Babcock & Wilcox Enterprises Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 12, 2025

There are 6 speakers on the call.

Operator

Good afternoon. Thank you for attending the Babcock and Wilcox Enterprises First Quarter twenty twenty five Conference Call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I'll now like to turn the conference over to your host, Sharon Brooks, BNW's Director of Communications. Thank you.

Operator

You may proceed, Ms. Brooks.

Speaker 1

Thank you, Matt, and thanks to everyone for joining us on Babcock and Wilcox Enterprises first quarter twenty twenty five earnings conference call. I'm Sharon Brooks, Director of Communications and Marketing. Joining the call today are Kenny Young, B and W's Chairman and Chief Executive Officer and Cameron Frymeier, Chief Financial Officer to discuss our first quarter results. During this call, certain statements we make will be forward looking. These statements are subject to risks and uncertainties, including those set forth in our Safe Harbor provision for forward looking statements that can be found at the end of our earnings press release and also in our Form 10 Q that was filed this afternoon and our Form 10 ks that is on file with the SEC and provide further detail about the risks related to our business.

Speaker 1

Additionally, except as required by law, we undertake no obligation to update any forward looking statement. We also provide non GAAP information regarding certain of our historical and targeted results to supplement the results provided in accordance with GAAP. This information should not be considered superior to or as a substitute for the comparable GAAP measures. A reconciliation of historical non GAAP measures can be found in our first quarter earnings release published this afternoon and in our company overview presentation filed on Form eight ks this afternoon and posted on the Investor Relations section of our website at bobcock.com. I will now turn the call over to Kenny.

Speaker 2

Thanks, Sharon, and thanks, everyone, for joining this afternoon. We are pleased to report a strong start to 2025 with robust first quarter results across our entire business. Our results in the first quarter reflect the strong global and North American demand for our technologies as we continue converting our $7,600,000,000 global pipeline of identified project opportunities into new bookings. We generated strong operating results highlighted by revenue, operating income and adjusted EBITDA that exceeded both company and consensus expectations for the quarter. The results in the quarter were led by a strong performance from our global parts and services business, which posted the highest Q1 bookings, revenue, gross profit and EBITDA in the past decade.

Speaker 2

The company's core business continues to perform ahead of expectations and we anticipate returning to positive cash flows in 2025. We are also excited to report a significant accomplishment from our recent strategic efforts to reduce or refinance our current debt. Earlier today, we announced that approximately 40% of our outstanding bonds have been exchanged into new five year notes at a discount to par, which significantly reduces our current debt, lowers our overall net debt and reduces our annual interest expense. This privately negotiated bond exchange is expected to result in $131,800,000 of outstanding bonds due in 2026 being replaced with new bonds in the amount of $100,800,000 that will be due in 02/1930. This lowers our annual interest expense by $1,100,000 and combined represents a positive step in our restructuring and refinancing efforts while demonstrating continued support from our lenders and bondholders.

Speaker 2

Moving forward, we continue to explore further debt refinancing options and are in discussions regarding other potential asset dispositions to reduce our current and long term debt obligations. In support of that objective earlier this month, we also announced the sale of the majority of the assets of our Denmark based waste energy subsidiary for $20,000,000 in gross proceeds to Canadivia Innova, formerly known as Hitachi Zosun. As part of the sale, dollars 5,000,000 of the $20,000,000 in total proceeds is directed to fund our Bright Loop project in Massillon, Ohio. As a part of this asset sale, we have also entered into agreements to work together regarding the North American waste energy market, leveraging each company's best in class waste energy grade technologies and B and W's boiler technologies. We also entered into an agreement to jointly develop Bright Loop opportunities to leverage renewable natural gas and other applications.

Speaker 2

ABI is a global leader in waste to energy technologies, carbon capture and renewable natural gas, and we look forward to working with them on joint opportunities in the years to come. We continue to see strong global demand for our diverse portfolio of technologies and are making progress in converting our $7,600,000,000 global pipeline of identified projects and opportunities as displayed by our strong bookings and backlog results this quarter. Our backlog of 5 and $26,800,000 at the end of the first quarter was a 47% increase compared to the same period of 2024. This represents the largest backlog in recent company history as our Thermal segment continues to perform based on higher baseload generation demand in North America. In addition, we achieved bookings from continued operations of 167,000,000 an 11% increase compared to the same period of 2024.

Speaker 2

This increase in bookings is supported by record high bookings from our global parts and services business. We believe these results affirm our strong foundation while underpinning our pipeline and outlook for the year ahead. Our efforts to progress BrightLoop are moving forward as we further the commercial development of existing projects and continue working to improve the overall operational effectiveness of these technologies to produce low cost green hydrogen. We are continuing to progress with engineering work for our previously announced BrightLoop projects. We are finalizing the financing for Massillon, Ohio project for which we have already have received a significant offtake agreement.

Speaker 2

When completed, the plant will produce five tons of hydrogen per day. And we anticipate completing financing in the next few months while simultaneously placing long lead time orders and continuing with all permits, licenses and construction. And we anticipate hydrogen production from the Masson plant sometime by mid twenty twenty six. We also continue to see opportunities for new projects related to renewable energy in The United States, which could enable us to leverage our climate bright decarbonization platform and presents additional higher margin prospects. These opportunities are for behind the meter data center power applications as well as carbon dioxide removal technology.

Speaker 2

Looking forward, we anticipate industry tailwinds and generation demand to continue throughout 2025 and the years ahead. However, the company is also keeping a close eye on the tariff negotiations and any potential impact on the business in 2025. As stated, the company's core business continues to perform ahead of expectations and we do again expect to return to positive cash flows in 2025. I'll now turn the call over to Cameron to discuss the financial details of the first quarter twenty twenty five. Cameron?

Speaker 3

Yes. Thanks, Kenny. I am pleased to review our first quarter results. Further details of which can be found in the 10 Q that is on file with the SEC. Our first quarter consolidated revenues were $181,200,000 which is 10% increase compared to the first quarter of twenty twenty four.

Speaker 3

The increase is primarily driven by activity related to a large natural gas project for 8,500,000.0 higher construction volume of $6,000,000 and an increase in thermal part sales of $10,000,000 Net loss from continuing operations in the first quarter of twenty twenty five was $7,800,000 which was a better result compared to the net loss of $12,800,000 in the first quarter of twenty twenty four. Our loss per share from continuing operations in the first quarter of twenty twenty five was $0.11 compared to a loss per share $0.19 in the first quarter of twenty twenty four. Our operating income in the first quarter of twenty twenty five was $5,900,000 exceeding our quarterly expectations and outpacing operating income of $5,700,000 in the first quarter of twenty twenty four. Our adjusted EBITDA was $14,300,000 compared to $11,300,000 in the first quarter of twenty twenty four. Bookings in the first quarter of twenty twenty five were $167,000,000 an 11% increase compared to the same period last year and ending backlog was 5 and $26,800,000 a 47% increase since the first quarter of twenty twenty four.

Speaker 3

As Kenny previously mentioned, this extremely strong quarterly bookings is supported by the high performance of our parts and service business this quarter. I'll now turn to the balance sheet, cash flow and liquidity. Total debt at 03/31/2025 was $473,600,000 and the company had cash, cash equivalents and restricted cash balance of $116,800,000 The company's core business is performing ahead of expectations and we continue to anticipate return to positive cash flows in 2025, excluding BrightRoot. One of our top priorities continue to be the refinancing and reduction of our current debt obligations. As noted previously, we have recently entered into a privately negotiated bond exchange, which is expected to result in 131,800,000.0 of outstanding bonds due in 2026 being replaced with new bonds equal to $100,800,000 that will be due in 02/1930.

Speaker 3

This is a significant positive step in our refinancing efforts as it decreases our debt obligation by $31,000,000 and reduces interest by $1,100,000 a year. Furthermore, this demonstrates the continued support from our lenders and our bondholders. We continue to explore further debt refinancing options to extend or reduce our current and long term debt obligations. We also continue to investigate the sale of certain other assets, similar to the sale of Denmark based waste energy subsidiary announced earlier this month. The proceeds of these sales will be used primarily to pay down existing debt and enhance working capital.

Speaker 3

I'll now turn the call back over to Kenny.

Speaker 2

Thanks, Cameron. Well, in closing, we remain intently focused on executing our strategic plan and driving further improvements in our balance sheet. Our global pipeline of over 7,600,000,000.0 and identified project opportunities remains healthy across all of our business segments, and we anticipate additional prospects for new bookings and stronger financial performance throughout 2025. We continue to believe our deep industry expertise with clean energy and carbon capture technologies coupled with our long history and traditional energy sources positions us well to deliver environmental, conscious technology driven solutions to our global customers. As always, I would like to recognize in the efforts of our dedicated and talented employees around the world who focused on working hard and safely to deliver a consistent profitable growth for our shareholders and help meet the world's need for clean and reliable energy now and in the future.

Speaker 2

I'd also like to thank our global customer base and suppliers for their continued support of Babcock and Wilcox, and we remain excited about the prospects that lie ahead. With that, I'll turn the call back over to Matt, who, will insist us, assist us on taking one or two questions. Matt?

Operator

Ladies and gentlemen, we will now begin the q and a session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press 1. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question.

Operator

First question is from the line of Aaron Spachella with Craig Hallum. Your line is now open.

Speaker 4

Yes. Hi, Kenny and Cameron. Thanks for taking the questions. Maybe first for me on guidance. Just wanted to make sure I might have missed it, but you're kind of reiterating guidance for the year.

Speaker 4

And I know you had some kind of caution on just project timing and tariffs and things like that. But with the strong start to the year, wanted to get a little bit more color there and maybe an update on coal to gas conversion project and kind of thoughts for contribution this year versus the next couple of years.

Speaker 2

Yes. We're haven't we didn't touch on guidance on the call just to kind of it's not we're basically just, keeping it where it is or was and on it and keeping an eye out for it. And rather than come back with different ranges and other aspects, we just said, leave it where it is, but not touch it. I think our, you know, the key part we gotta keep an eye on is, as we talked about offline, is the the tariffs, out there and the potential impact that that may have on projects. And that, honestly, now is anybody's guess or clue, with, you know, all that's going on, you know, in the world of these negotiations and discussions and back and forth and back and forth.

Speaker 2

Obviously, our customers keep an eye on those as well too. And, you know, as it relates to I think for parts and services, as we've talked about publicly, probably not a big impact overall on the business, but, you know, some of the larger and upgrades and other aspects, you know, those are things that have potential impacts, and we just have to work with our customers on on timing of that. So, you know, assets you know, the range is broad just because we you know, if a project gets delayed a month or two because of tariffs or other aspects as people kind of wait through their strategies in and around those, you know, it just has an impact overall in the business. So we just kinda didn't touch it on on any update or or any other conversation around the the guidance on it. On the the natural gas project right now, it's actually proceeding on schedule and and doing, you know, it's on time on schedule for us, and a customer.

Speaker 2

That's the the large one in Indiana, so that's progressing, I think, well. The know, hopefully, the the tariff aspects don't impact that at all from, you know, any kind of delays that may happen later on this year. The bulk of the shipment of of inbound technology will happen later this year, early into next year. So any impact from the tariffs on that would would not be realized until then. So I I think both us and the customer are just keeping a close eye on these, constant negotiations and updates coming out of Capitol Hill.

Speaker 2

And we'll make a kind of a real game time decision and strategy around those tariffs when it's when we get closer to those activities, if that makes sense.

Speaker 4

No, it does. Thank you. And then maybe second, with the asset sale, sounds like some of those proceeds are going to be going to Massillon. Can you just remind us of the timeline for that project? You touched on it a little bit, but just total kind of costs from you and for the overall project.

Speaker 4

Sounds like financing is still coming together there. And then just what that could mean for other projects in the pipeline as that gets up and running.

Speaker 2

Yes. So obviously, Masson is important for us to get in the ground. We have been, and still working through the the overall financing of that, aspect of it. It's the project itself probably, you know, at this stage needs around 40 or or 50,000,000 of of, additional financing to to complete that project. We have you know, as we stated, you know, wouldn't go too much further on this, but as we're in discussions with the some financing options on the company, that's clearly one of them, and we're working, you know, through those, details as we speak.

Speaker 2

So that's you know, hopefully, can complete that here in the next few months, and then, just release all of the orders that we have pending. The main bulk of that need right now is in the construction area, and we really wanna get the the construction teams on-site on ground here in the in, you know, the the fall of this year. And that's we're we're trying to stay to that schedule as we speak. And then, you know, with the anticipation, depending on the winter, how, light or hard it is, anticipate, you know, producing hydrogen sometime by mid next year at this stage. You know, I I think as we move ahead with that project and, and move forward on that, you know, the some of the other options or opportunities, not options, but opportunities that we're working on we'll start to to really move more into a serious, booking mode, you know, sometime in '26.

Speaker 2

And and, you know, that's the feedback we're getting as we we still work through some of the pipeline aspects out there. But the the pipeline of opportunities on you know, for BrightLoop seem to be growing. I just you know, that this is opportunity phase clearly, but, you know, within the oil and gas industry and some other, you know, heavy gas suppliers that are are still looking at, you know, utilizing natural gas to high or to hydrogen, you know, and the the value here that Brightwood brings is it brings an alternative that says, hey. If you wanna isolate c o two today, great. If you don't, fine.

Speaker 2

You know, up to the customer. But, you know, obviously, if, there are other mandates on c o two in the future, that option has been built in. So there's very little cost then for that new plant to have convert to carbon capture. It just it's a matter of what you wanna do with the c o two, whether you because we capture it as part of our process. So, there's significant capital saving versus other, natural gas to hydrogen technologies, And that's, you know, the one of the reasons for getting a lot of attention on this technology right now as as some of these larger companies are looking alternatives to steam methane reform and ATR, which which clearly SMR and ATR are proven bondable bankable technologies.

Speaker 2

Right? It's it's, it's been out of the marketplace for quite some time. Brightloop is new. So, the Maslin plant and getting the the commercial plant up is is vitally important. We we also continue, to have dialogue and and are in discussions with the Department of Energy and other groups on Capitol Hill, to participate either in Massillon or one or two of these other projects that we're involved in, Wyoming and or West Virginia.

Speaker 2

And we you know, and, hopefully, some of that will will move to a favorable outcome as well too. Way too early to tell, but, you know, those those discussions and conversations still continue.

Speaker 4

Understood. Thanks for taking the questions. I'll turn it over. Appreciate the color.

Speaker 2

Yes. Thanks, Aaron.

Operator

Thanks, Aaron. Thank you for your question. Next question is from the line of Rob Brown with Lake Street Capital Markets. Your line is now open.

Speaker 5

Good afternoon. You had a pretty strong demand environment going on. What are some of the drivers that are kind of driving that at this point?

Speaker 2

On the demand side, is that what you're asking Rob? Sorry, cut out briefly there.

Speaker 5

Yes, sorry. Just you had a very good bookings quarter. I think you said one of the best in ten years. Just wanted to get a sense of some of the drivers for that demand at this point.

Speaker 2

Yeah. The the I mean, the exciting part about, where we are I mean, obviously, base load generation worldwide, right, is is really increased. And and so the the concept of increasing utilization of some of our, you know, core technologies around in and around coal plants are are still, vitally important to meet that base load generation. And we're we're just seeing some of the the pickup from not only not only those plants, but, you know, other, you know, small plants as well too. There could be natural gas, package boilers, other aspects.

Speaker 2

So, you know, overall, from a parts and services standpoint, we're just seeing the need of base load generation increase, you know, and the and, you know, typically, q one for us is a little bit light, normally in our parts and services business. So it was pretty exciting to to see the the demand come in, and it's it's and it was, you know, global in reach. So it was international as well as in domestic North America for us on that. But primarily driven, you know, if you go back to the the basic aspect of it, a lot of these plants are being used more and more and more. Some of those plants last year may have shifted some of the outage work, delayed some of the outage work.

Speaker 2

As a result, they have more parts wear and tear that they need to maintain. Some of these plants are placing orders trying to anticipate parts and other aspects that they're going to need later on this year. So there's combinations of all of those pieces that happening across the board, but it's just exciting to see it translate into a very positive Q1.

Speaker 5

Okay, great. Then I guess you touched on it a little bit, but do you expect sort of normal seasonality with a bit of a step up throughout the year in terms of just the demand cycle or the activity cycle in those outages?

Speaker 2

Yes. I think we'll still see a normal seasonality in the parts services. The outages obviously create some of that happening as well too. But I think Q2 will be always low like q one is and, you know, q three, q '4 will will do better for sure. I don't we we don't anticipate seeing much difference on that, even given the the current aspect around it.

Speaker 2

But, you know, it's it's good to be a little bit ahead of the curve from a planning standpoint on where the demand is coming in on parts and services, but think seasonality is there. I know Cameron and you might have a different thought on that.

Speaker 3

I think that's exactly right. I think we'll see I think there's some lower this quarter, I think the seasonality is a big part of it. So no, agree completely.

Speaker 5

Okay, great. Thank you. I'll turn it over.

Operator

Thank you for your question. There are no additional questions waiting at this time. So I'll pass the call back to Sharon Brooks for any closing remarks.

Speaker 1

Thank you for joining us today. This concludes our conference call. A replay will be available for a limited time on our website. If you have a question that was not addressed during today's call, please feel free to reach out to our Investor Relations team at investorsbabcock dot com. Thank you.

Operator

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.

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Earnings Conference Call
Babcock & Wilcox Enterprises Q1 2025
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