Great. Well, good morning, everyone. Thank you for joining us here at the presentation for Forum Energy Technologies. My name is Andrew Leon Packer. I'm a member of the Energy Coverage Group within J.P. Morgan Investment Banking. Today we're going to see a presentation by Forum Energy Technologies. Forum Energy Technologies is a global manufacturer with an extensive products and solutions portfolio, serving the oil, natural gas, industrial, and renewable energy industries. Forum provides value-added solutions that increase the safety and efficiency of energy exploration and production, serving the drilling, subsea completions, production, and infrastructure sectors of the industry. I have the pleasure of being joined here by Mr. Neal Lux, current President and Chief Executive Officer of Forum Energy Technologies. Mr. Lux served as President and Chief Executive Officer since February of 2022. Since January of 2009, Mr.
Lux has held various operations roles of increasing responsibility with the company and its subsidiaries, including Executive Vice President, Operations, Senior Vice President, Completions, Managing Director, Global Tubing, and President, Global Tubing. He has over 20 years of industry experience in the areas of operations, sales, and marketing. He holds a B.S. in Industrial Engineering from Purdue University. So, Neal, over to you. Thanks for being here.
Thank you, Andrew. Appreciate the introduction. Good morning, everyone. I'm going to spend the next 20 minutes or so presenting an overview of Forum Energy Technologies, or FET. Starting with our forward-looking statements, really the main comment here is all financial information and details are aligned with our Q1 results and earnings call. With that, let's get started. At FET, we don't drill holes, but we sell critical capital equipment to industry leaders that do. We don't stimulate the wells, but we manufacture consumable products that enable the world's largest service companies to do so. We don't produce hydrocarbons, but we do engineer and deliver processing and pressure control equipment for our blue-chip customers that do produce oil and gas. We make it happen by manufacturing value-added products and solutions. Many of the efficiency gains experienced in our industry come from products that FET delivers.
We have helped enable our industry, our operators, to produce more with fewer rigs and fewer people. We are a global manufacturer. Almost all of our revenues derive from selling new products and solutions, along with aftermarket parts and service. We have a wide range of differentiated products in our portfolio, and our deep base of industry knowledge allows us to develop new solutions for our customers and separate FET from our competitors. We make it happen in the United States and around the world as a global manufacturer. So why FET? Why is FET a great company and, in our view, a better investment? First, the world needs energy. Energy is the fundamental building block of economic growth. This demand will propel strong global investment in energy production. And at FET, we will grow revenue profitably by executing our strategy to beat the market.
Our operating leverage will then drive margin expansion. Over long periods of time, for every $100 of revenue we increase, $30-$40 will drop to EBITDA. These are strong, incremental margins. With our capital-light business model, we will convert a significant portion of that EBITDA into free cash flow. Finally, with low and decreasing leverage, we will maintain a healthy balance sheet and position ourselves to return cash to shareholders. So starting with the macro, global energy demand on the left and energy supply forecast on the right, EIA's long-term outlook. I think it's a given that energy demand will grow. Many of the traditional factors: population growth, energy security, economic drivers, quality of life. I think a relatively new one for me, artificial intelligence, driving energy demand. I think traditional hydrocarbons will be a source of that energy.
At that low end of the supply forecast, we may see lower, slower growth over time. If that happens, our beat-the-market strategy will be more critical, which I'll talk about shortly. If we are closer to the midpoint or higher, which we believe is more likely, we will have a supportive market for solid revenue growth. As I just mentioned, we are strong believers in energy. We believe we have a long-term tailwind in demand for our products. To deliver exceptional value, we need to beat the market. We need to grow faster and more profitably than the industry. Our strategy is pretty simple. It's one, grow profitable market share. Two, develop differentiated products and technologies. Three, utilize global manufacturing and distribution footprint that's already in place. And four, we need to expand our participation in the energy transition.
Our success here will drive revenue growth faster than the overall industry. So let's step ahead and cover each in more detail. First, we've aligned our product portfolio with activity. I think this is clear from the pie chart on the right. Nearly 75% of our sales are activity-based consumables. As activity grows, we grow with it. And our consumable products are big-ticket items. Their unit prices are usually in the thousands, if not hundreds of thousands of dollars. So these are way more than just nuts and bolts. And these are critical components that need to be replaced every 3-6 months by our customers. Finally, we have higher margins with our consumables in general. On the capital side, a little bit smaller piece of that pie, we provide key components to upgrade the capability of our customers' rigs, Frac Fleets, and offshore support vessels.
We view these sales as an upside option. Timing of capital is harder to predict. However, capital sales can be icing on the cake to our activity-based service revenue. Next, we focus on niche markets. These are markets where we have meaningful share, also where we have fewer competitors. These are markets where we can differentiate ourselves with either technology, intellectual property, and manufacturing know-how. These are markets where expanding our share is very profitable. Finally, we will leverage our brands and our experts, our people. In many product lines, we have decades or more of experience. We are trusted, and our people understand our customers' businesses, their needs, what they value. This gives us opportunity. Great example. In our artificial lift segment, for over two decades, our Cannon brand has provided specialized cable protection systems that protected ESPs during installations and workovers. Our biggest market there was offshore.
Our brand, the Cannon brand, was the name people trusted when performance was required. That system worked very well onshore too, but we struggled to get traction. A few years ago, we purchased another artificial lift products company called MultiLift. They are the world's leader for sand protection systems, and their products are critical to extend the life of downhole pumps. At that time, that product was mostly used onshore. So that acquisition gave us the opportunity to utilize our experts onshore and offshore to cross-sell and bundle our products together. Today, we have substantially increased our market share for both products in a very profitable way. Within our existing markets, we have a tremendous opportunity to grow profitable market share. Another way we beat the market is through new product development. Operators are demanding greater efficiencies, lower well costs, increased safety.
To remain relevant, service companies who are our customers must upgrade their capabilities. By working together and innovating, we make them safer and more efficient. This is FET's opportunity to increase our total addressable market and room to grow profitably. A few examples here on the left side of this slide of differentiated products and technologies that we have recently developed. The first is the FR120 Iron Roughneck. This tool is critical for efficiently drilling long lateral wells. It quickly joins drill pipe, large diameter drill pipe together without damaging it. It is a very reliable solution and a significant upgrade in capability over existing models. It is a fantastic solution and one that has been adopted by the market. To its right is a PumpSaver Plus. This is a derivative of another successful product that we have, but it's used in a new application.
The PumpSaver Plus protects pumps from sand and gas lockup for rod lift applications, reducing pump failures and workovers, thereby saving operators a lot of money per year and keeping their wells producing. On the bottom left is our Enviro-Lite greaseless cable. This wildly successful product can run in and out of the well faster than traditional cables. It eliminates wasted time and allows pumpers to complete more stages per day. Finally, our newest product, FastConnect, on the bottom right, is a tool that is critical for multi-well pads. It allows the pressure pumper to quickly move from one well to another. And like our Enviro-Lite greaseless cable, FastConnect increases pumping time per day. Also, it eliminates grease from the well site. So we have a much more environmentally friendly solution that increases efficiency.
This product is going to disrupt a market where we currently do not participate. Innovation is critical to beat the market, and it's one that I've experienced firsthand. Earlier in my career, I personally developed a patented product that increased the capability of our customers' operations. It allowed us to differentiate ourselves from our competitors, to capture market share, and to grow quickly. Innovation is in our DNA, and it will allow FET to beat the market. We're going to beat the market in the U.S. and around the world. We have an extensive global reach. We have sites located around the globe. Our largest manufacturing facilities are in the U.S., Canada, United Kingdom, Germany, and Saudi Arabia. However, we ship our products around the world to every shade of blue. Our products and solutions go wherever energy is produced.
About 45% of our sales are outside the United States, and roughly 20% of our sales were for offshore applications. To meet growing global demand, to provide our products around the world, we do not need to expand our footprint or invest additional capital for growth. We can service the world with our strategic manufacturing hubs that are already in place. This is a great feature of FET's business model: global reach with capital-light scalability. The final leg of our beat-the-market strategy is energy transition. As a manufacturer of engineered solutions, we have many ways of participating in the energy transition. Our core competencies, manufacturing, engineering, and supply chain, apply both to traditional energy products and energy transition. We do not need to change who we are to participate in these markets because we already are today. Our valves are used for biogas and hydrogen facilities.
We have casing hardware sold into geothermal applications. We produce units that capture methane emissions on well sites. One area where we've seen meaningful demand is offshore wind. Our products, which are specialized remote-operated vehicles, are highly engineered products that can complete complex operations in water depths up to 10,000 feet. This product is dual use. It can be utilized for traditional oil and gas and the development of offshore wind farms. A great part for us is that we share clients for both industries. As demand has increased for both hydrocarbon production and offshore wind, utilization has been driven higher by our customers, and we're seeing increased demand for ROVs. We think the cycle is just beginning and that offshore wind has a long runway ahead of it.
Putting it all together, we have a strategy to beat the market, and we think it will pay off in the future. Importantly, it's paying off today. This strategy, plus a key acquisition, is driving incredible EBITDA and free cash flow growth. Specifically for 2024, we have reaffirmed our full-year guidance of EBITDA between $100 million and $121 million and free cash flow between $40 million and $60 million. As you can see from these two charts, these are significant improvements over past results. These improvements result from optimization of our product portfolio, which began in 2021, our top-line growth strategy, and the acquisition of Variperm Energy Services at the beginning of this year. As a product manufacturer, our model has considerable operating leverage. Growth in our top line results in healthy contribution margins, driving overall margins higher.
Our goal is to have EBITDA margins in the mid-teens, and we are confident we can achieve this target over time. Structurally, our operating model also benefits our free cash flow results. We are capital-light. We can grow our revenues meaningfully with minimal capital expenditures. In fact, we believe we can increase revenue 50% without increasing CapEx from its current levels. So we have the ability to scale up revenue and profitability significantly without having to deploy capital. This is a big upside to our company. Now let's turn to the balance sheet. So a lot of information here, but cap table on the left. And I think the key points are that at the end of the Q1 , we are well capitalized with relatively low net leverage of 2.3 times.
Our liquidity was $121 million, coming from cash on hand and availability under our $250 million senior secured asset-based credit facility. Our debt includes borrowings on the ABL, $60 million of seller notes associated with our Variperm acquisition, and $134 million remaining of our senior secured notes issued in 2020. Looking ahead, we have a clear plan to retire our long-term debt and put the company position to return cash to shareholders. Let's walk through our plan on the right side of this slide. With our liquidity and guided 2024 free cash flow, we expect to retire $134 million of senior secured notes by the end of this year. Likewise, we will utilize 2025 free cash flow to retire the seller's notes around the middle of next year.
At that point, in about 5- 6 quarters, we would have no long-term debt, only ABL borrowings, resulting in net leverage around 1x EBITDA and a very flexible capital structure. This would allow the return of cash to shareholders through dividends and repurchases. To put a finer point on that potential, a return of half of our guided 2024 free cash flow would today be a 10% yield on our current market capitalization. This is a significant return of cash to shareholders. So in summary, why FET? The world needs energy. Our blue-chip customers will deliver it with FET's products and solutions. Our strategy to beat the market will drive revenue growth, will expand margins, and will generate significant free cash flow. Ultimately, this will unlock unrealized shareholder value. Thank you.
Great. Thanks so much, Neal. Over to the audience. Any questions from the audience? If not, maybe I'll kick off with a few. Maybe we didn't get an opportunity during the presentation to touch a little bit more on Variperm. Can you talk a little bit more about that opportunity? What has it added to the portfolio? Do you see other M&A opportunities like that out there similar?
Yeah, great question. We're excited about the Variperm acquisition. We really feel like it was a home run. It's a differentiated product that operates in a niche market in Canada. High margins. They have really a lot of experts. What really sold it to me is when we visited, they actually received their customers' core samples, and they design their products in a way that maximizes production for their blue-chip customers. So great product line, one that we're excited to add, and it fits really well with our downhole product line as well, so artificial lift and downhole segment. As we look ahead, we think there's a lot of acquisition opportunities out there.
Part of the reason we want to generate free cash flow and retire our debt is we think there's a great opportunity for FET to be a consolidator in our industry, and we think we have a great platform to do so.
Excellent. And then shifting from maybe the inorganic to organic growth, we talked about this beat-the-market strategy. How do you think about the next wave of opportunities out there? Where is idea generation coming from? Is it geography-driven? Is it product-driven? How do you think about the beat-the-market strategy?
Yeah, no, that's a great question. So we've aligned our product lines with the markets that we serve. And to me, it starts with our people. We have experts in the markets that we've decided we want to attack, the niches that we want to attack. And by understanding our customers' business, understanding how we play a key role in that business, we can then develop products and solutions that create efficiencies for them and allow us to differentiate. So we've pushed down product development to the lowest level possible. And then at the senior level, we analyze and discuss what are the best opportunities for us going forward. And so we continually rotate through that list, promote the products that we think have the best opportunity, and kill the ones that don't.
Excellent. And then maybe last question for me is shifting back over to that free cash flow generation slide. That's a pretty amazing jump from 2023 to 2024. I know you listed some of the factors on that slide. What are some of the major factors driving that free cash flow conversion? Is it just the operating leverage? Is there a CapEx component? How are you driving that free cash flow?
Yeah, great. Another good question. So we're a capital-light business, so we generally do not spend a lot of CapEx. Our biggest capital requirement generally comes from working capital. We had entered 2022 and 2023 with a growth mindset, and we increased our working capital fairly significantly. We've slowed down that growth. In fact, we don't expect to grow working capital this year or to liquidate it. So our free cash flow plans that we've outlined are really just coming from our EBITDA, less taxes, less interest, and CapEx. So I think it's a very achievable plan and one that we reaffirmed in Q1. But looking ahead, I think we have an opportunity to liquidate inventory and turn that to free cash as well.
Excellent. And then maybe just one final question. The footprint is truly amazing. And you said, so no further CapEx to grow the revenue piece. How do you think about your manufacturing portfolio internationally? Is that something you're continuing to evaluate, or you feel like you have the right manufacturing capabilities in the right places?
We're always evaluating what we can do, what we can do better. But I feel like the footprint we have, we are touching the right markets, the right regions, and we really have the right assets in place to leverage investment, whether it's in the U.S., Canada, or around the world.
Well, anything else from our audience? Any other questions? I just want to open it up one more time just in case. Well, great. Well, Neal, we'll really appreciate the time. Thank you all for attending our session today. Appreciate it.
Thank you.
Have a great one. Thank you.