Babcock & Wilcox Enterprises, Inc. Q1 FY2024 earnings call

Management Statement and Operational Highlights

• The company had a strong start in 2024 with first quarter results ahead of expectations, driven by ~$500 million in new signed contracts/awards in Q1, nearly double the prior year.
• Strategic focus on higher-margin new build projects, upgrades, parts/services, and engineering for Climate Bright and Brightloop.
• Environmental segment was a standout with 23% revenue growth and 74% adjusted EBITDA increase.
• Brightloop technology shows progress with ~$1.5 billion pipeline of opportunities, aiming for $1 billion in bookings by 2028.
• Liquidity actions include increased borrowing capacity, advanced negotiations for nonstrategic business sale, with proceeds to pay down debt.

Segment Performance

• Renewables Segment: Revenues were $52.3 million in Q1 2024, a 38% decrease from Q1 2023. Adjusted EBITDA was $1.7 million in Q1 2024 compared to $4.3 million in Q1 2023, primarily due to reduced volume but partially offset by the European renewable parts and service business.
• Environmental Segment: Revenues were $48.4 million in Q1 2024, a 23% increase from Q1 2023. Adjusted EBITDA was $3.3 million in Q1 2024 compared to $1.9 million in Q1 2023, driven by higher volume and improved operating performance.
• Thermal Segment: Revenues were $110.2 million in Q1 2024, an 8% decrease from Q1 2023. Adjusted EBITDA was $13.7 million in Q1 2024, consistent with Q1 2023, with increased international sales offsetting a decrease in the U.S. Construction business.

Guidance

• Revised full-year adjusted EBITDA target to $105 million to $115 million, excluding Brightloop and Climate Bright expenses.
• Implied bookings in Q1 2024 were $506 million, ending backlog $826.4 million, up 29% from Q1 2023.
• Anticipate spending $7 million to $10 million on Brightloop projects in 2024.

Risks

• Previous liquidity concerns addressed through actions like nonstrategic business sales and increased borrowing capacity.
• Dependence on successful execution of strategic plan and timely commercialization of Brightloop technology.

Question and Answer

Q: Conversion timing of implied backlog and revenue start on new business?

A: Convert later this year, revenue over 2-3 years.

Q: Brightloop pipeline and customer discussions?

A: Pipeline growing, interest higher than anticipated, focus on moving early projects to commercialization.

Q: EPA emissions rules impact?

A: Pushes utilities to convert plants, add carbon sequestration, or use green fuels, creating opportunities for B&W.

Q: Brightloop projects status?

A: Ohio in final engineering/financing; Wyoming in final design/permitting; Louisiana in financing/discussions on feedstock.

Q: EBITDA cadence and free cash flow?

A: Q1 lowest, Q2 close to doubling Q1, Q3 up 30-35%, Q4 up 25%; free cash flow follows EBITDA path.