Babcock & Wilcox Enterprises, Inc. (BW) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you, and welcome to today's Babcock & Wilcox Investor Call. [Operator Instructions] I would now like to turn the call over today to Megan Wilson, Vice President of Investor Relations. Please go ahead.

Thank you, Michelle, and good morning, everyone. Welcome to Babcock & Wilcox Enterprises Conference Call. I'm Megan Wilson, Vice President of Investor Relations at B&W. Joining me this morning are Kenny Young, B&W's Chairman of the Board and Chief Executive Officer; Lou Salamone, Chief Financial Officer; and Jimmy Morgan, Chief Operating Officer, to discuss B&W's Board transition and provide an operational update. During this call, certain statements we make will be forward-looking. These statements are subject to risks and uncertainties, including those set forth in our safe harbor provision for forward-looking statements that can be found at the end of our most recent earnings press release and Form 10-Q and Form 10-K that are on file with the SEC, and provide further detail about the risks related to our business. Additionally, except as required by law, we undertake no obligation to update any forward-looking statements. With that, I will turn the call over to Kenny.

Thanks, Megan. Good morning, everyone, and thanks for joining our call. Babcock & Wilcox is on an exciting new path, and the director changes announced this morning represent another key milestone in the company's strategic transformation. This logical next step follows our improved operational stability, our credit facility extension, the launch of our new segments and brands and our ongoing geographical expansion. Combined, these steps provide the framework to support the company's growth over the remainder of 2020 and into '20 and '21 and well beyond. The addition of the new directors is part of a planned transition and strategic shift as the company focuses on accelerating growth and capitalizing on an expanding global pipeline within our new renewable, environmental and thermal segments. As discussed in our press release, these new independent members have been added to the Board of Directors: Philip Moeller, Rebecca Stahl and Joseph Tato. In addition, Henry Bartoli, our Chief Strategy Officer, and I will both join the Board, and I will as Chairman succeeding Matt Avril. In connection with the transition, Matt, as well as Cynthia Dubin, Brian Kahn, Bryant Riley and Ken Siegel have resigned from the Board. The new directors bring a successful track record and very strong industry and geographical experience across each of our segments. Phil Moeller currently serves as the Executive Vice President, Business Operations Group and Regulatory Affairs at the Edison Electric Institute, which is an association that represents all of the nation's investor-owned electric companies, a key part of our customer base. So Phil oversees issues impacting the future structure of the electrical power industry and previously held prominent positions such as the Commissioner of the Federal Energy Regulatory Commission, or FERC, from 2006 to 2015. Phil has an extensive -- has extensive experience within the energy sector, both domestically and internationally, across a variety of technologies and strategies. Rebecca Stahl is currently the Chief Financial Officer of the Association for Manufacturing Technology, or AMT, which is an organization that represents and promotes U.S.-based manufacturing technology and its members, another key part of our customer footprint. She previously held the Chief Financial Officer position at Lightbridge Communications Corporation, a multinational engineering company with operations in over 50 countries worldwide. And prior to joining AMT, Becky brings 25 years of financial and accounting experience as well as debt refinancing and equity raise experience to the Board. She has an extensive experience establishing and growing businesses and operations across Europe, the Middle East, Asia and Latin America. Joseph Tato, a partner at Covington & Burling, one of the world's leading law firms. Joe has extensive experience presenting clients in the development and financing of power, oil and gas, LNG, renewables and other infrastructure projects around the globe. He has extensive experience in mergers and acquisitions and waste-to-energy development and financing across Europe, Asia and the Middle East, the types of projects and end markets that underpin our pipeline and go-forward strategy. As I mentioned earlier, Henry Bartoli, our Chief Strategy Officer, has also rejoined the Board. Henry previously served on BW's Board from 2018 to 2020 and has more than 35 years of experience in the global power industry. Most recently, he served as President and Chief Executive Officer of Hitachi Power Systems America from 2004 to 2014. Over the past 2 years, Henry has played a vital role in working with Lou, Jimmy and myself in supporting our efforts to reduce risks from the prior EPC loss projects as well as our geographical expansion and growth initiatives. His combined knowledge of the company and the industry will serve us well as a Director on our Board. With these changes, the new Board is now composed of 6 members, with 4 serving independently. Current Director, Alan Howe, who has served on our Board since 2019 is now Lead Independent Director. In addition, to help facilitate a smooth transition, the former Board members will continue to provide support when and where needed to assist our new Board and company through the end of the year and beyond. I want to take this opportunity to thank our departing Board members. We greatly appreciate their efforts and support during the past few years as we have focused on weathering and recovering from the EPC loss contracts, improving our cost structure and refinancing and extending our debt. Their stewardship has been critical to our turnaround and improved financial stability, which served as the catalyst to execute now on our growth strategy. Looking forward, the newly appointed directors align with the next phase of our turnaround story as we focus on global expansion and capitalizing on the strong pipeline of opportunities across our newly branded segments, B&W Renewable, B&W Environmental and B&W Thermal. We continue to see significant potential to grow our business profitably across each of these brands with our improved project execution and efficient operational focus. Importantly, the new directors have successful backgrounds, spanning each of our new segments and have extensive experience in global growth initiatives. Personally, as Chairman of the Board, I look forward to working closely with each of them as we work to accomplish our mission of providing solutions to our customers around the world with proven industry-leading technologies. Now let's provide a quick operational update and further discuss our expansion plans. While we were unable to fully predict the ongoing impacts of COVID-19, we are beginning to see some forward momentum based on information from our customers, as evidenced by our bookings in third quarter to date. With about a month remaining in the quarter, preliminarily unaudited bookings as of the end of August in the third quarter are approximately $116 million as compared to $84 million of bookings in the full 3 months of the second quarter of this year. These bookings have included the sale of 2 patented SGC systems designed to help our customers meet U.S. EPA ash handling regulations and the installation of BW supplied efficiency-improving economizers for natural gas-fired boilers, both providing great examples of the innovative environmental and efficiency solutions we offer. Looking forward, we continue to see a rapidly expanding pipeline with over $5 billion of identified project opportunities that we expect to bid over the next 3 years, not including shorter lead time parts and sales -- parts, service and sales. This pipeline is well diversified across our new segments and geographies, with roughly $2 billion for the B&W Renewable segment, $2 billion for the B&W Thermal segment and around $1 billion for the B&W Environmental segment. This pipeline is also regionally diverse, with about 60% of our identified opportunities located outside of the Americas, in regions with significant addressable markets, which is driving our rapidly expanding sales and service teams in those locations. As our Chief Operating Officer, Jimmy Morgan will now discuss further. Jimmy?

Thanks, Kenny. As Kenny mentioned, we are currently expanding our sales, service and operational support teams in key international regions to align with our pipeline and target markets. Initially, we are planning to hire 32 sales team members and service engineers by the end of 2020, more than doubling our sales and service presence outside the Americas. This includes new hires in the Asia Pacific region, where we see close to $8 billion in addressable market over the next 3 years; additional hires in the Middle East and Africa, where we see more that $4 billion in addressable market over 3 years; and new hires in Europe as well to serve the more than $7 billion in addressable market over the same time frame. We're also hiring in the Americas, including Latin America, as we continue to service our vast installed base and expand our presence in North and South America. We see demand globally for our solutions as the world continues to press for higher clean energy standards, waste reduction, environmental technologies and thermal energy solutions across facility and customer -- installed industrial customer base. In particular, we are already seeing a significant increase in our activities in waste-to-energy and biomass markets through the integration of B&W's engineering, environmental equipment, boiler technology and Volund, DynaGrate, combustion grate under our new B&W Renewable segment. We expect this -- sorry, we expect this expansion to position us well to capitalize on our growing pipeline around the world by providing significantly expanded market access and on-the-ground resources to serve our customers. We are focused on converting our pipeline to project wins, improved project execution and profitability, and as always, quality and safety. I'll now turn it back over to Kenny.

Thanks, Jimmy. Our Board transition is another key step to further solidifying our positioning to successfully execute on our growth strategy, which includes expanding our global sales team, investing in new technologies and capitalizing on the robust global pipeline across our 3 segments. We are also currently preparing to report our financials under our new segments, starting with full year 2020 results to provide improved visibility to our stakeholders. While we were unable to fully predict the ongoing impacts of COVID, we believe our improved bookings for the third quarter-to-date, combined with information from our customers, indicate the continued progress of our turnaround and reflects growing momentum in our markets. Our employees and management are excited about our changes and the direction ahead. Their focus and dedication to our customers are unrelenting, and our customers are very supportive of the next-generation of Babcock & Wilcox. I will now turn the call back over to Michelle, who will assist in taking your questions. Michelle?

[Operator Instructions] I have no questions at this time. I'll turn the call back over to the presenters for closing remarks.

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

Thank you, everyone. This will conclude today's conference call. You may now disconnect.