What Babcock (BW) Said on Its Q3 Earnings Call

Key Points

• Third-quarter revenue more than doubled year over year to $290.8 million, driven largely by major power-generation projects. Adjusted EBITDA rose to $17.7 million, while gross margins faced pressure from project mix and a labor issue the company described as isolated.
• Bookings increased 112% to $228 million and backlog climbed to $2.5 billion; Babcock also cited a prospective pipeline exceeding $16 billion, though those opportunities are not yet contracted.
• Babcock reaffirmed its 2026 adjusted EBITDA target of $80 million–$105 million and set a 2027 target of $125 million–$140 million. Management expects significant cash flow in the fourth quarter and says the North Dakota project and parts-and-services demand will support 2027.

Babcock NYSE: BW, formally Babcock & Wilcox Enterprises, reported third-quarter 2026 revenue of $290.8 million, more than double the year-earlier figure, as large power-generation projects contributed to growth. The company reaffirmed its full-year adjusted EBITDA target and issued a higher target for 2027.

Revenue rose 109% from the third quarter of 2025, primarily because of increased large-project volume, including $77.8 million from a current large generation project, Chief Financial Officer Cameron Frymyer said. Operating income increased by $3.4 million to $13.8 million.

Net income rose by $35.1 million to $93.9 million, helped by improved operating results and the revaluation of warrants. Adjusted EBITDA, a non-GAAP measure, increased by $9.4 million to $17.7 million.

Frymyer said gross margins were affected by the mix of work, including greater construction revenue and a labor availability issue on one construction project. The company expects that project to be completed by year-end and considers the issue isolated.

Bookings and Pipeline Expand

Third-quarter bookings reached $228 million, up 112% from a year earlier, while backlog rose 571% to $2.5 billion, Chairman and CEO Kenny Young said. The parts and services business posted record bookings for the quarter.

Young said the company’s pipeline of potential opportunities exceeded $16 billion, including more than $10 billion in utility and industrial opportunities outside data centers and more than $6 billion in data center projects. Pipeline opportunities are prospective work, rather than booked orders.

Demand for reliable baseload electricity is prompting utilities to invest in existing coal-fueled plants, including refurbishment and recommissioning, Young said. He also cited opportunities in India and Southeast Asia, where he said natural gas is becoming more difficult to obtain for power generation.

The company expects significant bookings in the fourth quarter of 2026 and the first quarter of 2027. Young said some potential projects range from $200 million to $500 million, with several larger opportunities also under discussion. He cautioned that negotiations carry risks until contracts are signed.

“There’s always risk in anything until they’re signed,” Young said, adding that the company was working through issues including risk, speed, performance and guarantees.

2027 Outlook and Cash Flow

Babcock reaffirmed its 2026 adjusted EBITDA target of $80 million to $105 million and issued a 2027 target of $125 million to $140 million. Young said the North Dakota generation project and continued demand for parts and services would contribute next year. He added that prospective large bookings would have a bigger impact in 2028 and 2029, although they could provide some upside in 2027.

Asked about support for the 2027 target, Frymyer offered a rough estimate that about 75% would be covered by existing backlog or the company’s recurring book-and-bill business. He said that business typically generates approximately a couple hundred million dollars in annual revenue.

Frymyer expects a larger fourth quarter for parts and services following strong bookings and said demand should carry into the first quarter as customers prepare for spring outages.

Accounts receivable increased in the third quarter, contributing to higher working capital, Frymyer said. He expects those receivables to be paid in the fourth quarter and anticipates a “pretty decent amount of cash flow” in that period.

At September 30, total debt stood at $166.4 million, while cash, cash equivalents and restricted cash totaled $128.9 million. The company repurchased the remaining $61.8 million of its December 2026 bonds during the quarter and bought back $38 million of common stock. Young said additional repurchases were under discussion but made no commitment.

North Dakota and BrightLoop Projects

Young said the North Dakota project was progressing as planned, with nearly all required permit applications submitted and county approval secured for conditional use and zoning permits. Manufacturing work is underway, and the company expects on-site work to begin in early 2027, with construction continuing through 2029 and into 2030.

The company is also developing a commercial-scale BrightLoop facility in Massillon, Ohio, with operations planned for late 2027. Young said system components were nearly complete and site work had started.

Young said Babcock has more than $2 billion in potential BrightLoop opportunities outside its main pipeline. The technology is already generating some revenue from engineering and front-end studies, he said, but significant mature revenue is more likely in 2029, with some possible contribution in 2028.

About Babcock (NYSE:BW)

Babcock & Wilcox Enterprises, Inc is an energy and environmental technology company that provides equipment, systems and services for power generation, industrial operations and waste management. Its offerings include steam-generating technologies, boilers, emissions-control systems, construction and maintenance services, and related engineering support.

The company also develops technologies for renewable energy and waste conversion, including solutions designed to transform waste and biomass into useful heat and power.

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