Babcock & Wilcox(BW) - 2023 Q1 - Quarterly Report

Cautionary Statement Concerning Forward-Looking Information This section outlines that forward-looking statements are subject to risks and uncertainties, and the company has no obligation to update them - Forward-looking statements are based on management's current expectations and beliefs but involve a number of risks and uncertainties, including global macroeconomic conditions, the conflict in Ukraine, and the integration of acquired businesses[35][52][68] - Key risks also include the company's ability to obtain and maintain sufficient financing, comply with debt covenants, and successfully resolve claims and manage research and development projects[68] - The company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law[36] PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Presents unaudited condensed consolidated financial statements for Q1 2023 and 2022, including operations, balance sheets, and cash flows Condensed Consolidated Statements of Operations Summarizes the company's financial performance, including revenues, operating income, and net loss for the three months ended March 31 | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Revenues | $257,247 | $204,049 | | Operating Income (Loss) | $1,361 | $(6,783) | | Net Loss attributable to stockholders of common stock | $(16,211) | $(11,979) | | Basic Loss per share | $(0.18) | $(0.14) | | Diluted Loss per share | $(0.18) | $(0.14) | - Revenues increased by $53.2 million (26.1%) year-over-year, reaching $257.2 million in Q1 2023[40] - Operating income improved significantly from a loss of $(6.8) million in Q1 2022 to an income of $1.4 million in Q1 2023[40] - Net loss attributable to common stockholders widened by $4.2 million, primarily due to higher interest expense and other net expenses despite revenue growth and improved operating income[40] Condensed Consolidated Statements of Comprehensive (Loss) Income Details the components of comprehensive income, including net loss and other comprehensive income items | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(12,475) | $(8,684) | | Currency translation adjustments | $4,592 | $(4,285) | | Pension and post retirement adjustments, net of tax | $223 | $593 | | Other comprehensive income (loss) | $4,815 | $(3,692) | | Total comprehensive loss | $(7,660) | $(12,376) | - Total comprehensive loss decreased by $4.7 million, primarily due to a favorable swing in currency translation adjustments from a loss of $(4.3) million in Q1 2022 to a gain of $4.6 million in Q1 2023[42] Condensed Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, as of March 31, 2023, and December 31, 2022 | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------- | :------------- | :---------------- | | Total assets | $968,420 | $942,655 | | Total liabilities | $978,626 | $944,744 | | Total stockholders' deficit | $(10,206) | $(2,089) | | Cash and cash equivalents | $62,760 | $76,728 | | Contracts in progress | $163,916 | $134,939 | | Advance billings on contracts | $137,225 | $133,429 | - Total assets increased by $25.8 million (2.7%) from December 31, 2022, to March 31, 2023, driven by increases in contracts in progress and accounts receivable[43] - Total liabilities increased by $33.9 million (3.6%), primarily due to higher accounts payable and advance billings on contracts[43] - Total stockholders' deficit worsened significantly from $(2.1) million to $(10.2) million, reflecting the net loss for the period[43] Condensed Consolidated Statement of Stockholders' (Deficit) Equity Outlines changes in stockholders' equity, including net loss, currency adjustments, and stock-based compensation | Metric (in thousands) | Balance at December 31, 2022 | Net Change for Three Months Ended March 31, 2023 | Balance at March 31, 2023 | | :-------------------- | :--------------------------- | :----------------------------------------------- | :------------------------ | | Total Stockholders' (Deficit) Equity | $(2,089) | $(8,117) | $(10,206) | | Net loss | N/A | $(12,475) | N/A | | Currency translation adjustments | N/A | $4,592 | N/A | | Stock-based compensation charges | N/A | $3,294 | N/A | | Dividends to preferred stockholders | N/A | $(3,715) | N/A | - The accumulated deficit increased from $(1,358.9) million to $(1,375.1) million, primarily due to the net loss and preferred stock dividends[21] - Positive currency translation adjustments of $4.6 million partially offset the increase in the deficit[21] Condensed Consolidated Statements of Cash Flows Details the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31 | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(12,881) | $(41,999) | | Net cash used in investing activities | $(2,157) | $(65,384) | | Net cash used in financing activities | $(5,854) | $(1,568) | | Net decrease in cash, cash equivalents and restricted cash | $(22,392) | $(109,745) | | Cash, cash equivalents and restricted cash at end of period | $91,068 | $116,970 | - Operating cash outflow significantly improved by $29.1 million, from $(42.0) million in Q1 2022 to $(12.9) million in Q1 2023, despite a higher net loss[23][289] - Investing cash outflow decreased substantially by $63.2 million, primarily due to the absence of large business acquisitions seen in the prior year ($64.9 million)[23][262] - Financing cash outflow increased by $4.3 million, driven by higher loan repayments and preferred stock dividends[25][290] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements NOTE 1 – BASIS OF PRESENTATION Explains the accounting principles and assumptions used in preparing the interim financial statements - The interim condensed consolidated financial statements are prepared in accordance with GAAP and SEC instructions, relying on management's estimates and assumptions, which may differ from actual results[28][29] - The company continues to face challenges from the COVID-19 pandemic, the war in Ukraine, and global supply chain disruptions, impacting operations, pricing, and project timelines, particularly in the Asia-Pacific region[30] - The duration and scope of these market conditions are unpredictable, and their anticipated negative financial impact cannot be reasonably estimated[30] NOTE 2 – EARNINGS PER SHARE Details the calculation of basic and diluted earnings per share for the periods presented | Metric (in thousands, except per share amounts) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss attributable to stockholders of common stock | $(16,211) | $(11,979) | | Weighted average shares used to calculate diluted earnings (loss) per share | 88,733 | 87,992 | | Basic (loss) earnings per share | $(0.18) | $(0.14) | | Diluted (loss) earnings per share | $(0.18) | $(0.14) | - Basic and diluted shares are the same for both periods due to net losses incurred[5] - Stock options totaling 2.2 million shares (2023) and 0.4 million shares (2022) were excluded from diluted EPS calculation as their effect would have been anti-dilutive[6] NOTE 3 – SEGMENT REPORTING Provides financial information by the company's three reportable market-facing segments: Renewable, Environmental, and Thermal - The company operates through three reportable market-facing segments: Babcock & Wilcox Renewable, Babcock & Wilcox Environmental, and Babcock & Wilcox Thermal[6][33] | Segment (in thousands) | Three Months Ended March 31, 2023 Revenues | Three Months Ended March 31, 2022 Revenues | $ Change | % Change | | :--------------------- | :----------------------------------------- | :----------------------------------------- | :------- | :------- | | B&W Renewable | $100,112 | $67,961 | $32,151 | 47.3% | | B&W Environmental | $39,440 | $34,948 | $4,492 | 12.9% | | B&W Thermal | $119,236 | $102,239 | $16,997 | 16.6% | | Total Revenues | $257,247 | $204,049 | $53,198 | 26.1% | | Segment (in thousands) | Three Months Ended March 31, 2023 Adjusted EBITDA | Three Months Ended March 31, 2022 Adjusted EBITDA | $ Change | % Change | | :--------------------- | :------------------------------------------------ | :------------------------------------------------ | :------- | :------- | | B&W Renewable | $4,940 | $1,955 | $2,985 | 152.7% | | B&W Environmental | $1,906 | $1,439 | $467 | 32.5% | | B&W Thermal | $13,733 | $14,154 | $(421) | (3.0)% | - The company's chief operating decision maker does not consider assets by segment to be a critical measure, thus assets are not separately identified or reported by segment[9] NOTE 4 – REVENUE RECOGNITION AND CONTRACTS Explains the company's policies for recognizing revenue and managing contract balances - Revenue from goods and services transferred at a point in time accounted for 25% of total revenue in Q1 2023, up from 19% in Q1 2022[11] - Revenue from products and services transferred over time accounted for 75% of total revenue in Q1 2023, down from 81% in Q1 2022[11] | Contract Balance (in thousands) | March 31, 2023 | December 31, 2022 | $ Change | % Change | | :------------------------------ | :------------- | :---------------- | :------- | :------- | | Contracts in progress | $163,916 | $134,939 | $28,977 | 21% | | Advance billings on contracts | $137,225 | $133,429 | $3,796 | 3% | | Net contract balance | $26,691 | $1,510 | $25,181 | 1,668% | - Total backlog (remaining performance obligations) was $662.9 million as of March 31, 2023, with 77.7% expected to be recognized as revenue in 2023[3] - Contract assets included $6.1 million for change orders and/or claims in transaction prices as of March 31, 2023, with an additional $7.0 million in variable consideration for certain contracts, primarily in the B&W Renewable segment[13][16] NOTE 5 – INVENTORIES Details the composition and changes in the company's inventory balances | Inventory Component (in thousands) | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Raw materials and supplies | $91,668 | $87,554 | | Work in progress | $3,917 | $2,518 | | Finished goods | $14,154 | $12,565 | | Total inventories | $109,739 | $102,637 | - Total inventories increased by $7.1 million (6.9%) from December 31, 2022, to March 31, 2023, primarily due to an increase in raw materials and supplies[76] NOTE 6 – PROPERTY, PLANT & EQUIPMENT, & FINANCE LEASES Provides information on the company's property, plant, and equipment, and finance lease assets | Asset Category (in thousands) | March 31, 2023 | December 31, 2022 | | :---------------------------- | :------------- | :---------------- | | Net property, plant and equipment | $60,576 | $62,011 | | Net finance leases | $23,836 | $24,352 | | Total | $84,412 | $86,363 | - Net property, plant and equipment, and finance leases decreased slightly by $1.9 million from December 31, 2022, to March 31, 2023, mainly due to increased accumulated depreciation and amortization[59] NOTE 7 - GOODWILL Details the goodwill balances by segment and changes due to currency translation adjustments | Segment (in thousands) | Balance at December 31, 2022 | Currency Translation Adjustments | Balance at March 31, 2023 | | :--------------------- | :--------------------------- | :------------------------------- | :------------------------ | | B&W Renewable | $82,059 | $77 | $82,136 | | B&W Environmental | $5,347 | $32 | $5,379 | | B&W Thermal | $69,587 | $157 | $69,744 | | Total Goodwill | $156,993 | $266 | $157,259 | - Goodwill increased slightly by $0.3 million from December 31, 2022, to March 31, 2023, primarily due to currency translation adjustments[54] - No indicators of goodwill impairment were identified during the quarterly triggering event assessment for the quarter ended March 31, 2023[60] NOTE 8 – INTANGIBLE ASSETS Provides information on the company's definite-lived and indefinite-lived intangible assets | Intangible Asset (in thousands) | March 31, 2023 | December 31, 2022 | | :------------------------------ | :------------- | :---------------- | | Net definite-lived intangible assets | $57,300 | $58,763 | | Indefinite-lived intangible assets (Trademarks and trade names) | $1,530 | $1,530 | | Total intangible assets, net | $58,830 | $60,293 | - Net intangible assets decreased by $1.5 million from December 31, 2022, to March 31, 2023, primarily due to amortization expense[61] - Amortization of intangible assets is included in Cost of operations and SG&A in the Consolidated Statement of Operations but is not allocated to segment results[106] NOTE 9 – ACCRUED WARRANTY EXPENSE Details the company's policy for accruing warranty expense and changes in the warranty liability balance - The company accrues estimated warranty expense when associated revenues are recognized or when a contract becomes a loss contract[55] | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Balance at beginning of period | $9,568 | $12,925 | | Additions | $1,901 | $1,300 | | Payments | $(253) | $(193) | | Balance at end of period | $9,901 | $11,873 | - Accrued warranty expense increased to $9.9 million as of March 31, 2023, from $9.6 million at the beginning of the period, with additions of $1.9 million and payments of $(0.3) million[107] NOTE 10 – RESTRUCTURING ACTIVITIES Reports on restructuring charges and accrued liabilities related to strategic initiatives - Restructuring charges for Q1 2023 were $0.4 million, primarily consisting of legal fees related to the company's strategic re-branding initiative[108][109] | Segment (in thousands) | Three Months Ended March 31, 2023 Total | Three Months Ended March 31, 2022 Total | | :--------------------- | :---------------------------------- | :---------------------------------- | | B&W Renewable | $(89) | $(193) | | B&W Environmental | $20 | $69 | | B&W Thermal | $3 | $198 | | Corporate | $450 | $20 | | Total | $384 | $94 | - Accrued restructuring liabilities at March 31, 2023, totaled $2.0 million, primarily for employee termination benefits[73][109] NOTE 11 – PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS Details the net periodic benefit cost and contributions for pension and other postretirement plans | Metric (in thousands) | Three Months Ended March 31, 2023 Pension Benefits | Three Months Ended March 31, 2022 Pension Benefits | Three Months Ended March 31, 2023 Other Benefits | Three Months Ended March 31, 2022 Other Benefits | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Interest cost | $11,489 | $6,664 | $92 | $49 | | Expected return on plan assets | $(11,697) | $(14,366) | — | — | | Net periodic benefit cost (benefit) | $(12) | $(7,473) | $269 | $227 | - The company made contributions totaling $0.3 million to its pension and other postretirement benefit plans in Q1 2023, compared to $0.4 million in Q1 2022[84] - No mark-to-market adjustments for pension and other postretirement benefit plans were recorded during Q1 2023 or Q1 2022[56] NOTE 12 – DEBT Provides details on the company's senior notes, credit agreements, financial covenants, and surety bonds | Senior Notes (in thousands) | Net Debt Balance (March 31, 2023) | | :-------------------------- | :-------------------------------- | | 8.125% Senior Notes due 2026 | $189,573 | | 6.50% Senior Notes due 2026 | $146,413 | | Total Net Debt Balance | $335,986 | - As of March 31, 2023, no borrowings occurred under the Revolving Credit Agreement, but $13.7 million in financial letters of credit and $93.2 million in performance letters of credit were in use under the Letter of Credit Agreement[57][291] - The Debt Documents contain financial covenants, including fixed charge coverage and senior net leverage ratios, which were amended in November 2022 and May 2023 to adjust ratios and exclude certain acquisition-related expenses from EBITDA calculation[89][90][91][205][311] - As of March 31, 2023, the company was in compliance with all financial covenants[89] - Total surety bonds outstanding were $341.7 million, with $14.2 million backstopped by letters of credit[119][266] - Loans payable totaled $15.7 million (net of debt issuance costs), with $4.3 million classified as current and $11.4 million as long-term, including $13.1 million related to sale-leaseback financing transactions[120][295] NOTE 13 – PREFERRED STOCK Describes the terms of the company's Series A Cumulative Perpetual Preferred Stock and related dividend payments - The company has 7.75% Series A Cumulative Perpetual Preferred Stock with no stated maturity, paying cumulative cash dividends at 7.75% per annum on a $25.00 per share stated amount[95][148] - Dividends totaling $3.7 million were approved for Preferred Stock holders for the three months ended March 31, 2023[149] - The Preferred Stock ranks senior to common stock regarding dividend and liquidation rights, on parity with future parity stock, and junior to any future senior stock and all existing and future indebtedness[121] NOTE 14 – COMMON STOCK Provides information on the number of common shares outstanding and changes to the long-term incentive plan - The number of common shares outstanding was 88,745 thousand at March 31, 2023[43] - The 2021 Long-Term Incentive Plan was amended in May 2022 to increase the total number of shares authorized for award grants from 1.25 million to 5.25 million[96] NOTE 15 –INTEREST EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION Details the components of interest expense and supplemental cash flow disclosures | Interest Component (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Interest expense from Senior notes | $6,328 | $6,216 | | Amortization/accretion | $1,603 | $1,703 | | Interest from Lease liabilities | $724 | $708 | | Other interest expense | $4,007 | $2,640 | | Total interest expense | $12,662 | $11,267 | - Total interest expense for Q1 2023 was $12.7 million, up from $11.3 million in Q1 2022, primarily driven by higher other interest expense[97] | Cash Flow Supplement (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Income tax payments, net | $1,551 | $471 | | Total cash paid for interest | $6,382 | $6,709 | NOTE 16 – PROVISION FOR INCOME TAXES Reports on income tax expense and the effective tax rate for the periods presented | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Income tax expense | $490 | $1,230 | | Effective tax rate | (4.1)% | (16.5)% | - The effective tax rate is not reflective of the U.S. statutory rate due to valuation allowances against certain net deferred tax assets and unfavorable discrete items, primarily withholding taxes[100][126] NOTE 17 – CONTINGENCIES Discusses ongoing legal proceedings, litigation settlements, and potential impacts from geopolitical events - The Glatfelter Litigation alleges damages exceeding $58.9 million, but the company's contractual liability is capped at $11.7 million; the company intends to vigorously litigate[127] - The Stockholder Litigation reached a settlement in principle for $9.5 million, subject to court approval; the company will pay $4.75 million on behalf of related parties, with the remaining $4.75 million covered by insurance proceeds and other parties[140][155] - The company has accrued the $4.75 million payment and a probable loss recovery of $3.4 million related to the Stockholder Litigation settlement[155] - The company monitors potential impacts from the Russian invasion of Ukraine on sales by an Italian subsidiary to non-Russian counterparties who may resell to Russian entities, despite having no direct contracts with Russian entities[156] NOTE 18 – COMPREHENSIVE INCOME Reports on the components of accumulated other comprehensive income (loss) and their reclassification policies | AOCI Component (in thousands) | Balance at December 31, 2022 | Other Comprehensive Income (Loss) | Balance at March 31, 2023 | | :---------------------------- | :--------------------------- | :-------------------------------- | :------------------------ | | Currency translation loss | $(70,333) | $4,592 | $(65,741) | | Net unrecognized loss related to benefit plans (net of tax) | $(2,453) | $223 | $(2,230) | | Total | $(72,786) | $4,815 | $(67,971) | - Total accumulated other comprehensive loss (AOCI) improved to $(68.0) million at March 31, 2023, from $(72.8) million at December 31, 2022, primarily due to positive currency translation adjustments and pension/post-retirement adjustments[158] - Gains and losses deferred in AOCI are generally reclassified and recognized in the Condensed Consolidated Statements of Operations once they are realized[132] NOTE 19 – FAIR VALUE MEASUREMENTS Provides fair value information for financial instruments, including available-for-sale securities and senior notes | Available-for-sale Securities (in thousands) | March 31, 2023 Fair Value | December 31, 2022 Fair Value | | :------------------------------------------- | :------------------------ | :--------------------------- | | Corporate notes and bonds | $4,203 | $4,154 | | Mutual funds | $633 | $612 | | United States Government and agency securities | $4,108 | $4,023 | | Total | $8,944 | $8,789 | | Senior Notes (in thousands) | Carrying Value (March 31, 2023) | Estimated Fair Value (March 31, 2023) | | :-------------------------- | :------------------------------ | :------------------------------------ | | 8.125% Senior Notes due 2026 | $193,035 | $190,178 | | 6.50% Senior Notes due 2026 | $151,440 | $131,268 | - The fair values of cash, cash equivalents, and restricted cash approximate their carrying values due to their highly liquid nature[162] - The fair value of the company's Revolving Debt approximated its carrying value at March 31, 2023[162] NOTE 20 – RELATED PARTY TRANSACTIONS Discloses transactions and relationships with related parties, including B. Riley and its affiliates - B. Riley beneficially owns approximately 30.8% of the company's outstanding common stock as of March 31, 2023[138] - The company has engaged B. Riley Securities, Inc. for underwriting services related to its 8.125% Senior Notes, 6.50% Senior Notes, and 7.75% Series A Cumulative Perpetual Preferred Stock offerings, incurring significant underwriting fees[141][144][165][166][167][168][169][193] - B. Riley provides a guaranty of payment for the company's obligations under the Reimbursement Agreement, for which the company pays $0.9 million per annum[116][194] - The company acquired assets of Hamon Research-Cottrell, Inc. for $2.9 million, with B. Riley Securities acting as an investment banker and advisor to Hamon Holdings[139][183][198] - Executive consulting services from an affiliate of B. Riley for the CEO cost $0.2 million for both the three months ended March 31, 2023, and March 31, 2022[164] NOTE 21 – ACQUISITIONS AND DIVESTITURES Reports on business acquisitions and divestitures, including purchase prices and asset allocations - The company acquired 100% ownership of Fossil Power Systems, Inc. (FPS) on February 1, 2022, for approximately $59.2 million, and Optimus Industries, LLC on February 28, 2022, for approximately $19.2 million, both reported as part of the B&W Thermal segment[146][170][182][197][209] - The purchase price allocations for FPS and Optimus Industries were finalized during the quarter ended March 31, 2023[62][105][171][174] | Intangible Assets from Acquisitions (in thousands) | Fossil Power Systems | Optimus Industries | | :------------------------------------------------- | :------------------- | :----------------- | | Customer relationships | $20,451 | $2,100 | | Tradename | $787 | $220 | | Patented Technology | $578 | — | | Unpatented Technology | $3,276 | — | | Total intangible assets | $25,092 | $2,320 | - On July 28, 2022, the company acquired certain assets of Hamon Research-Cottrell, Inc. for approximately $2.9 million[139][183][198] - In June 2022, the company sold development rights related to a future solar project for $8.0 million, recognizing a $6.2 million gain on sale[202] NOTE 22 – NEW ACCOUNTING PRONOUNCEMENTS AND STANDARDS Discusses the adoption of new accounting standards and their impact on the financial statements - The company adopted ASU 2021-08, 'Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,' in January 2023, with an immaterial impact on its consolidated financial statements[178] - No other new accounting standards not yet adopted had a material impact during the quarter ended March 31, 2023[204] NOTE 23 – SUBSEQUENT EVENTS Reports on significant events that occurred after the balance sheet date but before the financial statements were issued - On May 9, 2023, the company entered into Amendment No. 3 to the Revolving Credit Agreement, which permits the exclusion of certain expenses from the calculation of EBITDA for financial covenant compliance[205][311] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation Management discusses the company's financial performance, condition, liquidity, and critical accounting policies for Q1 2023 Overview Provides a general business description and highlights key macroeconomic factors affecting the company - Babcock & Wilcox is a growing, globally-focused renewable, environmental, and thermal technologies provider with over 150 years of experience[209] - The company continues to adapt to macroeconomic conditions, including rising inflation, higher interest rates, foreign exchange rate fluctuations, the Ukraine conflict, and COVID-19 pandemic impacts on global supply chains and project postponements[207][208] - Restructuring efforts are focused on making the cost structure more variable and reducing costs, with expectations for bottom-line results and top-line growth across the B&W Renewable, B&W Environmental, and B&W Thermal segments[185] - The business is significantly dependent on the capital, operations, and maintenance expenditures of global electric power generating companies and industrial facilities[211] Results of Operations - Three Months Ended March 31, 2023 and 2022 Analyzes the company's financial performance, including revenues, operating income, and net loss, for the three months ended March 31 | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Revenues | $257,247 | $204,049 | | Operating Income (Loss) | $1,361 | $(6,783) | | Net Loss | $(12,475) | $(8,684) | - Total revenues increased by $53.2 million (26.1%) to $257.2 million in Q1 2023, driven by higher volumes in the Renewable and Environmental segments and increased construction activity in the Thermal segment[216][222][224][249] | Segment (in thousands) | Three Months Ended March 31, 2023 Adjusted EBITDA | Three Months Ended March 31, 2022 Adjusted EBITDA | | :--------------------- | :------------------------------------------------ | :------------------------------------------------ | | B&W Renewable | $4,940 | $1,955 | | B&W Environmental | $1,906 | $1,439 | | B&W Thermal | $13,733 | $14,154 | | Corporate | $(5,080) | $(4,373) | | Research and development costs | $(1,307) | $(655) | | Total Adjusted EBITDA | $14,192 | $12,520 | - Bookings increased to $266 million in Q1 2023 from $239 million in Q1 2022, and backlog grew to $663 million from $574 million[240] - Research and development costs increased to $1.3 million in Q1 2023 from $0.7 million in Q1 2022, due to timing of specific research and increased development efforts[227] - Advisory fees and settlement costs resulted in a benefit of $2.5 million in Q1 2023, compared to an expense of $3.9 million in Q1 2022, primarily due to a Parker loss recovery[277] - Transition costs decreased significantly to $0.1 million in Q1 2023 from $2.6 million in Q1 2022, reflecting efforts to outsource and transfer administrative tasks[279] Liquidity and Capital Resources Discusses the company's ability to meet its financial obligations, including debt service, dividends, and working capital needs - Primary liquidity requirements include debt service, preferred stock dividends, and working capital needs, funded by cash generated from operations and external financing[259] - As of March 31, 2023, cash and cash equivalents, current restricted cash, and long-term restricted cash totaled $91.1 million, with total debt of $351.7 million and $191.7 million of gross preferred stock outstanding[261] - Net cash used in operating activities significantly improved to $(12.9) million in Q1 2023 from $(42.0) million in Q1 2022[289] - The company utilizes a Revolving Credit Agreement and Letter of Credit Agreement, with $13.7 million in financial letters of credit and $93.2 million in performance letters of credit outstanding as of March 31, 2023[291] - Total surety bonds outstanding were $341.7 million, with $14.2 million backstopped by letters of credit[266] - The company believes future operating cash flows will be more than sufficient to cover debt repayments, contractual obligations, capital expenditures, and dividends for the foreseeable future[261] - No off-balance sheet arrangements are expected to have a material current or future effect on the company's financial condition, results of operations, liquidity, capital expenditures, or capital resources[296] Critical Accounting Policies and Estimates Identifies the accounting policies and estimates that require significant judgment and could materially impact financial results - The company's critical accounting policies and estimates are consistent with those disclosed in its Annual Report for the year ended December 31, 2022[297] - No significant changes to the company's accounting policies occurred during the three months ended March 31, 2023[297] Item 3. Quantitative and Qualitative Disclosures about Market Risk States that market risk exposures have not materially changed from those disclosed in the prior annual report - The company's exposures to market risks have not materially changed from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022[298] Item 4. Controls and Procedures Reports on the effectiveness of disclosure controls and procedures and internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, providing reasonable assurance for timely and accurate reporting[268][299] - No material changes in internal control over financial reporting occurred during Q1 2023, despite some team members working remotely due to the COVID-19 pandemic[269][300] - Management acknowledges the inherent limitations in all control systems, which can provide only reasonable, not absolute, assurance that objectives are met and that errors or fraud may still occur[301][310] Item 5. Other Information This section contains no specific information beyond its title, indicating no other material information to report under this item PART II - OTHER INFORMATION Item 1. Legal Proceedings Refers to Note 17 of the Condensed Consolidated Financial Statements for details on ongoing investigations and litigation - Information regarding ongoing investigations and litigation is incorporated by reference from Note 17 to the Condensed Consolidated Financial Statements[303] Item 1A. Risk Factors Refers to the Annual Report on Form 10-K for a discussion of risks and uncertainties, noting no material changes - The company's risk factors are consistent with those disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022[312] - No material changes to the risk factors were noted, other than the additional risk factor set forth in the report[312] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports on the acquisition of common stock to satisfy tax withholding obligations related to employee restricted stock vesting | Period | Total number of shares acquired | Average price per share | | :---------- | :------------------------------ | :---------------------- | | March 2023 | 11,845 | $5.58 | - Shares were acquired to satisfy employee statutory income tax withholding obligations related to the vesting of employee restricted stock[313] - The company does not have a general share repurchase program at this time[313] Item 6. Exhibits Lists the exhibits filed with the quarterly report, including corporate documents, debt agreements, and certifications - Exhibit 10.1 is Amendment No. 3 to Revolving Credit, Guaranty and Security Agreement, dated as of May 9, 2023[305] - Certifications from the Chief Executive Officer and Chief Financial Officer (Rule 13a-14(a)/15d-14(a) and Section 1350) are included as Exhibits 31.1, 31.2, 32.1, and 32.2[305] - XBRL Taxonomy Extension Schema, Calculation, Label, and Presentation Linkbase Documents are provided[305][306][315] SIGNATURES This section contains the official signatures for the report, confirming its submission - The report is signed by Louis Salamone, Executive Vice President, Chief Financial Officer, and Chief Accounting Officer, on behalf of Babcock & Wilcox Enterprises, Inc[317] - The report was signed on May 10, 2023[317]