01—Abstract
Summary
Summary of the 8-K filed January 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Baker Hughes (BKR) reported fourth-quarter and full-year 2023 results on January 23, 2024, with a strong close to the year.
Q4 revenue was $6,835 milliona, up 16% year-over-year and 3% sequentially, while GAAP net income attributable to the company rose to $439 million from $182 million a year earlier. Adjusted EBITDA reached $1,091 million, the first time above $1 billion in company history, and full-year adjusted EBITDA was $3.76 billion, up 26%. Full-year free cash flow was $2.05 billion, a 54% conversion rate from adjusted EBITDA, and shareholder distributions totaled $1.32 billion.
The quarter's order intake was softer than the prior period. Total Q4 orders were $6,904 millionb, down 19% sequentially and 14% year-over-year, driven mainly by timing in Gas Technology Equipment (orders down 47% year-over-year). Even so, IET orders exceeded $3 billion for the fifth consecutive quarter, full-year orders were a record $30.5 billion, and remaining performance obligations ended the year at $33.5 billion.
The book-to-bill ratio for the quarter was 1.0 overall and 1.1 for IET. Management highlighted margin progress in its Oilfield Services & Equipment segment, where EBITDA margin rose to 17.9% and Oilfield Services margins exceeded 20%, both records, and the company removed $150 millionc of costs in 2023. Management also announced recent actions to further streamline OFSE.
Investors will want to watch whether order timing normalizes in IET and whether the cost actions and pricing support continued margin expansion in 2024. The earnings call was scheduled for January 24, 2024.
02—Key points
Key Highlights
- Q4 2023 revenue of $6,835M, up 16% YoY; adjusted EBITDA of $1,091M, up 15% YoY and the first quarter above $1 billion
- GAAP diluted EPS of $0.43 and adjusted diluted EPS of $0.51 for Q4; full-year GAAP diluted EPS of $1.91 and adjusted diluted EPS of $1.60 (up 76%)
- Full-year 2023 revenue of $25.5B (up 21%) and adjusted EBITDA of $3.76B (up 26%); operating income of $2.32B (up 96%)
- Q4 orders of $6.9B fell 19% sequentially and 14% YoY on Gas Technology Equipment timing, while full-year orders reached a record $30.5B (up 14%)
- Remaining performance obligations of $33.5B at year-end, with IET RPO of $29.9B; OFSE EBITDA margin of 17.9% and Oilfield Services margin above 20%, both records
- Full-year free cash flow of $2.05B and shareholder distributions of $1.32B, including $538M of share repurchases
- Q4 included $165M of pre-tax adjusting items, and a $81M deferred tax asset valuation allowance release boosted adjusted earnings
03—Questions
Frequently Asked Questions
Why did Baker Hughes' orders decline in the fourth quarter despite strong IET performance?
Total Q4 orders fell 19% sequentially and 14% year-over-year to $6.9B. The decline was driven mainly by the timing of Gas Technology Equipment orders, which fell 47% year-over-year to $1.3B after a large prior-year quarter. IET orders still exceeded $3 billion for the fifth straight quarter, and the company reported a 1.0 total book-to-bill ratio.
How strong was Baker Hughes' full-year 2023 financial performance?
Full-year revenue rose 21% to $25.5B, adjusted EBITDA rose 26% to $3.76B, and GAAP net income attributable to the company reached $1.94B versus a loss of $601M in 2022. Operating cash flow was $3.06B and free cash flow was $2.05B, a 54% conversion rate from adjusted EBITDA.
What drove the difference between GAAP and adjusted results?
Q4 operating income of $651M excluded $165M of pre-tax items, mainly restructuring, impairment and other charges of $163M, which produced adjusted operating income of $816M. On the earnings line, Q4 adjusted EPS of $0.51 exceeded GAAP EPS of $0.43 because of non-operating mark-to-market losses on equity investments and a tax benefit from a $81M valuation allowance release.
What is the outlook for Baker Hughes' backlog and cash returns?
Remaining performance obligations ended 2023 at a record $33.5B, up $1.0B sequentially, providing revenue visibility. The company returned $1.32B to shareholders in 2023 through dividends and buybacks, and extended its $3B revolving credit facility to November 2028 while repaying $650M of senior notes that matured in December 2023. The release itself did not include formal 2024 guidance; management's outlook was to be discussed on the January 24 call.
04—Continue