Babcock & Wilcox Enterprises, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Generated strong operating results with parts and services up 31% due to AI data centers and baseload generation.
• Completed sale of Diamond Power International for $177 million, improving balance sheet and net leverage ratios.
• Entered private bond exchange, reducing annual interest expense by over $1 million and extending debt maturity to 2030.
• Backlog at end of Q2 2025 was $418.1 million, a 49% increase from Q2 2024, driven by higher baseload demand.
• Progress on BrightLoop technology with discussions on new plant conversions and data center projects.
• Alleviated going concern doubt through asset sales, debt reduction, and improved cash flows.

Segment Performance

• Parts and services business: Revenues increased by 31% compared to Q2 2024, driven by rising need for power due to AI data centers and baseload generation. Company-wide revenues with Diamond Power were $170.8 million, slightly ahead of Street expectations. Revenue from continuing operations without Diamond Power was $144.1 million in Q2 2025, roughly same as Q2 2024 but parts and services saw a dramatic increase. First half 2025 revenues from continuing operations without Diamond Power were under $300 million, up year-over-year. Adjusted EBITDA including Diamond Power was $21.6 million in Q2 2025 (over 70% more than Street expectations). Adjusted EBITDA from continuing operations without Diamond Power was $15.1 million in Q2 2025, a 90% increase from Q2 2024. First half 2025 adjusted EBITDA from continuing operations was $21.2 million, more than double from H1 2024.

Guidance

• Expect continued strong financial performance in the remainder of 2025, buoyed by over $7.6 billion global project pipeline.
• Anticipate returning to positive cash flows in 2025 excluding BrightLoop.
• Plan to win new plant conversions, upgrades, and behind-the-meter data center projects in North America and beyond.
• Will provide full guidance before end of 2025.

Risks

• Uncertainties related to forward-looking statements as per safe harbor provisions in earnings press release, Form 10-Q, and Form 10-K.
• Potential impact of timing and overlap of large project revenue recognition on quarterly results.
• Dependence on global demand for diverse technologies and ability to execute on project opportunities.

Question and Answer

Q: Talk about current demand for energy on thermal side and large upgrades/new builds.

A: Mentioned 120 GW increase in baseload generation in next 10 years, potential new coal generation, work with customers on BrightLoop and parts/services for existing plants.

Q: Thoughts on size/order of potential projects.

A: Too early to tell, but typically low 100s and varying sizes based on plant outputs.

Q: Second half guidance.

A: Anticipate strong year with parts and services growth, working on 2026 plans, guidance to be provided before end of 2025.

Q: Free cash flow confidence in back half.

A: Confident due to asset sales, interest reduction, natural gas projects, and growing parts and services.

Q: How extending plant life helps parts and service business.

A: Extending plant life leads to follow-on parts/services work and longer revenue realization.

Q: BrightLoop pipeline.

A: Over 10 projects, can produce steam/hydrogen, discussions with utilities on CO2 capture, biomass steam, etc.