Good morning, everyone. My name is Neal Lux. I am President and CEO of Forum Energy Technologies. We're excited to present for you this morning. I'll be joined by Lyle Williams, our Executive Vice President and CFO. As I begin, I'll just start with a quick introduction of myself. I joined the company in 2017. I was adopted through an acquisition from a manufacturing company that I helped start. I've been in the energy manufacturing equipment business for about 20 years now, and you know, had a lot of different operating roles and marketing and sales roles, but also innovation.
I have a patent to my name, and the T in FET, it stands for technology, and the innovation that we provide is a key part of our DNA as well as mine. Excited to be here. Turn it over to Lyle to introduce himself.
Thank you, Neal, and thanks very much everybody for joining us today. Lyle Williams, I'm Chief Financial Officer at FET. Like Neal, I have a long career in the industry, now reaching about 28 years, 20 of that with FET. A lot of different operating and financial roles, and very excited to be able to share the FET story with you today.
Great. Well, I'll begin. I think this screen here will be familiar to just about everybody, but it's our forward-looking statements, non-GAAP reconciliation. Begin with FET at a glance. We are a manufacturer with global reach. We address the market with two primary segments, our Artificial Lift and Downhole segment, and our Drilling and Completion segment. Within Artificial Lift and Downhole, we generally sell our products and solutions to exploration and production operators, the companies that actually own and produce hydrocarbons, companies like ExxonMobil, Canadian Natural Resources, Saudi Aramco, and so on. In this segment, we provide products that extend the life of wells, increase production, as well as take byproducts out of the production stream.
Drilling and completion side, we sell to the world's largest oil field service companies like Baker Hughes, Halliburton, SLB, and DOF Subsea. Here we provide a wide range of products that include, you know, drilling handling tools, iron roughnecks, and other capital equipment, coiled tubing, wireline, as well as subsea remotely operated vehicles. Again, it's a wide range of products. About half of our sales are inside the United States, the other half are all international. Our revenue split based on purchase cycle is about 75% activity-driven consumables.
These are large items generally, so not nuts and bolts, but you know have SKUs or unit prices in the $1,000 or $10,000 that need to be replaced you know every two or three months with our customers. The other portion of our sales is capital equipment. Here we provide upgrades and key components to our customers' drilling fleets, frac fleets, as well as underwater vehicles. Financially, quick summary here. Over the last five years, we've grown our revenue at about 10% a year on an annual basis, compound annual growth rate. We've grown our adjusted EBITDA about 4x from 2020 and increased our margins significantly.
Our guidance for 2026 is there in the shaded, so about $840 million in revenue, so an increase from last year, and $100 million of this like midpoint of our EBITDA guidance. Again, an increase over 2025 of about 16%. We feel good about this forecast. We assumed a relatively flat market activity into 2026, but we entered the year with our largest backlog in many years, and we've enacted a number of cost reductions that are structural, and we'll be able to see the benefit of those in 2026 as well. That was who we are. I think more importantly is why. Why is FET a great company and a better investment? Really comes down to what we believe four key pillars.
First, we have a track record of outperformance. Second, we are an incredible value. Third, we've had significant capital returns. And finally, and I think most importantly, and really what is exciting for us, is we are poised for growth. So Lyle and I will walk through each of these here over the next few minutes. Starting out with our track record of outperformance. It really begins with our key financial metrics. So we've grown our revenue versus the Russell 2000 at a much higher pace over the last four years, at a 10% compound annual growth rate versus 7% for the Russell. On a cash flow side, we have significantly outperformed the index with a 46% compound annual growth rate in free cash flow, excuse me, in cash flow, versus 9% for the Russell 2000.
We've done this through market share gains and acquisitions with our high operating leverage, which we'll talk about later, and our capital-light business model. This outperformance on key financial metrics has led to an outperformance with our stock price. Over the last five years, we've had a 25% CAGR on our share appreciation, and over the last year, we've grown that to a 139%. We've done that with strong financial growth, balance sheet fortification, and meaningful capital returns. Again, we have a strong record of outperformance.
Another key pillar of our investment thesis is our value. Here again, we compare FET with our small-cap index, the Russell 2000. This time across a number of valuation metrics. Beginning with free cash flow yield, with each share of FET, you're getting meaningfully more free cash flow than the average Russell 2000 stock. Advantage FET. Looking at more traditional valuation metrics, we are 2-3x less expensive than the average stock in the Russell 2000. Advantage FET. Finally, how are we doing that? Are we using a lot of leverage? Not at all. We have about a third of the leverage of an average Russell 2000 stock. Again, advantage FET. We're an incredible value with room to grow despite the terrific share price returns of the past 12 months. The third pillar of our investment thesis is our capital returns.
These have been significant and based around our free cash flow return framework. Let's talk about that. We've allocated our free cash flow to share repurchases and debt reduction. In 2025, we reduced our number of shares outstanding by 10%. We're purchasing 1.4 million shares of FET stock below $25 per share. That's less than half of our current share price. An incredible benefit to our shareholders. Also, we've transformed our balance sheet. For the past few years, we reduced the quantum of debt on our balance sheet by 69% and lowered our net leverage ratio from 3.9x to 1.2x at the end of last year. Our balance sheet is strong with this low leverage. We have ample liquidity, a flexible debt structure to fund exciting investments, and no debt maturities until 2029.
We'll seek to deploy our free cash flow to either share repurchases or acquisitions, comparing FET's free cash flow yield with that of potential target opportunities. The key point here is we are growing our dry powder to make further strategic investments and create even more value for our shareholders.
I think the first three pillars have been incredibly exciting, right? We've had the track record. We have incredible value. We've had significant capital returns. I think for our new shareholders or those that are looking at our company, really looking to the future, what's exciting for us, what gets this team going is that we are poised for growth. We want to talk about that. It begins really with our beat the market strategy. In our beat the market strategy, we choose to compete in targeted markets. We want to have limited competition and a differentiated product offering that our customers value. We also are going to utilize our competitive advantages to separate ourselves from this competition. This is our manufacturing know-how, our intellectual property, the brands that have been a part of our portfolio for decades or more, and importantly, our industry experts.
We have the people in our commercial and engineering and supply chain and manufacturing departments that allow us to differentiate and compete well. We're also going to innovate continuously. We develop differentiated technology and we increase our total addressable market. Finally, we are going to leverage our global footprint. This allows us to rapidly respond to customer demand and have an efficient and resilient supply chain. Since we implemented this strategy in 2022, we have grown our annualized revenue per rig by 20%. As we headed into this year, we've refined our strategy a little bit more and we separated our portfolio really into two areas. One are the products and solutions that address our leadership markets. Our leadership markets are about 2/3 of our revenue. In these markets, we have meaningful share.
We have solutions that are fully adopted by the industry and we have broad geographic exposure. The addressable market we serve here is about $1.5 billion in aggregate and our share is 36%. A few good examples of those technologies that address these markets, coiled tubing. We are one of three global manufacturers of quenched and tempered coiled tubing. Cased hole wireline. Again, we are one of three manufacturers for greaseless cables to support hydraulic high pressure fracturing applications. ROVs. We have the world's largest installed base of work class ROVs, these specialized robotic vehicles that work underwater to install subsea infrastructure. Then finally, final example, our sand and flow control products for thermal oil sands applications. We are by far the leading provider of these specialized solutions and highly technical sand and flow control devices.
Our goal as we look ahead to FET 2030 is to maintain our edge in these leadership markets and grow as the market grows. On the other side, we have our growth markets. This is our opportunity for new customer acquisitions. Our growth markets share a lot of characteristics with our leadership ones. They're targeted markets with few competitors. However, these are innovations that are newer on the adoption curve, or they are more limited in geography. Our opportunity is to expand the geographic reach. The aggregate of these markets is about $3 billion, or twice the size of our leadership market, and our market share is much smaller, only about 8%. Our opportunity here is growth with new customers. Couple examples. Defense.
We recently have booked a large order, we did this last year, for a rescue submarine for East Asia Navy. These submarines utilize the technology and supply chain and manufacturing that we develop for oil and gas, but we apply it to the defense market. With obviously geopolitical events that we're witnessing today and we've seen really over the last few years, this is a great market for us to grow. Another technology is coiled line pipe. For this product, we were able to take the same manufacturing setup that we have for downhole coiled tubing and apply a secondary process to the product that allows us to address a much larger and newer market. It addresses the connection of wells to pipeline infrastructure.
Coiled line pipe, this is utilized, this product is utilized both onshore and offshore, great opportunity for growth there. Then the final examples come from our downhole product lines. Pump protection. We manufacture specialized products that extend the life of operators' downhole pumps. Our tools go above and below the downhole pumps and protect the pump from sand and gas intrusion. By protecting the pump, we increase the production, and we do it at a significantly reduced cost. In the United States, this value proposition has resonated with our customers and has allowed us to gain significant share. Internationally, they utilize the same application, but they do not protect their pumps. This is a huge opportunity for us to take the technology that is proven in the United States and export it around the world.
In fact, that is a very common theme of our company, is taking tried and true technologies developed in the U.S. and exporting them around the world with our global footprint. Putting it together, we believe we can double our share in the growth markets from 8% to 16% over the next five years. This is a tremendous revenue growth organic opportunity for us. If we were to do that, we could grow our revenue from our guidance of $840 million this year to $1 billion by 2030 without any growth in the market itself. If the market doesn't grow, our share gains through innovation and by exporting our technologies around the world, we can grow our revenue at a 5% compound annual growth rate to $1 billion in 2030. That's kind of the baseline.
If our markets grow with us, so the market grows and we gain share, we have the opportunity to triple that growth rate to 15%, and over that time, double our revenue to $1.6 billion. Why do we think our markets will grow? Really, the drivers that support that growth are global GDP expansion over that time, urbanization, and electricity demand driving demand for oil and natural gas. This means we will need to invest in supply meaningfully, and we're gonna have to grow global rig count and have the same service intensity or service efficiency that we've had historically. What does that mean for FET? That means our products and solutions will be demanded at a significantly faster rate than just global GDP. We believe that our markets will grow 9%.
Our markets will grow 9% a year, and we're gonna gain share. That allows us to double our revenue in the next five years. What does that mean for us financially? Doubling our revenue in our growth market case, we go from $791 million in 2025 to $1.6 billion in 2030. With our high operating leverage, 25%-35% of our incremental revenue should turn into EBITDA. In that scenario, we nearly quadruple the amount of EBITDA we deliver by the end of 2030. With our capital-light business model, 60%-70% of the incremental EBITDA should turn into free cash flow. In that time period, we would triple our free cash flow. In the FET 2030 market scenario, our markets grow, we double our revenue, quadruple EBITDA, and triple free cash flow.
That is why we are excited for our poised for growth opportunity. Why FET? Track record of outperformance and incredible value even after our recent run-up in our stock price. We've had significant capital returns along with dry powder for more strategic investments, and we are poised for growth. Double revenue, quadruple EBITDA, triple key free cash flow. This is an exciting opportunity for FET and for our investors. To turn it back for Q&A, if we still have some time.
All right. Thank you. That wraps up the presentation. Now let's move on to a quick Q&A session. If anyone from the audience have any question, please feel free to drop it here on chat or on the Q&A button.
Okay, it looks like we have a question about how will the conflict in the Middle East impact our business in the near term and in the long term. I think the near term, we have, you know, we have employees that are in the region, so vital to us is their safety. Thankfully, you know, they've been able to navigate around any disruptions in that area. I think in the short term, the Middle East is about 11% of our revenue last year. The products that we ship into the region generally go through the Strait of Hormuz as well. While oil's coming out, our products are entering into that strait.
The faster we can get a ceasefire, the less disruption we will see in the short term. I think in the longer term, what this conflict has done is drained significant amounts of inventory, of oil inventory and gas production. I think this puts us in a longer term tailwind. As we think about how much more likely are our markets gonna grow, I think because of this conflict over the longer term, we're gonna have to produce more oil, we're gonna have to produce more gas, and that production is gonna require a lot more of our products today. This is extremely bullish for FET over the long term.
All right. Thank you for that. Any further questions from the audience?
Looks like we're out of questions here. We'd be obviously happy to follow up. I think, you know, we have Rob Kukla, our Director of Investor Relations, on the line as well. You know, we have access to Rob, and you can access him through our website. We'd be happy to follow up with any further questions.
All right. Seems like there's another question from the audience.
Okay. Other question is, you know, we presented our 2030 long-term growth plan. We're showing growth in the near term in 2026 over 2025. What gives us confidence in the near term growth and the long term? I think we covered the long term here. You know, I guess I think the confidence, I think the demand for energy is going to be there. I expect to live in a world in five years from now that's gonna have much more global GDP growth. We're gonna have higher standards of living. More and more of our global population will be urbanized and will be leaving poverty. That requires energy. I think long term, we're in great position there.
In the short term, as we think about 2026, I've mentioned a little bit in the beginning, but I think it's worth spending some time over it. We're entering the year with our largest backlog in many years and probably over a decade. We have a great backlog entering this year. Also we've continued to gain market share, so I think we're gonna continue to do that this year. Then finally, we've had some significant structural cost savings that we're gonna see the full benefit of in 2026. Backlog, market share gains, and structural cost savings have put us in a great position to show meaningful growth, really. EBITDA growing about 16% year-over-year in what we assumed at the time is a flat market.
If there's any benefit or any stronger demand from higher oil prices, we would be able to take part in that as well.
All right. Thank you. Seems like that wraps up. Oh, there's another question from the-
Yeah, I'm gonna read this question, and I'm gonna hand it over to Lyle though, but it's the question came in, Lyle. It says, "We've mentioned acquisition opportunities. What do valuations look like? What target size are you looking for if you find the deal in the right target size in EBITDA of a potential target?
Yeah, thanks. Thanks, Neal, and thanks for that question. FET has been quite an acquisitive company over our history with a number of acquisitions, most recent one being at the beginning of 2024. With the acquisition of Variperm Energy Services up in Canada, that was a terrific deal for FET, doubling our EBITDA and more than doubling our free cash flow. Since that period of time, we have generated enough cash to repay all the debt used in the acquisition and bought back most of the shares that we issued. That was a tremendous deal for us. What we look for in acquisitions are businesses that compete in targeted markets, just like FET, that have differentiated technology and with room to grow.
Given the breadth of our product portfolio, we have a number of opportunities to look at and call it a number of shots on goal. We're constantly turning over rocks, looking for opportunities like that where we could invest our free cash flow, and grow FET faster than we can organically. When we think about size, that really depends on the business that we're looking at. A key feature of our successful plan is our strong balance sheet. We'd look to maintain and protect that balance sheet. That does put a size limiter on the type of deal that we would look at, but there are many opportunities that are out there that would be a great fit for FET.
Maybe just to address the valuations concept like that, given the number of companies we look at, we can be selective. We are continuing to look for great deals with compelling valuations. As we think about what the right valuation would be, we'll be comparing any deal we do with FET's free cash flow yield using our full year guidance that we provided on our last call of free cash flow of $65 million for the full year. That puts us right about a 10% free cash flow yield on today's value. We would look at buying FET stock at a 10% yield or buying another company at something that would need to be more compelling than that.
Overall, I think the market's ripe with lots of opportunities for us, and we can be conservative and picky as to what deal we choose to do.
All right. I guess that wraps up our Q&A session. We truly appreciate your time and your engagement. Have a great day and hope to see you again in the future.
Thank you.
Thanks very much.