TechnipFMC plc Q1 FY2025 earnings call

• Total company revenue in the period was $2.2 billion. Adjusted EBITDA was $356 million, an increase of 38% compared to the prior year, with a margin of 15.9% when excluding foreign exchange impacts. Free cash flow was $380 million. - First quarter subsea inbound was $2.8 billion with a book-to-bill of 1.4. Orders have now exceeded revenue in eight of the last nine quarters. - Secured iEPCI awards from Equinor and Shell, and a strategic alliance with Cairn Oil and Gas. - Subsea opportunity list highlights more than $26 billion of opportunities, growing nearly 20% over the last twelve months. - Commodity prices: offshore remains a preferred investment of operators, with deepwater attracting a growing share of capital flows; U.S. land is most susceptible to lower commodity prices but 95% of total company revenue in 2025 will be generated from outside U.S. land market. - Tariffs: limited exposure, with anticipated impact to total company adjusted EBITDA less than $20 million for the full year.

In Subsea, revenue was $1.9 billion, a decrease of 5% versus the fourth quarter. Adjusted EBITDA was $335 million, with a margin of 17.3%, up 80 basis points from the fourth quarter. In Surface Technologies, revenue was $297 million, a decrease of 7% from the fourth quarter. Adjusted EBITDA was $47 million, with a margin of 15.7%, down 110 basis points versus the fourth quarter. Corporate and other items: corporate expense was $26 million, net interest expense was $10 million, and tax expense in the quarter was $87 million. Cash flow from operating activities was $442 million, capital expenditures were $62 million, resulting in free cash flow of $380 million.

• For the second quarter, anticipate subsea revenue to grow low double digits sequentially, with an increase in adjusted EBITDA margin of approximately 400 basis points. For Surface Technologies, anticipate revenue to increase approximately 5% sequentially with an adjusted EBITDA margin of approximately 15.5%. - Remain confident in prior expectation for total company adjusted EBITDA of approximately $1.76 billion when excluding foreign exchange. - Increase full-year expectations for free cash flow to a range of $1 billion to $1.15 billion.

• Commodity prices are a primary variable in clients' decisions to move forward on a development, with impact differing significantly by region and resource. - U.S. land market is amongst the most susceptible regions to lower commodity prices given its relatively high cost of development. - Limited exposure to recently announced tariffs, but still a risk to monitor with potential impact on financials.

Q: Good morning, Doug. How are you? And I'm wondering if the current environment favors certain markets moving forward over others, especially regarding U.S. Gulf and Petrobras.

A: No. We are not hearing and being requested to defer, push out, a project activity. Conversations have remained fairly consistent and maybe even a little bit accelerated. In the U.S. Gulf, do not see a slowing in the cadence of the developments of some of the newer greenfield opportunities like the Paleogene. And in Brazil, Petrobras is a very sophisticated client.

Q: Yeah. Good morning, Doug. You know, last quarter, you mentioned how you thought 2026 would be kind of a significant year for subsea orders with further margin expansion potential. My question is, how do you gauge the order outlook for 2026?

A: I would tell you my opinion 2026 as you correctly summarized is remains unchanged. The order flow in 2026 is really gonna be a function of the timing of FIDs. The quality of the advanced stage of the commercial discussions on those projects is very real. Increases the probability Many are will again be direct awarded to our company.

Q: Hey, guys. Doug, you mentioned that most of your conversations are for 2028 and beyond. I'm just curious what those customers are saying with respect to those long-dated projects. Has the current environment affected that at all versus what you were hearing earlier, or is it steady?

A: Good morning. Well, first of all, they're looking at a very different commodity outlook when they're looking at that period of time. They're looking at projects for the latter part of the decade. That will be delivered in, you know, three to five years. So that's a very different outlook. The other thing I would say is they're also looking more at gas.

Q: Thank you, Doug and Alf. Doug, maybe I wanna touch on execution as a more broader topic. You talked about tariffs, a rule comment there. It's a pleasant surprise. The the impact is pretty minimal. Right? But if we just talk about application more broadly on Zoom out, right, we have almost forgotten this is a project business. Things can go wrong because you've done such a fantastic job at execution. Right? But maybe talk to your project selection process, the the the improvements in the TNC and the projects that are in your backlog. Maybe just give us a little more color on how you have managed to execute and and during these uncertain times, right, how you still manage to remain in control of the process?

A: Sure. Thank you, Rob. It's actually a great follow-up, you know, after Mark's question because you know, the the difference for us is, you know, executing in an iEPCI 2.0 project has significantly lower risk than executing a non-iEPCI non-2.0 project. By the way, it showed up in our free cash flow this quarter. Because of our ability to be able to really do things in a unique way and often in a, you know, in a in a very in a way that rewards both our clients in terms of project certainty, but also rewards us as well.

Q: Hi. Thank you. I I guess we're we're seeing building evidence every quarter from from you guys that, you know, you've got something that that's differentiated here and and value added for the customer. But, you know, the you did mention in the press release that that commodity prices is a primary variable for the customer. So I'm just kind of curious you know, at what level does commodity price weakness start to to enter the conversation or maybe reduce the customers.

A: Sure, Mark. Important question. As stated earlier, that has not entered into the conversation at this point. Again, keeping in mind that these are longer cycle projects. And projects that once they are awarded, we've actually never had a project canceled or deferred that was in our backlog, including during COVID. So there's a lot of stability actually in this business because of the long-term the longer-term nature of the investments that the clients are making.

Q: Yes. Good morning. On the the project outlook list, there's a a larger board for Petrobras listed simply as revitalization of fields. I think it showed up last quarter, but can you just provide some more color on on that opportunity? Is it a bunch of step outs? Is there intervention component? Just does that refer to?

A: Sure, Scott, and good morning. Look, Petrobras is a very, very sophisticated client. They've been operating in the subsea. You know, one of the longest operators in the subsea. And, you know, they're very very good at what they do. And they'll look at their asset base, and if they see an opportunity to reconfigure let's think of it as reconfiguring, reconfiguring the architecture which would allow them to improve the recoverable from the reservoir. Then that's something that they're willing to invest in.

Q: Hi there. Thanks very much. I'm just one question remaining for for me today. We saw quite a wide range of pricing on some of the Petrobras awards in the start at the start of the year. Should you obviously, the macro's changed quite a lot from that time. But just in terms of, you know, what that any read of what we can take from that, is that a reflection of some of the capacity constraints that you're dealing with sort of in sort of 2025, 2026 or sort of a risk appetite that you approach some of these contracts with. Any color would be helpful. Thank you very much.

A: Sure. Thank you for the question. Look. You should all look. There's a very the market structure is very different than it used to be historically. You have very know, mature discipline companies that are you know, that are left, if you will, and therefore, you should expect to see a very disciplined approach. And as a result of that, I can assure you you always see a disciplined approach from TechnipFMC. And we do look at the project in its totality. We don't look at it in terms of, you know, absorbing capacity. We look at it in terms of generating the returns that were required for our company.