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01/10 16:00
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights several challenges: revenue declines in North America and international markets, significant activity drops in Mexico and Russia, and near breakeven free cash flow in Q1. While there are positive elements like share repurchases and strong liquidity, the negative market outlook and management's unclear responses on recovery timelines overshadow these. The Q&A section further emphasizes the challenges in Mexico and Russia, and the inability of Saudi growth to offset these declines. Overall, the sentiment leans negative, likely leading to a stock price decline.
Adjusted Free Cash Flow $524 million for the full year 2024, with a 37.9% free cash flow conversion rate, showing a commitment to drive this rate towards 50% in the long term.
Net Working Capital as a Percentage of Revenues Improved to 24.5% from 25.8% the previous year, representing a 610 basis points improvement compared to 30.6% in 2021.
Adjusted EBITDA Margins for Q4 24.3%, driven by the impact of lower revenues, while full-year adjusted EBITDA margins were 25.1%, marking the highest full-year margin in over 15 years.
CapEx $299 million for the full year 2024, or 5.4% of revenues, with a slight increase in Q4 due to opportunistic investments.
Share Repurchase Approximately $49 million worth of shares repurchased in Q4.
Quarterly Dividend Paid a $0.25 per share quarterly dividend.
Depreciation and Amortization Expected to decline approximately $100 million for the full year 2025.
Liquidity Approximately $1.3 billion, indicating confidence in managing the company through transitional periods.
Wealth Services Growth: The Wealth Services product line, focused on rigless intervention for production enhancement, has grown over 50% in three years, representing a significant growth vector.
Completions Growth: The completions product line grew in the mid-double digits in 2024, following a year of mid-20% growth in 2023.
DRE Product Line Growth: All major product lines within DRE exhibited significant growth in 2024.
International Revenue Growth: International business generated a 10% growth on a full-year basis, led by the Middle East, North Africa, and Asia with 17% year-on-year growth.
Market Outlook: The outlook for 2025 indicates a decline in total international revenues by mid-single digits, primarily due to reduced activity in Mexico and Russia.
Adjusted Free Cash Flow: Weatherford generated $524 million in adjusted free cash flow for the year, with a conversion rate of 37.9%.
Cost Optimization Program: A significant cost optimization program was initiated in Q4 2024, focusing on sustainable productivity gains through technology and lean processes.
Strategic Focus Areas for 2025: The company will focus on structural cost optimization, networking capital efficiency, and specific growth vectors including digital offerings and the Wealth Services business.
Activity Reduction in Latin America: Significant reduction in activity in Latin America, particularly in Mexico, due to a cost containment program, leading to a direct impact on revenue guidance.
Revenue Decline in North America: North America revenue down 2% sequentially, primarily due to a continued reduction in U.S. land activity.
International Business Challenges: International business down 6% sequentially, primarily driven by challenges in Latin America and Mexico.
Economic Uncertainty in Mexico and Russia: Anticipated significant drop in activity levels in Mexico and Russia, creating a drag on 2025 revenues.
Cost Control Measures: Initiated a significant cost optimization program to manage costs and maintain margins amid declining revenues.
Market Outlook: Overall market outlook has a negative bias in the immediate term, particularly in Mexico and Russia, affecting revenue projections.
Free Cash Flow Concerns: First quarter free cash flow expected to be near breakeven due to revenue declines, with a more substantial increase anticipated in the second half.
Depreciation and Amortization Impact: Expected decline in depreciation and amortization, which may favorably impact operating income.
Stock Price Concerns: Concerns around Weatherford’s performance in a softer market and decline in stock price relative to the sector.
Strategic Priorities: Outlined five strategic priorities: organization vitality, creating the future, customer experience, lean operations, and financial performance.
2025 Focus Areas: Three specific focus areas for 2025: structural cost optimization, networking capital efficiency, and targeted growth initiatives.
Cost Optimization Program: Initiated a significant cost optimization program aimed at sustainable productivity gains through technology and lean processes.
Growth Vectors: Identified specific growth vectors including Modus, MPD, wealth services, and digital offerings.
2025 Revenue Guidance: Expected revenues of $5.1 billion to $5.35 billion.
2025 Adjusted EBITDA Guidance: Projected adjusted EBITDA of $1.2 billion to $1.35 billion.
Free Cash Flow Conversion: Expected increase of 100 to 200 basis points year on year.
Q1 2025 Revenue Guidance: Projected revenues of $1.17 billion to $1.21 billion.
Q1 2025 Adjusted EBITDA Guidance: Expected adjusted EBITDA of $245 million to $265 million.
CapEx Guidance: CapEx to remain at 5% of revenues for 2025.
Quarterly Dividend: Paid a quarterly dividend of $0.25 per share.
Share Repurchase: Repurchased approximately $99 million of shares during the second half of 2024.
Q4 Share Repurchase: Repurchased approximately $49 million worth of shares in Q4.
The earnings call presents a mixed picture: strong EBITDA margin improvements and cost optimization are positives, but revenue declines and market headwinds in key regions are concerning. The Q&A highlights cautious optimism, particularly in Mexico and Saudi Arabia, but also reveals uncertainties in pricing pressures and future spending. The positive aspects are counterbalanced by the cautious guidance and market challenges, leading to a neutral sentiment.
The earnings call revealed mixed signals: strong free cash flow and liquidity, but challenges in Saudi Arabia and Mexico. The Q&A highlighted uncertainties in cash flow improvements and pricing pressures, although there's optimism in technology and M&A strategies. The guidance shows moderate growth, tempered by tariff impacts. The stock is expected to remain stable over the next two weeks, with no major catalysts for a significant move.
The earnings call reveals several negative factors: headcount reductions, uncertain customer spending, potential revenue decline, and unclear management responses in the Q&A. Despite stable dividends and share repurchases, the guidance reduction and market conditions indicate a negative outlook. The stock is likely to react negatively, with a potential decline of -2% to -8% over the next two weeks.
The earnings call highlights several challenges: revenue declines in North America and international markets, significant activity drops in Mexico and Russia, and near breakeven free cash flow in Q1. While there are positive elements like share repurchases and strong liquidity, the negative market outlook and management's unclear responses on recovery timelines overshadow these. The Q&A section further emphasizes the challenges in Mexico and Russia, and the inability of Saudi growth to offset these declines. Overall, the sentiment leans negative, likely leading to a stock price decline.
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