01—Abstract
Summary
Summary of the 8-K filed July 25, 2024. Cited figures are marked; the original filing is the authoritative source.
TechnipFMC reported second quarter 2024 results on July 25, 2024, with revenue of $2,325.6 milliona, up 13.9% sequentially and 17.9% year-over-year, and GAAP net income attributable to the company of $186.5 million, or $0.42 per diluted share.
Adjusted EBITDA was $361.4 millionb (15.5% margin), and excluding a $17.7 million foreign exchange loss it was $379.1 million. Adjusted diluted EPS was $0.43, up from $0.22 in the prior quarter. The quarter's strength was led by Subsea, where operating profit margin rose 480 basis points sequentially to 13.8% and adjusted EBITDA margin reached 17.7%.
Order momentum was strong. Total inbound orders were $3.09 billionc, giving a book-to-bill above 1 and a record total company backlog of $13.9 billion. Subsea inbound orders of $2.8 billion (book-to-bill of 1.4x) included the Whiptail project for ExxonMobil in Guyana, the Woodside Xena Phase 3 and Energean Katlan iEPCI projects, and a Petrobras flexible pipe contract.
Surface Technologies was steadier, with revenue up 3% sequentially but orders down 31% and backlog declining to $973 milliond. The prior quarter's operating profit included a $75.2 million gain on the Measurement Solutions divestiture, so Surface Technologies' sequential operating profit comparison is distorted. Management raised full-year 2024 guidance.
Subsea revenue is now expected at $7.6-7.8 billion (previously $7.2-7.6 billion), Subsea adjusted EBITDA margin at 16.5-17% (previously 15.5-16.5%), and free cash flow at $425-575 million (previously $350-500 million). Balance sheet and capital returns also improved: net debt fell to $260 million, the company returned $121.5 million to shareholders in the quarter, and Fitch's first-time BBB- rating joined S&P's March upgrade to investment grade, which removes collateral requirements on its revolving credit and letter of credit facilities.
02—Key points
Key Highlights
- Q2 2024 revenue of $2.33 billion, up 13.9% sequentially and 17.9% year-over-year; GAAP diluted EPS of $0.42 and adjusted diluted EPS of $0.43
- Record total company backlog of $13.9 billion, with total inbound orders of $3.09 billion exceeding revenue for the quarter
- Subsea book-to-bill of 1.4x on $2.8 billion of inbound orders, led by the ExxonMobil Whiptail project in Guyana and Woodside and Energean iEPCI awards
- Subsea operating profit margin rose 480 bps sequentially to 13.8%, and adjusted EBITDA margin reached 17.7%
- Full-year 2024 guidance raised for Subsea revenue ($7.6-7.8B), Subsea adjusted EBITDA margin (16.5-17%), and free cash flow ($425-575M)
- Net debt declined $66.8 million sequentially to $260.2 million; cash flow from operations of $231 million and free cash flow of $180 million in the quarter
- Investment-grade credit ratings from S&P (BBB-, March upgrade) and Fitch (BBB-, June) remove collateral requirements and lower future borrowing costs; Surface Technologies orders fell 31% sequentially and its backlog dropped to $973 million
03—Questions
Frequently Asked Questions
Why did reported net income barely move relative to the strength in operations?
Reported net income of $186.5 million includes a $17.7 million foreign exchange loss. Excluding the after-tax FX impact, net income was $204.3 million. Adjusted net income of $188.9 million also excludes a small $2.4 million of restructuring and other charges, so the underlying earnings trend is stronger than the GAAP figure suggests.
Is the Surface Technologies operating profit decline a concern?
Not on an underlying basis. Operating profit fell 70.4% sequentially to $30.6 million, but the prior quarter included a $75.2 million gain on the Measurement Solutions disposal. Excluding that gain, operating profit increased $2.4 million, driven by higher Middle East volume. Investors should still watch the 31% sequential drop in Surface Technologies orders and the decline in its backlog.
What drove the guidance increase, and is it sustainable?
Management raised Subsea revenue, Subsea adjusted EBITDA margin, and free cash flow guidance on strong Q2 execution and improved earnings mix from backlog. Management also expects Subsea adjusted EBITDA margin in Q3 at a level similar to Q2 and expects Subsea orders to approach $10 billion for 2024. Sustainability depends on continued project execution and on Subsea order intake converting to backlog, which is subject to typical project timing risk.
How strong is the company's balance sheet and capital return position?
Net debt fell to $260.2 million from $327.0 million in Q1, and cash and equivalents ended at $708.2 million. The company repurchased $100 million of shares and paid a $21.5 million dividend in the quarter. The two investment-grade ratings are expected to reduce interest costs and eliminate collateral requirements on its $1.25 billion revolving credit facility and $500 million letter of credit facility.
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