• Fourth Quarter Revenue: $2.31 billion.
• Fourth Quarter Net Income: $160 million or $0.41 per fully diluted share.
• Fourth Quarter EBITDA: $302 million or 13.1% of sales.
• Full Year 2024 Revenue: $8.87 billion.
• Full Year 2024 Net Income: $635 million or $1.60 per fully diluted share.
• Full Year 2024 EBITDA: $1.1 billion or 12.5% of sales.
• Free Cash Flow for 2024: $953 million.
• Book-to-Bill Ratio: 121% for the fourth quarter.
• Energy Equipment Segment Revenue Growth: 5% for 2024.
• Energy Products & Services Segment Margin Decline: 120 basis points year-over-year.
• Cash Flow from Operations (Q4 2024): $591 million.
• Capital Expenditures (2024): $351 million.
• Share Buybacks (Q4 2024): 7.5 million shares for $112 million.
• Dividend Paid (Q4 2024): $29 million.
• Backlog at Year-End 2024: $4.43 billion, up 7% from year-end 2023.

• Warning! GuruFocus has detected 5 Warning Sign with NOV.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• NOV Inc (NYSE:NOV) reported strong financial performance for 2024, with revenues of $8.87 billion and a net income of $635 million.
• The company achieved a book-to-bill ratio greater than 1:1 in 10 of the last 12 quarters, indicating strong demand and backlog growth.
• NOV's Energy Equipment segment led revenue growth with a 5% increase and expanded segment margins by 250 basis points.
• The company generated exceptionally strong free cash flow of $953 million, representing 86% of EBITDA.
• NOV's digital services, including the MAX data platform, saw significant traction, more than doubling user adoption in 2024.

Negative Points

• The Energy Products & Services segment experienced a decline in margins by 120 basis points due to reduced drill pipe demand.
• North American activity is expected to remain subdued, with weak demand for pressure pumping and stimulation equipment.
• Offshore drilling customers are facing temporary gaps in utilization due to delayed production plans, impacting rig aftermarket activity.
• The company anticipates a decline in Energy Equipment revenue by low single digits in 2025 due to offshore drilling support challenges.
• Macroeconomic and geopolitical uncertainties pose potential headwinds for NOV's operations and market conditions in 2025.

Q & A Highlights

Q: Clay, you mentioned a flat revenue outlook for 2025 but expect margin improvements. Can you elaborate on the expected magnitude of margin increase and the factors contributing to it? A: Clay Williams, CEO: Despite some emerging headwinds, we are optimistic about margin improvements in 2025. Energy Equipment margins improved over 300 basis points year-on-year, and we expect further improvements as we complete margin-challenged projects. Energy Products & Services face challenges, particularly in North America, but we are working on cost improvements and introducing higher-margin products. Overall, we anticipate a 50 to 150 basis point margin improvement, though this is not official guidance.

Q: Regarding free cash flow and capital returns, how do you plan to approach shareholder returns in 2025? A: Jose Bayardo, CFO: We remain confident in converting at least 50% of EBITDA to free cash flow. In 2024, we returned $337 million to shareholders, and with our cash balance now healthy, we expect to return the majority of our excess free cash flow to shareholders in 2025. We will continue to be aggressive with share buybacks, considering the current stock value.

Q: What are the signs you are watching in the offshore markets, and how do you expect the market to evolve in 2025? A: Clay Williams, CEO: Offshore drilling contractors are preparing for an upturn in 2026, with some deferring and others advancing projects. December saw good contracting activity, and we expect 2026 to be better. We are seeing economic discoveries in new basins and increased offshore LNG activity. While 2025 may see some challenges, we expect a recovery in the latter half of the year.

Q: Can you provide a directional outlook for backlog and book-to-bill in 2025? A: Clay Williams, CEO: We expect challenges in North American pressure pumping and offshore drilling, but strong demand for production equipment in deepwater and emerging unconventional plays. We anticipate a turnaround in wind turbine installation vessel orders and continued demand for construction vessels. Overall, we expect to offset softness in some areas with strengths in others.

Q: How does NOV benefit from potential growth in North American natural gas production? A: Clay Williams, CEO: NOV is well-positioned to benefit from increased natural gas activity. We provide critical components for gas production, including horizontal drilling tools, pressure pumping, completion tools, and gas dehydration systems. We are optimistic about the role of natural gas as a transition fuel and the opportunities it presents.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.