Ladies and gentlemen, thank you for standing by, and welcome to the Babcock & Wilcox Enterprises Q4 and Full Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. . I would now like to hand the conference over to your speaker today, Megan Wilcox, Vice President of Investor Relations at Babcock & Wilcox. Thank you. You may begin.

Thank you, April, and good morning, everyone. Welcome to Babcock & Wilcox Enterprises Fourth Quarter and Full Year 2020 Earnings Conference Call. I'm Megan Wilson, Vice President of Investor Relations at B&W. Joining me this morning are Kenny Young, B&W's Chairman and Chief Executive Officer; and Lou Salamone, Chief Financial Officer, to discuss our fourth quarter and full year results.

Thanks, Megan. Good morning, everyone, and thanks for joining our call. Our results for the fourth quarter and full year 2020 really reflect the ongoing positive impact of our strategic plan despite the adverse effects of COVID across all of our segments. And our strategic actions in 2020, including the rebranding of our segments, ongoing international expansion and continued food cost-saving initiatives provide a strong foundation for growth as we pursue our robust global pipeline. As Lou will discuss in more detail, with the recent closing of our common stock and senior note offerings, we have dramatically improved our capital structure. As a result of the offerings, we have reduced our secured debt by $274 million in our future cash interest payments by approximately $16 million annually. Combined with the reduction in our required pension contributions, we expect to save more than $40 million annually in cash expenses on a pro forma basis. Based on 2020 adjusted EBITDA and net debt as of December 31, 2020, the offerings resulted in a net leverage ratio reduction from 6.4%, down to 3.6x pro forma for the effects of our offerings and related debt paying downs and certain fees. The proceeds from our offerings not only significantly reduce our cash expenses, but also provide capital to support the expansion of our clean energy technology portfolio as we continue to execute our growth strategy.

Thanks, Kenny. I'll first review our full year 2020 results, and then I'll turn to our fourth quarter 2020 results in detail. Further detail on the first -- on our full year results can be found in our 10-K that's on file with the SEC. Consolidated revenues in 2020 were $566.3 million, a decrease as expected of 34% compared to 2019. Revenues in all segments were adversely impacted by COVID-19, including the postponement and delay of several projects. The GAAP operating loss in 2020 was $1.7 million, including the impact of the nonrecurring loss recovery of $26 million, which was offset by restructuring and settlement costs and advisory fees of $24.7 million compared to an operating loss of $29.4 million in 2019. The improvement in operating income was primarily due to the insurance loss recovery, the positive impact of cost savings initiatives and a lower level of losses on the EPC contracts which was partially offset by the divestiture of Loibl and the impacts of COVID-19 on revenue in all 3 of our segments. Adjusted EBITDA improved to $45.1 million compared to $45 million in 2019. We continue to see strong momentum within our bookings and backlog, with total bookings in 2020 of $645 million and a backlog at the end of the year of $535 million, a 21.3% increase compared to the prior year. I'll now turn to our fourth quarter results. Fourth quarter consolidated revenues were $149.9 million, down 17% as compared to the fourth quarter of 2019. As we said before, revenues in all segments were adversely impacted by COVID-19 as customers delayed projects and travel restrictions limited the ability of our company's workforce to be on-site. The completion of large projects in all 3 of our segments in the prior year -- in the prior year quarter also contributed to this decline. Our GAAP consolidated operating income was $2.2 million, inclusive of restructuring and settlement costs and advisory fees of $7.9 million compared to an operating income of $10 million in the fourth quarter of 2019. The decline in operating income was primarily due to lower volume as a result of impacts of COVID-19. This was partially offset by the effects of improved gross margin in the BMW Thermal segment. Adjusted EBITDA was $16.1 million compared to $22.8 million in the fourth quarter of 2019.

Lou, thanks. Well, in closing and in the near term, while we can't fully predict how COVID-19 will affect the timing of bookings and project progress, we are seeing renewed opportunities emerging as many of our customers have restarted pause projects or undertaking new projects and upgrades, leveraging our technology and capabilities. Combined with our recent strategic actions, this momentum is now driving significantly improved bookings and a confident outlook. Today, our focus is on winning and executing quality opportunities as well as aftermarket services to serve our customers' needs for renewable energy, environmental solutions and efficient operations. And based on current visibility in our customer plans, we expect continued strong bookings of significant earnings growth in 2021, with the return to quarterly trends, more typical of our industry, including the seasonal impacts of cold weather and customers reduced maintenance outages on first quarter performance, which is typical in historical performance. With our recent public offerings, we significantly reduced our leverage at future cash interest payments, derisked our balance sheet and provided a strong foundation to support our portfolio expansion around clean energy technologies and pursue our more than $5 billion 3-year pipeline of identified opportunities on top of our strong high-margin parts and services business. Looking forward, we remain focused on growing our Renewable and Environmental segments, including deploying our waste energy and carbon capture technologies to help meet critical climate goals as the next-generation B&W powers the global energy and environmental transformation. That concludes our remarks, and I'll turn the call back over to our operator to assist with taking your questions.

And your first question comes from Alex Rygiel with B. Riley.

A couple of quick questions here. First, it sounds like new order activity has continued to be very strong in January and February. Maybe you could comment on that comment on where you're seeing those strength either geographically around the world or in which division? And then maybe you could address the carbon capture technologies to speak to sort of the time line of demonstration and then commercialization?

Sure. Yes, no more than happy to. So -- and Lou chime in and provide some color here. But on the bookings, in the quarter, we're obviously seeing, clearly, based on the announcements we talked about in the thermal segment, some of the package borders and some of the other upgrades that we've done. Obviously, there's the -- you're seeing the businesses begin to issue new purchase order for upgrades enhancements, which we like. We like that business area, and we're starting to see that come back more. And some of that is in planning phases where they need to issue the PO now in order to line up with perhaps a spring outage or more importantly, a fall outage for the company business. So we're seeing some of that come in. And we're seeing also in -- around the world, and it some sizable loan environmental opportunities as well. Those are in waste energy, but capturing emissions out of those particular facilities. And we're just -- we're seeing that evolution. I think, globally, start to come back. There are clearly projects that we thought we would have booked by now, but due to COVID country-by-country around the world, there are various delays. At the same time, we're seeing other opportunities come in a little faster than we anticipated as well and obviously, taking advantage of those. But the environmental piece has been strong. Thermal right now is strong as everyone is gearing more or back in focusing on the upgrades, enhancements and some of the outages that normally occur -- that didn't occur last year. So we're seeing that positioning come in as well, too. So all positive from that. And as things settle down, obviously, around the world, a little bit more country-by-country, there are a number of…

Very helpful. And now you have $72 million of cash on your balance sheet, I suspect some of that might be needed for working capital as your revenue position starts to outgrow very nicely over the next couple of quarters. But how are you thinking about using that cash for M&A? And what does your M&A pipeline look like?

There are a lot of opportunities out from an M&A perspective, Alex, a great question. There are a number of opportunities out there. We're looking at anywhere from a little bit larger adjacent type companies or industries that -- especially in -- if you look at some of the cleanup work and environmental work that has to be done inside some of these areas, we think there's some interesting opportunities there, especially even on some of the older plants and fuel plants where you've got significant items there. But we also are looking at younger or let's just say, emerging technologies that is also complementary to what we're doing. That could be anywhere from looking at biofuels and syngas technology, in particular, around hydrogen and/or other aspects could be in ethanol, it could be in other renewable fuels and the creation of those either by waste or biomass. And those are typically a little bit smaller technologies and a little bit unique in that area. And there are a number of companies out there that have some interesting technology pieces that need a little bit of a platform, i.e., a global company, where they can they can actually grow inside of. And so we think those are interesting opportunities as well, and we'll continue looking at those. But main focus is on environmental services, carbon capture services around that and augmenting what technologies we have as well as in biomass, waste-to-energy and some of the -- again, going back to some of the syngas capabilities and around that, and we think that's some interesting areas as well, too. So we'll look at all of those aspects and obviously determine that based on a number of factors, that technology itself, how well we can bring it into the marketplace from an effectiveness standpoint and obviously move to accretion as soon as possible, some of the emerging technologies are in a smaller revenue stage at this point , where some of the more mature other areas we are looking at obviously would create sooner in these accretive almost immediately. So we'll balance that from looking at both sides of that, but those are the areas we're focused on. Lou, I don't know any other comment on that? Yes. Go ahead.

No. I think the one thing to point out is just since the beginning of the quarter, we've announced 7 large projects usually in the $10 million to $15 million range. And over half of those projects were in the Renewable and Environmental segment. And I think that continues to be a proof statement of where we're taking the company with Kenny's strategy of emphasizing Renewable and Environmental, while we're still having some Thermal for profitability, but we'll -- I think that's a good indication of where we're taking the company.

That's very helpful. And Lou, you mentioned in your prepared remarks, the expectation that there is sort of a step-up from 1Q to 2Q to 3Q to 4Q in financial performance, most likely both in revenue and EBITDA. So we're all sort of aligned on sort of short-term expectations. Can you help us to sort of maybe think about the first quarter and how it might compare to previous quarters? Or how it might contribute into sort of the full year for 2021?

Well, we don't really give guidance. We've set a target for 2021 of $75 million to $80 million of EBITDA. We'd expect as COVID lessons and vaccinations rise than the following quarters as really follows the historical trends of the company, it will increase, and we'll hit the $75 million to $80 million target that we talked about.

There are no further questions at this time. I will now turn it back over for closing remarks.

Thank you for joining us. That concludes our conference call. A replay will be available for a limited time on our website later today.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.