Babcock & Wilcox Enterprises Inc (BW) (Q2 2026) Earnings Call Highlights: Revenue Surges ...

Negative Points

• Babcock & Wilcox Enterprises Inc ( NYSE:BW ) experienced labor shortages in the second quarter, which negatively impacted efficiencies and increased direct costs on a specific construction project.

• The company recorded $77.4 million in non-cash warrants and other stock-related costs in the first half of 2026 due to the increase in stock performance, contributing to a net loss of $62.7 million.

• The availability of highly skilled labor, especially welders and electricians, remains a challenge in the US, requiring immediate action and ongoing investment in recruiting and training.

• The company's near-term focus in its Construction business has shifted towards variable price construction projects, which may introduce revenue and margin volatility.

• The BrightLoop commercial demonstration at Massillon is not expected to be operational until late 2027, limiting near-term revenue contributions from this technology.

• The company faces ongoing pressure from customers to accelerate project timelines, which could strain resources and increase execution risks.

• While the pipeline is robust, the conversion of opportunities to firm contracts is uncertain, and the company is still in active negotiations for several projects.

Q & A Highlights

Q: Can you elaborate on how the 4 to 6 gigawatts of potential pipeline projects are developing and how they compare to the Base Electron project? A: Kenny Young (Chairman and CEO) stated that B&W is in active discussions and negotiations on several projects. These will likely evolve with an initial limited notice to proceed (LNTP) before moving to a full notice to proceed (NTP). He highlighted a new strategy for some projects using 50-megawatt boilers and steam turbines in an enhanced combined cycle fashion, allowing customers to realize 1 gigawatt of power initially (20 turbines) and double output to 2 gigawatts when a combustion turbine is added later. He also noted unique discussions on larger coal-related projects, supported by the current administration, for grid connection or direct data center connection, positioning B&W as one of the few companies able to support these.

Q: What is the customer response to your quicker time-to-market and cost structure, and how is that resonating in the marketplace? A: Kenny Young (Chairman and CEO) explained that customers constantly push for faster delivery. B&W's enhanced combined cycle approach offers power three to five years faster than a combustion turbine alone, with a heat rate close to a traditional combined cycle plant. He emphasized the reliability advantage: if a combustion turbine goes down in a standard combined cycle plant, all electricity is lost, but with B&W's design, the boiler/steam turbine can continue operating, providing 50 megawatts of power. This reliability, combined with speed, is a key selling point.

Q: Can you provide a layout of how the Base Electron project is developing and how it will flow through the income statement over the next few quarters? A: Kenny Young (Chairman and CEO) said B&W recognized more revenue than anticipated in the first half due to manufacturing milestones being reached ahead of schedule and on budget. The bulk of revenue will pick up as the project moves into the construction phase, with materials shipping to the site starting early next year. Base Electron has filed its conditional use permit application, and B&W expects significantly more revenue in early 2027. This progress was a factor in raising the full-year 2026 adjusted EBITDA target.

Q: Can you speak to your confidence in meeting the growth from this first project and additional projects, particularly regarding supply chain and labor? A: Kenny Young (Chairman and CEO) detailed B&W's flexibility in manufacturing, using both internal and third-party facilities to shift boiler sizes and increase output. He confirmed a strong relationship with Siemens Energy, having secured manufacturing reservation rights for an additional 1 gigawatt of steam turbines (20 units) with first deliveries in 12-14 months. On labor, he acknowledged industry-wide shortages of skilled welders and electricians, which impacted a specific construction project in Q2. B&W is working closely with unions on incentives, rehires, and training to ensure availability for upcoming construction, particularly for the Base Electron project starting next year.

Q: Can you give more detail on the FEED study for the coal plant announcement and the timing and next steps for that opportunity? A: Kenny Young (Chairman and CEO) said B&W is actively working on the front-end engineering design (FEED) study with TerraSpark and the Department of Energy (DOE). The study involves plant flows, power flows, and boiler structuring options. He noted that many employees are excited to be involved in building a coal plant in the US again. It is too soon to forecast revenue from this project, but discussions are active and ongoing.

Q: What are the next steps for the BrightLoop (ClimateBright) initiative and what does the pipeline look like as you get that project up and running? A: Kenny Young (Chairman and CEO) confirmed that fabrication of major components for the Massillon, Ohio commercial demonstration is underway, with site construction beginning this year and operations expected by late 2027. He noted significant interest from hyperscalers and oil companies. The technology can produce hydrogen or steam, and there is strong interest in using it to produce steam from coal with CO2 isolation for enhanced oil or methane recovery at projects in West Virginia and Wyoming. He believes BrightLoop will be a key growth driver for bookings in 2028-2030, as hyperscalers seek carbon capture pathways for their data centers.

Q: Can you discuss the financial results for the second quarter and the first half of 2026? A: Cameron Frymyer (CFO) reported Q2 2026 consolidated revenues of $319.7 million, a 130% increase year-over-year. Net income was $14.3 million, a $72.8 million improvement, and adjusted EBITDA was $21.8 million, up $7.9 million. For the first half, revenues were $534.1 million versus $287.5 million in 2025, driven by large project volume including $131.7 million from Base Electron. The net loss of $62.7 million was attributed to $77.4 million in non-cash warrant costs due to stock performance; excluding these, adjusted net income was $14.7 million. Adjusted EBITDA for the first half was $37.8 million, up from $17.9 million.

Q: What were the key balance sheet and capital allocation actions during the quarter? A: Cameron Frymyer (CFO) stated total debt at June 30, 2026, was $276.8 million, with cash and restricted cash of $382.8 million. The company announced the repurchase of the remaining $61.8 million in outstanding December 2026 bonds. Additionally, the Board of Directors authorized a $50 million share repurchase program in July 2026, reflecting a disciplined approach to debt repayment and confidence in building shareholder value.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .