Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TechnipFMC PLC (FTI, Financial) reported strong operational performance with Subsea inbound orders reaching $2.8 billion and a book-to-bill ratio of 1.4.
- Adjusted EBITDA margin for Subsea improved by 370 basis points sequentially to 17.7%, exceeding prior full-year guidance.
- Total company revenue for the quarter was $2.3 billion, with adjusted EBITDA of $379 million and an adjusted EBITDA margin of 16.3%.
- TechnipFMC PLC (FTI) secured significant projects, including ExxonMobil's Whiptail project in Guyana and Petrobras' flexible pipe order.
- The company achieved a record backlog of $13.9 billion, driven by strong subsea orders and a book-to-bill ratio above 1 in 10 of the last 11 quarters.
Negative Points
- Foreign exchange impacts resulted in an $18 million loss, affecting overall financial performance.
- Despite strong performance, the Surface Technologies segment faced challenges due to the absence of revenue from the measurement solutions business sold in March.
- Net interest expense for the quarter was $21 million, adding to the company's financial burdens.
- Tax expense in the quarter was $59 million, impacting net income.
- The company faces potential capacity constraints in the future, as highlighted by customer concerns and the need for early commitments to secure quality capacity.
Q & A Highlights
Q: How do you see the sustainability of the subsea market beyond 2025, and what new frontiers are you eyeing?
A: Doug Pferdehirt, CEO: We see growth opportunities within existing basins like the Paleogene in the Gulf of Mexico and new basins such as Guyana and Mozambique. Emerging basins like Namibia, Suriname, and Tanzania also show potential. Improved project economics and our iEPCI and Subsea 2.0 offerings are key drivers. All-Electric systems will create additional opportunities, especially in CCS and brownfield tiebacks.
Q: Can you elaborate on the Surface Technologies opportunities in the Middle East?
A: Doug Pferdehirt, CEO: The opportunities are significant, particularly in Saudi Arabia and the UAE, where we have local facilities ramping up. Qatar also shows promise with dry tree offshore platforms. Our recent investments are beginning to pay off, and the opportunity set is substantial.
Q: What drove the guidance raise for Subsea in 2024?
A: Alf Melin, CFO: The raise was driven by strong operational performance, particularly in iEPCI projects in the North Sea and Gulf of Mexico. Improved efficiencies and a strong subsea services business also contributed. We now expect Subsea revenue of $7.6 billion to $7.8 billion and an adjusted EBITDA margin of 16.5% to 17%.
Q: Can you elaborate on the successful formula in Guyana and how it applies to other emerging basins?
A: Doug Pferdehirt, CEO: Our approach focuses on developing local talent and partnerships. In Guyana, we hired engineers before any tendering activity and trained them in other regions. This led to a workforce that is 80% local. We aim to replicate this model in emerging basins like Suriname, Namibia, and Mozambique.
Q: How does Subsea 2.0 contribute to margin improvements, and what is its current utilization?
A: Doug Pferdehirt, CEO: About 50% of our current orders are Subsea 2.0, with 25% running through facilities today. Future bids show a higher percentage of 2.0, indicating a multi-year runway for margin improvements. The configure-to-order model allows for shorter cycle times and better internal efficiencies.
Q: How are you managing capacity constraints given the growing backlog?
A: Doug Pferdehirt, CEO: Our configure-to-order model allows us to work closely with our supply chain, reducing latency and new order defects. Suppliers can pre-manufacture subcomponents, and we can give them annual commitments. This scalable model helps us manage capacity effectively.
Q: Are there many more customers that could migrate to Subsea 2.0?
A: Doug Pferdehirt, CEO: Almost every quarter, we add new customers to the 2.0 mix. Many customers are now adopting 2.0 as their standard, leading to direct awards. This focus on innovation drives growth and internal efficiencies.
Q: Are clients still committed to long-term projects extending to 2030 and beyond?
A: Doug Pferdehirt, CEO: Yes, clients are making earlier and longer commitments to secure quality capacity. They are signing up for long-term partnerships and exclusive use of our Subsea 2.0 and iEPCI offerings. This commitment ensures a steady pipeline of projects.
Q: What are your expectations for sustainable through-cycle margins?
A: Doug Pferdehirt, CEO: We aim for higher sustainable through-cycle margins than ever before, driven by high-quality orders and strong execution. Our focus on innovation and efficiency will continue to deliver improved financial performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
