HAL Earningcall Transcript Of Q2 of 2024

Eric Carre -- Executive Vice President, Chief Financial Officer

Thank you, Jeff, and good morning. Our Q2 reported net income per diluted share was $0.80.
Total company revenue for the second quarter of 2024 was $5.8 billion, flat sequentially.
Operating income was $1 billion, a sequential increase of 5%, and operating margin was 18%, a
sequential increase of 69 basis points.

Beginning with our Completion and Production division, revenue in Q2 was $3.4 billion,
sequentially flat. Operating income was $723 million, up 5% when compared to Q1 2024, and
operating income margin was 21%. These results were primarily driven by strong international

completion and production performance, offsetting softer results in North America. In our
Drilling and Evaluation division, revenue in Q2 was $2.4 billion, while operating income was $403
million, both sequentially flat from Q1 2024.

Operating margin was 17%, a sequential increase of 20 basis points. These results reflect the
strength of our global D&E business despite the roll-off of seasonal software sales in Q2 which
affected every region. Now, let's move on to geographic results. Our Q2 international revenue
increased 3% sequentially.

Europe/Africa revenue in the second quarter of 2024 was $757 million, an increase of 4%
sequentially. This increase was primarily driven by higher well construction activity and
improved wireline activity in Norway, along with increased completion tool sales and higher
stimulation activity in West Africa. Middle East Asia revenue in the second quarter of 2024 was
$1.5 billion, an increase of 5% sequentially. This increase was primarily related to higher activity
in the Middle East across multiple product lines and higher fluid services in Asia.

Latin America revenue in the second quarter of 2024 was $1.1 billion, sequentially flat. In North
America, revenue was $2.5 billion, representing a 3% decrease sequentially. This decline was
primarily driven by decreased pressure pumping services in US land and decreased completion
tool sales and testing services in the Gulf of Mexico. Moving on to other items.

In Q2, our corporate and other expense was $65 million. For the third quarter of 2024, we expect
our corporate expenses to increase slightly. Our SAP deployment remains on budget and is on
schedule to conclude in 2025. In Q2, we spend $29 million, or about $0.03 per diluted share, on
SAP S4 migration, which is included in our results.

For the third quarter, we expect SAP expenses to increase slightly. Net interest expense for the
quarter was $92 million. For the third quarter 2024, we expect net interest expense to be roughly
flat. Other, net expense for Q2 was $20 million, which was lower than anticipated, driven by
favorable FX movements.

For the third quarter of 2024, we expect this expense to be approximately $35 million. Our
effective tax rate for Q2 was 22.5%, lower than expected due to discrete items. Based on our
anticipated geographic earnings mix, we expect our third quarter of 2024 effective tax rate to
increase approximately 1%. Capital expenditures for Q2 were $347 million.

For the full year of 2024, we expect capital expenditures to be approximately 6% of revenue. Our
Q2 cash flow from operations was $1.1 billion and free cash flow was $793 million. During the
quarter, we repurchased $250 million of our common stock. For the full year 2024, we expect
free cash flow to be at least 10% higher than in 2023.

Now, let me provide you with some comments on our expectations for the third quarter. In our
Completion and Production division, we anticipate sequential revenue to be down 1% to 3% and
margins to decrease by 75 basis points to 125 basis points. In our Drilling and Evaluation
division, we expect sequential revenue to increase 2% to 4% and margins to increase by 25 basis
points to 75 basis points. I will now turn the call back to Jeff.

Jeffrey Allen Miller -- Chairman, President, and Chief Executive Officer

Thanks, Eric. Here are a few key points I would like you to take away from our discussion today. I
am pleased with our 18% margins and about $800 million of free cash flow in the second
quarter. We are well on track to deliver over 10% free cash flow growth this year.

I'm excited about our international business where our technology portfolio has never been
stronger. I am confident that our strategy to maximize value in North America is working, and I
expect it continues to deliver strong returns. Finally, I am convinced that our collaborative
approach and value proposition differentiate us from our competitors and are directly aligned
with how our customers expect to drive improved performance. And now, let's open it up for
questions.

Questions & Answers: