Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GE Vernova Inc (GEV, Financial) reported strong double-digit orders and revenue growth in its Power segment, with a 34% increase in power orders driven by substantial equipment demand.
- The Electrification segment achieved a 24% revenue increase, driven by stronger volume and price, and reached double-digit EBITDA margins for the first time.
- GE Vernova Inc (GEV) added 29 gigawatts of new capacity to the grid globally in 2023, with a significant portion in developing markets, contributing to a reduction in carbon intensity.
- The company generated substantial free cash flow, increasing its cash balance from $5.8 billion in Q2 to $7.4 billion in Q3.
- GE Vernova Inc (GEV) reaffirmed its full-year 2024 guidance, expecting revenue towards the high end of $34 billion to $35 billion and free cash flow trending towards the higher end of the range.
Negative Points
- The Offshore Wind segment faced significant challenges, including a substantial loss due to manufacturing deviations in turbine blades, impacting financial results.
- Despite improvements, the Wind segment experienced a 19% decline in orders due to lower Onshore equipment orders outside of North America.
- The company incurred additional contract losses at Offshore Wind, primarily due to execution delays and blade issues, resulting in a $700 million charge.
- GE Vernova Inc (GEV) experienced a fatality at an Onshore Wind site in Sweden, highlighting ongoing safety challenges.
- The timing of an inflection for Onshore Wind orders remains uncertain, with the company cautious about the market dynamics in North America.
Q & A Highlights
Q: Can you provide an update on the $3 billion Offshore backlog and the turbine blade issues?
A: Scott Strazik, CEO: The last four months have been challenging for Offshore Wind, delaying project execution. We are evaluating alternatives to increase the pace and will provide more transparency on the backlog burn down on December 10th. The blade issue was due to a manufacturing deviation in Canada, affecting a small proportion of blades. We are addressing these and resuming execution at sea, with installations ongoing at Dogger Bank and Vineyard Wind.
Q: What gives you confidence in Power equipment orders accelerating in the fourth quarter?
A: Scott Strazik, CEO: Power orders were up 34% in Q3, with 14 gigawatts of new orders year-to-date. We expect Q4 to be the strongest quarter of 2024, with a pipeline indicating similar or stronger orders in 2025, particularly in North America, driven by hyperscaler dynamics.
Q: Is the current pricing environment supportive of returning to high-teens or low-20s EBITDA margins in Gas Power?
A: Scott Strazik, CEO: We have a larger services business now, and the current pricing environment is better than what we are shipping today. This will benefit us significantly from the second half of 2026. We expect to continue expanding margins throughout the decade, with more details to be shared at our December 10th analyst day.
Q: How do you view the growth trajectory for Small Modular Reactors (SMRs) and their impact on financials?
A: Scott Strazik, CEO: We see orders for SMRs in the middle of the decade, with revenue starting late in the decade. The first 300 MW block is expected in Canada by 2029. While SMRs are promising, they will not materially impact our financials until early next decade.
Q: Can you sustain Onshore Wind's high-single digit margins on flat revenue, and when is an order inflection needed?
A: Scott Strazik, CEO: We expect flat revenue in 2025 with improved profitability. We don't need an orders inflection to sustain performance, and we see the current revenue level as a floor. The US needs to commission more gigawatts of wind to reach objectives, but we're not ready to call a date for this growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
