Forum Energy Technologies (NYSE:FET) held its first-quarter earnings conference call on Friday. Below is the complete transcript from the call.
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Summary
Forum Energy Technologies reported a strong first quarter with an 8% increase in revenue, 14% rise in EBITDA, and a 300% boost in net income year-over-year, driven by their 'beat the market' strategy.
The company achieved a book-to-bill ratio of 106% and increased its backlog by 44% compared to the previous year, reaching the highest level in 11 years.
Future guidance is optimistic with a forecasted second-quarter EBITDA of $24 to $30 million, and the company has raised its full-year EBITDA guidance midpoint to $103 million, anticipating market share gains and backlog conversion.
Operational highlights included the commercialization of innovative products like Duracoil 95, Unity ROV operating system, and Duralide manifold system, along with advancements in rig floor automation with the FR120 iron roughneck.
Management emphasized the strategic execution of cost savings, achieving $15 million in annualized savings, and continued share repurchase activities, indicating a strong balance sheet with extended credit facilities.
Full Transcript
OPERATOR
Good morning ladies and gentlemen and welcome to the Forum Energy Technologies first quarter 2026 earnings conference call. My name is Daniel and I will be your coordinator. For today's call, there is a process for entering the question and answer queue. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising. Your hand is raised to withdraw your question. Please press star 11 again. At this time, all participants are in a listen only mode and all lines have been placed on mute to prevent any background noise. This conference call is being recorded for replay purposes and will be available on the company's website. I will now turn the conference over to Rob Kukla, Director of Investor Relations. Please proceed, sir.
Rob Kukla (Director of Investor Relations)
Thank you, Daniel. Good morning everyone and welcome to Forum Energy Technologies' first quarter 2026 earnings conference call. With me today are Neil Lux, our President and Chief Executive Officer and Lyle Williams, our Chief Financial Officer. Yesterday we issued our earnings release which is available on our website. Today we are relying on federal safe harbor protections for forward looking statements. Listeners are cautioned that our remarks today will contain information other than historical information. These remarks should be considered in the context of all factors that affect our business, including Those disclosed in Forum Energy Technologies' Form 10-K and other SEC filings. Finally, management's statements may include non-GAAP financial measures. For reconciliation of these measures, please refer to our earnings release and website. During today's call, all statements related to EBITDA refer to adjusted EBITDA and unless otherwise noted, all comparisons are first quarter 2026 to fourth quarter 2025. I will now turn the call over to Neil.
Neil Lux (President and Chief Executive Officer)
Thank you Rob and good morning everyone. Our first quarter results reinforced our confidence in the path we presented with FET 2030. Year over year we increased revenue 8%, EBITDA 14% and net income 300%. The execution of our Beat the Market strategy drove these results impressively. We grew revenue per global rig 12% from a year ago and positioned our company for future gains with strong bookings. Orders were up 10% year over year with a book to bill of 106%. We entered the year with our highest backlog in 11 years and we grew that backlog again. Compared to the first quarter of last year, our backlog is up 44%. Also, following the completion of our structural cost saving initiatives, we are now a more efficient organization. These efforts have achieved 15 million of annualized savings. In addition, we continued our share repurchase program and strengthened the balance sheet by extending our credit facilities maturity to 2031. Overall, this was the kind of start we wanted to see providing momentum into the second quarter and beyond. Looking ahead, our results should increase substantially driven by market share gains, backlog conversion and cost savings. We are forecasting second quarter EBITDA between 24 and 30 million, which at the midpoint is up 32% from a year ago. These results would deliver incremental margins of 51% with EBITDA margin approaching 13%. This sequential improvement is driven solely by the execution of our plan. Turning to the full year, we are raising the midpoint of our EBITDA guidance to 103 million, up 20% compared with 2025. Importantly, while we are seeing signs of increased activity which is consistent with some analysts expectations, our forecast conservatively assumes a flat market. Should the market pick up, I would expect to see further upside to our forecast. During the first quarter we continued gaining market share through innovation and new customer adoption. This is a key part of our strategy. So let me provide an update on a few products we have recently commercialized. First, Duracoil 95 coil tubing for sour service environments is continuing to gain traction and is now active on three continents. This is an ideal product for Venezuela and the Middle East, especially if workover activity accelerates to bring production back online. Another innovation I want to mention is Unity, our next generation operating system for remote ROV operations. We recently had the opportunity to showcase this technology at a large international trade show. In a real time demonstration, our customers were able to control an ROV positioned hundreds of miles away from a terminal in our booth. It was a powerful demonstration of Unity's capabilities and and has ignited interest in our product. The next product I want to highlight is Duraline, our manifold system for multi well frac applications. Compared to our competition, Duraline is significantly safer and more efficient. Also, it is a great example of technology developed for US Shale applications that can be exported to international locations. In the first quarter we received a significant order for multiple systems to be deployed in Argentina this year. Another innovative area for FET is rig floor automation. We have developed patent pending software for the FR120 iron roughneck that automates the drill pipe makeup and breakout process with the push of a button. Our solution dramatically simplifies rig floor operations, reduces non productive time and increases drilling efficiency by 30%. This software will be packaged with new iron roughnecks and sold as an upgrade to existing ones. I am very excited about this development. Shifting to the power generation and data center markets, we have seen increased interest in the cooling solutions offered by our global heat transfer product family. Based on customer feedback, we have developed a stationary power cooling solution. This new design gives us an opportunity to address a bigger part of the market and since its introduction we have developed a strong commercial funnel. These innovations are great examples of how our product pipeline is supporting both near term share gains and the long term ambitions of FET 2030 Shifting to the Middle East Conflict and its Impact first and foremost, I am thankful all our employees in the region are safe. That is our primary concern. Also, operationally we have not suffered any facility damage. We have experienced some disruptions that are having a slight impact on our business, particularly around logistics and freight costs. However, our teams did an excellent job finding creative solutions to these challenges and we were able to increase revenue in the Middle East during the quarter. While uncertainty remains high, we are not forecasting any material negative impact from the conflict. For context, Middle East revenue is only 10% of our total, limiting the company's exposure. At the same time, this conflict is creating medium to longer term tailwinds for our industry. A significant portion of the world's oil and gas supply has been disrupted for 62 days and counting. Even if oil shipments through the Strait of Hormuz resume quickly, global oil inventories will be meaningfully reduced. Barring a material downturn in global demand, we expect investment in oil and gas production to increase over time to replace depleted inventories and support energy security. Some analysts have suggested that our industry will experience a prolonged upcycle beginning later this year or early 2027. This up cycle aligns with the growth market scenario of our Forum Energy Technologies 2030 vision. Under this scenario, our addressable markets grow at a rate of 9% annually and we expand our market share to 22% by 2030. The combination of market expansion and share gains doubles revenue to 1.6 billion, quadruples EBITDA and nearly triples free cash flow in that time frame. This scenario underscores our strategy's long term value creation potential while our near term focus remains on disciplined execution and cash flow generation. Now, to provide more detail on our first quarter results and near term financial outlook, I will turn the call over to Lyle.
Lyle Williams (Chief Financial Officer)
Thank you Neil. Good morning. I will begin with first quarter results and our guidance, then shift to a discussion of cash flow and our capital allocation strategy. First quarter revenue of 209 million came in near the top end of our guidance. Growth in offshore and international markets led the revenue increase of 3%, outpacing global rig count. Our international revenue was up 7% with Canada, Europe and Latin America, each delivering double digit gains. This is the third consecutive quarter when international exceeded US revenue and offshore revenue expanded 10% driven by a 20% increase in our subsea product line as the team begins to execute orders secured last year. Adjusted EBITDA for the quarter was 23 million in line with our guidance as cost savings benefits were largely offset by product mix. Adjusted net income of 6 million increased 11% on favorable income tax expense rate that benefited from geographic income mix. We grew backlog again in the first quarter even after very strong bookings in 2025, both segments posted a book to bill ratio greater than 100%. We saw higher demand for capital equipment in the stimulation and intervention and the drilling product lines and increased demand for wireline cables. Valve orders increased nicely bouncing back from tariff related impacts throughout 2025. Let me continue with additional color on our segment results. Drilling and completions revenue was 127 million flat with the previous quarter. The subsea product line increased 20% as we recognized revenue on ROVs and the rescue submarine project. The stimulation and intervention product line increased 7% supported by power end and wireline cable demand. And to note, our Quality Wireline product family set a new record this quarter in revenue and in Greeceless cable sales. Coil tubing revenue was down 17% coming off strong US sales last quarter and due to customer requested delivery pushouts into the second quarter. Despite flat revenue segment EBITDA was up 6%, benefiting from cost savings and improved plant utilization related to our facility consolidations. Artificial lift and downhole revenue was 82 million, up 9% with increased sales volumes across all three product lines. EBITDA was roughly flat reflecting a combination of product mix, timing of incentive expense and lower absorption at one facility which we expect to improve in the coming quarters. Consolidated free cash flow was $1 million, consistent with our guidance. As a reminder, our free cash flow is typically back half weighted. For example, roughly 2/3 of our free cash flow was generated in the second half of 2025. Despite the seasonally lower free cash flow, we still remained active on share buybacks. We repurchased almost 93,000 shares for approximately $5 million under our share repurchase authorization. These purchases averaged $49 per share, about 20% lower than our stock price at yesterday's close. In addition, we paid $9 million for withholding taxes associated with our stock based compensation program, avoiding the issuance of roughly 180,000 shares and ultimately benefiting our shareholders. These payments, along with transaction costs associated with the credit facility amendment resulted in a Modest and temporary increase in net debt. We ended the quarter with net debt of 121 million with a net leverage ratio still at a comfortable level of under 1.4 times. While this is higher than where we ended last year, we expect net leverage to decline to under 1 times by the end of the year. Liquidity of 91 million remains strong with 54 million available under our revolving credit facility. During the quarter, we extended our credit facility maturity to February 2031 with improved pricing and greater letters of credit capacity. This amendment combined with our strong balance sheet provides significant flexibility for FET to fund strategic initiatives including long term debt, retirement, organic growth and acquisitions. Now turning to our guidance for the second quarter. As Neil mentioned earlier, our our results should increase substantially, driven primarily by backlog conversion, cost savings and market share gains. We are forecasting revenue between 200 and 225 million and EBITDA between 24 to 30 million, which at the midpoints are up 6% and 32% from a year ago. Adjusted net income expected for the second quarter is between 6 and $11 million. Our free cash flow. Our full year guidance issued in February assumed relative flat market activity compared to the back half of 2025. Now, with strong first quarter results and increased expectations for the second quarter, we are raising the bottom end of our EBITDA guidance range from 90 to 95 million. We are maintaining our revenue guidance of 800 to 880 million and for adjusted net income we are guiding between 21 and 38 million. In addition, we reaffirm our full year free cash flow guidance of 55 to 75 million as we remain confident in our ability to convert approximately 65% of EBITDA into free cash flow. Let me conclude with our capital allocation expectations. As we discussed last quarter, our balance sheet is in great shape. We consider any further net leverage reduction as dry powder for incremental strategic investments, including acquisitions and share repurchases. With our MA framework, we seek to acquire companies with differentiated products competing in targeted markets at valuations that would be accretive to FET per share metrics. And we compare these acquisitions with repurchasing FET shares. This year, our bonds allow total repurchases of around 30 million. As long as our net leverage remains below 1.5 times, we believe FET remains a compelling investment. With that, I'll turn the call back to Neil for closing remarks.
Neil Lux (President and Chief Executive Officer)
Thank you, Lyle. Over the last few years we have implemented a strategy to make FET a better and stronger company. We are gaining share through commercial excellence and innovation. We are leveraging our global footprint, delivering our solutions to customers around the world. We are creating significant value for our shareholders and we have been successful despite market headwinds. Now we may be closer to finally having a market tailwind that can supercharge our efforts going forward. Thank you for joining us today, Daniel. Please take the first question
OPERATOR
as a reminder. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q and A roster. Our first question comes from Jeff Robertson with Water Tower Research. Your line is open.
Jeff Robertson (Equity Analyst at Water Tower Research)
Thank you. Good morning, Neil, with respect to the Unity ROV system and the trade show, are you seeing demand for that product outside of traditional energy? And then secondly, if we think about Unity and the cooling systems you all have, are there orders for those systems that are in the backlog or are you working on that?
Neil Lux (President and Chief Executive Officer)
Yeah, good question. So starting with Unity first, Jeff, it's still a fairly new system. We're gathering more and more fields, field data as well as understanding how much it benefits our customers. So that's early stages there. I do think it would have an application outside of oil and gas for control of an rov. But yes, I think the interest is high. And so we do have a number of Unity systems already in the backlog that will continue to add to, to what we've already delivered. And again, I think as we build that field experience, I think we'll then look at other applications outside oil and gas. And again, I think Defense would be a great application for it as well. On our cooling systems, we didn't mention in the call, but we formally had, we do have a cooling system that's mobile for data centers that we called PowerTron. The system I mentioned in the script is a new design that's actually a permanent, so it's not mobile. So this is brand new one that we are quoting actively and we are again building up a nice opportunity queue. So we don't have orders for that system yet, but I think all indications are we have a great product and would expect that going forward.
Jeff Robertson (Equity Analyst at Water Tower Research)
Can you comment, Neil or Lyle, on what the margin profile looks like in the backlog?
Neil Lux (President and Chief Executive Officer)
I think, again, let me start with the new products and innovations. I think generally our innovative products have higher margins than our standard overall margin. Again, I think the innovations we develop, you know, we're addressing specific customer needs and so we're able to get more value out of that. And I think as we talked about Our backlog coming into the year about 11% was new innovations or new products that we developed recently. So I would think, you know, overall our average margin would be on higher because of that.
Lyle Williams (Chief Financial Officer)
Yeah, Jeff, maybe a little color to add to that. Last year we booked a large amount of orders for subsea. Their book to bill was basically off the charts in a combination of defense and traditional oil and gas, ROVs and rescue submarine. Typically we see our subsea business with slightly lower contribution margins. There's a lot of pass through material and electronics, et cetera, that go through on those subsea orders. That tends to pull the average margin down. So I'd say the subsea portion of that backlog, which is meaningful is a little bit lower. But as Neil mentioned, our other products are putting through are coming in at higher margins.
Jeff Robertson (Equity Analyst at Water Tower Research)
And if I can have one more with respect to the Middle east and like Qatar's lng, that's part of it's gone offline. Are there conversations underway with customers in the Middle east that would increase demand for fet's business as the oil producers and gas producers maybe look to diversify their production capacity and maybe put a bigger emphasis on developing their own natural gas for internal consumption?
Neil Lux (President and Chief Executive Officer)
Yeah, I think it's maybe early on that rebuilding discussion, Jeff. You know, we're still staying close with our customers. I think as we mentioned, we are seeing, we did increase revenue in in the Middle east during the quarter. You know, one area that, you know, we didn't cover specifically was Venezuela. So we are seeing an increase there in demand, especially for our short cycle activity based, you know, like coil tubing, wireline, things like that. So I think as we maybe get farther from the conflict, I think there will absolutely be an opportunity in the Middle East. But I think interestingly we are finding some nice opportunities already in Venezuela.
Jeff Robertson (Equity Analyst at Water Tower Research)
Thank you.
Neil Lux (President and Chief Executive Officer)
Thanks Jeff.
OPERATOR
Thank you. Our next question comes from Steve Farrazzani with Sidoti. Your line is open.
Steve Farrazzani (Equity Analyst at Sidoti)
Morning, Neil. Morning, Lyle. Appreciate all the detail on the call, Neil. In terms of the guidance raised this early in the year, obviously you wouldn't do it without confidence. Just trying to get a better sense of the components that led you to that decision. You covered it a little bit. But to me the surprise here was the strength in orders. Given the fact that we haven't seen a pickup in North America yet, given the conflict in the Middle east, given you would assume a lot more uncertainty on behalf of customers. Were you surprised by that? We're certainly surprised by the strength in the order book for Q1 was that the major contributor. Were there other factors in the guidance raise?
Neil Lux (President and Chief Executive Officer)
Yeah, I think having a book to bill over 100% does give you a lot of confidence when you look out a quarter for sure. So I think that helped some of the orders that we booked. I mentioned the call a dura line for Argentina. That's one we've worked on for a long time and got to the finish line in Q1, so that that helped increase. Another area where we're seeing some great strength is in Canada with our Veraperm product line. They're delivering great results. I think with oil prices up, I think that's an area where we're going to see more and more investment. So that's been a big part of it. I think Veraperm being strong as well as, you know, some of our more valuable use. Our backlog coming into the quarter, I think gave us a lot of confidence in increasing that. Again, we're not assuming yet an increase in activity. We're kind of assuming, keeping our assumptions. But I do have to say we are, you know, getting initial, let's call it indications of some increase in activity. It's uneven so far, so I don't want to call it a trend. But if it does, if activity does increase, I think we will be aggressive in following it up.
Steve Farrazzani (Equity Analyst at Sidoti)
And then in terms of the strength in Q1, it sounds like you are also impacted by some delivery pushouts. Given the higher 2Q guidance. Fair to assume those deliveries were either completed or will be for sure completed in 2Q?
Neil Lux (President and Chief Executive Officer)
Yes, yes. I think we're specifically talking about coiled tubing, which we had customers a little unsure at the end of the quarter and just waited. But that is actually an area where we're seeing customers now kind of accelerate.
Steve Farrazzani (Equity Analyst at Sidoti)
So that's one of the initial indications that we've received. Got it. Have we seen the full benefit of your cost reductions now with the plant consolidation, or can we expect more to contribute to margins as the year goes on?
Neil Lux (President and Chief Executive Officer)
I think that the Q2 guidance fully assumes all of our cost reductions where I think we still had some being taken care of in Q1, and we also had some, you know, just operationally, you know, when you, when you consolidate facilities, we, you know, you always have some challenges there. But going forward in Q2, we feel really, really good about the cost savings and our ability to execute there.
Steve Farrazzani (Equity Analyst at Sidoti)
Got it. That's helpful. And Lyle, I do have to circle around on operating cash flow. Clearly, Q1 is always the lowest and you had pointed it out going into this quarter that being said, operating cash flow was lower than the previous two years. When I'm looking through the numbers, it looks like it's a timing issue with receivables collection as the delta between the last two years. Is that fair? And that's reasonable to think it's more timing than anything. And there's no reason to think you're not still on track for full year cash flow.
Lyle Williams (Chief Financial Officer)
Yes, Steve, the way I would answer is first, the seasonality is driven by incentive comp payments and property tax payments that go out in Q1. So that's the big drag on from a working capital perspective. Think of that as really, really timing. And then quarter to quarter we'll see pretty good movements in DSOs, for example, and those can go swing up and down based on projects, project timing for our bigger projects and kind of just what's happening with shipments and when those flow in. So we did see a little bump up in DSOs in the first quarter, but again we think that'll unwind in the second and third quarter. So yeah, maybe a little bit of movement in, in receivables and payables. But really the big driver for Q1 are those annual payments that we make every year. But we feel like we are on track absolutely for the full year, Steve.
Steve Farrazzani (Equity Analyst at Sidoti)
And in terms of the use of it, any change to your buyback strategy?
Lyle Williams (Chief Financial Officer)
Yeah, no, we like the buyback plan. We highlighted that about $5 million back this year. Total capacity for the year would be about 30 million. Just like we talked on last quarter's call, we do expect that to be back end weighted. You know, want to keep that somewhat in line with how our free cash flow flows in. So we've got a little bit of time on how that plays out. But definitely feel like with our free cash flow yield as high as it is over 10%, it definitely is an attractive investment for us to consider.
Steve Farrazzani (Equity Analyst at Sidoti)
Thanks, Neil. Thanks, Lyle.
Lyle Williams (Chief Financial Officer)
You're welcome.
OPERATOR
Thank you. Our next question comes from Dan Pickering with Pickering Energy Partners. Your line is open.
Dan Pickering (Equity Analyst at Pickering Energy Partners)
Morning, guys. I think Lyle, you mentioned, or maybe it was Neil, I can't remember. You talked about FET 2030 and you threw out some numbers. I just want to confirm what I heard. I think I heard doubling of revenues to 1 billion, 600 billion and EBITDA I think was quadrupling. So that's call it 400 million. I just want to confirm that it kind of implies an EBITDA margin of about 25%. I was hoping you could just kind of give us some perspective. I realize that is aspirational, it's forward looking, et cetera. But how do you think in there around pricing improvements and can you put that 25% margin level in context with prior sort of strong cycle periods?
Neil Lux (President and Chief Executive Officer)
Yeah, yeah, Dan. So I think, you know, those numbers are based compared to 2025. So we were just call it around 85 million of EBITDA in 2025, but gotcha. Okay. Revenue to 1.6. So we see that really as two drivers there. A market, market gains, market growth, excuse me, and share gains driving the revenue. And then with our operating leverage, we see let's call it 30% incremental margins on that revenue increase. So I think that's where we get the increase in overall margin. So I think if you play it out to that period, let's call it around 20% EBITDA margins once we have that kind of revenue growth and on our fixed, kind of fixed cost that we have here. So I think we have a good platform. And also as we look at it, you know, if you look at our revenue per rig in the US we're around $700,000 per rig annually. Internationally it's closer to 300,000. So the ability for us to export the technology, whether it's, you know, it's Duraline manifolds, our multi lift solution, esp life extenders or protectors going into the Middle east, we see that as a great opportunity. So if we could have international revenue per rig, international rig, get closer to the US that 1.6 target is aspirational, but it feels like a great target
Dan Pickering (Equity Analyst at Pickering Energy Partners)
for us to achieve. Okay, thank you.
Neil Lux (President and Chief Executive Officer)
Neil, you mentioned Venezuela. Are you seeing, what are you seeing in Venezuela? Is it inquiries about what you could do if companies go in there? Are you seeing companies that are already there asking for more stuff? Is this a Q2 revenue impact? Is it a later in the year into 27 revenue impact?
Dan Pickering (Equity Analyst at Pickering Energy Partners)
It's both.
Neil Lux (President and Chief Executive Officer)
So we are receiving orders and delivering material for customers who are already in country looking for our products so they can get back to work. And then we're also early stages looking at maybe more infrastructure type sales. Again, we'll call it coiled line pipe, things like that. Potentially valves going into Venezuela to help rebuild that infrastructure. I think that would be a longer term. But historically before, let's call it maybe it's 2007, I gotta get my memory going. It's been a while. Venezuela was a great market for a lot of our products. Getting back in there, opening that market again creates a lot of opportunity for us. Okay.
Dan Pickering (Equity Analyst at Pickering Energy Partners)
And Then you talked about Argentina and the Duraline order that you'd been working on for a while. Is that to go? Is that going in with a pressure pumper that has equipment there already or is it new capacity, new equipment moving in that you're going along with?
Neil Lux (President and Chief Executive Officer)
I'm not positive if the, if the pumps are in country yet or not, but I believe that's additional fleets that are being added to get the work done. Yeah, yeah, yeah.
Dan Pickering (Equity Analyst at Pickering Energy Partners)
That's a market we see a lot of opportunity. Last question for me as we bring it back to, you know, generally in the U.S. can you talk a little bit about sort of pricing behavior? When we see your results in Q1 and you're talking about Q2, is there really, is that a flat pricing environment that you're discussing? Are we seeing any upward bias anywhere? Is it kind of a steady market right now?
Neil Lux (President and Chief Executive Officer)
I'd say it's steady right now, Dan. You know, we're getting interest. We're hearing the phone's ringing, the inquiries are coming. We've had had a few customers ask to maybe receive material earlier than they had originally planned, but it's not a, you know, let's call it a boom, a boom yet. So I don't see a pricing impact here in Q2 necessarily, other than, you know, we have passed on, you know, any freight increases for if there's a diesel surcharge or any other sort of, you know, in the past we've passed on tariffs, for example, so if there's cost pressures like that, we'll push those through. But let's call it real pricing increase. We haven't approached that yet. So I think we have some capacity. I think some of our competitors have some capacity, at least initially. But as we go along in the cycle, you know, that's absolutely something we'll be looking for.
Dan Pickering (Equity Analyst at Pickering Energy Partners)
Thank you, guys.
Neil Lux (President and Chief Executive Officer)
Thanks, Dan.
OPERATOR
Thank you. Our next question comes from John Daniel with Daniel Energy Partners. Your line is open.
John Daniel (Equity Analyst at Daniel Energy Partners)
Hey, Neil, the first question is with the GHT product line, can you speak to what you're seeing from the sort of the North American frac companies replacement orders and inquiries?
Neil Lux (President and Chief Executive Officer)
Yeah, we have seen an uptick here in inquiries. I would say nothing, not a trend yet, John, but something that we're monitoring. I still think it's higher. We're still seeing more demand right now for our data center cooling opportunities than we are for frac. That said, even going into the year, we were a little bit surprised with a few capital orders on the drilling side, even on the pressure pumping side, where Customers were pulling the trigger even before this price increase. So I'm kind of cautiously optimistic that as we get farther in the cycle and activity picks up, I think, you know, just as you know better than most how old some of that equipment is out in the field, that we could have an opportunity to add some new capital there for our customers.
John Daniel (Equity Analyst at Daniel Energy Partners)
Okay, and then my follow up, and not to get too technical, but on the Duraline it was characterized as more efficient. Can you elaborate on what makes it more efficient?
Neil Lux (President and Chief Executive Officer)
Yeah, it's our Duraline connection. So, you know, we're able to rig up and rig down significantly faster. We also utilize high pressure hoses and cranes to move those hoses. So if you need to pull out a pump, you can do that in much faster time than you could with a traditional manifold. So it's something that we're seeing a lot of interest from the pressure pumpers there, large ones who want to be best in class. And so we're seeing good take up there.
John Daniel (Equity Analyst at Daniel Energy Partners)
And once you sell those systems, what type of consumables are going along with it? What's the repeat revenue opportunity, if you will?
Neil Lux (President and Chief Executive Officer)
Yeah, the whole system obviously is a pretty big order initially, but whether it's check valves, hose replacements, different types of bearings, different types of, of iron that we would also add. So I think that would be some of the pull through with that. So I think let's call it 80, 20 on capital versus recurring there. And a final question. I don't know how many, like the bearings and valves and fittings and all that is sourced from international markets. But assuming some of it is, do you see any potential supply constraints as an eventual Middle east rebuild comes? Like could you supply that you might have thought you could, gets diverted to a higher priced market, if you will. Is that a risk? Yeah, we haven't seen anything like that. We feel good about our supply chain, but it's obviously something we'll watch.
John Daniel (Equity Analyst at Daniel Energy Partners)
Okay, that's all I got. Thanks for including me.
Neil Lux (President and Chief Executive Officer)
Thank you.
OPERATOR
Thank you. Our next question comes from Eric Carlson. Your line is open.
Eric Carlson (Equity Analyst)
Hey guys, good morning. Good quarter again and maybe just I think last time we talked oil prices were probably in the mid mid 60s. And now you see obviously what's happened in the last few months and obviously a lot of headline volatility there. As when you think about the 2030 plan you presented, and I mean from a physical perspective, an oil market that is likely to lose really over a billion barrels of supply. When you think about the base case you've presented in that plan has been a no growth scenario and then the 2030 growth scenario. Can you just provide a little bit more context as to. To kind of your confidence in outcomes kind of given we probably need to build a lot of supply back into the market at some point here?
Neil Lux (President and Chief Executive Officer)
Yes, I think with the. As we look at, and I think I agree with you, Eric, the idea that we're going to take a billion barrels of oil out of inventory, that has to be replaced. And I think, you know, countries around the world, I think they're going to have to ask themselves how much inventory should they have. I would imagine it's going to be more than what they had coming into the conflict. So I think that there's even more demand on oil production. So that fits really well with our growth scenario. And again, we think that as the buildup comes both on oil and again, data centers is still out there, natural gas demand, I think, still going to grow. I think that biases up towards our growth outlook where we could double revenue because we're going to have our markets growing and we're going to be taking share. And again, we listed off a number of key innovations that's really driving growth and you add on to it the need to rebuild and refill. I think that's a great opportunity for us.
Eric Carlson (Equity Analyst)
Agreed. And then maybe just in that context of kind of headline volatility, obviously the commodity volatility has been high. I mean, your own equity volatility is relatively high too. I mean, pretty good results today. Equity market reaction is what it is for whatever reason. But in the context of your capital returns, when you look at volatility as an opportunity to buy more of what you already own and you know very well and a potential to kind of accelerate the growth plan, given what's happened in the broader market, does that change how you think about buybacks versus acquisitions? What's more attractive? I mean, the organic opportunity is obviously massive if it even plays out close to the 2030 growth scenario. And then maybe the last part of that would be. Is just from a MA market perspective, obviously this volatility is quite high. I'm just curious what your thoughts are on potential targets. Maybe if you could cover kind of the size of target again and then I would presume the bid ask spread has kind of widened here. But I'm just kind of curious as to kind of organic growth opportunity, how you allocate capital and then the M and A market. So that'd be helpful.
Neil Lux (President and Chief Executive Officer)
Thanks. Maybe I'll start and then hand it to Lyle. You know, think about our free cash flow yield is still around 10%, right. So I think it's higher than our peers and it's higher than the average small cap. So I think we still are a great value there, especially with our growth outlook. As we think about acquisitions, we have a criteria that's very, that we hold to, that they got to be differentiated products, got to have a few competitors, got to have great financial metrics and we'd want something that would be accretive. Right. We want to be able to grow free cash flow per share. I think that's really important. So we, we kind of have all that together. That said, Lyle and his team have developed a really interesting pipeline and something we continue to look at and there's opportunities out there, but we're going to be incredibly selective, especially with our free cash flow yield. Eric, thanks for the question. The thing I would add to Neil's comments, because they were spot on is because of the breadth of our product portfolio. It gives us, we've said it before, a lot of shots on goal around what kinds of products we could add that would be strategically beneficial to our business. But in every case the criteria is the same. We want businesses that have differentiated technology, that compete in targeted markets and that we could acquire as something that is going to be accretive to our per share metrics. So we can be conservative and we can be, we can take our time because we do have a good alternative investment in our own shares that we could buy. So definitely an interesting market out there. A lot of opportunities to look at. But as you mentioned, we've got a compelling base case if we can't find something that is even more compelling. And then maybe just valuations. Obviously the Verifm deal was done, I mean under four times EBITDA and a really impressive free cash flow multiple. I mean what, what does the market look like? I mean today, I mean I think from a trailing perspective when, if we would have maybe had this conversation in February, it goes well, the activity has continued to come down. Oil commodity prices are so, so that feels like you're almost bottom ticking the market. And then in the context where we sit today on a go forward basis, it feels like you need more activity. It's kind of hard to judge how much ultimately, but it feels like the need is there. The extent can be debated, I suppose, but just like seller expectations in today versus maybe a quarter ago would be just interesting to hear. Yeah, I think you're right. And if you look at public company valuations Multiples have increased year to date pretty meaningfully, ours included. And what you would expect, just as you mentioned, is sellers to try to take advantage of that with their own expectations. I think that being said, we've seen deals getting done still in the range of where we acquired veraperm. So our expectation is that those deals values haven't changed a lot meaningfully in the last 90 days. And as you mentioned, volatility in valuations around public company equities can be pretty high. So we'll be, we'll be appropriately conservative in any moves that we make there, making sure that we're very accretive to our story. Yeah. So basically all things equal, if something gets done, it's significantly accretive. And then the last point would be like, what is the target? I mean Veraperm was a very large acquisition that kind of transformed the business and really kind of set you up for where you are now. I mean, but that was a pretty large transaction. I mean, what is the general range you guys have been thinking about? If you can get something for the right price, that kind of looks like another home run like Verifm was. Yeah, as I mentioned, we do have a lot of shots on goal and that means the dispersion of what those could look like is pretty broad as well. Key things that we're going to do financially is keep our balance sheet very strong. So we're not going to risk the balance sheet by doing some bigger deal that stretches us out. That's not in our playbook.
Eric Carlson (Equity Analyst)
Obviously. You know, we talk about our stock being a very good value. So I think that puts kind of some brackets around the size of deal we might do. But they are pretty broad as far as what we're seeing that are interesting and it's just a matter if we bring something across the line, what might that be? Okay, that's helpful. And then last one, but seller type is that kind of like the veraperm deal where privately held companies or are there carve outs from other publics or. I mean what does that generally look like? We're kind of seeing it all. There are quite a few private equity held businesses that are long in the tooth in portfolios that are out there that data is, that data is available. Also we've seen some smaller deals that are owned by families that are looking at, you know, how do they plan for the next generation and estate planning kind of questions. So we've seen a broad mix and over our history of fet, we participated in a lot of different kinds of deals. So definitely an interesting time right now. Great. Well, that's all I got. Thanks. Thanks, Eric.
OPERATOR
Thank you. I'm showing no further questions at this time. I would now like to turn it back to Neil Looks for closing remarks.
Neil Lux (President and Chief Executive Officer)
Thank you for your support and participation on today's call. And we look forward to our next meeting in July to discuss FET second quarter 2026 results.
OPERATOR
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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