GE Vernova (GEV) 24 Jul 242024 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to GE Vernova's Second Quarter 2024 Earnings Conference Call. [Operator Instructions] 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.

operator. you, Thank Vernova's GE XXXX Call. Earnings Welcome Second to Quarter CEO, and CFO, I'm joined Parks. Strazik our by today Ken Scott

Our conference measures results. release which Reconciliations in call are non-GAAP Form and between and remarks today's our slides, GAAP will in include available the and all the on non-GAAP XX-Q, can presentation found both be press GAAP of financial website.

or our adjusted EBITDA organic discussed during prepared Please are revenue, basis. note and orders, that variances on year-over-year an remarks commentary on margin

about statements how forward-looking We performance. today. These on make will based are our we statements things see

at elect point not While update do we may to obligation any the these so. do forward-looking we statements some future, to in undertake

As due described may results and SEC differ actual to in materially uncertainties. our filings, risks

to With Scott. that, I'll hand over call the

welcome EBITDA to are margin improvement across and to transition. lead Good second strong in flow. in everyone, our the free delivered energy We segments trends opportunities Michael. quarter expansion adjusted in continuing call. morning, the with cash create us substantial results meaningful and to for all X quarter, earnings Thanks, Macro

driven increasing needs. generation, and for power emerging growth, manufacturing we're seeing electrification, First, data industrial demand center by EVs

a grid to both And demand free for infrastructure security demand need there support higher decarbonize simultaneously goals. significant are our third, and and systems, investments reliability investing customers businesses which running drives low Second, and disciplined flow. energy zero-carbon this our margin to is power generation for their as well expansion as while serving robust better, new grid connections. market We're growth, driving cash

segments. spend a few Turning on to of minutes I'll Slide our each X.

In the including orders also gas Korea. expect expansion. versus XXX in than in doubled delivered of and both basis year, this led for second points segment more we source commissioned to increased equipment segment. we which in Notably, in and this growing Power with orders, and units led The XX% be is orders half fleet Power recently continued Power XXXX. margin turbine turbines, billings heavy-duty quarter gas our Our by HA equipment services services achieving year-over-year. revenue higher South high-margin XXXth of Power HA of half Gas our H-class while revenue, strength growth strength an important by first orders

continues Electrification fastest-growing products, and switch new customers segment. modernize our to is that Profitable ensuring such connecting growth a system in electricity are as transformers new reliable invest generation key gears and and sources. as

For in for key example, be orders which a North opportunity more continues quarter growth this segment. than to doubled America, this

its with margin the by Overall, pricing year. industry this start progress I'm I basis since points expansion can electrification we strong and strong which the on given drive demand the significant expanded segment and backlog segment's the over grown XXX XX% quarter, has conviction of pleased Electrification dynamics. the have team's margins,

output increase We are this for levels rising our to thoughtfully demand. investing

For Stafford to the in example, transformers. are we almost U.K. facility deliver doubling capacity our HVDC

Wind Right most segment. now, the challenging remains

new an projects orders quarter, we onshore navigate the in interest permitting come that as the While backlog challenges customers we and inflection on in cautious the of timing onshore with remain higher rates. grew

quality our identified. issues are X new no improvement Onshore into years with we significant Wind We progress making and nearly are program,

gaining adding faster ways at for accelerate order our crews fleet to to are cranes our to customers, the pace. improvements for existing implement we the access look deliver work. to to continue into a to and more We In field

we enhance inspection including units, are leveraging manufacturing to our our new our process. For blade technologies, robot

was at of project. to had million have we shut the The Wind cause and our appropriate turbine Offshore, was one injured. half the restart agencies down with top the converted corrective backlog the our our revenue and $XXX of implement priority, a turbine as we first no are a then in customer working root we actions and With and event year. Last safely plan. always to a almost At safety week, blade Vineyard determine

to While blade we deviation. our cause a work to date continue that experience indicates to root manufacturing investigation finalize analysis, the affected our

an with identified in design at Wind information or indicating project the have installation event out We flaw was U.K., Offshore of experienced blade which a the engineering in by an the blade caused not error information sea. in we an connection

to We across going are here, operations be instead are Pace of working our we with but matters scrutinize rushed. Offshore Wind. thorough urgency to

selective highly pricing disciplined focused orders remain achieving we new forward, win commercial on and substantially offshore on higher Going terms. potential

opportunities still should by see play profitability In the become XXX the Wind in year for a Longer We energy segment this segment overall we points expansion. XXXX. Wind Wind and role approach margins critical transition. profitable basis expect the expanded and term, further in quarter, this to

to the over right of the Now side page.

ours our continuous end our get to in public a ensure arc in to driving safety, to fatality-free On return of in contractors Malaysia a his one life, June our GE farm. a months after in continue at and priority driving his are his on will personal improvement a a We top delivery of wind of operations, employees employee need better in lost event and lost working the Safety work in Vernova, An at Turkey, car direction a be work. accident cost. road at always and flash contractor consecutive an quality, to both events XX tough month home us. safety, life and the site for with reinforce car was

working where Quality, outcomes improve our Turning to are we to customers. our always for

reduces XX% field execution quality our team digital For and example, reduced a outage deviations platform customers. where improve the year in cycle experience for lean double gas outage, increased times that enabled our outages by our from live digits, has

to using also lean are We delivery. improve

Kaizens increasing material capacity. In a Electrification, executed the and recently team in France series of scheduling flow, tackling

per growth and seeing ultimately more a our outcomes helping of one increased certain are week new XX week, XXX% electrification production customers. As drive per we implemented, output for segment than the by the improving of switchgear our the result XX in its cells of processes to components from to we

Finally, to our G&A simplify using we are and lean reduce operations costs.

our productivity center second in our cost-out ability that in our at XXXX. confidence focusing our reductions We and to are quarter the in G&A increased executing corporate We in G&A realize give began initiatives me on driving and reducing segments.

volume. growth a and we've the XQ look our across points, margins multiple next Orders the by slide the by quarter to segments. over businesses, second healthy and X all last with years, adjusted expanded line delivered We and top expansion over Power we Turning led second across Grid. Gas equipment marking in price strong for disciplined in especially We 'XX quarter the EBITDA robust into financial services largest basis performance. with XXX order saw growth backlog were strength delivered

$X billion year-over-year we positive the cash sequentially as second with an flow Notably, balance. and as free with a quarter cash improvement ended over well $X.X generated billion

and trend our of raising towards end up the now to our $XX guidance to margins. X% organic adjusted on to expect Electrification, of previous higher to are will where be higher improvement from deliver we high EBITDA of largely XXXX which single-digit expansion is revenue $XX and now points the basis billion now Power, expectations our end range, XXX We margin driven of margin expect X%, billion we to We mid-single XXX The by expect expect digits. Electrification.

raising are also We guidance. XXXX flow our free cash

demand performance million billion Overall, the prior expansion second the and further our continued cash more quarter $X.X free Ken to about details to for $X.X flow, we confident guidance. from between billion, deliver $X.X We and range. now billion to our with expect $XXX for will years margin momentum feel the on I latest growth, turn strong to up and in business come. call over our

Scott. Thanks,

Let's turn X. to Slide

As delivered last nearly remains second was in orders cash quarter margin as flow strong X generation. Demand billion, expansion quarter the years X revenue. robust second which approximately $XX mentioned orders results already and Scott all and our positive largest segments EBITDA stated, in second reached with the we X.Xx quarter free across

equipment orders second more digits were equipment Electrification. year-over-year. in doubled and orders Power large the with double Offshore lower booked total Power to in than and quarter and Wind of orders X% Due strength HVDC last year, orders services grew

of sizable backlog of Our recently at of including divestiture remains the power EDF. a impact steam $XXX the portion billion, completed to

remains priority. our segments. Wind. electrification Services power growth with grew across revenue margin Revenue by X% offset X% remained solid, continued all in equipment with healthy, and growth backlog line in profitable and partially with disciplined strength Importantly, increasing

expansion In basis X XXX volume, impacts. positive this segments again productivity, addition, points of quarter. all driven of segments by price expansion the delivered driving from services Margin All than in quarter. benefited price offset inflationary XXX more Adjusted and points which XX%, basis grew expansion. more than was margin EBITDA

flow, cash and million offset sequentially and continue positive improving year-over-year over higher higher strong improving we in addition, billion Working largely our was $X actions $XXX million by than cash approximately Power. to benefit year-over-year Wind restructuring and partially from taxes. previously delivered free working $XXX of million the In capital announced collections. at over benefit to $XXX more due primarily capital quarter, both EBITDA We from adjusted an

flow. approximately an positive and free multiemployer The is of arbitration adjusted an EBITDA. in was benefit $XXX the received a million open decision cash included SG&A and P&L from SG&A we In from which refund adjusted in was quarter, approximately $XXX recorded million in pension resulting dispute, excluded plan

balance of $XXX of proceeds solid million of increased steam of approximately cash flow the was gain pretax EBITDA. which from $X.X our net a generation received result Finally, classified portion The adjusted outside in free combination and completing proceeds, million almost from divestitures which an cash free cash quarter, billion. recognized flow a excluded as and already are the of to sale of power, $XXX we

half XXX organic and performance Overall, generation. expansion points financial in cash EBITDA we're with our by revenue flow of free of XXXX, growth, margin nearly adjusted first positive the basis encouraged

by Slide further margin Now equipment Gas revenue Power. Power delivered Hydro double-digit X. solid XX%, segment and growth strong growth, with turning Orders grew and Power at orders expansion. to on quarter higher led another The EBITDA

turbines, the During by HA Power Equipment Services X orders heavy-duty second over also gas compared gas Power units as power in from Gas on quarter, included no XX% service second XX increased booked to orders XX% strength. XX%, gas Power. higher which driven revenue bookings quarter. XXXX Revenue HA Gas volumes. increased grew we grew unit equipment

of inflation. XXX resulting price as XX%, of offset margin services the than higher in impact increased productivity points volume, and EBITDA more expansion basis

additional on that we reliable see to gas a gas opportunities strategies ahead, gas to increased acceleration. as We and for generation, incremental and evaluate demand in XXXX at to demand term. fulfill Looking is booked, anticipate demand which medium Power over of baseload services resulting additional are long the meet potential equipment we growth both source already for continue to CapEx gas orders

Wind. to Turning

quarter second of EBITDA making XX% year, was large declined driving We order despite given in when Orders continued a the last levels. equipment the progress booked. revenue comparison tough offshore improved lower to

As increased declined by later than quarter of that equipment XXXX. offshore the the XX%, fourth quarter. from was in more a X.Xx but first sequentially reminder, order canceled the orders customer Onshore

Scott EBITDA offshore, points profitable offshore from interest cost queues and volume EBITDA second offshore revenue in interconnection remain as improved as XX% to backlog. of despite remaining prior As At continued timing losses an we lower higher offset we indicated on versus cautious the Revenue reductions. equipment again lower year improved customers North the quarter. and deliveries, execute decreased price Onshore America equipment our onshore by order growing onshore positive inflection margins navigate from the earlier, higher rates. basis decreased partially on continue and XXX in margins

at Wind to which expect is higher drive existing EBITDA are half in and we on both incremental our the meaningfully financial backlog. onshore our onshore currently demonstrating continue second further leverage. at better offshore of we In cost to improve volume signs work of margins, equipment XXXX, progress,

XX% of and revenue Now $X.X at another quarter quarter expansion. sequentially. strong had Orders revenue over billion, roughly Electrification, higher EBITDA margin X.Xx we second were growth and

equipment switch the strong, expanded Grid margin second to particularly year-over-year EBITDA and orders Revenue the XXX declined high-voltage prior solutions circuit by HVDC in orders led on growth recorded year. quarter higher grew and for XX% gears points conversion. power in Solutions, U.S., remaining volume, we and price grid strength in While productivity. significantly with breakers. due strong Within basis orders saw

margins expanded All electrification sequentially. and year-over-year of in businesses quarter and our were profitable second the both

with Equipment demand continue margin quarter approximately in billion, meaningful $XX see and segment expansion. to XXXX to to healthy this resulting We billion compared in the $X strong EBITDA up price growth revenue increased margins. electrification second of backlog and

our first XX. raising to Turning performance, we're XXXX half guidance. full Slide Largely our based strong year upon

anticipate We're range, be billion billion For which increasing the mostly also expect range due X%. XXX EBITDA guidance guidance, to By electrification our margin our revenue, Power end guidance, we of we're to to previous points, towards but maintain approximately driven revenue in basis our $XX expansion to now additional power to the now trending Gas strength. guide high by original EBITDA of our mainly of of now XXX segment, compared XXX we $XX margin points basis to X% adjusted approximately strength.

we from timing in In still be positive and cost revenue flat shipments the year to second turbine of Wind, this expect half, and essentially some approach cost, as well savings. profitability At to drive the price, productivity as variability could wind results. year-over-year

we're guidance continued low on and strong demand teens based from to price. double Electrification, our mid- growth increasing to revenue In favorable digits high

our previous expect high Given of our electrification EBITDA growth in digits. to XXXX margins mid-single expectations, to now achieve compared expectation single-digit higher revenue we

to EBITDA flow the $X.X also the outlook, be includes significant so to in higher CapEx billion of of gas orders first to XXXX, billion. booked guidance range year far full refund our increasing in with this the investments the arbitration fulfill the As along year. This slightly power performance expected a higher nonrecurring $X.X primarily cash of free cash we're and strong half result

quarter, onshore EBITDA gas volume, deliver out grow last Looking expansion year's across equipment expect and line productivity expected year-over-year last year-over-year revenue we meaningfully pricing. specifically backlog. and Wind from of the and we solid is revenue segments. to year continued growth expansion services margin top Relative from as quarter, higher-margin and power anticipate growth revenue third at higher to third we EBITDA margin the versus volume

onshore In higher addition, structure. along cost with volume, EBITDA and lower should from positive the improve price

Gas favorable At quarter, third the margin outages basis of sequential that growth, In for a and at Electrification, services EBITDA and we along Vernova. expansion volume, line adjusted expect lower solid in the top means most with note revenue pricing. productivity from like GE seasonality higher Power on years,

the expect taxes as anticipate quarter. second EBITDA. free as to lower to higher cash the received decrease We stronger we flow nonrecurring adjusted in from the driven cash flow arbitration largely improve by cash slightly EBITDA, and Sequentially, year-over-year adjusted free well refund CapEx the

also our We're We're rating capital built half and growth and of opportunities the shareholders. very the return year. by confident first in of for to the our sheet investment-grade as we the encouraged of to remain balance in evaluate maintaining momentum committed strength we

Scott. With that, I'll turn it back to

our and in, decarbonize our we the performance All Ken. Thanks, the world. about our first excited we half are future year, of pleased we this are with in as help and customers electrify

Market Vernova. lead dynamics continue strong that will for to drive to multi-decade growth demand GE

its Our Power XX% segment generates services. of revenues from

to with expanded cash number free of growing expect We power for flow years. margins drive a

and expect units, Wind especially We benefit North continue when in for to ramps margins expanding new Wind in to further. America, demand

sources. significantly improve customers more investments to seeing are we Electrification, connect increase In carbon reliability zero power grid-related and

years We in come. expect this the segment to margins deliver to also higher continue to

Our sustainability lean our of the at innovation operating company. remain system, core and

well are as better our electricity running businesses and We positioned evolve. are markets

coming together, deliver deliver And put to our for going growing clear all free a we substantial we adjusted EBITDA the when cash flow over opportunity and this value years. forward. to expect see We stakeholders

I'll hand Michael it With the back portion the that, Q&A to of for call.

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

Strouse comes JPMorgan. Our Instructions] question the [Operator of line first from Mark with

thorough project review the the taking I you're Vineyard that's with you're start your being here. I the news. time, been with a Wind of just So to and kind in segment wanted Wind appreciate

these through that talk on of to one line or quarters? just of you what can line or be mean this before, about weeks of kind Just expecting haven't that though? months been I even time be be the might kind should those for we maybe more

Dogger deliveries Bank And then second is. on that Europe? kind the the of to there your impact any on question project in Is

for the the since event. thanks days been It's XX Mark, question.

that's have at an of reinforce the indications engineering start, to beginning. the we important design Just no at flaw

factory manufacturing have identified assurance or data identified. work our I ultrasound, do. we context all made in have of the radiologist, blade to this and you in the of be an how quality and we prepared uses deviation we of made one have But that think where that identify think context work wind offshore use deviation a in for XXX through this deviations. inspection to we but in a process, non-destructive clear, Gaspé, material we gives material a our and the Because of know Canada mean or factories blades, testing, that, we're going existing the As said so to the we've ahead. that the blades existed, remarks, indication to a deviation reinspect should industry is for about for

going on thorough to We're process. this not going talk about every are We today. line to go time and the do blade, prudent,

We this, have but we move in the degree of from and there. of and do and I have customer to support can high do we'll that forward the confidence a work do, it agency both

On on things. there's would really path up risk Clearly, for kind few is 'XX. 'XX And deliveries to right framed that into we're taking up, what timing, guidance frame we're here on I your forward. some a question and of our now, from embedded moving just collections the into mean, while pause I we financial and

We're with progress wind Dogger we right today. project continue turbines to and to Bank, on do and commission to to we continue intend continue in that contact that. SSC, on Now now, and we install close

next Citi. the Andy line from comes of question with Our Kaplowitz

curiosity, have a order what it get year. 'XX? pick the still single-digit the onshore And But difficult 'XX in environment into flat of becomes more and in at planning guidance. does and of know of I Wind to Scott, look before out sort wind you of the high reiterated revenue second point on sort the so are you half if I at you margin up just

other remain are. single-digit 'XX X we turning profitability up time period I segments. onshore 'XX been and wind us framework the we've of is We -- 'XX. financial win approaching for mean But framing I in What we margins 'XX the as in consistent in we're in 'XX we just are emphasize and for would and Andy. with to dynamics of high for framing relative that our more years the profitable 'XX, segment with segment in difficult still a and 'XX confident in have the

And then see pipeline that it the just orders, could those it's possibility that orders same in starts to we'll onshore exact we revenue in Offshore on when be we you see, at the that leads through look when still backlog. at Wind a into orders for to 'XX 'XX we us convert the to still see tough through come that time inflection point call materially our

to is have and substantially Wind guide. talked a to very playing where about. to 'XX, becomes the So through with growth margins 'XX Wind we real accrete 'XX of going consistent see smaller as And we've the potential for we possibility revenue total some really then be the Offshore you're proportion Onshore what and for

right expanded would we had our it's as also 'XX, by out the question full of add, the And of XX remember within Onshore points. XXXX margin I we 'XX, thing an end thinking Wind the called one of as in half moving that second the around about that through about the backlog but we're backlog Yes. that I think

which in some the that confidence and just in deliver we second about made of Some will outlook approaching to for overall. year in and our backlog that us in profitability deliver Wind But begin statements accretion will of half, XXXX. the that XXXX and for Scott reiterated that gives the

orders as part move wind our of is of on XXXX, step-up will we asked you deliver it as into So about, we in backlog, will coming in second the in, already in the piece be But year. a and incremental half. the that

of line Dendrinos Our from Markets. the Chris next RBC question with comes Capital

in about sort talk maybe your there. and that on specific following up of of I Can demand where going Electrification you are that guess forward guess, and the, of the Power? question some today SI margins just maybe order things are part to embedded

the challenge repeat the having team Can here we're you audio room? an please question in

last guess question. I up Yes. the following was I just on

the in You around wind some that made and comments the looks in embedded backlog. Electrification. backlog profile like margin margins I'm the And for Power what curious

today. pricing I previously where strong think I'm of you'd at in dynamics some both kind mentioned segments. curious those things are

Yes.

seeing we to XXXX and margin orders would better we end also What it's of XX start through had kind the as the in because actually of that it, you -- I we're the call we're with number, we those backlogs grow So what's is half We you the now move at -- is Wind happening gave think move taking the into towards important we last XX I move pricing Wind in that year. months in staying as of that as accrete as, the as let's tell the we're seen XXXX. levels first XXXX.

So up it's those at levels. it's kind and staying of moved

Now asked about to where is Electrification. the and you Power on difference

to is had and at demand XXXX, on talked stronger in patterns and get have we've full the equipment point pricing had both a about expanded Electrification, X versus for those environment grow, And ended the continued Electrification. margins of reference points. we of what has backlog our end XXXX, to we Electrification Power is seen overall where As continued

books. to same Power coming quarter Electrification stronger And get strong on we're thing little move point obviously, better, booking any profitable have and volatility the dynamics pricing the better, orders can seeing on the But see orders grow the continuing we to as to really you backlog. time the so And over that and of continue it. within to bit as a dynamic

comes Ritchie Sachs. with Our Goldman next from Joe question

to equipment Power focus Gas want I on my orders. question

share second then your the think the year. have I'm order year. just well. also being X which you of given can guys incredible orders, last better having is maybe is Scott, versus and booked you're gains gigawatts you visibility talk we do expanding centers pretty the were the you rates much with this data how HAs and the year-to-date, where of if just market your so curious that And having market around conversations in about commentary half as -- of

with and orders first second with quarter. the the XX%. has equipment been Thanks, both north seeing Joe. the services digits the of Gas, first the though, half double cycle I installed grew quarter demand year clearly, orders for growing We're the second our and of first mean, the both investments in base encouraging both in also

expect you're seeing we and So a orders the see, year. year as strong the we the the a that orders second basis, investment of on sense in those first we in and are with half U.S. pipeline orders, it's our both the were sides. more as the to global mean, intentional half orders combination I year-over-year remarks of in have prepared on the do of

half XX HAs. first XX of So the year, heavy-duty we turbines had with gas

this in not on half place man we're today market. having But be see. that into supporting in Gap] we transaction, support one what that's based invest also or to stronger Second a to is growth. gas [Audio that gas us will one

question with line comes next Moses the from Our Sutton BNP. of

Greenville going a and you then margin Any rise on see gas model. turbines continuing helpful. perhaps constraints you razor to should to think eventual Just turbines? gas the factory we further so blade especially, topic. we on razor, are CCGTs Are as and do thoughts in utilities know and new capacity signaling maybe just gas on -- the And the could impact the on. peakers of pricing and like margin, how of How would something that, to XX% expanding relative historical at forward many contribution be think there add about you

if our concern. to and benefit base have us market that parts, mean well make in and and We we're a the be you Greenville challenge having flow not need But this now. lead that the Greenville. those market that I mean very into that that, into going chain I look on that to you'd support XX we're given We really across our make to to to the investments. a more with have. But at But in slots, to results 'XX challenges we'll forgings. the work physical position investments scar start. that's access gas to grow convert of we'll to do that's revenue pricing we going continue castings supply our tell needs we had see may we're factory. some for orders I'll lines to basis. healthier book in single do later. for the us, process we think investments a this on tested that into supply make we into lean piece years growth today, investing lot pricing a gain isn't Greenville to have visit we'll have and that see go-forward capacity us We're approximately Moses. environment And Thanks, as slots and we capacity. X right through of And clear

at Power So But better convert as accretive years we medium again, margins margin today now. business term the from to equipment we're long these are the do will see that over X to that booking segment where orders goes.

us, make to base expanded as provide to in with just our what investments And our to required year CapEx so managing orders that, than you base and more. support to support about significantly books and to get to in go because think numbers little get with should bit not our you the to, so had to through bit ahead working That's on there we a we sure trying capacity a need we're the Yes. our those are as the maybe different, supply coming see can we guided right support is this how much we're expect these but that place supply that. prepared they through we indicated can orders. more also remarks We're

million of from about $XXX things the power called and out trying ends the capacity flow looking to flow upon to to refund arbitration help just $XXX of it correlating needs And I again both to we item to supply and nicely, cash incremental well that up but be. million, as guidance, that on what that that said as took do up only where our by with guidance CapEx it the is another primarily dispute the in that we're range. not took based because on legal keep our base about cash we invest

good really place in. it's So a be to

as But we make have for as this is and Scott will order books decision. watch to today, said, try thoughtful good patterns that to on we these we really continue orders all and move the forward

we capital well as investments So environment. manage the the as through pricing

question with next Andrew Percoco Morgan Our Stanley. comes from

want segment. back come Electrification just I to the to

obviously the of year, this margin you're you for on You're margin already upside the backlog what of that captured as in basis full the guidance at in half capturing out kind Investor laid based of points Day, was XXXX. end the like increasing the XXXX. XXX of of It quarter seems

the So conservatism Is the gate I'm OpEx it curious accelerated the just or backlog? that that? maybe discipline at what's an Investor just driving better of Day. like conversion out of Is

terms in what of Can maybe us seeing the in come to then a just relative to update you question you're recognizing you're pricing that. XXXX? as follow-up And backlog to today on what

a the start, I year view in thank as At margins the You bet. exactly said, think had March, mid-single-digit you we, in you. of Andrew, Electrification. for

XXXX be expect the half profile be we which as year, indicative that gives Now the year much and has towards how and that mid-single-digit to year so expect single-digit in high the this now margins, by second of of margin delivering an delivered shift the profile you stronger growth for the margin will half full then indication beyond. into we the margins, default, of first we

right more more level frankly, bit a to incredibly this ramp and up more caution This good to now. manage giving good a as them into a we this and have do little us capacity also very job, confidence we on that's some for earlier to with growth on they very the team fulfill job. market strong substantial would And how our that invest trajectory. this of the them be There year in was is business not part has able a quickly doing growth into experienced growth. is And that

Now accrete you the year, start when discussions XXXX. basis backlog that at said over as in revenue of we we points our March, to convert in you to last XX% until step back doesn't also said, the XXX same to exactly but margin backlog that did time,

So but we're and in see to lot a to and be to just improve to excited performance we're opportunity 'XX there's high I mean this of work about financial get do. number the a of in improve to pleased lot also to getting a lot started Electrification, single-digit here.

lot of sit of here as So in we a and a optimism, move forward. confidence with July lot we today

on And to points a move. couple put to you how it, as of business finer think this going is about

in about lot business, the March, So right? at heard You even basis points, matter talk stronger electrification not contracts, a underwriting these us it approach the backlog an as all and we of only but a wasn't margin conservatism. in doing about even accreted XXX

even better managing execution in As their booked Scott to this said, what kind deliver matter we of margins than it business backlog. of a was

that So flow years, while we margin we into we're in better on the contracts what already thought a actually than at. that backlog will of that some are is contracted seeing what of we're the execution landing out some at later

as point on just that we you you I market we give point. very in how is think projects. I a the it's make executing and continuing on well, execution it market well the sure And execute side, business you an because about way these that but point, not want to are complicated that we're -- think to as not

thing Electrification a months. on strength say cycle, better not And are that's some right? that and the orders within few the second in of we would the So longer margins parts second of coming parts year. of may components, book those The pricing market, take the smaller are business there because actually, we I of are through of is year the the of into out going half to flow early this the in that

couple a just to Scott everything points got about how but sits. you've finer of execution think our it supports So that said,

question Melius comes Rob the with next from line Our Research. Wertheimer of

little on a And kind not obviously a Orders I variable work in lean volume probably stuff also to low the turbine is -- volume task industry. all side. the out. in question know were you've easiest unit been low That's of bit gas my guess So heavy-duty doing the great. of I

can So talk a certain if there's level things it? is, get of that And you're consistent I'm to segment large a about that really a to that could how curious the for if predictable sort margin there's really when And impact flow you what level willing steady state? a get flowing? be a to how real little you just process if and bit and

There's Thanks, start. opportunity. mean, Rob. clear I I'll

Greenville. of factories is this infrastructure building in that yes, in Although, we're pieces big our

go that existing on to with as parts build that up has freed lot of You these factory have really are the services a it Greenville, the into one to high-tech today I proud also what need we they is years single-piece mean, that factories. seen very than in factory less of of better a you created had add in it And flow through if X other ago the leveraging single gas doesn't gotten it lot that piece rework substantially turbines factories. We've gas grow line eliminated into I'm immense resemble -- has our but to we've frankly market from can capacity for this we for us amount an got factory to anything a just was. beginning because of end frankly, what capacity to where to without it move walk today. capacity it today,

have industrial elements real So footprint. our that's because the one of here arbitrage of we

the cranes. The have are We attached factories railroads. the to

long to in to machinery. but we faster We're suppliers to do. some to money going We do know some spend with our going work to have some for how to of to this spend items P&E market, this lead meet is have support partnership have we're some

So first make where continues, year. Ken makes effectively the this those it guide strength And in more on laid incorporating order booked free orders sense, the of some those have already out year is of investments that of that half flow already as the cash to the fact our investments. for we'll continue

margins, question it point margin a around you asked is Scott as a but only And not this impact. an the than in gas capital optimizing and power we is of down on Yes. most into, our our leaned is as of kind But further working impact. journey moved continue just to impact portfolio. great business also lean along the kind It's the ultimate of

So that flow. straight to flows free cash

to though this as in and we will bit runs even on know all well benefits a generation. better cash as us cash margins down bring early, of to side, invest CapEx going little we're better that, So flow that more

comes Our next question with from James Evercore. West

big Europe much to curious, guys and maybe I transistor infrastructure am I if I business believe global you grid that a think that's U.S., but elaborate realize. been Scott, actually going could and in the area I grid have you on this any of growth. historically more know of be strong than us your businesses and is because a

And some the on so education that commentary I outlook business. love and some maybe on

prepared business orders up it. the James, over is the as quarter. we framed European-centric I segment remarks, is a appreciate has business. double true. the second more been this But saw mean, reality you're I our in mean is I of the right. course historically, That that a this

growth starting especially fruit and grid through business of and segment side think customer the of one front like the benefiting in to really from key very we're to is we're I the things on pull another Vernova. strong more way driving even Power places where are GE And U.S. Electrification what like in in, that's relationships accounts, much And the I that. a as able our the from organized and of finding company, that is in bear is most as activity, with Vernova part grid with lean Wind to we're on one an coordinated end the mean with coordinated reality ability relationships level by our company really So this more

about we electrification, with When is. doing art we're having good especially even in lot strategic an especially is optimism of optimism where it And business a in customers and think what is it market U.S., possible on customers, of that an our gives the the our global fact we're much the with education that that the with the a more sessions true beyond going. that is good the me market, this have this I U.S. a

So level conviction the grid resiliency European to Ukraine, really spending have and high themselves since in real where of Europe another that's a at incredibly crisis our give levels in energy customers are case you independence driving -- growth.

time is fast, better this but we arbitrage North is helping and Western Asia too. Europe very us Vernova very lean those Philippe that about lot market, team and we create with X But more have the alone give are markets relationships, excited have very at important very that a customers are running with the as an benefits longer now. to this U.S. well that candidly, business The to term, know over be we're to into And converging lot about America. possibility a are the a strong here. right us growing But real factors business where going much a simply and isn't converging

a think of again, the kind to just to on bit little numbers maybe of of give where perspective about you just, And kind how are.

quarter HVDC, and it take second the of I'm the to first holds for and in going orders you as talk half well. If about kind

HVDC within of of fairly order you America, and spread for orders totals across remainder out are world. kind electrification of If rest the of orders evenly business the take Europe the Electrification, the North

is that of world. regions because Europe, we coming as impact like So while the mentioned, the really in around in affecting the Scott carry-on strong is HVDC all

So in globally you it look this balanced that perspective. at when more business much is feeling

one have question, time we last for please. Operator,

Mandloi This Mizuho. question will line with the Maheep come of from

liabilities down XX-Q, the the reduced quarter. at warranty billion, from $X.X product looking billion the in $X.X Just

to then here. think in to how about driving light just trying understand and liabilities and goes what's Massachusetts, of environmental the number that And potential Just that. lawsuit where AEP

Yes.

that that we as accrual. portion sold take of balances to that that warranty off fact steam and question. essentially EDF think their is we this made change the just good the right way in warranties, warranties. there, fundamental accruing about that The the way. I a change Maheep, it's in just the it would the take So real no business we're difference books, Really

on trends. other the accruing We're there's of same of same dynamics seeing still there. the So We're really kind no way. going patterns

of that piece of that So of of disposition significance nothing the there outside business.

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

about And thank call of dedication just excited I your the the our as we our their their and and thank for customers you in company for and going take we're Everyone, continued Vernova. employees, conclude in to forward. us. our GE want Michael. a partners trajectory minute trust work our for hard interest Thanks, do

over it to turn we'll operator. you, the Thank and back

Thank you, participating. ladies and Thank for conference. gentlemen. This today's concludes you

disconnect. now may You