01—Abstract
Summary
Summary of the 8-K filed April 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Baker Hughes (BKR) reported first-quarter 2024 results that beat on several profitability measures.
Revenue was $6.418 billiona, up 12% year-over-year but down 6% sequentially. Orders were $6.542 billion, including $2.9 billion at Industrial & Energy Technology (IET), and the company's book-to-bill ratio was 1.0 overall and 1.1 for IET. GAAP diluted EPS was $0.45, while adjusted diluted EPS was $0.43, up 50% year-over-year.
Adjusted EBITDA was $943 millionb, up 21% year-over-year, though down 14% sequentially. The year-over-year improvement was driven mainly by IET, where Gas Technology Equipment revenue rose 46% and segment operating income grew 37%. Oilfield Services & Equipment (OFSE) revenue rose 6% year-over-year but fell 4% sequentially, with segment EBITDA margin at 17.0%.
Sequentially, the business softened on lower volume and negative mix, and remaining performance obligations (RPO) fell $0.8 billion to $32.7 billionc. Capital returns remained a focus. Free cash flow was $502 million, operating cash flow was $784 million, and the company repurchased $158 million of shares.
The quarterly dividend rose one cent to $0.21d, an 11% increase year-over-year, and management reaffirmed its plan to return 60%-80% of free cash flow to shareholders. Investors will likely focus on whether the IET order cadence and the sequential decline in OFSE can sustain the full-year guidance.
02—Key points
Key Highlights
- Revenue of $6.418B, up 12% YoY but down 6% QoQ; orders of $6.542B, down 14% YoY.
- GAAP diluted EPS of $0.45 and adjusted diluted EPS of $0.43 (up 50% YoY); net income attributable to the company of $455M.
- Adjusted EBITDA of $943M, up 21% YoY but down 14% sequentially; adjustments were only $7M before tax.
- IET revenue up 23% YoY to $2.634B, led by Gas Technology Equipment (+46%); IET orders were $2.918B, down 17% YoY on timing of gas equipment awards.
- OFSE revenue of $3.783B (+6% YoY, -4% QoQ); segment EBITDA of $644M with a 17.0% margin.
- RPO declined $0.8B to $32.7B; free cash flow of $502M and operating cash flow of $784M.
- Shareholder returns of $368M, including $158M of buybacks; quarterly dividend raised to $0.21 (up 11% YoY).
03—Questions
Frequently Asked Questions
How did Baker Hughes perform in Q1 2024 compared with the prior year?
Revenue rose 12% to $6.418 billion and adjusted EBITDA rose 21% to $943 million. Adjusted diluted EPS grew 50% to $0.43, driven mainly by volume and pricing gains in both segments and by structural cost-out initiatives, partly offset by cost inflation.
Why did orders decline year-over-year despite strong IET awards?
Total orders fell 14% to $6.542 billion. IET orders dropped 17% year-over-year, mainly because Gas Technology Equipment orders fell 28% on timing. Management highlighted the large Aramco MGS3 and Black & Veatch Cedar LNG awards as evidence of continued momentum.
Is the dividend increase and buyback sustainable?
The company raised its quarterly dividend by one cent to $0.21 and repurchased $158 million of shares in the quarter. Management reaffirmed a target of returning 60%-80% of free cash flow to shareholders. Q1 free cash flow of $502 million covered the $368 million of total shareholder returns, though free cash flow fell 21% sequentially.
What drove the sequential decline in profitability?
Adjusted operating income and adjusted EBITDA fell sequentially on lower volume and negative mix in both IET and OFSE, partly offset by higher productivity. OFSE segment operating income dropped 14% sequentially, and OFSE orders declined 6%.
What should investors watch going forward?
Investors should watch the conversion of the $32.7 billion RPO into revenue, particularly as RPO declined sequentially, and whether the IET order pipeline and OFSE volumes recover enough to support full-year guidance. Management said Q1 put the company on a path toward its full-year targets.
04—Continue