Babcock & Wilcox Enterprises (BW) Q1 2026 earnings call transcript

Thank you, Ellen. And thanks to everyone for joining us in Babcock and Wilcox Enterprises. First Quarter 2026, Earning's Conference Call. I'm Sharon Brooks, Director of Communications. Joining the call today are Kenny Young, BMW's Chairman and Chief Executive Officer and Cameron Fryer, 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 in our quarterly report on Form 10Q that was filed with the SEC earlier today. Additionally, except as required by law, we undertake no obligation to update any forward-looking statement.

We also provide non-gap information regarding certain historical and targeted results to supplement the results provided in accordance with GAP. This information, which includes our discussion of adjusted EBITDA, adjusted net income and net debt, should not be considered superior to or as a substitute for the comparable GAP measures. A reconciliation of historical non-gap measures can be found in our first quarter 2026 earnings release published earlier today and in our company Overview Presentation filed on Form 8K, which is posted on the investor relations section of our website at Babcock. com.

Please also see our first quarter 2026 earnings release published on May 11, 2026 for further information regarding our bookings and backlog. I will now turn the call over to Kenny.

Thanks, Sharon. Well, good afternoon, everyone, and thanks for joining us on our first quarter 2026 earnings call. We are very pleased to report one of the strongest first quarter performances in recent company history. Babcock and Wilcox continued to see significant growth in the quarter driven by high demand for electrical generation from utility, industrial, and AI data center customers.

In addition, we also achieved strong operating results supported by continued momentum in our core business and ongoing debt reductions as well. Our quarterly results were highlighted by revenue and adjusted EBITDA that exceeded company and street expectations. Adjusted EBITDA was $16.1 million for the first quarter, which was 296% increase compared to the first quarter of 2025.

Our revenues for the quarter came in at $214 million, which is a 44% increase compared to the first quarter of 2025.

We also achieved positive adjusted net income from continued operations of $2.2 million after removing $81.8 million of costs associated with increased non-cash warrant and stock appreciation rights valuation, both of which are directly due to the significant stock price increase in the first quarter of 2026. These top line metrics captured with the recent tailwinds we've seen across our business and illustrate BMW's growth trajectory moving forward as we continue to capitalize on strong global demand for parts and services, new base load generation, and behind the meter AI data center projects.

These recent tailwinds can also be seen in our pipeline, bookings and backlogs as well, which saw significant acceleration during the first quarter of 2026. Our total pipeline grew by more than 17% to over $14 billion, including new AI data center opportunities.

Our bookings and backlog values continued to surge fueled by our core business growth and development of our base electron project in North Dakota, as we are in further discussions with other hyperscaler customers as well. In the first quarter of 2026, we had bookings of $2.5 billion, which is more than a 1900% increase compared to the first quarter of 2025.

Additionally, our backlog was $2.7 billion in the first quarter of 2026, which is a 483% increase compared to the first quarter of 2025. We believe our results reflect strong global demand for BMW technologies, and combined with the increased demand for power generation gives us a solid foundation for continued growth this year and for many years to come.

Our core business, excluding data centers, continued to excel as our parts and services saw elevated demand from the increased operation of base low generation in North America and beyond. Rising energy demand from consumers, industries and grid dependent AI data centers is prompting utilities to recondition and recommission coal fired generation assets to help meet accelerating low growth. The existing coal plants in the U. S. are currently operating at capacity factors of around 50%. Highlighting a significant source of underutilized generation capacity available to support expanding electricity needs.

At the same time, elevated natural gas prices are driving improved economics of coal-based generation. This has increased utilization and created additional demand for our core business offerings.

The rising demand for power across North America serves as a catalyst for BMW's continued growth, positioning us to play a critical role in supporting AI data center expansion and meeting increased base low generation needs in the years ahead. Our project with base electron is progressing favorably as boiler manufacturing and speed turbines move forward. Siemens energy continues to progress, turbine fabrication and other long lead time items such as boiler pressure parts are advancing as planned.

Most of the constructions, including civil and mechanical, is scheduled for 2027 to 2027 to 2028 and the impact of AI data center growth on BMW is truly profound. As we added over 2 billion in additional AI data center opportunities in our pipeline from hyperscalers and utility customers. And as I mentioned before, we remain in active discussions with different AI data center customers regarding potential bookings in 2026.

In the first quarter of 2026, we paid off 15 million in outstanding bonds that are due in December of 2026. This is the continuation of our bond buybacks and we expect to fully pay off the remaining 69 million in outstanding December 2026 bonds in a timely fashion. Including these bond repurchases, we have significantly reduced our secured debt and unsecured bonds by 87% in the first quarter of 2026, resulting in net debt of 42.4 million at the end of the quarter.

These recent debt payments bring our net debt to below one times our trailing 12 month adjusted EBITDA. Our efforts to progress our bright loop initiatives 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 hydrogen or steam. We are building momentum around the use of chemical looping as a means to convert solid and gas fuels to either hydrogen or steam generation, while simultaneously capturing the CO2 that can be used for enhanced oil or methane recovery and other beneficial uses.

The commercial scale demonstration of bright loop at our masculine Ohio project still remains a key priority for BMW as we continue to position the company for expanded growth opportunities in the years ahead. I'll now turn the call over to Cameron to discuss the financial details of the first quarter of 2026. Cameron?

Thanks, Kenny. I am pleased to review our first quarter of 2026 financial results. Further details of which can be found in the 10Q that was filed at the SEC this morning. Our first quarter of 2026 consolidated revenues were 214.4 million, which is a significant increase compared to a revenue of 148.6 million in the first quarter of 2025.

The increase is primarily driven by large project volume, including 31 million from base electrons and the increasing need for electricity from fossil fuels driven by the demand from AI data centers and expanding economies. Our core parts and services continue to perform well, delivering the strongest first quarter revenues in recent histories. This development comes as higher demand from consumers, industrials, and AI data centers drive increased coal-based load generation.

Continued growth in our parts and services is expected throughout 2026. Our operating loss in the first quarter of 2026 was 1.7 million, which is relatively flat compared to an operating loss of 1.8 million in the first quarter of 2025. Net loss from continuing operations in the first quarter of 2026 was 79.6 million compared to a net loss of 15.6 million in the first quarter of 2025.

This increase in net loss is attributed to 81.8 million of non-cash warrants and other stock-rated costs that were recorded this quarter due to the increase in our stock performance. That's including the impact of these stock warrants and other stock-rated costs, deans have reported adjusted net income from continuing operations of 2.2 million.

Adjusted EBITDA from continuing operations was 16.1 million in the first quarter of 2026 compared to 4 million in the first quarter of 2025.

I'll now turn to the balance sheet, cash flow, and liquidity. Total debt on our balance sheet at March 31, 2026 was 275.9 million, which includes unamertized fees, unamertized gains from the bond swap done in 2025.

As for these fees, gains, and leases are secured debt and senior notes total 237.2 million, of which 69.1 million is current, which as Kenny stated earlier, we will be paid off within the year. The company had cash, cash equivalent, and restricted cash balance of 194.8 million, giving us net debt as a March 31, 2026, of 42.4 million against our secured debt and senior notes.

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

Thanks, Cameron. Well, in closing, we are encouraged by a strong start to 2026. Our core business continues to see sustained opportunity fueled by the evolving need for power generation and growth in areas such as the AI data center space. BMW remains focused on our objectives and uniquely positioned to capitalize on this current landscape. Our pipeline remains robust, exceeding 14 billion in project opportunities with significant tailwinds bolstered by the growing impact of AI data centers. Meanwhile, our bookings of backlog continue to convert it at a strong pace, and we expect that moment to continue throughout 2026.

As we celebrate BMW's 160th year, I would like to recognize our employees around the world. Past and present, we have made this and milestone possible. Their expertise, commitment to working safely and dedication to advancing our technology and serving our customers, set Babcock and Wilcox apart, and have established our company as a recognized leader in the industry's research.

I also want to thank our customers and suppliers for their continued support, and with this strong foundation, we're excited about where we're headed and confident in our ability to leverage our leading power and environmental solutions to capitalize on the many opportunities ahead.

With that, I'll now turn the call back over to Ellen who will assist on a few questions. Ellen.

Sure. Yeah. Obviously, the data center aspect of our business is driving quite a bit there, but there are others. You know, we continue and I'll start with maybe one part here and work back, but we still continue to see a lot of opportunities in growing in either coal to natural gas conversion opportunities, or in some cases, some large coal generation plant upgrades, environmental upgrades to help and assist on those particular areas. So we're seeing a lot of larger opportunities across the breadth of our portfolio of technologies, both on the core side and environmental side as well.

Specifically in the data center opportunities, we are seeing new opportunities emerge, both from utilities as well as type of scalars that we're in discussions with that are, you know, in some cases, they're looking to power specific data center opportunities. In some cases, they're looking to power specific manufacturing or large manufacturing associated with data center opportunities. And so, you know, there's combinations there on the specific in case or in user where that power would be applied. But we're looking at talking to them around utilizing and leveraging, you know, BMW's Board of Technology. One of the key areas that we're focused on is supporting our customers on the ability to leverage our steam, boilers with steam turbine combination, but perhaps combine that with a combustion turbine down the road, where obviously you can gain some efficiencies through that combination of adding the combustion turbine with the steam boiler and steam turbine generation set on that.

But what we believe we also gain is you can actually increase the amount of power output provided on the same size or same score foot basis, if you will. So in other words, you know, if we're putting in 50 megawatt or 100 megawatt boiler by adding the combustion turbine and combining the heat on from the turbine into the steam boiler itself, we can actually almost double the size of the output from that particular site. So with very little real estate, we can actually increase the amount of wattage that can come from that particular location. So there's interest and a few of our customers that relate to those kind of long term technology aspects. And then, you know, clearly a few customers also want to make sure that they're in position to capture the CO2 at some future point time either for enhanced or recovery or methane recovery or, you know, other uses or even sequestration.

But, you know, so as we talk about the data center concept, there's some uniqueness around our ability to get the steam boiler and turbine out quicker than a combustion set, but does give them the ability to combine the combustion turbine at a later date in order to enhance that particular site or increase the overall productivity or output from an electrical generation standpoint. And that's, you know, an attractive or value proposition for our customers. So we're looking at all of that.

We'll get more revenue this year. I mean, it was a bigger ramp, obviously, you know, as mentioned, it's when we get into the full construction aspect on site. So, you know, not only civil and the early ground works and all of that, but more when we're putting up steel starting to do the steel production of the site itself. That's when there is a very significant ramp on revenue. So we'll see that, you know, as we go into next year there, but they'll continue to produce revenue this year for base electron as we complete, you know, different milestones on the manufacturing side of the project itself and complete some of the on site preparation work we need to do for engineering and other aspects for the civil construction capabilities and get the site prepped for the actual steel manufacturing itself.

So there are different milestones involved in those contracts. So we'll still see further revenue this year. But yeah, the huge amounts will start to impact next year.

Yeah. No, we still progress on those discussions with two or three different customers out there to determine, you know, obviously best way to move forward with them on that. I think if we get one or so across the goal line, it'll clearly be a project where it'll will sign a, you know, some sort of MOU or LNTP or something, obviously, to start and then allow us to get everything set up.

To move into the full notice to proceed, you know, at a later date. So similar to what we do just about every big project that BMW's ever been involved in. So on that front, but those discussions still continue in, you know, working through a number of different scenarios. You know, as typical on these kind of projects, there's a lot of different variables that. The end user and customers are trying to accomplish, you know, either be from a technology standpoint, end user standpoint, permitting standpoint, location, geography, you know, so on and so forth. So a lot of things kind of ebb and flow as we enter into these discussions, but they continue and, you know, we're hopeful that we can move one across the goal line.

Yeah, no, we feel good about the current supply chain that we've established. Obviously, around the base electron project, we use that in order to establish a broader aspect around potential on other data center projects so that we could, you know, begin to secure a little bit of capacity there around that. I think, you know, each one of these will be a little bit nuanced.

The size of the boilers or the size of the turbines will vary. You know, they'll be, as we've always talked about, we want to, as much as possible use and leverage existing technology that BMW has put in the marketplace. Same on the turbine side of the equation. But yeah, there will be, because there's a need to have different size boilers used, right? You know, for base electron, we're using the 300 megawatt boilers. You know, in other cases, we're looking at, you know, smaller, in some cases, we're actually looking at even bigger. So the positive news on that is that we have different manufacturers lined up to be able to accept, you know, depending on the size of the boiler out there.

And so we're, where we've been proactive on is to make sure as we move forward into these opportunities that the manufacturers are kind of. If you will, sitting stop by side with us as it relates to these so that we can ensure that we've got the capacity to make those happen out there. So we feel good about where we are right now.

You know, in the future, obviously having, you know, security on the steam turbine aspect of it for us and some of the pressure parts is going to be crucial. As we get, you know, past the one or two of these additional projects as we move along. We'll have to make sure that we've got, you know, we keep in mind how we can secure that capacity to continue to move forward. But, you know, at the moment, we feel pretty good about our position right now.

Yeah, no good question. Obviously, we, we kept the guidance where we are right now. Part of the process is as we try to figure out how much we can shift in either into construction or pull forward some of the manufacturing and other aspects around these projects that were involved in. You know, once we have a better handle on that here in the coming months, then, you know, we'll we look at the guidance we put out in the marketplace and we'll see how that goes. But, you know, I think the positive news is there's, you know, there's definitely potential for upside.

Related to our guidance that exists today. And we're going to, you know, keep an eye on how things progress this year and see where it goes, you know, obviously, if it doesn't hit this year, then it just goes into next year. So, you know, either way, it's a good position for B and W to be in, but, you know, we'll keep an eye on that and circle back around on that at a later date.

Yeah, no, it's obviously our parts and services. We mentioned had a significantly strong first quarter. You know, one of its best and from a first quarter standpoint in recent history, usually, you know, as you know, it's q one is a little low for us from a parking services q two. You know, maybe about the same slightly better, but q three, q four is where we really pick up on that due to the adages and over the aspect. You know, the demand we're seeing still is is is still strong out there for that business. We don't, you know, we don't see that changing as it goes into the rest of the year.

To do, you know, maybe a significant aspect, not necessarily a gas or cold gas conversion, but. You know, a broader upgrade or something, maybe environmental aspects as well, too. On these cold plants, I think the, you know, the uniqueness is that on the cold plants that they're being used, obviously more and more and more and they have capacity to be used even even further than they are today.

You know, as a result of that, you're seeing more investment put into the cold plants than we've seen in the past because they are running a lot longer and the need for them to run now is also increasing. So a lot of utilities, a lot of our customers are investing more into these plants to ensure the longevity. For the, you know, obviously base load generation. So it's, it's a good place for us to be in right now and excited about that. And, you know, we're taking a quarter of a time, but, you know, it's, it's right now we see a very strong outlook on the parts and services and anticipate that continuing right now for the foreseeable future.

I don't, you know, say the concept of the utilization on this. And that's the good news about it. These aren't just, you know, one off kind of parts aspects. This is based on a continuation of these plants running.

We don't do that slower down any time soon.

Yeah, that's, I mean, the, the data centers obviously have a large impact just because of the size, you know, consideration of those there. There are a few that we're talking to that are in the, you know, 500 megawatts range, you know, to start with, there's a couple that are in the 300 megawatt range, but, you know, there are some that are in the, you know, one to two gigawatt range. So there's, you know, there is a big demand for that. The data centers continue to grow and, you know, obviously we're not going to book all that business, but the opportunities are wide across, you know, that size range. So, you know, when you're talking about a one gigawatt plant or, or higher, you know, that's a significant project for us.

And so obviously has, you know, solid revenue ramifications if we get that booked and across the goal line. So, you know, overall, the pipeline out there is reflected in that. And we, you know, it's been able to allow us to grow it quite a bit, but the opportunities are, you know, still continue to evolve and come. But, you know, keep in mind that the pipeline is project where we think we'll close, not necessarily 100% with us, but we think we'll close within the next three years. There's obviously opportunities that are outside that three year window.

You know, that would increase the size of that, but we don't, we don't talk about the opportunities, but just to give you some idea, you know, there's, there's a lot of conversations on things that could be four years out that don't make it to the pipeline for that very definition.

Thank you for joining us. That concludes our conference call. A replay will be available for a limited time on our website later today.

You may now disconnect.