Technological Solutions That Improve Performance
Variperm’s margin accretive impact on FET’s financial performance was clearly evident in the company’s 1Q24 results. The acquisition, which closed in early January 2024, helped drive a 458-bp expansion in FET’s adjusted EBITDA margin in 1Q24, compared with 4Q23, and a 353-bp expansion Y/Y. The acquisition significantly enhanced FET’s Downhole and Artificial Lift segment product portfolio, exposing FET to new markets. Management believes it can leverage the combined global footprint of FET and Variperm to open new revenue opportunities for FET’s other product lines in Canada and increase Variperm’s exposure to customers in the US and international markets. The Variperm assets are included in FET’s Downhole and Artificial Lift segment, which posted $83.3 million of revenue and $18.0 million of adjusted EBITDA in 1Q24. Revenue grew 42% Q/Q and 34% Y/Y. Meanwhile Drilling & Completions Segment revenue declined 6% Q/Q and Y/Y. Adjusted EBITDA margins in both of FET’s reporting segments improved in 1Q24. The Drilling and Completions segment improved 195 bps Q/Q to 11.5% from 9.6%, and the Artificial Lift and Downhole segment improved 675 bps to 21.6% from 14.8%. The latter is driven by the accretion contributed by Variperm. Management’s guidance is for FY24 adjusted EBITDA and free cash flow of $100-120 million and $40-60 million, respectively. Our FY24 estimate is $111 million. Free cash flow and available liquidity could position FET to consider returning cash to shareholders in 2H25. Management expects to fully retire the $134.2 million principal amount of 9.00% convertible secured notes after it becomes callable with zero premium in August 2024. It then plans to use incremental free cash flow to repay the $59.7 million seller issued to close Variperm. Join us for a fireside chat on Tuesday, May 21, 2024, at 11:00 am ET with President and CEO Neal Lux and CFO Lyle Willliams. We will discuss FET’s strategy to “Beat the Market” with innovative technology solutions to meet customer needs, while driving FET’s adjusted EBITDA growth and margins. Those interested can register for the event via a link in our full report.
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