Baker Hughes 10-Q 2024-09-30

Filed 2024-10-23. 8 sections, 145K characters. Original on sec.gov · Markdown · JSON

Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_________to__________

Commission File Number 1-38143

Baker Hughes Company

(Exact name of registrant as specified in its charter)

Delaware81-4403168
(State or other jurisdiction(I.R.S. Employer Identification No.)
of incorporation or organization)
575 N. Dairy Ashford Rd., Suite 100
Houston,Texas77079-1121
(Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code: (713) 439-8600

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, par value $0.0001 per shareBKRThe Nasdaq Stock Market LLC
5.125% Senior Notes due 2040 of Baker Hughes Holdings LLC and Baker Hughes Co-Obligor, Inc.BKR40The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer" "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer☑Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

As of October 16, 2024, the registrant had outstanding 989,525,809 shares of Class A Common Stock, $0.0001 par value per share.

Baker Hughes Company

Table of Contents

Page No.
PART I -FINANCIAL INFORMATION
Item 1.Financial Statements (Unaudited)
Condensed Consolidated Statements of Income (Loss) (Unaudited) - Three and nine months ended September 30, 2024 and 20231
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Three and nine months ended September 30, 2024 and 20232
Condensed Consolidated Statements of Financial Position (Unaudited) - September 30, 2024 and December 31, 20233
Condensed Consolidated Statements of Changes in Equity (Unaudited) - Three and nine months ended September 30, 2024 and 20234
Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine months ended September 30, 2024 and 20236
Notes to Unaudited Condensed Consolidated Financial Statements7
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations24
Item 3.Quantitative and Qualitative Disclosures About Market Risk35
Item 4.Controls and Procedures36
PART II -OTHER INFORMATION
Item 1.Legal Proceedings37
Item 1A.Risk Factors37
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds37
Item 3.Defaults Upon Senior Securities37
Item 4.Mine Safety Disclosures37
Item 5.Other Information38
Item 6.Exhibits38
Signatures39

Baker Hughes Company 2024 Third Quarter Form 10-Q | i

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (UNAUDITED)

Baker Hughes Company

Condensed Consolidated Statements of Income (Loss)

(Unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except per share amounts)2024202320242023
Revenue:
Sales of goods$4,413$4,044$12,963$11,320
Sales of services2,4952,5977,5027,351
Total revenue6,9086,64120,46518,671
Costs and expenses:
Cost of goods sold3,5813,46710,7639,704
Cost of services sold1,7851,8315,3925,163
Selling, general and administrative6126271,8731,977
Restructuring, impairment and other—221161
Total costs and expenses5,9785,92718,04917,005
Operating income9307142,4161,666
Other non-operating income, net13494200638
Interest expense, net(55)(49)(143)(171)
Income before income taxes1,0097592,4732,133
Provision for income taxes(235)(235)(656)(614)
Net income7745241,8171,519
Less: Net income attributable to noncontrolling interests861716
Net income attributable to Baker Hughes Company$766$518$1,800$1,503
Per share amounts:
Basic income per Class A common stock$0.77$0.51$1.81$1.49
Diluted income per Class A common stock$0.77$0.51$1.80$1.48
Cash dividend per Class A common stock$0.21$0.20$0.63$0.58

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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Baker Hughes Company

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2024202320242023
Net income$774$524$1,817$1,519
Less: Net income attributable to noncontrolling interests861716
Net income attributable to Baker Hughes Company7665181,8001,503
Other comprehensive income (loss):
Foreign currency translation adjustments142(122)(50)47
Cash flow hedges8(14)6(3)
Benefit plans(5)24420
Other comprehensive income (loss)145(112)(40)64
Less: Other comprehensive income attributable to noncontrolling interests1———
Other comprehensive income (loss) attributable to Baker Hughes Company144(112)(40)64
Comprehensive income9194121,7771,583
Less: Comprehensive income attributable to noncontrolling interests861816
Comprehensive income attributable to Baker Hughes Company$911$406$1,759$1,567

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Baker Hughes Company 2024 Third Quarter Form 10-Q | 2

Baker Hughes Company

Condensed Consolidated Statements of Financial Position

(Unaudited)

(In millions, except par value)September 30, 2024December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents$2,664$2,646
Current receivables, net6,9207,075
Inventories, net5,2545,094
All other current assets1,7301,486
Total current assets16,56816,301
Property, plant and equipment (net of accumulated depreciation of $6,157 and $5,678)5,1504,893
Goodwill6,1676,137
Other intangible assets, net3,9954,093
Contract and other deferred assets1,9041,756
All other assets3,0973,043
Deferred income taxes649722
Total assets$37,530$36,945
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$4,431$4,471
Short-term and current portion of long-term debt52148
Progress collections and deferred income5,6855,542
All other current liabilities2,6222,830
Total current liabilities12,79012,991
Long-term debt5,9845,872
Deferred income taxes154176
Liabilities for pensions and other postretirement benefits991978
All other liabilities1,2681,409
Equity:
Class A Common Stock, $0.0001 par value - 2,000 authorized, 989 and 998 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively——
Class B Common Stock, $0.0001 par value - 1,250 authorized, nil issued and outstanding as of September 30, 2024 and December 31, 2023——
Capital in excess of par value26,04526,983
Retained loss(7,019)(8,819)
Accumulated other comprehensive loss(2,837)(2,796)
Baker Hughes Company equity16,18915,368
Noncontrolling interests154151
Total equity16,34315,519
Total liabilities and equity$37,530$36,945

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Baker Hughes Company 2024 Third Quarter Form 10-Q | 3

Baker Hughes Company

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

(In millions, except per share amounts)Class A and Class B Common Stock**Capital in Excess

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements and the related notes included in Item 1 thereto, as well as our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Annual Report").

Baker Hughes Company ("Baker Hughes," "the Company," "we," "us," or "our") is an energy technology company with a broad and diversified portfolio of technologies and services that spans the energy and industrial value chain. We conduct business in more than 120 countries and employ approximately 57,000 employees. We operate through our two business segments: Oilfield Services & Equipment ("OFSE") and Industrial & Energy Technology ("IET"). We sell products and services primarily in the global oil and gas markets, within the upstream, midstream and downstream segments, as well as broader industrial and new energy markets.

EXECUTIVE SUMMARY

Market Conditions

In the third quarter of 2024, we saw oil markets impacted by both demand and supply side factors, including slowing global economic growth, resilient North American production, weakening compliance in the Organization of the Petroleum Exporting Countries ("OPEC"), and geopolitical uncertainty.

As we look to the fourth quarter of 2024 and into 2025, we remain positive on the global gas outlook while the global oil outlook is uncertain. Based on the current macroeconomic and geopolitical environments, we expect 2025 global upstream spending to be similar to 2024. We maintain our expectation for producers to shift spending towards the optimization of mature assets and for continued strength in natural gas.

In OFSE, we see increased uncertainty in the macroeconomic backdrop. The continued production increases in North America, the growth in deepwater production, and the recent OPEC plans for production increases could put pressure on oil fundamentals. Geopolitical uncertainty across the Middle East could also create added volatility for oil prices.

In IET, we maintain an optimistic outlook for the development of global natural gas and liquefied natural gas ("LNG"). This positive outlook is supported by growing demand for projects across LNG, gas infrastructure, and onshore and offshore production. We also expect continued positive momentum from other structural growth drivers, such as increasing power demand, conversion of downstream applications, and the transition to new energy solutions.

Global geopolitical uncertainty continues to influence the oil and gas markets. While there has not been a material impact on our operations, we will continue to monitor and assess these risks. Furthermore, in IET, we will continue to manage the tightness in the aeroderivative supply chain.

Financial Results and Key Company Initiatives

In the third quarter of 2024, operating income was $930 million in the third quarter of 2024 compared to $714 million in the third quarter of 2023, increasing $216 million. This increase was driven by higher volume in IET, positive price in both segments and structural cost-out initiatives, partially offset by cost inflation in IET.

As our journey of transformation continues, we have made progress in our efforts to improve efficiencies and modernize how the business operates. The business has undertaken significant structural changes and we see the operating benefits coming through in the margin performance.

Baker Hughes remains committed to a flexible capital allocation policy that balances returning cash to shareholders and investing in growth opportunities. In the third quarter of 2024, we returned a total of $361 million to shareholders in the form of dividends and share repurchases.

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Outlook

Our business is exposed to a number of macro factors, which influence our outlook and expectations given the current volatile conditions in the industry. All of our outlook expectations are purely based on the market as we see it today and are subject to changing conditions in the industry.

  • OFSE North America activity: North America activity levels remain subdued going into the fourth quarter of 2024 and into 2025.

  • OFSE International activity: We expect a decelerating pace of growth for spending outside of North America in the fourth quarter of 2024 and into 2025.

  • IET LNG projects: We remain optimistic on the LNG market long-term and view natural gas as a transition and destination fuel. We continue to view the long-term economics of the LNG industry as positive.

We have other businesses in our portfolio that are more correlated with various industrial metrics, including global GDP growth. We also have businesses within our portfolio that are exposed to new energy solutions, specifically focused around reducing carbon emissions of the energy and broader industry, including: hydrogen; geothermal; carbon capture, utilization and storage; energy storage; clean power; and emissions abatement solutions. We expect to see continued growth in these global businesses as new energy solutions become a more prevalent part of the broader energy mix.

Overall, we believe our portfolio is well positioned to compete across the energy value chain and deliver comprehensive solutions for our customers. We remain optimistic about the long-term economics of the oil and gas industry, but we are continuing to operate with flexibility. Over time, we believe the world's demand for energy will continue to rise, and that hydrocarbons will play a major role in meeting the world's energy needs for the foreseeable future. As such, we remain focused on delivering innovative, low-emission, and cost-effective solutions that deliver step changes in operating and economic performance for our customers.

Sustainability

We believe we have an important role to play in society as an industry leader and partner. We view the area of environmental, social, and governance as a key lever to transform the performance of our Company and our industry. In January 2019, we made a commitment to reduce Scope 1 and 2 carbon dioxide equivalent emissions from our operations by 50% by 2030 and achieve net-zero emissions by 2050. We continue to make progress on emissions reductions, and reported in our 2023 Corporate Sustainability Report a 28.3% reduction in our Scope 1 and 2 carbon dioxide equivalent emissions as compared to our 2019 base year.

BUSINESS ENVIRONMENT

The following discussion and analysis summarizes the significant factors affecting our results of operations, financial condition, and liquidity position as of and for the three and nine months ended September 30, 2024 and 2023, and should be read in conjunction with our condensed consolidated financial statements and related notes.

Our revenue is predominately generated from the sale of products and services to major, national, and independent oil and natural gas companies worldwide, and is dependent on spending by our customers for oil and natural gas exploration, field development and production. This spending is driven by a number of factors, including our customers' forecasts of future energy demand and supply, their access to resources to develop and produce oil and natural gas, their ability to fund their capital programs, the impact of new government regulations, and their expectations for oil and natural gas prices as a key driver of their cash flows.

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Oil and Natural Gas Prices

Oil and natural gas prices are summarized in the table below as averages of the daily closing prices during each of the periods indicated.

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Brent oil price ($/Bbl) (1)$80.01$86.65$82.50$81.99
WTI oil price ($/Bbl) (2)76.4382.2578.5877.27
Natural gas price ($/mmBtu) (3)2.112.592.112.46

(1)Energy Information Administration ("EIA") Europe Brent Spot Price per Barrel

(2)EIA Cushing, OK West Texas Intermediate ("WTI") spot price

(3)EIA Henry Hub Natural Gas Spot Price per million British Thermal Unit

Outside North America, customer spending is influenced by Brent oil prices. In North America, customer spending is influenced by WTI oil prices and natural gas prices are measured by the Henry Hub Natural Gas Spot Price.

Baker Hughes Rig Count

The Baker Hughes rig counts are an important business barometer for the drilling industry and its suppliers. When drilling rigs are active, they consume products and services produced by the oil service industry. Rig count trends are driven by the exploration and development spending by oil and natural gas companies, which in turn is influenced by current and future price expectations for oil and natural gas. The counts may reflect the relative strength and stability of energy prices and overall market activity; however, these counts should not be solely relied on as other specific and pervasive conditions may exist that affect overall energy prices and market activity.

We have been providing rig counts to the public since 1944. We gather all relevant data through our field service personnel, who obtain the necessary data from routine visits to the various rigs, customers, contractors and other outside sources as necessary. We base the classification of a well as either oil or natural gas primarily upon filings made by operators in the relevant jurisdiction. This data is then compiled and distributed to various wire services and trade associations and is published on our website. We believe the counting process and resulting data is reliable; however, it is subject to our ability to obtain accurate and timely information. Rig counts are compiled weekly for the United States of America ("U.S.") and Canada and monthly for all international rigs. Published international rig counts do not include rigs drilling in certain locations such as onshore China because this information is not readily available.

Rigs in the U.S. and Canada are counted as active if, on the day the count is taken, the well being drilled has been started but drilling has not been completed and the well is anticipated to be of sufficient depth to be a potential consumer of our drill bits. In international areas, rigs are counted on a weekly basis and deemed active if drilling activities occurred during the majority of the week. The weekly results are then averaged for the month and published accordingly. The rig count does not include rigs that are in transit from one location to another, rigging up, being used in non-drilling activities including production testing, completion and workover, and are not expected to be significant consumers of drill bits.

The rig counts are summarized in the table below as averages for each of the periods indicated.

Three Months Ended September 30,Nine Months Ended September 30,
20242023% Change20242023% Change
North America796836(5)%788885(11)%
International937951(1)%9559421%
Worldwide1,7331,787(3)%1,7431,827(5)%

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The worldwide rig count was 1,733 for the third quarter of 2024, a decrease of 3% as compared to the same period last year primarily due to a decrease in North America. Within North America, the decrease was primarily driven by the U.S. rig count, which was down 10% when compared to the same period last year, partially offset by an increase in the Canada rig count, which was up 12% when compared to the same period last year. Internationally, the rig count decrease was driven primarily by a decrease in the Latin America, Asia-Pacific, and Europe regions of 10%, 2%, and 2%, respectively, when compared to the same period last year.

The worldwide rig count was 1,743 for the nine months ended September 30, 2024, a decrease of 5% as compared to the same period last year primarily due to a decrease in North America. Within North America, the decrease was driven by the U.S. rig count, which was down 15% when compared to the same period last year. Internationally, the rig count increase was driven primarily by an increase in the Africa, Middle East, Asia-Pacific, and Europe regions of 10%, 4%, 3%, and 1%, respectively.

RESULTS OF OPERATIONS

The discussions below relating to significant line items from our condensed consolidated statements of income (loss) are based on available information and represent our analysis of significant changes or events that impact the comparability of reported amounts. Where appropriate, we have identified specific events and changes that affect comparability or trends and, where reasonably practicable, have quantified the impact of such items. In addition, the discussions below for revenue and cost of revenue are on a total basis as the business drivers for product sales and services are similar. All dollar amounts in tabulations in this section are in millions of dollars, unless otherwise stated. Certain columns and rows may not add due to the use of rounded numbers.

Our condensed consolidated statements of income (loss) display sales and costs of sales in accordance with the Securities and Exchange Commission ("SEC") regulations under which "goods" is required to include all sales of tangible products and "services" must include all other sales, including other service activities. For the amounts shown below, we distinguish between "equipment" and "product services," where product services refer to sales under product services agreements, including sales of both goods (such as spare parts and equipment upgrades) and related services (such as monitoring, maintenance and repairs), which is an important part of our operations. We refer to "product services" simply as "services" within the Business Environment section of Management's Discussion and Analysis.

Our results of operations are evaluated by the Chief Executive Officer on a consolidated basis as well as at the segment level. The performance of our operating segments is primarily evaluated based on segment operating income (loss), which is defined as income (loss) before income taxes and before the following: net interest expense, net other non-operating income (loss), unallocated corporate expenses, significant restructuring plans, impairment and other charges, inventory impairments, and certain gains and losses not allocated to the operating segments.

In evaluating the performance, we primarily use the following:

Volume: Volume is defined as the increase or decrease in products and/or services sold period-over-period excluding the impact of foreign exchange and price. The volume impact on profit is calculated by multiplying the prior period profit rate by the change in revenue volume between the current and prior period. Volume also includes price, which is defined as the change in sales price for a comparable product or service period-over-period and is calculated as the period-over-period change in sales prices of comparable products and services.

Foreign Exchange ("FX"): FX measures the translational foreign exchange impact, or the translation impact of the period-over-period change on sales and costs directly attributable to change in the foreign exchange rate compared to the U.S. dollar. FX impact is calculated by multiplying the functional currency amounts (revenue or profit) with the period-over-period FX rate variance, using the average exchange rate for the respective period.

(Inflation)/Deflation: (Inflation)/deflation is defined as the increase or decrease in direct and indirect costs of the same type for an equal amount of volume. It is calculated as the year-over-year change in cost (i.e. price paid) of direct material, compensation and benefits, and overhead costs.

Productivity: Productivity is measured by the remaining variance in profit, after adjusting for the period-over-period impact of volume and price, foreign exchange, and (inflation)/deflation as defined above. Improved or lower period-over-period cost productivity is the result of cost efficiencies or inefficiencies, such as cost decreasing or

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increasing more than volume, or cost increasing or decreasing less than volume, or changes in sales mix among segments. This also includes the period-over-period variance of transactional foreign exchange, aside from those foreign currency devaluations that are reported separately for business evaluation purposes.

Orders and Remaining Performance Obligations

Summarized orders information for our segments are shown in the following table.

Three Months Ended September 30,$ ChangeNine Months Ended September 30,$ Change
2024202320242023
Orders:
Oilfield Services & Equipment3,8074,178(371)11,50012,470(970)
Gas Technology Equipment1,0882,813(1,725)3,8106,070(2,260)
Gas Technology Services778724542,2392,19643
Total Gas Technology1,8663,537(1,671)6,0498,266(2,217)
Industrial Products494477171,5641,5559
Industrial Solutions2932712383179734
Controls (1)————66(66)
Total Industrial Technology787748402,3952,418(23)
Climate Technology Solutions (2)21549166800463336
Industrial & Energy Technology2,8684,334(1,465)9,24411,148(1,904)
Total$6,676$8,512$(1,836)$20,744$23,618$(2,874)

(1)The sale of our controls business was completed in April 2023.

(2)For the three and nine months ended September 30, 2024, total new energy orders incorporates CTS in IET of $0.2 billion and $0.8 billion, respectively.

The Remaining Performance Obligations ("RPO") relate to the aggregate amount of the transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations. As of September 30, 2024, RPO totaled $33.4 billion, of which OFSE totaled $3.2 billion, and IET totaled $30.2 billion.

The Third Quarter of 2024 Compared to the Third Quarter of 2023

Revenue increased $267 million, or 4%, to $6.9 billion. OFSE increased $12 million and IET increased $254 million.

Selling, general and administrative decreased $15 million, or 2%, to $612 million, and our Corporate costs, which are primarily reported within this financial measure, decreased $3 million, or 3%, to $91 million. These decreases were driven primarily by cost optimization initiatives, partially offset by inflationary pressure.

Operating income increased $216 million, or 30%, to $930 million, driven primarily by: improved performance in margins from both segments, price, and continued benefit of cost optimization initiatives, partially offset by inflationary pressure and unfavorable business mix.

We recorded other non-operating income of $134 million in the third quarter of 2024, which included a net gain of $99 million from the change in fair value for certain equity investments. In the third quarter of 2023, we recorded $94 million of other non-operating income. Included in this amount was a net gain of $99 million from the change in fair value for certain equity investments.

Net interest expense incurred in the third quarter of 2024 was $55 million, which includes interest income of $18 million. Net interest expense increased $6 million compared to the third quarter of 2023, with lower interest income primarily driven by lower average cash on deposit.

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We recorded income taxes in the third quarter of 2024 and 2023 of $235 million. The difference between the U.S. statutory tax rate of 21% and the effective tax rate is primarily related to income in jurisdictions with tax rates higher than in the U.S. and losses with no tax benefit due to valuation allowances, partially offset by income subject to U.S. tax at an effective rate less than 21% due to valuation allowances.

Segment Revenues and Segment Operating Income

Oilfield Services & Equipment

Three Months Ended September 30,$ Change
20242023
Revenue
Well Construction$1,050$1,128$(77)
Completions, Intervention & Measurements1,0091,085(77)
Production Solutions98396716
Subsea & Surface Pressure Systems921770151
Total$3,963$3,951$12
Operating income$547$465$83
Operating margin (1)13.8%11.8%2pts

(1)Operating margin is defined as operating income divided by revenue.

OFSE revenue of $3,963 million increased $12 million in the third quarter of 2024 compared to the third quarter of 2023, driven by Subsea & Surface Pressure Systems ("SSPS"). From a geographical perspective, international revenue was $2,992 million, an increase of $106 million from the third quarter of 2023, primarily driven by the Europe/CIS/Sub-Saharan Africa regions, partially offset by the Latin America and Middle East/Asia regions. North America revenue was $971 million in the third quarter of 2024, a decrease of $93 million from the third quarter of 2023.

OFSE segment operating income was $547 million in the third quarter of 2024 compared to $465 million in the third quarter of 2023. The improved performance in the third quarter of 2024 was primarily driven by higher price, cost-out initiatives, and operational efficiencies driving productivity, partially offset by unfavorable business mix and inflationary pressure.

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Industrial & Energy Technology

Three Months Ended September 30,$ Change
20242023
Revenue
Gas Technology Equipment$1,281$1,227$54
Gas Technology Services69763759
Total Gas Technology1,9781,865113
Industrial Products5205201
Industrial Solutions25724314
Total Industrial Technology77776314
Climate Technology Solutions19163127
Total$2,945$2,691$254
Operating income$474$346$128
Operating margin (1)16.1%12.9%3.2pts

(1)Operating margin is defined as operating income divided by revenue.

IET revenue of $2,945 million increased $254 million, or 9%, in the third quarter of 2024 compared to the third quarter of 2023. The increase was primarily driven by Climate Technology Solutions and across the Gas Technology business and, to a lesser extent, in Industrial Technology.

IET segment operating income was $474 million in the third quarter of 2024 compared to $346 million in the third quarter of 2023. The improved performance in the third quarter of 2024 was primarily driven by higher volume, price, and cost-out initiatives, partially offset by inflationary pressure.

The First Nine Months of 2024 Compared to the First Nine Months of 2023

Revenue increased $1,794 million, or 10%, to $20.5 billion, driven by both segments. OFSE increased $352 million and IET increased $1,442 million.

Selling, general and administrative decreased $104 million, or 5%, to $1,873 million, and our Corporate costs, which are primarily reported within this financial measure, decreased $21 million, or 7%, to $271 million. These decreases were driven primarily by cost optimization initiatives, partially offset by inflationary pressure.

Operating income increased $750 million, or 45%, to $2,416 million, driven primarily by: improved performance within each segment, increased volume, price, and continued benefit of cost optimization initiatives, partially offset by unfavorable business mix and inflationary pressure.

Restructuring, impairment, and other charges were $21 million in the first nine months of 2024, compared to $161 million in the first nine months of 2023. The charges in the first nine months of 2023 primarily related to employee termination expenses driven by actions taken to facilitate the reorganization into two segments and to optimize our corporate structure. In addition, costs were incurred related to exit activities at specific locations in our segments to align with our current market outlook and to rationalize our manufacturing supply chain footprint.

Other non-operating income in the first nine months of 2024 was $200 million, which included a gain of $171 million from the change in fair value for certain equity investments. For the first nine months of 2023, we recorded $638 million of other non-operating income. Included in this amount was a gain of $639 million from the change in fair value for certain equity investments.

Net interest expense in the first nine months of 2024 was $143 million, which includes interest income of $74 million. Net interest expense decreased $28 million compared to the first nine months of 2023, primarily driven by

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higher interest income from the net impact of interest income and FX on cash held in Argentina and, to a lesser extent, lower interest expense following debt repayments.

In the first nine months of 2024 and 2023, the provision for income taxes was $656 million and $614 million, respectively. The difference between the U.S. statutory tax rate of 21% and the effective tax rate is primarily related to income in jurisdictions with tax rates higher than in the U.S. and losses with no tax benefit due to valuation allowances, partially offset by income subject to U.S. tax at an effective rate less than 21% due to valuation allowances.

Segment Revenues and Segment Operating Income

Oilfield Services & Equipment

Nine Months Ended September 30,$ Change
20242023
Revenue
Well Construction$3,201$3,265$(64)
Completions, Intervention & Measurements3,1323,08447
Production Solutions2,8862,86323
Subsea & Surface Pressure Systems2,5382,192346
Total$11,757$11,405$352
Operating income$1,462$1,253$209
Operating margin (1)12.4%11.0%1.4pts

**(1)**Operating margin is defined as operating income divided by revenue.

OFSE revenue of $11,757 million increased $352 million, or 3%, in the first nine months of 2024 compared to the first nine months of 2023, driven by SSPS and international markets, partially offset by North America. From a geographical perspective, international revenue was $8,773 million, an increase of $466 million from the first nine months of 2023, primarily driven by the Europe/CIS/Sub-Saharan Africa region, partially offset by the Latin America region. North America revenue was $2,984 million in the first nine months of 2024, a decrease of $113 million from the first nine months of 2023.

OFSE segment operating income was $1,462 million in the first nine months of 2024 compared to $1,253 million in the first nine months of 2023. The improved performance was primarily driven by higher volume, price, and cost-out initiatives, partially offset by unfavorable business mix and inflationary pressure.

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Industrial & Energy Technology

Nine Months Ended September 30,$ Change
20242023
Revenue
Gas Technology Equipment$4,030$3,026$1,004
Gas Technology Services2,0021,886115
Total Gas Technology6,0324,9131,119
Industrial Products1,4921,44943
Industrial Solutions78370776
Controls (1)—41(41)
Total Industrial Technology2,2752,19778
Climate Technology Solutions402156245
Total$8,708$7,267$1,442
Operating income$1,246$898$348
Operating margin (2)14.3%12.4%1.9pts

(1)The sale of our controls business was completed in April 2023.

(2)Operating margin is defined as operating income divided by revenue.

IET revenue of $8,708 million increased $1,442 million, or 20%, in the first nine months of 2024 compared to the first nine months of 2023. The increase was primarily driven by Gas Technology (predominately in GTE) and, to a lesser extent, in CTS and Industrial Technology.

IET segment operating income was $1,246 million in the first nine months of 2024 compared to $898 million in the first nine months of 2023. The improved performance in the first nine months of 2024 was driven by higher volume, price, and cost-out initiatives, partially offset by unfavorable business mix and inflationary pressure.

LIQUIDITY AND CAPITAL RESOURCES

Our objective in financing our business is to maintain sufficient liquidity, adequate financial resources, and financial flexibility in order to fund the requirements of our business. We continue to maintain solid financial strength and liquidity. At September 30, 2024, we had cash and cash equivalents of $2.7 billion compared to $2.6 billion at December 31, 2023.

In the U.S. we held cash and cash equivalents of approximately $0.5 billion and $0.6 billion and outside the U.S. of approximately $2.2 billion and $2.0 billion as of September 30, 2024 and December 31, 2023, respectively. A substantial portion of the cash held outside the U.S. at September 30, 2024 has been reinvested in active non-U.S. business operations. If we decide at a later date to repatriate certain cash to the U.S., we may incur other additional taxes that would not be significant to the total tax provision.

As of September 30, 2024 and December 31, 2023, we had $785 million and $637 million, respectively, of cash held in countries with currency controls that limit the flow of cash out of the jurisdiction or limit our ability to transfer funds without potentially incurring substantial costs. These funds are available to fund operations and growth in their respective jurisdictions, and we do not currently anticipate a need to transfer these funds to the U.S.

We have a $3.0 billion committed unsecured revolving credit facility ("the Credit Agreement") with commercial banks maturing in November 2028. The Credit Agreement contains certain representations and warranties, certain affirmative covenants and negative covenants, in each case we consider customary. No related events of default have occurred. The Credit Agreement is fully and unconditionally guaranteed on a senior unsecured basis by Baker Hughes. At September 30, 2024 and December 31, 2023, there were no borrowings under the Credit Agreement.

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Certain Senior Notes contain covenants that restrict our ability to take certain actions. See "Note 8. Debt" of the Notes to Unaudited Condensed Consolidated Financial Statements in this Quarterly Report for further details. At September 30, 2024, we were in compliance with all debt covenants. Our next debt maturity is December 2026.

We continuously review our liquidity and capital resources. If market conditions were to change, for instance due to the uncertainty created by geopolitical events, a global pandemic, or a significant decline in oil and gas prices, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be negatively impacted. Additionally, it could cause the rating agencies to lower our credit ratings. There are no ratings triggers that would accelerate the maturity of any borrowings under our committed credit facility; however, a downgrade in our credit ratings could increase the cost of borrowings under the credit facility. Should this occur, we could seek alternative sources of funding, including borrowing under the credit facility.

During the nine months ended September 30, 2024, we dispersed cash to fund a variety of activities including certain working capital needs, capital expenditures, the payment of dividends, and repurchases of our common stock.

Cash Flows

Cash flows provided by (used in) each type of activity were as follows for the nine months ended September 30:

(In millions)20242023
Operating activities$2,142$2,130
Investing activities(799)(503)
Financing activities(1,293)(861)

Operating Activities

Cash flows provided by operating activities were $2,142 million and $2,130 million for the nine months ended September 30, 2024 and 2023, respectively.

Our largest source of operating cash is payments from customers, of which the largest component is collecting cash related to our sales of products and services, including advance payments or progress collections for work to be performed. The primary use of operating cash is to pay our suppliers, employees, tax authorities, and others for a wide range of goods and services.

Cash generated from operating activities is primarily driven by net income adjusted for certain noncash items (including depreciation, amortization, gain on equity securities, stock-based compensation cost, deferred tax provision, and the impairment of certain assets).

For the nine months ended September 30, 2024, net working capital cash usage was $57 million, mainly due to an increase in inventory and contract assets as we continue to build for growth, partially offset by accounts receivables. Included in the cash flows from operating activities for the nine months ended September 30, 2024 are payments of $187 million made primarily for employee severance as a result of our restructuring activities.

For the nine months ended September 30, 2023, net working capital cash generation was $19 million for the nine months ended September 30, 2023, mainly due to strong progress collections on equipment contracts, mostly offset by an increase in receivables and inventory as we built for growth.

Investing Activities

Cash flows used in investing activities were $799 million and $503 million for the nine months ended September 30, 2024 and 2023, respectively.

Our principal recurring investing activity is the funding of capital expenditures including property, plant, and equipment ("PP&E") and software, to support and generate revenue from operations. Expenditures for capital assets were $925 million and $868 million for the nine months ended September 30, 2024 and 2023, respectively, partially offset by cash flows from the disposal of PP&E of $145 million and $150 million for the nine months ended September 30, 2024 and 2023, respectively. Proceeds from the disposal of assets are primarily related to

Baker Hughes Company 2024 Third Quarter Form 10-Q | 33

equipment that was lost-in-hole, predominantly in OFSE, and PP&E no longer used in operations that was sold throughout the period.

We had proceeds from the sale of certain equity securities of $21 million and $372 million during the nine months ended September 30, 2024 and 2023, respectively.

During the nine months ended September 30, 2023, we completed the acquisition of businesses for total cash consideration of $301 million, net of cash acquired, which consisted primarily of the acquisition of Altus Intervention in the OFSE segment in the second quarter of 2023. We also completed the sale of businesses and received total cash consideration of $293 million, which consisted primarily of the sale of our Nexus Controls business in the IET segment in the second quarter of 2023.

Financing Activities

Cash flows used in financing activities were $1,293 million and $861 million for the nine months ended September 30, 2024 and 2023, respectively.

During the nine months ended September 30, 2024, we repaid long-term debt of $134 million primarily related to debentures that matured in the second quarter of 2024. We increased our quarterly dividend during the nine months ended September 30, 2024 and 2023 by one cent to $0.21 and $0.20 per share, respectively. We paid dividends of $628 million and $586 million to our Class A shareholders during the nine months ended September 30, 2024 and 2023, respectively.

We repurchased and canceled 15.0 million shares of Class A common stock for a total of $476 million during the nine months ended September 30, 2024. During the nine months ended September 30, 2023, we repurchased and canceled 7.0 million shares of Class A common stock for a total of $219 million.

Cash Requirements

We believe cash on hand, cash flows from operating activities, the available revolving credit facility, access to our uncommitted lines of credit, and availability under our existing shelf registrations of debt will provide us with sufficient capital resources and liquidity in the short-term and long-term to manage our working capital needs, meet contractual obligations, fund capital expenditures and dividends, repay debt, repurchase our common stock, and support the development of our short-term and long-term operating strategies.

Our capital expenditures can be adjusted and managed by us to match market demand and activity levels. We continue to believe that based on current market conditions, capital expenditures in 2024 are expected to be made at a rate that would equal up to 5% of annual revenue. The expenditures are expected to be used primarily for normal, recurring items necessary to support our business.

We currently anticipate making income tax payments in the range of $900 million to $950 million in 2024.

Other Factors Affecting Liquidity

Customer receivables: In line with industry practice, we may bill our customers for services provided in arrears dependent upon contractual terms. In a challenging economic environment, we may experience delays in the payment of our invoices due to customers' lower cash flow from operations or their more limited access to credit markets. While historically there have not been material non-payment events, we attempt to mitigate this risk through working with our customers to restructure their debts. In regards to our primary customer in Mexico, we have not historically had any material write-offs due to uncollectible accounts receivable, nor are these balances currently in dispute. During 2024, we have issued a total of $475 million Credit Default Swaps to financial institutions, which were used to support borrowings for this customer, the proceeds from which were used to repay outstanding receivables.

A customer's failure or delay in payment could have a material adverse effect on our short-term liquidity and results of operations. Our gross customer receivables in the U.S. were 15% as of September 30, 2024. No other country accounted for more than 10% of our gross customer receivables at this date.

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International operations: Our cash that is held outside the U.S. is 83% of the total cash balance as of September 30, 2024. Depending on the jurisdiction or country where this cash is held, we may not be able to use this cash quickly and efficiently due to exchange or cash controls that could make it challenging. As a result, our cash balance may not represent our ability to quickly and efficiently use this cash.

Guarantor Information

We have senior unsecured notes and senior unsecured debentures (collectively the "Debt Securities") outstanding with an aggregate principal amount of $5.8 billion as of September 30, 2024, with maturities ranging from 2024 to 2047. The Debt Securities constitute debt obligations of Baker Hughes Holdings LLC ("BHH LLC"), an indirect, 100% owned subsidiary and the primary operating company of Baker Hughes, and Baker Hughes Co-Obligor, Inc, a 100%-owned finance subsidiary of BHH LLC (the "Issuers") that was incorporated for the sole purpose of serving as a corporate co-obligor of debt securities. The Debt Securities are fully and unconditionally guaranteed on a senior unsecured basis by us and rank equally in right of payment with all of the Company's other senior and unsecured debt obligations.

As permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, we have excluded summarized financial information for the Issuers because the combined assets, liabilities, and results of operations of the Issuers are not materially different than the corresponding amounts in our condensed consolidated financial statements and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.

CRITICAL ACCOUNTING ESTIMATES

Our critical accounting estimation processes are consistent with those described in Item 7 of Part II, "Management's discussion and analysis of financial condition and results of operations" of our 2023 Annual Report.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, (each a "forward-looking statement"). All statements, other than historical facts, including statements regarding the presentation of the Company's operations in future reports and any assumptions underlying any of the foregoing, are forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words "may," "will," "should," "potential," "intend," "expect," "would," "seek," "anticipate," "estimate," "overestimate," "underestimate," "believe," "could," "project," "predict," "continue," "target," "goal" or other similar words or expressions. Forward-looking statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, the risk factors identified in the "Risk Factors" section of Part II of Item 1A of this report and Part 1 of Item 1A of our 2023 Annual Report and those set forth from time-to-time in other filings by the Company with the SEC. These documents are available through our website or through the SEC's Electronic Data Gathering and Analysis Retrieval (EDGAR) system at http://www.sec.gov.

Any forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. The Company does not undertake any obligation to update any forward-looking statements, whether as a result of new information or developments, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk affecting us, see Item 7A. "Quantitative and Qualitative Disclosures about Market Risk," in our 2023 Annual Report. Our exposure to market risk has not changed materially since December 31, 2023.

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Item 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 15d-15(e) of the Exchange Act) were effective at a reasonable assurance level.

There has been no change in our internal controls over financial reporting during the quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See discussion of legal proceedings in "Note 16. Commitments and Contingencies" of the Notes to Unaudited Condensed Consolidated Financial Statements in this Quarterly Report, Item 3 of Part I of our 2023 Annual Report and Note 19 of the Notes to Consolidated Financial Statements included in Item 8 of our 2023 Annual Report.

Item 1A. RISK FACTORS

As of the date of this filing, the Company and our operations continue to be subject to the risk factors previously discussed in the "Risk Factors" sections contained in the 2023 Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table contains information about our purchases of our Class A common stock equity securities during the three months ended September 30, 2024.

PeriodTotal Number of Shares Purchased (1)Average Price Paid Per Share (2)Total Number of Shares Purchased as Part of a Publicly Announced Program (3)(4)Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (3)(4)
July 1-31, 20249,449$35.25—$1,893,645,541
August 1-31, 202424,541$35.35—$1,893,645,541
September 1-30, 20244,486,105$33.884,480,285$1,741,865,699
Total4,520,095$33.894,480,285

(1)Represents Class A common stock purchased from employees to satisfy the tax withholding obligations primarily in connection with the vesting of restricted stock units.

(2)Average price paid for Class A common stock purchased from employees to satisfy the tax withholding obligations in connection with the vesting of restricted stock units and shares purchased in the open market under our publicly announced purchase program.

(3)On July 30, 2021, our Board of Directors authorized the Company to repurchase up to $2 billion of its Class A common stock. On October 27, 2022, our Board of Directors authorized an increase to our repurchase program of $2 billion of additional Class A common stock, increasing its existing repurchase authorization of $2 billion to $4 billion. The repurchase program may be suspended or discontinued at any time and does not have a specified expiration date.

(4)During the three months ended September 30, 2024, we repurchased 4.5 million shares of Class A common stock at an average price of $33.88 per share for a total of $152 million.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

We have no mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K to report for the current quarter.

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Item 5. OTHER INFORMATION

Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements

During the three months ended September 30, 2024, certain of our officers or directors listed below adopted or terminated trading arrangements for the sale of shares of our Class A common stock in amounts and prices determined in accordance with a formula set forth in each such plan:

Name and TitleActionDatePlansNumber of Shares to be SoldExpiration
Rule 10b5-1 (1)Non-Rule 10b5-1 (2)
Maria Claudia Borras, Executive Vice President, Oilfield Services and EquipmentAdoptionSeptember 13, 2024X72,500Earlier of when all shares under plan are sold and May 30, 2025

(1)Intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)

(2)Not intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)

Item 6. EXHIBITS

Each exhibit identified below is filed as a part of this report. Exhibits designated with an "*" are filed as an exhibit to this Quarterly Report on Form 10-Q and Exhibits designated with an "**" are furnished as an exhibit to this Quarterly Report on Form 10-Q. Exhibits designated with a "+" are identified as management contracts or compensatory plans or arrangements. Exhibits previously filed are incorporated by reference.

22.1*List of Subsidiary Guarantors of Guaranteed Securities.
31.1*Certification of Lorenzo Simonelli, President and Chief Executive Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2*Certification of Nancy Buese, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32**Certification of Lorenzo Simonelli, President and Chief Executive Officer, and Nancy Buese, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.
101.INS*XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*XBRL Schema Document
101.CAL*XBRL Calculation Linkbase Document
101.DEF*XBRL Definition Linkbase Document
101.LAB*XBRL Label Linkbase Document
101.PRE*XBRL Presentation Linkbase Document
104*Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Baker Hughes Company (Registrant)
Date:October 23, 2024By:/s/ NANCY BUESE
Nancy Buese
Executive Vice President and Chief Financial Officer
Date:October 23, 2024By:/s/ REBECCA CHARLTON
Rebecca Charlton
Senior Vice President, Controller and Chief Accounting Officer

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