Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GE Vernova Inc (GEV, Financial) reported a strong start to 2025 with continued orders and revenue growth, and adjusted EBITDA margin expansion.
- The company has a solid balance sheet with an $8 billion cash balance and growing free cash flow, positioning it well for future investments.
- GE Vernova Inc (GEV) has a total backlog of $123 billion, with significant growth in both equipment and services backlogs.
- The Power segment delivered robust orders growth, increased revenue, and further EBITDA margin expansion, with gas power equipment orders increasing by over 30%.
- Electrification systems experienced a 10% sequential backlog growth, driven by strong demand for transformers and switchgear, particularly in North America and Asia.
Negative Points
- GE Vernova Inc (GEV) expects costs to increase by $300 million to $400 million in 2025 due to tariffs and resulting inflation.
- The Wind segment faced a 43% decrease in orders, driven by lower onshore wind equipment orders due to U.S. policy uncertainty and permitting delays.
- Offshore wind continues to face challenges, with losses improving sequentially but still impacted by a one-time termination of a supply agreement.
- The company remains cautious about the timing of an onshore order inflection in North America due to growing interconnection queues and policy uncertainty.
- Tariffs are expected to impact about a quarter of GE Vernova Inc (GEV)'s total direct spend, with the most significant impact on the China base.
Q & A Highlights
Q: Can you discuss the impact of tariffs on your costs and the mitigation strategies you are implementing?
A: Kenneth Parks, CFO, explained that the tariffs are expected to increase costs by $300 million to $400 million in 2025. The company is actively working on mitigation strategies, including pricing adjustments, supply chain relocation, and accelerating G&A cost reductions. The most significant tariff impact is from China, affecting about a quarter of GE Vernova's direct spend. The company is also leveraging existing contractual provisions to pass some costs to customers.
Q: Can you provide more details on the 21 gigawatts of slot reservations in the Power segment?
A: Scott Strazik, CEO, stated that about 60% of the 50 gigawatts under contract are in the U.S., with a third of the 21 gigawatts of slot reservations linked to data center projects. The remaining reservations are driven by broader electrification needs. The company expects these reservations to convert to orders as customers finalize EPC contracts and site selections.
Q: What is the cancellation risk for the 29 gigawatts in backlog and the 21 gigawatts in slot reservations?
A: Scott Strazik assured that the 29 gigawatts in backlog are firm, and the slot reservations have about 20% of their contracts paid. While there might be some movement in slot timings as customers finalize details, the overall cancellation risk is low. The company is already seeing orders for 2029 and discussions for 2030, indicating strong demand.
Q: How are pricing dynamics evolving in the gas and electrification segments?
A: Scott Strazik noted that the gas segment continues to see price increases, with the first half of 2025 showing better pricing than the second half of 2024. Electrification is also experiencing price gains, though at a slower rate, with variations by geography and product type. Kenneth Parks added that the backlog margins have improved, supporting future profitability.
Q: Have you observed any changes in customer behavior or contract structures due to recent economic concerns and tariffs?
A: Scott Strazik mentioned that the growth trajectory remains strong despite recent economic concerns. The company is making some adjustments to contract structures to better protect against future tariff changes. Kenneth Parks highlighted the importance of maintaining positive cash curves through careful management of downpayments and milestone payments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
