Babcock & Wilcox Enterprises, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The company provides renewable, environmental and thermal energy technologies and services. This is an annual report, not a standalone fourth-quarter report. Amounts below are in U.S. dollars.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $999.4 million | $847.9 million |
| Gross profit, calculated as revenue less cost of operations | $224.1 million; 22.4% margin | $186.9 million; 22.0% margin |
| Operating income | $19.9 million; 2.0% margin | $2.3 million; 0.3% margin |
| Loss from continuing operations | $78.6 million | $20.0 million |
| Loss from discontinued operations | $118.3 million | $6.6 million |
| Net loss | $197.0 million | $26.6 million |
| Net loss attributable to common shareholders; loss per share | $212.1 million; $2.38 | $37.7 million; $0.43 |
| Adjusted EBITDA, non-GAAP | $79.1 million | $67.5 million |
| Net cash used in operating activities | $42.3 million | $30.6 million |
- Revenue rose 17.9%. Segment revenue was $318.6 million in Renewable, $202.9 million in Environmental and $499.2 million in Thermal. Management attributed growth to renewable parts and services, SPIG air-cooled condenser work, and a large Thermal construction project.
- Operating income improved, but the continuing-operations loss widened largely because benefit-plan costs shifted from a $37.5 million benefit in 2022 to a $37.5 million expense in 2023. Interest expense also rose to $49.9 million from $44.9 million.
- Adjusted EBITDA increased, but it is a non-GAAP measure with substantial exclusions; review the reconciliation before comparing it with GAAP earnings.
Liquidity, debt and capital
- At year-end, cash, cash equivalents and restricted cash totaled $71.4 million, down from $113.5 million. Foreign entities held $44.4 million, which generally was not available for U.S. operations without repatriation or repayment of intercompany loans.
- Reported total debt was $379.5 million, including $337.9 million of senior notes on the balance sheet and $41.6 million of loans payable. The notes mature in 2026: $193.0 million principal at 8.125% and $151.4 million at 6.50%.
- Preferred stock had $191.7 million of gross stated value outstanding. The company paid $14.9 million in preferred dividends in 2023 and said suspension was among the cash-management options under consideration.
- Operating cash outflow increased year over year. Investing cash outflow was $7.9 million, while financing activities provided $8.6 million, primarily from net borrowings.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern based on projected liquidity needs. It said planned financing and other actions were probable to provide adequate liquidity for the following 12 months. Actions included asset sales, an at-the-market common-stock offering, a request to reduce pension contributions, and possible preferred-dividend suspension.
- In January 2024, the company entered into an Axos asset-based revolving facility of up to $150 million, subject to borrowing-base availability, with a $100 million letter-of-credit sublimit. The filing said approximately $5 million was available to borrow. Its maturity can accelerate to August 2025 if the 2026 notes are not refinanced or extended as specified.
Material developments, outlook and risks
- B&W Solar: The company committed in 2023 to sell the business and classified it as held for sale and discontinued operations. The 2023 discontinued-operations loss was $118.3 million; it included a $56.6 million goodwill impairment and $44.1 million of losses from contract cost-estimate changes. The filing also reports $17.6 million of charges for receivables and contract assets determined uncollectible. The sale was not reported as completed.
- Backlog: Adjusted backlog was $530.5 million at year-end, compared with $549.1 million in 2022; $434.9 million was expected to convert to revenue in 2024. Separately, total remaining performance obligations were $644.5 million, including $114.0 million associated with O&M contracts being exited. Backlog may be delayed, changed or cancelled and is not a guarantee of revenue or profit.
- Contract and market exposure: About 77% of 2023 revenue came from contracts recognized over time, often using cost-to-cost estimates. Fixed-price cost overruns, customer disputes, subcontractor performance, supply-chain disruption, inflation, higher rates and foreign-exchange volatility could affect margins and cash flow. Approximately 45% of revenue was related to coal-fired power plants; international customers represented about 49% of revenue.
- Debt and refinancing: The company must refinance or extend the 2026 notes; the Axos facility has an earlier conditional maturity. Debt covenant amendments and waivers have been recurring, and covenant compliance, borrowing availability, and access to letters of credit and surety bonds remain important risks.
- Controls and audit: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end due to material weaknesses involving staffing and training, account reconciliations and contract accounting, complex transactions, system access, segregation of duties, journal-entry review and monitoring. Deloitte issued an adverse opinion on internal control, while issuing an unqualified opinion on the financial statements. Management reported accounting errors identified and corrected during 2023 and is pursuing remediation.
- Other items: Defined benefit and postretirement plans were underfunded by approximately $164.6 million. A Glatfelter contract lawsuit alleged damages above $58.9 million; a court ruling limited claims to a contractual cap described as $11.7 million, subject to adjustments, and the filing said the outcome remained uncertain. The stockholder litigation settlement was approved in 2023.
- Management described cost reductions and development of BrightLoop and other clean-energy products, but provided no clear numerical revenue, earnings or cash-flow guidance for 2024. It cited continued exposure to geopolitical conflict, tariffs, regulation, competition, contract execution, and customer spending.
Investor verification priorities
- Confirm current liquidity, borrowing-base availability under Axos, cash location and restrictions, and progress on planned asset or equity sales.
- Track refinancing or extension plans for both 2026 note issues and compliance with amended debt covenants and letter-of-credit and bonding requirements.
- Verify the status and terms of the B&W Solar sale, remaining contract losses, and collectability of related receivables and contract assets.
- Assess whether internal-control material weaknesses have been remediated and whether subsequent filings report further errors or control issues.
- Monitor backlog conversion, fixed-price contract estimates, segment margins, operating cash flow, and the effect of pension costs and funding needs.
- Review the full filing’s legal-contingency disclosures and subsequent updates to the Glatfelter matter and other claims.