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Good day, ladies and gentlemen and welcome to the GE Vernova's Fourth Quarter and Full Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. My name is Liz and I will be your conference coordinator today. [Operator Instructions] 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 Lapides, Vice President of Investor Relations. Please proceed.

Welcome to GE Vernova's fourth quarter and full year 2024 earnings call. I'm joined today by our CEO, Scott Strazik; 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 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 and segment EBITDA and margin discussed during our prepared remarks are on an organic basis unless otherwise specified. 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 uncertainties With that, I'll hand the call over to Scott.

Thanks, Michael. Good morning, everyone and welcome to our fourth quarter earnings call. We built a strong foundation in 2024 and our first year as an independent company. The investment super cycle in the electric power sector, driven the growing need for reliable power generation, grid modernization and decarbonization continues to accelerate. The world is shifting, relying more on electrons and megawatts, and this is changing the energy landscape, driving increased demand for our equipment and services. We are investing in decarbonization technologies within our own portfolio. For example, advancing carbon capture and sequestration. Late last year, we had a great customer milestone with the announcement of the Net

Thanks Scott. Turning to Slide 7, we finished 2024 strong with record quarterly orders and revenues and adjusted EBITDA margin reaching 10.2%. We increased our cash balance to over $8 billion with our third consecutive quarter of positive free cash flow generation and the benefit of two additional value-accretive portfolio actions. Demand remained robust in the fourth quarter as we booked $13.2 billion of orders, an increase of 22% year-over-year and approximately 1.3 times revenue. Equipment orders grew 44%, driven by strength in both Electrification and Power, partially offset by lower orders in onshore wind. As a result, our backlog continued to grow both year-over-year and sequentially across equipment and services, reaching $119 billion. Equipment margin and backlog remains healthy with overall margin and backlog increasing approximately 5 points versus year-end 2023, reflecting our focus on disciplined profitable growth. Revenue increased 9%, driven by both higher equipment and services revenues. Wind and electrification equipment revenue both grew double-digits, while services revenue increased 6% with growth in all three segments. In addition, price was positive in each segment. Adjusted EBITDA grew to approximately $1.1 billion, up 85% and EBITDA margin expanded 440 basis points. We delivered our first quarter of double-digit margins with expansion in all three segments, driven by more profitable volume, price and productivity, which more than offset inflationary impacts. In addition, we benefited from previously announced restructuring actions, primarily at wind and power. We delivered approximately $600 million of positive free cash flow in the fourth quarter. As expected, free cash flow decreased year-over-year, primarily due to lower customer down payments at wind and actions we've taken to improve cash linearity across the quarters as we continue to more closely align the timing of disbursements and collections. Working capital in the quarter was an approximately $200 million cash benefit, which combined with our stronger EBITDA, more than offset higher CapEx investments to support future capacity expansion along with higher cash taxes on higher EBITDA. We're using lean to drive better cash management and linearity. For example, the electrification team implemented new standard work and daily management to improve the timing of invoices and reduce disputes. These actions drove a reduction in days sales outstanding by four days, resulting in approximately $80 million of additional free cash flow. We continue to leverage our lean culture across GE Venova to deliver better financial results. In the fourth quarter of 2024, we generated approximately $600 million of incremental pre-tax proceeds by selling partial ownership stakes in our GEV T&D India and China XD Grid businesses. These proceeds are classified outside of free cash flow and the gain was removed from adjusted EBITDA. We remain the majority shareholder of GEV T&D India and currently own 12% of China XD. Combined with our fourth quarter free cash flow, these proceeds increased our cash balance to $8.2 billion. Our strong cash balance and further improved free cash flow profile enabled us to frame our capital allocation strategy at our investor update on December 10, while maintaining our firm commitment to an investment-grade balance sheet, we expect to return at least one-third of cash generated to shareholders, starting with a $1 per share annualized dividend and our $6 billion share repurchase authorization. In late December, we initiated our share repurchase activity, buying approximately $3 million in the month. We're pleased with our full year 2024 financial performance. As Scott said, it was strong, but it was just the start of where we expect to go. During the year, we booked over $44 billion of orders led by double-digit equipment growth in both power and electrification, Services orders increased 12%, largely due to the strength of Power. We delivered approximately $35 billion in revenue, driven by high-teens growth in electrification, and high single-digit growth in power. We doubled our adjusted EBITDA to over $2 billion and expanded margins nearly 300 basis points year-over-year, with significant improvement in each segment. We also made solid progress towards our lower adjusted G&A target by achieving an almost $200 million reduction in 2024. Finally, we generated $1.7 billion of free cash flow a year-over-year improvement of $1.3 billion, primarily driven by our stronger EBITDA. Our growing backlog with higher margin provides an excellent foundation for further improvement in our financial performance ahead. Turning to Power on slide 8. Power delivered strong full year 2024 results led by the Gas Power business. Power orders grew 28%, given robust demand for gas equipment and 10% growth in services, which combined, increased adjusted backlog by more than $4 billion. Power grew revenue 7% for the year with Gas Power growing 9%. Power EBITDA increased by more than 20%, expanding margins by 180 basis points driven by services strength, more profitable equipment and continued productivity, partially offset by inflation. In the fourth quarter, Power orders grew 24% led by high equipment at Gas Power and hydro, partially offset by lower services. In Gas Power, equipment orders increased nearly 80% as we booked 24 heavy-duty gas turbines, including four HA units. This was almost triple the number of heavy-duty units booked in fourth quarter of 2023. Power Services orders remained strong, but declined 6%, largely due to a strong fourth quarter 2023 gas transactional services comparison. Revenue increased low single digits as Power Services growth and higher HA deliveries more than offset lower aero derivative shipments. EBITDA margins expanded to approximately 15%, led by gas power from services volume, productivity and price, more than offsetting the impact of inflation. Looking at the first quarter of 2025, we expect continued year-over-year growth in gas equipment orders. We also anticipate low single-digit revenue growth at Power but a low single-digit decline on a reported basis as a result of the impact of the divestiture of a portion of the steam business in the second quarter of 2024. We expect EBITDA margins of approximately 10% to 11% as productivity and price should more than offset inflation as well as higher investments at nuclear and gas. Turning to slide 9. Wind results continued to progress in 2024, improving full year EBITDA losses by 42%. Onshore had a solid second half to 2024 and achieved approximately 7% EBITDA margins for the year. Offshore performance was challenging as we recorded approximately $1 billion of incremental contract losses in 2024, largely due to the impacts of blade events and project execution delays. These costs were partially offset by a $300 million gain recorded in the third quarter from a previously canceled offshore project. We remain focused on continuing to improve results through better quality, delivery and cost productivity across wind. In the fourth quarter, wind orders decreased 41%, driven by lower onshore wind given we booked our largest ever onshore order in the fourth quarter of 2023, the 2.4 gigawatt Sun

Thanks, Ken. We are pleased with our performance this year and are excited about our future as we help our customers electrify and decarbonize the world. 2024 has increased my conviction, the GE Vernova is well positioned to lead. In Power, it's about delivering continued margin expansion with growing free cash flow, both from equipment as well as strong services. In wind, it's about disciplined margin expansion in onshore, while we position for the market inflection in quality and execution in offshore. For electrification, it's about delivering an accelerated high-margin profitable growth from rising demand for grid technologies. Market dynamics continue to drive strong demand that will lead to multi-decade growth for GE Vernova and continue creating value for our stakeholders. As we head into 2025, I am optimistic about the future, and we are just getting started. With that, I'll hand it back to Michael for the Q&A portion of the call.

Before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask one question so we can get to as many people as possible. Please return to the queue if you have follow-ups. Operator, please open the line.

[Operator Instructions] Our first question comes from Andrew Percoco with Morgan Stanley.

Hey, good morning, guys.

Good morning, Andrew.

Good morning. So, yeah, maybe just to start out at a very high level here. I mean, you guys gave a very comprehensive update back in December, but it's been a pretty active 48 hours or so with the new administration certainly some positives to point on the AI investments and the gas infrastructure side, but also some potential headwinds that we're seeing on wind. So, can you maybe just give us your latest thoughts on how you're thinking about this incoming administration and how it might impact the outlook across each of your businesses?

You bet, Andrew. I mean, I'll start. I just would take it a step back beyond maybe the last 48 hours, and let's just talk about the last six weeks since we were together December 10 for Analyst Day. And I would say in our largest scale businesses, the market continues to get stronger. I mean, we see accelerated activity in pipeline and gas that's very focused in the US, but not just the US. And what I'd emphasize on gas is it's becoming an even more diversified demand cycle and that you can start to see in the numbers. I mean, we had 25 HAs that had an order this year. We also had 20F class units. We had north of 40 aeroderivative units. So the diversity of demand just continues to get stronger. Similar theme in grid. Even in the last six weeks, we closed the year very strongly with grid orders. The pipeline remains very strong. But the diversity of the pipeline is really what I would emphasize. I mean, this was a business that two years ago was basically a European company. Today, we've taken a business that was $6 billion of backlog two years ago. It's $20 billion today. Yeah, a little bit more than half of that is still Europe, but 20% to 25% is in North America. The other 20% to 25% is the rest of the world with Asia really growing. So the diversity of demand in grid is just giving me that much more confidence in the durability of those two businesses. On the other side, to your question on wind, it remains soft. I mean, we talked about a generally flat financial projection with wind through the next few years. That's still really what we see six weeks later from where we were on December 10. We're cautious on when that inflection point is going to come in North America. We have been for a while, we still are today, and we're going to keep focused on executing and serving our customers as well as we can there. But the market fundamentals are softer there, certainly relative to the other two large businesses.

Our next question comes from Julian Mitchell with Barclays.

Hi. Good morning. And maybe just wanted to ask my question around the power organic sales outlook for year. So you grew, I think, low single0digit or you're guiding for low single digits growth starting out the year organically, you've got that mid single-digit guide for the year. Maybe help us understand sort of how we should think about that pace of acceleration through the balance 2025. And also help us understand within Power Service, how we should think about the growth there? Should it be equivalent to equipment this year at sort of mid single digits? Or do you see opportunities on the transactional side of power service maybe to get higher volume and price as gas power utilization rises? Thank you.

Thanks, Julian. Maybe if we just think about kind of the pace that business, I would say, if you think about equipment and services, which is really how you broke down your question, as we look at what's in backlog, while we're growing at a slightly slower organic pace early in the year, and we're still projecting mid single-digit growth overall for that business for the year. It's really just built upon how we expect the backlog to roll out. So the build cycle for that -- for the equipment piece. So nothing surprising there. We overall have about 90% of our overall GE Vernova volumes in backlog today. So that gives us really good visibility on how it's going to roll. So I wouldn't take any indication of maybe a slightly slower first quarter growth against the full year guide that's higher than that, is anything other than us having the knowledge of how that backlog is going to roll out. On the services side, there's certainly opportunity as we're in this cycle of higher utilization to see opportunities, not only on the contract service part of our portfolio, but also the transactional part of our service business, which equates for about half of the overall total. So we feel really good about good about where we're starting, and we feel the visibility into the backlog and the visibility into the service outages that will take us to the right place on the guide.

Julian, the only thing I'd emphasize is that we talked about in December, this being really the last year at mid single-digit revenue growth with an acceleration to high single digits in 2026 and beyond in this segment. And I spent a lot of the of the first month year with some of our suppliers and partners in this space and continue to have real confidence and conviction that they're capacitizing as we need them to for this growth that comes in 2016 and beyond.

Our next question comes from Mark Strouse with JPMorgan.

Good morning, Mark.

Good morning, Mark.

Hi. Good morning everybody. Thanks for taking my questions. So when we were together in December, you gave some color about increasing your pricing on the gas power side. Just curious if you can talk about order activity since then, or maybe just kind of general customer receptivity to that? And do you have any near-term plans to raise pricing further? Thank you.

Sure, Mark. I'd say, again, I'm picking on words a little bit, but the truth of it is an explicit orders in the last six weeks, there hasn't been an incredible amount of orders activity, right, because we, kind of, trended into the holidays and it's early in the new year. What I would say, though, is the intensity of discussions for more and bidding activity right now and the receptivity to pay for, what I'll call, premium slots in the out years going, and I'm talking premium slots 2028, 2029 really, to a large extent. The discussions are much more focused on how can the end customers fulfill than the last dollar of price. I wouldn't say there's been another explicit price increase since we were together December 10th, because the reality is we had, at that point, had a very, very productive month of November and had just taken the market up another level. So that hasn't changed. But I would not say at all in gas that the pricing dynamics are the main event. It's us continuing to partner with these end customers on their ability to actually generate the power when they need it. And we'll continue to do everything we can to serve them, but also maximize our economics.

Our next question comes from Nicole DeBlase with Deutsche Bank.

Yeah, thanks. Good morning guys.

Good morning, Nicole.

Can we talk a little bit about last week's SMR announcement, I thought that was really interesting. I guess, to what extent can deployment actually be accelerated? And does this come with increased customer interest in the SMR offering? Thank you.

Nicole, I think it's a great question. I'm glad to get a chance to spend a little bit more time talking about that. I mean, it is a longer term play for us, but last week was meaningful because when you think about where we were previous to that, our launch customers in North America with Ontario Power Generation and Tennessee Valley Authority. These are two customers that are 100% government owned. Last week's announcement was that next shift forward, having Duke, having AEP join into the mix and join into the consortium to invest in this product and commit towards our technology for projects that they have slotted for new zero carbon power between 2032 and 2034 in the US. So the activity of customer interest here, not just in the US, but also outside US is only strengthening. I mean, to give you a little bit more color, I was in Japan, the first week of the new year. We've turned down two of our BWX nuclear plants in Japan very recently. There's another 18 in Japan that have not been restarted that is only accelerating in activity. And I generally spend the first week of the new year in Japan for the New Year's greetings. It's the first year I've left the market saying, okay, this is happening now. These plants are going to be turned back on, whether it be from the federal government or from the local communities because of the clear need and we continue to see more activity on upgrades and up rates into the installed base in North America. We've talked in the past. We've got 65 plants running with our technology. We will add more megawatts to those existing plants and more and more customers with those plants are coming back us and saying, within the security apparatus of the existing plant, we can fit an SMR. And then when you've already got the security infrastructure that creates a lot of economic and operational arbitrage for them. So, you can hear the enthusiasm in my voice on this. Can we move it to the left earlier than the first plant being commissioned in in Ontario 2029? I don't think that will happen. The first plant will be commissioned in Canada in 2029. There's even more confidence that in the U.S., many more plants can be commissioned, let's just call it, 2032 and beyond, but this is about the next decade. It's not going to create a substantial amount of incremental megawatts until we get there.

Our next question comes from Andrew Obin with Bank of America.

Yes, good morning.

Good morning Andrew.

Hey Andrew.

Yes, the headlines like Constellation buying Calpine seems people are getting excited about natgas. As we think about services and the scope of your activities as price of gas is going up over the next several years. Just trying to understand what happens to the scope of your service activities as price of gas -- if price of gas structurally goes up? And if you are starting to have those conversations with your customers?

Andrew, if you just take the S-class fleet, which is our largest fleet in North America we have over 700 F-class gas turbines in the U.S. that we have incremental technology that we can insert into the existing installed base in the U.S. and drive output and efficiency savings. And that's just the F-class fleet in North America as an illustration amongst the 7,000 gas turbines we have globally, and that's what we're going to see happen. Admittedly, today, the discussions with incremental investments is more focused on megawatts than it is efficiency. I agree with your train of thought on where gas pricing is going, but the discussion is much more on we need every megawatt we can get right now and how can you operationally allow us to generate those megawatts, even if in the end, it leads to a few more outages over time because we run the gas turbines at higher firing temperatures as an example. But what this is clearly going to lead to is the scope per outage is going up because the amount that our customers are willing to invest in technology at that outage event is going up for -- at the moment, megawatts, but ultimately, efficiency will matter, too. So, that's why we've talked for the better part of, call it, the last four months about the fact that we see the upgrades growing directionally 50% by end of the decade in the gas business because of this market opportunity, and a lot of it's going to be in North America and the demand signals with more investment into gas like you alluded to with Constellation is a great indicator.

Our next question comes from Julien Dumoulin-Smith with Jefferies.

Good morning, Julien.

Good morning.

Our next question comes from Andrew Kaplowitz with Citigroup.

Hey, Andrew.

Good morning, everyone.

Good morning.

Scott, could you give more color into your commentary regarding accelerating capacity expansion to sell premium slots that you have on Slide 6. I think at the Investor Day, you were careful to say you're going to be thoughtful and down quickly, you grow capacity. And maybe Slide 6 commentary today seems slightly more appointed. I know you just talked about power and no real changes there, but what about an electrification? Are you potentially going to accelerate capacity a little bit on that side of the business?

Yes. And that comment is exactly, Andrew, as you said, more applicable to electrification. I'm looking forward to being at one of our factories in Pennsylvania in a few weeks for the better part of a week that makes switch gears for us. And we do see opportunity to continue to accelerate capacity build-out and electrification that is in North America in the near term, leveraging some of our industrial footprint. And as we do, the ability to sell those premium slots is something we're very, very focused on. So we did try to talk about this in December that, if there was an upside case within our, call it, what's in, what's out of our by 2028 guide. We did talk about accelerated fulfillment and electrification being the most applicable example. And that remains the case. And we've got a team that's incredibly focused on making progress there and a leadership team that's here to serve them, because the market needs everything we can give them. And we're hopeful we're going to ramp that up even faster. And with it, we should have fulfillment and price opportunity.

Yeah. And I think the only thing I would add to that is that One of the things we called out in December, which is still true only a few weeks later, is a big portion of the electrification capacity expansion really isn't driven by bricks and order, right? The lean -- lean culture within some of the businesses that are faster flow businesses, less kind of like project moving through the factory, but flow businesses. We're getting a significant amount of capacity expansion with lean initiatives, which are some of the most effective from a return perspective because you're not putting that bricks and mortar in the ground forever.

Our next question comes from Joe Ritchie with Goldman Sachs.

Good morning, Joe.

Hey, good morning, guys. So look, I think very few of us would have thought that over the past two years, you'd be able to grow that electrification equipment backlog to over $20 billion. It's pretty incredible. As you're looking out for 2025, Scott, any thoughts around how much that backlog can build? And then specifically as it relates to North America, really encouraging to hear that, that business is now 20%, 25% of your business today. What's the opportunity in North America?

Substantial. It is -- it continues to be the part of the business that as we lean into the front end, I continue to be encouraged that the GE Vernova symmetry synergy helps the most on the front end. We continue to educate our customers on our offerings in electrification, and we're like in the response. And I've alluded to the fact that I spent a week in Asia to start the year in both Singapore and Japan, that's applicable in those markets, too. We are not a known commodity, but there are industrial footprint opportunities for us to invest into in both Asia and North America that are attractive and that are -- that are things that we're going to keep working very hard right now. So, of our three business segments, Joe, it's very clear to me from a commercial perspective beyond market growth, us simply gaining share, let's say, within the market regardless of where it goes. There's a lot more for us to do in electrification. And I expect that $20 billion equipment backlog, to grow substantially in 2025 and beyond as we continue to run this business better.

Operator, we have time for about one last question.

This question will come from Moses Sutton with BNP Paribas.

Good morning, Moses.

Hi, Moses.

Hi. Thanks for squeezing me in. I wanted to continue on gas turbine pricing. At this point, new CCGTs are costing 2,000 per kilowatt all-in and rising perhaps. Is your content still tracking at 30% to 35% of that new build cost? And are pricing and bids. Is there any differentiation between, I don't know, like a U.S. 2027 versus an international 2028, which might have a little more open room? So just thoughts on that price level against the total content and then variation by geography and shipment near? Thanks.

Moses the directional numbers you're giving for an H-class gas turbine in North America or a plant build are directionally accurate today. And our share of that is directionally accurate too. So I wouldn't think it's different than what you're saying. The only thing maybe I would distinguish is we're very quickly getting to a point that the premium slot dynamic, there's not really a difference between 2027 and 2028 right now. I mean I think if you want to start to distinguish between schedule and capacity, it's really turning in more 2028 versus 2032, okay. And internationally, there are markets that will plan out that far. That may lead to modestly different way to think about things, but 2027, 2028, we are going to be talking about 2029 in gas before the year is over on some of these calls. That's very clear to me because we've got 20 gigawatts of capacity. We're going to have a strong orders here. We're going to fill the bathtub, so to speak, of those 20 gigawatts per year fairly quickly and be into the out years. So I don't think we're going to be making much of a pricing distinction between 2027 and 2029 right now. It's really going to continue to be a challenge of how the customers secure not just our equipment, but everything else required. The EPC support is going to be a big open switch and one that I'm going to invest a lot of time and in 2025 because I continue to believe that could be one of the bigger challenges towards fulfillment is just whether the projects stay on schedule, notwithstanding our explicit gas turbine deliveries. And we have a number of strategic sessions in the first quarter with those EPCs to just stay very aligned on their schedule and ours. So thanks for the question.

Before we wrap up, let me turn it back to Scott for closing comments.

No, everybody. I just want to thank everyone again for your continued interest in GE Vernova, as I do on all of these calls, I think it's important to recognize our employees in our first year as a public company. I have an incredible amount of pride to lead this group, a lot of optimism and ambition for the company that we're creating. I have a huge appreciation for the customers that are leaning in with us right now on the opportunity and the excitement they have for the art of the possible for what GE Vernova can be. So we had a good first year, but there's nobody inside the walls of GE Vernova that's celebrating right now. We've got our feet on the ground. We're very focused on the opportunity in front of us in these markets and serving it and going into a New Year with a lot of energy and a lot of optimism. So, thanks for giving us the time today, and we look forward to seeing all of you out in the field over the next few months.