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Item 7. Management’s Discussion and Analysis

2024-03-15 compared with 2023-03-16 · 292 added, 258 removed, 158 unchanged (78% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto included in Financial Statements under Item 8 within this Annual Report.

The following discussion of our financial position and results of operations should be read in conjunction with the financial statements and the notes thereto included in Consolidated Financial Statements and Supplemental Data in Item 8 within this Annual Report.

The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs.

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The following discussion includes a comparison of Results of Operations and Liquidity and Capital Resources for the years ended December 31, 2023 and 2022.

For comparisons of the years ended December 31, 2021 and 2020, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed on March 8, 2022.

Our consolidated financial statements are prepared in conformity with U.S.

generally accepted accounting principles ("GAAP").

Our discussions of the financial results include non-GAAP measures (e.g., foreign currency impact, EBITDA) to provide additional information concerning our financial results and provide information that we believe is useful to the readers of our financial statements in the assessment of our performance and operating trends.

We have also included a comparison of the Results of Operations for the years ended December 31, 2022 and 2021 in the B&W Renewable Segment discussion below as this is the only segment impacted by the discontinued operations.

For additional comparison of the years ended December 31, 2022 and 2021, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed on March 16, 2023.

Our consolidated financial statements are prepared in conformity with GAAP.

Our discussion of the financial results include non-GAAP measures (e.g., foreign currency impact, EBITDA, Adjusted EBITDA) to provide additional information concerning our financial results that we believe is useful to the readers of our financial statements in the assessment of our performance and operating trends.

BUSINESS OVERVIEW

Management continues to adapt to macroeconomic conditions, including rising inflation, higher interest rates, foreign exchange rate fluctuations and the impact of the ongoing conflict in Ukraine and the COVID-19 pandemic, all of which impacted the Company during 2022.

The COVID-19 pandemic has continued to create challenges for us in countries that at times throughout the year have had significant outbreak mitigation strategies, namely, countries in our Asia-Pacific region, which led to temporary project postponements and has continued to impact results in this region.

Additionally, the Company has experienced negative impacts to its global supply chains as a result of COVID-19, the war in Ukraine, Russia-related supply chain shortages and other factors, including disruptions to the manufacturing, supply, distribution, transportation and delivery of its products.

The Company has also observed significant delays and disruptions of its service providers and negative impacts to pricing of certain of its products.

These delays and disruptions have had, and could continue to have, an adverse impact on the Company’s ability to meet customers’ demands.

We are continuing to actively monitor the impact of these market conditions on current and future periods and actively manage costs and our liquidity position to provide additional flexibility while still supporting our customers and their specific needs.

The duration and scope of these conditions cannot be predicted, and therefore, any anticipated negative financial impact to the Company’s operating results cannot be reasonably estimated.

B&W is a growing, globally-focused renewable, environmental and thermal technologies provider with over 150 years of experience providing diversified energy and emissions control solutions to a broad range of industrial, electrical utility, municipal and other customers.

B&W’s innovative products and services are organized into three market-facing segments.

We are a growing, globally-focused renewable, environmental and thermal technologies provider with over 155 years of experience providing diversified energy and emissions control solutions to a broad range of industrial, electrical utility, municipal and other customers.

Our innovative products and services are organized into three market-facing segments.

Our reportable segments are as follows:

• Babcock & Wilcox Renewable:

Cost-effective technologies for efficient and environmentally sustainable power and heat generation, including waste-to-energy, solar construction and installation, biomass energy and black liquor systems for the pulp and paper industry.

B&W’s leading technologies support a circular economy, diverting waste from landfills to use for power generation and replacement of fossil fuels, while recovering metals and reducing emissions.

To date, we have installed over 500 waste-to-energy and biomass-to-energy units at more than 300 facilities in approximately 30 countries which serve a wide variety of utility, waste management, municipality and investment firm customers.

Additionally, we have installed more than 100MW of clean solar production.

• Babcock & Wilcox Renewabl e:

Our innovative hydrogen generation technology (BrightLoop TM ) supports global climate goals including the decarbonization of industrial and utility steam and power producers.

BrightLoo p TM offers significant advantages over other hydrogen generation technologies as it generates competitively priced hydrogen from a wide range of fuels (including solid fuels such as biomass and coal) with a high rate of carbon captured resulting in low (or even negative) carbon intensity hydrogen.

We also offer best-in-class technologies for efficient and environmentally sustainable power and heat generation, including waste-to-energy, oxygen-fired biomass-to-energy (OxyBright TM ), and black liquor systems for the pulp and paper industry.

Our leading waste-to-energy technologies support a circular economy, diverting waste from landfills to use for power generation or district heating, while recovering metals and reducing emissions.

To date, we have installed approximately 500 waste-to-energy and biomass-to-energy units at more than 300 facilities in approximately 30 countries which serve a wide variety of utility, waste management, municipality and investment firm customers.

• Babcock & Wilcox Environmental :

A full suite of best-in-class emissions control and environmental technology solutions for utility, waste to energy, biomass, carbon black, and industrial steam generation applications around the world.

B&W’s broad experience includes systems for cooling, ash handling, particulate control, nitrogen oxides and sulfur dioxides removal, chemical looping for carbon control, and mercury control.

The Company's ClimateBright family of products including SolveBright, OxyBright, BrightLoop and BrightGen, places us at the forefront of carbon dioxide capturing technologies and development with many of the aforementioned products ready for commercial demonstration.

Our full suite of best-in-class emissions control and environmental technology solutions for utility, waste-to-energy, biomass-to-energy, carbon black, and industrial steam generation applications supports environmental stewardship around the world.

Our broad experience includes systems for cooling, ash handling, particulate control, nitrogen oxide and sulfur dioxide removal, dioxin and furan control, carbon dioxide capture, mercury control as well as other acid gas and pollutant control.

Our ClimateBright TM family of products including SolveBright TM , OxyBright TM , BrightLoop TM and BrightGen TM , places us at the forefront of hydrogen production and carbon dioxide capturing technologies and development with many of the aforementioned products already commercially available and others ready for commercial deployment.

We believe these technologies position us to compete in the bioenergy with carbon capture and sequestration market.

Our portfolio of clean power production solutions continues to evolve to reach customers at all stages of their energy transition.

• Babcock & Wilcox Thermal:

Steam generation equipment, aftermarket parts, construction, maintenance and field services for plants in the power generation, oil and gas, and industrial sectors.

B&W has an extensive global base of installed equipment for utilities and general industrial applications including refining, petrochemical, food processing, metals and others.

On February 1, 2022, we acquired 100% ownership of Fossil Power Systems, Inc.

for approximately $59.2 million.

Fossil Power Systems, Inc., is a leading designer and manufacturer of hydrogen, natural gas and renewable pulp and paper combustion equipment including ignitors, plant controls and safety systems based in Dartmouth, Nova Scotia, Canada.

Fossil Power Systems, Inc.

is reported as part of our B&W Thermal segment.

On February 28, 2022, we acquired 100% ownership of Optimus Industries, LLC for approximately $19.2 million.

Optimus Industries, LLC designs and manufactures waste heat recovery products for use in power generation, petrochemical, and process industries, including package boilers, watertube and firetube waste heat boilers, economizers, superheaters, waste heat recovery equipment and units for sulfuric acid plants and is based in Tulsa, Oklahoma and Chanute, Kansas.

Optimus Industries, LLC is reported as part of our B&W Thermal segment.

On October 14, 2022, the Company changed the name of Fosler Construction Company, Inc.

("Fosler") to Babcock & Wilcox Solar Energy, Inc ("Babcock & Wilcox Solar").

Our business depends significantly on the capital, operations and maintenance expenditures of global electric power generating companies, including renewable and thermal powered heat generation industries and industrial facilities with environmental compliance policy requirements.

Our vast installed base of steam generation equipment and related auxiliaries spans the globe and includes customers in a variety of end markets including power generation, oil and gas, petrochemical, food and beverage, metals and mining, and others.

We provide aftermarket parts, construction, maintenance, engineered upgrades and field services for our installed base as well as the installed base of other OEMs;

the substantial and stable cash flows generated from these businesses helps to fund our investments in new clean energy initiatives.

In addition to our aftermarket offerings, we also provide complete steam generation systems including package boilers, watertube and firetube waste heat boilers, and other boilers to medium and heavy industrial customers.

Our unique range of offerings, coupled with the strength of our brand, provides a competitive advantage in existing and emerging markets.

In July 2022, we acquired certain assets of Hamon Holdings through a competitive sale process, in which B.

Riley Securities, Inc., a related party, was Hamon Holdings’ investment banker and advisor through a Chapter 11 363 Asset Sale.

We were the successful bidder for certain assets of one of those subsidiaries, Hamon, a major provider of air pollution control technology, for approximately $2.9 million.

In February 2022, we acquired 100% ownership of B&W Chanute, formerly known as Optimus Industries, LLC, for approximately $19.2 million.

B&W Chanute designs and manufactures waste heat recovery products for use in power generation, petrochemical, and process industries, including package boilers, watertube and firetube waste heat boilers, economizers, superheaters, waste heat recovery equipment and units for sulfuric acid plants and is based in Tulsa, Oklahoma and Chanute, Kansas.

B&W Chanute is reported as part of our B&W Thermal segment.

In February 2022, we acquired 100% ownership of FPS for approximately $59.2 million.

FPS is a leading designer and manufacturer of hydrogen, natural gas and renewable pulp and paper combustion equipment including ignitors, plant controls and safety systems based in Dartmouth, Nova Scotia, Canada.

FPS is reported as part of our B&W Thermal segment.

Our business depends significantly on the capital and operations and maintenance expenditures of global electric power generating companies, renewable and thermal powered heat generation industries, and industrial facilities with environmental compliance policy requirements.

Several factors may influence these expenditures, including:

• climate change initiatives promoting environmental policies which include renewable energy options utilizing waste-to-energy or biomass to meet legislative requirements and clean energy portfolio standards in the United States, European, Middle East and Asian markets;

• requirements for environmental improvements in various global markets;

• expectation of future governmental requirements to further limit or reduce greenhouse gas and other emissions in the United States, Europe and other international climate change sensitive countries;

• prices for electricity, along with the cost of production and distribution including the cost of fuels within the United States, Europe, Middle East and Asian based countries;

• climate change initiatives promoting environmental policies including renewable energy options utilizing waste-to-energy or biomass to meet legislative requirements and clean energy portfolio standards in the United States, European, Middle East and Asian markets;

• development of a hydrogen-based economy;

• regulations requiring environmental improvements in various global markets;

• expectations regarding future governmental requirements to further limit or reduce greenhouse gas and other emissions in the United States, Europe and other international climate change sensitive countries;

• prices for electricity, along with the cost of production and distribution including the cost of fuels within the United States, Europe, Middle East and Asian countries;

• demand for electricity and other end products of steam-generating facilities;

• level of capacity utilization at operating power plants and other industrial uses of steam production;

• requirements for maintenance and upkeep at operating power plants to combat the accumulated effects of usage;

• prices of and access to materials, particularly as a result of rising inflation and the continued impact of the Russian invasion of Ukraine;

• maintenance and upkeep requirements at operating power plants, including to combat the accumulated effects of usage;

• overall strength of the industrial industry;

• ability of electric power generating companies and other steam users to raise capital.

Customer demand is heavily affected by the variations in our customers' business cycles, by the overall economies and energy, environmental and noise abatement needs of the countries in which they operate.

Customer demand is heavily affected by the variations in our customers' business cycles, power demand in their operating territories, and by the overall economies and energy, environmental and noise abatement needs of the countries in which they

We have manufacturing facilities in Mexico, the United States, Denmark, the United Kingdom and China.

Many aspects of our operations and properties could be affected by political developments, including the ongoing Russian-Ukrainian conflict, environmental regulations and operating risks.

Many aspects of our operations and properties could be affected by political developments, including the ongoing Russia-Ukraine conflict, environmental regulations and operating risks.

These and other factors may have a material impact on our international and domestic operations or our business as a whole.

Through our restructuring efforts, we continue to make significant progress to make our cost structure more variable and to reduce costs.

We expect our cost saving measures to continue to translate to bottom-line results, with top-line growth driven by opportunities for our core technologies and support services across the B&W Renewable, B&W Environmental and B&W Thermal segments globally.

We expect to continue to explore other cost saving initiatives to improve cash generation and evaluate additional non-core asset sales to continue to strengthen our liquidity.

Thermal segments globally.

We continue to explore other cost saving initiatives to improve cash generation and evaluate additional non-core asset sales to continue to strengthen our liquidity.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these statements.

If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.

If one or more events related to these or other risks or uncertainty materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.

In addition, we continue to evaluate further dispositions, opportunities for additional cost savings and opportunities for subcontractor recoveries and other claims where appropriate and available.

If the value of our business was to decline, or if we were to determine that we were unable to recognize an amount in connection with any proposed disposition in excess of

the carrying value of any disposed asset, we may be required to recognize impairments for one or more of our assets that may adversely impact our business, financial condition and results of operations.

If the value of our business was to decline, or if we were to determine that we were unable to recognize an amount in connection with any proposed disposition in excess of the carrying value of any disposed asset, we may be required to recognize impairments for one or more of our assets that may adversely impact our business, financial condition and results of operations.

Market Update

Management continues to adapt to macroeconomic conditions, including the impacts from inflation, higher interest rates and foreign exchange rate volatility, geopolitical conflicts (including the ongoing conflicts in Ukraine and the Middle East) and global shipping and supply chain disruptions that continued to have an impact during 2023.

In certain instances, these situations have resulted in cost increases and delays or disruptions that have had, and could continue to have, an adverse impact on our ability to meet customers’ demands.

We continue to actively monitor the impact of these market conditions on current and future periods and actively manage costs and our liquidity position to provide additional flexibility while still supporting our customers and their specific needs.

The duration and scope of these conditions cannot be predicted, and therefore, any anticipated negative financial impact on our operating results cannot be reasonably estimated.

Discontinued Operations

During the third quarter of 2023, we committed to a plan to sell our B&W Solar business resulting in a significant change that would impact our operations.

As of September 30, 2023, we met all of the criteria for the assets and liabilities of this business, formerly part of our B&W Renewable segment, to be accounted for as held for sale.

In addition, we also determined that the operations of the B&W Solar business qualified as a discontinued operation, primarily based upon its significance to our current and historic operating losses.

The decision to sell the B&W Solar business, along with the significant increase in estimated costs to complete the B&W Solar loss contracts, resulted in a triggering event that required us to immediately perform certain valuations.

Certain trade accounts receivable and contract assets were determined to be uncollectible, resulting in charges of $17.6 million .

For goodwill, we performed a quantitative assessment using the income approach (discounted cash flows).

The income approach uses the disposal group's estimated future cash flows, discounted at the weighted-average cost of capital of a hypothetical third-party buyer to account for uncertainties within the projections.

The income approach also uses assumptions based on the disposal group's estimated revenue growth, operating margin, and working capital turnover.

As a result of this impairment test, we recognized an impairment of $56.6 million , or the entire balance of goodwill associated with B&W Solar.

These charges have been included in Loss from discontinued operations, net of tax in the Consolidated Statements of Operations.

The impairment charges and additional contract losses during the year ended December 31, 2023 totaled $56.6 million and $44.1 million, respectively.

B&W Solar had accrued loss contracts totaling $7.1 million at December 31, 2023 .

RESULTS OF OPERATIONS–YEARS ENDED DECEMBER 31, 2023 AND 2022

Components of Our Results of Operations

Our revenue is the total amount of income generated by our business and consists primarily of income from our renewable, environmental and thermal technology solutions 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, Babcock & Wilcox Renewable, Babcock & Wilcox Environmental and Babcock & Wilcox Thermal.

Operating (Loss) Income

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

Net income consists primarily of operating income minus other income and expenses, including interest income, foreign exchange and expense related to our benefit plans.

Our revenue is the total amount of income generated by our business and consists primarily of income from our 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 our revenue minus costs and expenses, including cost of operations, SG&A and advisory fees and settlement costs.

Net (loss) income

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

Consolidated Results of Operations

The following discussion of our 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 the most directly comparable measure calculated in accordance with generally accepted accounting principles (“GAAP”).

A reconciliation of net income (loss), the most directly comparable GAAP measure, to adjusted EBITDA is included in “Non-GAAP Financial Measures” 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.

The following discussion of our consolidated and business segment results of operations includes a discussion of adjusted EBITDA , which on a consolidated basis is a non-GAAP financial measure.

Adjusted EBITDA differs from net (loss) income, 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) income to adjusted EBITDA is included in “Non-GAAP Financial Measures” below.

Year ended December 31,

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$ 999,354 $ 847,918

Year ended December 31,

(in thousands) 2022 2021

Adjusted EBITDA

B&W Renewable segment (1) (2)

$ 26,069 $ 23,219

B&W Environmental segment 9,787 11,773

B&W Thermal segment 56,291 49,143

Corporate (16,477) (12,467)

Research and development costs (3,319) (1,093)

$ 72,351 $ 70,575

(1) Adjusted EBITDA in our B&W Renewable segment for 2022 includes a $6.2 million non-recurring gain on sale related to development rights of a future solar project that was sold as well as the reduction to Selling, General and Administrative Costs of $9.6 million that resulted from the reversal of the contingent consideration related to an acquisition.

2023 vs 2022 Consolidated Results

Revenues increased by $166.5 million to $889.8 million in 2022 as compared to $723.4 million in 2021, primarily attributable to a higher level of activity in our Renewable and Environmental segments which were both adversely impacted by COVID-19 in the prior year and the acquisitions of Babcock & Wilcox Solar and Babcock & Wilcox Renewable Service A/S in o ur Renewable segment.

Incremental revenue from current year acquisitions of FPS and Optimus also contributed to the favorable year-over-year change.

Segment specific changes are discussed in further detail in the sections below.

Net (loss) income unfavorably changed by $58.1 million to a loss of $26.6 million in 2022 as compared to income of $31.5 million in 2021.

Operating (loss) income unfavorably changed by $25.0 million to loss of $4.2 million in 2022 as compared to income of $20.8 million in 2021.

The year-over-year change is primarily related to overall increases in costs and expenses, higher interest expense, an increase in foreign exchange losses and goodwill impairment expense.

The aforementioned expense increases were partially offset by positive contributions fro m the current year acquisitions, and as described above, partially offset by a lower level of construction activity in our Thermal segment.

Restructuring activities, advisory fees, research and development, depreciation and amortization expense, pension and other postretirement benefit plans, foreign exchange, and income taxes are discussed in further detail in the sections below.

Year-over-year comparisons of our results from net income (loss) were also impacted by:

• $0.6 million and $4.9 million of restructuring costs were recognized in 2022 and 2021, respectively, and are more fully described in Note 12 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

• $1.4 million and $2.7 million of financial advisory service fees were recognized in 2022 and 2021, respectively.

Financial advisory service fees are included in Advisory fees and settlement costs in our Consolidated Statement of Operations.

• $1.5 million and $5.5 million of legal and other advisory fees were recognized in 2022 and 2021, respectively.

These fees are related to the contract settlement and liquidity planning and are included in Advisory fees and settlement costs in our Consolidated Statement of Operations.

• $6.5 million of gain on debt extinguishment in 2021 that did not recur in 2022.

• $1.8 million of loss on sale of business that was recorded in 2021.

• $7.7 million and $15.5 million of actuarially determined mark to market (“MTM”) gains (losses) on our pension and other post-retirement benefits in 2022 and 2021, respectively.

MTM losses are further described in Note 13 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

• $5.6 million and $4.9 million of litigation legal costs were recognized in 2022 and 2021, respectively.

These fees are included in Advisory fees and settlement costs in our Consolidated Statement of Operations.

• $7.2 million goodwill impairment charge recorded in 2022 related to our Babcock & Wilcox Solar reporting unit.

• $5.5 million of costs related to completed and potential acquisitions were recognized in 2022.

These costs are included in Selling, general and administrative expenses in our Consolidated Statement of Operations.

Revenues increased by $151.4 million to $999.4 million in 2023 as compared to $847.9 million in 2022, primarily attributable to increased revenue of $79.4 million in our global renewable parts and services business, increased revenue of $30.0 million at SPIG, our Air Cooled Condenser business in Italy, and $55.0 million due to a large new construction project in 2023, partially offset by a slight decline in service projects.

Operating income increased $17.6 million from $2.3 million in 2022 to $19.9 million in 2023, primarily due to increased gross margin of $37.2 million from the higher revenues and a reduction of $7.6 million in advisory fees and settlement costs in 2023, partially offset by higher SG&A expenses of $10.0 million and $4.6 million in product development costs associated with BrightLoop TM .

Additionally, there was a loss on the sale of an asset of $8.7 million in 2022 that did not recur in 2023.

Net loss from continuing operations increased by $58.6 million to $78.6 million in 2023 from $20.0 million in 2022, primarily attributable to a $75.0 million swing in benefit plans cost from a $37.5 million benefit in 2022 to a $37.5 million expense in 2023, offset slightly by the increased operating income described above .

Bookings and Backlog

Bookings and backlog are our measure of remaining performance obligations under our sales contracts.

Bookings and backlog are our measures of remaining performance obligations under our sales contracts.

Management believes 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.

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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 projects or operations and maintenance contracts are booked because they may be fulfilled over multiple years.

Backlog can vary significantly from period to period, particularly when large new-build conversions 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 from booking new business, subtractions from customer cancellations or modifications, changes in estimates of liquidated damages that affect selling price and revaluation of backlog denominated in foreign currency.

Bookings include additions related to new business or increases in project scope, subtractions due to customer cancellations or reductions in project 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.

Year ended December 31,

(In approximate millions) 2022 2021

(In millions) 2023 2022

B&W Renewable $ 256.0 $ 166.4

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Bookings $ 878.3 $ 858.4

(1) B&W Renewable bookings includes the revaluation of backlog denominated in currency other than U.S.

The foreign exchange impact on B&W Renewable bookings in the years ended December 31, 2022 and 2021 wa s $(8.9) million and $15.0 million, respectively.

(2) B&W Renewable bookings include a reduction of approximately $67.5 million related to the disposal of future unprofitable contracts.

Our backlog as of December 31, 2023 and 2022 was as follows:

As of December 31,

(In approximate millions) 2022 2021

(In millions) 2023 2022

B&W Renewable (1)

$ 133.5 $ 128.9

B&W Environmental 179.4 148.4

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Backlog $ 530.5 $ 549.1

(1) B&W Renewable backlog at December 31, 2022, includes $55.6 million related to long-term operation and maintenance contracts for renewable energy plants, with remaining durations extending until 2034.

Generally, such contracts have a dura tion of 10-20 years and include options to extend.

Of the backlog at December 31, 2022, we expect to recognize revenues as follows:

(In approximate millions) 2023 2024 Thereafter Total

(1) B&W Renewable backlog has been adjusted downward $114 million and $122 million at December 31, 2023 and 2022, respectively, to remove O&M contracts that are recognized as disposed.

Of the backlog as of December 31, 2023, we expect to recognize revenues as follows:

(In millions) 2024 2025 Thereafter Total

B&W Renewable $ 114.6 $ 18.5 $ 0.4 $ 133.5

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Non-GAAP Financial Measures

Adjusted EBITDA on a consolidated basis is a non-GAAP metric 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 presented below is consistent with the way the Company's chief operating decision maker reviews the results of operations and makes strategic decisions about the business and 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 costs, impairments, gains and losses on debt extinguishment, 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.

The Company uses adjusted EBITDA internally to evaluate its performance and in making financial and operational decisions.

When viewed in conjunction with GAAP results and the accompanying reconciliation in Note 4 to the Consolidated Financial Statements, the Company believes that its presentation of adjusted EBITDA provides investors with greater transparency and a greater understanding of factors affecting its financial condition and results of operations than GAAP measures alone.

We use non-GAAP financial measures internally to evaluate our performance and in making financial and operational decisions.

When viewed in conjunction with GAAP results and the accompanying reconciliation, 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 adjusted EBITDA.

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 5 to the 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 presented in this report is consistent with the way the our chief operating decision maker reviews the results of operations and makes strategic decisions about the business and 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, costs and operating income from contracts in disposal, 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.

Year ended December 31,

(in thousands) 2023 2022

(Loss) income from continuing operations $ (26,584) $ 31,538

Net loss $ (196,971) $ (26,584)

Loss from discontinued operations, net of tax (118,338) (6,596)

Loss from continuing operations (78,633) (19,988)

Interest expense, net 48,703 44,220

Income tax expense (benefit) 11,063 (2,224)

Income tax expense 8,481 11,059

Depreciation & amortization 19,990 21,628

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Benefit plans, net 37,505 (37,528)

Gain on sales, net (2,598) (13,984)

Gain on debt extinguishment — (6,530)

Loss (gain) on asset sales, net 57 (2,539)

Stock compensation 7,121 8,654

1 unchanged sentence

Advisory fees for settlement costs and liquidity planning 1,107 1,509

Settlement and related legal costs 10,734 4,894

Settlement and related legal (recoveries) costs (1,474) 10,734

Acquisition pursuit and related costs 827 5,504

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Financial advisory services — 1,424

Contract step-up purchase price adjustment 1,745 —

Loss from business held for sale — 483

Loss from a non-strategic business — 116

Goodwill impairment 7,224 —

Contract disposal 8,550 2,976

Letter of credit fees 7,702 5,204

Other - net 2,002 1,496

1 unchanged sentence

$ 79,131 $ 67,509

(1) Costs associated with development of commercially viable products that are ready to go to market.

(2) Adjusted EBITDA for the year ended December 31, 2022 includes a $6.2 million non-recurring gain on sale related to development rights of a future solar project that was sold as well as the reduction to Selling, General and Administrative Costs of $9.6 million that resulted from the reversal of the contingent consideration related to an acquisition.

(1) Adjusted EBITDA for the year ended December 31, 2022 includes a $6.2 million non-recurring gain on sale related to development rights of a renewable energy project.

Year ended December 31,

6 unchanged sentences

Corporate (21,374) (16,477)

Research and development benefit (costs) (3,319) (1,093)

Research and development (4,011) (3,319)

$ 79,131 $ 67,509

(1) Adjusted EBITDA in the Renewable segment for the year ended December 31, 2022 includes a $6.2 million non-recurring gain on sale related to development rights of a future solar project that was sold as well as the reduction to Selling, General and Administrative Costs of $9.6 million that resulted from the reversal of the contingent consideration related to an acquisition.

(1) See above for reconciliation of Net loss to Adjusted EBITDA.

(2) Adjusted EBITDA in the Renewable segment in 2022 includes a $6.2 million non-recurring gain on sale related to development rights of a renewable energy project.

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.

Corporate expenses not allocated to the reportable segments totaled $21.4 million and $16.5 million in the years ended December 31, 2023 and 2022, respectively.

The increase is primarily due to higher expenses related to audit and other consulting services and insurance.

Research and development

Our research and development activities are focused on improving our products through innovations to reduce their cost and improve competitiveness, reduce performance risk of our products to better meet our and our customers’ expectations.

Research and development expenses totaled $4.0 million and $3.3 million in the years ended December 31, 2023 and 2022, respectively.

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.

Pension benefits (includes defined benefit and other postretirement benefits plans) before MTM were $0.5 million and $29.8 million for the years ended December 31, 2023 and 2022, respectively.

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.

Total MTM adjustments for our defined benefit and other postretirement benefits plans were an expense of $38.0 million and a benefit of $7.7 million for the years ended December 31, 2023 and 2022, respectively.

Refer to Note 14 to the Consolidated Financial Statements for further information regarding our pension and other postretirement plans.

Loss (gain) on asset sales, 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.

Loss (gain) on asset sales, net totaled $0.1 million and $(2.5) million in the years ended December 31, 2023 and 2022, respectively.

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.

Expenses related to restricted stock units are recorded at the Corporate level and are recognized on a straight-line basis over a 3-year vesting period, except for market-based restricted stock units which are recognized over a derived service period.

Stock compensation was $7.1 million and $8.7 million for the years ended December 31, 2023 and 2022, respectively.

Restructuring activities and business services transition costs

Restructuring activities and business services transition actions across our business units and corporate functions resulted in expense of $5.7 million and $8.5 million in the years ended December 31, 2023 and 2022 , respectively.

The restructuring charges 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 Consolidated Statement of Operations.

Advisory fees for settlement costs and liquidity planning

Advisory fees decreased to $1.1 million in the year ended December 31, 2023 as compared to $1.5 million in 2022 .

The change is primarily due to decreased use of external consultants, especially in liquidity planning as that work ended in early 2023.

Settlement and related legal (recoveries) costs

Settlement costs decreased from $10.7 million in the year ended December 31, 2022 to recoveries of $(1.5) million in the year ended December 31, 2023.

See Note 21 for more detail.

Acquisition pursuit and related costs

Acquisition pursuit and related costs expenses totaled $0.8 million and $5.5 million in the year ended December 31, 2023 and 2022, respectively.

The decrease is a result of less activity in 2023, when compared to 2022.

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.

Product development expenses totaled $9.0 million and $4.1 million in the year ended December 31, 2023 and 2022, respectively.

The increase resulted primarily from timing of specific research and increased development efforts and activities related to our BrightLoop TM commercialization efforts and to further develop our ClimateBright TM 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 the Consolidated Statements of Operations at average exchange rates for the periods presented.

We record adjustments resulting from the translation of foreign currency financial statements as a component of accumulated other comprehensive loss.

We report foreign currency transaction gains and losses in the Consolidated Statements of Operations.

Foreign exchange was a net loss of $2.5 million and $0.6 million for the years ended December 31, 2023 and 2022, respectively.

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

Financial advisory services

We used no financial advisory services in 2023.

Financial advisory services were $1.4 million for the year ended December 31, 2022.

Contract disposal

We are in the process of exiting our only remaining fixed fee operational and maintenance ("O&M") contract in our Renewable segment.

A similar contract was exited as of December 31, 2022.

Losses related to this contract totaled $8.6 million and $3.0 million in the years ended December 31, 2023 and 2022, respectively.

We believe it is useful to exclude the impact of this contract on our operating results as well as our backlog in order to highlight the performance of the ongoing business.

Letter of credit fees

Letter of credit fees included in Cost of operations were $7.7 million and $5.2 million for the years ended December 31, 2023 and 2022, respectively.

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.

These 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.

B&W Renewable Segment Results

4 unchanged sentences

2023 vs 2022 results

Revenues in the B&W Renewable segment increased $173.8 million, to $330.6 million in 2022 compared to $156.8 million in 2021.

The increase in revenue is primarily due to higher volumes of new-build projects and revenues from acquisitions which closed on September 30 and November 30, 2021.

Revenues in the B&W Renewable segment increased $29.9 million, to $318.6 million in 2023 compared to $288.7 million in 2022, which is primarily the result of increased revenue of $29.5 million in our European Renewable parts and services business as we continue to expand globally.

Adjusted EBITDA in the B&W Renewable segment increased $1.4 million, to $22.6 million in 2023 compared to $21.2 million in 2022.

This is primarily due to higher revenue volume from new build products partially offset by the impact of four solar projects that became loss contracts in 2022 as described in Note 5 to the Consolidated Financial Statements.

Also partially offsetting the increase was combined the 2021 recognition of a settlement from a subcontractor that reimbursed us for project costs related to our Renewable EPC loss contracts and a larger percentage of SG&A expense allocated to the segment.

This is primarily attributable to the increased volume in our European Renewable parts and services business, partially offset by a $6.2 million gain on sale related to the development rights of a future renewable energy project that was sold in the prior year.

Year ended December 31,

(in thousands) 2022 2021 $ Change

Revenues $ 288,673 $ 144,310 $ 144,363

Adjusted EBITDA $ 21,227 $ 19,826 $ 1,401

2022 vs 2021 results

Revenues in the B&W Renewable segment increased $144.4 million, to $288.7 million in 2022 compared to $144.3 million in 2021, which is primarily due to higher volumes of new-build projects and a full year of revenue from the B&W Renewable Services A/S acquisition that closed on November 30, 2021.

Adjusted EBITDA in the B&W Renewable segment increased $1.4 million, to $21.2 million in 2022 compared to $19.8 million in 2021, which is primarily due to the higher revenue volume from the new-build projects, partially offset by higher SG&A expenses in 2022.

B&W Environmental Segment Results

4 unchanged sentences

2023 vs 2022 results

Revenues in the B&W Environmental segment increased 15% , or $20.6 million to $154.4 million in 2022 compared to $133.8 million in 2021.

The increase is primarily driven by higher volume of new build projects.

Adjusted EBITDA in the B&W Environmental segment wa s $9.8 million i n 2022 compared to $11.8 million in 2021 .

The change is primarily driven by higher volume, as described above, which resulted in increased gross profit, which was more than offset by a larger percentage of SG&A expense allocated to the segment.

Revenues in the B&W Environmental segment increased $48.5 million to $202.9 million in 2023 compared to $154.4 million in 2022 .

The increase is primarily driven by increased revenue of $30.0 million in SPIG, our Air Cooled Condenser business in Italy, as we continue to grow that business outside of Europe and an increase in revenue of $19.0 million in our ash handling business.

Adjusted EBITDA in the B&W Environmental segment wa s $15.3 million i n December 31, 2023 compared to $9.8 million in 2022.

The change is primarily driven by higher volume, as described above.

B&W Thermal Segment Results

4 unchanged sentences

2023 vs 2022 results

Revenues in the B&W Thermal segment decreased 4%, or $18.2 million, to $415.1 million in 2022 compared to $433.3 million generated in 2021.

The revenue decrease is largely attributable to lower construction project activity, primarily due to one large project that was executed in the prior period, partially offset by two acquisitions that closed in February 2022.

See Note 26 to the Consolidated Financial Statements for details on the FPS and Optimus acquisitions.

Adjusted EBITDA in the B&W Thermal segment increased $7.1 million to $56.3 million in 2022 compared to $49.1 million in 2021, which is mainly attributable to the two acquisitions that closed in February 2022.

See Note 26 to the Consolidated Financial Statements for details on the FPS and Optimus acquisitions.

The Thermal segment also received a lower percentage share of allocated SG&A expense in 2022.

These increases were partially offset by the lower volume of activity on construction projects in 2022.

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.

Corporate costs increased $4.0 million to $16.5 million in year ended December 31, 2022 as compared to $12.5 million incurred in the year ended December 31, 2021.

The increase is primarily due to higher expenses related to tax and accounting services.

Advisory Fees and Settlement Costs

Advisory fees and settlement costs decreased by $4.6 million to $8.5 million in the year ended December 31, 2022 as compared to $13.1 million in the corresponding period of 2021.

The change is primarily due to decreased use of external consultants in 2022.

Research and Development

Research and development expenses totaled $3.8 million and $1.6 million in the years ended 2022 and, 2021, respectively.

The increase resulted primarily from timing of specific research and increased development efforts and the non-recurring 2021 recognition of approximately $0.9 million in certain credits.

These expenses do not include our activities related to our BrightLoop commercialization plant.

Restructuring

Restructuring actions across our business units and corporate functions resulted in $0.6 million and $4.9 million of expense in the years ended December 31, 2022 and 2021, respectively.

The charges primarily consist of severance related to actions taken, including as part of the Company’s strategic, market-focused organizational and re-branding initiatives.

Transition Costs

Transition costs across our corporate and business functions resulted in $7.9 million and $5.9 million of expense in the years ended December 31, 2022 and 2021, respectively.

These charges primarily result from non-recurring actions taken to outsource certain tasks to offshore service providers or to transfer administrative and compliance tasks to global service providers as part of our strategic efforts to reduce future selling, general and administrative costs.

Transition costs are included in selling, general and administrative expenses in our Consolidated Statement of Operations,

Depreciation and Amortization

Depreciation expense was $11.0 million and $9.7 million in the years ended December 31, 2022 and 2021, respectively.

Amortization expense was $13.0 million and $8.6 million for the years ended December 31, 2022 and 2021, respectively.

Pension and Other Postretirement Benefit Plans

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.

Pension benefits before MTM were $29.8 million and $32.7 million in the years ended December 31, 2022 and 2021, respectively.

Our pension costs include MTM adjustments from time to time and are primarily a result of changes in the discount rate, curtailments and settlements.

Total MTM adjustments for our pension benefit plans were gains of $6.4 million for the twelve months ended months ended December 31, 2022.

Total MTM adjustments for our other postretirement benefit plans were gains of $1.4 million during the twelve months ended December 31, 2022.

Pension benefits, excluding MTM adjustments of a gain of $29.8 million, were $32.7 million in the year ended December 31, 2021.

The following sensitivity analysis reflects the impact of a 25 basis point change in the assumed discount rate and return on assets on our pension plan obligations and expense for the year ended December 31, 2022:

(In millions) 0.25% increase 0.25% decrease

Discount rate :

Effect on ongoing net periodic benefit cost (1)

Revenues in the B&W Thermal segment increased $84.1 million , to $499.2 million in the year ended December 31, 2023 compared to $415.1 million generated in 2022 .

The increase is driven by $55.0 million in revenue from a large new construction project and increased revenue of $49.9 million in our parts business, partially offset by a decline in service projects of $13.4 million due to a project being completed in 2022.

Adjusted EBITDA in the B&W Thermal segment increased $10.4 million to $66.7 million in 2023 compared to $56.3 million in 2022.

The increase is the result of the large new construction project and increased volume in our parts business described above.

Other Expenses Impacting Operating Results

Interest Expense

Interest expense in our Consolidated Financial Statements consisted of the following components:

Year ended December 31,

(in thousands) 2023 2022

Components associated with borrowings from:

Senior notes $ 25,601 $ 24,962

Revolving Credit Facility 1,494 —

27,095 24,962

Effect on projected benefit obligation (18.5) 19.3

Return on assets:

Effect on ongoing net periodic benefit cost (2.4) 2.4

(1) Excludes effect of annual MTM adjustment.

A 25 basis point change in the assumed discount rate and return on assets would have no meaningful impact on our other postretirement benefit plan obligations and expense for the year ended December 31, 2022 individually or in the aggregate, excluding the impact of any annual MTM adjustments we record annually.

Refer to Note 13 to the Consolidated Financial Statements for further information regarding our pension and other postretirement plans.

Foreign Exchange

We translate assets and liabilities of our foreign operations into United States dollars at current exchange rates, and we translate items in our statement of operations at average exchange rates for the periods presented.

We record adjustments resulting from the translation of foreign currency financial statements as a component of accumulated other comprehensive income (loss).

We report foreign currency transaction gains and losses in the Consolidated Statements of Operations.

Foreign exchange was a net loss of $(0.6) million and $(4.3) million for the years ended December 31, 2022 and 2021, respectively.

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

Components associated with amortization or accretion of:

Revolving Credit Agreement 4,643 4,400

Senior notes 2,525 2,612

Components associated with interest from:

Lease liabilities 2,235 2,372

Letter of Credit fees and interest 10,955 8,424

Other interest expense 2,442 2,091

15,632 12,887

Total interest expense $ 49,895 $ 44,861

The increase in interest expense in 2023, when compared to 2022 is driven by higher utilization of the revolver as well as increased incremental fees on letters of credit.

Year ended December 31,

(In thousands, except for percentages) 2023 2022

Income (loss) before income taxes $ (15,521) $ 29,314

Income tax expense (benefit) 11,063 (2,224)

Loss from continuing operations before income tax expense (70,152) (8,929)

Income tax expense 8,481 11,059

Effective tax rate (12.1) % (123.9) %

Our effective tax rate in 2022 reflects a valuation allowance against deferred tax assets in jurisdictions other than Mexico, Canada, Brazil, Finland, Germany, Thailand, the Philippines, Indonesia, the United Kingdom, Sweden and certain United States state jurisdictions.

The increase in our income tax expense in 2022 compared to 2021 is primarily attributable to a prior year reduction in the

valuation allowance of $8.7 million related to net operating losses and temporary deductible benefits in certain states.

Our effective tax rate reflects a valuation allowance against deferred tax assets in jurisdictions other than Mexico, Canada, Brazil, Finland, Germany, Thailand, the Philippines, Indonesia, the United Kingdom, Sweden and certain United States state jurisdictions.

The change in our income tax expense in 2023 compared to 2022 is primarily attributable to a prior year increase in the valuation allowance of $5.6 million related to net operating losses and temporary deductible benefits in certain states.

Liquidity and Capital Resources

Our primary liquidity requirements include debt service, funding 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 recent revolving credit agreement, senior notes, and equity offerings, including our Preferred Stock, each of which are described below and in the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report in further detail along with other sources of liquidity.

We believe that our current operating plan and borrowings available under our revolving credit agreement will be sufficient to satisfy our foreseeable liquidity needs and capital expenditure requirements, including for at least the next twelve months.

During 2022, we executed the following actions:

• on February 1, 2022, we acquired 100% ownership of Fossil Power Systems, Inc.

for approximately $59.2 million, excluding working capital adjustments;

• on February 28, 2022, we acquired 100% ownership of Optimus Industries, LLC ("Optimus") for approximately $19.0 million, excluding working capital adjustments;

• we sold $6.8 million aggregate principal of 8.125% Senior Notes and received $6.7 million of net proceeds;

• we sold development rights of a future solar project for $8.0 million and recorded a $6.2 million non-recurring gain;

• on July 28, 2022, we participated in the sale process of Hamon Holdings Corporation and acquired certain assets of one of its subsidiaries for approximately $2.9 million;

• on September 24, 2022, we acquired the remaining 40% ownership stake in Babcock & Wilcox Solar for $12.7 million and will make payments of $3.0 million, $5.0 million, and $4.7 million on January 16, 2023, June 30, 2023, and January 15, 2024, respectively, for a present value of $12.1 million at December 31, 2022;

• on October 14, 2022, we changed the name of the company formerly known as Fosler Construction Company, Inc.

to Babcock & Wilcox Solar Energy, Inc.

("Babcock & Wilcox Solar");

• during the year ended December 31, 2022, the Company sold certain real property and then entered into sale lease-back agreements for each sale property.

The Company accounted for the sale-leasebacks as three individual financing transactions aggregating $13.4 million.

See Notes 10, 14, 15, 16, 17, 18 and 26 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for additional information on our external sources of financing and equity offerings.

We fund our liquidity requirements primarily through cash generated from operations, external sources of financing, including our Credit Agreement with Axos Bank and senior notes, and equity offerings, including our Preferred Stock, each of which are described below and in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report in further detail.

We have recurring operating losses primarily due to losses recognized on B&W Solar loss contracts described in Note 4 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report as well as increased selling, general and administrative expenses and higher debt service costs.

Our net cash used in operating activities was $42.3 million and $30.6 million for the years ended December 31, 2023 and December 31, 2022.

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

following the date that this Annual 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 currently evaluating different strategies to obtain the required funding for future operations.

We have taken or plan to take all or some combination of the following actions, and continue to evaluate other actions:

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

• filed for a waiver of required minimum contributions to 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 sale process of several non-core real estate assets;

• plan to sell common shares pursuant to our At-The-Market Offering;

• considering alternative measures to manage cash flow, such as suspension of the dividend on our Preferred Stock.

Based on our ability to raise funds through the actions noted above and our Cash and cash equivalents as of December 31, 2023, we have concluded that it is probable that such proceeds would provide sufficient liquidity to fund operations for the next twelve months following the date of this Annual Report.

As a result, it is probable that our plans alleviate the substantial doubt about our ability to continue as a going concern.

Cash and Cash Flows

At December 31, 2022, our cash and cash equivalents, current restricted cash and long-term restricted cash totaled $113.5 million and we had total debt of $353.0 million as well as $191.7 million of gross preferred stock outstanding.

Our foreign business locations held $46.6 million of our total cash and cash equivalents, current restricted cash and long-term restricted cash at December 31, 2022.

As of December 31, 2023, our cash and cash equivalents, and restricted cash totaled $71.4 million and we had total debt of $379.5 million as well as $191.7 million of gross preferred stock outstanding.

Our foreign business locations held $44.4 million of our total cash and cash equivalents, and restricted cash as of December 31, 2023.

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 presently have not made a provision for in our results of operations.

We presently have no plans to repatriate these funds to the U.S.

In addition, we had $11.2 million of restricted cash at December 31, 2022 related to collateral for certain letters of credit.

Cash used in operations was $30.6 million in the year ended December 31, 2022, which is primarily attributable to the current year net loss of $26.6 million, partially offset by a $1.2 million net decrease in operating cash outflows associated with changes in working capital.

In the year ended December 31, 2021, cash used in operations was $111.2 million which is primarily attributable to the reduction in pension, postretirement and employee benefit liabilities and other accrued liabilities, partially offset by the current year net income and operating cash flows associated with changes in working capital.

Cash flows used in investing activities totaled $68.8 million in the year ended December 31, 2022, primarily due to business acquisitions of $64.9 million and $13.2 million of capital expenditures, partially offset by proceeds from the sale of business and assets of $5.5 million and sales and maturities of available-for-sale securities of $9.8 million .

In the year ended December 31, 2021, cash flows from investing activities used net cash of $33.5 million, primarily due to the acquisition of business of $55.3 million and $6.7 million of capital expenditures, offset by proceeds from the sale of business and assets of $25.4 million.

to foreign entities, which could expose us to taxes we have not made a provision for in our results of operations.

We have no plans to repatriate these funds to the U.S.

In addition, we had $0.6 million of restricted cash as of December 31, 2023 related to collateral for certain letters of credit.

Cash used in operations was $42.3 million in the year ended December 31, 2023, which is primarily attributable to the current year net loss, including discontinued operations, of $197.0 million, partially offset by $137.7 million in non-cash expense arising from goodwill impairment, adjustments to prior service pensions, depreciation and amortization and stock-based compensation expenses.

Cash used in operations was $30.6 million in the year ended December 31, 2022, which is primarily attributable to the net loss, including discontinued operations, of $26.6 million.

Cash flows used in investing activities totaled $7.9 million in the year ended December 31, 2023, primarily due to $9.8 million of capital expenditures, partially offset by net proceeds from transactions in available-for-sale securities of $2.0 million.

Cash flows used in investing activities totaled $68.8 million in the year ended December 31, 2022, primarily due to business acquisitions of $64.9 million and $13.2 million of capital expenditures, partially offset by proceeds from the sale of business and assets of $5.5 million and net sales and maturities of available-for-sale securities of $3.4 million.

Cash flows provided by financing activities was $8.6 million during the year ended December 31, 2023, primarily related to net borrowings of $25.9 million, partially offset by payments of preferred stock dividends of $11.1 million and payment of holdback funds related to an acquisition of $2.8 million.

Cash flows used in financing activities of $11.2 million during the year ended December 31, 2022, primarily related to repayments of debt of $16.9 million and payments of preferred stock dividends of $14.9 million, partially offset by combined borrowings on loans payable, issuance of senior notes and proceeds from sale-leaseback transactions of $27.4 million.

Cash flows from financing activities provided net cash of $302.8 million in the year ended December 31, 2021 primarily related to the issuance of common stock, senior notes and preferred stock offset by $75.4 million of repayments of the Last Out Term Loans, a $164.3 million net reduction on the prior U.S.

Revolving Credit Facility and $24.6 million of financing fees.

Debt Facilities

As described in the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, on June 30, 2021, we entered into the Reimbursement Agreement, Revolving Credit Agreement and Letter of Credit Agreement (collectively, the “Debt Documents” and the facilities thereunder, the “Debt Facilities”).

The obligations of the Company under each of the Debt Facilities are guaranteed by certain existing and future domestic and foreign subsidiaries of the Company.

Riley, a related party, has provided a guaranty of payment with regard to the Company’s obligations under the Reimbursement Agreement.

The Company expects to use the proceeds and letter of credit availability under the Debt Facilities for working capital and general corporate purposes.

The Revolving Credit Agreement matures on June 30, 2025.

As of December 31, 2022, no borrowings have occurred under the Revolving Credit Agreement and under the Letter of Credit Agreement, usage consisted of $13.6 million of financial letters of credit and $100.8 million of performance letters of credit.

As of December 31, 2022, the Company was in compliance with their Quarterly Fixed Charge Coverage financial covenant and received a waiver from MSD and PNC for the period ended September 30, 2022 as described within Note 16.

Debt and Credit Facilities

As described in Note 15 to our Consolidated Financial Statements included herein, at December 31, 2023, our debt facilities include the Reimbursement Agreement, Revolving Credit Agreement and Letter of Credit Agreement (collectively, the “Debt Documents” and the facilities thereunder, the “Debt Facilities”).

Our obligations under each of the Debt Facilities were guaranteed by certain of our existing and future domestic and foreign subsidiaries.

Riley, a related party, has provided a guaranty of payment with regard to our obligations under the Reimbursement Agreement.

We used the proceeds and letter of credit availability under the Debt Facilities for working capital purposes and general corporate purposes.

The Debt Facilities mature on June 30, 2025.

For the year ended December 31, 2023, we had average daily borrowings of $14.2 million, and had

a maximum daily amount outstanding of $34.9 million.

Usage under the Letter of Credit Agreement consisted of $15.9 million of financial letters of credit and $70.0 million of performance letters of credit at December 31, 2023.

As discussed in Note 25 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, in January 2024, we entered into a new Credit Agreement with Axos Bank.

This agreement substantially replaces the existing Reimbursement Agreement, Revolving Credit Agreement and Letter of Credit Agreement.

Riley, a related party, has provided a guaranty of payment with regard to our obligations under the Credit Agreement.

For further discussion on the new agreement, see Note 25.

Letters of Credit, Bank Guarantees and Surety Bonds

Certain of our subsidiaries 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.

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 December 31, 2023 was $39.4 million.

1 unchanged sentence

Of the outstanding letters of credit issued under the Letter of Credit Agreement, $54.0 million are subject to foreign currency revaluation.

We have also posted surety bonds to support contractual obligations to customers relating to certain contracts.

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 the applicable contracts.

We, and certain of our subsidiaries, have jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds those underwriters issue in support of some of our contracting activity.

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 December 31, 2023, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $141.7 million.

The aggregate value of the letters of credit backstopping surety bonds was $16.8 million.

Our ability to obtain and maintain sufficient capacity under our new Debt Facilities is essential to allow us to support the issuance of letters of credit, bank guarantees and surety bonds.

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 December 31, 2022, our Denmark subsidiary has an unsecured interest-free loan of $0.8 million under a local government loan program related to COVID-19 that is payable May 2023.

In addition, we recorded a $2.9 million loan payable related to financed insurance premiums payable April 2023, which is included in Current loans payable on our Consolidated Balance Sheets.

B&W Solar has loans, primarily for vehicles and equipment, totaling $0.5 million at December 31, 2022.

In addition, as disclosed within Note 10, the Company had approximately $13.3 million in Long Term Loans Payable which is net of debt issuance costs of $0.6 million, of which $0.6 million is classified as current, in finance liabilities as of December 31, 2022 in connection with their sale-leaseback financing transactions.

These loans are included in Notes payable and Long-term loans payables in the Company's Consolidated Balance Sheets.

As of December 31, 2023, we had loans payable of $41.6 million, net of debt issuance costs of $0.5 million, of which $6.2 million is classified as current, and $35.4 million as long-term loans payable on the Consolidated Balance Sheet.

Included in these amounts, we had approximately $12.3 million, net of debt issuance costs of $0.5 million, related to sale-leaseback financing transactions.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have, or are reasonably expected to have, a material current or future effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources at December 31, 2022.

We do not have any off-balance sheet arrangements that have, or are reasonably expected to have, a material current or future effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources as of December 31, 2023.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Contract costs include labor, material, overhead and warranty expenses.

Variable consideration in these contracts includes estimates of liquidated damages, contractual bonuses and penalties, and contract modifications.

We review contract price and cost estimates each reporting period as the work progresses and reflect adjustments proportionate to the costs incurred-to-date relative to total estimated costs at completion in income in the period when those estimates are revised.

Variable consideration in these contracts includes estimates of contract modifications, contractual bonuses and penalties, and liquidated damages.

We review contract revenue and cost estimates each reporting period as the work progresses and reflect adjustments proportionate to the costs incurred-to-date relative to total estimated costs at completion in income in the period when those estimates are revised.

These changes in estimates can be material.

For all contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected contract loss is recognized in full through the statement of operations and an accrual for the estimated loss on the uncompleted contract is included in Other accrued liabilities in the Consolidated Balance Sheets.

For all contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected contract loss is recognized in full through the Consolidated Statements of Operations and an accrual for the estimated loss on the uncompleted contract is included in Other accrued liabilities in the Consolidated Balance Sheets.

In addition, when we determine that an uncompleted contract will not be completed on time and the contract has liquidated damages provisions, we recognize the estimated liquidated damages we will incur and record them as a reduction of the estimated selling price in the period the change in estimate occurs.

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In most instances, contract modifications are for goods or services that are not distinct and, therefore, are accounted for as part of the existing contract, with cumulative adjustment to revenue.

We recognize claims receivable in contract revenues for extra work or changes in scope of work to the extent of costs incurred when we believe we have an enforceable right to the modification or claim and the amount can be estimated reliably, and its realization is probable.

In evaluating these criteria, we consider the contractual/legal basis for enforcing the claim, the cause of any additional costs incurred and whether those costs are identifiable or otherwise determinable, the nature and reasonableness of those costs, the objective evidence available to support the amount of the claim, and our relevant history with the counter-party that supports our expectations about their willingness and ability to pay for the additional cost along with a reasonable margin.

In our Consolidated Balance Sheets, claims receivable at December 31, 2022 and December 31, 2021 were not significant.

We recognize claims receivable in contract revenues for extra work or changes in scope of work to the extent of costs incurred when we believe we have an enforceable right to the modification or claim the amount can be reasonably estimated and its realization is probable.

In evaluating these criteria, we consider the contractual/legal basis for enforcing the claim, the cause of any additional costs incurred and whether those costs are identifiable or otherwise determinable, the nature and reasonableness of those costs, the objective evidence available to support the amount of the claim, and our relevant history with the counterparty that supports our expectations about their willingness and ability to pay for the additional cost along with a reasonable margin.

Claims receivable at December 31, 2023 and 2022 was not significant in the Consolidated Financial Statements.

Our revenue recognition policies, assumptions, changes in estimates and significant loss contracts are described in greater detail in Note 2 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Business Combinations

Assets acquired and liabilities assumed in a business combination are recognized and measured based on their estimated fair values at the acquisition date, while the acquisition-related costs are expensed as incurred.

Assets acquired and liabilities assumed in a business combination are recognized and measured based on their estimated fair value at the acquisition date, while the acquisition-related costs are expensed as incurred.

Any excess of the purchase consideration when compared to the fair value of the net tangible and intangible assets acquired, if any, is recorded as goodwill.

We engaged valuation specialists to assist with the determination of the fair value of assets acquired, liabilities assumed, non-controlling interest, and goodwill, for the acquisitions.

We engage valuation specialists to assist with the determination of the fair value of assets acquired, liabilities assumed, and goodwill, if any, for any acquisition.

If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, an estimate will be recorded.

Subsequent to the acquisition date, and not later than one year from the acquisition date, we will record any material adjustments to the initial estimate based on new information obtained that would have existed as of the date of the acquisition.

Subsequent to the reporting period, and not later than one year from the acquisition date, we will record any material adjustments to the initial estimate based on new information obtained that would have existed as of the date of the acquisition.

Any adjustment that arises from information obtained that did not exist as of the date of the acquisition will be recorded in the period the adjustment arises.

See Note 2 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for further discussion.

Goodwill is generally recorded as a result of a business combination and represents the excess of purchase price over the fair value of the tangible and identifiable net assets acquired.

We perform testing of goodwill for impairment annually on October 1st or when impairment indicators are present.

In assessing goodwill for impairment, the Company follows ASC 350, Intangibles – Goodwill and Other, which permits a qualitative assessment of whether it is more likely than not that the fair value of the reporting unit is less than its carrying value including goodwill.

If the qualitative assessment determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill, then no impairment is determined to exist for the reporting unit.

However, if the qualitative assessment determines that it is more likely than not that the fair value of the reporting unit is less than its carrying value, including goodwill, or we choose not to perform the qualitative assessment, then we compare the fair value of that reporting unit with its carrying value, including goodwill, in a quantitative assessment.

If the carrying value of a reporting unit exceeds its fair value, goodwill is considered impaired with the impairment loss measured as the excess of the reporting unit’s carrying value, including goodwill, over its fair value.

The estimated fair value of the reporting unit is derived based on valuation techniques the Company believes market participants would use for each of the reporting units.

We accrue estimated expense included in Cost of operations on our Consolidated Statements of Operations to satisfy contractual warranty requirements when we recognize the associated revenues on the related contracts.

In addition, we record specific provisions or reductions when we expect the actual warranty costs to significantly differ from the accrued estimates.

Factors that impact our estimate of warranty costs include prior history of warranty claims and our estimates of future costs of materials and labor.

Such changes could have a material effect on our consolidated financial condition, results of operations and cash flows.

Assets and Liabilities Held for Sale and Discontinued Operations

Assets and liabilities classified as held for sale are reported at the lower of their carrying value or fair value less costs to sell.

Depreciation and amortization of assets ceases upon designation as held for sale.

Discontinued operations comprise activities that were disposed of, discontinued or held for sale at the end of the period, represent a separate major line of business that can be clearly distinguished for operational and financial reporting purposes and represent a strategic business shift having a major effect on our operations and financial results according to ASC 205, Presentation of Financial Statements.

included all of the revenues and expenses for the B&W Solar business as discontinued operations in the Consolidated Statements of Operations and all assets and liabilities as held for sale in the Consolidated Balance Sheets.

Goodwill is generally recorded as a result of a business combination and represents the excess of the consideration transferred over the fair value of the assets acquired and liabilities assumed.

We perform testing of goodwill for impairment annually on October 1 or when impairment indicators are present.

In assessing goodwill for impairment, we follow ASC 350, Intangibles – Goodwill and Other, which permits a qualitative assessment of whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount including goodwill.

If the qualitative assessment determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, then no impairment is determined to exist for the reporting unit.

However, if the qualitative assessment determines that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, or we choose not to perform the qualitative assessment, then we compare the fair value of that reporting unit with its carrying amount, including goodwill, in a quantitative assessment.

If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered impaired with the impairment loss measured as the excess of the reporting unit’s carrying amount, including goodwill, over its fair value.

The estimated fair value of the reporting unit is derived based on valuation techniques we believe market participants would use for each of the reporting units.

Warranty expenses

We record estimated expense in Cost of operations in the Consolidated Statements of Operations to satisfy contractual warranty requirements when we recognize the associated revenues on the related contracts.

In addition, we record specific adjustments when we expect the actual warranty costs to significantly differ from the initial estimates.

Factors that impact our estimate of warranty costs include prior history of warranty claims and our estimate of future costs of materials and labor.

Such changes could have a material effect on our financial position, results of operations and cash flows.

See Note 12 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for further discussion.

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As of December 31, 2023, we have a valuation allowance on our deferred tax assets in substantially all jurisdictions, as we do not believe it is more likely than not that the deferred tax assets will be realized.

For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in our consolidated financial statements.

We record interest and penalties (net of any applicable tax benefit) related to income taxes as a component of provision for income taxes on our Consolidated Statements of Operations.

For those tax positions where it is more likely than not that a tax benefit will be realized, we have recorded the amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

For those income tax positions where it is not more likely than not that a tax benefit will be realized, no tax benefit has been recognized in the Consolidated Financial Statements.

We record interest and penalties (net of any applicable tax benefit) related to income taxes as a component of provision for income taxes in the Consolidated Statements of Operations.

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What changed 10-K

Item 7. Management’s Discussion and Analysis