Babcock & Wilcox Enterprises (BW) Q4 2024 earnings call transcript

I would like to turn the conference over to your host, Darren Brooks, BMW's direct care of communications. Thank you. You may proceed with his works.

Thank you, Cameron, and thanks to everyone for joining us on Babcock and Wilcox fourth quarter and full year 2024 earnings conference call. I'm Sharon Brooks, Director of Communications and Marketing. Joining the call today are Kenny Young, BMW's Chairman and Chief Executive Officer and Cameron Frymeyer, Chief Financial Officer, to discuss our fourth 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 annual report on Form 10K that has been filed with the SEC today. Additionally, except as required by law, we undertake no obligation to update any forward-looking statement.

We also provide non-gap information, including regarding certain of our historical and targeted results to supplement the results provided in accordance with GAP. This information 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 earnings release published this afternoon and in our company overview presentation filed on Form 8K today and posted on the investor relations section of our website at Babcock. com. I will now turn the call over to Kenny.

Thanks, Sharon. Well, good afternoon, everyone. Thanks for joining us on our fourth quarter and full-year 2024 earnings call. In 2024, we took specific actions that align with our business strategy that also paved the way to refinance or reduce our current debt obligations in 2025. With intent, we are shifting our focus on continued operations toward greater predictable revenues and margins, particularly from our thermal operations based on tailwinds of increased demand from the utility and industrial power generation sectors. We also see new biomass energy plants becoming a reality in North America and anticipate possible bookings later this year. We saw improvements across many of our top metrics during the fourth quarter of 2024, including improvements in revenues, operating income, and adjusted EBITDA when compared to 2023.

Our fourth quarter revenue came in at $200.8 million compared to $174.7 million in the fourth quarter of 2023, which was an increase of 15 percent. Operating income from continued operations increased to $11.6 million in the fourth quarter of 2024 compared to operating loss from continuing operations of $3.3 in the fourth quarter of 2023, reflecting the continued strong production of our core businesses.

Adjusted EBITDA from continuing operations was $24.0 million in the fourth quarter of 2024, which was a 55 percent year-over-year increase compared to the fourth quarter of 2023. Our margins are benefiting from our strategic shift to reduce reliance on high interest, low margin new bill projects. And after taking into account the recent divestitures, we have revised our full year 2025 UBITDA target range to be 70 to 85 million, excluding bright loop and climate bright expenses. Importantly, we continue to invest in our bright loop opportunities and continue to anticipate spending in the range of 10 to 15 million in 2025 on our bright loop projects and technology advancement, including CAPEX, which is apart from the masculine construction.

Transitioning to our full year of financial performance on a continuing operations basis, we continue to display year-over-year improvement in adjusted EBITDA, excluding bright loop and climate bright, with a 13 percent increase from 2023 on yearly totals. We expect our improving adjusted EBITDA performance trend to continue as we move through 2025, leading to our full year 2025 adjusted EBITDA target range of 70 to 85 million. Revenues remain stable across the year with the largest positive impact seen in our environmental segment. And perhaps the strongest performance across 2024 came in our bookings and backlog numbers. We continued to see strong demand for our diverse portfolio of technologies, which is driving our increased bookings of approximately 900 million in 2024 and a backlog now of over 540 million as we enter 2025.

Specifically, in 2024, we saw a year-over-year increase of 39 percent in our bookings and 40 percent in our backlog. We believe that these results affirm our strategic approach while underpinning our pipeline and outlook for sustained growth in 2025 and beyond. We believe the increasing need for power and electricity fueled by demand from AI data centers, electric vehicles, and expanding economies will be key drivers for growth across our broad range of technologies. We are seeing utility and industrial clients, including the oil and gas sector, continuing to increase capacity utilizing our core technologies while evaluating further power generation augmentation through biomass, hydrogen, and natural gas. We expect these tailwinds to increase in the coming years as the amount of front-end engineering design or feed opportunities has grown.

Today, we have 12 to 15 active feed studies that represent potential projects of over one billion in revenues in our pipeline. We believe that these expected industry tailwinds provide a strong foundation for BMW to grow in 2025 and beyond as we continue to drive for higher margins and improve cash flows. Overall, our results in the fourth quarter and across 2024 reflect the strong demand for our inverse portfolio that support the generation of efficient and sustainable energy regardless of fuel source. BMW has developed a strong foundation to capitalize on the continued growth in natural gas, conversions, environmental solutions, carbon capture, and clean energy opportunities globally with utility and industrial customers. Our investments across our climate rights suite of decarbonization technology to support the world's energy transition are progressing well and we're making steady progress on our bright blue projects and maps on Ohio with a target of producing hydrogen by early 2026.

Notably, we also recently announced a 10 million in funding for the development of a bright loop hydrogen production and carbon capture facility in Mason County, West Virginia. We remain fully committed to expanding our bright loop commercial activities in the years ahead with targeted bookings of approximately 1 billion by 2028 which represents less than 1 percent of the estimated global market for hydrogen production.

Within bright loop, it's been extremely exciting to watch our team advance the engineering process and the business towards deploying these technologies at scale and further expanding our suite of carbon capture solutions. During 2024, we made further progress on our stated strategy to the best non-strategic assets to improve our balance sheet, avoid internationally large new build projects and reduce associated corporate overhead. Importantly, we remain in negotiations related to the sale of other assets and in discussions with new senior lenders and certain bondholders to potentially reduce or refinance our current debt. I'll now turn the call over to Cameron to discuss the financial details for the fourth quarter and full year of 2024 results. As previously disclosed, Cameron has officially taken over as BMW CFO following loose alimony retirement at the end of 2024.

I'd like to express my sincere gratitude to Lou for his steadfast leadership over the past six years and we wish him all the best in his retirement. Cameron has an extensive background and career here at Bapcock and Wilcox and I'm excited about moving forward together and with that alternative, but things over to Cameron. Cameron?

Thanks, Kenny. I am pleased to review our full year 2024 results in addition to commenting on our financial position in 2025. For further detail, I call your attention to the fact that we filed our 10k with the SEC this afternoon and you can refer, can refer to it for further details beyond what we discussed in this call.

On a continuing operations basis, our 2024 consolidated revenues were $717.3 million, which remained stable compared to the revenue levels in the prior year. Net loss with continuing operations in 2024 was $73 million, which was a better result compared to the net loss of continued operations of $75.8 million in 2023. Primarily related to an overall decrease in our costs and expenses, offset partially by higher interest expense and banking fees. In addition, we had a loss per share of 96 cents in 2024 compared to a loss per share of $1.2 in 2023. Our adjusted EBITDA from continuing operations was $68.9 million compared to $60.8 million in 2023. Bookings and Bapcock performed very well across the year with year end bookings coming in at $889.6 million, a 39% increase from the $638.7 million in 2023, while backlogs saw a 47% increase from $368.2 million in 2023 to $540.1 million in 2024.

Spig, the Indescribable Services in Volent were reclassified into discontinued operations for 2024 and their results are no longer reflected in our continuing operations.

Our parts and services core business remained strong even with recent cool plant closures and natural gas conversions. Our robust backlog of $540.1 million in the strength of our parts business gives us confidence in our full year 2025 adjusted EBITDA target range of $70 to $85 million. I will now turn to our balance sheet and liquidity and comments on our positive outlook for improving cashflow trends in 2025. Total debt at December 31, 2024 was $464.6 million of which $124 million would have come due in January of 2027, but due to the springing maturity related to $193 million of senior notes is now due November of 2025 and therefore has been classified as current. In addition, $193 million of senior notes will be due February of 2026 and is within 12 months from the date of our 10k filing.

The company has had cash, cash equivalent and restricted cash balance of $127.6 million as of December 31. Given the size of the debt and the classification of the debt now being current, this raises a substantial doubt about the company's ability to continue as a going concern. However, it is important to point out that management believes it is taking all the necessary actions to address the current senior notes that will remove the springing date as our senior debt and if successful, we believe these actions will alleviate the going concern.

The significant steps we have taken to strategically re-align BMW and recent quarters positions thus for improved cashflow generation in the years ahead. Specifically, as Kenny mentioned, we completed the sale of our SBIG and GMB businesses for net proceeds of $33.4 million in the fourth quarter, which have improved our balance sheet and demonstrated our ability to continue to execute against our stated strategy to sell a certain asset. The company's core business continues to perform ahead of expectations and we anticipate returning to positive cash flows in 2025.

Looking forward, one of our top priorities is refinancing of our current debt obligations. We are in discussions regarding the refinancing of our debt with key bondholders as well as junior lenders and remain in process to sell certain other assets. The proceeds of these sales will be used primarily to pay down existing debt and working capital moving forward. I will now turn the call back over to Kenny.

Thanks Cameron. Well, in closing, we continue to execute against our strategic plan and remain instantly focused on driving further improvements on our balance sheet. Our global pipeline of over $7.6 billion in identified project opportunities remains healthy across all segments and we anticipate prospects for new bookings and stronger financial performance throughout 2025. BMW has deep industry expertise with clean energy and carbon capture technologies and with our long history and traditional energy sources and highly experienced and capable employees, we believe we are well positioned to deliver improved value and consistent growth for everyone including our shareholders. I would like to wrap up today by recognizing and thanking our customers as well as our employees who help meet the challenges of energy demand around the world.

I will now turn the call back over to Cameron who will help us with a few questions Cameron.

Yeah, I think there's a couple key metrics in there. I mean, first of all, with the introduction of all of the tariffs that have been recently announced, you know, has some ups and downs as it relates to our business. Typically, the tariffs are all passed through to customers in this particular case, but really don't know the economic impact of what customers may do. Either, you know, delay a start of a project or delay a project to wait for hopefully the tariffs get removed and affect the margin of the project for the customer standpoint.

So we just don't know the outcome of that particular piece and how it's going to play out obviously over the course of the year. So we're just keeping an eye on the tariff aspect on one hand. And then, you know, obviously we need to get through some of the debt restructuring and financing, which, you know, on that particular front to manage through, you know, obviously any impacts that would have, particularly around the business if it's from a cost standpoint. So we just need to see how that shakes out. So there's a couple key areas that we're focused on that gives us, you know, to step back and say, let's give a little bit of range here.

So we just don't know the impact of some of these, you know, in particular some of the tariffs that are being introduced.

No, well, the answer is we're in discussions with several customers on several aspects, right? We have, we bring in, obviously, equipment around the world or pieces of some of the projects that we execute on in North America come in from around the world. And obviously, some things get exported out of the US to other places in the world. So, you know, we've got the tariff issue on both sides of the equation on some projects. So too early to know specific project by project, but we are in talks with customers directly about, you know, certain projects that we're involved in.

You know, the potential cost of those tariffs and what the customer may or may not want to do. You know, some of those could be minor. I mean, it could be 10 or 15,000, you know, or a couple hundred thousand or other cases where the tariffs might be more material, you know, more into the, you know, the five to $7 million range depending on the scope and, you know, some of the aspects that are being considered there. So we have to work with the customer and see how they want to handle that. You know, obviously, when the equipment transfers across the borders, the tariffs kind of be paid immediately. And so that, you know, gets reflected back onto the client and some cases back on the, you know, within their customers as well too.

So, I'll append, but no definitive outcome, I would say, yet at this time, we're just kind of consciously in dialogue and discussions. And, you know, as you said, it changes daily. So who knows? And hopefully, some of these tariffs get removed or get reversed and business goes back to normal. But it's just a little too early to know.

Yeah, no, no, no problem. It's obviously the, from the IRA standpoint, which is all part of the conversation going to DC, I think the general feedback that we received is there's some confidence that the IRA credits will move forward. On specifically on Wyoming, on that project, we are working with Black Hills. They're looking to get some financing on this initial project out of the Department of Energy and their discussions in and around that. And, you know, obviously some some of the budgetary items need to settle as it relates to that. And we feel like we do have congressional support as it relates to that particular project to, and we have appropriations language sitting in the DOE that would help that particular project to just need to get things a little settled in the administration here to get that pushed forward.

But we are working with Black Hills on that. And as they're trying to get this project accomplished as well too. So just working through some of those scenarios still here in the Department of Energy. But, you know, it's all positive. You just got to get to the right, you know, yes, rather than a series of, you know, we'll give us another week here to figure out what's going on. So that, you know, a little caught up in that. It's a brand new administration, you know, obviously they're making a lot of noise and do a lot of things in a very short period of time. But, you know, they've only been in place for a couple months.

So they're still trying to work through, you know, some of the dynamics and how all that is going to shake out under the loan program and how they're going to proceed. So we're working, you know, with them and side-by-side on that front. So anticipated getting done here. But we're working with them on that front.

Yeah. No good question. We do get asked that a lot by a lot of people. It's kind of interesting. I mean, it's just high level. It's, you know, the general feeling, I guess, amongst utilities, it's a little, you know, if utilities are solid on fossil fuels in particular coal aspect and they've got new cases around it, a lot of those, a lot of those are going to, you know, stay in place for the foreseeable future, you know, regardless of what the EPA aspects are that are out there. I think, you know, those clients that are looking at natural gas conversions for the long run are typically looking at, you know, overall operational costs of, you know, coal versus natural gas.

And those conversions, you know, tend to have a 20-year capital lifecycle. So it's, we don't, we don't typically see a big swing in a shift either way based on the regulatory aspect coming out of the EPA because it's hard for the utilities to, you know, obviously read, address their capital needs every four years based on, you know, a different policy that might be invoked in DC. So I don't know that it'll have a big impact. It obviously clearly supports the continuation of where coal plants are, you know, will continue on and don't see any changes of those. You know, it could possibly delay some, a couple of gas conversions for a few years, you know, on that, which would have, I don't know, not a material impact on our business because we were solid, either way, right?

We sell the parts and services into the coal plant. If they convert to natural gas, that's fine too as well. And we can provide that that diversion aspect on it. So it's solid for us, no matter which way they go. So it may, you know, change the swing of revenues from a little bit more coal and a little bit less natural gas, depending on that swing. But, you know, materially, we shouldn't have a big big impact on our business out of there.

Yeah. Thanks, sir.

You've faded out, Rob, right at the end of that. But I think you were asking, how do we kind of see the pipeline shaping up this year? In bookings? Okay.

Yeah, no problem. So, you know, as I briefly mentioned the remarks, I mean, overall, we, we feel pretty solid about our pipeline that have been for quite some time, and the opportunities are actually growing and expanding. You know, we're starting to, as we see some of the feed studies now transfer into, especially on some of the, the newer plants when we're looking at biomass, you know, opportunities here in the U. S. We're still seeing a lot of the data centers, especially the larger ones looking for new power of sources to fill the need from the data center standpoint. And so, you know, we, some of the work there, we do kind of feel like that one or two of those may wind up being a whole piece of announcements over the next few months.

But we see one of the two of those at least seen as if they're going to move towards progressing to a positive outcome for us and get some bookings in there as well too. So, we're excited about that. You know, and we continue to ramp up, obviously on, across the board, you know, on a thermal aspect, we're seeing opportunities to help expand some of the plants and, and read distance some of the plants and other sides, you know, of, of that standpoint. With intent, I think as I mentioned in the remarks, you know, we're, we're doing less and less on larger new boat projects and the new boat projects in Europe and internationally as well.

We're going to focus more on parts and services on the international side. It just, it reduces our LCs and other aspects. We think that's the right decision to make. We think there's, you know, larger volumes here in North America to pursue. So, you know, I think we'll see a steady aspect of our thermal business, you know, is, is doing quite well. We'll, we'll, we're, we continue to expand on the parts and services side of thermal on the international basis. And we see that continuing on for the foreseeable future on that aspect of it. And then, I think we're going to, you know, possibly see a couple biomass and other opportunities emerge here in the United States, you know, toward the later part of the Okay, great.

Yeah, so, so overall that estimated to be around 140, 150 million dollar project for us. And we're, we're in discussions with certain outside investors that would take that project over the 10 million provided by the state. It specifically helps us do all of the the, the early engineering work on the project. We have secured the land for that location or finalizing the agreements, I think, about the size of that. But we'll secure the land for that location and complete that aspect in Mesa County. So we're, we're, and it's close to a, to be nameless, but a large data center. But so that that's happening. And there's the payments of the 10 million, there's milestone aspects that we've, I think we fit roughly about 5 million out of 10 or close to 5 million out of 10, you know, with the others coming with an outside EPC company that will probably retain for the project.

And so some of the funding will go towards that as well too. But it helps repay the engineering aspects for the project and get it off the ground to completion so that we can get to FID on that a little bit quicker. And we're in discussions, as I mentioned with a couple of outside investment firms on that front as well too. So the funding is nice to have because obviously it helps cover internal costs and other aspects that go specifically into that project. So that's exciting to get.