Q3 2024 GE Vernova Inc Earnings Call

October 23, 2024

Yeah.

Good day, ladies and gentlemen, and welcome to <unk>.

Third quarter 2020 earnings conference.

At this time all participants.

Yeah.

Luke: My name is Luke.

Luke: Towards the end of today.

Luke: Hey.

Speaker Change: Have you experienced issues with the webcast slides refreshing, where there appears to be delayed.

Speaker Change: Five on your keep watching it.

Speaker Change: 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 the piece.

Michael Piece: Investor Relations. Please proceed.

Michael Piece: Thank you welcome to <unk> third quarter 2024 earnings call I'm joined today by our CEO Scotts Crazy.

Michael Piece: And CFO, Ken Parks, our conference call remarks will include both GAAP and non-GAAP financial results.

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

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

Michael Piece: 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.

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

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

Scott: Thanks, Michael.

Scott: Everyone and welcome to our third quarter earnings call, we continue to gain confidence and conviction in the growth trajectory ahead for Zhu of Renova. We are in the early innings of an investment super cycle and the expansion and de carbonization of the electric power system, driven by increasing demand for power.

Scott: Increased focus on energy security and rising grid investments.

Scott: The GE Eva Nova purpose has never been more clear and we are excited to have published our first sustainability report last month.

Scott: Our objective with this report is to provide metrics on our progress in electrifying and Decarbonize in the world, while ensuring the communities, we operate and thrive and simultaneously get better each year and conserving resources with our own operations.

A quick discussion on a few of the sustainability metrics will measure an update each year and 2023, we added 29 gigawatts of new capacity to the grid globally with 42% in developing markets.

Scott: <unk> intensity of this capacity is approximately 25% below the global average carbon intensity of the existing global power sector and has the potential to avoid 20 million metric tons of cotwo per year.

I share. These examples to reinforce our true north and both adding capacity to the grid each year, while driving towards a more sustainable electricity system.

Scott: The sustainability metrics align our broader purpose with our multiyear financial ambitions to deliver attractive returns for our shareholders.

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

Scott: Our power segment led by gas power delivered strong double digit orders and revenue growth with over 200 basis points of margin expansion.

Scott: Power orders increased 34% this quarter driven by substantial equipment demand both for HCA and air derivative units as well as services.

Scott: Year to date, we have booked approximately 14 gigawatts of orders for new gas turbines nearly double last year's levels.

Scott: We expect the fourth quarter to be our largest equipment orders quarter of 2024.

Scott: As discussed in September we have now secured capacity to deliver between 70 to 80 heavy duty gas turbines per year, starting in 2026 up from 55 in recent years.

Scott: As we look at the anticipated orders profile for 2026 and 2027, even with this capacity expansion Manny.

Scott: Manufacturing slots are scarce.

Scott: In addition to equipment demand growth, we are seeing services demand in our install base grow meaningfully.

Scott: As customers aim to get more capacity and better performance out of their plants, we expect greater demand for upgrades driving gas services growth.

Scott: Today, we deliver about $2 billion of upgrades annually in our gas business and we anticipate this could grow by 50% by the end of the decade.

Scott: There is a lot to be excited about in our power segment.

Scott: Electrification is our fastest growing segment delivering a 24% revenue increase in the quarter driven by stronger volume and price demand for our products remains strong as customers modernize and invest in critical grid products, such as <unk> systems Transformers and <unk>.

Scott: Which gears, which are essential to ensuring a reliable electricity system and connecting new generation sources.

Scott: Over the last two years, we have seen our equipment backlog grow meaningfully and profitably and we are on track to more than triple This backlog by year end 'twenty four from year end 'twenty two levels of just over $6 billion.

Scott: This quarter electrification achieved double digit EBITDA margin for the first time with expansion of nearly 700 basis points demand trends and improving execution are driving an acceleration in margin expansion, increasing our confidence in our trajectory going forward and we expect this business to consumer.

Distantly deliver double digit EBITDA margins from here.

Scott: Turning to wind.

Scott: In onshore we continue to improve on our profitability expanding margins and delivering our most profitable quarter in a number of years, we remain cautious on the timing of the inflection for orders, but have positioned this business to deliver high single digit EBITDA margins on approximately flat revenue this year.

Scott: We continue to have confidence that as we drive onshore revenue growth as early as 2026, we can continue to accrete margins in this business.

Scott: In offshore we have had a difficult four months and are disappointed given the impact on our customers and on our financial results with a significant loss we took this quarter.

Scott: We have finalized root cause analysis and confirm the blade issue at vineyard wind was caused by a manufacturing deviation from our factory in Canada.

Scott: We have been very intentional.

Scott: Though not rushed and reevaluating our blade quality across offshore wind in totality.

Scott: As we Reaccelerate progress on our projects, we are proactively strengthening some of the blades either back at the factory or in the field to improve quality and readiness for their intended useful life.

Scott: We continue installing turbines and Dogger bank wallet vineyard wind, we're installing towers in the cells and are very close to resuming blade installation.

Scott: Looking ahead, we're focused on improving execution and delivering on the approximately 3 billion backlog and the safest highest quality delivery model that makes economic sense for our customers and ourselves we.

Scott: We do not foresee adding to this backlog without substantially different industry economics than what we see in the marketplace today.

Scott: I am proud of our team as they execute in this difficult environment and appreciate the engagement with our customers IRA.

Scott: I remain confident that we will return the wind segment to profitability in the fourth quarter.

Scott: Now over to the right side of the page.

Scott: We're focused on further embedding lean across the organization driving continuous improvement in safety quality delivery and cost.

Scott: Safety is our number one priority and unfortunately, we experienced a fatality this quarter in onshore wind site in Sweden.

Scott: We are working to accelerate the company wide adoption of our lifesaving rules deployed earlier this summer.

Scott: Turning to quality. An example of how we are implementing lean in our onshore wind business is our work horse turbine strategy.

Scott: Today, we have over 2000 of our workhorse two eight megawatt wind turbines that we've commissioned in the last two years. These units are performing at approximately 98% availability due to our focus on reduced variance and repeatable operations to drive better quality.

Scott: On delivery we are.

Scott: Leveraging lean to increase output of our existing manufacturing footprint with limited capital spend needed.

Scott: As an example in our power transmission business within grid, we will double the capacity of their manufacturing output of this business with 75% of the expansion coming from core lean improvements driven by better asset and labor utilization.

Scott: The remaining 25% of the capacity increase will come from site expansions.

Scott: On cost we announced the planned reduction in our offshore wind head count as part of our efforts to streamline our wind business to make it more efficient and to improve results. We are operating the wind segment as one global business with three main product lines.

Went onshore wind and one in offshore wind with increased visibility improved learnings across the teams and a better cost structure.

Scott: We are also driving meaningful productivity with our suppliers and the large electrification projects that we have secured in backlog in the last 21 months.

Scott: This progress continues to strengthen our confidence in our ability to deliver this growing backlog in electrification for our customers.

Scott: While substantially accretive margins in this business going forward.

Scott: Turning to the next slide for a look into our third quarter financial performance, we delivered a solid quarter with double digit orders with services up almost 30% and double digit revenue growth as well as significant margin expansion at power electrification and onshore win.

Scott: That said our quarter could have been even stronger if not for the quality and execution challenges in offshore wind, which we are addressing and learning from to make us a stronger company.

Scott: Going forward.

Scott: We generated substantial free cash flow and increased our cash balance from $5 8 billion in <unk> to $7 4 billion in <unk> <unk>.

Scott: During the quarter, we sold a 16% ownership stake in <unk> T&D, India part of the electrification segment at an attractive valuation that generated approximately $700 million of pre tax proceeds.

Scott: This transaction demonstrates how we intend to run GE for Nova.

Scott: We will monetize assets across our portfolio when we see attractive opportunities to do so enabling us to invest more in our core businesses to simplify the company and return capital to our shareholders.

Scott: We are reaffirming our full year 2024 guidance, we look forward to discussing our multiyear financial outlook as well as our capital allocation strategy at our Investor update in New York on December 10th.

Scott: More confident today in the future of our business than ever.

Speaker Change: And I will now turn the call over to Ken for more details on our third quarter performance.

Ken Parks: Thanks, Scott turning to slide six in the third quarter, we delivered solid results with double digit orders and revenue growth led by power and electrification.

Ken Parks: Margins expanded year over year across power electrification and onshore wind, but were offset primarily due to additional contract losses of offshore wind.

Ken Parks: Importantly, we generated substantial free cash flow in the quarter, driven by strong working capital management, including improved linearity.

Ken Parks: Orders grew 17% driven by services, which increased 28% with double digit growth across all three segments.

Ken Parks: Equipment orders grew approximately 8% power in electrification equipment orders grew substantially partially offset by lower equipment orders at wind.

Our backlog of $119 billion grew both year over year and sequentially and equipment margin and backlog remains healthy, reflecting our disciplined profitable growth priority.

Ken Parks: Revenue increased 10% in both equipment and services service revenue grew in all three segments, while continued momentum in electrification and power drove higher equipment revenue.

Ken Parks: In addition price remained positive across all three segments.

Ken Parks: Adjusted EBITDA continued to reflect higher more profitable volume price and productivity in the quarter.

Ken Parks: On an organic basis electrification realized nearly 700 basis points of margin expansion and power margins expanded more than 200 basis points.

Ken Parks: This margin strength was offset by wind primarily due to higher contract losses at offshore.

Ken Parks: We delivered nearly $1 billion of positive free cash flow improving $900 million year over year, primarily driven by stronger working capital management.

Ken Parks: Working capital was an approximately $600 million benefit in the quarter, improving over $500 million year over year, mainly due to improved linearity, which includes more closely aligning the timing of disbursements and collections.

Ken Parks: Our cash balance also reflects the monetization of a 16% ownership stake in our electrification joint venture in India, which generated approximately $700 million of pre tax proceeds classified as financing cash flows with no impact to adjusted EBITDA.

Ken Parks: We executed this transaction as a part of our ongoing process to simplify entity shareholding structures as well as to capitalize on strong equity valuations in India, while remaining the majority shareholder in this business serving an attractive market.

Ken Parks: Combined with our third quarter free cash flow. These proceeds increased our already solid cash balance to $7 4 billion.

We're encouraged by our year to date financial performance was solid revenue growth led by services, which increased 9% year over year adjusted EBITDA margin expansion of over 200 basis points and more than $1 $1 billion of positive free cash flow generation a year over year improvement of.

Ken Parks: Over $2 billion.

Ken Parks: Our backlog growth in both services and equipment provides an excellent foundation for continued strong financial performance.

Ken Parks: Turning to power on slide seven.

The segment delivered another strong quarter with continued double digit orders growth increasing revenue and further EBITDA margin expansion.

Ken Parks: Orders grew 34% led by higher equipment and services at gas power.

Ken Parks: Gas power equipment orders increased 40% as we booked nine <unk> units in the quarter, which exceeded the total number of <unk> booked in all of 2023.

Ken Parks: We also booked 15 aero derivative units in the quarter almost doubling units ordered in the third quarter of last year.

Ken Parks: Power services orders were up 29% due to higher demand from outages and upgrades.

Ken Parks: The robust demand for gas equipment and services is driving further growth in our backlog.

Ken Parks: Based upon the backlog, we're funding capacity expansion from customer orders unrelated downpayments to enable delivery of 70 to 80 heavy duty gas turbines annually starting in 2026.

Ken Parks: Revenue grew 13% driven by gas power <unk>.

Ken Parks: Services increased mainly from higher outage volume as well as price.

Ken Parks: Equipment revenue reflected growth in H, a gas turbine deliveries.

EBITDA increased 45%, resulting in 240 basis points of margin expansion as higher volume productivity and price more than offset the impact of inflation.

Ken Parks: We're using lean to drive better operational execution, and productivity, which is improving equipment profitability.

For example, the heavy duty gas turbine team enhanced standard work from underwriting to execution through a series of Chi's ons.

Ken Parks: This work has resulted in a 20% improvement in quality controls so far this year.

Generating productivity and margin expansion.

Ken Parks: We continue to leverage lean to drive better financial results and better outcomes for our customers.

Ken Parks: Looking at the fourth quarter, we expect gas equipment orders to accelerate we anticipate higher deliveries and services revenue to be offset by lower aero derivative deliveries, resulting in relatively flat revenue EBITDA and margin compared to a strong <unk> 23.

Ken Parks: We also expect continued productivity to offset inflation.

At wind onshore delivered its most profitable results in 12 quarters.

Ken Parks: While we incurred additional offshore contract losses related to the impacts of recent blade events and expected project execution delays.

Ken Parks: Wind orders declined 19% due to lower onshore equipment orders outside of North America as we remain selective about the markets we serve.

Ken Parks: In offshore we remain focused on executing our existing challenged backlog.

Ken Parks: Revenue decreased slightly in the quarter and offshore the impact of execution delays resulted in lower revenue, partially offset by a settlement of approximately $500 million for a previously canceled offshore project.

And onshore revenue grew due to higher North America equipment and services, despite lower volume outside of North America.

Ken Parks: EBITDA margins contracted 410 basis points versus the prior year.

Ken Parks: In offshore the impact of the approximately $700 million charge for additional contract losses was partially offset by the $300 million gain from the offshore project cancellation settlement.

Ken Parks: And onshore margins expanded from positive price and favorable equipment mix.

Onshore delivered better results, despite higher services costs as we're deploying more crews and cranes to continue improving fleet availability.

Ken Parks: Overall, we're focused on driving better quality cost and execution productivity across wind.

Ken Parks: As discussed we remain cautious on the timing of an onshore order inflection in North America as customers navigate growing interconnection queues.

Ken Parks: We do expect the wind segment to grow revenue and EBITDA substantially in the fourth quarter as we deliver more higher margin onshore equipment volume out of existing backlog.

Ken Parks: As a result, when should be modestly profitable in the quarter given stronger onshore results.

Ken Parks: Turning to electrification on slide nine we had another quarter of robust demand significant revenue growth and EBITDA margin expansion.

Ken Parks: Orders grew 17% driven by the increasing need for grid equipment.

Ken Parks: Within grid solutions orders remained strong in the U S, particularly for switch gears.

Ken Parks: In addition, electrification services orders grew 23%.

Ken Parks: Revenue increased 24% driven by grid solutions with meaningful growth in switch gears and transformers and by power conversion.

Ken Parks: EBITDA margin expanded nearly 700 basis points on strong volume with continued price and productivity.

Ken Parks: The segment achieved its first quarter of double digit EBITDA margins with all electrification businesses expanding margins in the quarter.

Ken Parks: We continue to see strong demand and price, resulting in electrification revenue growth and substantial EBITDA margin expansion.

Equipment orders are outpacing revenue further expanding the equipment backlog to approximately $19 billion.

Ken Parks: Up almost $6 billion compared to the third quarter of 2023.

Ken Parks: In the fourth quarter, we anticipate further equipment backlog growth driven by continued order strength at healthy margins.

Ken Parks: Revenues should increase year over year, but at a more modest rate relative to year to date performance given the comparably strong revenue and <unk> 23.

Ken Parks: We expect continued margin expansion from higher volume favorable pricing and productivity.

Ken Parks: Turning to slide 10 to discuss guidance.

Ken Parks: While I touched on the fourth quarter for this segment for GE or Nova overall, we expect solid year over year revenue growth and adjusted EBITDA margin expansion from higher more profitable volume.

<unk> and productivity despite losses it offshore.

Ken Parks: We expect fourth quarter free cash flow to be lower year over year as quarterly cash linearity improves.

Ken Parks: Given we booked our largest onshore order in <unk> last year. The <unk> wind project, we also expect lower down payments.

Ken Parks: In addition, we anticipate higher taxes as a result of our EBITDA growth along with higher Capex, primarily to support future capacity expansion in gas power and electrification.

Ken Parks: For the full year, we are reaffirming our 2024 GE <unk> guidance as stronger performance in power and electrification is offsetting additional losses at wind.

Ken Parks: We continue to expect revenue towards the high end of $34 billion to $35 billion.

Ken Parks: Adjusted EBITDA margin to be in the range of 5% to 7%.

Ken Parks: And free cash flow to be between one three and $1 7 billion.

Ken Parks: But trending towards the higher end of the range.

Ken Parks: By segment in power, we continue to expect mid single digit organic revenue growth with EBITDA margin expansion at the higher end of our 150 to 200 basis points from services strength and productivity.

Ken Parks: At wind, we still anticipate revenue to be essentially flat year over year.

Ken Parks: Positive price productivity and cost savings in onshore are expected to partially mitigate losses and offshore.

Ken Parks: As a result, we expect segment EBITDA to move closer to profitability, improving nearly 50% compared to the $1 billion loss in 2023.

Ken Parks: In electrification, we now expect high teens revenue growth, giving us increased confidence in achieving the upper end of high single digit EBITDA margins for the year.

Ken Parks: We're very encouraged by the growing strength, we're seeing at power and electrification and we're taking steps necessary to deliver better financial results at wind.

Ken Parks: We remain committed to maintaining our investment grade balance sheet and were growing our cash balance.

Ken Parks: We look forward to providing you with details on our multiyear financial outlook and capital allocation strategy at our December 10th meeting with.

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

Scott: Thanks, Ken.

Scott: We're pleased with our performance so far this year and excited about our future as we help our customers electrify and Decarbonize the world.

Scott: Market dynamics continue to drive strong demand that will lead to multi decade growth for GE, Eva Nova and continue creating value for our stakeholders, specifically our power segment generates approximately 70% of its revenue from services and we expect this segment to deliver continued margin expansion.

Scott: With growing free cash flow for a number of years.

Scott: We expect to continue expanding margins in onshore wind and we are vigorously addressing the challenges and offshore wind.

Scott: In electrification, we are seeing customers significantly increased grid related investments to improve reliability and connect more zero carbon power sources. We expect this segment to also deliver higher margins in the years to come.

Scott: As we execute on our strategy, our lean operating system commitment to sustainability and innovation remain at the core of our company. We are running our businesses better and are well positioned as electricity markets evolve.

Scott: 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 opportunities to deliver substantial value for our stakeholders going forward with that I'll hand, it back to Michael for the Q&A portion of our call.

Michael Piece: Before we open the line I'd ask everyone in the queue to consider your fellow analysts and ask one question. So we can get to as many people as possible. Please.

Michael Piece: Please return to the queue. If you have follow ups operator, please open the line.

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

Speaker Change: If you wish to withdraw your question or your question has already been answered. Please press star one again.

Speaker Change: Our first question comes from Julian Mitchell with Barclays.

Julian Mitchell: Hi, good morning.

Speaker Change: Julianna.

Julian Mitchell: Morning, maybe just a first question circling back on <unk>.

Julian Mitchell: Offshore as I was clear clearly a lot of news there in September.

Julian Mitchell: Can you just remind us kind of as you look today.

Julian Mitchell: How youre thinking about the pace of that $3 billion of offshore backlog being worked down.

And then there.

Julian Mitchell: A good update on the <unk>.

Julian Mitchell: Turbine blade issues in North America, maybe just anything on whats going on with the U K project. Please.

Speaker Change: Julian I mean, it's a start clearly.

Julian Mitchell: The last four months for offshore wind have been difficult for us I mean, the delayed project execution as cost. This time on when we had previously talked about completing the backlog we have to go which previously we had said we'd be largely complete by the end of 2025.

Julian Mitchell: In light of what we've kind of been managing through the last four months, that's moving to the right, but we're also at a period of time or evaluating alternatives things like.

Julian Mitchell: Incremental vessels things like that that can.

Julian Mitchell: Increase the pace and we're committed to kind of giving you transparency to the burn down of the approximately $3 billion backlog. We have left to go when we get together on December 10th as we outline our both 25 financial objectives and in our long range financial targets associated with that.

Julian Mitchell: On the blade piece of the equation just going right. There we've been very intentional and focused on this since the advent in July.

Julian Mitchell: We can tell you today that the root cause was what we framed up in July there was a manufacturing deviation at one of our factories in Canada.

Julian Mitchell: We have been very systematically reviewing all of our blades in offshore wind and we can say today that a very small proportion low single digit proportion of our manufactured blades in totality also had a manufacturing deviation similar to the blade that we experienced a failure in vineyard wind in those.

Julian Mitchell: We're taking action on those blades and we're doing that right now and really now getting to a point of shifting back to execution out at sea to your question on Dogger Bank, we're fully in installation and commissioning and Dogger bank today in the case of the vineyard, we have been installing both towers and the cells and.

Julian Mitchell: Just got a guidance to start to begin reinstalling blades that vineyard yesterday.

Julian Mitchell: So I think this blade chapter.

Julian Mitchell: We've learned a lot from the last three or four months and now this is back to project execution and we will give you more on the burn down of the $3 billion to go on December 10th and.

Speaker Change: And Julian I would just add.

Julian Mitchell: Where we are its important to understand that.

As we've taken that $700 million charge, we've taken into account all of the things that Scott has outlined so in other words, we know that theres cost for blood remediation. There's also this extension of the delivery timeline, which we have some current estimates at but we'll continue to work through at both on how it may impact the vineyard wind project as well as the Dogger Bank.

Julian Mitchell: Project. So the important thing to consider is.

Julian Mitchell: We've done a lot of work the teams have done some outstanding work to make sure that we're staying ahead of this with our customers and making sure we're delivering on our commitments there, but we have attempted our best effort in those charges to encapsulate all of the costs, that's going to come along with that so the numbers that we gave you our are as clean as they can be as far as what it takes to deliver.

Speaker Change: Our next question comes from Nicole <unk> with Deutsche Bank.

Speaker Change: Yeah. Thanks, Good morning, guys. Good morning, Nicole Good morning, Nicole.

Nicole: Maybe I can ask a question on power I think you guys said that you expect power equipment orders to accelerate in the fourth quarter. I guess can you talk a little bit about what you're hearing from customers to provide confidence in that outcome. Thank you.

Speaker Change: You bet, Nicole I mean, I'll I'll hit on it and although the power orders in the third quarter up 34% and as we said in our prepared remarks for gas as an example, we've taken.

Speaker Change: 14, Gigawatts of new orders three <unk> year to date, which is twice.

Speaker Change: Those equivalent levels in the first three quarters of last year. When we look at the pipeline coming from here, we do expect our fourth quarter to be our strongest quarter of 2024, and although it's early and we'll firm. This up before December 10, we see the 2025 orders looking very similar to 2024.

Speaker Change: Or if not modestly stronger, but probably with a larger tilt towards North America. The reality is the orders that we booked this year have been have a heavy proportion of middle East orders, we announced a large order in Japan in the third quarter U S. As part of the equation, but as we've been saying for quite some.

Speaker Change: Time, we see.

Speaker Change: North America, and we see the hyperscale or dynamic being more of a 'twenty five dynamic then 24 and that's exactly how we think this is going to still play out sitting here today.

Speaker Change: Our next question comes from Andrew <unk> with Morgan Stanley.

Speaker Change: Great. Thanks, so much good morning, guys. Thanks for taking the question.

Speaker Change: Stick with power for a second.

Speaker Change: Bit of a higher level question, but.

Speaker Change: Youre seeing a lot of demand, particularly in gas and I think kind of look back to the early two thousands and 2000 tens I mean, your power business with a high teens low <unk>.

EBITDA margin business and I'm, just kind of curious now that we're entering this next wave of growth in gas.

Speaker Change: Pricing environment supportive of you getting back to that margin structure or is there anything structurally different this time around that Mike.

Speaker Change: Impede your ability to get back there. Thank you.

Speaker Change: Andrew I mean at the start candidly, we have a much larger services business today than what we would've had at that comparison point because we've been growing the fleet all of these years since then so.

Speaker Change: At the start we've got an incredible services annuity stream, that's going to that's going to sustain itself for a long time.

Speaker Change: Compensation of what's going to play out the second half of this decade relative.

Speaker Change: Early in the two thousands is different in a sense that it's still going to be less gas turbines, but the gigawatt or the megawatts really per gas turbine or going to be substantially larger right now that we're we're shifting towards the towards the Haa profile, we are seeing substantially better pricing environment. Today then.

Speaker Change: Yeah.

What we're getting in orders today relative to what we're shipping and revenue today and that will start to benefit us really in.

Speaker Change: To a large extent the second half of 'twenty six and the full year of <unk> 27 in revenue on what I'd call.

Speaker Change: Today's new pricing environment and.

Speaker Change: And when you combine those two things together with a much larger services business.

Speaker Change: Customer.

Speaker Change: Sentiment, that's investing in that gas fleet substantially more today than certainly have the prior 10 years and that equipment profile that you're citing with better with better pricing, we have a lot of confidence that throughout the better part of this decade, we're going to keep expanding margins.

Speaker Change: And look forward to giving you really a new definition of what that should look like by 2028, and our December 10th Analyst day.

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

Speaker Change: Okay.

Hey, good morning, guys.

Speaker Change: Morning, Joe.

Joe Ritchie: Hey, Scott So when we met a few months ago, we were talking about a gas our equipment market of call. It roughly 35, gigawatts by 2028, and it seems like that market is basically effectively doubled overnight and so the real question.

Joe Ritchie: Longer term as you kind of think about the next few years is this the is this the new run rate for that business from an order perspective.

And then specifically as it relates to capacity. We know you are increasing your own capacity any update that you can give us from the supply chain on their ability to meet.

Faster and faster growth in the next few years.

Speaker Change: Thanks, Joe I'd say the orders level that we're seeing for 2024, which again as I said before 14, Gigawatts <unk> year to date twice, where we were last year in the fourth quarter should be our strongest quarter.

Speaker Change: When we package that for 24, and then look at 2025 at minimum based on the visibility we have there, we see 2025 being equivalent or modestly better orders levels than 2024 and that we can clearly see in front of us and are very comfortable articulating there is.

Speaker Change: Healthy backlog back pipeline excuse me beyond that that will work, but we can say that with quite a bit of definition for 'twenty four and 'twenty five.

Speaker Change: Quickly by the time you get into the first quarter of next year, we're really going to be focused on filling slots primarily in 2028.

Speaker Change: And that is that that level of 70 to 80.

Speaker Change: Gas turbines per year, probably on the lower end and 26, the higher end beyond that because the capacity starts to cut in in the middle of 'twenty six.

Speaker Change: We don't necessarily see today going materially higher than that 80 number that we've talked about most recently, but we're looking at tactical ways to to go modestly above that if and when it makes sense, but it's not likely to be another material shift to the.

Speaker Change: Today's run rate of 55 gas turbines a year. We've now secured capacity that to 80 that took us six months working with the supply chain to secure.

Speaker Change: And were really just continuing to firm that up and make tactical adjustments no major headlines beyond the updates we've given recently on that yeah, and I think one of the other things to consider as you're thinking about.

Speaker Change: How does that impact us from a <unk>.

Investment perspective, as we're thinking about building out for this capacity one of the nice things about the cycle that we're operating in as you know is that as we take orders and orders are coming in nicely those come along with down payments and we've been pretty clear and Scott set along the way and I think we've been said that in the last quarter call that as we're thinking about making.

Speaker Change: The investments and we're making these investments for this growing from 55 units a year to call. It 70 to 80.

We're really funding that with customer orders right. So customers are coming in they're making down payments and so the draw on capital really comes directly from the orders that we're taking and I think that's a really important thing to kind of build into your thinking around how we as a management team are making very disciplined decisions around those investment levels.

Speaker Change: Our next question comes from Julien Dumoulin Smith with Jefferies.

Hey, good morning team. Thank you guys very much for the time I. Appreciate it just pivoting slightly differently with empower or do you think about the BWXT opportunity here in GTH, how would you frame <unk> as a proportion of the overall growth trajectory. How would you frame kind of any initial expectations on awards here would love to would love to hear the new frame.

Speaker Change: <unk>.

Speaker Change: You bet I mean, I think when we get to the nuclear we really have to start with the existing installed base, we have and I mean in the U S. As an example, we have 65 plants today with our equipment and as an illustration, we see at least three gigawatts of incremental nuclear capacity, we can add with operates.

Speaker Change: The existing install base that we have in another couple of Gigawatts that could get added from restarting plants that are running today, so and I give that context to just say.

Speaker Change: In the case of nuclear and with the surge in demand cycle nuclear that's likely to trickle through to our financials sooner than small modular reactor. We can see orders playing out middle of the decade in that regard that cut into revenue late in the decade.

Speaker Change: On small modular reactor sent.

Speaker Change: Sentiment in commercial activity is continuing to accelerate here.

Speaker Change: The tone of the conversations also shifting a little bit even in the context of the summer really where.

Speaker Change: More discussions are taking place right now with existing nuclear plants that have the security infrastructure within it to add small modular reactors to the security apparatus that already exists with with existing plants.

Speaker Change: That has been a more dynamic.

Speaker Change: Dynamic conversation the last 90 days than when we were together at the July earnings call and I think there will be activity. There that's going to continue to move forward at that new build that follows for us ultimately.

This comes back to the first 300 megawatt block of power getting commission in Canada. In 2029, we don't see that move into the last 2029 really is the start and then from a revenue perspective, and really a U S. New capacity growth perspective, we're really excited about what <unk>.

Speaker Change: <unk> can mean for us, but it's not going to financially become a meaningful part of our income statement with revenue and growth until early into the next decade and those activities and those discussions are very healthy right now, but I think it's important to contextualize when it's really going to try.

Speaker Change: <unk> to the financials and it is going to take until then before it becomes a material part of our future growth.

Speaker Change: Our next question comes from Andrew <unk> with Bank of America.

Speaker Change: Yes, good morning.

Speaker Change: Good morning, Good morning, Andrew.

Speaker Change: Yes, just to follow up on Jamie asked the question.

Speaker Change: It seems that the cut for our profile.

Speaker Change: Nuclear side is changing we see a lot.

Speaker Change: Headlines about hyperscale or prime.

Speaker Change: Alright.

Speaker Change: And Brian It gives us.

Speaker Change: <unk> talked about.

Speaker Change: The channel.

Speaker Change: All of them are you disadvantaged in any way shape or form.

Speaker Change: I can see all in gas turbines.

Speaker Change: Got it.

Speaker Change: As a big positive.

Speaker Change: Customers may not necessarily have experienced.

Speaker Change: We have a reputation with them.

Speaker Change: Can you sort of get your fair share from this new platform customers are.

Speaker Change: Thank you.

Speaker Change: Yeah, I would say on nuclear Andrew going back to that I mean, when I think about.

Speaker Change: A cop 28 last year in Dubai, and thinking about 'twenty two heads of state talking about tripling the nuclear capacity in the world by 2050, it's going to be in all of the above dynamic with new nuclear add theres going to be large conventional blocks of power added theres going to be a multi.

Speaker Change: Multiple small modular reactor technologies that are going to be part of the equation.

Speaker Change: We're really excited about the sentiment shift back towards nuclear and have an incredible amount of confidence in our ability to serve that growing market to be clear a lot of the.

Speaker Change: The market sentiment with call it new archetype of customers that are interested in nuclear power are going to ultimately in most cases still have a traditional nuclear operator running those plants and those traditional nuclear operators are the bread and butter customers that we have three.

Speaker Change: <unk> with for decades.

Speaker Change: Commercial arrangements of exactly how that works between us to those operators of the assets and their commercial arrangement with the end customers. That's a lot of what's materializing in firming up and we will take some more time to unfold and that's a applicable statement for <unk>.

Speaker Change: Gas and nuclear but in both cases.

Speaker Change: I really like our chances to play a meaningful role serving that growing market and especially with nuclear what I would keep emphasizing is.

Speaker Change: This is about established technology and time to market and our BW our axes using established fuel ecstatic combustion chamber technology that gives us a high degree of confidence that we're going to cut in our first 300 megawatt blocks of power in 2029 and as we're into construct.

Speaker Change: <unk> on that first project in Canada next year.

Speaker Change: We have a lot of customer sentiment, that's following that progress and <unk>.

Speaker Change: Commercial activity will follow.

Speaker Change: Our next question comes from Andy Kaplowitz with Citigroup.

Speaker Change: Hey, good morning, guys.

Speaker Change: Good morning, Andy.

Andy Kaplowitz: Maybe just on onshore wind I think you said that you can maintain a high single digit margin on flat revenue, but you're still a little conservative on one in New Orleans section might be at this point with the understanding that you'll update US again in December could you sustain that kind of performance you had in onshore when do you kind of need an inflection in.

Andy Kaplowitz: Onshore wind bookings too to support the business.

Speaker Change: Well and we see we see.

Speaker Change: Much like we've had flat revenue in 'twenty four relative to 23, when we sit here today, we see flat revenue also in 2025, but with improved profitability in onshore wind on generally a similar looking revenue profile and that's just.

Speaker Change: The ability to continue to.

Speaker Change: We've been Remixing the profitability of the backlog and you started to see that in the third quarter with the most profitable quarter. We've had in three years and you'll see that even more so in the fourth quarter into next year.

Speaker Change: We don't need quote unquote orders inflection to sustain that performance I don't have a lot of apprehension that the top line level that we're at today is at risk of going lower as an example, so bite of fall I would think of this very much as a floor.

Speaker Change: Kind of the.

Speaker Change: The escape the second half performance of 2024 into 2025 on what onshore wind is.

Speaker Change: For us and a business that is very North America dependent and lets contextualize, where we are in North America, we're going to ultimately.

Speaker Change: <unk> in the industry this year mid.

Mid to high single digit Gigawatts of new onshore wind there is a lot of people to believe that number needs to be 15 to 20, Gigawatts a year for us to reach our objectives, where I'm cautious and it had been consistently cautious is.

Speaker Change: When we see the orders come that start to get us back to the U S.

Speaker Change: Commissioning double digit mid teens gigawatts of orders now when we do that volume leverage that we're going to yield an onshore wind is going to lead to a much more profitable business that we're all going to like a lot more.

Speaker Change: I'm, just not ready to call a date on when that comes because we just don't quite see that now.

Speaker Change: Although all indications say the U S does need that later in the decade.

Speaker Change: But I don't want you to take my comments to be one that we're concerned that it's going to go backwards. We feel like we're at a solid foundational level with onshore wind performance that will get better with topline growth, we're just not ready to call that topline growth yet.

Speaker Change: And I think that.

Speaker Change: To repeat something that we've kind of said in the last couple of calls.

Speaker Change: The wind team and specifically the onshore wind team Vic and team have been working really hard to take cost out of that business to make sure is as efficient as can be and in doing so kind of running to what Scott said that put some numbers around that they've resize the business to be profitable at about 1000 turbines a year, where obviously.

Speaker Change: Running at a higher rate than that so I would just say that because two to kind of respond to your question around when do we need the wind orders to turn in order to see an inflection in this business, we're already starting to see that inflection in profitability based upon cost management, plus I'll remind you that as we came into the year, we talked about in <unk>.

Speaker Change: Onshore wind backlog that had about 10 incremental points of margin in that backlog.

Speaker Change: That's really what's giving us confidence in the second half of this year to see the profitability improvement that we're seeing now which does set us up for the.

Speaker Change: Carry on point I wont necessarily say, a jumping off point for incremental growth because pricing has kind of stabilized at these better levels.

Speaker Change: But to be able to carry us through and then when that inflection comes we are because of the hard work of everybody in the business and a really good place to benefit from it.

Speaker Change: Our next question comes from Mark Strouse with Jpmorgan.

Mark Strouse: Yes. Good morning, Thanks for taking my questions.

Mark Strouse: To go back to the.

Mark Strouse: The comment about the power equipment orders in 2025, and kind of shifting shifting more towards the U S with the Hyperscale orders it.

Mark Strouse: As Youre progressing with these these conversations with the Hyperscale or are you seeing any commonality in the mix of product type that they are interested in as far as kind of arrow versus versus H class and then can you remind us is there any kind of meaningful difference between the two as far as kind of lead times or <unk>.

Mark Strouse: <unk> profile anything like that thank you.

Speaker Change: You bet Mark Thanks for the question and I do think this goes back a if I start I would just say the trend is definitely shifting more towards H, a gas turbine discussions with consistency than ore derivative, that's because the hyper scaler or evolving from.

Speaker Change: Single Datacenters dependent on 60 to 100 megawatts to starting to look at data Center Parcs in which you can start to.

Speaker Change: Think about multiple gigawatt size data center Parcs that support a number of data centers in one location.

Speaker Change: So there is a very healthy shift towards what may be a few years ago, we would've been talking to these customers about aero derivative applications in Ireland that were backup power for the grid.

Speaker Change: Two now this being baseload power with <unk> gas turbines at the exact time that our <unk> product line is set to thrive.

Speaker Change: And just to emphasize a few points there I mean, we have almost 60 gigawatts of H a gas turbines commission today, we have over 100, running we have or approaching 3 million operating hours with our gas turbines and for US. This is what is so exciting to us about.

Speaker Change: This part of the orders book, because when you start to look into that orders profile for 2025 that we do project to be more U S centric.

Speaker Change: Is similar in size to 24 may be modestly better than 2024, our orders level, you're seeing very good equipment economics, but then you're also adding more base load machines that are going to run.

Speaker Change: A substantial amount of the year. So the services calories for us on this this equipment opportunity in the lifecycle economics are just especially good because you've got the capacity adds and the services calories over the long term that we're really excited about.

Speaker Change: And that's all part of why with confidence.

Speaker Change: We could make the announcements in September that we are adding more capacity for gas from the 55 to 70 to 80, a year because the lifecycle economics are so compelling and frankly, the payback was so attractive.

Speaker Change: <unk> got the equipment margin.

Speaker Change: Keep the payback quite tight.

Speaker Change: Tight.

Speaker Change: But these are going to run at a baseload level for a very long time.

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

Speaker Change: This question comes from the line of Kristen <unk> with RBC capital markets.

Speaker Change: Yeah I appreciate you squeezing me in here I guess I wanted to hit on electrification here.

Speaker Change: I guess specifically.

Speaker Change: Our order demand continues to build we've heard that the <unk> market could have a backlog out into 2030. So the question is do you have the capacity to support demand in electrification.

Speaker Change: And then on top of that are you continuing to push prices higher quarter on quarter is that kind of leveled off here.

Speaker Change: Chris I appreciate the question I mean.

Speaker Change: Theres a lot just to reframe. This for a moment I mean, theres just a lot to be excited about with electrification today. I mean, you cited what we've been talking about which is the backlog will be more than triple what it was at the beginning of 'twenty three by the end of the year.

Speaker Change:

Speaker Change: We are continuing to see price in today's environment. So we don't feel like we've topped out there.

Speaker Change: Way that Ken mentioned earlier, we're in onshore wind as an example, that's really leveled off we're not there today and electrification part of why in our prepared remarks, we are intentional to talk about things like.

Speaker Change: The electrification the transmission business is the power transmission businesses.

Speaker Change: We've worked hard over the first nine months of the year to get to a point that we have a high degree of confidence that we're going to double the capacity of that business and 75% of the capacities just coming with managing the assets better managing labor better adding shifts that doesn't really require.

Speaker Change: Capex there is about 25% of the growth to double that does require capex that's site expansion. So.

Speaker Change: We use that illustration to just say it would be a lot harder for us to meet this growing demand if we were doing with Greenfield operations.

Speaker Change: What's happening here the reality is I've been around these businesses for a while.

Speaker Change: And broadly the collar energy businesses for awhile and for a big part of that period of time, we had overcapacity and an industrial footprint that was a financial drag.

Speaker Change: That same industrial footprint most explicitly in electrification is now a catalyst that allows us to drive towards growth more capital efficiently and time efficiently than others, because we're using existing footprint that has the factory that has the connection to the <unk>.

Speaker Change: Railroads.

Speaker Change: That has the electricity source already.

Speaker Change: And that's frankly, where we're seeing the electrification business continue to fulfill faster.

Speaker Change: <unk> faster than we thought I mean, you saw 24% revenue growth in the third quarter. It's because they are continuing to make real progress here executing on their backlog a bit faster than we anticipated when the year started and now we need to work our way through a budget process in November and share that with you on what it looks like for 2025.

Speaker Change: But we're excited about that trend.

Speaker Change: So that's a long winded context or explanation to say yeah. The backlog is up substantially but we have a lot of industrial assets that were demonstrated an ability to manage very efficiently that's going to allow us to grow into this in a very attractive way.

Speaker Change: And I think that.

Put a little bit of color on it from a regional perspective that we're excited about is the fact that you know.

Speaker Change: While the European business has historically and continues to be in our electrification business. The biggest individual piece of it what we're seeing is that those growth rates that we saw step up last year, where some of the large <unk> orders.

Speaker Change: While the compares get tougher year over year. The order order comparisons are good we're still staying at a good level not just on H B D C, but the other products in the portfolio, but what's really important is not only is it a dynamic that's driving our business for Europe, but the fastest growing part of our electrification business based.

Speaker Change: Upon comps is really in North America, and we're excited about both of those things both Europe and North America America, because they will provide multi year.

Speaker Change: <unk> for us to continue to see this business grow and expand as Scott outlined.

Speaker Change: Operator, before we wrap up let me turn it back to Scott for closing comments.

Scott: Michael Thank you everyone. We're excited about the trajectory of our company. We look forward to talking with many of you in the coming months, if the rap as I often do I do want to thank our employees our partners for their dedication and their hard work and our customers for their continued trust in us and thank you for your continued invest.

Scott: <unk> interest in <unk>, we're looking forward to the months to come we're in the early innings of.

Scott: A really exciting journey together and really looking forward to having everybody together on December 10th for our analyst meeting. So thanks, everyone.

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

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Speaker Change: Good day, ladies and gentlemen, and welcome to Mr quarter 2024 earnings Conference call.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: My name is Liz and I will be your conference coordinator today.

Speaker Change: Have you experienced issues with the webcast slides refreshing, where there appears to be delays in this line advancement.

On your two questions.

Speaker Change: 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.

Any investor Relations. Please proceed.

Michael Lapides: Thank you welcome to <unk> third quarter 2024 earnings call I'm joined today by our CEO Scotts Crazy.

Michael Lapides: <unk> CFO, Ken Parks, our conference call remarks will include both GAAP and non-GAAP financial results.

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

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

Michael Lapides: We will make forward looking statements about our performance. These statements are based on how we see things today, while we may elect to update these forward looking statements at some point in the future we do not undertake any obligation to do so.

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

Speaker Change: That I'll hand, the call over to Scott.

Scott: Thanks, Michael Good morning, everyone and welcome to our third quarter earnings call, we continue to gain confidence and conviction in the growth trajectory ahead for GE ever Nova we are in the early innings of an investment super cycle, and the expansion and de carbonization of the electric power system driven by increasing.

Speaker Change: Demand for power.

Speaker Change: Increased focus on energy security and rising grid investments.

Speaker Change: The GE <unk>, Nova purpose has never been more clear and we are excited to have published our first sustainability report last month.

Speaker Change: Our objective with this report is to provide metrics on our progress in electrifying and Decarbonize in the world, while ensuring the communities, we operate and thrive and simultaneously get better each year and conserving resources with their own operations.

Speaker Change: A quick discussion on a few of the sustainability metrics will measure an update each year and 2023, we added 29 gigawatts of new capacity to the grid globally with 42% in developing markets.

Speaker Change: Carbon intensity of this capacity is approximately 25% below the global average carbon intensity of the existing global power sector and has the potential to avoid 20 million metric tons of cotwo per year.

Speaker Change: I share. These examples to reinforce our true north and both adding capacity to the grid each year, while driving towards a more sustainable electricity system.

The sustainability metrics align our broader purpose with our multiyear financial ambitions to deliver attractive returns for our shareholders.

Speaker Change: Turning to slide four I'll spend a few minutes on each of our segments.

Speaker Change: Our power segment led by gas power delivered strong double digit orders and revenue growth with over 200 basis points of margin expansion.

Speaker Change: Power orders increased 34% this quarter driven by substantial equipment demand both for HCA and air derivative units as well as services.

Year to date, we have booked approximately 14 gigawatts of orders for new gas turbines nearly double last year's level.

We expect the fourth quarter to be our largest equipment orders quarter of 2024.

Speaker Change: As discussed in September we have now secured capacity to deliver between 70 to 80 heavy duty gas turbines per year starting in 2026.

Speaker Change: Up from 55 in recent years.

Speaker Change: As we look at the anticipated orders profile for 2026 and 2027, even with this capacity expansion.

Speaker Change: Manufacturing slots are scarce.

Speaker Change: In addition to equipment demand growth, we are seeing services demand in our install base grow meaningfully.

Speaker Change: As customers aimed to get more capacity and better performance out of their plants, we expect greater demand for upgrades driving gas services growth.

Speaker Change: Today, we deliver about $2 billion of upgrades annually in our gas business and we anticipate this could grow by 50% by the end of the decade.

Speaker Change: There is a lot to be excited about in our power segment.

Speaker Change: Electrification is our fastest growing segment delivering a 24% revenue increase in the quarter driven by stronger volume and price demand for our products remains strong as customers modernize and invest in critical grid products, such as H VDC systems Transformers and <unk>.

Speaker Change: Which gears, which are essential to ensuring reliable electricity system and connecting new generation sources.

Speaker Change: Over the last two years, we've seen our equipment backlog grow meaningfully and profitably and we are on track to more than triple This backlog by year end 'twenty four from year end 'twenty two levels of just over $6 billion.

Speaker Change: This quarter electrification achieved double digit EBITDA margin for the first time with expansion of nearly 700 basis points demand trends and improving execution are driving an acceleration in margin expansion, increasing our confidence in our trajectory going forward and we expect this business to consumer.

Speaker Change: Distantly deliver double digit EBITDA margins from here.

Speaker Change: Turning to wind.

Speaker Change: In onshore we continue to improve on our profitability expanding margins and delivering our most profitable quarter in a number of years, we remain cautious on the timing of the inflection for orders, but have positioned this business to deliver high single digit EBITDA margins on approximately flat revenue this year we.

Speaker Change: Continue to have confidence that as we drive onshore revenue growth as early as 2026, we can continue to accrete margins in this business.

Speaker Change: In offshore we have had a difficult four months and are disappointed given the impact on our customers and on our financial results with a significant loss. We took this quarter we.

Speaker Change: We have finalized root cause analysis and confirm the blade issue at vineyard wind was caused by a manufacturing deviation from our factory in Canada.

We have been very intentional.

Speaker Change: Arrow not rushed in reevaluating, our blade quality across offshore wind in totality.

Speaker Change: As we Reaccelerate progress on our projects, we are proactively strengthening some of the blades either back at the factory or in the field to improve quality and readiness for their intended useful life.

Speaker Change: We continue installing turbines and Dogger bank wallet vineyard wind, we're installing towers in the cells and are very close to resuming blade installation.

Speaker Change: Looking ahead, we're focused on improving execution and delivering on the approximately 3 billion backlog and the safest highest quality delivery model that makes economic sense for our customers and ourselves we.

Speaker Change: We do not foresee adding to this backlog without substantially different industry economics than what we see in the marketplace today.

Speaker Change: I am proud of our team as they execute in this difficult environment and appreciate the engagement with our customers.

Speaker Change: I remain confident that we will return the wind segment to profitability in the fourth quarter.

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

Speaker Change: We're focused on further embedding lean across the organization driving continuous improvement in safety quality delivery and cost.

Safety is our number one priority and unfortunately, we experienced a fatality this quarter in onshore wind site in Sweden.

We are working to accelerate the company wide adoption of our lifesaving rules deployed earlier this summer.

Speaker Change: Turning to quality. An example of how we are implementing lean in our onshore wind business is our work horse turbine strategy.

Speaker Change: Today, we have over 2000 of our workhorse 2.8 megawatt wind turbines that we've commissioned in the last two years. These units are performing at approximately 98% availability due to our focus on reduced variance and repeatable operations to drive better quality.

Speaker Change: On delivery, we are leveraging lean to increase output of our existing manufacturing footprint with limited capital spend needed.

Speaker Change: As an example in our power transmission business within grid, we will double the capacity of the manufacturing output in this business with 75% of the expansion coming from core lean improvements driven by better asset and labor utilization.

Speaker Change: The remaining 25% of the capacity increase will come from site expansions.

Speaker Change: On cost, we announced a planned reduction in our offshore wind head count as part of our efforts to streamline our wind business to make it more efficient and to improve results. We are operating the wind segment as one global business with three main product lines. Two went onshore wind and one in offshore wind with increased.

Speaker Change: Visibility improved learnings across the teams and a better cost structure.

Speaker Change: We are also driving meaningful productivity with our suppliers and the large electrification projects that we have secured in backlog in the last 21 months.

Speaker Change: This progress continues to strengthen our confidence in our ability to deliver this growing backlog and electrification for our customers.

Speaker Change: While substantially accretive margins in this business going forward.

Speaker Change: Turning to the next slide for a look into our third quarter financial performance, we delivered a solid quarter with double digit orders with services up almost 30% and double digit revenue growth as well as significant margin expansion at power electrification and onshore win.

Speaker Change: That said our quarter could have been even stronger if not for the quality and execution challenges in offshore wind, which we are addressing and learning from to make us a stronger company.

Speaker Change: Going forward.

Speaker Change: We generated substantial free cash flow and increased our cash balance from $5 8 billion in <unk> to $7 4 billion in <unk> <unk>.

Speaker Change: During the quarter, we sold a 16% ownership stake in GE <unk> T&D, India part of the electrification segment at an attractive valuation that generated approximately $700 million of pre tax proceeds.

Speaker Change: This transaction demonstrates how we intend to run <unk> we.

Speaker Change: We will monetize assets across our portfolio when we see attractive opportunities to do so enabling us to invest more in our core businesses to simplify the company and return capital to our shareholders.

Speaker Change: We are reaffirming our full year 2024 guidance, we look forward to discussing our multiyear financial outlook as well as our capital allocation strategy at our Investor update in New York on December 10th.

Speaker Change: I am more confident today in the future of our business than ever and I will now turn the call over to Ken for more details on our third quarter performance.

Ken Parks: Thanks, Scott turning to slide six in the third quarter, we delivered solid results with double digit orders and revenue growth led by power and electrification.

Ken Parks: Margins expanded year over year across power electrification and onshore wind but were offset.

Ken Parks: Primarily due to additional contract losses of offshore wind.

Ken Parks: Importantly, we generated substantial free cash flow in the quarter, driven by strong working capital management, including improved linearity.

Ken Parks: Orders grew 17% driven by services, which increased 28% with double digit growth across all three segments.

Ken Parks: Equipment orders grew approximately 8% power in electrification equipment orders grew substantially partially offset by lower equipment orders at wind.

Ken Parks: Our backlog of $118 billion grew both year over year and sequentially and equipment margin and backlog remains healthy, reflecting our disciplined profitable growth priority.

Ken Parks: Revenue increased 10% in both equipment and services service revenue grew in all three segments, while continued momentum in electrification empower drove higher equipment revenue.

Ken Parks: In addition price remained positive across all three segments.

Ken Parks: Adjusted EBITDA continued to reflect higher more profitable volume price and productivity in the quarter.

Ken Parks: On an organic basis electrification realized nearly 700 basis points of margin expansion and power margins expanded more than 200 basis points.

Ken Parks: This margin strength was offset by wind primarily due to higher contract losses at offshore.

Ken Parks: We delivered nearly $1 billion of positive free cash flow improving $900 million year over year, primarily driven by stronger working capital management.

Ken Parks: Combined with our third quarter free cash flow. These proceeds increased our already solid cash balance to $7 4 billion.

Ken Parks: We're encouraged by our year to date financial performance was solid revenue growth led by services, which increased 9% year over year.

Ken Parks: Adjusted EBITDA margin expansion of over 200 basis points and more than $1 $1 billion of positive free cash flow generation a year over year improvement of over $2 billion.

Ken Parks: Our backlog growth in both services and equipment provides an excellent foundation for continued strong financial performance.

Ken Parks: Turning to power on slide seven.

Ken Parks: The segment delivered another strong quarter with continued double digit orders growth increasing revenue and further EBITDA margin expansion.

Ken Parks: Orders grew 34% led by higher equipment and services at gas power.

Ken Parks: Gas power equipment orders increased 40% as we booked nine <unk> units in the quarter, which exceeded the total number of <unk> booked in all of 2023.

We also booked 15 aero derivative units in the quarter almost doubling units ordered in the third quarter of last year.

Ken Parks: Power services orders were up 29% due to higher demand from outages and upgrades.

Ken Parks: The robust demand for gas equipment and services is driving further growth in our backlog.

Ken Parks: Based upon the backlog, we're funding capacity expansion from customer orders unrelated down payments to enable delivery of 70 to 80 heavy duty gas turbines annually starting in 2026.

Ken Parks: Revenue grew 13% driven by gas power <unk>.

Ken Parks: Services increased mainly from higher outage volume as well as price.

Ken Parks: Equipment revenue reflected growth in H, a gas turbine deliveries.

Ken Parks: EBITDA increased 45%, resulting in 240 basis points of margin expansion as higher volume productivity and price more than offset the impact of inflation.

Ken Parks: We're using lean to drive better operational execution, and productivity, which is improving equipment profitability.

Ken Parks: For example, the heavy duty gas turbine team enhanced standard work from underwriting to execution through a series of Chi's ons.

Ken Parks: This work has resulted in a 20% improvement in quality controls so far this year.

Ken Parks: Generation productivity and margin expansion.

Ken Parks: We continue to leverage lean to drive better financial results and better outcomes for our customers.

Ken Parks: We also expect continued productivity to offset inflation.

Ken Parks: At wind onshore delivered its most profitable results in 12 quarters.

Ken Parks: While we incurred additional offshore contract losses related to the impacts of recent blade events and expected project execution delays.

Ken Parks: Wind orders declined 19% due to lower onshore equipment orders outside of North America as we remain selective about the markets we serve.

Ken Parks: In offshore we remain focused on executing our existing challenged backlog.

Ken Parks: And onshore revenue grew due to higher North America equipment and services, despite lower volume outside of North America.

Ken Parks: EBITDA margins contracted 410 basis points versus the prior year.

Ken Parks: And onshore margins expanded from positive price and favorable equipment mix.

Ken Parks: Onshore delivered better results, despite higher services costs as we're deploying more crews and cranes to continue improving fleet availability.