Q1 2024 Earnings Summary
- GEV is experiencing strong demand in its Electrification segment, with orders more than 2x first quarter revenue. This growth is driven by investments in grid modernization, particularly in high-voltage equipment and transformers, leading to margin expansion and long-term growth opportunities.
- Robust global demand for new gas power additions, especially in the Middle East and North America, has led to significant equipment orders growth. GEV booked 8 HA gas turbine orders in Q1, equal to all of 2023, indicating strong future revenue and backlog growth.
- Onshore Wind business achieved positive EBITDA for the third consecutive quarter, and GEV expects measurably higher revenues in the second half of the year. The company is approaching profitability for the Wind segment in 2024, driven by higher volumes and operational improvements.
- Offshore wind projects are generating losses, and while the company expects improvements, it anticipates only approaching profitability in the wind segment in 2024, indicating ongoing profitability challenges, especially in offshore wind .
- Electrification orders have longer delivery cycles, meaning that the benefits from the strong 2.2x book-to-bill ratio may not be realized until after 2025, delaying the contribution to margins .
- Increased gas equipment orders have a conversion cycle of 2-3 years, so even with a growing backlog, revenue growth from these orders may not materialize in the short term .
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Gas Equipment Orders Outlook
Q: Will gas equipment orders exceed revenue this year?
A: Yes, it's practical to think that gas equipment orders could exceed revenue in 2024, leading to a growing backlog. The conversion cycle from order to revenue is typically 2 to 3 years. -
Gas Services Growth
Q: Will gas services see strong growth ahead?
A: Yes, double-digit growth in gas services orders is expected to continue throughout 2024, driven by customers investing in the existing installed base and increased fleet utilization. -
Electrification Orders and Margins
Q: How are electrification orders impacting margins?
A: Strong growth in electrification orders, particularly in grid businesses like transformers and grid services, is contributing to margin expansion. Electrification is anticipated to reach mid-single-digit EBIT margins in 2024 and continue expanding into 2025. -
Onshore Wind Profitability Outlook
Q: Will the wind segment be profitable this year?
A: The company anticipates approaching profitability for the wind segment in 2024, with onshore wind expected to achieve high single-digit EBITDA margins. Revenues are projected to be higher in the second half, contributing to improved productivity. -
U.S. Utility Demand and AI Impact
Q: Are utilities reacting to increased power demand from AI?
A: Yes, utilities are accelerating discussions to secure capacity due to steeper load growth projections in the last 6 to 12 months. This includes framework agreements for future heavy-duty equipment, reflecting bullishness on capacity additions. -
Aeroderivative Turbines Demand
Q: What is the outlook for aeroderivative turbines?
A: Aeroderivative turbines are an exciting growth area, well-suited to complement wind and solar farms needing fast-ramping solutions. The economics favor day-one equipment revenue over services. -
Electrification Order Geography
Q: Where are electrification orders coming from?
A: Orders are more heavily weighted towards Europe, but there is good interest and demand in North America, with opportunities as the U.S. focuses on grid optimization strategies. -
Offshore Wind Strategy
Q: Will you participate in NYSERDA's offshore wind RFP?
A: Offshore wind is important, but the company will only add to its backlog with materially different economic terms than current projects. Focus is on projects set to thrive, with a new 15.5 MW product prototype expected by end of 2025. -
Company Performance vs Expectations
Q: Is the company outperforming internal expectations?
A: The strong momentum gives incremental confidence to deliver on the year's guidance, though performance is more seasonally focused on the second half.