Babcock & Wilcox(BW) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the period Item 1. Condensed Consolidated Financial Statements The company presents its unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025, and 2024, reflecting a decrease in Q2 2025 revenue but a significant improvement in operating income Condensed Consolidated Statements of Operations For Q2 2025, revenues decreased to $144.1 million, while operating income significantly improved to $8.1 million from a prior-year loss, driven by reduced costs | Indicator (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $144,054 | $151,414 | $299,860 | $292,288 | | Operating income (loss) | $8,128 | $(4,448) | $8,362 | $(3,459) | | Loss from continuing operations | $(6,052) | $(20,547) | $(20,057) | $(38,169) | | Net (loss) income attributable to stockholders | $(58,492) | $25,406 | $(80,499) | $8,573 | | Basic (loss) earnings per share | $(0.63) | $0.24 | $(0.89) | $0.01 | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $703.5 million, with a significant reclassification of $108.6 million in senior notes to current liabilities, widening the stockholders' deficit | Indicator (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $526,901 | $552,514 | | Total assets | $703,490 | $726,987 | | Total current liabilities | $529,293 | $406,651 | | Total liabilities | $1,012,176 | $1,010,159 | | Total stockholders' deficit | $(308,686) | $(283,172) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities increased to $33.8 million, while investing activities provided $10.6 million, primarily from asset sales | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(33,787) | $(26,745) | | Net cash provided by investing activities | $10,649 | $76,036 | | Net cash provided by financing activities | $2,580 | $81,620 | | Net (decrease) increase in cash | $(20,257) | $130,720 | | Cash at end of period | $110,807 | $202,089 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, divestitures, debt restructuring, and subsequent events, including going concern considerations and strategic actions to improve liquidity - Management acknowledges that operating losses and debt service costs raise substantial doubt about the company's ability to continue as a going concern, but believes strategic actions will provide sufficient liquidity for the next twelve months[34][35][36] - The company is actively divesting non-core assets to reduce debt and improve liquidity, having sold its Vølund business and the Diamond Power business, which are now classified as discontinued operations[43][47][50] - In May 2025, the company exchanged $131.8 million of its 2026 Senior Notes for $100.7 million of new 8.75% Senior Secured Notes due 2030, extending a significant portion of its debt maturity[83][85] - Subsequent to the quarter's end, the company closed the sale of its Diamond Power business for $177 million on July 31, 2025, and amended its Credit Agreement on August 8, 2025, to extend the maturity date to November 30, 2026[139][144] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 5% decrease in Q2 2025 revenue but a significant turnaround in operating income, driven by improved margins and a favorable product mix, alongside its liquidity strategy and backlog Results of Operations Consolidated revenues for Q2 2025 decreased by $7.4 million year-over-year due to lower large project volume, offset by increased parts sales, leading to a $12.6 million improvement in operating income - Q2 2025 revenue decreased by $7.4 million YoY, driven by a $20.0 million decline in large project volume, partially offset by a $15.5 million increase in parts sales[160] - Operating income for Q2 2025 improved by $12.6 million to an $8.1 million profit, primarily due to lower cost of operations from a favorable product mix and reduced costs on certain projects[161][163] | Segment | Q2 2025 Revenue (in millions) | Q2 2024 Revenue (in millions) | Q2 2025 Adj. EBITDA (in millions) | Q2 2024 Adj. EBITDA (in millions) | | :--- | :--- | :--- | :--- | :--- | | B&W Thermal | $104.3 | $107.3 | $17.5 | $9.9 | | B&W Renewable | $19.0 | $15.4 | $0.5 | $0.4 | | B&W Environmental | $20.8 | $28.7 | $2.3 | $1.7 | Bookings and Backlog The company's total backlog significantly increased to $418.1 million as of June 30, 2025, despite a decrease in Q2 2025 bookings compared to the prior year | Metric (in millions) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Backlog | $418.1 | $280.8 | | B&W Thermal | $345.9 | $177.4 | | B&W Renewable | $33.9 | $20.2 | | B&W Environmental | $35.6 | $70.8 | - Bookings in Q2 2025 were $112.9 million, a decrease from $135.9 million in Q2 2024, with year-to-date bookings also lower than the prior year period[178] Liquidity and Capital Resources The company addresses its liquidity requirements for debt service and working capital, outlining strategic actions including asset sales, equity offerings, and debt exchanges to ensure sufficient funding despite going concern doubts - The company has implemented several strategies to improve liquidity, including: - Selling non-core businesses for $197.1 million in net proceeds - Selling 10.2 million common shares for $15.0 million net proceeds - Exchanging $131.8 million of 2026 notes for new 2030 notes - Extending its credit facility maturity to November 2026[219][223] | Metric (in millions) | June 30, 2025 | | :--- | :--- | | Cash, cash equivalents, and restricted cash | $110.8 | | Total Debt | $471.3 | | Gross preferred stock outstanding | $191.7 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk exposures since its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes to the company's market risk exposures since its 2024 Annual Report[229] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of June 30, 2025, due to material weaknesses, but a remediation plan is underway to address these issues - The CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2025, because of existing material weaknesses[232] - A remediation plan is in progress to address the material weaknesses, focusing on hiring, training, enhancing controls over accounting and IT, and implementing a monitoring program[234][238] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, and other significant corporate events and disclosures Item 1. Legal Proceedings The company reports no material changes or new litigation to disclose since its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes in legal proceedings since the 2024 year-end report[239] Item 1A. Risk Factors A primary risk is the potential inability to obtain additional capital or refinance debt on commercially reasonable terms, which could materially harm the business and potentially lead to bankruptcy - A primary risk is the potential inability to obtain additional capital or refinance debt on commercially reasonable terms, which could materially harm the business and potentially lead to bankruptcy[241][243] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares related to employee restricted stock plans during the quarter ended June 30, 2025, and does not have a general share repurchase program in place - No share repurchases were made during the quarter, and no general repurchase program is active[244] Item 5. Other Information This section discloses the departure of the EVP and COO, significant executive bonus opportunities tied to asset sales, and an amendment to the Credit Agreement extending its maturity date - Chris Riker, Executive Vice President and Chief Operating Officer, announced he is stepping down, effective August 31, 2025[245] - The Compensation Committee approved bonus opportunities for executive officers related to the sale of Diamond Power, with the CEO eligible for up to $2,750,000 and the CFO for up to $1,500,000[246][247] - On August 8, 2025, the company amended its Credit Agreement, extending the maturity date to November 30, 2026, and deferring an increase in a key debt covenant ratio[248]