Babcock & Wilcox Enterprises (BW) Q2 2026 earnings call transcript

Thank you, Kristlyn, and thanks to everyone for joining us on Babcock and Wilcox Enterprises' second quarter-26 earnings conference call. I'm Sharon Brooks, Director of Communications.

Joining the call today are Kenny Young, B&W's Chairman and Chief Executive Officer and Cameron Frymeyer, Chief Financial Officer, to discuss our second 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 state's 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, accepted is 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 a discussion of adjusted EBITDA and adjusted net income, should not be considered superior to or a substitute for the comparable GAP measures.

A reconciliation of historical non-gap measures can be found in our second quarter-26 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 second quarter-26 earnings release released, published on August 10th, 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 second quarter-26 earnings call. We are pleased to report another strong quarter highlighted by robust financial results in active project development and continued operational momentum in our core business and further strategic debt reduction and stock repurchase. During the second quarter, Babcock and Wilcox continued to benefit from the growing need for reliable electrical generation from all sources of power consumption, including utilities, industrial, and data center customers.

These tailwinds drove strong operating results during the quarter and led us to raise our full year 2026 adjusted EBITDA target range from 80 to 105 million. As excited as we are about the increasing opportunities in utility, industrial, and AI and data center power generation project opportunities, we're equally excited about strong results in our core projects as well as our parts and services businesses.

These businesses have and continue to be strong cash generators for the company and continue to deliver significant growth each quarter due to the increased demand from coal and natural gas utilization, especially in the United States.

Our quarterly financial results were highlighted by revenue, net income, and adjusted EBITDA, all of which exceeded both company and consensus expectations.

In the second quarter of 2026, our pipeline bookings and backlog saw significant development as well. Our total pipeline is now over 14 billion, including four to six gigawatts worth of power generation opportunities. Our bookings and backlog surged year over year fueled by our core business growth and continued development of our base electron project in North Dakota. In the first half of 2026, we had bookings of 2.7 billion, which was an increase of more than 1,058% compared to the first half of 2025.

Additionally, our backlog was 2.6 billion in the second quarter of 2026, which was a 533% increase compared to the second quarter of 2025.

Strong global demand for BMW technologies together with increasing investment in power generation continues to reinforce our positive outlook. We are focused on executing our strategic priorities, delivering on our current pipeline, and maintaining the operational and financial flexibility needed to capitalize on future growth opportunities.

Turning to our core business, our parts and services continue to excel with demand for reliable base load power growing across North America and global markets as well. This accelerating demand is encouraging utilities to invest in the refurbishment, recommissioning, and continued operation of existing coal-fired generation assets to support grid reliability and meet future low growth. This development 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 load generation needs in the years ahead.

Our initial data center project with base electron is progressing ahead of expectations and on budget. Manufacturing of the boilers, steam turbines, and other long-beat time components continues to advance quickly and efficiently helping to deliver a reliable, high-capacity energy generation on the fast-track timeline required by AI data center customers. Base electron has submitted its conditional use permit application, and we are planning for most of the on-site construction, including civil and mechanical, to start in the first part of 2027, and turbines and boiler components delivered after construction begins.

The growth of AI-driven data centers is creating significant opportunities for BW with more than four to six gigawatts in new opportunities added from hyper-stailers, developers, and utility customers in our pipeline. We remain in active discussions with multiple AI data center customers utilizing coal and natural gas, and we expect a center project to move in full notice to proceed this year.

In anticipation of this next data center project, BMW has secured the manufacturing reservation rights for an additional one gigawatt of steam turbines from Siemens Energy. A total of 20 50 megawatts steam turbines will be produced with the first generator sets being delivered within 12 to 14 months thereafter, and additional deliveries to follow on a regular basis. This will help accelerate deployments for future BMW data center projects.

As BMW continues to expand, we are increasing our workforce to support the growth in our hiring and our engineering projects and business development organizations while increasing the availability of qualified skilled welders and electricians. As the global power demand continues its climb, availability of highly skilled labor, especially in the United States, is in short supply. Specifically, this negatively impacted efficiencies and resulted in higher direct costs on a specific construction project for BMW during the second quarter. We took immediate action in working with the unions to immediately increase qualified labor availability through incentives, rehires, and delayed retirements to ensure qualified skilled labor is available going forward.

Despite these U. S. industry-wide issues, we successfully navigated these labor impacts while still delivering robust, top-line results and strong, even a growth as well. We don't expect labor shortages to be persistent issues as our near-term focus within our construction business has shifted towards variable-priced construction projects, and we are increasing our recruiting and training efforts across many disciplines as well. Our Bright Loop initiatives continue to move forward as we advance the commercialization of our technologies to enable cost-effective energy production.

The commercial-scale demonstration of Bright Loop at our Maslow and Ohio Project site remains a strategic priority. We are continuing fabrication of major components for the facility while we prepare the site for major construction activities to begin yet this year. We have included a few photos of the various Bright Loop reactors in the fabrication process in our company overview presentation on our website.

The operation of Maslow and in late 2027 will position Bright Loop as a commercially available option for energy production as the demand for new generation assets continues to grow. We believe these efforts will strengthen BMW's leadership in low-carbon energy solutions and support our long-term growth. I'll now turn the call over to Cameron to discuss the financial details of the second quarter of the 2026. Cameron.

Thanks, Kenny. I am pleased to review our second quarter of 2026 financial results, further details of which can be found in the 10Q that was filed with the SEC this afternoon. Our second quarter of 2026 consolidated revenues were $319.7 million, which is a 130% increase compared to the second quarter of 2025. Net income was $14.3 million for the second quarter, a $72.8 million increase compared to the second quarter of 2025.

Finally, adjusted EBITDA was $21.8 million for the second quarter, a $7.9 million increase compared to the second quarter of 2025. These top line metrics capture the recent growth we've seen across our businesses and illustrate BMW's positive trajectory moving forward. In the first half of 2026, revenues were $534.1 million, which is a significant increase compared to the revenue of $287.5 million in the first half of 2025.

This is primarily driven by an increase in large project volume, including $131.7 million from base electron and the growing need for electricity from fossil fuels driven by demand from AI data centers and expanding economies. Our core parts and services continued to perform well during the first half of the year.

Net loss in the first half of 2026 was $62.7 million compared to a net loss of $80.5 million in the first half of 2025.

Net loss in the first half of 2026 is attributed to $77.4 million of non-cash warrants and other stock related costs that were recorded this year due to the increase in our stock performance. Excluded in the impact of these specific warrants and other stock related costs, BMW reported adjusted net income of $14.7 million in the first half of 2026.

Adjusted even though it was $37.8 million in the first half of 2026 compared to $17.9 million in the first half of 2025.

I'll now turn to the balance sheet cash loan liquidity. Total debt at June 30, 2026 was $276.8 million which includes unamertized fees and unamertized gains from our bond swap in 2025. The company had a cash cash equivalent and restricted cash balance of $382.8 million.

In the second quarter of 2026, we announced the repurchase of the remaining $61.8 million with directors in July of 2026 authorized a share repurchase program for up to $50 million. The combination of our bond payments and the launch of the share repurchase program illustrates BMW's disciplined approach to debt repayment while reflecting the confidence in our balance sheet and strategic approach to building shareholder value.

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

Thanks, Cameron. Well, in closing, we are encouraged by the progress that we have seen across the first half of 2026, which along with our visibility for continued strong demand and the second half helped drive our improved 2026 full year adjusted to even a target range. Our core business continues to see sustained opportunities fueled by growing demand for a reliable base load power and a continued focus on energy security. And we believe BMW is uniquely positioned to capitalize on these trends.

We continue to move forward with base electron project and see additional data center opportunities emerging and our pipeline now exceeds well over 14 billion in project opportunities at our bookings and backlog continue to convert at a strong pace. We are encouraged by momentum. We are seeing across our core markets and the opportunities to not only support the growing need for reliable base load generation, but also to play a key role in advancing energy security and supporting the global energy transition.

I will close by recognizing our talented and dedicated employees worldwide whose commitment and expertise continue to drive BMW success. We are grateful for their ongoing contributions as well as their continued support of our customers suppliers and partners around the world. We are optimistic about the opportunities ahead and look forward to further demonstrating BMW's role as a leader and innovator in delivering advanced power generation and environmental solutions that support reliable power and strengthen energy security and shape the future of the global energy landscape.

With that, I'll turn it back over to Chris and then we have time for just one or two questions. So Chris, I'll turn it over to you.

Yeah. So we were able to recognize a little bit more revenue and the first part that we anticipated, obviously from the production aspect and manufacturing aspect of various milestones that have been reached, which is exciting for us because we're ahead of expectations right now on that project and on budget. On that standpoint, I think the real book of the revenues pick up is as we move into the construction phase and we begin shipping materials on the side, which will have significant milestones. Obviously, that'll begin. That'll start early next year on the particular site location. And as mentioned, base files are initial permit application for the site and they're working through all of those details and we're supporting them heavily on that.

And we're excited about getting to the construction phase, which again will start next year. So we'll talk, we can actually, we'll keep an eye out on the revenue aspect and if we think we can pull in more revenue and even obviously we'll take a look at that in the coming quarters and make any adjustments accordingly on that standpoint.

And that's one of the reasons amongst others that we decided to increase the even range as well too. So we'll see how the milestones shake out, but I think we'll see significantly more revenue going into early part of next year.

Yeah, I'm no happy to. So, you know, we're involved in a number of them now, you know, in discussions and obviously negotiations on a few. I think these will evolve, you know, as we've stated publicly before, these will evolve with some sort of an initial LNTP of various sizes up front and then we'll move into full NTP or full notice to proceed on those projects.

We're obviously confident, excited about, you know, one or two that are developing that we went ahead and placed reservation rights for the Siemens turbines associated with that. In this particular case, instead of the larger boilers, we're using 50 megawatt boilers and steam turbines, in a enhanced combined cycle fashion where we can actually install the boiler and the turbine ahead of the combustion turbine and we're able to add a combustion turbine at a later date, but the customer can realize the full power of the 50 megawatt units that will provide initially one gigawatt worth of power 50 times 20.

When the combustion turbine is available, it'll basically on the same plot of land double the output from one gigawatt to gigawatt. So it's a real nice advantage for one or two of our customers and we're in discussions, you know, competing discussions with them. We're also, you know, I think this is unique in discussions around potential, other large project opportunities.

Some of those are coal related, which I, you know, realize many people will have a difficult time believing, but even outside the terrorist park project that we announced and we're working on the fee study associated with that project, we're in discussions on other potential coal related projects, you know, obviously backed by the current administration, but to be used, either in a grid connection associated with the data center or in direct connect to a data center, at a particular site, and these are, you know, larger projects as well too. So there are, you know, several that were involved in, you know, outside of the coal opportunities, but, you know, one of the reference that we think those are unique and it's also uniquely positioned as BMW is probably one of the only few companies that actually support those projects today.

Well, customers always want to go faster and faster, for sure, right? We understand that pressure and we're working, you know, to respond to that. That's one of the reasons we're moving quicker on. These Siemens turbines to be ready in, you know, a 12 to 14-month period to get initial shipments on that to match with the boiler opportunity out there overall. But, you know, from a capital, you know, our focus has always been on the total cost of levelized, or the levelized cost of electricity, so looking at total cost of ownership. But the levelized cost of electricity, when you look at that category or if you want to look at heat rate, when you leverage the enhanced combined cycle plant structure that we're doing, where we're taking the boiler and the turbine and matching it up with the combustion turbine at a later date, the combination of all three of those puts us on a heat rate that's not the much worse, if you will, than a combined cycle plant.

So, when you look at the overall efficiency aspect of those, we're pretty in line or pretty close, but we're providing power, you know, three to five years faster on those sites than a combustion turbine alone. I think the other key factor is, and we don't talk about this enough, but if it's just a standard combustion turbine with a Herstig and a steam turbine, under a combined cycle concept, the reliability of that is a little bit less. One, you know, it's well-known, combustion turbines are not quite as reliable as steam.

The second aspect of it is that the combustion turbine goes out of service, that entire amount of electricity is gone. When you have, in our case, we're taking a standard steam boiler, converting that into a combination of a Herstig and boiler, where it can accept the waste heat from a combustion turbine in the future, then we're able to generate power both from the combustion turbine as well as from the boiler slash steam turbine. So, if one or the other goes down, you still have one of the units operating. So, combined, they'll be producing, let's say, in his case, 100 megawatts. So, a 50 megawatt combustion turbine and a 50 megawatt steam and boiler slash Herstig would be creating 100 megawatts.

When one goes out, you still have 50 operating. In a normal combined cycle world, when that combustion turbine goes down for maintenance, you block the entire amount of electricity being produced. So, you gain much more reliability. You gain three to five years faster to market on speed standpoint from power standpoint. And, like I said, the efficiency and heat rate from a levelized cost of electricity is pretty close. So, a lot of advantages there on that. Having said that, our customers continue to put pressure on us to go faster and faster. And we continue to analyze ways and technologies and options to make that happen. And we'll continue to do so. But, you know, we're excited about where we are.

And obviously, you know, getting a few of these projects across the goal lines and support us. And we continue to work on those.

Yeah. So we do continue to work as we mentioned previously. When we look at the various opportunities, we have different manufacturing on, oh, just talking about the bullet for a second. We have different manufacturers and manufacturing processes that we rely on, both some of that's internal to ourselves. Some of that is third party related as well, where we can shift, you know, different boiler sizes into different manufacturing facilities.

So it gives us the ability to take on more and more project work. It's being that you've been doing that for quite some time and that's not any different as it relates to these opportunities. So we're, you know, we feel like that we have that kind of flexibility and capacity on these and, you know, we'll continue working with those manufacturers to increase the output and also the, not only the volume, but the speed too as well. Because obviously speed to getting this on side is really, really important.

You know, on on base electron case is, you know, mentioned we're ahead of where we planned and all of our manufacturing on the large long lead time items are producing on schedule. And, you know, so that that project's on track overall with them. You know, as we mentioned, the biggest component is making sure that we have access to, besides the boiler is steam turbine, especially for these initial projects where the combustion terms are. So that the turbine would be out of the later day.

And we obviously have a very close relationship with Siemens and, you know, continue to do so there. And we wanted to move ahead and invest in these next gigawatt worth of steam turbines.

And so that reservation has been secured on that and ready to ship in the next 12 to 14 months on those turbine units. And it's, you know, the relationship there is good not only from a supply chain standpoint, but from, you know, payment term standpoint on the financial side as well. So it's very positive in that relationship. And we continue to work with them on, you know, the evolution of the turbine and, you know, other aspects where we might improve overall efficiencies from an output standpoint, but also efficiencies from a time to market standpoint. So those are, you know, two characteristics that we're focused on. That's on those two major areas. When you look at, you know, the other aspect you mentioned is on labor.

And that's an area that we would continually keep a very close eye on on the availability of, I would say highly skilled labor. You know, it's one to have a workforce to that workforce has to be highly skilled, especially in these high pressure wells and those particular areas. And we're working very close with the various unions on that front, as well as our customers on that front to make sure that we're aligned and have the availability that we need when we need it, you know, in particular on basis, we move into construction.

Next year, we have been working very close with the unions to be ready to have welders available as we start those projects and a ramp rate, if you will, to increase the supply of quality welders. And moving them through our various safety and other training programs to ensure that they're ready to go to work on those particular projects. So we'll continue a focus there. You will continue to invest in that recruiting and training efforts along with the various unions.

And I will say that, you know, the unions have been extremely cooperative and supportive of this as well too. They see that importance and they know the demand is out there.

So it's, it's a good time in the industry, but anytime you have this massive amount of growth in the marketplace, especially here in the United States, it puts pressure to make sure that we're planning on those resources equally as well as the manufacturing side as well too. So we're, we're staying on top of it. And I feel like we've accomplished a lot of the last quarter and have put us in a good direction going into next year.

Yeah, we're working, we're working close on the feeds. Obviously, the feed is going through the whole, you know, front and engineering design aspect of the plant flows project, you know, power flows, everything else associated with that. You know, normal course on that particular piece. There is a lot of involvement with the DOE on that particular project and, you know, we're working very close with them as well too. So it's, it's going through its process and the, you know, Terrace Park is working through its approach on the process and, you know, looking at different options on how the structure of the boiler and other pieces to support their long term goals on that piece. But we're excited to be a part of that.

I can tell you from an employee perspective, we got a lot of employees that never thought they would see the light of data building a coal plant here in the US. So a lot of our engineers that have been around these, you know, critical, some critical or super critical plants are excited to be a part of it.

And we are as well too. So we're supporting efforts and obviously Terrace Park's got to eat on this, but a lot of discussions with them and working with them on getting this done. So, you know, it's too soon to anticipate quite yet like how we forecast that revenues associated with that project and when passed the feed study, but it's, you know, actively involved and engaged and we'll just have to see how it goes from here.

Yeah, so, well, I'm first on the on the Maslin project, and I haven't had my consumer presentations up by now, but on the project, you'll see some pictures of fabrication of the fuel reactors on bright loose that'll be going in that location. On the commercial aspect of that, there's we've got a lot of interest from hyperscalers and others, you know, even oil companies as it relates to to bright loop and that commercial demonstration of that particular project. So, you know, we obviously accomplished, I think, for the most part, all of the funding necessary to get that in the ground. And so we're, we'll begin construction on site later in the fall, but that will, that will begin and obviously our anticipation still is to have the fuel reactor and hydrogen reactor and initial phase operational, you know, sometime by latter part of 2027 on that location.

You know, bright loop is, as we talked about, can do hydrogen, but can also just do steam. And so we, we've got a lot of interest right now in the concept of that commercial demonstration showing that the fuel reactor at that scale up is important to move it into a higher scale. And when we look at both the West Virginia project as well as the Wyoming project, a lot of interest right now given, you know, the current environment is to produce steam.

From coal with the CO2 being isolated and used for enhanced methane recovery or enhanced oil recovery at those two locations. So, getting this commercially in the ground is important steps as it relates to those two projects and obviously we're in close discussions with both those customers as it relates to the Baslin project itself. So, the concept of that, I think still, you know, our opinion is still has a high growth capabilities. And if we had, you know, honestly, I'll just make the statement, if we had Maslin in the ground, you know, two, three years ago, four years ago on it, which was an impractical aspect. But, you know, if we had that commercial project done and moving on to larger projects, I think there's a lot of hyperscalers today that would be in discussions about utilizing bright loop for power generation because of its CO2 treatment capabilities, whether it's captured CO2 and sequester or whether it's used for other enhanced purposes, but they've been in the long run, the hyperscalers still want a pathway and a check the box that there could be at some future point in time, some sort of carbon capture associated with these data centers and AI infrastructure.

So, you know, we're obviously still in a good position, you know, we don't see an end to the power generation demands coming from AI and data centers, despite what the public markets have been stating, the demand continues not only here, but worldwide. And I think we're hopefully poised with the company to leverage that once we get this up and going by the end of 27. So, you know, we'll be looking at bookings in 28, 29, 30, you know, as we previously discussed bright loop, as well as, you know, other climate bright applications such as our Oxy combustion or post combustion technologies as well.

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

This concludes today's call. Thank you for attending. You may now disconnect.