GE Vernova (NYSE:GEV) Q3 2025 Earnings Call October 22, 2025 07:30 AM ET Speaker2Good day, ladies and gentlemen, and welcome to GE Vernova's conference call to discuss the acquisition of Prolec GE, as well as GE Vernova's third quarter financial results and outlook. At this time, all participants are in a listen-only mode. My name is Liz, and I will be your conference coordinator today. If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please ...

Financial Data and Key Metrics Changes - The company reported a 12% increase in revenue, with equipment revenue growing by 18% and services revenue increasing by 6% [22][20] - Adjusted EBITDA rose over 25% to $770 million, with an adjusted EBITDA margin expansion of 80 basis points [23][20] - The total backlog reached $129 billion, with equipment backlog growing from $45 billion to $50 billion in Q2 [17][18] Business Line Data and Key Metrics Changes - Power orders grew by 44%, driven by gas power equipment nearly tripling year over year [26] - Wind orders decreased by 5% year over year, primarily due to lower onshore wind equipment orders outside of North America [30] - Electrification orders remained strong at approximately $3.3 billion, although total orders decreased by 31% year over year due to large orders recorded in the previous year [33] Market Data and Key Metrics Changes - The company signed nine gigawatts of new gas equipment contracts in Q2, with a total backlog in slot reservation agreements growing to 55 gigawatts [6][17] - Demand for data centers remains strong, with nearly $500 million in orders in the first half of 2025 [10] - The Middle East market is accelerating, evidenced by a significant agreement for synchronous condensers [9] Company Strategy and Development Direction - The company is focusing on robotics and automation to improve productivity and efficiency in operations [13] - Strategic acquisitions are being pursued to enhance capabilities, such as the acquisition of Woodward's gas turbine parts business [15] - The company is investing in electrification and grid solutions, anticipating significant growth in these areas [5][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential driven by electrification and power demand, with expectations for continued margin expansion [5][41] - The company is navigating challenges in the European market but sees strong momentum in other regions [10][11] - Management highlighted the importance of maintaining financial strength while investing in growth opportunities [14][25] Other Important Information - The company plans to incur restructuring costs of approximately $250 million to $275 million over the next twelve months to improve efficiency [18] - Free cash flow generation remains strong, with approximately $200 million in Q2 and a total of $1.2 billion in the first half of 2025 [23][25] - The company ended Q2 with a cash balance of nearly $8 billion and no debt, allowing for continued investment in growth [25] Q&A Session All Questions and Answers Question: Can you provide more color on the demand outlook for the electrification segment, particularly regarding regional differences? - Management noted that while Europe may be losing steam, Asia is picking up, and there is a need to drive variable cost productivity due to decelerating pricing [46][48] Question: What are the pricing dynamics for the Gas Power business, particularly on the service side? - Management indicated that there is a price-up environment in services, which will materialize in the income statement over the next 12 to 24 months [51][52] Question: Can you clarify the dynamics behind the new equipment orders in power and the revenue increase? - Management explained that they booked nine gigawatts of orders, with a positive pricing dynamic contributing to the revenue increase [56][57] Question: What is the outlook for capacity in the gas segment and the impact of the Pennsylvania plant announcement? - Management stated that they aim to reach a 20-gigawatt run rate by the second half of 2026 and are focused on backlog growth [62][64] Question: What are the implications of the recent tax bill on the power business? - Management observed an acceleration of activity in wind and solar, with a growing pipeline for gas demand as well [81][82] Question: Why are gross margins declining, particularly in service gross margins? - Management attributed the decline to a mix issue between equipment and services, indicating a positive future outlook as new equipment units are delivered [87]

Financial Data and Key Metrics Changes - GE Vernova has a strong balance sheet with over $8 billion in cash and no debt, positioning the company well for growth [6] - The power business is expected to maintain EBITDA margins of 13-14% this year, with a floor of 16% by 2028, excluding new pricing trends [31][32] Business Line Data and Key Metrics Changes - The gas business is experiencing strong demand, with a backlog of 50 gigawatts, expected to grow to at least 60 gigawatts by the end of the year [69] - The electrification segment is the fastest-growing business, projected to surpass wind in revenue size within the next year [22] - Wind business currently has the softest market, but operational improvements are being made to enhance service offerings [18][50] Market Data and Key Metrics Changes - The demand for gas equipment is strong globally, particularly in Asia and the Middle East, with significant opportunities in countries like Saudi Arabia [24][64] - The European market is facing affordability challenges, impacting pricing dynamics in the grid business [44] Company Strategy and Development Direction - GE Vernova aims to leverage its unique position in the market, focusing on the electrification of the grid and the integration of various energy sources [5][20] - The company is committed to investing in R&D, with a 25% increase in the budget to support future growth [74] Management's Comments on Operating Environment and Future Outlook - Management is optimistic about the growth potential in the electrification market and the role of gas and nuclear in the energy transition [12][54] - The geopolitical landscape is seen as an opportunity for GE Vernova to address trade imbalances and strengthen its market position [62] Other Important Information - The company is actively working on carbon capture technologies and low-carbon hydrogen solutions to support energy transition goals [57][59] - GE Vernova is focusing on improving operational efficiencies within its existing manufacturing footprint to meet growing demand without overextending capacity [29][72] Q&A Session Summary Question: Are GE Vernova and/or competitors requiring reservation fees for gas turbine orders? If so, how meaningful are the fees? - GE Vernova requires an average of 20% of the gas turbine contract price as a deposit for slot reservation agreements [56] Question: What are GE Vernova's key opportunities and innovations in carbon capture and low carbon hydrogen? - The company is investing in direct air capture technology and building a new gas plant in the UK with carbon capture capabilities [57][58] Question: How is GE Vernova dealing with tariff impacts? - The company is implementing cost reduction measures and negotiating contractual provisions to manage tariff risks effectively [37][40] Question: How does GE Vernova view its competitive positioning in HVDC within the grid? - The equipment backlog in the grid business has grown significantly, with a focus on HVDC projects in North America [60][61] Question: Following new deals in the GCC, is the region becoming more important for GE Vernova? - The Middle East is strategically important for data centers and chip manufacturing, with significant opportunities for GE Vernova [64][65]