Baker Hughes Co. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Strong 2024 Results: Exceeded EBITDA guidance for the eighth consecutive quarter, setting new quarterly and annual records for revenue, free cash flow, and adjusted measures. Adjusted EPS increased 37% from Q4 2023 and 47% for the full year.
• Orders and Awards: Industrial and energy technology orders were strong in 2024, with $3.8 billion in Q4. Notable awards included LNG projects, gas infrastructure in Saudi Arabia, and new energy orders at $1.3 billion (70% YoY growth).
• Margin Expansion: Significant margin improvement across segments. IET adjusted EBITDA margin was 17.8% in Q4. OFSE margin expanded 1.5 percentage points in 2024.
• Innovation and Technology: Advancements in gas turbine technology, LNG equipment, oilfield services innovations (e.g., flexible pipe in Brazil), and digital solutions in gas technology services (e.g., GTS digital orders up 60% in 2024).

Segment Performance

• Industrial and Energy Technology (IET): In the fourth quarter, IET booked $3.8 billion in orders. For the full year 2024, IET secured $13 billion of orders with a book-to-bill of 1.1 times, resulting in near record RPO levels of $30.1 billion. Q4 adjusted EBITDA for IET was up 38% year-over-year. Full-year IET EBITDA approached $2.1 billion. Revenue contribution: IET accounted for $13 billion of the $28.2 billion total orders in 2024.
• Oilfield Services & Equipment (OFSE): Booked strong orders in flexibles during Q4, with full-year 2024 orders at $3.1 billion. OFSE EBITDA was $755 million in Q4 and $2.9 billion full-year, with a margin of 18.4%. Full-year 2024 OFSE margin expanded 1.5 percentage points to 18.4%.

Guidance

• Full-Year 2025: Expected total company revenue ~$27.75 billion and EBITDA ~$4.95 billion. IET orders expected $12.5-$14.5 billion. OFSE revenue forecast $15 billion, EBITDA $3 billion.
• First Quarter 2025: Expected revenues $6.5 billion and total EBITDA ~$1.02 billion. IET EBITDA ~$460 million, OFSE EBITDA ~$645 million.
• New Energy: Target $1.4-$1.6 billion in new energy orders in 2025, with confidence in 2030 target of $6-$7 billion.

Risks

• Market Uncertainties: Economic and geopolitical uncertainties affecting global growth could impact order and revenue trends.
• Supply Chain and Cost Pressures: Persistent supply chain issues and material cost inflation could affect pricing and margins.
• Regulatory Changes: Uncertainty in clean technology policies in the U.S. could impact new energy order execution.

Question and Answer

Q: Arun Jayaram - On 2025 IET order outlook and Gas Tech orders.

A: Lorenzo Simonelli - Discussed IET orders including LNG, gas infrastructure, and new energy, stating $13.5 billion midpoint for 2025 orders with GTE orders well in reach.

Q: David Anderson - On OFSE mix and 2025 guidance.

A: Lorenzo Simonelli - Talked about OFSE spending trends, noting North America spending down mid-single digits, international markets flat to down, but offshore and certain regions showing positive activity.

Q: Saurabh Pant - On Gas Tech Services growth drivers.

A: Lorenzo Simonelli - Highlighted mix (LNG installed base growth), upgrades, and digital as key drivers, with mix being the biggest driver.

Q: Stephen Gengaro - On OFSE and IET margin targets.

A: Nancy Buese - Discussed margin improvement through self-help initiatives and transformation, with OFSE margin up 1.5 points in 2024 and IET working towards 20% margin by 2026.

Q: Neil Mehta - On capital returns and M&A.

A: Nancy Buese - Spoke about returning 60%-80% of free cash flow to shareholders via dividends and buybacks, and opportunistic M&A in tuck-in and new energy areas.

Q: Scott Gruber - On free cash flow conversion.

A: Nancy Buese - Discussed working capital efficiency, tax management, and margin improvement as drivers of free cash flow conversion within 45%-50% target.

Q: Kurt Hallead - On IET's business mix by 2030.

A: Lorenzo Simonelli - Stated IET will grow as a larger portion of Baker Hughes over time, with both segments critical but IET's addressable market providing growth potential.