BWNB

Kenneth Young mentioned the company is executing on a strategy to expand Global Parts & Services, focus on North America opportunities, and reduce debt. Adjusted EBITDA and operating income outperformed expectations, with adjusted EBITDA 58% higher and operating income 315% higher than Q3 2024. Positive developments include signing a limited notice to proceed with Applied Digital for a $1.5 billion AI data center project, adding $3 billion to $5 billion in AI data center opportunities to the pipeline, global pipeline reaching $10 billion to $12 billion, progress on BrightLoop technologies with increasing activity for steam and hydrogen generation, and progress on ClimateBright with increased demand for carbon credits and upcoming carbon capture projects using SolveBright technology.

B&W is projecting a range of $70 million to $85 million in EBITDA from core business in 2026, which is 80% growth year-over-year from 2025. This does not include revenues or margin from AI data center projects. The company has paid or will pay down February 2026 notes by end of 2025, plans to pay down December 2026 bonds by year-end, and with recent equity raise, pro forma net debt will be $113.2 million, between 0.8 to 1.6x targeted 2026 EBITDA.

Babcock & Wilcox Enterprises' third quarter 2025 consolidated revenues were $149 million, roughly in line with the third quarter of 2024. Global Parts & Services had revenues of $68.4 million in the third quarter of 2025, compared to $61.7 million in the third quarter of 2024. The improvement is primarily due to increasing demand for electricity from fossil fuels driven by AI, data centers, and expanding economies. Global Parts & Services 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.

Risks include execution risks related to completing large projects like the Applied Digital deal, including supply chain and working capital management. There are also market uncertainties that could impact the timing and success of pipeline opportunities, such as delays in finalizing notice to proceed on projects or changes in demand for carbon capture solutions.

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: Sure. No. I appreciate that, Aaron. Thanks for jumping on the call today. So first of all, we're actually right now working with Applied, obviously, to finalize the exact location where this will take place and so we can finalize the full notice to proceed, which again, as [ John ] mentioned in the comments, we anticipate being done here in the next couple of months. As part of that, we're also behind the scenes working with a few of the steam turbine generators at this point in time and have secured some verbal commitments that we have the ability to meet these time frames. And so we'll look to finalize those details on that as well as our own manufacturing of these particular boilers. The great news, I think, in this case is that we're using -- I'm going to use the term off-the-shelf. So these are -- these 300-megawatt boilers are designs that we have installed at several locations prior to this event. So this is a proven technology and architecture. And so there's very little, if any, engineering that needs to be performed in order to get these to a manufacturing state. We already have the construction drawings of each of these fabrication diagrams, the layout, the header layout, the tubing, everything associated with this type of a boiler to meet the specs and standards here in the U.S. And so it's an easy method for us to move that right into the manufacturing process. And that's the exciting part here. It's a rare opportunity for us to do and utilize a design that we have implemented in many locations prior. So we're obviously very comfortable with the standards and the performance of the boilers, easy to move into manufacturing and leveraging the fact that we have access to the steam turbines in a much faster go-to-market model than trying to leverage a combined cycle or simple cycle turbine plant today. So that's the benefit here on that. But we're working through all of those in parallel with Applied and again, plan to have the full notice proceed signed here in the next couple of months. And we're working diligently behind the scenes to move the project full forward. As it relates to working capital aspects on it, we'll work with Applied on the timing of that and how we move that forward. That will be part of the full notice to proceed process here over the next couple of months. Typically, for us, we typically keep the working capital on projects like this at a neutral to positive. So down payment requirements that we have with manufacturers or subcontractors are typically collected upfront on these projects and have no reason to believe it would be any different here. So there -- that we're moving forward under that direction and Applied understands that as well. So we think that will help minimize this a little bit overall and any impact to working capital in the company, and we should remain cash flow positive on this as we typically do on projects like this at this point in time. So that's the overall plan. As far as revenue recognition goes and margin recognition, obviously, we're a POC shop under that. It will depend on timing of when we can apply the cost to the project into next year. Some of that will be based on the final notice to proceed and the time frame there. So it's a little bit vague and it won't be terribly much, I would say, in '26. I don't know, I'm just throwing out a number, maybe 10%, 15% of the value would be realized then. The bulk of it would, based on the accounting method would be realized more in the '27 and obviously '28. So we've -- based on the fact that we're still finalizing that NTP and our guidance next year, we have not included this project or any other data center projects in that $70 million to $85 million range. So this would represent complete upside and probably significant upside to any number that we would be putting out right now. Cameron, I don't know if you have anything you want to add to that, but otherwise, I'll turn it back to you.

Q: That's very helpful. And then maybe just second 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: We are obviously in talks with several as it relates to -- and have been -- I want to emphasize that have been prior to this announcement in talks with several on this particular solution in different sizes, right? Meaning and some would be smaller in maybe 0.5 gigawatt range, some are perhaps even a little larger in a 1.5 to 2 gigawatt range. So there's a number of these opportunities where this solution makes the most sense from both a cost standpoint as well as delivery and time frame standpoint. Some of that would be subject to complete availability in the manufacturing and the steam turbine side. And again, the early indications are we've got some real positive capacities there to meet this entire demand. And so it's -- on some of those, that we'll be working with them to move forward, hopefully, on a couple of the opportunities if we can get them to commit I would say those would be in the next year's time frame to announce on that regard. But we're obviously involved with these other opportunities that are out there and fully intend to push those across the goal line. That's on this solution. The other ones that we're heavily working with is related to our Denham partnership, and we are working very closely with Denham Capital right now on a number of locations to convert some coal plants to natural gas, and that's also in the works as well, too. So I think we have -- those opportunities are within that opportunity and pipeline as well as the other natural gas and steam turbine combination that were proposed for Applied would also be in that opportunity as well. So the combination of all that and the sizes of those, we decided to take the pipeline up even a little bit further from last week.

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: So the main -- so there's 2 main components to that capacity aspect, Rob, and thanks for jumping on, by the way. There's 2 aspects to that. One is the manufacturing of the boiler fabrication of the boiler. For us, that's part for the course, right? That's what we do. And we have been looking and evaluating our own internal capacities that we have today as well as our external partners that we use in various places around the world to manufacture these kind of systems. So all of those companies are on board with this. And quite frankly, it's a volume. Many of these manufacturing and fabrication groups are comfortable and used to dealing with projects of this size. So it's just a matter of how much we can put into each location on that, and we're going through that right now. So within -- I would say, within the pipeline that we have today, again, depending on the exact timing of some of this, we feel pretty comfortable that we can complete the manufacturing and have the capacity to do that on the boiler fabrication and manufacturing. On the steam turbine aspect of this, the good news is there's a lot more steam turbine companies than there are combined cycle and simple cycle companies out there. We're in -- can't give names right now, but we're in discussions with several and are quickly trying to move into a relationship with them that we have this capacity secured. And we believe, just based on a lot of the early conversations that we're having with these particular groups that, that capacity does exist. Maybe across a couple of different manufacturers, and we'll have to -- we'll work through that. But from a steam turbine perspective, we think these opportunities do exist. They're obviously very excited because this is a way for them to get involved in a high-growth area for them as well, too. So, so far, it's been full energy, if you will, across both the manufacturing side and on the steam turbine side as well.

Q: On the -- just switching to kind of 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: Yes. So there are a few projects that we're in dialogue and discussions on. Some of these are FEED studies that we always talk about FEED studies out there, FEED studies, meaning Front-End Engineering Design studies, and we have several of those going on at this case. So we're in discussions right now to finalize an opportunity and feel like that could happen fairly soon, hopefully, not days, weeks at max on a project that we can put out. And order of magnitude would be in the, I'll just call it, $70 million to $100 million-ish in that category. I'll give it kind of a little bit of a range there as we finalize it. But on the initial project itself, and then there's probably more opportunities and upside on that. But we are seeing in the U.S. from some of these operators and the hyperscalers and other aspects where a few occasions, they would like to have the CDRs or the carbon offtake as -- and the groups that are building out these power plants are looking at how they can capture CDRs or carbon to be able to sell those as additional revenue for the plant owners as it relates to building out the infrastructure to support the hyperscalers. And we've seen that with a few developers, and we've got, I think, a pathway here to hopefully announce a project or 2, but one specifically in the next days, if not weeks.

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: Yes. No, this is -- that $1.5 billion would anticipate and represent BW scope as associated with this project, right? B&W would bring all of the aspects and elements of the boiler and the steam capabilities plus the construction aspect, right? We have our own construction company here in the U.S. So it would be blended with construction, the steam turbines and the boiler aspect of it. And then we'll work through some of the other elements to complete the plant on time and on schedule. We'll work with Applied on that. So we put it as over $1.5 billion at that site. The total value could be higher depending on final scope, and we'll just have to work through that. But I wanted to give some idea and indication of what it looks like from a B&W perspective. So we intended that to be our scope. The scope of the project would be a little bit larger under that scenario, but we'll work with them to complete that once we have the NTP finalized.

Q: 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 whether that same model would exist elsewhere too early. Not saying it won't, but hard to say right now on it. We viewed it as a very positive thing. We think having those warrants out there, obviously, there's incentives for Applied to get the NTP done sooner and complete, obviously. But also, there's buying, if you will, or support for BW overall, not only as a potential customer and client, but as a shareholder as well, too. And we think all of that is very much positive. And we obviously have seen that throughout some of the data center and other aspects as well, too. So we view that as overall very, very positive. As far as the risk share, we're working through that right now on how that would appear to be. And obviously, with the outside manufacturers and speed turbines companies would share a part of that risk overall as well, too. And we, as we always do, we look to balance it. I think the biggest piece here is that -- and this is what greatly reduces the risk overall to us is that this is -- these are projects and technologies that we have performed on a multitude of other occasions. So there's no new technology being designed or installed here or implemented here. This is well-proven technology that has been installed in tens, if not dozens of locations where B&W has actually constructed these. Obviously, we have the I think, advantage in the U.S. having our construction company and leveraging the boiler makers who are a great welding and fabrication aspect of this on-site. But again, these are all boilers that have been built previously. So we know the performance, we know the complexity that's involved in these, the time frame that's involved in these and as well as we've gone through all of the risk aspect of overseeing the manufacturing processes of these and understand how to manage that manufacturing process effectively. And we've got all the best practices and everything from each of these that we've implemented in prior periods. So this is unlike any other large project that B&W has been in historically. This one, I think, is extremely unique and opportunistic because it is something that has been done many, many times before, and there is absolutely no new technologies being implemented here. So to us, that's a significant reduction in risk in that case. And the terms and conditions all be detailed in the final notice to proceed.