NOV Inc. Q2 FY2025 earnings call

• Revenue for the second quarter of 2025 was $2.2 billion, up 4% from the first quarter of 2025 and down 1% from the second quarter of 2024. EBITDA was $252 million or 11.5% of sales.
• Energy Equipment segment grew revenues 5% sequentially with strong capital equipment sales offsetting reduction in aftermarket parts and services demand, though unfavorable mix shift drove margins lower but 12th straight quarter of year-over-year margin expansion.
• Energy Products and Services had solid 3% sequential top line growth buoyed by higher capital equipment sales and efficiency-enabling technologies, offset by lower demand for certain consumable products and cost pressures compressing margins.
• Market conditions are challenging with macroeconomic uncertainty, OPEC+ production quota unwinding, and Middle East conflict making customers cautious. North American exploration and production companies curtail short-cycle activity, international conventional activity eases, offshore projects face delays but not cancellations.
• Efforts to reduce costs include simplifying/standardizing/centralizing business processes, strategic sourcing, business and facility consolidations, exiting unprofitable product lines, and plant-level operational efficiencies.

On a U.S. GAAP basis, for the second quarter of 2025, NOV reported revenues of $2.2 billion. The Energy Equipment segment had revenue of $1.21 billion in the second quarter of 2025, nearly unchanged from the second quarter of 2024. Despite flat revenue, EBITDA increased $16 million to $158 million, resulting in a 130-basis point increase in EBITDA margins to 13.1% of sales. Capital equipment portion of the Energy Equipment segment revenue grew low-double digits year-over-year, led by growth from process systems, subsea flexible pipe and marine and construction businesses. The Energy Products and Services segment generated revenue of $1.03 billion, a 2% decrease compared to the second quarter of 2024 due to lower global activity levels which were partially offset by higher sales from the segment's capital equipment offerings. Adjusted EBITDA declined $38 million to $146 million or 14.2% of sales. Sequentially, segment revenues were 3% higher with stronger results from capital equipment sales, including drill pipe and composite solutions businesses. For the second quarter, the sales mix of Energy Products and Services was 50% services and rental, 34% capital equipment and 16% product sales.

• For the third quarter, NOV forecasts consolidated revenue to decline between 1% to 3% year-over-year with adjusted EBITDA landing in the range of $230 million to $250 million.
• Full year tax rate is expected to be between 26% and 28%.
• Tariff expense is expected to rise to between $20 million and $25 million in the third quarter and between $25 million and $30 million in the fourth quarter, then level off.
• Energy Products and Services segment expects revenues for the third quarter to be flat to down 2% compared to the third quarter of 2024 with EBITDA between $130 million and $150 million.
• Energy Equipment segment expects revenue to decrease between 1% to 3% compared to the third quarter of 2024 with EBITDA in the range of $145 million to $160 million.

• Macroeconomic uncertainty, rapid unwinding of OPEC+ production quotas, and conflict in the Middle East make customers more cautious, affecting spending on aftermarket parts and services.
• Tariff policy uncertainty and related cost increases put pressure on margins.
• Decline in global drilling activity leads to reduced demand for aftermarket parts and services for certain equipment.
• Uncertainty in commodity prices, geopolitical conflicts, cost inflation, and trade policy may cause projects to be delayed or pushed to the right.

Q: When looking at margins and where they might bottom and how to ramp back up, Clay responds on the progress made before headwinds, the future opportunities in unconventional technology in international markets and deepwater activity.

A: Clay says margins were improving but headwinds from OPEC+ unwinding, tariffs, etc. are tough, but sees bright future in unconventional tech in international unconventionals and deepwater activity.

Q: What signifies market turning a corner and thoughts on cash generation, Rodney responds on working capital improvement, CapEx outlook.

A: Rodney mentions Q3 working capital as percentage of revenue at 30% with 300-basis point improvement year-on-year, CapEx relatively consistent to last year maybe slightly up, and free cash flow conversion outlook.

Q: About cost reduction and market preparation, Clay and Jose respond on being prepared for future market growth, repositioning due to macro uncertainties being transitory.

A: Clay and Jose say they're prepared for future market growth, repositioning is due to transitory macro factors, and cost savings efforts are ongoing.

Q: On flexible pipe business bookings and automation adoption, Clay and Jose respond on flexible pipe business strong execution, automation platforms adoption details.

A: Clay talks about flexible pipe business strong orders, Jose provides details on NOVOS system installations, robotics pipeline, and digital services uptake.

Q: On retrofitting U.S. well service fleet and coiled tubing market, Clay and Jose respond on potential of electric service rigs and coiled tubing market trends.

A: Clay mentions potential benefits of electric service rigs, Jose talks about coiled tubing market trends and NOV's innovative solutions like Agitator system.