GE Vernova (GEV) 2025年第2四半期決算カンファレンスコール書き起こし

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DATE

Wednesday, July 23, 2025 at 7:30 a.m. ET

CALL PARTICIPANTS

- Chief Executive Officer — Scott L. Strazik

- Chief Financial Officer — Kenneth S. Parks

- Vice President, Investor Relations — Michael Jay Lapides

Full Conference Call Transcript

Scott L. Strazik: 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 9 gigawatts of new gas equipment contracts in 2Q, of which 7 went into slot reservation agreements and 2 went directly into orders.

During the quarter, we also converted 3 gigawatts of SRAs from previous quarters into orders, while shipping 5 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 '26. 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 uprates 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-megawatt small modular reactor which is part of our higher R&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 billion in 2Q '25 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 $1.5 billion of this agreement to become an 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 billion market opportunity a year going forward and are investing in positioning our businesses to serve this opportunity. Demand for data centers also remain strong in Electrification.

We've already received almost $500 million in orders in the first half '25 versus $600 million in full year '24. So this growth market continues to accelerate. We do see weaker European HVDC orders in '25 as we sit here today with some projects canceled or moving to the right as affordability challenges in 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 '25 as we did in '23 and '24. On Wind.

Since the tax bill was signed on July 4, we've experienced an increase in customer engagement in the U.S. 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 '25. 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 million in the Wind segment but expect the business in the second half of '25 to be closer to breakeven. Our onshore fleet performance continues to improve. We've seen the availability of our fleet increase by 1 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 a more strategic way, 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 the business is 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 2 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 billion of cash. So far this year, we've spent $1.6 billion on stock buybacks, repurchasing approximately 5 million shares. We are continuing to invest in our organic growth.

Just last week, I was at our Charleroi factory in Pennsylvania, where we announced an incremental 250 jobs over the next 2 years with up to $100 million 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 '24.

But after approximately 100 days since close, we now see a clear path to 90,000 hours in the factory by '28, 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 were also excited to announce this week our acquisition of Alteia, 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, $1.6 billion 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 from here. Turning 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 billion to $50 billion in 2Q, up almost $7 billion in first half '25. 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 billion in the second quarter. We now maintain a total backlog of $129 billion.

In light of the strength of our Power and Electrification results in first half '25 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 '25, which we estimate to be trending towards the lower end of $300 million and $400 million at today's announced tariffs, so almost 1 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 band. The last thing I want to touch on and which Ken will also give more details to in the later slides, is our announced planned restructuring costs, which we expect to incur over the next 12 months of approximately $250 million to $275 million. It was very important to me that after our first year as a public company, we evaluated how our organization is performing and where we had opportunities to be more efficient and streamlined.

More important than the savings this will yield is that this is an important step forward in the culture of the company I want GE Vernova over to be. Even with the growth ahead of us, it is critical culturally we continue looking in the mirror and finding opportunities to get better with a lower cost structure. This is the first of many ways I expect us to be more productive while meeting the substantial growth ramp ahead in the early stages of this investment super cycle into the electric power system. With that, I'm going to hand it over to Ken to provide details on our second quarter results and our updated guidance.

Kenneth S. Parks: Thank you, Scott. Turning to Slide 5. We delivered strong results in 2Q 2025 with continued orders and revenue growth and adjusted EBITDA margin expansion. We also generated positive free cash flow again this quarter and returned approximately $450 million to shareholders through share repurchases and dividends while maintaining a healthy cash balance of nearly $8 billion. Demand remained robust in the second quarter as we booked $12.4 billion of orders, an increase of 4% year-over-year and approximately 1.4x revenue. Equipment orders grew 5%, driven by Power, which more than doubled year-over-year. Electrification equipment orders remained strong but decreased year-over-year given the value of large equipment orders recorded in the second quarter of last year.

Services orders increased 3% with growth in Power and Onshore Wind. As a result of the strong orders, our backlog continued to expand both year-over-year and sequentially across equipment and services, now reaching $129 billion in total led by both Power and Electrification. Equipment margin and backlog remains healthy, reflecting higher price as well as our continued focus on disciplined underwriting. Revenue increased 12% with higher equipment and services revenues in all 3 segments. Equipment revenue grew 18%, with double-digit growth in Electrification and Power, while total services revenue increased 6% and Price was positive in each segment. Adjusted EBITDA increased just over 25% to $770 million, led by strength in Electrification and Power.

Adjusted EBITDA margin expansion of 80 basis points was driven by more profitable volume, price and productivity, which more than offset investments for innovation and future volume growth as well as tariff impacts primarily at Offshore Wind. We continued to generate positive free cash flow with approximately $200 million in the second quarter, reflecting stronger adjusted EBITDA. Working capital in the quarter was an approximately $600 million cash benefit driven by strong down payments from rising orders and slot reservation agreements at Power, which more than offset cash taxes along with CapEx investments supporting capacity expansion.

As we've discussed in prior quarters, we continue to utilize lean to improve our billings and collection processes to drive better cash management and linearity. In the second quarter, we reduced days sales outstanding by 2 days sequentially, resulting in an approximately $200 million of additional free cash flow in the quarter. As expected, free cash flow decreased year-over-year due to the absence of a $300 million arbitration refund that we received in the second quarter of 2024, as well as a lower positive benefit from working capital and higher cash taxes on higher adjusted EBITDA.

As a result of our improving free cash flow linearity through the year, we continued to return cash to our shareholders in the second quarter with a total of approximately $450 million of share repurchases and dividends. So far this year, we've repurchased $1.6 billion of stock and we'll continue to execute our buyback authorization opportunistically as we firmly