NOV(NOV) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2025, NOV reported revenues of $2.1 billion, a 2% decrease year over year, with net income of$ 73 million or $0.19 per fully diluted share [4][14] - Adjusted EBITDA was$ 252 million, representing a 5% increase, with EBITDA margins expanding by 80 basis points to 12% [5][14] - The company generated $135 million in cash from operations and$ 51 million in free cash flow, with a cash balance increase of $689 million over the last twelve months [15][16] Business Line Data and Key Metrics Changes - The Energy Products and Services segment generated revenue of$ 992 million, a 2% decrease year over year, with EBITDA declining to $145 million or 14.6% of sales [16][18] - The Energy Equipment segment reported revenue of$ 1.15 billion, down 3% from the previous year, but EBITDA increased by $46 million to$ 165 million, resulting in a margin of 14.4% [21][24] - Capital equipment sales accounted for 57% of the Energy Equipment segment's revenues, with bookings for Q1 at $437 million, a 12% year-over-year increase [22][24] Market Data and Key Metrics Changes - International revenues decreased from 65% to 61% of total revenues, attributed to seasonal factors, but the international market is expected to grow as a share of the business [60] - North American activity is anticipated to decline in the double-digit range, while international markets, particularly in unconventional resources, are expected to perform better [60][68] Company Strategy and Development Direction - The company is focusing on operational efficiencies and careful cost management in light of emerging macroeconomic headwinds [6][9] - NOV is well-positioned for long-term growth, emphasizing the importance of deepwater and international shale production as future sources of incremental oil supply [11][41] - The company is actively diversifying supply chains to mitigate tariff impacts and is leveraging its U.S. manufacturing footprint to enhance competitiveness [30][39] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the geopolitical and macroeconomic environment, anticipating challenges in the second half of 2025 [29][41] - The outlook for offshore production remains robust, with expectations for more awards for FPSOs in 2025 compared to previous years [24][50] - Management highlighted the importance of technological advancements in improving drilling and production efficiencies, particularly in deepwater projects [45][46] Other Important Information - The company plans to pay a supplemental dividend of around$ 80 million, subject to Board approval, to align returns to 50% of excess free cash flow for 2024 [15] - NOV's backlog of capital equipment and projects has grown steadily, with margins improving significantly over the past four years [8][9] Q&A Session Summary Question: Guidance on 2025 margins relative to 2024 - Management indicated that EBITDA margins are expected to be flattish from the first half to the second half of 2025, with modest growth anticipated [56] Question: International revenues decrease - Management acknowledged a seasonal pullback but expects international revenues to grow as a share of the business going forward [60] Question: Capital equipment order activity - Management noted strong confidence in the offshore deepwater market, with potential FPSO awards in 2025, despite some macroeconomic uncertainties [66][68] Question: Tariff mitigation efforts and CapEx - Most mitigation plans do not require significant CapEx, focusing instead on operational efficiency and vendor collaboration [80] Question: M&A opportunities in the current economic environment - Management remains open to opportunistic M&A but emphasized the need for deals to make industrial sense and provide high returns [86][89]