Good afternoon. Thank you for attending today’s Babcock & Wilcox Enterprises Q1 2022 Earnings Conference Call. My name is Bethany and I will be your moderator for today’s call. I would now like to pass the conference over to our host, Sharyn Brooks with Babcock and Wilcox. Please go ahead.

Thank you, Bethany, and thanks to everyone for joining us on Babcock & Wilcox Enterprises first quarter 2022 earnings conference call. I’m Sharyn Brooks, Director of Communications. Joining the call today are Kenny Young, B&W’s Chairman and Chief Executive Officer; and Lou Salamone, Chief Financial Officer, to discuss our first quarter results. 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 earnings press release and also in our Form 10-Q that will be filed today and our Form 10-K that is 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. We also provide non-GAAP information regarding certain of our historical and targeted results to supplement the results provided in accordance with GAAP. This information should not be considered superior to or as a substitute for the comparable GAAP measures. A reconciliation of historical non-GAAP measures can be found in our first quarter earnings release published this afternoon and in our company overview presentation that will be filed on Form 8-K this afternoon and posted on the Investor Relations section of our website at babcock.com. I will now turn the call over to Kenny.

Thank you, Sharyn, and thanks to everyone for joining us this afternoon, what continues to be an extremely exciting time for all of us at Babcock and Wilcox. As a company, we have a very long and successful history as a technology leader and solutions provider throughout the world and across the power generation industry. That is something our employees are extremely proud of, not only because of what the company has accomplished and the strong relationships we’ve built with our customers and suppliers, but also because it puts us in a truly unique position to support the world’s energy transition and drive innovation forward. I do want to recognize and thank our employees around the world for their continued tireless efforts in driving our company forward. In fact, with their help in the 12 months ended March 31, 2022, we have reached approximately USD75 million of adjusted EBITDA, which is a significant accomplishment. Today, we’re working hard to support our customers’ needs for clean energy with an extensive range of proven technologies, including our climate-right suite of decarbonization technologies and our innovative hydrogen production technology solutions for solar power construction and installation, as well as market-leading waste energy and biomass energy systems. We have mission controls and cooling systems and next-generation energy storage solutions and aftermarket parts and services to help our customers keep their plants running at peak performance. We continue to support our fossil fuel customers globally as the need to provide power from fossil fuels has increased due to limited supply and higher prices for natural gas. We’ll talk more about some of the progress we’re making in those areas a little bit later on today, but first, I’m very pleased to share that we ended the quarter ahead of our plan. With increases in revenues, bookings and backlog over the same quarter a year ago, in fact, we now have the highest backlog since 2018 and we continue to be in a great position for an outstanding 2022 and beyond to meet our adjusted EBITDA targets and also achieve significant year-over-year growth as we focus on our long-term strategic objectives and, as always, the fundamentals like safety and strong project execution. Like many companies, we are seeing some supply chain challenges due to the war in Ukraine and the resurgence of COVID-19 in China and elsewhere. We are working to mitigate these issues by leveraging our established global resources with respect to raw materials that may be delayed or impacted as these situations evolve. At the same time, we’re seeing the potential for additional tailwinds across our business segments as customers face decisions, not only about decarbonization efforts to support climate change goals but also about energy security and alternatives to natural gas. B&W has the ability to serve customers’ needs across those spectrums. We will also continue to monitor the potential for opportunities in those areas as the situation continues to evolve. While the pandemic has continued to cause delays for some project bookings or push back some of the start dates of some projects, bookings for the quarter were very strong at USD239 million, which reflects a 41% increase over the same quarter a year ago. Despite these increases, we did see some impacts, particularly in our aftermarket parts and services group as the high use of coal during the period meant that parts and service visits were delayed by some customers. Backlog at quarter end was a solid USD721 million, and we continue to see a robust pipeline of more than USD7.5 billion of identified project opportunities over the next three years. Turning to our ClimateBright decarbonization platform, we’ve had a very exciting quarter that included the announcement that we’re partnering with Kiewit Industrial to support the Fidelis New Energy’s planned 200-megawatt net-negative carbon impact biomass power plant in Baton Rouge, Louisiana. It will be the largest of its kind in the world and we will provide power for Fidelis’ Gron Fuels facility, which will produce sustainable jet fuel, diesel fuel, green hydrogen, and others. We will provide a B&W biomass boiler, our proprietary OxyBrite oxy-combustion carbon capture technology, and a full suite of environmental systems to control emissions. This project is currently not in our backlog, and we’re very excited about the opportunities for our OxyBright system, which uses pure oxygen for combustion and can be used with a wide range of fuels to produce a concentrated stream of CO2, which can then be sequestered underground or put to other beneficial use. It’s truly a groundbreaking project and a great opportunity to demonstrate the leadership role B&W can play in providing advanced technologies for decarbonization, emission controls, and the generation of clean power, and we’re pleased to have been named the preferred supplier for this project to provide our engineering design, equipment, and technology as it moves forward. We’re also making progress on our efforts to develop a near-term demonstration site for the next scale-up of our BrightLoop decarbonization, hydrogen, and syngas production technology. This is a technology we’re extremely enthusiastic about and one that we’ve developed through many years of effort in conjunction with the Ohio State University and the Department of Energy. It truly revolutionizes the boiler system and uses a chemical reaction process to create combustion without incineration. The BrightLoop process uses a patented particle, which is very flexible and can react with a variety of feedstocks, including natural gas, biomass, coal, treated municipal solid waste, syngas, and even petroleum coke from the refining industry. So, it really provides customers with a lot of options in terms of the applications where it can be used. Just as important, since BrightLoop uses a chemical reaction, we can isolate syngases from the process, including pure hydrogen, along with a pure stream of CO2 for either sequestration or other industrial uses. We are moving into a full-scale demonstration of the technology this year, and we have identified one site in particular with favorable conditions, and we are working to secure access to the property along with a potential hydrogen offtaker. We are also working to secure external grants and investments for this groundbreaking project, and at the same time, we’re moving forward with final design and engineering, which is progressing as planned. Needless to say, interest in our BrightLoop product is very high worldwide, particularly given its revolutionary ability to use solid fuels to generate hydrogen. As part of our commercial demonstration project, we plan to use biomass fuel to generate hydrogen, sequester the CO2 generated from the process, and also use this site to test other solid fuels using this chemical looping process. So, again, we see this as a game-changing technology evolution that can effectively separate CO2 while producing hydrogen, steam, or syngas. It’s exceptionally versatile and can support a wide array of applications, and it’s scalable, so it can be adapted economically to both large and small installations. With respect to other aspects of our business, we continue to see strong interest, particularly in our renewable energy technology, and expect to announce a number of new build renewable bookings in the second quarter. Certainly, our first-quarter revenues of USD68 million in our B&W Renewable segment, which is a 136% increase over the first quarter 2021, represents a great start to the year as we see continued demand for our waste energy and biomass energy products and other products and services within this segment. We’re also seeing continued growth within our global parts and services business with bookings for equipment upgrades, services, and replacement parts. We’re excited about opportunities to build on our parts and service and retrofit opportunities not only throughout North America but internationally as well. We continue to make strategic investments in our clean and renewable energy businesses as part of our growth strategy and closed on two strategic acquisitions during the quarter. In the first, which closed in February, we acquired 100% of Fossil Power Systems or FPS based in Nova Scotia, Canada. FPS is a leading designer and manufacturer of hydrogen, natural gas, and renewable pulp and paper combustion equipment, including igniters, scanners, plant controls, and safety systems. FPS technologies and capabilities are ideally suited to clean energy applications such as firing hydrogen, which complements our clean energy strategy, in particular, the BrightLoop and BrightGen technologies. We closed on an additional acquisition in February when B&W acquired 100% of the equity interest of Optimus Industries based in Tulsa, Oklahoma, creating an even broader foundation of capabilities to serve our customers. Optimus has reputable and reliable technologies that align closely with B&W’s business and designs and manufactures steam generation and waste heat recovery technologies for use in the power generation, petrochemical, and process industries, including packaged boilers, water tube and fire tube waste heat boilers, economizers, superheaters, waste recovery equipment, and products for sulfuric acid plants. This acquisition provides opportunities in the growing heat recovery steam generator aftermarket, as well as access to broader U.S. package boiler manufacturing capabilities. We’re extremely pleased to have the experienced and dedicated FPS and Optimus employees and additional capabilities as part of our company, and the transition activities related to these acquisitions continue to move along smoothly. We also announced in March that B&W joined the United Nations Global Compact. This initiative provides a global platform for the development, implementation, and disclosure of responsible business practices in the areas of human rights, labor, the environment, and anti-corruption. This reinforces our company’s commitment to the 10 principles of the Global Compact and our commitment to advancing the UN sustainable development goals. It also helps further position B&W as a leader in the global energy transition to clean, sustainable, and socially responsible ways of powering utilities and industry. With that, I’ll turn the call over to Lou to discuss the financial details of the first quarter of 2022.

Thanks, Kenny. I’m pleased to review our first-quarter results, further details on which can be found in the 10-Q that will be on file with the SEC. Our first-quarter consolidated revenues were USD204 million, which is a 21% improvement compared to the first quarter of 2021. This is primarily due to higher volume by new build projects and the impact of the acquisitions we completed in the fourth quarter of 2021 and the first quarter of 2022. In addition to a higher level of activity in the Environmental segment, it was partially offset by a lower level of construction activity in the Thermal segment. Our operating loss in the first quarter was USD6.8 million as compared to an operating loss of USD6.5 million in the first quarter of 2021. Our adjusted EBITDA was USD12 million compared to an USD8.6 million adjusted EBITDA in the first quarter of 2021. While bookings in the first quarter of 2022 were USD239 million, which is a 41% increase compared to the first quarter bookings of 2021, our ending backlog was USD721 million, which is a 35% increase compared to backlog at the end of the first quarter of 2021. As Kenny stated, it is the highest backlog for several years. I’ll now turn to our first-quarter segment results. Within the Babcock and Wilcox Renewables segment, as Kenny mentioned earlier, revenues were USD68 million for the first quarter of 2022, which is an increase of 136% compared to the USD28.8 million in the first quarter of 2021. This was primarily driven by a higher volume of new build projects, as well as acquisitions in the fourth quarter of 2021. Adjusted EBITDA in the quarter was USD1.5 million as compared to USD200,000 in the first quarter of 2021, again, primarily due to the increase in volume, which was partially offset by the impacts of business mix within the segment. Within the Babcock and Wilcox Environmental segment, revenues were USD34.9 million in the first quarter, which is an increase of 12.2% compared to the USD31.2 million in the first quarter of 2021. The increase is primarily driven by increased volume in our ash handling systems, scrubbers, precipitators, and cooling systems. Adjusted EBITDA in this segment was USD1.4 million for the quarter, as compared to USD1.1 million in the same period last year. This was primarily due to the increased volume. Turning to our Babcock & Wilcox Thermal segment, revenues were USD102.2 million in the first quarter of 2022, which is a decrease of 6% compared to USD108.3 million in the first quarter of 2021. This was primarily due to a lower level of activity on construction projects and partly offset by the acquisitions completed in the first quarter of 2021. Adjusted EBITDA in the first quarter of 2022 was USD14 million, which is up 34% compared to the USD10.5 million in the first quarter of 2021. This was primarily due to acquisitions and the continued cost savings and restructuring initiatives benefiting the current year, which more than offset the overall decrease in volume. I’ll now turn to our balance sheet, cash flow, and liquidity. Total debt at March 31, 2022, was USD343.8 million, and the company had cash, cash equivalents, and restricted cash of USD117 million. Finally, based on our strong bookings and backlog in the first quarter of 2022, we’re reiterating our 2022 target of USD110 million to USD120 million in adjusted EBITDA. I’ll now turn the call back over to Kenny.

Thanks, Lou. Well, B&W has come a long way over the last couple of years. Today, we have a strong balance sheet, solid performance across all three of our business segments, outstanding technology, and a robust pipeline of potential opportunities. We also have a tremendous team of dedicated employees who continue to focus on safety, strong project execution, growing bookings, and our backlog and on really stepping up to drive forward and support the world’s climate objectives while also providing the products and services our customers need to meet energy demands not only just today but also in the future. It took a lot of hard work, perseverance, and commitment to get where we are today, and we’re excited about the opportunities ahead of us across our businesses. We see continued growth in our renewable new build waste energy and biomass energy business, opportunities for our renewable aftermarket parts and services. We see new opportunities for our thermal business with increased need for equipment upgrades and services as our customers work to keep their plants operating efficiently and cleanly so they can supply the needed power to their customers, especially as energy security takes a more prominent place in the current geopolitical climate. We also see increased opportunities for our environmental business in the areas of emissions control, ash handling, cooling systems, and construction and installation services. Perhaps most importantly, we continue to see B&W on the forefront of the global fight against climate change. As we’ve said before, we expect 2022 to be a milestone year for our ClimateBright decarbonization and hydrogen solutions platform, and that remains true today. We are enthusiastic about the opportunities ahead in this area and about being a leader and innovator in carbon capture, decarbonization, and hydrogen production as we drive forward with our advanced technologies and demonstrate the solutions we can provide to help our customers address the world’s urgent climate objectives. With that, now I’ll turn the call back over to Bethany, who will assist in taking your questions.

Our first question is from the line of Rob Brown with Lake Street Capital.

My first question is on the Fidelis project. And I just wanted to get a sense of sort of how that rolls out into the business? And then maybe some further color on the CO2 reduction component. Is that the first commercial scale of that project? And I just want to get a sense of how that’s developed in the market?

Yes. No, I appreciate the question. So, the Fidelis project is very exciting for us. Obviously, we announced the partnership to be on that project. We are in full engineering mode and in discussions in and around the configuration of that particular technology. I believe Fidelis has already started the groundbreaking associated with the Gron Fuels portion of that particular plant facility in Baton Rouge or will be shortly. There are two parts to that. One is the Gron facility, which is the creator of the jet fuels. We’re not involved in that. The second part is the biomass plant facility that will power the Gron fuels, and that’s where we’re focused on from our boiler technology and providing our OxyBright combustion technology. We’ve actually done small scale-up work on the OxyBright previously. This will be a further move of that. It’s ready for commercial implementation and that’s what this will represent on that plant. It will be a 200-megawatt, as we’ve talked about in there or larger, still to be determined. In conjunction, on top of that with the OxyBright technology to sequester the CO2. Fidelis plans to isolate CO2 and sequester that as part of their carbon initiatives associated with that jet fuel. So, we’re excited about that. As I mentioned in the remarks, it’s not in our backlog. We’re still working through details on that, but it’s a groundbreaking project in its size and groundbreaking in utilizing the decarbonization and sequestering that here in the U.S. So, we’re excited about that. Obviously, the long-term relationship that we develop with Fidelis is great as well. It’s a good relationship all the way around on that particular piece. More to follow on that. Obviously, we’ll put out public statements when we can on that particular plan as it continues to move forward, but it clearly is a milestone for us, especially on getting the oxy-combustion into a large commercial implementation to get that going. So we’re excited about that.

Okay, great. And then on the pipeline, you had good order activity, which I also mentioned some project timing shifts around. Could you give us a sense of how much you’re shifting around? And do you sort of pick that up this year? Or are things getting shifted out further?

Yes, there has been a shift. I’ll let Lou elaborate, but some order delays, which have been included in the overall figures by this time, have resulted in about two months of delays in implementation. Most of our customers, if not all, have been very supportive in shifting the supply of steel and other components from Europe to Asia for their specific projects. We haven't encountered any issues with any customer regarding these changes in the supply chain as we transition from Europe to overseas. As we look at specific components, a few things have faced slight delays impacting some revenues. However, as shown in the balance sheet, we have increased inventory by roughly USD10 million to compensate for those lagging parts, positioning ourselves to leverage our parts business, particularly in the fossil fuel sector, where many clients have been operating their plants continuously. This has delayed our ability to implement new parts and services and conduct field services. Nevertheless, it has provided us the opportunity to understand some of the global supply chain dynamics better, and we feel confident that as we move forward, we’ll be well positioned to provide those essential parts and services, and we are already beginning to see progress in that area. We believe we're in a strong position. Lou, do you have anything to add?

Yes. We’ve attempted to estimate the impact of the situation in Ukraine on our results. I prefer not to give specific figures as they are merely estimates. It can be difficult to determine whether the effects are due to COVID or the Ukraine war, but for this quarter, I believe we were affected by less than roughly USD10 million in revenue, which was a timing issue rather than an actual loss of revenue, and this reduced our gross profit by a couple of million dollars. Most of this will likely occur in the upcoming quarters, if not in the current quarter. About USD800,000 of this was due to increased supply costs. While the impact isn’t huge, it's significant enough to warrant attention. Our supply chain team did an excellent job of proactively purchasing to boost our inventory, and we have a global supply chain that allows us to quickly find alternative suppliers for these purchases. We continue to keep a close watch on the situation daily.

Our next question comes from the line of Brent Thielman with D.A. Davidson.

A couple of things here. Just recognized the business is very seasonal, and the back half is obviously pretty consequential to your full-year expectations. But it does seem like you’re seeing an awful lot of growth momentum here. So, just with respect to the guidance, are there any elements of increasing concern just regarding margins for the rest of the year or timing of projects, or other contingent fees you’re just trying to factor in way in here just in regard to maintaining the outlook?

No, good question. I’ll chime in and let Lou jump in as well too. The biggest impact we had on margins in Q1 was a little bit lower in the parts and services, mainly because our customers’ plants were running at full tilt because of the high price of natural gas. Parts and services historically has a high gross margin level. We had a shift more towards some project aspects in Q1 but obviously thrilled about the solid numbers we produced in Q1 and building up a backlog. It’s never predictable; things are jumping back to normal, but we are seeing already some of the parts and services business pick back up because clients are now at a point where they’ve got to start repairing and fixing some of these plants that have been running full tilt again. We’ll see how that shakes out over the next several months, but we’re entering into some of the parts season. We will continue to be cyclical. I think our project business and even some of the parts business because we’re going to obviously get through spring and hit summer. The demand for these power plants will pick back up again. We often see the fall as one of the stronger parts seasons for us, and we fully anticipate that happening. I think we’ll stay with the cyclical aspect at this point in time. The margins will always shake out as parts and services fluctuate versus the project aspect that you saw in Q1. But Lou, anything you want to add there?

In comparing gross profit from the first quarter of 2021 to the same period in 2022, we see a slight decrease of a little over 2%, moving from around 22% to 20% gross profit. This decline is primarily attributed to a slowdown in the parts business, which is understandable since the power plants remained operational. However, we expect to recover that gross profit mix as parts sales increase. Our significant backlog reinforces our confidence in this recovery.

Okay. I appreciate that. I guess second question is just what sort of contingencies and other things are you doing just with respect to new bids and contracts? You’ve obviously got a very big backlog. You’ve been picking up a lot of work. How are you guys kind of protecting yourselves in some of the inflationary and logistical procurement challenges out there, particularly on a contractual basis?

Yes. Good question, Brent. Most of our contracts, we have the ability to readjust pricing if pricing is unprecedented. Because of the situation in Ukraine and COVID, most of our contracts, we do a really good job of making sure we’ve got flexibility if we have to redirect supply chain or if pricing goes up on some of the core materials and parts so that the impact isn’t necessarily borne by B&W, but is passed along to our customer base. Not always the case, but we do a really good job of pushing on that and forcing that. Obviously, we’ve also, as Lou mentioned, done a fabulous job managing the global supply chain to help with our vendors and suppliers to get ahead of the curve. It’s been a combination of a lot of work by a lot of people on a global basis, but we try to be ahead of the contractual language to minimize the impact on us.

We’ve also increased our inventory as planned, taking advantage of our cash to go out and purchase at a better cost. Our global supply chain allows us to be more nimble and flexible with suppliers in different parts of the world where pricing might be better. It’s a combination of things we have to do every day. Our supply chain people have been very successful at managing these aspects.

Okay. Really helpful. Maybe just the last one on the ClimateBright platform. You continue to make really good inroads here. I guess, to all of the things that you’ve seen over the past quarter and what you’ve got coming up, do you reaffirm the view that this can become more of a contributing business next year? Is it sooner? Just maybe the pace of success you’ve had here, how that compares to those expectations?

Yes. We’re excited about getting this project off the ground on the commercial demonstration, which is necessary to prove the scale-up. We’re doing a 21x scale-up on the technology and the commercial demonstration, which will position us to move it into bigger applications. We have a number of potential customers that are closely following the engineering and progress we’re making in this commercial demonstration. We’re working with a number of groups and entities that are following this aspect because there is demand and application for this technology. It may not always feel apparent from an investor standpoint, but we are accelerating the commercial demonstration process on BrightLoop specifically. We’ve isolated a group inside the company that is focused on this commercial demonstration. We’ll keep pressing to get this demonstration done this year so we can leverage that from a revenue standpoint, obviously, in 2023 and beyond.

Our last question is from the line of Alex Rygiel with B. Riley.

A very nice quarter. A few questions here. First, backlog growth of 35% was really solid, but you haven’t even yet included Fidelis. Sort of excluding Fidelis for the moment, it sounds like you’re really bullish on expanding backlog between now and year-end. First, is that a fair conclusion? And then secondly, from a geographic standpoint, do you see an acceleration in your international markets? Or do you see an acceleration in your U.S. markets?

No, we are bullish on the increase of backlog going into the rest of the year, which obviously sets us up very strongly for 2023 and beyond. In Europe, we’re in discussions with a number of customers about moving quicker in renewable energy and some newer technologies, or even our existing technology. We have a lot of customers in Europe looking to revamp some of their fossil fuel plants to continue burning a little bit longer than they had planned due to high natural gas prices. We think there could be some potential upgrades and enhancements in our parts and services, and we're trying to support our customers best we can across all of those goals. Yes, I would say we’re bullish on the backlog increasing by the end of the year based on what we’ve discussed so far.

That’s helpful. And turning to M&A being somewhat of a core pillar to your growth strategy. Are you starting to see pricing or should we say seller expectations improve here a little bit with some of the market turmoil across the street? And any sort of segment in particular that is catching your attention the most these days?

I don’t think the geopolitical situation or COVID has really changed too much regarding multiples or seller expectations; it’s still a little variable out there. We are looking at many different opportunities. Some of those are not necessarily 100% acquisitions but can be minority investments in emerging technologies. We continue to look at opportunities, especially on the thermal side of the business, that may complement our parts and services platform. We think those would be high synergistic opportunities.

And then lastly, as it relates to BrightLoop, when might we hear more regarding location, property, customer, and so forth?

We are working diligently right now on a couple of specific locations and sites and opportunities. I hope it’s in the not-too-distant future, whether it’s days or weeks, but not months or quarters. We’re working on the engineering and working with an EPC partner that would do part of the construction aspect around that. We’re also working with some federal funding aspects that are associated with that and with other potential customers. Hopefully, it’s a week from now when we can provide further announcements regarding that demonstration.

Thank you. That concludes the question-and-answer session. I would like to pass it back to Sharyn Brooks for any closing remarks.

Thank you, Bethany, and thanks to everyone for joining us today. That concludes our conference call. A replay will be available on our website for a limited time later today.

That concludes the Babcock & Wilcox Enterprises Q1 2022 earnings conference call. I hope you all enjoy the rest of your day. You may now disconnect your lines.