Babcock & Wilcox Enterprises, Inc.

Components of Our Results of Operations

Revenue

Revenue is the total amount of income generated by our business and consists primarily of income from the renewable, environmental and thermal technology solutions and services we provide to a broad range of industrial, electric utility and other customers. Revenue from our operations is assessed based on our three market-facing segments, B&W Renewable, B&W Environmental and B&W Thermal.

Operating income

Operating income consists primarily of revenue minus costs and expenses, including cost of operations, SG&A, and advisory fees and settlement costs.

Net loss

Net loss consists primarily of operating (loss) income minus other income and expenses, including interest income, foreign exchange and expense related to our benefit plans, and provision for income taxes.

Consolidated Results of Operations

The following discussion of our consolidated and business segment results of operations includes a discussion of Adjusted EBITDA, which, when used on a consolidated basis, is a non-GAAP financial measure. Adjusted EBITDA differs from net loss, the most directly comparable measure calculated in accordance with GAAP. Management believes that this financial measure is useful to investors because it excludes certain expenses, allowing investors to more easily compare our operating performance period to period. A reconciliation of net loss to Adjusted EBITDA is included in "Non-GAAP Financial Measures" below.

Revenues increased by $16.9 million to $181.2 million in the three months ended March 31, 2025 as compared to $164.3 million in the three months ended March 31, 2024. The increase was primarily driven by activity related to a large natural gas project of $8.5 million, higher construction volume of $6.0 million and an increase in parts sales of $10.0 million. These were partially offset by projects that were worked off in 2024 but not fully replaced in the first quarter of 2025.

Operating income for the three months ended March 31, 2025 was $5.9 million as compared to $5.7 million in the three months ended March 31, 2024. Operating income was flat year over year despite the aforementioned revenue growth due to increased cost of operations associated with the revenue growth as well as impairment and losses on disposal of approximately $1.0 million and slight increases in SG&A expenses.

Loss from continuing operations decreased by $5.0 million to $7.8 million in the three months ended March 31, 2025 as compared to $12.8 million in the three months ended March 31, 2024. The decrease was primarily driven by the $5.1 million loss on debt extinguishment from the prior year as the remaining deferred financing fees associated with the terminated PNC Revolving Credit Agreement were written off.

Other Expenses Impacting Operating Results

Interest Expense

Interest expense for the three months ended March 31, 2025 is lower due to the decrease in letter of credit usage in 2025 compared to 2024.

Income Taxes

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 2025 is not reflective of the U.S. statutory rate primarily due to 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 the customers to payment 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 booking new business or increases in project scope, subtractions due to customer cancellations or reductions in 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.

Backlog as of March 31, 2025 and 2024 was as follows:

Of the backlog at March 31, 2025, we expect to recognize revenues as follows:

Non-GAAP Financial Measures

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. Adjusted EBITDA differs from the most directly comparable measure calculated in accordance with GAAP. A reconciliation of net loss, the most directly comparable GAAP measure, to 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 and the accompanying reconciliation in Note 4 to the Condensed Consolidated Financial Statements, we believe the presentation of 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 on a consolidated basis is defined as the sum of the Adjusted EBITDA for each of the segments, further adjusted for corporate allocations and research and development costs. At a segment level, the Adjusted EBITDA metrics presented in this report is consistent with the manner in which our CODM primarily reviews the results of operations and makes strategic decisions about the business. Our CODM is the chief executive officer and on a quarterly basis reviews actuals to budgets and forecasts when making decisions. Adjusted EBITDA is calculated as earnings before interest, tax, depreciation and amortization adjusted for items such as gains or losses arising from the sale of non-income producing assets, net pension benefits, restructuring activities, impairments, gains and losses on debt extinguishment, legal and settlement costs, costs related to financial consulting, research and development costs, and other costs that may not be directly controllable by segment management and are not allocated to the segment. We present consolidated Adjusted EBITDA because we believe it is useful to investors to help facilitate comparisons of the ongoing, operating performance before corporate overhead and other expenses not attributable to the operating performance of our revenue generating segments.

Corporate

Corporate costs in Adjusted EBITDA include SG&A expenses that are not allocated to the reportable segments. These costs include, among others, certain executive, compliance, strategic, reporting and legal expenses associated with governance of the total organization and being an SEC registrant, and research and development activity costs.

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 benefits from our defined benefit and other postretirement benefit plans based on actuarial calculations primarily because our expected return on assets is greater than our service cost. Service cost is low because our plan benefits are frozen except for a small number of hourly participants.

Our pension costs include MTM adjustments and are primarily a result of changes in the discount rate, curtailments and settlements. Any MTM charge or gain should not be considered to be representative of future MTM adjustments as such events are not currently predicted and are in each case subject to market conditions and actuarial assumptions as of the date of the event giving rise to the MTM adjustment.

Refer to Note 11 to the Condensed Consolidated Financial Statements for further information regarding our pension and other postretirement plans.

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 compensation

The grant date fair value of stock 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 Selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

Settlements and related legal costs (recoveries)

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2024 as there have been no material changes and no new litigation to disclose as of March 31, 2025.

Advisory fees for settlement costs and liquidity planning

Advisory fees fluctuate based on use of external consultants.

Loss on debt extinguishment

Losses on debt extinguishment were due to the write-off of deferred financing fees and certain other exit costs associated with our extinguishment of the Debt Facilities.

Acquisition pursuit and related costs

Acquisition pursuit and related costs fluctuate based on activity.

Product development

Our product development activities include expenses that relate to sales, marketing, and other business development expenses for our products and services still under development and not yet widely available and are primarily from the timing of specific research and increased development efforts and activities related to our BrightLoop™ commercialization efforts and to further develop our ClimateBright™ portfolio. Management excludes these expenses from Adjusted EBITDA as they often may not correlate to revenue or other operations occurring in the current period.

Foreign exchange

We translate assets and liabilities of our foreign operations into U.S. dollars at current exchange rates, and we translate items in our Condensed Consolidated Statement of Operations at average exchange rates for the periods presented. We record adjustments resulting from the translation of foreign currency amounts as a component of Accumulated Other Comprehensive Loss. 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.

Foreign exchange gains and losses are primarily related to unhedged intercompany loans denominated in European currencies to fund foreign operations.

Letter of credit fees

Letter of credit fees are routinely incurred in the course of executing customer contracts. A portion of the fees are included in the contract prices with our customers. Certain letter of credit amounts represent performance guarantees akin to insurance that are not passed along to our customers and are excluded from Adjusted EBITDA as they do not reflect the performance of the business. Letter of credit fees are not passed along to customers and included in Cost of operations in the Condensed Consolidated Statement of Operations.

RESULTS BY SEGMENT

B&W Renewable Segment Results

Revenues in the B&W Renewable segment increased 4%, or $1.1 million, to $28.5 million in the three months ended March 31, 2025 compared to $27.5 million in the three months ended March 31, 2024. This is primarily due to increases in our pulp and paper business.

Adjusted EBITDA in the B&W Renewable segment increased $0.5 million, to $3.1 million in the three months ended March 31, 2025 compared to $2.6 million in the three months ended March 31, 2024 driven by the revenue volume described above.

B&W Environmental Segment Results

Revenues in the B&W Environmental segment decreased 46%, or $12.3 million, to $14.4 million in the three months ended March 31, 2025 compared to $26.7 million in the three months ended March 31, 2024. The decrease is primarily due to larger projects that were worked off in 2024 but not fully replaced in the first quarter of 2025.

Adjusted EBITDA in the B&W Environmental segment was $2.3 million in the three months ended March 31, 2025 compared to $1.0 million in the three months ended March 31, 2024. The increase is primarily attributable to the lower allocated SG&A expenses due to less revenue.

B&W Thermal Segment Results

Revenues in the B&W Thermal segment increased 25%, or $28.1 million, to $138.2 million in the three months ended March 31, 2025 compared to $110.2 million in the three months ended March 31, 2024. The increase is primarily related to revenues from a large natural gas project of $8.5 million, higher construction volume of $6.0 million and an increase in parts of $10.0 million.

Adjusted EBITDA in the B&W Thermal segment decreased $1.1 million to $12.4 million in the three months ended March 31, 2025 compared to $13.4 million in the three months ended March 31, 2024. The increase is due to the revenue increase described above offset partially by a larger share of allocated SG&A expenses due to the increase in revenue.