Facility from LIBOR to the Secured Overnight Financing ~~Rate.~~Rate (“SOFR”). The ~~Company plans to adopt the guidance prospectively in second quarter 2023 and does~~adoption of this standard did not ~~expect it to~~ have a material impact on the Company's consolidated financial statements.

3. Revenue

Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services. For a detailed discussion of our revenue recognition policies, refer to the Company’s 2022 Annual Report on Form 10-K.

Disaggregated Revenue

Refer to Note 9 Business Segments for disaggregated revenue by product line and geography.

Table of Contents

Forum Energy Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

Contract Balances

Contract balances are determined on a contract by contract basis. Contract assets represent revenue recognized for goods and services provided to our customers when payment is conditioned on something other than the passage of time. Similarly, the Company records a contract liability when we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract. Such contract liabilities typically result from billings in excess of costs incurred on construction contracts and advance payments received on product sales.

The following table reflects the changes in our contract assets and contract liabilities balances for the ~~three~~six months ended ~~March 31,~~June 30, 2023 (in thousands):


		March 31, 2023				December 31, 2022				Decrease						June 30, 2023				December 31, 2022			Decrease
								$				%						$					%
Accrued revenue	Accrued revenue			$	671			$	665									Accrued revenue	$	820		$	665
Costs and estimated profits in excess of billings	Costs and estimated profits in excess of billings	14,538				15,139									Costs and estimated profits in excess of billings		12,592				15,139
Contract assets - current	Contract assets - current	15,209				15,804									Contract assets - current	13,412				15,804
Contract assets - noncurrent	Contract assets - noncurrent	2,413				2,638									Contract assets - noncurrent	2,106				2,638
Contract assets	Contract assets	$	17,622			$	18,442			$	(820)		(4)	%	Contract assets	$	15,518			$	18,442		$	(2,924)	(16)	%

Deferred revenue	Deferred revenue	$	13,420			$	14,401								Deferred revenue	$	11,548			$	14,401
Billings in excess of costs and profits recognized	Billings in excess of costs and profits recognized	421				305									Billings in excess of costs and profits recognized	2,913				305
Contract liabilities	Contract liabilities	$	13,841			$	14,706			$	(865)		(6)	%	Contract liabilities	$	14,461			$	14,706		$	(245)	(2)	%

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, our contract assets decreased by ~~$0.8~~$2.9 million and our contract liabilities decreased by ~~$0.9~~$0.2 million primarily due to the timing of milestone billings for projects in our Subsea Technologies product line.

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, we recognized ~~$7.3~~$11.4 million of revenue that was included in the contract liability balance at the beginning of the period.

Substantially all of our contracts are less than one year in duration. As such, we have elected to apply the practical expedient which allows an entity to exclude disclosures about its remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

4. Inventories

The Company's significant components of inventory at ~~March 31,~~June 30, 2023 and December 31, 2022 were as follows (in thousands):


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
Raw materials and parts	Raw materials and parts	$	95,435	$	94,182	Raw materials and parts	$	98,177	$	94,182
Work in process	Work in process	34,240		27,489		Work in process	35,645		27,489
Finished goods	Finished goods	197,566		187,448		Finished goods	207,860		187,448
Total inventories	Total inventories	327,241		309,119		Total inventories	341,682		309,119
Less: inventory reserve	Less: inventory reserve	(39,627)		(39,291)		Less: inventory reserve	(39,208)		(39,291)
Inventories, net	Inventories, net	$	287,614	$	269,828	Inventories, net	$	302,474	$	269,828

Table of Contents

Forum Energy Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

5. Intangible Assets

Intangible assets consisted of the following as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively (in thousands):


		March 31, 2023								June 30, 2023
		Gross Carrying Amount		Accumulated Amortization		Net Intangibles		Amortization Period (In Years)		Gross Carrying Amount		Accumulated Amortization		Net Intangibles		Amortization Period (In Years)
Customer relationships	Customer relationships	$	266,996	$	(151,891)	$	115,105	10 - 35	Customer relationships	$	267,614	$	(156,397)	$	111,217	10 - 35
Patents and technology	Patents and technology	88,984		(36,794)		52,190		5 - 19	Patents and technology	89,063		(38,265)		50,798		5 - 19
Non-compete agreements	Non-compete agreements	188		(188)		—		5	Non-compete agreements	190		(190)		—		5
Trade names	Trade names	42,710		(27,599)		15,111		7 - 19	Trade names	42,806		(28,153)		14,653		7 - 19
Trademarks	Trademarks	5,089		(1,866)		3,223		15	Trademarks	5,089		(1,951)		3,138		15
Total intangible assets	Total intangible assets	$	403,967	$	(218,338)	$	185,629		Total intangible assets	$	404,762	$	(224,956)	$	179,806


	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Intangibles		Amortization Period (In Years)
Customer relationships	$	266,537	$	(147,496)	$	119,041	10 - 35
Patents and technology	88,863		(35,298)		53,565		5 - 19
Non-compete agreements	188		(188)		—		5
Trade names	42,638		(27,071)		15,567		7 - 19
Trademarks	5,089		(1,781)		3,308		15
Total intangible assets	$	403,315	$	(211,834)	$	191,481

6. Debt

Notes payable and lines of credit as of ~~March 31,~~June 30, 2023 and December 31, 2022 consisted of the following (in thousands):


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
2025 Notes	2025 Notes	$	134,208	$	256,970	2025 Notes	$	134,208	$	256,970
Unamortized debt discount	Unamortized debt discount	(7,143)		(15,314)		Unamortized debt discount	(6,474)		(15,314)
Debt issuance cost	Debt issuance cost	(1,753)		(3,759)		Debt issuance cost	(1,589)		(3,759)
Credit Facility	Credit Facility	25,000		—		Credit Facility	10,000		—
Other debt	Other debt	2,675		2,013		Other debt	2,734		2,013
Total debt	Total debt	152,987		239,910		Total debt	138,879		239,910
Less: current portion	Less: current portion	(988)		(782)		Less: current portion	(1,053)		(782)
Long-term debt, net of current portion	Long-term debt, net of current portion	$	151,999	$	239,128	Long-term debt, net of current portion	$	137,826	$	239,128

2025 Notes

In August 2020, we exchanged $315.5 million principal amount of our previous 6.25% unsecured notes due 2021 for new 9.00% convertible secured notes due August 2025 (the “2025 Notes”). The 2025 Notes pay interest at the rate of 9.00%, of which 6.25% is payable in cash and 2.75% is payable in cash or additional notes, at the Company’s option. The 2025 Notes are secured by a first lien on substantially all of the Company’s assets, except for Credit Facility priority collateral, which secures the 2025 Notes on a second lien basis. During the ~~quarter~~six months ended ~~March 31,~~June 30, 2023, $122.8 million or 48% of the principal amount of the 2025 Notes mandatorily converted into approximately 4.5 million shares of common stock.

Table of Contents

Forum Energy Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

Credit Facility

~~In September 2021, we amended our~~Our senior secured revolving credit facility (“Credit Facility”) ~~to, among other things, extend the~~, which has a maturity date toof September 2026, ~~reduce the aggregate amount of the commitment under the Credit Facility, and change the interest rate applicable to outstanding loans. Following such amendment, our Credit Facility~~ provides revolving credit commitments of $179.0 million (with a sublimit of up to ~~$45.0~~$70.0 million available for the issuance of letters of credit for the account of the Company and certain of its domestic subsidiaries) (the “U.S. Line”), of which up to $20.0 million is available to certain of our Canadian subsidiaries for loans in U.S. or Canadian dollars (with a sublimit of up to $3.0 million available for the issuance of letters of credit for the account of our Canadian subsidiaries) (the “Canadian Line”).

Availability under the Credit Facility is subject to a borrowing base calculated by reference to eligible accounts receivable in the U.S., Canada and certain other jurisdictions (subject to a cap) and eligible inventory in the U.S. and Canada. Such eligible accounts receivable and eligible inventory serve as priority collateral for the Credit Facility, which is also secured on a second lien basis by substantially all of the Company's other assets. The amount of eligible inventory included in the borrowing base is restricted to the lesser of ~~$125.0~~$124.5 million (subject to a quarterly reduction of $0.5 million) and 80.0% of the total borrowing base. Our borrowing capacity under the Credit Facility could be reduced or eliminated, depending on future fluctuations in our receivables and inventory. As of ~~March 31,~~June 30, 2023, our total borrowing base was $178.3 million, of which ~~$25.0~~$10.0 million was drawn and ~~$24.0~~$22.8 million was used for security of outstanding letters of credit, resulting in remaining availability of ~~$129.3~~$145.5 million.

~~Prior to the amendment discussed below, borrowings~~Borrowings under the U.S. Line ~~were~~are subject to an interest rate equal to, at the Company's option, either (a) the ~~LIBOR,~~SOFR, subject to a floor of 0.00%, plus a margin of 2.25% to 2.75%, or (b) a base rate plus a margin of 1.25% to 1.75%, in each case based upon the Company's quarterly total net leverage ratio, with the U.S. Line base rate determined by reference to the greatest of (i) the federal funds rate plus 0.50% per annum, (ii) the one-month adjusted ~~LIBOR~~SOFR plus 1.00% per annum, and (iii) the rate of interest announced, from time to time, by Wells Fargo at its principal office in San Francisco as its prime rate, subject to a floor of 0.00%.

Borrowings under the Canadian Line were subject to an interest rate during the reporting period equal to, our subsidiary's option, either (a) the Canadian Dollar Offered Rate (“CDOR”), subject to a floor of 0.00%, plus a margin of 2.25% to 2.75%, or (b) a base rate plus a margin of 1.25% to 1.75%, in each case based upon the Company's quarterly net leverage ratio. The Canadian line base rate is determined by reference to the greater of (i) the one-month CDOR plus 1.00% and (ii) the prime rate for Canadian dollar commercial loans made in Canada as reported by Thomson Reuters, subject to a floor of 0.00%.

The weighted average interest rate under the Credit Facility was approximately ~~7.96%~~8.00% for the ~~three~~six months ended ~~March 31,~~June 30, 2023.

The Credit Facility also provides for a commitment fee in the amount of (a) 0.375% on the unused portion of commitments if average usage of the Credit Facility is greater than 50% and (b) 0.500% on the unused portion of commitments if average usage of the Credit Facility is less than or equal to 50%.

If excess availability under the Credit Facility falls below the greater of 12.5% of the borrowing base and $22.4 million, we will be required to maintain a fixed charge coverage ratio of at least 1.00:1.00 as of the end of each fiscal quarter until excess availability under the Credit Facility exceeds such thresholds for at least 60 consecutive days. Furthermore, the Credit Facility includes an obligation to prepay outstanding loans with cash on hand in excess of certain thresholds and includes a cross-default to the 2025 Notes.

In April 2023, the Credit Facility was amended to, among other things, (a) replace the interest rate benchmark for borrowings denominated in U.S. dollars from LIBOR to the Secured Overnight Financing Rate; (b) reset existing capacity under the general "Permitted Dispositions" basket; and (c) increase the domestic letter of credit sublimit from $45.0 million to $70.0 million.

Deferred Loan Costs

We have incurred loan costs that have been deferred and are amortized to interest expense over the term of the 2025 Notes and the Credit Facility. In connection with the September 2021 Credit Facility amendment, we deferred approximately $1.6 million of loan costs that will be amortized over the facility's remaining life.

Other Debt

Other debt consists primarily of various finance leases of equipment.

~~Table of Contents~~

~~Forum Energy Technologies, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

Letters of Credit and Guarantees

We execute letters of credit in the normal course of business to secure the delivery of product from specific vendors and also to guarantee our fulfillment of performance obligations relating to certain large contracts. WeThe Company had ~~$24.0~~$22.8 million and $21.8 million in total outstanding letters of credit as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

Table of Contents

Forum Energy Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

7. Income Taxes

For interim periods, our income tax expense or benefit is computed based on our estimated annual effective tax rate and any discrete items that impact the interim periods. For the three and six months ended ~~March 31,~~June 30, 2023, the Company recorded a tax expense of $1.9 million and a tax expense of $4.7 million, respectively. For the three and six months ended June 30, 2022, the Company recorded a tax expense of ~~$2.8~~$1.7 million and ~~$1.9~~$3.6 million, respectively. The estimated annual effective tax rates for all periods 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.

We have deferred tax assets related to net operating loss and other tax carryforwards in the U.S. and in certain states and foreign jurisdictions. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning and recent operating results. As of ~~March 31,~~June 30, 2023, we do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions: the U.S., the U.K., Germany, Singapore, China and Saudi Arabia. As a result, we have certain valuation allowances against our deferred tax assets as of ~~March 31,~~June 30, 2023.

8. Fair Value Measurements

The Company had ~~$25.0~~$10.0 million of borrowings outstanding under the Credit Facility as of ~~March 31,~~June 30, 2023. The Credit Facility incurs interest at a variable interest rate, and therefore, the carrying amount approximates fair value. The fair value of the debt is classified as a Level 2 measurement because interest rates charged are similar to other financial instruments with similar terms and maturities.

The fair value of our 2025 Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for those or similar instruments. At ~~March 31,~~June 30, 2023, the fair value and the carrying value of our 2025 Notes approximated ~~$130.3~~$132.3 million and ~~$125.3~~$126.1 million, respectively. At December 31, 2022, the fair value and the carrying value of our 2025 Notes approximated $272.8 million and $237.9 million, respectively.

There were no other significant outstanding financial instruments as of ~~March 31,~~June 30, 2023 and December 31, 2022 that required measuring the amounts at fair value on a recurring basis. We did not change our valuation techniques associated with recurring fair value measurements from prior periods, and there were no transfers between levels of the fair value hierarchy during the ~~three~~six months ended ~~March 31,~~June 30, 2023.

Table of Contents

Forum Energy Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Business Segments

The Company reports results of operations in the following three reporting segments: Drilling & Downhole, Completions, and Production. The amounts indicated below as “Corporate” relate to costs and assets not allocated to the reportable segments. Summary financial data by segment follows (in thousands):

Three Months Ended March 31,
2023 2022
Revenue
Drilling & Downhole $ 76,794 $ 71,260
Completions 73,667 52,542
Production 38,995 31,505
Eliminations (499) (133)
Total revenue $ 188,957 $ 155,174
Segment operating income (loss)
Drilling & Downhole $ 8,438 $ 5,986
Completions 3,556 (715)
Production 1,629 (1,752)
Corporate (7,032) (9,205)
Total segment operating income (loss) 6,591 (5,686)
Loss (gain) on disposal of assets and other (260) 22
Operating income (loss) $ 6,851 $ (5,708)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue
Drilling & Downhole	$	80,677	$	76,493	$	157,471	$	147,753
Completions	72,099		66,079		145,766		118,621
Production	33,046		29,879		72,041		61,384
Eliminations	(373)		(205)		(872)		(338)
Total revenue	$	185,449	$	172,246	$	374,406	$	327,420

Segment operating income
Drilling & Downhole	$	8,290	$	8,528	$	16,728	$	14,514
Completions	4,190		3,587		7,746		2,872
Production	1,114		(154)		2,743		(1,906)
Corporate	(6,645)		(6,885)		(13,677)		(16,090)
Total segment operating income (loss)	6,949		5,076		13,540		(610)
Loss (gain) on disposal of assets and other	542		(908)		282		(886)
Operating income	$	6,407	$	5,984	$	13,258	$	276

A summary of consolidated assets by reportable segment is as follows (in thousands):

March 31, 2023 December 31, 2022
Drilling & Downhole $ 348,581 $ 340,819
Completions 373,222 366,771
Production 98,427 95,089
Corporate 29,726 32,078
Total assets $ 849,956 $ 834,757


	June 30, 2023		December 31, 2022
Drilling & Downhole	$	353,678	$	340,819
Completions	371,824		366,771
Production	99,581		95,089
Corporate	18,627		32,078
Total assets	$	843,710	$	834,757

Corporate assets primarily include cash, certain prepaid assets and deferred loan costs.

~~The following table presents our revenues disaggregated by product line (in thousands):~~

Three Months Ended March 31,
2023 2022
Drilling Technologies $ 40,777 $ 29,235
Downhole Technologies 23,211 19,564
Subsea Technologies 12,806 22,461
Stimulation and Intervention 47,326 30,159
Coiled Tubing 26,341 22,383
Production Equipment 19,896 15,167
Valve Solutions 19,099 16,338
Eliminations (499) (133)
Total revenue $ 188,957 $ 155,174

Table of Contents

Forum Energy Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

The following table presents our revenues disaggregated by product line (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Drilling Technologies	$	45,265	$	33,540	$	86,042	$	62,775
Downhole Technologies	22,072		21,422		45,283		40,986
Subsea Technologies	13,340		21,531		26,146		43,992
Stimulation and Intervention	46,395		37,337		93,721		67,496
Coiled Tubing	25,704		28,742		52,045		51,125
Production Equipment	17,666		16,425		37,562		31,592
Valve Solutions	15,380		13,454		34,479		29,792
Eliminations	(373)		(205)		(872)		(338)
Total revenue	$	185,449	$	172,246	$	374,406	$	327,420

The following table presents our revenues disaggregated by geography (in thousands):
Three Months Ended March 31,
2023 2022
United States $ 129,186 $ 97,232
Middle East 17,982 11,153
Canada 13,668 11,389
Europe & Africa 11,672 15,377
Latin America 8,768 10,964
Asia-Pacific 7,681 9,059
Total revenue $ 188,957 $ 155,174


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
United States	$	119,544	$	114,626	$	248,730	$	211,858
Middle East	18,717		14,796		36,699		25,949
Canada	14,399		10,203		28,067		21,592
Europe & Africa	10,673		15,518		22,345		30,895
Latin America	12,265		8,736		21,033		19,700
Asia-Pacific	9,851		8,367		17,532		17,426
Total revenue	$	185,449	$	172,246	$	374,406	$	327,420

10. Commitments and Contingencies

In the ordinary course of business, the Company is, and in the future could be, involved in various pending or threatened legal actions, some of which may or may not be covered by insurance. Management has reviewed such pending judicial and legal proceedings, the reasonably anticipated costs and expenses in connection with such proceedings, and the availability and limits of insurance coverage, and has established reserves that are believed to be appropriate in light of those outcomes that are believed to be probable and can be estimated. The reserves accrued at ~~March 31,~~June 30, 2023 and December 31, 2022, respectively, are immaterial. In the opinion of management, the Company’s ultimate liability, if any, with respect to these actions is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

In October of 2017, one of our subsidiaries, Global Tubing LLC (“Global Tubing”), filed suit against Tenaris Coiled Tubes, LLC and Tenaris, S.A. (together “Tenaris”) in the United States District Court for the Southern District of Texas seeking a declaration that its DURACOILTM products do not infringe certain Tenaris patents related to coiled tubing. Tenaris filed counterclaims against Global Tubing alleging DURACOILTM products infringe three patents. Tenaris sought unspecified damages and a permanent injunction. In response, Global Tubing alleged that its products do not infringe and the Tenaris patents are invalid and unenforceable. On March 20, 2023, the court agreed with Global Tubing, finding all patents unenforceable and dismissing all Tenaris infringement claims. Global Tubing intends to seek an award of its attorneys’ fees and costs incurred as a result of the litigation. Tenaris has appealed the final judgment and Global Tubing has filed a cross-appeal.

For further disclosure regarding certain litigation matters, refer to Note 12 of the notes to the consolidated financial statements included in Item 8 of the Company’s 2022 Annual Report on Form 10-K filed with the SEC on February 28, 2023.

Table of Contents

Forum Energy Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

11. Earnings (Loss) Per Share

The calculation of basic and diluted earnings per share for each period presented was as follows (dollars and shares in thousands, except per share amounts):

Three Months Ended March 31,
2023 2022
Net loss $ (3,486) $ (9,199)
Weighted average shares outstanding - basic 10,179 5,683
Dilutive effect of stock options and restricted stock — —
Dilutive effect of convertible notes due 2025 — —
Weighted average shares outstanding - diluted 10,179 5,683
Loss per share
Basic $ (0.34) $ (1.62)
Diluted $ (0.34) $ (1.62)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss) - basic	$	(6,579)	$	9,264	$	(10,065)	$	65
Interest on dilutive convertible notes due 2025	—		2,762		—		—
Net income (loss) - diluted	$	(6,579)	$	12,026	$	(10,065)	$	65

Weighted average shares outstanding - basic	10,210		5,747		10,195		5,715
Dilutive effect of stock options and restricted stock	—		187		—		195
Dilutive effect of convertible notes due 2025	—		4,547		—		—
Weighted average shares outstanding - diluted	10,210		10,481		10,195		5,910

Earnings (loss) per share
Basic	$	(0.64)	$	1.61	$	(0.99)	$	0.01
Diluted	$	(0.64)	$	1.15	$	(0.99)	$	0.01

For the three months and six months ended ~~March 31,~~June 30, 2023, ~~and 2022,~~ we excluded all potentially dilutive restricted shares and stock options in calculating diluted earnings per share as the effect was anti-dilutive due to net losses incurred for these periods. For the three months and six months ended June 30, 2022, the diluted earnings per share calculation excludes approximately 59 thousand and 116 thousand shares, respectively.

12. Stockholders' Equity

Stock-based compensation

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company granted 86,912 time-based restricted stock units to employees that vest ratably over three years.

In addition, during the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company granted 86,912 performance restricted stock units to employees (assuming target performance) that vest based upon the total shareholder return of the Company's common stock as compared to a group of peer companies over three different performance periods. The performance periods run from January 1, 2023 through December 31, 2023, January 1, 2023 through December 31, 2024 and January 1, 2023 through December 31, 2025, and 1/3 of each award is allocated to each performance period. The performance restricted stock units may settle for between 0% and 200% of the target units granted in shares of the Company’s common stock.

13. Related Party Transactions

The Company has sold and purchased inventory, services and fixed assets to and from affiliates of a former director. The dollar amounts of these related party activities are not significant to the Company’s unaudited condensed consolidated financial statements.

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 February 28, 2023, 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 company serving the oil, natural gas, industrial and renewable energy industries. With headquarters located 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 energy and new energy companies. Consumable products are used by our customers in drilling, well construction and completions activities and at processing centers and refineries. Our capital products are directed at drilling rig equipment for constructing new and 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 ~~three~~six months ended ~~March 31,~~June 30, 2023, approximately 65% 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.

A summary of the products and services offered by each segment is as follows:

•Drilling & Downhole. This segment designs, manufactures and supplies products and provides related services to the drilling, well construction, artificial lift and subsea energy construction markets, including applications in oil and natural gas, renewable energy, defense, and communications. The products and related services consist primarily of: (i) capital equipment and a broad line of expendable products consumed in the drilling process; (ii) well construction casing and cementing equipment and protection products for artificial lift equipment and cables; and (iii) subsea remotely operated vehicles (“ROVs”) and trenchers, submarine rescue vehicles, specialty components and tooling, and complementary subsea technical services.

•Completions. This segment designs, manufactures and supplies products and provides related services to the coiled tubing, well stimulation and intervention markets. The products and related services consist primarily of: (i) capital and consumable products sold to the pressure pumping, hydraulic fracturing and flowback services markets, including hydraulic fracturing pumps, cooling systems, high-pressure flexible hoses and flow iron as well as wireline cable and pressure control equipment used in the well completion and intervention service markets; and (ii) coiled tubing strings and coiled line pipe and related services.

•Production. This segment designs, manufactures and supplies products and provides related equipment and services for production and infrastructure markets. The products and related services consist primarily of: (i) engineered process systems, production equipment, as well as specialty separation equipment; and (ii) a wide range of industrial valves focused on serving oil and natural gas customers as well as power generation, renewable energy and other general industrial applications.

Market Conditions

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.

Recent inflationary pressures, rising interest rates and volatility in the banking sector have created a heightened concern of a global recession. Oil and natural gas prices softened in the first ~~quarter~~half 2023 in part as a result of such recessionary fears. Despite these near-term macroeconomic challenges, we expect that the world's long-term energy demand will continue to rise and may outpace global supply as ~~China's economy recovers from the COVID-19 pandemic shutdowns and~~ OPEC+ remains committed to maintaining stable oil prices. We expect that hydrocarbons will continue to play a vital role in meeting the world's energy needs while renewable energy sources continue to develop.

The price of oil has varied dramatically over the last several years. The spot prices for ~~WTI~~West Texas Intermediate (“WTI”) and United Kingdom Brent crude oil (“Brent”) fell from $61.14 and $67.77 per barrel, respectively, as of December 31, 2019 to lows below $15.00 per barrel in April 2020. Since that time, oil prices rebounded to highs above $120.00 per barrel in March 2022 but have softened in the ~~first~~second quarter 2023 to an average of ~~$75.93~~$73.54 and ~~$81.07,~~$77.99, for WTI and Brent, respectively. In addition, natural gas prices have decreased by ~~43.5%~~71.2% comparing the ~~first~~second quarter 2023 to the ~~first~~second quarter 2022.

Our revenues, over the long-term, are highly correlated to the global drilling rig count, which has increased to ~~1,896~~1,796 rigs as of the end of the ~~first~~second quarter 2023 from a low of 1,030 rigs in the third quarter 2020. The average U.S. rig count for the ~~first~~second quarter 2023 was ~~2.1%~~5.4% lower and ~~20.1%~~0.8% higher compared to the ~~fourth~~first quarter ~~2022~~2023 and ~~first~~second quarter 2022, respectively. The international rig count for the ~~first~~second quarter 2023 was ~~0.9%~~4.9% higher and ~~11.2%~~17.6% higher compared to the ~~fourth~~first quarter ~~2022~~2023 and ~~first~~second quarter 2022, respectively.

Global drilling and completions activity remains below pre-pandemic levels. However, international markets are expected to grow throughout 2023 and outpace the U.S. 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.

The table below shows average crude oil and natural gas prices for ~~West Texas Intermediate crude oil (“WTI”), United Kingdom~~WTI, Brent, ~~crude oil (“Brent”),~~ and Henry Hub natural gas:


		Three Months Ended							Three Months Ended
		March 31,		December 31,		March 31,			June 30,		March 31,		June 30,
		2023		2022		2022			2023		2023		2022
Average global oil, $/bbl	Average global oil, $/bbl							Average global oil, $/bbl
West Texas Intermediate	West Texas Intermediate	$	75.93	$	82.79	$	95.18	West Texas Intermediate	$	73.54	$	75.93	$	108.83
United Kingdom Brent	United Kingdom Brent	$	81.07	$	88.72	$	100.87	United Kingdom Brent	$	77.99	$	81.07	$	113.84

Average North American Natural Gas, $/Mcf	Average North American Natural Gas, $/Mcf							Average North American Natural Gas, $/Mcf
Henry Hub	Henry Hub	$	2.64	$	5.55	$	4.67	Henry Hub	$	2.16	$	2.64	$	7.50

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				Three Months Ended
		March 31,	December 31,	March 31,		June 30,	March 31,	June 30,
		2023	2022	2022		2023	2023	2022
Active Rigs by Location	Active Rigs by Location				Active Rigs by Location
United States	United States	760	776	633	United States	719	760	713
Canada	Canada	221	187	198	Canada	117	221	113
International	International	915	907	823	International	960	915	816
Global Active Rigs	Global Active Rigs	1,896	1,870	1,654	Global Active Rigs	1,796	1,896	1,642

Land vs. Offshore Rigs	Land vs. Offshore Rigs				Land vs. Offshore Rigs
Land	Land	1,655	1,634	1,446	Land	1,546	1,655	1,430
Offshore	Offshore	241	236	208	Offshore	250	241	212
Global Active Rigs	Global Active Rigs	1,896	1,870	1,654	Global Active Rigs	1,796	1,896	1,642

U.S. Commodity Target	U.S. Commodity Target				U.S. Commodity Target
Oil/Gas	Oil/Gas	603	618	510	Oil/Gas	572	603	564
Gas	Gas	155	156	122	Gas	143	155	148
Unclassified	Unclassified	2	2	1	Unclassified	4	2	1
Total U.S. Active Rigs	Total U.S. Active Rigs	760	776	633	Total U.S. Active Rigs	719	760	713

U.S. Well Path	U.S. Well Path				U.S. Well Path
Horizontal	Horizontal	697	708	575	Horizontal	650	697	652
Vertical	Vertical	18	24	24	Vertical	19	18	26
Directional	Directional	45	44	34	Directional	50	45	35
Total U.S. Active Rigs	Total U.S. Active Rigs	760	776	633	Total U.S. Active Rigs	719	760	713

The table below shows the amount of total inbound orders by segment:


(in millions of dollars)	(in millions of dollars)	Three Months Ended						(in millions of dollars)	Three Months Ended						Six Months Ended
		March 31,		December 31,		March 31,					June 30,		March 31,		June 30,		June 30,		June 30,
		2023		2022		2022					2023		2023		2022		2023		2022
Drilling & Downhole	Drilling & Downhole	$	81.0	$	87.2	$	70.9			Drilling & Downhole	$	82.1	$	81.0	$	74.4	$	163.1	$	145.3
Completions	Completions	66.0		81.4		53.7				Completions	62.7		66.0		64.7		128.7		118.4
Production	Production	31.9		46.5		40.4				Production	41.5		31.9		63.8		73.4		104.2
Total Orders	Total Orders	$	178.9	$	215.1	$	165.0			Total Orders	$	186.3	$	178.9	$	202.9	$	365.2	$	367.9

Results of operations

Three months ended ~~March 31,~~June 30, 2023 compared with three months ended ~~March 31,~~June 30, 2022


		Three Months Ended March 31,						Change					Three Months Ended June 30,						Change
(in thousands of dollars, except per share information)	(in thousands of dollars, except per share information)	2023			2022			$		%		(in thousands of dollars, except per share information)	2023			2022			$		%
Revenue	Revenue											Revenue
Drilling & Downhole	Drilling & Downhole	$	76,794		$	71,260		$	5,534	7.8	%	Drilling & Downhole	$	80,677		$	76,493		$	4,184	5.5	%
Completions	Completions	73,667			52,542			21,125		40.2	%	Completions	72,099			66,079			6,020		9.1	%
Production	Production	38,995			31,505			7,490		23.8	%	Production	33,046			29,879			3,167		10.6	%
Eliminations	Eliminations	(499)			(133)			(366)		*		Eliminations	(373)			(205)			(168)		*
Total revenue	Total revenue	188,957			155,174			33,783		21.8	%	Total revenue	185,449			172,246			13,203		7.7	%
Segment operating income (loss)
Segment operating income												Segment operating income
Drilling & Downhole	Drilling & Downhole	8,438			5,986			2,452		41.0	%	Drilling & Downhole	8,290			8,528			(238)		(2.8)	%
Operating margin %	Operating margin %	11.0		%	8.4		%					Operating margin %	10.3		%	11.1		%
Completions	Completions	3,556			(715)			4,271		*		Completions	4,190			3,587			603		16.8	%
Operating margin %	Operating margin %	4.8		%	(1.4)		%					Operating margin %	5.8		%	5.4		%
Production	Production	1,629			(1,752)			3,381		193.0	%	Production	1,114			(154)			1,268		823.4	%
Operating margin %	Operating margin %	4.2		%	(5.6)		%					Operating margin %	3.4		%	(0.5)		%
Corporate	Corporate	(7,032)			(9,205)			2,173		23.6	%	Corporate	(6,645)			(6,885)			240		3.5	%
Total segment operating income (loss)		6,591			(5,686)			12,277		215.9	%
Total segment operating income												Total segment operating income	6,949			5,076			1,873		36.9	%
Operating margin %	Operating margin %	3.5		%	(3.7)		%					Operating margin %	3.7		%	2.9		%
Loss (gain) on disposal of assets and other	Loss (gain) on disposal of assets and other	(260)			22			(282)		*		Loss (gain) on disposal of assets and other	542			(908)			1,450		*
Operating income (loss)		6,851			(5,708)			12,559		220.0	%
Operating income												Operating income	6,407			5,984			423		7.1	%
Interest expense	Interest expense	4,549			7,624			(3,075)		(40.3)	%	Interest expense	4,689			7,842			(3,153)		(40.2)	%
Foreign exchange losses (gains) and other, net	Foreign exchange losses (gains) and other, net	2,972			(5,986)			8,958		*		Foreign exchange losses (gains) and other, net	6,436			(12,838)			19,274		*

Total other expense		7,521			1,638			5,883		359.2	%
Loss before income taxes		(670)			(7,346)			6,676		90.9	%
Total other (income) expense, net												Total other (income) expense, net	11,125			(4,996)			16,121		322.7	%
Income (loss) before income taxes												Income (loss) before income taxes	(4,718)			10,980			(15,698)		(143.0)	%
Income tax expense	Income tax expense	2,816			1,853			963		52.0	%	Income tax expense	1,861			1,716			145		8.4	%
Net loss		$	(3,486)		$	(9,199)		$	5,713	62.1	%
Net income (loss)												Net income (loss)	$	(6,579)		$	9,264		$	(15,843)	(171.0)	%

Weighted average shares outstanding	Weighted average shares outstanding											Weighted average shares outstanding
Basic	Basic	10,179			5,683							Basic	10,210			5,747
Diluted	Diluted	10,179			5,683							Diluted	10,210			10,481
Loss per share
Earnings (loss) per share												Earnings (loss) per share
Basic	Basic	$	(0.34)		$	(1.62)						Basic	$	(0.64)		$	1.61
Diluted	Diluted	$	(0.34)		$	(1.62)						Diluted	$	(0.64)		$	1.15
* not meaningful	* not meaningful											* not meaningful

Revenue

Our revenue for the three months ended ~~March 31,~~June 30, 2023 was ~~$189.0~~$185.4 million, an increase of ~~$33.8~~$13.2 million, or ~~21.8%~~7.7%, compared to the three months ended ~~March 31,~~June 30, 2022. For the three months ended ~~March 31,~~June 30, 2023, our Drilling & Downhole, Completions, and Production segments comprised ~~40.6%~~43.5%, ~~38.8%~~38.7%, and ~~20.6%~~17.8% of our total revenue, respectively, which compared to ~~45.9%~~44.4%, ~~33.8%~~38.3%, and ~~20.3%~~17.3% of our total revenue, respectively, for the three months ended ~~March 31,~~June 30, 2022. The overall increase in revenue is primarily related to increases in market activity and global rig count in the ~~first~~second quarter 2023 compared to the ~~first~~second quarter 2022. The changes in revenue by operating segment consisted of the following:

Drilling & Downhole segment — Revenue was ~~$76.8~~$80.7 million for the three months ended ~~March 31,~~June 30, 2023, an increase of ~~$5.5~~$4.2 million, or ~~7.8%~~5.5%, compared to the three months ended ~~March 31,~~June 30, 2022. This increase was led by a ~~$11.5~~$11.7 million, or ~~39.5%~~35.0%, increase in revenue for our Drilling Technologies product line due to higher sales volumes of both consumable products and capital equipment driven by increased market activity and global rig count. Revenue for our Downhole Technologies product line increased by ~~$3.6~~$0.7 million, or ~~18.6%~~3.0%, primarily due to higher sales volumes of artificial lift products ~~and casing equipment~~ in the ~~first~~second quarter 2023 compared to the ~~first~~second quarter 2022. Revenue for our Subsea Technologies product line decreased by ~~$9.7~~$8.2 million, or ~~43.0%~~38.0%, from lower volumes of ROVs and Launch and Recovery Systems (“LARS”) partially offset by an increase in after-market part sales and service.

Completions segment — Revenue was ~~$73.7~~$72.1 million for the three months ended ~~March 31,~~June 30, 2023, an increase of ~~$21.1~~$6.0 million, or ~~40.2%~~9.1%, compared to the three months ended ~~March 31,~~June 30, 2022. This significant improvement includes a revenue increase of ~~$17.2~~$9.1 million, or ~~56.9%~~24.3%, for our Stimulation & Intervention product line primarily due to higher demand of ~~power ends,~~ radiators, wireline cable and ~~wireline cable.~~high-pressure hoses. Revenue for our Coiled Tubing product line ~~increased~~decreased by ~~$4.0~~$3.0 million, or ~~17.7%~~10.6% in the ~~first~~second quarter 2023 compared to the ~~first~~second quarter ~~2022. These higher revenue levels were driven by increased hydraulic fracturing and well intervention service activity levels.~~2022 due to lower sales volumes.

Production segment — Revenue was ~~$39.0~~$33.0 million for the three months ended ~~March 31,~~June 30, 2023, an increase of ~~$7.5~~$3.2 million, or ~~23.8%~~10.6%, compared to the three months ended ~~March 31,~~June 30, 2022. The increase was driven by a ~~$4.7~~$1.2 million, or ~~31.2%~~7.6%, primarily due to increased demand for our processing equipment and technologies within our Production Equipment product line, and a ~~$2.8~~$1.9 million, or ~~16.9%~~14.3%, increase in sales of our valve products within our Valve Solutions product line.

Segment operating income (loss) and segment operating margin percentage

Segment operating income for the three months ended ~~March 31,~~June 30, 2023 was ~~$6.6~~$6.9 million, a ~~$12.3~~$1.9 million improvement compared to ~~a loss~~an income of ~~$5.7~~$5.1 million for the three months ended ~~March 31,~~June 30, 2022. For the three months ended ~~March 31,~~June 30, 2023, segment operating margin percentage was ~~3.5%~~3.7% compared to ~~(3.7)%~~2.9% for the three months ended ~~March 31,~~June 30, 2022. 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 & Downhole segment — Segment operating income was ~~$8.4~~$8.3 million, or ~~11.0%~~10.3%, for the three months ended ~~March 31,~~June 30, 2023 compared to operating income of ~~$6.0~~$8.5 million, or ~~8.4%~~11.1%, for the three months ended ~~March 31,~~June 30, 2022. The ~~$2.5~~$0.2 million ~~improvement~~decrease in segment operating results is primarily attributable to lower volume and profitability of our Subsea product line projects, partially offset by higher gross profit from ~~the 7.8% increase in segment revenues, favorable~~our Drilling Technologies product ~~mix and improved operating leverage. These gains were partially offset by higher freight and employee related costs.~~line revenue growth.

Completions segment — Segment operating income was ~~$3.6~~$4.2 million, or ~~4.8%~~5.8%, for the three months ended ~~March 31,~~June 30, 2023 compared to segment operating ~~loss~~income of ~~$0.7~~$3.6 million, or ~~(1.4)%~~5.4%, for the three months ended ~~March 31,~~June 30, 2022. The ~~$4.3~~$0.6 million ~~improvement~~increase in segment operating results was primarily due to higher gross profit from the ~~40.2%~~9.1% increase in revenues, ~~discussed above and from favorable product mix. These gains were~~ partially offset by ~~higher steel, freight and employee related costs.~~unfavorable product mix in our Coiled Tubing product line.

Production segment — Segment operating income was ~~$1.6~~$1.1 million, or ~~4.2%~~3.4%, for the three months ended ~~March 31,~~June 30, 2023 compared to a loss of ~~$1.8~~$0.2 million, or ~~(5.6)%~~0.5%, for the three months ended ~~March 31,~~June 30, 2022. The ~~$3.4~~$1.3 million ~~improvement~~increase in segment operating results was driven by the ~~23.8%~~10.6% increase in revenues ~~discussed above as well as lower depreciation~~ and ~~freight costs.~~favorable price recovery following materials cost inflation experienced in 2022.

Corporate — Selling, general and administrative expenses for Corporate were ~~$7.0~~$6.6 million for the three months ended ~~March 31,~~June 30, 2023 compared to ~~$9.2~~$6.9 million for the three months ended ~~March 31,~~June 30, 2022. 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. This decline was primarily due to a $2.7 million charge recognized in the three months ended March 31, 2022 related to a modification of long-term incentive awards associated with the executive leadership transition.

Other items not included in segment operating income (loss)

Gain (loss) on the disposal of assets and other is not included in segment operating income (loss), but is included in total operating ~~loss.~~income (loss).

Other income and expense

Other income and expense includes interest expense and foreign exchange gains (losses) and other. We incurred ~~$4.5~~$4.7 million of interest expense during the three months ended ~~March 31,~~June 30, 2023, a decrease of ~~$3.1~~$3.2 million compared to the three months ended ~~March 31,~~June 30, 2022, ~~mainly~~ due to the decline in the balance of 2025 Notes upon conversion of $122.8 million aggregate principal amount of our 2025 Notes to common stock in January 2023. See Note 6 Debt for further details related to the ~~our~~ 2025 Notes and Credit Facility.

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.

Taxes

We recorded tax expense of ~~$2.8~~$1.9 million and tax expense of ~~$1.9~~$1.7 million for the three months ended ~~March 31,~~June 30, 2023 and 2022, respectively. The estimated annual effective tax rates for the three months ended ~~March 31,~~June 30, 2023 and 2022 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.

Six months ended June 30, 2023 compared with six months ended June 30, 2022


	Six Months Ended June 30,						Change
(in thousands of dollars, except per share information)	2023			2022			$		%
Revenue
Drilling & Downhole	$	157,471		$	147,753		$	9,718	6.6	%
Completions	145,766			118,621			27,145		22.9	%
Production	72,041			61,384			10,657		17.4	%
Eliminations	(872)			(338)			(534)		*
Total revenue	374,406			327,420			46,986		14.4	%
Segment operating income
Drilling & Downhole	16,728			14,514			2,214		15.3	%
Operating margin %	10.6		%	9.8		%
Completions	7,746			2,872			4,874		169.7	%
Operating margin %	5.3		%	2.4		%
Production	2,743			(1,906)			4,649		243.9	%
Operating margin %	3.8		%	(3.1)		%
Corporate	(13,677)			(16,090)			2,413		15.0	%
Total segment operating income	13,540			(610)			14,150		2,319.7	%
Operating margin %	3.6		%	(0.2)		%
Loss (gain) on disposal of assets and other	282			(886)			1,168		*
Operating income	13,258			276			12,982		4,703.6	%
Interest expense	9,238			15,466			(6,228)		(40.3)	%
Foreign exchange losses (gains) and other, net	9,408			(18,824)			28,232		*

Total other (income) expense, net	18,646			(3,358)			22,004		655.3	%
Income (loss) before income taxes	(5,388)			3,634			(9,022)		(248.3)	%
Income tax expense	4,677			3,569			1,108		31.0	%
Net income (loss)	$	(10,065)		$	65		$	(10,130)	(15,584.6)	%

Weighted average shares outstanding
Basic	10,195			5,715
Diluted	10,195			5,910
Earnings (loss) per share
Basic	$	(0.99)		$	0.01
Diluted	$	(0.99)		$	0.01
* not meaningful

Revenue

Our revenue for the six months ended June 30, 2023 was $374.4 million, an increase of $47.0 million, or 14.4%, compared to the six months ended June 30, 2022. For the six months ended June 30, 2023, our Drilling & Downhole, Completions, and Production segments comprised 42.1%, 38.7%, and 19.2% of our total revenue, respectively, which compared to 45.1%, 36.2%, and 18.7% of our total revenue, respectively, for the six months ended June 30, 2022. The overall increase in revenue is primarily related to increases in market activity and global rig count in the first half of 2023 compared to the first half of 2022. The changes in revenue by operating segment consisted of the following:

Drilling & Downhole segment — Revenue was $157.5 million for the six months ended June 30, 2023, an increase of $9.7 million, or 6.6%, compared to the six months ended June 30, 2022. This increase was led by a $23.3 million, or 37.1%, increase in revenue for our Drilling Technologies product line due to higher sales volumes of both consumable products and capital equipment driven by increased market activity and global rig count. Revenue for our Downhole Technologies product line increased by $4.3 million, or 10.5%, primarily due to higher sales volumes of artificial lift products and casing equipment in the first half of 2023 compared to the first half of 2022. Revenue for our Subsea Technologies product line decreased by $17.8 million, or 40.6%, from lower volumes of ROVs and LARS, partially offset by an increase in after-market part sales and service.

Completions segment — Revenue was $145.8 million for the six months ended June 30, 2023, an increase of $27.1 million, or 22.9%, compared to the six months ended June 30, 2022. This significant improvement includes a revenue increase of $26.2 million, or 38.9%, for our Stimulation & Intervention product line primarily due to higher demand of radiators, wireline cable, power ends and high-pressure hoses. Revenue for our Coiled Tubing product line remained relatively flat compared to the first half of 2022.

Production segment — Revenue was $72.0 million for the six months ended June 30, 2023, an increase of $10.7 million, or 17.4%, compared to the six months ended June 30, 2022. The increase was driven by a $6.0 million, or 18.9%, increase in demand for our processing equipment and technologies within our Production Equipment product line, and a $4.7 million, or 15.7%, increase in sales of our valve products within our Valve Solutions product line.

Segment operating income (loss) and segment operating margin percentage

Segment operating income for the six months ended June 30, 2023 was $13.5 million, a $14.2 million increase compared to a loss of $0.6 million for the six months ended June 30, 2022. For the six months ended June 30, 2023, segment operating margin percentage was 3.6% compared to (0.2)% for the six months ended June 30, 2022. 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 & Downhole segment — Segment operating income was $16.7 million, or 10.6%, for the six months ended June 30, 2023 compared to operating income of $14.5 million, or 9.8%, for the six months ended June 30, 2022. The $2.2 million increase in segment operating results is primarily attributable to higher gross profit from the 6.6% increase in segment revenues and favorable product mix. These gains were partially offset by higher freight costs.

Completions segment — Segment operating income was $7.7 million, or 5.3%, for the six months ended June 30, 2023 compared to segment operating income of $2.9 million, or 2.4%, for the six months ended June 30, 2022. The $4.9 million increase in segment operating results was primarily due to higher gross profit from the 22.9% increase in revenues and favorable product mix. These gains were partially offset by higher freight costs.

Production segment — Segment operating income was $2.7 million, or 3.8%, for the six months ended June 30, 2023 compared to a loss of $1.9 million, or (3.1)%, for the six months ended June 30, 2022. The $4.6 million increase in segment operating results was driven by the 17.4% increase in revenues and improved cost management.

Corporate — Selling, general and administrative expenses for Corporate were $13.7 million for the six months ended June 30, 2023 compared to $16.1 million for the six months ended June 30, 2022. 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)

Gain (loss) on the disposal of assets and other is not included in segment operating income (loss), but is included in total operating income (loss).

Other income and expense

Other income and expense includes interest expense and foreign exchange gains (losses) and other. We incurred $9.2 million of interest expense during the six months ended June 30, 2023, a decrease of $6.2 million compared to the six months ended June 30, 2022, due to the decline in the balance of our 2025 Notes upon conversion of $122.8 million aggregate principal amount of our 2025 Notes to common stock in January 2023. See Note 6 Debt for further details related to the 2025 Notes and Credit Facility.

Taxes

We recorded tax expense of $4.7 million and tax expense of $3.6 million for the six months ended June 30, 2023 and 2022, respectively. The estimated annual effective tax rates for the six months ended June 30, 2023 and 2022 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 the 2025 Notes. Our primary uses of capital have been for inventory, sales on credit to our customers, maintenance and growth capital expenditures, 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 ~~March 31,~~June 30, 2023, we had $134.2 million principal amount of 2025 Notes outstanding and ~~$25.0~~$10.0 million of borrowings outstanding under our revolving Credit Facility. The 2025 Notes mature in August 2025 and, subject to certain exceptions, the Credit Facility matures in September 2026. See Note 6 Debt for further details related to the terms for our 2025 Notes and Credit Facility.

As of ~~March 31,~~June 30, 2023, we had cash and cash equivalents of ~~$46.8~~$24.8 million and ~~$129.3~~$145.5 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 continue to expect total 2023 capital expenditures to be less than ~~$15.0~~$10.0 million, consisting of, among other items, replacing 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 the principal amount of our 2025 Notes outstanding 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 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 first ~~quarter~~half 2023, we repurchased approximately 139 thousand shares of our common stock for aggregate consideration of approximately $3.5 million with remaining authorization under this program of $2.4 million.

Our cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 are presented below (in millions):


		Three Months Ended March 31,					Six Months Ended June 30,
		2023		2022			2023		2022
Net cash used in operating activities	Net cash used in operating activities	$	(23.1)	$	(24.9)	Net cash used in operating activities	$	(29.5)	$	(50.6)
Net cash used in investing activities	Net cash used in investing activities	(0.8)		(0.7)		Net cash used in investing activities	(1.7)		(1.4)
Net cash provided by (used in) financing activities		19.3		(0.6)
Net cash provided by financing activities						Net cash provided by financing activities	4.1		32.6
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	0.3		(0.1)		Effect of exchange rate changes on cash	0.8		(0.6)
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	$	(4.3)	$	(26.3)	Net decrease in cash, cash equivalents and restricted cash	$	(26.3)	$	(20.0)

Net cash used in operating activities

Net cash used in operating activities was ~~$23.1~~$29.5 million for the ~~three~~six months ended ~~March 31,~~June 30, 2023 compared to ~~$24.9~~$50.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022. This increase in operating cash flows is primarily attributable to ~~the improvement~~net decrease in ~~net income adjusted~~cash used for ~~non-cash items,~~working capital, mainly accounts receivable and cost and estimated profit in excess of billings, which ~~provided $8.7~~used cash of $43.8 million ~~of cash~~ for the ~~three~~six months ended~~March 31,~~ June 30, 2023 compared to ~~provided $4.8~~used cash of $75.2 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022.

Net cash used in investing activities

Net cash used in investing activities was ~~$0.8~~$1.7 million for the ~~three~~six months ended ~~March 31,~~June 30, 2023, including ~~$1.1~~$2.8 million of capital expenditures, partially offset by ~~$0.3~~$1.1 million of proceeds from the sale of property and equipment. Net cash used in investing activities was ~~$0.7~~$1.4 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022, including ~~$0.9~~$3.6 million of capital expenditures, partially offset by ~~$0.1~~$2.6 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 ~~$19.4~~$4.1 million for the ~~three~~six months ended ~~March 31,~~June 30, 2023 compared to ~~$0.6~~$32.6 million of cash ~~used in~~provided by financing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2022, respectively. The change in net cash provided by ~~(used in)~~ financing activities primarily resulted from ~~$25.0~~$10.0 million of net borrowings on the revolving Credit Facility, offset by $5.4 million of repurchases of common stock under our share repurchase program and long-term incentive awards during the ~~three~~six months ended ~~March 31, 2023.~~June 30, 2023 compared to a net $33.6 million of borrowings on the revolving Credit Facility during the six months ended June 30, 2022.

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; (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, 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 (collectively referred to as the “Obligated Group”) 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 March 31,					Three Months Ended June 30,				Six Months Ended June 30,
Summarized Statements of Operations	Summarized Statements of Operations		2023		2022			Summarized Statements of Operations	2023		2022		2023		2022
Revenue	Revenue		$	151,263	$	116,360		Revenue	$	139,745	$	137,024	$	291,008	$	253,384
Cost of sales	Cost of sales		116,471		90,525			Cost of sales	107,589		101,014		224,060		191,539
Operating income (loss)			2,667		(2,643)
Net loss			(3,486)		(9,199)
Operating income								Operating income	6,209		22,726		8,876		20,083
Net income (loss)								Net income (loss)	(6,579)		9,264		(10,065)		65


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
Summarized Balance Sheet	Summarized Balance Sheet					Summarized Balance Sheet
Current assets	Current assets	$	397,664	$	378,812	Current assets	$	398,057	$	378,812
Non-current assets	Non-current assets	271,288		279,389		Non-current assets	264,188		279,389

Current liabilities	Current liabilities	$	160,534	$	175,155	Current liabilities	$	167,409	$	175,155
Payables to non-guarantor subsidiaries	Payables to non-guarantor subsidiaries	145,730		132,839		Payables to non-guarantor subsidiaries	164,748		132,839
Non-current liabilities	Non-current liabilities	204,644		293,150		Non-current liabilities	187,895		293,150

Critical accounting policies and estimates

There have been no material changes in our critical accounting policies and procedures during the ~~three~~six months ended ~~March 31,~~June 30, 2023. For a detailed discussion of our critical accounting policies and estimates, refer to our 2022 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.”

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures have been designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Our disclosure controls and procedures include controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of ~~March 31,~~June 30, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~March 31,~~June 30, 2023.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended ~~March 31,~~June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2427

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Information related to Item 1. Legal Proceedings is included in Note 10 Commitments and Contingencies, which is incorporated herein by reference.

Item 1A. Risk Factors

For additional information about our risk factors, see “Risk Factors” in Item 1A of our 2022 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~The following table is a summary of our repurchases of our common stock during the three months ended March 31, 2023.~~

Period Total number of shares purchased (a) Average price paid per share Total number of shares purchased as part of publicly announced plan or programs (a) Maximum value of shares that may yet be purchased under the plan or program (in thousands) (a)
January 1, 2023 - January 31, 2023 — $ — — $ 5,941
February 1, 2023 - February 28, 2023 — $ — — 5,941
March 1, 2023 - March 31, 2023 138,638 $ 25.22 138,638 2,444
Total 138,638 $ 25.22 138,638

~~(a)~~ 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 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. The program may be executed using open market purchases pursuant to Rule 10b-18 under the Exchange Act, in privately negotiated agreements, or by way of issuer tender offers, Rule 10b5-1 plans or other transactions. From the inception of the program through ~~March 31,~~June 30, 2023, we have repurchased approximately 298 thousand shares of our common stock for aggregate consideration of approximately $7.6 million. Remaining authorization under this program is $2.4 million.

No shares were purchased during the three months ended June 30, 2023.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

2528

Item 6. Exhibits


Exhibit
Number		DESCRIPTION

~~10.1*#~~3.1	—	Third Amended and Restated Bylaws of Forum Energy Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form ~~of 2023 Performance Restricted Stock Unit Agreement.~~8-K, filed with the U.S. Securities and Exchange Commission on May 16, 2023).

10.210.1*#	—	~~Form~~Fourth Amended and Restated Credit Agreement, dated as of March 30, 2023, ~~Restricted Stock Unit Agreement.~~by and among Forum Energy Technologies, Inc., Forum Canada ULC, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto.

22.1*	—	Subsidiary guarantors of the Company's Convertible Secured Notes due 2025.

31.1**	—	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2**	—	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**	—	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**	—	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**	—	Inline XBRL Instance Document

101.SCH**	—	Inline XBRL Taxonomy Extension Schema Document.

101.CAL**	—	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB**	—	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE**	—	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF**	—	Inline XBRL Taxonomy Extension Definition Linkbase Document.

104**	—	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Previously filed.

**Filed herewith.

#Identifies management contracts and compensatory plans or arrangements.

2629

SIGNATURES

As required by Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has authorized this report to be signed on its behalf by the undersigned authorized individuals.

FORUM ENERGY TECHNOLOGIES, INC.

Date:

~~May 5,~~August 4, 2023

By:

/s/ D. Lyle Williams, Jr.

D. Lyle Williams, Jr.

Executive Vice President and Chief Financial Officer

(As Duly Authorized Officer and Principal Financial Officer)

By:

/s/ Katherine C. Keller

Katherine C. Keller

Vice President and Principal Accounting Officer

(As Duly Authorized Officer and Principal Accounting Officer)

2730


PART I - FINANCIAL INFORMATION			3
Item 1. Financial Statements (Unaudited)			3
Condensed consolidated statements of comprehensive loss			3
Condensed consolidated balance sheets			4
Condensed consolidated statements of cash flows			5
Condensed consolidated statements of changes in stockholders’ equity			6
Notes to condensed consolidated financial statements			8
Item 2. Management's discussion and analysis of financial condition and results of operations			16
Item 3. Quantitative and qualitative disclosures about market risk			2426
Item 4. Controls and procedures			2427
PART II - OTHER INFORMATION			2528
Item 1. Legal proceedings			2528
Item 1A. Risk factors			2528
Item 2. Unregistered sales of equity securities and use of proceeds			2528
Item 3. Defaults Upon Senior Securities			2528
Item 4. Mine Safety Disclosures			2528
Item 5. Other Information			2528
Item 6. Exhibits			2629
SIGNATURES			2730


Period	Total number of shares purchased (a)	Average price paid per share		Total number of shares purchased as part of publicly announced plan or programs (a)	Maximum value of shares that may yet be purchased under the plan or program (in thousands) (a)
January 1, 2023 - January 31, 2023	—	$	—	—	$	5,941
February 1, 2023 - February 28, 2023	—	$	—	—	5,941
March 1, 2023 - March 31, 2023	138,638	$	25.22	138,638	2,444
Total	138,638	$	25.22	138,638