TechnipFMC plc Q2 FY2025 earnings call

• Douglas Pferdehirt highlighted total company revenue was $2.5 billion, adjusted EBITDA was $509 million with a margin of 20.1% (excluding foreign exchange impacts), free cash flow was $261 million, and $271 million distributed to shareholders. • Emphasized transformation in Subsea with reinvention of commercial models, configurable product offerings, and optimized workflows. • Noted improved performance in Surface Technologies due to transformation, focusing on core markets and exiting unprofitable North American markets. • Subsea orders totaled $2.6 billion, with diverse awards including iEPCI, Subsea services, and direct awards. • Highlighted technology innovation such as hybrid flexible pipe, all-electric technology, and collaborations with Petrobras and BP. • Mentioned robust offshore activity, strong front-end engineering, and opportunities in regions like Guyana, Mozambique, Suriname, etc.

In Subsea, revenue was $2.2 billion, increasing 14% sequentially. Adjusted EBITDA was $483 million, up 44% sequentially with a margin of 21.8%. In Surface Technologies, revenue was $318 million, an increase of 7% from the first quarter. Adjusted EBITDA was $52 million, up 12% sequentially with a margin of 16.4%.

• Third quarter: Subsea revenue expected to grow low to mid-single digit sequentially with adjusted EBITDA margin similar to Q2's 21.8%. Surface Technologies revenue anticipated to increase low single digit sequentially with margin ~16%. • Full year: Increased adjusted EBITDA margin expectations for both segments, total company adjusted EBITDA expected ~$1.8 billion (excluding foreign exchange), free cash flow near top end of $1B-$1.15B range.

Forward-looking statements are subject to risks and uncertainties, as described in TechnipFMC's most recent 10-K, 10-Q, and other periodic filings with the U.S. Securities and Exchange Commission.

Q: Another strong Subsea order book this quarter. Clearly, you're confident in beating the $10 billion target this year. I was hoping you could break down sort of the composition a bit more and kind of how you see it changing this year. I'm first curious about the services. You had called out services being very strong this quarter. I'm curious if there was kind of a one-off or this is a new trend. And secondarily, as you're expecting more awards in the second half, I'm curious if you're expecting more awards in the second half to come from the Subsea opportunities list? Or is that more likely iEPCI direct awards?

A: Sure, Dave. Thank you. So regarding Subsea services, I think it's evident that we have been successful in the marketplace and our clients' adoption of our iEPCI and Subsea 2.0, which has resulted in a significant number of direct awards, meaning they don't go to competitive tender. They're just direct awarded to our company, has changed the market dynamic, let's say. That results in us having an ever-increasing installed base on the seafloor. This is an OEM model. We inspect, maintain, repair, service all of our products that are on the seafloor typically for a 20- to 35-year life depending upon the design of the equipment and the requirement of the contract. So a very long sustainable tail of services which is increasing in size as we've been more successful as we talked about a moment ago. So when you put the 2 together, it's certainly a very positive trend for our Subsea services business. We talked about the growth last year where we had achieved $1.6 billion for Subsea services, and we said that it would grow in line with revenue again this year or approximate $1.8 billion. And I can confirm that, that is indeed the plan. So yes, no one-off, just a -- this is a result of the strategy of the company, the winning rate that we have had, the success, the repeat orders, the direct awards, the unique alliances that we have been able to form and the continuous focus on supporting those through innovation and technology, superior execution, both in terms of the project execution, but also the service execution, has set up our Subsea services business to be a very strong and important component of our inbound. I believe there was a second follow-up, and I missed -- I lost it already, you can may be...

Q: I was just sort of asking, you have your Subsea opportunities list, which you updated. I'm just curious, you're talking about the direct awards, which are different from that. I was just curious, are more -- in the second half, are more awards kind of shifting more towards the Subsea opportunities list? Or is it more of the direct awards side? Just kind of curious how that's shaping up.

A: Yes. Good question. And just to remind everyone else, we publish the industry's Subsea opportunity list that -- those opportunities that are likely to FID over the next 24 months broadly across the industry. So that's something that can be used as a reference document, and we update that every quarter, which we did again this quarter. And that list has continued to grow. But there's also a secondary list that is very important and exclusive to our company. And this is a result of the fact that we have the only iEPCI and Subsea 2.0 offering, which results in us working in the very early stages, typically 2 to 3 years before a contract is awarded exclusively with our clients to develop a subsea architecture that is unique and quite frankly, can't be designed or developed by others because they don't have the tools and resources and technology that we have. So they work with us on a proprietary basis. And then those projects when and if they go to FID are direct awarded to our company. That list, I will tell you, is also growing. So both the public list and the private list, for lack of a better term, are both growing in size. In terms of the mix in the second half, where is it likely to come from? I think it will continue to be strongly supported by both of those. And I think I am confident that our level of direct awards will continue to be very robust, which means that private list is very, very critical to our company.