Q4 2024 Babcock & Wilcox Enterprises Inc Earnings Call
and David
Thank you for your time, and I'll see you in the next video.
Speaker Change: Good afternoon. Thank you for attending the Babcock & Wilcox Enterprise's fourth quarter 2024 conference call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would like to turn the conference over to your host, Jared Brooks, B&W's Director of Communications. Thank you. You may proceed with this works.
Speaker Change: Thank you, Cameron, and thanks to everyone for joining us on Babcock & Wilcox Enterprises 4th quarter and 4th year 2024 earnings conference call. I'm Sharyn Brooks, Director of Communications and Marketing.
Kenny Young: Joining the call today are Kenny Young, BNW's Chairman and Chief Executive Officer and Cameron Frymeier, to Financial Officer to discuss our fourth quarter results.
Kenny Young: During this call, certain statements we make will be forward-looking. These statements are subject to risks and uncertainties, including those that forth in our safe harbor provision for forward-looking statements that can be found at the end of our earnings press release and in our annual report on Form 10K that has been filed with the SEC today.
Kenny Young: Additionally, except as required by law, we undertake no obligation to update any forward-looking statement.
Kenny Young: We also provide non-GAAP information, including regarding certain of our historical and targeted results to supplement the results provided in accordance with GAP.
Kenny Young: This information should not be considered superior to or as a substitute for the comparable
Kenny Young: A reconciliation of historical non-GAAP measures can be found in our earnings release published this afternoon and in our company overview presentation, filed on Form 8K today and posted on the Investor Relations section of our website at Babcock.com. I will now turn the call over to Kenny.
Kenny Young: Thanks, Sharon. We're good afternoon everyone and thanks for joining us on our fourth quarter and full year in 2024 earnings call.
Kenny Young: In 2024, we took specific actions that align with our business strategy that also paved the way to refinance or reduce our current debt obligations in 2025. With intent, we are shifting our focus on continued operations toward greater predictable revenues and margins, particularly from our thermal operations.
Kenny Young: based on tail ends of increased demand from the utility and industrial power generation sectors. We also see new biomass energy plants becoming a reality in North America and anticipate possible bookings later this year.
Kenny Young: We saw improvements across many of our top metrics during the fourth quarter of 2024, including improvements in revenues, operating income, and adjusted EBITDA when compared to 2023.
Kenny Young: Operating income for continued operations increased to 11.6 million in the 4th quarter of 2024.
compared to operating loss from continuing operations of 3.3.
Kenny Young: in the fourth quarter at 2023, reflecting the continued strong production of our core businesses.
Kenny Young: Adjusted EBITF from continuing operations was 24.0 million in the fourth quarter of 2024 which was a 55% year-over-year increase compared to the fourth quarter of 2023.
Kenny Young: Our margins are benefiting from our strategic shift to reduce reliance on high interest low-margined new build projects. And after taking into account the recent de-vestitures, we have revised our full-year 2025 Ubit of Target range.
Kenny Young: to be 70 to 85 million in excluding bright loop and chronic bright expenses.
Kenny Young: Importantly, we continue to invest in our Bright Loop opportunities and continue to anticipate spending in the range of 10 to 15 million in 2025 on our Bright Loop project and technology advancement, including CAPEX, which is a part from the masculine construction. [inaudible]
[inaudible]
Kenny Young: Transitioning to our full-year financial performance on a continuing operation space
Kenny Young: Revenues remained stable across the year with the largest positive impact seen in our environmental segment.
Kenny Young: The strongest performance across 2024 came in our bookings and backlog numbers. We continued to see strong demand for our diverse portfolio of technology, which is driving our increased bookings of approximately $900 million in 2024, and a backlog now of over $540 million.
Kenny Young: We entered 2025.
Kenny Young: Specifically in 2024, we saw a year over year increase of 39% and our bookings at 47% in our backlog.
Kenny Young: We believe that these results are for our strategic approach, while underpinning our pipeline and outlook for sustained growth in 2025 and beyond.
Kenny Young: We believe the increasing need for power and electricity fueled by demand from AI data centers electric vehicles than expanding economies will be key drivers for growth across our broad range of technologies we.
Kenny Young: We're seeing utility and industrial clients, including the oil and gas sector, continuing to increase capacity utilizing our core technologies, while evaluating further power generation augmentation through biomass hydrogen and natural gas.
Kenny Young: We expect <unk> to increase in the coming years as the amount of front end engineering design or feed.
Kenny Young: <unk> has grown today, we have 12% to 15 active feed studies that represent potential projects of over $1 billion in revenues in our pipeline.
Kenny Young: We believe that these expected industry tailwind to provide a strong foundation for <unk> to grow in 2025 and beyond as we continue to drive for higher margins and improved cash flows.
Kenny Young: Overall, our results in the fourth quarter and across 2024 reflects the strong demand for our diverse portfolio.
Kenny Young: That support the generation of efficient and sustainable energy.
Garbus fuel source BMW has developed a strong foundation to capitalize on the continued growth in natural gas.
Kenny Young: <unk> environmental solutions carbon capture and clean energy opportunities globally with utility and industrial customers.
Kenny Young: Our investments across our climate right suite of de Carbonization technology to support the worlds energy transition are progressing well and we're making steady progress on our bright with projects in Massillon, Ohio with a target of producing hydrogen by early 2026, notably we also recently announced a $10 million in funding for the.
Kenny Young: The development of a bright blue hydrogen production and carbon capture facility in Mason County, West Virginia.
Kenny Young: We remain fully committed to expanding our bright loop commercial activities in the years ahead with targeted bookings of approximately $1 billion by 2028, which represents less than 1% of the estimated global market for hydrogen production.
Speaker Change: Then Bryan look it's been extremely exciting to watch our team advanced the engineering process and the business towards deploying these technologies at scale and further expanding our suite of carbon capture solutions.
Speaker Change: During 2024, we made further progress on our stated strategy to divest non strategic assets to improve our balance sheet.
Speaker Change: Boyd internationally large newbuild projects and reduced associated corporate overhead.
Speaker Change: Fortunately, we remain in negotiations related to the sale of other assets and in discussions with new senior lenders and certain bondholders to potentially reduce or refinance our current debt.
Speaker Change: I'll now turn the call over to Cameron to discuss the financial details for the fourth quarter and full year of 2024 results.
Speaker Change: As previously disclosed camera has officially taken over as BMW CFO following Lou Salamone his retirement at the end of 2024.
Speaker Change: To express my sincere gratitude dilutive for his steadfast leadership over the past six years and we wish him all the best in his retirement Cameron has an extensive background in career here at Babcock and Wilcox and I'm excited about moving forward together and with that I'll turn things over to Cameron Cameron. Thanks, Kenny I am pleased to review our full.
Cameron: Year 2024 results in addition to commenting on our financial position entering 2025.
Cameron: For further detail I call your attention to the fact that we filed our 10-K with the SEC. This afternoon, and Ukraine FERC can refer to and for further details beyond what we discussed in this call.
Cameron: On a continuing operations basis, our 2024 consolidated revenues were $717 3 million, which remained stable compared to the revenue levels in the prior year net.
Cameron: Net loss from continuing operations in 2024 was $73 million, which was in a better result, compared to a net loss of continuing operations of $75 8 million in 2023.
Cameron: Primarily related to an overall decrease in our costs and expenses offset partially by higher interest expense and banking fees.
Cameron: In addition, we had a loss per share of <unk>, 96, and 2024 compared to a loss per share of $1 two in 2023.
Cameron: Our adjusted EBITDA from continuing operations was $68 9 million compared to $60 8 million in 2023.
Cameron: Bookings and backlog performed very well across the year with year end bookings coming in at $889 6, Million% to 39% increase from the $638 7 million in 2023, while backlog saw a 47% increase from $368 2 million in 2023 to $540 one.
Cameron: 2024.
Cameron: Big theme that renewable services and volume were reclassified into discontinued operations for 2024 and their results are now reflected in our continuing operations.
Cameron: Our parts and services core business remains strong even with recent coal plant closures and natural gas conversions, our robust backlog of $540 1 million and the strength of our parts business gives us confidence in our full year 2025, adjusted EBITDA target range of 70% to $85 million.
Cameron: I will now turn to our balance sheet and liquidity and comment on our positive outlook for improving cash flow trends in 2025.
Cameron: Total debt at December 31, 2024 was $464 6 million of which $124 million would have come due in January of 2027, but due to the springing maturity related to the $193 million of senior notes is now due in November 2025, and therefore has been classified as.
Cameron: Current in addition, the $193 million of senior notes will be February of 2026 and is within 12 months of the data of our 12 months from the date of our 10-K filing.
Cameron: The company has had cash cash equivalents and restricted cash balance of $127 6 million as of December 31.
Cameron: Given the size of the debt and the classification of the debt now being current this raises a substantial doubt about the company's ability to continue as a going concern. However, it is important to point out that management believes it is taking all the necessary actions to address the current senior notes that would remove the springing date as our senior debt.
Cameron: And if successful we believe these actions will alleviate the going concern.
Cameron: The significant steps, we have taken to strategically realign BMW in recent quarters positions positions us for improved cash flow generation in the years ahead, specifically as Kenny mentioned, we completed the sale of our stake and Jim maybe this is for net proceeds of $33 4 million in the fourth quarter, which improved our balance.
Cameron: Seat and demonstrating our ability to continue to execute against our stated strategy to sell certain assets.
Cameron: The company's core business continues to perform ahead of expectations and we anticipate returning to positive cash flows in 2025 looking forward one of our top priorities is refinancing of our current debt obligations. We are in discussions regarding the refinancing of our debt with key bondholders as well as junior lenders and remain in process to sell.
Cameron: Certain other assets. The proceeds of these sales will be used primarily to pay down existing debt and working capital moving forward I will now turn the call back over to Kenny.
Kenny Young: Thanks, Kamran well in closing we continue to execute against our strategic plan and remain intently focused on driving further improvements in our balance sheet, our global pipeline of over $7 6 billion and identified project opportunities remains healthy across all segments, and we anticipate prospects for new bookings and stronger financial performance.
Cameron: <unk> 2025.
Speaker Change: BMW has deep industry expertise, we are clean energy and carbon capture technologies and with a long history in traditional energy sources and highly experienced and capable employees. We believe we are well positioned to deliver improved value and consistent growth for everyone, including our shareholders.
Speaker Change: I would like to wrap up today by recognizing and thanking our customers as well as our employees, who help meet the challenges of energy demand around the world.
I will now turn the call back over to Cameron, who will help us with a few questions camera.
Yeah.
Speaker Change: 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 of 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.
Speaker Change: As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking a question that we will pause briefly as questions are registered.
Speaker Change: The first question is from the line of Android speed Shiloh with Craig Hallum. You May proceed.
Speaker Change: Yes, Hi, Kenny and Cameron Thanks for taking the questions.
Speaker Change: First for me on the on the guidance a little bit wider range than normal.
Speaker Change: To start the year can you just kind of discuss some of the puts and takes there what might get you to the <unk>.
Speaker Change: Top end versus the low end and just kind of confidence as we head through the year, how that builds, especially considering the new large coal to gas project.
Speaker Change: Yes, I think.
Speaker Change: There's a couple of key metrics in there I mean first of all.
Speaker Change: With the introduction of all of the tariffs that have been recently announced.
Speaker Change: Has some ups and downs as it relates to our business typically the tariffs are all pass through to customers. In this particular case, but really don't know the economic impact of what customers may do either delay the start of a project or delay a project wait for hopefully the tariffs get removed.
Speaker Change: In effect the margin of the project for the customer standpoint. So we just don't know the outcome of that particular piece and how that's going to play out obviously over the course of the year. So we're just keeping an eye on the tariff aspect on on one hand.
Speaker Change: And then obviously, we need to get through some of the debt restructuring and financing which.
Speaker Change: On that particular front.
Speaker Change: To manage through.
Speaker Change: Obviously any impacts that would have particularly on the business if it.
Speaker Change: And from a cost standpoint, so we just need to see how that shakes out. So theres a couple of key areas that we're focused on that that gives us.
Speaker Change: Step back and say lets give a little bit of a range here because we just don't know the impact of some of these particularly of some of the tariffs that are being introduced.
Speaker Change: Right and on that I mean, I know, it's still early and obviously evolving by the day, but.
Speaker Change: What's your kind of current thoughts on are you seeing an impact there any kind of delays in project timing versus how you were maybe thinking about it a quarter or two ago.
Speaker Change: No is the answer is we're in discussions with several customers on several aspects right rehab, we bring in obviously equipment around the world are pieces of some of the projects that we execute on our North America come in from around the World. Obviously, some things get exported out of the U S to other places in the world. So we've got the tariff issue or both.
Speaker Change: So the equation on some projects so too early to know specific project by project, but we are in talks with customers directly about certain projects that we're involved in.
Speaker Change: The potential cost of those tariffs and what the customer may or may not want to do some of those could be minor I mean, it could be 10 or 15000.
Speaker Change: Couple of hundred thousand the other cases, where the tariffs might be more material more into the 5% to $7 million range, depending on the scope and some of the aspects that are being considered there. So we have to work with the customer and see how they want to handle that.
Speaker Change: Obviously, when the when the equipment transfers across the borders the tariffs paid immediately.
Speaker Change: And so that gets reflected back onto the clients in some cases back on the on the.
Speaker Change: Within their customers as well too so all patents.
Speaker Change: Patterns, but no definitive outcome I would say at this time, we're just kind of cautiously in dialogue and discussions.
Speaker Change: As you said it changes daily so who knows and hopefully some of these tariffs get get removed or get reversed in business goes back to normal, but it's just a little too early to know.
Speaker Change: Understood and then I appreciate the update on Massillon.
Speaker Change: Can you maybe give an update on the <unk>.
Speaker Change: Wyoming project, you know kind of where that stands next guideposts, we should kind of look for there is there any impact from kind of IRA and again, just kind of broader federal.
No noise there been update there would be great.
Speaker Change: Yes, no no no no problem.
Speaker Change: It's obviously the from the <unk>.
Array standpoint.
Which is all part of the conversation going on in DC I think the general.
Speaker Change: Feedback that we received as there is some confidence that the IRA credits will move forward.
Speaker Change: Specifically on Wyoming on that project, we are working with Black Hills.
Speaker Change: They're looking to get some financing on this initial project out of the department of energy and in discussions in and around that obviously, some some of the budgetary.
Speaker Change: Items need to settle as it relates to that.
Speaker Change: Well, we feel like we do have congressional support as it relates to that particular project.
Speaker Change: Yeah.
Speaker Change: Appropriations language sitting in the dose that would.
Speaker Change: It helped that particular project just need to get things a little settled and the administration here too to get that pushed forward, but we are working with black hills on that end.
Speaker Change: As they are trying to get this project accomplished as well too. So just working through some of those scenarios still here in the department of energy, but.
Speaker Change: It's all positive we just got to get to the right, yes, rather than a series of well.
Speaker Change: Give us another week year to figure out what's going on so that little caught up in that it's a brand new administration.
Speaker Change: Obviously, they are making a lot of noise in.
Speaker Change: I do it a lot of things in a very short period of time, but they've only been in place for a couple of months. So theres still trying to work through some of the dynamics and how all of that is going to shake out under the loan program and how theyre going to proceed. So we're working with them side by side on that front, so anticipated getting done here, but we're working with them on that Bob.
Speaker Change: Right. Thanks, Thanks for that and then maybe last.
Speaker Change: So the EPA is reconsidering some of the emissions regulations can you just maybe give an update there what that could mean for the thermal business both on existing kind of power generation assets and then some of the coal to gas conversion opportunities you have in the pipeline.
Speaker Change: Yes, no good question.
Speaker Change: We do get asked that a lot.
Speaker Change: By a lot of people is it's kind of interesting I mean, it just high level.
Speaker Change: The general feeling I guess amongst utilities, a little utilities that are solid on fossil fuels in particular coal aspect and they've got new cases around it a lot of those a lot of those are going to stay in place for the foreseeable future.
Speaker Change: Regardless of what the EPA aspects are that are out there I think.
Those clients that are looking at natural gas conversions for the long run are typically we're going to overall operational cost of coal versus natural gas and those conversions tend to have a 20 year capital lifecycle. So.
Speaker Change: We don't we don't typically see a big swing in it.
Speaker Change: Shifting either way based on the regulatory aspect coming out of the EPA.
Speaker Change: Because it's hard for the utilities.
Speaker Change: Obviously re address their capital needs every four years based on.
Speaker Change: Different policy that might be invoked.
Speaker Change: In D. C. So I don't know that it will have a big impact obviously clearly supports the continuation of where coal plants are.
Speaker Change: We will continue on and don't see any changes to those.
Speaker Change: Good.
Speaker Change: It could possibly delay.
So a couple of gas conversions for a few years.
Speaker Change: On that which would have I don't know not a material impact on our business because we were solid either way right. We saw the parts and services into the coal plants, if they convert to natural gas that's fine too as well and we can provide the conversion aspect on it so.
Speaker Change: It's solid for us no matter, which way. They go so it may change the swing in revenues from little bit more call. It a little bit Nevertheless, natural gas depending on that swing, but materially it shouldnt have a big big impact on our business out there.
Speaker Change: Understood. Thanks for taking the questions I will turn it over.
Speaker Change: Yeah. Thanks, Sir.
Speaker Change: The next question is from the line of Rob Brown with Lake Street Capital markets. You May proceed.
Rob Brown: Good afternoon.
Speaker Change: I just brought it up on the.
Speaker Change: How much you had strong bookings in the quarter, but just wanted to get a sense of how the pipelines are shaping up for this year are you are you seeing that kind of bookings muscle continue how should we think about the bookings run rate some of it.
Speaker Change: You have speeded up Rob right at the end of that but I think you were asking how do we kind of see the pipeline shaping up this year.
Speaker Change: And bookings Okay correct.
Speaker Change: Yeah no problem.
Speaker Change: So.
Speaker Change: Briefly mentioned the remarks, I mean overall, we feel pretty solid about our pipeline that have been for quite some time and the opportunities are actually growing and expanding.
Speaker Change: We're starting to.
Speaker Change: As we see some of the feed studies.
Speaker Change: Now transfer and especially on some of the newer.
Speaker Change: Plants, when we're looking at biomass opportunities here in the U S.
Speaker Change: We're still seeing a lot of the data centers.
Speaker Change: The larger ones looking for new power sources to fill the need from the datacenter standpoint, and so we.
Speaker Change: Some of the work there and we do feel like that one or two of those may wind up being booked this year as we go into 'twenty six 'twenty seven.
Speaker Change: We're working on those.
Speaker Change: Hopefully some announcements.
Speaker Change: Over the next few months, but.
Speaker Change: We see one of the two of those at least seem as if theyre going to move towards a progressing to a positive outcome for us and get some bookings in there as well too so.
Speaker Change: We're excited about that.
We continue to ramp up obviously on across the board on thermal aspect we're seeing.
Speaker Change: Opportunities to to help expand some of the plants and reposition some of the plants and other opportunities there.
Speaker Change: Around those as well too so its really on both sides.
Speaker Change: Of that standpoint with that Ted I think as I mentioned in the remarks were.
Speaker Change: We're doing less and less on larger newbuild projects and.
Speaker Change: The.
Speaker Change: The newbuild projects in Europe, and internationally as well, we are going to focus more on parts and services on the international side.
Speaker Change: Reduces our Lcs and other aspects, we think thats the right decision to make and we think there's larger volumes here in North America to pursue so I think we will see a steady aspects of our thermal business.
Speaker Change: He is doing quite well, where we can.
Speaker Change: <unk> continued to expand on the parts and service side are there more on the international basis.
Speaker Change: We see that continuing on.
Speaker Change: For the foreseeable future.
Speaker Change: On that aspect of it and like I mentioned I think we're in a possibly see a couple of biomass and other opportunities emerge here in the United States.
Speaker Change: Toward the later part of the year. So we're excited about those as well.
Speaker Change: Okay, Great and then on the West Virginia Project, you talked about $10 million of support what what's the next steps there and myself the size of that project.
Speaker Change: Yes, so overall the estimated to be around $140 million to $150 million project for us and we're in discussions with certain outside investors that would take that project over the $10 million.
Speaker Change: Provided by the state and specifically helps us do all of the.
Speaker Change: The early engineering work.
Speaker Change: On the project.
Speaker Change: We have secured the land.
Speaker Change: For that location.
Speaker Change: Finalizing the agreements I think about the time for that but well secured the land for that location.
Speaker Change: And complete that aspect and Mesa County, so were and Thats close to us.
Speaker Change: To be nameless, but a large data center.
Speaker Change: But so that's happening and there is the payments on the $10 million milestone aspects that we've I think we've had roughly about $5 billion out of 10 or close to $5 million out of the tent.
Speaker Change: With the others coming with an outside EPC company that will probably be retained for the project.
Speaker Change: And so some of the funding will go towards that as well too, but it helps to repay the engineering aspects for the project and get it off the ground.
Speaker Change: The completion, so that we can get to <unk> on that.
Speaker Change: Little bit quicker and were discussed as I mentioned with a couple of outside investment firms on that front as well too so.
Speaker Change: The funding, it's nice to have but obviously it helps cover internal costs and other aspects that go specifically into that project. So that's exciting to get.
Speaker Change: Okay, great. Thank you I'll turn it over.
Speaker Change: That was the last question.
Speaker Change: I will now turn the call back over to the management team for any closing remarks.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you for joining us that concludes our conference call today, a replay will be available for a limited time on the BMW website.
Speaker Change: And that concludes today's Babcock and Wilcox fourth quarter 2024 earnings Conference call. Thank you for your participation division with the rest of your day.