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spk07: Good evening. My name is Hannah and I will be your conference operator today. At this time, I would like to welcome everyone to the 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star key. Thank you. Sharon, you may begin your conference call.
spk00: Thank you, Hannah, and thanks to everyone for joining us on Babcock & Wilcox Enterprises' third quarter 2023 earnings conference call. I'm Sharon Brooks, Director of Communications. Joining the call today are Kenny Young, B&W Chairman and Chief Executive Officer, and Lou Salamone, Chief Financial Officer, to discuss our third quarter results. During this call, certain statements we make will be forward-looking. These statements are subject to risks and uncertainties, including those set forth in our Safe Harbor provision for forward-looking statements that can be found at the end of our earnings press release and also in our Form 10-Q that will be filed today and our Form 10-K that is on file with the SEC and provide further detail about the risks related to our business. Additionally, except as required by law, we undertake no obligation to update any forward-looking statement. We also provide non-GAAP information regarding certain of our historical and targeted results to supplement the results provided in accordance with GAAP. This information should not be considered superior to or as a substitute for the comparable GAAP measures. A reconciliation of historical non-GAAP measures can be found in our third quarter earnings release published this afternoon and in our company overview presentation that will be filed on Form 8K this afternoon and posted on the investor relations section of our website at babcock.com. I will now turn the call over to Kenny.
spk02: Thanks, Sharon, and thanks to everyone for joining us today. Well, as you can tell by our earnings release, it's been a busy third quarter for Babcock and Wilcox. I'd like to start the call today by first reviewing our third quarter performance on a continued operations basis, accounting for the announced reclassification of our solar business, as well as the latest advancements across our Bright Loop and Climate Bright initiatives. I'll also discuss our announced strategic business realignment and the rationale behind that decision, as well as details related to our 2023 and 2024 financial targets, which are based primarily on the strong performance of our aftermarket parts and services businesses before turning the call over to Lou. Let me start by highlighting the broad-based activity that drove revenue growth across all business segments during the quarter. Revenue for the third quarter was $239 million, which is 13% improvement compared to the prior year and our third consecutive quarter of revenue expansion on a year-over-year basis. Our top-line improvement was led by thermal revenues that increased approximately 17% when compared to the third quarter of 2022, followed by renewable, more specifically our renewable services, as well as environmental revenues, increasing 11% and 4% respectively. Our aftermarket parts and services business in thermal and renewable, typically our higher margin businesses, continue to perform above our internal expectations. Consolidated adjusted EBITDA from continuing operations for the quarter was also impressive at $20 million, an improvement of $7 million, or 54%, when compared to the same period last year. This is inclusive of roughly $2 million in expenses for Bright Loop and Climate Bright in Q3 2023. While product mix was a large factor in the adjusted EBITDA performance for the quarter, attributable to the higher margin nature of our aftermarket businesses, we also demonstrated strong execution on increased volumes of projects within our environmental segment. While continued operation bookings and backlog were mostly flat year-over-year, This is largely attributable to timing of new bookings as negotiations on a few larger opportunities are taking slightly longer than anticipated. Some of these delays are positive due to increased scope for B&W aftermarket services as many utilities and large energy companies are reevaluating the timing of new build projects and deferring to upgrades due to higher interest rates and other geopolitical factors. Our outlook for near-term booking opportunities remains robust, positioning us well to achieve updated backlog growth in a range of 550 to 650 million by year-end 2023 based on continued operations, not including our reclassified assets. In addition, based on our improved performance of thermal parts and services and our global reach in providing clean energy technologies, we remain confident in achieving our revised full year adjusted EBITDA target from continuing operations of 85 to 90 million in 2023 when excluding Bright Loop and Climate Bright expenses. Transitioning to Bright Loop and Climate Bright commercial activities, we are pleased to provide several updates related to our hydrogen generation technology and project portfolio. As previously mentioned, we are developing a small bright loop hydrogen production plant in Matlin, Ohio, very near our headquarters here in Akron. We are close to signing a definitive agreement for hydrogen offtake at this location for up to three tons per day of hydrogen production for the next 10 years. We are also excited to announce we have a letter of intent for project level financing, and we have signed a lease agreement and are moving forward with construction to produce hydrogen by the end of 2024 or very shortly or early into 2025. With regard to our medium and larger platforms, we are also excited to announce a collaboration with Air Products, which represents a key step forward in our development of net negative carbon intensity hydrogen production facility in Louisiana utilizing Brightloop technology. More specifically, we have signed a memorandum of understanding with their products to enter into a definitive offtake agreement for up to 200 tons of carbon-negative hydrogen per day, as well as the CO2 produced at the facility, with the initial production facility expected to be operational in late 2026. This comes on the heels of our previously announced offtake agreement with General Hydrogen to acquire both hydrogen and CO2 from our medium-sized biomass bright loop platforms. Both of these agreements come with 10-year length terms. Based on the traction we have received to date, it has become clear that commercial solutions that address carbon neutral targets have become imperative. Importantly and parallel, we continue progressing in Wyoming and within recently announced hydrogen hubs, especially in West Virginia. This includes permitting, fuel commitments and collaboration, offtake, land allocations, as well as project funding. While our recent developments across Bright Loop projects continue to progress, we're also pleased to announce a meaningful update to our board of directors. Effective today, Dr. Naomi Bones will join our board of directors bringing an extensive expertise within the energy sector, particularly in hydrogen generation and carbon capture. We welcome Naomi to the board and are confident her deep industry experience will prove valuable as we continue to accelerate our hydrogen strategy going forward. To reiterate, our updated pipeline, when excluding the reclassified operations, is over $8.5 billion across all three segments, with approximately $1 billion in Brightloop opportunities. We believe this puts us on a pathway to reach $1 billion in bookings by 2028 with a combination of small, medium, and large projects. We feel confident that could lead to $1 billion in revenues from Brightloop by 2030 and beyond. and would still only represent 1% of the market share of total hydrogen spend by 2030. I'd now like to focus on the announced strategic business realignment, including what it means for the company going forward and its immediate impact to our current operations. In response to today's market conditions, which include higher interest rate costs and reduced or delayed growth capital expenditures by our customers, We see a growing global trend in extending the operational lifespan of existing power and industrial generation facilities. This presents us with an opportunity to shift our focus to the more predictable revenue streams generated from our aftermarket businesses. We plan to utilize these cash flows to strengthen our balance sheet and reduce our overall debt. while we are also evaluating strategic aftermarket alternatives related to non-strategic assets. Further, we expect to realize up to $30 million in annualized cost savings, primarily through reduction of the high overhead associated with seeking multiple new-build projects. Our heightened focus on producing more predictable cash flow generation is consistent with our approach to provide long-term profitable growth for the company and its shareholders ultimately driving our decision to streamline our efforts to concentrate on aftermarket businesses and capitalize on higher margin parts and service opportunities. In order to ensure a successful realignment of our updated strategy, our focus is on the following. One, a greater emphasis on higher margin aftermarket parts and services across all three segments, while further reducing overhead costs associated with certain large new build project opportunities. reducing our senior secure letters of credit facility by up to $20 million by the end of fiscal year 2024, refinancing our existing senior secure credit facility to reduce our interest expense by up to $5 million, and just today announcing a commitment for $150 million in refinancing. bolstering cash flow generation and strengthening the balance sheet, and utilizing federal, state, and project level financing to accelerate the deployment of our Bright Loop and Climate Bright technologies. While we recognize the long-term growth potential for solar from both the community and utility standpoint, there were several key factors that our management team and board considered when evaluating what steps the company would take regarding the pathway for continued growth. As part of this evaluation process, we have decided to reclassify our solar business out of continuing operations. This is primarily due to the historical projects, the higher risks, and the margin profiles. Looking ahead to next year, our focus on promoting future growth aligns with the sustained demand we observe across all segments. paving the way for improved performance in 2024 with our announced adjusted EBITDA target range of 100 to 110 million when excluding Bright Loop and Climate Bright. Importantly, given our strategic business realignment, we now have increased visibility and confidence in our outlook as a significant portion of our targeted adjusted EBITDA will be generated from existing backlog with less reliance on large projects. I'll now turn the call over to Lou to discuss the financial details of the third quarter. Lou?
spk04: Thanks, Kenny. I'm pleased to review our third quarter results and our recent commitment for the refinancing of our senior credit facility, further details of which can be found in our 10-Q that is on file with the SEC. I'd also like to call your attention to the fact that I will be referring to amounts of our continuing operations. Our third quarter consolidated revenues were $239.4 million, which is a 13% improvement compared to the third quarter of 2022. This is primarily attributable to higher volumes in our renewable segment due to the B&W Renewable Services operations, as well as the thermal segment volume, which increased due to higher levels of construction and parts activity. Our net operating income for the third quarter of 2023 was $5.5 million compared to an operating loss of $2.7 million in the third quarter of 2022. Our adjusted EBITDA was $20 million as compared to $13 million in the third quarter of 2022. Bookings in the third quarter of 2023 were $198 million, and the ending backlog at the end of the third quarter in 2023 was $507 million. Our net loss per share in the third quarter was 18 cents as compared to a loss per share of 15 cents in the third quarter of 2022. As Kenny mentioned, we've reclassified the solar business out of continuing operations. As a result, we'll have taken an impairment charge of about $56.6 million and recognized contract losses of 47.9 million, which include future estimated losses both of which are reported in discontinued operations. We're pursuing potential recoveries of certain of these amounts, up to $40 million, and there is no assurance that these amounts will be recovered. Accordingly, such recoveries have not been recognized in the financial statements. I'll now turn to our third quarter segment results. Within our Babcock and Wilcox renewable segment, revenues were $87.1 million for the third quarter of 2023, which is an 11% increase compared to $78.5 million in the third quarter of 2022. The increase in revenue is due primarily to higher volume associated with renewable services, and our adjusted EBITDA in the third quarter was $10.1 million as compared to $4.5 million in the third quarter of 2022, primarily due to the higher revenue volumes as described above. Within the Babcock-Wilcox environmental segment, revenues were 46.4 million in the third quarter of 2023, which is an increase of 4% compared to the 44.6 million in the third quarter of 2022. The increase is primarily driven by a lower volume related to flue glass treatment process projects, offset by a higher overall volume of cooling technology projects. Adjusted EBITDA was $5 million for the quarter as compared to $3.1 million for the same period last year. And again, this is primarily driven by a higher product mix, higher margin product mix as described above, along with favorable closeouts of a flue gas treatment plant. Sorry about that. Hard for me to say flue gas. Turning our Babcock and Wilcox to our thermal segment, revenues were $107 million in the third quarter of 2023. which is an increase of 17% compared to the $91.3 million in the third quarter of 2022. And this was primarily attributable to the higher level of volume in our construction projects, as well as parts and service and our package boiler businesses. This was partially offset by a decline in certain service projects. Adjusted EBITDA in the third quarter of 2023 was $11.3 million, Compared to $10.8 million in the third quarter of 2022, this is primarily driven by the higher revenue volume and product mix described above. I'll now turn to our balance sheet cash flow and liquidity. Total debt at September 30, 2023 was $377.6 million, and the company had cash, cash equivalents, and restricted cash balance of $65.1 million. Additionally, subsequent to September 30, 2023, We obtained a commitment to refinance our senior credit facility and amend our existing reimbursement agreement, including updating certain financial covenants thereunder. The refinance commitment is expected to reduce our interest costs by up to $5 million per year based on current interest rates. The financing and strategic alignment should significantly improve our liquidity this quarter and onward. I'm also pleased to announce that we have signed, as Kenny had mentioned, we've signed a letter of intent for the financing of our first Bright Loop hydrogen project being developed in Massillon, Ohio. Now, I'll turn the call back over to Kenny.
spk02: Thanks, Lou. Well, in closing, while Q3 wasn't without challenges and included several strategic decisions to improve the fundamentals of our business, we are extremely excited about the growth opportunities ahead of us. With increasing commercial interest in our core and new technologies and global demand for our baseload power generation, our market outlook remains robust and we see the momentum in booking activity accelerating into 2024 and beyond. Finally, as always, I'd like to recognize the efforts of our employees as they continue to drive our success as an organization worldwide. With the outstanding support of our extremely talented and experienced employees and the continued confidence of our customers, We're driving innovation and supporting the global transition of sustainable solutions, and we're focused on delivering strong, profitable growth for our shareholders. We are entering a new phase as we execute our strategic business realignment, and we look forward to the transformation that will enhance overall margins and improve cash flows generation for the company. I'll now turn the call back over to Hannah, who will assist with any questions. Hannah?
spk07: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your questions. We will pause here briefly as questions are registered. Our first question is from the line of Erin Spitella with Craig Hallam. You may proceed.
spk03: Yeah, good afternoon, Kenny and Lou. Thanks for taking the questions.
spk02: Hey, no problem.
spk03: Thanks. You know, first for me on the guidance, you know, appreciate some of the color there. Can you just talk a little bit more about, you know, the exclusion of kind of Bright Loop and Climate Bright there? You know, what those investments might look like as we think about 2024? And then maybe just elaborate a little bit. You talked about some kind of project level financing and other things that you're pursuing there.
spk02: Sure, no, I'd be happy to. So I would think about Bright Loop and Climate Bright from a broader company expense standpoint to be, I don't know, under $10 million, but $5 to $7 perhaps somewhere in that neighborhood, just to give some transparency there. From a B&W standpoint, obviously the project financing that we're referring to will go in at the project level versus an impact necessarily to B&W. So there will be a timing, and depending on how that project financing is set up and the exact structure of ownership of those particular projects, how the revenue will flow back and forth to B&W, as we've mentioned in the past. But from an expense perspective, you know, rough order magnitude, that's how we're thinking about Bright Loop and Climate Bright.
spk03: All right, thanks for that. And then second, you know, just on the backlog, you talked a little bit, but can you just give a little more color on some of those projects? You know, sounds like maybe just slipping into 2024. You know, have any of those been lost, or is it just kind of more of a project timing? And then you kind of talked about accelerating momentum, just, you know, maybe some of the areas that you're looking for as we head into 2024.
spk02: Yeah, well, actually, I would, even though we're in November here, we're talking about Q3 on this call. I would say some of those are slipping more into Q4, maybe into 2024. It just depends as we work through these negotiations on a few projects that we're trying to complete on that. You know, as referenced in my comments, some of those delays are referred to increasing some scope and activity potentially for B&W. as a few of the projects were looking to larger upgrades and enhancements. And some of our customers are now trying to ascertain how they can extend out the life of these plants longer than maybe they had anticipated. it's caused us to or caused them to relook at some of the scope in a positive way as it relates to B&W. And so we're excited about that. But, you know, so those negotiations continued. But hopefully, and we have, you know, full intent to get those books still in Q4. But, you know, one or two of those may slip out into 2024 as well. But more of a timing, I think, just from a negotiations aspect and as the customers relook at, their approach to some of these technologies and the lifespan of the plants, which in the long run votes well for us as an aftermarket provider. So that's how we look at it. I think worldwide, obviously, Some new build opportunities, in particular, I would say in renewable energy, waste energy, some of those are delayed a little bit because of the interest rate increases and timing of capital expenditures, but not for any other reason. So there's a few that will probably extend in the next year overall. But for us, as we talked about on the business, as reducing the overhead associated with large new build, which this is an opportunity for us to do that. We also see potentially increasing opportunities around licensing and licensing some of our waste energy technologies in support of some of the new direction that we want to take in the company. So we'll balance that as we transition more towards licensing and less on specific large new build opportunities.
spk03: Understood. Thanks for taking the questions. I'll turn it over. Thank you.
spk07: Thank you, Mr. Spichella. Our next question is from the line of Brent Healman, DA Davidson. You may proceed.
spk06: Hey, thanks. Good afternoon. Hey, Kenny, Lou. I just wanted to confirm the 2024 EBITDA target is 100 to 110x Bright Loop and Climate Bright? That's correct. Yep. Okay. And I just, again, another clarification, I think you said 5 to 7 million against that potentially and costs just in support of Bright Loop and Climate Bright. Is that the right sort of baseline?
spk02: Yeah, I think that's, you know, say below 10, but somewhere in that range, I think it's a good number. It will tweak in very little bit depending on the project financing and how we We deal with that on these projects as they continue to advance in the timing of some of the state funding that we're anticipating, as well as other SPV level investors that would be investing in those projects. So there's just an element of that timing piece and how the revenue flow between the projects back to BW would take place. which could plus or minus those expenses from an EBITDA standpoint. And it's a little early to predict precisely how that will work and the timing of that, but we see that pathway unfolding. So just to give you some range, that's kind of how we're thinking about it.
spk06: Okay, that's helpful. And I guess, I mean, particularly in regard to some of these moves to boost the cash flow of the business, can you talk about what sort of your expectations are, you know, assuming kind of this 2024 EBITDA target range should get some benefits from this overall strategic realignment. I assume there's less drag from certain operations as a function of this. How should we think about that 2024 EBITDA, you know, converting into the cash flow?
spk04: Yeah, Brent, from our standpoint, With the emphasis on the thermal business and what we also call power business, which generate much more cash flow than new build projects, we should start seeing a better conversion than we've had in the past from adjusted EBITDA to the cash. Some of that cash will be used, as Kenny talked about, to continue to expand our bright loop penetration. But we should be able to convert a much higher percentage than we've converted and have positive cash flow coming into the second quarter of next year. Conversion rate would probably be, I'll be a little bit broad on that because of CapEx, but the conversion rate would probably be in the 60% range with respect to cash.
spk06: Starting to queue, is that right, Lou? Yeah.
spk04: Yeah, I'd say middle of Q2 we'll start seeing that. Because Q1, as you know, Brent, Q1 is always a slow quarter for us as well as others in this industry.
spk06: Yeah. Okay. And then I guess just in regard to some of the financing that you've done here recently, maybe I mean, your thoughts, next steps just related to the capital structure that you may or may not need to take, I guess, in order to sort of support the ongoing kind of financing commitments you've got out there, support the growth of the company, support Brightloop. Do you feel like the capital structure is in place? You can do all that at this stage.
spk04: Yeah, I think the committed financing that we talked about earlier for the $150 million for the senior credit facility, which will be both what I'll call the letters of credit facility and the revolver, certainly helps our capital structure, as does the lower interest rate. And as Kenny mentioned, we're kind of looking at some of the strategic areas that may not fit with our new direction. And that may generate some cash.
spk02: I'll add to that just real quick, though. But that 100 to 110 million EBITDA range, it's important to note and try to emphasize this, that we're lessening, if you will, the reliance on large new build projects as it relates to that. target, you know, that doesn't mean that we won't be entering into certain projects if it makes sense for us to enter into. We're trying to obviously allow those to be more upside to that target rather than a necessity in order to achieve the target. So try to be a little more conservative on that approach with putting that guidance or targets out there.
spk06: Okay, great. Thank you, Kenneth. Yep.
spk07: Thank you, Mr. Sandman. Our next question is from Rob Brown with Lake Street Capital Markets. You may proceed.
spk01: Good afternoon. I just want to clarify a little bit more on your comments on the realignment and then not sort of pursuing these larger projects. What kind of the – I assume it's waste to energy, but are you Are you then no-bidding projects, or how do you sort of go to market with that, and how do you change your focus there?
spk02: Yeah, it's not as complicated as it sounds. We're simply twofold, and I'll explain it further. Certain opportunities in certain parts on waste energy, particularly international opportunities, require certain security package levels. The security packages, IELCs, letters of credit, as it relates to us, come with high interest rates, right? So a lot of, in waste to energy, the margins are not as high on new build, clearly not as high as our after markets part services on renewable services. But those letters of credit and the interest associated with them really compresses the margins. plus additional risk. So as we look at going forward, two aspects. There are opportunities and projects that were in discussions and negotiations on regarding waste energy specifically that would have higher margin potential or targets associated with them that are well above and beyond the interest expense associated with the letters of credits. So those are positive ones or opportunities for us to pursue. But we want to remove the reliance of that in our forecast so that they're more upside rather than a necessity, if that makes sense. But secondarily, We do see an expansion opportunity on licensing. We have been licensing our waste energy technology in several markets, and that typically comes at even higher gross margins and significantly lower amounts of letters of credit, so the interest rate expenses are higher. or the cost of that are much more attractive to us from a margin standpoint. So it's not necessarily a no bid or a zero bid. It's just as we continue to focus, we'll reduce the overhead down to match what we think is, you know, the hand one or two or three or whatever the projects that we think that are, you know, a stronger opportunity for us from a margin and cash flow standpoint as we also increase the licensing model that we have, you know, particularly around our waste energy technologies. So it's – I don't know if that makes sense, but it's as simple as that sounds.
spk01: Okay. Got it. Thank you. In the Bright Loop pipeline – I know you've given some pretty good color on it over on your last analyst kind of update. How is that pipeline kind of at this point? Are you seeing more projects come into it? Are you seeing, you know, what's the direction in terms of project certainty and some of those projects that were waiting for some of the, you know, government supports and financing incentives?
spk02: Yeah, so we are excited about the opportunities in the pipeline building. When we announce the pipeline, we typically keep it to a three-year deadline. projects that we think we'll book in the next three years. So I guess if we expanded that pipeline to total opportunities, you would see several more billions in those opportunities. And that's mainly around Brightloop as it relates to those large projects. So our overall opportunities on Brightloop keep growing around that. As a result of that, we keep expanding that organization going forward in Bright Loop and Climate Bright. We haven't got to a final decision on this yet, but we're debating and discussing whether or not we should move Bright Loop and Climate Bright maybe to a separate at least discussion, not necessarily segment going into next year, but we're not at that point yet. But the short-term aspect, as Lou mentioned, Ohio now is moving into a real project for us. The financing is coming into place. The off-take agreements are moving into definitive agreements for up to 10 years of take or pay on that hydrogen. Obviously, it's not a big plant, relatively speaking. But it's important because it puts in the ground commercial technology for us and moves it from where we were before. The state discussions that we're having with several states now continue. Those applications are moving into a real status. Some of those will start to move into public domain soon, and you'll see further announcements on that. It might be a phased-in approach on some of that funding coming from states. And we continue the discussions on the federal level as well, too. The other aspects, again, it's kind of a circular piece, but the hydrogen hubs that were just recently announced. by the DOE, in particular the Appalachian Hub. We've mentioned before previously some of the work that's taking place there in Mountaineer in West Virginia. That's all pulled through. Some of that will get down to us. That's going to take time, obviously, but those things keep moving on. We've increased testing now. Boy, I'm going to throw out a number. It's probably we're up to about 30 different fuel testing or samples that we're testing across a broad range, both in utilizing solid fuels such as certain coal developments, also in biomass developments in multiple locations. That's going through our labs at this point in time. So we keep increasing the amount of fuel testing related to the opportunities. And we keep developing the opportunities as we keep unfolding the projects that are there before us, but you know as mentioned on the comments today You know the developments around air products and getting to a 10-year agreement with moving forward with them to finalize a 10-year agreement that location is a big step that plus the general hydrogen announcement puts us in an offtake of up to 220 tons a day and We are in negotiations on the feedstock aspect, mainly biomass in that particular location, and we're in negotiations on the lease and then the air permitting process there. We are also in discussions on funding around that project, so all corners of that pyramid are coming together. um the same in in some of the other locations as and and you know we'll keep announcing that obviously as we we continue to make progress there but but bright loop keeps expanding and and we're we're excited about you know those opportunities One of the areas I didn't talk about in the comments, but I'll say it on the call here, that we're starting to see, and we're early on this, so we'll identify it as we move along. But what we're starting to see globally, and potentially in the U.S., is actually combining ammonia, either net negative or net neutral ammonia, with coal-fired plants to reduce the overall CO2 offset of those coal-fired plants. We see that activity happening a lot, especially in Asia. There's been some discussions with a few here in the U.S., so really early on on that application. But that's exciting for us because, as I mentioned before, a lot of these plants now are looking to extend their life cycle and power generation. And if we can introduce a net neutral or net negative ammonia production from biomass, which Brightloop can do, these power plants can actually have a carbon offset that would take, literally depending on the mix, could take a coal plant down to at least net neutral by 2030. And we think that's an exciting development. We're early in that discussion, but it bodes well for us because it's both aftermarket parts and services for our baseload power generation and thermal group, But it also opens up offtake for the ammonia produced by net negative carbon intensity bright loop using biomass. So we're excited about both ends of that spectrum. And that's one of the decision points that went into our thinking to get more around our thermal parts and services and our renewal parts and services and focus more on the bright loop climate bright because it's becoming more real for us. At the same time, reduce emissions. you know, some of the costs associated with some of the other areas. So all of that adds into that realignment strategy.
spk03: Okay, great. Thank you for all the callers. I'll turn it over.
spk07: Thank you, Mr. Brown. Our last question is from the line of Alex Dreigel with C. Reilly. You may proceed.
spk05: Thanks. Good evening, Kenny and Lou. A lot going on here. So, let's get into a couple things. First, as it relates to the $30 million in annual cost savings, can you comment on the timing of that and how important is that in getting to your guidance of $100 million to $110 million next year?
spk02: Yeah, some of that has already started, and we'll help out a little bit in Q4, and clearly we'll kick in heavily into Q1 on that. So that process has already begun. Obviously, we're taking steps. Some of the timing of that may be more in Q1 than now, but they've been identified, and those are in process to be implemented, I guess. That's the way to describe it.
spk05: Excellent. And then there was a reference to strategic alternatives related to non-strategic assets. Is there any chance you could quantify kind of the possible value here that you could realize? in making those?
spk02: No, great question, Alex. I wish I could, but I'll leave that out for the moment. But just wanted to say we look at various things from assets. Some of those could be property locations and other things, assets that no longer strategically that we need going forward, but don't have a valuation or anything that we'd want to put out at this point in time.
spk05: Great. Thank you very much.
spk07: Thanks, everyone. That concludes the question and answer session. I would now like to turn the call over to Sharon for any closing remarks.
spk00: Thank you for joining us today. This concludes our conference call. A replay will be available for a limited time on our website later today. That concludes today's call.
spk07: Thank you for your participation. You may now disconnect your lines.
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