Baker Hughes Company Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Strong Second Quarter Results: Delivered strong results, maintaining the trend of meeting or exceeding EBITDA guidance midpoint for the 10th consecutive quarter. Adjusted EBITDA rose to $1.21 billion with 170 basis point year-over-year margin improvement due to structural cost actions and stronger operational execution.
• Strategic Transactions: Announced 3 strategic transactions to advance portfolio optimization. Entered into a joint venture with Cactus, sold Precision Sensors & Instrumentation to Crane Company, and signed an agreement to purchase Continental Disc Corporation. These transactions aim to enhance earnings durability and create long-term value.
• IET Highlights: IET orders showed strong momentum with $3.5 billion in the quarter, including over $550 million in data center power generation equipment orders. Booked more than $550 million in power generation equipment orders for data centers during the quarter. Confident in achieving IET's full year order guidance range of $12.5 billion to $14.5 billion.
• OFSE Highlights: OFSE experienced 90 basis points of sequential margin improvement driven by stronger International and Subsea & Surface Pressure Systems revenue and progress on cost-out initiatives. Maintained strong momentum in production and mature asset solutions with several meaningful awards.

Segment Performance

• Industrial & Energy Technology (IET): Quarter orders totaled $3.5 billion. Year-to-date IET orders reached $6.7 billion. Revenue increased 5% year-over-year to $3.3 billion. Segment EBITDA grew significantly by 18% year-over-year, with margins expanding 190 basis points to 17.8% despite tariff-related headwinds. Book-to-bill was 1.1x for the quarter, and backlog reached a new record of $31.3 billion, growing 3% sequentially.
• Oilfield Services & Equipment (OFSE): Revenue in the quarter was $3.6 billion, up 3% sequentially. OFSE delivered EBITDA of $677 million, exceeding the midpoint of the guidance range. EBITDA margins expanded 90 basis points sequentially to 18.7% driven by cost-out initiatives and stronger revenue in certain areas.

Guidance

• IET: Confident in achieving full year order guidance range of $12.5 billion to $14.5 billion. Year-to-date IET orders totaled $6.7 billion, with strong momentum in various segments including data centers and gas tech services. Backlog reached a new record of $31.3 billion.
• Financial: Generated free cash flow of $239 million in the quarter and returned $423 million to shareholders. For full year 2025, total company EBITDA midpoint is $4.675 billion. IET maintained midpoint of orders guidance range at $13.5 billion and raised revenue and EBITDA guidance. OFSE reestablished full year guidance with midpoints of $14.2 billion for revenue and $2.625 billion for EBITDA.

Risks

• Trade Policy Uncertainty: Tariff changes negatively impacted EBITDA by approximately $15 million in the second quarter. There is potential for further impact on EBITDA in the second half if trade policies escalate, including retaliatory tariffs in key regions. Mitigation actions are in place but ongoing trade policy shifts pose a risk.

Question and Answer

Q: Scott Andrew Gruber asked about margin performance drivers, confidence in hitting 20% margin in IET in '26, and OFSE margin outlook.

A: Ahmed Moghal and Lorenzo Simonelli responded discussing segment margin drivers, progress in business system implementation, and confidence in margin progression. In OFSE, margins expanded due to cost efficiency and disciplined pricing. In IET, progress on business system implementation and record margins in Gas Tech contributed to margin expansion, and confidence in achieving 20% margin target was expressed.

Q: J. David Anderson inquired about IET order performance, trend of components in the rest of the year, and 2026 orders, especially data center.

A: Lorenzo Simonelli responded on IET order strength, with $3.5 billion in the quarter and year-to-date total of $6.7 billion. Expectations for second half included strengthening LNG orders and continued strength in GTS. Data center orders were strong with over 70 NovaLT units booked, on track to meet or exceed $1.5 billion target earlier than planned.

Q: Arun Jayaram asked about net impact of 3 transactions on 2026 and further portfolio moves.

A: Ahmed Moghal and Lorenzo Simonelli discussed net EBITDA impact of transactions, with expected over $100 million impact in 2026. Portfolio optimization strategy continues, with focus on acquiring businesses that strengthen industrial footprint and divesting noncore assets to redeploy capital into higher-margin opportunities.

Q: Saurabh Pant asked about tariff impact, recent developments, and second half expectations.

A: Ahmed Moghal responded on second quarter tariff impact of approximately $15 million, and expectation of net EBITDA impact of $100 million to $200 million in the second half. Discussed recent tariff announcements and mitigation actions in place to manage the impact of trade policy changes