Earnings call transcript: Babcock & Wilcox Q4 2024 misses EPS forecast

Babcock & Wilcox Enterprises (BW) reported a fourth-quarter 2024 earnings per share (EPS) of -$0.52, missing the forecasted EPS of $0. The company’s revenue for the quarter was $200.8 million, falling short of the expected $212.3 million. Despite these misses, the stock price rose 5.59% in aftermarket trading to $0.71, reflecting a positive investor response to other aspects of the company’s performance and outlook.

Key Takeaways

• Babcock & Wilcox’s Q4 2024 revenue increased by 15% year-over-year.
• The company reported a significant improvement in operating income, reaching $11.6 million.
• Stock price rose by 5.59% in aftermarket trading despite missing EPS and revenue forecasts.
• Strong demand from AI data centers and electric vehicles is driving growth.
• The company is targeting $1 billion in BrightLoop bookings by 2028.

Company Performance

Babcock & Wilcox demonstrated robust growth in Q4 2024, with revenue increasing by 15% compared to Q4 2023. The company also improved its operating income significantly, reporting $11.6 million compared to a loss in the same quarter the previous year. This performance is supported by a diversified portfolio and strong demand in key sectors such as AI data centers and electric vehicles.

Financial Highlights

• Revenue: $200.8 million, up 15% year-over-year.
• Operating Income: $11.6 million, a significant improvement from -$3.3 million in Q4 2023.
• Adjusted EBITDA: $24 million, a 55% increase year-over-year.
• Net Loss from Continuing Operations: $73 million for 2024, improved from $75.8 million in 2023.

Earnings vs. Forecast

Babcock & Wilcox’s actual EPS of -$0.52 fell short of the forecasted EPS of $0, marking a significant miss. The revenue of $200.8 million also did not meet the expected $212.3 million. This performance contrasts with the company’s previous quarters, where it had shown improvements in other financial metrics.

Market Reaction

Despite the earnings miss, Babcock & Wilcox’s stock rose by 5.59% in aftermarket trading, reaching $0.71. This increase suggests that investors are optimistic about the company’s future prospects and strategic initiatives, particularly in the renewable energy sector. The stock’s performance is notable considering its 52-week low of $0.641.

Outlook & Guidance

Looking ahead, Babcock & Wilcox is targeting an adjusted EBITDA of $70-85 million for 2025. The company is focusing on refinancing debt obligations and anticipates a return to positive cash flows in 2025. Key projects, such as the Brightwood hydrogen production facility, are expected to drive future growth.

Executive Commentary

CEO Kenny Young stated, "We believe that these expected industry tailwinds provide a strong foundation for BW to grow in 2025 and beyond." CFO Cameron Freymeier added, "We are in discussions regarding refinancing of our debt with key bondholders," highlighting the company’s proactive approach to financial management.

Risks and Challenges

• Potential impacts of new tariffs on project timing and margins.
• Ongoing discussions about the Wyoming project and DOE financing.
• Minimal expected impact from EPA emissions regulation reconsideration.

Q&A

During the earnings call, analysts inquired about the potential impacts of new tariffs and the status of ongoing projects. The company addressed these concerns, emphasizing its strategic efforts to mitigate risks and capitalize on growth opportunities in the renewable energy sector.

Full transcript - Babcock & Wilcox Enterprises (BW) Q4 2024:

Cameron, Conference Call Operator, Babcock and Wilcox: Good afternoon. Thank you for attending the Babcock and Wilcox Enterprises Fourth Quarter twenty twenty four 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, Darren Brooks, BMW’s Director of Communications. Thank you.

You may proceed, Mrs. Brooks.

Sharon Brooks, Director of Communications and Marketing, Babcock and Wilcox: Thank you, Cameron, and thanks to everyone for joining us on Babcock and Wilcox Enterprises fourth quarter and full year twenty twenty four earnings conference call. I’m Sharon Brooks, Director of Communications and Marketing. Joining the call today are Kenny Young, B and W’s Chairman and Chief Executive Officer and Cameron Freymeier, Chief Financial Officer, to discuss our fourth 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 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 10 ks that has been filed with the SEC today.

Additionally, except as required by law, we undertake no obligation to update any forward looking statement. We also provide non GAAP information, including 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 earnings release published this afternoon and in our company overview presentation filed on Form eight K today and posted on the Investor Relations section of our website at babcock.com. I will now turn this call over to Kenny.

Kenny Young, Chairman and Chief Executive Officer, Babcock and Wilcox: Thanks, Jarren. Well, good afternoon, everyone, and thanks for joining us on our fourth quarter and full year twenty twenty four earnings call. 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 based on tailwinds 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.

We saw improvements across many of our top metrics during the fourth quarter of twenty twenty four, including improvements in revenues, operating income and adjusted EBITDA when compared to 2023. Our fourth quarter revenue came in at $200,800,000 compared to hundred and $74,700,000 in the fourth quarter of twenty twenty three, which was an increase of 15%. Operating income from continued operations increased to $11,600,000 in the fourth quarter of twenty twenty four compared to operating loss from continuing operations of 3,300,000 in the fourth quarter of twenty twenty three, reflecting the continued strong production of our core businesses. Adjusted EBITDA from continuing operations was $24,000,000 in the fourth quarter of twenty twenty four, which was a 55% year over year increase compared to the fourth quarter of twenty twenty three. Our margins are benefiting from our strategic shift to reduce reliance on high interest low margin newbuild projects.

And after taking into account the recent divestitures, we have revised our full year 2025 EBITDA target range to be 70,000,000 to $85,000,000 excluding BrightLoop and Climate Bright expenses. Importantly, we continue to invest in our BrightLoop opportunities and continue to anticipate spending in the range of $10,000,000 to $15,000,000 in 2025 on our BrightLoop projects and technology advancement, including CapEx, which is apart from the Masland construction. Transitioning to our full year financial performance on a continuing operations basis, we continue to display year over year improvement in adjusted EBITDA excluding BrightLoop and Climate Bright with a 13% increase from 2023 on yearly totals. We expect our improving adjusted EBITDA performance trend to continue as we move through 2025 leading to our full year 2025 adjusted EBITDA target range of $70,000,000 to $85,000,000 Revenues remained stable across the year with the largest positive impact seen in our environmental segment and perhaps the strongest performance across 2024 came in our bookings and backlog numbers. We continue to see strong demand for our diverse portfolio of technologies, which is driving our increased bookings of 9% in our bookings and 47% in our backlog.

We believe that these results affirm our strategic approach while underpinning our pipeline and outlook for sustained growth in 2025 and beyond. We believe the increasing need for power and electricity fueled by demand from AI data centers, electric vehicles and expanding economies will be key drivers for growth across our broad range of technologies. We are 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. We expect these tailwinds to increase in the coming years as the amount of front end engineering design or FEED opportunities has grown. Today, we have 12 to 15 active FEED studies that represent potential projects of over $1,000,000,000 in revenues in our pipeline.

We believe that these expected industry tailwinds provide a strong foundation for BW to grow in 2025 and beyond as we continue to drive for higher margins and improved cash flows. Overall, our results in the fourth quarter and across 2024 reflect the strong demand for our diverse portfolio that support the generation of efficient and sustainable energy regardless of fuel source. B and W has developed a strong foundation to capitalize on the continued growth in natural gas, conversions, environmental solutions, carbon capture and clean energy opportunities globally with utility and industrial customers. Our investments across our Climate Rights suite of decarbonization technology to support the world’s energy transition are progressing well and we’re making steady progress on our Brightwood project in Madison, Ohio with a target of producing hydrogen by early twenty twenty six. Notably, we also recently announced a $10,000,000 in funding for the development of a BrightLoop hydrogen production and carbon capture facility in Mason County, West Virginia.

We remain fully committed to expanding our BrightLoop commercial activities in the years ahead with targeted bookings of approximately $1,000,000,000 by 2028, which represents less than 1% of the estimated global market for hydrogen production. 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. During 2024, we made further progress on our stated strategy to divest non strategic assets to improve our balance sheet, avoid internationally large new build projects and reduce associated corporate overhead. Importantly, 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. I’ll now turn the call over to Cameron to discuss the financial details for the fourth quarter and full year of 2024 results.

As previously disclosed, Cameron has officially taken over as B and W CFO following Lou Salomon’s retirement at the end of twenty twenty four. I’d like to express my sincere gratitude to Lou for his steadfast leadership over the past six years and we wish him all the best in his retirement. Cameron has an extensive background and 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?

Cameron Freymeier, Chief Financial Officer, Babcock and Wilcox: Thanks, Kenny. I am pleased to review our full year 2024 results in addition to commenting on our financial position entering 2025. For further detail, I call your attention to the fact that we filed our 10 K with the SEC this afternoon and you can refer to it for further details beyond what we discuss in this call. On a continuing operations basis, our 2024 consolidated revenues were $717,300,000 which remained stable compared to the revenue levels in the prior year. Net loss from continuing operations in 2024 was $73,000,000 which was a better result compared to a net loss of continuing operations of $75,800,000 in 2023.

Primarily related to an overall decrease in our costs and expenses offset partially by higher interest expense and banking fees. In addition, we had a loss per share of $0.96 in 2024 compared to a loss per share of $1.02 in 2023. Our adjusted EBITDA from continuing operations was $68,900,000 compared to $60,800,000 in 2023. Bookings and backlog performed very well across the year with year end bookings coming in at $889,600,000 a 39% increase from the $638,700,000 in 2023, while backlog saw a 47% increase from $368,200,000 in 2023 to $540,100,000 in 2024. SPIG, B and W Renewable Services and Volant were reclassified into discontinued operations for 2024 and their results are no longer reflected in our continuing operations.

Our parts and services core business remains strong even with recent coal plant closures and natural gas conversions. Our robust backlog of $540,100,000 and the strength of our parts business gives us confidence in our full year 2025 adjusted EBITDA target range of $70,000,000 to $85,000,000 I will now turn to our balance sheet and liquidity and comment on our positive outlook for improving cash flow trends in 2025. Total debt at 12/31/2024, was $464,600,000 of which $124,000,000 would have come due in January 2027, but due to the springing maturity related to the January of senior notes is now due November of twenty twenty five and therefore has been classified as current. In addition, the $193,000,000 of senior notes will be due February ’20 ’20 ’6 and is within twelve months of the date of our twelve months from the date of our 10 ks filing. The company has had cash, cash equivalents and restricted cash balance of $127,600,000 as of December 31.

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 will remove this springing date as our senior debt. And if successful, we believe these actions will alleviate the going concern. The significant steps we have taken to strategically realign BMW in recent quarters positions us for improved cash flow generation in the years ahead. Specifically, as Kenny mentioned, we completed the sale of our SPIG and GMAB businesses for net proceeds of $33,400,000 in the fourth quarter, which improved our balance sheet and demonstrated our ability to continue to execute against our stated strategy to sell certain assets.

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 refinancing of our debt with key bondholders as well as junior lenders and remain in process to sell 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, Chairman and Chief Executive Officer, Babcock and Wilcox: Thanks, Cameron. Well, in closing, we continue to execute against our strategic plan and remain continually focused on driving further improvements on our balance sheet. Our global pipeline of over $7,600,000,000 in identified project opportunities remains healthy across all segments and we anticipate prospects for new bookings and stronger financial performance throughout 2025. B and W has deep industry expertise with clean energy and carbon capture technologies and with our 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. I would like to wrap up today by recognizing and thanking our customers as well as our employees who helped 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. Cameron?

Cameron, Conference Call Operator, Babcock and Wilcox: Thank you. We will now begin the question and answer session. The first question is from the line of Aaron Sichalla with Craig Hallum. You may proceed.

Aaron Sichalla, Analyst, Craig Hallum: Yes. Hi, Kenny and Cameron. Thanks for taking the questions. First for me on the guidance, a little bit wider range than normal to start the year. Can you just kind of discuss some of the puts and takes there?

What might get you to the 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?

Kenny Young, Chairman and Chief Executive Officer, Babcock and Wilcox: Yes. I think there’s a couple of key metrics in there. I mean, first of all, we with the introduction of all of the tariffs that have been recently announced, has some ups and downs as it relates to our business. Typically, the tariffs are all passed through to customers in this particular case, but really don’t know the economic impact of what customers may do either delay start of a project or delay a project to wait for hopefully the tariffs get removed and affect the margin of the project for the customer standpoint. So we just don’t know the outcome of that particular piece and how it’s going to play out obviously over the course of the year.

So we’re just keeping an eye on the tariff aspects on one hand. And then obviously we need to get through some of the debt restructuring and financing which on that particular front to manage through obviously any impacts that would have particularly on the business if it from a cost standpoint. So we just need to see how that shakes out. So there’s a couple of key areas that we’re focused on that gives us to step back and say, hey, let’s give a little bit of range here. So we just don’t know the impact of some of these, in particular some of the tariffs that are being introduced.

Aaron Sichalla, Analyst, Craig Hallum: Right. And on that, I mean, I know it’s still early and obviously evolving by the day. But 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?

Kenny Young, Chairman and Chief Executive Officer, Babcock and Wilcox: No. Well, the answer is we’re in discussions with several customers on several aspects, right. We have we bring in obviously equipment around the world or pieces of some of the projects that we execute on in 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 on both sides of the equation on some projects. So too early to know specific like project by project, but we are in talks with customers directly about certain projects that we’re involved in, 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 10,000 or 15,000 or a couple of hundred thousand.

There are other cases where the tariffs might be more material, more into the $5,000,000 to $7,000,000 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. Obviously, when the equipment transfers across the borders, the tariffs can be paid immediately. And so that gets reflected back onto the client, in some cases, back on the within their customers as well too. So all depends, but no definitive outcome I would say yet.

At this time, we’re just kind of consciously in dialogue and discussions. And as you said, it changes daily, so who knows. And hopefully some of these tariffs get removed or get reversed and business goes back to normal, but it’s just a little too early to know.

Aaron Sichalla, Analyst, Craig Hallum: Understood. And then appreciate the update on Massillon. Can you maybe give an update on the Wyoming project, 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 noise there? An update there would be great.

Kenny Young, Chairman and Chief Executive Officer, Babcock and Wilcox: Yes. No, no, no problem. It’s obviously from the IRA standpoint, which is all part of the conversations going on in D. C. I think the general, at least feedback that we received is there’s some confidence that the IRA credits will move forward.

On specifically on Wyoming on that project, we are working with Black Hills. They’re looking to get some financing on this initial project out of the Department of Energy and then discussions in and around that. And obviously some of the budgetary items need to settle as it relates to that. And we feel like we do have congressional support as it relates to that particular project to and we have appropriations language sitting in the DOE that would help that particular project. We just need to get things a little settled in the administration here to get that pushed forward.

But we are working with Black Hills on that and as they’re 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 it’s all positive. It just got to get to the right yes rather than a series of well give us another week here to figure out what’s going on. So that a little caught up in that. It’s a brand new administration.

Obviously, they’re making a lot of noise and doing a lot of things in a very short period of time. But they’ve only been in place for a couple of months. So they’re still trying to work through some of the dynamics and how all that’s going to shake out under the loan program and how they’re going to proceed. So we’re working with them and side by side on that front. So anticipated getting done here, but we’re working with them on that front.

Aaron Sichalla, Analyst, Craig Hallum: Right. Thanks for that. And then maybe last, 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?

Kenny Young, Chairman and Chief Executive Officer, Babcock and Wilcox: Yes. No, good question. It’s we do get asked that a lot by a lot of people. It’s kind of interesting. I mean, it’s just high level.

It’s the general feeling, I guess, with amongst utilities, it’s a little if utilities are solid on fossil fuels, in particular coal aspect and they’ve got new cases around it, a lot of those are going to stay in place for the foreseeable future 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 looking at overall operational costs of coal versus natural gas. And those conversions tend to have a twenty year capital life cycle. So it’s we don’t typically see a big swing and a shift either way based on the regulatory aspect coming out of the EPA, because it’s hard for the utilities to obviously readdress their capital needs every four years based on a different policy that might be invoked in D. C.

So I don’t know that it will have a big impact. It obviously clearly supports the continuation of where coal plants are will continue on and don’t see any changes of those. It could possibly delay some a couple of gas conversions for a few years on that which would have, I don’t know, not a material impact on our business because we were solid either way, right? We sell the parts and services into the coal plant. If they convert to natural gas, that’s fine too as well and we can provide that conversion aspect on it.

So it’s solid for us no matter which way they go. So it may change the swing of revenues from a little bit more coal and a little bit less natural gas depending on that swing. But materially, it shouldn’t have a big impact on our business, I don’t think.

Aaron Sichalla, Analyst, Craig Hallum: Understood. Thanks for taking the questions. I’ll turn it over.

Kenny Young, Chairman and Chief Executive Officer, Babcock and Wilcox: Yes. Thanks, Aaron.

Cameron, Conference Call Operator, Babcock and Wilcox: The next question is from the line of Rob Brown with Lake Street Capital Market. You may proceed.

Rob Brown, Analyst, Lake Street Capital Markets: Good afternoon. Hi, Rob. On the strong bookings in the quarter, but just want to get a sense on how the pipeline is shaping up for this year. Are you seeing that kind of bookings level continue? How should we think about the bookings run rates into the

Kenny Young, Chairman and Chief Executive Officer, Babcock and Wilcox: year? You’ve faded out, 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 in bookings? Okay.

Rob Brown, Analyst, Lake Street Capital Markets: Correct.

Kenny Young, Chairman and Chief Executive Officer, Babcock and Wilcox: Yes, no problem. So as I briefly mentioned in the remarks, I mean, overall, we feel pretty solid about our pipeline. They have been for quite some time and the opportunities are actually growing and expanding. We’re starting to as we see some of the FEED studies now transfer into especially on some of the newer plants when we’re looking at biomass opportunities here in The U. S.

We’re still seeing a lot of the data centers, especially the larger ones looking for new power of sources to fill the need from the data center standpoint. And so we some of the work there, we do kind of feel like that one or two of those may wind up being booked this year as we go into ’26 and ’27 and we’re working on those hopefully some announcements over the next few months. But we see one or two of those at least seeing as if they’re going to move towards progressing to a positive outcome for us and get some bookings in there as well too. So we’re excited about that. And we continue to ramp up obviously on across the board.

On thermal aspect, we’re seeing opportunities to help expand some of the plants and recondition some of the plants and other opportunities there around those as well too. So it’s really on both sides of that standpoint. With intent, I think as I mentioned in the remarks, we’re doing less and less on larger new boat projects in the new boat projects in Europe and internationally as well. We’re going to focus more on parts and services on the international side. It’s just it reduces our LCs and other aspects.

We think that’s the right decision to make. And we think there’s larger volumes here in North America to pursue. So I think we’ll see a steady aspect to our thermal business is doing quite well. We continue to expand on the parts and services side of thermal on the international basis. And we see that continuing on for the foreseeable future on that aspect of it.

And then like I mentioned, I think we’re going to possibly see a couple of biomass and other opportunities emerge here in The United States toward the later part of the year. So we’re excited about those as well.

Rob Brown, Analyst, Lake Street Capital Markets: Okay, great. And then on the West Virginia project, you talked about $10,000,000 of support. What’s the next steps there and the amount of help the size of that project?

Kenny Young, Chairman and Chief Executive Officer, Babcock and Wilcox: Yes. So overall that’s estimated to be around $140,000,000 to $150,000,000 project for us. And we’re in discussions with certain outside investors that would take that project over. The $10,000,000 provided by the state specifically helps us do all of the early engineering work on the project. We have secured the land for that location or we’re finalizing the agreements I think about the time for that.

But we’ll secure the land for that location and complete that aspect in Mesa County. So we’re and it’s close to a to be nameless, but a large data center. But, so that’s happening. And there’s the payments on the $10,000,000 there’s milestone aspects that we’ve I think we’ve hit roughly about $5,000,000 out of the 10 or close to $5,000,000 out of the 10. With the others coming with an outside EPC company that will probably retain for the project.

And so some of the funding will go towards that as well too, but it helps repay the engineering aspects for the project and get it off the ground to completion so that we can get to FID on that a little bit quicker. And we’re in discussions, I mentioned, with a couple outside investment firms on that front as well too. So the funding is nice to have because obviously it helps cover internal costs and other aspects to go specifically into that project. So that’s exciting to do.

Rob Brown, Analyst, Lake Street Capital Markets: Okay, great. Thank you. I’ll turn it over.

Cameron, Conference Call Operator, Babcock and Wilcox: That was the last question. I will now turn the call back over to the management team for any closing remarks.

Sharon Brooks, Director of Communications and Marketing, Babcock and Wilcox: Thank you for joining us. That concludes our conference call today. A replay will be available for a limited time on the B and W website.

Cameron, Conference Call Operator, Babcock and Wilcox: That concludes today’s Babcock and Wilcox Fourth Quarter twenty twenty four Earnings Conference Call. Thank you for your participation and enjoy the rest of your day.

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