Q3 2024 Babcock & Wilcox Enterprises Inc Earnings Call
Importantly, we remain in negotiations related to the sale of other non strategic assets and are evaluating further debt refinancing with proceeds is expected to reduce or refinance our debt obligations strengthen our balance sheet and to support growth working capital or growth opportunities.
We continued to make progress on our cost reduction efforts during the third quarter, achieving $26 5 million in cost savings to date as we work towards the target of over 30 million in annualized.
Can you higher margins in the future.
Speaker Change: I'd like to now discuss our strong third quarter operating performance and we saw a meaningful increase in our adjusted EBITDA, which came in at $22 3 million this quarter compared to $20 million in the third quarter of 2023.
Speaker Change: This year over year improvement was even more significant after excluding the impact of our recently diverse.
It's scale and further expanding our suite of carbon capture solutions.
Speaker Change: I'll now turn the call over to Lou who will discuss the financial details of the third quarter of 2020 for Blue. Thanks, Kenny I am pleased to review our third quarter results further details on which can be found in the 10-Q that was it is on file with the SEC.
Speaker Change: Our third quarter consolidated revenues were $209 9 million, which is a decrease compared to the third quarter of 2023.
Speaker Change: This decrease is primarily attributable to the inclusion in 2023 of $7 4 million of revenues of the BW Rs asset that was divested in the second quarter of 2024.
When <unk> is excluded from the 2023 revenues they increased by our revenues increased in 2024 by $4 7 million, which is driven by growth in our domestic and European environmental businesses as well as the thermal segment benefits related to a large natural gas project and increased volume in <unk>.
Speaker Change: Parks during the year.
We saw an operating loss in the third quarter of 2024 of $1 4 million compared to operating income of $5 5 million in the third quarter of 2023.
Speaker Change: This loss was primarily attributable to the previously mentioned divestiture of VW Rs.
Speaker Change: As well as 121 time charges of $5 8 million noncash impairment related to the sale of our <unk> subsidiary and a $4 9 million settlement to exit the loss generating long term maintenance contract, which Kenny mentioned earlier.
Speaker Change: Our adjusted EBITDA, excluding bright loop in climate Bright expenses was $23 3 million, which is ahead of expectations for the quarter.
Speaker Change: Implied bookings in the third quarter of 2024, or $810 5 million and ending implied backlog was $628 2 million.
Speaker Change: In the third quarter of 2024, we had a loss per share of <unk> 10 cents as compared to a loss per share of $1 35, and the 33rd quarter of 2023.
Speaker Change: I'll now turn to our third quarter segment results.
Speaker Change: Within our Bob Babcock and Wilcox renewable segment revenues were $38 2 million for the third quarter 2024, which is a decrease compared to the third quarter of 2023. This decrease in revenue was primarily due to the divestiture of <unk>, which we previously mentioned.
Speaker Change: Adjusted EBITDA in the third quarter of 2024 was $5 million, a decrease of 51% compared to the $10 1 million in the third quarter of 2023.
Speaker Change: Again, the third quarter of 2023 included $7 4 million from BW Rs and this was partially offset by favorable project closeouts in the current quarter.
Speaker Change: Bookings during the third quarter of 2024 exceeded bookings in the same period of 2023 with total bookings increasing to $40 8 million in the third quarter of 2024 from $32 7 million in the third quarter of 2023.
Speaker Change: Within the Babcock and Wilcox Environmental segment revenues were $56 6 million in the third quarter of 2024, which is an increase of 22% compared to the $46 4 million in the third quarter of 2023.
Speaker Change: This increase was primarily driven by growth of our domestic industrial and electrostatic precipitated business. In addition to growth in our European environmental business.
Speaker Change: Adjusted EBITDA was $4 7 million for the quarter, which is favorable to our forecast despite being a slight decrease compared to the $5 million in the same period last year.
Speaker Change: Turning to our Babcock and Wilcox thermal segment revenues were $119 9 million in the third quarter of 2024, which is an increase of 12% compared to the third quarter of 2023.
Speaker Change: The revenue increase was primarily the result of a large natural gas project, which accounted for $4 2 million and an increased volume of parks, which accounted for $4 8 million of the increase.
Speaker Change: Adjusted EBITDA in the third quarter of 2024 was $18 4 million, an increase of $11 3 million in the third quarter of 2023.
Speaker Change: This was primarily driven by revenue drivers previously mentioned and by favorable project margins in our construction business.
Speaker Change: I'll now turn to our balance sheet cash flow and liquidity total debt at September 32024 was $475 4 million and the company had cash cash equivalents and restricted cash balances of $127 9 million.
Speaker Change: As noted previously we completed the sale of our spec and GMA businesses for net proceeds of $33 7 million during the quarter, which improved our balance sheet and demonstrated our ability to continue to execute against our stated strategy to sell certain non strategic businesses. Additionally.
Speaker Change: As previously announced we are initiating processes to sell certain other non strategic businesses and assets. The proceeds of these sales will be used primarily to pay down existing debt and for working capital I'll now turn the call back over to Kenny.
Kenny: Thanks Lou.
Kenny: Well in closing.
Kenny: We continued to execute against our strategic plan and remain intently focused on driving further improvements in our balance sheet. As we look ahead to the fourth quarter, we expect seasonal strong results and operating momentum driven by our thermal and environmental segments to continue with increased services and project schedules.
Kenny: From our customers our global pipeline of over 9 billion of identified project opportunities remains healthy across all our business segments.
Our divestitures and we anticipate prospects for new bookings and stronger financial performance through the fourth quarter and heading into 2025, we continue to believe our deep industry expertise with clean energy and carbon capture technologies, coupled with our long history in traditional energy sources positions us well to deliver.
Kenny: Liver environmentally conscious technology, driven solutions to our global customers.
Kenny: I would like to wrap up.
Kenny: Today by recognizing and thanking our customers as well as our employees who work hard every day in a safe way to meet the challenges of energy demand around the world and looking forward. We remain excited about the unique position we hold to provide our diverse portfolio of technologies to meet the increasing base.
Speaker Change: <unk> generation demand in North America, and across the globe and support the world's need for proven clean energy solutions, both now and in the future with that I'll turn the call back over to Victoria, who can help.
Victoria: With our questions Victoria.
Of course.
Victoria: We will now begin the question answer session.
Victoria: Our first question today comes from the line of Alex Rygiel with B Riley.
Alex Rygiel: Your line is now open thanks, good evening, Thanks, Good evening, gentlemen, nice quarter.
Speaker Change: Thanks Ali couple of quick questions.
First as it relates to your EBITDA guidance 91 to 95, recognizing that's adjusted to exclude some of these divestitures can you talk to that new guidance range relative to maybe past guidance and where your sort of base business was adjusted if at all.
Speaker Change: Yes, if you I mean, if you look past the guidance I think we're at 105 to 115, if we if we bridge.
Speaker Change: The big.
Speaker Change: <unk> results for the quarter and some various expenses associated with that particular piece. It takes you down to that.
Speaker Change: 90 $495 million scenario. So we actually just reset based on this big primarily based on the <unk> and <unk> be divestitures that were just completed for the quarter in that area and then.
Speaker Change: That's the primary aspect around it so the rest of it would be just noise, but it bridges the gap between the new target in the old target.
Speaker Change: Yes.
Speaker Change: Very helpful and then.
Speaker Change: The 12 to 15 active feed studies.
Over $1 billion.
Speaker Change: 100 traditional conversion rate on these and what portion of this is kind of already in black backlog or implied backlog.
Speaker Change: So the most of the feed studies would be those are smaller right. So the typical revenue in feed study can vary from $5 million too.
Speaker Change: Two or $3 million, depending on the size of the feed studies. So they are not material as it relates to revenue or a backlog standpoint.
Speaker Change: On it but once we're engaged.
Speaker Change: <unk> studied the conversion rate usually is pretty high.
Speaker Change: As you can imagine right customers are not necessarily hiring us to do a full range of feed study and then with no follow on but.
Speaker Change: Roughly you can say probably on a.
Speaker Change: 40, or 50% conversion rate on a on an active feed study at any given time, so would be converted.
Speaker Change: There could be a timing element could be.
Speaker Change: About a year it could be two or three years before they're converted into active projects from there but the.
Speaker Change: The exciting part for US and this is something that we changed a lot of our I mean, we've really driven to obtain more feed study to leverage the strong engineering position. We have for these clients to move into carbon capture and obviously bright loop in other areas around it. So the number of feed studies are exciting for us and I think it's also reflective that we're up to.
Speaker Change: <unk> feed studies on a lot of these newer technologies, including bright loop. So we've got a couple active bright with feed studies right now with.
Speaker Change: Clients up in Canada, as I mentioned in and elsewhere that are outside of the ones that we've been developing and so we think that's a pretty exciting development for us.
Speaker Change: Is the concept of utilizing at Brightcove technology, starting to really take hold I would say.
And some of these larger industrial clients as they're looking at alternative ways to produce energy going forward.
Speaker Change: Yes.
Speaker Change: That's great I'll get back into queue. Thank you.
Speaker Change: Thanks, Alex.
Speaker Change: Thank you for your question.
Speaker Change: Our next question comes from the line of Erin <unk> with Craig Hallum.
Speaker Change: Your line is now open.
Speaker Change: Yes, Hi, Kenny and Lou Thanks for taking the questions.
First good to see the coal to gas order full notice to proceed can you just maybe give a little bit of detail on timing and just kind of the cadence of that revenue over the next couple of years and then just talk about the pipeline there I mean are there.
Speaker Change: <unk> studies for that or is there a good amount of work kind of behind that with other other conversions.
Speaker Change: Let me answer the latter first yes. There is we have several actually prospects in the pipeline on natural gas conversions, but not all that big obviously, but.
Speaker Change: Out there, but we do have a number of those.
Speaker Change: Hate to give a number but let's just say greater than a dozen that we're looking at.
Speaker Change: Again, those would vary in size.
Speaker Change: On opportunities, but a lot of the utilities are looking long term around either natural gas or <unk>.
Speaker Change: And you would have using continuing to use coal as it relates to Baseload generation here in the U S and we're seeing that continue on.
Speaker Change: As far as the revenue goes of the on the natural gas conversion project on that.
Speaker Change: Obviously, we just received the full notice to proceed thats why we are announcing it today on the call and excited about that.
Speaker Change: But revenues would really start to kick in in 'twenty, five, but also 26 and a little under 27 as well on that so it will be spread over.
Speaker Change: That longer period of time on it so but we're obviously excited to get the full notice to finally, the full notice to proceed came in a little longer than we expected but.
Speaker Change: We have it now so it is going to move into full backlog here I guess in November and we'll start the full work on it here this quarter.
Speaker Change: Alright, I appreciate the color there and then just maybe on the balance sheet can you talk about where kind of letters of credit stand today and kind of the timeline for those rolling off and freeing up some liquidity and then just on free cash flow.
Speaker Change: Outlook, there as we head into 2025.
Speaker Change: Yes, good letters of credit right now are in the $80 million range.
They will roll off over the next year and a half now what will happen.
Speaker Change: Not to the same extent, but new letters of credit will come in as we win new business, but.
Speaker Change: But we've been able to decrease the percentage of letter of credits that are required.
Speaker Change: And then on the second part of the question Aaron was.
Speaker Change: Yes, just kind of thoughts on free cash flow conversion as we look towards.
Speaker Change: Thinking about what 2025 can look like.
Speaker Change: Yes, I think.
Speaker Change: Free cash flow conversion.
Speaker Change: As we walk through the EBITDA.
Speaker Change: There is the.
Speaker Change: Interest expense is in the $50 million range, including the.
Speaker Change: The.
Speaker Change: The dividends on the restrict on the preferred stock so youre probably talking of.
Speaker Change: 95, plus 100 to 95 of EBITDA.
Speaker Change: Talking about 40% conversion rate on that after after.
Speaker Change: Interest and the Brighton cost of about capitalized costs of about $10 million.
Speaker Change: Great.
Speaker Change: We should add that the so to.
Speaker Change: Big G, maybe obviously thats a fourth quarter.
Speaker Change: Impact to the company, but there is probably roughly $10 million of letters of credit that will go away over time, it will take a few months to.
Speaker Change: To widen those offer convert those but the new owner will take over those letter of credits. So we will reduce the letters of credit by that amount over the next month or two so that 80 that I quoted is really when you take into account the sales.
Speaker Change: Tenant will roll off is really 70, and as I said that will decrease and some will come back as we win new business.
Speaker Change: Alright that makes sense appreciate the color I'll turn it over.
Speaker Change: Thanks Sharon.
Speaker Change: Thank you for your question.
Speaker Change: Our next question comes from the line of Rob Brown with Lake Street capital markets.
Speaker Change: Your line is now open.
Speaker Change: Hi, good afternoon.
Speaker Change: Hey, Rob.
Speaker Change: First question is on the Maslin project I think you talked about some long lead items.
Speaker Change: When does that start to ramp in forwarding.
Speaker Change: Tremendous again, when you start to generate.
Speaker Change: Our operate that facility.
Speaker Change: So those items are in full order now obviously some of that is in material long lead time orders like air compressors and other aspects some of that is with outside engineering firms.
Speaker Change: Some of the requirements for the civil construction, drawing diagrams that we've got to submit as well too to along with the permits on that piece the real ramp up we will start to.
Occur probably early Q2 next year I mean on the ramp up of the cost sides of the construction element.
And then Q3 will move into a heavy period Q4.
Speaker Change: And then the following quarter, we're kind of winding down.
Speaker Change: Right now were.
Speaker Change: Targeting.
Speaker Change: To be able to produce hydrogen by early 2006 and the early early part of 'twenty six.
Speaker Change: Then that would go into full commercial state somewhere in Q2 of 'twenty around Q2 of 2006.
Speaker Change: With and then.
Speaker Change: We will begin obviously selling a hydrogen as soon as it's ready and full commercial state, but the production plan of hydrogen which is the critical part of this.
Speaker Change: Should be in the early part of 2026, that's what we're targeting right now.
Speaker Change: I think.
Rob Brown: Positively just add to that because well go ahead, Rob sorry.
Rob Brown: Sure.
Speaker Change: Yes go ahead I was going to.
Speaker Change: Talk a little bit about the west, Virginia, kind, a loan guarantee or loan I guess alone.
Speaker Change: What sort of project that that would be for and maybe the other dependencies there to get that.
Speaker Change: <unk>.
Speaker Change: Yes so.
Speaker Change: We should have that signed here in the next.
Speaker Change: Coming day or two or three on that we've reached full agreement with the state economic group and they've been wonderful to work with very supportive of that project.
Speaker Change: So the plan is we will target.
A small small to midsize bright loop facility that would ramp up by 2030 is one that has to be in operation.
And there is.
Speaker Change: Tied to that forgivable loan is really the key caveat. There is a limited number of on site jobs that will come.
Speaker Change: Create that will obviously be part of the construction aspect of the project and then the ongoing operations of that particular site for that project. So.
Speaker Change: The target is to have that project or that plant up and running by 2030 on that so that's.
Speaker Change: That's what we've got contemplated in the agreement.
Speaker Change: Okay. Thank you I'll turn it over.
Speaker Change: Thanks, Rob Thank you for your questions Rob.
Speaker Change: There are no additional questions at this time.
Speaker Change: That is the conclusion of today's call. Thank you for your participation and join the rest of your day.
Speaker Change: Okay.
Speaker Change: Yes.