Q4 2019 Earnings Call
Hello, and welcome to the Babcock and Wilcox enterprise fourth quarter and full year 2019 earnings conference call. At this time all participants are in listen only mode. After the speakers presentation, there will be a question and answer session.
The question during the session you'll need to press star one on your telephone if you're acquiring any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today, you can Wilson Vice President Investor Relations. Thank you. Please go ahead.
Thank you Sean tell and good afternoon, everyone welcome to Babcock and Wilcox enterprises fourth quarter and full year 2019 earnings Conference call. I knew you can Wilson, Vice President of Investor Relations at BMW.
Joining me this afternoon or county on Bmws, Chief Executive Officer at least alimony, Chief financial officer to discuss our fourth quarter and full year 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 statement. It can be found at the end of our earnings press release and also in our annual report on form 10-K set us on file with the FCC and provide further detail about the risks related to.
Our business.
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 results.
Supplement the results provided in accordance with gap.
This information should not be considered superior to where the substitute for the comparable GAAP measures. A reconciliation of historical non-GAAP measures can be found in our fourth quarter and for your earnings release published yesterday afternoon.
With that I will turn the call over to Kenny.
Thanks began and good afternoon, everyone. Thanks for taking the time to join us.
Today, our 2019 results really demonstrates the effectiveness.
Our proven and experienced management team and implementation of our turnaround strategy.
Our employees or technology or unsurpassed within the power industry.
And we are executing on our operational cost saving initiatives, we've achieved steadily increasing profitability for three consecutive quarters in 2019.
On an adjusted EBITDA basis in the fourth quarter, we generated positive GAAP income from continuing operations for the first time since the third quarter 2016.
Our transformation has been accelerating we enter 2020 in our strongest position in years driving cost savings improving operating margins strengthening our balance sheet growing profitable revenues.
Pursuing a robust pipeline of new opportunities worldwide.
Our focus is bottomline results and strong cash management.
Like many companies around the world, we have been affected by the actions taken or being taken by various local and national governments worldwide due to the global co bid 19 pandemic.
Control it spread.
Several of our major offices and many of our projects are located in areas with restrictions that necessitate work from home arrangements and that forced delays and deferrals and many of our projects like every company impacted by the pandemic, it's impossible for us to fully predict the extent, we're targeting including its influence.
One of the liquidity and ongoing refinancing process.
However, in this time of crisis throughout the world two points to encourage and drive those for it at Babcock and Wilcox.
The first is that we are part of a critical industry, we provide products and services needed to ensure power and energy infrastructure in the U.S. and around the world is available and ready to support our communities helped deliver the products technologies and services necessary to overcome this crisis asked.
We are deemed and its central business, we're able to continue operating and supporting our customers as requested.
We are a continual contact with our customers suppliers lenders and various government officials to work together on ways to deal with the challenge is dependent it presents and we appreciate the support in collaboration we are sitting across the board.
In addition, because of the critical nature of our business. We expect that a majority of revenues that are deferred due to the pandemic will eventually return in the fall of 2020 or the spring or 2021, depending on certain customer and project specific factors.
The second key point is that we added talented and dedicated inexperienced set of employees and management your IBW.
His team has been honed and strengthened by the challenges that our businesses have faced in the past four years as be grappled with the effects of the pin debit can related restrictions on our day to day wives or employees have continued to demonstrate their commitment to ensuring our work continues recognizing how critical it is to our customers.
And the people communities they serve.
As I said, we can't fully predict the future impacted cobot 19 on our business and it's causing significant challenges. However, taken together. The fact that we are critical industry provider that we have a strong base an experienced a dedicated employees gives me the confidence that when the impact to cope with 19 or better understood advantaged globally.
And current restrictions art eased at the appropriate time, BMW will be well position to continue executing our strategy to leverage our best in class core technologies engineering and services to provide support to support our customers around the globe.
We will be able to drive forward, what projects delayed or deferred because it depends doesn't make conditions when dependable conditions allow as we continue to pursue our strong pipeline of opportunities around the world I'll now turn the call over to allude to discuss the fourth quarter 2019, a detailed as we as well as our full year results Lou.
Thank you County, I'll review, our fourth quarter 2019, consolidated and segment results in detail.
And then I'll turn to our full year 2019 consolidated results.
Further detail on our full year results can be found in the 10-K, which we filed with the F.C. said.
Our fourth quarter consolidated results were 180.4 million. This was a decrease of about 19% compared to our fourth quarter 2018.
This decrease was expected due our focus on our core technologies and profitability as well as some lower volume of periodic large construction do build projects in the BMW segment, which were completed.
Prior in here.
Our GAAP operating income for the fourth quarter was 10 billion inclusive of restructuring and settlement costs and advisory fees of approximately 7.2 million.
Paired to an operating loss.
137 million in the fourth quarter of 2000.
An 18.
The improvement in operating income was primarily due to improved gross margins in the Babcock <unk> Wilcox settlement segment.
The absence of losses on our six European EGPC lost contracts and a change in the strategy and the SPIG segment to improve its profitability by focusing on more selective bidding in core geography some products.
Our consolidated adjusted EBITDA also improved to a positive 19.3 million compared to a negative 114 point.
2 million in the fourth quarter of 2018.
Ill now move and cover the fourth quarter segment results.
The revenues into Babcock <unk> Wilcox settlement were 137 million in the fourth quarter of 2009 train a decrease of approximately 33.7 per cent compared to the 206 million in the prior year period. This was primarily attributable to lower volume of large concern.
Structuring new builds in the fourth quarter as was expected based on the timing of the completion of some of our construction projects adjusted EBITDA in the fourth quarter of 2019 was 19.1 million. This was a decrease of 33.6% compared to the.
28.8 million in last year's corner and was primarily due to the effects of lower volumes.
The segment adjusted EBITDA margin was 13.9% in the quarter.
At about the same period of the same as the period for last year.
Fourth quarter adjusted gross profit in the segment was 39 million a 15% decrease compared to the prior year period, primarily due to the decrease volume, which was partially offset by the benefits benefits of our cost reduction processes gross profit margin improved to 28.
8.4% as compared to 22.2% in the same prior period last year, primarily due to our improved revenue mix and increase proportion of higher margin parts sales and cost savings benefits.
Moving on to the SPIG segment as expected due to our change in strategy revenues decreased 48.1% to 18.7 million in the fourth quarter of 2019 compared to 36 million in the fourth quarter of 2018.
This anticipated decrease was mainly due to lower volume of new build cooling systems projects. Following a shift to more selectively build a bit and focus on core geography and products to improve our profitability.
Adjusted EBITDA was a negative six 600000, an improvement of 28.1 billion a over the prior year, which was a negative 28.7 billion.
This was driven by our new strategy.
And the benefits of restructuring, especially in a cost savings and operating cost reductions.
Adjusted gross profit margin.
Improved to two a positive 1 billion into fourth quarter of 2019 as compared to a negative 16.9 million in the prior year period, primarily due to the effects of our new strategy.
[laughter].
Revenues in the ball and then other renewable segment were 26 point Threemillion for the fourth quarter of 2019 compared to a negative 10.3 billion in the fourth quarter of 2018.
Our fourth quarter revenues in this segment were higher compared to the prior year due to the impact of previously disclosed settlement related to certain EGPC lost projects on 2018 revenues as well as increased volume and the segments operations and maintenance licensing and environment.
In a lines and partially offset by the sale of wall loyal, which was which generated revenues of approximately 7.6 million in the prior year quarter.
Adjusted EBITDA in the quarter improved to a positive 2 million as compared to a negative 110 million in the fourth quarter of last year, returning the segments of profitability on an adjusted EBITDA basis. This is primarily due to the absence of losses in the European EGPC loss costs.
Tracks and the impact of the settlement and the fourth quarter.
2018 results.
In the fourth quarter 2019, the segment recorded a gain of 1.2 million.
On the European eat CPC lost contracts as compared to a 104 million of equivalent losses recorded in the fourth quarter of 2018, and this is inclusive of warranty expense.
Segment had one remaining extended scope contract, which turned into a small loss in the fourth quarter of 2019 due to an increase in it the estimate to complete this contract.
This contract was however turned over to the customer in October of 2019.
Beyond the effect of the settlement on 2018 results and the absence of losses on the E. P. C lost contracts.
Fourth quarter 2019, adjusted EBITDA included lower levels of direct overhead support and lower SGN Hay and partially offset by the absence of the gross profit from loyal due to itself.
The segment's adjusted gross profit was a positive $5.6 million in the fourth quarter of 2019 and improvement of 106.8 million compared to the negative 101.2 million reported in the fourth quarter of 2018.
I'll now turn to our full year results for 2019.
For 2000 lighting full year, the consolidated revenues were 859.1 billion.
An expected decrease of approximately 19% compared to 2018 and this is driven by the company's focus on our core technologies and on profitable bidding on profitable contracts across all segments as well as the completion of the European EGPC law.
Last contracts.
GAAP operating loss for 2019 was 29.4 million, it's inclusive of restructuring and settlement costs and advisory fees of 39.7 million compared to an operating loss of 426.6 million in 2018.
The improvement in operating income was primarily due to improved gross margins in the Babcock <unk> Wilcox settlement significantly lower level of losses on the European EGPC lost contracts.
And a shift in our strategy in the SPIG segment to improve its profitability.
The full year 2019.
Was profitable on an adjusted EBITDA basis, with adjusted EBITDA of 33.3 billion compared to a negative 297.7 billion adjusted EBITDA in 2018.
I'll now turn to highlight our cash flow balance sheet and liquidity.
Cash flow from operations in the fourth quarter of 2019 generated 24.8 billion.
We ended the quarter with unrestricted cash and cash equivalents of 43.8 million and our revolving debt as the as of December 31st was 179 million.
Interest expense in the quarter was 27.5 million as compared to 13.9 million in the prior year quarter and this increase was primarily due driven by increases in amortization or accretion of deferred or contingencies related to our revolving credit facility and our.
Last out term loans.
We're continuing to pursue cost recoveries under various insurance policies and from subcontractors for the European EGPC lost contracts.
We've nearly completed the implementation of our cost saving initiatives that were targeted to be 119 billion on an annualized basis.
As of the ended the fourth quarter roughly 97% of these savings measures have been implement it with a balanced implemented in the first half of 2020.
We will continue to look for additional opportunities to increase our efficiencies and we are also continuing to evaluate potential dispositions as appropriate.
As Kelly mentioned before we began to feel the effects of cobot 19, the business was progressing as planned for the first quarter 2020.
We are in central business, we support critical U.S. and international energy and industrial infrastructure.
We have a proven and experienced management team and employee team that engineered the turn around about business.
Last year.
They are even more determined this year as we plan and implement changes throughout our operations in response to the unprecedented impacts of cobot 19.
Our business has been significantly affected by cobot lighting and the pandemic has caused uncertainty in the global financial markets.
It's impossible to predict the impact the uncertainty is as that has been created by this pandemic anup and what it will have on our business liquidity and our other financial resources. However, we're focused on managing our costs and our cash flow Susan's Christ.
Yes, well, we are continually evaluating the effects of the financial market disruption on our business.
And most importantly to support our customers in the long term I'll now turn it back over to county.
Thanks, Lou Penny are.
Yes can you hear me.
Yep.
Never got we can hear absolute.
Our performance in the fourth quarter 2019 shows Weve turned the corner on proving our profitability. Following our recent strategic actions in cost saving efforts entering 2020 in a position of strength.
Our demonstrated track record and working through significant challenges, while continuing to execute superbike confidence to our customers lenders and shareholders and our ability to successfully lead the business through this unprecedented period in recent global history.
We are communicating daily with each business segment profit and loss leader in the company around the World you understand the impact of the pandemic as well as the related cash flows and contingencies on a project by project basis.
We have strength the knowing the majority of our revenues that are deferred to do to covert 19 are expected to return and the follow up 2020 or spring of 2021, depending on the customers in various stages of each project.
We are working daily with their customers and support them throughout this period as well as continuing certain projects, while planning to remobilization of delayed projects.
We're also focusing on supporting our customers in our energy infrastructure, taking care of our employees and managing our cash flow in liquidity through this crisis to protect are fundamentally strong core business for the long term.
I will now turn the call back over to some tell.
Will assist us in taking your questions.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound or Husky. Please standby only compiled it una roster.
Your first question comes from Matt That's Sir with Winfield capital. Your line is open.
Hi, good afternoon and.
No I'd like to start by saying you guys you've done a lot of heavy lifting last year and it's certainly as many companies that as you pointed out in your remarks Jeremy.
It is.
A very traffic safety. It's all this work to be faced with the greatest on loan that we are looking at and show.
First of all congratulations good work on the heavy lifting that you've done a.
Watched com checking the ball and national questions.
Sure sure <unk> <unk> central business does that apply all in all jurisdictions that you're doing business.
Here in other countries.
Is there a central business designation that sure.
Well, thanks all employees.
Yeah can you hear me, Okay, sorry, we're doing that you're talking about Japan, you don't worry bond I got your that's fine we aren't where do we are in a central business and filed around the world and each of our operations and providing the services, where where local jurisdictions demons support essential business isn't that filing from that standpoint clearly.
Because of our position in supporting modestly the the energy sector, both in the U.S., but around the world and waste energy sector around the world, but we do provide essential technologies to hospitals.
Communities and other other institutions as well as the paper and hope industry that it's still a vital sanction.
Occurring today, and so again best we can and will be can where we are providing a lottery system support.
Effectively to those businesses as well too, but we are do you gave essential in and again jurisdictionally round the world. They call. It different names, where we are well we were redeemed dealt with.
Got it rose by any other than the solar Roes are you finding any difficulty keeping your people are healthy and.
Keeping your operation staff.
This.
Please.
No. Good question from a company perspective as of right now we're not directly aware of any of our employees that have been tested positive for the virus. We clearly are taking as you know significant steps like most companies today around the world.
Both from a proactive standpoint from a company perspective also following closely.
Not only here in the U.S. with CDC and local guidelines and regulations with your.
State local officials, but internationally as well to working with the foreign governments and following those guidelines.
As well and doing our best to two lucky per employee said clearly like many companies we are establishing a strong work at home presence.
There are it's you cases, and if you ask aspects, where we do have employees that need to go into the office.
Obviously from an engineering respective meet access.
Technologies that would not be appropriate from a work at home, but we are taking those proactive measures. Our customers are supported and working and we're working with them to follow in the compliance standards that there may be implementing as it relates to on site activities, when and where possible and we're following their lead as well too.
On those employees and so far.
Were very thrilled the fact that so we've not had any direct impact by employees on a worldwide basis from a it sounds positive standpoint, I need the virus.
Well.
<unk> remained solid and.
[laughter] the work that you do requires people have online as Rollins.
So.
That's good news.
Oh God.
Two more short ones one.
How does this impact the revised you were thinking of doing or maybe you still active one bad.
Our.
Given your results in the fourth quarter institution speech for Lincoln is your Chechen moving ahead there.
Yeah, Matt Good question, we're obviously there the impacts of this virus on on the business as we talked about in deferring a lot of revenues and projects.
Obviously presents challenges as it relates to the refinancing effort and process at this point time.
And we're working closely with all lenders in discussions I'm at at this point I wouldn't want to go too much further than that but we're in talks with the.
The lenders as well as others around working in managing through all of this process at this point, but clearly the co bid or impact is expelled and it will be felt in the business them as well as in the refinancing how far we don't know when we're working through that real time as we speak.
Well, but I'm glad to hear that at least.
Still active wanted more lives likely so but yes.
We've got to get through there. She is after the work you guys your dog.
I'm sure that there is some acknowledgement lending community that she out plays out last question in fact, you've heard much should be everything is fine.
What's your cash flow.
Oh, Okay, actually where do you want to take out go ahead.
Operationally operationally or cash right now is up is positive.
Obviously, we can't really judge the future impacts, although we've been working closely.
Of the covert 19 pandemic, but right now we have been a utilizing our our revolver and so far we've been been able to generate a cash flow through borrowings and through to the operations of our company.
Well, let's hope that the operations continued to show you don't that that revolver Gerard and.
Ah, yes that would just after she wants to get how that plays out. Thank you very much for taking my questions.
Thanks, Good luck Josh.
Thank you.
Again, if you would like to ask the question a star one on your telephone.
Your next question comes from Robert Kathy with a CW capital Your line is open.
Hey, guys, Yeah, I'd like to reiterate Robert Thanks, So much for the hard work here. We appreciate it. Thank you guys them into a lot.
I was just curious on I know you can't comment on that specific the likelihood of financing, but what.
What is that what do you need and perhaps what do you want in the form at the facility that would.
I mean, what would work and then what would be or your ideal wish list.
[noise] well I think you know from ours.
Robert Best way could answer that I think and moved feel free to chime in but I think the bets where I can answer that is is clearly right now like every other company around the world. We're we're first and foremost trying to protect our our customers and employees and making sure that we have capital sufficient to work through.
This particular period, where projects and or delayed or deferred.
So we're we're working as I mentioned in there in the briefing here. We're working 24 seven literally I mean, it's it literally is probably 18 our days right now went round the world working project by project on a day in day out basis.
Really answer to me.
The impact of the cash flows into projects either by you know cases, where we have to defer project later project, where the client has.
Chosen to take initiatives to.
Limit the number of personnel onsite and therefore, it's certain projects I've been delayed or deferred I think our our standpoint and what we're trying to identified I wouldn't want to go into details here, but what we're trying to identify is what is the the gap if you will and working through this period. So it was obviously questions. We all have visit.
It's too how long will this period last and win win will globally. The various government actions allow us to get back to work and some normality in the business.
Some of that will happen in phases, some of that will hopefully start.
Shortly here this summer and again in certain parts of the World is it where some of these lockdowns in shutdowns and quarantines will start to be lifted possibly.
Others will be deferred to the fall, yet and others right now we're still being.
We're working through with the customers to determine whether or not we would occur in the fall or what occurs in the spring or if they shifted out of full year.
These are all in various stages right now and we're working to identify that it depends on obviously, how long its labs and and when we can get back to work and obviously start recognizing revenue at the same time.
We're working through that we're also working with various government officials and various government programs that all of you were following.
Trying to ascertain which of those programs or grants or loans or deferment of.
Taxes, and otherwise that we can leverage as good as a company and implement within our cash flow strategies. We're watching that very closely we have a number of professional resources assisting with that we are obviously doing that from a company standpoint, as well and were just a little bit early as it relates to what are those opportunities we.
And we've all I'm sure state on top of the news and we have ideas and concepts that we think we'll be able to support the company, but not to the point that we can 100% plan on those and we're working through that real time, and then working with our lenders real time as it relates to how much cash will need to support so it's all in a in a real time aspect.
And obviously as we announced programs or cost containments or other programs to defer some cash flow some of that we'll have to publicly announce them and we'll do so and others will will do is just relates to good prudence and managing the business at this point, but.
It's too early to really tell the full impact and will there will obviously working on that real time with every Warner stakeholder shareholders and board to determine that and work through how best we can manage through this period.
Okay, well that's helpful. I appreciate it and again.
Good luck guys and thanks for the hard work.
Yeah no problem. Thanks will support we appreciate that rough.
There are no further questions at this time I'll now turn the call back over to the presenters for closing remarks.
Thank you for joining us that concludes our conference call a replay will be available for a limited time on our website later today.
This concludes today's conference call you may now disconnect.
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