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NI

NOV Inc. (NOV)·Q3 2025 Earnings Summary

Executive Summary

  • NOV delivered resilient Q3 despite softer activity and tariffs: revenue $2.18B (-1% YoY, flat QoQ), Adjusted EBITDA $258M (11.9% margin, up QoQ), GAAP diluted EPS $0.11; free cash flow surged to $245M on $352M CFO .
  • Demand skewed to offshore production: Energy Equipment revenue +2% YoY to $1.25B with EBITDA margin 14.4% (+140 bps YoY), while Energy Products & Services fell 3% YoY to $0.97B amid lower global drilling and mix/pricing pressure .
  • Orders re-accelerated: $951M bookings, 141% book-to-bill; Energy Equipment backlog reached $4.56B, the highest since the segment was set up, driven by subsea flexible pipe and process systems strength .
  • Q4 guide implies softer activity: consolidated revenue -5% to -7% YoY; Adjusted EBITDA $230–$260M; segment guides: EE revenue -2% to -4% YoY (EBITDA $160–$180M) and EPS revenue -8% to -10% YoY (EBITDA $120–$140M) as tariffs (~$25M) and lower near‑term activity weigh .

What Went Well and What Went Wrong

What Went Well

  • Offshore-led mix supported margins and cash: “Strong execution on our offshore production backlog… helped NOV maintain steady revenue and margins sequentially… drove robust free cash flow of $245 million” (CEO) .
  • Energy Equipment performance: revenue +2% YoY to $1,247M; Adjusted EBITDA $180M (14.4% margin), marking 13 straight quarters of YoY margin growth; backlog $4.56B .
  • Orders momentum and project wins: $951M bookings (141% book‑to‑bill), including flexible riser/flowline awards (Black Sea, Guyana, Brazil), MEG system for Black Sea FPSO, second APL SSY for FLNG in Argentina .

What Went Wrong

  • Margin compression from tariffs/mix: Gross margin fell to 18.9% (Q2: 21.4%; Q3’24: 20.4%); tariff expense just under $20M in Q3 and guided to ~$25M in Q4 .
  • Energy Products & Services (short-cycle) softness: revenue -3% YoY to $971M; EBITDA $135M (13.9%); impacted by lower drilling activity, infrastructure project delays, less favorable mix, and pricing pressure .
  • Non-recurring charges: $65M “Other Items” (asset/inventory write-downs, severance) weighed on GAAP results; management noted inventory charges won’t benefit future margins (i.e., scrapped) .

Financial Results

Consolidated Performance

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Billions)$2.191 $2.188 $2.176
Gross Margin %20.4% 21.4% 18.9%
Operating Profit ($USD Millions)$143 $143 $107
Adjusted EBITDA ($USD Millions)$252 (11.5%) $252 (11.5%) $258 (11.9%)
Diluted EPS (GAAP) ($)$0.33 $0.29 $0.11

Orders, Cash Flow, and Balance Sheet KPIs

MetricQ2 2025Q3 2025
Bookings ($USD Millions)$420 $951
Book-to-Bill (%)66% 141%
Energy Equipment Backlog ($USD Billions)$4.30 $4.56
Cash from Operations ($USD Millions)$191 $352
Free Cash Flow ($USD Millions)$108 $245
Total Debt ($USD Billions)$1.73 $1.73
Cash & Equivalents ($USD Billions)$1.08 $1.21
Tariff Expense (approx.) ($USD Millions)~$11 just under $20

Segment Breakdown

MetricQ3 2024Q2 2025Q3 2025
Energy Products & Services Revenue ($USD Millions)$1,003 $1,025 $971
Energy Products & Services Operating Profit ($USD Millions)$83 $83 $38
Energy Products & Services Adjusted EBITDA ($USD Millions)$146 (14.2%) $146 (14.2%) $135 (13.9%)
Energy Equipment Revenue ($USD Millions)$1,219 $1,207 $1,247
Energy Equipment Operating Profit ($USD Millions)$122 $122 $130
Energy Equipment Adjusted EBITDA ($USD Millions)$158 (13.1%) $158 (13.1%) $180 (14.4%)

Results vs. S&P Global Consensus

Metric (Q3 2025)ConsensusActual
Revenue ($USD Billions)$2.137*$2.176
Primary EPS ($)$0.242*$0.232*

Values with asterisks (*) retrieved from S&P Global.

Notes:

  • GAAP diluted EPS was $0.11, reflecting $65M of “Other Items” (asset/inventory write-downs, severance) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Revenue (YoY)Q4 2025—Down 5% to 7% New
Consolidated Adjusted EBITDA ($M)Q4 2025—$230–$260 New
Energy Equipment Revenue (YoY)Q4 2025—Down 2% to 4% New
Energy Equipment EBITDA ($M)Q4 2025—$160–$180 New
Energy Products & Services Revenue (YoY)Q4 2025—Down 8% to 10% New
Energy Products & Services EBITDA ($M)Q4 2025—$120–$140 New
Tariff Expense ($M)Q4 2025—~ $25 New
Tax Rate (Full Year)202526–28% (reiterated)26–28% Maintained
DividendOngoing$0.075/share quarterly$0.075/share declared Aug 14, 2025 Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (Prior-2)Q2 2025 (Prior-1)Q3 2025 (Current)Trend
Tariffs & Cost ActionsEarly mitigation plan; estimate Q2 tariff impact $8–$10M; focus on supply-chain rewiring and shared services .Tariff impact ~$11M in Q2; expected to rise to $20–$25M in Q3/Q4; $100M annualized cost savings program through 2026 .Q3 tariff expense just under $20M; Q4 guide ~$25M; continuing sourcing/process initiatives .Worsening near term; mitigations ongoing
Offshore/deepwater upcycleDeepwater break-evens <$50/bbl; tracking up to 12 FPSO awards; strong production equipment pipeline .FIDs delayed by supply chain/cost inflation, but not cancelled; flexible pipe/process systems record revenue .Deepwater seen leading supply growth post-2026; strong bookings tied to offshore development .Positive medium term
International unconventionalsGrowing momentum (Saudi Jafurah, Argentina Vaca Muerta); midstream/composite pipe demand .Middle East/LATAM mixed; rising coil tubing/wireline demand internationally .Build-out expanding (Bahrain, Argentina, UAE, Qatar); multiple examples of adoption .Broadening
Aftermarket & drilling activityNA activity risk rising; aftermarket softness expected .EE aftermarket sharply lower; drilling spares bookings dipped; seasonal rebound expected later .Aftermarket still soft; book‑and‑turn items cautious into Q4 .Soft near term
Automation/AI & digitalNOVOS platform, robotics pipeline starting; data platforms gaining .22 automation upgrades in process; robotics on 4 rigs, 11 in pipeline .6 robotics packages operating; further contracts/efficiency improvements; data-enabled drilling .Accelerating
Working capital/FCFImproved WC efficiency; positive Q1 FCF .TTM FCF conversion >80%; working capital % improving .Q3 FCF conversion ~95%; WC intensity 27.9% .Strong execution

Management Commentary

  • Strategic positioning: “The breadth and resilience of NOV’s portfolio continue to underpin our performance… resurgence in offshore investment and the emergence of unconventional development in new regions… will rely on NOV’s differentiated tools and technologies.” (CEO) .
  • Medium-term outlook: “We see the back half of 2026 and beyond as a period of strengthening demand across both offshore and international land markets.” (CEO) .
  • Segment mix shift: “We expect Energy Equipment’s contribution to EBITDA to rise… to ~55% in 2025, while Energy Products & Services moves to about 45%.” (COO) .
  • Cost and tariff mitigation: “Programs are on track to deliver over $100M in annualized cost savings by the end of 2026… tariffs and other inflationary impacts remain headwinds.” (CFO) .
  • Notable quote on cash: “Free cash flow generation remained robust at $245 million… 95% conversion rate during the quarter.” (CFO) .

Q&A Highlights

  • Orders cadence and backlog quality: Management expects Q4 book-to-bill near 1x (could be slightly below unless a large order lands), but emphasized multi‑year trend and backlog quality with embedded pricing/margins improving into 2026 .
  • Charges/“Other Items”: $65M largely inventory and restructuring; inventory charges are scrapped and do not benefit future margins .
  • International unconventionals: Broad-based early-stage buildouts (Bahrain coring to infrastructure and service equipment ramp) and increasing orders for coil tubing/wireline; intervention/stimulation book‑to‑bill >150% in Q3 .
  • FPSO/FIDs: 2025 awards tracking lower than earlier hopes (3 YTD, potentially a couple more), but outlook improving for late 2026–2027 .
  • FCF/WC trajectory: Working capital as % of revenue expected ~27–28% in Q4; ~50% EBITDA→FCF conversion seen as sustainable longer‑term .

Estimates Context

  • Revenue beat: $2.176B actual vs $2.137B consensus* (beat), driven by strong execution in Energy Equipment (process systems, flexible pipe) offsetting aftermarket softness .
  • EPS mixed: S&P Global “Primary EPS” actual $0.232* vs $0.242* consensus (slight miss), while GAAP diluted EPS was $0.11 due to $65M Other Items; tariff/mix headwinds and charges weighed .

Values with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Mix matters: Offshore production equipment strength and a record Energy Equipment backlog underpin margins and cash amid short-cycle softness—expect near-term pressure but durable medium-term setup .
  • Cash discipline is a differentiator: $352M CFO and $245M FCF in Q3 with ~95% conversion; structural WC initiatives and policy to return ≥50% of excess FCF support shareholder returns .
  • Tariffs are a headwind into Q4: Expect ~$25M in Q4 tariff expense; mitigations/cost programs are progressing but won’t fully offset near term .
  • Q4 guide prudent: Consolidated revenue -5% to -7% YoY; EBITDA $230–$260M reflects seasonality and softer aftermarket—watch orders, spares bookings, and any late‑quarter capital deliveries .
  • 2026 setup improving: Management expects offshore drilling pickup in 2H26 and continued international unconventionals buildout, which should re‑accelerate orders (automation, flexible pipe, process systems) .
  • Segment lens for positioning: Favor Energy Equipment beneficiaries of deepwater/LNG project cycles; in EPS, focus on technology‑led share gainers (drill bits/motors, telemetry, coatings) and international rental exposure .
  • Watch catalysts: Large offshore awards (flexibles, MEG, SSY), spares bookings inflection as rigs re‑contract, robotics/automation wins, and any resolution/abatement of tariff pressures .

Appendix: Additional Q3 Items

  • Capital returns: Repurchased ~6.2M shares ($80M) and paid $28M in dividends in Q3; total capital returned $108M .
  • Balance sheet: Total debt $1.73B; cash $1.21B at quarter‑end .
  • Dividend: $0.075/share declared Aug 14, 2025 (paid Sep 26, 2025) .