Baker Hughes(BKR) - 2024 Q1 - Quarterly Results

Q1 2024 Performance Overview Baker Hughes reported strong Q1 2024 financial results, marked by revenue and earnings growth, strategic contract wins, and shareholder returns Financial Highlights Baker Hughes achieved strong Q1 2024 financial performance with 12% revenue growth, 21% adjusted EBITDA growth, and a 50% increase in adjusted diluted EPS Q1 2024 Key Financial Metrics | Metric | Q1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | $6.4B | +12% | | Net Income | $455M | -21% | | Adjusted Net Income* | $429M | +48% | | Adjusted EBITDA* | $943M | +21% | | GAAP Diluted EPS | $0.45 | -20% | | Adjusted Diluted EPS* | $0.43 | +50% | | Cash Flow from Operations | $784M | +70% | | Free Cash Flow* | $502M | >100% | - Total orders for the quarter were $6.5 billion, a decrease of 14% year-over-year, primarily driven by the timing of large orders in the prior year[3][10] - The company returned $368 million to shareholders, which included $158 million in share repurchases and a quarterly dividend increase to $0.21 per share, an 11% year-over-year increase[5][7] Management Commentary CEO Lorenzo Simonelli affirmed a strong Q1 2024, positioning the company for full-year guidance, driven by positive order momentum and commitment to shareholder returns - The company is on track to achieve its full-year guidance based on the solid Q1 results[6] - Strong orders in the Industrial & Energy Technology (IET) segment, totaling $2.9 billion, were a key highlight, including significant awards from Aramco and Black & Veatch for LNG projects[7] - The company remains on track to return 60% - 80% of free cash flow to shareholders[7] Business & Operational Highlights The company secured significant multi-year contracts across OFSE and IET segments, including major awards for gas technology equipment and climate technology solutions - OFSE Segment Wins: - Secured two multi-year awards from Petrobras for integrated well construction and artificial lift services in Brazil - Saw strong demand for its Lucida advanced rotary steerable service with three contracts in North American land[13][14] - IET Segment Wins: - Awarded a major contract by Worley/Aramco to supply 17 compressor trains for Saudi Arabia's Master Gas System 3 project - Secured an order from Black & Veatch to supply electric-driven liquefaction technology for the Cedar LNG project in Canada - Won three orders to support natural gas field development in Abu Dhabi[14][15][17] - Climate Technology Solutions (CTS) Momentum: - Received an award from Snam for hydrogen-ready NovaLT12™ turbines for a new gas compressor station in Italy - Booked a contract to supply zero-emissions integrated compressor technology to TotalEnergies in Argentina[18] Consolidated Financial Results The company's consolidated financial results for Q1 2024 show strong year-over-year growth in revenue and operating income, alongside healthy cash flow generation Overall Performance Analysis Consolidated revenue grew 12% year-over-year to $6.4 billion, with adjusted operating income increasing 29% due to volume, pricing, and cost-out initiatives Consolidated Revenue & Operating Income (in millions) | Metric | Q1 2024 | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | | Total Revenue | $6,418 | +12% | -6% | | Total Segment Operating Income | $752 | +23% | -17% | | Adjusted Operating Income* | $660 | +29% | -19% | | Adjusted EBITDA* | $943 | +21% | -14% | - The year-over-year increase in adjusted operating income and EBITDA was driven by volume and pricing in both segments and structural cost-out initiatives[26] - The sequential decrease in adjusted operating income and EBITDA was driven by lower volume and negative mix in both IET and OFSE[26] - The company's total book-to-bill ratio in the quarter was 1.0, while the IET segment's book-to-bill was 1.1[22] Other Financial Items The company generated $784 million in operating cash flow and $502 million in free cash flow, with Remaining Performance Obligations at $32.7 billion Q1 2024 Cash Flow & Capex (in millions) | Metric | Q1 2024 | | :--- | :--- | | Cash Flow from Operating Activities | $784 | | Capital Expenditures, net | $282 | | Free Cash Flow* | $502 | Remaining Performance Obligations (RPO) (in billions) | RPO Category | Q1 2024 | QoQ Change | | :--- | :--- | :--- | | Total RPO | $32.7 | -$0.8 | | OFSE RPO | $3.4 | -5% | | IET RPO | $29.3 | -2% | Segment Performance Both OFSE and IET segments demonstrated strong year-over-year performance, with OFSE driven by international markets and IET by gas technology equipment Oilfield Services & Equipment (OFSE) The OFSE segment reported $3.8 billion in revenue, up 6% year-over-year driven by international markets, despite sequential declines in revenue and operating income OFSE Q1 2024 Performance (in millions) | Metric | Q1 2024 | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | | Orders | $3,624 | -12% | -6% | | Revenue | $3,783 | +6% | -4% | | Operating Income | $422 | +14% | -14% | | EBITDA* | $644 | +11% | -9% | - Year-over-year revenue growth was driven by international markets (+8%), while North America revenue was flat. The Europe/CIS/Sub-Saharan Africa region saw the strongest growth at 29% YoY[34][36] - The sequential decrease in operating income and EBITDA was primarily driven by lower volume and negative mix[37] Industrial & Energy Technology (IET) The IET segment achieved strong year-over-year growth with revenue up 23% to $2.6 billion and operating income up 37%, primarily driven by Gas Technology Equipment IET Q1 2024 Performance (in millions) | Metric | Q1 2024 | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | | Orders | $2,918 | -17% | -4% | | Revenue | $2,634 | +23% | -8% | | Operating Income | $330 | +37% | -20% | | EBITDA* | $386 | +30% | -17% | - The year-over-year increase in revenue was primarily driven by Gas Technology Equipment, which grew 46% to $1.21 billion[43][47] - The year-over-year increase in operating income and EBITDA was driven by higher volume, pricing, and cost-out initiatives, partially offset by unfavorable mix from higher equipment growth, inflation, and increased R&D spending[48] - Orders decreased 17% year-over-year, mainly due to the timing of Gas Technology Equipment orders, which were down 28% compared to a strong prior-year period[46] Financial Statements & Reconciliations This section provides detailed reconciliations of GAAP to non-GAAP financial measures and presents the unaudited condensed consolidated GAAP financial statements Reconciliation of GAAP to Non-GAAP Measures This section details the reconciliation of GAAP financial results to non-GAAP measures, including adjusted operating income, EBITDA, and free cash flow - Table 1a reconciles GAAP Operating Income ($653 million) to Adjusted Operating Income ($660 million) by excluding items like restructuring and impairment charges[52] - Table 1b reconciles Net Income Attributable to Baker Hughes ($455 million) to EBITDA ($936 million) and Adjusted EBITDA ($943 million)[53][54] - Table 1d reconciles Net Cash Flows from Operating Activities ($784 million) to Free Cash Flow ($502 million) by subtracting capital expenditures[59] GAAP Financial Statements The report presents unaudited condensed consolidated GAAP financial statements, including Statements of Income, Financial Position, and Cash Flows for Q1 2024 - The Condensed Consolidated Statements of Income show key metrics like Revenue, Operating Income, and Net Income[64] - The Condensed Consolidated Statements of Financial Position detail the company's assets, liabilities, and equity as of March 31, 2024, compared to December 31, 2023[66] - The Condensed Consolidated Statements of Cash Flows outline the cash generated or used in operating, investing, and financing activities during the quarter[68] Supplemental Information This section outlines forward-looking statements and key risk factors that could materially impact the company's future financial results and operations Forward-Looking Statements & Risk Factors The report includes forward-looking statements subject to risks such as execution challenges, market volatility, economic instability, and geopolitical conflicts - The document includes forward-looking statements concerning future circumstances and results, which are subject to significant risks and uncertainties[72] - Identified risk factors include: - Execution Risk: Ability to convert orders and RPO to revenue - Market Conditions: Volatility in oil and gas prices and demand - Economic/Political Conditions: Impact of worldwide inflation, credit availability, and sanctions - Geopolitical Risks: Conflicts in regions like Russia/Ukraine and the Middle East[73][78][79][75]