Welcome back, everyone. Next, we have Forum Energy Technologies. Trades on the New York Stock Exchange under the symbol FET. It's a global manufacturing company serving the oil, natural gas, defense, and renewable energy industries, providing value-added solutions aimed at improving the safety, efficiency, environmental impact of customers' operations. Happy to welcome Neal Lux, CEO, and Lyle Williams, CFO. Welcome, gentlemen, to the conference. We're very much looking forward to hearing your presentation today.
Great. Thank you, Ana. Thanks for having us. We're excited to be here. I think before we jump in, you know, Lyle and I will just give a quick background about ourselves and our history here at FET. I'll start. Again, Neal Lux, President and CEO. I've held that title for a little over four years now. I was adopted into the FET family in 2017 when the company purchased the manufacturing startup that I was one of the founders at. So I've spent quite a bit of time here at FET. My background is, you know, operations as well as sales and marketing. Also, innovation and product development has been a big part of my career.
Personally, I do hold a few patents that have generated a meaningful revenue and profits for our companies over the past 10 or 15 years. Excited to be here. Lyle, why don't you jump in and introduce yourself as well?
I will, Neal. Thank you, and thank you, Ana. Thanks, everyone, for taking time today to hear the FET story. I've been in the oil and gas equipment manufacturing industry for about 27, 28 years, the last 19 of those with FET, in growing roles in operations and in finance, and in the CFO chair since 2020. Really pleased to be able to share our story with you today.
Great. I'll go ahead and start us off. Again, beginning with our forward-looking statements and non-GAAP reconciliation. I think all those on the line are familiar with this slide, so I'll move on to Forum Energy Technologies at a glance and really walk through who we are. We are a manufacturer with a global reach, and we approach our market with really two segments, our Artificial Lift and Downhole segment, which is about 40% of our revenue, and Drilling and Completions, which makes up the remainder. Within Artificial Lift and Downhole, our primary customers are oil and gas operators, you know, the companies that own and process hydrocarbons, companies like ExxonMobil, Canadian Natural Resources, Saudi Aramco, for example.
In this segment, we produce products that increase oil and gas production through Artificial Lift mechanisms that avoid contamination into the production stream and extend the life of pumps and such. That's our Artificial Lift and Downhole. Within our Drilling and Completions segment, our customers are generally the world's largest oil field service companies, so companies you're probably familiar with, Baker Hughes, Halliburton, SLB, DOF Subsea. In this segment, we provide equipment that allows our customers to drill longer laterals, to frack more stages per day, to utilize special tools like coiled tubing and wireline to increase oil production, as well as subsea robotics to install deepwater subsea infrastructure. Our revenue mix based on geography is about 50/50, so about half our sales are outside the United States.
On our purchase cycle mix, as we think about how our products are utilized by our customers, about 80%, just under 80% of our revenue is what we call activity-driven consumables. As our customers drill more wells, complete more wells, you know, complete more activity, they will utilize more and more of our products. The remainder of our revenue is what we call capital equipment, and here we provide key components that extend the capability of drilling rigs, of frac fleets, as well as the subsea robotics that I mentioned earlier. Then quick summary on our financial performance, you know, over the last five years, we've had, you know, significant growth in revenue.
Last year, just under $800 million from $541 million in 2021. With that, we extended our EBITDA significantly, again, over four times increase from 2021 through last year. As we look ahead into 2026, you know, we've guided a pretty substantial increase in revenue and EBITDA for the company, and that was really pre-Iran war as well. Our expectation coming into 2026 was that market activity would be relatively flat year-over-year. We are coming into 2026 with our highest backlog in many years, and we continue to execute on our strategy of gaining market share. We are in a good position to deliver on the guidance we've provided.
That's Forum at a glance. I think for those that are listening or watching today, maybe what's more important is why FET? Why is FET a great company, but more importantly, an even better investment? Really comes down to four pillars, the first being our track record. We have a track record of outperformance. We'll talk a little bit more about that in a minute. Also, for those who follow our stock, we've had a great run, yet we still are an incredible value. Third, we've had significant capital returns. Again, we've reduced debt, we've returned cash to our shareholders. Finally, the fourth pillar of why FET is we are poised for growth, and that is the part that gets us excited.
I think as we look ahead over the next five years, our growth story is what excites us as a management team, and I think will excite you as potential investors. Let's step through each of these. Beginning with track record of outperformance. You know, starting with our revenue. If you compare our revenue growth on a compound annual growth rate basis, we've grown revenue at 10% a year from 2021 through 2025. This compares only 7% for the Russell 2000, so significant outperformance there. Where it really stands out is on adjusted cash flow. Our adjusted cash flow has grown at a 46% compound annual growth rate versus only 9% for the Russell 2000. We've done that through executing our strategy, which is market share gains, and we've also had key acquisitions.
In addition, we have a high operating leverage, and we'll spend some more time here later, but a significant portion of our incremental revenue turns into EBITDA and cash flow. Finally, we have a very capital-light business model. CapEx is a small portion of our revenue, and we can grow without a significant increase in investment. The track record of outperformance continues on share price. Again, revenue, free cash flow has grown, and we've seen that reflected in our share price. Over the last five years, we've had a 25% annual return, again, versus only 5% for the Russell, and that has accelerated over the past year, so about 139% versus only 11% for the Russell.
Again, the financial growth that we mentioned earlier, we've also fortified our balance sheet by reducing our debt significantly. We'll talk a little bit more about that in a bit. We've had meaningful capital return. Track record of outperformance on our revenue, cash flow, and that has led our stock price.
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. First, beginning with free cash flow yield. With every 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 two to three times 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? No, 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 return of the past 12 months. The third pillar of our investment thesis is our capital returns.
These have been significant and are 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%, repurchasing 1.4 million shares of FET stock below $25 per share. That's less than half of the current share price, an incredible benefit to 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 3.9 x to 1.2 x 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're gonna seek to deploy our free cash flow to either share repurchases or acquisitions, comparing FET's free cash flow yield with that of potential acquisition targets. The key point here is we are growing our dry powder to make further strategic investments and create even more value for our shareholders.
Track record, incredible value, significant capital returns. I think it's a great story already, but we are just getting started. Again, the part that is exciting for us as a management team and that extends throughout our organization is that we are poised for growth, and that growth strategy really begins with our beat the market approach. With our beat the market, we seek to compete in targeted markets. We wanna have few competitors, and we wanna have differentiated products that our customers value. Also, we are gonna utilize our competitive advantages.
This is our manufacturing know-how, our intellectual property, the brands that we have cultivated and that have years or decades of use in the market. Our people who are industry experts, who understand how our products are utilized in the field and allow us to increase the value of those products for our customers. A lot of times we do that through innovation, which is the third pillar of our beat the market strategy. Here, we want to develop differentiated technology, and we want to increase our total addressable market. Putting that together, we will then leverage our global footprint. As I mentioned at the very beginning, about half of our sales are outside the United States, and we have the footprint to rapidly respond to customer demand wherever it is. It also gives us an efficient and resilient supply chain.
Since we implemented our beat the market strategy in 2022, our annualized revenue per global rig is up over 20%. That is remarkable share gains utilizing our beat the market strategy. Now, as we came into this year, 2026, we refined the strategy even more, and we separated our portfolio out into the markets that they address, into our leadership and our growth markets. Our leadership markets today represent about 2/3 of our revenue. In our leadership markets, our products and solutions have meaningful share in the markets they address. They're the solutions that they provide are fully adopted by the industry, and they have broad geographic exposure. That addressable market in aggregate for our leadership markets is about $1.5 billion, of which we have 36% share. Again, meaningful share.
A few examples of the products and solutions we have there, coiled tubing. We are one of three global manufacturers of quench-and-tempered coiled tubing. Cased hole wireline. We are one of three global manufacturers of specialty cable that is utilized in high-pressure applications. One of three. ROVs, which stands for Remotely Operated Vehicles. These are subsea robotics that install deepwater subsea infrastructure, and we believe we have the largest install base of these robotics with our customers. Finally, Sand and Flow Control. We make specialized tools that reduce the steam and sand penetration of the oil production stream in specialized thermal oil sands well in Canada and around the world. With our leadership markets, our goal is to grow with the market over the next five years and sustain our edge.
Again, we have great position here, and we're gonna sustain our leadership, and we're gonna grow with the market. The other part of our portfolio is our growth markets. Here is our opportunity for new customer acquisition. Within our growth markets, we have very similar targeted markets. Again, we wanna have few competitors where we compete, give us a better opportunity to win. However, the solutions that we are providing here may be earlier on the adoption curve, and so they're starting to gain adoption, but not fully adopted yet. Or we may be more limited in geography. We are in, you know. Our solutions are adopted in one geography, but not worldwide. So as we think about that addressable market, it's about twice the size of our leadership markets, and our share is actually much smaller and allows us to grow.
In a $3 billion market, our share today is only about 8%. Couple examples here. First is Defense. This is a great market for us to approach by utilizing the supply chain, the manufacturing and engineering know-how that we've developed for deepwater oil and gas development. We can apply that, those learnings, that technology to the defense industry. Just last year, we booked a very large order for a rescue submarine for the Indonesian Navy. We believe this is another growth platform for the company as we go forward, especially in today's challenging geopolitical environment. Another technology is Coiled Line Pipe. What's exciting here is we were able to leverage the manufacturing infrastructure that we already had in place and added a final step, an additional step to our product that allowed us to address a different market.
In this market, we are moving hydrocarbons from one area to another, and we're doing it with a technology that is installed quicker and has a much more cost benefit for our customers. The final two examples I want to provide are our Pump Protection and Casing Hardware. In the Pump Protection product line that we have, we have great share in the United States because our value proposition is pretty simple. By utilizing the tools that FET provides, we are able to extend the life of our customers' downhole pumps, thereby increasing their oil production and doing it at a lower cost. Increased oil production, lower cost, that is a very, very powerful value proposition. We've done very well in the United States with this. We have high share.
We are taking that value proposition and expanding it internationally, where the market, we believe, is four times bigger. The opportunity that we have to acquire new customers will allow us to double our share in these markets, to go from 8%-16% share by 2030. Again, our goal, double our share in our growth markets. What does that mean for FET as a whole? We looked at really two scenarios for the next five years. One we call our flat market scenario, and that is in the light gray. In the flat market scenario, we assume that our markets don't grow, that there's not more investment in oil and gas, that it's steady state from 2026 through 2030.
In that scenario, we believe we can grow our revenue to $1 billion by executing on our beat the market strategy and by doubling our share in the growth markets that I just talked about. However, that's not our base strategy. That's not our base outlook. We believe that there is a bigger opportunity. We believe that our markets are poised for growth. In that scenario, we think we could double our revenue over the next five years at a real 15% annual growth rate. Why do we think that? As we look ahead, and we think about the world in 2030, we believe there will be significantly more GDP growth. There will be more urbanization, and demand for electricity will drive demand for oil and natural gas. To provide that supply, our industry will need to invest meaningfully.
We're gonna have to add rigs, and we're gonna have to do that at a higher efficiency level. The products and solutions that FET provides have been the backbone of the shale revolution. We have given our customers the tools to be more and more efficient, and we will continue doing that going forward. In our FET 2030 growth market scenario, we believe our markets will grow 9% a year, and we will gain share, thereby allowing us to grow our sales by 15%, so doubling our revenue in the next five years. Financially, as we think about a high level, P&L there, from 2025 just under $800 million in a flat market growing to $1 billion, and in the growth market scenario, doubling our revenue to $1.6 billion.
With our operating leverage, we believe 25%-35% of our incremental revenue will be turned into EBITDA. You can see that on the right. We will quadruple our EBITDA by doubling our revenue. With our capital-light business model, 60%-70% of incremental EBITDA will turn into free cash flow. As we think about FET 2030, in the growth market scenario, where demand for oil and gas increases at a reasonable pace, we have the opportunity to double revenue, quadruple EBITDA, and triple free cash flow in the next five years. That is a very powerful growth strategy. Why FET? Our track record of outperformance, we remain an incredible value today, we are committed to significant capital returns, and we have a plan that is allowing us to poise this company for more growth.
We have an exciting story, and we enjoyed sharing it with you today, and we look forward to hearing more questions from the audience. Ana, back over to you.
Thank you, gentlemen. Great presentation. Question, what are FET's most important product lines, and how different are they from your competitors?
Yeah. We have a wide range of product lines. You know, we look at each of them, and we look at where we compete. Again, generally, we compete with only a few competitors, so that's how we differentiate. We also look at our teams that we have in place. We have, over the years, hired engineers that work for our customers and understand how our products are used in the field, and this has allowed us to continue to innovate and differentiate our product lines. We have very similar characteristics across our product lines, even though the products are very different, have very different applications. Our downhole product line is probably our biggest, with around 25% of our sales, and it is a high margin, high value area.
We do have a broad portfolio, and we really love our portfolio products and what we can do for our customers.
Are your products mission critical or commoditized?
They're absolutely mission critical. At the very beginning, we spent a little bit of time talking about our purchase cycle. About 80% of our products are what we call activity-based consumables. Without our products, our customers can't complete the work that's required. By positioning ourselves with just a few competitors, we avoid the commodity-commoditization trap. Maybe a good example why we believe we're not in the commodity business, as we went through, let's call it Liberation Day, about a year ago, tariffs were increased, and costs were increased across the board for many manufacturers. As a company, we were able to pass through all the cost increases that we had to our customers because our products are critical to completing their mission.
We definitely position ourselves to be an incredible supplier and a value-added partner with our customers.
Talk about your free cash flow. Is it sustainable or is it driven by working capital swings?
Yeah, Lyle, why don't you jump on that?
Sure. No, Ana, thanks for that question. We love the free cash flow question. Over the last couple years, we've generated nearly $200 million in free cash flow compared to our market cap, which is around $700 million, so very substantial portion. Over the last two years, we have monetized a good bit of working capital and taken other assets that were underutilized and liquidated those as well. Our free cash flow guidance for this year, the midpoint of that guidance is $65 million, and that does include about another $10 million of reduction in net working capital. But I think that shows the strength of our free cash flow model and trend. As Neal discussed in our financial model here, we expect 60%-70% of all of our incremental EBITDA to turn into cash.
We don't need to spend that money on CapEx, and our balance sheet is in really great shape. We can turn our incremental revenue really strongly into cash.
Anna, if I could just-
Mm-hmm.
Do you mind if I just add one more point there? Just real quick before the next question on the cash flow side. You know, a few years ago, we changed our incentive structure for all our leadership to be more cash flow focused. So from myself and Lyle all the way down to our frontline leadership, they are focused on generating cash, so that's made us more efficient with our working capital. I think that's what's allowed us to turn a lot of that into cash. As we grow, we'll be more efficient as we grow without having to make as significant investment in inventory as we have had to do in the past.
Perfect. Talk a little bit about how cyclical your revenues are relative to oil prices?
Yeah. As we think about our demand, our primary activity leaders, let's call it, is we look at global rig count. Global rig count is sensitive to oil prices, but what we've found is there's generally a price band. What, you know, could be, you know, $50-$70 a barrel will mean a certain level of activity, and if you go above or below, that'll change. If you're in that band, we'll be fairly, let's call it, fairly consistent. Our goal, again, we mentioned it before as our beat the market strategy, is that we wanna grow when the market goes up.
When rigs are added, we wanna grow our revenue per rig faster, and if rigs were to decline, we want our decline to be less severe because we would gain share. Big part of our strategy is to gain share regardless of oil price and rig count changes.
You've demonstrated strong organic growth and capital discipline. Where do you draw the line between continuing to invest internally through share buybacks versus allocating that capital towards accelerating through inorganic growth? Do you focus that inorganic effort in the growth or leadership markets? What are your thoughts?
Yeah. Maybe I'll start and then let Lyle add because his team does a fantastic job of identifying acquisition candidates for us. Again, we had one large acquisition, excuse me, about two years ago that has been incredibly meaningful for the company. We were able to buy it at a very good price, and it's a strong cashflow generator. We have a criteria that we follow as we look at, you know, as we look at acquisition candidates. Again, it has to be differentiated product. It has to, you know, be accretive to our financial metrics. If we were to complete a deal, we don't wanna overburden the balance sheet.
Maybe Lyle, talk a little bit more about the opportunities that you see.
I will. We. There are definitely a good number of opportunities out there for FET on the acquisition front. Many smaller businesses that are looking for a way to grow, maybe they look a lot like our growth products. Their products are proven, but they're only in one market. We can leverage our supply chain and grow them. We'll continue to do that. We turn over a lot of rocks looking for those new technologies that Neal mentioned. When we think about where to deploy our capital, and that's a big focus for us. This last year was very heavily focused on share repurchases and on debt reduction.
With our net leverage ratio ended last year at 1.2x , we think that is a reasonable range for a company like FET, with a strong balance sheet and good ability to adjust our cash flow in the event of a down cycle or an up cycle. Any further reductions we see in net debt look like dry powder that we could deploy towards either more share buybacks or acquisitions. We'll balance our free cash flow yield, which is very strong, with the free cash flow yield we could get from an acquisition. That's our big financial lever that we use when we're looking at deals, and that's what we'll do. Very exciting opportunity for us on the M&A front.
Wonderful. Well, we have more questions for you, but we are out of time. I wanna leave you with this question, whoever can answer it. What does success look like for you and the company in two to three years?
Yeah. A great question. We're, you know, for us it's executing our growth strategy that we continue to gain share. Ideally, we're gonna have a market tailwind, especially with the increase in commodity prices and energy security. Success for us is to be along our growth pattern, our growth plan that we want to achieve over the next five years. I think three years out will be a good check-in point to see where we're at on our execution of our strategy. If we follow our history, we have a track record of outperformance, and I think we'll deliver.
Perfect. Well, thank you, Neal. Thank you, Lyle. We appreciate your time and thorough presentation, and we'd love to continue on the conversation with you on our platform, in the near future.
Thank you, Ana.
Thanks, Ana.
All right, everyone, we'll be right back with our next presenter.