TechnipFMC (FTI) Q4 2025 Earnings Call Transcript

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Date

Thursday, Feb. 19, 2026 at 8:30 a.m. ET

Call participants

• Chair and Chief Executive Officer — Douglas Pferdehirt
• Chief Financial Officer — Alf Melin
• Head of Investor Relations — Matt Seinsheimer

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Takeaways

• Total company revenue -- $9.9 billion for the year, representing 9% growth.
• Adjusted EBITDA -- $1.8 billion for the year, up 33%, with a margin increase outpacing revenue growth.
• Free cash flow -- $1.4 billion full year, more than doubling prior-year results.
• Shareholder distributions -- $1 billion in 2025, exceeding double the prior-year level.
• Total inbound orders -- $11.2 billion for the year, supported by major Subsea contracts.
• Company backlog -- $16.6 billion at year-end, a 15% increase.
• Subsea inbound orders -- $10.1 billion for the year; iEPCI projects comprised the largest share.
• Subsea backlog -- Ended at $15.9 billion; less than 10% is now classified as legacy projects.
• Direct awards/iEPCI/Subsea 2.0 -- Accounted for over 80% of total Subsea inbound orders during 2025.
• Surface Technologies revenue -- $323 million for the quarter, down 2% sequentially; adjusted EBITDA $58 million, up 8% sequentially.
• Subsea segment quarterly revenue -- $2.2 billion, down 5% sequentially, mostly due to lower activity in the North Sea and Latin America.
• Subsea adjusted EBITDA margin -- 18.9% in the quarter; full-year 2025 margin of 20.1%, up 340 basis points.
• Surface Technologies adjusted EBITDA margin -- 18% in the quarter, up 160 basis points; full-year 2025 margin improved 170 basis points to 16.7%.
• Q4 operating cash flow and CapEx -- $454 million operating cash flow; $94 million in capital expenditures; $359 million of free cash flow for the quarter.
• Share repurchases in Q4 -- $168 million, plus $20 million in dividends; total Q4 shareholder distributions were $188 million.
• Year-end cash and net cash position -- $1 billion in cash and cash equivalents; net cash position increased to $602 million.
• Subsea segment guidance -- 2026 revenue expected at $9.4 billion and adjusted EBITDA margin of 21.5% (midpoint), implying 16% adjusted EBITDA growth.
• Surface Technologies guidance -- 2026 revenue guided to slightly above $1.2 billion; adjusted EBITDA margin 17.25% (midpoint).
• Company adjusted EBITDA guidance -- Over $2.1 billion expected in 2026, representing 15% growth at midpoint, excluding FX, with margin expansion in both segments.
• Free cash flow guidance -- Expected range of $1.3 billion to $1.45 billion for 2026; at least 70% to be returned to shareholders.
• Subsea services revenue expectation -- $2 billion for 2026, anticipated to grow in line with company revenue.
• Subsea opportunity list -- Reflects $29 billion of future development potential over 24 months, marking a record high.
• Capital expenditures guidance -- Approximately $340 million for 2026, just over 3% of expected revenue.
• Corporate expense guidance -- $120 million for the year, with $40 million projected in the first quarter.
• Direct award revenue share progression -- Direct award revenue share rose from 50% several years ago to 80% in 2025, with a lag between order intake and revenue conversion.

Summary

The earnings call highlighted a structural transformation toward high-margin, repeatable Subsea projects underpinned by differentiated offerings such as iEPCI and Subsea 2.0, with over 80% of Subsea inbound orders awarded on a direct basis. Management indicated that the fast-growing Subsea opportunity list, now at $29 billion for the next 24 months, could drive further increases in backlog and revenue in future years. TechnipFMC (NYSE:FTI) is guiding for margin expansion in both major segments for 2026, with above 15% adjusted EBITDA growth supported by improved operating leverage, a disciplined capital allocation framework, and high-quality backlog. The company plans to return at least 70% of free cash flow to shareholders, emphasizing a continued asset-light strategy and high conversion rate of EBITDA to free cash flow. Portfolio approaches and early integrated customer engagement were cited as key drivers of visibility, cycle-time reduction, and competitiveness in offshore project delivery.

• Douglas Pferdehirt said, "Subsea opportunity list is both growing and accelerating. And we fully expect that this will be reflected in inbound order growth in 2027 and beyond."
• Douglas Pferdehirt described the shift toward gas-focused projects, stating that "gas equipment tends to be more complex. It is better for us because it is more differentiated."
• Profitability improvements for Surface Technologies are attributed to ongoing business transformation, high-grading of portfolio, and prioritizing international markets now comprising 65% of that segment.
• Customer adoption of portfolio-based project execution, as exemplified by BP (NYSE: BP)'s synchronized developments, supports efficiency gains for both clients and TechnipFMC.
• Alf Melin said, "we increased total company adjusted EBITDA to $1,800,000,000, an increase of 33% versus 9% growth in revenue," highlighting operating leverage and efficiency.
• Management expects restructuring actions in Subsea to yield sustainable margin improvements through 2026 and beyond.
• Alf Melin said 2025 free cash flow conversion was approximately 80%, setting a strong precedent for disciplined working capital management going forward.
• Company leadership stated that continued cycle time reduction is central to value creation and "relentless pursuit" of project execution certainty.

Industry glossary

• iEPCI: Integrated Engineering, Procurement, Construction, and Installation – a project model where a single firm provides end-to-end delivery for offshore oil and gas systems, streamlining execution and reducing cycle time.
• Subsea 2.0: A configured-to-order product architecture developed by TechnipFMC aimed at standardization, simplification, and industrialization of subsea equipment for greater efficiency and scalability in deployment.
• Direct award: Contracting process where work is granted to a contractor without a competitive tender, enabled by established technological or commercial differentiation.
• Backlog: The total value of customer orders yet to be fulfilled, representing future revenue to be recognized as projects are executed.
• SURF: Subsea Umbilicals, Risers, and Flowlines; a set of offshore oil and gas installation elements connecting subsea wells to surface facilities.
• Greenfield development: The creation of new oil and gas fields where no prior infrastructure exists, offering a "blank slate" for design and execution.
• Configure-to-order: Manufacturing and business process in which products are tailored from standardized components to meet customer-specific requirements efficiently.

Full Conference Call Transcript

Matt Seinsheimer: And welcome to TechnipFMC plc's Fourth Quarter 2025 Earnings Conference Call. Our news release and financial statements issued earlier today can be found on our website. I would like to caution you with respect to any forward-looking statements made during the 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. Known 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 would now like to turn the call over to Douglas Pferdehirt, TechnipFMC plc's Chair and Chief Executive Officer. Thank you, Matt. Good afternoon, and good morning to all. Thank you for participating in our fourth quarter earnings call. I am very proud to report our strong quarterly and full year results, as we closed out 2025 with solid operational momentum.

Total company inbound for the year was $11,200,000,000. Backlog ended the year at $16,600,000,000. Total company revenue for the year grew 9% to $9,900,000,000 with adjusted EBITDA improving to $1,800,000,000, an increase of 33% when compared to the prior year. Full year free cash flow increased to $1,400,000,000 and shareholder distributions grew to $1,000,000,000, both more than double the levels achieved in the prior year. Turning to Subsea. Orders in the quarter were $2,300,000,000, resulting in $10,100,000,000 of inbound for the full year, with iEPCI projects being the largest contributor of inbound in 2025. There was also continued momentum for new opportunities within existing basins, with BP Tiber being our most recent iEPCI contract in the Paleogene.

Notably, TechnipFMC plc has been awarded five of the six 20K projects sanctioned thus far. The widespread adoption of our differentiated offering has clearly been a catalyst for our commercial success. Over the last three years, we delivered on our goal to inbound more than $30,000,000,000 of Subsea orders. This has driven Subsea backlog to $15.9 with legacy projects now representing less than 10% of backlog. Given our expectation for $10,000,000,000 of Subsea inbound in the current year, we anticipate further growth in backlog. Direct awards, iEPCI, and Subsea 2.0 configure-to-order offerings represent an increasing share of our inbound. In fact, this combination accounted for more than 80% of our total Subsea inbound in 2025.

We continue to be selective in the work that we pursue. We prioritize projects that utilize our iEPCI and Subsea 2.0 configure-to-order offerings. And our services business has been a clear source of differentiation, leveraging the industry's largest installed base. Most importantly, this high-quality inbound derisks project execution, enabling accelerated project timelines and increased schedule certainty. The inbound secured in 2025 also speaks to a change in customer behavior, with more clients adopting a portfolio approach to offshore development. Instead of focusing on the next project exclusively, operators are taking a broader portfolio view of their opportunities, executing a vision for their entire asset base.

An example of this mindset is simultaneous development of greenfield assets, where operators execute multiple projects in parallel, industrializing the entire field. BP's approach to the Paleogene is an excellent example where TechnipFMC plc is executing the Tiber and Cascita projects at the same time, utilizing a consistent project methodology focused on our 20K equipment and integrated delivery. To be clear, this is not business as usual. Historically, operators would wait for the completion of the first project to incorporate learnings into subsequent phases. Today, those benefits are seen as incremental to the more substantive improvements gained from a portfolio approach.

By executing as a single unit, operators benefit from integration and standardization that enable them to reach target production more quickly and economically than would be possible as stand-alone projects. This shift in customer focus from a single project to a more comprehensive portfolio view clearly benefits from our differentiation, with TechnipFMC plc's iEPCI model and Subsea 2.0 solutions serving as key enablers of this change in behavior. The increased collaboration that comes with the portfolio approach also provides us with greater visibility into the project pipeline. Importantly, this early engagement provides us the greatest opportunity to help our customers more efficiently design and develop their entire program.

Today, our clients are much more confident that they can build cost and schedule certainty into their expectations, and that is creating additional opportunities for our company. This change in customer behavior also has a positive impact on the outlook for Subsea. We expect a greater share of capital spending to move offshore, where reservoirs are prolific, high quality, and accessible to many operators, with attractive project economics that continue to improve. And we are seeing the impact of this change on our Subsea opportunities list, with the latest update reflecting the sixth consecutive quarterly increase in value. The list now highlights approximately $29,000,000,000 of opportunities for future development when using the midpoint of project values.

This is the highest level ever recorded, and it was achieved even with a significant level of projects awarded in the period. And keep in mind, this only reflects a 24-month view and is not indicative of the full opportunity set for our company. There are multiple new frontiers under consideration for greenfield development, more than at any time I can remember. Greenfields are unique in that they provide a blank slate. They have no preexisting field infrastructure or legacy architecture, and technologies can limit flexibility in future enhancements. This makes a portfolio approach very effective for accelerating development in new frontiers, reinforcing our confidence in continued strength in offshore activity through the end of the decade and beyond.

I now want to close with a few key messages. First, 2025 was another year of exceptional performance for TechnipFMC plc, and I want to acknowledge the efforts of the 22,000 women and men across the globe. They take great pride in the company and are passionate about what they do. This is evident in our full year results, where continued strength in order inbound drove growth in high-quality backlog, and continued strength in execution elevated the expansion in both EBITDA and free cash flow. This team has a strong desire to win and is unwavering in its commitment to deliver.

The second point I want to convey is that 2025 was another major milestone for TechnipFMC plc, but we are far from achieving optimal performance. We had great commercial, operational, and financial success in the year, but the groundwork for these results was set in motion many years ago with our introduction of new commercial models and configured-to-order product architecture, and our internal focus on the principles of simplification, standardization, industrialization. While the impact of these changes is real and sustainable, we are confident that considerable upside remains. And much like our current success, it will not be dependent upon any one driver. We are confident that we will deliver further advancements in integrated execution.

We will benefit from an expansion in configured-to-order offerings as we adopt them across more product platforms. And we will deliver greater operating leverage than what has historically been achieved in our industry. Finally, I want to reiterate our commitment to the relentless pursuit of the reduction of cycle time. The actions we have taken, which are ultimately focused on driving project returns higher, clearly demonstrate our ability to create sustainable value for our customers and real differentiation for our company. We know that our work is not complete. We know that more value can be created.

And with a culture focused on continuous improvement in everything we do, we also know that we have the right strategic mindset in place to make offshore investment an even bigger and more sustainable opportunity. I will now turn the call over to Alf to discuss our financial results. Thanks, Doug. Revenue in the quarter was $2,500,000,000. Adjusted EBITDA was $440,000,000 when excluding $52,000,000 of restructuring

Alf Melin: impairment and other charges and a foreign exchange gain of $1,000,000. Turning to segment results. In Subsea, revenue of $2,200,000,000 decreased 5% versus the third quarter. The sequential decline was primarily due to lower activity in the North Sea and Latin America, offset in part by higher activity in Asia Pacific. Adjusted EBITDA was $416,000,000, down 18% sequentially, primarily driven by seasonally lower vessel-based activity and reduced fleet availability due to higher scheduled maintenance in the period. Adjusted EBITDA margin was 18.9%. For the full year, Subsea revenue grew 11% versus the prior period, with Subsea adjusted EBITDA margin up 340 basis points to 20.1%.

Matt Seinsheimer: In Surface Technologies,

Alf Melin: revenue was $323,000,000, a decrease of 2% from the third quarter. The sequential decrease was driven by lower activity in North America and timing of project-related activity in the Middle East, partially offset by higher activity in Asia Pacific. Adjusted EBITDA was $58,000,000, an increase of 8% sequentially, due to higher services activity in the Middle East and operational efficiencies related to business transformation initiatives. Adjusted EBITDA margin was 18%, up 160 basis points from the third quarter. For the full year, adjusted EBITDA margin improved 170 basis points to 16.7%, even with revenue essentially flat when compared to the prior period. Turning to corporate and other items. Corporate expense was $35,000,000. Net interest expense was $5,000,000.

And tax expense was $33,000,000. Cash flow from operating was $454,000,000, with capital expenditures totaling $94,000,000 in the quarter. This resulted in free cash flow of $359,000,000. Free cash flow for the full year was $1,450,000,000. We repurchased $168,000,000 of stock in the fourth quarter. When including $20,000,000 of dividends, total shareholder distributions were $188,000,000. For the full year, total shareholder distributions more than doubled versus the prior year to $1,000,000,000. Cash and cash equivalents ended the year at $1,000,000,000. Our net cash position increased to $602,000,000. Moving to our financial outlook. We have provided detailed guidance for the year in our earnings release. I will now provide additional color on the guidance and our first quarter outlook.

Starting with Subsea, during the fourth quarter we incurred restructuring charges related to simplification and industrialization actions being taken to further improve operating efficiency. As Doug indicated, our financial results and operating momentum remain strong, but we know we can achieve even more. These actions will deliver sustainable improvement in 2026, with additional benefits to be realized beyond the current year. With that in mind, we are updating our previous Subsea guidance provided in October. We now expect revenue of $9,400,000,000 with adjusted EBITDA margin of 21.5% at the midpoint of the full year range. This implies growth in Subsea adjusted EBITDA of 16% when compared to 2025.

For the first quarter, we anticipate Subsea revenue to increase low single digits sequentially, while adjusted EBITDA margin is expected to improve approximately 50 basis points from the 18.9% reported in the fourth quarter. Moving to Surface Technologies. We are guiding to full year revenue of just over $1,200,000,000, with adjusted EBITDA margin improving to 17.25% at the midpoint of the guidance range. For the first quarter, we anticipate Surface Technologies revenue to decline approximately 10% when compared to fourth quarter results, with an adjusted EBITDA margin of approximately 16.5%. And turning to corporate, we are guiding to full year expense of $120,000,000 with an expectation that we will incur approximately $40,000,000 in the first quarter.

Lastly, I want to comment on our free cash flow guidance. We remain committed to a very disciplined, asset-light approach to capital management. We anticipate capital expenditures to approximate $340,000,000 for the full year, representing just over 3% of revenue. Additionally, we expect full year free cash flow to be in a range of $1,300,000,000 to $1,450,000,000. This would imply free cash flow conversion of approximately 65% at the midpoint of guidance. And as previously indicated, we expect to return at least 70% of free cash flow to shareholders in 2026 through dividends and share repurchases. In closing, I am very proud that we delivered on our financial targets in 2025.

When excluding foreign exchange, we increased total company adjusted EBITDA to $1,800,000,000, an increase of 33% versus 9% growth in revenue. We drove strong improvement in adjusted EBITDA margin for Subsea and Surface Technologies, with increases of 340 and 170 basis points, respectively. And we delivered growth in total company backlog to $16,600,000,000, up 15% from the prior year. I am also proud to share our full year guidance for 2026 reflects continued operational momentum, with total company adjusted EBITDA expected to exceed $2,100,000,000 at the midpoint of our guidance items. This represents growth in adjusted EBITDA of 15% versus 2025, when excluding foreign exchange, with margin expansion in both segments. Lastly, we expect strong cash from our growing EBITDA.

And given the flexibility provided by our strong balance sheet, you should expect us to return the majority of this free cash flow to our shareholders. Operator, you may now open the line for questions.

Matt Seinsheimer: We will now begin the question and answer session. To ask a question, press star followed by the number one on your telephone keypad. We ask that you please limit yourself to one question and one follow-up. Our first question will come from the line of Arun Jayaram with JPMorgan Securities. Please go ahead.

Matt Seinsheimer: Good morning, Doug and team. Doug, I wanted to see if you could elaborate on your thoughts on margin expansion potential from industrializing the SURF process? And you talked about this morning in your prepared remarks about delivering further advancements in your integrated project execution. Just wondering if you could maybe shed some light on your thoughts on industrializing the SURF process to drive margins higher?

Alf Melin: Thank you, Arun, and good morning.

Matt Seinsheimer: Look. I would be happy to. As I noted in, I think, a prior quarter, you know, when we started down the path of industrialization, and to configure-to-order, you know, product architecture, which we call Subsea 2.0, that was prior to the merger. So it was obviously focused on the assets that reside on the seabed.

Alf Melin: Because that was with

Matt Seinsheimer: was what was within the scope within the scope of FMC Technologies at the time. As a fully integrated company, we now have access to not only the seabed, but

Alf Melin: the water column in addition.

Matt Seinsheimer: I think that, you know, so that is where our focus is now is to expanding that configured order applications and all the efficiency gains and all the improvements in terms of reduction of cycle time for our clients and improved project certainty in terms of the delivery of the projects, which our clients benefit from, to the remainder of the Subsea environment. You are referring to the SURF, if you will, the water column.

Alf Melin: I will say this. I think that the opportunities there

Matt Seinsheimer: are as substantial as the opportunities we are experiencing now with the Subsea 2.0 architecture on the seabed. Great. Great. And just, you know, my follow-up, Doug, is you mentioned how 10% of your backlog is called legacy, call it maybe lower margin kind of backlog from a few years ago? But as you look at the margins

Scott Gruber: that you are booking in backlog today relative to your Subsea 2026 guide of 21.5% for EBITDA, can you talk about how much visibility do you have on further margin expansion Subsea? You know, how many years of margin expansion do you see when you think about that backlog versus what you have guided to this morning?

Matt Seinsheimer: Sure. So let me start by confirming that we are inbounding at a level that is accretive to our backlog margin. And that is important. And that will obviously flow through revenue and then ultimately through EBITDA, EBITDA margin.

Alf Melin: So you will see that. And as you know, we have a substantial backlog already, which is very high quality, and we are adding additional quality to that.

Matt Seinsheimer: Look. I have said this publicly. I want our clients to win. And if our clients win, they like us to win as well. So this is not about pricing or this is not about margin. This is about the relentless pursuit of reduction of cycle time and certainty.

Alf Melin: If I can sit down with a client and show them that we have the unique capability

Matt Seinsheimer: and the only ones who can deliver them a project significantly, you know, in a significantly shorter time frame, accelerating their time to first oil or first hydrocarbon, and giving them certainty in that outcome. Then I share a greater economic of that value that I create.

Alf Melin: So we feel

Matt Seinsheimer: that we have a long way to go in terms of the reduction of cycle time. Remember, this industry, you know, we just started this with the creation of TechnipFMC plc. We have a long way to go. We talked about it in response to the first part of your question. There is even more scope within our own remit, let alone further innovation that we are working on today as well. So that is our focus. That is what we think about every single day. That is why we make our customers win.

Alf Melin: And that is why we win as well.

Scott Gruber: Great. Thank you.

Matt Seinsheimer: Our next question will come from the line of Scott Gruber with Citigroup. Please go ahead.

Alf Melin: Doug, you mentioned the renewed interest in greenfield development.

Matt Seinsheimer: Just wanted to see if you could unpack that a bit more for us. You know, we are obviously hearing exploration mentioned on some customer calls, but just how widespread is the renewed interest in exploration across your customer base? And across geographies?

Alf Melin: Yeah. Good morning, Scott. I am going to parse the question just a little bit. Right? Because there is greenfield developments and then there is exploration. And you are right to point out exploration leads to future greenfield developments.

Matt Seinsheimer: But I want to make sure everybody recognizes or appreciates that there are substantial greenfield developments where the exploration has already been done. These projects did not move forward for a variety of reasons, including, you know, take everything I said to Arun's question in the inverse. The industry was not good about reducing cycle time. The industry was not good about certainty in terms of delivery. And because of that, the economics did not necessarily support those projects to move forward. So we are seeing quite a few greenfield developments that are, that the exploration has been done, that, if you will, have been in the queue. In addition to that, you are hearing about increases in exploration budgets.

You are hearing about new emerging basins being identified. Be it the equatorial margin in Brazil, we are hearing about Colombia now, I mean, almost every day, we wake up hearing new news of new opportunities in the offshore environment. We would humbly like to think that is because we have given our customers the confidence and the ability to go back and really scrub that portion of their portfolio or their reserve base, look for those opportunities. So really, Scott, they are quite global in nature, and I am only parsing the fact that this is not about waiting on seismic and waiting on exploration drilling.

That is happening, and that is good because that will continue to feed the hopper, if you will. And I kind of referred to that when I talked about through the end of the decade and beyond. But as importantly, there are opportunities out there that are being accelerated right now so that, and we have the tools and the kit and the ability necessary to accelerate those developments for our customers. I appreciate that. And then a quick follow-up on Arun's question around the SURF standardization. Like there is a big opportunity here, and I remember having detailed discussion with you maybe a year ago or so about it.

And I know this, you know, takes a while to execute on. But where do you stand in that process? And kind of how much more is there to go?

Alf Melin: Yeah. I thought I was going to get away with that committing to it, Scott.

Matt Seinsheimer: So thanks for circling back. Well, when is it going to last you? Look. You know, that is fair. Look. We have been working on it for a bit. We are impatient. Our customers are impatient, and that is a good thing. But we want to make sure we do it right.

Alf Melin: But, look, there will be more to come, and we will be excited to share that news

Matt Seinsheimer: with the industry. Great. Look forward to it. Thank you.

Matt Seinsheimer: Our next question will come from the line of Mark Wilson with Jefferies. Please go ahead.

Matt Seinsheimer: Thank

Mark Wilson: Thank you, and good morning. I would like to ask Doug about the point you make about EC considerable upside still. And just to check how

Victoria McCulloch: clearly returns have been coming through, margin has been improving. Three years now of $10,000,000,000 inbound in Subsea and another billion to come. And more opportunities in 3% of revenue. You spoke in the past about no expansion to roofline was a key element of previous years. In terms of the capacity that is within this business, should there be more of a response beyond, I do not know, the $10,000,000,000 level? How much volume capacity do you think there is within your existing setup? And I think I particularly speak to the Subsea 2.0 if that is done at two of your three facilities. Thanks, Doug.

Matt Seinsheimer: Thank you, Mark. I definitely knew I was not going to get away with this one. So it is a fair question, and let me give you a direct response. So as you pointed out, we have had a healthy, you know, rate of inbound. We have had $30,000,000,000 over three years. We just now reaffirmed the $10,000,000,000 for 2026. But we are also showing a Subsea opportunity list that is really expanding

Alf Melin: at a rate that we have not seen before. If you look at the number of awards

Matt Seinsheimer: number of projects that were awarded in this quarter, i.e., they came out of the Subsea opportunity list, what was we are talking about the net increase, but if you look at the gross increase, it was quite substantial. And there are others to come. So as we look forward, and you are right. You are hearing this from our clients, which is more important. It is just we are just basically, you know, gathering that information and sharing that with you. Their focus is on offshore. Their focus is on developing offshore reserves. Their focus is on adding reserves by focusing on offshore opportunities. And again, we are seeing that happen around the world across our client set.

As we have talked about before, our client set has expanded quite dramatically, three to four times what it was historically. There are many new companies that are operating and performing offshore Subsea developments, enabled by

Alf Melin: the simplicity and the ability to work with one company, TechnipFMC plc, in an iEPCI 2.0 direct award manner.

Matt Seinsheimer: But if I really kind of encapsulate your whole question, and to me, what it really comes down to is, you know, is this $10,000,000,000 a magic number? Or where do we go from here? And I want to be very, very clear that the Subsea opportunity list is both growing and accelerating. And we fully expect that this will be reflected in inbound order growth in 2027 and beyond.

Victoria McCulloch: I will hand it over. Thank you, Jack.

Alf Melin: Our next

Matt Seinsheimer: question will come from the line of Derek Podhaizer with Piper Sandler. Please go ahead.

Matt Seinsheimer: Hey. Good morning, Doug. I wanted to go back to your comments around your portfolio approach, specifically BP's Tiber and Cascadia. Could you help provide us with tangible examples of how Tiber is leveraging the engineering and equipment progress with Cascita to help drive down costs and increase your efficiencies.

Derek Podhaizer: Ultimately, just trying to understand more what this means for your earnings power and margins moving forward if you have more of this portfolio approach from your customers.

Alf Melin: Sure, Derek. And look, all the credit goes to BP. We are humbled and honored to be their partner.

Matt Seinsheimer: In the Paleogene. I want to start with that. Working together in many, many discussions, we came to the conclusion that there was a different way of

Alf Melin: the historical way of working together. And the I and when we looked at it,

Matt Seinsheimer: you know, we knew we wanted to go towards standardization. We knew we wanted to have repeatability. You know, the old saying, design one, build many. But when you have large gaps of time and distance in between projects, when you introduce new project directors on both sides, our side, their side, when you introduce new engineering teams, both sides, our side, their side, etcetera, etcetera, and then you get into the supply chain, and you are dealing with the supply chain that you turn on, you turn off, you turn on, you turn off. You are never going to get those efficiencies. So BP decided to take a very different approach.

We are extremely humbled and honored to be part of it.

Alf Melin: I do not want to get into, if you will, the dollar savings because I think that would be

Matt Seinsheimer: you know, not appropriate for me to do. That is more, you know, BP's business.

Alf Melin: But they clearly are benefiting.

Matt Seinsheimer: We clearly are benefiting as a result of the ability to be able to have continuity, visibility and continuity into our own manufacturing, also being able to have one single project team instead of setting up two teams, and in the supply chain because our suppliers benefit from that visibility and that continuity as well. So again, I do not like to talk about margin. I like to talk about improving Subsea project returns, which benefits our customer and also benefits us.

Derek Podhaizer: Yeah. No. That is very helpful. Appreciate that. And then maybe on Subsea Services, clearly a differentiator.

Matt Seinsheimer: For the company. I think you previously guided that it should grow in line with your top line growth, which we have the guidance now. But maybe could you touch upon what your expectations are for the Subsea Services side of things? Is this an expectation around

Derek Podhaizer: $1,900,000,000 to $2,000,000,000 for the year? Just maybe some more color and help on how we should think about services as we look into 2026.

Alf Melin: So, again, in line with revenue, so let us call it $2,000,000,000.

Victoria McCulloch: Great. Perfect. Thank you, Doug. I will turn it back.

Alf Melin: Our next question will come from the line of Victoria McCulloch with

Matt Seinsheimer: RBC. Please go ahead. Morning. Thanks very much for your time. Just one for me. On Surface Technologies, I guess, to service different part of discussion. A similar theme. You have seen a material increase in the margin over the past twelve months in Technologies. You attribute it in the presentation to operational efficiencies. This is what you spoke to us about a year ago, but can you give us an idea of how this can, to your expectation on how this would deliver? And, again, on that on Surface Technologies, how much more is there to achieve there?

Matt Seinsheimer: Look. Very proud of the segment. As we talked about in a prior call, you know, we took a decision to really look at that business, make some tough decisions,

Alf Melin: really focus on the right customers in the right geographies, utilizing the right technologies. So if you will, high-grading our portfolio. This is not a business when you focus on market share

Matt Seinsheimer: that it ends up very well. So we took a different approach. And we said, look. We are going to focus on quality

Alf Melin: and not quantity.

Matt Seinsheimer: And we are going to high-grade our portfolio. We have done that. It is performing very well as you can see as a result of that. There were some incremental benefits in Q4. But as we move forward, we expect the segment to continue to operate at a very high level. You know, it is now 65% of our business in Surface Technologies is in our international portfolio. We continue to benefit from the investments that we have made both in Saudi Arabia as well as in Abu Dhabi in terms of local content, local manufacturing.

And so, yeah, that is really, that is how I would summarize, you know, the outlook remains, you know, difficult because of the North America market. But we obviously benefit from the strength of the majority of our portfolio outside of the North American market.

Matt Seinsheimer: Thanks very much. Maybe just a follow-up to look at Subsea. You talk to us a bit about how your discussions with customers have been in a very choppy macro environment. But again, you know, reflecting, you know, how there is greater CapEx moving offshore, and we are seeing pressure certainly and discussion points around resources and reserves life. Those are conflicting, I guess, points, but more is being added to the Subsea. Do we think that potentially the market is more cost in the spot pricing than your customers are when they have discussions with you and, you know, how much is that, how much is that benefit TechnipFMC plc, you know, from a, like, I guess, pricing perspective?

Alf Melin: Sure. I would say I would describe it this way. One of the benefits of being in the offshore market is, you know, our customers

Matt Seinsheimer: know, take, you know, some of that near-term choppiness, if you will, is smoothed out. They understand these are prolific reserves. You know, these are prolific reserves. So when they are going after these, they have a denominator that is much different than any other investment opportunity they have in their portfolio. So all that they are looking for is obviously a forward view of the commodity price and a competent to execute the project, both from their team as well as from the industry.

Alf Melin: And this is where, you know, this has been the biggest

Matt Seinsheimer: change that has occurred, you know, in the last several years, is they have regained their confidence because of what we have created with TechnipFMC plc with the Subsea 2.0 configured-to-order product line and with our commitment to them and to the investment community of our relentless pursuit of the reduction of cycle time. So we do not talk about price. We talk about improving project returns, which benefit our clients. As I said earlier, if it benefits our clients, it benefits us. And, you know, once you get that mindset and you get out of a fixed asset mindset of day-rate utilization and pricing, you can really change your conversation with the clients.

We have a seat at the table far earlier than anyone else. And they give us visibility now as they look from and take a project approach that is unprecedented because they like what we are doing. And they want to make sure that they have the access to our iEPCI 2.0 solution, which leads to this level of direct awards that is now over 80% of our business is direct awarded to our customer, from our customer, and never goes out to a competitive tender.

Matt Seinsheimer: Super. Thanks very much for your color and the time today. Our next question come from the line of David Anderson with Barclays. Please go ahead.

Matt Seinsheimer: Hi. Good morning. This is Eddie Kim on for Dave with a prior commitment this morning. Doug, you mentioned operators are increasingly taking a portfolio approach to their opportunities. Of course, this provides you with greater visibility on Subsea orders. But does this also

Alf Melin: maybe result in more content with this approach where we are developing two projects simultaneously results in more content for you than if developed one after the other? And do you expect more companies to start to adopt this portfolio approach going forward? Or is this really limited to a few select majors?

Matt Seinsheimer: Sure, Eddie. Thank you. And, you know, say hi to David for us. In regards to the, you are on to something, very astute. You know, remember, we are the architects. So when we are talking about either a portfolio approach or an integrated FEED study leading to an integrated EP study, we are the architects. Now we will always design the field to ensure the best suitability for the reservoir, the, you know, the best in terms of the relentless pursuit of reduction of cycle time, but, clearly, we are going to make sure that if we have any technologies that are applicable that are going to help meet those objectives,

Alf Melin: we are going to incorporate those into the architecture.

Matt Seinsheimer: So the benefit of being the architect and the builder, if you will, you know, you can, you know, it is pretty clear that there are benefits

Alf Melin: of being able to do both, and we are uniquely positioned as the only company that has the capability to do both. So that is the position we are in. So, yes, to your point,

Matt Seinsheimer: it does create opportunities. Now in terms of the portfolio approach, you look, you have to have the asset base. Right? So not all clients have a reservoir that has

Alf Melin: a clear line of sight to doing, you know, multiple greenfield developments. Sometimes it is a one-off development.

Matt Seinsheimer: And that is absolutely fine. That is absolutely normal. But where clients have the ability to do multiple greenfield developments within a regional, an area, if you will, it is certainly applicable to any client, and BP is not the only one. I thought it was appropriate to pass the message about BP and what they are doing to Paleogene because I do know it was a recent award. And I do think it is appropriate to do so. But others are looking at the same approach.

Alf Melin: Got it. Thanks for that color. So number of signs pointing to a 2027 inflection in offshore activity.

Matt Seinsheimer: It seems be reflected in your growing Subsea opportunities list. But you talk to customer behavior and what you are seeing from them? You consistently mentioned sort of this growing shift of capital into offshore. I guess, what inning do you think we are in terms of operators shifting capital to offshore? Just wanted to get your sense of if most operators are already there at this point or if we are still in the early stages

Victoria McCulloch: of this capital shift into offshore?

Alf Melin: Good question, and I do not want to answer on behalf of my

Matt Seinsheimer: clients. That would be inappropriate. I am a service guy. Always have been. I know where I am on, you know, in the food chain. I would just look at their behavior. And I think what you are seeing in their behavior is they are in the very early stages, and they see a long runway ahead.

Alf Melin: Got it. Great. Thanks, Doug. I will turn it back.

Matt Seinsheimer: Our next question comes from the line of Caitlin Donahue with Goldman Sachs. Please go ahead. Good morning, and thank you for taking my questions. Doug, you mentioned that iEPCI and Subsea 2.0 are representing a good portion of total Subsea inbound orders, orders in 2025. Can you speak to your long-term expectations for this continued adoption? How do you see this flowing through to further margin expansion over the next few years?

Matt Seinsheimer: Great question, Caitlin.

Alf Melin: We have identified, you know, we said that the iEPCI was the majority of our inbound orders this past year, which is

Matt Seinsheimer: really quite substantial. A new product architecture like Subsea 2.0 configured-to-order, introducing that into the market is one challenge. An even greater challenge is when you change the commercial model. So, look, there was a point in time. It was a few years ago, had bid, but there was a point in time where I said if we could achieve one third of our orders from

Alf Melin: iEPCI or integrated

Matt Seinsheimer: the integrated approach, that, you know, that would be substantial. We are obviously well beyond that.

Alf Melin: And when you look at the different

Matt Seinsheimer: applications around the world, neither iEPCI nor Subsea 2.0 have any sort of a technical limit or

Marc Bianchi: you know,

Matt Seinsheimer: commercial limit, you know, that they both could not go to 100%. What I did allude to in my prepared remarks, though, is in legacy field, you know,

Alf Melin: is Subsea 2.0 backwards compatible? Yes.

Matt Seinsheimer: You know, is iEPCI applicable in brownfield, greenfield, emerging markets, mature markets? Yes. But sometimes you will find customers who just want to either repeat the past because it is a small tieback and, you know, maybe the last activity in that field or that region for them. So I think there is always going to be a percentage, but Caitlin, it is a fair challenge. And I think that we certainly approach every opportunity as iEPCI 2.0 until proven otherwise. And you will see and continue to see

Douglas Pferdehirt: both iEPCI 2.0. As a result of that, you will see iEPCI 2.0 continue to grow in our inbound.

Matt Seinsheimer: That is helpful. Thank you. And then just one more question on the Subsea 1Q revenue guide. I know it is the increase sequentially low single digits. Is that just more of a comment on a little bit less of that muted seasonality that we are seeing in 1Q as a result of some of these macro factors? Are there certain regions that you can call out that you are really looking at for some of this increased activity through 2026?

Douglas Pferdehirt: Sure. I am going to give that to Alf, and he will get into that. But if you do not mind, I would like him just to first kind of summarize, you know, the revision to the 2.0 or to the 2026 guidance because I do not want that to get lost on the call. It was an important element.

Alf Melin: Well, thanks for the question. Yep. Thanks for the question. So first of all, just to summarize, you know, we did raise Subsea guidance as you probably all noted. It is an important piece of reaching company EBITDA for the year. The adjusted EBITDA, we have to be adjusted EBITDA above $2,100,000,000. So that is built on a lot of the things that Doug talked about already. You know, we clearly achieved our inbound objective 2025. We have a growing opportunity list. We are committed to $10,000,000,000 and have a solid path to that. The high-quality backlog, all of those things come together and gives us confidence.

And then the Subsea Services revenue and growth on top is giving us a $22,000,000,000. So we thought it was important to, as we work overall initiating guidance for the company, to update this. If you look at the margin profile of Subsea, and again, I want to point out that we are introducing through the restructuring charges we have taken this quarter, we are initiating actions, and we are further taking actions in 2026 to further boost our margin expansion, not only in '26, but also beyond. And I think with what Doug said, we are very focused on driving revenue and margin expansion into the years beyond 2026.

Regarding the Q1, it is definitely what you were talking about. There is nothing big happening or anything structural that you should think about more than the seasonality. We continue to have two quarters a year where several of our vessels in our fleet are either dry-docked, they might be in for maintenance or some sort of upgrade, and taking advantage of the slower period, in particular in the North Sea area. And that is what you see pronounced in Q4, and you will continue to see some of that in the first quarter. But there is nothing really otherwise. The underlying run rate of our Subsea business is very strong.

And then coupled with all the things that we already said about our outlook and our ability to expand margins, we are confident in the overall guidance that we have given for Subsea.

Matt Seinsheimer: Thanks for the color. I will turn it back. Our next question will come from the line of Mark Bianchi with TD Cowen. Please go ahead.

Matt Seinsheimer: Hey. Thanks. Doug, I am going to ask you if you could to quantify two things, to the extent you are able to. So first, on this portfolio approach that you are talking about, in working with the customers, can you maybe help us understand how much of the sales funnel of opportunities that you are looking at? And I realize, you know, we have got the Subsea opportunity slide, and then there is, like, all these other discussions that you are having that might not be on slide. So if you sort of take that together, is there a percentage of the stuff that you are discussing with customers that would be part of a portfolio approach?

And then as we think about

Marc Bianchi: you know,

Matt Seinsheimer: $10,000,000,000 of orders this year, more than $10,000,000,000 in '27 and beyond, what proportion of those orders would be coming from the portfolio approach?

Douglas Pferdehirt: Yeah, Mark. Hard to put a hard number on it only because, as I said,

Matt Seinsheimer: earlier,

Douglas Pferdehirt: it, you know, it depends on the client, and it depends upon their portfolio in that particular geography, if you will. Because, you know, when you do the portfolio approach, it is more focused around a particular reservoir or a particular geography. So I would say today, it is, you know, it is a smaller portion, but it is something that our customers are responding well to. And I think looking at their own

Alf Melin: future developments

Douglas Pferdehirt: and seeing where and how it could be applied within their own opportunity list. So, you know, I guess that is the big difference, Mark, is we are sitting down looking at their opportunity list, instead of, as we were in the past, sitting around waiting to receive a request for tender. It is a very different seat at the table than we used to have.

Alf Melin: Yep.

Matt Seinsheimer: Okay. Helpful. And then the other thing to quantify, and this is really just to maybe level set and understand. You talked about 80% of the orders being direct awarded, right? So with Services and iEPCI and so forth. How much of revenue is direct, is coming from direct awarded projects, maybe in '25, '26, and '27, just so we can get a sense of, you know, the progression on the revenue side and maybe versus what the order percentage is.

Douglas Pferdehirt: Sure, Mark. So I think if you go back, you know, just a couple of years, we used to talk about 50%. I think two years ago, maybe one year ago, we started talking about 70%. This year, 80%. You know projects take two to three years to flow through. So I think that gives you a pretty good roadmap, and that is obviously going to benefit us going forward.

Matt Seinsheimer: Great. Thanks so much, Doug. I will turn it back.

Matt Seinsheimer: Our next question will come from the line of Saurabh Pant with Bank of America. Please go ahead.

Victoria McCulloch: Hi. Good morning, Doug.

Alf Melin: Good morning. How are you? Good. Good. Good, Doug. Maybe I will just dig into

Saurabh Pant: the whole Subsea opportunity list discussion. The one thing that I am noticing, Doug, is that there are more and more projects that are gas-directed with just oil-directed. Right? We remember a decade back, anybody struck a big gas reservoir, it used to be a disappointing moment, right? But we are more and more developing these bigger reservoirs that are part of the opportunity list. But for you as the Subsea architect, how much difference does it make if a project is oil versus gas? Is there any revenue intensity impact? Anything we should read into the complexity and by extension, margin impact potentially down the road from just the whole oil versus gas dynamic in Subsea?

Douglas Pferdehirt: No. It is a great observation. It actually is something we internally had anticipated would happen a bit sooner than it has happened. But we are seeing a shift towards gas. And you know, that is partly driven by

Alf Melin: the

Douglas Pferdehirt: you know, there was quite an expansion in terms of LNG capacity around the world. You know, that is slowing down, but you have got to feed that. And what people do not, I guess the dots that people do not necessarily connect, is other than in the U.S. and Russia, almost all LNG is fed by offshore reservoirs, not onshore reservoirs. That is a generalization, but it is directionally correct.

Alf Melin: So

Douglas Pferdehirt: okay. Two things happen. One, you know, you have to develop the assets for the feed gas. But then over time, you now have a massive investment in an LNG facility; you have to continue to feed that with gas. So you almost commit yourself to continuing doing Subsea developments offshore once you build that LNG facility. So we see that happening around the world, and we are obviously a beneficiary of that. In terms of gas versus oil, we love everybody equally.

That being said, a gas tree tends to be a higher unit cost than an oil tree, and it typically has to do with a more corrosive environment and the velocities that we need to be able to, you know, control and operate safely in a Subsea environment. So net-net, gas equipment tends to be more complex. It is better for us because it is more differentiated and it, you know, that is who we are. It fits better, you know, it just creates even greater differentiation versus the rest of the industry, you know. But either way, you know, we will take either one. We are just here to help our customers reach their objective.

Saurabh Pant: Right. Right. Okay. Okay. That is fantastic color, Doug. And then Alf, maybe one for you on the whole free cash flow discussion. Like you said, '26 guidance implies 65% conversion out EBITDA at the midpoint. But we were talking about orders. Working capital is a big part of it, right? So if orders start to inflect again from that $10,000,000,000 annualized run rate in '27 and beyond, working capital should be a tailwind again just how you get paid from a timing perspective, right?

So are we looking at a prolonged period, two to three years, where free cash flow conversion out of EBITDA is going to be higher than that 55% working capital neutral number we were talking about on the last call?

Alf Melin: Yep. So thanks for the question. So first of all, your observation is correct. We have had a, first of all, a really strong and exceptionally strong free cash flow generation this past year. I think our cash conversion is actually mathematically close to 80%, and it is, in terms of the foundation for this, it is always going to be both commercial and operational execution towards your goals. And that is the foundation of improving our working capital. Now we are setting ourselves up for another strong year. We are clearly improving working capital once again from the same variables that I talked about, the commercial and operational side.

And as well, we could not forget that our CapEx is being kept at a 3.2% level. However, having said that, you know, looking out several years, there is always a mix of orders, etcetera, so you can never fully predict. But in general, if we are able to continue to have good commercial success in terms of how work is falling into where we have commercial strengths to realize, and as well, we need to execute on this because it is not just commercially be setting up. We need to execute on this.

There is opportunity to continue this, but I would caution against just assuming that you can, in perpetuity, keep putting up better and better working capital numbers. Because every year, you start at a better position, and you need to improve from there. And there are still, from some of the cash that you are collecting, you still need to execute, and that creates timing of where outflows could be higher. So I will not speculate out more than say that '26 is going to be a really, really good year where we improve working capital again. But I still think we need to focus on the neutral when we look in the very long term.

Saurabh Pant: Yep. No. That makes sense, Alf. Right? I mean, the whole point is that yours is a very low capital intensity business, right? So on the true cycle basis, your free cash flow power would be really strong. That is what I wanted to just get into. So thank you. Thank you a lot. Thanks a lot, Doug.

Alf Melin: Yeah. Thank you. Clearly confirmed.

Matt Seinsheimer: Do we have time for one more question? Our final question will come from the line of Paul Redman with BNP Paribas. Please go ahead.

Matt Seinsheimer: Yeah. Thank you very much for taking one more question.

Victoria McCulloch: You mentioned earlier that you are the only company that is an architect and a developer.

Matt Seinsheimer: But I also wanted to ask,

Victoria McCulloch: what are the risks about replication on iEPCI or on Subsea 2.0 with your competitors? Because company generating such fantastic margins, growth, growth in backlog, you would assume that companies would start to pick up and think about how we could possibly challenge this.

Marc Bianchi: Are you seeing any actions by customers

Victoria McCulloch: to copy what you are doing? Is it copyable? You very much.

Douglas Pferdehirt: Sure, Paul. The short answer is it is very diff, you know, it is difficult. Many years ago, back in 2017, I said it took us four years, you know? You know? So gave, you know, kind of an idea of how much detailed engineering program it requires. Look. Can others do it? Yes. We have never said we are the only ones who can do it. We are the only ones who chose to do it. We chose a path of integration, walk either our others have chosen a path of consolidation. Just a different strategy. We are going to stick with our strategy.

Matt Seinsheimer: I will now turn the call back over to Matt Seinsheimer for any closing comments.

Matt Seinsheimer: Thank you. This concludes today's conference call. A replay of the call will be available on our website beginning at approximately 3 p.m. New York time today. If you have any further questions, please feel free to reach out to the investor relations team. Thank you for joining us. Regina, you may now end the call.

Matt Seinsheimer: This does conclude our call today. Thank you again for joining. You may now disconnect.

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