TechnipFMC plc Q3 FY2023 Earnings Call

Thank you for holding, and welcome everyone to the TechnipFMC Third Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Thank you. I will now turn the call over to Matt Seinsheimer, Senior Vice President, Investor Relations and Corporate Development. Mr. Seinsheimer, please go ahead.

Thank you, Jack. Good morning and good afternoon, and welcome to TechnipFMC's third quarter 2023 earnings conference call. Our news release and financial statements issued earlier today can be found on our website. I'd like to caution you with respect to any forward-looking statements made during this call. Although these forward-looking statements are based on our current expectations, beliefs, and assumptions regarding future developments and business conditions, they are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by these statements. Non-material factors that could cause our actual results to differ from our projected results are described in our most recent 10-K, most recent 10-Q, and other periodic filings with the U.S. Securities and Exchange Commission. We wish to caution you not to place undue reliance on any forward-looking statements which speak only as of the date hereof. We undertake no obligation to publicly update or revise any of our forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise. I will now turn the call over to Doug Pferdehirt, TechnipFMC's Chair and Chief Executive Officer.

Thank you, Matt. Good morning and good afternoon. Thank you for participating in today's earnings call. We delivered solid results in the third quarter. Subsea inbound orders came in strong, at $1.8 billion, and adjusted EBITDA improved sequentially for both Subsea and Surface Technologies, exceeding the guidance we provided on our second quarter call. This momentum is also driving our expectations for full-year results higher. Continuing with total company financial highlights in the quarter, revenue was $2.1 billion, adjusted EBITDA $284 million, with an adjusted EBITDA margin of 13.8% when excluding foreign exchange impacts. Total company inbound was $2.1 billion, total company backlog ended the period at $13.2 billion. In Subsea, we received significant orders for flexible pipe in the period. These included an award from Petrobras for the pre-salt fields in Brazil and our largest-ever flexibles contract in the Gulf of Mexico for Woodside's Trion project. As both pioneer and market leader of this technology, flexible pipe provides us with the unique capability to design fully integrated end-to-end subsea systems for our clients. We have the unique ability to integrate flexible technology into our iEPCI offering, which greatly simplifies field architecture. This enables a further reduction in project cycle time, improving economics and driving greater differentiation in our integrated offering. Beyond flexibles activity, we also experienced an exceptionally high level of unannounced project awards in the quarter, which speaks to the ongoing strength of the market. In Subsea Services, inbound was robust, driven by installation and life of field activities. Given the continued strength in our inbound, we are confident that subsea orders will exceed $9 billion for the full-year. And if we extend the view to include our current expectations for 2024, we now believe the next five quarters will approach $11 billion. With this near-term update, we now expect to exceed the guidance for $25 billion of subsea inbound through 2025, and we will provide an update on this extended outlook on our fourth-quarter earnings call. The durability of this cycle is driven by both an expansion in the number of active basins, which has nearly doubled versus the prior cycle, as well as a growing and more diverse customer base. Additionally, this cycle was supported by a robust and strengthening pipeline of FEED activity. In the third quarter, FEED studies increased nearly 40% when compared to the number of awards in the first half of the year. Importantly, more than half of the studies awarded to our company in 2023 have the potential to be direct-awarded upon project FID. This provides us with extended visibility and confidence that subsea opportunities will remain resilient beyond 2025 even before we consider new frontiers that are likely to present themselves in the second half of the decade. Subsea backlog ended the period at $12.1 billion, a nearly 60% increase year-over-year. An increasing proportion of this backlog is coming from iEPCI, Subsea 2.0, and other direct awards, reflecting the high quality of our order book. Year-to-date, we have been awarded the industry's three largest integrated contracts: Equinor's BM-C-33 project in Brazil, the Rosebank project in the U.K., and Aker BP's Utsira High project in the North Sea. While integrated execution will certainly shorten cycle times, the size and scope of these awards provide us with multiyear visibility as a significant portion of the project revenues extend beyond 2025. In Surface Technologies, international activity increased sequentially. We continue to ramp up production in our Saudi Arabia facility, as well as successfully execute on our multiyear framework agreement with Abu Dhabi National Oil Company. Activity in North America was moderately lower in the period, however operating margin improved sequentially, benefiting from the strategic actions previously taken to reduce our cost structure. In closing, our commercial and operational success continues to drive improved financial results. And Alf will discuss how the strength in the second half should drive our full-year results higher. Additionally, the upward revisions to our Subsea order outlook are fueled by high-quality inbound driven by iEPCI, Subsea Services, and other direct awards, which are now expected to represent more than 70% of segment orders in the current year. And more importantly, these results are further strengthening the foundation for higher and more sustainable performance in the years ahead. I will now turn the call over to Alf to discuss our financial results.

Thanks, Doug. Inbound in the quarter was $2.1 billion, of which $1.8 billion came from Subsea. Revenue in the quarter totaled $2.1 billion. EBITDA was $284 million when excluding foreign exchange loss of $46 million, and impairment, restructuring, and other charges totaling $4 million. Operationally, we delivered solid results. In Subsea, revenue was $1.7 billion, up 6% from the second quarter. The increase was driven by mid single-digit revenue growth in both projects and services. The largest drivers of the improvement were in Norway and Brazil. Adjusted EBITDA was $258 million, with a margin of 15.1%, up 70 basis points from the second quarter. Results benefited primarily from higher volume and favorable activity mix. In Surface Technologies, revenue was $349 million. This was a modest decline versus the second quarter, primarily driven by lower revenue in North America, which decreased 8% sequentially, partially offset by higher international activity. Adjusted EBITDA was $50 million, a 6% sequential increase. International results benefited from improved operational performance in the Middle East. North America results were largely unchanged versus the prior quarter despite the revenue decline, benefiting, in part, from strategic actions taken in prior quarters. Adjusted EBITDA margin was 14.3%, up 100 basis points versus the second quarter. Turning to corporate and other items in the period, corporate expense was $24 million when excluding less than $1 million of charges. Net interest expense was $27 million, and tax expense was $19 million. And lastly, we incurred a foreign exchange loss of $46 million in the quarter. Approximately 50% of the loss was directly related to actions taken that we believe will reduce the volatility in our foreign exchange exposure going forward. Importantly, we believe these were one-time elements of our results in the period. Approximately 30% of the FX loss was related to the current cost of hedging our euro-denominated debt and liability positions, with the remaining portion due to unfavorable movement in currencies that we are unable to economically hedge, with the Argentine peso having the biggest impact in the period. Cash flow from operating activities was $222 million, and included a $27 million payment related to the previous legal settlement with a French national prosecutor's office. Capital expenditures were $44 million. This resulted in free cash flow of $178 million in the quarter. In August, we completed the sale of the Apache II pipelay vessel for net cash proceeds of $54 million. The sale marks another tangible strategic step forward in our commitment to higher and more sustainable financial returns. We ended the period with cash and cash equivalents of $691 million. Net debt fell almost $200 million to $650 million. During the quarter, we repurchased 2.7 million shares for $50 million and paid $22 million in dividends. Total shareholder distributions for the period were $72 million. Moving to our guidance, I will first provide an update to our segment expectations for the fourth quarter. For Subsea, we expect the typical seasonal impacts, with revenue declining approximately 10% sequentially, and adjusted EBITDA margin coming in at approximately 13%. For Surface Technologies, we expect revenue to increase about 5% sequentially, and adjusted EBITDA margin to be approximately 14%. Turning to the full year, we anticipate corporate expense to come in at the high end of the range of $100 million to $110 million. With these updates, we now anticipate the range of outcomes for total company adjusted EBITDA to approximate $950 million for the full year when excluding foreign exchange. This represents a $35 million improvement versus the guidance we provided on our second quarter earnings call. Lastly, we reiterate our free cash flow guidance of $225 million to $375 million for the current year. In closing, I will share with you my three key takeaways from the quarter. First, given the strong Q3 results and improved outlook for Q4, we are increasing our guidance for full-year company EBITDA to approximately $915 million when excluding foreign exchange. Second, free cash flow generation improved in the period as expected, keeping us on track to achieve our full-year guidance. And third, with the initiation of a dividend in the quarter and ongoing share repurchase activity, we distributed over $70 million, demonstrating our commitment to return cash to our shareholders.

Certainly. David Anderson at Barclays, your line is open.

Great, thanks. Good morning, Doug. How are you?

Very well, David. And yourself?

I'm doing great. I have a question regarding the order outlook. Over the next five quarters, you're projecting $11 billion. How does that $11 billion look different going forward, if at all? Is the customer mix changing in any particular way? I believe you mentioned that you're anticipating 70% to be Subsea 2.0. With market capacity tightening, it seems pricing should also start to stabilize. Could you elaborate on how things might differ moving forward compared to what you've gathered over the past year?

Sure, Dave. At a high level, I would say we are seeing much higher quality incoming business. There are several factors contributing to this, but the most significant for our company is that direct awards now make up over 70% of our business in subsea. This is driven by our unique integrated offering, our subsea architecture, Subsea 2.0, and our strong, long-standing client relationships. Additionally, there is a shift in our customer base. I've mentioned this over the past few quarters; we continue to see the customer base expanding, with more clients entering the offshore sector due to high-quality reserves and access to those reserves. The combination of our integrated offering and Subsea 2.0, along with our collaborative approach with clients, positively impacts both our existing and new clients. What excites us the most is the quality of opportunities we have, and we can be selective in this market due to our position. This allows us to focus on high-end, high-quality opportunities that will drive our success in the coming years.

So on another subject we're starting to hear something about is rising breakeven costs for offshore. We know rig rates have more than doubled over the past few years, service costs are moving higher. Just wondering, in your conversations with customers, do you get any sense from customers that they're concerned about that? Is that potentially driving a sense of urgency for your customers to get a project locked up before costs move higher? And just related to that question, what's the percentage of an overall project, what percentage do you guys typically comprise? I know they're all different, but maybe just a range would be helpful.

I'm sorry, the second part, what percentage of?

Yes, of your business sort of comprises one of these offshore projects. Just curious, is it 20%, is it 30%? Just trying to get a better handle on where you sit in the scheme of things.

Thank you, Dave. I'll address the second part first as it will clarify the first part. In brownfield development, which involves utilizing an existing host facility and possibly extending or connecting to a new reservoir, we represent up to 70% of the cost, usually ranging from 60% to 70%. Essentially, we are a significant cost driver for these projects. While I will move away from discussing costs momentarily, it's important to note we account for a substantial portion of the project's overall value. For greenfield development, the typical distribution is roughly one-third for the driller, one-third for us, and one-third for the entity constructing the floating facility. This means we have somewhat less influence over project economics in greenfield scenarios, but our impact is still significant. The key factor here is time. While rig companies often emphasize day rates, the real determinant of project economics is how quickly we reach first oil and ensure timely project delivery. This approach is what influences our customers' choices, as they seek to partner with top-tier companies that can fulfill projects on schedule. With TechnipFMC, we can generally complete projects a year earlier than if they were handled without us, thanks to our iEPCI 2.0 model, which significantly reduces costs and cycle times. We're witnessing a growing trend toward selecting high-quality partners. Customers remain focused on economics, which aligns with our own interests. As a dedicated player in the offshore industry, we fully appreciate the value it brings and focus on enhancing project economics through our unique iEPCI 2.0 offerings. This gives our customers confidence that we can consistently deliver projects on time, which we consider our core advantage, Dave.

Great, thanks a lot, Doug. Appreciate it.

Luke Lemoine at Piper Sandler, your line is open.

Hey, good morning, Doug.

Morning, Luke.

When you laid out that initial Subsea margin target of 15% for '25, in late-'21, which you actually just hit this quarter, I don't believe there was much '25 backlog basically at the time. Just guessing this is somewhat predicated on what you saw coming in the pipeline from 2.0, iEPCI, direct awards, which you've talked about. Since then, you've raised that margin target earlier this year. But my question is, even though you have some backlog visibility past '25, which you show in your slide deck, how comfortable are you with where margins get ahead for maybe the next three to four years? And just to clarify, not looking for a specific margin target, just your confidence and visibility in that three to four-year timeframe?

No problem, Luke. You are correct. In November 2021, the situation was very different. At that time, we aimed to increase our margins to 15% primarily through internal initiatives. The Subsea 2.0 system has transformed our operating model from engineered-to-order to configured-to-order, which has significantly impacted our business. Developing the architecture and gaining the necessary scale are essential to realize the benefits of this model. This presents a unique opportunity for our company. When we set the 15% target, it was based on internal initiatives, but since then, market conditions have improved, leading us to raise the target to 18%. It is worth noting that we have already achieved three times the 15% target this quarter. We remain highly confident in our ability to enhance our margins further, particularly as we benefit more from the configured-to-order model and see an increase in iEPCI and 2.0 direct awards, which provide us with volume and scale advantages. Additionally, improving market conditions bolster our confidence and support our view that the 18% target represents a significant milestone in our ongoing journey. We are very optimistic about the future.

All right, got it. Thanks so much, Doug.

Marc Bianchi at TD Cowen, your line is open.

Hi, thank you. Maybe just quickly, Alf, to confirm on the EBITDA for this year, you said $915 million not $950 million, correct?

Yes, Marc, confirm, 915 is what I said, and it's $35 million up from the prior guide that we had from the prior quarter.

Yes, okay, super. Thank you.

And, Marc, can I ask something just to clarify? You may remember that in the previous quarter, we mentioned that we expected a 35% growth in EBITDA for 2024. Now with this new number of 915, you can still apply that 35%. To be very clear, we haven't diminished our expectation of 35% growth going into 2024. I'm glad you clarified the difference between 950 and 915, but the same dynamics are still in effect.

Interesting question, and actually I think a lot about this just in my spare time. So, look, a lot changed. And when we talk about the customers, I would say our customers are much more collaborative, much more open to partner-led solutions, much more open to new technologies. And it's really what enabled us to be able to achieve the success we've achieved with Subsea 2.0. The idea of standardization has been around since before 2010. The ability to be able to go from engineer to order to configure to order, which is much more than just standardization, was really the key when we unlocked that and were able to convince our customers that they could still have, if you will, optionality. But the building blocks were going to be standardized, not the final product, but the input to the final product was going to be standardized, that really changed the way of thinking. So, a lot of the credit goes to our customers. And their behaviors, which have certainly changed and improved over the period of time, our customer base has also expanded quite significantly over that period of time, that I mentioned in the script, we're operating in twice the number of basins that we have historically operated in, so people don't really think about it that much, but just the offshore market. When we think about offshore as offshore, but it was fairly limited in the areas of offshore that were really being developed, and that has doubled. And then, when you start to look at the, what keeps this momentum going, you start to look at all these frontier basins that we're hearing about. They're not onshore, they're offshore. And they're offshore around the world. They're not in any one particular continent or one particular area. They're spread around the world. And those areas are the ones that are going to contribute well beyond the numbers that we're talking about today. So, it is very, very different. And thank you for pointing out, I do want to close on, we're a different company, we were a great company in 2010. I believe we're an even greater company today. And again, that's driven by the change in our operating model and our ability to be able to demonstrate to our clients and give them the confidence to direct toward us the work that they do, because of who we are.

Thank you. Yes, excellent set of results and an outlook there. Doug, just a few outside points and the sale of the Apache vessel, I'm just wondering if there's any more of those planned. And then, the other question, do you see on the horizon a first offshore CCS award coming at all? Those are my two points?

Thank you, Mark. Regarding the fleet, since we established the company on January 17, 2017, our focus has been on achieving outstanding returns throughout business cycles. A key part of that strategy has involved handling our fleet differently. We don’t need to own and operate all the vessels we utilize. Our success depends on being a company that earns trust and fosters collaboration. This reputation has allowed us to build a strong vessel ecosystem and partner with leading companies like Allseas and Saipem, with more partnerships to come. This approach gives us the flexibility to assess whether our assets are strategic to our business. If they aren't, we can optimize our returns by reducing our fixed costs. I'm sorry, Mark, and I just was reminded of your second question. I got excited about the first. Thank you. On the second question, I would answer that by saying indeed.

Hi, good morning everybody. Hello?

Good morning, Kurt.

Great. I want to ensure you're still with me. Doug, with the growing inbound and backlog in Subsea and the increased visibility toward the end of the decade, could you provide some insights into how you're managing execution risk internally? What can you offer your clients to assure them that when they send work your way, you'll be in a strong position to manage it and deliver on time?

Kurt, that's a crucial question. When speaking with clients, they often reach out to discuss new opportunities and emerging markets, seeking assurance that TechnipFMC will deliver. The core of our conversation centers on the importance of keeping our commitments, and we've proven our ability to do that. We continue to reduce cycle times, bring innovation to the industry, and maintain our status as a preferred partner due to our commitment and company values. Importantly, we help clients understand how the transition from engineer to order to configure to order has transformed our operational model. Earlier this week, we had the chance to share with our Board of Directors our current operations and the significant changes in visibility and understanding of crucial success factors that ensure projects are completed on time. Tracking these success factors represents a fundamental shift. While engineer to order relies solely on whether the output is delivered on time, which is often too late for corrections, configure to order allows us to be proactive. We can now anticipate needs and take action much earlier. In the past, we would spend nine months on detailed engineering before even placing an order; our competitors still face this challenge. Now, we can collaborate with clients to plan years in advance and put in place the necessary components to ensure timely delivery. This new operational approach is evident in all our locations, allowing clients to witness our high-level delivery firsthand.

That's great color. And a follow-up, kind of curious, right, we've seen some recent, kind of tying everything together here, right? With respect to the order book, the upcoming, the insights as to the projects that are slated for even later this decade, and the incremental oil that's going to bring to the market right, yet. So, pack them out and suggest continued oil demand growth out beyond 2030. Obviously, the IEA kind of picks a different tone, but through all your experience in dealing with different cycles, right? At the end of the day, I can't imagine the customer moving forward with a project that's going to deliver first oil in the latter part of the decade, if their data is telling them that the markets not going to be there for the product. But that's kind of curious as to when try to piece all this stuff together. How do you sort through the noise?

Kurt, I believe you seek high-quality data, listen to your clients, and aim for the most realistic outcome unaffected by external factors. It is evident that there will be ongoing and strong demand. Based on the references you mentioned earlier, we definitely have faith in the data and insights provided by OPEC.

Arun Jayaram at J.P. Morgan, your line is open.

Good morning, Doug. I wanted to get some thoughts on the flexibles business at FTI. I was wondering if you could give us a sense of how much of your current contribution is from flexibles, and as we think about a couple of the large project awards that you announced this quarter with Petrobras and with Woodside in the Gulf of Mexico, how that mix could change and maybe the margin profile as well as maybe just the technology that you think you bring to the table versus two of your other peers that are in that segment?

Sure, Arun. As you mentioned, there are very few of us working in this area. We are pioneers and market leaders. Our focus is primarily on the higher end of the flexibles market. We have consistently driven advancements in diameter, pressure rating, tensile strength, and more. While the percentage of the business represented is significant, what matters more is the unique quality we bring to the table. Just like anyone with a bayou base or gumbo recipe has a secret ingredient, this is ours. It defines what makes iEPCI appealing. Without this element, the advantages of an integrated offering are limited. That's why, as the first mover, we decided to partner with Technip. The flexible products from Coflexip were essential to our vision of a streamlined subsea architecture. Not only does this product line hold value, but we are the only company with this offering as part of an integrated organization. The real advantage comes from the impact it has on our iEPCI awards and our margins in that area.

Okay. That's helpful. Maybe just a follow-up for Alf, you mentioned how the soft guide on 2024 is 35% EBITDA growth from the 915. I wanted to maybe ask for a little bit of a clarification on the cash return. I believe the stated policy is to return 60% of your free cash flow back. And one of the questions from investors is, how does the PNF settlement, how does that impact the free cash flow calculation and cash return?

No. Thank you for the questions. So, first of all, very clear, we do have a commitment out there that we will return at least 60% of our free cash flow to shareholders. And we're going to stay true to that over the next few years. So, what we further are saying is that really also the growth rate of 35% that you see in EBITDA from 2023 to 2024, we expect to apply that to distributions as well for 2024. So, in short, answering your question, yes, there is an impact of roughly $170 million of payments outflow next year in terms of the free cash flow. But overall, we still expect to increase shareholder distributions by 35% in line with our EBITDA guidance. So, that also tells you something about the underlying strong fundamental cash flow that you're going to see year-over-year, if you exclude the impact of these $170 million of payments.

Scott Gruber at Citigroup, your line is open.

Yes, good morning. Doug, in your prepared remarks, I believe you mentioned upside to service revenue in addition to the upside to order intake. You guys have been targeting $1.5 billion of service inbound and in '25. I'm just curious whether you guys are contemplating upside to that number as well.

Thanks, Scott. Obviously, we'll be giving a bit more detail with our Q4 on our Q4 call, but I would tell you, as you were kind enough to ask the question, we are very proud of our subsea services business. We have high expectations of our subsea business, so you should expect to see our subsea services business continue to benefit not only from the higher level project awards, which means a higher level of installation activity, but we're also seeing customers focus more on inspection, maintenance, and repair, really wanting to ensure optimized uptime of their producing assets, as well as our subsea well intervention services. And that's really about ensuring the production, because there may be some downhole issue that has occurred, and our ability then to go out and help them intervene into the well in the most cost-effective way. So, there are multiple drivers and a significant amount of optimism around our Subsea services business.

Got it. And the margins for that business have typically been better, what's the outlook for pricing and margins going forward then? I just imagine that there's more competition between installation and the maintenance and inspection, just given that the equipment award volume is going up and therefore the installation outlook is going up, does that create competition for those resources to do the inspection, maintenance, repair, such that you can get incremental pricing and margins?

First of all, Scott, keep in mind that this is an OEM model, so we take care of everything we install. We have the largest install base in the world, which benefits us as these businesses continue to grow. This growth is driven by our recent award activity over the past few years that has significantly increased our subsea services business compared to the market. However, it's all part of an OEM business. I don't usually discuss pricing in detail, but we closely collaborate with our clients to ensure that we are satisfied and feel that we are being treated fairly and appropriately in terms of economics, and we are very comfortable with that.

Saurabh Pant with Bank of America, your line is open.

Hi, good morning, Doug.

Good morning.

Doug, a quick follow-up on the flexibles question earlier on, it's really good to see the traction third quarter. Can you talk to us a little bit about the demand outlook for flexibles, and maybe talk to your capacity, the industry's capacity to deliver on that demand? And the reason I'm asking that, Doug, for some context is because one of your large competitors has talked about being sold out through 2025, so I'm just trying to think how's the demand looking, how's the capacity looking, particularly at FTI?

We don't emphasize being sold out; instead, we concentrate on creating technology that allows for shorter delivery times, faster deliveries, and increased throughput. Subsea 2.0 significantly reduces our processing time by 50%, enabling us to handle double the capacity at our existing facility without requiring further capital investment. In contrast, the industry still relies on the engineer-to-order model, which limits the output based on facility size, thus influencing how much we can be sold out or how utilized we are. We are now expanding the 2.0 methodology across all our offerings, including flexibles, aiming for a better configured-to-order product rather than engineer-to-order. This change will allow us to increase our manufacturing throughput to better meet market demands. Additionally, we are focusing on our partners, direct awards, and iEPCI projects, which are crucial to the success of integrated projects. As I mentioned earlier, we prioritize high-quality segments in the flexibles market, although there is a lower-end segment where we can participate, our main focus remains on the higher end rather than the commoditized sector.

Okay, awesome, Doug, thank you for that. And just a quick follow-up, because we get this question a lot from investors, so let me just ask you the way I get asked. Two of your competitors recently formed a joint venture. How should we think about the potential impact of that joint venture on the overall market, the industry's capability to respond to what's going on, and how does it impact FTI in particular, how should investors think about that?

So, just to clarify, you're talking about the three subsea?

Yes, I'm talking about the OneSubsea joint venture?

I'm sorry, I meant the three subsea companies that are coming together… Well, look, I think, first and foremost, it's clear validation of the strength of the market. Three subsea companies wouldn't be coming together if they didn't see the strength in the market going forward. So, it's just a point of validation. But it's also a reshaping of the market, right? So, we see both of these things as quite favorable to our company. We've talked a lot about bringing companies together, consolidation is one thing. Creating an integrated offering, we feel is the better way to go about it, investing in technology, doing things that are going to improve our clients' project returns, that's where they see the value. And that's, quite frankly, why we've seen and continue to see the level of direct awards to our company, which is quite unprecedented in our industry, or I believe any industry. So, look, from our point of view, we did our heavy lifting back in 2015, believe it or not that long ago is when we started the journey. We completed the merger on January 17, 2017. And look, I'll be very candid, it took years. It took years to get everything operating at the level it's operating at today. Bringing together two companies, let alone three companies, it's not easy to do. So, we're really glad we did ours eight years ago, I can tell you that. And today, we're singularly focused on our clients, and singularly focused on their success by delivering the world's very best subsea projects.

Our last question will come from the line of Waqar Syed at ATB Capital Markets. Your line is open.

Thank you for taking my question. First one, Doug, you've given guidance that, over the next five quarters, inbound orders in Subsea could be around $11 billion. If you look back over the last three to four months, has that view been upgraded or has that view relatively remained unchanged but the confidence in that outlook has increased?

A fair question, I would say it's been upgraded, and the confidence has increased.

Okay. Now, does that have any impact then on your 2025 outlook for revenues and EBITDA?

Absolutely not.

Sure. Here’s the rewritten Earnings Call remark: Okay. And then.

Let me clarify. That may have been a brief response. Regarding the $25 billion target for 2025, as mentioned in my script, we plan to provide an update on that during the Q4 guidance. If we focus on inbound as you pointed out, EBITDA is important. As I mentioned earlier, we just provided a forecast for total company EBITDA for 2024, which has increased for the second consecutive quarter, demonstrating a strong trend. We will break that down further during the fourth-quarter call and may revisit the 2025 projections as well, which are trending positively.

Okay. And then in terms of your capital spending, $250 million or so for this year, is that number likely to change? I know it's still early for next year or is that kind of base level $250 million that's likely to stay year-over-year?

The truth is we don't know. And I know it's an important number because I know it's a visible number for investors to use in their decision-making. What I would encourage people to realize is it's really the prioritization of that spend. And it's clearly being prioritized to upstream, and it's clearly being prioritized to offshore. So, from our perspective, we are very confident in the continued growth of the capital expenditure.

I want to remind you that when you look at our capital expenditure, we have provided long-term guidance indicating we will be in a range of 3.5% to 4.5%. However, over the past 12 months and more, we have demonstrated that we can operate at the lower end of that range at 3.5%, and that continues to be our guidance, meaning 3.5% of revenue. This holds true for this year and is likely to be true for next year as well. Please keep that number in mind as a guide for the intermediate term.

No, thank you, Alf. I was answering it just to be clear, I was referring to our customers' capital expenditure. And thank you for clarifying the interim, Alf, I appreciate it.

Thank you very much, appreciate the answers.

Thank you. This concludes our third quarter conference call. A replay of the call will be available on our website beginning at approximately 8:00 p.m. British Summer Time today. If you have any further questions, please feel free to contact the Investor Relations team. Thank you for joining us. Jack, you may now end the call.

This concludes today's conference. We thank you for your participation. You may now disconnect.