Babcock & Wilcox's Q2 2025: Exploring Contradictions in Plant Demand, Project Pipelines, and Cash Flow Projections

Plant utilization and demand for parts and services, customer discussions and project pipeline, BrightLoop pipeline and opportunities, parts and services revenue stream and impact of plant extensions, free cash flow projections are the key contradictions discussed in Babcock & Wilcox's latest 2025Q2 earnings call.



Parts and Services Revenue Growth:
- Babcock & Wilcox Enterprises reported a 31% increase in parts and services revenue for the second quarter of 2025 compared to the second quarter of 2024.
- This growth was driven by rising demand for power and electricity due to the rapid expansion of AI-driven data centers and increased baseload generation usage across consumer manufacturing and industrial sectors.

Adjusted EBITDA Improvement:
- The company's adjusted EBITDA, including Diamond Power, was $21.6 million for the second quarter, over 70% greater than Street expectations.
- This improvement was primarily due to the 31% increase in higher-margin parts and services revenue coming from coal and fossil fuel power plants in the U.S. and internationally.

Backlog Increase:
- The backlog at the end of the second quarter was $418.1 million, a 49% increase compared to the same period in 2024.
- The increase in backlog is attributed to higher baseload generation demand in North America.

Sale of Diamond Power:
- Babcock & Wilcox Enterprises completed the sale of Diamond Power International for gross proceeds of $177 million, approximately 8x EBITDA.
- This sale improves the company's balance sheet and positions it to support long-term power needs and advance new technologies, such as BrightLoop.

Financial Stability and Debt Reduction:
- The company alleviated previous doubts about continuing as a going concern through asset sales, debt reduction, and improved cash flows.
- A privately negotiated bond exchange reduced annual interest expense by over $1 million annually and extended debt maturity to 2030, demonstrating continued support from lenders and bondholders.