Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Babcock & Wilcox Enterprises Inc (NYSE:BW) reported significant operating margin improvement year-over-year, driven by strategic actions to avoid lower-margin projects and improve project performance.
• The company has a strong pipeline of 12 to 15 active front-end engineering design studies, representing potential projects worth over $1 billion.
• Babcock & Wilcox Enterprises Inc (NYSE:BW) has increased its implied backlog by 48% compared to the same period last year, excluding divestitures.
• The company has made progress on its cost reduction efforts, achieving $26.5 million in cost savings towards a target of over $30 million in annualized savings.
• Babcock & Wilcox Enterprises Inc (NYSE:BW) continues to invest in its Brightloop and ClimateBright technologies, with expectations of higher margins and growth in the future.

Negative Points

• The company recorded a $5.8 million non-cash impairment related to the sale of an asset and a $4.9 million settlement to exit a loss-generating contract, impacting operating income.
• Babcock & Wilcox Enterprises Inc (NYSE:BW) reported a decrease in consolidated revenues for the third quarter compared to the same period in 2023, primarily due to divestitures.
• The company experienced an operating loss of $1.4 million in the third quarter of 2024, compared to an operating income of $5.5 million in the third quarter of 2023.
• There is a significant amount of debt on the balance sheet, with total debt at $474.5 million as of September 30, 2024.
• The company revised its full-year 2024 EBITDA target downward due to recent divestitures, indicating potential challenges in maintaining previous financial expectations.

Q & A Highlights

• Warning! GuruFocus has detected 11 Warning Signs with BW.

Q: Can you discuss the new EBITDA guidance range of $91 to $95 million and how it compares to past guidance? A: The previous guidance was $105 to $115 million. The adjustment to $91 to $95 million primarily reflects the divestiture of SPIG and GMAB. This change bridges the gap between the new and old targets. - Kenny Young, CEO

Q: What is the conversion rate for the 12 to 15 active feed studies worth over a billion dollars, and how much of this is in backlog? A: The conversion rate for feed studies is typically high, around 40-50%. These studies are smaller in revenue but lead to larger projects. The studies are crucial for leveraging engineering strengths in carbon capture and Brightloop technologies. - Kenny Young, CEO

Q: Can you provide details on the timing and revenue cadence for the coal-to-gas conversion project? A: The project has received full notice to proceed. Revenue will start in 2025, continuing through 2026 and into 2027. We have several other prospects in the pipeline for natural gas conversions. - Kenny Young, CEO

Q: What is the current status of letters of credit, and how will they impact liquidity? A: Letters of credit are around $80 million and will roll off over the next year and a half. New letters will be issued as we win new business, but we've reduced the percentage required. - Luth Aimone, CFO

Q: Can you elaborate on the Maslin project and its timeline for ramp-up and operation? A: Long lead items are ordered, and ramp-up will start in early Q2 next year, with heavy activity in Q3 and Q4. We aim to produce hydrogen by early 2026, reaching full commercial operation by Q2 2026. - Kenny Young, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.