- Orders of $5.1 billion for the quarter, up 12% sequentially and
up 4% year-over-year.
- Revenue of $5.1 billion for the quarter, up 8% sequentially and
up 9% year-over-year.
- GAAP operating income of $194 million for the quarter, up 18%
sequentially and favorable year-over-year.
- Adjusted operating income (a non-GAAP measure) of $333 million
for the quarter was up 23% sequentially and favorable
year-over-year.
- Adjusted EBITDA* (a non-GAAP measure) of $611 million for the
quarter was up 9% sequentially and up 38% year-over-year.
- GAAP loss per share of $(0.08) for the quarter which included
$0.18 per share of adjusting items. Adjusted earnings per share (a
non-GAAP measure) was $0.10.
- Cash flows generated from operating activities were $506
million for the quarter. Free cash flow (a non-GAAP measure) for
the quarter was $385 million.
The Company presents its financial results in accordance with
GAAP. However, management believes that using additional non-GAAP
measures will enhance the evaluation of the profitability of the
Company and its ongoing operations. Please see reconciliations in
the section entitled "Reconciliation of GAAP to non-GAAP Financial
Measures." Certain columns and rows in our tables and financial
statements may not sum up due to the use of rounded numbers.
*Adjusted EBITDA (a non-GAAP measure) is defined as operating
income (loss) excluding depreciation & amortization and
operating income adjustments.
Baker Hughes Company (NYSE: BKR) ("Baker Hughes" or the
"Company") announced results today for the second quarter of
2021.
Three Months Ended
Variance
(in millions except per share amounts)
June 30, 2021
March 31, 2021
June 30, 2020
Sequential
Year-over- year
Orders
$
5,093
$
4,541
$
4,888
12
%
4
%
Revenue
5,142
4,782
4,736
8
%
9
%
Operating income (loss)
194
164
(52
)
18
%
F
Adjusted operating income (non-GAAP)
333
270
104
23
%
F
Adjusted EBITDA (non-GAAP)
611
562
444
9
%
38
%
Net loss attributable to Baker Hughes
(68
)
(452
)
(195
)
85
%
65
%
Adjusted net income (loss) (non-GAAP)
attributable to Baker Hughes
83
91
(31
)
(9
)%
F
EPS attributable to Class A
shareholders
(0.08
)
(0.61
)
(0.30
)
86
%
71
%
Adjusted EPS (non-GAAP) attributable to
Class A shareholders
0.10
0.12
(0.05
)
(16
)%
F
Cash flow from operating activities
506
678
230
(25
)%
F
Free cash flow (non-GAAP)
385
498
63
(23
)%
F
"F" is used in most instances when
variance is above 100%. Additionally, "U" is used in most instances
when variance is below (100)%.
“We are pleased with our second quarter results as we continued
to generate significant free cash flow, execute on our strategy,
and lead in the energy transition. During the quarter, TPS and OFE
delivered solid orders and operating income while OFS continued to
improve margins. We continued to invest and collaborate in
strategic areas for new energy frontiers, advancing our
partnerships in hydrogen, carbon capture, utilization and storage,
and clean integrated power. I want to thank our employees and
partners for their continued hard work and commitment to safety,”
said Lorenzo Simonelli, Baker Hughes chairman and chief executive
officer.
“As we look ahead to the second half of 2021, we see continued
signs of global economic recovery that should drive further demand
growth for oil and natural gas. Although we recognize the risks
presented by the variant strains of the COVID-19 virus, we expect
spending and activity levels to gain momentum through the year as
the macro environment improves, likely setting up the industry for
stronger growth in 2022.
“We remain focused on executing our strategy as the macro
economy improves and our customers continue on their journey to a
net-zero future. We look forward to supporting our customers,
advancing our strategic priorities, and delivering for our
shareholders,” concluded Simonelli.
Quarter Highlights
Supporting our Customers
The OFS segment executed an innovative Integrated Well Services
tripartite agreement with bp and Odfjell Drilling to work together
and transform platform drilling and completions activity in the
North Sea’s Clair Field, the largest oil field in Western Europe.
The five-year agreement will aim to improve production across the
Field and will use Integrated Operations Level Three (IO3), the
most progressive and technologically-advanced model for shaping
offshore work and onshore support.
OFS continued to secure contracts for its differentiated
portfolio of electrical submersible pump systems (ESPs) in multiple
regions. In the Middle East, OFS secured a contract with an oil and
gas operator to install over 500 ESPs across onshore operations,
enhancing the customer’s capabilities to increase production and
provide reliable energy. In Latin America, OFS secured an
eight-year sole provider rental contract with a customer in Ecuador
for ESPs, horizontal pumping systems, variable speed drives, and
ProductionLink digital solutions, ensuring reliable and efficient
operations.
OFS also increased its leadership position in Latin America,
securing a large offshore Integrated Drilling Services contract
with Petrobras in Brazil. The contract will aim to increase
integration, expand remote services, and promote drilling
efficiency.
The OFE segment secured multiple significant contracts with
Petrobras in the second quarter and continued to gain traction with
its Subsea Connect portfolio of technologies. OFE signed a frame
agreement for two flexible pipe contracts across five of Petrobras’
offshore fields, totaling more than 300 kilometers of pipe to
ensure reliable connections and optimal flow under high pressures,
extreme temperatures and corrosive conditions. OFE was also awarded
a subsea oilfield equipment contract from Petrobras as part of the
Marlim and Voador field revitalization plan in the Campos Basin,
including production and injection manifolds, control modules,
subsea connection systems and associated services.
The TPS segment maintained its LNG leadership with several new
equipment contracts in multiple regions, including the supply of
main refrigerant and power generation technology for Nigeria LNG’s
Train 7 project and aeroderivative gas turbine and compression
technology for New Fortress Energy’s first “Fast LNG” modular
offshore liquefaction project.
TPS secured a key contract for an ethylene cracker facility in
India, displacing a competitor and providing compressor trains
based on high efficiency steam turbine and centrifugal compression
technologies. TPS also secured a key industrial win for its
NovaLT12 technology for a combined heat and power application which
will power a factory in the Kingdom of Saudi Arabia. TPS grew its
year-over-year upgrades volume with multiple awards to support
customer decarbonization efforts.
The DS segment continued to secure important contracts to
advance customers’ energy transition goals, helping to reduce
methane and carbon emissions as well as improve efficiencies. DS
saw a number of awards in its flare.IQ advanced flare gas
monitoring and optimization system, with contracts secured in the
Middle East, China, North America and Europe.
DS secured a flare.IQ contract with bp, marking the first time
flare.IQ will be used in the upstream oil and gas sector and
continuing the two companies’ partnership to measure and reduce
bp’s emissions from flaring at its global flaring operations.
flare.IQ will be embedded into bp’s existing System 1 condition
monitoring software from Bently Nevada, requiring no additional
hardware for the customer.
DS continued to expand its industrial asset management wins
across multiple end-markets. Bently Nevada secured a contract with
a large corrugated paper manufacturing company for its condition
monitoring and protection solutions, including wireless sensors,
remote monitoring and diagnostics services to optimize production
and reduce maintenance costs. The recently acquired ARMS
Reliability business in Bently Nevada also grew its industrial
asset management orders, including a subscription for its OnePM
software to be deployed by a global chemicals customer with initial
roll-out in China and Chile.
Executing on Priorities
Baker Hughes led another consecutive quarter in transforming its
core operations, investing for growth in strategic areas, and
positioning the Company for new frontiers.
The Company announced multiple collaborations and investments to
decarbonize industries and develop low and zero-carbon technologies
for the energy transition:
- Announced intention for Baker Hughes to become a cornerstone
investor in the FiveT Hydrogen Fund alongside Chart Industries and
Plug Power, helping to advance the hydrogen economy and
infrastructure projects necessary for the hydrogen value
chain.
- Announced an investment in Electrochaea, a growth-stage
technology company, to expand Baker Hughes’ carbon capture,
utilization and storage (CCUS) portfolio with power-to-gas
solutions. Baker Hughes will combine its post-combustion carbon
capture technology with Electrochaea’s bio-methanation technology
to transform CO2 emissions into lower-carbon synthetic natural gas.
Baker Hughes will take an approximately 15% stake in Electrochaea
and assume a seat on Electrochaea’s Board of Directors.
- Signed a strategic global agreement with Air Products to
develop next generation hydrogen compression solutions to lower the
cost of production and accelerate adoption of hydrogen as a
zero-carbon fuel. Baker Hughes will provide advanced technologies
for global hydrogen projects including the NovaLT16 turbine for Air
Products’ net-zero hydrogen energy complex in Alberta, Canada, as
well as advanced compression technology for the NEOM carbon-free
hydrogen project in the Kingdom of Saudi Arabia.
- Signed an agreement with Borg CO2, a Norwegian carbon capture
and storage developer for industrial clusters, to collaborate on a
CCUS project to service as a decarbonization hub for multiple
industrial sites in the Viken region of Norway. The project aims to
capture and store up to 90% of the CO2 from the industrial sites,
eventually being liquified, shipped and stored underneath the
seabed of the North Sea. Borg CO2 will leverage Baker Hughes’ CCUS
technology portfolio, including the Chilled Ammonia Process and
Compact Carbon Capture solutions.
- Signed an agreement with Bloom Energy to collaborate on the
potential deployment of integrated, low-carbon power generation and
hydrogen solutions. The two companies will focus on developing
integrated power solutions using Bloom Energy’s solid oxide fuel
cell technology and Baker Hughes NovaLT gas turbine technology;
integrated hydrogen solutions using Bloom Energy’s solid oxide
electrolyzer cells with Baker Hughes’ hydrogen compression
technology; and opportunities to leverage both companies’
portfolios for low-carbon and emissions reduction solutions. Pilot
projects are expected to be launched in the next 2-3 years.
- Signed an agreement with Samsung Engineering to identify joint
business development opportunities for energy and industrial
customers to reduce their emissions. The two companies will focus
on hydrogen and CCUS projects, leveraging Baker Hughes’
compression, NovaLT gas turbines, flexible pipe, and condition
monitoring technologies and services. The two companies will
initially focus on key Korean customers and projects including
refineries, petrochemical plants, and industrial environmental
facilities.
- Signed an agreement with Rosetti Marino, a provider of
integrated project execution, engineering, procurement,
fabrication, installation and commissioning services for the oil
and gas, renewables, chemical, power generation and shipbuilding
sectors. The two companies will collaborate on jointly developing
CCUS projects, initially focusing on opportunities in Italy to
boost the activation of a local supply chain and drive progress in
energy transition in the region.
Baker Hughes signed a major agreement with PJSC LUKOIL to
collaborate on multiple energy efficient technologies for the oil
and gas sector to increase efficiencies, reduce carbon emissions,
raise productivity and support the energy transition.
The companies will partner to test artificial lift systems (ALS)
technology using Baker Hughes’s ESPs with LUKOIL’s leading energy
efficient Permanent Magnet Motors (PMM), reducing energy
consumption by 15-20% compared to existing artificial lift
processes. The companies will also explore emissions mapping and
abatement projects at LUKOIL’s overseas projects and a
collaboration to produce Baker Hughes’ spoolable composite pipes in
Russia, leveraging LUKOIL’s polymer production to provide an
efficient and lower carbon alternative to traditional steel
pipes.
TPS continued its focus on services growth, maintaining
long-term relationships with LNG customers and achieving a major
milestone by securing a six-year services contract extension in
North America for a key producer. TPS also grew its year-over-year
upgrades volume with significant deals across multiple regions, in
particular Europe and the Middle East, for various applications
including pipelines and offshore, as well as solutions to support
customers’ operational decarbonization efforts.
Leading with Innovation
Baker Hughes continued to develop and deploy technologies to
advance the energy transition, improve efficiencies, reduce
emissions and accelerate digital transformation for industrial
customers.
The BakerHughesC3.ai joint venture alliance (BHC3) announced
that KBC, a wholly-owned subsidiary of Yokogawa Electric
corporation, has adopted BHC3’s artificial intelligence (AI)
technology to enhance its existing software portfolio for oil and
gas process simulation, supply chain optimization and energy
management. BHC3’s AI solutions will provide continuous automated
updates to physics-based simulations through a flexible model to
scale for any industrial configuration and environment. KBC expects
the software deployment to generate significant annual economic
value for customers, estimating that improved operations will yield
more than $0.65 per barrel.
DS continued to drive digital transformation for industrial
customers through its Nexus Controls and Bently Nevada product
lines. In Latin America, DS secured a contract to upgrade
Ecopetrol’s turbomachinery control systems for an upstream facility
in Colombia. The contract includes control systems, cybersecurity,
and excitation systems from Nexus Controls as well as the 3500
condition monitoring system and System 1 software from Bently
Nevada.
Waygate Technologies launched a new digital service using
advanced robotics to provide safe and efficient inspection as well
as cleaning of industrial boilers. The service, known as Boiler
Robotic Inspection & Cleaning (BRIC), leverages sophisticated
ultrasonic and visual sensors and was developed in close
collaboration with BASF, a world leader in chemicals. BRIC
eliminates physical risks of inspections, provides more precise
data than competing technologies, and dramatically cuts costs for
customers in the chemical, pulp & paper, energy and other
manufacturing industries.
TPS continued to advance technologies for the energy transition.
As part of a research and innovation consortium funded by the EU
Horizon 2020 program, TPS is developing supercritical CO2
technologies for flexible and efficient energy storage systems,
with a first of its kind compressor to be used in thermal power
plants. The compressor prototype is being tested at Baker Hughes’
facilities in Italy and is expected to increase overall plant
efficiency, reduce emissions and water consumption, and provide
more flexibility to adapt for changing energy conditions.
Consolidated Results by Reporting
Segment
Consolidated Orders by Reporting
Segment
(in millions)
Three Months Ended
Variance
Consolidated segment orders
June 30, 2021
March 31, 2021
June 30, 2020
Sequential
Year-over- year
Oilfield Services
$
2,359
$
2,200
$
2,411
7
%
(2
)%
Oilfield Equipment
681
345
699
97
%
(3
)%
Turbomachinery & Process Solutions
1,513
1,447
1,313
5
%
15
%
Digital Solutions
540
549
465
(2
)%
16
%
Total
$
5,093
$
4,541
$
4,888
12
%
4
%
Orders for the quarter were $5,093 million, up 12% sequentially
and up 4% year-over-year. The sequential increase was a result of
higher order intake in Oilfield Equipment, Oilfield Services and
Turbomachinery & Process Solutions, partially offset by a
reduction in Digital Solutions. Equipment orders were up 15%
sequentially and service orders were up 10%.
Year-over-year, the increase in orders was a result of higher
order intake in Turbomachinery & Process Solutions and Digital
Solutions, partially offset by a decline in Oilfield Equipment and
Oilfield Services. Year-over-year equipment orders were down 6% and
service orders were up 12%.
The Company's total book-to-bill ratio in the quarter was 1.0;
the equipment book-to-bill ratio in the quarter was 0.9.
Remaining Performance Obligations (RPO) in the second quarter
ended at $23.8 billion, an increase of $0.6 billion from the first
quarter of 2021. Equipment RPO was $7.6 billion, up 1%
sequentially. Services RPO was $16.2 billion, up 3%
sequentially.
Consolidated Revenue by Reporting
Segment
(in millions)
Three Months Ended
Variance
Consolidated segment revenue
June 30, 2021
March 31, 2021
June 30, 2020
Sequential
Year-over- year
Oilfield Services
$
2,358
$
2,200
$
2,411
7
%
(2
)%
Oilfield Equipment
637
628
696
1
%
(8
)%
Turbomachinery & Process Solutions
1,628
1,485
1,161
10
%
40
%
Digital Solutions
520
470
468
11
%
11
%
Total
$
5,142
$
4,782
$
4,736
8
%
9
%
Revenue for the quarter was $5,142 million, an increase of 8%,
sequentially. The increase in revenue was driven by higher volume
across all segments.
Compared to the same quarter last year, revenue was up 9%,
driven by higher volume in Turbomachinery & Process Solutions
and Digital Solutions segments, partially offset by Oilfield
Equipment and Oilfield Services.
Consolidated Operating Income by
Reporting Segment
(in millions)
Three Months Ended
Variance
Segment operating income
June 30, 2021
March 31, 2021
June 30, 2020
Sequential
Year-over- year
Oilfield Services
$
171
$
143
$
46
20
%
F
Oilfield Equipment
28
4
(14
)
F
F
Turbomachinery & Process Solutions
220
207
149
6
%
48
%
Digital Solutions
25
24
41
3
%
(39
)%
Total segment operating income
444
379
221
17
%
F
Corporate
(111
)
(109
)
(117
)
(2
)%
5
%
Inventory impairment
—
—
(16
)
—
%
F
Restructuring, impairment & other
(125
)
(80
)
(103
)
(56
)%
(21
)%
Separation related
(15
)
(27
)
(37
)
46
%
60
%
Operating income (loss)
194
164
(52
)
18
%
F
Adjusted operating income*
333
270
104
23
%
F
Depreciation & amortization
278
292
340
(5
)%
(18
)%
Adjusted EBITDA*
$
611
$
562
$
444
9
%
38
*Non-GAAP measure.
"F" is used in most instances when
variance is above 100%. Additionally, "U" is used in most instances
when variance is below (100)%.
On a GAAP basis, operating income for the second quarter of 2021
was $194 million. Operating income increased $30 million
sequentially and increased $245 million year-over-year. Total
segment operating income was $444 million for the second quarter of
2021, up 17% sequentially and favorable year-over-year.
Adjusted operating income (a non-GAAP measure) for the second
quarter of 2021 was $333 million, which excludes adjustments
totaling $139 million before tax, mainly related to restructuring
and separation related charges. A complete list of the adjusting
items and associated reconciliation from GAAP has been provided in
Table 1a in the section entitled “Reconciliation of GAAP to
non-GAAP Financial Measures.” Adjusted operating income for the
second quarter of 2021 was up 23% sequentially, driven by volume
increases across all segments. Adjusted operating income was
favorable year-over-year driven by volume in the Turbomachinery
& Process Solutions segment, and margin expansion in the
Oilfield Services and Oilfield Equipment segments, partially offset
by margin contraction in the Digital Solutions segment.
Depreciation and amortization for the second quarter of 2021 was
$278 million.
Adjusted EBITDA (a non-GAAP measure) for the second quarter of
2021 was $611 million, which excludes adjustments totaling $139
million before tax, mainly related to restructuring and separation
related charges. Adjusted EBITDA for the second quarter was up 9%
sequentially and up 38% year-over-year.
Corporate costs were $111 million in the second quarter of 2021,
up 2% sequentially and down 5% year-over-year.
Other Financial Items
Income tax expense in the second quarter of 2021 was $143
million.
Other non-operating loss in the second quarter of 2021 was $63
million. Included in other non-operating loss was a non-recurring
charge for a loss contingency related to certain tax matters and
losses from the net change in fair value of our investment in
C3.ai.
GAAP diluted loss per share was $(0.08). Adjusted diluted
earnings per share was $0.10. Excluded from adjusted diluted
earnings per share were all items listed in Table 1a in the section
entitled "Reconciliation of GAAP to non-GAAP Financial Measures" as
well as the "other adjustments (non-operating)" found in Table
1c.
Cash flow from operating activities was $506 million for the
second quarter of 2021. Free cash flow (a non-GAAP measure) for the
quarter was $385 million. A reconciliation from GAAP has been
provided in Table 1d in the section entitled "Reconciliation of
GAAP to non-GAAP Financial Measures."
Capital expenditures, net of proceeds from disposal of assets,
were $121 million for the second quarter of 2021.
Results by Reporting Segment
The following segment discussions and variance explanations are
intended to reflect management's view of the relevant comparisons
of financial results on a sequential or year-over-year basis,
depending on the business dynamics of the reporting segments.
Oilfield Services
(in millions)
Three Months Ended
Variance
Oilfield Services
June 30, 2021
March 31, 2021
June 30, 2020
Sequential
Year-over- year
Revenue
$
2,358
$
2,200
$
2,411
7
%
(2
)%
Operating income
$
171
$
143
$
46
20
%
F
Operating income margin
7.3
%
6.5
%
1.9
%
0.8
pts
5.4
pts
Depreciation & amortization
$
195
$
201
$
248
(3
)%
(21
)%
EBITDA*
$
366
$
344
$
293
7
%
25
%
EBITDA margin*
15.5
%
15.6
%
12.2
%
(0.1
)pts
3.4
pts
Oilfield Services (OFS) revenue of $2,358 million for the second
quarter increased by $158 million, or 7%, sequentially.
North America revenue was $693 million, up 11% sequentially.
International revenue was $1,665 million, an increase of 6%
sequentially, driven by higher revenues in Asia Pacific, Europe,
and Latin America.
Segment operating income before tax for the quarter was $171
million. Operating income for the second quarter was up $28
million, or 20% sequentially, primarily driven by higher
volume.
Oilfield Equipment
(in millions)
Three Months Ended
Variance
Oilfield Equipment
June 30, 2021
March 31, 2021
June 30, 2020
Sequential
Year-over- year
Orders
$
681
$
345
$
699
97
%
(3
)%
Revenue
$
637
$
628
$
696
1
%
(8
)%
Operating income (loss)
$
28
$
4
$
(14
)
F
F
Operating income margin
4.3
%
0.7
%
(2.1
)%
3.7
pts
6.4
pts
Depreciation & amortization
$
26
$
32
$
34
(21
)%
(25
)%
EBITDA*
$
53
$
37
$
20
45
%
F
EBITDA margin*
8.4
%
5.8
%
2.9
%
2.5
pts
5.5
pts
Oilfield Equipment (OFE) orders of $681 million were down $18
million, or 3%, year-over-year, driven by lower order intake in the
Subsea Production Systems, and Subsea Pressure Control Projects
businesses, and from the disposition of the Surface Pressure
Control Flow business in the fourth quarter of 2020, partially
offset by growth in Services and Flexible Pipe Systems. Equipment
orders were down 7% and services orders were up 8%
year-over-year.
*Non-GAAP measure.
OFE revenue of $637 million for the quarter decreased $59
million, or 8%, year-over-year. The decrease was driven by lower
volume in the Subsea Drilling Systems business, and from the
disposition of the Surface Pressure Control flow business in the
fourth quarter of 2020, offset by higher volume in the Flexible
Pipe Systems business.
Segment operating income before tax for the quarter was $28
million, an increase of $42 million year-over-year. The increase
was driven by higher cost productivity.
Turbomachinery & Process
Solutions
(in millions)
Three Months Ended
Variance
Turbomachinery & Process
Solutions
June 30, 2021
March 31, 2021
June 30, 2020
Sequential
Year-over- year
Orders
$
1,513
$
1,447
$
1,313
5
%
15
%
Revenue
$
1,628
$
1,485
$
1,161
10
%
40
%
Operating income
$
220
$
207
$
149
6
%
48
%
Operating income margin
13.5
%
13.9
%
12.8
%
(0.5
)pts
0.7
pts
Depreciation & amortization
$
30
$
30
$
27
1
%
13
%
EBITDA*
$
250
$
237
$
176
5
%
42
%
EBITDA margin*
15.4
%
16.0
%
15.1
%
(0.6
)pts
0.2
pts
Turbomachinery & Process Solutions (TPS) orders were up $200
million, or 15%, year-over-year. Equipment orders were up 8% and
service orders were up 20%.
TPS revenue of $1,628 million for the quarter increased $467
million, or 40%, year-over-year. The increase was driven by higher
equipment volume. Equipment revenue in the quarter represented 48%
of total segment revenue, and service revenue represented 52% of
total segment revenue.
Segment operating income before tax for the quarter was $220
million, up $71 million, or 48%, year-over-year. The increase was
driven by higher volume and cost productivity, offset partially by
higher equipment mix.
Digital Solutions
(in millions)
Three Months Ended
Variance
Digital Solutions
June 30, 2021
March 31, 2021
June 30, 2020
Sequential
Year-over- year
Orders
$
540
$
549
$
465
(2
)%
16
%
Revenue
$
520
$
470
$
468
11
%
11
%
Operating income
$
25
$
24
$
41
3
%
(39
)%
Operating income margin
4.8
%
5.2
%
8.8
%
(0.3
)pts
(4
)pts
Depreciation & amortization
$
22
$
21
$
24
4
%
(7
)%
EBITDA*
$
47
$
46
$
65
4
%
(28
)%
EBITDA margin*
9.1
%
9.7
%
14.0
%
(0.6
)pts
(4.8
)pts
*Non-GAAP measure.
Digital Solutions (DS) orders of $540 million were up $75
million, or 16%, year-over-year, driven by higher order intake in
the Waygate Technologies, Bently Nevada, Druck and Nexus Controls
businesses.
DS revenue of $520 million for the quarter increased $51
million, or 11%, year-over-year, primarily driven by higher volume
across the Process & Pipeline Services, Waygate Technologies
and Bently Nevada businesses, partially offset by the Nexus
Controls business.
Segment operating income before tax for the quarter was $25
million, down $16 million, or 39%, year-over-year. The decrease
year-over-year was primarily driven by lower cost productivity.
Reconciliation of GAAP
to non-GAAP Financial Measures
Management provides non-GAAP financial measures because it
believes such measures are widely accepted financial indicators
used by investors and analysts to analyze and compare companies on
the basis of operating performance and liquidity, and that these
measures may be used by investors to make informed investment
decisions.
Table 1a. Reconciliation of GAAP and
Adjusted Operating Income/(Loss)
Three Months Ended
(in millions)
June 30, 2021
March 31, 2021
June 30, 2020
Operating income (loss) (GAAP)
$
194
$
164
$
(52
)
Separation related
15
27
37
Restructuring, impairment & other
125
80
103
Inventory impairment
—
—
16
Total operating income adjustments
139
106
156
Adjusted operating income (non-GAAP)
$
333
$
270
$
104
Table 1a reconciles operating income (loss), which is the
directly comparable financial result determined in accordance with
Generally Accepted Accounting Principles (GAAP), to adjusted
operating income (a non-GAAP financial measure). Adjusted operating
income excludes the impact of certain identified items.
Table 1b. Reconciliation of Operating
Income (Loss) to EBITDA and Adjusted EBITDA
Three Months Ended
(in millions)
June 30, 2021
March 31, 2021
June 30, 2020
Operating income (loss) (GAAP)
$
194
$
164
$
(52
)
Depreciation & amortization
278
292
340
EBITDA (non-GAAP)
472
456
288
Total operating income adjustments (1)
139
106
156
Adjusted EBITDA (non-GAAP)
$
611
$
562
$
444
(1)
See Table 1a for the identified
adjustments to operating income.
Table 1b reconciles operating income (loss), which is the
directly comparable financial result determined in accordance with
GAAP, to EBITDA (a non-GAAP financial measure). Adjusted EBITDA (a
non-GAAP financial measure) excludes the impact of certain
identified items.
Table 1c. Reconciliation of Net Income
(Loss) Attributable to Baker Hughes to Adjusted Net Income (Loss)
Attributable to Baker Hughes
Three Months Ended
(in millions, except per share
amounts)
June 30, 2021
March 31, 2021
June 30, 2020
Net loss attributable to Baker Hughes
(GAAP)
$
(68
)
$
(452
)
$
(195
)
Total operating income adjustments (1)
139
106
156
Other adjustments (non-operating) (2)
71
663
156
Tax on total adjustments
(19
)
(33
)
(11
)
Total adjustments, net of income tax
191
736
301
Less: adjustments attributable to
noncontrolling interests
40
193
138
Adjustments attributable to Baker
Hughes
151
543
164
Adjusted net income (loss) attributable to
Baker Hughes (non-GAAP)
$
83
$
91
$
(31
)
Denominator:
Weighted-average shares of Class A common
stock outstanding diluted
811
746
655
Adjusted earnings (loss) per Class A
share— diluted (non-GAAP)
$
0.10
$
0.12
$
(0.05
)
(1)
See Table 1a for the identified
adjustments to operating income.
(2)
2Q'21 primarily due to a non-recurring
charge for a loss contingency related to certain tax matters and
losses from the net change in fair value of our investment in
C3.ai. 1Q'21 primarily related to the losses from the net change in
fair value of our investment in C3.ai, partially offset by the
reversal of current accruals due to the settlement of certain legal
matters. 2Q'20 primarily driven by the loss on sale of a business,
partially offset by a tax benefit related to the CARES Act.
Table 1c reconciles net income (loss) attributable to Baker
Hughes, which is the directly comparable financial result
determined in accordance with GAAP, to adjusted net income
attributable to Baker Hughes (a non-GAAP financial measure).
Adjusted net income attributable to Baker Hughes excludes the
impact of certain identified items.
Table 1d. Reconciliation of Cash Flow
From Operating Activities to Free Cash Flow
Three Months Ended
(in millions)
June 30, 2021
March 31, 2021
June 30, 2020
Cash flow from operating activities
(GAAP)
$
506
$
678
$
230
Add: cash used in capital expenditures,
net of proceeds from disposal of assets
(121
)
(180
)
(167
)
Free cash flow (non-GAAP)
$
385
$
498
$
63
Table 1d reconciles net cash flows from operating activities,
which is the directly comparable financial result determined in
accordance with GAAP, to free cash flow (a non-GAAP financial
measure). Free cash flow is defined as net cash flows from
operating activities less expenditures for capital assets plus
proceeds from disposal of assets.
Financial Tables
(GAAP)
Condensed Consolidated
Statements of Income (Loss)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
(In millions, except per share
amounts)
2021
2020
2021
2020
Revenue
$
5,142
$
4,736
$
9,924
$
10,160
Costs and expenses:
Cost of revenue
4,166
4,058
8,090
8,727
Selling, general and administrative
642
590
1,229
1,265
Goodwill impairment
—
—
—
14,773
Restructuring, impairment and other
125
103
205
1,429
Separation related
15
37
42
77
Total costs and expenses
4,948
4,788
9,566
26,271
Operating income (loss)
194
(52
)
358
(16,111
)
Other non-operating loss, net
(63
)
(244
)
(689
)
(219
)
Interest expense, net
(65
)
(69
)
(138
)
(128
)
Income (loss) before income taxes
66
(365
)
(469
)
(16,458
)
Benefit (provision) for income taxes
(143
)
21
(213
)
16
Net loss
(77
)
(344
)
(682
)
(16,442
)
Less: Net loss attributable to
noncontrolling interests
(9
)
(149
)
(162
)
(6,020
)
Net loss attributable to Baker Hughes
Company
$
(68
)
$
(195
)
$
(520
)
$
(10,422
)
Per share amounts:
Basic and diluted loss per Class A common
stock
$
(0.08
)
$
(0.30
)
$
(0.67
)
$
(15.93
)
Weighted average shares:
Class A basic & diluted
806
655
773
654
Cash dividend per Class A common stock
$
0.18
$
0.18
$
0.36
$
0.36
Condensed Consolidated
Statements of Financial Position
(Unaudited)
(In millions)
June 30, 2021
December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents
$
3,913
$
4,132
Current receivables, net
5,407
5,622
Inventories, net
4,212
4,421
All other current assets
1,980
2,280
Total current assets
15,512
16,455
Property, plant and equipment, less
accumulated depreciation
5,086
5,358
Goodwill
6,052
5,977
Other intangible assets, net
4,202
4,397
Contract and other deferred assets
1,836
2,001
All other assets
3,981
3,819
Total assets
$
36,669
$
38,007
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable
$
3,593
$
3,532
Short-term debt and current portion of
long-term debt
51
889
Progress collections and deferred
income
3,467
3,454
All other current liabilities
2,694
2,352
Total current liabilities
9,805
10,227
Long-term debt
6,722
6,744
Liabilities for pensions and other
employee benefits
1,163
1,217
All other liabilities
1,579
1,577
Equity
17,400
18,242
Total liabilities and equity
$
36,669
$
38,007
Outstanding Baker Hughes Company
shares:
Class A common stock
828
724
Class B common stock
214
311
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
(In millions)
2021
2021
2020
Cash flows from operating activities:
Net loss
$
(77
)
$
(682
)
$
(16,442
)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization
278
570
694
Goodwill impairment
—
—
14,773
Other asset impairments
34
22
1,127
Loss on sale of business
—
—
217
Loss on equity securities
27
815
—
Working capital
166
571
388
Other operating items, net
78
(112
)
(49
)
Net cash flows from operating
activities
506
1,184
708
Cash flows from investing activities:
Expenditures for capital assets, net of
proceeds from disposal of assets
(121
)
(301
)
(493
)
Other investing items, net
165
171
56
Net cash flows from (used in) investing
activities
44
(130
)
(437
)
Cash flows from financing activities:
Net repayments of debt and other
borrowings
(9
)
(45
)
(149
)
Proceeds from (repayment of) commercial
paper
(832
)
(832
)
737
Proceeds from issuance of long-term
debt
—
—
500
Dividends paid
(149
)
(280
)
(236
)
Distributions to GE
(39
)
(95
)
(136
)
Other financing items, net
(1
)
(33
)
(21
)
Net cash flows from (used in) financing
activities
(1,030
)
(1,285
)
695
Effect of currency exchange rate changes
on cash and cash equivalents
11
12
(83
)
Increase (decrease) in cash and cash
equivalents
(469
)
(219
)
883
Cash and cash equivalents, beginning of
period
4,382
4,132
3,249
Cash and cash equivalents, end of
period
$
3,913
$
3,913
$
4,132
Supplemental cash flows disclosures:
Income taxes paid, net of refunds
$
9
$
48
$
211
Interest paid
$
106
$
157
$
141
Supplemental Financial Information
Supplemental financial information can be found on the Company’s
website at: investors.bakerhughes.com in the Financial Information
section under Quarterly Results.
Conference Call and Webcast
The Company has scheduled an investor conference call to discuss
management’s outlook and the results reported in today’s earnings
announcement. The call will begin at 8:30 a.m. Eastern time, 7:30
a.m. Central time on Wednesday, July 21, 2021, the content of which
is not part of this earnings release. The conference call will be
broadcast live via a webcast and can be accessed by visiting the
Events and Presentations page on the Company’s website at:
investors.bakerhughes.com. An archived version of the webcast will
be available on the website for one month following the
webcast.
Forward-Looking Statements
This news release (and oral statements made regarding the
subjects of this release) may contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, (each a “forward-looking statement”). The words
“anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,”
“estimate,” “project,” “foresee,” “forecasts,” “predict,”
“outlook,” “aim,” “will,” “could,” “should,” “potential,” “would,”
“may,” “probable,” “likely,” and similar expressions, and the
negative thereof, are intended to identify forward-looking
statements. There are many risks and uncertainties that could cause
actual results to differ materially from our forward-looking
statements. These forward-looking statements are also affected by
the risk factors described in the Company’s annual report on Form
10-K for the annual period ended December 31, 2020; the Company's
subsequent quarterly report on Form 10-Q for the quarterly period
ended March 31, 2021; and those set forth from time to time in
other filings with the Securities and Exchange Commission (“SEC”).
The documents are available through the Company’s website at:
www.investors.bakerhughes.com or through the SEC’s Electronic Data
Gathering and Analysis Retrieval (“EDGAR”) system at: www.sec.gov.
We undertake no obligation to publicly update or revise any
forward-looking statement.
Our expectations regarding our business outlook and business
plans; the business plans of our customers; oil and natural gas
market conditions; cost and availability of resources; economic,
legal and regulatory conditions, and other matters are only our
forecasts regarding these matters.
These forward-looking statements, including forecasts, may be
substantially different from actual results, which are affected by
many risks, along with the following risk factors and the timing of
any of these risk factors:
Restructuring - Our restructuring plans may not be successful
and achieve the expected result; continued deterioration of market
conditions, whether due to the continued spread of COVID-19 or
other events could result in further restructuring costs and
impairments.
COVID-19 - The continued spread of the COVID-19 virus and the
continuation of the measures to try to contain the virus, such as
travel bans and restrictions, quarantines, shelter in place orders,
and shutdowns, and the related uncertainties.
GE Separation - The failure to successfully eliminate
dependencies on GE or a failure by GE to supply products and
services to us in accordance with applicable contractual terms
could have a material effect on our business.
Economic and political conditions - the impact of worldwide
economic conditions; the effect that declines in credit
availability may have on worldwide economic growth and demand for
hydrocarbons; foreign currency exchange fluctuations and changes in
the capital markets in locations where we operate; and the impact
of government disruptions and sanctions.
Orders and RPO - our ability to execute on orders and RPO in
accordance with agreed specifications, terms and conditions and
convert those orders and RPO to revenue and cash.
Oil and gas market conditions - the level of petroleum industry
exploration, development and production expenditures; the price of,
volatility in pricing of, and the demand for crude oil and natural
gas; drilling activity; drilling permits for and regulation of the
shelf and the deepwater drilling; excess productive capacity; crude
and product inventories; liquefied natural gas supply and demand;
seasonal and other adverse weather conditions that affect the
demand for energy; severe weather conditions, such as tornadoes and
hurricanes, that affect exploration and production activities;
Organization of Petroleum Exporting Countries (“OPEC”) policy and
the adherence by OPEC nations to their OPEC production quotas.
Terrorism and geopolitical risks - war, military action,
terrorist activities or extended periods of international conflict,
particularly involving any petroleum-producing or -consuming
regions; labor disruptions, civil unrest or security conditions
where we operate; potentially burdensome taxation, expropriation of
assets by governmental action; cybersecurity risks and cyber
incidents or attacks; epidemic outbreaks.
About Baker Hughes:
Baker Hughes (NYSE: BKR) is an energy technology company that
provides solutions for energy and industrial customers worldwide.
Built on a century of experience and with operations in over 120
countries, our innovative technologies and services are taking
energy forward - making it safer, cleaner and more efficient for
people and the planet. Visit us at bakerhughes.com
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210721005143/en/
Investor Relations Jud Bailey +1 281-809-9088
investor.relations@bakerhughes.com
Media Relations Thomas Millas +1 713-879-2862
thomas.millas@bakerhughes.com
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