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Babcock & Wilcox(BW) - 2024 Q3 - Earnings Call Transcript
BWBabcock & Wilcox(BW)2024-11-13 02:20
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Financial Data and Key Metrics Changes - The company reported consolidated revenues of 209.9millionforQ32024,adecreasecomparedtoQ32023,primarilyduetothedivestitureoftheBWRSasset,whichaccountedfor209.9 million for Q3 2024, a decrease compared to Q3 2023, primarily due to the divestiture of the BWRS asset, which accounted for 7.4 million in 2023 revenues [23] - Adjusted EBITDA for Q3 2024 was 22.3million,anincreaseof7822.3 million, an increase of 78% year-over-year when excluding the impact of the divested BWRS business [17] - The company recorded an operating loss of 1.4 million in Q3 2024, compared to operating income of 5.5millioninQ32023,largelyduetoone−timechargesrelatedtodivestitures[24]BusinessLineDataandKeyMetricsChanges−IntheRenewablesegment,revenueswere5.5 million in Q3 2023, largely due to one-time charges related to divestitures [24] Business Line Data and Key Metrics Changes - In the Renewable segment, revenues were 38.2 million, a decrease attributed to the divestiture of BWRS, with adjusted EBITDA down 51% to 5million[26]−TheEnvironmentalsegmentsawrevenuesincreaseby225 million [26] - The Environmental segment saw revenues increase by 22% to 56.6 million, driven by growth in domestic industrial and European businesses, with adjusted EBITDA at 4.7million[27]−TheThermalsegmentreportedrevenuesof4.7 million [27] - The Thermal segment reported revenues of 119.9 million, a 12% increase, with adjusted EBITDA rising to 18.4million,reflectingfavorableprojectmargins[28]MarketDataandKeyMetricsChanges−Thecompanynotedasignificantincreaseinimpliedbookingsto18.4 million, reflecting favorable project margins [28] Market Data and Key Metrics Changes - The company noted a significant increase in implied bookings to 810.5 million and an ending implied backlog of 628.2millionattheendofQ32024[25]−Thedemandforenergyfromvarioussectors,includingartificialintelligenceandelectricvehicles,isexpectedtodrivegrowthacrossthecompany′stechnologies[9][10]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedondivestingnon−strategicassetstoimproveitsbalancesheet,havingraisedover628.2 million at the end of Q3 2024 [25] - The demand for energy from various sectors, including artificial intelligence and electric vehicles, is expected to drive growth across the company's technologies [9][10] Company Strategy and Development Direction - The company is focused on divesting non-strategic assets to improve its balance sheet, having raised over 116 million from asset sales in 2024 [14] - Investments in the BrightLoop and ClimateBright technologies are expected to lead to higher margins and improved cash flows in the future [16] - The company anticipates a strong pipeline of over 9billioninprojectopportunitiesoverthenextthreeyears,including9 billion in project opportunities over the next three years, including 2.4 billion in BrightLoop and ClimateBright opportunities [13][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in leveraging the increasing demand for baseload generation and the growth of clean energy technologies [8][11] - The company expects strong operating momentum in Q4 2024, driven by its Thermal and Environmental segments [31] - Management highlighted the importance of ongoing investments in decarbonization technologies and the anticipated growth in hydrogen production [19][20] Other Important Information - The company achieved 26.5millionincostsavingstodate,withatargetofover26.5 million in cost savings to date, with a target of over 30 million in annualized savings [15] - A tentative agreement for a 10 million forgivable loan from West Virginia for a BrightLoop project is expected to be signed soon [21] Q&A Session Summary Question: Can you talk about the new EBITDA guidance range relative to past guidance? - Management indicated that the new guidance of 91 million to 95millionreflectsadjustmentsduetothedivestituresofSPIGandGMAB,whichimpactedpreviousexpectations[35]Question:WhatisthetraditionalconversionratefortheactiveFEEDstudies?−ManagementstatedthattheconversionrateforactiveFEEDstudiesistypicallyaround4095 million reflects adjustments due to the divestitures of SPIG and GMAB, which impacted previous expectations [35] Question: What is the traditional conversion rate for the active FEED studies? - Management stated that the conversion rate for active FEED studies is typically around 40% to 50%, with a high likelihood of follow-on projects [36] Question: Can you provide details on the timing and revenue cadence for the natural gas conversion project? - Revenue from the natural gas conversion project is expected to ramp up in 2025 and continue into 2026 and 2027 [42] Question: What is the current status of letters of credit and free cash flow outlook? - Letters of credit stand at approximately 80 million, with a timeline for rolling off over the next 1.5 years, and free cash flow conversion is projected at around 40% [45][47] Question: When will the Massillon project start generating hydrogen? - The company targets to produce hydrogen by early 2026, with full commercial operations expected around Q2 2026 [51]