Baker Hughes(BKR) - 2025 FY - Earnings Call Transcript

Financial Data and Key Metrics Changes - Baker Hughes has nearly doubled EBITDA over the past five years, with a margin expansion of almost 600 basis points [6][8] - The company is targeting total margins of 20% by 2028, an increase of nearly 300 basis points from the 2025 implied guidance [17][19] - IET segment is expected to account for 48% of total revenues in 2025, with IET margins projected to be above 18% [6][10] Business Line Data and Key Metrics Changes - OFSE revenue is generated over 70% internationally, with offshore contributing approximately 40% of segment revenue [4] - IET margins have expanded despite a less favorable mix, with gas technology equipment margins up more than 9 percentage points since the start of Horizon One [10][11] - The deployment of the Baker Hughes Business System has driven more than a 13 percentage point improvement in SSPS margin since 2022 [11] Market Data and Key Metrics Changes - The company sees positive tailwinds in LNG, gas infrastructure, and distributed power solutions, contributing to the confidence in achieving $40 billion of IET orders over the next three years [18][25] - The demand for data centers is increasing, which is expected to drive growth in distributed power generation [25] Company Strategy and Development Direction - The Free Horizon Strategy aims to transform Baker Hughes into a differentiated energy and industrial technology company, focusing on sustained growth and durable earnings [2][3] - Horizon Two (2026-2028) will focus on scaling profitability and deepening the industrial footprint, with a goal of achieving 20% IET margins by 2026 [8][17] - The Chart Industries acquisition is expected to accelerate strategic progress and broaden exposure across core structural growth markets [15][20] Management's Comments on Operating Environment and Future Outlook - Management emphasizes the importance of AI and digital technologies in driving efficiency and enhancing customer outcomes [8][22] - The company is confident in the growth of natural gas in the energy mix and sees significant opportunities from the Chart acquisition [23] Other Important Information - Baker Hughes has generated over $2.5 billion in cash proceeds from strategic actions since the merger in 2017 [16] - The company aims to raise at least $1 billion from non-core asset sales to achieve leverage targets [19] Q&A Session Summary Question: Understanding the $40 billion IET orders over the next three years - Management highlighted that several end markets, including LNG and data centers, are expected to see growth, providing confidence in the $40 billion target [25] Question: Capacity increase in GTE with the same footprint - Management explained that the increase is due to the application of the Baker Hughes Business System, which allows for greater efficiency without significant CapEx [27] Question: Efficiency expectations from the Chart acquisition - Management confirmed that improving margin outlook at Chart is a key driver for the acquisition, leveraging the Baker Hughes Business System for operational consistency [28]