TechnipFMC PLC Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Arun Jayaram - JPMorgan - Analyst : Doug, my first question, Doug, is I wondered if you could talk about kind of the margin journey. At the midpoint of the range, you're now pushing close to 20% margins in Subsea. And I wondered if you could talk about between the favorable mix -- and you mentioned in the release some of the multiple drivers to boost business performance, but give us a sense of where do you think we can move across in this margin journey as we think about '26 and beyond?

Question: Arun Jayaram - JPMorgan - Analyst : Great. My follow-up, Doug, obviously, the Saipem Subsea merger announcement earlier this week has attracted a lot of buy-side attention. In fact, FTI was mentioned a number of times on that conference call. Saipem did mention they're going to honor their surf agreement with FTI until expiration. But I was wondering if you could give us your bigger picture thoughts on the implications of this merger in your business and maybe we've been getting a lot of questions on if you could go through some of the specifics of your Surf agreement with Saipem and maybe the go forward, what happens on exploration, et cetera. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, FTI.N - Q4 2024 TechnipFMC PLC Earnings Call

Question: Scott Gruber - Citi - Analyst : Yes. Great to see the cash return target going to over 70%, which I think is very leading -- my question is how you think about managing the balance sheet, now that your net cash, we'll see how much more cash you put on the balance sheet this year, maybe it's north of $200 million, which kind of could take you towards $500 million. But is there a level where you think you have enough cash on the balance sheet, would you cap it around $500 million and kind of move to return basically all cash to shareholders? How do you think about managing the cash on the balance sheet?

Question: Scott Gruber - Citi - Analyst : Great. Appreciate the color. And then turning to the Subsea revenue mix. In terms of the revenue contribution from Subsea 2.0 projects in '25, kind of roughly where would that stand? And how much will services contribute? Just thinking about the kind of higher margin contributors here impacting the mix?

Question: Scott Gruber - Citi - Analyst : It's great. Do you have a rough figure for the service portion of it, too?

Question: Scott Gruber - Citi - Analyst : Service, first of all.

Question: Scott Gruber - Citi - Analyst : Great. I appreciate all the color. I'll turn it back.

Question: John David Anderson - Barclays Capital Inc. - Analyst : I just want to ask you kind of kind of a bigger offshore question. So we've seen some mixed use in offshore markets are expected to play out over the next 12 to 18 months. On the 1 hand, we have the offshore drillers that aren't seeing many new tenders that seem to be suggesting projects might be getting pushed out a bit. On the other hand, we have service companies that are expecting '26 to be a market improvement in offshore development activity. Just want to know if you can kind of give us what you're seeing from your standpoint in terms of installations and backlog conversion. Do you think 2026 could be a step-up in that? Or it will be similar as far as you can tell, standing here today?

Question: John David Anderson - Barclays Capital Inc. - Analyst : That was actually my follow-up question was on the tendering activity. I was just kind of curious if maybe you can provide a little color around that of kind of what you're seeing out there. You said a growing list of name projects, but I assume there's a lot of exploration happening. Maybe talking about the gas demand? Are you starting to see more on that side of the business? I know some projects were sort of pushed off to the side on the gas side continue to develop. Can you maybe just add a little bit more color in terms of those conversations and where do you think we're going to start seeing more of these orders? And I don't know if you want to go there, but I mean it's $10 billion annually. Is that a number you think you can kind of keep consistently beyond '25.

Question: Mark Wilson - Jefferies - Analyst : Doug, your own global opportunity slide shows the highest number of really large awards, over $1 billion that I think you've ever shown before, now in double figures of $10 million. Could you speak to, Doug, the reasons behind these project sizes getting larger? Is it the complexity of the projects and the equipment required or the depth or indeed, is it simple pricing? That's the first question. And the second then is you also spoke to how cycle time is so important for clients. And earlier this year, I believe you spoke about being able to deliver your equipment still a year quicker than the competition. I just like to confirm that to be the case and whether there's anything to update on that? Those are two questions.

Question: Marc Bianchi - TD Cowen - Analyst : I first want to ask about the surface outlook here. So for first quarter, I know it's typically seasonally down from fourth quarter, but it looks like a bit more pronounced here and then what I need to assume to get to the revenue for the year reflects a pretty sharp snapback. So maybe you could just sort of walk us through how you see that unfolding?

Question: Marc Bianchi - TD Cowen - Analyst : Got it. Got it. Okay. Alf Maybe this next one is probably for you as well. The CapEx guidance for the year is looking like, I think it's about a 20% increase from what we saw in '24 and it looks like revenues guided up about 9% at the midpoint. So suggests a bit more capital intensity, but maybe you could sort of talk through where that CapEx is going and kind of how to think about it beyond.

Question: Marc Bianchi - TD Cowen - Analyst : Got it. Okay. And then just on that, is there any impact to EBITDA margin in the current period and next year from this? Or is it all kind of flowing through CapEx and ultimately, D&A?

Question: Kurt Hallead - Benchmark - Analyst : So Doug, thanks for all that insight and helping us see kind of what you see in your conversations with your varying customer base. So I guess my question is you've seen a pretty remarkable increase in the inbound being 80% of iEPCI and Subsea 2.0. Look, I guess, theoretically, you can see that go to 100%, but I also have to imagine that there's probably some limit to that. But I'd like to get your insight and your perspective on where you think that percentage could ultimately land.

Question: Victoria McCulloch - RBC Capital Markets - Analyst : Firstly, if I could ask, you talked about the standardization and industrializing of internal processes. When you spoke in your initial comments. Could you provide some color as to how much of these actions are already reflected in these financial results you're seeing? And another follow-on, but maybe a slightly different topic. Brazil doesn't meet your -- not all projects in Brazil sort of integrated strategy and the appetite that you have in the business. Can you talk about your desire to maintain active in this market to the same degree and what you're seeing as attractive bidding opportunities in the next 12 months?

Question: Victoria McCulloch - RBC Capital Markets - Analyst : Doug. Look forward to an even deeper Brazil deep dive at some point.

Question: Atidrip Modak - Goldman Sachs - Analyst : Doug, I'm curious about the potential for free cash flow conversion improvement over time. It sounded like could see some improvement as the ERP CapEx comes off. But is there a directional color you can provide on how you see the free cash flow conversion potential of the business over time?

Question: Atidrip Modak - Goldman Sachs - Analyst : That's super helpful. And then the last one, I guess, you guys gave us a lot of color on tendering and order expectations over the next few years. But I'm curious how those conversations are going with the regional customers, the ones that are just a little bit more difficult for us to track and how that plays into the order expectations for the out years? Any color you can provide around that?

Question: Atidrip Modak - Goldman Sachs - Analyst : I think there are smaller players that might have a few fields here and there that are farmed out that could be potential.