Q2 2020 Babcock & Wilcox Enterprises Inc Earnings Call
[music], ladies and gentlemen, thank you for standing by welcome to the Babcock and Wilcox second quarter 2020 earnings Conference call.
Time, all participants are no listen only mode. After the speakers presentation, there will be a question and answer session.
To ask a question during the session you'll need to press star one on your telephone.
If you're for any further assistance. Please press star Zero I would now like to have the conference over to your speaker for today.
And you can Wilson Vice President Investor Relations. Please go ahead ma'am.
Thank you Sean town and good afternoon, everyone welcome to Babcock and Wilcox Enterprises second quarter 2020 earnings Conference call I'm, you can Wilson, Vice President of Investor Relations at BMW.
Joining me this afternoon or can be NWS, Chief Executive officer, and lose Salomon Chief Financial officer to discuss our second quarter results.
During this call certain statements, we make will be Forwardlooking. 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 also in our form 10-Q that was filed yesterday and our form 10-K that is on file with the FCC and provide for.
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 to supplement the results provided in accordance with gap.
This information should not be considered superior to or as a substitute for the comparable GAAP measures.
A reconciliation of historical non-GAAP measures can be found in or second quarter earnings release published yesterday afternoon.
With that I will turn the call over to Kenny.
Thanks begun good afternoon, everyone and thanks for joining me.
Many companies around the world or second quarter results were negatively impacted by Kubat 19 here in the U.S. internationally.
As we go delays in anticipated bookings in project deferrals across all three segments.
Normally we have continued to take steps to provide a safe working environment in our offices in manufacturing facilities and had or customer sites.
We greatly appreciate all the efforts of our employees are taking to create a safer work environment as long as their relentless support for customers. During this resulted in a time.
Like other companies impacted by the pandemic it is impossible for us to fully predict the extensive for timing or further cobot 19 affects however, based on current information from our customers. We expect the majority of our deferred projects to Remobilize in late 2020 and throughout 2021, depending on search.
Location and project specific factors.
More importantly, our pipeline is expanding over 5 billion of identified projects that we expect to bid in the next three years, not including or parts and services.
This pipeline is focused on renewable energy environmental solutions and advanced technologies globally with roughly 2 billion for the BMW renewable segment 2 billion for the BMW thermal segment and 1 billion for their BMW environmental segment.
We continue to see significant opportunities to grow our business profitably with our improved project execution inefficient operational focus.
Our focus is on bottom line results and strong cash management.
As I said before during this challenging global pandemic to keep points encouraged and drivers forward about Garcon Wilcox, we provide critical essential infrastructure products and services and our managers and employees for experienced dedicated and more determined than ever our team continues to demonstrate their dedication.
As we navigate this crisis and I'd like to thank them for their ongoing efforts.
As we look for toward our future. This is an exciting day of BMW today, we launched a strategic organizational and branding initiatives designed to leverage emerging markets.
Accelerate our growth and provide improved visibility into our expanding environmental and renewable technologies and services.
Through these initiatives, we're aligning our market facing segments and financial reporting under three new segments.
BMW environmental VW renewable and BMW thermal.
We believe these three segments better reflect where core markets products and strategies and highlight or offerings for sustainable energy and industrial infrastructure.
We expect a strategic direction will improve our organizational structure and support our growth as we expand our global sales team and geographical presence, particularly in the Middle East Africa, and Asia Pac regions to identify win and execute on key growth opportunities in these areas.
We are opening several offices in each region, including regional headquarters in Dubai in Perth, Australia in hiring business development field services and sells engineered personnel globally.
As part of this initiative Jimmy more did has taken on the rule of BMW Chief operating officer, Jimmy joining BMW in 2016 with decades of experience in the energy or construction industries and he was instrumental in her efforts over the last few years to complete the European EGPC lost projects and drive our turnaround.
Jimmy will be responsible for a strategic and operational performance under each of these new friends. We will further support our leadership the technology resources globally to drive the expansion of our renewable and environmental platforms through project wins and quality execution as we build the next generation Babcock and Wilcox we.
Recognize the world is changing rapidly. The next generation BMW is focused on meeting customer and market needs by providing technology solutions to help achieve a clean sustainable energy and industrial infrastructure. We're also working with various governmental agencies in NGL goes through funded projects to design and.
Build new technologies that will improve our environment in years to calm.
We're increasing our focus on reducing their carbon footprint and low emission technologies to create energy from waste. We believe we have the technologies and expertise and opportunities to expand our renewable and environmental platform significantly in the next few years, well steadily growing our traditional thermal business throughout or a vast installed.
Base.
Globally the market for technologies is growing significantly including opportunities a new waste to energy facilities advanced thermal technologies and improved environmental standards, our new market facing brands are designed to align with these market drivers so lets dive into the now.
BMW environmental supports a clean energy infrastructure by providing a full suite a best in class emissions controls environmental solutions for utility and industrial steam generation applications around the world.
BMW his broad experience includes systems for cooling ash handling particulate control nitrogen oxide and sulfur dioxide removal chemical looping for carbon control and Mercury control in the last 12 months. This brand has represented about 20% of our sales. We expect this brand to continue to grow worldwide.
As a buyer environmental regulations continue to drive is toward a cleaner energy future.
BMW renewable is a leader in developing ecological sound ways to use resources like biomass and waste to create clean renewable energy.
This brand we offer cost effective technologies for efficient and environmentally sustainable power and he generation, including waste energy biomass energy and black liquor systems for the pulp and paper industry Bmws technology support a circular economy diverting waste from landfills to use for power.
Generation, and replacing fossil fuels, while recovering metals and reducing emissions.
Last 12 months. This brand has represented about 27% of ourselves and we expected to grow significantly worldwide as the demand for renewable waste energy and biomass systems continues to grow and we expands our presence.
Geographically.
VW thermal provides proven steam generating products that are efficient safe and reliable, including steam generation equipment aftermarket parts and construction maintenance and field services for plants and the power generation oil and gas in industrial sectors. BMW has extensive global base of installed equipment for utilities in general.
Industrial applications, including refinery petrochemical food processing metals, and others and we continue working to grow our aftermarket business to support this installed base in the last 12 months. This brand has represented about 53% of our sales we expected to grow steadily as we expand or aftermarket services in parts business.
Within our own installed base as well as those of our competitors, while increasing our service capabilities worldwide.
With our new organizational alignment and branding combined with our effort to broaden our global sales service and business development presence geographically, we expect growth from our expanding global pipeline and improved operational execution to drive significant earnings growth throughout 2021 it beyond.
Ill now turn the call over to allude to discuss the key points of our financial performances of the second quarter 2020.
Thank you can.
Our second quarter consolidated revenues were 135.4 million.
Cobot 19 negatively impact that all of the segments in our business by delaying or deferring anticipated projects and bookings into later in 2020 or into 2021.
Our GAAP consolidated operating loss was 7.7 million, which included restructuring settlement and advisory costs of 4.4 million.
Our GAAP loss from continuing operations was 18.1 million. This represents a 10.2 million improvement compared to the second quarter of 2019.
Our consolidated adjusted EBITDA was 1.4 million.
Adjusted EBITDA was adversely affected again by the impacts of cope with my team across all of the segments of our business and also was offset by the completion of several large construction projects in the Babcock <unk> Wilcox segment.
As they completed at the end of 2019 in early 2020.
While the positive impacts as our cost savings efforts over the last year, a half maybe masked by the adverse impacts of covert 19.
We continue to see the increasing benefits of our previously implemented cost saving initiatives.
This affects both costs of our operations and our SGN a costs.
These cost saving initiatives helped drive a 7.5 million reduction in consolidated SGN a expense in the quarter. This is a 17.8% improvement compared to the second quarter of 2019.
These initiatives also helped drive adjusted gross profit in the Babcock <unk> Wilcox segment to 27.9% this quarter as compared to 18.8% in the same period of last year.
We expect to continue to see the benefits of our cost saving initiatives and 2020 and then the 2021 as these savings from change from the changes implemented in 2019 are fully implement it overtime.
Turning to our cash flow balance sheet and liquidity cash flow from operations in the second quarter was the use of approximately 13.8 million and this was primarily for working capital needs.
We ended the quarter with unrestricted cash and cash equivalence of 36.81 million as well as approximately 40.3 million available for borrowings under our U.S. revolving credit facility.
Total debt at June Thirtyth was 338 million 164.7 million was related to the revolver and 173.3 million to our last out term loans.
All of our senior debt is classified on our balance sheet as noncurrent.
Interest expense in the quarter was 15.5 million as compared to 26.8 million in the prior year quarter. The decrease was primarily driven by reduced deferred financing commitment and contingent consent fees related to our U.S. revolving credit facility.
Further detail regarding our second quarter results, including comparisons with the second quarter of 2019 can be found an outright related earnings release, and the 10-K filed yesterday.
Today, we're focused on managing our costs and cash flow as the global call Cobot 19 pandemic continues while evaluating its effects on our business and the changing restrictions and other measures taken by various localities, we continue to support our customers in the long term.
As we evaluate the impact of cobot 19 on our business.
It was impossible to fully predicted we expect deferrals and delays a certain projects to continue to affect our performance and 2020 and anticipate that the majority of the deferred projects well remobilize in late 2020 and throughout 2021.
As part of our efforts to Matt manage cost or this crisis, we've taken a number of measures, including temporary unpaid furloughs for certain employees temporary deferrals of 50% of the service fees or salaries for certain members of our management team and 50% of the cash compensation payable to our board of directors.
We've also suspended our four one k. match for U.S. employees for the rest of the year.
We've also participated and temporary rent payment deferrals for certain of our facilities and the fairing in accordance with the cares active 2020. The plan your pension contribution payments of 5.5 billion. Each in April in July as well as other measures to conserve cash.
Looking forward as we continue to strengthen our organizational structure under our new branding. We're also strengthening our internal systems as appropriate and particular, we continue to moderate modernize our infrastructure and have begun to move a significant amount of our I T systems and infrastructure to the cloud.
We're also continuing continuously pursuing further cost efficiencies and we're continuing to pursue cost recoveries on their various insurance policies and from subcontractors to recover some of the losses from these from the European EGPC contracts.
We expect to begin reporting our financial results under the new segments, starting with our full year 2020 results I'll now turn it back over to Kenny Thanks Lou.
While we can't fully predict how cobot 19 will affect the timing of bookings and project progress in the near term.
We are seeing renewed opportunities emerging as many of our customers restart paused projects are undertake new projects and upgrades leveraging our technology.
We are pursuing and have won new grants and paid research opportunities to design and build new emerging technologies.
Now with the launch of our new segmentation and organizational alignment combined with the ongoing expansion of our geographic presence our focus is on winning and executing quality projects as well as aftermarket services to serve our customers need for renewable energy environmental solutions and efficient operations.
We believe we have the technology expertise and opportunities to expand a renewable and environmental platform significantly in the next few years.
Finally, before we close I would encourage everyone to checkout or new branding.
Www Dot Babcock dot com.
I'll now turn the call back over the operator, who will assist us and taking your questions.
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Oh.
Our first question comes from the line of a participant is information wasn't able to be gathered caller. Please state your name and company. Your line is open.
Hi, My name is David things like I'm going to buffer and Bob BW.
My question, specifically county.
I was looking.
An update on what's happening with potentially the main street lending program from the Fad.
And our PPP loans that were available you know I was hoping that you would try to get some relief.
Federally and I was wondering what the timing was I know that might have met the under the drilling sort of quarter.
Oh, Thanks, David.
Like you we follow very closely daily as a matter of fact.
Other developments in around the PPP programs as well as.
You mentioned on the call some of the payroll tax deferrals and other programs that have been provided through the covenant relief efforts by the U.S. government as well as state local governments as well too from that standpoint. So we do follow that constantly closely as it relates to that so many of those programs.
Based on various conditions and other aspects don't apply to us and so we continue to to watch and monitor which which programs possibly could it.
You know like other companies, we are where we're practical impossible voicing our references and concerns and priorities to our state local official as well as many of our federal officials as well to to try to.
Get our voice heard in Congress on Capitol Hill, and in the state front as well too, but so we do follow it very very closely at this point in time as well as.
What PPP with VW look too large to get a couple of million dollars. Other PPP was up yet.
There is various aspects PBP would just that we wouldn't qualify for under at that point in time other aspects in and around some of the refinancing efforts that we out as well to put us in a position, where we were not able to leverage some of those programs. So yeah, basically we weren't able to take advantage of that but we'll oh, we do we do keep an eye and hopefully some changes will take place.
We set will open some of that backup.
Right. Okay. Okay. Thank you Kim.
Yep.
Again, if you would like to ask the question a start one on your telephone.
There are no further questions at this time I'll now turn the call back over to 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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