Babcock & Wilcox Enterprises (BW)

Megan Wilson Vice President of Investor Relations
Kenny Young Chief Executive Officer
Lou Salamone Chief Financial Officer
Henry Bartoli Chief Strategy Officer
Call transcript
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Good morning. My name is Jessa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Babcock & Wilcox Enterprises First Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question-and-answer session [Operator Instructions] Thank you. Investor may President, your Vice Wilson, Relations, begin you conference. Megan

Megan Wilson

Megan everyone. Jessa, XXXX Babcock I’m of and you, B&W. Welcome Relations Earnings Vice at Investor good Call. Quarter Thank First morning to President Enterprises & Conference Wilson, Wilcox

Kenny morning Henry Lou results. and B&W’s Chief Chief first quarter Strategy Officer Joining Salamone, are Executive Financial Chief me Young, this our Officer; Bartoli, Officer; to discuss

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

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

regarding or release of A historical yesterday. not historical substitute This We can With Kenny. of also accordance the considered provided certain in measures GAAP. comparable will first found GAAP our our for supplement I be a provide non-GAAP to results to superior the information earnings be with turn should reconciliation in results as information quarter measures. non-GAAP that, to published call over

Kenny Young

we next to From transformation our the working call. Thanks & how we’d to about going to thoughts like achieve Babcock is our employees earnings slightly diligently company company’s feel are joining.Today, we the approach and over and Henry and of I morning for about Thank want our months. Wilcox you, the all and Lou, to forward everyone. direction several good and what Megan take so view a standpoint, share positive different trending strongly a we

across our delivering customers to technologies SPIG. three past and we’ve as & Wilcox, been company Our the towards dedication employees their Babcock in our throughout Vølund transitioned have our the relentless core months several segments:

our We steps a significantly our have sheet significant reduce our value for market taken position to customers, refinance profitable begin down debt the position and recognize our shareholders. put for the and in off risks, future, process our increase improve share, to balance or our historical challenges, write company and this best to employees write our ourselves

We cash increase strong and we will still our we times the face basis, under at market a on in to we base. we commitments contracts. improved complete see bumps road on do improve and opportunities the will a toward share Although an flows have remaining challenges, see customer clear pathway and building already global as loss EPC to margins loyal leading

XXXX Although solid say we in XXXX, longer-term for returns we shadow see of give ago, too of as clear losses. throughout on to held our loss emerge performance from financing it’s B&W's increased objectives can’t we quarter-by-quarter and those we achieve certain a details can as explain explicit XXXX, it should greater which historical serve investor underlying for early foundation will to guidance indications the call XXXX. made and About enter settlements that an month project soon all we the

our with agreements. complete to these working and customers to close are remaining obligations out our We finalize closely

still of have and go, we now to action. first we our corner Now towards as realize profitability. We the you'll to turning strategic we momentum have on starting our discuss quarter our way recent a results, see benefits that are path XXXX real the but

initiated initiatives, now actions announced has are reduction. of identified necessary we The taking discussed, cost corporate previously previously $XXX have the which on quarters. next to million several we I and ensure over steps strategy cost-saving over Henry execute for and our Lou, As the includes company

supporting in processes and structure systems, unnecessary little level a customer and down from value at remove as lowest the customers and our the our overhead. culture shareholder reinforce incentives manufacturing Our philosophy identify drive levels. accountability we as to project to Then is of safety cost push and that and practical much offer and that value

past have results of all be years, and safety employees. top improved few Our over this to the our for continues mind

hidden. from our line of We each that have have leverage by previous as this unlock the the removing value strength segment for million our more continues to EBITDA our in pipeline. Babcock barriers are that unnecessary a organization flattened with to the new has philosophy, But experts inside over Wilcox company improve the should to The where leadership strong our is & and our I'll run which created quarter more of Today, today company. bottom rate well and first, our and perform XXXX. tap industry backlog get from target, a applying costs we we to adjusted $XXX been By strategy explain further results. of

expect we soon strategy segment projects it. SPIG changing will is Our loss to EPC the our drive beginning for put results, behind Vølund and segment

the we're As to on Lou now of the over profitability. turn turning to I said, quarter to XXXX I'll first discuss call detail. in our the corner path

Lou Salamone

Thanks, additional in And our We We financing plans. Kenny. actions improved and operations implement of We that strategic execute achieved to XXXX. and our provides are liquidity had out a we significantly many to our profitability. them. very busy carried continuing first quarter the

quarter. results Let me into of the now the get

prior X XXXX exchange the lower down first in The X.X% in compared the of million. being for loss Prior significant GAAP They revenues $XX EPC The the to $XXX.X quarter stages the result $XX.X several are European XXXX the $X costs In operating first the of XXXX, operating lower operating of EPC first contracts. the first or million related and the on loss be million XXXX calculation most the quarter. basis the compared the the that to in quarter and in The income loss going restructuring basis company's of quarter. fees. comparable drivers quarter first was -- EBITDA than was to about a were our In we losses however, quarter million of XXXX additionally all drivers contracts, as exclude million company negative quarter to of primarily pension Adjusted were adjusted XXXX basis operating its exclude were was the advisory on the final in generating million first first to at a $XX.X other in adjusted revenue as as compared the XXXX. the The of of therefore, settlement quarter loss the $XXX.X quarter negative contracts EPC the to in the quarter an quarter. and, changed it consolidated currency significant of of and completion in first charges XXXX than in decrease, losses and a in the as was the foreign activities lower $XX.X expense benefit, certain consistent and quarter references 'XX, so, both net most first loss EBITDA EBITDA effects disclose XXXX, XXXX. calculated forward reconciliation. of to will million of

gross was to of the XX.X% construction to The the improved quarter approximately margin revenue, the in gross is was that's year's was by in as This in percentage adjusted to and total amount This the percentage I to Now XX.X% driven of partially segment the Babcock on in our let segment, cooling to compared geographies SPIG. those XXXX estimated to segment the our corporate initiatives, million were quarter a positive and for the cost-saving year. effects remaining million to year. results. in this the me focusing profit in a quarter. contracts quarter. for XXXX of compared million strong from to and same improve a in same systems, of $X.X driving to prior quarter million of The gross and the revenues the a in to segment million the products as improvement called the increase the million revenue. 'XX formerly direction in quarter the initiatives in XXXX were segment, increase increased incurring compared $XXX,XXX $X.X percentage-wise period overhead our in due attributable $XX.X of quarter, $X first last the and rather quarter X.X% EBITDA than $X.X $XXX.X contracts as initiatives lower period cost, progress in new this of includes construction, last that Industrial as for the no project period. gross absorbed construction million at cooling quarter construction a legacy the of that volume compared XXXX at from revenue in gross Power was revenues turn increase in single their the in and Notwithstanding so projects. lower compared $X.X new profit compared the Adjusted new negative higher our $XX.X for and complete in by a segment And first the project the profit to improved services there improved compared that quarter industrial million XXXX higher implementation negative small by to profitability to first our million first quarter more in Wilcox decreased bidding $X.X of was the offset whereas XX.X% to impact lower lower in without change by profit in XXXX profit million $X from increases $XXX.X a revenues Wilcox gross this gross again, a the & margin on as new was prior cost-saving SPIG compared cost-saving strategic larger system loss in its also following 'XX positive continued quarter as the of quarter. strategy the segment, taken just XXX% an mainly Gross build $XX.X quarter. significant Again, level our first is the increased the reflects improvement SPIG to selectively build to expected costs was X.X% build million 'XX formerly prior in year, profit and the quarter in core XX.X% estimated from achieved the In this remained greater strategy mix mainly those the same the a increases by year to This in we���ve prior to of profitability in were business. period, XXXX in compared this the million 'XX explained the change of U.S. in more strategic on mix last the adjusted This of first number of last margin in first above, in & EBITDA projects. year-end. the it The impacted, quarter to EBITDA and in as quarter driven to 'XX the $XX.X primarily The to our performed a quarter of segment, million profit by Power mainly Babcock margin in of as of profit

to segment. Vølund, our on Moving Vølund

first XXXX First XXXX. segment, were in quarter quarter in in the million of of Renewable to formerly Vølund the $XX compared the $XX.X the segment, revenues first million quarter

of were quarter in quarter as in was the lower resulting of compared in in construction being year prior recognized the first completion than lower revenues revenue contracts recognized XXXX. stages EPC to European were several final the loss The XXXX

of Additionally, the was recognition contracts. limited a revenue contracts variance on XXXX. Corporation of Vølund also the contracts on in of Beach first in in gross The million in in as we a to negative settlements overt by September revenues $XX.X of and Resource first to includes certain bid sale of million reported the the profit loss, six in effects resulted a EPC decision compared losses to cost the segment estimated project an XXXX a the compete quarter as compared to XXXX, the from XXXX a in energy recorded quarter in improved of the recorded million of and first EPC in this XX, settlements. $XX.X Palm European and to the reduction million the bidding March $X.X XXXX, first the the segment quarter The driven In resulting as quarter of negative EPC made first net not XXXX million $X.X the changes contracts renewable of by $XX.X quarter. on full Recovery

$XX.X XXXX third gross quarter Beach gross contracts, was Beyond Palm adjusted the as improved loss was the SG&A this compared the was effect lower quarter the and first profit warranty EPC of our the losses $X.X the as offset gross the affected lower Corporation in in XXXX. overhead activities. reduction the to that, million last levels of million Resource expense, was absence quarter profit from loss in cost lower to negative of contracts Recovery million quarter by to direct by year. of of mentioned, and EBITDA in mainly $XX.X restructuring cost the first due a by sold well experienced The reduced Again, reflecting benefits as I negative support profit

completion offset to as spending fees, toward the quarter the capital. to restructuring from the and a XX, flow, contracts turn with our before cost use quarter, the SPIG March as sheet now number of was settlement segments equivalents. we of million This operations That financing and quarter. mainly the end flow first achieved the flow million. due balance and cash subsequent cash the ended the Babcock $XX.X unrestricted me to XXXX, by well $XX.X is We to cash cash loss Wilcox Cash that related and in advisory Let & liquidity. progress of strong the EPC from was cost, first working of

at debt to prior Our $XX.X our $XXX.X was the million the million quarter. quarter, $XX.X in million as of the revolving year first interest total was expense end and compared

for releases and our April in of borrowed a revolving first an of our expenses in number additional The were of EPC April the we $XXX settlement revolver, and of future of of last-out in working our borrowing of As liquidity some under filings due the and needs. the The in unrestricted quarter our capital -- settlement XXXX, quarter paydown previously million loans discussed through million and of revolver. those settlement million revolver. made placement of proceeds closing debt $XXX credit first described of On used pay payment under loss on amounts into last-out press term the agreements approximately fees, its is placement after of under EPC loans on amendments $XX entered facility term as loss repayment loans, portion of remainder plus filings. in and and available and the due fees company the term from to agreements X, debt contracts up the last-out project the repayment availability the a had the cash hand

to per of per rights approval designee; As a common million million part our split. most recent of $X.XX amendment, B. last-out XX.X Capital shareholder $X.XX held agreed common stock months; for reverse X approximately seek at $X.XX issue by or the at stock at warrants, share; stock principal to execute each of approximately a per Management share of -- share purchase loan share its to Riley six and term we to all Vintage the offering $XX within execute exchange

month We these Exchange listing New timing go as the Shareholder the Annual corporate permitted on Meeting, to for relates continued expected are that this on our now been required period deficiency. action the York preparing we to NYSE Stock have to cure under the we shareholder actions Based beyond seek to curing plan rules criteria take. shareholder of approval to request the approval six

million up March repay of from to our proceeds last-out $XX million increases requires credit facility amendment, offering. we reducing also liquidity required XX, us loans rights and by the XXXX. the $XX using term the borrowing minimum among that $XX recent by other permits from capacity our to most existing It things, Our million refinance to the

are in cost-saving approximately three of line $XXX the cost-saving with early implemented have million Roughly the and corporate at identified over Kenny discuss and we've fourth been across our been segments cost implemented and As plan savings the into date have progressing remainder balance through being expectations. initiatives. of these and begun measures implementation savings further, annualized of and will all to savings in and implementation The our XXXX the level, with XXXX. identified

savings as our company actions it not to over now provide a Finally, the this of guidance discuss Kenny I'll point on at in number strategy going forward. back turn intend cost previously does based and time. initiative, strategic ongoing stated, to to

Kenny Young

Great. Thanks, Lou.

new reduced the strong loss robust beginning and as costs. bookings, the pipeline strengths SPIG from BW's you EPC its to its emerge segment pipeline adjusted see limited the the projects. more overhead charges returning to traction. segment year remaining The technology legacy on loss shadow behind Vølund projects can are with rebuilding results, & from on So gaining doubled quarter prior with its are soon core remaining and with The be with European segment Wilcox its this its returned EPC profitability management as and EBITDA to of strengths Babcock The the obligations few to a backlog. compared is than and no strategy team projects the additional us

We to $XXX a million in target EBITDA about run of XXXX. adjusted rate continue

we're there. talk There and focused strategy have to implementation. perspective, are One, initiatives, strengths improved focused we'll cost million implemented about and that let's So our we Lou which targeting get majority and three we've improved about cost-saving parts one, a on focused how on of said, in execution. the annualized about previously From cost identified implementation. have or cash $XXX begun savings, one savings with have on flows, talked begun project already our as

an of this to savings, We're and we as our continuing cost the speak. through structures evaluate to reductions. are challenged teams additional working we've identify additional even million find cost process our across We company, to $XX

our our unnecessary global $XXX helps we'll unnecessary and to and and this on possible refinancing leverage suppliers. company a to financial customers from perspective, and with the reestablishing as gross with align reduce over more eliminating more to proceeds this aggressively restructuring profit rights we debt. are Our of our our new financing, down streamline outcomes amendment, in in position by reduce expect bottom fees quarters, advantageous our ratio We're overhead our Ultimately, soon operational profit our From more had operations as alone, settlement we bottom million. eliminating fees, put of in efforts as this continue our using profit $XX Babcock of the environment to credibility and the that put position, XXXX, bring line. drive were segment the terms and return Wilcox we will and costs to for this programs financial new avoid our growth quarter the customers substantial & so the with and settlement advisory after come more next overhead, line. In recent To To million financial advisory to over look cash our to more costs, our our, few perspective, shareholders. flow in a these our our a we costs, gross in perspective, stable pay expected roughly the under offering incentive have support to lenders, challenges. restructuring XXXX first with focused

We amendment $X.X and interest also million in cash had fees. in expense million $X.X

bookings this improved also will going forward. terms customers, and improve our with expect our for and improvement We suppliers us pipeline position

we an retrofit on increased the and with execution. products aftermarket core focus and strengths services on and our company, emphasis for on let's and are Industrial Finally, services. Power focusing our Across and

in quality, segment each on capture high-margin focused and We've improve identified to rather are more than execution. revenues. projects business opportunities We chasing

quarter a than As previously. strong we accelerate our of as quarter with overhead the the first and pipeline same adjusted financial than Babcock over credibility year EBITDA customers. the We bookings corporate while in cost regain robust more and segment expect to before, its Wilcox I more said & bookings our carrying saw last doubled

Our of utility, on the being a environmental pulp gas employees oil world-class are and boiler supplier and paper leading and markets. focused to controltechnologies and

the fleet related base coal to aftermarket a installed and around equipment Our power generation global puts position strength of us and vast needs. in unique environmental support the world

represents installed paper a aftermarket untapped base Our largely for pulp services. potential and

boiler Our industrial opportunity. package great business offers

we services to continue installed while the pursuing Going well. we base base tapping our our our base installed market, underserved as and to domestic installed in into expect serve along with forward and Internationally, competitors industrial aftermarket aggressively environmental see international the million $XXX Meanwhile, build equipment cost has pursue services. segment above savings growth with in the in additional consolidated continued already aggressively new reductions to boilers identified. the

without XXXX, business of in Our additional management profitability quarter results the drive in by significant few segment’s returned of SPIG the new team the legacy remaining first the efforts to forward to quarter. losses the projects

to strategy, reap change of is we in stabilizing. benefits As the begin the our business

higher-value focused I core geographies, products with are We terms chasing better on like bidding revenues. projects said, on and now profitability not selectively our

execution. We also are driving improved project

soon leaders segment, further behind to loss evaluate the been maintained and forward cost underlying be specific The Vølund projects SPIG. business conveyors systems. We us technology and has cost reductions in environmental continue within boilers, grates, that drive from renewable for and margins. control apart EPC have will been solid The steady relatively

support As and business bidding and no is for years. business the the coming spill in design previously focus technologies, the expect a we’ve profitably operator around can stronger participate to many U.K. solid were in working the loss are required well supplier. core on that through EPC technology its Meanwhile, and previously it that a to We model position emerge in and served overhead Vølund Vølund reductions projects. the projects returning over longer as world to see that pipeline the quarters. we supply discussed, the and business The will

with teams potentially few required associated projects tests millions millions the close are and EPC under loss tasks just have a to the EPC working agreements. diligently the We risk down certain of remaining reduced our hundreds to out from and

year. and flow second cost initiatives with well and the becoming our of believe Taken to our the and benefits in profitability position saving we project the evident this XXXX to return continued as us execution cash exit on together, more we refinancing half focus strengths, improved

look EBITDA to couple support and The path to much vendors As markets the run have target. years we we a past be and of look strategy and forward our We what $XXX continued face in to better customers, easy forward to power we achieve deliver XXXX, to employees. million but our and been we clear challenges, adjusted a appreciate XXXX our industrial rate together believe not offers working core this still believe XXXX. of we

& years, For name. more our the has wrote one defines steam. greatest We than Wilcox Babcock on The book XXX of literally assets the world-class been technology. company

continue and We and that to that that to forward take over. for in legacy, & it's pride we look name Babcock not demonstrating Wilcox,

getting In started. fact, we're just

now turn to So taking the your over the back I'll call operator who'll assist questions. us in


are the at back There questions for no management this I'll remarks. to call over time. turn closing

Megan Wilson

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


This concludes call. conference today's

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