10-Q: Babcock & Wilcox Sees Strong Revenue Growth on Large Projects

Babcock & Wilcox Enterprises, Inc. reported a substantial increase in revenues for the second quarter of 2026, driven by significant project volume, including a major contract with Base Electron.

Summary

• Babcock & Wilcox Enterprises, Inc. reported a significant increase in revenues for the three months ended June 30, 2026, reaching $319.7 million, up from $138.9 million in the same period of 2025.
• This revenue growth was primarily driven by an increase in large project volume, notably $100.7 million from the Base Electron contract.
• Costs of operations also increased substantially to $273.1 million, up from $97.4 million, attributed to higher revenue, product mix, and increased construction costs due to skilled labor shortages.
• Operating income improved to $11.8 million from $7.0 million, and income from continuing operations turned positive at $14.3 million, compared to a loss of $7.4 million in the prior year's quarter.
• For the six months ended June 30, 2026, revenues reached $534.1 million, a significant increase from $287.5 million in the prior year, though the company reported a loss from continuing operations of $65.4 million, impacted by a non-cash change in the fair value of customer warrants.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this filing as cautiously optimistic, with significant revenue growth driven by large projects, but tempered by increased costs and ongoing concerns about internal controls.

Positives

• Significant revenue growth of $180.9 million in Q2 2026 compared to Q2 2025, reaching $319.7 million.
• Strong performance in large projects, including $100.7 million from the Base Electron contract in Q2 2026.
• Operating income increased by $4.8 million to $11.8 million in Q2 2026.
• Income from continuing operations turned positive at $14.3 million in Q2 2026, a substantial improvement from a $7.4 million loss in Q2 2025.
• Total bookings for the six months ended June 30, 2026, were $2.66 billion, a significant increase from $230.0 million in the prior year, with $2.4 billion attributed to the Base Electron project.
• Backlog as of June 30, 2026, stood at $2.57 billion, a substantial increase from $405.6 million as of June 30, 2025.

Negatives

• Costs of operations increased by $175.7 million in Q2 2026 compared to Q2 2025, largely due to higher revenue and product mix.
• Construction costs have increased due to a nationwide shortage of skilled labor, impacting productivity on certain job sites.
• The company reported a loss from continuing operations of $65.4 million for the six months ended June 30, 2026, primarily due to a non-cash change in the fair value of customer warrants ($64.4 million expense).
• Disclosure controls and procedures were not effective as of June 30, 2026, due to previously reported material weaknesses in internal control over financial reporting.
• The company's 6.50% Senior Notes due 2026 are maturing in December 2026, requiring refinancing or repayment.

Risks

• Potential for future conditions that could raise substantial doubt as to the ability to continue as a going concern.
• Obligation to refinance or repay 6.50% Senior Notes due 2026 prior to maturity.
• Risks associated with contractual pricing in the industry and disputes with customers on long-term contracts.
• Reliance on third-party performance and potential disruptions at manufacturing facilities.
• Ability to execute growth strategy and deliver backlog on time.
• Professional liability, product liability, warranty, or other claims.
• Inadequate insurance coverage.
• Competition from current and future competitors.

Future Outlook

The company expects to recognize approximately 16% of its remaining performance obligations in 2026, 26% in 2027, and 58% thereafter. Management believes current operating plans and available credit facilities are sufficient for at least the next twelve months, with potential for additional capital raises for future activities.

Management Comments

• The increase in revenues is primarily driven by an increase in large project volume, including $100.7 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.
• Construction costs have increased due to a nationwide shortage of skilled labor, which has caused lower than expected productivity on certain job sites.
• The Company's management, including its CEO and CFO, concluded that the Condensed Consolidated Financial Statements present fairly, in all material respects, the financial position, results of operations and cash flows in conformity with GAAP, despite the ineffectiveness of disclosure controls and procedures.
• Management believes that EBITDA and Adjusted EBITDA provide investors with greater transparency and a greater understanding of factors affecting financial position and results of operations.

Industry Context

StockSavvy.ai notes that the demand for electricity from fossil fuels, driven by AI and data centers, is a significant tailwind for Babcock & Wilcox's large project segment. However, the company faces industry-wide challenges with skilled labor shortages impacting construction costs and productivity.

Comparison to Industry Standards

• The company's revenue growth in large projects, particularly the $2.4 billion Base Electron contract, aligns with a trend in the energy sector towards large-scale infrastructure development to meet increasing power demands.
• The reported increase in construction costs due to labor shortages is a common challenge across the construction and industrial sectors, impacting project timelines and profitability.
• The company's focus on environmental and emissions control solutions is consistent with broader industry trends towards cleaner energy technologies, although the current revenue drivers are fossil fuel-based power plants.

Corporate Governance

Legal Proceedings

• No material changes or new litigation to disclose as of June 30, 2026, compared to the Annual Report on Form 10-K for the year ended December 31, 2025.

Related Party Transactions

• Transactions with B. Riley, which beneficially owns approximately 19% of outstanding common stock and has board nomination rights.
• Sales agreements with B. Riley for the offer and sale of common stock, with B. Riley entitled to 3.0% of gross proceeds.
• Financial advisory services agreement with B. Riley, with fees for qualified debt transactions and other services.
• Underwriting agreement with B. Riley for a public offering of common stock, resulting in underwriting discounts and commission fees of $11.8 million.
• Repurchase of common stock from certain members of the Board of Directors for $5.0 million.

Stakeholder Impact

• Shareholders: Dilution from equity offerings, but also potential upside from increased project backlog and revenue. Share repurchase program may support share price.
• Creditors: Continued focus on debt service and refinancing of maturing notes.
• Employees: Impacted by skilled labor shortages affecting productivity and potential restructuring activities.
• Customers: Benefit from increased project execution capacity, but may face potential impacts from labor shortages on project timelines.

Next Steps

• The company will continue to work towards full remediation of material weaknesses in internal control over financial reporting.
• The 6.50% Senior Notes due 2026 are scheduled for redemption on August 13, 2026.
• The company will continue to monitor and evaluate the effectiveness of its internal control over financial reporting.
• The company may elect to raise additional capital through equity or debt financing for future business activities.

Key Dates

Recommendation

The significant revenue growth and improved operational performance are positive, driven by strong demand in key projects like Base Electron. However, persistent cost pressures, the substantial loss from continuing operations for the six-month period due to non-cash warrant revaluations, and ongoing concerns regarding internal control effectiveness warrant a cautious approach. The upcoming maturity of the 6.50% Senior Notes also presents a refinancing risk. While the outlook is improving, the company needs to demonstrate sustained profitability and effective control remediation to warrant a more aggressive rating.

Keywords

Babcock & Wilcox, Energy Technologies, Power Plants, Base Electron, AI Data Centers, Project Volume, Revenue Growth, Financial Report