Babcock & Wilcox Enterprises, Inc.

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.

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.

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?