Good afternoon. Thank you for attending the Babcock & Wilcox Enterprises Third Quarter 2024 Conference Call. [Operator Instructions] I would like to turn the conference over to your host, Sharyn Brooks, B&W's Director of Communications. Thank you. You may proceed, Ms. Brooks.

Thank you, Victoria, and thanks to everyone for joining us on Babcock & Wilcox Enterprises Third Quarter 2024 Earnings Conference Call. Joining the call today are Kenny Young, B&W's Chairman and Chief Executive Officer; and Lou Salamone, Chief Financial Officer, to discuss our third 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 was filed this afternoon 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 third quarter earnings release published this afternoon and in our company overview presentation 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.

Thanks, Sharyn. Well, good afternoon, everyone, and thanks for joining us on our third quarter 2024 earnings call. We generated significant operating margin improvement on a year-over-year basis during the third quarter of 2024, reflecting our recent strategic actions of avoiding lower-margin projects and improving project performance as well as reducing costs. This was highlighted by our strong increases in our adjusted EBITDA, operating income and net income compared to the same period in 2023 when excluding revenue from BWRS, which was an asset we sold in the second quarter of this year. During the third quarter of 2024, we recorded 2 significant onetime items. The first was a noncash $5.8 million impairment related to the sale of our SPIG asset, which we just closed recently in the fourth quarter of this year. And the second was a $4.9 million settlement to exit the last O&M multiyear maintenance contract for a biomass plant in the U.K., this historical contract associated with one of the biomass plants from 2018 and has had over $15 million of losses over the last 3 years and we anticipated potential higher losses over the remaining 10 years. This was a remarkable settlement for us. Excluding these onetime provisions, we would have improved our operating income and net income by $10.3 million, both of which would have been on track with expectation. This really demonstrates the company's improved overall margin performance. We believe that we are in a unique position to leverage the significant increase in baseload generation demand in North America and around the world. The demand for energy from our -- from consumers, data centers and large businesses, either from the grid or behind the meter, along with increased energy needs from utility and large industrial clients, are providing even greater opportunities for us…

Thanks, Kenny. I'm pleased to review our third quarter results, further details on which can be found in the 10-Q that was -- that is on file with the SEC. Our third quarter consolidated revenues were $209.9 million, which is a decrease compared to the third quarter of 2023. This decrease is primarily attributable to the inclusion in 2023 of $7.4 million of revenues of the BWRS asset that was divested in the second quarter of 2024. When BWRS is excluded from the 2023 revenues, they increased by -- our revenues increased in 2024 by $4.7 million, which is driven by growth in our domestic and European Environmental businesses as well as the Thermal segment benefits related to a large natural gas project and increased volume in parts during the year. We saw an operating loss in the third quarter of 2024 of $1.4 million compared to operating income of $5.5 million in the third quarter of 2023. This loss is primarily attributable to the previously mentioned divestiture of BWRS as well as 2 onetime charges of a $5.8 million noncash impairment related to the sale of our SPIG subsidiary and a $4.9 million settlement to exit the loss-generating long-term maintenance contract, which Kenny mentioned earlier. Our adjusted EBITDA, excluding BrightLoop and ClimateBright expenses, was $23.3 million, which is ahead of expectations for the quarter. Implied bookings in the third quarter of 2024 were $810.5 million, and ending implied backlog was $628.2 million. In the third quarter of 2024, we had a loss per share of $0.10 as compared to a loss per share of $1.35 in the third quarter of 2023. I'll now turn to our third quarter segment results. Within our Babcock & Wilcox Renewable segment, revenues were $38.2 million for the third quarter of 2024, which is…

Thanks, Lou. Well, in closing, we continue to execute against our strategic plan and remain intently focused on driving further improvements in our balance sheet. As we look ahead to the fourth quarter, we expect seasonal strong results and operating momentum driven by our Thermal and Environmental segments to continue with increased services and project schedules from our customers. Our global pipeline of over $9 billion of identified project opportunities remains healthy across all our business segments despite our divestitures, and we anticipate prospects for new bookings and stronger financial performance through the fourth quarter and heading into 2025. We continue to believe our deep industry expertise with clean energy and carbon capture technologies coupled with our long history and traditional energy sources positions us well to deliver environmentally conscious technology-driven solutions to our global customers. I would like to wrap up today by recognizing and thanking our customers as well as our employees, who work hard every day in a safe way to meet the challenges of energy demand around the world. And looking forward, we remain excited about the unique position we hold to provide our diverse portfolio of technologies to meet the increasing baseload generation demand in North America and across the globe and support the world's need for proven clean energy solutions both now and in the future. With that, I'll turn the call back over to Victoria, who can help with our questions. Victoria?

[Operator Instructions] Our first question today comes from the line of Alex Rygiel with B. Riley.

Nice quarter. A couple of quick questions, Kenny. First, as it relates to your EBITDA guidance, $91 million to $95 million, recognizing that's adjusted to exclude some of these divestitures, can you talk to that new guidance range relative to maybe past guidance and where your sort of base business was adjusted, if at all?

Yes. If you -- I mean, if you look past the guidance, I think we're at $105 million to $115 million. If we bridge the SPIG, GMAB results for the quarter and some various expenses associated with that particular piece, it takes you down to that $94 million, $95 million scenario. So we actually just reset based on the SPIG -- primarily based on the SPIG and GMAB divestitures that were just completed for the quarter in that area. And then I mean that's the primary aspect around it. So the rest of it would be just noise, but it bridges the gap between the new target and the old target.

Very helpful. And then of the 12 to 15 active FEED studies worth over $1 billion, what's your traditional conversion rate on these? And what portion of this is kind of already in backlog or implied backlog?

So most of the FEED studies would be -- those are smaller, right? So the typical revenue in FEED study can vary from $0.5 million to $2 million or $3 million depending on the size of the FEED study. So they're not material as it relates to revenue or in a backlog standpoint on it. But once we're engaged in a FEED study, the conversion rate usually is pretty high. As you can imagine, our customers are not necessarily hiring us to do a full range of FEED study and then with no follow-on. But roughly, you could say probably on a 40% or 50% conversion rate on an active FEED study at any given time would be converted. There could be a timing element. It could be inside a year. It could be 2 or 3 years before they're converted into active projects from there. But the exciting part for us, and this is something that we changed, a lot of our -- I mean, we've really driven to obtain more FEED study to leverage the strong engineering position we have for these clients to move into carbon capture and obviously BrightLoop and other areas around it. So the number of FEED studies are exciting for us. And I think it's also reflective that we're obtaining FEED studies on a lot of these newer technologies, including BrightLoop. And so we've got a couple of active BrightLoop FEED studies right now with clients up in Canada, as I mentioned, and elsewhere that are outside of the ones that we've been developing. And so we think that's a pretty exciting development for us as the concept of utilizing a BrightLoop technology is starting to really take hold, I would say, in some of these larger industrial clients as they're looking at alternative ways to produce energy going forward.

Our next question comes from the line of Aaron Spychalla with Craig-Hallum.

First, good to see the coal to gas order, full notice to proceed. Can you just maybe give a little bit of detail on timing and just kind of the cadence of that revenue over the next couple of years? And then just talk about the pipeline there. I mean are there FEED studies for that? Or is there a good amount of work kind of behind that with other conversions?

Let me answer the latter first. Yes, there is -- we have several actually prospects in the pipeline on natural gas conversions. They're not all that big, obviously, but -- out there, but we do have a number of those. I hate to give a number, but let's just say greater than a dozen that we're looking at. Again, those would vary in size on opportunities. But a lot of the utilities are looking long term around either natural gas or the continuity of using -- continuing to use coal as it relates to baseload generation here in the U.S. And we're seeing that continue on. As far as the revenue goes of the -- on the natural gas conversion project on that, we -- obviously, we just received the full notice to proceed. That's why we're announcing it today on the call and excited about that. But revenues would really start to kick in, in '25 but also '26 and a little into '27 as well on that. So it will be spread over that longer period of time on it. So -- but we're obviously excited to get the full notice -- to finally the full notice to proceed. Came in a little longer or late than we expected, but we have it now. So it's going to move into full backlog here, I guess, in November, and we'll start the full work on it here this quarter.

All right. I appreciate the color there. And then just maybe on the balance sheet, can you talk about where kind of letters of credit stand today and kind of the time line for those rolling off and freeing up some liquidity? And then just on free cash flow, the outlook there as we head into 2025.

Yes, go ahead, Lou.

Yes. Letters of credit right now are in the $80 million range. They will roll off over the next 1.5 years. What will happen, not to the same extent, but new letters of credit will come in as we win new business. But we've been able to decrease the percentage of letter of credits that are required. And then on the second part of the question, Aaron, was...

Yes. Just kind of thoughts on free cash flow conversion as we look towards -- thinking about what 2025 can look like.

Yes. I think the free cash flow conversion, as we've walked through the EBITDA, there is -- the interest expense is in the $50 million range, including the dividends on the preferred stock. So you're probably talking of the 95 plus -- $100 million to $95 million of EBITDA, you're probably talking about a 40% conversion rate on that after the interest and the BrightLoop cost of about -- capitalized BrightLoop cost of about $10 million.

And we should add that the -- so SPIG and GMAB, obviously, that's a fourth quarter impact to the company, but there's probably roughly $10 million of letters of credit that will go away over time. I mean it will take a few months to wind those off or convert those, but the new owner will take over those letter of credit. So we'll reduce the letters of credit by that amount over the next month or 2.

So the $80 million that I quoted is really when you take into account the sales, and those $10 million will roll off is really $70 million. And as I said, that will decrease and some will come back as we win new business.

Our next question comes from the line of Rob Brown with Lake Street Capital Markets.

First question is on the Massillon project. I think you talked about some long lead items. When does that sort of start to ramp in full? And could you remind us again when you start to generate kind of or operate that facility?

So those items are in full order now. Obviously, some of that is in material long lead time orders like air compressors and other aspects. Some of that is with outside engineering firms on some of the requirements for the civil construction drawings, diagrams that we've got to submit as well to -- along with the permits on that piece. The real ramp-up will start to occur probably early Q2 next year, I mean, on the ramp-up of the cost sides of the construction element. And then in Q3, we'll move into a heavy period, Q4. And then the following quarter, we'll kind of wind it down. We -- right now, we're targeting to be able to produce hydrogen by early '26, in the early, early part of '26. And then that would go into full commercial state somewhere in Q2 of '20 -- around Q2 of '26 with -- and then we'll begin obviously selling the hydrogen as soon as it's ready in full commercial state. But the production plan of hydrogen, which is the critical part of this, it should be in the early part of 2026. That's what we're targeting right now. I think the -- just add to that because -- go ahead, Rob. Sorry.

I was going to talk a little bit about the West Virginia kind of loan guarantee or loan, I guess, forgivable loan. What sort of project that, that would be for and maybe the sort of other dependencies there to get that launched?

Yes. So we should have that signed here in the next coming day or 2 or 3 on that. We've reached full agreement with the state economic group, and they've been wonderful to work with and very supportive of that project. So the plan is we will target a small to midsize BrightLoop facility that would ramp up by 2030 is when that has to be in operation. And there's -- tied to that forgivable loan is -- really the key caveat there is a limited number of on-site jobs that will create that will obviously be part of the construction aspect of the project and then the ongoing operations of that particular site for that project. So the target is to have that plant up and running by 2030 on that. So we -- that's what we've got contemplated in the agreement.

There are no additional questions at this time. That is the conclusion of today's call. Thank you for your participation, and enjoy the rest of your day.