Q2 2024 GE Vernova Inc Earnings Call

Operator: Good day, ladies and gentlemen, and welcome to GE Vernova's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker Change: Good day, ladies and gentlemen, and welcome to GE Vernova's second quarter 2024 earnings conference call.

Liz: My name is Liz, and I will be your conference coordinator today. If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please hit F5 on your keyboard to refresh. 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.

Liz: At this time, all participants are in a listen-only mode. My name is Liz, and I will be your conference coordinator today.

Speaker Change: If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please hit F5 on your keyboard to refresh. As a reminder, this conference is being recorded.

Speaker Change: 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.

Michael Lapides: Thank you, operator. Welcome to GE Vernova's second quarter 2024 earnings. 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 Form 10-Q, the press release, and in the presentation slides, all of which are available on our website.

Michael Lapides: Thank you, Operator. Welcome to GE Vernova's second quarter 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.

Speaker Change: Reconciliations between GAAP and non-GAAP measures can be found in today's Form 10-Q , the press release, and in the presentation slides, all of which are available on our website.

Michael Lapides: Please note that year-over-year commentary or variance on orders, revenue, adjusted EBITDA, and margin discussed during our prepared remarks are on an organic basis. We will make forward-looking statements about our performance. These statements are based on how we see things today, and while we may elect to update these forward-looking statements at some point in the future, we do not undertake any obligation of duty. As described in our SEC filings, actual results may differ materially due to risk and uncertainty. With that, I'll hand the call over to Scott.

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

Speaker Change: 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.

Scott L. Strazik: 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.

Scott L. Strazik: Thanks, Michael. Good morning, everyone, and welcome to our second quarter earnings call. We delivered strong results in the quarter with adjusted EBITDA margin expansion across all three segments and a substantial improvement in free cash flow. Macro trends are continuing to create meaningful opportunities for us to lead in the energy sector. First, we're seeing increasing demand for power generation driven by manufacturing growth, industrial electrification, EVs, and emerging data centers. Second, there is a significant need for grid infrastructure investments to support both energy security and reliability goals.

Scott L. Strazik: Thanks, Michael. Good morning, everyone, and welcome to our second quarter earnings call. We delivered strong results in the quarter with adjusted EBITDA margin expansion across all three segments and substantial improvement in free cash flow.

Scott L. Strazik: Macro trends are continuing to create meaningful opportunities for us to lead in the energy transition. First, we're seeing increasing demand for power generation driven by manufacturing growth, industrial electrification, EVs, and emerging data center needs.

Scott L. Strazik: Second, there is a significant need for grid infrastructure investments to support both energy security and reliability goals.

Scott L. Strazik: And third, our customers are investing to decarbonize their power systems, which drives demand for low and zero carbon generation, as well as new grid. We're serving this robust market demand while simultaneously running our businesses better, driving disciplined growth, margin expansion, and higher free cash flow. Turning to slide four.

Scott L. Strazik: And third, our customers are investing to decarbonize their power systems, which drives demand for low and zero carbon generation, as well as new grid connections.

Scott L. Strazik: We're serving this robust market demand while simultaneously running our businesses better, driving disciplined growth, margin expansion, and higher free cash flow.

Scott L. Strazik: I'll spend a few minutes on each of our slides. Our power segment, led by gas power, delivered growth in both equipment and high-margin services orders and revenue, while also achieving 180 basis points of margin expansion. Power orders increased 30% this quarter, led by strength and equipment orders, which more than doubled year over year. Notably, we recently commissioned our 100th HA gas turbine in South Korea.

Scott L. Strazik: Turning to slide four. I'll spend a few minutes on each of our segments.

Scott L. Strazik: Our power segment, led by gas power, delivered growth in both equipment and high-margin services orders and revenue, while also achieving 180 basis points of margin expansion.

Scott L. Strazik: Power orders increased 30% this quarter, led by strength and equipment orders, which more than doubled year over year.

Scott L. Strazik: Notably, we recently commissioned our 100th HA gas turbine in South Korea. The H-class fleet is an important source of growing services revenue and billings for our power segment.

Scott L. Strazik: The H-class fleet is an important source of growing services, revenue, and billings for our power sector. In the second half of this year, we expect continued strength in orders for heavy-duty gas turbines, including HA units, to be higher versus the first half of 2024. Electrification is our fastest growing sector. Profitable growth continues as customers modernize and invest in new products, such as transformers and switchgears, that are key to ensuring a reliable electricity system for connecting new generation sources. For example, orders more than doubled this quarter in North America, which continues to be a key growth opportunity for this segment.

Scott L. Strazik: In the second half of this year, we expect continued strength in orders with heavy-duty gas turbines, including HA units, to be higher versus first half 2024.

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

Scott L. Strazik: For example, orders more than doubled this quarter in North America, which continues to be a key growth opportunity for this segment. Overall, the electrification segment has grown its backlog by over 25% since the start of the year.

Scott L. Strazik: Overall, the electrification segment has grown its backlog by over 25% since the start of the year. I'm pleased with the team's progress on margins, which expanded 360 basis points this quarter, and I have conviction we can drive significant margin expansion given the electrification segment's strong demand and strong industry pricing dynamics. We are thoughtfully investing to increase our output levels for this rising demand. For example, we are almost doubling capacity at our Stafford facility in the UK to deliver HVDC transformers. Right now, when remains the most challenging.

Scott L. Strazik: I'm pleased with the team's progress on margins, which expanded 360 basis points this quarter, and I have conviction we can drive significant margin expansion given the electrification segment's strong demand and strong industry pricing dynamics.

Scott L. Strazik: We are thoughtfully investing to increase our output levels for this rising demand. For example, we are almost doubling capacity at our Stafford facility in the UK to deliver HVDC transformers.

Scott L. Strazik: While we grew onshore backlog in the quarter, we remained cautious on the timing of an inflection in onshore orders as customers navigate the challenges that come with approving new projects and higher interest rates. We are nearly two years into our Onshore Wind Quality Improvement Program, and we are making progress, with no new significant issues identified. We continue to look for ways to implement the improvements into our existing fleet at a faster pace in order to deliver for customers.

Scott L. Strazik: Right now, wind remains the most challenging segment. While we grew onshore backlog in the quarter, we remain cautious on the timing of an inflection in onshore orders as customers navigate the challenges that come with permitting new projects and higher interest rates.

Scott L. Strazik: We are nearly two years into our Onshore Wind Quality Improvement Program and we are making progress with no new significant issues identified. We continue to look for ways to implement the improvements into our existing fleet at a faster pace.

Scott L. Strazik: We're adding crews to the field and gaining access to more cranes to accelerate our work. For our new units, we are leveraging technologies, including our blade inspection robot, to enhance our manufacturing process. At Offshore, we have converted almost $800 million of our backlog to revenue in the first half of the year. Last week, we had a turbine blade event at our Vineyard Wind Project, but the turbine was shut down safely, and no one was injured. With safety always as the top priority, we are working with our customer and the appropriate agencies to determine the root cause and then implement corrective actions and a restart, while we continue to work to finalize our root cause Our investigation to date indicates that the affected blade experienced a manufacturing deviation.

Scott L. Strazik: In order to deliver for customers, we are adding crews to the field and gaining access to more cranes to accelerate our work. For our new units, we are leveraging technologies, including our blade inspection robot, to enhance our manufacturing process.

Scott L. Strazik: At Offshore, we have converted almost 800 million of our backlog to revenue in the first half of the year.

Scott L. Strazik: Last week, we had a turbine blade event at our Vineyard Wind Project. The turbine was shut down safely and no one was injured.

Scott L. Strazik: With safety always as a top priority, we are working with our customer and the appropriate agencies to determine the root cause and then implement corrective actions and a restart plan.

Scott L. Strazik: While we continue to work to finalize our root cause analysis, our investigation to date indicates that the affected blade experienced a manufacturing deviation.

Scott L. Strazik: We have not identified information indicating an engineering design flaw in the blade or information of a connection with the blade event we experienced in an offshore wind project in the UK, which was caused by an installation error out at sea. We are working with urgency to scrutinize our operations across offshore wind. Haste matters.

Scott L. Strazik: We have not identified information indicating an engineering design flaw in the blade or information of a connection with the blade event we experienced in an offshore wind project in the UK which was caused by an installation error out at sea.

Scott L. Strazik: We are working with urgency to scrutinize our operations across offshore wind. Pace matters here, but we are going to be thorough instead of rushed.

Scott L. Strazik: But we are going to be thorough instead of Rush. Going forward, we remain highly selective on potential offshore wind new orders focused on achieving substantially higher prices and Discipline, a commercial term. In the wind segment overall, this quarter, we expanded margins by 400 basis points and see opportunities for further expansion. We still expect the wind segment to approach profitability this year and become profitable in 2025. Longer term, wind should play a critical role in the energy. Now, over to the right side of the page. We are driving continuous improvement in safety, quality, delivery, and cost. On safety after 10 consecutive months of fatality-free operation.

Scott L. Strazik: Going forward, we remain highly selective on potential offshore wind new orders focused on achieving substantially higher pricing and disciplined commercial terms.

Scott L. Strazik: In the wind segment overall this quarter, we expanded margins by 400 basis points and see opportunities for further expansion.

Scott L. Strazik: We still expect the wind segment to approach profitability this year and become profitable in 2025. Longer term, wind should play a critical role in the energy transition.

Speaker Change: Now, over to the right side of the page.

Speaker Change: We are driving continuous improvement in safety, quality, delivery, and cost. On safety, after 10 consecutive months of fatality-free operations, June was a tough month for us.

Scott L. Strazik: June was a tough month for us. An employee of ours in Malaysia lost his life driving to a work site in his personal car in a one-car accident on a public road, and a contractor working at Our Direction in Turkey lost his life in an arc flash event at a window.

Speaker Change: An employee of ours in Malaysia lost his life driving to a work site in his personal car in a one-car accident on a public road, and a contractor working at Our Direction in Turkey lost his life with an arc flash event at a wind farm.

Scott L. Strazik: Safety will always be the top priority at GE Vernova, and both events reinforce our need to continue to get better to ensure our employees and contractors return home at the end of Turning to Quality, where we are always working to improve our outcomes for our customers. For example, in a year where gas outages increased double digits, our team has reduced quality deviations by 15% from live outages, our Lean-enabled digital outage platform that reduces cycle times and improves the field execution experience for our customers.

Speaker Change: Safety will always be the top priority at GE Vernova and both events reinforce our need to continue to get better to ensure our employees and contractors return home at the end of work.

Speaker Change: Turning to quality, where we are always working to improve our outcomes for our customers.

Speaker Change: For example, in a year where gas outages increased double digits, our team has reduced quality deviations by 15% from live outage, our lean-enabled digital outage platform that reduces cycle times and improves the field execution experience for our customers.

Scott L. Strazik: We're also using Lean to improve delivery. In electrification, the team in France recently executed a series of Kaizens tackling material flow, scheduling, and increasing capacity. As a result of the new processes we implemented, one of the production cells increased its output of certain switchgear components by 135%.

Speaker Change: We are also using LEAN to improve delivery. In electrification, the team in France recently executed a series of Kaizens tackling material flow, scheduling, and increasing capacity.

Speaker Change: As a result of the new processes we implemented, one of the production cells increased its output of certain switchgear components by 135%.

Scott L. Strazik: 17 per week to more than 40 per week, helping to drive the growth we are seeing in our electrification segment and ultimately improving outcomes for. Finally, we are using Lean to simplify our operations and reduce GNA; we are focusing on reducing our GNA and driving productivity at our corporate center and in our sector. We began executing COSTED initiatives in the second quarter to give me increased confidence in our ability to realize GNA reduction by 2025.

Speaker Change: from 17 per week to more than 40 per week, helping to drive the growth we are seeing in our electrification segment and ultimately improving outcomes for our customers.

Speaker Change: Finally, we are using Lean to simplify our operations and reduce G&A costs.

Speaker Change: We are focusing on reducing our GNA and driving productivity at our corporate center and in our segments. We began executing cost-ed initiatives in the second quarter to give me increased confidence in our ability to realize GNA reductions in 2025.

Scott L. Strazik: Turn to the next slide for a look at our strong second quarter financial results. Orders were robust, with 2Q24 marking the second-largest order quarter we've delivered over the last three years, and we saw healthy equipment backlog growth across multiple businesses, especially in gas power and grid. We delivered disciplined, top-line growth led by the strength in price and service. We expanded adjusted EBITDA margins by over 300 basis points with expansion across all sectors

Speaker Change: Turn to the next slide for a look into our strong second quarter financial performance.

Speaker Change: Orders were robust with 2Q24 marking the second largest order quarter we've delivered over the last three years and we saw healthy equipment backlog growth across multiple businesses.

Speaker Change: especially in gas power and grid.

Speaker Change: We deliver disciplined, top-line growth led by the strength in price and services value.

Speaker Change: We expanded adjusted EBITDA margins by over 300 basis points with expansion across all segments.

Scott L. Strazik: Notably, we generated positive free cash flow with an over $1 billion improvement year over year as well as sequentially and ended the second quarter with a $5.8 billion cash flow. We are raising our 2024 guidance and now expect revenue to trend towards the higher end of our 34 to $35 billion range, largely on electrification. We now expect our adjusted EBITDA margin to be 5-7%, up from previous expectations of the higher end of the mid...

Speaker Change: Notably, we generated positive free cash flow with an over $1 billion improvement year over year, as well as sequentially, and ended the second quarter with a $5.8 billion cash balance.

Speaker Change: We are raising our 2024 guidance and now expect revenue to trend towards the higher end of our $34-35 billion range, largely on electrification.

Speaker Change: We now expect our adjusted EBITDA margin to be 5-7%, up from previous expectations of the higher end of mid-single digits.

Speaker Change: The improvement is driven by power, which we now expect will deliver 150 to 200 basis points of organic margin expansion, and electrification, where we expect high single-digit margins.

Speaker Change: We are also raising our 2024 free cash flow guidance.

Speaker Change: We expect to deliver between $1.3 billion and $1.7 billion, up from the prior $700 million to $1.1 billion range.

Speaker Change: Overall, with continued demand growth, further margin expansion, and strong free cash flow, we feel confident about the momentum in our business for years to come. I will now turn the call over to Ken for more details on our second quarter performance and our latest guidance.

Scott L. Strazik: The improvement is driven by power, which we now expect will deliver 150 to 200 basis points of organic margin expenditure, and electrification, where we expect high single-digit margins. We are also raising our 2024 free cash flow. We expect to deliver between $1.3 billion and $1.7 billion, up from the prior $700 million to $1.1 billion. Overall, with continued demand growth, further margin expansion, and strong free cash flow, we feel confident about the momentum in our business for years. I will now turn the call over to Ken for more details on our second quarter performance and our latest guidance. Thanks, Scott. Let's turn to slide six.

Kenneth S. Parks: As already stated, we delivered strong results in the second quarter with EBITDA margin expansion across all three segments and positive free cash flow generation. Demand remains robust as orders reach nearly $12 billion, which Scott mentioned was our second largest order quarter in the last three years and approximately 1.4 times second quarter revenue. Power equipment orders more than doubled, and total services orders grew double digits with strength in power and electrification. However, due to large offshore wind and HVDC equipment orders booked in the second quarter of last year, orders were 7% lower year over year.

Ken: Thanks, Scott. Let's turn to slide six.

Ken: As already stated, we delivered strong results in the second quarter with EBITDA margin expansion across all three segments and positive free cash flow generation.

Ken: Demand remains robust as orders reached nearly 12 billion dollars, which Scott mentioned was our second largest orders quarter in the last three years, and approximately 1.4 times second quarter revenue.

Scott L. Strazik: Power equipment orders more than doubled, and total services orders grew double digits with strength in power and electrification.

Scott L. Strazik: Due to large offshore wind and HVDC equipment orders booked in the second quarter of last year, orders were 7% lower year over year.

Kenneth S. Parks: Our backlog remains sizable at $115 billion, including the impact of the recently completed divestiture of a portion of steam power to EDS. Importantly, equipment margin and backlog remain healthy, in line with our disciplined profitable growth priorities. Revenue grew 2% with continued strength in electrification and power, partially offset by wind. Services revenue remains solid, increasing 9% with growth across all segments. In addition, all three segments benefited from positive price again this quarter. Adjusted EBITDA grew 85%, driving 320 basis points of margin expansion. All segments delivered more than 150 basis points of expansion along the corridor.

Scott L. Strazik: Our backlog remains sizable at 115 billion dollars including the impact of the recently completed divestiture of a portion of steam power to EDF.

Scott L. Strazik: Importantly, equipment margin and backlog remains healthy, in line with our disciplined, profitable growth priority.

Scott L. Strazik: Revenue grew 2% with continued strength in electrification and power, partially offset by wind.

Scott L. Strazik: Services revenue remains solid, increasing 9% with growth across all segments.

Scott L. Strazik: In addition, all three segments benefited from positive price again this quarter.

Scott L. Strazik: Adjusted EBITDA grew 85%, driving 320 basis points of margin expansion. All segments delivered more than 150 basis points of expansion in the quarter.

Kenneth S. Parks: Margin expansion was driven by productivity, price, and services volume, which more than offset an inflationary impact. In addition, we continue to benefit from our previously announced restructuring actions, largely in wind and power. We delivered over $800 million of positive free cash flow, improving more than $1 billion, both sequentially and year over year, from working capital and higher adjusted EBITDA, partially offset by higher cash tax. Working capital was an approximately $760 million benefit in the quarter, improving over $700 million year-over-year, due primarily to strong collections.

Scott L. Strazik: Margin expansion was driven by productivity, price, and services volume, which more than offset inflationary impacts.

Scott L. Strazik: In addition, we continue to benefit from our previously announced restructuring actions, largely at wind and power.

Scott L. Strazik: We delivered over $800 million of positive free cash flow, improving more than $1 billion both sequentially and year over year from working capital and higher adjusted EBITDA, partially offset by higher cash taxes.

Scott L. Strazik: Working capital was an approximately $760 million benefit in the quarter, improving over $700 million year-over-year due primarily to strong collections.

Kenneth S. Parks: In the quarter, we received an approximately $300 million refund resulting from a positive arbitration decision in an open multi-employer pension plan dispute, which is included in free cash flow. The P&L benefit of approximately $250 million was recorded in SG&A and was excluded from adjusted SG&A and adjusted EBITDA.

Scott L. Strazik: In the quarter, we received an approximately $300 million refund, resulting from a positive arbitration decision in an open multi-employer pension plan dispute, which is included in free cash flow.

Scott L. Strazik: The P&L benefit of approximately $250 million was recorded in SG&A and was excluded from adjusted SG&A and adjusted EBITDA.

Kenneth S. Parks: Finally, as a result of completing the sale of a portion of steam power, we received approximately $600 million of net proceeds, which were classified outside of free cash flow, and recognized an almost $900 million pre-tax gain in the quarter, which was excluded from adjusted EBITDA. The combination of free cash flow generation and proceeds from divestitures increased our already solid cash balance to $5.8 billion. Overall, we're encouraged by our financial performance in the first half of 2024, with organic revenue growth, an adjusted EBITDA margin expansion of nearly 400 basis points, and positive free cash flow generation.

Scott L. Strazik: Finally, as a result of completing the sale of a portion of steam power, we received approximately six hundred million dollars of net proceeds

Scott L. Strazik: which were classified outside of free cash flow and recognized an almost $900 million pre-tax gain in the quarter which was excluded from adjusted EBITDA.

Scott L. Strazik: The combination of free cash flow generation and proceeds from divestitures increased our already solid cash balance to $5.8 billion.

Scott L. Strazik: Overall, we're encouraged by our financial performance in the first half of 2024 with organic revenue growth, adjusted EBITDA margin expansion of nearly 400 basis points and positive free cashflow generation.

Kenneth S. Parks: Now turning to power, on slide 7, the segment delivered another strong quarter with double-digit order growth, solid revenue growth, and further EBITDA margin expansion. Orders grew 30%, led by higher equipment at gas power and hydropower. During the second quarter, gas power equipment orders increased over 60% as we booked 14 heavy-duty gas turbines, which included four HA units, compared to no HA unit bookings in the second quarter of 2023. Power Services orders grew 12% driven by gas power. Revenue grew 10% on higher gas service volumes.

Scott L. Strazik: Now turning to power on slide seven, the segment delivered another strong quarter with double digit orders growth, solid revenue growth, and further EBITDA margin expansion.

Scott L. Strazik: Orders grew 30% led by higher equipment at gas power and hydropower.

Scott L. Strazik: During the second quarter, gas power equipment orders increased over 60% as we booked 14 heavy duty gas turbines, which included four HA units compared to no HA unit bookings in 2023 second quarter.

Scott L. Strazik: Power to Power Services orders grew 12% driven by gas power.

Kenneth S. Parks: Equipment revenue also increased from gas power streams. EBITDA increased 24%, resulting in 180 basis points of margin expansion as higher service volume, productivity, and price more than offset the impact of inflation. Looking ahead, we see increased demand for gas as a reliable source of baseload generation, which is resulting in incremental growth opportunities for both gas equipment and gas services over the medium to long term. We anticipate additional 2024 CAPEX at Power to fulfill demand on gas orders that are already booked, and we continue to evaluate strategies to meet potential additional demand accelerations. Turning to wind, we continued making progress in driving improved EBITDA despite lower revenue levels. Orders declined 44% given the tough comparison to the second quarter of last year when a large offshore equipment order was booked.

Scott L. Strazik: Revenue grew 10% on higher gas service volumes. Equipment revenue also increased from gas power strength.

Scott L. Strazik: EBITDA increased 24%, resulting in 180 basis points of margin expansion as higher services volume, productivity, and price more than offset the impact of inflation.

Scott L. Strazik: Looking ahead we see increased demand for gas as a reliable source of baseload generation which is resulting in incremental growth opportunities for both both gas equipment and gas services over the medium to long term.

Scott L. Strazik: We anticipate additional 2024 CAPEX at power to fulfill demand on gas orders that are already booked, and we continue to evaluate strategies to meet potential additional demand acceleration.

Scott L. Strazik: Turning to wind, we continued making progress and driving improved EBITDA despite lower revenue levels.

Scott L. Strazik: Orders declined 44% given the tough comparison to the second quarter of last year when a large offshore equipment order was booked.

Kenneth S. Parks: As a reminder, that offshore order was later canceled by the customer in the fourth quarter of 2023. Onshore equipment orders declined 11% but increased more than two and a half times sequentially from the first quarter. As Scott indicated earlier, we remain cautious on the timing of an onshore order inflection in North America as customers navigate growing interconnection queues and higher interest rates. Revenue decreased 20% from lower onshore equipment deliveries, partially offset by higher offshore revenue as we continue to execute on our offshore equipment backlog.

Speaker Change: As a reminder, that offshore order was later canceled by the customer in the fourth quarter of 2023.

Speaker Change: Onshore equipment orders declined 11%, but increased more than 2 1?2 times sequentially from the first quarter.

Speaker Change: As Scott indicated earlier, we remain cautious on the timing of an onshore order inflection in North America as customers navigate growing interconnection queues and higher interest rates.

Speaker Change: Revenue decreased 20% from lower onshore equipment deliveries, partially offset by higher offshore revenue as we continue to execute on our offshore equipment backlog.

Kenneth S. Parks: EBITDA margins improved 400 basis points versus the prior year from positive price and continued cost reduction. At offshore, EBITDA losses decreased, and onshore margins improved despite lower volume remaining profitable again in the second quarter. Wind is demonstrating signs of financial progress. We continue our work onshore and offshore to drive incremental cost leverage. In the second half of 2024, we expect to further improve EBITDA on meaningfully higher onshore equipment volumes at better margins, which are currently in our existing backlog.

Speaker Change: EBITDA margins improved 400 basis points versus the prior year from positive price and continued cost reductions.

Speaker Change: At offshore, EBITDA losses decreased, and onshore margins improved despite lower volume, remaining profitable again in the second quarter.

Speaker Change: WIND is demonstrating signs of financial progress. We continue our work at both onshore and offshore to drive incremental cost leverage.

Speaker Change: In the second half of 2024, we expect to further improve EBITDA on meaningfully higher onshore equipment volume at better margins, which are currently in our existing backlog.

Kenneth S. Parks: Now at electrification, we had another strong quarter of revenue growth and EBITDA margin expansion. Orders were $4.8 billion, roughly 2.7 times second quarter revenue, and over 30% higher sequentially. While remaining strong, second quarter orders declined year over year due to significantly higher HBDC orders recorded in the prior year.

Speaker Change: Now at electrification, we had another strong quarter of revenue growth and EBITDA margin expansion. Orders were $4.8 billion, roughly 2.7 times second quarter revenue, and over 30% higher sequentially.

Speaker Change: While remaining strong, second quarter orders declined year over year due to significantly higher HBDC orders recorded in the prior year.

Kenneth S. Parks: Within grid solutions, we saw strong order growth in the U.S., particularly for high-voltage switch gears and circuit breakers. Revenue grew 19% with strength in equipment, led by grid solutions and power conversion. EBITDA margin expanded 360 basis points on volume, price, and productivity. Additionally, all of our electrification businesses were profitable in the second quarter and expanded margins both year over year and sequentially. We continue to see strong demand and prices, resulting in electrification revenue growth and meaningful EBITDA margin expansion.

Speaker Change: Within grid solutions, we saw strong orders growth in the U.S., particularly for high-voltage switchgears and circuit breakers.

Speaker Change: Revenue grew 19% with strength and equipment, led by grid solutions and power conversion.

Speaker Change: EBITDA margin expanded 360 basis points on volume, price, and productivity.

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

Speaker Change: We continue to see strong demand and price resulting in electrification revenue growth and meaningful EBITDA margin expansion.

Kenneth S. Parks: Equipment backlog in this segment increased to approximately $17 billion, up $5 billion compared to the second quarter of 2023, with healthy margins. Turning to slide 10, largely based upon our strong first half performance, we're raising our full year 2024 guidance. For revenue, we're now trending towards the high end of our original $34 to $35 billion guidance range, mostly due to additional electrification strength. We're also increasing our adjusted EBITDA margin guidance, which we now expect to be in the range of 5% to 7%.

Speaker Change: Equipment backlog in this segment increased to approximately 17 billion dollars, up 5 billion dollars compared to the second quarter of 2023 with healthy margins.

Speaker Change: Turning to slide 10, largely based upon our strong first half performance, we're raising our full year 2024 guidance.

Speaker Change: For revenue, we're now trending towards the high end of our original $34 to $35 billion guidance range, mostly due to additional electrification strength.

Speaker Change: We're also increasing our adjusted EBITDA margin guidance, which we now expect to be in the range of 5% to 7%.

Kenneth S. Parks: By segment, we maintain our power revenue guidance, but now anticipate approximately 150 to 200 basis points of EBITDA margin expansion compared to our previous guide of approximately 100 basis points driven mainly by gas power strength. At WEND, we still expect revenue to be essentially flat year over year and to approach profitability this year from positive price, productivity, and cost savings. In the second half, the timing of turbine shipments, as well as cost, could drive some variability in wind results.

Speaker Change: By segment, we maintain our power revenue guidance, but now anticipate approximately 150 to 200 basis points of EBITDA margin expansion compared to our previous guide of approximately 100 basis points driven mainly by gas power strength.

Speaker Change: At WEND, we still expect revenue to be essentially flat year over year and to approach profitability this year from positive price, productivity, and cost savings.

Speaker Change: In the second half, the timing of turbine shipments, as well as cost, could drive some variability in wind results.

Kenneth S. Parks: In electrification, we're increasing our revenue growth guidance from low double digits to mid to high teens based on continued strong demand and favorable prices. Given our higher revenue growth expectations, we now expect electrification to achieve high single-digit EBITDA margins in 2024 compared to our previous expectation of mid-single digit. As a result of the higher EBITDA outlook, along with the strong cash performance and the non-recurring arbitration refund in the first half of 2024, we're also increasing our full-year free cash flow guidance to be in the range of $1.3 to $1.7 billion.

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

Speaker Change: Given our higher revenue growth expectations, we now expect electrification to achieve high single-digit EBITDA margins in 2024 compared to our previous expectation of mid-single digits.

Speaker Change: As a result of the higher EBITDA outlook, along with the strong cash performance and the non-recurring arbitration refund in the first half of 2024, we're also increasing our full-year free cash flow guidance to be in the range of $1.3 to $1.7 billion.

Speaker Change: This includes slightly higher expected CapEx investments, primarily to fulfill significant gas power orders booked so far this year.

Kenneth S. Parks: This includes slightly higher expected CapEx investments, primarily to fulfill significant gas power orders booked so far this year. Looking specifically at the third quarter, we expect solid year-over-year revenue growth and continued EBITDA margin expansion across the segment. Relative to last year's third quarter, we anticipate power top-line growth from higher gas equipment and services revenue and EBITDA margin expansion versus last year from volume, productivity, and price. Wind revenue is expected to grow meaningfully year over year as we deliver higher-margin onshore volume out of backlog.

Speaker Change: Looking specifically at the third quarter, we expect solid year-over-year revenue growth and continued EBITDA margin expansion across the segments.

Speaker Change: Relative to last year's third quarter, we anticipate power top-line growth from higher gas equipment and services revenue and EBITDA margin expansion versus last year from volume, productivity, and pricing.

Speaker Change: Wind revenue is expected to grow meaningfully year-over-year as we deliver higher margin onshore volume out of backlog.

Kenneth S. Parks: In addition, EBITDA should improve from the higher onshore volume along with positive price and lower cost structure. At electrification, we expect solid top-line growth along with margin expansion from higher volume, productivity, and favorable prices. In the third quarter, note that, like in most years, the seasonality of outages and services revenue at gas power means lower adjusted EBITDA on a sequential basis for GE Vernova. However, we expect free cash flow to improve year over year, driven by the stronger adjusted EBITDA. sequentially, we anticipate free cash flow to decrease largely due to lower adjusted EBITDA, slightly higher CAPEX, and cash taxes, as well as the non-recurring arbitration refund received in the second quarter.

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

Speaker Change: At electrification, we expect solid top-line growth along with margin expansion from higher volume, productivity, and favorable pricing.

Speaker Change: In the third quarter, note that, like in most years, the seasonality of outages and services revenue at gas power means lower adjusted EBITDA on a sequential basis for GE Vernova.

Speaker Change: We expect free cash flow to improve year over year, driven by the stronger adjusted EBITDA.

Speaker Change: Subquentially, we anticipate free cash flow to decrease largely from the lower adjusted EBITDA, slightly higher CAPEX, and cash taxes, as well as the non-recurring arbitration refund received in the second quarter.

Kenneth S. Parks: We're very encouraged by the momentum we built in the first half of the year. We're also confident in the strength of our balance sheet and remain committed to maintaining our investment grade rating as we evaluate opportunities for growth and return of capital to shareholders. With that, I'll turn it back to Scott.

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

Scott L. Strazik: Thanks, Ken. All in all, we are pleased with our performance in the first half of this year, and we are excited about our future as we help our customers electrify and decarbonize the world. Market dynamics continue to drive strong demand that will lead to multi-decade growth for GE Vernova. Our power segment generates 70% of its revenues from service.

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

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

Scott L. Strazik: market dynamics continue to drive strong demand that will lead to multi-decade growth for GE Vernova.

Scott L. Strazik: Our power segment generates 70% of its revenues from services.

Scott L. Strazik: We expect power to drive expanded margins with growing free cash flow for a number of. We expect to continue expanding margins in wind and to benefit from wind demand for new wind units, especially in North America, ramps further. In electrification, we are seeing customers significantly increase grid-related investment to improve reliability and connect more zero carbon power. We expect this segment to also continue to deliver higher margins in the years to come, and we are lean operating. Sustainability and innovation remain at the core of our company.

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

Scott L. Strazik: We expect to continue expanding margins in wind and to benefit when demand for new wind units, especially in North America, ramps further.

Scott L. Strazik: In electrification, we are seeing customers significantly increase grid-related investments to improve reliability and connect more zero-carbon power sources.

Scott L. Strazik: We expect this segment to also continue to deliver higher margins in the years to come.

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

Scott L. Strazik: We are running our businesses better and are well-positioned as electricity markets evolve. We expect to deliver growing adjusted EBITDA and free cash flow over the coming years. And when we put all this together, we see a clear opportunity to deliver substantial value for our stakeholders going forward. After that, I'll hand it back to Michael for the Q&A portion. 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.

Scott L. Strazik: We are running our businesses better and are well positioned as electricity markets evolve.

Scott L. Strazik: We expect to deliver growing adjusted EBITDA and free cash flow over the coming years.

Scott L. Strazik: And when we put all this together, we see a clear opportunity to deliver substantial value for our stakeholders going forward. With that, I'll hand it back to Michael for the Q&A portion of the call.

Michael Lapides: 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.

Scott L. Strazik: Please return to the queue if you have any follow-up questions. With that, operator, please open the lawn. Ladies and gentlemen, if you wish to ask a question, please press star 1 1 on your telephone. If you wish to withdraw your question, or your question has already been answered, please press star 1 1 again.

Michael Lapides: Please return to the queue if you have follow-ups.

Michael Lapides: With that, Operator, please open the lawn.

Speaker Change: Ladies and gentlemen, if you wish to ask a question, please press star 1 1 on your telephone.

Speaker Change: If you wish to withdraw your question, or your question has already been answered, please press star 11 again.

Mark Wesley Strouse: Our first question comes from Mark Strouse with J.P. Morgan. Yes, good morning. Thank you very much for taking our questions. So, I wanted to start with the wind segments and just kind of the Vineyard Wind Project that's been in the news. Appreciate that you're taking your time and being thorough with the review here.

Speaker Change: Our first question comes from the line of Mark Strouse with J.P. Morgan.

Mark Wesley Strouse: Yes, good morning. Thank you very much for taking our questions. So I wanted to start with with the wind segment and just kind of the Vineyard Wind Project that's been in the news.

Mark Wesley Strouse: I appreciate that you're taking your time, you know, being thorough with the review here. Just for those on the line that haven't been through one of these before, can you just kind of talk about what that timeline might be, though? I mean, should we be expecting this?

Scott L. Strazik: Just for those on the line that haven't been through one of these before, can you just kind of talk about what that timeline might be, though? I mean, should we be expecting this to be more kind of weeks or months or maybe even quarters? And then kind of the second question on that is, Is there any impact on your deliveries on the Dogger Bank project in Europe? Thank you. Mark, thanks for the question. It's been 11 days since the event.

Mark Wesley Strouse: to be more kind of weeks or months or maybe even quarters. And then kind of the second question on that is...

Speaker Change: Is there any impact to your deliveries on the Dogger Bank project in Europe ?

Scott L. Strazik: Just to reinforce at the start, we have no indications of an engineering design flaw. That's important at the beginning. As we said in the prepared remarks, we have identified a material deviation or a manufacturing deviation in one of our factories that, through the inspection or quality assurance process, we should have identified. Because of that, we're going to use our existing data and re-inspect all of the blades that we have made for offshore wind.

Speaker Change: Thank you. Mark, thanks for the question. It's been 11 days since the event. Just to reinforce at the start, we have no indications of an engineering design flaw. That's important in the beginning.

Speaker Change: As we said in the prepared remarks, we have identified a material deviation or a manufacturing deviation in one of our factories that

Speaker Change: Through the inspection or quality assurance process, we should have identified

Scott L. Strazik: And for context, in this factory in Gaspé, Canada, where the material deviation existed, we've made about 150 blades. So, that gives you an indication and context of the work ahead. But to be clear, this is work we know how to do. I mean, the industry uses non-destructive testing—think ultrasound, think a radiologist, but for a blade—to identify deviations.

Speaker Change: Because of that, we're going to use our existing data and re-inspect all of the blades that we have made for offshore wind and for context.

Speaker Change: This factory in Gaspé, Canada, where the material deviation existed, we've made about 150 blades, so that gives you an indication and context of the work ahead.

Speaker Change: But to be clear, this is work we know how to do. I mean, the industry uses nondestructive testing, think ultrasound, think a radiologist, but for a blade to identify deviations.

Scott L. Strazik: We are going to go and do this on every blade. A prudent, thorough process. We're not going to talk about the timeline today. We have work to do, but I have a high degree of confidence that we can do this, and we'll do it in support of both the customer and the agency and move forward from there. On your question about kind of deliveries and timing, I would just frame up a few things. I mean, clearly, while we're on pause right now, there's risk to some collections moving from 24 into 25.

Speaker Change: We are going to go and do this on every blade, prudent, thorough process.

Speaker Change: We're not going to talk about the timeline today. We have work to do, but I have a high degree of confidence that we can do this and we'll do it in support of both the customer and the agency and move forward from there. On your question on kind of deliveries and timing, I would just...

Scott L. Strazik: And that is embedded into our financial guidance here for what we have framed up. And we're really taking the path forward. Now on Darger Bank, we continue to install and commission wind turbines right now.

Speaker Change: frame up a few things. I mean, clearly while we're on pause right now, there's risk to some collections moving from 24 into 25, and that is embedded into our financial guidance here for what we framed up.

Speaker Change: and we're really taking the path forward. Now on Dogger Bank, we continue to install and commission wind turbines right now, and we intend to continue to do that. We're in close contact with SSC, and we continue to progress on that project today.

Scott L. Strazik: And we intend to continue to do that. We're in close contact with SSE, and we continue to progress on that project today. Our next question comes from the line of Andy Kaplowitz. Morning, guys. Good morning, Andy.

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

Andrew Alec Kaplowitz: Scott, so if I look at sort of the order environment and wind, just out of curiosity, I know you reiterated the flat revenue guidance, but at what point does wind have to pick up before, you know, you get into 25 and it becomes a more difficult year, and are you still planning on sort of the high single-digit margin on onshore in the second half of the year? We are. I mean, we're still consistent with our financial framing of approaching profitability in 24 in the segment with high single-digit onshore wind margins in 24 and the segment turning profitable in 25, Andy.

Speaker Change: Morning guys. Morning Andy. Good morning.

Andy Kaplowitz: Scott, so if I look at sort of the order environment and wind, just out of curiosity, I know you reiterated the flat revenue guidance, but at what point does wind have to pick up before, you know, you get into 25 and it becomes a more difficult year? And are you still planning on sort of the high single digit margin in onshore in the second half of 24?

Speaker Change: We are. I mean, we're still consistent with our financial framing of approaching profitability in 24 in the segment, with high single-digit onshore wind margins in 24, and the segment turning profitable in 25, Andy.

Andrew Alec Kaplowitz: What I would just emphasize is, you know, 24 and 25, as we've been framing up for a period of time, are two more difficult years for us in wind relative to the dynamics we have in the other segments, but we may remain confident in that framework for 24 and 25. And then when you look at the orders pipeline that we see, it's just tough for us to call when it starts to convert into orders. We still see the possibility that we could see those orders come through in 25 that leads to a revenue inflection point in 26 for onshore at the exact same time that will still be materially through our offshore wind backlog. So 24 and 25 are going to be very consistent with what we've talked about.

Speaker Change: What I would just emphasize is, you know, we, 24 and 25, as we've been framing up for a period of time, are two more difficult years for us and win relative to the dynamics we have in the other segments, but we may remain confident in that framework for 24 and 25.

Speaker Change: And then when you look at the orders pipeline that we see, it's just tough for us to call when it starts to convert.

Speaker Change: into orders.

Speaker Change: We still see the possibility that we could see those orders come through in 25.

Speaker Change: that leads to a revenue inflection point in 26 on onshore at the exact same time that we'll still be materially through our offshore wind backlog.

Scott L. Strazik: And then you're really playing through to 26 where we see the real possibility for margins to increase substantially as we have the potential for some onshore wind growth and offshore wind becomes a smaller proportion of the total revenue. Yeah, and the one thing I would add, I think it's a great question around thinking about 25, but also remember that as we're moving through the second half of 24, we called out onshore wind in the backlog as of the end of 2023, and we had expanded our margin within that backlog by about 10 full points.

Speaker Change: 24 and 25 is going to be very consistent with what we've talked about, and then you're really playing through.

Speaker Change: to 26, where we see the real possibility for margins to accrete substantially as we have the potential for some onshore wind growth and offshore wind becomes a smaller proportion of the total revenue guide.

Speaker Change: Yeah, and the one thing, the one thing I would add, I think it's a great, the right question around thinking about 25.

Speaker Change: But also remember that as we're moving through the second half of 2024, we called out an onshore wind in the backlog as of the end of 2023, that we had expanded our margin within that backlog by about 10 full points.

Scott L. Strazik: Some of that will begin to deliver in 2024, in the second half, which gives us confidence in the statements that we made and that Scott just reiterated about our outlook and approaching profitability for the year, for wind overall. But some of that accretion and backlog will deliver in 2025.

Speaker Change: Some of that we'll begin to deliver in 2024 in the second half, which gives us confidence in the statements that we made and that Scott just reiterated about our outlook and approaching profitability.

Speaker Change: for the year for wind overall, but some of that accretion and backlog will deliver in 2025. So part of the step up in 2025, as you asked about, will be

Kenneth S. Parks: So part of the step up in 2025, as you asked about, will be incremental wind orders coming in in the second half. But a piece of that is already in our backlog, and we will deliver on it as we move into. Our next question comes from the line of Chris Dendrinos of RBC Capital Market. Yeah, good morning.

Speaker Change: incremental wind orders coming in in the second half, but a piece of that is already in our backlog and we will deliver on it as we move into the year.

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

Christopher J. Dendrinos: I guess maybe just following up on part of that question there. Can you talk about some of the margins that are embedded in your order demand today and sort of where the, I guess, things are going forward, specific maybe to electrification and power. Thanks. Can you please repeat the question, team? We're having an audio challenge here in the room.

Christopher J. Dendrinos: Yeah, good morning. I guess maybe just following up on part of that question there, can you talk about some of the margins that are embedded in your order demand today and sort of where the, I guess, things are going?

Christopher J. Dendrinos: forward, specific maybe to electrification and power. Thanks.

Speaker Change: Can you repeat that for us?

Speaker Change: Can you please repeat the question, team? We're having an audio challenge here in the room.

Christopher J. Dendrinos: Yeah, I guess I was just following up on the last question. You made some comments about the margins embedded in that wind backlog, and I'm curious what the margin profile looks like for the backlog in power and electrification. I think you'd previously mentioned some strong pricing dynamics in both those segments, so I'm kind of curious where things are at today. Yeah, so we would tell you that in the, let's start with the wind, because I think it's important as we're also, I gave you the 2023 number, what's happening as we move into 2024. We have seen wind margin backlogs accrete and grow over the last 12 to 18 months as we move towards the end of 2023.

Speaker Change: Yeah, I guess I was just following up on the last question. You made some comments around the margins embedded in that wind backlog, and I'm curious

Speaker Change: what the margin profile looks like for the backlog in power and electrification. I think you'd previously mentioned some strong pricing dynamics in both those segments, so kind of curious where where things are at today.

Speaker Change: Yeah, so we would tell you that in the, let's start with when, because I think it's important as we're also, I gave you the 2023 number, what's happening as we move into 2024.

Speaker Change: We had seen wind margin backlogs accrete and grow as, call it the last 12 to 18 months as we move towards the end of 2023.

Christopher J. Dendrinos: What we're seeing in orders that we're taking in now is that better pricing is actually staying at kind of those levels as we move through the first half of the year. So it's moved up, and it's kind of staying at those levels. Now, the difference is what you asked about power and electrification.

Speaker Change: What we're seeing in orders that we're taking in now is that better pricing is actually staying at kind of those levels as we move through the first half of the year.

Speaker Change: So, it's moved up and it's kind of staying at those levels. Now, the difference is to where you asked about on power and electrification.

Kenneth S. Parks: As those demand patterns have continued to grow, what we've seen is the pricing environment has continued to get stronger versus where we ended 2023, both in power and electrification. And a point of reference is on electrification; we talked about our overall electrification equipment at the end of 2023. Our margins and backlog expanded five full points, and so we're seeing that continue to grow as we move forward. And any quarter point can have a little bit of volatility to it.

Speaker Change: As those demand patterns have continued to grow, what we've seen is...

Speaker Change: The pricing environment has continued to get stronger versus where we ended 2023, both in power and electrification. And a point of reference is on electrification, we had talked about our overall electrification equipment. At the end of 2023, our margins and backlog had expanded.

Speaker Change: five full points. And so we're seeing that continue to grow as we move over time, and any quarter point can have a little bit of volatility to it. But the pricing dynamic within electrification continuing to get better.

Kenneth S. Parks: But the pricing dynamic within electrification is continuing to get better, booking better, stronger, profitable orders and backlog. And obviously, the same thing on the power dynamics, as you see the really strong orders coming onto the book. Our next question comes from Joe Ritchie with Goldman Sachs. Morning, Joe.

Speaker Change: booking better, stronger, profitable orders in backlog. And obviously the same thing on the power dynamics as you see the really strong orders coming onto the books.

Speaker Change: Our next question comes from Joe Ritchie with Goldman Sachs.

Joseph Alfred Ritchie: Thanks. Hey, good morning, guys. Good morning.

Joseph Alfred Ritchie: Good morning, Joe. Thanks. Hey, good morning, guys. Good morning. I want to focus my question on

Scott L. Strazik: I want to focus my question on gas power equipment orders. And so, you know, year to date, you guys have booked nine gigawatts of orders, which is pretty incredible, given where we were last year. Scott, how much of this do you think is the market expanding versus market share gains? And then also your commentary around the HAs being, you know, having better order rates in the second half of the year. I'm just curious if you can maybe just talk about your visibility and the conversations that you're having with data centers as well. Thanks, Joe.

Joseph Alfred Ritchie: on gas power equipment orders. And so, you know, year to date, you guys have booked nine gigawatts of orders, which is pretty incredible, given where we were last year. Scott, how much of this do you think is the market expanding versus market share gains?

Speaker Change: And then also your commentary around the HAs having better order rates in the second half of the year. I'm just curious if you could maybe just talk about your visibility and the conversations that you're having with data centers as well.

Scott L. Strazik: I mean, clearly, the first half of the year has been encouraging with the demand cycle for gas. Both first and second quarter equipment orders grew north of 50%. We're also seeing investments, though, in the installed base and in our services orders, both growing double digits in both the first and the second quarter. So you're seeing investment on both sides. I mean, we were. But we're not in a place today that this is one transaction, one market, that's supporting us also having to invest in more gas. Our next question comes from the line of Moses Sutton. Hi, thanks for taking my question.

Scott L. Strazik: Thanks, Joe. I mean, clearly, the first half of the year has been encouraging with the demand cycle for gas, both first and second quarter equipment orders grew north of 50%. We're also seeing the investments, though, in the install base with our services orders, both growing double digits in both the first and the second quarter. So,

Scott L. Strazik: You're seeing the investment on both sides. I mean, we were intentional in our prepared remarks in the sense that as strong as those orders are on a year-over-year basis, with the pipeline we see, and it's a combination of...

Scott L. Strazik: U.S. orders and global orders, we do expect the second half of the year to have more orders than the first half of the year. So first half of the year, we had 30 heavy-duty gas turbines with 12 HAs.

Scott L. Strazik: The second half will be stronger based on what we see, but we're not in a place today that this is one transaction, one market.

Scott L. Strazik: into gas that's supporting us also having to invest into more gas to support that growth.

Scott L. Strazik: Our next question comes from the line of Moses Sutton with BNP.

Moses Nathaniel Sutton: Just continuing on the gas topic, how should we think of the eventual capacity constraints at Greenville and perhaps expanding the factory, especially as we know, many utilities are signaling a further rise in CCGTs and peakers and so on. And then, just to add to that, how do you think about pricing of gas turbines going forward and impact on margin relative to maybe a historical razor, razor blade model? Could you see something like a 20% contribution margin on new gas turbines? Any thoughts there would be helpful.

Moses Nathaniel Sutton: Hi, thanks for taking my question. Just continuing on the gas topic,

Moses Nathaniel Sutton: How should we think of the eventual capacity constraints at Greenville and perhaps expanding the factory?

Speaker Change: And especially as we know many utilities are signaling.

Moses Nathaniel Sutton: further rise ANC CGTs and peakers and so on. And then just to add to that, how do you think about pricing of the gas turbines going forward and impact on margin?

Speaker Change: Relative to maybe a historical razor, razor blade model, could you see something like 20% contribution margin on new gas turbines? Any thoughts there would be helpful.

Scott L. Strazik: Thanks. Thanks, Moses. I'll start. If we had the benefit of having you visit Greenville with us, you'd see that we have clear capacity to grow into this market in Greenville, but the challenge isn't going to be the Greenville factory. We're investing in single piece flow and lean lines that have given us a lot of physical capacity. However, we do have challenges and needs to work across our supply base and supply chain to gain access to more parts. Think castings and forgings.

Speaker Change: Thanks, Moses. I'll start. I mean, if we had the benefit of having you visit Greenville with us, you'd see that we have clear capacity to grow into this market in Greenville. The challenge isn't going to be the Greenville factory. We're investing into

Speaker Change: single-piece flow and lean lines that have given us a lot of physical capacity.

Speaker Change: We do have challenges and needs to work across our supply base and supply chain to gain access to more parts.

Speaker Change: think castings and forgings and we're going through that process right now and that very well may lead to some investments we need to make to support this growth on a go-forward basis, but that's

Speaker Change: investments we'll make as the market-tested results tell us to make those investments.

Scott L. Strazik: And we're going through that process right now, and that very well may lead to some investments we need to make to support this growth on a going forward basis. But those are investments we'll make as the market tested results tell us to make those investments. But today we're not in a position that that's really our concern. I mean, we look at our slots; we're pricing for the scarce slots that we have.

Speaker Change: But today, we're not in a position that...

Speaker Change: That's really our concern. I mean, we look at our slots, we're pricing for the scarce slots that we have.

Kenneth S. Parks: We do continue to see a healthier pricing environment for gas on orders that will book in 24 into 25, and that will convert into revenue approximately 3 years later. So we do see that, over the medium to long term, as margin accretive to where the power business segment goes. But again, these are equipment orders we're booking today at better margins that will convert in 3 years. Yeah, you know, just so you think about how we're managing through the required investments to support that, we indicated in the prepared remarks that you should expect to see a little bit more CapEx coming through our numbers this year than maybe we had guided to, not significantly different, but a bit more.

Speaker Change: We do continue to see a healthier pricing environment for gas on orders that will book N24 into N25 and that will convert into revenue approximately three years later. So, we do see that over the medium to long term as...

Speaker Change: margin accretive to where to where the power business segment goes. But again these are equipment orders we're booking today at better margins that will convert three years from now.

Speaker Change: Yeah, you know, just so you think about how we're managing through the required investments to support that.

Speaker Change: where we indicated in the prepared remarks that

Speaker Change: You should expect to see a little bit more CapEx coming through our numbers this year than maybe we had guided to. Not significantly different, but a bit more. That's because these orders are on the books, and we're trying to go ahead and get in place to get our capacity expanded as much as we can to support that.

Kenneth S. Parks: That's because these orders are on the books, and we're trying to get in place to get our capacity expanded as much as we can to support that. We're also working with our supply base to make sure our supply base is right there with us so they can provide what we need to support those orders.

Speaker Change: We're also working with our supply base to make sure our supply base is right there with us so they can provide what we need to support those orders.

Kenneth S. Parks: I call that out because, correlated with what we said about cash flow guidance, we took our cash flow guidance up nicely, not only just based upon the refund from the arbitration item on the legal dispute web, about $300 million, but we took it up by another $300 million on both ends of the range. And it is with that incremental capacity and CapEx that we're looking to invest, again, primarily in power, as well as trying to do things to help and keep our supply base where it needs to be.

Speaker Change: I called that out because, you know, correlating that to what we said about cash flow guidance, we took our cash flow guidance up nicely, not only just based upon...

Speaker Change: The refund from the arbitration item on the legal dispute was about $300 million.

Speaker Change: but took it up by another $300 million on both ends of the range. And that is with that incremental capacity in CapEx that we're looking to invest again primarily in power as well as

Kenneth S. Parks: So, it's a really good place to be in, but as Scott said, you know, this is all orders that we have on the books today, and we will continue to watch these order patterns as we move forward and try to make really good, thoughtful decisions so we manage through. Our next question comes from Andrew Percoco with Morgan Stanley. Great, thanks so much for taking the question.

Speaker Change: trying to do things to help and keep our supply base where it needs to be. So it's a really good place to be in.

Speaker Change: But as Scott said, this is all for orders that we have on the books today, and we will continue to watch these order patterns as we move forward and try to make really good thoughtful decisions so we manage through the capital investments as well as the pricing environment.

Speaker Change: Our next question comes from Andrew Prococo with Morgan's Family.

Andrew Salvatore Percoco: I just want to come back to the electrification segment. You're obviously increasing the margin guidance this quarter for the full year. At investor day, you kind of laid out 500 basis points of margin upside based on what was already captured in the backlog at the end of 2023. It seems like you're capturing, you know, half of that in 2024. So I'm just curious, like, what's driving that? Is that an accelerated conversion of the backlog? Is it a better optics discipline?

Andrew Prococo: Thanks so much for taking the question. I just want to come back to the electrification segment. You're obviously increasing the margin guidance.

Speaker Change: This quarter, for the full year, at the investor day, you kind of laid out 500 basis points of margin upside based on what was already captured in the

Scott L. Strazik: Or maybe just some conservatism out of the gate at investor day? And then maybe, as a follow-up question to that, you know, can you just update us on what you're seeing come to the backlog today in terms of pricing relative to what you're recognizing in 2024? Thank you.

Speaker Change: The backlog is the end of 2023. It seems like you're capturing, you know, half of that in 2024.

Speaker Change: So, I'm just curious, like, what's driving that? Is that an accelerated conversion of the backlog, is it better op-ex discipline, or maybe just conservatism?

Speaker Change: out of the gate at the investor day. And then maybe as a follow-up question to that, can you just update us on what you're seeing come to the backlog today in terms of pricing relative to what you're recognizing in 2024? Thank you.

Kenneth S. Parks: Andrew, thank you. At the start, I think exactly as you said, we, in March, had a view of mid-single-digit margins for the year in electrification. Now, the first half of the year has delivered mid-single-digit margins.

Speaker Change: You bet. Andrew, thank you. At the start, I think exactly as you said, we, in March, had a view of mid-single-digit margins for the year in electrification. Now, the first half of the year has delivered mid-single-digit margins. So, by default, as we shift towards the full year now delivering high single-digit margins, that gives you an indication for how much stronger we expect the margin profile to be in the second half of this year.

Scott L. Strazik: So, by default, as we shift towards the full year now delivering high single-digit margins, that gives you an indication of how much stronger we expect the margin profile to be in the second half of this year, which will then be indicative of the margin profile and growth that we expect into 2025 and beyond. There was some level of caution on our part earlier in the year on how quickly we would meet and be able to ramp up to this growth. This is not a business that has experienced this substantial growth trajectory, and the team's doing a very good job.

Speaker Change: which will then be indicative of the margin profile and growth that we expect into 2025 and beyond.

Speaker Change: There was some level of...

Speaker Change: caution on our part earlier in the year on how quickly we would fulfill and be able to ramp up into this growth. This is not a business that has experienced

Speaker Change: this substantial growth trajectory. And the team's doing a very good job. And frankly, as they do a very good job, that's also giving us a little bit more confidence to invest into more growth with them and more capacity for them to manage this incredibly strong market that we have right now.

Scott L. Strazik: And frankly, as they do a very good job, that's also giving us a little bit more confidence to invest in more growth with them and more capacity for them to manage this incredibly strong market that we have right now. Now, at the same time, when you step back to our discussions in March, exactly as you said, we did accrete margin 500 basis points in the backlog last year, but we also said that over 50% of that backlog doesn't start to convert to revenue until 2026.

Speaker Change: Now, at the same time when you step back to our discussions in March, exactly as you said, we did accrete margin 500 basis points in the backlog last year, but we also said that over 50% of that backlog doesn't start to convert to revenue until 2026.

Scott L. Strazik: So we're pleased to see the financial performance improve in 24 and to get to this high single-digit number; we're just getting started here. I mean, there's a lot of opportunity to improve and a lot to be excited about in electrification, but also a lot of work to do. So we sit here today in July with a lot of optimism and a lot of confidence as we move forward.

Speaker Change: So, we're pleased to see the financial performance improve in 2024 and to get to this high single-digit number.

Speaker Change: We're just getting started here. I mean, there's a lot of opportunity to improve and a lot to be excited about in electrification, but also a lot of work to do. So we sit here today in July with a lot of optimism.

Kenneth S. Parks: And to put a couple of finer points on it as you think about, you know, how this business is going to move, you heard us talk a lot in March, not only about the electrification business, but all about doing, you know, an even stronger approach to underwriting these contracts, right? So, as we even accreted the margin and backlogged about 500 basis points, it wasn't a matter of conservatism, as Scott said; it was a matter of this business kind of managing its execution to deliver even better margins than what we booked in backlog.

Speaker Change: and a lot of confidence as we move forward.

Speaker Change: and to put a couple of finer points on it as you think about you know how this business is going to move.

Speaker Change: You heard us talk a lot in March, not only on the electrification business, but all about doing an even stronger approach at underwriting these contracts, right? So as we even accreted the margin and backlogged about 500 basis points.

Speaker Change: It wasn't a matter of conservatism. As Scott said, it was a matter of this business kind of managing their execution to deliver even better margins than what we booked in backlog. So

Kenneth S. Parks: So, while some of that will flow out into later years, what we're seeing is the execution on some of the contracts that are already in backlog. We're actually landing at a better margin than what we thought that we contracted at. I give you that point because it's not a market point; it is an execution point. And I think we want you to make sure and think about that business in the way that we are continuing to execute very well, not just on the market side, but also as how we're executing on these complicated projects.

Speaker Change: While some of that will flow out into later years, what we're seeing is the execution on some of the contracts that are already in backlog.

Speaker Change: We're actually landing at a better margin than what we thought that we contracted at.

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

Kenneth S. Parks: The second thing I would say is there are parts of the electrification business that have a shorter cycle, right? So some of the smaller components, we take orders, and we may book within a few months.

Speaker Change: The second thing I would say is there are parts of the electrification business

Speaker Change: that are not longer cycle, right? So some of the smaller components.

Kenneth S. Parks: And because of the strength of that market, the pricing that's coming through on those in the early parts of this year is gonna flow out into better margins in the second half of the year. So it just supports everything that Scott said, but you've got a couple of finer points to think about our execution. Our next question comes from the line of Rob Wertheimer with Melius Research.

Speaker Change: Actually, we take orders and we may book within a few months.

Speaker Change: And because of the strength of that market, the pricing that's coming through on those in the early parts of this year are going to flow out into better margins in the second half of the year. So it just supports everything that Scott said, but you've got a couple of finer points to think about how our execution sits.

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

Robert Cameron Wertheimer: Morning, Rob. Thank you. Good morning, everybody. So my question is also on the heavy duty gas turbine side.

Speaker Change: Morning, Rob. I thank you. Good morning, everybody.

Robert Cameron Wertheimer: Orders were obviously great, and I guess I know all the work you've been doing to lean stuff out. That's probably not the easiest task in a kind of low volume, low unit volume, you know, a little bit volatile.

Robert Cameron Wertheimer: So, my question is also on the heavy-duty gas turbine side. Orders were obviously great.

Robert Cameron Wertheimer: I guess I know all the work you've been doing to lean stuff out. That's probably not the easiest task in a kind of low-volume

Robert Cameron Wertheimer: So I'm a little bit curious if there's a certain level where you can get to real sort of process flow and, you know, and really just have things consistent and predictable and flowing. And, you know, what that level is, if there's a margin impact when you really get to a steady state and how large that could be for the segment, if you're willing to talk about it. Thank you. Thanks, Rob. I mean, I'll start.

Speaker Change: low unit volume, you know, in a little bit variable industry. So I'm a little bit curious if there's a certain level that you can get to real sort of process flow and, you know, and really just have things

Speaker Change: consistent and predictable flowing and you know what that level is if there's a if there's a margin impact when you really get to a steady state and how large that could be for this segment if you're willing to talk about it. Thank you.

Scott L. Strazik: There's clear opportunity, although yes, these are big pieces of infrastructure that we're building in our factories in Greenville. You can walk through that factory today, and if you had seen it five years ago compared to what it is today, it doesn't resemble what it was.

Speaker Change: Thanks, Rob. I mean, I'll start. There's clear opportunity, although yes, this is big pieces of infrastructure that we're building in our factories in Greenville. You can walk through that factory today and

Speaker Change: If you had seen it five years ago to what it is today, it doesn't resemble what it was. I mean, we are, I'm really proud.

Speaker Change: of where we've gotten to with very high-tech, single-piece flow.

Scott L. Strazik: I mean, we are, I'm really proud of where we've gotten to with very high-tech single piece flow that has eliminated an immense amount of rework in factories. We've got parts that move substantially less through the factory today because they just go on one single piece line from beginning to end as we build these gas turbines that have, frankly, freed up a lot of capacity in the factory to add a lot of service capacity to Greenville.

Speaker Change: that has eliminated an immense amount of rework in factories. We've got...

Speaker Change: parts that move substantially less through the factory today because they just go in one single piece line from beginning to end as we build these gas turbines that have frankly freed up a lot of capacity in the factory.

Speaker Change: to add a lot of services capacity into Greenville. But frankly, it also has created the capacity for us to grow into this better gas market without a need for anything other than leveraging our existing factories.

Speaker Change: That's one of our real elements of arbitrage here, because we have the industrial footprint, we have the cranes, the factories are attached to the railroads.

Speaker Change: We do have some P&E we're going to have to spend for some machinery. We're going to have to spend some money in partnership with some of our suppliers to...

Speaker Change: support faster, long-lead items to meet this market.

Speaker Change: But this is work we know how to do.

Speaker Change: So, Ken effectively laid out the fact that our free cash flow guide for this year

Speaker Change: is already incorporating some of those investments on orders that have already booked in the first half of the year. And as the order strength continues where it makes sense, we'll continue to make more of those investments.

Scott L. Strazik: And as order strength continues where it makes sense, we'll continue to make more of those investments. Yeah, and you asked a great question around the impact on ultimate margins, but as Scott just kind of leaned into, the point is, not only is it a margin impact, but as we continue to kind of move down this lean journey, and the gas power business is further along than most within our portfolio, it's also an optimization of our working capital impact.

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

Speaker Change: Yeah, and you asked a great question around the impact on ultimate margins, but as Scott just kind of leaned into...

Speaker Change: The point is, not only is it a margin impact, but as we continue to kind of move down this lean journey, and the gas power business is further along than most within our portfolio.

Speaker Change: It's also an optimizing of our working capital impact. So that flows straight to free cash flow. So even though we're going to invest a little bit more in CapEx early, we know that that will bring us benefits on cash flow side, and all of this runs down to better margins as well as better cash generation.

Kenneth S. Parks: Our next question comes from James West with Evercore. Morning, James. Hey, good morning. Morning, Scott. Morning, Ken. Good morning.

Speaker Change: Our next question comes from James West with Evercore.

James Carlyle West: Good morning, James.

James Carlyle West: Curious, Scott, if you could maybe..., elaborate on your grid and grid infrastructure and your transistor businesses, because I think that's going to be a big area of growth. I know that you guys have historically been strong in Europe and the US, but I believe this is a much more global business than any of us actually realize. And so I'd love some commentary on the outlook and maybe some education on that business. James, I appreciate it. I mean, the reality is that you're right.

James Carlyle West: Hey, good morning. Morning, Scott. Morning, Ken.

James Carlyle West: elaborate on your grid and grid infrastructure and

James Carlyle West: you know transistor businesses because I think that's going to be a big area of growth. I know that you guys have historically been strong in Europe and the U.S. but I believe this is a much more global business than any of us actually realize and so I'd love you know some some commentary on the outlook and maybe some some education on that business.

Scott L. Strazik: I mean, historically, this has been a more European-centric business. That is true. But as we discussed in the prepared remarks, this is a business segment that saw our orders double over the course of this second quarter. So I think the reality is our electrification segment in grid is the part of GE Vernova that's benefiting the most from Vernova. And what I mean by that is, we're really able to lean in, in a much more coordinated way, on the front end of this business with our relationships on the power and wind sides and are finding an ability to pull through even more grid growth with very strong customer relationships in places like the US.

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

James Carlyle West: over the course of this second quarter.

James Carlyle West: I think the reality is our electrification segment and grid is the part of GE Vernova that's benefiting the most from Vernova. And what I mean by that is...

Speaker Change: were really able to lean in.

Speaker Change: in a much more coordinated way on the front end of this business with our relationships on the power.

Scott L. Strazik: And as one company and organized as one company, where, especially with things like key accounts, we're driving another level of coordinated activity, we're starting to really bear fruit from that. And when we think about the strategic sessions we're having with our customers, it is true that electrification, especially in the US, We're doing an education, even with our customers, on what the art of the possible is, and... It gives me that much more optimism that, beyond the fact that this is a good market and a good global market, especially in the US, I have a lot of optimism about where this business is going.

Speaker Change: and Winside and are finding an ability to pull through.

Speaker Change: even more grid growth with very strong customer relationships in places like the U.S. And as one company, and organized as one company, where especially with things like key accounts, we're driving another level of...

Speaker Change: coordinated activity, we're starting to really bear fruit from that. When we think about the strategic sessions we're having with our customers, it is true that an electrification, especially in the U.S.,

Speaker Change: We're doing an education, even with our customers, on what the art of the possible is.

Speaker Change: It gives me that much more optimism that beyond the fact that this is a good market and a good global market especially in the US

Scott L. Strazik: So, you really have a conviction case in Europe where, since the crisis in Ukraine, our European customers are spending at incredibly high levels to give themselves another level of resiliency and energy independence that's driving grid growth. The US isn't growing as fast, but candidly, we have more arbitrage to lean into with the Vernova benefits that are helping us right now.

Speaker Change: I have a lot of optimism with where this business is going. So, you really have a conviction case in Europe where...

Speaker Change: Since the crisis in Ukraine, our European customers are spending at incredibly high levels to give themselves

Speaker Change: real another level of resiliency and energy independence that's driving grid growth

Speaker Change: The U.S. isn't growing as fast, but candidly,

Speaker Change: We have more arbitrage to lean into with the Vernova benefit.

Scott L. Strazik: And over the longer term, Asia is going to be an important market too, but this is very much about Western Europe and North America. But those markets alone, with customers we know very well and with very strong relationships, converging at a time when Philippe and the team are simply running this business a lot better, are two converging factors that give us the real possibility to create a business that we're very excited about here.

Speaker Change: that are helping us right now.

Speaker Change: And over the longer term, Asia is going to be an important market too, but this is very much a lot about Western Europe and North America.

Speaker Change: But those markets alone with customers we know very well and have very strong relationships, converging at a time where Philippe and the team are simply running this business a lot better are two converging factors that give us real possibility to create a business that we're very excited about here.

Scott L. Strazik: And maybe just, again, just to kind of give you a little bit of perspective on how to kind of think about where the numbers are. If you take HVDC, and I'm gonna talk about orders in the second quarter, and it kind of holds for the first half as well. If you take HVDC orders kind of out of the order totals for electrification, the remainder of the orders within the electrification business are fairly evenly spread across North America, Europe, and the rest of the world.

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

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

Speaker Change: The remainder of the orders within the electrification business are fairly evenly spread across North America.

Kenneth S. Parks: So we like that because while HVDC is coming in strong in Europe, as Scott mentioned, the carry-on impact is really affecting all of the regions around the world. So this business is feeling much more balanced globally when you look at it in that perspective. Operator, we have time for one last question. This question will come from the line of Maheep Mandloi with Missouha.

Speaker Change: Europe , and rest of world.

Speaker Change: So we like that because while HVDC is coming in strong in Europe , as Scott mentioned, the carry-on impact is really affecting all of the regions around the world. So this business is feeling much more balanced globally when you look at it in that perspective.

Speaker Change: Operator, we have time for one last question, please.

Speaker Change: This question will come from the line of Maheep Mandloi with Mizzouho.

Maheep Mandloi: Hey, can you guys hear me? We can. Good morning. Oh, hey, good morning. Thanks for the questions here. Just looking at the 10Q, the product warranty liability was reduced from $1.4 billion to around $1.2 billion in the quarter. So it's trying to understand what's driving that and, in light of the AEP lawsuit and potential environmental liabilities in Massachusetts, just how to think about where that number goes here. Yeah, so it's a good question.

Maheep Mandloi: Hey, can you guys hear me? We can. Good morning.

Maheep Mandloi: Just looking at the 10Q, the product warranty liability is reduced from $1.4 billion to $1.2 billion in the quarter. So it's trying to understand what's driving that. And in light of the AEP lawsuit and potential environmental...

Maheep Mandloi: Liabilities in Massachusetts, just how to think about where that number goes here.

Kenneth S. Parks: I would just think about it this way, really no fundamental change in warranties, the way we're accruing warranties. The real difference right there, Maheep, is just the fact that as we take the portion of the steam business that we sold to EDF and take their balances off the books, that made essentially that change in that warranty accrual. So there's really no other dynamics going on there. We're still acting the same way. We're seeing the same kind of patterns of trends.

Maheep Mandloi: Yeah, so it's a good question. I would just think about it this way. Really no fundamental change in warranties, the way we're accruing warranties. The real difference right there, Maheep, is just the fact that as we take...

Maheep Mandloi: the portion of the STEAM business that we sold to EDF.

Maheep Mandloi: and take their balances off the books. That made essentially that change in that warranty accrual. So there's really no other dynamics going on there. We're still accruing the same way. We're seeing the same kind of patterns of trends. So nothing of significance there outside of the disposition of that piece of that business.

Kenneth S. Parks: So nothing of significance there outside of the disposition of that piece of that. Before we wrap up, let me turn it back to Scott. Scott, closing comments? Thanks, Michael. Everyone, we're excited about the trajectory of our company going forward. I do want to take a minute as we conclude the call and just thank our employees, our partners for their dedication and hard work, and our customers for their continued trust in us.

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

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

Kenneth S. Parks: And thank you for your interest in GE Vernova. Thank you. We'll turn it back over to the operator. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect. ??? ??? ??? ??? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music, Thank you for watching!

Speaker Change: Thank you. We'll turn it back over to the operator.

Speaker Change: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

Speaker Change: [inaudible] I'm sorry for the inconvenience I hope you all enjoyed the video I hope you all enjoyed the video I hope you all enjoyed the video I hope you all enjoyed the video

Speaker Change: Thank you for watching!

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Speaker Change: I'm Scott Strazik. I'll see you next time.

Speaker Change: [inaudible]