MasTec and Forum Energy Technologies Report Strong Q2 Results and Positive Outlooks

Earnings call: MasTec reports solid Q2 with strong backlog growth By Investing.com

MasTec Inc . (NYSE:MTZ), a leading infrastructure construction company, reported a robust second-quarter for 2024, with revenues hitting $3 billion and an adjusted EBITDA of $268 million. The adjusted earnings per share were $0.96, surpassing the guidance by $0.08. The company's backlog increased to $13.3 billion, up $500 million from the previous quarter, indicating a strong pipeline of future work. MasTec delivered solid margin performance in its Communication and pipeline segments, although it faced some pressure in its Power Delivery segment. The company's CEO, Jose Mas, expressed confidence in the future growth, citing the awarded 700-mile high-voltage transmission and substation project and anticipated federal funding increases as key growth drivers. In conclusion, MasTec's second-quarter earnings call reflected a company that is navigating industry challenges while positioning itself for future growth. With a solid financial performance and strategic projects in the pipeline, MasTec appears to be on a path to capitalize on the expanding infrastructure and clean energy markets. The company's next quarterly call is anticipated to provide further updates on its performance and project execution. MasTec Inc. (MTZ) has recently demonstrated a strong financial performance, and insights from InvestingPro provide a deeper understanding of the company's market position and future outlook. With a market capitalization of $7.96 billion, MasTec is a significant player in the infrastructure construction industry. The company has experienced a large price uptick over the last six months, with a 44.51% return, reflecting investor confidence and market momentum. This aligns with the company's robust second-quarter results and the CEO's optimistic outlook for future growth. InvestingPro Tips highlight that MasTec is trading at a high earnings multiple, with a P/E ratio of 1012.76, indicating high investor expectations for future earnings growth. The adjusted P/E ratio for the last twelve months as of Q2 2024 stands at 497.55, which remains elevated, suggesting that the market anticipates continued profitability and growth. Analysts have revised their earnings upwards for the upcoming period, reinforcing the positive sentiment surrounding the company's financial prospects. The company's revenue growth has been solid, with a 10.97% increase over the last twelve months as of Q2 2024. This growth trajectory is expected to continue, as indicated by the strong backlog reported in the recent earnings call. Despite weak gross profit margins of 12.3%, MasTec is predicted to be profitable this year, as per InvestingPro Tips, which is consistent with the positive outlook presented by the CEO. InvestingPro offers additional insights into MasTec, with 11 more tips available for investors seeking a comprehensive analysis of the company's performance and potential (https://www.investing.com/pro/MTZ). These tips can provide investors with valuable information to make informed decisions about their investment in MasTec. In summary, MasTec's financial health and market performance, as reflected in the InvestingPro metrics and tips, support the company's optimistic outlook and strategic positioning for capitalizing on growth opportunities in the infrastructure and clean energy markets. Operator: Welcome to MasTec's Second Quarter 2024 Earnings Conference Call, initially broadcast on Friday, August 2, 2024. Let me remind participants that today's call is being recorded. At this time, I'd like to turn the call over to our host, Marc Lewis, MasTec's Vice President of Investor Relations. Marc? Marc Lewis: Thanks, Samara, and good morning, everyone. Welcome to MasTec's second quarter call. The following statement is made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. In these communications, we make certain statements that are forward-looking, such as statements regarding MasTec's future results, plans and anticipated trends in the industries where we operate. These forward-looking statements are the company's expectations on the day of initial broadcast of this conference call, and the company does not undertake to update these expectations based on subsequent events or knowledge. Various risks, uncertainties and assumptions are detailed in our press releases and filings with the SEC. Should one or more of these risks or uncertainties materialize or should any of our underlying assumptions prove incorrect, actual results may differ significantly from results expressed or implied in today's call. In today's remarks by management, we will be discussing adjusted financial metrics, reconciled in yesterday's press release and supporting schedules. In addition, we may use certain non-GAAP financial measures in the call today. The reconciliation of any non-GAAP financial measures not reconciled in these comments to the most comparable GAAP financial measure can be found in our earnings press release. Please note that we have two additional documents associated with today's webcast, which, along with the earnings press release, can be found on the Investors Events and Presentations page of our website at mastec.com. There is a companion presentation with information and analytics on the quarter just ended and guidance summary for Q3 and the balance of the year. This should help you with your models. Both PDF files are available for download. With us today, we have Jose Mas, our Chief Executive Officer; and Paul Dimarco, our EVP and Chief Financial Officer. The format of the call will be opening remarks and analysis by Jose, followed by a financial review from Paul. These discussions will be followed by a Q&A period and we expect the call to last about 60 minutes. We had a nice quarter, a lot of important things to talk today. So I'll turn the call over to Jose Mas. Jose? Jose Mas: Thanks Mark. Good morning and welcome to MasTec's 2024 second quarter call. Today, I'll be reviewing our second quarter results as well as providing my outlook for the markets we serve. First, some second quarter highlights. Revenue for the quarter was $3 billion. Adjusted EBITDA was $268 million. Adjusted earnings per share was $0.96. And backlog at quarter end was $13.3 billion, a $500 million sequential increase. In summary, we had another good and clean quarter. While revenues were slightly below expectations, margins were about 65 basis points better than expected. Solid margin performance in our Communication and pipeline segments, coupled with solid improvements in our Clean Energy segment, were partially offset by some pressure in our Power Delivery segment. Our second quarter results, coupled with our full year guidance, which is essentially unchanged, demonstrate both the improvements in our business over the last year and our confidence in the future. As a reminder, on our 2023 year-end call in February, we talked extensively about the signs of weakness we were seeing in electrical distribution spending. While some of the pressure continues, we're pleased that our diversification strategy and strength in other markets have allowed us to perform above expectations. Despite the short-term pressure in our power delivery segment, the longer-term outlook continues to get significantly better. The projected energy load growth in the U.S. will have a substantial impact on our business as our customers take advantage of this growth opportunity, resulting in meaningful increases in investment in both generation and grid expansion. We are incredibly well positioned to take advantage of this opportunity. These opportunities, coupled with increased federal funding impacting our communications and infrastructure segments, along with an increased expectation that natural gas will play a larger role in energy generation going forward, provide us with unprecedented opportunities across our entire portfolio. I'd like to walk through a number of positive developments that I believe will have a significant impact on our ability to grow both revenues and earnings. First, in our Power Delivery segment. During the second quarter, MasTec was awarded a 700-mile, high-voltage transmission and substation project. The project is expected to start in early 2025, and complete in 2028, with annual revenues projected to be in the $300 million to $500 million range. This project, one of the largest in the United States, represents a significant win for MasTec, as a pursuit of large transmission project has been an important part of our strategy. We've made significant investments over the last few years to better position us to compete and win large projects, and this award is a great start. While there continues to be a number of large transmission opportunities in the near-term, the reality is that to meet load growth expectations, transmission spending is going to have to meaningfully increase. While a major challenge has been the time involved in the development cycle for transmission projects, we are encouraged by recent proposed legislation in Washington. On Wednesday of this week, the Senate Energy and Natural Resources Committee in a bipartisan 15 to 4 vote passed the Energy Permitting Reform Act of 2024. The purpose of this bill is to accelerate the expansion and upgrade of the U.S. electricity grid. While the build needs to make it through Congress and there will be challenges in an election year, it demonstrates the bipartisan awareness of the importance of this issue. We believe this is a great sign. In our Communications segment, margins outperformed, and we expect that trend to continue. Our second half growth is largely intact, and we're encouraged by our progress in both the wireless and wireline markets. Our market share expansion with AT&T, coupled with the Nokia (HE:NOKIA) Ericsson (BS:ERICAs) swap out is on track for our second half expectations, and we continue to experience strong growth opportunities in our wireline business. We expect second half revenues in 2024 to grow organically by nearly 20% compared to last year. Looking ahead, beads funding is becoming clear as to both size and timing, and we expect it to have an impact on our business in 2025. There has been a number of new customer entrants to the market. Many are backed by private equity and very interested in our end-to-end solutions approach, which we believe gives them a competitive edge, thus providing a great opportunity for us. In our Oil and Gas Pipeline segment, revenues were slightly lower than expected as some projects shifted to the second half, but margins outperformed. While backlog is down, demand is strong. We expect this segment to return to a more book and burn cadence as it relies less on larger projects. We are confident in the visibility we have in this segment for the next few years and we now believe that gas-fired generation will play a much larger role in helping meet load growth needs. Having good visibility over a multiyear time frame is very different than where we've been in the last few years and that gives us a lot of confidence about our business. Finally, in our Clean Energy & Infrastructure segment, revenue was up 25% sequentially, and margins were in line with expectations. We had about a 1.2x book-to-bill in backlog for the segment. And most importantly, we have excellent visibility going forward. We're in great shape on project activity, and while we had a big ramp projected for the second half of the year, we're confident in our ability to hit it. We also expect continued backlog growth through the balance of the year and beyond. We continue to see really strong demand in both renewables and infrastructure projects and based on expected wins in bookings, believe we're in great shape to show really strong growth in 2025. In Infrastructure, the need for our nation and our states to invest in deferred infrastructure spending has never been greater. Infrastructure build investments in highways, bridges, seaports, airports and rail coupled with significant increases in private spending related to site development, manufacturing and data centers is providing MasTec's infrastructure business with exciting growth opportunities. Bid activity is very high and on many opportunities, competition is limited. As it relates to renewables, we had a solid quarter of bookings, and we expect that trend to continue. On NextEra's recent earnings call, they stated that demand for renewables is expected to triple over the next 7 years versus the prior 7. Let me repeat that, triple over the next 7 years. While I believe we need to embrace all forms of electricity generation to meet the growing demands of both manufacturing and artificial intelligence, there is no faster alternative than deploying renewables with storage. During the last quarter, we have seen virtually all of our renewable customers, utilities as well as independent developers, position themselves to meet the growing demand of load growth through the deployment of renewables. We strongly believe that irrespective of the election and political dynamics, renewables are going to play a leading role in meeting our country's future energy needs. We, at MasTec, are incredibly well positioned to benefit from that for many years to come. In summary, we delivered another solid quarter and are off to a good start to the year. Our recent transmission project win is an important milestone for us and hopefully, the beginning of many more future awards. This win, coupled with the industry's need to meet the load growth demands, positions our Power Delivery segment to outperform for the foreseeable future. Our Clean Energy & Infrastructure segment will also be a big beneficiary of the increased investments in power generation. Couple that with both the demand in telecom and the stability within our Oil and Gas pipeline segment and I believe MasTec has never been so well positioned. I'd like to take this opportunity to thank the men and women of MasTec. I'm honored and privileged to lead such a great group. The men and women of MasTec are committed to the values of safety, environmental stewardship, integrity, honesty and in providing our customers a great-quality project at the best value. These traits have been recognized by our customers, and it's because of our people's great work that we've been able to position ourselves for continued growth and success. I'll now turn the call over to Paul for our financial review. Paul? Paul Dimarco: Thank you, Jose and good morning everyone. To begin, a few second quarter highlights. We generated adjusted EBITDA of $268 million, exceeding guidance by $8 million, with margins 65 basis points ahead of expectations. This, despite revenue coming in about 4% below guidance. Our pipeline segment had a very strong quarter, and we were in line with our margin expectations in the other segments. Adjusted earnings per share was $0.96, exceeding guidance by $0.08, driven primarily by the adjusted EBITDA beat. We generated approximately $265 million of cash flow from operations in the quarter despite 10% sequential revenue growth. Our improving margin profile and lower DSOs were the key drivers to the strong cash flow. Accordingly, we reduced net debt by approximately $200 million with net leverage under 2.5x. 18-month backlog in Q2 totaled $13.3 billion, an increase of $500 million from the first quarter. This reflects an increase to record levels for each segment, except for pipeline, which continues to transition towards more book and burn activity with less reliance on larger projects. The main drivers of the overall increase in backlog was the large power delivery award Jose discussed earlier, and good bookings at CE&I. We also continue to see improving visibility towards higher volume next year in our Communications segment. Now I'd like to cover our segment performance and expectations. Second quarter pipeline segment revenue was $572 million, with adjusted EBITDA of $135 million or 23.6%. Revenue was slightly below forecast due to timing of project burn, but we continue to have strong performance across the broad mix of service offerings. MVP is now online with only right-of-way restoration activities remaining. We continue to see improving demand in this segment and now expect 2024 pipeline segment revenue to reach $2.1 billion, a $100 million increase from our prior guidance. Adjusted EBITDA margins for the full year are now expected to be in the high teens, improving 300 to 400 basis points versus 2023. For the third quarter, we expect revenue to be approximately $540 million with adjusted EBITDA margins also in the high teens. Second quarter communications revenue was $825 million with adjusted EBITDA margin of 9.9%, ahead of our guidance. As we gain visibility towards the second half of 2024, we are reducing full year segment revenue guidance by $50 million to $3.45 billion, but keeping our adjusted EBITDA forecast unchanged with margins in the high single digits. For the third quarter, we anticipate revenue will be approximately $950 million, up 15% year-over-year, with adjusted EBITDA margins in the low double digits. We continue to see strong demand for both wireless and wireline services that are expected to continue to ramp in the second half of 2024 and be fully ramped in 2025. Communications segment backlog of $5.9 billion, once again represents a new record. Second quarter Power Delivery segment revenue was $637 million, and adjusted EBITDA margin was 8.1%. Revenue was slightly lower than expectations as we saw continued softness for distribution services with certain customers. We are excited to announce the signing of the significant transmission and substation contract, which provides excellent visibility and resource utilization for the next few years. 18-month backlog for Power Delivery is about $3 billion, representing a record for this segment as well. Please note, our backlog only includes a portion of the new transmission award. For the full year, we are revising our forecast to reflect a slower recovery in demand for distribution services as certain customers continue to defer spending in the near-term. We now expect segment revenue to be $2.5 billion with adjusted EBITDA margins in the high single digits or about 100 basis points lower than 2023. Our 2024 forecast does not include a significant contribution from emergency restoration services or the large transmission award noted earlier. While we are taking the temporary slowdown as an opportunity to evaluate our overall cost structure, we are highly confident these deferrals will alleviate, so we are being cautious to preserve capacity. Third quarter revenue is forecasted at $650 million with adjusted EBITDA margins in-line with the full year estimate. Second quarter, Clean Energy and Infrastructure segment revenue was $942 million, about $80 million below guidance, driven by timing of project starts, primarily in our civil infrastructure group. We expect to make up this revenue in the back half of 2024. Adjusted EBITDA margin was 5% for the quarter, in-line with our forecast. Backlog increased $160 million to approximately $3.7 billion, reflecting strong bookings for clean energy projects in the quarter. In addition to these awards, we are still working under limited notices to proceed on contracts with total value greater than $2 billion, the vast majority of which will be performed in 2025. Our full year Clean Energy segment guidance remains unchanged at $4.4 billion of revenue with mid-single-digit adjusted EBITDA margins. Third quarter segment revenue is forecasted to be $1.3 billion, up 20% year-over-year, with adjusted EBITDA margins in the mid-single digits, improving approximately 100 basis points from Q2. On a consolidated basis, full year revenue is now expected to be $12.4 billion with adjusted EBITDA unchanged from our prior guidance at $975 million. Our consolidated second half outlook remains largely unchanged with $6.75 billion of revenue and adjusted EBITDA margins of approximately 8%. We expect third quarter revenue to be $3.45 billion with adjusted EBITDA of $295 million or 8.6%. We are also raising our adjusted EPS estimates to $3.03 for the full year and $1.24 for the third quarter. We had very strong cash flow performance in Q2, generating $265 million of cash flow from operations, despite 10% sequential revenue growth. Our improved earnings and strong working capital management with DSOs at 69 days were key drivers. Liquidity stands at $1.8 billion and net leverage is under 2.5x. The expected second half revenue growth will drive additional working capital investment, particularly in the third quarter, and our outlook assumes DSO in the mid-70s for the second half, an increase from the 69 days achieved during the second quarter. We now expect full year cash flow from operations to be in the low $600 million range, exceeding our prior forecast of $550 million. In regards to our capital structure, in Q2, we completed a $550 million inaugural investment-grade notes offering to refinance our term loan maturing in 2025 and certain bonds we assumed with the acquisition of IEA. The financing was very well received by investors with a peak order book 7x oversubscribed. The new notes reduced interest rates by approximately 80 basis points versus the refinanced debt. Finally, as a reminder, you can find a guidance summary on our Investor Relations section of our website that summarizes our outlook and provides additional data points for modeling purposes. I'll now turn the call over to the operator for Q&A. Operator: Thank you. [Operator Instructions] We will take our first question from Jamie Cook with Truist Securities. Please go ahead. Jamie Cook: Hi, good morning and congrats on a nice quarter, considering the noise out there from some of your peers. But Jose, I guess my first question, congratulations on the large transmission win. If you could help us just understand the competitive environment with that project sort of the comfort level with risk. And do we assume that's a margin that would be above segment level because I'm assuming there's probably a little more risk in there. And then just sort of what else is out there in 2024 that you could potentially book which secures your visibility for 2025? And then my second question, cash flow guide is very strong this quarter. You're going to be under 2x levered. Lots of growth opportunities, Jose, first to sort of capitalize on OpEx historically. Just wondering your appetite for M&A and where that would be? Would it be data center? Are you interested in power gen as that market could be coming back? Just trying to understand your thoughts there because you usually - again, the first to go to market and get in front of people. Thank you. Jose Mas: Yes. Good morning, Jamie, and thanks for the question. I think a couple of things. We've obviously been talking about our pursuit of large transmission projects for a long time. I think we feel great about this project. We're super excited. We're a little bit limited in what we're saying. We obviously haven't announced the name of the project, and we'll be making a joint announcement with the customer in the coming months as they finalize really the start date. So we're really excited. We think that - we've gone after a number of these. We're really comfortable with the risk profile that we've taken. We think we understand the project really well. It's been a long pursuit for us and one that we're excited to get behind us. And I think it bodes incredibly well for us in the market, right? I think that, obviously, this is the largest transmission project we've ever won and our ability to execute on it is going to really open a lot of doors for us. And again, we're super excited. As it relates to our leverage, we're in great shape. We've been talking about paying down debt over the course of the last year. I think we've made great strides I think we're in a position, quite frankly, to do anything we want as it respects to M&A. With that said, I think we're really focused on organic growth. I think the organic opportunities in front of us are unbelievable. And I think that's our primary focus. I think we'll look at M&A maybe more for tuck-ins for really opportunities to open markets that maybe we're not in, but I don't think you should expect anything major from us on the M&A side. Jamie Cook: But just to follow-up on the transmission project, is there anything else out there that you could book for 2024? Or do we need to sort of get through this project before, you know what I mean, before we see incremental bookings on large transmission? Jose Mas: Well, no, there are a number of projects that are out there currently that we're chasing. Obviously, this is a project that's going to be built from '25 to '28. So this project by itself is going to give our group really nice growth opportunities. But we're not out of the market. There are a number of projects we're still competing. We hope to win more projects, and we hope this is just to start really the - what we've kind of been building up for. I mean we made a number of acquisitions in 2022 to really position us to be in the space in a more meaningful way. And I think this is really the culmination and the beginning of those - of starting that of getting a first big win and really positioning ourselves in the marketplace as somebody that can and will do these on an ongoing basis. Neil Mehta: Yes. Good morning, Jose and team. Congrats on a strong quarter here. But my first question was just around the outlook for the Communications segment. 2025 is going to be an important year in terms of that business. And so just curious about some of the moving pieces as we think about '25 versus '24? And then what do you think about the multiyear outlook for that segment? Jose Mas: Yes. Good morning, Neil, I think we feel great about it. We've talked about really double-digit growth in that business in '25 where we're coming off in '24. Just based on what's happened in the business over the last year with the awards that we got at the end of '23. We're still comfortable with that. Obviously, we're super excited about what beads funding is going to bring to the market. There's no question that with federal funding, sometimes there's delays. So there's we never expected beads to really impact our business in '24. We think it impacts our business in '25, but that's not the peak year, right? We think we'd begin to see it in '25. In our prepared remarks, we talked a little bit about the types of customers that are entering the market. We've got a lot of private equity-backed customers that are starting to overbuild and build their own fiber-to-the-home systems. We think we're incredibly well positioned to offer them services that others can't. So we're really bullish on the business. We think '25 is going to be a great year, much better than '24, both from a revenue and a margin perspective, and we think that only builds in '26 and beyond. Neil Mehta: Okay. That's helpful. And then a follow-up, you mentioned on the distribution side, some deferral of spend, and we've seen that with some of your peers as well. And it's just difficult to reconcile with the fact that we need to spend so much to keep our grid in good shape here with the oncoming growth in power demand. So what's driving that? Is that a function of regulatory outcomes or timing and just your perspective on how this evolves here as we go into 2025? Jose Mas: Look, I think there's so much is around rate cases, and there's a lot of rate cases that are either - that either started this year are going to start next year. Utilities have been impacted by both inflation and supply chain increases over the course of the last couple of years. They're looking for recovery. It's - we're seeing a concerted effort on transmission and generation. So I do think we're going to see massive increases in both on the utility side. And on the distribution side, I think it all catches up right at the end of the day as these rate cases get defined. I think they're going to get what they need and we're going to see it get back to the levels that we were expecting. In the meantime, we haven't seen a heavy storm season yet. We're expected to be a really strong storm season. And I think the challenges in restoring those systems are going to create a lot of pressure on the utilities, especially if they begin to underspend in distribution. So I think this is a momentary issue that we will get through. It doesn't make sense when you think about what's happening at the macro level with the load growth demands that are coming. And I think the utilities are going to feel that pressure and eventually be forced to not only invest in distribution, but more importantly, invest in both generation and transmission. Operator: We will take our next question from Sangita Jain with KeyBanc. Please go ahead. Sangita Jain: Hi, good morning, thank you for taking my questions. So Jose, if I can ask you one more on the transmission project. Do you feel like you have all the necessary state and schedule permits to start construction in early 2025? Or are they still being lined up? Jose Mas: Well, I think all these projects, they kind of start when the permits are already. So there are still a handful of permits that are being secured. We expect them to be secured by the end of the year and the project to start at the beginning of the year. And I think as we make progress there, that's when you'll see us do a joint announcement with our customer. Sangita Jain: Great. And on Clean Energy, I just kind of wanted to see how you are positioned for the rest of the year given all the policy headwinds. Do you feel like you have to book more work to meet your guidance? Or are you comfortable with what you have in backlog to meet your guidance for the rest of the year? Jose Mas: It's a great question. We obviously have a big ramp in the second half versus the first half. We feel that at this point, all of the projects that we need to meet that ramp, we have. So we do not feel that we need to book any new work or unidentified work to meet our projections for 2024. Obviously, we're still super bullish. And I think Paul alluded to what we're seeing in the bidding market there. We expect backlog to continue to increase, which is going to position us incredibly well for 2025. So I know there's a lot of noise out there. I know there's a lot of concerns. But quite frankly, we don't see it. We think the demand is off the charts. We think there is tremendous opportunities out there. And we're really bullish, not just for the balance of '24, but quite frankly, going into '25, what we're seeing in that market. Operator: We will take our next question from Alex Rygiel with B. Riley. Please go ahead. Alex Rygiel: As you think about the communications segment, there's a bit of a mix shift here as we enter 2025 from kind of a traditional tower construction in mature telco and cable company kind of wireline work, to equipment change out speed projects with a lot of new entrants. So if that's the case, how might we think about the margin profile in communications over the next couple of years? Jose Mas: We're really proud of the margins that we delivered in Q2 relative to the expectations. We were slightly better. We talked a lot in the past about when our comms margins were at 12% to 13%. We think that that's doable again. We're obviously in a growth cycle right now. It's going to take a little bit of time to get to a steady state. But I do think that margin profile is available, and I do think that across the industry, not just in MasTec, but across the industry, you're going to see continued margin appreciation in telecom. Alex Rygiel: And congratulations on that Power Delivery project, super exciting to see it start 2025. Margins historically in power delivery have been in the high single digits. As we look out into 2025 and beyond, do you think the volume of work you could be capturing now might allow you to raise your sort of margin profile to that double-digit level longer term? Jose Mas: I mean, I think the short answer is absolutely. When you look at the evolution of our Power Delivery segment, again, it kind of started through a number of acquisitions a few years ago. We were very public about the margin profile of those acquisitions. We think we've done a really good job at improving those margins. But at the end of the day, it's about scale, right? And I think we're getting to that point where we're building the scale that we need to deliver double-digit margins, which we think is quite custom throughout the peer group. We think we'll achieve that. We think we're getting close. We were hopeful that margins would do better than they have in '24. Obviously, the challenges in the distribution market have impacted our margins for '24. But we're really bullish about what our positioning is in the market and our ability to continue to improve those margins as the next couple of years roll off. Operator: And we will take our next question from Andy Kaplowitz with Citigroup. Please go ahead. Andy Kaplowitz: Jose you raised your oil and gas revenue and margin forecast for '24. And we know you have a number of Permian projects that can move forward over the next few quarters. Obviously, there is a focus on natural gas, as you talked about. The elections out there, maybe changed the landscape, but could you actually maintain your '24 revenue level moving forward even without an MVP type project? And can you sustain margins at these higher levels that you are now doing moving forward? Jose Mas: Yes. So, look, we think it's a really active market. We - I think on our last call, we talked about our belief that we can maintain this $2 billion level for the foreseeable future without any really large projects. We continue to believe that. So, we think '25 is going to be a very stable year. We also think that there are some things that could potentially improve that, right. There are some larger-type projects being talked about. We have some of these alternative type projects, like some of the CO2 and hydrogen projects that we think could meaningfully move that industry as well. So, we are really bullish, a lot more bullish than we have been about the future of that business. I don't know that a lot of that hits in '25. I think '25 is a stable year. But I do think beyond '25, there are some really good opportunities to significantly expand on that market. Andy Kaplowitz: Thanks for that Jose. And then we are about 10 questions in, and we still haven't had a question on data centers yet so, the state of the market, but maybe you can update us on what's going on for you guys there. I think last quarter, you told us - you completed $150 million of work. There is about $1 billion of RFPs out there. So, how has the market developed for you? Is this a '25 opportunity for you? How should we think about it for you guys? Jose Mas: So, I think it's developing as we expected, right. We expect to do a couple of hundred million dollars in '24 still on data center work. We are hoping that that number significantly increases in '25. The opportunities are there. We are in the middle of what we think is a pretty hefty bid cycle right now. So, we will know more of this in the coming months. But look, I mean we - I know we didn't use the word data center, but the reality is the data center is driving so many pieces of our business, right. We think that what we have learned and I think it continues to evolve. But what we are learning is, it's all about power, right. It's all about the ability to power these data centers. That's going to be ultimately how fast this moves ahead. It's all going to be centered around power and that significantly impacts our business, right, from all the way from generation to power delivery. And on both sides of it, we think we are incredibly well positioned. We think it's going to add tremendous growth opportunities to our customer base, which then forces them to spend a lot more capital on the types of projects that we do. And I feel like so much of what we do every day is really around having those conversations, talking to people on both sides, both on the data center or hyperscaler side versus the utility side, understanding how everybody is attacking it and then trying to position ourselves in the best manner to win. So, I feel great. I think there is going to be a lot more opportunities than we have even talked about to-date, and we have really got to position ourselves to take advantage of that. But I think it's going to be a huge opportunities for companies in our space. Operator: We will take our next question from Justin Hauke with Robert W. Baird. Please go ahead. Justin Hauke: Great. Yes. No, I just wanted to ask a couple more on the transmission project as well given that is new. I mean something you guys have talked about wanting to be in for a while. I was just curious, I mean is that fully sole sourced from you, or some of that being sub-contracted out and I guess if it is, I mean just the - I guess just the visibility you have on that and even just the labor capacity you have to do some of that work, given that it's a little bit different on the high-voltage side versus maybe some of the work that you guys have generally done in that segment? Jose Mas: Well, I want to clarify a couple of things. One is we have done a lot of high-voltage transmission work. It's been an important part of our business for a long time. We have just come off of a handful of really successful projects in the last couple of years that I think gave our customers the confidence in our ability to perform and do these kind of projects. So, we feel we are extremely qualified to do this, and we have done a lot of it. So, I don't want anybody to believe that this is something new or something different than what we have done. Obviously, the size and scale is different. But we have been - we think we are really good at doing this type of business, and we have proven that time and time again. This project is a sole-source project. And again, it's one that we think we have got the labor and the equipment to perform. So, we are - again, we are super excited. We think we are super ready and can't wait to execute on the project and show what we can do. Justin Hauke: Okay. Great. Yes, looking forward to seeing that. That started learning a little bit more about where it actually is. I guess the second one, I guess staying in this general topic. But on the regulatory challenges in distribution, is that still really just confined to Illinois for you, or are you seeing it in other geographies and customers kind of on what you talked about before? And then just one last one I will just, I guess didn't into that. But on the storm work, did you guys do anything storm restoration for Hurricane Beryl last month? Thanks. Jose Mas: Yes. So, a couple of things, on - if you look at rate cases around the country, they are not just in Illinois, right. There are rate cases everywhere. I think that the challenges have been more widespread than Illinois. I think we have got a number of peers that have announced earnings in the last two weeks that have, I think talked about that at nauseam [ph]. So, there is weaknesses in other places outside of Illinois for different reasons. And in some places, we haven't seen as much weakness. So, it is geographical. But I do think it's - and I think it's three big issues, right. It's rate cases, it's inflation, it's been the cost creep of the supply chain over time, and ultimately, how our utility is going to be reimbursed by that within their states. So, everybody is working on that a little bit different. Again, I think it all gets resolved, and we are going to see a significant increase to spending again, but that's kind of the world that we are living in right now. And the second part of the question. On the hurricane, we didn't - in the Southern Texas area, which is where it really impacted on the CenterPoint side, we didn't really do much with CenterPoint. So, we were not very active on that storm now. Operator: And we will take our next question from Steven Fisher with UBS. Please go ahead. Steven Fisher: Thanks. Good morning. I just wanted to follow-up on the outlook for clean energy bookings and particularly renewables. Curious how far out your solar backlog extends at this point, because I think part of what you had visibility on, into 2025 before was maybe contributing to your expectation for double-digit growth there. And are you expecting to book anything notable in clean energy in the second half of this year? Jose Mas: Sure. So, I would say a few things. Unlike a lot of the equipment suppliers, right, we - when we book something, it's a lot closer to the actual start time of construction. So, there is a big difference between what we include in backlog and the visibility that we have as a company. So, we have a number of customers where we have talked about multiyear outlooks, where we have really good visibility into what we think we will build for them not only in '25, but actually in '26 and beyond. The reality is that none of that shows up in backlog. So, a lot of the commentary and the confidence that we have in our business has nothing to do with the backlog numbers. It has to do with the conversations that we are having with key customers about multiyear outlooks. Unfortunately, that just doesn't show up in backlog. It only shows up in backlog when a project is about to start. So, our backlog today doesn't really include any work that goes beyond 2025, first, because it's only for 18 months. So, as a matter of fact, it won't include anything. But second, we wouldn't call backlog a lot of these projects. So, what we have in backlog is short-term. We do expect to win a considerable amount of work in the second half of this year. That will solidify our 2025 pipeline and give, I think really good color into what '25 will look like for us. So, we don't really - again, we don't need to win a lot or anything to complete our '24 year, so that we have kind of booked. We have got it in backlog. We are working off that. Now, it's all about building for '25. And I think we will be able to demonstrate that over the next couple of quarters. And again, just on the dialogue that we are having with our customers, it's why we are so confident for a much longer period than just the 18-month backlog. Steven Fisher: That's great. And then just my follow-up, it is nice to see that you are getting to the point of really starting to deliver these clean energy projects for the second half of this year. So, as you move into that, kind of what steps are you taking to ensure that good delivery is going to be as expected and how should we think about the supply chain and kind of the preparation of your teams to be able to deliver as expected? Jose Mas: Steve, it's a great question. And it's one that, obviously, we have been focused on since the day we bought IEA. This is what it's been all about. We have really been in a position, we think, to execute at this level for a long period of time. Unfortunately, last year, we didn't have the work to deliver on it. This year, we have got the backlog and the work to deliver. Our teams are ready. We are operationally focused. That's where all of our focus goes into today. We are very confident in our ability to execute. We can't wait to demonstrate it over the course of the next six months, but that's what our business is all about today. We think that on the front end, on the business development side and the bookings side, we are in a very different place than we were a year ago. We have held on to the right resources to be able to execute on the work, and that's the stage that we are in today. And again, we are super excited about getting there versus where we were at last year. Operator: And we will take our next question from Adam Thalhimer with Thompson Davis. Please go ahead. Adam Thalhimer: Jose, you mentioned looking at infrastructure jobs with limited competition. And I am curious what you are seeing there and what sized project you would be comfortable with? Jose Mas: Yes. Adam, look, our infrastructure business is now approaching $2 billion. It's a combination of both our legacy MasTec infrastructure business with the infrastructure business that we picked up with IEA. I think we have been surprised at the performance of the business since we acquired it. It's actually outperformed segment margins since the acquisition. I think we have been really surprised by the opportunity set and the fact of how rapidly it's expanding. We are seeing very limited competition across a number of different geographies on large projects. And I think we have gained a lot of confidence in our ability to execute. So, it's outperforming what I expected. I think we are gaining a lot more confidence in our ability to invest in that business and grow that business. And I think it's going to be a much bigger part of MasTec's future than maybe what we originally anticipated. So, I still think it's early. I think that hopefully, over the coming quarters, we will be able to get deeper into the question that you just asked, which is the type and size of projects that we are willing to go after. There is actually a lot going on there, but we would rather talk about it when we think we have had some wins and feel good about being able to publicly talk about it. Adam Thalhimer: Okay. And the $2 billion of limited notice to proceed in clean energy, is that - has that been stable? Are those projects delayed, or are they just moving through the normal course movement towards construction? Jose Mas: Yes. It's - the $2 billion that we have today is very different than the $2 billion that we had six months ago, right. So, those projects are converting to backlog, so they start with a limited notice to proceed, eventually books into backlog and then new projects are coming into limited notice to proceeds. So, the $2 billion that we have today is actually completely different than the $2 billion that we had six months ago. I don't remember specifically all of those projects from a quarter ago, but it's an ever transitioning list. So, it's really the - the list that it hits before it hits backlog, and I think it's been very active, very healthy, and we continue to see that trend. Operator: And our last question comes from Brian Brophy with Stifel. Please go ahead. Brian Brophy: Thanks. Good morning everybody. Appreciate taking the question. I guess could you remind us, just sticking on the large transmission project in here, historically, what kind of margins have you had on these large transmission projects? And is there any reason to assume this one is going to be materially different? Jose Mas: Yes. So, we believe that all of the large transmission projects, the ones that we have completed to-date and the ones that either we are contracted to do or hopefully, will do, all have the ability to hit double-digit margins. At different points in times, a project may not meet its objectives. But for the most part, we think that they are very healthy projects. They have very healthy margin potential and it's all about our ability to execute it. So, our expectation on that project would be that when it's all said and done that we have delivered, hopefully at or above double-digit margins. Brian Brophy: Okay. That's helpful. And then you also called out some civil project starts getting delayed a little bit here in the second quarter. Is there anything specific to call out there? And I assume those projects are starting here in the second half. How should we be thinking about those? Thanks. Jose Mas: Yes. Some of it is government work. We picked up a significant civil business that has some highway and projects associated with it and stuff. And it's just normal delays. So, it's just projects that started a little bit behind schedule. We have said we are going to make it up in the second half, so those projects will just accelerate a little bit as it relates to construction. So, really just tweaking nothing meaningful. Operator: And at this time, I will turn the conference back to Jose Mas for any additional or closing remarks. Jose Mas: Just want to thank everybody for their interest in MasTec. And we look forward to updating you on our performance on our next quarterly call. Thank you. Operator: And this concludes today's call. Thank you for your participation. You may now disconnect.

Earnings call: Forum Energy Technologies raises free cash flow outlook By Investing.com

Forum Energy Technologies (FET) has reported a robust second quarter in 2024, marked by strong free cash flow that surpassed expectations and facilitated an upward revision of their full-year guidance. The company is actively improving its balance sheet by redeeming a substantial portion of its 2025 notes, aiming to retire the remaining balance within the year. FET's growth strategy, which includes new product development and expanding its international market presence, has resulted in a significant increase in sales outside the United States, now representing half of the total sales. Although the U.S. market is projected to remain subdued, FET's capital-light business model and operational efficiency have contributed to the raised free cash flow forecast. The company is also considering options to refinance its debt to accelerate its plan to return cash to shareholders. Forum Energy Technologies (FET) has navigated a challenging U.S. market by leveraging its international presence and new product development, resulting in a promising outlook for the remainder of 2024. The company's strategic moves, including the redemption of its 2025 notes and the successful Variperm acquisition, have positioned it well for continued growth and shareholder returns. As FET continues to execute its growth strategy, investors will be watching closely for further updates in the upcoming conference call scheduled for early November to discuss third-quarter results. Forum Energy Technologies (FET) has demonstrated resilience and strategic foresight in its Q2 2024 performance, with a notable focus on international expansion and operational efficiency. The company's commitment to strengthening its financial position is evident in its latest metrics and market performance. With these insights, it's clear that FET is making strategic moves to enhance shareholder value. For investors looking for more in-depth analysis, InvestingPro offers additional tips; there are currently 7 more tips available on the platform that could provide further clarity on FET's financial health and investment potential. Operator: Good morning, ladies and gentlemen, and welcome to the Forum Energy Technologies Second Quarter 2024 Earnings Conference Call. My name is Gigi, and I'll be your coordinator for today's call. [Operator Instructions] 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: Thank you, Gigi. Good morning, everyone, and welcome to FET's second quarter 2024 earnings conference call. With me today are Neal Lux, our President and Chief Executive Officer; and Lyle Williams, our Chief Financial Officer. Yesterday, we issued our earnings release, and it is available on our website. Please note that we are relying on the safe harbor protection afforded by federal law. Listeners are cautioned that our remarks today may contain information other than historical information. These remarks should be considered in the context of all factors that affect our business, including those disclosed in FET's Form 10-K and other SEC filings. Finally, management's statements may include non-GAAP financial measures. For a reconciliation of these measures, you may refer to our earnings release. During today's call, all statements related to EBITDA refer to adjusted EBITDA. And unless otherwise noted, all comparisons are second quarter 2024 to first quarter 2024. I will now turn the call over to Neal. Neal Lux: Thank you, Rob, and good morning, everyone. Now that we are halfway through the year, it is a good time to take stock of our progress, and I am pleased with our direction. Free cash flow results have been strong, and we have converted EBITDA into cash faster than our plan. This performance has provided confidence to raise our free cash flow guidance for full year 2024. Also, we are in the process of redeeming more than half of our 2025 notes prior to the end of the third quarter, and it is our intention to retire the balance around the end of the year. At that point, the remainder of our debt will be fully prepayable without penalty and will not mature until December 2026. This is a big step for our balance sheet. In addition, we are executing our beat the market strategy through new product development and international market penetration. These results are evident in our market share gains and increased sales outside of the United States, which were 50% of FET's total in the second quarter. Finally, our financial results demonstrate the positive benefits of the Variperm acquisition. We have increased EBITDA nearly 50% year-over-year despite a more challenging market. The combination of our companies has successfully increased our scale and margins. As a management team, we have a strong focus on free cash flow. And this quarter, we generated $21 million through consistent profitability and improved working capital management. This allowed us to repurchase $13 million of our 2025 notes and announced the redemption of another $60 million. In addition, we are raising our full year 2024 free cash flow guidance to between $50 million and $70 million. The team continues to execute at a high level, and I am proud of their efforts. Putting it all together, we are following through on our plan to create value through a strong balance sheet. Once complete, FET would be positioned to return cash to shareholders around the middle of next year. Last quarter, we discussed our growth and profitability strategy. This consists of four foundational pillars: growing profitable market share, developing differentiated products and technologies, utilizing our optimized global manufacturing and distribution footprint and expanding our participation in energy transition. I'd like to provide an update on progress made so far. First, we are seeing the benefits from new product development. We have a growing opportunity pipeline within the power generation sector for our industry leading JumboTron XL heat transfer unit. The JumboTron XL is a critical component for power systems that are utilized for many applications, including AI data centers. The power gen market should grow rapidly over the coming years. Importantly, these opportunities are geographically diverse with demand in the U.S., Middle East, Canada and Latin America. This is an exciting opportunity that expands FET's addressable market. We are also benefiting from our optimized global presence. To meet growing global demand and provide our products around the world, we do not need to expand our roof line or invest additional growth capital. We can service the world with the strategic manufacturing and distribution hubs that are already in place. A great example is our Saudi Arabian manufacturing facility, where we are delivering products and technologies to support unconventional resource development throughout the Middle East. These products include key hydraulic fracturing components, casing equipment and hardware, coiled tubing and artificial lift solutions. For the first half of 2024, we have grown our Middle East revenue by 16% compared to the first half of 2023. This highlights our ability to pivot with changing market conditions and grow where our customers are spending money. Turning to the second quarter. We delivered revenue and EBITDA within our guidance range despite softer than expected U.S. activity. Our year-over-year results demonstrate the benefit of our beat the market strategy and the Variperm acquisition. Our revenue increased 11% and EBITDA was up 48% with a 320 basis point improvement in margins. These results are particularly impressive given that the global rig count was down about 5%. Variperm performed well during the quarter, even though the Canadian market was down due to typical seasonality. While revenue was essentially flat, favorable mix and cost controls helped Variperm deliver increased EBITDA and margin contribution. They were also a meaningful portion of FET's free cash flow. Revenue synergies from the acquisition are starting to reap benefits. By working closely with Variperm's experts to expand FET share, we increased our artificial lift and casing equipment sales in Canada by 5%. Also, we are leveraging an existing distribution network to have product readily available for these customers. Gaining share in a new market takes time, but we do have some early wins. Now let me give you additional color on the prior quarter's market conditions and how it impacted our results. In the U.S., E&P consolidation continues to slow drilling and completion spending as companies evaluate their combined portfolios. Also, weak natural gas prices contributed to a decline in U.S. rig count and hydraulic fracturing activity. Internationally, rig activity declined 6% due entirely to Canadian breakup. Outside of Canada, rig count was flat with strengthening activity from shale plays in the Middle East and Latin America. Also, offshore activity remains vibrant as demonstrated by our strong subsea quotation pipeline. Now let me turn to our outlook for the remainder of the year. We believe it is unlikely that U.S. rig count and hydraulic fracturing activity will experience a significant increase from current levels. As a result, we now expect U.S. rig count to be down 15% on average for the year compared to our initial expectation of a 5% decrease. However, the benefits of our Variperm acquisition and beat the market strategy should mitigate the softness. With this revised market outlook, we are reducing the top end of our 2024 EBITDA guidance by $10 million. Therefore, our updated range is now $100 million to $110 million. We anticipate the third quarter to be relatively on par with the second with revenue in the range of $200 million to $220 million and EBITDA in the range of $24 million to $28 million. Despite this change in our EBITDA guidance, we have increased confidence in our ability to generate free cash flow. As a result, we have increased our guidance range by $10 million to between $50 million and $70 million. This reflects the benefit of our capital light business model and operational execution. I am now going to turn the call over to Lyle for more details on FET's second quarter financial results. Lyle Williams: Thank you, Neal. Good morning, everyone. I will begin my comments providing more color on our strong cash flow and our balance sheet. We generated free cash flow of $21 million in the second quarter. This represents an 81% EBITDA to free cash flow conversion, a decrease in net working capital driven by inventory management and good collections contributed to the strong free cash flow results. Reductions in inventory have generated significant cash flow so far this year. Our teams continue to drive down inventory by tightening our supply chain. We are reducing the flow of inbound raw material to match market conditions while still meeting customer demand. We have the ability to drive inventory lower and will push for increased inventory turns. Our efforts to achieve more timely collections are also paying off. We have achieved significant improvement in our days sales outstanding since the beginning of 2023. In fact, excluding the impact of Variperm, our second quarter DSOs decreased by nine days year-over-year. Net-net, we have reduced working capital by $11 million this year, which boosted our free cash flow results. Recall that our prior free cash flow guidance assumed no reduction in net working capital. With the net working capital reduction already achieved and our plans for the remainder of the year, I want to reiterate the guidance Neal discussed earlier. We are raising our full year free cash flow guidance to $10 million, with working capital benefit driving the overperformance. We ended the quarter with $32 million of cash on hand and $103 million of availability under our revolving credit facility with total liquidity of $135 million. Our net debt was $225 million. Utilizing annualized first half EBITDA, net leverage ratio was 2.2 times, a slight improvement from the previous result. Last quarter, we laid out a plan to put FET in position to return cash to shareholders. With the announced $60 million partial redemption of the 2025 notes in August, our current liquidity and guided free cash flow, we remain on track with this plan. We expect to retire the 2025 notes around the end of this year and the seller notes around the middle of next year. With low leverage and a flexible capital structure, we would be in a position to return cash to shareholders through share repurchases or dividends. And this would still leave considerable free cash flow for further reduction of our revolver balance, strategic growth investments, our incremental distributions. We will continue to evaluate refinancing options that could accelerate this plan while we execute in the third and fourth quarters. Now let me provide comments on our segment results. The Drilling and Completions segment revenue decreased 2%, primarily due to lower sales of ROVs, cable management systems and treating iron. During the quarter, coiled tubing revenue increased 24% as the international markets caught up from a slower first quarter. We also saw a 50% increase in frac power and shipments as we added a new large customer and had an increase in refurbishment work. Lower revenue and less favorable product mix drove the segment EBITDA decline of 16%. Orders were $110 million, down 6% with a book-to-bill ratio of 94%. Orders for drilling and stimulation related capital equipment were lower during the quarter, partially offset by increased international orders in the coiled tubing product line. The artificial lift and downhole segment revenue was up 6%. Higher sales in the Middle East for both our casing equipment and valves products drove the growth. Favorable mix in the downhole product line pushed segment EBITDA up by 9% and EBITDA margins up 70 basis points to over 22%. Orders were $70 million, a 20% decrease due to our production equipment product line, where order timing creates swings quarter-to-quarter. The outlook for production equipment is solid as their backlog remains strong with a year's worth of work in the system. Now let me provide some color on our revenue by geography given the disparity between activity in the U.S. and international markets. In the second quarter, international revenues grew to 50% of our total revenue compared with 35% just a year ago. This shift is significant given the softness in the U.S. And as Neal mentioned, our strategy to grow internationally is making progress. Second quarter international revenues were up 13%, with the majority of the improvement in the Middle East. There, we recognized large project shipments of coiled tubing and of valves manufactured in our Saudi Arabian facility. Downhole revenues also strengthened with market share gains for casing hardware and artificial lift products. In addition to growth in the Middle East, our Canadian revenues grew slightly in contrast to our expectations of a decline due to spring breakup. These results demonstrate the value of our global footprint in mitigating the softer U.S. market. And the U.S. market has been down this year. Our revenue correlates with rig count. So when the U.S. market begins to improve, we should benefit. To wrap up, let me provide a few details for modeling purposes for the third quarter. We anticipate corporate costs and depreciation and amortization expense to be roughly in line with the second quarter. We will see reduced levels of interest expense in future quarters with a $13 million of the 2025 notes repurchased in the second quarter and the $60 million redemption in August. For the third quarter, we expect interest expense to be approximately $8 million or about $700,000 less than the second quarter. For the fourth quarter, we should realize an incremental $600,000 of benefit from the reduced amount of outstanding 2025 notes. With the retirement of these notes, we will write off the related unamortized debt discount and debt issuance costs. These were roughly $3.5 million at June 30. The discount originated in 2020 when we issued the notes and recognized a gain based on the fair market value estimated at that time. In the third quarter, we expect a nonrecurring charge of approximately $1.8 million associated with the $60 million we were deemed in August. Finally, we anticipate income tax expense in the back half of 2024 to be slightly higher than the $6 million reported for the first half of this year. Let me turn the call back to Neal for closing remarks. Neal? Neal Lux: Thank you, Lyle. Looking ahead, we expect the U.S. market to remain soft and down from our original estimate earlier this year. However, our outlook for Canada and the international markets remains intact and will help mitigate this additional softness. We will continue to execute and deliver financial results that support our long-term strategy. Our focus on cash generation is paying off. We raised our guidance and expect to generate strong free cash flow this year. Our plan remains on track to retire both the 2025 notes and sellers term loan around the middle of next year. This will provide greater flexibility and optionality for returning cash to shareholders. To conclude, I would like to thank our global team for their hard work and dedication, especially our Houston area employees impacted by Hurricane Beryl, despite having limited or no power, self-service or Internet, they found a way to get the job done. Again, thank you. Gigi, please take the first question. Operator: Thank you. [Operator Instructions] Our first question comes from the line of Dave Storms from Stonegate. David Storms: Good morning. Just hoping we could start with cash flow guidance. Great to see it take a step up. Could you help us understand just kind of some of the puts and takes that will put you on either the higher or lower end of that guidance range? Neal Lux: Maybe I'll start and let Lyle jump in. I think in general, we're seeing a good conversion of working capital into free cash flow. So our teams are focused on reducing DSOs and really matching the inventory that we're receiving to market demand. So I think with the guidance that we laid out for EBITDA, we feel really confident in the free cash flow range that we've provided. Lyle Williams: I'll give a little bit of detail there. If you think about the key contributors, that's going to be maybe a swing plus or minus in EBITDA given our full year EBITDA range. And then the free cash flow range is a little bit wider and that's the flux is going to be plus or minus on working capital that Neal talked about. So if we're closer to the top end of our EBITDA range, I think we'll get a little bit less juice out of the working capital, just based on higher accounts receivable. But if we're at the bottom end, I think we get the opposite. And so they've kind of net each other out. David Storms: Understood. That's very helpful. Thank you. And then, I know there's a lot of anticipation around returning capital to shareholders middle of next year. Is there any more color you can give us on what that may look like? I know you mentioned repurchases or dividends. Maybe just any variables that would sway your decision or is the decision one way or another? Neal Lux: It's something that we're obviously thinking about a lot. We have some time. But I think to us, the key is we are going to return cash to shareholders, something we really want to do. And so we're going to really evaluate all the options and see what makes sense for long term. So we think it's a commitment that we need to be consistent with, and that's where we want to be as a long-term company. David Storms: Understood. And if I could ask one for international. I know coming out of the first quarter, the international markets may be a little slow to release their budgets, so that 50% number in 2Q. How much of that may be a catch-up? And how much of that maybe is a really good baseline for FET Co.? Lyle Williams: Yeah, Dave. The 50% of our revenue that's international is really a shift from what was 35% last year. So as we've grown international, we've added Variperm, which is another contributor there, and U.S. is a little softer as a percentage of our revenue, it's larger. Also, if you think about the sequential increase, overall international revenues were up 13%. So we do experience some pluses or minuses around project shipments. So we mentioned some of the valves in coiled tubing catch up maybe sequentially. But I think very importantly is the market share growth that we've seen outside the U.S., whether that's around our casing hardware business, we mentioned artificial lift products, and some of that incremental frac power in sales that we had were aimed specifically at unconventional plays in Latin America and the Middle East. So we've had some market pickup -- market share gain there as well. David Storms: Yeah. Very helpful. And if I could just ask one more question. You mentioned, you've brought on a customer in Drilling and Completions, pretty sizable customer. Just curious as to what the overall customer acquisition environment is like, especially given all the pickup in market share internationally. Neal Lux: Yeah. We've -- for us, one of our core values is to remain customer-focused and we look at the markets where we participate, and we want to find customers where we can solve their problem. And for many of our products, they last longer. They allow our customers to go deeper, they've reduced their overall OpEx. And so we want to get that value proposition in front of as many customers as possible in markets where we have good scale and can generate more margins. And I think we're seeing a kind of a, let's call it, a secular trend is the exportation of let's call it, technology that we've utilized in unconventional resources in the U.S., exporting that technology overseas. We've seen it in coiled tubing, we've seen in stimulation intervention. We've seen it in other drilling. And so that's where we're able to take advantage as we've helped this industry the productivity gains this industry has achieved come from products that we provide. We've seen that productivity in the U.S., and we're helping grow that productivity internationally with those -- that same technology. David Storms: That's all. Very helpful. Thank you for taking my questions. Good luck on the third quarter. Neal Lux: Thank you, Dave. Operator: Thank you. Our next question comes from the line of Dan Pickering from Pickering Energy Partners. Daniel Pickering: Canada, impressive performance there. I want to make sure I heard -- I think I heard flat quarter-to-quarter for Canada revenues overall, and then also think I heard flat Variperm quarter-to-quarter revenues. Is that right? Neal Lux: Canada was 5% up. So I think what we wanted to say is our casing hardware and artificial lift solutions, we grew our share there a little bit, so about 5%. But Variperm was essentially flat quarter-to-quarter. Despite obviously, spring breakup. Daniel Pickering: Okay. Right. And that, I guess, certainly caught my eye because it's a pretty substantial difference relative to kind of your thought it could be down as much as half. Is there -- was there a customer win? Was it just steadier business than you expected? What's the -- or is it just getting to know Variperm and the volatility in that business and it surprised you a little bit? Neal Lux: I think the steady (ph) is part of it. The other part is the share we gain by utilizing Variperm's contact distribution network. I mean they -- that team up there has done a fantastic job with their customer base and they've opened a lot of doors for us. And again, we're early on in that revenue synergies, but we're excited about that potential. Daniel Pickering: Yeah. That's awesome. Earlier in the year, you talked about sort of second half being stronger for Variperm oil, sands activity, etc. Is that still the outlook? Is there any update, given the fluctuations we've seen in crude price? Neal Lux: We don't really see a change in that outlook. It's something we'll monitor. I think with those big -- those projects there and the drilling schedule could something shift from Q4 into Q1. I think that's possible. But right now, really no change in our outlook for oil, sands development. Daniel Pickering: Okay. So second half better than first half, and the first half here has been a little bit better than you thought. Neal Lux: Correct. Daniel Pickering: Good. That's a nice start for that acquisition. I wanted to shift over if we could, to the balance sheet. And so while I think I heard you saying what's -- can you just walk us through the note redemption process. It's -- we know its $60 million but you've said August several times. Is there a specific date here? And then how do we fund that? Do we fund it? Do we pull cash balances down a little bit more? Do we bump the revolver up? How do you see kind of processing that paydown? Lyle Williams: No. Thanks for the question, Dan. Basically, we're a little bit ahead of our process and that we did retire, we did redeem or buyback, sorry, $13 million worth of notes in the second quarter, did that with cash on hand in our revolver. The $60 million specifically in mid-August, we -- our indenture of the notes requires a 30-day notice period to redeem notes. So on July 17, we issued that redemption notice for $60 million. We'll redeem those in August -- on August 16 for that other -- that first $60 million. When we think about where the funding is going to come from that, it's going to come a little bit out of cash flow in the third quarter and a little bit with addition on to our revolver. And importantly, we ended the second quarter with $135 million of total liquidity, and that's cash plus availability of our revolver. So we've got a lot of dry powder there and would be able to redeem those notes with that, do a similar process in the fourth quarter to get the rest of those '25 million notes redeemed by the end of the year. Daniel Pickering: And Lyle, is there a similar redemption notice process. So you issued a press release saying, hey, we're going to redeem the remainder. And so we will follow the same process? We'll see something in October, November and that redemption that would follow 30 days later. Lyle Williams: It would, Dan. That would be the similar process. Daniel Pickering: Okay. Good. That's helpful. And then my last question and it's one more focused on operations. Your valve business, you had a nice bump. Can you talk a little bit was that. Is that a restocking by distributors? Was it the Middle East growth that drove that? I'm just curious if we're seeing a change in business dynamics. Neal Lux: No change in business dynamics, no restocking by distributors. This is more project deliveries in both the U.S. and in Arabia. So, pleased with the kind of trend we're seeing in Saudi, I think it's gone well. And so we'll keep that up. But no real change in the valve industry dynamics there. Daniel Pickering: Thanks. And I said it was my last question. I do have one more. Kind of every other quarter I asked you about the environment for bolt-on acquisitions and opportunities. Variperm, obviously, you're early in that process still, but things seem to be going well. What's the overall environment for things like another Variperm or opportunities? And as you're answering that question, I guess, North America is sloppy right now. Would you stay away from North American exposure or do you think about North America as an opportunity? Neal Lux: Yeah. Good. So I think obviously, Variperm for us was a home run right value margin. I'd love to find another one. Those will be hard to find. We'll continue to look. I think that the overall environment though, there are opportunities out there. I think activity is robust. The deals seem to be getting done. And with our kind of breadth of product lines and our geography diversity, we'll we can kind of hit both the U.S. and international. We're not running away from the U.S. I think ideally would want to find a business that would have both a U.S. and an international presence. And so we'll continue to look for that. But really, our criteria, though, is we want to find the strong industrial logic, where it fits in our portfolio, and we're going to be conservative with the leverage on our balance sheet going forward. Operator: Thank you. Our next question comes from the line of Jeff Robertson from Water Tower Research. Jeffrey Robertson: Thanks. Good morning. Neal, you spoke a little bit about revenue per rig. And I'm wondering if you can talk both between the U.S. and international markets.? Where do you see further gains in the type of sales mix that will offset the weakness you see in the rig count? And then secondly, are those gains pretty sticky if you start to see some sort of improvement in rig count in 2025? Neal Lux: Yes. Good question. So yeah, I think in the U.S., we have methodically increased our revenue, let's call it, U.S. revenue per U.S. rig. If we were to estimate, we're probably up 4% or so year-over-year, and that would truly be market share gains. I think on the -- with about 75% of our sales being activity-based driven in my experience, our experience with the business we have that once you get in with that customer and you deliver, you do have some stickiness, right? And you understand their needs, what they value and you can have the product ready for them and you can deliver on time. And those are really key points. So yeah, I think our expectation and the challenge we're going to put to our teams is not only do we need to hold those customers, we do need to grow it as the market rebounds. Jeffrey Robertson: Are some of those gains driven by the service providers wanting FET's products or is it a mix of that plus the E&P operator or the well owners saying if you're going to drill our well, we want these types of products on site for that FET supplies? Neal Lux: Yeah. I think it's a good combination of both. So we do see pull-through from the E&P to the service company for certain products we have that helped the service company increase their productivity. We also -- about half of our sales are directly to E&P operators already. So we're able to put that value proposition directly to them. So combination of both our strategy is we want to differentiate. We want to deliver technology and solutions that make our customers more efficient. So the better we are at laying out that value proposition, the more often we're going to grow that share. Jeffrey Robertson: And on renewables or energy transition, you mentioned power generation as a potential new revenue opportunity in your JumboTron XL system. Is that because you're seeing requests for bids and people doing fabrication studies? Or are you actually starting to see orders for products to be -- to build out these types of systems around the world? Neal Lux: Yeah. So we have delivered these sales already last year and this year. But what's exciting to us is the pipeline does seem to be expanding really rapidly. And I think just as maybe more of an industry comment that as these data centers are being built out, and there just seems to be a lot of concern about where the power is going to come from. So we're seeing more of that, let's call it, mobile power gen being utilized in different applications. So we're seeing that bid activity directly, and we've seen a really big spike. Again, these projects do take time, but we see that as a long-term growth driver for us. Jeffrey Robertson: And then to follow on that, do those types of projects create aftermarket business through servicing and replacement cycles? Neal Lux: They do. Our units are really robust. So they do last a long time. And so I think it's a longer service cycle for us. But once that unit is in place, it will run for a decade. And so we'll have a tail to that. It will start to -- it will be a couple of years before we see any aftermarket from it. But once that's installed, we got a long tail there. Jeffrey Robertson: And then a last question. On the Middle East and your revenue growth in the second quarter, are you seeing projects or big-scale projects that you see that continuing in not necessarily the quarterly growth, but are you seeing continued exposure for increased sales as you look out into 2025 and maybe even 2026? Neal Lux: Yeah. I was actually just sitting with one of our Middle East sales leaders yesterday and talking with him and just see -- he sees a good pipeline, and I agree into '25 really no change to the trend. And so we'll continue to benefit from that. And I still think there's a lot of opportunity there for us to, again, keep exporting not only the unconventional technology, but our downhole technology as well. Jeffrey Robertson: Just on margins, Neal or Lyle, with the 12.5% to 13% margins in the first two quarters of this year. Do you think the product mix as you think about 2025 will be similar to 2024 can lead to the similar type margins or do you think there's room for expansion? Lyle Williams: Yeah. I'll work on that Jeff. If you look at our overall margins, they've been relatively flat post the acquisition, post the integration of Variperm, which gave us a really nice boost and you mentioned mix. But clearly, in my comments, we talked a lot about mix being the driver. And so that is something that we're looking at. I think where we can control mix and influence mix is with our market share gains that we have. So take, for example, artificial lift and downhole sequentially, incremental EBITDA margins were about 37%. We talked a little bit earlier about Variperm. Their revenue was down just slightly. So call it roughly flat, but their overall profitability was up quarter-on-quarter. We also talked about our other downhole products being stronger. Those come at a nice healthy margin, offset a little bit by softer margins with valves. So as we continue to grow downhole product line with share gains, I think that will be a boost and a tailwind to our margins. The other tailwind that would come is through operating leverage. So our revenues have been decently flat with the market activity coming down. But if we get that turn and we can see a run up in revenues, we could benefit -- our margins will benefit from operating leverage as well. So a couple of levers that would make those go higher in the future. Operator: Thank you. One moment for our next question. Our next question comes from the line of Eric Carlson. Unidentified Participant: Another great quarter. I mean it's hard to complain when you can almost generate 25% of your market cap in cash in a whole year, which I think the international markets are probably a little bit underappreciated by the market currently, but maybe just a little bit more on Canada and when you think about activity there. I guess Baker Hughes 144 oil-specific rigs currently, which is, I mean, maybe 20-plus percent above last year. And could you maybe just share a little bit on when you think about Canadian activity, obviously, am I correct in thinking that being more oil-weighted is a benefit to Variperm specifically? Neal Lux: Yeah, absolutely. There's a certain percentage of those rigs that you mentioned that work in the oil sands. And so it's timing of those wells that are being drilled. And so I think Variperm, we-- when we did the acquisition, we felt had a long-term run rate there, not only with new projects, but as the fields would be, let's call it, infill drill, just to keep up with the decline rate just to stay flat, they would need to keep utilizing their product. And then the other -- maybe the other part of that is the newer wells today typically have longer laterals and require more units of Variperm product per well. So I think that's another secular trend that we're pleased to see. So you have more oil rigs in Canada should absolutely help Variperm. Unidentified Participant: Great. And then maybe just on that longer lateral comment in the industry broadly. I mean, obviously, when you think about kind of the business lines you have, if you look in to any of the E&P calls, you hear basically longer laterals, more stages completed per day. And when you think about like a 4 mile lateral versus a 2 mile lateral, obviously, you need less rigs to complete that work, but the intensity of those rigs and the materials are there. So when you think about just building product mix for the future as technology continues to improve. I mean, do you think about how do we benefit from more stages complete or, call it, lateral miles drilled or whatever that may be. And we'll get less on kind of the pure rig count number? Can you just provide some thoughts around that? Neal Lux: Yeah. No, that's -- you hit it right on the kind of the trends that we see. I think we generally refer to rig because it's published weekly. It's something everyone has access to. We internally track -- we track stages, we track wells. There's a little bit of a lag in the data. So it makes it hard to be forward-looking. But we all -- our focus is really the service intensity. So as you made a mention of longer laterals. So that would be the lateral gets longer, the coiled tubing string is longer. So that's more revenue per string. The wireline string is longer. So that's more revenue per cable. As you pump more stages per day, you're going to wear out your power ends, you're going to wear out your flexible hoses more quickly this year than you did the year before. So you're going to see increased replacement cycle. So all that will be will benefit us. So yes, you're right, rig count maybe isn't the best view of our business. But over time, we're going to increase our U.S. revenue per U.S. rig. And I think we have -- we said about 4% or so already, and we'll continue to improve on that as time goes forward. Unidentified Participant: And then maybe you can just share a little bit more info on kind of the Middle East specifically. Obviously, you see a lot of unconventional gas announcements and looking into kind of the other service providers, they expect to deliver rigs into the Middle East? And maybe just, I don't know, like what is the market opportunity there? And I even saw like the announcement, I think there was a post somewhere where you guys kind of are going to manufacture the radiators within the Saudi Arabian facility now maybe correct me if I'm wrong. Just -- can you provide some content to the market opportunity there? I mean obviously, numbers are way above pre COVID, so you guys are kind of executing there. But does that become I mean, is that the biggest growth potential and then all incremental U.S. activity that becomes a ton of torque to the outsider? How do you -- I guess how do you think about the product mix geographically going forward? Neal Lux: I think your last comment there was really real spot on that we do see, let's say, long-term growth in the Middle East. If the U.S. and Can were to return -- the U.S. were to return back to, let's call it, more normal levels, we would see a ton of torque. Historically, in Middle East was maybe less service-intensive, so you didn't see the types of sales per rig that maybe you would see in the United States. However, that is changing, and that's -- you mentioned our radiator manufacturing that we're looking to conduct -- we are conducting in Saudi. They are starting to drill unconventional wells in a big way, that's going to use a lot of coil. It's going to use a lot of wireline. It's going to consume a lot of power ends, and they're going to require new radiators to -- the newest types of radiators for their frac fleets there. Lyle Williams: Eric, we are bullish about the Middle East. We're also bullish about the offshore markets and our subsea business. So if you think about that business and one of the big drivers that everyone watches is subsea wellheads or subsea tree orders and subsea tree orders have been up and strong. We mentioned last quarter, we're seeing higher and higher utilization of the existing ROV fleets which is a big driver for us initially, that's driving spare parts. Our pipeline of new inquiries for incremental ROVs to add to our customers' fleets is meaningful. So we're excited about that as well as opportunities in the defense sector. So while we do see a lot of excitement around the Middle East, we also see opportunities coming on the subsea side as well into next year. Unidentified Participant: Okay. Great. That's all. Very helpful.. And then, I guess this is my last question, last comments and just kind of one of your thoughts. I mean we're a little bit ways away, but it's getting closer. And when you think about kind of the potential to return capital, I guess I would just encourage you, if you're trading at a 25% free cash flow yield and a 50% discount to your peers on an EBITDA multiple basis to put every dollar possible to buying shares. Now obviously, if the market reprices you, dividends are great and then using share repurchases to either increase free cash flow per share or the ability to pay dividend per share without increasing the cash outlay. That's great. But at current valuation, I would pound the table on buying factor shares. And if that reduces liquidity or whatever it may be, it's kind of irrelevant from a long-term shareholder standpoint. So I just kind of like your internal comments of where your kind of valuation sits relative to peers. I mean, obviously, this is hypothetical because you can't do it at this point in time. But if you could return capital to shareholders, like what are your guys have thoughts once you get to that point? Lyle Williams: Great question. And as Neal mentioned earlier, we're working through that process, but we see the same thing that you do. With our free cash flow yield that we have is tremendous. There's not many companies that have that as an opportunity. And our -- and part of that is because our multiple -- our valuation on a multiple basis is less than a lot of similarly situated companies. So I think either way, either that multiple recovers, and we're pleased with that and/or we have an opportunity to retire shares, buy back shares that would be really strong. So things that we would definitely look at, like you mentioned, we'll come up with that plan and share that when we get closer. Unidentified Participant: Great. Well great quarter. Thanks, guys. Appreciate you taking the question. Operator: Thank you. At this time, I would now like to turn the conference back over to Neal Lux for closing remarks. Neal Lux: Thank you again, Gigi, and thank you for your support and participation on today's call. We look forward to talking to you all again in early November to discuss FET's third quarter 2024 results. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.