Babcock & Wilcox Enterprises, Inc. Q3 FY2025 earnings call

• Strategy: Executing to expand Global Parts & Services, focus on North America opportunities, and reduce debt. Align with power demand growth in North America and AI data center expansion.
• Financials: Adjusted EBITDA 58% higher and operating income 315% higher vs Q3 2024. Backlog up 56% QoQ to over $393 million.
• Projects: Signed limited notice to proceed with Applied Digital for a $1.5 billion AI data center project, adding $3B-$5B to pipeline. BrightLoop technologies progressing for steam/hydrogen; ClimateBright seeing demand for carbon credits with potential significant carbon capture project soon.
• Balance Sheet: Paid down $70M of 2026 bonds, raised $65M equity, improving balance sheet with pro forma net debt of $113.2M.

Global Parts & Services segment had revenues of $68.4 million in the third quarter of 2025, compared to $61.7 million in the third quarter of 2024. This segment's performance contributed to improved margins, with Adjusted EBITDA and operating income significantly outperforming expectations. The segment achieved the highest quarterly and year-to-date bookings, revenue, and gross profit in recent company history, with backlog rising 56% quarter-over-quarter to over $393 million.

• Projected 2026 core business Adjusted EBITDA range: $70 million to $85 million (80% growth YoY from 2025).
• AI data center project with Applied Digital adds $3B-$5B to pipeline, total global pipeline $10B-$12B.
• Guidance does not include revenue/margin from AI data center projects yet, representing significant upside.

• Forward-looking statements subject to risks and uncertainties as per safe harbor provisions.
• Market conditions impacting ATM sales resumption and share price.

Q: Maybe first on the $1.5 billion project. Can you just talk a little bit about next steps that are needed and how you see potential contribution from a timing and margin perspective moving forward? And then just thoughts on the supply chain and kind of working capital needs as that ramps?

A: Working with Applied to finalize location and full notice to proceed in next couple months. Working capital typically neutral to positive. Revenue recognition and margin realization to be mostly in 2027 and 2028, with little in 2026.

Q: On the additional pipeline, it sounds like last week, it was $1.5 billion. Today, it sounds like maybe $3 billion to $5 billion. So maybe some growth there. Can you just talk about how mature some of those opportunities are and potential timing of when you could see some of those move forward as well?

A: In talks with several on AI data center solutions, some in 0.5GWh to 2GWh ranges. Hoping to announce a couple in next year. Also working with Denham on coal to gas conversions.

Q: On the ability or your capacity for that pipeline, what is your capacity sort of in this power gen segment? And how do you sort of think about capacity kind of limits there?

A: Two components: boiler manufacturing (internal and external partners comfortable) and steam turbines (many companies involved, capacity exists).

Q: On the ClimateBright projects. I think you mentioned the CO2 capture opportunity that's developing. Could you give a little more color there on when that might happen and what the size could be?

A: In discussions on FEED studies, expecting to announce a project soon, order of magnitude $70M to $100M.

Q: Kenny, I want to ask just back on the Applied Digital contract, the $1.5 billion, is that all within B&W's scope? I know this is all getting worked out. But obviously, it's a massive potential uptick to the backlog that you have today. So I just wanted to kind of understand what's all in there.

A: $1.5 billion anticipates B&W scope including boiler, steam capabilities, and construction. Scope may be larger, working through final notice to proceed.

Q: Brent Thielman: Okay. Yes, I appreciate that, Kenny. And then I guess, just as a follow-up, anything you can say in terms of just risk sharing associated with it. Is this all fixed price in terms of execution? And I noticed there's an equity component that Applied Digital gets in BW. Maybe just talk about that and whether that's going to be something that's ongoing as you look to maybe some of these other opportunities out there.

A: Hard to say on risk sharing model elsewhere. Viewed equity component as positive with incentives for Applied. Risk reduced due to proven technology, no new tech involved.