Babcock & Wilcox(BW) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company's consolidated revenues for Q2 2024 were $233.6 million, a decrease compared to the same period in 2023, primarily due to a strategic shift to reduce reliance on lower-margin projects and the completion of a large construction project in 2023 [18] - Operating income for Q2 2024 was$42.2 million, significantly higher than $12.4 million in Q2 2023, driven by a gain on the sale of a subsidiary and reduced selling, general, and administrative expenses [18] - Adjusted EBITDA for Q2 2024 was$24.6 million, exceeding expectations, while earnings per share improved to $0.24 from a loss of$0.10 in Q2 2023 [19] Business Line Data and Key Metrics Changes - The Environmental segment saw revenues increase by 15% to $56.2 million in Q2 2024, with adjusted EBITDA nearly doubling to$6.7 million, driven by a higher margin product mix [20] - The Renewables segment experienced a revenue decline year-over-year, but adjusted EBITDA increased by 40% due to cost reduction efforts [10] - Thermal segment revenues were $120 million, in line with expectations despite a decrease from Q2 2023, with adjusted EBITDA at$13 million [21] Market Data and Key Metrics Changes - The company reported a global pipeline of over $9 billion in identified project opportunities, including$1.5 billion in BrightLoop and ClimateBright opportunities [11][12] - The backlog and applied backlog at the end of Q2 2024 were $472 million and$757 million, respectively, representing a 39% increase compared to the same period in 2023 [12] Company Strategy and Development Direction - The company is focused on advancing its ClimateBright Decarbonization Technologies and has seen increased demand for hydrogen generation and carbon capture projects [5][6] - A strategic shift to be more selective in pursuing higher-value projects has led to improved margins and reduced reliance on low-margin new build projects [9][10] - The company plans to invest $10 million to$15 million in BrightLoop projects in 2024, aiming for commercial demonstration and operational effectiveness [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the prospects for new bookings and strong financial performance in the second half of 2024, driven by Thermal and Environmental segments [24][25] - The company anticipates continued growth in coal to natural gas and coal to biomass projects in the U.S. due to new EPA requirements [13] - Management reiterated the full-year adjusted EBITDA target range of $105 million to$115 million, excluding BrightLoop and ClimateBright [13] Other Important Information - The sale of the Danish renewable services subsidiary improved the company's balance sheet and liquidity, with ongoing negotiations for additional non-strategic asset sales [7][22] - The company achieved $25 million in cost reductions to date, with a target of over$30 million in annualized savings [8] Q&A Session Summary Question: Update on BrightLoop projects in Ohio - Management explained that the construction period for the Ohio project will take 12 to 18 months, with financing offsetting cash outflows during this time [27] Question: Progress on larger projects in Wyoming and Baton Rouge - Management confirmed full engineering mode for the Wyoming project and ongoing discussions for the Baton Rouge project, with potential for significant hydrogen production [28][29] Question: Guidance and risks associated with EBITDA targets - Management indicated that timing on larger gas conversion projects could impact the EBITDA range, emphasizing the importance of order timing [31] Question: Timing of additional non-core asset sales - Management is in discussions for one or two additional non-core asset sales expected this year [33] Question: Clarification on the leaseback arrangement for the Ohio project - Management detailed that the total project cost is estimated at $60 million to$65 million, with B&W's upfront investment being around $5 million to$10 million [36]