Marc Bianchi • TD Cowen

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CFO Ramsey Hamady confirmed that the planned OpEx increase for Q3 and Q4 is a methodical step aligned with the existing strategy to develop 12 modules and invest in supply chain commercialization, not for building modules speculatively. Regarding Fluor, Hamady stated that while he cannot comment on their specific plans, NuScale's go-to-market strategy remains consistent and unchanged regardless of Fluor's ownership decisions.

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President and CEO John Hopkins defined a 'firm order' as moving beyond MOUs to negotiated term sheets and power purchase agreements, noting customers are now visiting manufacturing facilities. Regarding regulatory streamlining, Hopkins stated that while some process improvements are possible, the fundamental rigor of safety reviews will remain. He expressed confidence in their current progress with the NRC for the 77-megawatt design approval, which is on track for July.

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CFO Ramsey Hamady and executive Clayton Scott clarified that their commercial partner, ENTRA1 Energy, is progressing different types of discussions with tech companies. President and CEO John Hopkins added that competitor deals validate the market trend. Hamady confirmed the $20 million deposit relates to progress with RoPower. Hopkins explained the RoPower FEED process is distinct from the prior UAMPS project, with a final investment decision expected in about a year.

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CFO J. Kevin Vann and SVP Michael Lennox attributed the margin beat to exceptional execution by employees on cost and performance goals. CEO John Lindsay confirmed the international exit rig count for Q4 is expected to be 62. Regarding margins, Kevin Vann stated the current quarter is an inflection point, with positive momentum expected from improving FlexRig profitability in Saudi and growth in other regions like South America and Australia.

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SVP and CFO Kevin Vann confirmed the historical guidance of around $25 million annually from the eight Saudi FlexRigs, suggesting this could increase due to operational synergies with the legacy KCAD team. Regarding the outlook, President and CEO John Lindsay noted that while partnerships are strong, lower oil prices are creating uncertainty in North America. Kevin Vann added that June is a "wild card" and guidance was moderated due to price volatility and tariff uncertainty. For Offshore, he described the business as steady but acknowledged that new business could be moderated by global oil price uncertainty.

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Chairman & CEO Paolo Rocca confirmed the Q3 outlook was for a high single-digit decline in sales, not volume. He explained that while expanding U.S. steel production can help, it won't eliminate the tariff impact. COO Gabriel Podskubka added that the temporary pause in the profitable fracking business and lower shipments of high-margin offshore pipe would negatively affect the Q3 margin mix.

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Chairman and CEO Paolo Rocca confirmed the overall view on buybacks hasn't changed, but the Board will re-evaluate based on new factors, including policies from the new U.S. administration and potential M&A opportunities. On Mexico, he described Pemex's sharp reduction in investment and activity as 'unsustainable' and expects a policy reset in the second half of 2025, though recovery will take time due to financial constraints.

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Chairman & CEO Paolo Rocca clarified that the 10-15% decline forecast is for sales volume. He projected that the EBITDA margin for the second half would be around the lower end of the previously guided 20-25% range. President of U.S. Operations Luca Zanotti added that high import levels have delayed price stabilization in the U.S., but he expects this to improve as imports recede.

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CEO Ron Gusek and CFO Michael Stock clarified the activity and pricing pressures are separate factors impacting Q3. Stock indicated decremental margins would be slightly elevated from the typical 35% due to fleet count changes. He also stated the $75 million CapEx reduction for 2025 is split roughly evenly between reduced completions spending and delays in power generation deliveries, which he described as a firming up of schedules.

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CFO Michael Stock characterized the outlook as "slow and steady progress." CEO Ron Gusek attributed the expected Q2 improvement to normal seasonality, with utilization that ramped up through Q1 continuing into Q2 across basins. He noted that even Canadian seasonality is becoming less impactful, leading to a typical sequential trend for the frac business.

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CFO Michael Stock stated that the entire 400 MW is ordered, with binding customer commitments for two-thirds of it currently in negotiation. He clarified that total company free cash flow is expected to be positive, not breakeven. He reiterated that share repurchases are opportunistic and funded by organic cash flow; any potential borrowing would be to fund significant growth, not buybacks.

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CFO Michael Stock stated that completions CapEx will be lower in 2025, and total company CapEx will likely be slightly lower unless a significant power generation opportunity emerges. He attributed the Q4 revenue trend to 'mix issues' and suggested the current pricing pressure is inconsistent with 2025 demand, hinting at a potential recovery. CEO Christopher Wright added that Liberty's experience is likely 'reasonably indicative' of the overall market, though influenced by its specific customer relationships.

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CEO & Chair Douglas Pferdehirt confirmed that strong services inbound leads to strong revenue and reiterated the $1.8 billion services revenue target for the year, in line with overall Subsea growth. EVP & CFO Alf Melin explained that the lower corporate expense in the first half was due to timing, with spending on programs like the ERP upgrade expected to increase in the second half.

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CEO Douglas Pferdehirt responded that lower prices have not yet impacted client conversations for long-cycle offshore projects, which have low breakevens (sub-$40 or sub-$30) and are prioritized over onshore investments. He described the subsea services business as highly resilient and not discretionary, as it addresses essential maintenance, repair, and well intervention needs, making it less sensitive to short-term price swings.

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CFO Alf Melin attributed the Q1 Surface weakness to North American uncertainty and project timing, with a full-year recovery driven by strong Middle East growth. He explained the CapEx increase is primarily for a multi-year ERP system upgrade, noting that total spending remains below the company's long-term guidance range as a percentage of revenue.

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CFO Alf Melin and CEO Douglas Pferdehirt indicated that margins should continue to benefit beyond 2025 as new, accretive orders replace the remaining legacy projects in the backlog. On cash conversion, Mr. Melin reiterated the company's target of converting at least 50% of EBITDA to free cash flow but stated that specific 2025 free cash flow guidance would be provided with Q4 earnings.

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EVP & CFO Eric Carre confirmed that while a precise Q4 guide is premature, the company directionally expects flattish revenue at best, with a decline in C&P revenue and an increase in D&E revenue. He anticipates C&P margins will soften further due to U.S. frac 'white space,' while D&E margins will continue to strengthen. Chairman, President & CEO Jeff Miller directly affirmed that C&P margins are expected to hold above double digits as the company exits the year.

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EVP & CFO Eric Carre provided directional Q4 guidance, expecting flattish overall revenue with C&P revenue declining and Drilling and Evaluation (D&E) revenue increasing. He anticipates further C&P margin softening due to U.S. frac market weakness but continued strengthening in D&E margins. Chairman, President & CEO Jeff Miller confirmed he expects C&P margins to hold above double digits.

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CEO Jillian Evanko clarified the estimated $50 million annual gross tariff impact does not include mitigation efforts, and the company is confident it can manage the impact within its existing guidance. She confirmed typical Q1-to-Q2 seasonality is expected. Both she and CFO Joseph Brinkman noted normal Q2 cash outlays include a semi-annual interest payment and higher tax payments.

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CEO Jillian Evanko estimated LNG orders were 20-25% of the 2024 total and projected a similar mix for 2025, calling it a conservative view. She clarified that the Teddy 2 facility costs in H2 2024 were due to non-repeating supplier issues and that the Specialty Products full-year gross margin would have been approximately 29% without them, offering a cleaner baseline for 2025.

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CEO Jillian Evanko stated that demand remains strong across most end markets, with the exception of China's industrial gas sector. She attributed the Q3 Specialty Products order weakness to project timing, not structural issues, highlighting a verbally awarded $40M+ mining order. She noted the pipeline is growing with wider adoption of IPSMR technology and expects the Q4 book-to-bill ratio to be 1.0x or greater.

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CEO Jillian Evanko projected sequential EBITDA improvement through the back half, avoiding a significant 'hockey stick' jump in Q4. For cash flow, she anticipates both Q3 and Q4 will be positive, with Q4 being stronger than Q3, and confirmed that Q3 free cash flow is expected to be an improvement over Q2.

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Chairman and CEO Clay Williams clarified that all second-half guidance is 'more directional than precise' due to heightened macro uncertainty, though he expects deepwater projects to be more resilient. CFO Rodney Reed did not specify a direct tariff impact on cash flow timing but reiterated confidence in achieving a 50% free cash flow conversion of EBITDA for the full year.

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Chairman, President and CEO Clay Williams attributed the Q4 margin pressure to adverse mix shifts in both segments. He explained that while disappointed to miss the 2024 margin target due to North American weakness, improved backlog quality and cost savings are expected to drive margin expansion in 2025. He characterized the offshore drilling outlook as "in flux," with some customers delaying spending due to "white space" while others plan upgrades.

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President & CEO Earl Austin attributed the expected margin recovery to several factors: an anticipated improvement in the industrial business, a shift in Canada from large pipeline projects to core LDC work, the accretive nature of recent acquisitions, and a rebound in capital spending by gas utility customers. He added that while he expects improvement, he is not yet satisfied and believes the segment can ultimately reach upper-single or even double-digit margins.

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President and CEO Earl "Duke" Austin reported that key supply chain items like transformers and breakers remain constrained; the situation hasn't worsened but also hasn't improved, having 'stayed the same.' He expressed high confidence in Quanta's ability to manage these issues for its partners. On the labor front, he was unequivocal, stating Quanta's workforce capacity has consistently outpaced any project constraints and could handle a significant ramp-up in demand.

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Lorenzo Simonelli, Chairman and CEO, stated that while official 2025 guidance will be given in January, they anticipate a robust level of activity similar to 2024. He indicated that project cycle times are expected to remain consistent, which implies a similar pace of backlog conversion and will help maintain the Remaining Performance Obligation (RPO) at record levels.

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