Babcock & Wilcox Enterprises (BW)

Megan Wilson Vice President, Investor Relations
Leslie Kass President and Chief Executive Officer
Joel Mostrom Interim Chief Financial Officer
Call transcript
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Good afternoon. My name is Christine and I will be your conference operator today. At this time, I would like to welcome everyone to the Babcock & Wilcox Q3 2018 Earnings Conference Call. [Operator Instructions] Thank you. Megan Wilson, Vice President of Investor Relations, you may begin your conference.

Megan Wilson

good and Christine you, afternoon everyone. Thank Babcock conference call. to & Wilcox earnings XXXX quarter third Enterprises’ Welcome I Wilson, am at Relations Megan Vice President Investor of B&W.

Chief discuss our afternoon B&W’s quarter results. Mostrom, this Leslie third Chief Executive and Interim to me Joel Officer Officer Joining Financial and are President Kass,

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

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

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

Leslie Kass

apologize I for Megan. voice. recovering I you, a everyone my and bad Thank Good afternoon, from am cold.

provide and markets. a customers adequate to and industrial provide services projects. over an focus renewable strategic core which our will have renewable to on remaining on continued third on today actions with energy to few projects discuss actions, providing I quarter our we challenged liquidity with and and in you these to designed quality update products our power of make end During last the our and weeks, several the complete are progress us

with in we mid-September, of million our in with and sale our JV in million strategic business Universal on for MEGTEC $XXX actions, to the for Palm power products focus and of First, maintenance India the our terms retrofit actions, this core closed for the This sale in year, earlier at early completed closed operations emphasis and interest quarter, Center combined and in markets of services our These $XX the in of million. the Dürr strategy our $XXX the previously our process of Florida, planning Recovery increased Covanta, sale our we Resource October, businesses and strategic we proceeds. on in resulted announced an third also aftermarket In affirmed services. gross process. industrial business and to Beach

of number The to improve planning another savings leading opportunities also a $XX us program, to remaining these see customers. quarter. started $XX million the to the of quarter. $XX in begin the to We third the this cost in identified at took look business line process initial second quarters of capture our in savings expect to our million to more We delivery savings and million $XX million. implement target each third previously and benefits annualized also program cost We from business to our strategic cost increase announced implement and initiatives in fourth

time to Joel projects, Finally, required our support discuss and loss in of detail. which to to credit we a number renewable facility complete made will our the amendments more liquidity the provide

operational longer the as business performance, energy each to we challenges expected trial operations. into have sites of Turning at projects with renewable moved than our our startup of completion taken and

to startup operations underway projects have year. all UK, over in All projects, end of is power Denmark are biomass That all of customer are grid by now in three the the expected the the the phase. turned start or one and turned plant trial over to a of to three shortly. the the units expected we generated be project to warranty make in these X the in In continue we to with customers However, the progress to and of October. X

other will over UK beam the quarter disclosed the with remaining that be project over in is line with operational negotiations. continue quarter expectations progressed failure Denmark The in project previously project pending in to The in customer the XXXX. of be turned the third turned we fully expect and third and steel in to

parts we well including and compared segment’s despite aftermarket working exceeded up year-to-date suppliers, shows In power, renewable projects bookings with regulations. strength last up our our due of expectations efforts sales customers, by both performed and were decreased to these services seek where environmental with the SG&A quarter quarter we caused our and we business and margin and margin on lines. business we As to reduce possible. before, for impact quarter portfolio have lines, growing industrial be of to and retrofit uncertainty Gross continue in its which discussed continue EBITDA year, for the to both compared the in year same other delays to recoveries costs. The Bookings see are the insurers others the contracts prior to U.S. to equipment-only profitable.

EBITDA the adjusted target power to $XXX of for roughly segment million in XXXX. continue We

months, challenging focus the as stabilizing a U.S. taken the projects quarter, outside operations restructuring, including execution, business wind to and project in had on several be the legacy last SPIG the management our new down. appear While increased actions

a approach a in Our in strategy region resulted projects for the growth selective wet to pursue we backlog EMEA the the focus business. lower XXXX change technology on to and aftermarket in and more

the our terms in performance backlogs over XXXX. more and will had turn to detail better projects now call I Joel drive provide these financial improved to to designed results. However, on

Joel Mostrom

Thanks, Leslie.

and were year European completion lower compared of across Our XX% many due prior in million the million, volume being business late $XXX sales $XX.X renewable down to consolidated of third revenues stages all quarter to quarter or our projects segments.

renewable $XX.X Europe. The by loss Corporation, our was of $XX.X quarter, segment. to during lines quarter currency a EBITDA in financial advisory items higher the results operating operations non-cash renewable reported in foreign related Adjusted support a of to of deferred out aftermarket mark-to-market expenses, charge cost due a complete a Palm $XX.X results tax volume to cooling benefits the remaining in there record systems For These projects including compared increased industrial reflecting to were cost the a non-cash income of million assets. gain the million and to complete quarter, negatively in negative the were valuation sale of like partially point the higher million also business $X.X and impacted loans, equipment-only level SG&A GAAP primarily $X.X net segment’s affected to third tax intercompany energy West other Resource a to allowance several newbuild charges by our million the cost Recovery quarter million million initiatives. contracts mainly loss lower savings of legacy cost, would Beach the XXXX. to and are increased we from I continuing pension offset GAAP $XX against and negative that due lower

net judgment and these such deferred reversed the allowance to the future. be at warranted, resulted does was limit that assets allowance valuation future deferred our not this in our September allowance tax in tax a of use against an While a in assets XXXX our can full valuation the analysis XX, ability

was the profit profit of as the and mainly partially to million, as these other due $XX.X and on and incurred Now, X.X% EBITDA relative in last last volume the compared the sales to business period to the by initiatives. in revenue equipment-only caused of aftermarket delays other volume. construction primarily costs the due also in increased the support SG&A startup Revenues business. and the Power’s in the third down sales in savings combustion lower estimated to margin quarter. mainly the was quarter. of in was equipment-only to In last such as offset profit in contracts The negative aftermarket adjusted for the segment’s quarter. lower in XX.X% regulations. completion the lines $XX.X contracts resulted segment, year costs XX%, same costs. in projects are quarter $XX.X turning on million than with cost U.S. were $XX.X of revenue the the encountered European XX.X% compared segment, million was lower XX% during down reductions quarter $XX.X quarter were as to cost in lower in slightly of of commissioning increased year compared stages changes in complete well same or uncertainty volume was million retrofit was third charges by contracts by contracts $XX.X loss during lower benefits cost in the gross in anticipated to segment’s slight to of power renewable renewable the our A revenue year. line environmental in and quarter. segment or gross when was coal the issues to million phases. operations regulations, prior several projects up million, down the were was segment The margin year was offset from XX.X% to loss $XX.X saw million in lines residual $XX.X results, due EBITDA fewer more The late of the Gross prior XXXX, in revenue U.S. year’s $XXX.X expectations, segment’s the for progress quarter six the decrease million incremental because million, projects to main compared This contracts

EBITDA initiatives. lines segment’s to of continuing mentioned, contracts costs with relief customers equipment-only on was gross projects Adjusted recoveries seek by due all possible. profit continue our to lower Leslie losses business and the where insurance negative be $XX.X loss in offset these million other our the SG&A cost As pursue $XX.X of we work savings and aftermarket due Also to recently to from profitable. down are activity decrease announced million, to portfolio potential

last $XX.X closed of our to And to as in which Resource consists bookings the to now renewable SPIG approximately that segment, Corporation reduction our and Palm quarter with the volumes that customer. year, a strategy, sales legacy million increases During or the of cooling a strategy bad volume we down EBITDA $XX systems on to more improve our by Beach mainly in of million, systems due XX.X% West for Adjusted XXXX $XX.X geographies Revenue following $XXX to focus third markets products. this and for profitability and a million business. segment was selective bidding Recovery in a under contracts and change sold include costs sale, lower Industrial reserve quarter, was business, a lower of in million related subject estimated a compared newbuild consequence previous long-term core sale $XX.X cooling in O&M due debt to bankrupt newbuild associated million the adjustment. complete to loss for the

and Newbuild systems Beach million, products Also and monetize closed operations revolving joint and towards mostly assets O&M under and Universal to third previous end core balance Dürr in strategy are our to as well are businesses aftermarket sales expected combined business Industrial facility. the in of on to MEGTEC sold the $XXX AG be for venture to October our contracts quarter year. X. non-core investment complete our reduce our sale strategy the with on opportunities to our more on of this the credit This the by consistent to India our of the our refocus as and shift Palm with cooling retrofit during Power adjustment, the subject sale, West

primarily these $XX.X and from due U.S. international our mainly sale $XX.X flow of completion Universal cash balance on Since projects. MEGTEC Turning balances. under used of year, compared and in ended October our the September revolving been to to equivalents to credit of facilities. our XX in towards the renewable to related X reflecting on cash expense cash. newbuild sheet the the net use we We borrowings cash and $XX.X to was quarter our and operations borrowing last quarter quarter then, the proceeds million. reduce liquidity, net with from the restricted activity at to sale credit a $X.X were Total a as higher million work million, $XXX operations, was million of spending facilities balances Interest have of continuing the level related flow, million

the sale in which $XX million the project in retain company milestones cash Resource of access and term covenants. loan provides elements Corporation liquidity revolving that the a number achieved. October, the million and key amendments to the mentioned, for $XX liquidity As our incremental the Leslie Palm of customers Beach credit recent obtain to a amendment few increasing to loss Recovery the our that last-out quarter during million proceeds, extended net third to financial a $XX the the reductions of has once minimum to milestone company Renewable cumulative are incremental to The deadline provision generate made certain of million now loss million certain our and $XX company, February incremental certain at company XXXX, dates concessions of facility provide most liquidity we company. the allow extend reset under to and $XX contract A from the to a least requirement XX, benefits from include received amendments proceeds to covenant

are from additional discussions commitments for have still we we While concessions. in customers, a number secure of to secured concessions

addition, with X Renewable included turnover contracts. recent amendment modifications most in the In to customer the loss connection milestones

turnover completion one we to milestones, X With the of respect of the extended have these the other were the of With projects, the one XX turnover days. milestones. dates achieved

mentioned, estimated cost cost initiatives. savings we The targeting new now achieve of million also through an annualized in Leslie of target to savings $XX $XX $XX are has our million savings million. As

fourth have with we expectations. quarter, the plan in realized the in $XX been the line million are during to During segments progressing and all savings realized level. the third savings quarter, identified cost expect XXXX. of implementation at the corporate $X approximately our savings be and Cost balance the And across with million and

Finally, we we stated number ongoing financial that actions, and on the announced last strategic withdrew XXXX the asset of company’s quarter, based previously divestitures guidance.

Given the ongoing over company cost Leslie. guidance with actions, associated savings other back does intend the to turn efforts call this now the divestitures, these initiatives provide and time. not at strategic to I’ll

Leslie Kass

at make laser on over to three turned end remain projects objective focused of the this the by we progress one turned and were least We and to project more Joel. now expected completing with Thanks, renewable on able over year. the be

last of number Joel As in the ongoing to withdrew we quarter, due business. changes mentioned, guidance our

over. our the completion when However, our remaining to intend and updates stakeholders are provide that forward of renewable we going understand and projects in projects we investors the interested turned are

have We positioning B&W the towards significant made for future. strides

We Charlotte, new place expect This our announced better costs, move space and in and and to more that meet facility operational move needs have much to Akron reduce help future Carolina a that we we recently and provide from our headquarters year. to a and North dynamic shifted lease our work. to Ohio next current will employees with collaborative

business streamlined with million. of pursued have We our sales asset and $XX through an improved target cost-cutting activities

and energy what be customers the product business. the expect We of the led our core improve and during actions we process, cash technologies markets forward and strong With call of year I in next delivery to in expanding to look our to over your all together will and support and performance increase With driving term. to completion XXXX. profitability for employees questions. us by in see our power times flow services are environmental better who will improvements to working strategic planning deliver our our long now we initiatives taking we a Christine much continued will place, turn and serve assist in believe the back appreciate these these a challenging to

Megan Wilson

for joining our for a website A you conference be Thank today. our limited us. replay later That on call. will concludes available time


today’s conference concludes call. This

may You now disconnect.