Did TechnipFMC's Q3 2024 earnings reflect strong underlying operating performance?

Operating performance was solid, with Subsea operating profit up 62.5% year over year and adjusted EBITDA up 62.6% company-wide. However, reported net income and EPS were boosted by a $60.6 million non-cash tax benefit from releasing a valuation allowance, so investors should look at adjusted EBITDA and operating profit as the cleaner measures of ongoing performance.

What drove the increase in the 2025 Subsea outlook?

Management raised 2025 Subsea revenue guidance to $8.3–8.7 billion (from about $8 billion) and adjusted EBITDA margin to 18.5–20% (from about 18%). Management cited a diversified and growing Subsea Opportunities List, expected 2025 iEPCI and Subsea 2.0 inbound exceeding 2024 levels, continued Subsea Services growth, and better execution.

How much capacity does the new buyback program provide, and how is capital being returned?

The board added $1 billion to the share repurchase authorization, bringing total capacity to $1.2 billion, which the company says exceeds 10% of its outstanding shares at the prior day's closing price. In Q3 alone, the company repurchased 3 million shares for $80 million and paid $21.5 million in dividends, for total distributions of $101.5 million. Since July 2022, it has returned more than $740 million.

Are there concerns in the quarter that investors should monitor?

Yes. Surface Technologies revenue fell 8.1% year over year and its backlog declined 16.4%. Subsea inbound orders dropped 13.2% sequentially after a very strong Q2, and the full-year 2024 free cash flow guidance includes a roughly $170 million legal settlement payment. Q3 also included a $3.1 million pre-tax foreign exchange loss.

What do the Q3 Subsea awards signal for future revenue?

The quarter included a substantial Petrobras flexible pipe contract, a significant Petrobras subsea production systems contract for pre-salt fields in Brazil, and a substantial bp Kaskida iEPCI project in the Gulf of Mexico. Subsea backlog scheduling shows $1.5 billion to be recognized in the rest of 2024, $5.5 billion in 2025, and $6.7 billion in 2026 and beyond, which supports multi-year revenue visibility.

FTI 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed October 24, 2024. Cited figures are marked; the original filing is the authoritative source.

TechnipFMC reported third-quarter 2024 results on October 24, 2024, with revenue of $2,348.4 million^a (up 14.2% year over year), net income attributable to the company of $274.6 million ($0.63 per diluted share), and adjusted EBITDA of $386.1 million (16.4% margin).

Adjusted net income was $280.5 million^b, or $0.64 per diluted share, but this figure includes a $60.6 million non-cash tax benefit from releasing a valuation allowance on deferred tax assets, so the underlying operating improvement is smaller than the headline growth rates suggest. Excluding a $3.1 million pre-tax foreign exchange loss, adjusted EBITDA was $389.2 million. Total company backlog reached a record $14.7 billion, and Subsea backlog hit $13.7 billion, supported by $2.5 billion of Subsea inbound orders (book-to-bill of 1.2x).

Management raised its 2025 Subsea guidance to revenue of $8.3^c–8.7 billion (from roughly $8 billion) and adjusted EBITDA margin of 18.5–20% (from roughly 18%). The board also expanded the share repurchase authorization by $1 billion to a total of $1.2 billion, and management said it expects to nearly double 2024 shareholder distributions versus 2023. Free cash flow was $225.3 million in the quarter, and net debt fell $131 million sequentially to $129.2 million.

Investors should weigh the strong order intake and visibility against several items. Surface Technologies revenue declined 8.1% year over year, Subsea inbound orders fell 13.2% sequentially, and the company disclosed a roughly $170 million^d legal settlement payment within its 2024 free cash flow guidance. The full-year 2024 guidance was also trimmed for net interest expense and tax provision, and the company remains exposed to ongoing oil and gas project timing and macro risks.

02—Key points

Key Highlights

Record total backlog of $14.7 billion (up 11.1% year over year), with Subsea backlog at a record $13.7 billion and Subsea inbound orders of $2.5 billion (book-to-bill 1.2x).
Q3 2024 revenue of $2,348.4 million (up 14.2% YoY) and adjusted EBITDA of $386.1 million, a 16.4% margin (up 490 bps YoY).
GAAP diluted EPS of $0.63 and adjusted diluted EPS of $0.64, but the results include a $60.6 million non-cash tax benefit from a valuation allowance release, which flatters earnings.
Raised 2025 Subsea guidance: revenue of $8.3–8.7 billion (from ~$8 billion) and adjusted EBITDA margin of 18.5–20% (from ~18%).
Share repurchase authorization increased by $1 billion to $1.2 billion total, more than 10% of shares outstanding at the October 23, 2024 closing price; management expects 2024 shareholder distributions to nearly double versus 2023.
Net debt reduced by $131 million sequentially to $129.2 million; cash of $837.5 million and Q3 free cash flow of $225.3 million.
Full-year 2024 guidance updated: net interest expense lowered to $65–70 million and tax provision lowered to $170–180 million, with free cash flow of $425–575 million including roughly $170 million for a legal settlement payment.

03—Questions

Frequently Asked Questions

Did TechnipFMC's Q3 2024 earnings reflect strong underlying operating performance?
Operating performance was solid, with Subsea operating profit up 62.5% year over year and adjusted EBITDA up 62.6% company-wide. However, reported net income and EPS were boosted by a $60.6 million non-cash tax benefit from releasing a valuation allowance, so investors should look at adjusted EBITDA and operating profit as the cleaner measures of ongoing performance.
What drove the increase in the 2025 Subsea outlook?
Management raised 2025 Subsea revenue guidance to $8.3–8.7 billion (from about $8 billion) and adjusted EBITDA margin to 18.5–20% (from about 18%). Management cited a diversified and growing Subsea Opportunities List, expected 2025 iEPCI and Subsea 2.0 inbound exceeding 2024 levels, continued Subsea Services growth, and better execution.
How much capacity does the new buyback program provide, and how is capital being returned?
The board added $1 billion to the share repurchase authorization, bringing total capacity to $1.2 billion, which the company says exceeds 10% of its outstanding shares at the prior day's closing price. In Q3 alone, the company repurchased 3 million shares for $80 million and paid $21.5 million in dividends, for total distributions of $101.5 million. Since July 2022, it has returned more than $740 million.
Are there concerns in the quarter that investors should monitor?
Yes. Surface Technologies revenue fell 8.1% year over year and its backlog declined 16.4%. Subsea inbound orders dropped 13.2% sequentially after a very strong Q2, and the full-year 2024 free cash flow guidance includes a roughly $170 million legal settlement payment. Q3 also included a $3.1 million pre-tax foreign exchange loss.
What do the Q3 Subsea awards signal for future revenue?
The quarter included a substantial Petrobras flexible pipe contract, a significant Petrobras subsea production systems contract for pre-salt fields in Brazil, and a substantial bp Kaskida iEPCI project in the Gulf of Mexico. Subsea backlog scheduling shows $1.5 billion to be recognized in the rest of 2024, $5.5 billion in 2025, and $6.7 billion in 2026 and beyond, which supports multi-year revenue visibility.

04—Continue

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