BW - Earnings call transcript Q3 2019 | Babcock & Wilcox Enterprises, I

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Babcock & Wilcox’s Q3 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Thank you.

I will now turn the conference over to Megan Wilson.

begin. may You

Megan Wilson

and Wilcox Cinedra, I’m everyone. to at Welcome Wilson, Thank third good quarter & B&W. Relations Investor Enterprises President call. XXXX Babcock Vice you, of afternoon, earnings Megan conference

Kenny are Financial discuss Chief Henry our afternoon this quarter and me Young, Chief Lou Officer; Officer Executive Strategy Chief results. B&W’s Bartoli, third Salamone, Officer; to Joining

our for in uncertainties, will of are our our earnings subject statements business. our statements on and press this During Annual that the including set XX-Q be the detail on release file forward-looking. and those our be and found risks XX-K call, provision certain further end statements These the to SEC Safe forth also can provide that in Form risks forward-looking are we with Report and Harbor make Form about related at to

we as forward-looking required by except Additionally, no law, any update obligation statements. to undertake

regarding results comparable published superior measures quarter provide as found results A also be be considered substitute historical to, non-GAAP accordance information of historical release information reconciliation third not measures. can in certain this This the for, in earnings GAAP. morning. provided a our of our should We the GAAP or supplement non-GAAP to with

will With to the turn that, Kenny. I over call

Kenneth Young

Thanks, Megan. joining for Good afternoon, everyone, our call. and thanks

and our margins quarter EBITDA basis. and operating cost adjusted the the against significantly quarter profitability year, recognizing our on throughout and second and consecutive consolidated continue operational consolidated For our saving third we for continue strategy a executing improving the initiatives, achieving

technologies & the Vølund down across our in costs company. global market across Babcock and We parallel and Wilcox, while presence our increasing are core driving delivering now SPIG entire segments, the

expectations the we margins, growing forward EPC debt. and of increasing customers’ profitable sheet, balance are finalization operating driving exceeding and revenues our projects, our the refinancing With improving our with loss

significant types fuel our industries a pipeline appreciate are generation and potential face our new environmental as market opportunities still we and well relationships to with we continue a controls. with growing to improved worldwide, both potential steam the and challenges, in Asia globally. Middle the for customers of and share multiple U.S., diversification as flows to pursuing clear We and see on for real increase path across growth Although cash East, strong

Today, our around management our the are engineering services best-in-class employees reach technologies, to team our leverage in world and target EBITDA strategy adjusted our run XXXX. core executing $XXX rate, million to of our

will XXXX segment. third we Now business as you have results, discuss we our see every quarter performance in improved

Babcock strategically our within saw and Vølund results the segments to and & of core which we SPIG have Our complete that quarter, scope margins profitably. Wilcox shrinking significantly this consolidated can segment, strength the win bid the reflect improved bookings been solid and while work

And loss as divested businesses. certain were lower This finalized project, and low-margin, high-risk products the EPC planned. non-core year-over-year historical quarter, revenues exiting we as services and

We strategies and to are expand intelligently. market executing in grow business each share

opportunities costs. cost also steady cut our We’re progress saving to we’re on and aggressively further investigating unnecessary initiatives, making

and and progress right be the of are emerge profitability down to long-term we we a transformation Today, we where path as growth. expect sustained from

over call the of to Lou? detail. turn to discuss now in XXXX I’ll the more third quarter Lou

Louis Salamone

Thanks, Kenny.

million, our due quarter technologies as quarter to of to strategic finalization As compared EPC of XX% the decrease consolidated profitability, the contracts loss third on expected, revenues a and the third the Kenny explained, and and core $XXX.X of our focus XXXX. were

million, an loss the operating third million an was GAAP third of quarter XXXX. of in operating $XX.X $XX.X to the compared million. of XXXX improvement $X.X quarter loss Our in of That’s

in segment, Babcock a losses our EPC on in construction selective the six profitability improved lower and by by products. our to more in projects contracts SPIG operating loss on Wilcox bidding and & segment European the loss core improved strategy geographies gross focusing of The driven a on the was improve level primarily change margins in

$X and million and restructuring $X.X quarter’s included This settlement million loss of costs advisory fees.

consolidated $XX.X generated consolidated consolidated in positive by million, adjusted third with EBITDA adjusted of compared a $XX.X EBITDA negative million, $XX.X a EBITDA as of million adjusted Our as also we quarter XXXX. improved of the

Turning The results improved in to in operating our & Wilcox continued metrics. improvement segments. key to our segment Babcock show

related $XXX.X prior XXXX, of third While million year revenues to the period, lower million quarter of decreased XX.X% construction primarily large new in to gold $XXX.X volume to the to compared completion attributable projects. in

on EBITDA This in of third million with increased quarter was the – year’s in million, $XX.X due Our overhead gross lower improved other increases previously which compared to segment the partially by adjusted primarily in and offset absorbed quarter. projects, construction increase of being was by volume last to segments. margins $XX.X was effects as XXXX by the by that absorbed to the XX%

was margin XX.X%, year. EBITDA to same compared adjusted The the period X.X% in last

the to in last million, $XX and year compared Third $XX.X gross as compared quarter in period XX% margin profit XX.X%, XX% same in million the increased the to as the adjusted was prior to profit year. period, gross segment

to SPIG our our on segment. Moving

revenues This to to in $XX.X to third expected, of focus due system to quarter to and was on million of compared by As cooling due a third the million and our following change anticipated decrease profitability. the geographies decreased more new mainly shift selectively in quarter bid projects, build XXXX. of volume in products improve $XX.X core strategy, lower our XX.X% to XXXX, the

driven and to by $X.X adjusted EBITDA negative new and same this cost SG&A reductions. benefits our of negative the to to compared improved million In a $XX.X that restructuring, regard, is in last savings, the a cost as million addition in by million, $X.X operating strategy, period year,

in profit strategy. the third effects $X.X prior of due $X negative our primarily gross quarter, to a million in again, negative new improved compared a period, year to to as Adjusted the million the

XXXX. XXXX, Vølund for $XX.X as As of the of for expected, segment quarter million the – to million Other compared third & revenues in in quarter $XX.X Renewable were quarter third the the

to which annual $XX generated finalization year to of quarter prior revenues due the a model. million, sales of compared quarter and were approximately the previously the business and Third of shift million a loss $XX and had EPC lower technology Loibl to core contracts, PBRRC the revenues businesses,

was compared to EBITDA in on negative cost attention decrease United by offset well the of of quarter year. the as cutting. million, was operations as quarter improved contracts last $X.X in a losses Adjusted the level Kingdom. startup to $XX.X the $XX.X to contracts, of due to million maintenance two as partially EPC and in lower loss third This primarily the This by million

to equivalent losses recorded loss, million segment the expense. of of In and a $XX.X the third the $XXX,XXX XXXX, third compared inclusive quarter net of was in XXXX, recorded warranty quarter of a as this

EBITDA XXXX the any quarter support, Beyond the year. Loibl due gross the EPC effect direct overhead from contracts, during by included which operations the the of levels expense them profit lower absence offset loss of partially and lower PBRRC warranty of the third adjusted were to sold SG&A, and being

to The of to profit positive XXXX, to quarter the $XX.X quarter third in reported million $XX.X the million segment gross $X.X third a adjusted in million XXXX. compared a improved of negative as

last-out quarter at unrestricted of XX September to operations in cash sheet now cash $XXX.X was in from $XX.X revolving the with loans. $XX.X and quarter prior and quarter expense this million, accretion use by was million. Cash term in cash equivalents We flow ended I’ll a cash to the driven quarter. of was balance the of $XX.X revolving primarily our the increase Interest the turn as $X.X debt million related of facility increases amortization million. and million. deferred liquidity. credit flow, or our compared our in contingencies And or was to Total

continuing for European pursue policies under We’re from EPC and recoveries the contracts. various loss to cost insurance subcontractors

XXXX. settlement to on in a our under to portion a we paid EPC $X.X full which million June the As related first losses of previously XXXX, July disclosed, in insurer project, agreed of the of

to in under June fifth settlement in agreement of in insurance $X.X one agreed recover XXXX, Also, on That million September losses principle certain recovery project. was the and payment insurance policy received we of XXXX. to one a

appropriate available. pursue recoveries We are potential claims insurance, where and other to continuing and actively

detail on issued can in information XXrd XXth second delevered earnings today. significantly our As transactions with of found series equitization these one-for-ten on Further split and our in our respectively. release July, reverse earnings stock be a quarter completed the sheet, balance call, and transactions on and a – July our discussed on we of the XX-Q

agreement requires refinance March to refinance prior credit to the revolving or required and Our to as we us and is on underway. XX, fully intend facility such effort credit XXXX,

savings to continue annualized progress we million cost savings. Kenny make As initiatives, targeting in our on $XXX mentioned,

XXXX. of fourth be into the implemented roughly we quarter, of implemented and third with or those end As the of part them, $XXX savings, the early of million the quarter XX% remainder to the of in have

are identified and been segments implementation corporate the as progressing have expected. savings and plan cost The all the at savings and level, across

to to as continue opportunities continuing look additional We evaluate also for potential efficiency we’re dispositions appropriate. for and

Finally, as based number of continuing on and ongoing is cost of initiatives, company previously not this savings the time. practice actions guidance stated, its strategic at providing the

the Kenny. to back call turn now over I’ll

Kenneth Young

Thanks, Lou.

saving acceleration improved our to recent strategy: strategic Our performance three said our initiatives, core in following efforts. execution. and and saving technologies cost parts quarter are cost third leveraging with we cash And the greatly our there shows before, action project improved flow as

at drive through our employees saving confident Lou initiatives are our importantly, also but already cost and continue and operations. the delivery improvements to quality, business achieved expenses, our unnecessary spoke reduction every through in level. out this We of to we of determined, cost more to and committed are necessary streamlining

flow operational as company amendment, progress. establish a expect to which refinancing, the to foundation, fees. From advisory Once financial stronger perspective, and a settlement, positioned substantial avoid we we we completed, cash restructuring is continue for and in

Finally, strengths execution. we’re on and concentrating our

are the focusing emphasis and for an projects, our the EPC with services. the products loss With services on industrial of power markets retrofit and and we aftermarket increased core finalization on

business, earlier, higher-margin said lower-risk, just pursuing As rather opportunities each as we our identified project in I segment to improve revenues. more on continue are focusing execution. We’ve than to capture we projects

means environmental also & and aftermarket services base competitors around means paper pulp industrial underserved world our Babcock with packaged our business In and the the pursuing installed growth retrofits, in equipment, equipment our tapping large environmental boilers and and and the well. this base. international vast for supporting installed into our base aftermarket It segment, installed as boiler Wilcox services

world-class its continue with geographies and opportunities terms. and leverage based execution bidding cooling we improve on project core higher-value expertise. better segment, SPIG this and products on our targeting In selectively means This its projects to

means been And grates, as on in – returned we’ve around improving we this taken there, leaders designer control environmental segment, profitably where served technology us for where for decades, supplier world. we’ve our years well focusing which a operator, in model as see renewable and systems Vølund and business where technologies a solid the core and prior our pipeline of and as well plant many to the a as components these for we boilers

continued We employees appreciate vendors, the support customers, and our our of our our shareholders.

We are our to committed strategy.

in confident we technologies are about our optimistic future. and very are our We employees and

now will taking call over will the the your turn I in operator, to questions. us back assist who

Operator

time, questions. [Operator Instructions] are this And at no there

Megan Wilson

you A call. be time joining That replay on website conference a for later for today. our limited concludes will our Thank us. available

Operator

Ladies and participating. gentlemen, you this concludes conference call. Thank for today’s

now disconnect. may You

Babcock & Wilcox Enterprises, I (BW) 7 Nov 192019 Q3 Earnings call transcript