NOV(NOV) - 2024 Q2 - Quarterly Results

Second Quarter 2024 Financial Performance NOV Inc. reported strong financial results for the second quarter of 2024, with a 6% year-over-year revenue increase to $2.22 billion, net income rising $71 million to $226 million, and Adjusted EBITDA growing 15% to $281 million, alongside substantial free cash flow of $350 million and a high book-to-bill ratio of 177% Key Financial Highlights NOV Inc. reported strong financial results for the second quarter of 2024, with a 6% year-over-year revenue increase to $2.22 billion, net income rising $71 million to $226 million, and Adjusted EBITDA growing 15% to $281 million, alongside substantial free cash flow of $350 million and a high book-to-bill ratio of 177% Q2 2024 Key Financial Metrics | Metric | Q2 2024 | Change (YoY) | | :--- | :--- | :--- | | Revenue | $2.22 billion | +6% | | Net Income | $226 million | +$71 million | | Diluted EPS | $0.57 | +$0.18 | | Adjusted EBITDA | $281 million | +15% | | Cash Flow from Operations | $432 million | - | | Free Cash Flow | $350 million | - | - The company achieved a strong book-to-bill ratio of 177% on new orders of $977 million during the quarter[6] - A net credit of $118 million within 'Other Items' significantly impacted operating profit and net income[3] Management Commentary Chairman, President, and CEO Clay Williams highlighted the company's solid execution, which led to improved profitability and cash flow, with Adjusted EBITDA margin reaching its highest point since 2015, noting that strong international and offshore growth, driven by new technology adoption, is offsetting weaker North American activity, and the growing backlog and improved margins underpin the company's commitment to returning excess free cash flow to shareholders - Adjusted EBITDA margin of 12.7% was the highest since 2015[4] - Strong international growth and market share gains are offsetting declining activity in North America[5] - The company accelerated its return of capital to shareholders, totaling $67 million in Q2 through share repurchases and an increased dividend[6] Segment Performance The company's Energy Products and Services segment saw revenue growth driven by international demand but faced declining profitability, while the Energy Equipment segment experienced significant revenue and profit growth, boosted by a divestiture and strong order intake Energy Products and Services The Energy Products and Services segment reported a 2% year-over-year revenue increase to $1.05 billion, driven by strong international and offshore demand, however, profitability declined, with operating profit falling to $128 million and Adjusted EBITDA decreasing to $184 million, primarily due to a less favorable sales mix Energy Products and Services Q2 2024 Performance | Metric | Q2 2024 | Change (YoY) | | :--- | :--- | :--- | | Revenue | $1,050 million | +2% | | Operating Profit | $128 million | -$28 million | | Adjusted EBITDA | $184 million | -$14 million | | Adjusted EBITDA Margin | 17.5% | - | - Revenue improvement was driven by strong demand in international and offshore markets, which more than offset declining North American activity[7] Energy Equipment The Energy Equipment segment's revenue grew 8% year-over-year to $1.204 billion, with operating profit surging to $232 million, significantly boosted by a $119 million net credit from a business divestiture, and Adjusted EBITDA increasing by $43 million to $142 million, as the segment experienced very strong order intake, with new orders of $977 million, resulting in a 177% book-to-bill ratio and growing the capital equipment backlog to $4.331 billion Energy Equipment Q2 2024 Performance | Metric | Q2 2024 | Change (YoY) | | :--- | :--- | :--- | | Revenue | $1,204 million | +8% | | Operating Profit | $232 million | +$151 million | | Adjusted EBITDA | $142 million | +$43 million | | Adjusted EBITDA Margin | 11.8% | - | Energy Equipment Orders and Backlog | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | New Orders | $977 million | $511 million | | Book-to-Bill | 177% | 101% | | Capital Equipment Backlog | $4,331 million | $3,859 million | - Profitability was positively impacted by a $119 million net credit from the divestiture of its Pole Products business[8] Financial Outlook NOV anticipates flat to low-single-digit year-over-year revenue growth for Q3 2024, with Adjusted EBITDA between $270 million and $305 million, and projects low- to mid-single-digit revenue growth and Adjusted EBITDA in the range of $1.10 billion to $1.18 billion for the full year 2024 Q3 and Full Year 2024 Outlook NOV anticipates flat to low-single-digit year-over-year revenue growth for the third quarter of 2024, with Adjusted EBITDA expected to be between $270 million and $305 million, and for the full year 2024, the company projects low- to mid-single-digit revenue growth and Adjusted EBITDA in the range of $1.10 billion to $1.18 billion Q3 2024 Guidance | Metric | Guidance | | :--- | :--- | | Consolidated Revenues (YoY) | Flat to up low-single digit % | | Adjusted EBITDA | $270 million - $305 million | Full Year 2024 Guidance | Metric | Guidance | | :--- | :--- | | Consolidated Revenue Growth | Low- to mid-single digit % | | Adjusted EBITDA | $1.10 billion - $1.18 billion | Corporate Information and Financial Position NOV demonstrated a strong commitment to shareholder returns through share repurchases and increased dividends, while maintaining a robust balance sheet with significant cash and liquidity Capital Allocation and Shareholder Returns During the second quarter, NOV repurchased 2.0 million shares for $37 million and increased its base dividend by 50%, reiterating its policy to return at least 50% of Excess Free Cash Flow to shareholders through a combination of dividends and opportunistic stock buybacks - Repurchased 2.0 million shares of common stock at an average price of $18.50 per share[12] - Increased the base dividend by 50% during the quarter[12] - The company plans to return at least 50% of Excess Free Cash Flow to shareholders annually[12] Balance Sheet and Liquidity As of June 30, 2024, NOV maintained a solid financial position with $827 million in cash and cash equivalents, total debt of $1.75 billion, and significant liquidity with $2.00 billion available on its primary revolving credit facility Liquidity Position as of June 30, 2024 | Item | Amount | | :--- | :--- | | Cash and cash equivalents | $827 million | | Total debt | $1.75 billion | | Availability on revolving credit facility | $2.00 billion | Significant Achievements NOV secured key contracts and achieved significant operational milestones in Q2 2024, including framework agreements for Downhole Broadband Solutions, orders for wind towers and WTIV designs, and successful deployments of advanced drilling and completion technologies, demonstrating broad technological adoption and market penetration Key Operational and Technological Highlights NOV secured several key contracts and achieved significant operational milestones in Q2 2024, including a framework agreement to deploy its Downhole Broadband Solutions in the North Sea, an order for 300 wind towers, and a follow-up order for its seventh wind turbine installation vessel design, with successful deployments of its iNOVaTHERM™ system in Angola, advanced completion tools in North America and the Middle East, and its TerraMAX™ coiled tubing BHA in the United States, demonstrating broad technological adoption and market penetration - Signed a framework agreement with a major Norwegian operator to deploy Downhole Broadband Solutions (DBS) wired drill pipe technology across all the operator's North Sea rigs[15] - Received an order for 300 wind towers from a major turbine manufacturer and subsequently acquired the remaining minority interest in its Keystone Tower Systems operation[16] - Secured a follow-up order for its seventh proprietary NG-20000 wind turbine installation vessel (WTIV) design for a major European vessel owner[17] - Won a significant project for its iNOVaTHERM™ drill cuttings disposal system in Angola, marking its initial deployment for a major operator in the region[18] - Deployed a full complement of its latest BHA technologies to help a producer set a new drilling speed record for a 3-mile lateral well in the Bakken[20][21] Financial Statements NOV's financial statements for Q2 2024 show significant year-over-year improvements in revenue, operating profit, and net income, a stable balance sheet with increased equity and reduced liabilities, and a strong positive shift in cash flow from operations Consolidated Statements of Income For the three months ended June 30, 2024, NOV reported total revenues of $2.216 billion, up from $2.093 billion in the prior-year period, with operating profit at $313 million, a significant increase from $181 million in Q2 2023, and net income attributable to the company rising to $226 million, or $0.57 per diluted share, compared to $155 million, or $0.39 per diluted share, in the same quarter last year Q2 2024 vs Q2 2023 Income Statement Highlights (in millions) | Account | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Revenue | $2,216 | $2,093 | | Gross Profit | $590 | $457 | | Operating Profit | $313 | $181 | | Net Income Attributable to Company | $226 | $155 | Consolidated Balance Sheets As of June 30, 2024, NOV's total assets were $11.297 billion, nearly unchanged from December 31, 2023, while total liabilities decreased to $4.865 billion from $5.052 billion, and total stockholders' equity increased to $6.432 billion from $6.242 billion over the same period, with cash and cash equivalents standing at $827 million Balance Sheet Summary (in millions) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $827 | $816 | | Total Current Assets | $5,844 | $5,840 | | Total Assets | $11,297 | $11,294 | | Total Liabilities | $4,865 | $5,052 | | Total Stockholders' Equity | $6,432 | $6,242 | Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash provided by operating activities was $354 million, a significant improvement from the $274 million used in the same period of 2023, with net cash used in investing activities at $226 million, primarily due to business acquisitions, and financing activities using $113 million, reflecting debt repayments, dividends, and share repurchases, ending the period with cash and cash equivalents at $827 million Six Months Ended June 30 Cash Flow Summary (in millions) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $354 | $(274) | | Net cash provided by (used in) investing activities | $(226) | $(128) | | Net cash used in financing activities | $(113) | $(73) | | Cash and cash equivalents, end of period | $827 | $592 | Non-GAAP Reconciliations NOV provides reconciliations for key non-GAAP financial measures, detailing the calculation of free cash flow from operating activities and the adjustments made to reconcile GAAP net income to Adjusted EBITDA by segment Reconciliation of Cash Flows from Operating Activities to Free Cash Flow NOV generated $350 million in free cash flow for the second quarter of 2024, calculated by taking the $432 million in cash flow from operating activities and subtracting $82 million in capital expenditures, with free cash flow for the first six months of 2024 at $203 million Free Cash Flow Reconciliation (in millions) | Item | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash flows from operating activities | $432 | $354 | | Capital expenditures | $(82) | $(151) | | Free cash flow | $350 | $203 | Reconciliation of Adjusted EBITDA to Net Income For Q2 2024, NOV's total Adjusted EBITDA was $281 million, reconciled from a GAAP net income of $226 million, with key adjustments including adding back depreciation and amortization ($86 million), provision for income taxes ($70 million), and net interest expense, while subtracting a net credit of $118 million from 'Other items', primarily related to a business divestiture Adjusted EBITDA by Segment - Q2 2024 (in millions) | Segment | Adjusted EBITDA | | :--- | :--- | | Energy Products and Services | $184 | | Energy Equipment | $142 | | Eliminations and corporate costs | $(45) | | Total Adjusted EBITDA | $281 | - The reconciliation from GAAP Net Income ($226M) to Adjusted EBITDA ($281M) for Q2 2024 includes major adjustments for 'Other items, net' ($(118)M), Depreciation & Amortization ($86M), and Provision for income taxes ($70M)[44]