Babcock & Wilcox Enterprises, Inc.

Fiscal Year 2023 Financial Performance Snapshot

Babcock & Wilcox (B&W) demonstrated a significant turnaround in Fiscal Year 2023, boosting profitability despite a revenue dip. The company reported total revenues of approximately $850 million, down from $920 million in Fiscal Year 2022, primarily due to strategic divestitures. Despite this revenue reduction, B&W achieved a net income of $25 million, a substantial improvement from a $40 million net loss in the prior year. This positive shift stemmed from enhanced operational efficiency and fewer one-time charges. Adjusted EBITDA reached $75 million, and operating cash flow for the year totaled $60 million, demonstrating stronger cash generation from core operations.

Strategic Transformation and Core Focus

B&W has strategically transformed its business, divesting non-core assets to streamline operations, reduce debt, and sharpen its focus on key growth areas. Throughout Fiscal Year 2023 and early Fiscal Year 2024, the company completed the sale of several business units:

• Vølund: Sold in Q4 2023, bringing in $75 million.
• Diamond Power: Sold in Q1 2024, generating $110 million.
• B&W also divested other smaller entities, including Babcock & Wilcox Renewable Service AS (BWRS) and SPIG.

These divestitures generated over $200 million in gross proceeds, which B&W primarily used to reduce outstanding debt and enhance liquidity. This strategic shift now allows B&W to concentrate on its core segments: Babcock & Wilcox Renewable (waste-to-energy, biomass), Babcock & Wilcox Environmental (air pollution control, ash handling), and Babcock & Wilcox Thermal (energy generation, industrial boilers).

Core Business Segments and Revenue Drivers

Three core segments now primarily drive B&W's revenue:

• Babcock & Wilcox Renewable: Converts waste and biomass into energy, contributing approximately 35% of total revenue.
• Babcock & Wilcox Environmental: Offers advanced environmental technologies for air pollution control and ash handling, accounting for about 30% of revenue.
• Babcock & Wilcox Thermal: Delivers advanced steam generation and energy technologies for utilities and industrial clients, representing 35% of revenue.

B&W maintains a global footprint, with significant operations and revenue streams across North America, Europe, and Asia-Pacific. This diversification helps mitigate market risk and allows the company to capitalize on growing international demand for sustainable energy and environmental solutions. The order backlog at year-end 2023 reached $1.2 billion, providing revenue visibility for the next 18-24 months.

Financial Health and Debt Management

As of December 31, 2023, B&W reported total long-term debt of $450 million, a significant reduction from $600 million in the prior year. This decrease largely resulted from applying divestiture proceeds. Key debt instruments include:

• $200 million in 6.50% Senior Notes due 2026.
• $150 million in 8.125% Senior Notes due 2026.
• $100 million in 8.75% Senior Notes due 2030.

B&W strengthened its liquidity position, holding $120 million in cash and cash equivalents, plus an additional $50 million available from its revolving credit facility. Managing these debt maturities, especially the 2026 notes, is a key financial priority. The company is actively exploring refinancing options and continued debt reduction strategies.

Competitive Position

B&W faces intense global competition across its renewable, environmental, and thermal markets. The company competes on the strength of its long-standing engineering expertise, advanced proprietary technologies, global project execution capabilities, and established customer relationships. Its ability to offer integrated solutions, combined with a focus on innovation in sustainable energy and environmental control, significantly differentiates it. While these markets feature a diverse range of competitors, from large multinational corporations to specialized regional players, B&W leverages its strong brand reputation and proven track record to maintain and expand its market presence.

Key Risks and Outlook

Investors should note several key risks. These include the successful refinancing of upcoming debt maturities, commodity price volatility affecting project costs, intense market competition, and potential project delays or cost overruns. Regulatory changes affecting environmental standards or renewable energy incentives could also impact demand. Looking ahead, B&W's strategy aims to leverage its streamlined structure to drive profitable growth in its core renewable, environmental, and thermal segments, especially in emerging markets for sustainable energy solutions. The company anticipates modest revenue growth in Fiscal Year 2024, fueled by strong backlog execution and new order generation, alongside a continued focus on margin expansion.