Baker Hughes Co. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Macro Outlook: The global economy started cautiously due to geopolitical tensions, trade policy uncertainty, etc. Oil prices under downward pressure with OPEC+ increasing production, while natural gas has a positive outlook with long-cycle gas-levered projects making progress.
• First Quarter Results: Delivered strong results with adjusted EBITDA of $1.04 billion, up 10% year-over-year. Set new first quarter records for revenue, EPS, EBITDA, and EBITDA margin. Generated free cash flow of $454 million and returned $417 million to shareholders.
• Awards and Technology: Strong commercial momentum with record attendance at the Annual Meeting, data center awards, LNG orders, CCS partnerships, and geothermal developments.

Segment Performance

• Industrial & Energy Technology (IET): Booked $3.2 billion of orders in the quarter with segment backlog reaching a record level of $30.4 billion. Revenue increased 11% year-over-year to $2.9 billion, EBITDA grew 30% year-over-year to $520 million to $580 million on revenue of $3.0 billion to $3.3 billion, led by growth in Gas Tech Services. Book-to-bill was 1.1x, and RPO reached a new record of $30.4 billion.
• Oilfield Services & Equipment (OFSE): Revenue in the quarter was $3.5 billion, down 10% sequentially. OFSE EBITDA margin rate was 17.8%, improving 80 basis points year-over-year. Forecasted EBITDA for OFSE in the second quarter is $600 million to $700 million on revenue of $3.3 billion to $3.7 billion.

Guidance

• Second Quarter: Total revenue expected to be $6.3 billion to $7 billion and total EBITDA approximately $1.04 billion to $1.2 billion. IET forecasted EBITDA $520 million to $580 million on revenue $3.0 billion to $3.3 billion. OFSE forecasted EBITDA $600 million to $700 million on revenue $3.3 billion to $3.7 billion.
• 2025 Outlook: Uncertainty due to trade policy, but IET guidance range remains achievable. OFSE visibility limited beyond the second quarter with global upstream spending expected to be down high-single digits in 2025.

Risks

• Geopolitical tensions and trade policy uncertainty impacting the global economy and business operations.
• Oil price volatility and tariff impacts affecting upstream spending and business margins.

Question and Answer

Q: Regarding guidance, with tariff uncertainty, what's the confidence in achieving the low end of the EBITDA guide?

A: Lorenzo Simonelli and Ahmed Moghal discussed that after accounting for mitigation actions, they estimate a net EBITDA impact of $100 million to $200 million from tariffs. If tariff-related impacts land towards the lower end and oil prices stabilize, the full-year results could approach the low end of the guidance range.

Q: Talk about the opportunity in the data center side for IET?

A: Lorenzo Simonelli mentioned strong demand for data centers with McKinsey projecting U.S. data center energy demand to increase at 23% CAGR by 2030. Baker Hughes has secured data center awards, including from Frontier Infrastructure and Turbine-X Energy, with plans to book at least $1.5 billion of orders in data center equipment over the next three years.

Q: Details on mitigation initiatives for tariffs?

A: Ahmed Moghal stated they have a centralized coordination hub monitoring developments, leveraging global supply chain, free trade agreements, and contract mechanisms to offset tariff impacts. Actions include aligning manufacturing with end markets, utilizing free trade agreements, and contract pricing adjustments.