Q2 2024 Babcock & Wilcox Enterprises Inc Earnings Call

Good evening. My name is Makaya and I will be your conference operator today. At this time, I would like to welcome everyone to the conference call.

Operator: All lines will be muted during our presentation portion of the call, with the opportunity for questions and answers at the end. Sharyn, you may begin your conference call at this time.

All lines will be muted during the presentation portion of the call with opportunity for questions and answers at the end.

Speaker Change: Sharyn, you may begin your conference call at this time.

Sharyn Brooks: Thank you, Mepiah, and thanks to everyone for joining us on Babcock & Wilcox Enterprises' second quarter 2024 earnings conference call. I'm Sharon Brooks, Director of Communications.

Thank you, Mepiah, and thanks to everyone for joining us on Babcock and Wilcox Enterprises, second quarter, 2024 earnings conference call. I'm Sharon Brooks, Director of Communication.

Sharyn Brooks: Joining the call today are Kenny Young, B&W's Chairman and Chief Executive Officer, and Lou Salamone, 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 Harvard provision for forward-looking statements that could be found at the end of our earnings press release and also in our form 10Q that was filed this afternoon and our form 10K that is on file with the SEC and provides further detail about the risks related to our business.

Speaker Change: Joining the call today are Kenny Young, B&W's Chairman and Chief Executive Officer, and Lou Salamone, Chief Financial Officer, to discuss our second quarter results.

During this call, certain statements we make will be forward-looking.

B statements are subject to risks and uncertainties, including those set forth in our state Harvard provision for forward-looking statements that could be found at the end of our earnings press release and also in our form 10Q that was filed this afternoon and our form 10K that is on file with the SEC and provide further detail about the risks related to our business.

Speaker Change: Additionally, except as required by law, we undertake no obligation to update any forward-looking statements.

Speaker Change: We also provide non-GAP information 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 GAAP measures .

Speaker Change: A reconciliation of historical non-GAAP measures can be found in our second quarter earnings release published this afternoon and in our company overview presentation filed on Form 8K this afternoon and posted on the Investor Relations section of our website at babcock.com. I will now turn the call over to Kenny.

Sharyn Brooks: Additionally, except if required by law, we undertake no obligation to update any forward-looking statements. We also provide non-GAAP information regarding certain of our historical and targeted results to supplement the results provided in accordance with GAAP. 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 our second quarter earnings release published this afternoon and in our company overview presentation filed on form 8K this afternoon and posted on the investor relations section of our website at babcock.com. I will now turn the call over to Kenneth.

Kenneth Young: Thanks, Sharon. And thanks, Micaiah. And good afternoon, everyone.

Kenny Young: Thanks, Sharon, and thanks, Micaiah. And good afternoon, everyone, and thanks for joining us on our second quarter 2024 earnings call.

Kenneth Young: And thanks for joining us on our second quarter, the 2024 earnings call. We continue to build on our strong start to 2024 with robust second quarter results across all of our businesses. Our results in the second quarter reflect increased demand for our portfolio of technologies that support the generation of efficient and sustainable energy, regardless of fuel source, and B&W is well positioned to capitalize on the continued growth in natural gas conversions, environmental solutions, carbon capture, and clean energy opportunities globally with utility and industrial customers. We are excited about the progress we're making to advance our revolutionary ClimateBRIGHT decarbonization technologies, including our innovative Bright Loop system that creates hydrogen without incineration or gasification to support the world's energy transition.

Kenny Young: We continue to build on our strong start to 2024 with robust second quarter results across all of our businesses.

Kenny Young: Our results in the second quarter reflect the increased demand for our portfolio of technologies that support the generation of efficient and sustainable energy.

Kenny Young: regardless of fuel source, and B&W is well positioned to capitalize on the continued growth in natural gas conversions, environmental solutions, carbon capture, and clean energy opportunities globally with utility and industrial customers.

Kenny Young: We are excited about the progress we're making to advance our revolutionary climate bright decarbonization technologies, including our innovative bright loop system that creates hydrogen without incineration or gasification to support the world's energy transition.

Kenneth Young: We continue to see opportunities for new bookings this year for these types of hydrogen generation and carbon capture projects, and we'll discuss some exciting new developments later during this call. Additionally, our teams have worked hard to reduce our overall costs and improve our margins, as we are seeing the benefits of our more selective market approach and targeting higher-value projects and opportunities. We've also seen an increase in paid front-end engineering design or fee studies regarding various biomass, carbon capture, and hydrogen opportunities. We expect that a few of these speed studies will lead to booking opportunities over the coming years, and we are looking at expanding our engineering teams due to the increased demand for these studies.

Kenny Young: We continue to see opportunities for new bookings this year for these types of hydrogen generation and carbon capture projects.

Kenny Young: and we'll discuss some exciting new developments later during this call.

Kenny Young: Additionally, our teams have worked hard to reduce our overall costs, improve our margins, as we are seeing the benefits of our more selective market approach and target of higher value projects and opportunities.

Kenny Young: We've also seen an increase in paid front-end engineering design or fee studies regarding various biomass, carbon capture and hydrogen opportunities.

Kenny Young: We expect that a few of these speed studies will lead to booking opportunities over the coming years, and we are looking at expanding our engineering teams due to the increased demand for these studies.

Kenneth Young: As mentioned, we generated another quarter of strong operating results during Q2, highlighted by and just one event that exceeded our expectations and keeps us on track to achieve our full year adjusted EBITDA target of 115 million. Based on the combination of strong thermal parts, bookings, and new customer activities, and better than expected, adjusted even through the second quarter of 2024, we are reiterating our full-year adjusted EBITDA target of 115 million. Despite the sale of our Danish Renewable Services subsidiary, which was completed during the second quarter.

Kenny Young: As mentioned, we generated another quarter of strong operating results during Q2, highlighted by adjusted EBITDA that exceeded our expectation and keeps us on track to achieve our full year adjusted EBITDA targets.

Kenny Young: Based on the combination of strong thermal parts, bookings and new customer activities, and better than expected, adjusted even through the second quarter of 2024, we are reiterating our full-year adjusted, but a target of 105 to 115 million.

Kenny Young: despite the sell of our Danish Renewable Services subsidiary, which was completed during the second quarter.

Kenneth Young: The proceeds from this sale improved our balance sheet and demonstrates the execution of our stated intent to sell certain non-strategic businesses. Importantly, we remain in negotiations related to the sale of other non-strategic assets with proceeds expected to significantly reduce our debt obligations, improve liquidity, and support growth working capital.

Kenny Young: The proceeds from the sale improved our balance sheet and demonstrates the execution of our stated intent to sell certain non-strategic businesses.

Kenny Young: Importantly, we remain in negotiations related to the sale of other non-strategic assets with proceeds expected to significantly reduce our debt obligations, improve liquidity, and support growth working capital.

Kenneth Young: We also continue to make progress on our cost reduction efforts during the second quarter, achieving 25 million to date as we work toward our target of over 30 million of annualized cost savings. We have significantly improved cash flow and our solar operations, which produced 6 million of cash in the second quarter and is now generating positive EBITDA results despite its classification. In parallel, we continue utilizing cash to ramp up our investment in bright loop and climate bright as we continue developing the pipeline of opportunities and anticipate booking later this year. These actions, and our improved margins, are creating a pathway that will allow us to improve our liquidity as we focus on reducing our long-term debt.

Kenny Young: We also continue to make progress on our cost reduction efforts during the second quarter, achieving 25 million to date as we worked toward our target of over 30 million of annualized cost savings.

Kenny Young: We have significantly improved the cash and our solar operations, which produced 6 million of cash in the second quarter and is now generating positive EBITDA results despite its classification.

Kenny Young: In parallel, we continue utilizing cash to ramp up our investment in bright loop and climate bright as we continue developing the pipeline of opportunities and anticipate booking later this year.

Kenny Young: These actions and our improved margins are creating a pathway that will allow us to improve our liquidity as we focus on reducing our long-term debt.

Kenneth Young: The expected growth and anticipated higher margins of our bright loopflow carbon hydrogen technology and our climate bright decarbonization technology should also lead to continued higher margins in the future. Now, we'd like to discuss our strong second quarter operating performance, in which our adjusted EBITDA exceeded the company's expectations. These results combine with strong bookings and year-to-date sets of states for us to reiterate our full-year adjusted EBITDA target range. We are already seeing the benefits of our strategic plan as adjusted EBITDA margins expanded during the second quarter of 2024.

Kenny Young: The expected growth and anticipated higher margins of our bright-loop low-carbon hydrogen technology and our climate-right decarbonization technology should also lead to continued higher margins in the future.

Kenny Young: Now we'd like now to discuss our strong second quarter operating performance.

Kenny Young: in which our adjusted EBITDA exceeded the company's expectations.

Kenny Young: These results, combined with strong bookings and year-to-date, set the stage for us to reiterate our full year-adjusted EBITDA target range.

Kenny Young: We are already seeing the benefits of our strategic plan as adjusted EBITDA margins expanded during the second quarter of 2024, representing 100 basis points of improvement compared to the second quarter of 2023.

Kenny Young: Our margins are benefiting from the shift to reduced reliance on high-interest, low-margin new-build projects. Our margins have been further supported by strength across our aftermarket parts and services businesses.

Kenny Young: From a segment perspective, our environmental business...

Kenny Young: was a standout performer during the second quarter, with revenue increasing 15% compared to the second quarter of 2023 and margins that continued to expand, which drove a 97% increase in total adjusted EBITDA compared to the second quarter of 2023.

Kenneth Young: These results were primarily driven by higher margin product mix, along with a favorable closeout of the flu gas treatment project. However, revenue declined year over year in the renewable segment as a result of our strategic shift to be more selective and reduce the number of low margin new build projects that we pursue. Adjusted EBIT even increased by 40% compared to the second quarter of last year, benefiting from our cost reduction efforts related to the restructuring of our renewable business. However, thermal revenue declined compared to the second quarter of 2023 as a result of the completion of a large construction project in 2023.

Kenny Young: These results were primarily driven by higher-margin product mix, along with a favorable closeout of the flu gas treatment project.

Kenny Young: While Revenue decline year over year in the renewable segment as a result of our strategic shift to be more selective and reduce the number of

Kenny Young: low-margin, new-build projects that we pursue.

Kenny Young: Adjusted EBITDA increased 40% compared to the second quarter of last year benefiting from our cost reduction efforts related to the restructuring of our renewable business.

Kenny Young: The thermal revenues declined compared to the second quarter of 2023 as a result of a completion of a large construction project.

Kenny Young: and 2023.

Kenny Young: However, customer demand for our thermal segment...

Kenny Young: Products and Services remain strong, as demonstrated by bookings in the first half of 2024 that exceeded bookings in the same period of 2023. And we anticipate a strong Q4 based on previously announced gas conversion projects and recent parts and service bookings.

Kenny Young: We continue to see strong underlying industry trends with expanding global demand for clean power production and energy security.

Kenny Young: and a global pipeline of identified project opportunities of over 9 billion, which includes over 1.5 billion of bright loop and climate bright opportunities of long.

Kenneth Young: These trends are foundational drivers for our business outlook for 2024 and beyond, as we continue to make considerable progress and convert this pipeline into built-in. Moving through the second half of 2024, we anticipate prospects for continued new bookings and strong financial performance. Our backlog and applied backlog at the end of the second quarter were $472 million and $757 million, respectively, representing a slight decrease in bookings but an increase of 39% compared to the backlog and implied backlog at the end of the second quarter of 2023.

Kenny Young: These trends are foundational drivers for our business outlook for 2024 and beyond as we continue to make considerable progress in converting this pipeline into bookings.

Kenny Young: Moving through the second half of 2024, we anticipate prospects for continued new bookings and strong financial performance.

Kenneth Young: [inaudible]

Kenneth Young: A slight decrease in bookings, but an increase of 39 percent compared to the backlog and implied backlog at the end of second quarter of 2023. As we introduce last quarter, the implied backlog figure includes awarded projects as well as those under contract and have not been fully released.

Kenneth Young: As we introduced last quarter, the implied backlog figure includes awarded projects as well as those under contract and have not been fully released for performance, and provides a better representation of our customer demand. Looking ahead, given the new EPA requirements, we are seeing increasing opportunities for coal-to-natural gas and coal-to-biomass projects within the United States, which is very exciting for us as we look to the remainder of 2024 and into 2025. Many of these projects are either under development in the proposal stage or in final design and have revenue ranges of $50 million to $400 million in value for B&W. With our increasing visibility of customer demand and our near-term booking success, we are reiterating our full-year 2024 adjusted EBITDA target range of $105 to $115 million, which excludes Bright Loop and Climate Bright.

Kenneth Young: for performance and provides a better representation of our customer demand.

Kenneth Young: Working ahead, given the new EPA requirements, we are seeing increasing opportunities for cold and natural gas and cold biomass projects within the United States.

Kenneth Young: Which is very exciting for us is we look to the remainder of 2024 and into 2025. Many of these projects are either under development in the proposal stage or in final design, and have with revenue ranges of 50 to 400 million in value for BMW.

Kenneth Young: with our increasing visibility of customer demand and our near-term booking success.

Kenneth Young: We are reiterating our full year 2024 adjusted EBITDA target range of $105 to $115 million.

Kenneth Young: Importantly, we continue to invest in our Bright Loop opportunities and anticipate spending in the range of $10 to $15 million in 2024 on our Bright Loop projects and technology advancement, including CAPEX. Our efforts to progress Bright Loop are moving forward as we further the commercial development of our existing projects and continue working to improve the overall operational effectiveness of these technologies to produce low-cost, low-carbon-intensity hydrogen. We are continuing to progress with engineering work for our previously announced Bright Loop projects in Gillette, Wyoming, Baton Rouge, Louisiana, and Massillon, Ohio.

Kenneth Young: which excludes Bright Loop and Climate Bright. Importantly, we continue to invest in our Bright Loop opportunities and anticipate spending in the range of $10 to $15 million in 2024 on our Bright Loop projects and technology advancement, including CAP-S.

Kenneth Young: Our efforts to progress bright loop are moving forward as we further the commercial development of our existing projects and continue working to improve the overall operational effectiveness of these technologies to produce low cost, low carbon intensity hydrogen.

Kenneth Young: We are continuing to progress with engineering work for our previously announced bright-loop projects in July, Wyoming, Baton Rouge, Louisiana, and Maslenohio. In fact, today we are excited to announce that the UK developments regarding our Maslenohio project.

Kenneth Young: In fact, today we are excited to announce a few key developments regarding our Massillon, Ohio project. As we have previously stated, it's important to prove the commercial demonstration of Bright Loop both for hydrogen production as well as for syngas production, which can be used as sustainable aviation fuel, or SAF, or other synthetic fuels. We have signed a 10-year ticket-tendered off-take agreement with CGI International for up to 5 tons of hydrogen per day while sequestering CO2. We have also reached indicative financing terms for the construction and leaseback of the site for up to 10 years as well.

Kenneth Young: As we have previously stated, it's important to prove the commercial demonstration of Bright Loop both for hydrogen production, as well as syngas production, which can be used as sustainable aviation fuel, or SAF, or other synthetic fuels.

Kenneth Young: We have signed a 10-year take-it-tendered off-take agreement with CGI International for up to five tons of hydrogen per day while sequestering the CO2.

Kenneth Young: We have reached indicative financing terms for the construction and leaseback of the site for up to 10 years as well.

Louis Salamone: We do anticipate signing the SBV-financing letters of intent and beginning construction immediately with the goal of reaching hydrogen production by the end of 2025 or early 2025. This is a significant development for our Bright Loop technologies, as we will now have a commercial demonstration facility near our headquarters in Ohio. This will raise our technology readiness level to bankable projects as we continue our efforts towards the Wyoming, Louisiana, and potentially West Virginia projects, as well as other bright-loop opportunities where we are in discussions or have engaged in deep studies around the world.

Louis Salamone: We do anticipate signing the SBV financing letters of intent and begin construction immediately with the goal of reaching hydrogen production by the end of 2025 or early 2026.

Louis Salamone: This is a significant development for our bright blue technology as we now will have a commercial demonstration facility near our headquarters in Ohio.

Louis Salamone: This will raise our technology readiness level into bankable projects as we continue our efforts towards the Wyoming, Louisiana, and potentially West Virginia projects, as well as other bright-loop opportunities where we are in discussions or have engaged in deep studies around the world.

Louis Salamone: We remain excited about the prospects and outlook for the Bright Loop platform, with visibility to reach 1 billion in bookings by 2028, driven by a combination of small, medium, and large Bright Loop projects that are in our current identified pipeline. As I mentioned earlier, this pipeline includes approximately 1.5 billion of Bright Loop and climate change opportunities alone. We continue to believe this level of activity has the potential to lead to $1 billion in revenues by 2030, which would still only represent roughly 1% of the market share for total global hydrogen spend by 2030.

Louis Salamone: We remain excited about the prospects and outlook for the Bright Loop platform, with visibility to reach 1 billion in bookings by 2028, driven by a combination of small, medium, and large Bright Loop projects that are in our current identified pipeline.

Louis Salamone: As I mentioned earlier, this pipeline includes approximately 1.5 billion of bright loop and climate bright opportunities alone.

Louis Salamone: We continue to believe this level of activity has potential to lead to 1 billion in revenues by 2030 which would still only represent roughly 1% of the market share for total global hydrogen spend by 2030.

Louis Salamone: 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. We also continue to see opportunities for new projects related to waste energy in the United States, which should enable us to leverage our climate decarbonization platform and present additional higher-margin prospects. I'll now turn the call over to Lou to discuss the financial details of the second quarter of 2024. Lou?

Louis Salamone: With Embright 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.

Lou: We also continue to see opportunities for new projects related to waste energy in the United States, which should enable us to leverage our climate-wide decarbonization platform and present additional higher margin prospects.

Louis Salamone: I'll now turn the call over to Lou to discuss the financial details of the second quarter for 2024. Lou?

Louis Salamone: I'm really pleased with our second quarter results, further details on which can be found in the 10-Q that's on file with the SEC. Our second quarter consolidated revenues were 233.6 million, which is a decrease compared to the second quarter. This decrease is primarily attributable, as Kenny mentioned, to our strategic approach of reducing reliance on lower margin projects and completion of very large construction projects in the second quarter of 2023. Our operating income in the second quarter of 2024 was $42.2 million compared to an operating income of $12.4 million in the second quarter of 2023. Operating income well exceeded expectations and was primarily attributable to a gain on the sale of our Denmark-based subsidiary and a decrease in selling, general, and administrative expenses.

Louis Salamone: Thanks, Kenny. I'm really pleased to read our second quarter results, further details on which can be found in the 10-Q that's on file with the SEC.

Louis Salamone: Our Adjusted EBITDA, excluding Bright Loop and Climate Bright Expenses, was 24.6 million, which was ahead of expectations for the Corps. Implied bookings in the second quarter of 2024 were 193 million and ended with an ending implied book backlog of 757.8 million. Our earnings per share in the second quarter were a positive $0.24, as compared to a loss per share of $0.10 in the second quarter of 2023. I'll now turn to our segment quarterly reporting results.

Louis Salamone: Our second quarter consolidated revenues were $233.6 million.

Louis Salamone: which is a decrease compared to the second quarter.

Louis Salamone: This decrease is primarily attributable to...

Kenny: As Kenny mentioned...

Louis Salamone: to our strategic approach of reducing reliance on lower-margin projects and completion of a very large construction project in the second quarter of 2023.

Louis Salamone: Our operating income in the second quarter of 2024 was $42.2 million compared to an operating income of $12.4 million in the second quarter of 2023.

Louis Salamone: Operating Income, well exceeded expectations and is primarily attributable to again on the sale of our Denmark-based subsidiary and a decrease in selling general and administrative expenses.

Speaker Change: Howard Jocelyn Evita, excluding bright loop and climate bright expenses, was 24.6 million, which was ahead of expectations for the Corps.

Louis Salamone: and Clyde Bookings in the second quarter of 2024, were a 193 million and ended and ending and Clyde Book Back Log with 757.8 million.

Louis Salamone: Our earnings for share in the second quarter, or a positive 24 cents, has compared to a loss for share of 10 cents in the second quarter of 2023.

Louis Salamone: Within our Babcock's and Wilcox's segment, revenues were $61 million for the second quarter of 2024. This is a decrease compared to the second quarter of 2023. The revenue decrease is primarily due to our strategic shift to be more selective and reduce the number of lower margin new build projects that we will pursue. Adjusted even further, the second quarter of 2024 was 7.7 million, an increase of 63% compared to the 4.7 million in the second quarter of 2023.

Speaker Change: I'll now turn to our segment with quarterly reporting results.

Louis Salamone: Within our bad cost and Wilcox revenue segment revenues were 61 million for the second quarter of 2024.

Louis Salamone: This is a decreased compared to the second quarter of 2023, and the revenue decreases primarily due to our strategic shift to the more selected and reduced the number of lower margin new build projects that we will pursue.

Speaker Change: A Justice League at down the second quarter of 2024 was 7.7 million.

Louis Salamone: an increase of 63% compared to the $4.7 million in the second quarter of 2023.

Louis Salamone: This is primarily due to the reduction of our reliance on low margin new build projects and a decrease in selling and in general administrative expenses and cost saving initiatives related to the restructuring of our renewable business.

Louis Salamone: Within Babcock & Wilcox's environmental segment, revenues were $56.2 million for the second quarter. This is an increase of 15% compared to the $48.7 million in the second quarter of 2023.

Louis Salamone: This is an increase of 15% compared to $48.7 million in the second quarter of 2023. This increase is primarily driven by higher overall volumes of cooling technology projects, partially offset by lower volumes of flue gas treatment projects. Adjusted EBITDA was $6.7 million for the quarter compared to $3.4 million in the same quarter of last year. So our adjusted EBITDA on that segment nearly doubled, and this was primarily driven by an improved product mix and favorable flue gas treatment projects. Turning to the Babcock & Wilcox thermal segment.

Louis Salamone: This increase is primarily driven by higher overall volumes of cooling technology projects, partially offset by lower volumes of flue gas treatment projects.

Louis Salamone: And adjusted EBITDA was $6.7 million for the quarter compared to $3.4 million in the same quarter of last year. So our adjusted EBITDA on that segment nearly doubled. And this is primarily driven by improved product mix and favorable flue gas treatment projects.

Louis Salamone: Revenue was 120 million compared to the second quarter of 2024, which is in line with company expectations, despite the decrease compared to the 2023 quarter. The revenue decrease is primarily attributable to the completion of a large construction project in 2023 that was not fully replaced in the second quarter of 2024. Joseph David Thielman, The second quarter of 2024 was 13 million, which is in line with our expectations and a slight decrease compared to the second quarter of 2023.

Louis Salamone: Turning to the Babcock & Wilcox thermal segment, revenues were $120 million in the second quarter of 2024, which is in line with company expectations, despite the decrease compared to the 2023 quarter.

Louis Salamone: The revenue decrease is primarily attributable to the completion of a large construction project in 2023 that was not fully replaced in the second quarter of 2024.

Speaker Change: Joseph David Down, the second quarter of 2024 was 13 million, which is in line with our expectations and a slight decrease compared to the second quarter of 2023. Primarily due to the completion of that previously mentioned large projects.

Speaker Change: I'll now turn to our balance sheet, cash flow and liquidity. Total debt at 23, 2024 was 7476.8 million, and the company had cash, cash equivalents, and restricted cash of 202.1 million.

Louis Salamone: As Kenny previously mentioned, we've significantly closed out the Legacy Solar Projects and it's just a past year being neutral to positive going forward.

Speaker Change: As previously noted, we completed the sale of the Denmark-based subsidiary during the quarter, which improved our balance sheet and demonstrated our ability to execute against our state strategy to sell certain non-strategic businesses.

Louis Salamone: Additionally, as previously announced, we are initiating processes to sell certain other non-strategic business assets.

Louis Salamone: and Assets, the proceeds of these cells will be used primarily to pay down existing debt and for working capital.

Louis Salamone: As a result of these actions we are confident that we have overcome the previous liquidity concerns and continue to invest over $10 million a year annually in the bright loop and climate-break suite of projects to accelerate our future growth. I'll now turn it back to Ken.

Louis Salamone: Additionally, as previously announced, we are initiating processes to sell self-certainly another not strategic business as that, and assets. The proceeds of these sales will be used primarily to pay down existing debt and for working capital. As a result of these actions, we're confident that we have overcome the previous liquidity concerns and continue to invest over $10 million a year annually in the bright loop and climate-break suite of projects to accelerate our future growth. I'll now turn it back to Ken.

Kenneth Young: Lou. Well, in closing, we remain intently focused on executing our strategic plan and driving further improvements on our balance sheet. More specifically, we anticipate additional sales of non-strategic businesses to drive further improvements in our cash liquidity position and leverage ratio. As we look ahead to the sector half of 2024, we expect operating momentum driven by our thermal and environmental segments to continue with increased services and project schedules from our customers. Our global pipeline of over 9 billion and identified project opportunities remained healthy across all our business segments, and we anticipate prospects for new bookings and stronger financial performance throughout the second half of 2024.

Speaker Change: Thanks Lou

Kenneth Young: Well, in closing, we remain intently focused on executing our strategic plan and driving further improvements in our balance sheet. More specifically, we anticipate additional sales of non-strategic businesses to drive further improvements in our cash liquidity position and leverage ratio.

Kenneth Young: As we look ahead to the second half of 2024, we expect operating momentum driven by our thermal and environmental segments to continue with increased services and project schedules from our customers.

Kenneth Young: Our global pipeline of over 9 billion and identified project opportunities remains healthy across all our business segments and we anticipate prospects for new bookings.

Kenneth Young: and stronger financial performance throughout the second half of 2024.

Kenneth Young: We continue to believe our deep industry expertise with clean energy and carbon capture technologies coupled with our long history of traditional energy sources positions us well to deliver environmentally conscious technology driven solutions to our global customers.

Kenneth Young: And lastly, as always, I would like to recognize the efforts of our dedicated and talented employees around the world.

Speaker Change: We have a great team at BNW that's focused on working hard

Kenneth Young: for our shareholders and help meet the world's need for clean, reliable energy now and in the future.

Kenneth Young: I would also like to thank our global customer base and suppliers for their continued support of Babcock & Wilcox. Looking ahead, we are excited about leveraging our leading power and environmental solutions to capitalize on the strong growth prospects ahead for the remainder of 2024 and beyond. And we remain focused on being a leader, an innovator, and an advocate for a clean energy future. I will now turn the call back over to Micaiah, who will assist us with your questions. Thank you. We will now begin the question.

Kenneth Young: I would also like to thank our global customer base and suppliers for their continued support of Babcock & Wilcox, and looking forward, we are excited about leveraging our leading power in environmental solutions to capitalize on the strong growth prospects ahead for the remainder of 2024 and beyond.

Kenneth Young: And we remain focused on being a leader, an innovator, and an advocate for a clean energy future.

Speaker Change: I will now turn the call back over to Makayat. We'll assist this with your questions, Makayat.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your headset before asking a question. The first question comes from the line of Rob Brown with Lake Street Capital Markets. You may proceed, Rob.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press star 1.

Operator: As a reminder, if you are using a speaker phone, please remember to pick up your headset before acting a question. The first question comes from the mom of Rob Brown with Lake Street Capital Markets. You may proceed Rob.

Operator: www.TheBusinessProfessor.com

Robert Brown: My first question is on the Bright Loop project in Ohio. You've got an off-ticket agreement there and some financing. Could you give us a sense of how that ramps up and how the economic model works for you? Yeah.

Robert Brown: [inaudible]

Rob Brown: First question is on the Bright Loop project in Ohio.

Rob Brown: You've got an off-ticket agreement there and some financing. Can you give us a sense on how that ramps and how the economic...

Kenneth Young: Yeah, basically, there'll be a construction period to build the project, you know, over the next 12 to 18 months on the project. So the primary part of the financing will be used to offset a significant amount of cash being borne by the company during the construction period. And then there will be a leaseback of the site during the offtake period when revenues are being produced off the offtake agreement. So over the 10-year period, that cash and revenue offset each other from that standpoint.

Speaker Change: and Little Works for you.

Kenneth Young: Yeah, so basically there will be a construction period to build the project, you know, over the next 12 to 18 months.

Kenneth Young: On the projects of the primary part of the financing will be used to offset a significant amount of cash being borne by the company for the construction period.

Kenneth Young: And then there will be a leaseback of the site during the off-take period when revenues are being produced off the off-take agreement. So over the 10-year period, that cash and revenue offset each other on that standpoint. So it's... Thank you.

Kenneth Young: It is a great way for us to build a first commercial project without using a significant amount of our own capital to build a commercial demonstration plant. So, pretty excited both about the financing opportunity and also the offtake agreement to buy the hydrogen during that period.

Kenneth Young: It is a great way for us to build a first commercial project without using a significant amount of our own capital to build a commercial demonstration plant. So pretty excited both on the financing opportunity and also the offtake agreement to buy the hydrogen during that period.

Kenneth Young: Great. And then some of the larger projects that you have under development, I know you talked about the engineering work. Could you give us a sense of how those progress, and I think you talked about expectations for this year, getting some of those to move forward as well, but just an update on how the one... Baton Rouge Projector. Yeah, we're

Kenneth Young: Great, and then some of the larger projects that you have under development I know you talked about the engineering work.

Kenneth Young: Could you give the sense of how those progress and I think you talked about expectations by this year, getting some of those to move forward as well, but just to update on how the Wyoming.

Kenneth Young: Yeah, we're in full engineering mode and working on the Wyoming project right now, and we have been, you know, doing a lot of the on-site engineering works, civil engineering, those type of activities in conjunction with that. We are, as previously stated, working closely with Black Hills Energy on that particular project, who would be the user of the hydrogen as they're working through their rate-based considerations inside Wyoming in parallel.

Kenneth Young: and the Baton Rouge Projects are...

Kenneth Young: coming along. Yeah, we're in full engineering mode and working on the Wyoming project right now, have been doing a lot of the on-site engineering works, civil engineering, those type of activities in conjunction with that.

Kenneth Young: We're up.

Kenneth Young: As previously stated, we're working closely with Black Hills Energy on that particular project who would be the user of the hydrogen as they're working through their rate-based considerations inside Wyoming.

Kenneth Young: So, we continue supporting them in those particular efforts and, you know, anticipate more developments and other activities around that, hopefully later this year that we can put out. On the Baton Rouge project, primarily, we are, although I can't name them public at this point, but we, since we are under an NDA, are in full discussions with the developer and investor on the initial 15-ton per day project that we contemplate there, with the follow-on up to 200 tons per day at that particular site.

Kenneth Young: So we continue supporting them on those particular efforts and anticipate more developments and other activities around that hopefully later this year.

Kenneth Young: that we can put out. On the Baton Rouge project, primarily we are, although I can't name them public at this point, but we, since we are under NDA, but we are in...

Kenneth Young: full discussions with the developer and investor in the initial 15 ton per day project that we contemplate there with the follow-on up to 200 tons per day in that particular site. And so we're

Kenneth Young: And so, we're in full discussions with them on moving that project forward. So, too early to announce, you know, any certainty on the developments of that investment coming in, but other than that, we're in full discussions and considerations right now for both the 15 and the 200-ton per day projects in Baton Rouge. And that, again, would be using biomass in that particular case.

Kenneth Young: Word in full discussions with them on moving that project forward. So, too early to enact any certainty on the developments of that investment coming in, but other than that, we're in full discussions.

Kenneth Young: considerations right now for both the 15 and the 200 ton per day projects in Baton Rouge and that again that would be using biomass in that particular case.

Operator: Okay, great. Thank you. Congratulations on the progress. I'll turn it over to you.

Operator: Okay, great. Thank you. Congratulations on all the progress. I'll turn it over.

Alexander Rygiel: Thank you, the next question from the law of Alex Rygiel would be Rally, you may receive.

Speaker Change: Thank you. The next question is from the line of Alex Rygiel with B Raleigh. You may proceed.

Alexander Rygiel: Thanks. Good evening, guys. There are a lot of great things here. Hey, how are you doing?

Alex Rygiel: Thanks for the evening guys, a lot of great things here.

Kenneth Young: So a couple of questions first, Kenny, has a release to your guidance. It's great to hear that you're reiterating your guidance; you read the dog guidance. I guess my question is, this sort of..., kind of what's at risk there? Or maybe what portion of that guidance, if any at all, is not yet in backlog? And or What are some variables that can help you to be, you know, near the low end or the high end of that range?

Speaker Change: Today I will teach you how to do it.

Doug: Doug, couple questions first at Kenny has a release to your guidance. It's great to hear that you're reiterating your guidance, you read the dog guidance. I guess my question is the sort of...

Kenneth Young: Kind of what's at risk there or maybe what portion of that guidance, if any at all, is not yet in backlog and or what are some variables that can help you to be, you know, near the low end or the high end of that range?

Kenneth Young: Yeah, it's mainly timing on primarily, I would say, a couple of the larger projects, gas diversion projects that we announced previously. And it's really the timing of the exact starting point of some of those activities. And, you know, like anything on our projects, especially larger projects, our revenue and margin are all based on costs and recognition, so it's just the timeliness of how we get orders through on some of those projects and just the timing of that, that could get, you know, the higher end of the range of the lower end of the range on that. So that's that's always our challenge, but those are the main considerations there.

Kenneth Young: Yeah, it's mainly timing on primarily, I would say, a couple of the larger projects, gas conversion projects, that we, you know, announced previously, and it's just, it's really the timing of the exact starting point of some of those activities.

Kenneth Young: And, you know, like anything on our on our projects, especially larger projects, you know, our revenue and margin is all based on cost.

Kenneth Young: recognition. So it's just the timeliness of how we get orders through and on some of those projects and just the timing of that, that could get, you know, the higher end of the range or the lower end of the range on that. So that's always our challenge. But

Kenneth Young: Those are the main considerations there.

Speaker Change: Texas, and then great to see your net debt down here. Any update on the timing of additional not going to asset sales?

Kenneth Young: Other than that, we're just in discussions, and those continue on, and I would leave it at that for now, obviously, since we're in discussions and negotiations on those, but do anticipate one or two, yes, this year on that. And, you know, it's probably the most important thing.

Kenneth Young: We're other than we're just in discussions and those continue on and anticipate.

Kenneth Young: Hopefully, one or two, yet this year, I would leave it at that for now. Obviously, since we're in discussions and negotiations on those, but we didn't do anticipate one or two, yet this year on that. That's probably what I want to get into it on the call.

Kenneth Young: and then coming back to the Ohio Bright New Product. Can you help me to understand that, at least again? How much capital is being able to be put up on the front end there, or construction? Exactly what's the time frame, or when does that sort of get paid back?

Kenneth Young: Excellent. And then coming back to

Kenneth Young: The Ohio Bright New Project. Can you help me to understand that at least back again, how much capital is being able to have to put up on the front end there for construction and exactly what's the time frame or when does that sort of just pay back and so on?

Kenneth Young: Yeah, I think, and we can go into it more, but go ahead, Lou. Go ahead. No, go ahead, Kenny, and then I'll follow up.

Kenneth Young: Yeah, I think, and Lou can go into it more, but go ahead, Lou. Go ahead. No, go ahead, Kenny, and then I'll follow up.

Kenneth Young: Okay, so what we're anticipating means the total project cost to build a project will be, you know, in the roughly 50-60 million range. I should say that.

Kenneth Young: Okay, so what we're anticipating, I mean the total project to build a project will be, you know, in the roughly 50-60 million range.

Kenneth Young: I should say that was just called 65 million range to build out that particular project is what we're anticipating.

Lou: Initially, we'll probably, you know, have, I don't know, roughly 5 to 10 is a mission. We're spending about 10 to a year at that thing in Blight Loop. Some of that investment goes towards that project.

Lou: It's not duplicative or incremental on top of that and just want to add that. So, you know, about five to ten would come from BMW and that and the rest would be fine-in.

Kenneth Young: Out to do the construction portion of that particular project, and then the revenues for the hydrogen would start with, you know, the first state of producing hydrogen, which can we do anticipate, you know, the end of 25, really 26, as we start to place some of the least long lead time orders for equipment and other aspects associated with that particular project. Overall, so let's, let's, Lou, I don't know if you want to add to that, but that's what we're about to, how I think about it in terms of it being W's portion of it.

Kenneth Young: Out to do the construction portion of that particular project and then the the revenues For the hydrogen would start With you know the first day that we're producing hydrogen which can we do anticipate you know the end of 25 really 26

Kenneth Young: as we start to place some of the long lead time orders for equipment and other aspects associated with that particular project.

Kenneth Young: Over all, so that's Louis, I don't know if you want to add to that, but that's a reporter about it to how I think about it in terms of it being W's portion of it. So I think we're excited about it because...

Lou: We need to have that commercial demonstration out, and this is actually a much more affordable way for us to do that.

Lou: to get that first commercial project off the ground so that we can increase our TRL level. And what we're excited about, normally, we would have to invest in that project ourselves and build it ourselves, almost like an R&D facility. In this particular case, we're doing that in a commercial environment where we're receiving revenues to cover the costs associated with that based on the revenues of the hydrogen that will be...

Kenneth Young: So we think it's a great way for us to get this off the ground, a great way to do it with a low amount of cash requirements by B&W, and we get to offset the financing cost of that over the long-term period versus the taker, if they tender, offtake agreement that's for up to five times a day. So that part seems like a win-win for us. But Lou, if you want to add some color, to amplify it a little bit. It's really just a...

Lou: selling to the offtake or through the offtake agreement itself. So we think it's a great way for us to get this off the ground.

Lou: A great way to do it with a low amount of cash requirements by BNW, and we get to offset the financing cost of that over the...

Kenneth Young: Long-term period versus the take or its tender off-take agreement that's up for up to five times a day. So that part seems like a win went for us, but if you want to add some color.

Louis Salamone: Just to amplify a little bit, Alex, it's really a two-phase process with one entity financing. One will be the construction phase, where we'll have your basic construction loan for the construction period, and then there will be what we call an off-take period to go with the off-take once the construction is completed, where we'll have what would be akin to a long-term lease for the remainder of the project to amortize out those construction costs that we incur.

Louis Salamone: It's just to amplify a little bit, Alex.

Louis Salamone: It's really a two-phase process.

Louis Salamone: with one entity.

Louis Salamone: financing. One will be the construction phase.

Louis Salamone: where we'll have, you know, your basic construction loan for the construction period.

Louis Salamone: And then there will be what we call an off-take period to go with the off-take once the construction is completed, where we'll have what would be akin to a long-term lease.

Speaker Change: for the remainder of the amortized out those construction costs that we incur. So, as Kenny said, for us, it's a really good...

Louis Salamone: So, as Kenny said, for us, it's a really good cash flow project because we're able to keep cash on our balance sheet, use the construction financing, and then use the lease financing when the off-take agreement starts producing revenue.

Louis Salamone: Cash Flow Project because we're able to keep cash on our balance sheet, use the construction financing, and then use the lease financing when the off-state agreement starts producing revenue.

Alex: That's great. Thank you.

Operator: Thank you. There are currently no questions in the register, so at this time, I'd like to pass the conference back over to the measurement team for any further remarks.

Speaker Change: Thank you. There are currently no questions registered, so at this time I'll like to pass the conference back over to the measurement team for any further remarks.

Kenneth Young: Thank you, Micaiah. And thanks, everyone, for joining us. That concludes our conference call. A replay will be available for a limited time on our website later today.

Kenneth Young: Thank you, Makaya, and thanks everyone for joining us. That concludes our conference call. A replay will be available for a limited time on our website later today.

Operator: Once again, thank you all for listening to today's call. This will now conclude today's conference call. We appreciate your participation. We hope you have a wonderful day, and you may now disconnect.

Operator: Once again, thank you all for attending today's call. This will now conclude today's conference call. We appreciate your participation. We hope you have a wonderful day and you may now disconnect.

Speaker Change: www.thevenusproject.com www.thevenusproject.com

Kenneth Young: Texlant, and then great to see you netbed down here. Any update on the timing of additional

Kenneth Young: I was just called 60 to 55 million range to build out that particular project is what we're anticipating. Initially, we'll probably, you know, have, I don't know, roughly 5 to 10 is a mission we're spending about 10 a year on that, that's taking a flight loop, some of that investment goes towards that project. So it's not duplicative or incremental on top of that, and I just want to add that. So you know, about 5 to 10 would come from BMW and that and the rest would be fine.

Louis Salamone: Primarily due to the completion of that previously mentioned large project. I'll now turn to our balance sheet, cash flow, and liquidity. Total debt at June 30, 2024 was $476.8 million, and the company had cash, cash equivalents, and restricted cash of $202.1 million. As Kenny previously mentioned, we've significantly closed out the legacy solar projects and anticipate cash use being neutral to positive going forward. As previously noted, we completed the sale of a Denmark-based subsidiary during the quarter, which improved our balance sheet and demonstrated our ability to execute against our state of strategy to sell certain non-strategic business.

Kenneth Young: However, customer demand for our thermal segment, products, and services remains strong, as demonstrated by booking in the first half of 2024 that exceeded booking in the same period of 2023. And we anticipate a strong Q4 based on previously announced gas conversion projects and recent parts in service booking. We continue to see strong underlying industry trends with expanding global demand for clean power production and energy security and a global pipeline of identified project opportunities of over $9 billion, which includes over $1.5 billion in right-loop and climate-right opportunities, along

Louis Salamone: This was primarily due to the reduction in reliance on low margin new build projects and a decrease in selling and general administrative expenses and cost saving initiatives related to the restructuring of our renewable business. Within Babcock & Wilcox's environmental segment, revenues were $56.2 million for the second quarter.

Kenneth Young: We continue to believe our deep industry expertise with clean energy and carbon capture technologies, coupled with our long history of traditional energy sources, positions us well to deliver environmentally conscious technology-driven solutions to our global customers. And lastly, as always, I would like to recognize the efforts of our dedicated and talented employees around the world. We have a great team at BMW that's focused on working hard and safely to deliver consistent, profitable growth for our shareholders and help meet the world's need for clean, reliable energy now and in the future.

Kenneth Young: So I think we're excited about it because... We need to have that commercial demonstration out, and this is actually a much more affordable way for us to do that, to get that first commercial project off the ground so that we can increase our TRL level. And what we're excited about is that, normally, we would have to invest in that project ourselves and build it ourselves, almost like an R&D facility. In this particular case, we're doing that in a commercial environment where we're receiving revenues to cover the cost associated with that based on the revenues of the hydrogen that we'll be selling to the offtaker or through the offtake agreement itself.

Kenneth Young: We're registering 100 basis points of improvement compared to the second quarter of 2023. Our margins are benefiting from the shift to reduce reliance on high-interest, low-margin, new-build projects. Our margins have been further supported by strength across our aftermarket parts and services businesses. From a segment perspective, our environmental business was a standout performer during the second quarter, with revenue increasing 15% compared to the second quarter of 2023 and margins that continue to expand, which drove a 97% increase in total adjusted EBITDA compared to the second quarter of 2023.