Today's report was not a one-off. The market's reaction may or may not be, time will tell.
GEV is the class of the field in the energy infrastructure biz.
From Investing,com, July 23 (skipping past the financial and narrative introduction):
....Full transcript - GE Vernova LLC (GEV) Q2 2025:
Liz, Conference Coordinator:
Good day, ladies and gentlemen, and welcome to GE Vernova’s Second
Quarter twenty twenty five Earnings Conference Call. 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 hit F5 on your keyboard to refresh. 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 Lapides, Vice President of Investor Relations.
Please proceed.
Michael Lapides, Vice President of Investor Relations, GE Vernova:
Welcome to GE Vernova’s second quarter twenty twenty five earnings
call. I’m joined today by our CEO, Scott Strazie and our 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 presentation
slides,
Scott Strazie, CEO, GE Vernova: all
Michael Lapides, Vice President of Investor Relations, GE Vernova:
of which are available on our website. Please note that year over year
commentary or variances on orders, revenue, adjusted, and segment
EBITDA margin discussed during our prepared remarks are on an organic
basis, unless otherwise specified. 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’ll hand the call over to
Scott.
Scott Strazie, CEO, GE Vernova: Thanks Michael and good
morning everyone. We had a productive second quarter positioning us
well to continue to accelerate our growth and margin expansion. This era
of accelerated electrification is driving unprecedented investments in
reliable power, grid infrastructure, and decarbonization solutions. We
see attractive end markets converging with better run businesses, giving
us a substantial opportunity to create value from here. At the start, I
just want to share some market context as I see it today.
Continued strength in gas power demand as we signed nine gigawatts of
new gas equipment contracts in 2Q, of which seven went into slot
reservation agreements and two went directly into orders. During the
quarter, we also converted three gigawatts of SRAs from previous
quarters into orders while shipping five gigawatts of equipment. This
resulted in backlog remaining at 29 gigawatts while growing slot
reservation agreements from 21 to 25 gigawatts, building our total
backlog in slot reservation agreements to 55 gigawatts from the 50 we
talked about at April earnings. We continue to see higher turbine prices
and strong demand and still expect to have at least 60 gigawatts
between backlog and reservation agreements by the end of the year at
better margins with significant momentum into 2026. But the power demand
isn’t limited to gas new units.
We also see solid services demand growth as customers look to invest
in their existing fleets. Not only are we seeing strength in gas
services, steam services orders were up 30% in Q2 in support of nuclear
extensions and upgrades and we booked significantly higher up rates in
hydro, which increased 61%. We continue to work hard to ramp our
production capacity at Gas Power and to meet this rising demand for
services across our fleet. We also are pleased with the progress in our
300 MW small modular reactor, which is part of our higher R and D for
this year. We are starting to see the initial proof points of our
investment.
We are in construction in Ontario on the first project. The NRC has
now formally accepted TVA’s application to construct at Clinch River
site, which means the formal process has started and I expect more
customer announcements with our SMR technology in the second half of the
year. Continued progress in electrification. We grew our equipment
backlog an incremental $2,000,000,000 in 2Q twenty twenty five led by
Europe with North America and Asia backlogs both sequentially increasing
almost 10%. Demand in The Middle East is accelerating, as evidenced
with our announcement on the Saudi grid stabilization equipment,
synchronous condensers.
We expect at least $1,500,000,000 of this agreement to become in
order in the third quarter. Synchronous condensers provide voltage
support and frequency regulation to help balance the grid when
generation levels are volatile, especially in areas with significant
renewable intermittency. This is a technology we have manufactured for
years and now the market is starting to catch up. Investments in the
reliability and resiliency of the grid are clearly growing globally.
Technologies like synchronous condensers have been a small market over
the last decade, but we see this as a credible $5,000,000,000 market
opportunity a year going forward and are investing in positioning our
businesses to serve this opportunity.
Demand for data centers also remains strong in electrification. We’ve
already received almost $500,000,000 in orders in the first half twenty
twenty five versus 600,000,000 in full year 2024, so this growth market
continues to accelerate. We do see weaker European HVDC orders in 2025
as we sit here today, with some projects canceled or moving to the right
as affordability challenges in The EU becomes even more real. But the
momentum we are seeing elsewhere in this segment is more than offsetting
it and we continue to see a clear pathway to grow our electrification
equipment backlog at least as much in 2025 as we did in 2023 and 2024.
On wind, since the tax bill was signed on July 4, we’ve experienced an
increase in customer engagement in The US, so the potential certainly
exists for an inflection towards growth, although permitting and
managing through the interconnect queue are also key.
It is early and we’ll see how the rest of the year materializes. I’m
also encouraged with some wins we’ve had recently in international
markets: Romania, Australia, Japan, Spain, Germany markets where we
expect to see orders in second half twenty twenty five. The markets
continue to come our way while we continue to work hard every day to run
our businesses better. Ken will walk through the detailed performance
by business, but I was pleased to see Power deliver EBITDA margins north
of 16% with electrification approaching 15% in 2Q, but I would
emphasize that as our teams continue to get their feet under them, we
see real opportunity to continue to accrete margins higher from here. On
wind, we continue to ship more profitable onshore equipment, but that
was more than offset in 2Q with our investments in our services quality
programs in the field in addition to the impact of tariffs on our
offshore wind business.
Year to date, we’ve lost approximately $300,000,000 in the wind
segment, but expect the business in the 2025 to be closer to breakeven.
Our onshore fleet performance continues to improve. We’ve seen the
availability of our fleet increase by one percentage point since last
year, positively impacting our customers with long term service
contracts. We are starting to free up more capacity in 3Q onwards for
transactional related work in the onshore installed base. In offshore,
we installed 34 units in 2Q and commissioned 33, our most productive
quarter to date.
Another variable that is giving me real confidence in the future is
that we are now getting to a point in many of our larger businesses,
certainly in both gas and grid solutions, where we have a solid enough
lean foundation to evaluate robotics and automation in more strategic
ways both in the factories and out in the field. Standard work in our
functions is also laying the foundation to even more aggressively invest
in AI and drive real productivity improvements at pace. As I see it,
robotics and automation are critical but can only be invested into once a
business has sufficiently eliminated the waste in their core processes.
In a similar vein, a business must get to standard work before
investing in AI. We are now ready for both and these two themes are
important parts of our strategy reviews that will take place in 3Q
across the company.
Better market conditions and continued operational improvement in our
businesses are both important, as is our focus on leading the industry
from a position of financial strength. We were pleased to deliver
positive free cash flow again in Q2 and end the quarter with almost
$8,000,000,000 of cash. So far this year, we’ve spent $1,600,000,000 on
stock buybacks, repurchasing approximately 5,000,000 shares. We are
continuing to invest in our organic growth. Just last week, I was at our
Charle Roy factory in Pennsylvania where we announced an incremental
$2.50 jobs over the next two years with up to $100,000,000 investment
that will support a doubling of volume out of that factory from 25 to
28.
We are also pleased with our progress in our small strategic
acquisitions. A great example of this is our acquisition of Woodward’s
gas turbine parts business, which includes a factory that allows us to
redirect work and optimize the layout of our Greenville plant with
limited CapEx spending and improved productivity in our gas power supply
chain. Prior to our acquisition, this site experienced 50,000 labor
hours in 2024, but after approximately one hundred days since close, we
now see a clear path to ninety thousand hours in the factory by 2028,
freeing up space in our Greenville factory to drive more productive
growth. These are the kinds of transactions we are working hard to add
to our pipeline where we see clear opportunity to complement the growth
in markets we serve with our lean discipline to do very attractive,
lower risk, and accretive deals in our core. We are also excited to
announce this week our acquisition of Altea scheduled for an August 1
close.
With this acquisition, we are buying an existing partner that uses AI
and visualization technologies to help our customers manage and
orchestrate the grid. We will be able to immediately integrate this with
our GridOS as another important step forward for our electrification
software business. I share all of that to just outline in my words what
it means to lead from a position of financial strength. Dollars
1,600,000,000.0 stock buyback at very attractive valuation, smart
vertical integration of supply chain opportunities in our core where we
can rapidly increase productivity to gain substantial operating leverage
and strategic additions of complementary new technology to improve
growth going forward. In all these cases, it is early, but I expect us
to deliver substantially more 20 from here.
To the next slide on our second quarter results. We continue to build
a stronger backlog supporting the long term growth potential in our
businesses. Our equipment backlog grew from 45,000,000,000 to
$50,000,000,000 in 2Q, up almost $7,000,000,000 in first half twenty
twenty five. We are growing this backlog at improved margins and
consistent with prior communications. Look forward to showing you at
fourth quarter earnings next January the full change in margin in the
equipment backlog.
Our services backlog also grew approximately $1,000,000,000 in the
second quarter. We now maintain a total backlog of $129,000,000,000 In
light of the strength of our power and electrification results in first
half twenty twenty five and forecast for the remainder of the year,
we’ve revised up our EBITDA margin expectations for both segments and
increased our free cash flow expectations for the year, in line with
these expanded margins at modestly higher revenue levels. Ken will
provide more details, but these updated estimates fully embed the cost
of tariffs in 2025, which we estimate to be trending towards the lower
end of $304,100,000,000 dollars at today’s announced tariffs, so almost
one point of negative EBITDA margin embedded in the guide. The teams are
making real progress on a go forward basis on how we are contracting
for this, in addition to new sourcing strategies and more utilization of
free trade zones, but for ’25, it is likely the impact remains within
this ban. The last thing I want to touch on, and which Ken will also
give more details to in the later slides, is our announced plan
restructuring costs which we expect to incur over the next twelve months
of approximately $250,000,000 to $275,000,000 It was very important to
me that after our first year as a public company we evaluated how our
organization was performing and where we had opportunities to be more
efficient and streamlined....
The stock is currently at $616.81, up $67.82(+12.35%) after setting a new all-time high at $633.72.
