TechnipFMC plc — Q1 2024 Form 10-Q
Business and period: Unaudited results for the three months ended March 31, 2024, compared with Q1 2023. The company operates in Subsea and Surface Technologies, serving oil and gas customers and developing New Energy offerings.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change / context |
|---|---|---|---|
| Revenue | $2,042.0 million | $1,717.4 million | Up 18.9% |
| Gross profit / margin | $341.4 million / 16.7% | $220.9 million / 12.9% | Higher, mainly from Subsea volume and favorable activity mix |
| Income before income taxes | $210.6 million | $45.2 million | Includes a $75.2 million gain on the Measurement Solutions business sale in 2024 |
| Net income attributable to TechnipFMC | $157.1 million | $0.4 million | Diluted EPS was $0.35 versus $0.00 |
| Operating cash flow | $(126.7) million | $(386.2) million | Cash used in both periods; year-over-year improvement of $259.5 million |
| Cash and cash equivalents | $696.8 million | $951.7 million at Dec. 31, 2023 | Quarter-end cash decreased $254.9 million |
| Total debt | $1,023.8 million | $1,067.3 million at Dec. 31, 2023 | Company-reported net debt was $(327.0) million (cash less debt), versus $(115.6) million |
| Backlog | $13.49 billion | $13.23 billion at Dec. 31, 2023 | 35.1% expected to be recognized through 2024 |
Subsea revenue rose 25.0% to $1,734.8 million; segment operating profit increased to $156.6 million from $66.8 million, with margin rising to 9.0% from 4.8%. Surface Technologies revenue fell 6.9% to $307.2 million, while operating profit was $103.4 million versus $22.4 million, including the $75.2 million disposal gain. Excluding that gain, the filing does not provide a complete adjusted segment-profit measure.
Current assets were $4.77 billion and current liabilities $4.13 billion at quarter-end. Capital expenditures were $52.0 million. Investing cash flow was positive $136.3 million, including $186.1 million of proceeds from the Measurement Solutions sale. Financing cash outflow was $256.2 million, including $150.1 million of share repurchases and $21.7 million of dividends.
Material changes and notable items
- Subsea drove revenue growth, with higher installation activity, equipment sales, and flexible-pipe supply, particularly in Brazil, Guyana, Angola, and the United States.
- Inbound orders were $2.77 billion, compared with $2.86 billion in Q1 2023. Subsea backlog increased to $12.46 billion from $12.16 billion at year-end; Surface Technologies backlog declined to $1.04 billion from $1.07 billion.
- The March 11 sale of Measurement Solutions generated $186.1 million in cash proceeds and a $75.2 million gain. The business had been classified as held for sale at year-end.
- Other comprehensive loss was $84.7 million, primarily reflecting foreign-currency translation and hedge losses.
- S&P upgraded the company to investment grade, BBB-, in March 2024. The company reported compliance with debt covenants and $1.25 billion of available revolving-credit-facility capacity.
Outlook, risks, and contingencies
Management described its market outlook as constructive, citing energy demand, offshore and Middle East investment, subsea services, and technology-led project economics. It expects Subsea inbound orders to reach $30 billion over the three-year period ending in 2025. The filing does not provide specific full-year 2024 revenue or earnings guidance. Management reported New Energy inbound orders above $1 billion and highlighted subsea carbon capture and storage opportunities.
Management expects to maintain sufficient liquidity and sustainable leverage, and says capital expenditures can be adjusted to activity levels. Key risks include oil and gas demand and pricing, geopolitical and regulatory developments, fixed-price contract execution and cost overruns, supplier and joint-venture dependence, cybersecurity, foreign-exchange movements, and legal or environmental matters. The filing says there were no material changes to previously disclosed risk factors.
The company had $2.01 billion of maximum potential undiscounted guarantees, primarily performance guarantees, and stated it did not expect known contingencies to materially adversely affect its financial position, results, or cash flows. A French anti-corruption settlement had $111.5 million outstanding at March 31, 2024, payable in installments through July 2024. Other ordinary-course legal and tax matters remain subject to uncertainty.
Important facts for investors to verify
- How much of reported earnings and Surface Technologies profit reflects the one-time Measurement Solutions disposal gain, and what are underlying margins?
- Whether operating cash flow improves as project milestones, working capital, and customer advances evolve; Q1 operating cash flow remained negative.
- Backlog conversion timing, project execution, and whether the stated Subsea order objective is achieved.
- Completion and cash impact of the remaining French settlement payments, alongside guarantees and other legal contingencies.
- Ongoing shareholder distributions and repurchases in relation to liquidity, debt maturities, and U.K. distributable-reserve requirements.