GE Vernova Inc. Q4 FY2024 earnings call

• The investment super cycle in the electric power sector drives demand for GE Vernova's equipment and services, with focus on decarbonization technologies like carbon capture and small modular nuclear reactors.
• Power segment had 7% revenue growth and margin expansion, with gas orders doubling and services growth. Electrification saw 18% revenue growth and margin expansion. Wind made progress in turnaround with reduced EBITDA losses.
• Embedding lean culture across the organization to drive operational improvement in safety, quality, delivery, and cost. For example, a gas power services and repair facility in Singapore achieved fatality-free operations, reduced rework, and increased productivity through lean lines.
• Financially, 2024 saw $44 billion of orders, $35 billion in revenue, EBITDA margin expansion across segments, and free cash flow improvement. Backlog grew to $119 billion, and cash balance nearly doubled to over $8 billion.

Power: In 2024, Power delivered 7% revenue growth and nearly 200 basis points of margin expansion. Full year gas orders were approximately 20 gigawatts, double the previous year's level. Gas Power equipment orders saw nearly 80% growth in Q4 2024 with 24 heavy-duty gas turbines booked. Services orders remained strong but declined 6% in Q4. Electrification: Achieved 18% revenue growth and over 500 basis points of margin expansion in 2024. Equipment orders grew nearly 20%, and revenue was up 18% for the year. Q4 orders were robust at ~$4.8 billion, 2.2 times Q4 revenue. Wind: Cut EBITDA losses by almost half in 2024. Onshore had high single-digit EBITDA margins on flat revenue. Offshore focused on executing remaining ~$3 billion backlog, with margins expected to improve as unprofitable business is completed. Revenue contribution: Power, Electrification, and Wind each contributed based on their respective performance in 2024.

• For 2025, reaffirms revenue in $36 billion to $37 billion range, mid-single-digit year-over-year increase. Adjusted EBITDA margin expected to expand to high single digits. Free cash flow between $2 billion and $2.5 billion.
• Power: Mid-single-digit organic revenue growth, EBITDA margins 13%-14%.
• Wind: Revenue down mid-single digits, EBITDA losses $200 million to $400 million, improving year-over-year with onshore margin expansion and lower offshore losses.
• Electrification: Mid- to high-teens organic revenue growth, 11%-13% EBITDA margins, with strong demand for grid technologies.

• Uncertainty in the timing of an inflection in North America Onshore wind orders.
• Market dynamics impacting offshore wind, with unprofitable business completion affecting margins.
• Inflationary impacts on costs partially offset by productivity, but still a risk.
• Timing of project milestones and EPC support challenges affecting fulfillment in gas turbine deliveries.

Q: How is the incoming administration impacting the outlook across each business?

A: In gas and grid, market activity continues to strengthen with diversified demand. In wind, market fundamentals remain softer.

Q: Talk about power organic sales outlook for 2025.

A: Mid single-digit growth overall, with visibility into backlog rollout. Services side has opportunities on contract and transactional services.

Q: Customer receptivity to pricing increases on gas power side?

A: Discussions focused on megawatts needed now, with premium slots in out years. No explicit new price increases recently, but discussions on maximizing economics.

Q: SMR announcement and customer interest?

A: Last week's announcement with new customers like Duke and AEP, increasing interest. Activity in Japan and North America on SMRs and existing plant upgrades.

Q: Impact of gas price increase on service activities?

A: Discussions more on megawatts now, but scope per outage expected to increase as customers invest in technology during outages. Upgrades in gas business expected to grow 50% by end of decade.

Q: Diversification of turbine sales and volumetric upside?

A: F-class gas turbines easier to make, helping with supply constraints. Diversification gives ability to serve customer base, but balance with supply base.

Q: Accelerating capacity expansion in electrification?

A: Opportunity to accelerate capacity build-out in electrification, leveraging industrial footprint. Lean initiatives driving capacity expansion without major bricks-and-mortar investments.

Q: Electrification backlog growth and North America opportunity?

A: $20 billion equipment backlog expected to grow substantially in 2025 and beyond. Significant opportunity in North America with continued customer education and industrial footprint investments.

Q: Gas turbine pricing against new build cost and geography variation?

A: Directional numbers for H-class gas turbines and plant builds are accurate. Premium slot dynamic not differing much between 2027 and 2028, but EPC support a challenge for fulfillment.