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NOV Inc. (NOV)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue $2.31B, diluted EPS $0.41, and Adjusted EBITDA $302M; sequential revenue grew 5% and margins improved to 13.1% Adjusted EBITDA, while free cash flow reached $473M .
  • Energy Equipment led margin expansion (14.4%, +310 bps YoY) on higher-margin backlog execution; orders were $757M with a 121% book-to-bill, and year-end backlog rose to ~$4.43B (+$279M YoY) .
  • Management guided Q1 2025 consolidated revenue down 1–3% YoY and Adjusted EBITDA of $235–$265M; segment outlook: Energy Products & Services flat to down 2% (Adj. EBITDA $145–$165M) and Energy Equipment down 3–5% (Adj. EBITDA $135–$150M) .
  • Capital returns remain a key catalyst: NOV returned $141M in Q4 and $337M in 2024, reiterated a commitment to return at least 50% of Excess FCF annually and indicated a supplemental dividend in H1’25 (~$80M expected) plus aggressive buybacks in 2025 .

What Went Well and What Went Wrong

What Went Well

  • Energy Equipment margins expanded to 14.4% (+310 bps YoY) on strong execution of higher-margin backlog; Q4 Adjusted EBITDA rose to $185M (+$38M YoY) . “We expect further improvement in margins out of backlog as we move into the first part of 2025” .
  • Robust cash generation: Q4 cash from operations $591M and free cash flow $473M; FY24 FCF conversion of ~86% of EBITDA, enabling $414M increase in cash and material capital returns . “We now expect to return well over 50% of our excess free cash flow in 2025” .
  • Order momentum and backlog: Q4 orders $757M (121% book-to-bill); Energy Equipment backlog ~$4.43B at year-end (+$279M YoY), with record flexible pipe backlog and improving pricing/margins .

What Went Wrong

  • Short-cycle headwinds: Energy Products & Services (EPS) EBITDA fell $20M YoY to $173M and margin compressed to 16.3% on lower global drilling activity and weaker North America mix (drill pipe volumes down sharply) .
  • Offshore “white space”: slower spare parts demand and expected mid-to-upper single digit decline in rig aftermarket in 2025; potential trough in Q3 before improvement in Q4 2025 .
  • Pressure pumping/stimulation softness in North America weighed on aftermarket and capital equipment; Energy Equipment revenue outlook low single-digit decline for 2025 despite production equipment strength .

Financial Results

Consolidated Results vs Prior Quarters and YoY/Guidance

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$2.216 $2.191 $2.308
Gross Profit ($USD Millions)$590 $469 $493
Gross Margin (%)26.6% 21.4% 21.4%
Operating Profit ($USD Millions)$313 $194 $207
Operating Margin (%)14.1% 8.9% 9.0%
Net Income Attrib. to Company ($USD Millions)$226 $130 $160
Diluted EPS ($USD)$0.57 $0.33 $0.41
Adjusted EBITDA ($USD Millions)$281 $286 $302
Adjusted EBITDA Margin (%)12.7% 13.1% 13.1%
Cash from Operations ($USD Millions)$432 $359 $591
Free Cash Flow ($USD Millions)$350 $277 $473
Consensus Revenue (S&P Global)UnavailableUnavailableUnavailable
Consensus EPS (S&P Global)UnavailableUnavailableUnavailable

Note: Wall Street consensus via S&P Global was unavailable due to system limits.

Segment Breakdown

SegmentQ2 2024 Revenue ($MM)Q3 2024 Revenue ($MM)Q4 2024 Revenue ($MM)Q2 Adj. EBITDA ($MM)Q3 Adj. EBITDA ($MM)Q4 Adj. EBITDA ($MM)Q2 Adj. EBITDA MarginQ3 Adj. EBITDA MarginQ4 Adj. EBITDA Margin
Energy Products & Services1,050 1,003 1,060 184 172 173 17.5% 17.1% 16.3%
Energy Equipment1,204 1,219 1,287 142 159 185 11.8% 13.0% 14.4%

KPIs (Orders, Backlog, Book-to-Bill, Capital & Returns)

KPIQ2 2024Q3 2024Q4 2024
Energy Equipment Orders ($MM)977 627 757
Book-to-Bill (%)177% 111% 121%
Energy Equipment Backlog ($MM)4,331 4,478 4,428–4,430
Share Repurchases ($MM)37 80 112
Dividend Declared (per share)—$0.075 (Nov 14) —
Total Debt ($B)1.75 1.75 1.74
Cash & Equivalents ($B)0.827 0.985 1.23

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Adjusted EBITDAQ4 2024$280–$300M Actual $302M Raised vs guidance (beat top end)
Consolidated Revenue (YoY)Q1 2025—Down 1–3% YoY New
Consolidated Adjusted EBITDAQ1 2025—$235–$265M New
Energy Products & Services RevenueQ1 2025—Flat to down 2% New
Energy Products & Services Adj. EBITDAQ1 2025—$145–$165M New
Energy Equipment RevenueQ1 2025—Down 3–5% New
Energy Equipment Adj. EBITDAQ1 2025—$135–$150M New
Capital ReturnsFY 2025At least 50% Excess FCF (framework) Majority of Excess FCF; supplemental dividend H1’25 (~$80M expected) Raised emphasis (larger buybacks + supplemental)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Digital/AI/AutomationMax platform growth; DBS wired drill pipe framework with major operator; automation records Continued adoption of Max Completions and Max Production; wired drill pipe demand; premium-priced tools Improving
Supply Chain“Healing”/normalization drove margins and cash flow Normalized supply chains supported margin gains and working capital efficiency Improving
Offshore “white space”Strong bookings/backlog; still robust FPSO/flexible pipe demand Spare parts slowdown; service/repair offsets; aftermarket expected down mid–upper single digits in 2025, recovery in H2’25 Mixed near term
North America activityDeclining activity; mix headwinds; pressure pumping orders down Subdued/flat; pressure pumping weakness; EPS exposed to NA, drill pipe volumes down Worsening
International/Middle East & LatAmStrong demand; flexible pipe awards; LatAm strength Middle East mixed (Saudi declines offset by Kuwait/UAE/Oman); LatAm strong (Brazil); unconventional growth (Argentina) Mixed to positive
LNG/Natural GasMEG dehydration solutions; FLNG processing orders LNG chain exposure across processing, moorings, offloading; NA gas uptick could benefit upstream portfolio Improving

Management Commentary

  • “Fourth quarter revenues grew 5% sequentially to $2.3 billion… EBITDA was $302 million or 13.1% of sales” — Clay Williams .
  • “Energy Equipment… margins up over 300 basis points year-on-year… We expect further improvement in margins out of backlog as we move into the first part of 2025” — Clay Williams .
  • “We achieved an 86% conversion rate of EBITDA to free cash flow in 2024… we now expect to return well over 50% of our excess free cash flow in 2025” — Jose Bayardo .
  • “Guidance: Q1’25 consolidated revenues down one to three percent with Adjusted EBITDA between $235 million and $265 million” — Company outlook .

Q&A Highlights

  • Margin trajectory: Management sees potential 50–150 bps margin improvement in 2025 driven by backlog mix, cost initiatives (drill pipe manufacturing and Tuboscope coating debottlenecking), and higher-margin product adoption; not formal guidance but “not unreasonable” assumption .
  • Capital returns: With cash balance up $414M and strong FCF conversion, NOV expects to return the vast majority of Excess FCF in 2025, plus a supplemental dividend to reach its 50% target for 2024 (~$80M anticipated, subject to Board approval) and aggressive buybacks at compelling valuations .
  • Offshore dynamics: “White space” likely reduces spare parts demand near term; more longer-term SPS recertifications with larger scope expected; recovery as drillers prepare for 2026 upcycle; backlog/work scope remains roughly flat YoY on rigs/projects .
  • Book-to-bill/outlook: After 121% Q4 and 122% FY, 2025 orders face North America stimulation headwinds and drilling equipment moderation, offset by deepwater production equipment strength and potential WTIV orders .
  • LNG/gas exposure: NOV benefits across upstream (bits, downhole tools, completions, chokes, composite flowlines) and processing (MEG dehydration), positioning for NA gas activity tied to LNG exports and power demand .

Estimates Context

  • S&P Global consensus for Q4 2024 revenue and EPS was unavailable due to system limits; therefore, estimate comparisons cannot be provided. Where guidance was previously issued (Q4 Adjusted EBITDA $280–$300M), NOV delivered $302M (beat top end) .

Key Takeaways for Investors

  • Energy Equipment is the earnings engine near term: backlog quality and pricing support continued margin expansion despite modest revenue pressure in 2025 .
  • Short-cycle exposure remains a drag: EPS margin and profitability sensitive to North America activity and drill pipe volumes; management is executing cost actions and shifting mix to higher-margin tools .
  • Cash return story strengthening: High FCF conversion, rising cash, majority of Excess FCF targeted for returns in 2025, plus supplemental dividend in H1’25; buybacks likely continue given valuation commentary .
  • Deepwater/LNG tailwinds intact: FPSO/process systems and flexible pipe backlog at record levels with strong pricing; watch for WTIV and construction vessel orders as incremental 2025 catalysts .
  • Near-term aftermarket softness: Rig aftermarket mid–upper single-digit decline expected in 2025 with trough mid-year; recovery anticipated into Q4’25 and 2026 preparations .
  • Q1’25 setup: Expect revenue down 1–3% YoY and EBITDA $235–$265M; segment guidance implies seasonal softness but margin resilience from backlog .
  • Trading implications: Favorable risk/reward if market leans into capital returns and margin expansion; be cautious on near-term aftermarket and North America stimulation weakness until signs of inflection emerge .