Babcock & Wilcox Enterprises, Inc. (NYSE:BW) Q4 2022 Earnings Conference Call March 15, 2023 8:00 PM ET Company Participants Sharyn Brooks – Director of Communications Kenny Young - Chairman & CEO Lou Salamone - CFO Conference Call Participants Aaron Spychalla - Craig-Hallum Capital Group Rob Brown - Lake Street Capital Markets Brent Thielman - D.A. Davidson Alex Rygiel - B. Riley Operator Hello, everyone and welcome to the Babcock and Wilcox Q4 and Full-Year 2022 Earnings Conference Call. My name is Emily ...

PART I - FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) Acquisitions drove revenue growth, but higher costs, impairment, and interest expenses led to a net loss and equity deficit [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2022 revenues rose to $214.9 million, but goodwill impairment and higher costs led to a $20.6 million net loss Condensed Consolidated Statements of Operations (Unaudited) | (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | **$214,870** | **$159,960** | **$639,938** | **$531,068** | | Operating (loss) income | $(10,318) | $14,761 | $(13,433) | $11,083 | | Goodwill impairment | $7,224 | — | $7,224 | — | | Net (loss) income | $(20,566) | $13,648 | $(32,244) | $1,346 | | Net (loss) income attributable to common stock | $(21,481) | $9,962 | $(39,742) | $(4,107) | | **Diluted (loss) earnings per share** | **$(0.24)** | **$0.11** | **$(0.45)** | **$(0.05)** | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $881.6 million due to reduced cash, resulting in a $17.1 million stockholders' deficit Condensed Consolidated Balance Sheet Highlights (Unaudited) | (in thousands) | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $48,471 | $224,874 | | Total current assets | $498,593 | $582,434 | | **Total assets** | **$881,567** | **$913,265** | | Total current liabilities | $319,533 | $253,383 | | **Total liabilities** | **$898,695** | **$854,643** | | **Total stockholders' (deficit) equity** | **$(17,128)** | **$58,622** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations was $67.4 million, while investing activities used $67.6 million, primarily for acquisitions Cash Flow Summary (Unaudited) | (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(67,380) | $(107,834) | | Net cash used in investing activities | $(67,570) | $(5,878) | | Net cash (used in) provided by financing activities | $(19,081) | $159,218 | | **Net (decrease) increase in cash, cash equivalents and restricted cash** | **$(157,217)** | **$48,324** | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail segment performance, goodwill impairment, debt covenant waivers, litigation settlement, and acquisition impacts - The company operates in three segments: B&W Renewable, B&W Environmental, and B&W Thermal. For the nine months ended Sep 30, 2022, the Renewable segment's revenue more than doubled to **$224.9 million**, while the Thermal segment's revenue decreased to **$309.9 million**[38](index=38&type=chunk)[40](index=40&type=chunk) - Total backlog was **$730.0 million** as of September 30, 2022. The company expects to recognize approximately **32.5%** of this in the remainder of 2022, **46.4%** in 2023, and **21.1%** thereafter[47](index=47&type=chunk) - The company recorded a **$7.2 million** goodwill impairment loss related to the Fosler Construction reporting unit during Q3 2022 due to significant deterioration in operating results and other factors[56](index=56&type=chunk)[57](index=57&type=chunk)[59](index=59&type=chunk) - As of September 30, 2022, the company was not in compliance with its quarterly fixed charge coverage test covenant and received a waiver. Subsequent to the quarter end, on November 7, 2022, the company amended its debt documents to modify certain financial covenants for future periods[88](index=88&type=chunk)[181](index=181&type=chunk) - The company reached a settlement agreement in principle for stockholder litigation with a total payment of **$9.5 million**. The company will pay **$4.75 million** on behalf of other defendants, and the remaining **$4.75 million** will be paid to the company from insurance proceeds and other contributions[116](index=116&type=chunk) - On September 24, 2022, the company acquired the remaining **40%** ownership stake in Fosler Construction for **$12.7 million**[153](index=153&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operation) Acquisitions drove Q3 2022 revenue growth, but supply chain issues and higher costs led to a net loss and reduced liquidity [Results of Operations](index=42&type=section&id=Results%20of%20Operations) Acquisition-driven revenue growth in Q3 and YTD was offset by increased costs, resulting in net losses for both periods Revenues by Segment (in thousands) | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | B&W Renewable | $81,687 | $38,000 | $224,875 | $105,155 | | B&W Environmental | $44,626 | $38,249 | $111,186 | $97,767 | | B&W Thermal | $91,331 | $83,819 | $309,875 | $328,416 | | **Total Revenues** | **$214,870** | **$159,960** | **$639,938** | **$531,068** | Adjusted EBITDA by Segment (in thousands) | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | B&W Renewable | $4,522 | $11,399 | $14,846 | $15,030 | | B&W Environmental | $3,082 | $3,476 | $5,112 | $7,286 | | B&W Thermal | $10,761 | $9,329 | $41,276 | $32,436 | | **Total Adjusted EBITDA** | **$13,055** | **$18,851** | **$45,684** | **$42,644** | - Total company backlog increased to **$730 million** at September 30, 2022, up from **$540 million** at the same time in 2021[211](index=211&type=chunk) - Net changes in gross profit from contract estimates were negative **$8.7 million** in Q3 2022, a significant reversal from a positive **$5.5 million** in Q3 2021, largely due to losses on Fosler Solar projects[214](index=214&type=chunk)[51](index=51&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity tightened significantly due to cash used in operations and acquisitions, with total cash falling to $69.5 million - Total cash, cash equivalents, and restricted cash was **$69.5 million** at September 30, 2022, down from **$226.7 million** at December 31, 2021[257](index=257&type=chunk) - Cash used in operations was **$67.4 million**, and cash used in investing activities was **$67.6 million** for the nine months ended September 30, 2022, mainly due to acquisitions[258](index=258&type=chunk)[259](index=259&type=chunk) - As of September 30, 2022, the company had **$333.9 million** in outstanding surety bonds and **$109.4 million** in letters of credit usage under its Debt Facilities[262](index=262&type=chunk)[264](index=264&type=chunk) - The company was not in compliance with its Quarterly Fixed Charge Coverage financial covenant as of September 30, 2022, and received a waiver from its lenders[262](index=262&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk exposures were reported since the 2021 Annual Report - There have been no material changes to the company's market risk exposures since the 2021 year-end report[271](index=271&type=chunk) [Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal controls - The CEO and CFO concluded that disclosure controls and procedures are effective as of September 30, 2022[273](index=273&type=chunk) - No changes in internal control over financial reporting occurred during Q3 2022 that have materially affected, or are reasonably likely to materially affect, internal controls[274](index=274&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) Details on ongoing legal proceedings and litigation settlements are provided in Note 17 of the financial statements - For details on legal proceedings, the report refers to Note 17 of the Condensed Consolidated Financial Statements[280](index=280&type=chunk) [Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors, except for a new risk concerning the Ukraine-Russia conflict's impact on operations - A new risk factor has been added regarding the adverse effects of the ongoing invasion of Ukraine by Russia on the company's business, including supply chain disruptions for materials like steel in Europe[282](index=282&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase shares during Q3 2022 and has no general share repurchase program - The company did not repurchase any shares during the third quarter of 2022 and does not have a share repurchase program[283](index=283&type=chunk) [Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files

Babcock & Wilcox Enterprises, Inc. (NYSE:BW) Q2 Earnings Conference Call August 8, 2022 12:00 AM ET Company Participants Sharyn Brooks - Director, Communications Kenny Young - Chairman and CEO Lou Salamone - CFO Conference Call Participants Rob Brown - Lake Street Capital Alex Rygiel - B. Riley Aaron Spychalla - Craig-Hallum Operator Good afternoon. Thank you for attending Babcock & Wilcox Second Quarter 2022 Earnings Call. My name is Matt and I will be your moderator for today’s call. All lines will be mut ...

[Cautionary Statement Concerning Forward-Looking Information](index=3&type=section&id=Cautionary%20Statement%20Concerning%20Forward-Looking%20Information) This report contains forward-looking statements based on current expectations that are subject to various risks and uncertainties - The report includes forward-looking statements identified by words like "expect," "plan," and "believe," concerning future operational performance or events[7](index=7&type=chunk) - These statements are based on current management expectations and involve numerous risks and uncertainties, including impacts from COVID-19, the Russia-Ukraine conflict, acquisition integrations (Fosler, VODA, Fossil Power, Optimus), financing capabilities, debt compliance, market competition, economic conditions, backlog cancellations, contract performance, third-party performance, claim resolutions, restructuring benefits, R&D management, operational risks, regulatory approvals, pension liabilities, and international socio-political and economic conditions[8](index=8&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law[10](index=10&type=chunk) [PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This item presents the company's unaudited condensed consolidated financial statements and detailed notes for the periods ended June 30, 2022 [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Key Data from Condensed Consolidated Statements of Operations | Metric (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | 221,019 | 202,860 | 425,068 | 371,108 | | Income (Loss) from Operations | 3,668 | 2,784 | (3,115) | (3,678) | | Net Income (Loss) Attributable to Common Stockholders | (6,282) | 1,395 | (18,261) | (14,069) | | Basic Earnings (Loss) Per Share | (0.07) | 0.02 | (0.21) | (0.18) | | Diluted Earnings (Loss) Per Share | (0.07) | 0.02 | (0.21) | (0.18) | - For the three months ended June 30, 2022, **revenue increased 9.0% year-over-year to $221.0 million**; for the six months ended June 30, 2022, **revenue increased 14.5% to $425.1 million**[13](index=13&type=chunk) - For the three months ended June 30, 2022, the company reported a **net loss of $3.0 million**, compared to a net income of $3.1 million in the prior-year period, primarily due to increased interest expense and foreign exchange losses[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Key Data from Condensed Consolidated Statements of Comprehensive Income (Loss) | Metric (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | (2,994) | 3,141 | (11,678) | (12,302) | | Currency Translation Adjustments (CTA) | (6,634) | (1,478) | (10,919) | (1,548) | | Other Comprehensive Loss | (6,832) | (1,280) | (10,524) | (5,664) | | Comprehensive Income (Loss) Attributable to Stockholders | (9,328) | 1,851 | (21,243) | (17,973) | - For the three months ended June 30, 2022, **currency translation adjustments resulted in a loss of $6.6 million**, a significant increase from the $1.5 million loss in the prior-year period[17](index=17&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Key Data from Condensed Consolidated Balance Sheets | Metric (in thousands of U.S. dollars) | As of June 30, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Cash and Cash Equivalents | 71,524 | 224,874 | | Restricted Cash and Cash Equivalents | 8,664 | 1,841 | | Total Current Assets | 515,554 | 582,434 | | Goodwill | 164,777 | 116,462 | | Intangible Assets, Net | 63,561 | 43,795 | | Total Assets | 913,939 | 913,265 | | Total Current Liabilities | 302,535 | 253,383 | | Pension and Other Postretirement Benefit Liabilities | 166,056 | 182,730 | | Total Liabilities | 882,222 | 854,643 | | Stockholders' Equity Attributable to Stockholders | 7,204 | 33,149 | | Total Stockholders' Equity | 31,717 | 58,622 | - As of June 30, 2022, **cash and cash equivalents decreased significantly by 68% to $71.5 million** from $224.9 million at December 31, 2021[20](index=20&type=chunk) - As of June 30, 2022, **goodwill and net intangible assets increased substantially to $164.8 million and $63.6 million**, respectively, due to acquisition activities[20](index=20&type=chunk) [Condensed Consolidated Statement of Stockholders' Equity (Deficit)](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Stockholders'%20Equity%20(Deficit)) Key Data from Condensed Consolidated Statement of Stockholders' Equity (Deficit) | Metric (in thousands of U.S. dollars) | Balance at Dec 31, 2021 | Balance at Mar 31, 2022 | Balance at Jun 30, 2022 | | :--- | :--- | :--- | :--- | | Common Stock, Shares | 86,286 | 86,338 | 86,392 | | Common Stock, Par Value | 5,110 | 5,111 | 5,112 | | Preferred Stock, Shares | 7,669 | 7,669 | 7,669 | | Preferred Stock, Par Value | 77 | 77 | 77 | | Capital in Excess of Par Value | 1,518,872 | 1,520,545 | 1,521,931 | | Accumulated Deficit | (1,321,154) | (1,333,133) | (1,339,415) | | Accumulated Other Comprehensive Loss | (58,822) | (62,514) | (69,346) | | Stockholders' Equity Attributable to Stockholders | 33,149 | 43,942 | 7,204 | | Noncontrolling Interests | 25,473 | 25,011 | 24,513 | | Total Stockholders' Equity | 58,622 | 43,942 | 31,717 | - As of June 30, 2022, **total stockholders' equity decreased to $31.7 million** from $58.6 million at December 31, 2021, primarily due to net loss, currency translation adjustments, and preferred stock dividend payments[22](index=22&type=chunk) - For the six months ended June 30, 2022, the company **paid $7.4 million in preferred stock dividends**[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Key Data from Condensed Consolidated Statements of Cash Flows | Metric (in thousands of U.S. dollars) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (63,591) | (86,075) | | Net Cash Used in (Provided by) Investing Activities | (65,582) | 6,611 | | Net Cash (Used in) Provided by Financing Activities | (15,642) | 151,289 | | Effect of Exchange Rate Changes | (1,712) | 4,350 | | Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash | (146,527) | 76,175 | | Cash, Cash Equivalents and Restricted Cash at End of Period | 80,188 | 143,598 | - For the six months ended June 30, 2022, **net cash outflow from operating activities was $63.6 million**, an improvement from the $86.1 million outflow in the prior-year period[26](index=26&type=chunk) - **Net cash outflow from investing activities was $65.6 million**, primarily due to **$64.9 million for business acquisitions**[26](index=26&type=chunk) - **Net cash outflow from financing activities was $15.6 million**, mainly due to the payment of **$7.4 million in preferred stock dividends**[28](index=28&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [NOTE 1 – BASIS OF PRESENTATION](index=11&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) - The interim condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC instructions for interim financial information, including normal, recurring adjustments[31](index=31&type=chunk) - The **COVID-19 pandemic continues to adversely affect the company's business operations**, supply chain, and project timelines, causing project delays and increased costs[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) [NOTE 2 – EARNINGS PER SHARE](index=12&type=section&id=NOTE%202%20%E2%80%93%20EARNINGS%20PER%20SHARE) - **Basic and diluted earnings per share are identical** for the three and six months ended June 30, 2022, and the six months ended June 30, 2021, due to net losses[36](index=36&type=chunk) - If the company had achieved net income, **diluted shares would have increased by an additional 0.9 million** (Q2 2022) and 1.4 million (H1 2021)[37](index=37&type=chunk) [NOTE 3 – SEGMENT REPORTING](index=12&type=section&id=NOTE%203%20%E2%80%93%20SEGMENT%20REPORTING) - The company's operations are organized into three market-facing reporting segments: **Babcock & Wilcox Renewable, Babcock & Wilcox Environmental, and Babcock & Wilcox Thermal**[39](index=39&type=chunk) Segment Revenues and Adjusted EBITDA | Metric (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Revenues:** | | | | | | B&W Renewable | 75,227 | 38,344 | 143,188 | 67,155 | | B&W Environmental | 31,612 | 28,358 | 66,560 | 59,518 | | B&W Thermal | 116,305 | 136,316 | 218,544 | 244,597 | | **Adjusted EBITDA:** | | | | | | B&W Renewable | 8,869 | 3,427 | 10,324 | 3,631 | | B&W Environmental | 591 | 2,705 | 2,030 | 3,810 | | B&W Thermal | 16,361 | 12,572 | 30,515 | 23,107 | - **Adjusted EBITDA is a non-GAAP measure** used internally to evaluate performance and make strategic decisions, adjusted for specific items[42](index=42&type=chunk) [NOTE 4 – REVENUE RECOGNITION AND CONTRACTS](index=15&type=section&id=NOTE%204%20%E2%80%93%20REVENUE%20RECOGNITION%20AND%20CONTRACTS) - The vast majority of the company's revenue (**79% in Q2 2022 and 80% in H1 2022**) is derived from products and services transferred over time, primarily custom-engineered solutions and construction services[47](index=47&type=chunk) Contract Balance Changes | Metric (in thousands of U.S. dollars) | As of June 30, 2022 | As of December 31, 2021 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Contracts in Progress | 111,913 | 80,176 | 31,737 | 40% | | Advance Payments on Contracts | 95,718 | 68,380 | 27,338 | 40% | | Net Contract Position | 16,195 | 11,796 | 4,399 | 37% | | Accrued Contract Losses | 1,849 | 378 | 1,471 | 389% | - As of June 30, 2022, the company's **total backlog (remaining performance obligations) was $731 million**, with expected revenue recognition of 48.4% in 2022, 28.2% in 2023, and 23.4% thereafter[50](index=50&type=chunk) - The **Fosler Solar reporting unit incurred losses** due to inadequately disclosed construction activity status at the time of acquisition, resulting in a **$14.4 million increase in goodwill**, primarily from accrued liabilities and warranty accruals[53](index=53&type=chunk) [NOTE 5 – INVENTORIES](index=16&type=section&id=NOTE%205%20%E2%80%93%20INVENTORIES) Inventory Composition | Inventory Category (in thousands of U.S. dollars) | As of June 30, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Raw Materials and Supplies | 73,681 | 56,352 | | Work-in-Process | 9,198 | 5,723 | | Finished Goods | 16,233 | 17,452 | | Total Inventories | 99,112 | 79,527 | - As of June 30, 2022, **total inventories increased to $99.1 million**, a $19.6 million increase from December 31, 2021, driven primarily by higher raw materials and supplies[53](index=53&type=chunk) [NOTE 6 – PROPERTY, PLANT & EQUIPMENT, & FINANCE LEASES](index=16&type=section&id=NOTE%206%20%E2%80%93%20PROPERTY,%20PLANT%20&%20EQUIPMENT,%20&%20FINANCE%20LEASES) Net Property, Plant & Equipment, & Finance Leases | Metric (in thousands of U.S. dollars) | As of June 30, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Land | 2,460 | 1,489 | | Buildings | 35,291 | 31,895 | | Machinery and Equipment | 147,161 | 144,325 | | Construction in Progress | 4,834 | 12,480 | | Less: Accumulated Depreciation | 135,783 | 133,137 | | Net Property, Plant and Equipment | 53,963 | 57,052 | | Finance Leases | 34,159 | 34,159 | | Less: Accumulated Amortization of Finance Leases | 7,594 | 5,584 | | Net Property, Plant & Equipment, & Finance Leases | 80,528 | 85,627 | - As of June 30, 2022, **net property, plant, and equipment, and finance leases was $80.5 million**, a decrease from $85.6 million at December 31, 2021, mainly due to a reduction in construction in progress[54](index=54&type=chunk) [NOTE 7 - GOODWILL](index=16&type=section&id=NOTE%207%20-%20GOODWILL) Summary of Changes in Goodwill | Segment (in thousands of U.S. dollars) | Balance at Dec 31, 2021 | Balance at Jun 30, 2022 | | :--- | :--- | :--- | | B&W Renewable | 79,357 | 89,560 | | B&W Environmental | 5,667 | 5,511 | | B&W Thermal | 31,438 | 69,706 | | Total | 116,462 | 164,777 | - As of June 30, 2022, **total goodwill increased to $164.8 million**, a $48.3 million increase from December 31, 2021, primarily from the acquisitions of **Fossil Power ($35.4 million)** and **Optimus Industries ($11.1 million)**[56](index=56&type=chunk) - **Measurement period adjustments for the Fosler acquisition resulted in a $10.7 million increase in goodwill**, mainly due to the initial recognition of accrued liabilities and warranty accruals[56](index=56&type=chunk) [NOTE 8 – INTANGIBLE ASSETS](index=17&type=section&id=NOTE%208%20%E2%80%93%20INTANGIBLE%20ASSETS) Net Intangible Assets | Intangible Asset Category (in thousands of U.S. dollars) | As of June 30, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Customer Relationships | 68,041 | 46,903 | | Unpatented Technology | 18,189 | 15,410 | | Patented Technology | 3,638 | 3,103 | | Trade Names | 13,228 | 12,747 | | Acquired Backlog | 3,100 | 3,100 | | Other | 9,228 | 9,319 | | Less: Accumulated Amortization | (53,168) | (48,092) | | Net Definite-Lived Intangible Assets | 62,256 | 42,490 | | Indefinite-Lived Intangible Assets (Trademarks and Trade Names) | 1,305 | 1,305 | | Total Net Intangible Assets | 63,561 | 43,795 | - As of June 30, 2022, **net intangible assets increased to $63.6 million**, a $19.8 million increase from December 31, 2021, primarily due to new intangible assets from acquisitions[57](index=57&type=chunk)[59](index=59&type=chunk) Estimated Future Amortization Expense for Intangible Assets | Year | Amortization Expense (in thousands of U.S. dollars) | | :--- | :--- | | Remainder of 2022 | 3,987 | | 2023 | 7,973 | | 2024 | 7,901 | | 2025 | 7,061 | | 2026 | 5,909 | | 2027 | 5,276 | | Thereafter | 24,149 | [NOTE 9 – ACCRUED WARRANTY EXPENSE](index=18&type=section&id=NOTE%209%20%E2%80%93%20ACCRUED%20WARRANTY%20EXPENSE) Changes in Accrued Warranty Expense | Metric (in thousands of U.S. dollars) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Beginning Balance | 12,925 | 25,399 | | Additions | 2,942 | 3,608 | | Expirations and Other Changes | (2,028) | (4,309) | | Payments | (2,144) | (8,576) | | Foreign Exchange and Other | (612) | 254 | | Ending Balance | 11,083 | 16,376 | - As of June 30, 2022, the **ending balance for accrued warranty expense was $11.1 million**, a decrease from the prior-year period; additions for the period included **$0.4 million related to Fosler projects**[62](index=62&type=chunk) [NOTE 10 – RESTRUCTURING ACTIVITIES](index=19&type=section&id=NOTE%2010%20%E2%80%93%20RESTRUCTURING%20ACTIVITIES) Restructuring Charges (Benefits) | Segment (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | B&W Renewable | (20) | 557 | (213) | 1,066 | | B&W Environmental | 34 | 209 | 103 | 298 | | B&W Thermal | 82 | 1,542 | 280 | 1,890 | | Corporate | (198) | 92 | (178) | 139 | | Total | (102) | 2,400 | (8) | 3,393 | - For the three and six months ended June 30, 2022, restructuring activities resulted in a **$0.1 million benefit and an $8 thousand loss**, respectively, a significant reduction from the prior-year period, reflecting a lower level of restructuring actions[65](index=65&type=chunk) - As of June 30, 2022, the **restructuring liability was $4.1 million**, primarily related to employee termination benefits[66](index=66&type=chunk) [NOTE 11 – PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS](index=20&type=section&id=NOTE%2011%20%E2%80%93%20PENSION%20PLANS%20AND%20OTHER%20POSTRETIREMENT%20BENEFITS) Net Periodic Benefit Cost (Income) | Metric (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Periodic Benefit Cost (Income) for Pension Benefits | (7,427) | (5,918) | (14,900) | (15,011) | | Net Periodic Benefit Cost (Income) for Other Benefits | 227 | 218 | 454 | 436 | - For the six months ended June 30, 2022, the company **contributed $0.5 million to its pension and other postretirement benefit plans**, significantly lower than the $24.3 million contributed in the prior-year period[70](index=70&type=chunk) - There were **no mark-to-market (MTM) adjustments** for pension and other postretirement benefit plans for the three and six months ended June 30, 2022[69](index=69&type=chunk) [NOTE 12 – DEBT](index=20&type=section&id=NOTE%2012%20%E2%80%93%20DEBT) Net Debt Balance of Senior Notes | Note Category (in thousands of U.S. dollars) | 8.125% Senior Notes | 6.50% Senior Notes | Total | | :--- | :--- | :--- | :--- | | Senior Notes due 2026 | 188,595 | 151,440 | 340,035 | | Unamortized Deferred Financing Costs | (4,641) | (5,967) | (10,608) | | Unamortized Premium | 541 | — | 541 | | Net Debt Balance | 184,495 | 145,473 | 329,968 | - In the first half of 2022, the company **sold $2.4 million of its 8.125% Senior Notes** under a sales agreement, receiving net proceeds of $2.4 million[73](index=73&type=chunk) - As of June 30, 2022, there were **no borrowings under the Revolving Credit Facility**, and usage under the Letter of Credit Facility included **$16.1 million in financial letters of credit** and **$96.2 million in performance letters of credit**[78](index=78&type=chunk) - As of June 30, 2022, letters of credit and bank guarantees outside the Letter of Credit Facility totaled **$50.5 million**, and outstanding performance surety bonds totaled approximately **$293.3 million**[86](index=86&type=chunk)[87](index=87&type=chunk) [NOTE 13 – PREFERRED STOCK](index=22&type=section&id=NOTE%2013%20%E2%80%93%20PREFERRED%20STOCK) - The company has issued **7.75% Series A Cumulative Perpetual Preferred Stock** with a liquidation preference of $25.00 per share and pays quarterly dividends[93](index=93&type=chunk) - For the six months ended June 30, 2022, the Board of Directors approved and paid **total preferred stock dividends of $7.4 million**[94](index=94&type=chunk) - For the six months ended June 30, 2022, the company **did not sell any additional preferred stock** under its sales agreement with B. Riley Securities, Inc[96](index=96&type=chunk) [NOTE 14 – COMMON STOCK](index=24&type=section&id=NOTE%2014%20%E2%80%93%20COMMON%20STOCK) - Company stockholders approved an amendment to the 2021 Long-Term Incentive Plan, **increasing the total common shares authorized for awards from 1,250,000 to 5,250,000**[98](index=98&type=chunk) [NOTE 15 –INTEREST EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION](index=25&type=section&id=NOTE%2015%20%E2%80%93INTEREST%20EXPENSE%20AND%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) Composition of Interest Expense | Category (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Senior Notes | 6,114 | 3,459 | 12,329 | 5,192 | | Amortization or Accretion | 1,818 | 1,893 | 3,520 | 7,761 | | Lease Liabilities | 697 | 708 | 1,405 | 1,324 | | Other Interest Expense | 2,033 | 1,124 | 4,675 | 2,202 | | Total Interest Expense | 10,662 | 8,021 | 21,929 | 22,244 | - For the three months ended June 30, 2022, **total interest expense increased to $10.7 million**, a $2.6 million increase from the prior-year period[100](index=100&type=chunk) - For the six months ended June 30, 2022, **cash paid for interest totaled $13.0 million**, primarily for the 8.125% and 6.50% Senior Notes[102](index=102&type=chunk) - As of June 30, 2022, **restricted cash and cash equivalents were $8.6 million**, which included $5.9 million held in escrow for the acquisition of Fossil Power Systems[100](index=100&type=chunk) [NOTE 16 – PROVISION FOR INCOME TAXES](index=26&type=section&id=NOTE%2016%20%E2%80%93%20PROVISION%20FOR%20INCOME%20TAXES) Income Tax (Benefit) Expense and Effective Tax Rate | Metric (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | (Loss) Income Before Income Taxes | (4,349) | 6,687 | (11,803) | (5,920) | | Income Tax (Benefit) Expense | (1,355) | 3,546 | (125) | 6,382 | | Effective Tax Rate | 31.2% | 53.0% | 1.1% | (107.8)% | - The **effective tax rate does not reflect the U.S. statutory rate**, primarily due to a valuation allowance against certain net deferred tax assets and non-recurring items like withholding taxes[105](index=105&type=chunk) [NOTE 17 – CONTINGENCIES](index=26&type=section&id=NOTE%2017%20%E2%80%93%20CONTINGENCIES) - In the **Glatfelter litigation**, the court dismissed claims of fraud and negligent misrepresentation and capped potential damages at **$11.7 million** if the contract is found valid[107](index=107&type=chunk) - A **settlement in principle was reached in the shareholder litigation** for a total payment of **$9.5 million**, including corporate governance changes; $4.75 million will be paid by the company on behalf of B. Riley Financial, Inc. and Vintage Capital Management, LLC, with the other $4.75 million paid to the company from insurance proceeds and other parties[110](index=110&type=chunk) - The **Russia-Ukraine conflict may impact the company's business**, and while it has no direct contracts with Russian entities, its Italian subsidiary has approximately **$3.1 million in sales to non-Russian parties** who may resell products to or use them in Russia[111](index=111&type=chunk) [NOTE 18 – COMPREHENSIVE INCOME](index=28&type=section&id=NOTE%2018%20%E2%80%93%20COMPREHENSIVE%20INCOME) Changes in Accumulated Other Comprehensive Income (Loss) | Metric (in thousands of U.S. dollars) | Balance at Dec 31, 2021 | Balance at Mar 31, 2022 | Balance at Jun 30, 2022 | | :--- | :--- | :--- | :--- | | Currency Translation Loss | (55,499) | (59,784) | (66,418) | | Unrecognized Loss Related to Pension Plans (Net of Tax) | (3,323) | (2,730) | (2,928) | | Total | (58,822) | (62,514) | (69,346) | - As of June 30, 2022, **accumulated other comprehensive loss increased to $69.3 million**, primarily driven by losses from currency translation adjustments[114](index=114&type=chunk) [NOTE 19 – FAIR VALUE MEASUREMENTS](index=29&type=section&id=NOTE%2019%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) Fair Value of Available-for-Sale Securities | Category (in thousands of U.S. dollars) | As of June 30, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Corporate Notes and Bonds | 6,900 | 9,477 | | Mutual Funds | 640 | 714 | | U.S. Government and Agency Securities | 3,016 | 2,017 | | Total | 10,556 | 12,208 | Fair Value of Senior Notes (as of June 30, 2022) | Note Category | Carrying Value (in thousands of U.S. dollars) | Estimated Fair Value (in thousands of U.S. dollars) | | :--- | :--- | :--- | | 8.125% Senior Notes | 188,595 | 179,216 | | 6.50% Senior Notes | 151,440 | 131,026 | - The **fair value of the contingent consideration liability related to the Fosler Construction Company acquisition is $9.6 million**, classified as a Level 3 liability based primarily on significant unobservable inputs[123](index=123&type=chunk) [NOTE 20 – RELATED PARTY TRANSACTIONS](index=30&type=section&id=NOTE%2020%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) - As of June 30, 2022, **B. Riley beneficially owned approximately 30.5%** of the company's outstanding common stock[125](index=125&type=chunk) - The company pays **CEO service fees to B. Riley's affiliate**, BRPI Executive Consulting, LLC, totaling **$0.2 million in Q2 2022** and **$0.4 million in H1 2022**[126](index=126&type=chunk) - The company paid multiple underwriting fees and other transaction costs to B. Riley Securities, Inc. related to the issuance of senior notes, common stock, and preferred stock[127](index=127&type=chunk)[128](index=128&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[133](index=133&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[139](index=139&type=chunk) - B. Riley Financial, Inc. provides a **payment guaranty for the company's Reimbursement Agreement obligations**, for which the company pays B. Riley an annual fee of **$0.9 million**[135](index=135&type=chunk) [NOTE 21 – ACQUISITIONS AND DIVESTITURES](index=31&type=section&id=NOTE%2021%20%E2%80%93%20ACQUISITIONS%20AND%20DIVESTITURES) - On September 30, 2021, the company acquired a **60% controlling interest in Fosler Construction Company Inc.** for a total consideration of **$36.0 million**, including $27.2 million in cash and $8.8 million in contingent consideration, resulting in a **$14.4 million increase in goodwill**[141](index=141&type=chunk)[142](index=142&type=chunk)[145](index=145&type=chunk) - On November 30, 2021, the company acquired **100% of the shares of VODA A/S** in Denmark for approximately **$32.9 million**[146](index=146&type=chunk) - On February 1, 2022, the company acquired **100% of the shares of Fossil Power Systems, Inc.** for approximately **$59.2 million**, including a $5.9 million holdback[148](index=148&type=chunk) - On February 28, 2022, the company acquired **100% of the membership interests of Optimus Industries, LLC** for approximately **$19.2 million**[151](index=151&type=chunk) - On June 30, 2022, the company **sold the development rights to future solar projects for $8.0 million**, recognizing a **$7.0 million gain on the sale**[163](index=163&type=chunk) [NOTE 22 – NEW ACCOUNTING STANDARDS](index=36&type=section&id=NOTE%2022%20%E2%80%93%20NEW%20ACCOUNTING%20STANDARDS) - In H1 2022, the company adopted **ASU 2020-06** (Debt with Conversion and Other Options), which did not have a material impact on the condensed consolidated financial statements[167](index=167&type=chunk)[169](index=169&type=chunk) - The company is evaluating the impact of **ASU 2021-08** (Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers), effective January 2023[169](index=169&type=chunk) - The company is evaluating the impact of **ASU 2018-19** (Codification Improvements to Topic 326, Financial Instruments—Credit Losses), effective January 2023, which introduces the current expected credit losses (CECL) model[170](index=170&type=chunk) [NOTE 23 – SUBSEQUENT EVENTS](index=38&type=section&id=NOTE%2023%20%E2%80%93%20SUBSEQUENT%20EVENTS) - On July 20, 2022, B. Riley's affiliate, BRF Investments, LLC, **exercised warrants to purchase 1,541,666 shares of common stock** at a price of $0.01 per share[171](index=171&type=chunk) - On July 28, 2022, B&W was the successful bidder to acquire the assets of **Hamon Research-Cottrell, Inc.**, a leading supplier of air pollution control technologies, for approximately **$2.9 million**[172](index=172&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operation) This item provides management's discussion and analysis of the company's financial condition and results of operations for the three and six months ended June 30, 2022 [BUSINESS OVERVIEW](index=38&type=section&id=BUSINESS%20OVERVIEW) - B&W is a global provider of renewable, environmental, and thermal technologies with over 150 years of experience, serving industrial, electric utility, and municipal customers[174](index=174&type=chunk) - The company's business is organized into three market-facing segments: **B&W Renewable, B&W Environmental, and B&W Thermal**[175](index=175&type=chunk) - In February 2022, the company acquired **Fossil Power Systems, Inc. and Optimus Industries, LLC**, both of which are included in the B&W Thermal segment[176](index=176&type=chunk)[177](index=177&type=chunk) - The company's business is significantly dependent on capital, operating, and maintenance expenditures by global power generation companies and industrial facilities with environmental compliance requirements[178](index=178&type=chunk) - The **Russia-Ukraine conflict has negatively impacted the global economy**, causing supply and material shortages and affecting the timing of revenue recognition on several projects[180](index=180&type=chunk) [RESULTS OF OPERATIONS](index=40&type=section&id=RESULTS%20OF%20OPERATIONS) [Components of Our Results of Operations](index=40&type=section&id=Components%20of%20Our%20Results%20of%20Operations) - **Revenues** are primarily derived from renewable, environmental, and thermal technology solutions[185](index=185&type=chunk) - **Income (loss) from operations** consists mainly of revenues less costs of operations, SG&A expenses, and advisory fees and settlement costs[186](index=186&type=chunk) - **Net income (loss)** is primarily composed of operating income less other income and expenses, including interest income, foreign exchange, and benefit plan-related expenses[187](index=187&type=chunk) [Condensed Consolidated Results of Operations](index=40&type=section&id=Condensed%20Consolidated%20Results%20of%20Operations) Summary of Condensed Consolidated Results of Operations | Metric (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | 221,019 | 202,860 | 425,068 | 371,108 | | Net Income (Loss) | (2,994) | 3,141 | (11,678) | (12,302) | | Income (Loss) from Operations | 3,668 | 2,784 | (3,115) | (3,678) | | Adjusted EBITDA | 20,608 | 15,222 | 32,628 | 23,793 | - For the three months ended June 30, 2022, **revenue increased 9.0% year-over-year to $221.0 million**, driven by the acquisitions of Fosler Construction and VODA and increased volume in the Environmental segment[191](index=191&type=chunk) - For the three months ended June 30, 2022, the **net loss increased to $3.0 million**, primarily due to higher interest expense and foreign exchange losses[192](index=192&type=chunk) - For the six months ended June 30, 2022, the **net loss improved to $11.7 million**, mainly due to positive contributions from acquisitions[194](index=194&type=chunk) [Bookings and Backlog](index=42&type=section&id=Bookings%20and%20Backlog) Summary of Bookings and Backlog | Metric (in millions of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Bookings | 245 | 168 | 484 | 337 | | Total Backlog | 731 | 500 | | | - As of June 30, 2022, **total backlog was $731 million**, a **46.2% increase** from $500 million at June 30, 2021[200](index=200&type=chunk) Expected Revenue Recognition from Backlog | Year (in millions of U.S. dollars) | 2022 | 2023 | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | | B&W Renewable | 178 | 111 | 123 | 412 | | B&W Environmental | 59 | 25 | 43 | 127 | | B&W Thermal | 118 | 70 | 5 | 193 | | Other/Eliminations | (1) | — | — | (1) | | Expected Backlog Revenue | 354 | 206 | 171 | 731 | [Non-GAAP Financial Measures](index=43&type=section&id=Non-GAAP%20Financial%20Measures) - **Adjusted EBITDA is a non-GAAP measure** used internally to evaluate performance and make strategic decisions, calculated by adjusting net income (loss) for interest, taxes, depreciation, amortization, and other specific items[203](index=203&type=chunk) Reconciliation of Adjusted EBITDA to Net Income (Loss) | Metric (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | (2,994) | 3,141 | (11,678) | (12,302) | | EBITDA | 13,445 | 19,349 | 24,517 | 25,309 | | Adjusted EBITDA | 20,608 | 15,222 | 32,628 | 23,793 | - Adjusted EBITDA for Q2 and H1 2022 includes a **$7.0 million non-recurring gain** from the sale of solar project development rights[204](index=204&type=chunk) [B&W Renewable Segment Results](index=44&type=section&id=B&W%20Renewable%20Segment%20Results) B&W Renewable Segment Revenues and Adjusted EBITDA | Metric (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | 75,227 | 38,344 | 143,188 | 67,155 | | Adjusted EBITDA | 8,869 | 3,427 | 10,324 | 3,631 | - For the three months ended June 30, 2022, **B&W Renewable segment revenue grew 96% to $75.2 million**, primarily due to the acquisitions of Fosler Construction and VODA and increased new build project volume[208](index=208&type=chunk) - For the three months ended June 30, 2022, **Adjusted EBITDA increased to $8.9 million**, driven by revenue growth and a **$7.0 million non-recurring gain** from the sale of solar project development rights[209](index=209&type=chunk) [B&W Environmental Segment Results](index=44&type=section&id=B&W%20Environmental%20Segment%20Results) B&W Environmental Segment Revenues and Adjusted EBITDA | Metric (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | 31,612 | 28,358 | 66,560 | 59,518 | | Adjusted EBITDA | 591 | 2,705 | 2,030 | 3,810 | - For the three months ended June 30, 2022, **B&W Environmental segment revenue grew 11% to $31.6 million**, driven by higher overall volume in the systems product line[214](index=214&type=chunk) - For the three months ended June 30, 2022, **Adjusted EBITDA decreased to $0.6 million**, primarily due to the completion of higher-margin projects in the prior period[215](index=215&type=chunk) [B&W Thermal Segment Results](index=45&type=section&id=B&W%20Thermal%20Segment%20Results) B&W Thermal Segment Revenues and Adjusted EBITDA | Metric (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | 116,305 | 136,316 | 218,544 | 244,597 | | Adjusted EBITDA | 16,361 | 12,572 | 30,515 | 23,107 | - For the three months ended June 30, 2022, **B&W Thermal segment revenue decreased 15% to $116.3 million**, primarily due to lower construction project activity, partially offset by the acquisitions of Fossil Power Systems and Optimus Industries[218](index=218&type=chunk) - For the three months ended June 30, 2022, **Adjusted EBITDA increased to $16.4 million**, driven by a favorable product mix and acquisitions, which offset the decline in overall volume[219](index=219&type=chunk) [Corporate](index=45&type=section&id=Corporate) - **Corporate costs**, representing unallocated SG&A in Adjusted EBITDA, **increased to $4.2 million in Q2 2022**, a year-over-year increase of $1.2 million, primarily due to higher tax and accounting services[222](index=222&type=chunk) - For H1 2022, **corporate costs increased to $8.6 million**, a year-over-year increase of $2.9 million, mainly due to higher tax and accounting services[224](index=224&type=chunk) [Advisory Fees and Settlement Costs](index=47&type=section&id=Advisory%20Fees%20and%20Settlement%20Costs) - **Advisory fees and settlement costs increased to $5.1 million in Q2 2022** (up $0.6 million YoY) and **$9.1 million in H1 2022** (up $1.3 million YoY), primarily related to higher legal fees and other costs[225](index=225&type=chunk) [Research and Development](index=47&type=section&id=Research%20and%20Development) - **R&D expenses were $1.1 million in Q2 2022** and **$1.9 million in H1 2022**, focused on product improvement, cost reduction, and meeting customer expectations[226](index=226&type=chunk) [Restructuring](index=47&type=section&id=Restructuring) - Restructuring activities resulted in a **$0.1 million benefit in Q2 2022** and **$0 expense in H1 2022**, a significant reduction from the prior-year period, reflecting a lower level of restructuring actions[227](index=227&type=chunk) [Transition Costs](index=47&type=section&id=Transition%20Costs) - **Transition costs were $1.9 million in Q2 2022** and **$4.5 million in H1 2022**, primarily from outsourcing certain tasks to offshore providers or shifting administrative tasks to global service providers to reduce future SG&A expenses[228](index=228&type=chunk) [Depreciation and Amortization](index=47&type=section&id=Depreciation%20and%20Amortization) - **Depreciation expense was $2.6 million in Q2 2022** and **$4.8 million in H1 2022**[229](index=229&type=chunk) - **Amortization expense was $3.1 million in Q2 2022** and **$7.1 million in H1 2022**, a significant increase from the prior-year period[229](index=229&type=chunk) [Pension and Other Postretirement Benefit Plans](index=47&type=section&id=Pension%20and%20Other%20Postretirement%20Benefit%20Plans) - The company recognizes income from its defined benefit and other postretirement benefit plans, primarily because the expected return on assets exceeds service costs[230](index=230&type=chunk) - There were **no mark-to-market (MTM) adjustments** for pension and other postretirement benefit plans for the three and six months ended June 30, 2022[231](index=231&type=chunk) [Foreign Exchange](index=48&type=section&id=Foreign%20Exchange) - Foreign exchange resulted in a **$4.3 million loss in Q2 2022** (vs $1.8 million gain YoY) and a **$1.2 million loss in H1 2022** (vs $0.6 million gain YoY)[235](index=235&type=chunk) - Foreign exchange gains and losses are primarily related to unhedged intercompany loans denominated in European currencies[235](index=235&type=chunk) [Income Taxes](index=48&type=section&id=Income%20Taxes) Income Tax (Benefit) Expense and Effective Tax Rate | Metric (in thousands of U.S. dollars) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | (Loss) Income Before Income Taxes | (4,349) | 6,687 | (11,803) | (5,920) | | Income Tax (Benefit) Expense | (1,355) | 3,546 | (125) | 6,382 | | Effective Tax Rate | 31.2% | 53.0% | 1.1% | (107.8)% | - The effective tax rates for Q2 and H1 2022 do not reflect the U.S. statutory rate, primarily due to a valuation allowance against certain net deferred tax assets and unfavorable non-recurring items[237](index=237&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) [Liquidity](index=48&type=section&id=Liquidity) - The company's primary liquidity needs include **debt service, preferred stock dividend payments, and working capital requirements**[238](index=238&type=chunk) - Liquidity is primarily sourced from **cash from operations, external financing** (including senior notes and equity offerings), and the Revolving Credit Facility[238](index=238&type=chunk) - In H1 2022, the company completed the acquisitions of **Fossil Power Systems and Optimus Industries** and sold **$2.4 million of its 8.125% Senior Notes**[239](index=239&type=chunk) [Cash and Cash Flows](index=49&type=section&id=Cash%20and%20Cash%20Flows) - As of June 30, 2022, the company had **$71.5 million in unrestricted cash and cash equivalents**, **$334.3 million in total debt**, and **$191.7 million in total preferred stock**[242](index=242&type=chunk) - For the six months ended June 30, 2022, **net cash outflow was $63.6 million from operations**, **$65.6 million from investing** (primarily business acquisitions), and **$15.6 million from financing** (primarily preferred stock dividends)[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) - Foreign locations held **$33.2 million of unrestricted cash**, which is generally not available to fund U.S. operations unless repatriated or used to repay intercompany loans, potentially incurring taxes[242](index=242&type=chunk) [Debt Facilities](index=49&type=section&id=Debt%20Facilities) - The company entered into a Reimbursement Agreement, Revolving Credit Facility, and Letter of Credit Facility on June 30, 2021; as of June 30, 2022, there were **no borrowings under the Revolving Credit Facility**[246](index=246&type=chunk) - Usage under the Letter of Credit Facility included **$16.1 million in financial letters of credit** and **$96.2 million in performance letters of credit**[246](index=246&type=chunk) - Related party **B. Riley provides a payment guaranty** for the company's obligations under the Reimbursement Agreement[246](index=246&type=chunk) [Letters of Credit, Bank Guarantees and Surety Bonds](index=49&type=section&id=Letters%20of%20Credit,%20Bank%20Guarantees%20and%20Surety%20Bonds) - As of June 30, 2022, letters of credit and bank guarantees outside the Letter of Credit Facility totaled **$50.5 million**[247](index=247&type=chunk) - As of June 30, 2022, outstanding performance surety bonds totaled approximately **$293.3 million**[250](index=250&type=chunk) - The ability to obtain and maintain sufficient capacity under existing debt facilities is critical to support the issuance of letters of credit, bank guarantees, and surety bonds[251](index=251&type=chunk) [Other Indebtedness - Loans Payable](index=50&type=section&id=Other%20Indebtedness%20-%20Loans%20Payable) - As of June 30, 2022, a Danish subsidiary had a **$0.8 million interest-free loan** (COVID-19 related) due in May 2023[252](index=252&type=chunk) - Fosler Construction has **$0.6 million in vehicle and equipment loans**[253](index=253&type=chunk) [Off-Balance Sheet Arrangements](index=50&type=section&id=Off-Balance%20Sheet%20Arrangements) - As of June 30, 2022, the company had **no off-balance sheet arrangements** expected to have a material current or future effect on its financial condition, results of operations, liquidity, capital expenditures, or capital resources[254](index=254&type=chunk) [Critical Accounting Policies and Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There were **no material changes to critical accounting policies and estimates** during the six months ended June 30, 2022, from those disclosed in the Annual Report for the year ended December 31, 2021[255](index=255&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's exposure to market risk has not materially changed from that disclosed in the Annual Report for the year ended December 31, 2021 - The company's exposure to market risk has **not materially changed** from that disclosed in the Annual Report for the year ended December 31, 2021[256](index=256&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) This item confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2022, and reports no material changes to internal control over financial reporting during the period [Disclosure Controls and Procedures](index=50&type=section&id=Disclosure%20Controls%20and%20Procedures) - As of June 30, 2022, the company's CEO and CFO concluded that its **disclosure controls and procedures were effective** to provide reasonable assurance that information required in reports filed under the Securities Exchange Act is recorded, processed, summarized, and reported in a timely manner[258](index=258&type=chunk) [Changes in Internal Control Over Financial Reporting](index=51&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There were **no material changes to internal control over financial reporting** during the three months ended June 30, 2022[260](index=260&type=chunk) - Internal controls were **not materially affected** despite some team members working remotely due to the COVID-19 pandemic[260](index=260&type=chunk) [PART II - OTHER INFORMATION](index=51&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part provides other required information, including legal proceedings, risk factors, sales of unregistered securities, and exhibits [Item 1. Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) This item references Note 17 to the financial statements for information on ongoing investigations and legal proceedings - For information regarding ongoing investigations and legal proceedings, refer to **Note 17 to the Condensed Consolidated Financial Statements**[262](index=262&type=chunk) [Item 1A. Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) This item updates risk factors, highlighting the ongoing adverse impact of the Russia-Ukraine conflict on the company's business and operations - There have been **no material changes to the risk factors** listed in the Annual Report for the year ended December 31, 2021, except for the new risk factor below[263](index=263&type=chunk) - The **Russia-Ukraine conflict may continue to adversely affect the company's business and results of operations**, causing significant volatility and disruption in global markets, including shortages of supplies and materials required for the company's business[264](index=264&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item reports no unregistered sales of equity securities for the quarter ended June 30, 2022, and details shares withheld for employee tax obligations - During the quarter ended June 30, 2022, the company **did not withhold any shares** to satisfy employee statutory income tax withholding obligations in connection with the vesting of employee restricted stock[265](index=265&type=chunk) - The company **does not currently have a common stock repurchase program**[265](index=265&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This item lists the exhibits filed as part of the Form 10-Q report, including various agreements, certificates, and XBRL taxonomy documents - Exhibits include the Master Separation Agreement, Restated Certificate of Incorporation, Amended and Restated By-laws, Certificates of Designations, and certifications by the CEO and CFO[268](index=268&type=chunk) [SIGNATURES](index=53&type=section&id=SIGNATURES) This section contains the required signatures for the report filing under the Securities Exchange Act - The report is signed on behalf of Babcock & Wilcox Enterprises, Inc. by **Louis Salamone, Executive Vice President, Chief Financial Officer, and Chief Accounting Officer**, on August 8, 2022[273](index=273&type=chunk)

| --- | --- | --- | |------------------|-------|------------------| | | | | | | | | | BABCOCK | | | | BABCOCK ONMENTAI | | BABCOCK & WILCOX | | BABCOCK | | Company Overview | | | | May 9, 2022 | Safe Harbor Statement B&W Enterprises cautions that this presentation contains forward-looking statements, including, without limitation, statements relating to adjusted EBITDA and sales targets, expectations regarding future growth, expansion and profitability, as well as statements about B&W's future pipeline of n ...

Babcock & Wilcox Enterprises, Inc. (NYSE:BW) Q1 2022 Results Conference Call May 9, 2022 5:00 PM ET Company Participants Sharyn Brooks - Director, Communications Kenny Young - Chairman and CEO Lou Salamone - CFO Conference Call Participants Rob Brown - Lake Street Capital Brent Thielman - D.A. Davidson Alex Rygiel - B. Riley Operator Good afternoon. Thank you for attending today’s Babcock & Wilcox Enterprises Q1 2022 Earnings Conference Call. My name is Bethany and I will be your moderator for today’s call. ...

Financial Performance - Revenues for the three months ended March 31, 2022, were $204,049 thousand, an increase of 21.3% compared to $168,248 thousand in 2021[14] - Total costs and expenses increased to $210,832 thousand in Q1 2022 from $174,710 thousand in Q1 2021, representing a 20.7% rise[14] - The net loss attributable to stockholders was $11,979 thousand for Q1 2022, compared to a net loss of $15,464 thousand in Q1 2021, showing a 22.3% improvement[14] - Basic and diluted loss per share improved to $(0.14) in Q1 2022 from $(0.22) in Q1 2021[14] - The company reported a total comprehensive loss of $12,376 thousand for Q1 2022, down from $19,827 thousand in Q1 2021, indicating a 37.5% reduction[16] - Net loss for the three months ended March 31, 2022, was $8,684,000, an improvement from a net loss of $15,443,000 in 2021, representing a 43.5% reduction[24] - Adjusted EBITDA for the three months ended March 31, 2022, was $12,020,000, compared to $8,571,000 for the same period in 2021, representing an increase of 40.3%[41] - The net loss improved to $8.684 million in Q1 2022 from a net loss of $15.443 million in Q1 2021, showing progress in financial performance[184] Cash and Liquidity - Cash and cash equivalents as of March 31, 2022, were $108,137 thousand, a decrease from $224,874 thousand at December 31, 2021[18] - The company had a total stockholders' equity of $43,942 thousand as of March 31, 2022, compared to $58,622 thousand at December 31, 2021[21] - Net cash used in operating activities for Q1 2022 was $41,999,000, an improvement from $53,954,000 in Q1 2021[24] - The company has $110 million available under the Revolving Credit Agreement, with no borrowings as of March 31, 2022[73] - Liquidity requirements are primarily funded through cash generated from operations and external financing sources, including senior notes and revolving credit agreements[211] Segment Performance - The B&W Renewable segment generated revenues of $67,961,000 in Q1 2022, compared to $28,811,000 in Q1 2021, marking a significant increase[39] - The B&W Environmental segment reported revenues of $34,948,000, up from $31,160,000 in the same period last year, reflecting a 8.9% growth[39] - The B&W Thermal segment's revenues decreased to $102,239,000 from $108,281,000, indicating a decline of 5.5% year-over-year[39] - B&W Renewable segment revenue rose by $39.2 million to $67.961 million in Q1 2022, up from $28.811 million in Q1 2021, driven by acquisitions and increased project volume[188] - B&W Environmental segment revenues increased by 12%, or $3.8 million, to $34.9 million for the three months ended March 31, 2022, compared to $31.2 million in the same period of 2021[190] - B&W Thermal segment revenues decreased by 6%, or $6.0 million, to $102.2 million for the three months ended March 31, 2022, compared to $108.3 million in the same period of 2021[194] Assets and Liabilities - Total assets decreased to $954,699 thousand as of March 31, 2022, from $913,265 thousand at December 31, 2021[18] - Interest expense decreased to $11,267 thousand in Q1 2022 from $14,223 thousand in Q1 2021, reflecting a 20.5% reduction[14] - Contract liabilities increased to $100,130,000 as of March 31, 2022, from $68,615,000 at the end of 2021, reflecting a 46% increase[46] - The company recorded an increase in goodwill of $14.9 million due to the acquisition of Fosler, which included $14.5 million of accrued liabilities[49] - Total inventories as of March 31, 2022, were $90,401,000, compared to $79,527,000 at the end of 2021, indicating a 13.5% increase[51] Acquisitions and Investments - The company acquired 100% ownership of VODA A/S for approximately $32.9 million, focusing on aftermarket parts and services for energy-producing incineration plants[137] - The acquisition of Fossil Power Systems, Inc. was completed for approximately $59.1 million, excluding working capital adjustments, with a hold-back of $5.9 million contingent on certain conditions[139] - The company recognized a gain of $1.9 million from the sale of real property assets in Copley, Ohio, sold for $4.0 million[150] - A gain of $13.9 million was recognized from the sale of real property assets in Lancaster, Ohio, sold for $18.9 million[151] Legal and Regulatory Matters - The company has ongoing stockholder litigation regarding fiduciary duties related to the 2019 rights offering, with potential material impacts still undetermined[102] - The company expects no material adverse effects from routine litigation or disputes related to business activities[104] - The Glatfelter Litigation alleges damages in excess of $58.9 million, with the company seeking damages over $2.9 million in a counterclaim[101] Research and Development - Research and development costs increased to $719 thousand in Q1 2022 from $588 thousand in Q1 2021, marking a 22.3% increase[14] - Research and development expenses remained relatively stable at $0.7 million in Q1 2022, compared to $0.6 million in Q1 2021[198] Taxation - The effective tax rate for the three months ended March 31, 2022, was (16.5)%, compared to (22.5)% for the same period in 2021[97] - The company's consolidated effective income tax rate varies between approximately 19% and 30% due to foreign operations and jurisdictional mix[99]

Company Overview and Strategy - Babcock & Wilcox (B&W) is a global provider of renewable, environmental, and thermal technologies with over 150 years of experience[4, 36] - B&W is focused on expanding its clean energy portfolio through innovation and acquisitions, including solar installation, renewable aftermarket services, and hydrogen combustion equipment[6, 38] - The company's key growth strategies involve expanding sales internationally, providing carbon reduction solutions, leveraging its installed base for aftermarket sales, and offering environmental technologies[13] Financial Performance and Targets - B&W achieved approximately $71 million in adjusted EBITDA for the 12 months ending December 31, 2021[7, 39] - The company is targeting an adjusted EBITDA of $110-$120 million for fiscal year 2022[7, 39] - Full year 2021 Revenue was $723 million[16] Market Opportunities and Pipeline - B&W has a pipeline of over $7.5 billion in identified project opportunities in high-growth markets over the next three years[5, 37, 19] - The company has secured significant awards, including five renewable new-build waste-to-energy projects since September 2021[5, 37] - B&W is positioned to capitalize on global trends driving the need for environmental and renewable solutions, including increasing regulatory restrictions on landfilling and the drive toward renewable energy sources[12] Business Segments and Revenue Breakdown - Consolidated Industrial accounts for 35% of revenue, while Power Generation accounts for 65%[16] - Aftermarket & Upgrades contribute 39% to revenue, and Parts & Services account for 45%[16] - North America accounts for 67% of revenue, Europe for 16%, and Asia & Other for 17%[16]

Babcock & Wilcox Enterprises, Inc. (NYSE:BW) Q4 2021 Earnings Conference Call March 8, 2022 8:00 AM ET Company Participants Megan Wilson - Chief Strategy Officer and Senior Vice President, Corporate Development Kenny Young - Chairman and Chief Executive Officer Lou Salamone - Executive Vice President and Chief Financial Officer Conference Call Participants Zane Karimi - D.A. Davidson Alex Rygiel - B. Riley Rob Brown - Lake Street Capital Markets Disclaimer*: This transcript is designed to be used alongside ...

PART I [Business](index=6&type=section&id=Item%201.%20Business) Babcock & Wilcox Enterprises, Inc. (B&W) is a global provider of renewable, environmental, and thermal technologies, strategically expanding through acquisitions in clean energy and influenced by capital expenditures and regulations Company Segments | Segment | Description | | :--- | :--- | | **B&W Renewable** | Technologies for waste-to-energy, solar, biomass, and black liquor systems | | **B&W Environmental** | Emissions control and environmental technology solutions like cooling, ash handling, and particulate control | | **B&W Thermal** | Steam generation equipment, aftermarket parts, and services for power generation, oil & gas, and industrial sectors | - The company completed four strategic acquisitions to bolster its renewable and thermal segments: **Fosler Construction (Sept 2021)**: 60% stake in a solar energy contractor to capitalize on the high-growth U.S. solar market[26](index=26&type=chunk) **VODA A/S (Nov 2021)**: 100% ownership of a Danish aftermarket parts and services provider to strengthen its renewable service business in Europe[27](index=27&type=chunk) **Fossil Power Systems, Inc. (Feb 2022)**: 100% ownership of a manufacturer of hydrogen, natural gas, and renewable combustion equipment[28](index=28&type=chunk) **Optimus Industries, LLC (Feb 2022)**: 100% ownership of a designer of waste heat recovery products[29](index=29&type=chunk) - The COVID-19 pandemic has adversely impacted business by disrupting global supply chains, delaying projects into 2022 and beyond, and imposing travel restrictions that affect the company's ability to service customers at worksites[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) 2021 Capital Activities | Activity | Date | Net Proceeds / Amount (in millions) | | :--- | :--- | :--- | | **Equity Offerings** | | | | Common Stock Offering | Feb 2021 | ~$163.0 | | Preferred Stock Offering | May 2021 | ~$106.4 | | **Debt Offerings** | | | | 8.125% Senior Notes | Feb 2021 | ~$120.0 | | 6.50% Senior Notes | Dec 2021 | ~$145.0 | - At December 31, 2021, the company employed approximately **1,800 people worldwide**, with about **400 hourly employees** affiliated with unions, and considers its employee and union relations to be in good standing[66](index=66&type=chunk) [Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse operational, industry, financial, international, and ownership risks, including COVID-19 impacts, fixed-price contract losses, coal-fired plant dependence, liquidity needs, geopolitical events, and significant shareholder influence - **Operational Risks**: The business continues to be adversely affected by the COVID-19 pandemic, which has caused project delays and supply chain disruptions[83](index=83&type=chunk)[84](index=84&type=chunk) The company is also subject to losses if actual costs exceed estimates on fixed-price contracts, a risk that has materialized in the past[88](index=88&type=chunk) - **Industry Risks**: A substantial portion of revenue (**47% in 2021**) is related to coal-fired power plants, making the company vulnerable to a decline in spending on coal-based energy[121](index=121&type=chunk)[123](index=123&type=chunk) Demand is also subject to macroeconomic downturns and supply chain issues[125](index=125&type=chunk) - **Liquidity and Capital Risks**: The business requires significant bonding and letter of credit capacity to bid on and execute contracts[132](index=132&type=chunk) Goodwill and intangible assets (**$160.3 million** at year-end) are subject to impairment risk[137](index=137&type=chunk) Debt agreements contain restrictive covenants that could limit operational flexibility[146](index=146&type=chunk) - **International & Regulatory Risks**: The company's business may be affected by sanctions and export controls related to Russia's invasion of Ukraine[178](index=178&type=chunk) It is also subject to the U.S. Foreign Corrupt Practices Act (FCPA) and other anti-bribery laws, as well as political and economic uncertainties in foreign markets[185](index=185&type=chunk)[187](index=187&type=chunk) - **Ownership Risks**: B. Riley Financial, Inc. holds significant influence, controlling approximately **30.3% of the voting power** and having the right to nominate three directors as of December 31, 2021[198](index=198&type=chunk)[200](index=200&type=chunk) [Unresolved Staff Comments](index=34&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - None[244](index=244&type=chunk) [Properties](index=34&type=section&id=Item%202.%20Properties) The company's principal properties include owned and leased manufacturing facilities, administrative offices, and service centers across its three segments globally Principal Properties by Segment (as of Dec 31, 2021) | Segment | Location | Use | Ownership | | :--- | :--- | :--- | :--- | | **B&W Renewable** | Esbjerg, Denmark | Manufacturing/Admin | Owned | | | Copenhagen, Denmark | Admin Office | Leased (2023) | | **B&W Environmental** | Paruzzaro, Italy | Admin Offices | Leased (2024) | | | Ding Xiang, China | Manufacturing | Leased (2023) | | **B&W Thermal** | Akron, Ohio | Admin Offices | Leased (2034) | | | Lancaster, Ohio | Manufacturing | Leased (2041) | | | Dumbarton, Scotland | Manufacturing | Owned | | | Guadalupe, Mexico | Manufacturing | Leased (2024) | [Legal Proceedings](index=34&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding ongoing investigations and litigation is incorporated by reference from Note 22 to the Consolidated Financial Statements - For details on legal proceedings, refer to Note 22 of the Consolidated Financial Statements[246](index=246&type=chunk) [Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[248](index=248&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matter and Issuer Purchase of Equity Securities](index=35&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matter%20and%20Issuer%20Purchase%20of%20Equity%20Securities) The company's common stock trades on the NYSE, with its performance lagging benchmarks, and it issued preferred stock to B. Riley in 2021 to prepay term loans - The company's common stock is traded on the NYSE under the symbol **BW**[251](index=251&type=chunk) - A performance graph comparing cumulative total shareholder return over five years shows B&W's stock performance lagging behind the S&P 500, Russell 2000, and a custom peer group[255](index=255&type=chunk) - On June 1, 2021, the company issued **2,916,880 shares** of its Preferred Stock to B. Riley in a private exchange to prepay **$73.3 million** of existing term loans[257](index=257&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operation](index=36&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operation) This section analyzes the company's financial performance from 2019-2021, highlighting 2021 revenue growth to $723.4 million, a return to profitability with $31.5 million net income, increased Adjusted EBITDA, and strengthened liquidity through strategic financing activities [Overview](index=37&type=section&id=Overview) B&W's business is structured into Renewable, Environmental, and Thermal segments, with recent strategic acquisitions expanding its clean energy focus, driven by global power generation and industrial sector capital expenditures - The company's business is organized into three market-facing segments: Babcock & Wilcox Renewable, Babcock & Wilcox Environmental, and Babcock & Wilcox Thermal[260](index=260&type=chunk) - Recent strategic acquisitions include **Fosler Construction (solar)**, **VODA (renewable services)**, **Fossil Power Systems (combustion equipment)**, and **Optimus Industries (waste heat recovery)** to expand its clean energy and thermal businesses[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[265](index=265&type=chunk) - Key business drivers include climate change initiatives, environmental regulations, electricity prices, and the overall strength of the industrial sector[266](index=266&type=chunk) [Results of Operations - Years Ended December 31, 2021, 2020, and 2019](index=38&type=section&id=Results%20of%20Operations%20-%20Years%20Ended%20December%2031%2C%202021%2C%202020%2C%20and%202019) In 2021, consolidated revenues increased 27.7% to $723.4 million, driven by strong recovery in Thermal and Environmental segments, leading to a net income of $31.5 million and increased backlog Consolidated Financial Performance (in millions) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Revenues** | $723.4 | $566.3 | $859.1 | | **Operating Income (Loss)** | $20.8 | $(1.7) | $(29.4) | | **Net Income (Loss)** | $31.5 | $(10.3) | $(129.0) | | **Adjusted EBITDA** | $70.6 | $45.7 | $46.0 | Segment Revenue Performance (in millions) | Segment | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | B&W Renewable | $156.8 | $156.2 | +0.4% | | B&W Environmental | $133.8 | $108.0 | +23.9% | | B&W Thermal | $433.3 | $305.0 | +42.1% | - The B&W Renewable segment's adjusted EBITDA decreased to **$23.2 million** in 2021 from **$25.0 million** in 2020, primarily because 2020 results included a one-time **$26.0 million** insurance settlement recovery related to legacy EPC loss contracts[299](index=299&type=chunk)[301](index=301&type=chunk) - Backlog increased to **$639 million** at the end of 2021, up from **$535 million** at the end of 2020, with bookings of **$779 million** for the year[289](index=289&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) The company significantly improved its liquidity and capital structure in 2021 through strategic equity and debt offerings, ending the year with $224.9 million in cash and new debt facilities - The company executed several major financing actions in 2021, including offerings of common stock, preferred stock, 8.125% Senior Notes, and 6.50% Senior Notes, which significantly bolstered its cash position[334](index=334&type=chunk) Key Balance Sheet and Cash Flow Items (Year-End 2021) | Item | Amount (in millions) | | :--- | :--- | | Unrestricted Cash & Equivalents | $224.9 | | Total Debt | $340.3 | | Gross Preferred Stock | $191.7 | | Cash Used in Operations | $(111.2) | | Cash Used in Investing | $(33.5) | | Cash from Financing | $302.8 | - On June 30, 2021, the company replaced its prior A&R Credit Agreement with new debt facilities, including a **$50 million** asset-based revolving credit facility and a **$110 million** letter of credit facility[334](index=334&type=chunk)[343](index=343&type=chunk) - As of December 31, 2021, the company had outstanding letters of credit, bank guarantees, and surety bonds totaling approximately **$374.9 million** to support its contractual obligations[347](index=347&type=chunk)[349](index=349&type=chunk) [Critical Accounting Policies and Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section details critical accounting policies requiring significant management judgment, including revenue recognition on long-term contracts, business combinations, loss contingencies, and income taxes - **Revenue Recognition**: A significant portion of revenue is recognized over time using the cost-to-cost input method, which relies on estimates of total costs at completion[355](index=355&type=chunk) Changes in these estimates can materially impact reported profits[356](index=356&type=chunk) - **Business Combinations**: Acquired assets and liabilities are measured at their estimated fair values, with any excess purchase price recorded as goodwill, a process involving significant valuation estimates[361](index=361&type=chunk) - **Loss Contingencies**: Liabilities for probable and reasonably estimable losses are accrued, requiring judgment, especially for complex litigation, and future earnings could be affected by changes in estimates[363](index=363&type=chunk) - **Income Taxes**: The company records a valuation allowance against deferred tax assets that are not more likely than not to be realized[364](index=364&type=chunk) As of December 31, 2021, a valuation allowance exists in substantially all jurisdictions[366](index=366&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=52&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are interest rate fluctuations and foreign currency exchange rate exposures, particularly to the Danish krone, British pound, Euro, Canadian dollar, Mexican peso, and Chinese yuan - The company is exposed to foreign currency exchange risk, primarily from the **Danish krone**, **British pound**, **Euro**, **Canadian dollar**, **Mexican peso**, and **Chinese yuan**[369](index=369&type=chunk) - A hypothetical **100 basis point** change in FX rates would impact annual earnings by an estimated **$0.8 million**, based on intercompany loan balances at December 31, 2021[369](index=369&type=chunk) [Consolidated Financial Statements and Supplemental Data](index=52&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplemental%20Data) This section presents the audited consolidated financial statements for 2019-2021, along with the independent auditor's unqualified report on financial statements and internal controls Consolidated Statement of Operations Highlights (in thousands) | Line Item | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Revenues** | $723,363 | $566,317 | $859,111 | | **Operating Income (Loss)** | $20,821 | $(1,737) | $(29,382) | | **Net Income (Loss)** | $31,538 | $(10,297) | $(129,039) | | **Diluted EPS** | $0.26 | $(0.21) | $(3.87) | Consolidated Balance Sheet Highlights (in thousands) | Line Item | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $224,874 | $57,338 | | Total Assets | $913,265 | $599,077 | | Total Liabilities | $854,643 | $930,054 | | Total Stockholders' Equity (Deficit) | $58,622 | $(330,977) | Consolidated Statement of Cash Flows Highlights (in thousands) | Line Item | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(111,196) | $(40,806) | $(176,317) | | Net Cash (Used in) from Investing Activities | $(33,541) | $2,219 | $8,779 | | Net Cash from Financing Activities | $302,812 | $44,098 | $167,018 | [Controls and Procedures](index=109&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated and concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with the independent auditor issuing an unqualified opinion - The CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2021[670](index=670&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2021[674](index=674&type=chunk) This assessment excluded the recently acquired businesses, Fosler Construction and VODA[675](index=675&type=chunk) - There were no material changes in internal control over financial reporting during the fourth quarter of 2021[677](index=677&type=chunk) [Other Information](index=112&type=section&id=Item%209B.%20Other%20Information) On March 2, 2022, the Board of Directors amended the company's bylaws to eliminate the age limitation for board members - The company's bylaws were amended on March 2, 2022, to remove any age limitation for directors[688](index=688&type=chunk) PART III [Directors, Executive Officers, and Corporate Governance](index=112&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) This section provides information on executive officers as of March 1, 2022, with other governance details incorporated by reference from the 2022 Annual Meeting Proxy Statement Executive Officers (as of March 1, 2022) | Name | Age | Position | | :--- | :--- | :--- | | Kenneth Young | 58 | Chairman and Chief Executive Officer | | Louis Salamone | 75 | Executive Vice President, Chief Financial Officer and Chief Accounting Officer | | Jimmy B. Morgan | 53 | Executive Vice President and Chief Operating Officer | | John J. Dziewisz | 56 | Executive Vice President, General Counsel and Corporate Secretary | - Information regarding directors, the audit committee, and compliance with Section 16(a) is incorporated by reference from the company's definitive proxy statement[690](index=690&type=chunk) [Executive Compensation](index=113&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning the compensation of directors and executive officers is incorporated by reference from the company's 2022 Annual Meeting Proxy Statement - Details on executive compensation are incorporated by reference from the Proxy Statement for the 2022 Annual Meeting of Stockholders[697](index=697&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=113&type=section&id=Item%2012.%20Security%20Ownership%20of%20Beneficial%20Owners%20and%20Related%20Stockholder%20Matters) This section provides equity compensation plan information as of December 31, 2021, with further security ownership details incorporated by reference from the 2022 Annual Meeting Proxy Statement Equity Compensation Plan Information (as of Dec 31, 2021) | Plan Category | Securities to be Issued Upon Exercise | Weighted-Average Exercise Price ($) | Securities Remaining for Future Issuance | | :--- | :--- | :--- | :--- | | Approved by security holders | 2,093,000 | $19.11 | 326,000 | [Certain Relationships and Related Transactions, and Director Independence](index=113&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information concerning related party transactions and director independence is incorporated by reference from the company's 2022 Annual Meeting Proxy Statement - Details on related transactions and director independence are incorporated by reference from the Proxy Statement for the 2022 Annual Meeting of Stockholders[699](index=699&type=chunk) [Principal Accountant Fees and Services](index=113&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding fees billed by the principal accountant, Deloitte & Touche LLP, is incorporated by reference from the company's 2022 Annual Meeting Proxy Statement - Information on fees paid to the principal accountant, Deloitte & Touche LLP, will be presented in the Proxy Statement for the 2022 Annual Meeting of Stockholders[700](index=700&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=114&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report, including an index of all exhibits - This section contains the index of all exhibits filed with the Form 10-K, including the Master Separation Agreement, Bylaws, Indentures for senior notes, and various credit agreements[705](index=705&type=chunk)[706](index=706&type=chunk) [Form 10-K Summary](index=122&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that there is no Form 10-K summary - None[725](index=725&type=chunk)