Unnamed: 0 int64 | symbol string | quarter int64 | year int64 | date string | company_name string | company_id float64 | text string |
|---|---|---|---|---|---|---|---|
2,400 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | one of the priority suppliers in a joint Kaizen focused on addressing a key constraint. Our supply chain and engineering teams jointly leverage FLIGHT DECK to identify action plans to improve throughput significantly, aligned with our needs for second half deliveries. These actions resulted in a double-digit material input growth here so far in July versus the second quarter average. So a promising start. Overall, we are not yet at a desired state, but we are counting on these joint action plans and continuous improvement to achieve our second half ramp. So far in July, relative to April, we've seen overall higher engine output, stability and reduce variability. We are also deploying FLIGHT DECK aggressively in our own operations to improve safety, quality, delivery and cost and in that order. We've made solid progress in support of our airline customers. For example, our internal shop visit output improved 15% sequentially. And nowhere has this improvement been more visible than with LEAP. We've continued to decrease our turnaround time for LEAP shop visits to 86 days compared to roughly 100 days in 2023. This yielded a 9% increase in LEAP internal shop visits sequentially. We are also investing both organically and inorganically to meet the expected growth in shop visits as the LEAP fleet doubles by 2030. (Audit End) As we announced last week, over the next five years, we are planning to invest $1 billion in our MRO facilities around the world to increase capacity and introduce new technologies to further reduce turnaround time and costs. This includes a recent agreement to acquire dedicated LEAP test cell, unlocking a key constraint in our shop visit output. Overall, I am encouraged by our progress, but by no means satisfied. I'm confident that in the second half, we will increase engine delivery significantly and continue to grow shop visits in support of our customers. In the quarter, while I'll put weight on revenue, GE Aerospace delivered significant profit and free cash flow growth. Demand remains strong |
2,401 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | while I'll put weight on revenue, GE Aerospace delivered significant profit and free cash flow growth. Demand remains strong with orders up 18%. Revenue was up with growth in both segments. Services growth combined with price more than offset the lower engine shipments. Our operating profit was $1.9 billion, up 37% year-over-year from services growth, price and favorable mix. Operating margins expanded 560 basis points to 23.1%. Both operating profit and margin were up significantly at CES and DPT. Adjusted EPS was $1.20, up more than 60% year-over-year. This improvement was driven by increased operating profit combined with a lower tax rate. Free cash flow was $1.1 billion, up nearly 20%, driven by higher earnings, which more than offset inventory growth from the supply chain constraints I mentioned a moment ago. Halfway through the year, we are well positioned with earnings and free cash flow both up significantly year-over-year and free cash flow conversion of nearly 120%, giving us confidence to raise our full-year profit and cash guidance. This continued profit and free cash flow growth, combined with returning approximately $25 billion of available cash to shareholders, will continue to compound returns. Now over to Rahul for the details on our segment results and our guidance. |
2,402 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: Thank you, Larry, and good day, everyone. Starting with CES. Air traffic growth remained robust with departures up 9% year-to-date, and we continue to expect to be up high-single digits for the full-year. Passenger departures are expected to be up high-single digits as narrowbody remains solid with LEAP up nearly 30% in the second quarter, more than 3x that of overall narrowbody market. Dedicated freight departures are now expected to be up mid-single digits versus a prior expectation of low-single digits. Moving to CES' second quarter results. Sustained commercial momentum drove significant orders growth, up 38% this quarter. Both services and equipment were up more than 35% with strong spare parts demand. Revenue grew 7%, with services volume and price more than offsetting lower engine deliveries. Services grew 14% from mid-teens internal shop visit growth with strength in time and material visits and improved pricing. As expected, year-on-year shop visits grew more than spare parts. Equipment revenue declined 11% from 26% lower engine shipments. This was partially offset by customer mix and price. Supply chain constraints impacted shipments across both narrowbody and widebody with LEAP down 29%. Profit was $1.7 billion, up 21%, with margins expanding 320 basis points, driven by improved performance in services from higher volume, pricing and mix, lower engine shipments and improving LEAP services profitability also supported profit and margin expansion. This more than offset the impact of lower spare engine deliveries and increased investments that impacted equipment offer. Taking a step back, at CES, we delivered a strong first half with services revenue up 13% and overall segment profit up nearly 20%. Turning to DPT. The sector remains resilient with U.S. defense spending expected to grow low-single digits and international up mid-single digits. With FLIGHT DECK, we are focused on running this business better to deliver more predictably while continuing to invest in the future of Combat. We |
2,403 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | are focused on running this business better to deliver more predictably while continuing to invest in the future of Combat. We recently achieved a significant milestone delivering two 901 engines for the U.S. Army's Improved Turbine Engine Program, or ITEP, for integration and testing on the UH-60 Black Hawk. The T901 engine will ensure that war fighters have the performance, power and reliability necessary to maintain significant advantage on the battlefield for decades to come. Turning to our results. Orders were down 25%, primarily due to timing of orders in Defense & Systems. Defense book-to-bill was 0.9 in the quarter and 1.0 for the first half. Revenue grew 1%. Defense & Systems revenue was down 6%. Engine deliveries were down approximately 60% from supply chain challenges and a tough year-over-year compare when we delivered significantly higher units. This more than offset pricing and services growth. Propulsion & Additive Technologies grew 16% with growth across several businesses, from higher output and improved pricing. Profit was $344 million, up more than 70% year-over-year, with margins expanding 580 basis points from higher output, favorable product mix, productivity, price and the absence of program-related costs. Through the first half of the year, DPT delivered high single-digit revenue growth and significant operating profit improvement. The business remains well positioned to deliver growth over the medium term with a backlog of nearly $17 billion. Spending a moment on corporate. Adjusted cost and intercompany eliminations were roughly $130 million, down nearly 40% year-over-year. This $80 million improvement is from actions taken to streamline our cost structure, accelerate elimination of wind-down costs and favorable interest income that more than offset higher intercompany eliminations. As part of our continued efforts to simplify and focus on our core, this quarter, we completed the sale of Electric Insurance. We also reached an agreement to sell the licensing business and a reinsurance |
2,404 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | we completed the sale of Electric Insurance. We also reached an agreement to sell the licensing business and a reinsurance agreement to exit a block of our life and health insurance business. Combined, these actions will result in proceeds of roughly $700 million of investing cash flow. Looking ahead, given the strong results and the momentum in our business, we are raising our profit and cash guidance. We are reducing our revenue guidance given lower engine output expectations. Growth is now projected to be up high-single digits due to lower equipment revenue in CES. We now expect CES equipment revenue to be up high single to low-double digits from prior guidance of up high teens. This includes our updated full-year LEAP output expectations of flat to up 5% year-over-year. We continue to expect CES services to grow mid-teens, putting overall growth of CES at low-double digits to mid-teens. Consistent with prior guidance, we expect DPT growth of mid- to high-single digits. Operating profit is now expected to be in a range of $6.5 billion to $6.8 billion, up $250 million at the midpoint from prior guidance with margin expansion year-over-year. This improvement is primarily from CES, with operating profit now expected to be $6.3 billion to $6.5 billion from $6.1 billion to $6.4 billion previously, reflecting improved services performance and impact of lower equipment sales. DPT profit guidance is unchanged, and corporate costs and intercompany eliminations are now expected to be below $900 million from approximately $1 billion previously. Our expectations for interest expense and tax rate are unchanged, and we are raising our adjusted EPS guidance range to $3.95 to $4.20, up more than 50% year-over-year at the midpoint from higher profit growth. We are also raising our free cash flow guidance to $5.3 billion to $5.6 billion with above 100% conversion of net income given profit growth. While we still expect to reduce working capital for the year, the improvement is expected to be lower given the impact of supply |
2,405 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | we still expect to reduce working capital for the year, the improvement is expected to be lower given the impact of supply chain challenges to inventory. Overall, free cash flow is up approximately $700 million year-over-year at the midpoint. All in, GE Aerospace is positioned for significant revenue, profit and free cash flow growth with strong conversion in 2024. Larry, back to you. |
2,406 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Lawrence Culp: Rahul, thanks. As we take flight as GE Aerospace, we have sustained competitive advantages with a tremendous value proposition. With the industry's largest and growing fleets, our platforms are preferred by customers, across the narrowbody, widebody and defense sectors. We are aiming to provide industry-leading reliability and durability, prioritizing SQDC in that order. This means delivering unmatched time on wing and faster turnaround times for our customers. With our deep domain expertise and engineering talent, commitment to innovation and capacity to invest, we are poised to deliver breakthrough technologies in both commercial and defense. And with FLIGHT DECK as our foundation, we will deliver for customers and create exceptional value for shareholders. All in, we expect to grow operating profit to approximately $10 million in 2028 and generate free cash flow in excess of net income, creating compounding returns. We are making meaningful progress to advance our strategic priorities and service of our customers, employees and shareholders while keeping an eye towards the future and paving the way with innovation for a more sustainable flight. Now Blaire, let's go to questions.
Blaire Shoor: 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. Liz, can you please open the line?
Operator: (Audit Start) [Operator Instructions] Our first question comes from Robert Spingarn with Melius Research.
Robert Spingarn: Good afternoon.
Lawrence Culp: Good morning, Rob.
Rahul Ghai: Hey, Rob. |
2,407 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Robert Spingarn: Good afternoon.
Lawrence Culp: Good morning, Rob.
Rahul Ghai: Hey, Rob.
Robert Spingarn: I don't know who wants to take this one, but I wanted to ask you, just given the slower ramp on the narrowbody programs as well as the durability issues on the geared turbofan, we've seen airlines extending the lives of older aircraft and engines. Are we getting to the point where some of your CFM56 customers are talking about increasing the work scope of their third shop visits or maybe even doing a fourth shop visit?
Lawrence Culp: Well, Rob, I think that you really put your finger on one of the important underlying dynamics here, not only in the quarter, but as we think about the second half and even the next few years, the CFM56 is clearly still the workhorse of the industry, right? I mean if we look at utilization in a time when people thought we might begin to see a little bit of a fade, utilization year-over-year is consistent with the CFM56, delighted to see the LEAP up 4 points from a share perspective. So overall GE narrowbody powered propulsion is probably north of 70%. So I think the CFM is going to have a longer life in many fleets. And clearly, that's going to help us in the aftermarket, both from a volume and from a scope perspective. |
2,408 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: Rob, just to maybe add a little bit to what Larry said. Just given the dynamics that he mentioned and you mentioned earlier, we are expecting that the peak shop visit that we had previously projected in 2025. And then we start to see the sequential downtick in 2026, 2027 is what we said at Investor Day. Now as we sit here today, we do expect that shop visit is probably plateau at that 25 level for maybe another couple of years and then start declining. So definitely, we are seeing that the program – the platform is getting used and the shop visits will be higher for an extended period of time, and we will see third shop visits. And that we're seeing that even with some of the lessors coming out and commenting that the leases are getting extended beyond 14, 15 years, for another four, five years. So we will definitely see what you just said.
Operator: Our next question comes from Myles Walton with Wolfe Research.
Myles Walton: Hey, good morning. I apologize for the background noise. I'm actually here at the show. I was hoping, Larry or Rahul, you could comment on the 15 supplier sites and nine suppliers who seem to be the source of the bulk of the delays in parts. And where that was last year? And maybe just if you can bucket the types of products we're talking about at those 15 sites? Thanks. |
2,409 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Lawrence Culp: Myles, we can hear you loud and clear. We're not too far away, I suspect. I think if you go back to April, what we said was three quarters of the challenge with respect to deliveries was really rooted in these 15 supplier sites again with nine different companies. And rather than finger point, our mindset was we're going to problem solve. And we've gone in deeply again with FLIGHT DECK to really try to understand these constraints at the core. And the slide that you see in the deck, I think, is evidence that, that approach, that collaborative problem-solving rather than finger-pointing is really yielding results. We didn't expect that we would see a blanket impact immediately, but to be able to point to two-thirds of those sites showing strong, nearly doubling of their sequential outputs, inputs to us, I think really tells us something, right, that this approach is going to have impact. Unfortunately, we didn't have all of the impact that we would have liked across those 15 and we need everybody's ore in the water, if you will. We need everybody contributing, particularly with respect to new engine deliveries. But I think given what we have seen here in July, the way that we're working across different commodity classes shows that this approach is a better way to get more, not only here in the third quarter or the second half, but as we think about what is a multiyear ramp, right, the airframers that we talk to here at Farnborough certainly in the airlines as well. No one loves the fact that a new narrowbody order may not be delivered until 2029 or 2030. So it's all about the ramp. We've got years in front of us, thankfully, what a wonderful business challenge to have. But I really like the way our suppliers have met us here, embrace the tools. And we just need more time working in this fashion in order to have the full effect that we, our airframer and our airline customers all desire.
Operator: Our next question comes from Sheila Kahyaoglu with Jefferies. |
2,410 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Operator: Our next question comes from Sheila Kahyaoglu with Jefferies.
Sheila Kahyaoglu: Hi. Good morning, Larry and Rahul. How are you?
Lawrence Culp: Good. Thank you, Sheila.
Sheila Kahyaoglu: Maybe if I could ask about the CES margins, which were pretty awesome. So just looking at the LEAP deliveries in the quarter Q1 versus Q2, Q2 had 70 less LEAP deliveries in the quarter. So about a $10 million profit swing depending upon your loss assumption there. So CES margins of 27% in Q2 versus Q3 – versus Q1 of 2023 implies that the core service margin improved about 1,000 to 1,500 basis points depending on what you want to choose, so 25% to 35% plus. So what drove that despite shop visits being better than spares? And how do we think about the second half progression? |
2,411 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: Yes. No, Sheila, it was a good quarter for CES overall. OE volume was weak, as you pointed out. But the service revenue recovered really nicely, and the overall services growth was kind of in line with what we had projected for full-year. So it kind of came in exactly what we were thinking. And the drop-through from services was very strong. The shop visits skewed towards time and material work. And then the work scopes were heavier as well. And that helped both revenue and the profit on those shop visits. This along with pricing and customer mix helped the services profit growth. And in equipment, the engine shipments were lower, but within equipment, we also reduced our spare engine deliveries and higher investments. And that kind of offset the impact of the lower engine shipments. So overall, OE profit was more flattish than anything else. Now as we look at the trends in first half that gave us the confidence here to raise profit expectations for the full-year by, call it, $150 million to $200 million at the midpoint of the guide. Now what's driving that are two things. One, the services growth that we just mentioned, all the things that we are seeing. We projected that favorability to now flow through into the second half as well, both with work scopes and some of the customer mix being favorable. And then we lowered our OE revenue output but, call it, $600 million, $650 million at the midpoint of the guide, and that is helping profit. So that is where you see our CES profit up for the year, $150 million to $200 million. And the margins are for CES will be kind of at this level will be flattish for the year, and that is despite this being the first year of 9x shipments. So really, really happy with the way the CES business is coming along. (Audit End)
Operator: Our next question comes from the line of David Strauss with Barclays.
David Strauss: Thanks. Good morning, good afternoon.
Lawrence Culp: Good morning, David.
Rahul Ghai: Good morning. |
2,412 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | David Strauss: Thanks. Good morning, good afternoon.
Lawrence Culp: Good morning, David.
Rahul Ghai: Good morning.
David Strauss: Larry, can you just maybe dig into this – the lower LEAP shipments in the quarter? I know you're talking about things progressing with these nine suppliers, but at the same time, obviously, deliveries were way down in the quarter. I would imagine they were 100, 125 short of kind of your internal expectations. Can you kind of just square that things are getting better, but deliveries were a lot lower than expected? Thanks. |
2,413 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Lawrence Culp: David, I don't want to repeat what I said earlier. I do think one of the things to keep in mind is that there is a timing dynamic relative to when we receive various inputs and win in turn, we convert that into an engine that we can deliver be it to Airbus or to Boeing, right? So April was challenging in a number of ways. We didn't have the recovery in May that I think we had hoped. We might see underlying the quarter, though, sequentially was the net improvement that I mentioned, and that has only continued to build here in July. We haven't seen that somewhat typically slow start to a quarter that I was concerned about. So there's really nothing more I can say about why the new unit deliveries LEAP included were disappointing. It is what it is, where we're focused, as we think about the rest of the year, is how do we deliver more and how do we deliver more reliably. You'll note that we are adjusting our outlook for LEAP deliveries this year. On a full-year basis, we now think we will be somewhere between flat and up 5%, obviously lower than where we thought, but still showing modest growth. And more importantly, I think, given what we're doing with FLIGHT DECK in the supply base, the expectations we have, not only for more inputs, but in turn more outputs positions us to be at a healthier, more stable, higher exit rate come the end of the year. That's where we're focused. That's what we're sharing with our customers work to do, work I think this team knows how to do.
Operator: Our next question comes from the line of Seth Seifman with JPMorgan.
Seth Seifman: Hey. Thanks very much and good morning.
Rahul Ghai: Hey, Seth.
Lawrence Culp: Good morning, Seth. |
2,414 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Seth Seifman: Hey. Thanks very much and good morning.
Rahul Ghai: Hey, Seth.
Lawrence Culp: Good morning, Seth.
Seth Seifman: I wondered just to kind of follow-up on that last question and thinking about the progression on the delivery side. I think you need a pretty significant increase off of the Q2 equipment revenue level to get to the guide for the year. Is it going to be possible to make much progress in Q3? Should we expect a much more significant progress in Q4? And any other color that you can provide about the sequential dynamics across the company? |
2,415 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: Seth, let me start by just kind of maybe talking a little bit about how we think the back half will shape up and Larry can add if there's anything more on the delivery side. Listen, overall, as you look at our first half to second half growth. First half, we've delivered about 9% growth. And it's kind of in line with what we are projecting for the full-year. So our year-over-year growth is going to look similar between first half and second half. The year-over-year growth will be higher in the fourth quarter as both services and OE ramp. So we'll see that. Now in terms of profit and drop-through, the margins will be higher in 3Q versus 4Q since the 9x shipment impact is going to be primarily in the fourth quarter and corporate expenses will be higher in the fourth quarter as well. So we expect the third quarter margins to be kind of flattish year-over-year since we had a strong 3Q last year. So now if you look at kind of getting to how 3Q looks operationally, we've had a better start to 3Q. I think Larry mentioned that in his prepared remarks, the number of engines we've shipped here in the third quarter – in the first month of the third quarter in July are significantly higher than what we delivered in the first three weeks in April. So we are seeing sequential progress. And then if you look at the material inputs and as we compare the material inputs through the first three weeks in July versus the first three weeks in April, even for these suppliers that have been constraining output in the second quarter, we've seen a significant improvement. So that's going to allow us to drive the sequential improvement here in the third quarter. So I think we are off to a good start. More work to do here for sure. But July has been encouraging. Anything to add?
Lawrence Culp: You got it.
Operator: Our next question comes from the line of Gautam Khanna with Cowen.
Gautam Khanna: Yes. Hey, good morning. Thank you, guys.
Lawrence Culp: Good morning.
Gautam Khanna: And good results.
Rahul Ghai: Thanks, Gautam. |
2,416 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Lawrence Culp: Good morning.
Gautam Khanna: And good results.
Rahul Ghai: Thanks, Gautam.
Lawrence Culp: Thank you.
Gautam Khanna: So I was curious just to follow-up. Could you talk a little bit about how much inventory you're actually absorbing incrementally in the guidance? And maybe if you can speak to what your strategy is with the supply chain, given some folks are constrained, but some folks are probably ahead, given the lower LEAP projection relative to the start of the year? Like are you in the process of slowing down some folks. If you could just talk about that inventory dynamic and what you're absorbing incrementally in, any color you can provide? Thanks.
Lawrence Culp: Well, maybe we'll just take those in reverse order, and I'll start. I think that we really aren't trying to slowdown in a meaningful way. We're really trying. The way I think about it is we're trying to make sure that we're calibrated with respect to what we need from everybody because as you point out, different folks are in different places, as we think about the back half, as we think about 2025, as we think about 2026. I think part of why this has been so challenging and maybe even head scratchingly so for some, is that the industry was dialed down to almost zero in the pandemic. And what we don't want to do and the reason we do carry probably more inventory today, well, at year-end than we would like is we don't want to turn down the folks that are performing well unduly as we calibrate the ramp rates with those that will, in all likelihood, paces. So we've taken a view that in some instances, the inventory is in effect an investment with the supply base for ourselves to make sure that we've got a more predictable ramp. Remember, a lot of lean is rooted in flow, and flow really is around availability to the extent that we've got some folks that are performing. We don't want to, if you will, penalize them as we think about all that we're going to need from them, not only over the next six months, but frankly, over the coming years. |
2,417 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: And Gautam, you'll see that in our Q. I think you're spot on. We've seen significant inventory growth here in the first half of the year, close to $1.2 billion of inventory growth, which is, call it, $0.5 billion higher than what we grew in the first half of last year. So significant headwind here. Now with the improvement in output that we are projecting here for the second half of the year, we do think that while inventory will grow in the second half of the year, obviously, the pace of growth will slow down significantly here. And then it won't be as much of a headwind as it was last year in the second half of the year. So it has been a challenge. But again, as Larry said, that is something we've been trying to manage and manage it as appropriately as we can. But the good news is, despite the $1 billion pool of inventory growth in the first half of the year, we still had 120% conversion. So strong cash growth. Cash was up about $1 billion year-over-year in the first half. So we kind of absorbed it, we managed it and try to do better in the second half.
Operator: Our next question comes from the line of Scott Deuschle with Deutsche Bank.
Scott Deuschle: Hey. Good afternoon.
Rahul Ghai: Good afternoon.
Lawrence Culp: Hey, Scott.
Scott Deuschle: Hey, Larry. Not to beat a dead horse, but just following up on Myles' earlier question. I was wondering if you could offer some more detail on those, I guess, six or so remaining supplier sites that are the key bottlenecks at this point? Basically trying to understand if we're down to the investment casting and forging suppliers at this point or if it's a broader side of bottlenecks. And I appreciate you not wanting to pointing fingers, but just get a sense for whether there's something in common undergirding this remaining set of suppliers? Thanks. |
2,418 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Lawrence Culp: Got it. I think you've heard me pretty clearly. I appreciate that. I think the common denominator is, frankly, we all need to do better, and we need to be more collaborative and fully in problem solving mode. That's the headset that we have at GE Aerospace. I'm convinced while that takes different forms of different suppliers, that is where everyone of those nine suppliers across those 15 sites are. Some made more progress than others, but it's a long race, right? This was not a 90-day sprint, this is a marathon. And regardless of where folks are from a commodity category perspective, from a geography perspective, publicly held, privately held, it just doesn't matter, right? We've got to get the teams in. We've got to go deep. We've got to get into the granular operational detail to solve those problems, unlock those constraints and increased capacity raise yields much as I think we have been doing, picked up the pace a bit here, I think, in the second quarter and just need to do a lot more of that broadly in the second half.
Operator: Our next question comes from the line of Robert Stallard with Vertical Research.
Robert Stallard: Thanks so much. Good afternoon.
Rahul Ghai: Good afternoon, Robert.
Robert Stallard: Just following on from your earlier comments, Larry, and your confidence in GE's ability to deliver new engines in the second half. What's your confidence in the relative forecasts of the airframers and also their broader supply chain also catching up and delivering the parts? |
2,419 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Lawrence Culp: Well, I think we'll leave to our customers' commentary on everything they're managing. We're focused on what we can manage, right? And I think that the updated guide here, the color around LEAP specifically, is certainly that of high confidence. It wouldn't come out of our mouths. It wouldn't be in our prepared remarks otherwise. But again work to do. Work we’re I think we're encouraged by with respect to the second quarter impact, the start to July as well. But we've got a lot of work in front of us. We've got many days to do that work. That's where this team is focused completely. I can assure you.
Operator: Our next question comes from the line of Noah Poponak with Goldman Sachs.
Noah Poponak: Hey, good morning everyone.
Lawrence Culp: Good morning, Noah.
Noah Poponak: You show on Slide 17 that the CES services orders are growing much faster than revenue and the absolute dollar levels are much higher. I guess, eventually, overall aftermarket has to normalize as we fully recover air travel growth. What's behind that? How much of that is the LEAP? And does that suggest that CES services growth can actually accelerate next year versus this year? |
2,420 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: No, no, you're right. I mean, we had a good second quarter on orders. We had a good first half. I mean services orders were kind of, as you said, mid-30s for the second quarter, up 30% or so for the first half. Strong book-to-bill here in the first half of the year on top of a good book-to-bill we saw in 2023. So the momentum is definitely there on the services side. And as you look at the back half of the year, we are expecting the services growth to be a little bit higher in the second half than in the first half, right, both the shop visits and on spare parts on a year-over-year basis. So we delivered 9% internal shop visit growth in the first half of the year. And if you look at our low to mid-teens guidance on shop visits, that would imply that shop visits will be closer to high teens in the second half of the year on a year-over-year basis. So that's what we are projecting. But overall, it's mid-teens services growth, and that is consistent with what we think the future years will look like. I think that we had – when we look at our 2025 outlook, we were projecting continuous strong services growth. So it's good to see the strong orders growth, good to see, as Larry said earlier, LEAP gaining share on the overall air traffic departure side as well.
Operator: Our next question will come from the line of Gavin Parsons with UBS.
Gavin Parsons: Thanks. Good morning.
Lawrence Culp: Good morning.
Gavin Parsons: I mean, I guess to Rob's question earlier on extending life of older engines, clearly strong demand for both growth and new aircraft. But it's been a couple of airline profit warnings over the last week or two. So I just wanted to ask if you've had any early indications from your discussions with customers, whether it be relating to fleet planning, sensitivity to pricing or any other changes? Thanks. |
2,421 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Lawrence Culp: Gavin, as you would imagine, we follow all of that pretty closely, both, well, in the U.S., here in Europe globally. We really have not seen any effect on our business. And to Rahul's comments a moment ago, will remain watchful, but don't anticipate that. Again, I think to the earlier question, with services orders up 36% in CES in the second quarter, that's the way our customers are speaking to us. I look at where we are here in the third quarter just in terms of how much of the spares activity we have in backlog, I think it's in the 90% range at this point. So well positioned very early here in the quarter. And again, I would just also point to the utilization that we see on the CFM56, still strong. No real change this year. And the uptake, the upshot of the LEAP taking four points of market share. So GE-powered narrowbody activity remains strong. You just take the comments that were out here in Europe yesterday, it seemed to be more pricing oriented than anything else. So we'll keep a weather eye out. But right now, our challenge, our struggles to keep up with this exceptionally strong demand, both in the aftermarket and again with new make.
Operator: Our next question will come from the line of Jason Gursky with Citi.
Jason Gursky: Hey. Good morning, everybody.
Lawrence Culp: Good morning, Jason.
Jason Gursky: Hey. Larry, I was wondering if you could just spend a few more minutes on the rise and maybe provide an update on development milestones there and how the customer conversations are going, at this point, you mentioned that you're showcasing the engine there, at Farnborough, I'm just kind of curious what you think customer acceptance is going to – is shaping up to look like at this point? |
2,422 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Lawrence Culp: Jason, I would say that customer interest seems to only build with the passage of time. This is now the third air show in a row that I've attended with the RISE engine, the Open Fan engine front and center here. Obviously, when we talk about RISE, we're really talking about an umbrella of different technology programs, not only the Open Fan, but also our compact core work or hybrid electric activity and everything we're doing on SaaS. But with respect to Open Fan, I think what we've been sharing with people is that we had a very good first ingestion test with the Open Fan blade in the quarter, we are starting our second endurance campaign or test with the high-pressure turbine airfoils. And there's been a lot of work with respect to the hybrid electric elements of that architecture work that, as you may know, we do with NASA. I mentioned, I think, earlier the wind tunnel testing that we've done here in Europe in conjunction with Airbus. So there, I think, over 200 – I think maybe it's 250 component level tests, module level tests that we have behind us this is still a technology development effort. Make no mistake about it, we've got a long way to go. But what's interesting, particularly here in Europe, in virtually every airline CEO that I talk to starts the conversation with sustainability. And I'm very keen to get our views on SAF compatibility, but also ahead of SAF capacity being available at scale what are we going to do to enable the next generation of narrowbodies. And we go hard and fast to rise, talk about the progress that we're making with Open Fan. And I think that is story that continues to build enthusiasm and support because we know that the ultimate target that 20% step-up in propulsive efficiency and emissions reduction really is the future of flight.
Blaire Shoor: We have time for one last question.
Operator: This question will come from the line of Matt Akers with Wells Fargo.
Matthew Akers: Hi. Good morning, guys. Thanks for the question.
Lawrence Culp: Good morning, Matt. |
2,423 | GE | 2 | 2,024 | 2024-07-23 07:30:00 | General Electric Company | 177,031 | Matthew Akers: Hi. Good morning, guys. Thanks for the question.
Lawrence Culp: Good morning, Matt.
Matthew Akers: I wanted to ask, what are kind of your latest thoughts on LEAP kind of breakeven timing just given volumes are running a little bit lower than we thought and it sounds like you're deploying a lot of resources to work through some of the supplier issues. Just curious if the timing has shifted at all?
Rahul Ghai: Yes. Hello, Matt. Timing has not shifted. So we expected LEAP to be profitable here in 2024 and the program to be breakeven in 2025. And LEAP services, in fact, shaping a little bit better than what we originally thought as we started the year, and we mentioned that in our prepared remarks. So that's how the overall program is shaping up we're making the progress on durability that we were expecting. It will be LEAP’s tracking better than CFM56 at this stage of the life cycle we are expecting LEAP performance to be in line with CFM56 performance on the A320s by the end of the year. So that is obviously a huge milestone given all the improvements we've been driving, the HPT LEAP was the last thing that was – and we expect that to happen here in the fourth quarter. We've completed more than 3,500 tests from that, 3,500 hours of testing on that. So that's going really well. So all in, I think LEAP is progressing exactly the way we would have liked services like a little bit better program should break even next year.
Blaire Shoor: Larry, any final comments?
Lawrence Culp: Blaire, thank you. I think just to close, the GE Aerospace team is going to stay grounded in our responsibility that we share to live the purpose, to invent the future of flight to lift people up and bring them home safely. So we really appreciate your time today and, of course, your interest in GE Aerospace.
Operator: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect. |
2,424 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Operator: Good day, ladies and gentlemen, and welcome to the GE Aerospace First Quarter 2024 Earnings Conference Call. At this time all participants are in a listen-only mode. My name is Liz, and I will be your conference coordinator today. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Steve Winoker, Vice President of Investor Relations. Please proceed.
Steve Winoker: Thanks, Liz. Welcome to GE Aerospace's first quarter 2024 earnings call. I'm joined by Chairman and CEO, Larry Culp; and CFO, Rahul Ghai. Many of the statements we're making are forward-looking and based on our best view of the world and our businesses as we see them today. As described in our SEC filing and website, those elements may change as the world changes. With the spin-off of GE Vernova successfully completed earlier this month, GE Vernova will report its results separately on April 25. While included in our consolidated first quarter results, we're focusing today's commentary and Q&A primarily on GE Aerospace. Now over to Larry. |
2,425 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Larry Culp: Steve, thank you, and good morning everyone. Welcome to our first earnings call as GE Aerospace, now a pure-play global leader in propulsion, services and systems. We're wholly focused on our aerospace and defense customers, serving the 900,000 passengers in the air right now with our technology under wing. It's an incredible responsibility for our teams globally and why we take safety and quality so seriously. We'll come back to GE Aerospace in a moment. But before we do, we'll talk about GE on a consolidated basis, which is how we operated for the first few months of this year. Just three weeks ago on April the 2nd, we completed GE Vernova spin and launched GE Aerospace, ringing the bell at the New York Stock Exchange after the successful spin of GE HealthCare last year. It was a proud moment that we celebrated with our teams around the world. This marked a new beginning, following the completion of GE's multi-year transformation that strengthened our businesses both financially and operationally. Thanks to the GE team. We significantly improved our financial position, reducing debt by more than $100 billion since 2018 and enhanced our operational execution by embracing lean with a relentless focus on safety, quality, delivery and cost, in that order, to better serve our customers. Together, we built a strong foundation for our three independent companies that to date have increased shareholder value nearly fivefold. Now GE begins again, three industry leaders fit for purpose for the next century plus and ready to put their stamps on the world: GE HealthCare, GE Vernova and GE Aerospace, each carry forward GE's innovative spirit, customer focus and passion to build a world that works, fully focused on their respective missions to lead precision health, the energy transition and the future of flight. None of this would have been possible without the important work of our teams. I want to express again my sincere gratitude to our incredible people whose unmatched passion and talent have made this |
2,426 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | teams. I want to express again my sincere gratitude to our incredible people whose unmatched passion and talent have made this achievement possible. Thank you. If we turn to Slide 4, we had an exceptionally strong last quarter as GE. In the first quarter, orders were up substantially in both GE Aerospace and Power. Revenue was up 10% organically with all segments contributing to the growth and equipment and services were up across both GE Aerospace and GE Vernova. Adjusted operating profit was $1.5 billion, up more than $600 million, with 300 basis points of organic margin expansion. This was largely driven by pricing and volume, which more than offset investments and inflation. Adjusted EPS was $0.82, up more than 3x year-over-year. And free cash flow was $850 million, up more than 5x, or $700 million, driven by higher earnings and a continued reduction in working capital. In all a very strong performance for GE, reflecting real momentum at both GE Aerospace and GE Vernova. And now the day has come where we bring our full focus to GE Aerospace. Our commercial propulsion fleet is the industry's largest and youngest, thanks to our world-class engineering and services teams. And in defense, we're proud to be the rotorcraft and combat engine provider of choice, powering two thirds of these aircraft worldwide. A massive part of our business is aftermarket services, representing 70% of our $32 billion in revenue. Importantly, as we meet higher levels of demand today, services enable us to better understand how our technologies are performing, and we use that intelligence to help shape our future product road maps. Turning to our performance. GE Aerospace had a solid start to the year. In the first quarter, we delivered double-digit revenue and profit growth as well as margin expansion in both businesses, with free cash flow doubling year-over-year. Overall, we have great confidence in our forward trajectory. We're raising our full year operating profit guidance and see a path to our $10 billion operating profit |
2,427 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | forward trajectory. We're raising our full year operating profit guidance and see a path to our $10 billion operating profit target by 2028. Turning to Slide 6, as you heard from us last month at our Investor Day, we are keeping our strategy simple, focused on today, tomorrow and the future with safety and quality first. Enter FLIGHT DECK, our proprietary lean operating model to ensure focused execution as a public company. Fundamentally, it’s a systematic approach to running our businesses to deliver exceptional value as measured through the eyes of our customers and it's the best way we know to operationalize flight safety at GE Aerospace in combination with our safety and quality management systems. Starting with today, we're focused on service and readiness, keeping our customers’ fleet flying. We are experiencing a tremendous demand cycle for services as more people fly and fly more often. In the quarter, GE CFM departures were up low double digits, and we are revising our expectations upward for the year. The onus is on us to meet this demand, and with FLIGHT DECK, we are maintaining the highest standards of safety and quality with greater predictability and speed, easy to say, hard to do. A key priority in our services business is improving turnaround times to increase our shop visit output. We are making progress with LEAP, a significant driver of shop visit growth this year. For example, at our Malaysia site, our joint GE Aerospace and Safran team collaborated to produce average LEAP test sale hours by 30% per engine, and they are working toward a 50%-plus improvement by year-end. As a result, the team has closed 95% of a 100-engine gap in test capacity so far while optimizing LEAP baseline test time, eliminating interruptions and reducing network variation. Actions like these are improving our shop turnaround time, which for LEAP was down approximately or down to approximately 90 days this quarter, a 10% reduction versus our roughly 100-day average last year. While there is more work to do, we are |
2,428 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | 90 days this quarter, a 10% reduction versus our roughly 100-day average last year. While there is more work to do, we are focused on getting engines back in the hands of our customers faster without compromising safety or quality. For tomorrow, we remain focused on delivering on the ramp. This quarter, total engine deliveries improved up 9% year-over-year, including defense up over 50%. However, these deliveries were short of our objectives due largely to continued material availability challenges. Thus, we have intensified our efforts working with our suppliers to problem solve these issues. Here is where FLIGHT DECK is key. Currently, we can track about 80% of our largest delivery challenges back to 15 supplier sites. We're deploying more than 550 engineers and supply chain resources, up 25% from last year, working with them to improve quality and delivery performance. For example, we're problem-solving with one of our Tier 1 suppliers by going to Gemba at their most constrained supplier. We are shoulder to shoulder with them, leveraging FLIGHT DECK and working together to identify and break constraints such as labor shortfalls, manufacturing yield issues, identifying alternate material types for raw material shortages and improving flow and lead times. As a result, that constrained supply recently improved output by more than 25% and is no longer pacing deliveries. We also recently announced we're investing more than $650 million in both our manufacturing facilities and our supply chain this year, reflecting our commitment to strengthening quality and increasing production to better support our customers' long-term needs. At the same time, both airlines and our defense customers are expanding and modernizing their fleets and choosing to do so with us, adding to our $150 billion-plus backlog and continuing to build our installed base of engines and services. At the Singapore Airshow, Thai Airways committed to powering its new wide-body fleet of Boeing 787 aircraft with our GEnx-1B engines. The GEnx is now a |
2,429 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Thai Airways committed to powering its new wide-body fleet of Boeing 787 aircraft with our GEnx-1B engines. The GEnx is now a cornerstone of the airline's long-term plan to open new markets and meet surging demand while working to achieve its environmental goals. American Airlines secured 85 new Boeing 737 MAX Jets, which will be powered by our LEAP-1B. And easyJet made a commitment for more than 300 LEAP-1A engines for its fleet of 157 A320neo aircraft. In our Defense & Propulsion Technologies business, we won a new order for F414 engines to power additional KF-21 fighter jets for the Korean Air Force, continuing to build our international business. And for the future, we are advancing the technology building blocks that will define the future of flight with more than $2 billion of R&D spending this year. For example, we're continuing to make progress with testing in our CFM RISE program. We completed our first fan ingestion test with our full-scale RISE fan blade, and the results were extremely encouraging. On the defense side, in partnership with Sikorsky Innovations, our team is finalizing designs for a hybrid-electric power systems test bed with a 600-kilowatt electric motor. This will support Sikorsky's plan to build, test and fly a hybrid electric vertical takeoff and landing demonstrator with a tilt wing configuration. Altogether, we're running GE Aerospace with customer expectations front and center, while delivering breakthrough innovation that will further shape the future of flight. And FLIGHT DECK ensures we work as one team, utilizing one operating model, implement one strategy and ultimately yielding one culture. This will help us to lead the industry forward and advance our vision to be the company that defines flight for today, tomorrow and the future. Now let me hand it over to Rahul. |
2,430 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: Thank you, Larry, and good morning, everyone. Larry, I fully share your enthusiasm as we embark on the next chapter of our journey as a standalone company. We will cover GE Aerospace's results on a standalone basis, the same as a full year guide. Also, for simplification, our results will be prepared on a reported basis, and we are limiting non-GAAP free cash flow adjustments to spin-related matters. Overall, GE Aerospace delivered a solid start to the year with all headline metrics up double-digits. Demand remained resilient. Orders grew 34% with similar growth rates in both Commercial Engines & Services or CES, and Defense & Propulsion Technologies or DPT. Revenue was up 15% from pricing, spare parts volume and an increase in wide-body and defense engine deliveries. Operating profit was $1.5 billion, up 24% with margins up 140 basis points to 19.1%. The profit growth was driven primarily by price, growth in services volume and favorable mix. Profit and margins were up in both CES and DPT. Adjusted corporate costs and elimination, including prior GE corporate costs were $130 million, down more than 20% year-over-year. Post the GE Vernova spin-off, we expect to incur roughly $300 million for the remaining wind-down of GE corporate office and close to $250 million to set up standalone infrastructure for GE Aerospace. We will continue to adjust these items from earnings and cash. Free cash flow was $1.7 billion, doubling year-over-year with higher earnings and working capital improvements offsetting AD&A outflow. Specifically, working capital was a source largely from strong collections and progress payments, while inventory was a headwind. The strength of our operational and financial fundamentals gives us confidence to return 70% to 75% of our available cash to investors. Earlier this month, we initiated a quarterly dividend at $0.28, a 250% increase. And at our Investor Day, we announced a $15 billion share buyback, a testament to the strength of our balance sheet. Through a new capital return |
2,431 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Day, we announced a $15 billion share buyback, a testament to the strength of our balance sheet. Through a new capital return framework, we are well positioned to create significant shareholder value while we continue to invest in growth, innovation and focused M&A. Now turning to CES and DPT results. Starting with CES, a $24 billion business with 70% of revenue generated from services. As Larry mentioned, demand continues to be robust. For the year, we now expect departures to grow high single-digits. Total departures are off to a stronger start versus our prior expectation, growing 11% in the quarter with particular strength in China. We continue to expect departure growth to moderate throughout the year. We expect passenger traffic growth in high single-digit range for the year, a slight improvement. Narrow-body remains solid with increased CFM56 fleet utilization and significant LEAP growth. Further, we now expect freight demand to be up low single-digits versus a prior expectation of down mid single-digits. Heightened geopolitical conflicts have increased the need for air cargo and improved its relative economics. As a result, commercial momentum continues. CES orders were up 34% this quarter. Both services and equipment were up double-digits, largely driven by strong demand for LEAP and spare parts across our platforms. Overall, customer dynamics remain positive with strong order books from both airlines and airframers. On narrow-body platforms, we won more than 300 LEAP-1B engines and a multiyear services agreement from Akasa Air. And on widebody platforms, recent key wins included 90 GEnx engines for Thai Airways, 16 GE9X engines for Ethiopian Airlines and 10 GEnx engines for LATAM Group. This improving demand backdrop underscores our confidence in our annual guide and longer-term outlook. Now looking at CES' first quarter results. Revenue grew 16% with volume up low double-digits and the remainder driven primarily by higher price. Services growth of 12% was driven by pricing and strong spare part |
2,432 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | and the remainder driven primarily by higher price. Services growth of 12% was driven by pricing and strong spare part volume, which grew faster than internal shop visits that were up 3%, impacted by material inputs challenges. Equipment growth of 31% was driven by pricing and deliveries, which were up 2% with higher wide-body engine mix. LEAP shipments were roughly flat year-over-year given the supply chain challenges. As expected, spare engine shipments were down slightly. Profit was $1.4 billion, up 17% with margins expanding 10 basis points from pricing, spare part sales and mix. This more than offset higher inflation investments and a change in estimated profitability on long-term service agreements on a mature platform, which negatively impacted both services revenue and profit by roughly $200 million. At CES, we are pleased with the strong start to the year, delivering significant growth and profit improvement. Turning to DPT, which includes both Defense & Systems and propulsion and additive technologies. This is roughly a $9 billion business, where services make up approximately 55% of the revenue. Looking at the sector broadly, national defense budgets are growing with U.S. spending expected to grow low-single digits and international spending up mid-single digits. Our defense customers’ ask of us is clear, support their readiness while delivering more and more predictably. Turning to our first quarter results. Orders were up 34%, underscoring strong demand and the quality of our franchisees with defense book-to-bill of 1.1x. Revenue grew 18%. Defense unit deliveries grew by 45 engines on an easier compare. This combined with pricing and growth in classified programs, increased Defense & Systems revenue by 17%. Propulsion and Additive Technologies grew 19%, primarily from growth at Avio and Unison to support GEnx and LEAP. Profit was $250 million, up 26%, with margins expanding 80 basis points. Volume and pricing, net of inflation, more than offset investments and defense equipment mix. In all, improved |
2,433 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | 80 basis points. Volume and pricing, net of inflation, more than offset investments and defense equipment mix. In all, improved delivery and pricing drove strong revenue and profit growth this quarter. Given our solid start and constructive outlook for rest of the year, we are raising our full year profit and cash guidance, as outlined on Slide 11. We continue to project at least low-double digit revenue growth. In CES, we still expect revenue growth of mid to high teens. In services, we continue to expect mid-teens revenue growth with shop visit output growing faster than spare part sales. We are anticipating reduced LEAP output in the range of 10% to 15% growth, but continue to expect overall equipment revenue growth of high-teens from improving widebody mix. In DPT, we continue to expect mid to high single-digit revenue growth, primarily driven by equipment growth. Operating profit is now expected to be in a range of $6.2 billion to $6.6 billion, up from $6 billion to $6.5 billion previously. CES operating profit guidance is now expected to be in a range of $6.1 billion to $6.4 billion, up $100 million at the mid-point from favorable revenue dynamics. DPT profit guidance is unchanged. In corporate, we continue to expect cost and eliminations of about $1 billion, including $600 million of corporate expenses and roughly $400 million of eliminations. We now expect margins to expand roughly 50 basis points for the year versus flat previously. Now as a standalone company, we are initiating adjusted EPS in a range of $3.80 to $4.05, up more than 30% year-over-year. This includes first quarter adjusted EPS of approximately $0.92, up more than 40% year-on-year. And on free cash flow, we expect higher profit to flow through to cash, delivering more than $5 billion with conversion well above 100% of net income. Overall, we are encouraged by the strong start and the market environment that gives us confidence to raise our performance expectations for the year. Larry, back to you. |
2,434 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Larry Culp: Rahul, thanks. We’re clearly off to a solid start this year. If I close on Slide 12, this captures the essence of GE Aerospace and what we take forward with us. We have an excellent franchise, with sustained competitive advantages and a compelling value proposition. Our platforms are preferred by customers across narrow-body, widebody and defense. We’re aiming to provide industry-leading reliability and durability, prioritizing safety and quality first, then delivery, finally, cost. This means delivering unmatched time on wing and faster turnaround times for our customers. And we’re doing this across the industry’s largest and growing fleets. With our deep domain expertise and talent, commitment to innovation and capacity to invest, we’re poised to deliver the breakthrough technologies of the future. And with FLIGHT DECK as our foundation to bring this all together, our team is poised to realize our full potential and deliver exceptional value for our customers and our shareholders. I’ve never been more confident in our path ahead as GE Aerospace. Before I pass it back to Steve for Q&A, I’d like to take a moment to recognize him and his many contributions to GE. As you know by now, today is Steve’s last call with us after more than five years with the company or put another way, after 22 earnings calls. His dedication and partnership leading the Investor Relations team and serving as a trusted strategic adviser to me and the rest of the leadership team here has been invaluable throughout our transformation. On behalf of myself and the entire team, Steve, we thank you and wish you the best of luck in your next chapter. And I know Rahul would like to say a few words. |
2,435 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: Thanks, Larry. Steve, I want to personally thank you for your trusted advice and friendship, as I joined the company and as we executed the launches of GE Aerospace and GE Vernova. Your strategic and operating depth and your collaborative style have been instrumental in our transformation. And I know many on this calls and on the calls in the year past are appreciative of your responsiveness to their questions and the work you have done to simplify our financial disclosures while communicating our transformation with clarity and candor. We wish you all the best, and I’ll pass it back to you, in the spirit of making you work till the last day, for questions.
Steve Winoker: Larry, Rahul, thank you. I can’t go on just without at least one quick comment. It’s really been a true honor privilege and pleasure to serve with you and the rest of the teams at GE and GE Aerospace, a real master class for me. Thank you for always giving our investors and analysts a seat at the table. And I’m deeply grateful, proud of the teams and excited to see what comes next, and I know the futures of GE Aerospace, GE Healthcare and GE Vernova are bright indeed. So now before we open the line, I’d ask everyone in the queue to consider your fellow analysts again and ask one question so we can get to as many people as possible. And if we have extra time, we’ll circle back around. We ask that you please save any GE Vernova questions until their earnings call later this week again. Liz, can you please open the line?
Operator: [Operator Instructions] Our first question comes from the line of David Strauss with Barclays.
David Strauss: Great. Thanks. Good morning. Congrats, Steve.
Steve Winoker: Good morning.
David Strauss: One to Larry, Rahul, I wanted to ask about the updated LEAP delivery guidance now, 10% to 15%, down from 20% to 25%. Could you just dig into that a little bit what drove that? Is that constraint on the supplier side? Is that Boeing taking down their schedule? What exactly went into that? Thanks. |
2,436 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Larry Culp: Yes. I would say that, that clearly is a change here in the update this morning. Dave and company are going to talk about their rates tomorrow, I’m sure, on their earnings call. So we’ll leave that conversation with them. But rest assured, as we are with all of our customers, we’re well calibrated and aligned with respect to what we need to do, what they need from us as we look forward. But I think all of us, particularly at this moment, before we talk about rates, always come back to make sure we’re doing all that we can on the safety and quality fronts to ensure the best possible performance of our products, both as they’re being manufactured and then in turn, deployed in the field.
Operator: Our next question comes from Ron Epstein with Bank of America.
Ron Epstein: Hey, good morning.
Larry Culp: Good morning, Ron.
Ron Epstein: If you could talk a little bit about the orders. I mean, they’re up pretty spectacularly. Commercial Engines and Services up 78%. Defense, Propulsion and Technologies, up 72%. How much is that volume versus pricing?
Rahul Ghai: Ron, I would say most of that is volume. And pricing helped across the board, showed up in our revenue growth, margin expansion and in the orders outlook. But of a 34% increase in orders, I would say, most of that is coming from base volume growth with price contributing as well.
Operator: Our next question will come from the line of Sheila Kahyaoglu with Jefferies.
Sheila Kahyaoglu: Thank you. Good morning, Larry and Rahul and Steve.
Larry Culp: Good morning. |
2,437 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Sheila Kahyaoglu: Thank you. Good morning, Larry and Rahul and Steve.
Larry Culp: Good morning.
Sheila Kahyaoglu: Congratulations on elevating the Investor Relations game to the next level. So one for Larry or Rahul. Q1 margins, you guys have done a really great job, 19%, 150 bps above the prior guide – sorry, the midpoint. Rahul, maybe if you could revisit the 2 points of margin headwind you pointed us to last quarter. You mentioned LEAP is lower on that unit volume maybe about 40 bps of a tailwind versus your original guide, and then GE9X is probably consistent. So maybe if you could talk about the puts and takes along with the investment and timing to get us to that mid-17% range for the year?
Rahul Ghai: Okay. A couple of things in there, Sheila. Let me start with where you started, which was the 2 points of margin headwind that we had spoken to on the January call and on our Investor Day. So if you go back, we had expected 2 points of margin pressure from LEAP OE ramp, introduction of 9X and the step-up in R&D to support LEAP durability, introduction of 9X and develop the future of flight. Now with the pushout of LEAP volume, that headwind of the 2 points is marginally lower. But now if you step back and look at our overall guide for the year, listen, strong start to the year. We are pleased with where we are. And that has given us confidence to raise guidance for the full year and we expect the momentum to fully continue as we get into the second quarter. And overall, for first half, we are expecting about low double-digit revenue growth and about half of profit and free cash for the year, so far more linear year than we’ve done in the past. And overall, as you step back and look at the full year, profit up $150 million at the midpoint of our guide to a range of $6.2 billion to $6.6 billion, call it, mid-teens profit growth and more than 30% EPS growth. So it will be a good year if you deliver these numbers.
Operator: Our next question will come from Myles Walton with Wolfe Research. |
2,438 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Operator: Our next question will come from Myles Walton with Wolfe Research.
Myles Walton: Thanks. Good morning and good luck, Steve. If I adjust CES for the $200 million long-term contract adjustment, the CES margins are up like 250 basis points year-on-year despite this OE growth at 2x aftermarket growth. And I hear what you’re saying, a roll on the spares exceeding shop visits. But is there anything else under the surface that really explains that kind of counterintuitive margin expansion?
Rahul Ghai: No, listen, we had a good start in CES, $1.4 billion of profit, margin expansion despite the CMR, the service profit adjustment that we had to make in the quarter. And the big drivers here were pricing and customer mix, both on the equipment and on services. The mix shift from – mix shift in OE from LEAP to wide-body mix health and also in services, our spare part volume growth was higher than shop visit growth. So that mix shift in services was a contributor as well. So encouraging start, but as you go through the year, keep in mind that the equipment growth will ramp in the second half of the year. Equipment growth will also include 9X shipments and the services mix will skew back towards the shop visit growth, which we still expect to be maybe low to mid-teens for the year. So the second half profit growth on a year-over-year basis will be lower than the profit growth that we’ll see in the first half. But overall, listen, good start in CES, gives us confidence to raise the full year for CES in profit by about $100 million.
Operator: Our next question will come from Robert Stallard with Vertical Research.
Robert Stallard: Thanks so much. Good morning.
Larry Culp: Good morning.
Robert Stallard: Just following on from David’s question on the LEAP. Do these issues with ramping up the LEAP have positive implications for the CFM shop visit peak, which I think you’ve earlier estimated at 2025, and also the height of that peak potentially going forward? |
2,439 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Larry Culp: Well, I would say that we do see, I think, some knock-on positive effects in the aftermarket, both here in 2024, but also in some of our projections. I think it was just even last month at Investor Day, we talked about how retirements have been lower than we would have anticipated, thus that should yield 200 incremental shop visits in 2024 relative to what we anticipated. I think as long as capacity demand remains strong, I get a report every morning at 6 a.m. this morning showed our departures on a worldwide basis across all of our platforms up 7.8%, right? That’s part of what Rahul alluded to in our prepared remarks with respect to our more optimistic outlook with respect to passenger demand. We know the airlines are looking to generate as much lift as they possibly can. And to the extent that they're paced by deliveries, retirements will slow. And that installed base will be worked. Unfortunately, much of that came from our factories, and we're well positioned to support that. Does that push out the timing of perhaps peak CFM56? Yes. But it's early, right? And I don't think we're going to try today to take a quarter in that timeframe as to when that might occur. But it's a positive dynamic for us in the aftermarket, both with existing platforms and increasingly with the LEAP.
Operator: Our next question will come from Seth Seifman with JPMorgan.
Seth Seifman: Hey, thanks very much. Good morning everyone and congratulations, Steve, and thanks for all the help. Wanted to ask about shop visit growth and sort of the any challenges around the guidance for the year and the level of visibility that you have, sort of starting off with 3% and needing to get to kind of at least a mid-teens type of number for the year. And that being constrained by various challenges in supply chain and internal productivity and kind of how much confidence you have around that ramp and shop visit growth. |
2,440 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Larry Culp: Morning, Seth. Clearly, if we're going to talk about a guide as we are this morning, there's a high level of conviction. But I think you put your finger on what we are working on day-in, day-out here operationally. I think the financial numbers year-over-year are strong, but we know that we could have delivered. We could have executed on more shop visits in the first quarter had we had more reliable, more predictable material flow into our shops. That doesn't impact us as much in terms of spare parts, right? We don't need everything necessarily to move that product to customers, but we do in the case of a shop visit. Some of the FLIGHT DECK examples that I referenced, I think, give us real encouragement that the work we're doing with those top five or top 15 supplier sites is yielding progress. If you look at what we've seen just here in April. We've had a stronger start to the second quarter in terms of shop visit activity, completed outputs than we did in January. That's one comparison that we focus on, because we still are not as linear through the course of a quarter as we would like and making good use of the first two, three, four weeks of a quarter is critical for us to be able to deliver the year-over-year a little on the sequential growth that we would like to see that's embedded here, and most importantly, what our customers need from us given how active they're working in these assets. So the supply chain topic is still relevant. I suspect we'll be talking about it again for the foreseeable future, but I'm very encouraged by the progress that we're making. We just need to make a whole lot more.
Operator: Our next question will come from the line of Ken Herbert with RBC Capital Markets.
Ken Herbert: Hi good morning and congratulations, Steve.
Steve Winoker: Thanks, Ken. |
2,441 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Ken Herbert: Hi good morning and congratulations, Steve.
Steve Winoker: Thanks, Ken.
Ken Herbert: Larry or Rahul, you called out freight as a source of growth in the quarter. And I think you raised your full year outlook there from sort of previously down maybe low single to now up low single as we think about the impact in CES. Is that just in relation to what we've seen in the Middle East? Are you seeing other fundamental changes that give you more confidence there? And how do we think about that impact specifically as we think about the CES business and where you're seeing that flow through?
Larry Culp: Well, Ken, you're spot on. We're taking that again to level set everybody from an outlook I had is down mid-singles this year to now a positive low single-digit number. I think there is some influence here from what's happening in the Middle East. But I think we're just seeing a higher demand overall from an air cargo perspective. That will principally course through our wide-body exposure more so than the single aisles. And I don't think we're going to quantify it here, but that's certainly part of what is behind the improved service outlook and thus, the improved overall outlook for the rest of this year.
Rahul Ghai: And Ken, just to add to that, the direct impact is all depends on the number of shop visits that kind of move into the year. And I think that is – that always takes time. So there’s not a direct correlation here that may show up during the year. But overall, as we look over an extended period of time, as we look at 2024, 2025 combined, that will definitely be a positive driver. So we do expect the benefit from the higher freight departures to be in our financials. The question is probably not as much in 2024, more in 2025.
Operator: Our next question comes from the line of Gautam Khanna with TD Cowen.
Gautam Khanna: Hey, good morning, and congrats, Steve.
Steve Winoker: Thanks, Gautam.
Larry Culp: Good morning. |
2,442 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Gautam Khanna: Hey, good morning, and congrats, Steve.
Steve Winoker: Thanks, Gautam.
Larry Culp: Good morning.
Gautam Khanna: So you guys mentioned the lower LEAP production this year. I assume it’s a function of lower one BOE needs. But I was curious if you could just help us understand how we should think about the LEAP OE versus spares provisioning mix this year versus your prior expectations? And also wondering, given the lower rate on LEAP, are you going to be slowing down some of your LEAP suppliers? Or given the comments you made on the constraints within the supply chain, are you still pushing all these guys to continuously raise production to work as hard as they can?
Larry Culp: Let me take those in reverse order. I’ll speak to the supply chain, and Rahul can speak to where we are from a spares perspective. As I indicated, we’re calibrated with both of our major narrow-body airframers. As we do that, we are always in turn, calibrating with the supply base. And I think what we want to do in that work is make sure we’re not overly indexed, if you will, on the next quarter or two, so important. We want to make sure that we are preparing over the next several years to ramp; given the skylines that both of our major air framer customers enjoy today, right? A single-aisle slot is a scarce commodity. If we were out looking for one day, we might not find it until the next decade. That said, I think everybody, GE Aerospace included is primarily focused on making sure from a safety and a quality perspective that we are in no way compromising as we think about the wonderful gift we have in the form of these robust skylines. And that’s been at the heart of the GE work, the lean transformation for years now. Right here is talk about SQDC, safety and quality before delivering cost. It’s at the core of FLIGHT DECK and everything that we do. Rahul, spares? |
2,443 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: So on the spare engine, Gautam, overall, our spare engine ratio came down slightly in the first quarter on a year-over-year basis. And we do expect the full year spare engine ratio to be down as well versus 2023 kind of as we’ve communicated before. So really not a lot of change here from the change that we are making in the LEAP install engine output to translate into spare engines. So we still expect the spare engine ratio to be down year-over-year. And it will be – it will keep coming down over the next couple of years, I would say, on a gradual basis, Gautam, just given where LEAP spare engine has been in the past. So we expect a continued decline here in the spare engine ratio over the next couple of years gradually.
Operator: Our next question will come from the line of Scott Deuschle with Deutsche Bank.
Scott Deuschle: Hey, good morning.
Larry Culp: Good morning, Scott.
Rahul Ghai: Good morning, Scott.
Scott Deuschle: Hey Rahul, what does the 100% free cash flow conversion target for 2028 assumed with respect to the proportion of new engines being sold on CSAs in that timeframe, particularly on LEAP. Mainly, I’m just curious if you’re assuming LEAP mostly migrates to T&M by that time? Thanks.
Rahul Ghai: We do expect, Scott, that as we go through the year, as you go through the decade, I should say, that there will be more T&M contracts. Keep in mind, as Russell spoke at Investor Day, our 2030 target for LEAP is we do about 60% or so of the shop visits between us and Safran, and 40% are done externally. And of that 60%, there will be a mix between CSAs and T&M, but we are actively working to increase the T&M population. Our CBSA partners are standing up there helping us as well. So we would see a migration from CSAs to T&M contracts with about 60% of the shop visits done in-house here between Safran and GE Aerospace, and the remaining 40% being done by our channel partners.
Operator: Our next question will come from the line of Robert Spingarn with Melius Research. |
2,444 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Operator: Our next question will come from the line of Robert Spingarn with Melius Research.
Robert Spingarn: Good morning.
Larry Culp: Good morning.
Robert Spingarn: Congrats to the team for this new chapter and getting through the spins, and congrats to you, Steve. I wanted to ask you, Larry, about RISE, just to change the topic a little bit, and the potential here to deliver 20% improvement in fuel consumption versus current engines, both air framers appear interested in RISE. And if competing engine OEMs aren't providing an open fan architecture, could we find ourselves in a position where RISE is or CFM is the only engine provider for the next-gen narrow bodies? Or do you think that the need for competition changes that dynamic?
Larry Culp: Well, I think where we're focused today is really in two areas: one, making sure that we continue to advance the building blocks of the underlying technologies with that engine platform. And that's the work that we're spending a considerable amount of money on as part of that $2 billion R&D budget this year. I'd say the other area is making sure that we are closely aligned with the air framers, not only with respect to giving them visibility on the progress that we're making in our technology road map, but also working with them as they think about their own product road maps into the future so that there is that, well, that collaborative symbiotic dynamic. How all that plays out, time will tell. But as we have done over generations, we want to lead with innovation, we want to lead with technology, we want to be close to the air framers. I think everyone understands that we are going to need to see that type of 12%-plus step function in efficiency the next-gen platform. And as we have in the past, we intend to have GE Aerospace at the forefront.
Operator: Our next question will come from the line of Noah Poponak with Goldman Sachs.
Noah Poponak: Can you hear me?
Rahul Ghai: We can.
Larry Culp: Good morning, loud and clear. |
2,445 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Noah Poponak: Can you hear me?
Rahul Ghai: We can.
Larry Culp: Good morning, loud and clear.
Noah Poponak: Hi. Sorry it cut out on my end. But, good morning everyone and let me add my congratulations to completing the spin. And Steve thanks a lot for all your help getting up to speed.
Steve Winoker: Thank you.
Noah Poponak: Rahul, could you spend another minute on the free cash in the quarter and for the full year. If you're going to have any seasonality that looks like the company used to or the industry often does through the year, that number in the first quarter would imply a lot of upside to the five. I know you highlighted working capital, timing, it didn't look like that big of a number in the quarter on an absolute basis. Maybe it's just normally weaker. So yes, I guess how much bigger is the greater sign on the five now than it was before? Or did you just truly have pure timing in the quarter? |
2,446 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: Yes. So Noah, listen, good start on cash. Obviously, pleased. We doubled our free cash flow at Aerospace year-over-year. I would say, first, let's just talk about the quarter. Two main drivers here: one was earnings growth, and second was working capital improvement, which kind of offset the AD&A headwind. And working capital in the quarter was a source of cash versus a use of cash last year. So that was a good turnaround from what we delivered. And the improvements we saw in the quarter came from a days sales outstanding that were down six days year-over-year and then progress payments that we got from customers. Inventory continues to be a challenge, given all the material availability, and so our WIP levels are high and the trapped inventory that we have increased as well. So overall, earnings growth and working capital kind of drove the first quarter. And as you look at the full year, to your question on how – what's changed versus our prior guide. As I said in my prepared remarks, we do expect the incremental earnings growth that we are driving to flow through to cash. So we increased the midpoint of our op profit by, call it, $150 million, so call it $100 million kind of post taxes. That should – our free cash should be up by that. Again, on a full year basis, same drivers of free cash. Earnings growth and working capital improvement will continue to be the two big drivers. I think the things that we are watching here, Noah, as you go into the second half of the year is going to be the inventory reduction that we can drive. So that's the one that's – just given the supply chain challenges, given the demand dynamics with the air framers, so we continue to watch that inventory level and can we drive the same level of inventory reduction that we had initially planned that we've started the year. So again, good start. We expect about half the full year cash to be in the first half of the year. And then we do think that the earnings increase that we've driven should flow through our cash as well. |
2,447 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | first half of the year. And then we do think that the earnings increase that we've driven should flow through our cash as well. And greater than 100% conversion, well above 100% for the year. |
2,448 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Operator: Our next question will come from the line of Matt Akers with Wells Fargo.
Matt Akers: Yes. Hi, good morning guys.
Larry Culp: Good morning.
Matt Akers: Can you touch a little bit more on the $650 million investment, just the benefits you expect to get from that? And it looks like there's a lot of additive manufacturing in there. Can you just talk about that opportunity as well?
Larry Culp: Well, it really is a broad-based enhancement of our existing domestic footprint. I'm sure you've seen some of the line item details that were publicized locally across the country. I think more than anything, what we wanted to do was make sure we were supporting the fixed capital investments required to operationalize FLIGHT DECK to prepare for the capacity expansions and in some instances, be it additive or in some other technologies like CMCs that we were getting out ahead of demand to the fullest extent possible. Again, back to the reality of the skylines we talked about earlier. So that's what we'll do. That's kind of the announcement that we made here recently. I'm sure there will be follow-on announcements as we continue to invest. But the most important investments, I think we make are those that we make in our people. And much of what we do from a training development perspective, especially, vis-à-vis, FLIGHT DECK, is really geared toward making sure that the people who come in every day are able to do great work and put those fixed assets to their highest and best use.
Steve Winoker: Hey Liz, we have time for one last question.
Operator: This question will come from the line of Jason Gursky with Citi.
Jason Gursky: Yes. Same thing with Noah. Can you hear me all?
Rahul Ghai: We can.
Larry Culp: Very well. Good morning. |
2,449 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Jason Gursky: Yes. Same thing with Noah. Can you hear me all?
Rahul Ghai: We can.
Larry Culp: Very well. Good morning.
Jason Gursky: Yes. Okay. Does go quiet right before you're allowed to go on the line. Hey Steve, thanks for all of the help over the last year or so. And Blair, look forward to working with you. I'm sure you're listening in. Larry, a clarification point here and then just a really quick question. On the clarification side of things, I think in your commentary about volume on LEAP during your prepared remarks, you talked a little bit about the supply chain being a bit of a constraint there. So I want to make sure that that's the case in addition to whatever is going on with Boeing. And then on the question side of things, the – just kind of curious how the customer tone is these days on the narrow-body side when with those airlines where you're competing for slots against the Pratt & Whitney engine, whether the tone of those conversations is any more constructive for you in the competitive environment is looking more optimistic for you on head-to-head competition against the Pratt engine. Thanks.
Larry Culp: Yes. I would say, as I think both Rahul and I have commented, that we're well calibrated with Boeing on the LEAP-1B requirements. We'll leave it to Dave and Brian to speak to the details tomorrow. I think as we look forward, not only with that engine, but others, the supply chain challenge that we've touched on in prior calls continues to be relevant. With respect to new business, I think if you look at our win rates, particularly in narrow-body space over the last several years, we've been very encouraged by the sequential trend, the upticks that we have seen there. And we will continue to work hard to earn the business that ought to come our way. No change in that posture whatsoever.
Steve Winoker: So Larry, any final comments? |
2,450 | GE | 1 | 2,024 | 2024-04-23 07:30:00 | General Electric Company | 177,031 | Steve Winoker: So Larry, any final comments?
Larry Culp: Steve, thank you. And again, thanks for everything. Yes, let me just close. I hope you see here that the GE Aerospace team is moving forward with a greater focus to invent the future of flight, to lift people up and bring them home safely. And with FLIGHT DECK as our foundation, I'm confident we will realize our full potential in service of our customers, employees and shareholders. We appreciate your time today and your interest in GE Aerospace.
Operator: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect. |
2,451 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Operator: Good day, ladies and gentlemen, and welcome to the GE Aerospace First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. My name is Liz, and I will be your conference coordinator today. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Blaire Shoor from the GE Aerospace Investor Relations Team. Please proceed.
Blaire Shoor: Thanks, Liz. Welcome to GE Aerospace's first quarter 2025 earnings call. I'm joined by Chairman and CEO, Larry Culp; and CFO, Rahul Ghai. Many of the statements we're making are forward-looking and based on our best view of the world and our businesses as we see them today. As described in our SEC filings and website, those elements may change as the world changes. Additionally, Larry and Rahul, consistent with prior quarters, will speak to total company and corporate financial results and guidance today on a non-GAAP basis. Larry, over to you. |
2,452 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Larry Culp: Blaire, thanks, and good morning, everyone. While a lot has happened since January, we at GE Aerospace remain focused on our purpose. Our team works daily to invent the future of flight, lift people up, and bring them home safely. Those last four words ring true to us, given right now there are nearly a million people in the sky with our technology underwing. This is an incredible responsibility and one that we take very seriously. With safety at our core, we're advancing our vision to be the company that defines flight for today, tomorrow, and the future. Today, we're focused on service and readiness, keeping our customers' fleets flying. For tomorrow, we're delivering the ramp and executing our $170 billion-plus backlog. And for the future, we're advancing the technology that will define the future of flight across both commercial and defense with approximately $3 billion in annual R&D spending. FLIGHT DECK, our proprietary lean operating model, is how we translate that strategy into results. Launched a year ago, we're activating FLIGHT DECK to deliver for our customers and create long-term value for our shareholders. Turning to the first quarter. GE Aerospace delivered a strong start to the year. Orders were up 12% and revenue grew 11% with double-digit growth in both Services and Equipment. Profit was up $2.1 billion, up 38% with contributions from both segments, leading to margins of 23.8%. Overall, we delivered $1.49 of EPS, up 60% year-over-year and free cash flow was $1.4 billion. In Commercial Engines & Services or CES, we're servicing and growing the industry's most extensive commercial installed base. Services strength continued with orders up 31% and revenue up 17%, driving total operating profit growth of 35% year-over-year. In Defense & Propulsion Technologies or DPT, we're improving the delivery of our leading defense programs while developing mission-critical technology. The first quarter was solid with defense units growing 5% and profit increasing 16%. My thanks go out to all of our |
2,453 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | technology. The first quarter was solid with defense units growing 5% and profit increasing 16%. My thanks go out to all of our 53,000 employees around the world for delivering once again for our customers. Moving to Slide 5. GE Aerospace supports efforts to revitalize domestic manufacturing, and it's why we're investing $1 billion in U.S. manufacturing this year and hiring over 5,000 U.S. workers. At the same time, we support promoting free and fair trade that ensures the continued strength of the U.S. Aerospace industry. Our industry has a nearly $75 billion trade surplus, the highest trade balance of any sector, and exports more than $135 billion of products each year. This is possible because the global aviation sector has long operated without tariffs on civil aircraft engines and avionics. As the U.S. Administration engages in discussions with its trade partners, we'll continue to advocate for an approach that re-establishes zero-for-zero tariffs in the aviation sector and ensures a level playing field for the U.S. Aerospace industry. In the meantime, heightened tariffs will result in additional costs for us and our supply chain. We're leveraging available programs the administration is providing businesses, such as duty drawbacks along with other strategies to optimize our operations like expanding foreign trade zones. With those actions, we expect to reduce the tariff costs to roughly $500 million. We're taking additional actions to offset this remaining impact. This includes controlling costs while maintaining investments in key priorities and pricing actions. Departures remained favorable in the quarter, up 4% in line with our expectations. Given strong orders growth over the last several quarters, our commercial services backlog has grown out to over $140 billion. We've had a lag in converting those orders to revenue given the broader supply chain dynamics. Our spare parts delinquency continues to increase, unfortunately, up over 2x year-over-year. And our internal shop visit slots are full with a |
2,454 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | delinquency continues to increase, unfortunately, up over 2x year-over-year. And our internal shop visit slots are full with a healthy pipeline of engines, which have been removed but not yet inducted into our shops. So far, second-quarter departures are shaping up more or less in line with the first quarter. We're taking a more cautious approach and embedding a slower second half in our estimate, resulting in departures up low single digits for the full year. This includes a reduction in North American departures, which make up about 25% of the total. So to step back, while the broader environment is certainly uncertain, we are watching demand closely and we're operating from a position of strength. The actions we're taking combined with our robust backlog position us well to maintain our full year guidance. Shifting to Slide 6. We're focused on meeting the aftermarket and OE ramp to deliver for our customers. Demand continues to outpace supply, and we're utilizing FLIGHT DECK to tackle supply chain constraints head-on. In the first quarter, material input at our priority supplier sites was up 8% sequentially, which supported CES services revenue up 17% year-over-year. While defense units were a bright spot up 5%, total engine units were down 6% with LEAP down 13%. This was lighter than we expected from the slower start to material inputs in January and the lead times to complete new engines. We drove significant improvement in material input in February and March, giving us confidence that we will accelerate output in the second quarter. In partnership with our suppliers, we're leveraging FLIGHT DECK to deliver. Our priority suppliers continue to improve shipments against their committed targets, which increased both year-over-year and sequentially. In the first quarter, they delivered shipping more than 95% of their committed volumes. Our new technology and operations organization has hit the ground running. In March, we hosted a supplier symposium to share our near and long-term growth outlook across both |
2,455 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | has hit the ground running. In March, we hosted a supplier symposium to share our near and long-term growth outlook across both Services and OE. This helps our suppliers with required transparency and stability they need to make critical investments to support the ramp in a forum for discussing key challenges in doing so. Importantly, we know these joint efforts with our suppliers work. Last quarter, we shared that a joint Kaizen with one of those priority suppliers achieved a 50% increase in output in just one week. Now, at the end of the first quarter, the same team has delivered a 3x increase quarter-over-quarter. Additionally, LEAP remains an important growth area with the fleet expected to more than double by the end of the decade. We're continuing to expand capacity to support aftermarket demand. LEAP external shop visits grew over 60% in the first quarter, demonstrating the rapid growth in the third-party network. Also, all engine shipments to Airbus now incorporate a durability kit, including the upgraded HPT blade, which was approved back in December, and enables the LEAP-1A to achieve CFM56 levels of time on wing. We're also shipping those same blades to MRO shops to support upgrades of the existing fleet. The upgraded HPT blades incorporate a simpler design, requiring less capacity, improving process yields, and ultimately supporting higher output, critical additional benefits that will support achieving the 15% to 20% growth in LEAP deliveries we expect in 2025. We're already seeing improvement in our overall output through April and remain confident will accelerate in 2025 and longer-term. Turning to Slide 7. In the first quarter, we saw continued demand for both our Services and Products. At CES, we secured multiple agreements for our customers' growing fleets. We secured entry commitments from ANA for both our narrow-body and wide-body platforms. They selected LEAP and GEnx engines to power 13 A321neos, up to 22 737 MAXs, and 18 787-9 aircraft as part of their fleet upgrade. Additionally, we |
2,456 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | GEnx engines to power 13 A321neos, up to 22 737 MAXs, and 18 787-9 aircraft as part of their fleet upgrade. Additionally, we received a commitment from Malaysia Aviation Group for 60 CFM LEAP engines plus additional spares to power 30 Boeing 737 MAX aircraft. And in the wide-body segment, Korean Air announced an agreement for up to 30 Boeing 787-10s and 20 777-9s with our GEnx and GE9X engines underwing. In DPT, defense budgets are increasing globally, and customers are selecting our leading programs. We received a contract from the U.S. Air Force valued up to $5 billion that supports foreign military sales for the F110 engines, which power the F-15 and the F-16 aircraft operated by allies around the world. At the same time, we're strengthening our leadership position with continued investments. Starting with the RISE program, we recently completed a second endurance test campaign on the high-pressure turbine blades earlier in the development process than ever before. This demonstrated improved durability and fuel efficiency, key customer priorities for the future of flight. We also completed the initial ground runs for the T901 engine on a U.S. Army Black Hawk helicopter, a major milestone towards delivering a more powerful mission-ready aircraft and one that puts us on a path to a flight test. Finally, we successfully completed the Detailed Design Review for the XA102 adaptive cycle engine, working toward production of a full-scale model. This is a critical milestone supporting the U.S. Air Force's next-generation Adaptive Propulsion program. We were also pleased to see President Trump's awarded the F-47 and the administration's commitment to advance this important program. Our progress on advanced engines position us well with the administration's efforts to maintain military air superiority. So overall, we're focused on executing our sizable backlog while investing in the technology building blocks that will define the future of flight. Rahul, over to you. |
2,457 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: Thank you, Larry. Good morning, everyone. We started out 2025 with a strong first quarter marked by significant top-line and EPS growth. Orders were up 12% and revenue was up 11%, both led by Commercial services. Profit was $2.1 billion, up $600 million or 38%, driven by services volume, favorable mix, and price. Margin expanded 460 basis points to 23.8%. EPS of $1.49 was up 60% from profit growth, a favorable tax rate, and a lower share count from buyback actions. Free cash flow was $1.4 billion, down 14% and in line with our expectations. Working capital was a source, primarily from contract assets. Inventory increased to prepare for higher output and to tackle ongoing material availability challenges. This was partially offset by payables. Given our operational and financial strength, we continue to expect to deploy over $8 billion of cash to shareholders in 2025 through dividends and buybacks. We remain well-positioned to drive significant shareholder returns while continuing to invest in growth, innovation, and focused M&A. Looking closer at our businesses, starting with CES. In the quarter, orders were up 15% with Services up 31% while Equipment was down 13% given a tough compare. Revenue was up 14%, led by Services up 17%. Spare parts revenue was up more than 20% from higher volume and price. Internal shop visit revenue grew 11% from higher shop visit output, increased work scopes, and widebody mix. Equipment grew 9% with favorable customer mix and price offsetting unit deliveries that were down 9%. While still elevated, the spare engine ratio stepped down sequentially in line with expectations, and the LEAP life-of-program spare engine ratio remains in low double digits. Profit was $1.9 billion, up 35% from services volume, mix, and price. This more than offset inflation, increased R&D, and a year-over-year change in estimated profitability on long-term service agreements of approximately $100 million, primarily from the estimated impacts of tariffs. CES margins expanded 420 basis points to |
2,458 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | of approximately $100 million, primarily from the estimated impacts of tariffs. CES margins expanded 420 basis points to 27.5%. Overall, a very strong start for CES, largely driven by Services. Moving to DPT. Orders were flat year over year with Services up 14% while Equipment was down given the significant growth in first quarter of last year. Defense demand remains robust with a book-to-bill of 1.4x. Revenue grew 1%. Defense & Systems revenue was flat. Defense unit growth of 5% and price were offset by lower Services revenue. Propulsion & Additive Technologies grew 1%. Services volume and price offset lower internal shipments from our planned lower start in equipment sales. Profit was up 16%, driven by customer mix, productivity, and price. This was partially offset by self-funding of next-generation investments and inflation. Margins improved 160 basis points to 12.7%. Stepping back, DPT delivered a better-than-expected first quarter. Shifting to corporate cost, including eliminations, was about $70 million. This was down over 40% or approximately $55 million, mostly driven by expenses down roughly $40 million. Now moving to our guidance on Slide 11. First quarter exceeded expectations given stronger spare parts sales and services mix, which should continue. We have a robust backlog supporting our growth for several years, and we're taking actions to offset the impact from tariffs and to help us in navigating the uncertainty in the environment. Operationally, we are performing better than we expected on the January earnings call, but given the macroeconomic backdrop, we are holding our guidance across the board. Therefore, we continue to expect low double-digit revenue growth, profit of $7.8 billion to $8.2 billion, EPS of $5.10 to $5.45, and free cash flow of $6.3 billion to $6.8 billion. We're also maintaining our segment guidance. Unpacking the moving pieces. We have included the following in our guidance. Recognizing the dynamic background, we are preparing for tariffs that could persist through year end |
2,459 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | following in our guidance. Recognizing the dynamic background, we are preparing for tariffs that could persist through year end with 10% tariffs remaining in place and then reciprocal tariffs resuming after the 90-day pause. As Larry mentioned, we expect roughly $500 million of cost after our operational actions to minimize the tariff impact. From there, we expect to primarily mitigate this remaining $500 million through SG&A cost controls and price increases. We are maintaining our R&D spend for the year. Regarding the macro environment, given the ongoing uncertainty in the second half, we are adjusting some of our full-year expectations. We now expect low single-digit full-year departure growth, down from mid-single-digits in January. Given the tariffs in place, we reduced spare parts and spare engine sales for the year to that region. This demand is not foregone as the customers in China still have needs for services and spare engines, but they may be delayed. We are maintaining our full year spare parts guidance of low double-digit growth given the stronger start to the year and nearly 90% of spare parts in backlog for second quarter. We expect minimal impact on internal shop visit revenue which represents roughly 60% of our total services revenue given our backlog, pent-up demand, and limited risk to shop visits pushing out. Overall, we continue to expect low double-digit to mid-teens services growth. We have not factored in a slowdown in airframer delivery schedules, further tariff escalation, or a global recession into our guidance. We remain confident in our ability to deliver another year of strong results. With that, Larry, I'll turn it back. |
2,460 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Larry Culp: Rahul, thank you. We're encouraged by our strong start which combined with the actions we're taking puts us well on our way to achieving our full year guide. CES is on track for another year of significant growth, and we expect continued solid performance at DPT. GE Aerospace has sustained competitive advantages. We have a diversified fleet of preferred platforms across the narrow body, widebody, and defense sectors. At the core of everything we do is safety, quality, delivery, and cost, always in that order. Our services and technology offer industry-leading operational reliability, including greater efficiency, extended time on wing, and faster turnaround times. We serve the industry's largest fleet of 70,000 engines with unrivaled customer service and flight support. This keeps us close to our customers through decades-long life cycles, building meaningful relationships and making us the partner of choice. Our talented engineering teams continue to develop breakthrough innovations to support our existing fleet and advance next-generation technologies. And FLIGHT DECK supports us in delivering results and lasting value for our customers and shareholders. These differentiators, combined with our growing backlog, will not only help us manage the near term but enable us to deliver long-term value. With that, Blaire, let's go to questions.
Blaire Shoor: 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. Liz, can you please open the line?
Operator: [Operator Instructions] Our first question comes from Doug Harned with Bernstein.
Douglas Harned: Thank you. Good morning.
Larry Culp: Good morning, Doug. |
2,461 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Douglas Harned: Thank you. Good morning.
Larry Culp: Good morning, Doug.
Douglas Harned: Larry, you talked about tariffs at the outset, and tariffs in aviation really aren't good for anybody. And you said that you're advocating a return to that zero-tariff approach. But I wonder if you can comment some on the interactions that you've had or perhaps others in the industry have had with the administration in order to advocate for that point of view for aviation. And perhaps you can say, are there any thoughts you have about how this might play out over time, scenarios that may be possible given the uncertainty right now? |
2,462 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Larry Culp: Well, Doug, I think it's easier to speak to the first part of that than the second part. We have spoken to a number of people, senior people within the administration, including the President. We have been, I think, full-throated in our support of the administration's efforts to support American competitiveness and revitalize American manufacturing. We're well aligned in that regard. But it's easy to overlook the $75 billion trade surplus the sector enjoys, largely on the back of this tariff-free regime that we've had since 1979. So, all we have suggested as the administration works through a myriad of issues is that they can consider the position of strength that the country enjoys as a result of this tariff-free regime, and to consider reestablishing the same. There are a whole host of potential scenarios here, Doug, that we could take on operationally. I won't take your time to go through them. There is uncertainty. None of us, I think, know for sure how this plays out. But as Rahul walked through a moment ago, I think what we've basically assumed here is that what we're dealing with is what we'll see through the rest of the year. We've knocked down a good bit of the gross effects through the actions like duty drawbacks and foreign trade zones, but we're still staring at the better part of $0.5 billion of headwind in 2025. And in turn, that's where the cost control actions and the price actions that we've touched on here give us additional offset opportunities. But as we work those operationally, rest assured, we will continue to advocate in the best ways possible on behalf of the industry.
Operator: Our next question comes from Sheila Kahyaoglu with Jefferies.
Sheila Kahyaoglu: Good morning, Larry and Rahul. Thank you.
Larry Culp: Thank you, Sheila. |
2,463 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Sheila Kahyaoglu: Good morning, Larry and Rahul. Thank you.
Larry Culp: Thank you, Sheila.
Sheila Kahyaoglu: Maybe just sticking on the tariffs topic, if that's okay, very good start to both CES and DPT, total profit beat of $250 million, even baking in the $100 million of impact from tariffs in Q1, and you talked about a $500 million net impact. How do we think about the margin cadence in Q2 and the second half as we think about those tariffs coming in? |
2,464 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: Right. No, Sheila. So let me start, and Larry can jump in here. Listen, we've had a good start here. First quarter came in better than what we expected. And as we think about the year, and we mentioned this in January, we did expect a strong start to the year. We were aiming for a more linear year than we had last year, and given the OE ramp was a little bit back-end loaded, we have 9x shipments in the back half of the year and then lower spare engine ratio and including step up in corporate expenses. So we had expected that we'll have a stronger first half, and we've seen that in the first quarter. So -- and as we think about the second quarter, to your question, we do expect that momentum to continue into the second quarter. And what we are thinking for second quarter right now, given where we are in April, is that the GE Aerospace revenue growth to be better than what we delivered in first quarter and the profit dollars for the second quarter to be flat to sequentially up from first quarter and decently up on a year-over-year basis. So -- and this will be primarily driven by Services, and we expect similar revenue growth in Services as we did in the first quarter. As I said on the call, more than 90% of the spare parts are in the backlog, which is a similar position that we were in January for first quarter. And -- but this spare parts growth in the second quarter will be partially offset by a higher OE growth. Now as we think about the second half of the year, a lot more uncertainty given the volatility around the macro trends that we've spoken to, but we've embedded a certain amount of conservatism in our guide around departures that we spoke about and issues arising from the tariffs in China. So given that, we've reduced our expectations for spare engines and spare parts deliveries to China. Now some of them will get diverted to other customers, but will probably - still be an impact. And we've also factored in the potential slowdown in departures in North America. But overall, we are holding |
2,465 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | be an impact. And we've also factored in the potential slowdown in departures in North America. But overall, we are holding the low double-digit spare parts growth for the year, just given the start that we've had. So if you put all that together, we should still see year-over-year profit growth in the second half should be a -- still be a very, very good year for us. And overall, as we sit here today, Sheila, we feel better about the year even with the tariffs, even with the macroeconomic uncertainty that we did back in January. And knowing that where we are in the world right now, we'll be back together in June at the Paris Air Show, and we'll give you an update there. |
2,466 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Operator: Our next question comes from David Strauss with Barclays.
David Strauss: Thanks. Good morning, everyone.
Rahul Ghai: Good morning, Dave.
Larry Culp: Good morning, David.
David Strauss: So just wanted to dig in a little bit on that second half of the year assumption on departures. It looks like you're assuming basically no departure growth in the second half of the year. Is that right? And what is specifically in a flat departure scenario are you assuming for spares? And a follow-up there on shop visits. I know you talked about you've got a lot of backlog on shop visits, but how long would you think that departures can stay relatively flattish before you start to see an impact in terms of shop visits just from retirements picking up and so on. Thanks. |
2,467 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Larry Culp: David, you touched on a number of the variables there. Again, the mid-single-digit outlook for departures that we saw -- we talked about back in January, held up quite well in the first. And it looks like, just looking at the -- this morning's data, that continues to be the case. We often, I think, maybe over-indexed on the dynamics in the U.S. market, we know there's some cross-border traffic softening in Canada to the U.S., even Europe to the U.S. But broadly, when you look around the world, departures are holding up pretty well. Rahul had used the word conservatism earlier. I think we're just taking a conservative view with respect to the second half. U.S. departures could soften. We may see some adjustments elsewhere. We'll leave the detailed planning to the airlines. But again, I think we know that it will take some time for that to impact us, not that we will be immune for the calendar year, but when you look at past downturns, it has taken two, three, four quarters, sometimes longer for that departure slowdown to really impact our activities. And I think that's why we've highlighted the strength of the spare parts order book that we have in hand, again, 90% of the second quarter already in place. And with the engines that are off wing, either in our shops today, waiting to come into shop, or waiting to be delivered to us, that would take us well into the fall. So we don't like the fact that we've got such delinquencies in place. We want to serve our customers better, but it does, I think, support the underlying strength of the backlog and the delinquency as we look at our opportunities to execute and deliver through the rest of this calendar year. But again, there's uncertainty here. We're taking what we think is a cautious view, and we'll be watching it very, very closely.
Operator: Our next question comes from Gautam Khanna with TD Cowen.
Gautam Khanna: Good morning, guys.
Rahul Ghai: Good morning, Gautam.
Larry Culp: Good morning. |
2,468 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Gautam Khanna: Good morning, guys.
Rahul Ghai: Good morning, Gautam.
Larry Culp: Good morning.
Gautam Khanna: I was wondering if you could elaborate on your pricing strategy and how it might differ from normal years. Are you going to wait until kind of mid-year to enact spare price increases? What's different as you approach pricing to offset the tariffs this year?
Rahul Ghai: So Gautam, we are doing this -- there are two pieces to this. We'll do our typical kind of catalog price increases that we do late in the summer. Again, our thinking around that has not changed. We are still aiming for that mid to high single-digit price increases on our spare parts kind of later that summer, which is consistent with where we were in January. So that expectation has not changed. Now that typically translates into kind of mid-single digit at the overall services level for us after sharing with the revenue share partners and everything else. The pricing benefit on the remaining service contract is lower than what we see on the spare parts, as you know, but overall, I think that expectation has not changed. I think what we alluded to on the tariffs was a temporary surcharge for recovering the cost that we are feeling right now. Now we're trying to offset that with all the things that we spoke about, that Larry spoke about even a minute ago, to Doug's question. So we're trying to manage through that. And then we're going to take some SG&A cost control actions. And whatever is left, we'll share that in some way shape or form through a tariff surcharge. And hopefully, that doesn't -- it's not a permanent thing, and we can take those away as soon as the tariffs end. So that's our thinking right now.
Operator: Our next question comes from Ken Herbert with RBC Capital Markets.
Ken Herbert: Yes. Hi, good morning, everybody.
Larry Culp: Good morning, Ken. |
2,469 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Ken Herbert: Yes. Hi, good morning, everybody.
Larry Culp: Good morning, Ken.
Ken Herbert: Hi, Larry or Rahul, I just wanted to see, in the first quarter, really strong spare parts purchasing. Can you comment if you expected or saw any pre-buys there, specifically in China or elsewhere, perhaps maybe ahead of the tariffs or other factors? And as part of that over 20% growth, can you give any granularity on maybe wide-body versus narrow-body dynamics were specifically LEAP versus CFM56?
Rahul Ghai: So Ken, no pre-buys. I mean, typically, we don't see that in January. I think we kind of knew that. I think as we go back to the first quarter earnings call, we said 90% was in the backlog. And we are sitting in a similar situation here in the second quarter, as we've said a couple of times here. So no pre-buys. I think the departures were up 4%. They're hanging in there. We're up 4% in the first quarter. They're hanging in at that level, even in the second quarter, through April and through the forward schedules that we are seeing in May. So clearly, that trend is continuing. So no prebuy. Now in terms of the wide-body, narrow-body and on LEAP versus CFM56, obviously, LEAP is growing faster, right? We expected more than 30% shop visit growth on LEAP. And within that 30% shop visit growth, the external channel, we expect the external channel to -- this year to be about 15% of our total shop-visit revenue versus kind of 10% last year. So within that, you can see the external channel beginning to pick up, and that is driving the LEAP spare parts revenue growth. For CFM56, we continue to expect kind of mid-single-digit shop visit growth, which will drive the CFM56 revenue. So LEAP is clearly growing faster here than CFM56 on a percentage basis. And -- but narrow body, wide-body, I think that obviously, LEAP is driving a little bit higher percentage growth, but we're seeing good growth even on the widebody side, especially at GE90 and nx get into heavier work scopes. |
2,470 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Operator: Our next question comes from Myles Walton with Wolfe Research.
Myles Walton: Thanks. Good morning.
Larry Culp: Good morning, Myles.
Myles Walton: Rahul, maybe for you. The equipment gross margins in the quarter was another quarter of positive gross margins, I think, 12%, even better than the 8% you had last quarter despite a lower spare engine ratio. I'm just curious, is there anything structural going on with respect to the razor/razorblade model and making money maybe on new equipment? Or is there something else under the surface you could give some color to?
Rahul Ghai: Yes. So Myles, a couple of things there. One, the number that you have is obviously at the total GE Aerospace level versus CES, you should keep that at the back of your mind. And as you saw, defense, we did say, higher revenue growth. I mean the units were up 5% in defense. So that helps. The defense business does contribute to that margin profile because those units are profitable. Now within CES, our OE volume was a little bit lower. And as you saw, the spare engine ratio did come down sequentially, but was still elevated, and that will come -- keep coming down as the year progresses, but in line with what we had projected at the beginning of the year. So nothing abnormal there. And really no change, broadly speaking, to the razor/razorblade model. Now widebodies are obviously -- those platforms are now profitable at the - for the OE business. So that is helping here as well.
Operator: Our next question comes from Noah Poponak with Goldman Sachs.
Noah Poponak: Hi, good morning, everyone.
Larry Culp: Hi, Noah, good morning. |
2,471 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Noah Poponak: Hi, good morning, everyone.
Larry Culp: Hi, Noah, good morning.
Noah Poponak: A few questions on cash flow and its deployment. To what extent was the quarter ahead of the free cash plan? And if it was, how much of that is pure outperformance versus quarterly timing? And then I wanted to ask on the duty drawback, how long does it take to recover? And what does that mean for cash flow? And then in terms of its deployment, how does the current environment change your thinking in terms of being more aggressive or more conservative on capital deployment?
Larry Culp: Well, maybe we could take those in reverse order, Noah. I think as Rahul said in our prepared remarks, we continue to think that in '25, we'll have more than $8 billion of total returns between the dividend and the buyback at $7 billion. As you would appreciate, given the comments this morning and the conviction we have about the outlook, we'll be thoughtful, we'll be opportunistic. We do have -- I think it's close to $3 billion of remaining authorization on the buyback once that $7 billion that we planned for this year has been utilized. So we've got some latitude, some flexibility in that regard. With respect to the duty drawback, normal course, we would see that cycle somewhere, call it, four, five months, we'll see how things play out in this environment, but that would be a good planning assumption.
Rahul Ghai: And Noah, for the -- on the first quarter cash, we basically came in, in line. I think we'd expect to kind of at the levels we are at, working capital was positive in the quarter. You saw the inventory build that we had, it was down - a little bit year-over-year just given the timing of cash tax payments and some of the employee liabilities that we had. But again, nothing unusual or unexpected. And as we sit here for the second quarter, we do expect to have a strong second quarter on cash. It should be sequentially up from first quarter and we expect more than 100% conversion for the second quarter. |
2,472 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Operator: Our next question comes from Scott Deuschle with Deutsche Bank.
Scott Deuschle: Hi, good morning.
Larry Culp: Good morning, Scott.
Scott Deuschle: Rahul, in your last Investor Day deck, you had this chart that showed price increases on both LEAP OE and LTSA contracts. And I think it compared pricing from prior to 2018 to pricing in 2022 and 2023. And the step-up was something to the tune of 100%, I think. I guess, can you characterize how much of that 100% increase in price you see at this point in the income statement versus how much is still just sitting in the backlog and remaining to be seen? Thank you.
Rahul Ghai: Yes. No, Scott, you're right. So let me take that in two pieces. One, I think you're right, the shop visit prices are going up. And that's just basically the end of launch period pricing, right? I mean, obviously, as we were in the 2019 to 2021 time frame, it was a very different time period, we were in that initial stages of launch. As we've come out of that, the LEAP shop visit pricing has gone up since then. And -- but as we think about that price increase that we put in place, that takes a few years for it to show up in the P&L, as you mentioned, just given the timing of contract and obviously, with the delays in aircraft deliveries, that cycle is a little bit elongated. So while the price -- we are implementing price increases for the shop visits and the portfolio accretion is at a higher price, that has not really showed up in our P&L just yet. So that will take another couple of years before it starts showing up. And those contracts that we have signed recently will go into effect.
Operator: Our next question comes from Seth Seifman with JPMorgan.
Seth Seifman: Hi, thanks very much. Good morning.
Larry Culp: Good morning, Seth. |
2,473 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Seth Seifman: Hi, thanks very much. Good morning.
Larry Culp: Good morning, Seth.
Seth Seifman: Good morning. I wanted to -- a follow-up question on those on the drawbacks. I guess, how do you think about those working through the supply chain? Do suppliers -- do you have any -- do suppliers take care of all of that themselves? Does any of it go through you? And do you anticipate, given that some of them might not be as well-capitalized, some need to support them or perhaps on the flip side, given the amount of inventory that you have that there is maybe an opportunity to draw a little bit less right now? And basically, how the -- you're thinking about managing the supply chain in light of the tariffs. |
2,474 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Larry Culp: Well, Seth, I would say big picture, there's a tremendous amount of work going on with the new tech and ops organization to strengthen our overall working relationship with the supply base, large and small. I appreciate your comment about our current inventory levels. I don't think we're looking to make an adjustment here given some of the uncertainty because we know with the backlog that we are challenged to deliver both OE and aftermarket. For the rest of this decade, we're going to need that inventory, and we want to strengthen the supply base, and we're going to be looking to find ways in which we can do that amid this uncertainty. Clearly, for the suppliers with whom we've got firm fixed contracts, that additional burden will be borne by them. We'll work through where appropriate, right, adjustments in our overall arrangements with them. Clearly, we've got some bigger suppliers. We've got our partnership with Safran as well, where it's a different dynamic. So there are a lot of moving pieces here, and that's probably why we wanted to take the step that we did this morning to include a good bit of that as best we know it today into the forward guide, right? Again, to Doug's earlier question, we'll be advocating for a position which we believe to be very much aligned with the President's America-First Trade agenda. But to the extent that things don't change to the extent that recyclical tariffs kick in, in the back half, we want to make sure we're ready, hand in hand with our suppliers, large and small, in addition to taking the cost and price actions that we referenced. But it's a fluid situation. I think that's part of what I expect we'll be talking about through the course of the spring and summer here, not the least of which is at Paris, as we work our way through this, along with everybody else. |
2,475 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: So just to add maybe two points to what Larry said. One, we've learned a lot here, right, over the last month or so since we start working these -- the offsetting actions and understanding what programs are there that we can utilize to offset the gross impact. We are sharing that with our supply base and helping them understand what we know today, right? And I'm sure we'll learn from them as well as we prepare notes. So that's one. And the second, to your point about the duty drawbacks, I think, they can claim the duty drawbacks for everything that we export. But obviously, we will provide them the documentation and the support they need to avail of that program.
Operator: Our next question comes from Jason Gursky with Citi.
Jason Gursky: Hi, good morning, everybody.
Larry Culp: Good morning, Jason.
Jason Gursky: Good morning. Just wanted to ask a bigger picture question on the defense side of things. We've seen kind of a flurry of executive orders come out of the White House. And most recently, we got one related to the potential to rewrite Federal Acquisition Regulations. So I just wanted to get a sense from you all on what impact that might have on the industrial base. The administration seems to be pitching this as "kind of cutting red tape, and speeding up the acquisition process." But I'm wondering if that's always a good thing or are there going to be some unintended consequences that we should be on the lookout for as it looks -- as we look at this kind of rewrite of FAR. |
2,476 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Rahul Ghai: Yes. So Jason, I don't know if we know exactly what's on your mind, but there are a couple that I'm aware of or we are aware of here, and we could take it offline if that doesn't get to your question, which is -- I think there are 2 pieces. One is the FMS reform to support and deliver more efficiently and effectively our exports to our allies. And we, at GE Aerospace, are fortunate to be in a position where we have several highly capable programs that have a lot of international demand, whether it's Black Hawk, Apache, F-16, and soon to be exported, the F-15EX. So all these improvements allow us to get our products in the hands of our allies, and that's a really welcome improvement. So we appreciate everything that's done, and that will help support our growth, but also that of the broader industry. And then the other improvements and requirements in acquisition processes to define the requirements, so that elimination of any bureaucratic issues there also supports us. So -- and then a few other things that are about loss programs and all that. Now again, we don't have a ton of that in our portfolio. So that does not directly impact us. But again, I think holding the industry accountable for its performance is not a bad thing.
Operator: Our next question comes from Ron Epstein with Bank of America.
Ron Epstein: Hi, and good morning, guys. Maybe a little different angle on the tariff question. How are you all thinking about rare earths and some of the rare metals that you need either directly in what you do or what your suppliers need given some of the changing rules in China? I mean do you have it inventoried? Or do you have alternative ways to source it? How are you thinking about that? |
2,477 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Larry Culp: Ron, as you would imagine, we've been thinking about that a lot. And I'm sure everybody else in the space has. Between alternate sources and inventory positions, both our own and with our supplier partners, we don't currently see any real issues here. There are some things that we'll continue to work through. We'll see how this is resolved from a trade negotiation perspective. But that's not high on our worry list at the moment.
Operator: Our next question comes from Scott Mikus with Melius Research.
Scott Mikus: Good morning.
Larry Culp: Good morning, Scott.
Scott Mikus: Hi, Larry, I just wanted to ask a quick question on the pricing dynamics. So pricing in the aftermarket has been very healthy in the past several years, but now airlines are seeing softening demand for travel. The departures at least seem to be holding up for now. So I'm just wondering how are you thinking about balancing the price increases to offset tariffs and inflation while avoiding demand destruction so engines aren't seeing premature retirements?
Larry Culp: Scott, there's clearly a balancing act here. I think what we've always tried to do is really adhere to a handful of principles with respect to making sure we -- share in the value that we create are compensated for the risks that we take on, and obviously deliver adequate returns on the investments, the long-term, long-cycle investments that we make. I think Rahul talked about how we're going about some of the longer-term actions, both around some of the new programs like LEAP, how we're approaching the CLP, the spare parts pricing later this year, and the surcharges, the hopefully temporary surcharges vis-a-vis the tariffs. So all of that's in play. And again, we need to balance that out in the right way, given the competing priorities here. But I think we're optimistic that we can do that smartly, fairly constructively with our customers around the world and do so in a way that doesn't, as you say, disrupt demand? |
2,478 | GE | 1 | 2,025 | 2025-04-25 07:30:00 | General Electric Company | 177,031 | Blaire Shoor: Liz, I think we will wrap it up there. Larry, any final comments?
Larry Culp: Blaire, thank you. Just to close, our customers and the flying public are counting on us, we know that, and we're confident in our ability to deliver. The GE Aerospace team is up to that challenge. We continue to increase our deliveries of services and products, keeping safety and quality top of mind, while developing the technologies for the future. We appreciate your time today and your interest in GE Aerospace.
Operator: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect. |
2,479 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | Operator: Welcome, everyone. Thank you for standing by for the Alphabet Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jim Friedland, Senior Director of Investor Relations. Please go ahead.
Jim Friedland: Thank you. Good afternoon, everyone, and welcome to Alphabet's fourth quarter 2024 earnings conference call. With us today are Sundar Pichai; Philipp Schindler; and Anat Ashkenazi. Now I'll quickly cover the Safe Harbor. Some of the statements that we make today regarding our business, operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our Forms 10-K and 10-Q, including the risk factors. We undertake no obligation to update any forward-looking statement. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website located at abc.xyz/investor. Our comments will be on year-over-year comparisons unless we state otherwise. And now I'll turn the call over to Sundar. |
2,480 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | Sundar Pichai: Thanks, Jim, and hello, everyone. We delivered another strong quarter in Q4, driven by our leadership in AI and our unique full stack. We're making dramatic progress across compute, model capabilities, and in driving efficiencies. We're rapidly shipping product improvements, and seeing terrific momentum with consumer and developer usage. And we're pushing the next frontiers, from AI agents, reasoning and deep research, to state-of-the-art video, quantum computing and more. The company is in a great rhythm and cadence, building, testing, and launching products faster than ever before. This is translating into product usage, revenue growth, and results. In Search, AI overviews are now available in more than 100 countries. They continue to drive higher satisfaction in Search usage. Meanwhile, circle to search is now available on over 200 million android devices. In Cloud and YouTube, we said at the beginning of 2024 that we expected to exit the year at a combined annual revenue run rate of over $100 billion. We met that goal and ended the year at a run rate of $110 billion. We are set up well for continued growth. So today I'll provide an update on our AI progress and how it's improving our core consumer products. Then I'll touch on Cloud, YouTube, Platforms and Devices, and Waymo. Let's start with AI. Last quarter, I outlined the three areas of our differentiated full stack approach to AI innovation. Our leading AI infrastructure, our world-class research, including models and tooling, and our products and platforms that bring these innovations to people at scale. First, AI Infrastructure. Our sophisticated global network of cloud regions and data centers provides a powerful foundation for us and our customers, directly driving revenue. We have a unique advantage, because we develop every component of our technology stack, including hardware, compilers, models, and products. This approach allows us to drive efficiencies at every level, from training and serving, to developer productivity. In 2024, |
2,481 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | This approach allows us to drive efficiencies at every level, from training and serving, to developer productivity. In 2024, we broke ground on 11 new cloud regions and data center campuses in places like South Carolina, Indiana, Missouri, and around the world. We also announced plans for seven new subsea cable projects, strengthening global connectivity. Our leading infrastructure is also among the world's most efficient. Google data centers deliver nearly 4x more computing power per unit of electricity compared to just 5 years ago. These efficiencies, coupled with the scalability, cost and performance we offer, are why organizations increasingly choose Google cloud's platform. In fact, today, cloud customers consume more than 8x the compute capacity for training and inferencing compared to 18 months ago. We'll continue to invest in our cloud business to ensure we can address the increase in customer demand. Second, world class research including models. In December, we unveiled Gemini 2.0, our most capable AI model yet, built for the agentic era. We launched an experimental version of Gemini 2.0 flash, our workhorse model with low latency and enhanced performance. Flash has already rolled out to the Gemini app, and tomorrow we are making 2.0 flash generally available for developers and customers, along with other model updates. So stay tuned. Late last year, we also debuted our experimental Gemini 2.0 Flash Thinking Model. The progress-to-scale thinking has been super fast, and the reviews so far have been extremely positive. We are working on even better thinking models and look forward to sharing those with the developer community soon. Gemini 2.0 advances in multi modality and made of tool use enable us to build new agents that bring us closer to our vision of a universal assistant. One early example is Deep Research. It uses agentic capabilities to explore complex topics on your behalf, and give key findings, along with sources. It launched in Gemini Advanced in December, and is rolling out to android |
2,482 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | behalf, and give key findings, along with sources. It launched in Gemini Advanced in December, and is rolling out to android users all over the world. We are seeing great product momentum with our consumer Gemini app, which debuted on IOS last November. And we have opened up trusted tester access to a handful of research prototypes, including Project Mariner, which can understand and reason across information on a browser screen to complete tasks and Project Astra. We expect to bring features from both to the Gemini app later this year. We're also excited by the progress of our video and image generation models. Veo 2, our state-of-the-art video generation model, and Imagen 3, our highest quality text-to-image model. These generative media models, as well as Gemini, consistently top industry leader boards and score top marks across industry benchmarks. That's why more than 4.4 million developers are using our Gemini models today, double the number from just 6 months ago. And we continue to drive research breakthroughs in quantum computing. At the end of last year, we announced Willow, our new state-of-the-art quantum computing chip that can reduce errors exponentially as we scale up using more qubits. Willow is an important step in our journey to build a useful quantum computer with practical applications. This technology holds so much promise, which is why there was real excitement around this breakthrough. Third, our Products and Platforms put AI into the hands of billions of people around the world. We have seven Products and Platforms with over 2 billion users and all are using Gemini. That includes Search, where Gemini is powering our AI overviews. People use Search more with AI overviews and usage growth increases over time as people learn that they can ask new types of questions. This behavior is even more pronounced with younger users who really appreciate the speed and efficiency of this new format. We also are pleased to see how Circle to Search is driving additional Search use and opening up even more |
2,483 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | of this new format. We also are pleased to see how Circle to Search is driving additional Search use and opening up even more types of questions. This feature is also popular among younger users. Those who have tried Circle to Search before now use it to start more than 10% of their searches. As AI continues to expand the universe of queries that people can ask, 2025 is going to be one of the biggest years for Search innovation yet. Now, let me turn to key highlights from the quarter across Cloud, YouTube, Platforms and Devices, and Waymo. First, Google Cloud. Our AI-powered cloud offerings enabled us to win customers such as Mercedes-Benz, Mercado Libre and Servier. In 2024, the number of first-time commitments more than doubled, compared to 2023. We also deepened customer relationships. Last year, we closed several strategic deals over $1 billion, and the number of deals over $250 million doubled from the prior year. Our partners are further accelerating our growth, with customers purchasing billions of dollars of solutions through our Cloud marketplace. We continue to see strong growth across our broad portfolio of AI-powered Cloud solutions. It begins with our AI Hypercomputer, which delivers leading performance and cost, across both GPUs and TPUs. These advantages help Citadel with modeling markets and training, and enabled Wayfair to modernize its platform, improving performance and scalability by nearly 25%. In Q4, we saw strong uptake of Trillium, our sixth-generation TPU, which delivers 4x better training performance and 3x greater inference throughput compared to the previous generation. We also continue our strong relationship with NVIDIA. We recently delivered their H200-based platforms to customers and just last week, we were the first to announce a customer running on the highly-anticipated Blackwell platform. Our AI developer platform, Vertex AI, saw a 5x increase in customers year-over-year, with brands like Mondelez International and WPP building new applications and benefitting from our 200+ |
2,484 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | year-over-year, with brands like Mondelez International and WPP building new applications and benefitting from our 200+ foundation models. Vertex usage increased 20x during 2024, with particularly strong developer adoption of Gemini Flash, Gemini 2.0, Imagen 3, and most recently, Veo. We are also seeing strong growth in our AI-powered databases, data analytics, and cybersecurity platforms. Customers including Radisson Hotels are now using Gemini to Search and analyze multi-modal data from across multiple Clouds. Our AI-powered Threat Intelligence and Security Operations products help customers, including Vodafone and AstraZeneca, identify, protect and defend against threats. Our growing portfolio of AI applications is also seeing strong customer adoption. In Q4, we introduced Google Agentspace, which helps enterprises synthesize data with Google-quality Search, create Gemini-powered agents, and automate transactions for employees. In addition, we recently gave all Google Workspace Business and Enterprise customers access to all of our powerful Gemini AI capabilities to help boost their productivity. Moving to YouTube. Nielsen data shows YouTube continues to be number one in streaming watchtime in the U.S., with our share of streaming now at a record high. On election day alone, over 45 million viewers across the U.S. watched election-related content on YouTube. Our early investment in podcasts is paying off. We integrated podcasts into the core YouTube experience, particularly with video. We are now the most frequently used service for consuming podcasts in the U.S., according to a recent Edison report. This success reflects our long-term approach of investing in emerging trends, from mobile to the living room. We now have over 250,000 creators in the YouTube Shopping affiliate program in the U.S. and Korea alone. We expanded YouTube Shopping at the end of last year to three additional countries, allowing even more creators to share their favorite products with fans and grow their businesses. Philipp will talk |
2,485 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | countries, allowing even more creators to share their favorite products with fans and grow their businesses. Philipp will talk more about YouTube performance later in the call. Next, Platforms and Devices. Google One's performance has been outstanding, and is one of our fastest growing subscription products in terms of subscribers and revenue growth. Last month, we announced the first beta of Android 16, plus new Android updates, including a deeper Gemini integration coming to the new Samsung Galaxy S25 series. We also recently announced Android XR, the first Android platform built for the Gemini era. Created with Samsung and Qualcomm, Android XR is designed to power an ecosystem of next-generation extended reality devices, like headsets and glasses. Finally, a few words on Waymo which made tremendous progress last year, safely serving more than 4 million passenger trips. It is now averaging over 150,000 trips each week, and growing. Looking ahead, Waymo will be expanding its network and operations partnerships to open up new markets, including Austin and Atlanta this year and Miami next year. And in the coming weeks, Waymo One vehicles will arrive in Tokyo for their first international road trip. We're also developing the sixth-generation Waymo Driver, which will significantly lower hardware costs. I want to thank our employees around the world for another great quarter. 2025 is going to be exciting and we’re all ready for it. Philipp, I will hand it over to you. |
2,486 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | Philipp Schindler: Thanks, Sundar, and hello, everyone. I will quickly cover performance for the quarter, then frame the rest of my remarks around the progress we are delivering across Search, Ads, YouTube and Partnerships, highlighting the impact AI is having on our business and our customers. Google Services revenues were $84 billion for the quarter, up 10%, driven primarily by 11% year-on-year growth in advertising revenues. Strong growth in Search and YouTube advertising was partially offset by year-over-year decline in network revenues. In terms of vertical performance, the 13% increase in Search and other revenues was led by financial services followed by retail. The 14% growth in YouTube advertising revenues was driven by strong spend on U.S. election advertising, with combined spend from both parties almost doubling from what we saw in the 2020 elections. Now, in Q4, we saw continued strong growth in revenues from Search. We had lots of exciting updates in December, and we're rapidly integrating our AI innovation into our consumer experiences. We've already started testing Gemini 2.0 in AI overviews and plan to roll it out more broadly later in the year. In Search, we're seeing people increasingly ask entirely new questions using their voice, camera, or in ways that were not possible before, like with Circle to Search. We're making these benefits available to more consumers. Google is already present in over half of journeys where a new brand, product, or retailer are discovered. By offering new ways for people to Search, we're expanding commercial opportunities for our advertisers. Shoppers can now take a photo of a product and, using lens, quickly find information about the product, reviews, similar products, and where they can get it for a great price. Lens is used for over 20 billion visual search queries every month, and the majority of these searches are incremental. Retail was particularly strong this holiday season, especially on Black Friday and Cyber Monday, which each generated over $1 billion |
2,487 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | was particularly strong this holiday season, especially on Black Friday and Cyber Monday, which each generated over $1 billion in ad revenue. Interestingly, despite the U.S. holiday shopping season being the shortest since 2019, retail sales began much earlier, in October, causing the season to extend longer than anticipated. People shop more than a billion times a day across Google. Last quarter, we introduced a reinvented Google shopping experience, rebuilt from the ground up with AI. This December saw roughly 13% more daily active users on Google shopping in the U.S. compared to the same period in 2023. Closing out on Search with travel, and sharing another interesting trend where we saw spend expand to travel Tuesday. This contributed to 20% year-on-year revenue growth for travel advertisers across Cyber Monday and Travel Tuesday. Moving to Ads. We continue investing in AI capabilities across media buying, creative and measurement. As I said before, we believe that AI will revolutionize every part of the marketing value chain, and over the past quarter, we've seen how our customers are increasingly focusing on optimizing their use of AI. As an example, Petco used DemandGen campaigns across targeting, creative generation, and bidding to find new pet parent audiences across YouTube. They achieved a 275% higher return on ad spend and a 74% higher click through rate than their social benchmarks. On media buying, we made YouTube select creator takeovers generally available in the U.S. and will be expanding to more markets this year. Creators know their audience the best and creator takeovers help businesses connect with consumers through authentic and relevant content. Looking at Creative, we introduced new controls and made reporting easier in PMAX, helping customers better understand and reinvest into their best performing assets. Using asset generation in PMAX. Event Ticket Center achieved a 5x increase in production of creative assets, saving time and effort. They also increased convergence by 300% compared |
2,488 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | a 5x increase in production of creative assets, saving time and effort. They also increased convergence by 300% compared to the previous period when they used manual assets. And finally, Measurement. Last week, we made Meridian, our marketing mix model, generally available for customers, helping more business reinvest into creative and media buying strategies that they know work. Based on a Nielsen meta-analysis of marketing mix models, on average, Google AI-powered video campaigns on YouTube deliver 17% higher return on advertising spend than manual campaigns. Turning to YouTube. We saw robust revenue growth backed by continued growth and watch time across ad supported and premium experiences. Our focus here remains on building a streaming platform that enables creators to thrive and unlock the full potential of AI. Expanding on our state-of-the-art video generation model, we announced Veo 2, which creates incredibly high quality video in a wide range of subjects and styles. It's been inspiring to see how people are experimenting with it. We'll make it available to creators on YouTube in the coming months. We continue to invest in helping YouTube creators work with brands. All advertisers globally can now promote YouTube creator videos and ad campaigns across all AI-powered campaign types in Google Ads. And creators can tag partners in their brand videos. Sephora used DemandGen's Shorts-Only channel to boost traffic and brand searches for the Holiday Gift Guide campaign and leverage creator collaborations to find the best gift. This drove an 82% relative uplift in searches for Sephora Holiday. Shorts continues its ascent and is closing the gap with long form. In 2024, the monetization rate of Shorts relative to in-stream viewing increased by more than 30 percentage points in the U.S., and we expect to make additional progress in 2025. We're making it easier for advertisers to benefit from Shorts on all screens. We're particularly excited by its success on connected TV, which now makes up 15% of shorts viewing |
2,489 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | from Shorts on all screens. We're particularly excited by its success on connected TV, which now makes up 15% of shorts viewing in the U.S. Using a combination of ad formats, Louis Vuitton reached their overall objectives on both long-form and short-form content. Their shorts exceeded luxury goods benchmark for average view duration by 89% for equivalent video lengths, while their long-form content exceeded the benchmark by over 15%, with strong engagement from Gen Z and Millennials. Looking into the living room, we continue to be number one in streaming watch time in the U.S for nearly two years, according to Nielsen, and our share of streaming is at a record high. Viewers globally streamed over 1 billion hours of YouTube content daily on their TVs in 2024. YouTube makes multi-year investments to tap into shifting consumer behavior. The current surge in living room viewership directly reflects years of work to build the right products and partnerships. Creators are now prioritizing high-quality viewing experiences that truly shine on TV screens, inspiring even more viewers to tune in. In fact, the number of creators making majority of revenue from TV is up over 30% year-on-year. We have also invested in podcasts, where popular shows like Club Shay Shay and Lex Friedman are increasingly a visual format. YouTube creators and viewers are embracing this. In 2024, people watched over 400 million hours of podcasts each month on living room devices alone. YouTube is now the most popular service for podcast listening in the U.S., according to Edison. As always, let me wrap with the strong momentum we're seeing in partnerships, where the breadth of what Google has to offer is increasingly being recognized. Sundar mentioned our deepening partnership with Samsung. Another expanding partnership is with Citi, who is modernizing its technology infrastructure with Google Cloud to transform employee and customer experiences. Using Google Cloud, it will improve its digital products, streamline employee workflows, and use |
2,490 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | and customer experiences. Using Google Cloud, it will improve its digital products, streamline employee workflows, and use advanced high-performance computing to enable millions of daily computations. This partnership also fuels Citi's generative AI initiatives across customer service, document summarization, and search to reduce manual processing. With that, allow me a moment to thank Googlers everywhere for their extraordinary commitment and to our customers and partners for their continued trust. Anat, over to you. |
2,491 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] |
2,492 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth |
2,493 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost |
2,494 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our |
2,495 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure |
2,496 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions. |
2,497 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | Operator: [Operator Instructions] And our first question comes from Brian Nowak with Morgan Stanley. Your line is now open.
Brian Nowak: Thanks for taking my questions. I have two, one for Sundar, one for Anat. Sundar, maybe kind of step back on Search, there's a -- it seems like there's a lot of advances to come with Gen AI and agentic possibilities with Search. Can you just sort of walk us through your big picture vision over the next few years of how you think about your Search product continue to evolve to stay at the top of the funnel and drive more engagement and monetization for your users and advertisers. And then the second one, Anat, I think about 90 days ago, you talked about sort of further efficiencies and areas of simplification on the OpEx space. Can you just sort of walk us through some examples of where you see the potential for further efficiencies to the OpEx space, excluding the DNA step-ups that we have to come in 2025. Thanks.
Sundar Pichai: Thanks, Brian. On Search, obviously, we view, I mean, this has been a long continual journey. AI overviews has been the next step. It's playing out positively, as we have indicated, the metrics look great, and we are obviously trading on that experience, bringing better and better models, expanding to the number of queries where it works and so on. But there's a lot more to come. I think we'll continue bringing AI in more powerful ways, in multi-modal ways. Things like what we've done with Lens Circle to Search, you can imagine the future with Project Astra. You can also imagine areas like we have done in Gemini Deep Research, possibilities where you are really dramatically expanding the types of use cases for which Search can work, things which don't always get answered instantaneously but can take some time to answer. Those are all areas of explorations and you will see us, putting newer experiences in front of users through the course of 2025. And so I do feel the opportunity space with AI, there's a lot of unlock ahead. |
2,498 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | Anat Ashkenazi: Thanks. And for the question with regards to where do we see or where do I see leverage moving forward and some of the comments I've made on the previous call. I certainly see opportunities for further productivity and efficiency, and this is one of our priority areas. And we're going to do that so that we can make sure we continue to invest in areas such as AI and cloud where we see potential for continued growth. I'll remain focused on areas that I've mentioned before, which include the technical infrastructure, so the $75 billion in CapEx I mentioned for this year, the majority of that is going to go towards our technical infrastructure, which includes servers and data centers. So ensuring we do that in the most efficient way is critical. Second is managing headcount growth, and we're going to be investing in areas of growth, such as AI and cloud, but looking across the organization and moderating that growth will be important. Optimizing the real estate footprint is one of the areas I've mentioned. We're continuing to focus on that. As well as looking at how we simplify the organization, we've previously mentioned bringing like areas together. Sundar talked about bringing some of the AI research teams together so that we can operate with increased speed, but also how we operate within the organization. Using our own AI tools to how we run the business, whether it's the code that Sundar mentioned on the previous call, writing code with AI, or even running some of our key processes using AI tools. So we're looking at all that. It's going to -- it's -- this is not a one-quarter type of effort. It's going to continue throughout the year, and we're going to continue to focus on that so that we can support the growth in other areas.
Operator: Our next question comes from Doug Anmuth with JPMorgan. Your line is now open. |
2,499 | GOOGL | 4 | 2,024 | 2025-02-04 16:30:00 | Alphabet Inc. | 29,096 | Operator: Our next question comes from Doug Anmuth with JPMorgan. Your line is now open.
Doug Anmuth: Thanks for taking the questions, one for Philipp and one for Anat. Philipp, can you just talk more about the expanded rollout of ads on AI overviews and perhaps what additional things you may have learned in 4Q? And I guess in particular, just curious if you rolled out to a higher percentage of commercial queries and is it still fair to say that you're monetizing nearly on par with existing search? And then Anat, just on the -- on cloud growth, a little bit of decel 3Q to 4Q, but it sounded like you also suggested that your capacity constrained in the fourth quarter. I just wanted to push on that a little bit more. How -- is that accurate and is it fair to say that revenue growth could have been higher with much more capacity? Thanks.
Philipp Schindler: So, on your first question, first of all, AI overviews, which is really nice to see, continue to drive higher satisfaction and search usage. So, that's really good. And as you know, we recently launched the ads within AI overviews on mobile in the U.S., which builds on our previous rollout of ads above and below. And as I talked about before, for the AI overviews overall, we actually see monetization at approximately the same rate, which I think really gives us a strong base on which we can innovate even more. |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.