GE Vernova Inc.

Good day, ladies and gentlemen, and welcome to GE Renova's third quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode. My name is Liz, and I will be your conference coordinator today. If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please hit F5 on your keyboard to refresh. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Michael Levine. Vice President of Investor Relations. Please proceed.

Thank you. Welcome to GE Vernova's third quarter 2024 earnings call. I'm joined today by our CEO, Scott Strazing, and CFO, Ken Parks. Our conference call remarks will include both GAAP and non-GAAP financial results. Reconciliations between GAAP and non-GAAP measures can be found in today's Form 10Q press release and in the presentation slides, all of which are available on our website. Please note that year over year commentary or variances on orders, revenue, adjusted EBITDA, and margin discussed during our prepared remarks are on an organic basis. We will make forward-looking statements about our performance. These statements are based on how we see things today. While we may elect to update these forward-looking statements at some point in the future, we do not undertake any obligation to do so. As described in our SEC filings, actual results may differ materially due to risks and uncertainty. With that, I'll hand the call over to Scott. Thanks, Michael.

Good morning, everyone, and welcome to our third quarter earnings call. We continue to gain confidence and conviction in the growth trajectory ahead for GE Vernova. We are in the early innings of an investment super cycle in the expansion and decarbonization of the electric power system, driven by increasing demand for power, increased focus on energy security, and rising grid investments. The GE Vernova purpose has never been more clear, and we are excited to have published our first sustainability report last month. Our objective with this report is to provide metrics on our progress in electrifying, and decarbonizing the world while ensuring the communities we operate in thrive and simultaneously get better each year in conserving resources with our own operations. A quick discussion on a few of the sustainability metrics we'll measure and update each year. In 2023, we added 29 gigawatts of new capacity to the grid globally with 42% in developing markets. The carbon intensity of this capacity is approximately 25% below the global average carbon intensity of the existing global power sector and has the potential to avoid 20 million metric tons of CO2 per year. I share these examples to reinforce our true north in both adding capacity to the grid each year while driving towards a more sustainable electricity system. These sustainability metrics align our broader purpose with our multi-year financial ambitions to deliver attractive returns for our shareholders. Turning to slide four, I will spend a few minutes on each of our segments. Our power segment, led by gas power, delivered strong double digit orders and revenue growth with over 200 basis points of margin expansion. Power orders increased 34% this quarter, driven by substantial equipment demand both for HA and air derivative units, as well as services. Year to date, we have booked approximately 14 gigawatts of orders for new gas turbines, nearly double last year's level. We expect the fourth quarter to be our largest equipment orders quarter of 2024. As discussed in September, we have now secured capacity to deliver between 70 to 80 heavy duty gas turbines per year, starting in 2026, up from 55 in recent years. As we look at the anticipated orders profile for 2026 and 2027, even with this capacity expansion, manufacturing slots are scarce. In addition to equipment demand growth, we are seeing services demand in our install base grow meaningfully. As customers aim to get more capacity and better performance out of their plants, we expect greater demand for upgrades driving gas services growth. Today, we deliver about 2 billion of upgrades annually in our gas business, and we anticipate this could grow by 50% by the end of the decade. There is a lot to be excited about in our power segment. Electrification is our fastest growing segment, delivering a 24% revenue increase in the quarter, driven by stronger volume and price. Demand for our products remains strong as customers modernize and invest in critical grid products, such as HVDC systems, transformers, and switchgears, which are essential to ensuring a reliable electricity system and connecting new generation sources. Over the last two years, we have seen our equipment backlog grow meaningfully and profitably, and we are on track to more than triple this backlog by year-end 24 from year-end 22 levels of just over $6 billion. This quarter, electrification achieved double-digit EBITDA margin for the first time with expansion of nearly 700 basis points. Demand trends and improving execution are driving an acceleration in margin expansion, increasing our confidence in our trajectory going forward, and we expect this business to consistently deliver double-digit EBITDA margins from here. Turning to wind. In onshore, we continue to improve on our profitability, expanding margins, and delivering our most profitable quarter in a number of years. We remain cautious on the timing of the inflection for orders, but have positioned this business to deliver high single-digit EBITDA margins on approximately flat revenue this year. We continue to have confidence that as we drive onshore revenue growth, as early as 2026, we can continue to accrete margins in this business. In offshore, we've had a difficult four months and are disappointed given the impact on our customers and on our financial results with the significant loss we took this quarter. We have finalized root cause analysis and confirm the BLADA issue at Vineyard Wind was caused by a manufacturing deviation from our factory in Canada. We have been very intentional thorough, not rushed, in re-evaluating our blade quality across offshore wind in totality. As we re-accelerate progress on our projects, we are proactively strengthening some of the blades either back at the factory or in the field to improve quality and readiness for their intended useful life. We continue installing turbines and dogger bank while at Vineyard Wind we're installing towers and nacelles and are very close to resuming blade installation. Looking ahead, we're focused on improving execution and delivering on the approximately 3 billion backlog in the safest, highest quality delivery model that makes economic sense for our customers and ourselves. We do not foresee adding to this backlog without substantially different industry economics than what we see in the marketplace today. I'm proud of our team as they execute in this difficult environment and appreciate the engagement with our customers. I remain confident that we will return the win segment to profitability in the fourth quarter. Now over to the right side of the page. We're focused on further embedding lean across the organization, driving continuous improvement in safety, quality, delivery, and cost. Safety is our number one priority and unfortunately, We experienced a fatality this quarter at an onshore wind site in Sweden. We are working to accelerate the company-wide adoption of our life-saving rules deployed earlier this summer. Turning to quality, an example of how we are implementing lean in our onshore wind business is our workhorse turbine strategy. Today, we have over 2,000 of our workhorse 2.8 megawatt wind turbines that we've commissioned in the last two years. These units are performing at approximately 98% availability due to our focus on reduced variance and repeatable operations to drive better quality. On delivery, we are leveraging lean to increase output of our existing manufacturing footprint with limited capital spend needed. As an example, in our power transmission business within grid, we will double the capacity of the manufacturing output of this business. with 75% of the expansion coming from core lean improvements driven by better asset and labor utilization. The remaining 25% of the capacity increase will come from site expansions. On cost, we announced a planned reduction in our offshore wind headcount as part of our efforts to streamline our wind business to make it more efficient and to improve results. We are operating the wind segment as one global business with three main product lines. two in onshore wind and one in offshore wind with increased visibility, improved learnings across the teams, and a better cost structure. We are also driving meaningful productivity with our suppliers in the large electrification projects that we have secured in backlog in the last 21 months. This progress continues to strengthen our confidence and our ability to deliver this growing backlog in electrification for our customers. while substantially accreting margins in this business going forward. Turn to the next slide for a look into our third quarter financial performance. We delivered a solid quarter with double digit orders with services up almost 30% and double digit revenue growth as well as significant margin expansion at power, electrification and onshore wind. That said, Our quarter could have been even stronger if not for the quality and execution challenges and offshore wind, which we are addressing and learning from to make us a stronger company going forward. We generated substantial free cashflow and increased our cash balance from 5.8 billion in 2Q to 7.4 billion in 3Q. During the quarter, we sold a 16% ownership stake in GE Vernova T&D India part of the electrification segment at an attractive valuation that generated approximately 700 million of pre-tax proceeds. This transaction demonstrates how we intend to run GE Vernova. We will monetize assets across our portfolio when we see attractive opportunities to do so, enabling us to invest more in our core businesses to simplify the company and return capital to our shareholders. We are reaffirming our full year 2024 guidance. We look forward to discussing our multi-year financial outlook, as well as our capital allocation strategy and our investor update in New York on December 10th. I'm more confident today in the future of our business than ever. And I will now turn the call over to Ken for more details on our third quarter performance.