Babcock Wilcox Enterprises Inc

Liquidity

Our primary liquidity requirements include debt service, funding of 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 Axos Credit Agreement and senior notes, and equity offerings, including the Sales Agreement (as defined below) and our Preferred Stock, each of which are described in the Notes to Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report in further detail.

On April 10, 2024, we entered into a sales agreement (the "Sales Agreement") with B. Riley Securities, Inc., Seaport Global Securities LLC, Craig-Hallum Capital Group LLC and Lake Street Capital Markets, LLC (together, the "Agents"), in connection with the offer and sale from time to time of shares of our common stock, having an aggregate offering price of up to $50.0 million, through the Agents. As of May 3, 2024, 1.5 million shares have been sold pursuant to the Sales Agreement. Refer to Note 22 to the Condensed Consolidated Financial Statement for additional discussion of the Sales Agreement.

We have recurring operating losses primarily due to losses recognized on our B&W Solar business as described in Note 4 to the Consolidated Financial Statements included in Part II, Item 8 of our Form 10-K filed on March 15, 2024 as well as higher debt service costs. Our net cash used in operating activities was $14.9 million and $12.9 million for the three months ended March 31, 2024 and 2023, respectively. Our assessment of our ability to fund future operations is inherently subjective, judgment-based and susceptible to change based on future events. Currently, with existing cash on hand and available liquidity, we are projecting insufficient liquidity to fund operations through one year from the date this Quarterly Report is issued. These conditions and events raise substantial doubt about our ability to continue as a going concern.

In response to the conditions, we are implementing several strategies to obtain the required funding for future operations, and are considering other alternative measures to improve cash flow, including suspension of the dividend on our Preferred Stock. The following actions occurred during the three months ended March 31, 2024:

•entered into advanced negotiations related to the sale of one of our non-strategic businesses. Proceeds from the sale are expected to be approximately $40.0 million to $46.0 million, subject to due diligence and continuing negotiations. We cannot provide any assurances that such transaction will close or that proceeds will not be more or less than we anticipate;

•initiated the sale process of certain of our non-strategic businesses;

•filed for a waiver of required minimum contributions to the Retirement Plan for Employees of Babcock & Wilcox Commercial Operations (the "U.S. Plan"), that if granted, would reduce cash funding requirements in 2024 and would increase contributions annually over the subsequent five-year period. We cannot provide any assurances that such waiver will be granted;

•initiated the process to sell several non-core real estate assets;

•initiated the sale of common shares pursuant to our At-The-Market Offering; and,

•negotiated the settlement of a liability to the former owner of B&W Solar at a discount, resulting in future cash savings of $7.2 million..

Based on our ability to raise funds through the actions noted above and our Cash and cash equivalents as of March 31, 2024, we have concluded it is probable that such actions would provide sufficient liquidity to fund operations for the next twelve months following the date of this Quarterly Report. As a result, it is probable that our cash flow improvement plans and anticipated proceeds from the sale of non-strategic assets alleviate the substantial doubt about our ability to continue as a going concern.

Cash and Cash Flows

At March 31, 2024, cash and cash equivalents, current restricted cash and long-term restricted cash totaled $102.5 million, which included $58.6 million of restricted cash related to collateral for certain letters of credit. We had total debt of $441.6 million as well as $191.7 million of gross preferred stock outstanding. Our foreign business locations held $25.9 million of our total unrestricted cash and cash equivalents at March 31, 2024. 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 presently have no plans to repatriate these funds to the U.S.

Cash used in operations was $14.9 million in the three months ended March 31, 2024, which is primarily attributable to the year-to-date net loss of $16.8 million. Cash used in operations was $12.9 million in the three months ended March 31, 2023, which was primarily attributed to the year-to-date net loss of $12.5 million.

Cash flows used in investing activities was $2.8 million and $2.2 million in the three months ended March 31, 2024 and 2023, respectively, primarily due to capital expenditures.

Cash flows provided by financing activities of $51.3 million in the three months ended March 31, 2024, primarily due to net borrowings on the Axos Credit Agreement of $61.6 million, offset by the payment of preferred dividend of $3.7 million. Cash flows used in financing activities was $5.9 million in the three months ended March 31, 2023, primarily due to the payment of the preferred stock dividend of $3.7 million and loan repayments of $1.7 million.

Debt Facilities

As discussed in Note 13 to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report, we entered into a new Credit Agreement with Axos in January 2024. B. Riley, a related party, has provided a guaranty of payment with regard to our obligations under the Credit Agreement. This agreement substantially replaces the existing Reimbursement Agreement, Revolving Credit Agreement and Letter of Credit Agreement. We are transitioning letters of credit outstanding under the Letter of Credit Agreement and Reimbursement Agreement to the Axos Credit Agreement. We believe all outstanding letters of credit will be transitioned to the Axos Credit Agreement by June 30, 2024, at which time the Letter of Credit Agreement and Reimbursement Agreement is expected to be terminated.

On April 30, 2024, we, along with certain subsidiaries as guarantors, the lenders party to the Credit Agreement , and Axos, as administrative agent, entered into the First Amendment to Credit Agreement (the “First Amendment”). The First Amendment, among other things, amends the terms of the Credit Agreement to increase the amounts available to be borrowed based on inventory in the borrowing base under the Credit Agreement (the "Increased Inventory Period"). In 2024, the Increased Inventory Period commences on April 30 and ends on July 31 and would provide approximately $6.0 million additional available borrowings under the Credit Agreement. The Increased Inventory Period is available to us upon our election in subsequent years (subject to a $75,000 fee if we make such an election), and commences on March 1 and ends on July 31.

At March 31, 2024, usage under the Credit Agreement and Letter of Credit Agreement consisted of $11.5 million of financial letters of credit and $68.1 million of performance letters of credit at March 31, 2024.

Letters of Credit, Bank Guarantees and Surety Bonds

Certain of our subsidiaries, that are primarily outside of the United States, have credit arrangements with various commercial banks and other financial institutions for the issuance of letters of credit and bank guarantees in association with contracting activity. The aggregate value of all such letters of credit and bank guarantees outside of our Letter of Credit Agreement as of March 31, 2024 was $39.0 million. The aggregate value of the outstanding letters of credit provided under the Letter of Credit Agreement backstopping letters of credit or bank guarantees was $17.2 million as of March 31, 2024. Of the outstanding letters of credit issued under the Letter of Credit Agreement, $48.0 million are subject to foreign currency revaluation.

We have posted surety bonds to support contractual obligations to customers relating to certain contracts. We utilize bonding facilities to support such obligations, but the issuance of bonds under those facilities is typically at the surety's discretion. These bonds generally indemnify customers should we fail to perform our obligations under our applicable contracts. We, and certain of our subsidiaries, have jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds the underwriters issue in support of some of our contracting activity. As of March 31, 2024, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $146.8 million. The aggregate value of the letters of credit backstopping surety bonds was $15.3 million.

Our ability to obtain and maintain sufficient capacity under our current debt facilities is essential to allow us to support the issuance of letters of credit, bank guarantees and surety bonds. Without sufficient capacity, our ability to support contract security requirements in the future will be diminished.

Other Indebtedness - Loans Payable

As of March 31, 2024, we had loans payable of $103.2 million, net of debt issuance costs of $0.5 million, of which $4.5 million is classified as current, and $98.7 million as long-term loans payable on the Consolidated Balance Sheet. This includes $90.1 million on the revolving debt facilities, which is comprised of $36.8 million drawn on the revolving credit portion of the facility and $53.3 million drawn on the letter of credit portion, and $12.1 million, net of debt issuance costs of $0.5 million, related to sale-leaseback financing transactions.