Babcock & Wilcox Enterprises (BW)

Chase Jacobson Vice President-Investor Relations
Leslie Kass President and Chief Executive Officer
Jenny Apker Senior Vice President and Chief Financial Officer
Craig Bibb CJS Securities
Call transcript
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Good afternoon. My name is Josh, and I will be your conference operator today. At this time, I would like to welcome everyone to the Babcock & Wilcox Q1 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. you. Thank Instructions] [Operator President Relations, Vice your may conference. of Jacobson, you Investor begin Chase

Chase Jacobson

and Welcome I'm afternoon, Wilcox you, at good Thank Josh, everyone. President Investor Quarter Earnings B&W. Vice Enterprise's XXXX to Conference Jacobson, Call. Chase of Relations First & Babcock

this to B&W's and Joining outlook. quarter and discuss Officer; our afternoon Chief and President Leslie Senior XXXX Apker, first Jenny Vice are Chief Executive Kass, me President and Financial Officer, results

SEC subject to this harbor forward-looking. are also During XX-K the that certain These set about provide at related those make of statements provision our XX-Q found further end to on the Form risks and statements our annual the report safe and be are in and will release risks forth call, and we forward-looking can our our on Form including be earnings uncertainties, detail that statements press business. in for with our file

by forward-looking obligation required no law, undertake as except statements. Additionally, we any update to

provide non-GAAP outlook to We as website Leslie. quarter for, over forward GAAP our with in can to, results babcock.com. found call measures provided considered not our as non-GAAP the GAAP. A in superior the historical our information accordance results substitute of be With of reconciliation also published the in measures. earnings our or that, information as supplement turn should to well regarding a certain this company presentation at be This Relations comparable posted of historical Investor section first overview release I'll our and afternoon on the

Leslie Kass

in and line Power in the generally Good with was first Thank afternoon in you, Chase. Performance segments quarter. our everyone. our expectations Industrial

our potential with cost contracts. projects and in by was to overshadowed rolling cost progress made claims these identify opportunities and We're in recoveries of four on pursuing the the performance our year. losses. are challenges, Renewable mitigating previously increases to offset announced the parties expected working are in be partially completed other six being is segments to new-build and middle these all customers from these this other an Despite However, effort on

Before speak to and strategic providing like initiatives. an highlights, I'd actions on operational update to our three

a First, aware, $XXX.X used We support as provided and Management. appreciate the raising we We million. of completed most of by strong offering, Vintage the our last rights week, are shareholders you backstop approximately Capital financial expense, this second-lien interest term net debt our balance to only our million $XXX our improves improves of the flexibility. loan. also repay Repaying not sheet overall and proceeds reduces but

the make of with for and improve MEGTEC in Second, to flexibility. hope further financial sales as the we Universal we’re progress to the potential work continuing our and process to make an announcement future

Officer. more Third, years improve on at throughout companies and are Robert cost March the XX and to working is I closely a our efficiencies financial their Marsal Director Chief than Bob appointed & Caruso helping with as organization. XX, B&W's and team reductions we management drive has Implementation all of operational experience of and Alvarez Managing Bob together profile.

detail be provide this this able expect to more effort We summer. to on

net line settlements due projects. schedule In the a of number costs million April, to associated These Renewable early announcement with operations. including our recorded our subcontractor $XX.X were a progressing other increased projects. to Turning of in delays, factors, complete claim with costs our we to estimated and

each and continue moving are finish progress to to tangible We side day. line closer make the on each

in plan in strong a million new quarter highest existing $XXX coal-fired quarter, retrofit plant million, business as environmental contract an its million to with the is replacement identified refocus profitability our punch-list is wood. strategy well. firing middle in other March, fully in execution important XXXX. early the aftermarket the complete on portion and project and U.K. the projects four firing Construction project is on largest $XX work back In in Construction is half on project project we on in the two Denmark, is SPIG. we faced over the costs our additional to awards equipment wood-bearing those with one in the to achieved achieved contracts and these quarterly businesses, at beam critical another and continue One Industrial now mid-XXXX, planned Power and turnover work. to facilities this of projects this These on customer bookings be And structural outage turnover Industrial, full to fully back final to a had proceedings, partner working could following finishing legacy September was are quarter more a the turnover project to we the customer the certain of new track late XXXX. estimated with late through approvals in a In XXXX. and nearly turned progressing, Renewable construction oil. waited customer U.K., and later as where as as first bookings seasonal for partial This the Midwest the for filing track work work. our waste-to-energy get In to turnover a towards commissioning included while the positive due the of recently year. In for second first of This plants of over On roughly is to step milestone expected power is through on in parts of Power later at of that two in expected this we delays lastly, projects, the we insolvency signs segment's showing for expected rate we of we're off and to complete quarter failure were construction the solvent before increased and is customer since be $XX improvement an story. loss the year required turned regulatory work. accounted are in on to and the activities. year

Importantly, line growth. enjoyed ion results. with in battery more to coating in MEGTEC With Jenny organic provide financial expectation, turn that, detail Italy revenue large booked a and, now the I'll a order our on for our battery to facility lithium equipment over call production robust

Jenny Apker

Leslie. Thanks,

quarter were down year-over-year segment. Our new-build Renewable to on XX% expected prior Power $XXX recognized our million, consolidated the and our compared to revenues an first due year, revenue lower decrease in projects

EBITDA due a other and Renewable our was $XX.X expense revolving to we Interest costs, loss our GAAP related the joint TBWES level a borrowings on impairment primarily the for sale $XX to and to reported loan. second-lien loss year, million. reflecting in million, $XX nearly of For charge in excludes loss a first venture, our the credit facility gain last the of of on an higher compared million quarter, the up joint our $XXX.X term which quarter, million segment. BWBC was Adjusted operating certain venture, restructuring quarter the the

We expect the for week. term year to of our loan, repayments expense significantly of which the rate remainder second-lien interest run following was lower the completed last

cooling modestly revenue and the and retrofit revenue headline on we in XXXX, the of In segment, result profitability first to Power on renewable margin O&M on million strength SPIG, the adjusted offset we increase changes estimated implementing those margin six business. a the to the lower year-over-year a a our the continued revenue new-build our quarter and portfolio our In projects, of as segment where Turning few quarter $XX of generate XXXX. on first the last fewer compared to partially quarters. quarter model was X.X% costs in up segment systems year-over-year Compared contracts, of of to steady in products services Power, down we build segment the projects. when revenue focused the for to to level XX.X%, was strong mainly solid six of environmental in our new-build year, due $X produced volume. in and million, new declined segment timing results. up the and balance was for bookings markets. bookings compared projects EBITDA mail revenue throughout the contracts estimated over increases by the and to bookings in in projects. $XXX Adjusted Industrial modest well a revenue low XXXX, reflecting which execute XXXX while and normal strong in by segment of last million, business higher second but offset spite in quarters, in driven Gross complete of loss due new last a to revenue margin was quarter MEGTEC's on SG&A lower point contracts impacted to Industrial the last in end compared was Power's improving losses Based year, under half last million lower by costs $XX EBITDA the complete modestly revenue driven XX% contracts. of in million, in XXXX. versus This but the environmental $XX contracts. cadence loss. the was the down the gross profits several of quarter, lower partially the by be to QX the EBITDA first expect was the held year, this QX at to to to this backlog, XX.X% costs a of increased largely Renewable, new-build support Adjusted in completion segment of In

we understand we where sale MEGTEC in process, businesses, at for the While contributions this and desire the because for EBITDA our time. and we possible that are information Universal on valuations information of potential provide cannot additional

Act, impairment QX, we toward coal-fired recognized our in monetize aftermarket in impact interest our that million in transaction Cuts venture, our accrued build assets. BWBC, TBWES, sell in to preliminary retrofit the the we for more to shift venture quarter, our million. sell projects large the was market benefits the These quarter, related joint our sold rate in were first that investment interest and $XX that rate in approximately foreign joint in new balance expected method agreement opportunities joint to realized effective the our effective negative the large continue Jobs will sale the a noncore from China the equity on our Tax reflecting the close Actions of gain our to an year. expense. is international For of tax to our limits Also ventures factors $XX.X with of later and and to India our the and and year. following power and JV. investment million business of interests impact This losses XX%, away adjusted In consistent $X.X are tax strategy approximately in tax deductibility both to Asian no which investment a

the quarter, expectations $XX in our the due to new-build projects. balance line in flow use the generally and sheet to with with completion of of and liquidity. advance to our Turning cash flow, mainly cash Free Renewable million, spending

each $XXX cash cash initiatives. We the We QX proceeds cash effects XX, million allowing expect and of to under QX proceeds March savings $XX unrestricted the U.S. us from was cash. with into net QX. credit of Included March the in from net Total cash or revolver. our any inflows account This not and were cash from net was and sales this outflows cost at include of restricted positive at and forecast May, in our asset $XX of international cash balance In does in facilities of restricted down sale the apply restricted XX contemplated ended quarter revolving cash of equivalents balances our BWBC. million account the transferred to million. early pay approximately an

the As rights of release offering, balance XXXX, the funds May was X, the BWBC the of of and $XXX completion million. this following

$XX We $XX EBITDA guidance are affirming XXXX our adjusted million. of million to

call solidly positive now adjusted quarter improving I'll guidance over throughout each the in quarter the to the second Leslie. back Our assumes EBITDA year. with EBITDA turn

Leslie Kass

summer. In are Jenny. and business taking on to initiatives. profitability on and in the expect this these viewpoint, We're closing, a believe projects. improving Thanks, overall stronger over update the progressing we're and stages actions remain focused of an activities provide we we that strategic driving From also B&W's for toward Renewable final goal our important

develop Over market. with onboard offering Universal. and the we the second-lien last Implementation MEGTEC strategic and term repaid improve structure our have Power they to and with progress cost the services bookings This customers Officer forward. our process the while performance portfolio within demonstrated and of stream. or ensure and our power and our outlook was SPIG. and In and our the they loan. operational week, we to segment. for Chief quarter drive a increased going has for this to visibility B&W expand alliance growth We're solid to initiatives us We're for with And with make providing to provide encouraged with continue need performance services across comprehensive working margin products with completed advantage competitive resources most the is strategy robust coal-fired the rights improved define continuing And helping into with provides to B&W MEGTEC Industrial, our we're from us revenue at Universal. agreements

While our position to work yet improving. for do, future we of have lots the is

of support and the we're B&W's we with services from company. With our continue ensure equipment our on provide the expect our foundation they to building to historic strong shareholders, high-quality customers engineered

as you With working will as Chief you It service call to in Finally, in all I I Josh, her would with taking in best the been few well us now assist Financial for will months other for wish positions thank as B&W’s the that, Jenny turn and role like in the the a we retirement. to this your Officer. pleasure has questions. who over your years, back last


[Operator Bob Instructions] question from Your Labick with Securities. first CJS comes

Your line open. is

Craig Bibb

Bibb MEGTEC? what you can Craig tell with us Bob for for – and you Could it’s sales the tell CJS process Hi, Universal just Securities. about on

Leslie Kass

to about have in it conclude the future that’s and afraid near we Now I’m all.

Craig Bibb

And backlog, industrial on are ballpark the the the bookings – Okay. the then what in margins

Jenny Apker

year. see, I noted margins should the – unusual as of margins would the for down that those – on for segment nothing up that is be kind consistent margin. or of think bookings is bookings or rest that about I given we've margins with target There the

Craig Bibb

are where we now? Apart

Jenny Apker

the we No, guidance if the for for the new for margins at gave you margins think industrial business year, I go to in where that's the back should the bookings. full you look

Craig Bibb

Okay. the given cash for remainder mean, I we of what guidance, for the the year? burn should look

Jenny Apker

a of to as quantum asset potential challenging that point parts pieces reduction, time, for to include given a of very some moving of timing, on coming. given potential are be the year is sales, number now number the cost right specific include you you It moving we've guidance as give basis. the at but There this you per not which We've would light activities. in all to the specifics a in

Craig Bibb

as go? Okay. And moving pieces as they will the positive you far just generate holding as QX that guidance was your can you are all in and cash

Jenny Apker

That yes. is the forecast,

Craig Bibb

right, All Great. you. thank


call this no I currently are There time. at the to further presenters. questions the will turn back

Chase Jacobson

Thank you, everybody.

limited up with you We the later weeks. in on will will following our days be look today. and forward replay coming to A time available for website a


call, conference today’s now may concludes disconnect. This you