NOV Inc. Q1 FY2025 earnings call

NOV reported Q1 2025 revenues of $2.1 billion, net income of $73 million ($0.19 per fully diluted share), and EBITDA of $252 million (12% of sales), up 80 basis points year-over-year. Energy Equipment saw significant margin improvement due to strong demand for deepwater production equipment and cost reductions. Energy Products and Services outperformed global drilling activity but had lower margins from reduced drilling-related capital equipment sales. The company continues cost reduction efforts, focuses on operational efficiencies, and manages costs amidst macroeconomic headwinds. Second quarter revenues and EBITDA expected to grow modestly, but tougher conditions later due to trade war, OPEC decisions, etc. Tariff mitigation strategies include diversifying supply chains, leveraging US manufacturing, using USMCA, rerouting manufacturing, sourcing raw materials from lower tariff areas, and negotiating discounts. Long-term trends include confidence in offshore production supplanting US unconventional resources, outsized natural gas demand, and application of digital/AI technologies in oilfield operations.

For the first quarter of 2025, NOV's Energy Equipment segment had revenue of $1.15 billion, down 3% year-over-year, but EBITDA increased $46 million to $165 million, with a 430 basis point margin increase to 14.4% of sales. Capital Equipment sales accounted for 57% of the segment's revenues, and aftermarket sales/services made up 43%. Bookings were $437 million, up 12% year-over-year, and backlog was $4.41 billion, up 12% from Q1 2024. The Energy Products and Services segment generated revenue of $992 million, a 2% decrease year-over-year. EBITDA declined $29 million to $145 million, or 14.6% of sales. Sales mix was 52% services and rentals, 30% capital equipment, and 18% product sales. Services and rentals improved 4% year-over-year, but product sales declined 13% due to lower activity in Saudi Arabia and Mexico.

Second quarter Energy Equipment segment revenue is expected to be flat to up 1% compared to Q2 2024, with EBITDA in the range of $155 million to $175 million. Consolidated revenue is expected to be down 1% to 4% compared to Q2 2024, with EBITDA in the range of $250 million to $280 million. Full year tax rate is expected to be between 26% and 28%.

Emerging trade war, OPEC adding barrels leading to lower oilfield activity, LNG demand, and natural gas help notwithstanding. Uncertainty in tariff regimes with potential impacts on supply chains and margins, and North American E&P activity at risk due to lower commodity prices leading to more downside scenarios.

Q: Given guidance and weaker second half, how thinking about 2025 margins relative to 2024?

A: First half to second half, Energy Equipment segment EPS growth is in the ballpark of 3% to 5%, consolidated growth is around 1% to 2%, and EBITDA margins are flattish.

Q: International revenues ticked down, will international share continue to grow?

A: International is expected to hold up better than North America due to strength in unconventional shale/gas and deepwater offshore activity.

Q: Elaborate on capital equipment order activity and FPSO side?

A: Offshore deepwater market has strong confidence, with potential 12 FPSO awards in 2025, but uncertainty in capital equipment orders due to macro factors.

Q: Tariff mitigation efforts and CapEx?

A: Mitigation plans mostly don't require significant CapEx, and CapEx may be skewed lighter in the second half but there are ongoing investments in operational efficiency.

Q: Offshore growth and FIDs?

A: FIDs in deepwater continue driven by strong economics, emerging basins, and natural gas as a target.

Q: Second half EPS growth confidence with activity risk?

A: Larger deepwater projects are more resilient, but guidance is directional with rig count-driven parts at risk.