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Babcock & Wilcox Enterprises (BW)

Participants
Megan Wilson VP, IR
Kenny Young CEO
Lou Salamone CFO
Henry Bartoli CSO
Call transcript
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Operator

Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Babcock & Wilcox’s Q2 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. of you President conference. begin Vice Wilson, Investor may Relations, your Megan

Megan Wilson

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

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

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

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

We results release can our also this should considered provide non-GAAP as measures morning. to superior A This the GAAP in reconciliation to non-GAAP in second a not our measures. with provided supplement historical of information be comparable or found of earnings GAAP. results historical for accordance substitute be information quarter regarding certain the published

call With that, the I will over Kenny. to turn

Kenny Young

and of across shared Vølund & Good an our core are Thanks, employees through we the segments: to and our SPIG. thoughts deliver our time to what our three Babcock quarter thanks diligently morning Last regarding all everyone transformation to commitment Megan. for taking technologies working Wilcox, join. the intense achieve company’s so and

fixated to sustained profitable operating on our on a returned debt. progress company improving process growing ourselves loss profitability remain EBITDA with expectations, on our profitability improvement this During significant reducing and our we’ve our positioning quarter our real revenues customers’ profitability, for adjusted We risks, sheet, starting to our sustained the balance basis. which exceeding in an path refinancing made towards

have Although, recoveries path on insurance challenges, and claims. a recognizing started we flows cash face from rigorous still we’re to improve

on new anticipate and establish already improved building to real will longer potential customer We XXXX bottom-line term fully market see in our a XXXX. bidding an We’re see throughout strong an the foundation share opportunities and global base. on we and loyal basis on increase for objectives and

actions. taking systems cost reduction over includes the concrete cost execute which as company and our several unnecessary $XXX identified annualized corporate our plans of We’re next removing a quarters. to identified ensure steps as from are initiated and saving on We’ve we has over much The million announced previously strategy overhead. practical

also a on stronger which our discuss rights sheet detail the financial put a which debt accountability transactions company balance and Lou refinance not We’ve We’re offering in as deleveraged put will only effective more later. lowest our to costs. the safety, as improve we over we structuring each one including remove drive level that unnecessary good pushing incentives expect planned our a These and quarter in previous to but value position down foundation. significantly transactions the equitization to completed us

achieve technologies, We team, management with executing our our importantly, are strategy focused our million Most rate EBITDA entire core split Stock $XXX employees also share run and a adjusted on the leverage engineering listing criteria. services minimum stock targeted comply to in York reverse XXXX. of Exchange entire best-in-class to our completed global price New our to

segment performance our we see end. second Now, every we’ve that business that you’ll towards in as results, XXXX discussed quarter improved

can Vølund this and win bid shrinking we segments while to the consolidated with quarter, $XXX.X million strategically Our of and revenues the profitably. and revenues of the Babcock margins solid saw & the strength Wilcox’s which have strong reflect work SPIG segment bookings been improving complete

as planned, services significantly West as historical were we also Beach high and This products of margin Palm revenues divested projects, year-over-year coming in XXXX. reduced risk low loss assets and exited the from third of quarter quarter our EPC revenues lower the

expand a a share number grow business complete pursuing smart we market the and we We’re as to which topline be see aggressively. in now, and executing we’re strategies way of so, transformation. to each do Right expect our exactly in where to we’re opportunities we

the not We’re sake chasing for revenues revenue. of

foundation term a long for sustained building profitability growth. and We’re

detail. now Lou? over who will second in XXXX discuss to call Lou, the I’ll turn the quarter more

Lou Salamone

Thank you, Kenny.

our of expected on our LIBOR $XX.X in As $XXX.X million, in West through Kenny of to XXXX. technologies decrease down consolidated million Beach quarter Palm to a and second wind we the the those second quarter reductions recent dispositions core project focus our compared as we mentioned and and profitability, revenues strategy lost changes as revenues and of were

and Our operating GAAP the driven loss all loss an of segments by primarily level loss to operating of European $X.X $XXX initiatives. of on was improved quarter. of charges million in absence profit operating was gross million our quarter benefits improvement SG&A goodwill restructuring in our by improvements control led second the cost XXXX, the the in impairment an in losses XXXX EPC comparable loss the compared lower million The contracts, of of $XXX.X and of

fees a included of This costs. million million $X.X charges restructuring advisory quarter's and $X.X loss also for

negative in as EBITDA $X we XXXX. as consolidated adjusted EBITDA generated adjusted million of consolidated by second million of the improved a to compared million adjusted quarter consolidated a $XX.X also Our $XX.X positive EBITDA

on results move to of improved various the our discussed going second segments. and quarter now I’m

million was compared year partly period. segment construction by offset by quarter Wilcox metrics. which volume activity. Revenues to all was the increased & Babcock operating retrofit $XXX.X Our increased lower key $XXX increase mainly to driven prior This improvement in the X.X% second by in in showed as million

XX.X% period profit as margin to improved to year last gross at compared same was gross The Our cost the and control This higher XX.X% profit second construction to volume, XXXX of period. compared million previous costs. the operating in increase lower primarily XXXX $XX XX.X% year. due was in margin better quarter as at in the $XX.X the to million higher the warranty than

as EBITDA last to XXXX well quarter as improvement margins gross to Adjusted $XX million continued costs. second year's the profit mainly to compared this $X.X million reduction quarter, XX% attributable was as again G&A in the in for of our increased

legacy primarily expected as second our to core Moving segment, following geographies products as strategy, to as change profitability the onto well we improve due key down volume revenue bidding lower $XX XXXX. contracts in second SPIG anticipated cooling of to $XX.X SPIG quarter in Revenue to to build more aftermarket and XXXX lower selectively million in change our in decreased in as on continue our in XX.X% the wind our services strategy million quarter at SPIG of an system by of volume loss new declined as services. the by compared

the result compared a change of in to in $XXX,XXX the quarter of year strategy, second million in XXXX As gross as our period. improved profit to prior $X.X

$X.X year. EBITDA initiatives improved by improvement million this gross segment. to by $X.X Adjusted Again, period improvement SPIG and in a the savings same negative was taken a $XXX,XXX by driven million the last of as the to compared cost negative the benefits profit

in as were XXXX, $XX.X second XXXX. Moving expected segment revenues quarter for Vølund the second quarter the the million on in $XX in of million as Vølund, compared to to

EPC of compared our XXXX winding the third Beach and shift and quarter the quarter and than were West on full technology products of bidding scope year in contracts Palm projects. other services revenues EPC up of quarter and to lower the primarily the continued prior legacy again Second to delivering the sale a loss due rather to core

that decline expected maintenance partially United the Kingdom was This the related and offset of startup of two by the to EPC customers. contracts followed operations turnover in our the contracts

As segment a profit quarter this the by positive and million a the of second $X.X million million of as losses $XX.X to due contracts. European to result the $XX.X settlements loss a loss of the contracts, was of the primarily of in lower on Again, XXXX. winding the EPC second to quarter XXXX improved level down negative compared gross EPC in

complete In as the quarter of the recorded estimated losses second segment in to revenues resulting losses contracts recorded to European second six from XXXX, million changes compared equivalent $X.X the quarter $XX.X of and in in million a the cost XXXX. net

gross the savings also Palm of offset and from lower XXXX sale the quarter by EPC from levels due were which gross contracts, third absence the XXXX. the West effect expense Beach also its of support warranty quarter to of the the included Beyond loss overhead, profit direct second project profit of in

$XX.X $XXX,XXX in million reflecting gross Adjusted benefits compared lower well due quarter profit reductions. EBITDA last of of improvement was quarter and the was cost negative in adjusted mainly a the second SG&A costs restructuring year. the EBITDA a This to as to negative as as

from flow European use accrued six million flow, is progress out to reduction against the also EPC to talking turn was Now funding a losses new balance the a I liquidity. loan This loss contracts quarter would related about by due in like sheet of our and last Cash of which the accounts considered liability. cash to term our settlements a was liabilities. the $XXX and payable contracts, mainly offset accrued of to our current and European in our EPC operations

quarter with unrestricted the of $XX.X million. cash We ended

our to debt this amortization in expense driven last out new as million increases revolving revolving to in term quarter increase $XXX.X prior and loan compared primarily million. in was the year is both Our interest million and expense $XX.X quarter was Interest total related $XX.X the loans. by the and

principle on of to agreement pursue We're under of insurance continuing of the $X.X In We're other million XXXX, losses the settlement subcontractors for related policy potential EPC pursue the we various recoveries insurance XXXX. another project from portion full loss insurance and which Also million to agreed to certain European insurer recover under settlement to a continuing June, contracts. in June projects. recoveries claims losses the July paid appropriate available. and a we first of XXXX, $X.X where cost to under on in one in to a policies for agreed

cash quarter, second reduce we closing in million credit sold primarily were under Germany. In at to handling Loibl, $X.X received business used a proceeds which the facility. balances in the B&W We outstanding material

the sale of our the our terms $X.X revolving under of release the and by performance $X million improved the agreement. totaling reduced of facilitated capacity credit credit credit letters million which borrowing also However, facility

potential continuing We in as the evaluate dispositions appropriate future. to are

million from $XX of to XXX term facility A-X amended we million. previously XXXX, of Riley Tranche incremental last-out to credit disclosed an as loans uncommitted As April B. as up agreement on well we X, provide our

affect entered with stockholder transactions term among subject for to equitization to Vintage the of approval. into other things Riley series of and portion out agreement B. last loans also We Capital an the a

a of issuance at A-X at Tranche of the effect of reverse X.X a affected transactions XX, split common one-for-ten In warrants the exchange the reverse per purchase of XX, per million the at loan share and principal split $X.XX These $X.XX These an common the stock of $X.XX XXXX. to a immediately share. stock offering on transactions last-out-term approximately included transactions. that On one-for-ten stock took July following, rights $XX share. for stock completed we million acquisition the equitization after after completion of were all July

Gross remaining to $XX.X million $XX.X offerings Tranche was proceeds to last-out-term from under of A-X rights the million last-out-term borrowings $XX.X A-X of was of repay loans. used million outstanding which The were fully reduce the the the Tranche the used loans.

of million addition common stock last-out-term for million commitment of through all loans $X.X $XX.X offering, XA A-X the principal for issued of the the with of In backstop conjunction exchange Tranche loans. outstanding and and we of Riley's the in B. last-out-term Tranche rights in

accrued After In our and of $XXX transactions the last-out-term and million A-X A-X was deleveraging sheet. transactions, interest. fully a of resulting the significant the debt million of to in-kind Tranches reduced through last-out-term equity by loans extinguished aggregate, equitization of loans paid these to were Tranche in we of our reduced the completion A-X inclusive equitization balance balance $XX.X

the including Tranche the and giving to XX.X of commitment resulted the total in shares in backstop of XX.X reverse shares X.X shares outstanding the and in the million stock resulted principal. the million rights split, A-X of outstanding This XX.X for additional exchange transactions effect common million. offering million shares XX issuance After million stock for through shares

company company's intends credit facility The it terminate prior credit refinance agreement on to as credit March the required. or requires revolving XX, and the to to facility the XXXX

mentioned, businesses Kenny our continue to efficient. As make more we

have progressing the Cost level in an balance additional line savings in to and million in targeting the cost three in segments to-date Roughly and and with the of implemented now the implementation million been $XXX identified in million of majority quarter the we $XXX corporate savings. be across expectations. been identified quarters measures XXXX and annualized remainder at savings and XXXX. savings implemented are with savings This $XX plan are the all have our

we business. opportunities for efficient We will manage as continue look for additional to our

previously to initiatives, ongoing time. as of at does savings stated company number provide cost the Finally, the guidance this actions based strategic on and not intend

Thank it turn to you. I'll strategy Kenny our over going discuss now to forward.

Kenny Young

Thanks Lou.

XXXX performance second momentum and actions cost-saving of quarter shows the Our following in recent efforts. our strategic

Our consolidated margins return an operating adjusted profitability significantly business to basis. EBITDA improved and on

continued & the its our core deliver company on we're strong our and profitability making improve and progress steady to Wilcox focusing segment Our across Babcock strategy value businesses. our performance for customers by technologies and on

equitization preparing refinance financial recovery. to to as our complete, support are transactions our we With planned ongoing

demonstrating our our we the businesses customers forward and look continues, core to XXXX to shareholders. As our underlying of strengths

with cost-saving execution. cash strengths improved initiatives, we before, are and said our three As project strategy, to this leveraging flows improved there parts

said, From majority we've our savings, of and we'll have we're a perspective impact Lou and $XXX in as the already targeting time. over which see to identified bottom cost about line annualized savings more implemented million

are our We evaluate to to cost additional continuing savings. identify structure and

Our incentive expected these support by outcomes the with and programs our our and efforts customers shareholders. align

with perspective next quarters, with establishing as possible. company equitization financial credibility improved we've refinancing soon de-levered the April towards position stronger lenders, our customers sheet continue flow will been cash few and suppliers. ultimately a company financing, our and as our substantially and a the a we significantly working Through balance we've operation environment as over the for we transaction, From

advisory substantial fees Once have come expect and settlement, restructuring the avoid we challenges. our to with that amendment, financial recent completed,

We customers pipeline will ultimately also our our suppliers with improvement terms expect and forward. bookings improved improve this going support and conversions

are an services. on core products aftermarket on and services we're core we Finally, and emphasis focusing concentrating strengths with our increased Across markets company, on and our power and execution. for the retrofit industrial

improve revenues. simply in higher as continue As chasing execution. I we said quality projects to we pursuing identified We've than margin segment to are earlier, business project opportunity more each rather capture our

bookings The its last Babcock nearly pipeline. continue doubled compared solid the adjusted quarter the robust quarter same year. EBITDA last year second in to Wilcox quarter the and & see segment same a saw up over slightly to We

and world-class have throughout our controls committed a utility, of challenges paper markets. Our as and been and pulp employees remain to they financial and technology environmental to supplier the leading boiler oil being gas

we our underserved with our with of Our base world fleet base coal well. aftermarket Babcock and & support power installed into one global and the around environmental brand services install retrofits, generation the Wilcox vast is tap strengths, as equipment competitors our as

see new growth grate the and Internationally, the install services international boiler paper packaged aftermarket to potential for We're growth and business. its along untapped we as boilers aggressively pursuing our and our pulp continue industrial equipment in build potential environmental services. base as well of with

stable evident of strength We financial more return expect the more as and segment footing. to & a to Babcock Wilcox more become we

Our under SPIG management. business is stabilizing new

value higher selectively We said, on not quality bidding like revenues. chasing with based products on opportunities core our are projects terms, geographies, I and targeting better

bookings same to last quarter pipeline the steady the is year saw compared and strong. quarter This

execution continue project segment. cost driving in reductions improvements this further evaluating We and

several to We the the over SPIG improve expect segment quarters. continue to next

steady world. The and projects for Vølund EPC where returning it no business a and us and margins. The supplier and decades. operator business bidding maintains we that grates, now renewable apart the system from projects and longer can well solid its as core largely see scope segment building on around many is relatively core the environmental loss model to are The years EPC been pipeline leaders technology technologies profitably a have designer, been focus technology served the conveyors business for that behind has for underlying boilers, specific control solid in

we gross support Vølund to the last reductions through expect to coming recorded a projects in the the that previously overhead as quarter segment This positive profit were to work performance over improve required we quarters. continue and

the debt flow, more positions profitability and we improved to becoming on on the refinancing emphasis the path year. cash sustain evident initiative benefits us core in our our half extremely with second together, Taken believe technologies, and project of execution well continued cost-saving our

continued what vendors, a deliver and is in better and XXXX better an our working of the industrial we core our power to XXXX. to even be already We should appreciate shareholders together in look forward and customers, support employees markets

We ongoing are committed transformation. to our

optimistic confident our strategic world-class are and our going We and in technologies forward. about dedicated employees path

will With that over I taking assist Chris, us your now return to call questions. the who back will in

Megan Wilson

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

Operator

This concludes today's conference call.

now disconnect. may You