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D. Lyle Williams

Thank you, Neal. Good morning. The team overcame tariff impacts to deliver positive financial results in the first quarter. These results met our expectations with revenue of $193 million and EBITDA of $20 million.
Orders increased 6% to $201 million for a book to build ratio of 104%. Stimulation and intervention product line orders returned to customary levels, and we received meaningful bookings for Subsea projects in the quarter.
Furthermore, in April, we've already booked another $8 million of Subsea orders. Growing backlog in the subsea product line reflects the strength of the offshore market and will support overall revenue through the next few quarters. The drilling and completion segment performed well in the quarter.
Revenue increased $5 million driven by a rebound in sales of completions related, consumable, and capital equipment. Favorable product mix and overhead cost reduction initiatives supported 64% incremental EBITDA margins and operating profitability benefited further from lower amortization expense.
In contrast, our artificial lift and downhole segment revenues declined. An unfavorable product mix lowered margins. First quarter results were impacted by the timing of shipments of project orders and softer demand for Variperm products. Given the strength of its fourth quarter results, Variperm had a high performance bar to overcome. This product family experienced particular weakness in Canada with unfavorable customer and product mix impacting results.
However, our investment thesis for Variperm remains intact, and we anticipate positive progression through the year.
In addition, we are experiencing negative headwinds in our valve solution product line. On our fourth quarter call, we stated that we may see short-term impacts and variability in our results as we pass through tariff impacts with increased pricing. The magnitude of tariffs levied on Chinese imports has impacted demand for our Valves product line, which, like our competitors, sources a large amount of product from China.
With the uncertainty around these tariffs, our customers began a buyer strike, significantly reducing orders and delaying near-term deliveries.
We believe these reduced purchase levels could continue for a couple quarters. Until tariff levels wane or distributor inventories are depleted.
In the meantime, for Valve Solutions and our other product lines, we are adjusting sourcing strategies and raising prices in response to specific tariff-driven impacts.
Looking ahead to the second quarter, despite market uncertainty, we have not seen operators deviate materially from their plans. Some customers have indicated more white space on their calendars beginning late in the second quarter, but this could be offset by a pickup in natural gas activity.
Overall indications are that drilling and completions activity should remain relatively stable from 1st quarter levels. Therefore, we expect flat quarter over quarter results with second quarter revenue to be in the range of $180 million to $200 million and EBITDA to be between $18 million and $22 million.
We estimate corporate costs of $7 million depreciation and amortization expense of $8 million interest expense of $5 million and tax expense of $3 million. With our focus on cash, we generated $7 million in free cash flow in the first quarter, up 3 times from the prior year first quarter.
This marks our seventh consecutive quarter of positive free cash flow generation. As Neal mentioned, we remain confident in our full year free cash flow guidance of $40 million to $60 million.
In the event that market activity declines and our EBITDA is closer to the $85 million, then we expect unwinding working capital to bridge the potential decrease in EBITDA. Our full year confidence comes from more than just our ability to convert working capital.
Over the past two years, we transformed our business systems and reinforced these improvements with key performance indicators and financial incentives aimed at strong, repeatable free cash flow generation. We envision FET being a cash flow engine that regardless of market condition yields $3.5 to $5 of free cash flow per share this year.
The balance sheet improvements we made over the past several years, including the debt conversion to equity, organic debt retirement, and refinancing, put FET in a solid financial position. We have $108 million of liquidity and no debt maturities until 2028.
At the end of the first quarter, our net debt was $146 million for a quarter ending net leverage ratio of 1.56 times. This strong balance sheet and continued free cash flow allow us to further reduce net debt and return cash to shareholders.
We began our shareholder returns in the first quarter by repurchasing roughly 1% of our outstanding shares for $2 million. As we outlined last quarter, our plan is to utilize 50% of our free cash flow to further reduce our net debt. The remaining free cash flow would be used for strategic investments.
That increase shareholder value, including share repurchases. As a reminder, our net leverage ratio must be below 1.5 times for us to repurchase shares.
Given the market uncertainty and potential for slower activity, this incurrence test may impact the size and timing of our share re-purchase. However, with our forecasted free cash flow, we remain comfortable with our ability to both reduce net leverage and continued share repurchases this year.
Let me turn the call back to Neal for closing comments, Neal.

Neal Lux

Thank you, Lyle. Taking a step back, the market we find ourselves in today is uncertain. While we are eliminating expenses to adjust to potential market activity, we will not jeopardize our future.
We have the resources to execute our beat the market strategy. We will continue to make commercial and engineering investments that will drive profitable market share growth through innovation.
We believe strongly that the investment case for FET remains intact. This belief is based on our track record of significant outperformance, the incredible value of our stock, and our long-term growth potential.
Since 2021, FET has grown revenue at a compound annual rate of 15%, 3 times faster than the Russell 2000 index, which we are a part of. We have grown EBITDA and cash flow over 70% annually, many times better than our index.
Simply put, we have delivered spectacular relative financial results, and yet we trade at a significant discount to the Russell 2000 and with our oilfield service peers.
Today our forward free cash flow yield is north of 25%. Very few stocks trade at yields this high, while also having FET's long-term growth potential. This unlocked value makes share buybacks extremely compelling.
Since we announced our buyback authorization in December, we have outperformed the oil field Service Index, the Russell 2000, and the average of our peers by significant margins. This performance has confirmed our buyback thesis, and we will seek to buy as many shares as possible within a returns framework. There is uncertainty over the next 6 to 12 months.
However, longer term. We envisioned strong growth for FET. The world needs energy. Over the next decade, population growth, economic expansion, and full-scale implementation of artificial intelligence will drive energy demand.
Investment will be required to supply the world's needs. It is only a matter of time. Before the headwinds we see today. We'll turn into tailwinds supercharging our growth.
In the meantime, we are executing our beat the market strategy. We will deliver our products to customers around the world with our global footprint. And we will continue to innovate and develop new products and solutions that increase the safety and efficiency of energy production.
Thank you for joining us today. Gigi, please take the first question.

Question and Answer Session

Operator

(Operator Instructions)
Josh Jayne, Daniel Energy Partners

Josh Jayne

Thanks. Good morning. First question, I wanted to hit on, the subsidy side you talked about bookings were up 60% quarter over quarter, do the customer adoption of some new products and then you also highlighted, I think, an additional order in April. Maybe you guys could talk about more about that given at least on the rig count side we've seen a bit of a slowdown in rigs being contracted, but you seem to highlight some strength there so talk about the products that are getting adopted and the outlook there a bit more.

Neal Lux

Yeah, that's, we're really excited about the progress of making in Subsea. We address, obviously offshore oil and gas, offshore wind and defense with that product line and really across, all three areas we're seeing good inbound, inquiries as well as turning those inquiries into orders, we provide remote operated vehicles, ROVs, and launch and recovery systems. For those markets, and I think we've established over the years a position of strong market share and you know we believe around 30% of the vehicles, that are in use today or more were our brand. And so I think as those vehicles have aged and the work has increased, we're seeing a lot more demand for those vehicles and then with the Unity, software system operating system that we developed that allows for more remote operation capability we've sold about eight more of those systems since the beginning of the year and we'll be delivering those throughout the year.
So, excited about the activity we're seeing in in Subsea. I think it also shows really the breadth of our of our reach, Subsea is about 10% of our revenue, but. Offshore, we think is around 15% to 20% of our total revenue whether it's, done through our offshore pipelines or equipment we deliver with our drilling group.

Josh Jayne

Okay, thanks for that. And then as my follow up, another thing that sort of jumped out a little bit release was part of the increase in orders for drilling completion was for stimulation related equipment. Could you talk about what products there so strength, given that completion crews aren't moving higher and has a lot of inventory been exhausted and could you see a similar level of orders even if crew counts are sort of flat to down given the uncertainty you talked about in the second half of the year?

Neal Lux

Yeah, I think the, we ended last year when I say we our industry was really lean, they frac pumps -- crews that were working, really limited all purchases as they would, to a minimum as they as they finished Q4 in the quarter I think we rebounded to what's a normal level. To be at, and what we are seeing is, as maybe there's fewer crews working or, but they are doing more per day. They're pumping more stages per day, they're working more hours per day and so we're seeing key items like our power ends which is really the drive for frac pumps, historically was, we call it capital, but what we're seeing is that those power ends are being replaced.
Or rebuilt significantly, after 12 or 18 months so they're being replaced much more quickly than, just a few years ago when those pieces of equipment would last three or four years. So I think that's part of it really view that as a rebound also saw a rebound in our wireline product line which again serves the completion group. I think they get a rebound from Q4 but also. Our cables are going, farther than the hole and are working more stages per day so that, they're just going to wear out quicker so that's part of the cadence there as well.

Josh Jayne

That's a lot. I'll turn it back.

Neal Lux

Thanks Josh.

Operator

Dan Pickering, Pickering Energy Partners.

Dan Pickering

Morning guys. Lyle, could you remind us, so you indicated that you repurchased shares during the quarter, and you talked about that 1.5 leverage ratio which sounds like you ended the quarter slightly above the metric, but you repurchase shares during the quarter. Does that mean you, you'd paid down the facility or how did that work during the quarter and how do we think about that variability as we move into the Q2 and Q3?

D. Lyle Williams

That's a super question, Dan, and it's and there's a good nuance there with how our metrics are done. We'll report to you and our other investors on a quarterly basis, both our EBITDA and our net debt, and hence we ended with that 1.56% for the incurrence test ratio of 1.5 times, we measure EBITDA quarterly just like we do for our public files here, but we measure net debt. Within 30 days of buying back our shares, our bondholders wanted us to do that just so we kept a tighter rein maybe than quarter to quarter, called it month to month or even week to week as far as how cash moves.
So that opens up windows for us to buy shares within a quarter, and that's what happened in the first quarter. We were able to take advantage of the market early and our leverage ratio there. Similarly, as we think ahead to the second quarter we're in now. Even the third quarter, those windows were open based on just the intra quarter timing of how our cash flows in the quarter. So expect that and expect that that those windows will open and we'll be able to take advantage of them here in the second and third quarter.

Dan Pickering

Okay, that's helpful. And then maybe can you spend a little bit of time talking about the cost efforts, you mentioned in the press release and the call sort of $10 million annualized, is that just tell us a little bit about how we'll start to see that. Do we think we get some of it immediately or is it longer dated? How do we expect to see it flow through?

D. Lyle Williams

Yeah, we did see a little bit of benefit already in the first quarter with some of the activities and cost reduction measures that we put in place even before kind of call it the April noise that happened in the market. So we've seen a little bit there. But if we think about our cost structure, it's a really highly variable cost structure between material and labor and overhead being a significant portion of our overall cost structure. Good news is that makes it very variable.
So with activity coming down, we can manage those costs down very well. What we're specifically targeting with the $10 million is some of the more fixed costs. So those are ones that won't necessarily vary with revenue, and those could be embedded in cost of goods sold. It could also be within our SG&A. So we'll be looking at efficiency gains, changes that we can make, and the like that will drive some cost out. Those are going on right now and we'd expect some benefit in the second quarter and more benefit to roll through into the third quarter as well.

Dan Pickering

Okay, thank you, and then, maybe as you indicated we haven't seen any softness yet there's risk. What specific business lines or is it order in intake? What are you watching as you're sort of canary in the coal mine around, activity and any softness.

Neal Lux

Yeah, we have haven't seen that yet. I think a couple things, about 80% to 85% of our revenue is activity based, so these are, consumables that are required to operate for our customers, whether it's coil tubing or wireline or our downhole tools. So you know we're really close to that. What we wanted to do though is what we thought was prudent is when you see oil prices come down to a level like they're at now.
Unless there's a rebound, we will leave, recount or overall activity is going to follow with a lag and so, part of our cost saving effort, part of our material, let's call it slowdown of inbound material that we wanted to get ahead of this thing so I think it's easier if you make the cut sooner, and then let's say we work a little bit more overtime we use a little bit more inventory.
And you know if oil prices, let's say rebound in the next you know next couple months or next couple weeks you know it won't hurt our long term ability to respond to that so we're going to stay close to the customers we you know we're going to follow our inbound orders. In the canary in the coal mine is if we see shipments drop off in a month, we'll know our customers are pulling back but right now we haven't heard any specific indications of that, so we're operating businesses as usual, but we're keeping an eye out and we're going to be proactive in in how we respond.

Dan Pickering

Good. Well, I applaud you guys for being quick on the trigger here. Last question for me, you mentioned pushing price in certain areas related to rising costs is it holding? Is it sticking? Is that part of the buyer strike on the valve side, for instance, is they don't like the higher price and they're waiting to see if it'll come down just what's the reaction to price?

Neal Lux

So you know we have just, a lot of different advantage, we have a lot of different products we just a lot of markets. I think each of those, are unique to me the valve story is, it's China specifically, where almost all valves that are imported in the US originate, and I think also our customers see the quick change whether you know the tariffs start at, 30%, then they go up to 145%. Are they going to come down in a in a week, based on a tweet, so I think that's part of the valve specific story is, if you unless you absolutely positively must have a valve, you are better off holding off in almost all cases
Now we think that inventory is going to run out there our customers are going to need it and they're going to have to have to buy it. That said, we are also looking at alternative, strategies that could. Take away or radically improve our cost position and make us far more competitive so we're implementing those efforts not ready to get into those details yet today but we want to find a way to take these lemons and make lemonade out of them.

Operator

Thank you.

Neal Lux

Thanks, Dan.

Operator

Jeff Robertson, Water Tower Research.

Jeff Robertson

Thanks. Good morning. You all spoke about a little bit of, turbulence in Canada in the first quarter. Can you elaborate on what's going on up there with Vern and whether or not that's seasonal or temporary or anything more.

Neal Lux

Yeah, so I think, I think it's definitely temporary and I think we're also heading into what's typically a slower season in in Canada overall but you know what we're, what we saw with Variperm is really a combination of customer and product mix and what we mean by customers is that there's certain, oil sands operators where we have a higher market share so if more of those customers are working, obviously it's more share for us.
So I think our customer mix or the or the share of who was working or drilling in Q1 was unfavorable for. I think the other part was that for those that were working that we were selling to, they didn't utilize our flow control products as much as what other operators would. I think it was a product mix there as well, so a little bit off there but.
Overall, very firm still generating a ton of cash, I think they're still in the right position. They're still innovating. So I think as we look to the back half of the year, I think we'll see some improvement with that business going forward, still love it, still have the type of margins we're impressed with, just had a great fourth quarter, maybe not quite as good in Q1, don't see any long term impact though.

Jeff Robertson

We're basically a month into a lower oil price, so your comments around the lag in activity is that your customers try to figure out their businesses. Can you share a color on recent conversations with customers about longer lead time?

Neal Lux

Our longest lead time items tend to be with our capital businesses and so you know that's for example Subsea and you know we are seeing more activity there on our consumable based businesses you know you know the cuss the conversations we're having with our customers really haven't changed from where we've been so, at the at the ops level.
They are not seeing any changes again, our view is that we want to be prepared, and get out in front of it and that's why we're acting this way. We just, we feel like the macro in many ways leads the activity and unless oil prices rebound or gas price, gas activity really jumps, we just envision recount coming down in the next three to six months.

D. Lyle Williams

If you do see over time a shift toward more gas directed drilling where. There can be higher temperatures and higher town hall, pressures to deal with.
Does that affect the life of some of the consumables and maybe shorten the replacement cycle of certain products versus having them work in oil reservoirs?

Neal Lux

It, you got it 100% right there, Jeff, yeah, absolutely, gas tends to be higher pressure, higher temperature, items like wireline, coil tubing, even some of our downhole tools, they do out wear out more quickly, need to be replaced more frequently, so yeah, even actually even surface items like pumps, wear out more quickly under that higher pressure, so. Yeah, all in all, a shift to more gas, I think would help our would help our consumable demand.

Jeff Robertson

Thanks. And then just lastly, have you seen any change in any of the renewable type? Exposure that you have whether it's data centers with I think your cooling units or demand for a [random].

Neal Lux

Yeah, let me start with the offshore. So we, I think our offshore business is really eastern hemisphere, or southern, let's call it South America focused. So we have not seen a change. In fact, we've seen acceleration in the offshore again, I think part of that is oil and gas, part of that's defense, part of that is also the offshore wind, so no. No change there on the PowerGen side data centers we are still adding and still booking our coolers that that go into those applications. So, the [Powertron] which is our radiator for power applications you were still seeing a nice uptake there and we expect to expect that to continue through the year.

Jeff Robertson

Thank you.

D. Lyle Williams

Thanks Jeff.

Operator

Steve Ferrazzani, Sidoti.

Steve Ferrazzani

Morning everyone appreciate all the detail on the call. Wanted to ask about your how you can benefit from your geographical diversification in this environment. I mean, the expectation that you walk through it the US short cycle probably gets hit first, but you know when you hear the calls, certain markets that you're in are likely to hold up better. Can you talk about is there any way to target the stronger markets and you can't completely replace what you'll lose in a short cycle, but what you can do in that kind of environment.

Neal Lux

Yeah, great question. I think maybe first examples the Subsea business, right? I think there's, there have been times where, that, the longer cycle or Subsea just was out of favor and there's more focus on US land. I think we're seeing really the opposite now. We're seeing, really strong momentum. I think our bookings in Subsea was that we had the best bookings quarter in five quarters or so I think that was really encouraging.
So that that's part of, how we do it again if you think about our subsidy business typically it's eastern hemisphere related or South America so that that's going well we also, we're expanding our downhole business line into the Middle East, those efforts started, obviously a few years ago they're continuing, and we still see good results there.

D. Lyle Williams

Steve, I'll jump in. In addition to what we might see from the markets, I think there are cost and or tariff advantages that we can take advantage of with our geographic footprint from a manufacturing perspective. Clearly have a lot of manufacturing footprint in the US. And for months have been working on an effort to insource product that previously had been outsourced.
Through doing that we increase manufacturing utilization, which is great at this potentially softer time, but also can avoid some of the tariff impact.
And similarly we can use our international facilities like Neal mentioned on the call in order to avoid US facilities completely. So that's shifting supply chain where maybe components come in from high tariff countries. In the US to then be re-exported for international markets, we just skip the US step whether that's leveraging our facility in Saudi or in Canada. A product can head in there from international locations, be manufactured, assembled, tested, and then shipped out. So that international footprint is really something we're able to take advantage of here in this time of tariff-related uncertainty.

Steve Ferrazzani

He never knew the flexibility was going to be this useful I'm assuming but very helpful right now no doubt good to see you're ahead of it. Can I ask?

Neal Lux

Go ahead.

Steve Ferrazzani

I was going to ask about, look, steel price has been the most obvious one you can -- you can raise prices, but there's going to be a lag. Do you have any idea right now based on your 2Q guidance?
What the impact is from tariffs and is there any way to quantify that and there's a lot of moving parts to that. What the impact to you is in [Q2] based on your guidance from higher costs and tariffs.

Neal Lux

Yeah, I think the biggest impact will be valves, right? So we're we talked about the buyer structures I think that that's in our number so that is concerning for us and we we've implement we put that in our forecast.
The other areas where we've seen price increase I think couples you're right on the price you're going to have a lag when you when you raise price but we also have a lag of when the costs are going up because we did have, we do have some inventory we did have some orders I think we're hopeful that those balance and that you know any tariff impact that's out there we're going to recoup with either price or change in our supply chain.

Steve Ferrazzani

Okay, that's helpful. Last one for me and it said I guess maybe hopefully we don't run into this scenario. There is the event where you're building cash, but the window remains closed for an extended period in that event.
Do you just build is the plan to build cash or would you, would you look for alternate usage?

D. Lyle Williams

No, great question, and I think, as you recall in our framework that we've laid out, first half of our cash is going to go to net debt reduction. And when we restructure our debt last year, Steve, you'll remember that we left a decent chunk of cash on our revolver.
So the idea there is we not only reduce net debt, but we actually reduce absolute debt and save interest expense. So that half will go to paying down our revolver. If there's a reason why we can't buy back shares for some period of time, I think we continue to pile down the revolver that will lower net debt and ultimately open the window back up.
So I think we'll get the benefit of reduced interest expense if that happens, but really we believe we can get there with a leverage ratio on a more expedited basis.

Steve Ferrazzani

Perfect. Thanks everyone, appreciate it.

Operator

Dave Storms, Stonegate

Dave Storms

Good Morning everyone appreciate you taking my questions. Just want to start and apologies if I missed this, but assuming the tariff levels do wane a little bit over the coming months, how much of the demand do you think could be made up and how much of those orders, are just kind of gone?

D. Lyle Williams

Yeah, that's a great question. I think a big feature of what we're talking about, remember, is our Val's product line, and we will look at the valves that we primarily manufacture and source from China. The major supply chain for our competitors is also from China. So we feel that all of our competitors are seeing the same thing, and we hear about similar price increases and price actions. So I think what that means is we really have this buyer strike where buyers just aren't buying products.
At some point, the ultimate demand and then use rebounds, where things could be delayed more permanently is really call it capital spend by end users. So that's in a refinery or a Variperm project or on a pipeline, if that's deferred, then that demand just gets deferred. If it's maintenance or if it's depleting inventories, then I think we could see a rebound.
So a really positive move would be a decrease in those tariffs. I think as we look at the geopolitical macro and what's being said about trade policies, we're not expecting that. So I think what we expect is a longer run with these tariffs. Maybe they come down some, but still see a pretty high number, which gets back to Neal's comment about us looking at alternate sourcing strategies using other facilities to move in and mitigate the impact of tariffs and ultimately have a much lower cost basis.

Dave Storms

That's perfect. Thank you. And then it just kind of dovetailing off of that, what kind of competition are you seeing in finding those alternate sourcing of the supply lines? I got to imagine, kind of everyone has the same plan.

Neal Lux

We haven't seen, let's call it much competition for that. I think, we'd set up a lot of these supply lines, earlier, so we've, if you go back in time, Trump really introduced tariffs and duties, 2017. So we've been dealing with this for the last eight years or so.
Big push on our side is to is to have supply chain resiliency so I think we've built that in there maybe the what would be a little different was would be the assembly activities that I think that both Lyle and I have both mentioned, you know that's a little new and again that's more just to avoid the tariffs again which to me is ironic is that we added these tariffs and yet we're now pushing manufacturing outside the United States because of them so. I think they're just a terrible trade policy and hopefully we can fix that.

Dave Storms

So that's great. And then one more for me if I could just thinking about the customers and the buyer strike any sense finger in the wind, crystal ball question on how long they could hold out, kind of maybe how much track is in front of them, before there would be capitulation. Could it be a quarter, two quarters, two years.

Neal Lux

Not really sure, they don't keep [experience], I think over the last few years they've been more lean with inventories.
So I could see it, slowly move, but if the price remains high, they'll, it's not going to be a full capitulation. They're just going to buy the minimum of what they need, to get to get through, but I think if there once there's certainty around where the tariffs are and that they're not moving, yeah, I think they need to get back to business as usual.

Dave Storms

That's great, thank you very much and good luck you too.

Neal Lux

Thank you.

Operator

Eric Carlson.

Eric Carlson

Hey guys, good morning. I had a long list of questions that I kind of crossed off most of them as we went here, I guess, when I think about how you've kind of managed cash over the last few years and kind of the outlook here so going to generate close to kind of 100% of current market cap in cash over 2024 and 2025 and what did you say the net that level is that currently or as if I guess of [331]?

D. Lyle Williams

It's about $150 million -- so $148 million I think is the number.

Eric Carlson

Okay, $148 million, so basically the potential to get kind of that net debt down to $100 million to $115 million depending how the year plays out so.
Current market cap. Sorry, I'm doing quick math. You're, I mean, you're basically looking at trading by year end 3.2 times to 3.5 times EBITDA with the enterprise value under $300 million.
Maybe a little context, so 2020 you had negative $20 million of EBITDA and finished the year at $230 million of enterprise value. I'm doing quick math 2021, $20 million positive EBITDA ended the year with $275 million enterprise value, so not far off what kind of year end looks like and clearly significantly better. So maybe the question would be is how do you execute buybacks in a meaningful way.
Without maybe pushing market price too much and taking advantage of this while it lasts, can you source directly from some of the other large shareholders or the bondholders that still exist? Maybe talk me through execution of the buyback and maybe how that has happened so far.

D. Lyle Williams

Yeah, Eric, it's a great question and it's something that we, we're definitely focused on as we've seen since we announced our share buyback, our value has moved pretty materially in the market and being impacted recently by what's going on with trade and tariff policies and OPEC+.
So I think as we think about the way to do that, clearly being in the market could have an upward pressure on our stock price. I think if we, as we look at that though, we're trading at a pretty significant discount. You highlighted some of those metrics that are out there. I think we feel the same way.
So there's an opportunity to really move what's going on from a stock price perspective, move the amount of shares we buy back given the current stock price, and definitely something that we would love to take advantage of. There'll be some carefulness in what we do, but I would expect us to try to get out of the market and be there, especially when those windows open for us related to our net leverage ratio.

Neal Lux

Yeah, I mean, for our thinking to be north of 25% again this is our forward free cash flow yield at kind of the midpoint of our guidance that that's just seems like a ridiculous number, and so we think that there's a lot of value there. So even if the price were to double, there's still, 12.5% free cash yield is still it probably put us in the top quartile of peers or higher so.
I think the, what's frustrated us is the undervalue and again we need to get our story out and we've been doing that we're going to consistently do that we think there's more and more people that interest.
I think if you look at our track record of performance we've done what we've said we should do we've outperformed almost every index that that we're a part of if you're an invest you know portfolio manager and you're and you can compare us with the index like the Russell 2000 if that's where you're being measured, why wouldn't you be an FET? The values there, the performance is there, and ultimately I think what's really exciting for us is long term, we think there's a lot of growth here as well so it's a great combination and it's one that.
We're excited, and we're going to try to try to buy these shares as many as possible as we can, especially while the price of this is this cheap.

Eric Carlson

Yeah, agreed, so, and then maybe the last thing is in the context of long term, maybe the, obviously the cure for low prices is low prices and kind of, a headwind turning into a tailwind ultimately I mean what have you guys learned I know like when we.
Kind of came into 2023, built working capital a little bit in 2023. I mean, how have you guys changed from as headwinds turn to tailwinds and thinking about managing cash really kind of hammering home this return of capital story keeping leverage low, maybe just walk me through kind of as we turn the corner which will ultimately happen I mean how have you guys, change your mindset or yeah, as you plan for that and think about that, maybe just some color would be helpful.

Neal Lux

Yeah, no, I think if you go back to our origins where we began, I think, as a small cap company in a growing industry, we sought to grow EBITDA. That was the focus that's been the focus of our careers for many years. I think as we got into this cycle and we saw, changes.
We want to be cash focused we ultimately want to generate free cash flow so if the cycle begins to turn and we start to see growth we're going to have a high bar of returns for each of our businesses and we know we can achieve it but we want to be turning our working capital, very quickly and so we think about key measures, ones that we have internally are incremental return on incremental working capital. We want to get that, whatever working capital we add in a year, we want to have that back in in cash and so that's going to be a focus on the turn.
Our best businesses are going to get the. Capital are ones that don't achieve those results they're not going to and so that we're going to, we want to utilize our working capital which again is our biggest use of cash we want to do it in the most efficient way possible.

Eric Carlson

And then maybe the last thing on cash would be my last question would be, I know we've seen a few of the sale lease back transactions over the last few years. Is there anything out there potentially that could be a one-off cash generator really set you below that and that leverage show and open up a big window or?
To be determined just curious if there's anything that you could see in the short term to generate kind of a one-time cash flow.

D. Lyle Williams

Yeah, Eric, the teams have done a really good job over the last few years of turning our real estate, our dirt into capital that we could redeploy and use, and that's been very good. The amount of real estate that we have left is getting really pretty thin as far as what's available, and that's good news. We've now gotten our cash redeployed, our capital redeployed.
So definitely things that we look at is, are all of our assets generating appropriate returns and to the extent that they're not. It's a question that we ask ourselves is, should we monetize that and be able to put that cash to a more high return use? So definitely something we look at and we'll keep you updated if something pops loose.

Eric Carlson

Good, Thanks guys, appreciate it.

Operator

Thank you. At this time, I would not like to turn the conference back over to Neal Lux for closing remarks.

Neal Lux

Thanks, Gigi and thank you everyone for your support and participation on today's call. We look forward to our next meeting at the end of July to discuss our second quarter 2025 results.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.