Babcock & Wilcox Enterprises, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. B&W supplies renewable, environmental and thermal technologies and related services. Results are presented for continuing operations unless noted.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $207.6 million | $241.3 million |
| Gross profit / margin | $48.5 million / 23.4% | $51.9 million / 21.5% |
| Operating income / margin | $4.3 million / 2.1% | $1.3 million / 0.5% |
| Adjusted EBITDA (non-GAAP) | $12.5 million | $13.6 million |
| Net loss | $16.8 million | $12.5 million |
| Net loss attributable to common stockholders; diluted loss per share | $20.5 million; $0.23 | $16.2 million; $0.18 |
| Cash used in operating activities | $14.9 million | $12.9 million |
Margins above are calculated from reported revenue and costs. Interest expense was $12.8 million, compared with $12.7 million a year earlier. A $5.1 million loss on debt extinguishment related to the prior PNC revolving facility contributed to the greater continuing-operations loss.
At March 31, cash and cash equivalents were $43.9 million; total cash, cash equivalents and restricted cash were $102.5 million, including $58.6 million restricted. Total debt was approximately $441.6 million, and gross preferred stock outstanding was $191.7 million. Stockholders’ deficit was $222.5 million. Cash and cash equivalents held by foreign entities totaled $25.9 million and generally were not available for U.S. operations without repatriation or repayment of intercompany loans.
Material changes versus Q1 2023
- Revenue declined $33.7 million, or about 14%. Renewable revenue fell $31.8 million, reflecting fewer waste-to-energy projects and a shift toward European parts and services; Thermal revenue fell $9.0 million, partly because a large U.S. construction project completed in 2023 was not fully replaced. Environmental revenue rose $8.9 million.
- Adjusted EBITDA decreased $1.0 million. Renewable adjusted EBITDA fell to $1.7 million from $4.3 million; Environmental improved to $3.3 million from $1.9 million; Thermal was broadly unchanged at $13.7 million.
- Operating income improved by $3.0 million, supported by lower SG&A and a favorable final settlement related to the former owner of B&W Solar, but net loss worsened due primarily to debt-extinguishment expense and discontinued-operation losses.
- Backlog at March 31 was $532.8 million versus $628.0 million a year earlier. Implied backlog, including awarded or contracted projects not fully released for performance, was $826.4 million versus $638.6 million. Bookings were $207.0 million versus $247.0 million.
Outlook, financing, risks and unusual items
- Going concern and liquidity: Management reported that existing cash and available liquidity alone were projected to be insufficient to fund operations for one year after filing, raising substantial doubt about going concern. Management concluded it was probable that planned financing and cash-improvement actions would provide sufficient liquidity for the next 12 months and alleviate that doubt. These actions include pursuing asset sales, selling non-core real estate, seeking a waiver of certain pension contributions, the common-stock ATM offering, and a negotiated $7.2 million future cash saving related to B&W Solar. The planned sales and waiver are not assured.
- Equity offering: On April 10, 2024, the company established an ATM program for up to $50 million of common stock. By May 3, 1.5 million shares had been sold. Agent commissions are 3% of proceeds from shares sold through the designated agent.
- Debt and covenants: A January 2024 Axos asset-based facility provides up to $150 million, subject to borrowing-base availability, and bears floating-rate interest. At quarter-end, $36.8 million was drawn on the revolving portion and $53.3 million on the letter-of-credit portion. B. Riley guarantees the facility; B&W pays it an annual fee of approximately $3 million. The facility’s stated maturity is January 2027, but may accelerate to August 2025 if the 2026 senior notes are not refinanced or the facility maturity is not extended. The company reported compliance with applicable covenants at March 31. An April 30 amendment provided approximately $6 million of additional borrowing availability for a seasonal period.
- Preferred dividend: The company paid $3.7 million in preferred dividends during the quarter and is considering suspending future dividends as a liquidity measure.
- Backlog and execution: The company expects to recognize approximately 64% of its $650.4 million of remaining performance obligations in 2024, 17% in 2025 and 19% thereafter. Backlog may be canceled or changed and is not a guarantee of future revenue. No formal earnings guidance is provided in the filing.
- Discontinued operations: B&W Solar remained held for sale and discontinued operations. It generated $11.4 million of revenue and a $1.0 million net loss in Q1 2024, versus $16.0 million of revenue and $0.2 million of income in Q1 2023. The company was pursuing a sale of this business.
- Litigation: Glatfelter alleges damages exceeding $58.9 million in a boiler-related lawsuit. The court limited damages to a contractual cap based on a $11.7 million purchase price, subject to adjustments; trial was scheduled for August 5, 2024. The company said the outcome’s potential material impact could not yet be determined.
- Controls and market risks: Disclosure controls were deemed ineffective due to previously reported material weaknesses in internal control over financial reporting, which remained unremediated at March 31. Management stated the financial statements fairly present results in all material respects. Inflation, higher interest rates, currency volatility, geopolitical conflicts, and shipping and supply-chain disruptions may affect costs, timing and customer demand.
Most important facts for investors to verify
- Whether planned business and real-estate sales close, expected proceeds are realized, and the company achieves adequate liquidity through the next 12 months.
- ATM share sales, resulting dilution, net proceeds, and any decision regarding preferred dividends.
- Axos borrowing-base availability, letter-of-credit transition and capacity, covenant compliance, borrowing costs, and refinancing plans for the 2026 senior notes.
- Progress in selling B&W Solar and the business’s effect on cash needs, losses and reported backlog.
- Backlog conversion, project estimates and margins, particularly given lower reported bookings and the distinction between contracted backlog and implied backlog.
- Developments in the Glatfelter litigation and remediation of the internal-control material weaknesses.