Executive Summary / Key Takeaways

• TechnipFMC (FTI) has fundamentally reshaped its business through integration (iEPCI), standardization (Subsea 2.0), and industrialization (SSI), moving beyond traditional oilfield service models to become a differentiated provider of subsea and surface technologies.
• The company's unique offerings, particularly iEPCI and Subsea 2.0, provide quantifiable benefits to clients like reduced cycle times and lower project costs, driving high-quality inbound orders, significant direct awards (over 80% of Subsea inbound in 2024), and an expanding backlog ($15.8 billion as of Q1 2025).
• Strong operational execution, fueled by the new operating model and SSI initiatives, is translating backlog conversion into improved financial performance, including expanding margins (Subsea Q1 2025 Adjusted EBITDA margin 17.3%, Full Year 2025 guidance 18.5%-20%) and robust free cash flow generation ($441.7 million operating cash flow in Q1 2025, Full Year 2025 FCF guidance $1 billion - $1.15 billion).
• FTI maintains a strong balance sheet with investment-grade credit ratings from all three major agencies, enabling increased shareholder distributions (commitment to distribute >=70% of 2025 FCF, increased share repurchase authorization) while managing debt.
• Despite macro uncertainties and competitive pressures, FTI's limited exposure to volatile markets (95% of 2025 revenue outside US land), favorable offshore project economics (low breakevens), and deep, diversified opportunity pipeline extending through the end of the decade underpin a confident outlook.

Setting the Scene: A Transformed Leader in Offshore Energy

TechnipFMC plc stands as a pivotal player in the global energy landscape, specializing in subsea and surface technologies, systems, and services crucial for the exploration and production of oil and natural gas. The company operates through two primary segments: Subsea, which focuses on the design, engineering, manufacturing, and installation of subsea systems and infrastructure, and Surface Technologies, providing advanced wellhead systems and pressure control products for onshore and shallow water applications.

The company's current strategic posture is deeply rooted in a transformative journey initiated by the 2017 merger of FMC and Technip. This union was not merely a consolidation but a deliberate integration aimed at fundamentally altering the economics of subsea developments by significantly reducing project cycle times. This historical pivot laid the groundwork for the development of TechnipFMC's core differentiated offerings: the integrated Engineering, Procurement, Construction, and Installation (iEPCI) model and the modular, configurable Subsea 2.0 product platform. These innovations, coupled with an internal drive for Simplification, Standardization, and Industrialization (SSI), represent a strategic departure from traditional bespoke approaches, positioning FTI as an architect and integrated provider rather than solely a component supplier.

The broader energy industry backdrop provides a favorable environment for FTI's focus areas. Economic growth is expected to continue, driving anticipated growth in energy demand. While challenges like inflation and geopolitical conflicts persist, energy security and affordability have risen in prominence alongside sustainability commitments. This context supports continued investment in conventional oil and natural gas resources, particularly in offshore and Middle East markets. Deepwater developments, in particular, are attracting a growing share of global capital flows, driven by significantly improved economic returns and vast resource accessibility. Projections indicate that approximately 10 million barrels per day of the new oil production required by 2040 will come from new deepwater sources, highlighting the long-term opportunity in FTI's core market.

Competitive Dynamics and Differentiated Positioning

The energy equipment and services sector is intensely competitive, featuring major global players like Schlumberger (SLB), Baker Hughes (BKR), and Halliburton (HAL), alongside specialized firms such as Subsea 7 (SUBCY) and regional players like Ranger Energy Services (RNGR) in specific segments. While competitors often pursue strategies centered on scale or specific service line dominance, TechnipFMC has carved out a distinct position through its integrated approach and proprietary technology.

FTI's core competitive advantage lies in its iEPCI model and Subsea 2.0 platform. The iEPCI model integrates the traditionally separate scopes of subsea production systems, umbilicals, risers, flowlines, and installation vessels under a single contract and interface. This contrasts with competitors who may offer individual components or services but lack the seamless integration capability across the full subsea field architecture. This integration is not just a commercial model; it's enabled by FTI's technological prowess and operational strategy.

Subsea 2.0, FTI's configurable product architecture, offers tangible, quantifiable benefits over traditional subsea production systems. By leveraging a Configure-to-Order (CTO) model, Subsea 2.0 aims to achieve up to 25% lower product costs and significantly shorten delivery times to approximately 12 months, compared to longer cycles for bespoke systems. This pre-engineered approach allows FTI to redefine its sourcing strategy and transform manufacturing flow, increasing manufacturing cadence and expanding capacity without requiring significant capital expenditures on new infrastructure. Management notes that even within the Subsea 2.0 architecture, teams are finding ways to improve efficiency by manufacturing features across multiple parts with the same profile, reducing machine setup time.

These technological and operational differentiators translate directly into competitive advantages. The ability to offer reduced cycle times and greater project certainty through iEPCI and Subsea 2.0 is a critical value proposition for clients, leading to a significant portion of FTI's business being awarded directly (over 80% of Subsea inbound in 2024). This contrasts with competitors who may face challenges in execution and delivery certainty, as evidenced by instances where clients have reportedly sought FTI's support when competitors faced performance issues. While competitors like SLB and BKR possess strong digital capabilities and broader scale, FTI's integrated technology and operational model provide a distinct edge in the execution of complex subsea projects, allowing it to capture a premium in the market.

In the Surface Technologies segment, FTI's competitive position is strengthened by its focus on less cyclical international markets, particularly the Middle East. Investments in new, state-of-the-art facilities in Saudi Arabia and the UAE, coupled with the qualification of its product portfolio, provide a differentiated growth opportunity. This local presence and higher-specification equipment capability allow FTI to compete effectively against both global peers and regional players, securing significant inbound orders in these key geographies. While the US land market is more susceptible to commodity price volatility and features cost-focused competitors like RNGR and HAL, FTI's limited exposure there (estimated 5% of 2025 revenue) and focus on major clients provide a degree of stability.

FTI's flexible pipe technology is another key differentiator, particularly in markets like Brazil and within its iEPCI offering. As a leader in this space, FTI's ability to integrate flexible pipe into subsea architecture designs simplifies field layouts, improves flexibility, accelerates first oil, and increases project certainty compared to rigid pipe alternatives. Ongoing R&D, such as developing a new generation of flexible pipe to address stress corrosion cracking in Brazil, further reinforces this technological moat.

While FTI's integrated model and proprietary technologies provide significant competitive moats, the company is not without vulnerabilities. Potential disadvantages include the need to continue investing in digital capabilities to keep pace with peers like SLB and BKR, and managing supply chain dependencies which could impact costs. However, the strategic focus on SSI and close collaboration with suppliers within the Configure-to-Order model are designed to mitigate some of these risks and enhance scalability.

The competitive landscape is dynamic, with recent developments like the proposed Saipem (SAIPY) Subsea merger highlighting a trend towards consolidation among some players. FTI management views this as reinforcing the distinction between consolidation (more of the same) and FTI's chosen path of integration, which aims for fundamental change and improved economics. FTI's strong backlog, differentiated offerings, and focus on execution position it favorably to capitalize on the expanding offshore market opportunities, even as competitive dynamics evolve.

Performance Reflecting Strategic Execution

TechnipFMC's recent financial performance underscores the positive impact of its strategic transformation and operational execution. For the first quarter ended March 31, 2025, the company reported total revenue of $2.23 billion, an increase of 9.4% compared to $2.04 billion in the same period of 2024. This growth was primarily driven by the Subsea segment, which saw revenue increase by $201.4 million to $1.94 billion, reflecting the conversion of increased backlog, particularly from higher iEPCI and services activities in key regions like Indonesia, Norway, and Nigeria. The Surface Technologies segment experienced a slight revenue decrease to $297.4 million, mainly due to lower activity in North America and Europe, compounded by the prior year's gain on the sale of the Measurement Solutions business, partially offset by growth in the Middle East.

Profitability showed significant improvement, particularly in the Subsea segment. Total company gross profit increased to $464.9 million in Q1 2025 from $341.4 million in Q1 2024. Subsea gross profit rose by $121.4 million, benefiting from a favorable activity mix ($93.3 million) and volume increase ($28.1 million). Adjusted EBITDA for the first quarter of 2025 was $356 million, with a total company margin of 15.9%. The Subsea segment reported an Adjusted EBITDA margin of 17.3%, an 80 basis point sequential improvement from Q4 2024, driven by strong project execution despite typical seasonal softness in services and fleet maintenance. The Surface Technologies segment posted an Adjusted EBITDA margin of 15.7%.

Operating expenses saw increases, with selling, general, and administrative expenses rising by $24.4 million due to higher employee costs supporting increased business activities. Other expense, net, also increased, largely due to foreign currency losses. Income from equity affiliates saw a notable increase to $9.4 million from $1.4 million, reflecting improved operational activity in joint ventures. Net interest expense decreased to $9.9 million, primarily due to a reduction in outstanding debt. The provision for income taxes increased significantly, resulting in a higher effective tax rate of 37.8% in Q1 2025 compared to 23.6% in Q1 2024, mainly attributable to changes in geographical profit mix and accruals for uncertain tax positions.

Cash flow generation was particularly strong in the first quarter, a period typically impacted by seasonality. Operating activities provided $441.7 million in cash, a substantial increase from cash used in the prior year period. This performance was attributed to increased volume, an improved project mix leading to strong cash collections, and accelerated client cash payments received in advance. Investing activities used $58.2 million, primarily due to increased capital expenditures ($61.8 million) and the absence of proceeds from the MSB sale received in Q1 2024. Financing activities used $365.9 million, mainly driven by increased share repurchases ($250.1 million).

The company maintains a robust balance sheet and strong liquidity. As of March 31, 2025, cash and cash equivalents stood at $1.19 billion, resulting in a net cash position of $281.9 million. Total debt was $904.9 million. The company's financial strength is further validated by achieving investment-grade credit ratings from S&P (BBB-), Fitch (BBB-), and Moody's (Baa3), leading to the release of collateral on credit facilities and access to lower borrowing costs. FTI remains committed to returning value to shareholders, declaring a quarterly cash dividend of $0.05 per share and repurchasing $250.1 million of shares in Q1 2025. Cumulative share repurchases since July 2022 total $955.5 million, with $844.5 million remaining under the current authorization. The company plans to distribute at least 70% of its free cash flow in 2025 and intends to pay down €200 million of private placement notes maturing in June 2025. Capital expenditures for 2025 are guided at approximately $340 million, below the long-term target range, partly due to investment in an ERP upgrade program.

Outlook and Risks

TechnipFMC's outlook remains confident, underpinned by a robust backlog and a positive view of the offshore and Middle East markets. As of March 31, 2025, total order backlog reached $15.8 billion, with Subsea backlog at $14.9 billion and Surface Technologies at $870.4 million. The company expects to recognize approximately 32.9% of this backlog as revenue through 2025, providing significant revenue visibility.

Inbound orders continue to be strong, totaling $3.09 billion in Q1 2025, with Subsea inbound at $2.79 billion, resulting in a Subsea book-to-bill of 1.4. The company is confident it will exceed $10 billion in Subsea inbound orders in 2025, achieving its target of $30 billion in orders over the three years ending 2025. This inbound is characterized by a more diversified mix of opportunities, increasing adoption of Subsea 2.0 and iEPCI, and continued growth in Subsea Services.

Management's full-year 2025 guidance remains unchanged for total company Adjusted EBITDA at approximately $1.76 billion (excluding foreign exchange). Free cash flow guidance for 2025 has been increased to a range of $1 billion to $1.15 billion, reflecting the strong Q1 performance and confidence in continued cash conversion (trending well above 50% EBITDA to FCF conversion). Segment-specific guidance for Q2 2025 anticipates sequential revenue growth of low double digits for Subsea with a significant margin increase (approx. 400 basis points), and approximately 5% sequential revenue growth for Surface Technologies with a margin around 15.5%. The full-year 2025 outlook for Subsea revenue is $8.3 billion to $8.7 billion, with Adjusted EBITDA margin of 18.5% to 20%, both representing increases from prior outlooks and implying significant year-over-year EBITDA growth. Surface Technologies full-year 2025 revenue is guided at $1.275 billion with an Adjusted EBITDA margin of 15.5%.

Looking beyond 2025, management's opinion on 2026 remains unchanged, anticipating another solid year for Subsea orders, potentially in the $10 billion range again, dependent on FID timing but supported by advanced commercial discussions and expected direct awards. The Subsea opportunity list, highlighting over $26 billion in potential awards over the next 24 months, has grown nearly 20% over the past year, indicating a deep pipeline of future projects. Visibility extends through the end of the decade, driven by new horizons in existing basins, emerging frontiers (Suriname, Namibia, Mozambique), and gas-focused opportunities.

Despite the positive outlook, several risks could impact performance. These include unpredictable trends in commodity prices, although FTI's limited exposure to the volatile US land market (5% of 2025 revenue) and the favorable economics of offshore developments (low breakevens) mitigate this risk. Competition remains a factor, but FTI's differentiated offerings and execution track record support its market position. Geopolitical events, regulatory changes (including tariffs, with an estimated <$20 million EBITDA impact in 2025), supply chain disruptions, and the ability to successfully execute on the large backlog are also key considerations. While execution risk exists, FTI's new operating model, SSI initiatives, and focus on project certainty are designed to proactively manage these challenges. The company's reliance on subcontractors and joint venture partners, as well as potential liabilities inherent in the industry, also pose risks.

Conclusion

TechnipFMC's investment thesis is compelling, centered on a successful strategic transformation that has created a differentiated, high-quality business model in the offshore energy sector. By integrating capabilities through iEPCI, standardizing products with Subsea 2.0, and driving internal efficiency via SSI, the company is delivering tangible value to clients, securing a robust backlog of high-margin projects, and converting this into strong financial performance and free cash flow.

The company's Q1 2025 results demonstrated solid execution and cash generation, reinforcing confidence in its ability to meet or exceed its increased 2025 guidance for both profitability and free cash flow. With investment-grade credit ratings and a commitment to significant shareholder distributions, FTI is balancing growth investments with capital returns. While macro uncertainties and competitive pressures persist, FTI's limited exposure to volatile markets, favorable offshore economics, technological leadership, and deep opportunity pipeline position it well for sustainable growth and profitability through the end of the decade and beyond. The continued adoption of its integrated and standardized offerings, coupled with relentless focus on execution, are critical factors that differentiate FTI and support its positive long-term outlook.