GE Vernova (NYSE:GEV) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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....Full Transcript
OPERATOR
As
a reminder, this conference is being recorded. I would now like to turn
the program over to your host for today's conference, Michael Lapidis,
Vice President of Investor Relations. Please proceed.
Michael Lapidis, Vice President of Investor Relations
Thank
you. Welcome to GE Vernova's second quarter 2026 earnings call. I'm
joined today by our CEO, Scott Strazik, and CFO, Ken Parks. Our
conference call remarks will include both GAAP and non-GAAP financial
results. Reconciliations between GAAP and non-GAAP measures can be found
in today's Form 10-Q, press release, and the presentation slides, all
of which are available on our website. Please note that unless otherwise
specified, our year-over-year commentary or variances on orders,
revenue, adjusted segment EBITDA, and margin discussed during our
prepared remarks are on an organic basis, which includes the removal of
the impact of our Prolec GE acquisition. We will make forward-looking
statements about our performance. These statements are based on how we
see things today. While we may elect to update these forward-looking
statements at some point in the future, we do not undertake any
obligation to do so as described in our SEC filings. Actual results may
differ materially due to risks and uncertainties. With that, I hand the
call over to Scott.
Scott Strazik, Chief Executive Officer
Thank
you, Michael. Good morning, and welcome to GE Vernova's 2Q26 earnings
call. Our team is executing well as the demand for our solutions in
power and electrification accelerates. In 2Q, our equipment orders more
than doubled and service orders grew 15%. Our total backlog has reached
$176 billion with improving margins. This is up $13 billion from last
quarter and is on track to reach $200 billion in ’27. The long-cycle
electric power industry is in the early stages of a multi-decade growth
opportunity and we are well positioned to create substantial value.
Let
me walk through the demand environment across our three segments. In
Power, we continue to see strong global demand for our equipment and
services. In Gas Power, we shipped 3 gigawatts while signing 20
gigawatts of orders and slot reservation agreements in the quarter in
countries like the U.S., Brazil, and Qatar to grow our total gigawatts
under contract from 100 to 116 gigawatts sequentially. This includes
orders for 52 heavy-duty units and 61 aeroderivatives in the quarter.
More
than half of the gigawatts that are now under contract are for our
largest, most efficient HA turbines, units expected to run baseload and
provide substantial services growth for us in the next decade. Backlog
grew from 44 to 53 gigawatts and SRAs increased from 56 to 63 gigawatts
for our total gigawatts under contract. Demand remains diverse with
approximately 100 customers in 26 different countries, of which
approximately 80% are traditional customers and 20% are for data
centers.
We now expect at least 125
gigawatts under contract by the end of the year. We had a strong first
half and now have agreements signed into ’31. In the second half of the
year, we expect to convert many of these SRAs into orders, driving
continued growth in our backlog while achieving an important inflection
point. With gigawatts in backlog greater than SRAs in ’27, we expect our
combined gigawatts under contract to continue to grow. We continue to
see strong pricing in gas to deliver and service our critical equipment
needed to electrify the world.
On the
equipment side, first-half ’26 orders were priced more than 20% above
4Q25 equipment orders, reflecting the conversion of higher-priced SRAs
to backlog. In 2Q, we booked a higher dollar-per-kilowatt price in
orders given a higher mix of aeroderivatives versus heavy-duty gas
turbines and incremental combined cycle equipment as SRAs converted to
orders. Given our large SRA balance, we would expect gas equipment
orders in the second half to have a dollar per kilowatt at the higher
end of the range of 10 to 20 points versus 4Q25 orders.
For
services, we continue to benefit from increased volume and solid
pricing. This is happening not only on long-term service agreements but
also on transactional orders. We've seen transactional orders per unit
continue to rise by double digits annually as customers invest in
upgrades and greater scope in outages, all at higher prices. In
Electrification, we continue to see robust demand from unprecedented
electricity demand growth, increasing grid stability needs, and national
security interests....
....Turning to slide 8 on Wind, we remain focused on what we can control.
In the second quarter, the team continued to
deliver improving performance in Onshore Wind services, while making
good progress on Dogger Bank B installations and commissioning. Wind
orders declined 40%, mainly due to lower Onshore equipment orders,
primarily in North America, partially offset by higher services. It
remains difficult to call an inflection point in U.S. orders as
customers still face permitting delays and tariff uncertainty. Wind
revenue decreased 11% in the quarter, given lower Onshore equipment
deliveries as a result of soft orders in the first half of 2025,
partially offset by higher Onshore services, as well as Offshore
revenues driven by higher deliveries and installations at Dogger Bank B.
Wind EBITDA losses were $275 million in the quarter, in line with our
expectations. The anticipated year over year increase in losses was
primarily the result of lower equipment deliveries at Onshore Wind and
higher project costs at Offshore Wind, partially offset by improved
Onshore services. For third quarter 2026, we anticipate Wind revenue to
decline at a low double-digits rate year over year due to lower Onshore
equipment deliveries.
We expect EBITDA to
be approximately breakeven due to continued improvement in Onshore
services profitability and lower project costs for Offshore, partially
offset by lower Onshore equipment deliveries. We expect improvement in
Wind revenue and EBITDA in the second half of the year, given 70% of
2025 equipment orders were in the second half and will be delivered in
the second half of 2026. Also, the volume we've shipped in this first
half had fewer contractual protections for tariffs, since we signed
these orders before their implementation....
Last I saw the stock was changing hands at $992.25 down $86.56 (-8.02%) having traded as low as $987.01.
If this keeps up I'll probably be joining the crabby over-educated wannabe elites singing The Internationale outside of Tractor Factory No. 3.
