Babcock & Wilcox Enterprises Inc.
05/11/2026 | Press release | Distributed by Public on 05/11/2026 04:13
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial position and results of operations should be read in conjunction with the financial statements and the notes thereto included in the Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements as a result of many factors, including those described in more detail under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the SEC. See also "Cautionary Statement Concerning Forward-Looking Information" herein. Unless otherwise noted, discussion of our business and results of operations refers to our continuing operations.
BUSINESS OVERVIEW
We are a globally focused energy technologies provider with nearly 160 years of experience providing diversified energy and emissions control solutions to a broad range of industrial, electrical utility, municipal and other customers. Our innovative products and services are organized in one reporting segment.
Customer demand is heavily affected by the variations in our customers' business cycles, power demand in their operating territories, and by the overall economies, energy, environmental and regulatory requirements of the countries in which they operate.
We have manufacturing facilities in Canada, Mexico and the United States. Many aspects of our operations and properties could be affected by political developments, environmental regulations and operating risks. These and other factors may have
a material impact on our international and domestic operations or our business as a whole.
Discontinued Operations
Vølund
In April 2025, we sold our Vølund business for a base purchase price equal to $15.0 million plus $0.1 million (400,000 Danish krone). We recorded a net loss of $36.8 million, which included a write off of CTA of $52.6 million. For more information, see Note 3 to the Condensed Consolidated Financial Statements.
Diamond Power
In July 2025, we closed the sale of our Diamond Power business for a base purchase price of $177 million, subject to certain offsets and adjustments. We recorded a gain of $53.2 million on the sale. During the three months ended March 31, 2026, we recorded a gain of $3.5 million as part of the settlement of certain outstanding items in accordance with the agreement. For more information, see Note 3 to the Condensed Consolidated Financial Statements.
ASH
In October 2025, we completed a sale of the net assets comprising our ASH business for $29 million, subject to customary fees and adjustments, and recorded a gain of $21.5 million on the sale. For more information, see Note 3 to the Condensed Consolidated Financial Statements.
Solar
As of December 31, 2025, B&W Solar was disposed of through abandonment, as we ceased all business operations and either transferred or wrote off its remaining assets. For more information, see Note 3 to the Condensed Consolidated Financial Statements.
BWRS
During the three months ended March 31, 2026, we recorded a loss of $0.9 million as part of settlement negotiations with the buyer. For more information, see Note 3 to the Condensed Consolidated Financial Statements.
RESULTS OF OPERATIONS
Condensed Consolidated Results of Operations
The following discussion reflects the consolidated results of our operations as noted below:
| Three Months Ended March 31, | |||||||||||||||||
| (in thousands) | 2026 | 2025 | $ Change | ||||||||||||||
| Revenues | $ | 214,414 | $ | 148,598 | $ | 65,816 | |||||||||||
| Costs and expenses: | |||||||||||||||||
| Cost of operations | 170,957 | 120,831 | 50,126 | ||||||||||||||
| Selling, general and administrative expenses | 44,379 | 28,304 | 16,075 | ||||||||||||||
|
Research and development costs
|
803 | 348 | 455 | ||||||||||||||
| Impairment of long-lived assets | - | 950 | (950) | ||||||||||||||
|
(Gain) loss on asset disposals, net
|
(69) | 8 | (77) | ||||||||||||||
|
Operating loss
|
(1,656) | (1,843) | 187 | ||||||||||||||
| Interest expense | 4,448 | 11,042 | (6,594) | ||||||||||||||
| Change in fair value of customer warrants | 70,242 | - | 70,242 | ||||||||||||||
| Income tax expense | 4,154 | 1,922 | 2,232 | ||||||||||||||
|
Loss from continuing operations
|
$ | (79,622) | $ | (15,632) | $ | (63,990) | |||||||||||
Three months ended March 31, 2026 and 2025 Consolidated Results
Revenues increased by $65.8 million to $214.4 million in the three months ended March 31, 2026 compared to $148.6 million in the three months ended March 31, 2025. The increase is primarily driven by an increase in large project volume, including $31.0 million from Base Electron. This improvement is primarily due to the increasing need for electricity from fossil fuels driven by the demand from AI, data centers and expanding economies.
Costs of operations increased by $50.1 million to $171.0 million in the three months ended March 31, 2026 compared to $120.8 million in the three months ended March 31, 2025. The increase is primarily driven by the increased revenue as described above as well as the product mix of higher large-project volume which carries higher costs needed to complete certain projects.
SG&A expenses increased by $16.1 million to $44.4 million in the three months ended March 31, 2026 compared to $28.3 million in the three months ended March 31, 2025. The increase is primarily driven by an increase in share price of our common stock during the three months ended March 31, 2026, which resulted in the increase in stock-based compensation expense for grants to senior members of management, including an increase in the valuation of stock appreciation rights
Research and development costs increased by $0.5 million to $0.8 million in the three months ended March 31, 2026 compared to $0.3 million in the three months ended March 31, 2025. The increase is primarily driven by BrightLoop™ investment.
Impairment of long-lived assets decreased by $1.0 million in 2026. The decrease relates to an impairment recognized in 2025 relating to a reduction in our real estate footprint.
(Gain) loss on asset disposals, net increased to a gain in the three months ended March 31, 2026 compared to a loss in the three months ended March 31, 2025 due to small disposals in 2026.
Operating loss decreased by $0.2 million to $1.7 million in the three months ended March 31, 2026 compared to $1.8 million in the three months ended March 31, 2025. The decrease is a result of the cost increases previously noted.
Loss from continuing operations increased by $64.0 million to $79.6 million in the three months ended March 31, 2026 compared to $15.6 million in the three months ended March 31, 2025, primarily driven by a non-cash change in fair value of customer warrants of $70.2 million and an increase in income tax expense of $2.2 million, partially offset by a reduction in interest expense of $6.6 million.
Other Expenses Impacting Operating Results
Interest Expense
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2026 | 2025 | |||||||||
| Components associated with borrowings from: | |||||||||||
| Senior Notes due 2026 | $ | 1,172 | $ | 6,320 | |||||||
| Senior Notes due 2030 | 2,832 | - | |||||||||
| Credit Agreement | 3 | 1,168 | |||||||||
| 4,007 | 7,488 | ||||||||||
| Components associated with amortization or accretion of: | |||||||||||
| Credit Agreement | 230 | 1,609 | |||||||||
| Senior Notes due 2026 | 227 | 656 | |||||||||
| Senior Notes due 2030 | (1,701) | - | |||||||||
| (1,244) | 2,265 | ||||||||||
| Components associated with interest from: | |||||||||||
| Lease liabilities | 562 | 591 | |||||||||
| Letter of Credit interest | 1,406 | 452 | |||||||||
| Other interest expense | 39 | 246 | |||||||||
| Capitalized interest | (322) | - | |||||||||
| 1,685 | 1,289 | ||||||||||
| Total interest expense | $ | 4,448 | $ | 11,042 | |||||||
The decrease in interest expense for the three months ended March 31, 2026 is primarily the result of the paydown of the Senior Notes Due 2026 in the second half of 2025 and in the first quarter of 2026, and the accretion of the gain on exchange of a portion of the Senior Notes Due 2026 into the Senior Notes due 2030.
Change in Fair Value of Customer Warrants
The increase in customer warrant fair value expense of $70.2 million is a result of the change in fair value of customer warrants for the three months ended March 31, 2026 primarily driven by an increase in the Company's stock price since the grant dates of the warrants.
Income Taxes
| Three Months Ended March 31, | |||||||||||||||||
| (in thousands, except for percentages) | 2026 | 2025 | Change | ||||||||||||||
|
Loss from continuing operations before income tax expense
|
$ | (75,468) | $ | (13,710) | $ | (61,758) | |||||||||||
|
Income tax expense
|
4,154 | 1,922 | 2,232 | ||||||||||||||
| Effective tax rate | (5.5) | % | (14.0) | % | |||||||||||||
Deferred tax assets are evaluated each period to determine whether realization is more likely than not. Valuation allowances are established when management determines it is more likely than not that some portion, or all, of the deferred tax assets
will not be realized. Valuation allowances may be removed in the future if sufficient positive evidence exists to outweigh the negative evidence under the framework of ASC 740, Income Taxes ("ASC 740").
Our effective tax rate for the first three months of 2026 is not reflective of the U.S. statutory rate, which was impacted by the mix of profitable foreign operations and losses in the U.S., certain foreign entities having a tax rate higher than the U.S. statutory rate, valuation allowances against certain net deferred tax assets and unfavorable discrete items. In certain jurisdictions where we anticipate a loss for the year or incur a loss for the year-to-date period for which a tax benefit cannot be realized in accordance with ASC 740, we exclude the loss in that jurisdiction from the overall computation of the estimated annual effective tax rate.
Bookings and Backlog
Bookings and backlog are our measures of remaining performance obligations under our sales contracts. We believe these metrics provide investors, lenders and other users of our financial statements with a leading indicator of future revenues. It is possible that our methodology for determining bookings and backlog may not be comparable to methods used by other companies.
We generally include expected revenue from contracts in our backlog when we receive written confirmation from our customers authorizing the performance of work and committing our customers to pay for work performed. Backlog may not be indicative of future operating results, and contracts in our backlog may be canceled, modified or otherwise altered by customers. Backlog can vary significantly from period to period, particularly when large new-build conversion projects or operations and maintenance contracts are booked because they may be fulfilled over multiple years. Because we operate globally, our backlog is also affected by changes in foreign currencies each period.
Bookings represent changes to the backlog. Bookings include additions related to new business or increases in project scope, subtractions due to customer cancellations or reductions in project scope, changes in estimates that affect selling price and revaluation of backlog denominated in foreign currency. We believe comparing bookings on a quarterly basis or for periods less than one year is less meaningful than for longer periods, and that shorter-term changes in bookings may not necessarily indicate a material trend.
Total bookings as of March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, | |||||||||||
| (in millions) | 2026 | 2025 | |||||||||
| B&W | $ | 2,512.5 | $ | 121.3 | |||||||
Our backlog as of March 31, 2026 and 2025 was as follows:
| As of March 31, | |||||||||||
| (in millions) | 2026 | 2025 | |||||||||
| B&W | $ | 2,728.8 | $ | 467.9 | |||||||
Of the backlog at March 31, 2026, we expect to recognize revenues as follows:
| (in millions) | 2026 | 2027 | Thereafter | Total | |||||||||||||||||||
| B&W | $ | 570.3 | $ | 603.6 | $ | 1,554.9 | $ | 2,728.8 | |||||||||||||||
Non-GAAP Financial Measures
In addition to Loss from continuing operations, we use non-GAAP financial measures internally to evaluate our performance and make financial and operational decisions. When viewed in conjunction with GAAP results and the accompanying reconciliations, we believe that the presentation of these measures provides investors with greater transparency and a greater understanding of factors affecting our financial position and results of operations than GAAP measures alone. The presentation of non-GAAP financial measures should not be considered in isolation or as a substitute for the related financial results prepared in accordance with GAAP.
The following discussion of our business segment results of operations includes a discussion of EBITDA and Adjusted EBITDA. EBITDA focuses on the earnings generated from core business operations, without considering the effects of financing, accounting decisions or tax. EBITDA and Adjusted EBITDA differ from the most directly comparable measure calculated in accordance with GAAP. A reconciliation of Loss from continuing operations, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA is included below. Management believes that this financial measure is useful to investors because it excludes certain expenses, allowing investors to more easily compare our financial performance period to period. When viewed in conjunction with GAAP results, we believe the presentation of EBITDA and Adjusted EBITDA provides investors with greater transparency and a greater understanding of factors affecting our financial position and results of operations than GAAP measures alone.
Adjusted EBITDA is calculated as earnings before interest, tax, depreciation and amortization, and adjusted for items such as gains or losses arising from the sale of non-income producing assets, net pension benefits, stock-based compensation, restructuring activities, impairments, gains and losses on debt extinguishment, legal and settlement costs, costs related to financial consulting and amortization and valuation of customer warrants. Additionally, the Company redefined its definition of Adjusted EBITDA to eliminate the effects of certain items including interest on letters of credit included in Cost of operations and product development costs. Prior period results have been revised to conform with the revised definition and present separate reconciling items in our reconciliation.
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2026 | 2025 | |||||||||
|
Loss from continuing operations
|
$ | (79,622) | $ | (15,632) | |||||||
| Interest expense, net | 3,808 | 10,802 | |||||||||
|
Income tax expense
|
4,154 | 1,922 | |||||||||
| Depreciation & amortization | 2,501 | 2,315 | |||||||||
| EBITDA | (69,159) | (593) | |||||||||
| Impairment of long-lived assets | - | 950 | |||||||||
| Benefit plans, net | (429) | 779 | |||||||||
|
(Gain) loss on asset disposals, net
|
(69) | 8 | |||||||||
| Stock-based compensation | 13,232 | 763 | |||||||||
| Restructuring activities | 509 | 111 | |||||||||
|
Loss on debt extinguishment
|
28 | - | |||||||||
|
Settlements and related legal costs
|
41 | 64 | |||||||||
| Foreign exchange | 101 | 402 | |||||||||
| Financial advisory services | 455 | 1,848 | |||||||||
| Customer warrant amortization | 1,064 | - | |||||||||
| Change in fair value of customer warrants | 70,242 | - | |||||||||
| Other - net | 62 | (284) | |||||||||
| Adjusted EBITDA | $ | 16,077 | $ | 4,048 | |||||||
Impairment of long-lived assets
Impairment of long-lived assets refers to when the carrying amount of an asset exceeds the fair value or recoverable amount.
Benefit plans, net
We recognize pension and other postretirement benefit income or expense based on actuarial calculations. The net impact depends on the relationship between the expected return on plan assets and the cost of providing benefits. Benefit costs are relatively low because our plans are frozen, meaning employees are no longer earning additional benefits.
Reported pension results may vary due to mark-to-market adjustments, which reflect changes in interest rates, asset performance, or one-time events such as plan settlements or curtailments. These adjustments are driven by market conditions and actuarial assumptions as of the date of the event. Because mark-to-market impacts are inherently volatile and often event-driven, any gain or loss recognized in a given period should not be considered indicative of future pension income or expense.
Refer to Note 12 to the Condensed Consolidated Financial Statements for further information regarding our pension and other postretirement plans.
(Gain) loss on asset disposals, net
We, at times, will sell or dispose of certain assets that are unrelated to our current or future operations. Therefore, we believe it is useful to exclude these gains and losses from our non-GAAP financial measures in order to highlight the performance of the continuing business.
Stock-based compensation
The grant date fair value of stock-based compensation varies based on the derived stock price at the time of grant, valuation methodologies, subjective assumptions and reward types. This may make the impact of this form of compensation on our current financial results difficult to compare to previous and future periods. Therefore, we believe it is useful to exclude stock-based compensation from our non-GAAP financial measures in order to highlight the performance of the business and to be consistent with the way many investors evaluate our performance and compare our operating results to peer companies.
Restructuring activities
Restructuring activities and business services transition actions across our business units and corporate functions primarily consist of severance and related costs associated with non-recurring actions taken to transform our operations with impacts on employees and facilities used in our businesses. Business services transition costs relate to new technology implementation, expected to provide future benefit and are included in Cost of operations and SG&A expenses in the Condensed Consolidated Statements of Operations.
Loss on debt extinguishment
Losses on debt extinguishment were due to the exit costs associated with our repurchase of outstanding Senior Notes due 2026.
Settlements and related legal costs
Settlements and related legal costs relate to expenses associated with resolving legal disputes, whether through negotiated settlements or court judgments.
Foreign exchange
Foreign exchange gains and losses are primarily related to settlement of transactions denominated in a currency different than the functional currency of the Company. We report foreign currency transaction gains (losses) in income in the Condensed Consolidated Statements of Operations. Management excludes these expenses from Adjusted EBITDA as they do not reflect the ordinary course of business and are inherently unpredictable in timing and amount.
Financial advisory services
Financial advisory services relate to financial and business planning and other professional services.
Customer warrant amortization
Customer warrants amortized over the life of the associated agreement and recorded as a reduction to Revenues in the Condensed Consolidated Statements of Operations. Management excludes the reduction to revenue from Adjusted EBITDA as they are a non-cash transaction and do not reflect the ordinary course of business.
Refer to Note 14 to the Condensed Consolidated Financial Statements for further information regarding our Customer warrant amortization.
Change in fair value of customer warrants
Change in fair value of customer warrants is recognized as a gain or loss in the Condensed Consolidated Statements of Operations. Management excludes the expense from Adjusted EBITDA as they are a non-cash transaction and do not reflect the ordinary course of business.
Refer to Note 14 to the Condensed Consolidated Financial Statements for further information regarding our Change in fair value of customer warrants.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Our primary liquidity requirements include debt service, funding dividends on Preferred Stock and working capital needs. We fund our liquidity requirements primarily through cash generated from operations, external sources of financing, including our Credit Agreement, senior notes, and equity offerings, and our Preferred Stock, each of which are described below and in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report in further detail. We believe that our current operating plan and borrowings available under our Credit Agreement will be sufficient to satisfy our foreseeable liquidity needs and capital expenditure requirements, including for at least the next twelve months. We may elect to raise additional capital through the sale of additional equity or debt financing to fund business activities such as strategic acquisitions, capital expenditures, working capital needs or other purposes beyond the next twelve months. Additional financing may not be available on terms favorable to us or at all, and may also be impacted by any disruptions in the financial markets. In addition, our existing indebtedness could limit its ability to obtain additional financing.
Cash and Cash Flows
The following discussion on our cash flows is inclusive of continued and discontinued operations, consistent with our presentation on the Condensed Consolidated Statements of Cash Flows in accordance with GAAP.
At March 31, 2026, our cash and cash equivalents, and restricted cash totaled $194.8 million, and we had total debt of $275.9 million, of which $25.4 million is unamortized premium. We also had $191.7 million of gross Preferred Stock outstanding. Our foreign business locations held $12.8 million of our total cash and cash equivalents as of March 31, 2026. In general, our foreign cash balances are not available to fund our U.S. operations unless the funds are repatriated or used to repay intercompany loans made from the U.S. to foreign entities, which could expose us to taxes we have not made a provision for in our results of operations. We have no plans to repatriate these funds to the U.S. We had $37.9 million of restricted cash as of March 31, 2026 related to collateral for certain letters of credit as part of funding for several ongoing projects.
Cash flows provided by operating activities was $17.8 million for the three months ended March 31, 2026, which is primarily attributable to our current net loss of $76.9 million being offset by non-cash expenses arising from a change in fair value of customer warrants of $70.2 million, stock-based compensation of $13.2 million, depreciation and amortization of long-lived assets of $2.5 million and amortization of customer warrants of $1.1 million. Cash flows provided by operating activities also included movements in certain operating assets and liabilities such increases in accounts payable of $39.6 million and accrued and other current liabilities of $5.6 million, resulting from the timing of payments to vendors. Partially offsetting these inflows were outflows from accounts receivable - trade, net of $8.0 million, contracts in progress of $18.0 million and advanced billings on contracts of $5.5 million which are primarily impacted by timing differences related to progress made on ongoing projects, billings, and collections, increased operating costs as a result of increased revenue, and may fluctuate significantly period to period.
Cash flows used in operating activities was $8.5 million for the three months ended March 31, 2025, which is primarily attributed to the current net loss of $22.0 million, partially offset by non-cash adjustments arising from the impairment of long-lived assets of $8.8 million, depreciation and amortization of long-lived assets of $2.5 million, deferred financing fees of $1.5 million and operating lease expenses of $1.7 million. Cash flows used in operating activities also included movements in certain operating assets and liabilities such as accounts receivable - trade, net of $14.3 million, advance billings on contracts
of $7.5 million and pension liabilities, accrued postretirement benefits and employee benefits of $3.6 million, which are primarily impacted by collections, timing differences related to billings and contributions made to the plan. These were partially offset by cash flow increases from accounts payable of $19.6 million and contracts in progress of $11.0 million which are primarily impacted by timing of payments to vendors and timing differences related to progress on ongoing projects.
Cash flows used in investing activities was $3.5 million and $3.9 million for the three months ended March 31, 2026 and 2025, respectively, primarily due to capital expenditures associated with BrightLoop™ projects. 2026 is partially offset by proceeds from sale of business of $3.6 million.
Cash flows used in financing activities was $20.3 million for the three months ended March 31, 2026, primarily due to payments on the Axos Credit Agreement of $29.1 million, buybacks of Senior Notes due 2026 of $15.0 million, employee tax withholding on stock-based compensation of $6.2 million and Preferred Stock dividend payment of $3.7 million, partially offset by the issuance of common stock of $34.1 million. Cash flows used in financing activities was $0.4 million for the three months ended March 31, 2025, primarily due to the payment of the Preferred Stock dividends of $3.7 million and net payments on the Axos Credit Agreement of $1.4 million, partially offset by the issuance of common stock of $5.2 million.
Debt and Credit Facility
Information related to our debt and Credit Facility is described in Note 13 to the Condensed Consolidated Financial Statements and is incorporated herein by reference.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
For a summary of the critical accounting policies and estimates that we use in the preparation of our unaudited Condensed Consolidated Financial Statements, see "Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no significant changes to our policies during the three months ended March 31, 2026 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
Babcock & Wilcox Enterprises Inc. published this content on May 11, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 11, 2026 at 10:14 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]