Babcock & Wilcox Enterprises - Q2 2023

Transcript

Moderator (participant)

Hello all, a warm welcome to Babcock & Wilcox second quarter 2023 earnings conference call. My name is Louisa, I'll be your moderator for today. You will have the opportunity to ask a question once we reach the question and answer portion. You may do so by pressing star, followed by one on your telephone keypad when we come to that stage. I now have the pleasure of turning over to your host today, Sharyn Brooks. Sharyn, please go ahead when you're ready.

Sharyn Brooks (Director of Communications)

Thank you, Louisa, and thanks to everyone for joining us on Babcock & Wilcox Enterprises second quarter 2023 earnings conference call. I'm Sharyn Brooks, Director of Communications. Joining the call today are Kenny Young, B&W's Chairman and Chief Executive Officer, and Louis Salamone, Chief Financial Officer, to discuss our second quarter results. During this call, certain statements we make will be forward-looking. These statements are subject to risks and uncertainties, including those set forth in our safe harbor provision for forward-looking statements that can be found at the end of our earnings press release and also in our Form 10-Q that will be filed today, and our Form 10-K, that is on file with the SEC, and provide further detail about the risks related to our business. Additionally, except as required by law, we undertake no obligation to update any forward-looking statement.

We also provide non-GAAP information regarding certain of our historical and targeted results to supplement the results provided in accordance with GAAP. This information should not be considered superior to or as a substitute for the comparable GAAP measures. A reconciliation of historical non-GAAP measures can be found in our second quarter earnings release, published this afternoon, and in our company overview presentation that will be filed on Form 8-K this afternoon and posted on the Investor Relations section of our website at babcock.com. I will now turn the call over to Kenny.

Kenny Young (Chairman and CEO)

Thanks, Sharyn, and thanks to everyone for joining us this afternoon. Well, as mentioned in our earnings release, we exceeded our company expectations in revenues and Adjusted EBITDA for the second quarter of 2023, demonstrating the continued momentum we've experienced across all business segments. Revenues across all segments posted a second consecutive quarter of double-digit revenue expansion on a year-over-year basis, with renewable, environmental, and thermal increasing by 31%, 54%, and 36%, respectively. In tandem, we recognized an underlying improvement in revenue, Adjusted EBITDA and net loss on a year-over-year basis, despite increased spending in support of our emerging and new technologies in our Renewable segment. These investments include sales, marketing, engineering, research and development, and back office services, and are all important to support future growth from our clean energy segments.

We are seeing our pipeline increasing to $9 billion of new projects over the next three years, which again, does not include our continued strong parts and services platform. In fact, we are seeing more than $1 billion in BrightLoop opportunities alone. We'll be sharing more about that later in this call. Our bookings in Renewable increased by 28% in Q2 of 2023 versus Q2 of 2022. Our Environmental segment was consistent and held approximately the same amount of bookings and backlog year-over-year. Thermal bookings were lower quarter-over-quarter, primarily due to a large equipment supply and construction project that we announced in 2022. However, Thermal parts bookings increased by 17% year-over-year, quarter-over-quarter. Overall, our backlog was lower quarter-over-quarter by 6%, again, due to the large Thermal project mentioned previously in 2022.

Our outlook for new booking opportunities remains robust, and we are projecting backlog to grow significantly to a range of $850 million-$1 billion by year-end 2023, which includes key projects in both Thermal and Renewable. If achieved, this would represent a growth of 20%-40% in total company bookings and backlog by year-end 2023. Our parts and services business in the second quarter continued to support our revenue generation, accounting for nearly 37% of the company's total revenues. The Thermal segment was a large driving factor, as we maintain a vital role in supporting the broad demand for energy security among global expansion and gas conversion efforts. We see Thermal parts and services returning to normal levels, which is reflected in our revenues and full year expectations.

In addition, our global reach and our renewable services, especially in Europe, was in line with our outlook at the start of the year and is expected to remain strong through the remainder of 2023. As I mentioned earlier, our project bookings within our clean energy technologies continues to grow, and most notably, the interest across our ClimateBright decarbonization platform continues to increase. In July, we announced that B&W received a contract award from NorthStar Clean Energy to conduct an engineering study of our SolveBright carbon dioxide capture process to convert a coal-fired power plant to biomass fuel. This study is the first phase of a commercial scale project, partially funded by the U.S. Department of Energy, and marks an integral step towards our anticipated large-scale commercial project to retrofit Filer City's station's power plant with biomass and decarbonization technologies to replace coal.

When complete, the 75 megawatt power plant would use sustainable biomass as a fuel to generate power with net negative CO2, providing power to more than 70,000 homes. We are excited to bring our clean energy technology to the market and further advance NorthStar's decarbonization efforts. In addition, you should watch for an important announcement from the Governor of West Virginia about a hydrogen project developed by our partners at Fidelis. This new opportunity is based on previous Fidelis H2 announcements, and we are excited to be part of this developing next step in clean powered generation in West Virginia. That announcement will be made tomorrow morning around 10:30 A.M. Eastern Time. With regard to our renewable project developments, we are pleased with the recent demand we have had within our solar business as well.

Despite the headwinds within the residential solar space that you've probably read about recently, the tailwinds across the U.S. for both community and commercial solar projects continues to grow. Our recent contract award totaling $20 million by Summit Ridge Energy for roughly 25 megawatts of community solar energy projects in Illinois reinforces this point. This contract marks another successful collaboration between B&W and Summit Ridge Energy, and demonstrates the increasing demand in community and utility-scale solar projects. We are in negotiations on additional solar projects that, when combined with the recent Summit Ridge Energy announcements, would equate to approximately $100 million in solar bookings in the second half of 2023. That is roughly double the amount of bookings in 2022.

We are also increasing our investments in solar business, which in the long run, will help position the company for improved gross margin and operating margins on a run rate basis by year-end. This includes back-office systems and support, increased self-performance, as well as site management. Transitioning to our BrightLoop hydrogen generation technology, we are pleased to report several key developments, including announcing a dedicated organization within Babcock & Wilcox, led by our Chief Strategy and Technology Officer, Brandy Johnson, to drive our execution and ramp-up of our initial commercial projects in Wyoming and Louisiana. For market clarity, we are redefining our BrightLoop systems as small, medium, and large for now, to demonstrate their ability to meet demand at all sizes. Initially, we are planning to deliver medium platforms in Wyoming and Louisiana, with scale-up to the larger platforms planned for both sites.

Just yesterday, we announced an offtake agreement with General Hydrogen to acquire both hydrogen and CO2 from our medium-sized biomass BrightLoop platform. We are also in formal discussions with another global syngas company to sign an additional offtake for hydrogen from both a medium and large platform. The Louisiana projects will produce an initial hydrogen output of approximately 10-15 tons per day for industrial use, with an anticipated scale-up to large unit hydrogen production by the second half of 2029. This timeline closely reflects the development plans in place for our Wyoming project, with initial hydrogen production output of approximately 10-15 tons per day by mid-2025, with anticipated scale up to a large unit hydrogen production by the second half of 2028.

We have demand for one or two smaller platforms, roughly 1-3 tons of hydrogen per day, and are determined to have one of those sites producing hydrogen by the end of 2024. For our upcoming small and medium-scale projects, we've outlined projected development plans with the timeline for initial hydrogen production in 2024. Meanwhile, while BrightLoop financing efforts continue to develop, our confidence remains strong. We anticipate funding coming from state and local governments, as well as investments from various pension funds and end customers, as well as Babcock & Wilcox. We are seeking direct financing either at the project level or through B&W, directed towards specific projects. Longer term, we continue working with various Department of Energy and DOE loan program offices, including congressionally approved appropriations funding, directed towards the funding of hydrogen demonstration using chemical looping.

Our pipeline, as previously mentioned, is over $9 billion across all three segments, and we currently have, as mentioned previously, approximately $1 billion in BrightLoop opportunities alone. We believe this puts us on a pathway to reach $1 billion in bookings by 2028, with combinations of small, medium, and large projects. We feel confident that could lead to $1 billion in revenues by 2030 and beyond. That will still only represent roughly 1% of the market share of total hydrogen spend by 2030. To give more clarity, roughly, and of course, depending on specific site factors, the revenues associated with the small projects will equate to roughly $5 million-$40 million per unit. Revenues for the medium units will be roughly $40 million-$100 million per unit, and revenues for large units will be approximately $150 million-$400 million per unit.

These revenues should bring 20%-25% gross margins plus, I'm sorry, 25% gross margins. The follow-on revenues, of approximately $200,000-$250,000 per ton of hydrogen produced in services and particle support per day, will produce even higher margins. You will find more details in the new BrightLoop deck posted to our website today, and we've also included some of the new BrightLoop slides in our investor deck as well.

Given the strong financial performance that has continued throughout the year, paired with our seasonally strong third and fourth quarter results, which are cyclically second half weighted, we are confident in our ability to achieve our full year 2023 Adjusted EBITDA target of $100 million-$120 million, while continuing to balance our investments in future growth along with Adjusted EBITDA performance. I'll now turn the call over to Lou to discuss the financial details of the second quarter in 2023. Lou?

Louis Salamone (CFO)

Thanks, Kenny. I'm pleased to discuss our second quarter results, further details of which can be found in our 10-Q that was filed with the SEC today. Our second quarter consolidated revenues were $305.2 million, which is a 38% improvement compared to the second quarter of 2022. This is primarily attributable to higher volumes in our Renewable segment due to Renewable Service and our solar-based businesses, higher overall volume in our Environmental segment, and increasing Thermal segment volume due to higher levels of construction and parts activity. Our net operating income in the second quarter of 2023 was $7 million, as compared to an operating income of $3.7 million in the second quarter of 2022. This second quarter included a one-time gain on a sale of an asset.

Our adjusted EBITDA was $21.9 million, compared to $22.9 million in the second quarter of 2022, which, when adjusted for the one-time sale of the asset in the second quarter of 2022, represents a significant improvement in adjusted EBITDA from $15.9 million-$21.9 million. Bookings in the second quarter of 2023 were $191 million, we had an ending backlog of $567 million.

Our loss per share in the second quarter was $0.10, compared to a loss per share of $0.07 in the second quarter of 2022, or in 2022, a loss per share on an underlying basis when excluding a non-cash pension benefit of $7.4 million, and this also included the one-time gain on the sale of the asset, which I previously, previously mentioned. I'll now discuss our second quarter segment results. Within our Babcock & Wilcox Renewable segment, revenues were $98.9 million for the second quarter of 2023, which is an increase of 31% compared to the $75.2 million in the second quarter of 2022. This increase in revenue is primarily due to higher volume associated with our Renewable Service business and our solar businesses.

Adjusted EBITDA in the second quarter of 2023 was $500,000, as compared to $4.2 million, when excluding a non-recurring $7 million gain from the sale related to development rights of a future solar project in the second quarter of 2022. Within the Babcock & Wilcox Environmental segment, revenues were $48.7 million in the second quarter of 2023, which is an increase of 54% when compared to $31.6 million in the second quarter of 2022. This increase is primarily driven by overall higher volume of dry cooling technology projects across the environmental segment. Adjusted EBITDA was $3.4 million for the quarter, compared to $600,000 for the same period last year, again, primarily driven by higher revenue volume, as described above.

Turning to our Babcock & Wilcox Thermal segment, revenues were $158 million in the second quarter of 2023, which represents an increase of 36% compared to the $116.3 million in the second quarter of 2022. This was primarily attributable to the higher level of volume in our construction projects and our package boiler business. Adjusted EBITDA in the second quarter of 2023 was $24.4 million, which is an increase of 49% compared to the $16.4 million in the second quarter of 2022. This is again, primarily driven by the higher revenue volume described above, as well as better project performance. I'll now turn to our balance sheet, cash flow, and liquidity.

Total debt at June 30th, 2023, was $358.2 million, and the company had a cash, cash equivalents and restricted cash balances of $83.9 million at the end of June, at June 30th, 2023. I'll now turn it back to Kenny.

Kenny Young (Chairman and CEO)

Thanks, Lou. Well, in closing, you know, we continue to position Babcock & Wilcox as a leader within the broader clean energy transition, further developing our suite of decarbonization solutions while continuing to support our thermal customers. With our line of sight into expanding new bookings, opportunities, and expanded pipeline of over $9 billion in identified global projects, including our BrightLoop hydrogen generation technology, we are excited about the remainder of 2023 and the industry tailwinds in place for 2024 and beyond. Our momentum in the first half of the year wouldn't have been possible without the dedicated team of B&W employees driving these initiatives behind the scenes.

I would like to thank all of our employees for your continued efforts in moving these innovations forward and also supporting our customer projects, both domestically and abroad, while working safely and providing the highest quality, performance and operational success. In addition to thanking our employees, we also want to extend our appreciation to our valued customers, shareholders, and trusted partners for the continued support and belief in our company. Our commitment in driving innovation forward is central to B&W's mission, and we look forward to working with you and building upon our accomplishments in the years to come. With that, I will now turn the call back over to Louisa, who will set up your questions. Louisa?

Moderator (participant)

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad now. When preparing to ask your question, please ensure that your headset is unmuted locally before speaking. We'll pause briefly while questions are now being registered. Our first question today comes from Aaron Spychalla of Craig-Hallum. Aaron, please go ahead when you're ready.

Aaron Spychalla (Senior Research Analyst)

Hi, Kenny Young and Louis Salamone. Thanks for taking the questions. You know, maybe first on my end, you know, can you just talk a little bit about the NorthStar Clean Energy project and, and just kind of what the opportunity on the revenue side is there, and maybe timeline, milestones, as we look to kind of phase one to phase two? If there's anything else you can share there on the opportunity with, with this customer or, or other, customers on, on, like, the biomass side of things?

Kenny Young (Chairman and CEO)

Sure. Yeah, no, I'd be happy to. Thanks, Aaron, first of all, for joining today. The key kickoff project, which we announced, was the, obviously, the engineering study and phase, and that's it, it's small revenues for us, probably $1 million for that phase of the project, overall. The intent would be that that's complete here in, you know, in probably third, early fourth quarter, and finalizing that by year-end with the client. We, we anticipate once they move past that phase, when they, you know, if they move into the full project phase of the project, which is a 75 megawatt biomass facility, you know, our, our efforts in, in this regard on this project will be more focused towards the decarbonization aspect of that plant and site.

The SolveBright technologies will be positioned well there for that, and we're excited about that opportunity. Ballpark, if we were to move to full project phase, you know, we'd think about the revenues being, you know, somewhere in the $90 million-$100 million-ish range, ±, you know, depending on the exact scope and, and finalizing that particular contract. That probably would be something that would be if we get to that range or that step, would be a booking that we would realize somewhere mid-next year, 3rd quarter, maybe something like that. But that's, that's, that's the exciting part, is, it's one of the early opportunities around our SolveBright technology, and, and we're excited to, to see that move forward.

Aaron Spychalla (Senior Research Analyst)

Got it. Thanks for the color there. Maybe just second, you know, can you just on, on the backlog and, and kind of the guidance, can you just talk a little bit about the, the confidence you have in, in the second half and kind of reaching, reaching the guide, just, you know, you kind of laid out $850 million-$1 billion. Just any color on, on what areas, you know, drive, drive that?

Kenny Young (Chairman and CEO)

Yeah. No, that's. I, I think I said $850 million to $1 billion, I want to clarify, you're right, it's $850 million, so thanks, thanks for clarifying that. There's obviously a number of projects that we have, that we're in negotiations on, that are, you know, sizable projects in both, you know, thermal as well as in the clean energy technologies that we're involved in today. You know, some of those. You know, obviously, when we give a range, we're anticipating some of those to happen, and some may get pushed into early next year. We've got a number of those projects that we're in negotiations on right now.

You know, from an internal planning perspective, we thought one or two of those may, may move into bookings more in the Q2, Q3, but they're, they're slipping, you know, into Q3, Q4. And, and one or two of those may slip into next year. That's why we provide the range of the $850 million to $1 billion. But, you know, we see, a pathway to those opportunities, and, you know, we're in, in discussions and negotiations on those as we speak. That's what gives us the, the confidence in, in, in those numbers. Hopefully, that helps, but happy to answer as more if I can.

Aaron Spychalla (Senior Research Analyst)

No, I, you know, I think that's good. Thanks for taking the questions. Appreciate it.

Kenny Young (Chairman and CEO)

Yeah, no problem. Thanks, Aaron. Appreciate it.

Moderator (participant)

Thank you for your question, Aaron. Our next question today comes from Rob Brown of Lake Street Capital Markets. Rob, please go ahead.

Rob Brown (Founding Partner and Senior Equity Research Analyst)

Hi, Kenny and Lou. On the, on the BrightLoop pipeline...

Kenny Young (Chairman and CEO)

Hi, Rob.

Rob Brown (Founding Partner and Senior Equity Research Analyst)

I think you've gotten, you've gotten more bullish on the BrightLoop pipeline and, and sort of, you know, scoped it out a little bit more, definitively here. What's, what's sort of driving all that confidence? I assume it's a number of customer interactions, but, you know, where are the customers at, and is it, is it, you know, driven by some of the IRA and other legislation?

Kenny Young (Chairman and CEO)

Yeah, well, combinations of all that. It, it, it is more bullish because of the interactions that we're having both, both on the, you know, the Wyoming aspect and the Louisiana aspect initially on those two. There's excitement for us anyway, and I won't, you know, can't comment much further, but, you know, in and around discussions we're having in the oil and gas industry on potential projects using petroleum coke or pet coke as a fuel source as well, too. Plus a number of, of other projects. We're, we're also seeing, you know, discussions, and we're, we're moving into specific long-term planning around, as I mentioned in the call, scale-up from the initial medium-sized projects in both those locations, Louisiana and Wyoming, to large size units in both those locations.

The need for hydrogen on both of those are much bigger than the medium units will provide, but the scale-up is, is, you know, in discussions right now, and we see pathways to move those forward a little bit. Further, once we get the medium size up and running. We've got, you know, pathway into large units and see visibility into those. We see visibility into other projects, like I said, in the oil and gas industry, as well as, you know, a few others that are around the world. That's, that's on, you know, I would call it, I'm saying immediate opportunities, meaning opportunities that we're actively engaged in.

We're in early discussions with, on other projects, potentially in Europe and elsewhere, that give us confidence, in those around, you know, our abilities to get to those bookings and, and backlog that I mentioned. I'm sorry, our, our bookings and revenues that I mentioned on the call, associated with BrightLoop. The, you know, uniqueness for us is we're one of the only technologies that can leverage, A, a, a solid fuel aspect on a scale-up environment to produce hydrogen and, and also isolate the CO2. The second aspect is, you know, we're unique in our abilities to be able to blend fuels on BrightLoop. That really comes into play in these opportunities.

If you look at, you know, for example, in Wyoming, the possibility exists, and we're planning on introducing a mixture of biomass with, in that particular case, coal as a fuel source. That will, as to your point, will allow us to leverage some of the IRA credits, 45B credits on that or us or the customer, depending on how we finalize that. Still the drivers from the IRA standpoint, to blend the biomass in with the coal, to leverage those credits. That's something that we're in dialogue and discussions right now directly with the customer, you know, to make a final determination there. Ours is the only real technology that can have that, that dual blending.

We'll be looking at, you know, similar aspects on either natural gas and biomass in other locations, and yet in other locations, it'll strictly be biomass, and yet in others, it'll be strictly natural gas. We have that, that runway. When you look at. Just to expand on that, I'm gonna go a little bit further. When you look at our technologies versus, say, steam methane reform or auto thermal reform, technologies, we're vastly different, in the fact that we can produce hydrogen from natural gas, but our process using the chemical looping, will actually, create and isolate the CO2 on the front end of the process, rather than in a very expensive post-combustion environment.

SMR and ATR, by their definition, and the way the technology works, actually requires a post-combustion carbon capture, which is very expensive from a capital standpoint, and to be able to provide. Long term, you know, we believe the market for hydrogen being produced from natural gas will remain strong for many, many, many, many years. The fact that we can produce hydrogen from natural gas, but we automatically isolate the CO2 for either other beneficial use or sequestration, puts us in a real competitive advantage from a cost profiling standpoint versus traditional SMR and ATR technology. If you combine all of those elements together, it gives us confidence in our technology and, you know, where we see it going.

Rob Brown (Founding Partner and Senior Equity Research Analyst)

Okay, thanks for the great overview there. Then, and then in general, on your, on your pipeline growth or your increase in your pipeline estimate, how much of that or how is the European waste energy market at this point? Has that increased as well?

Kenny Young (Chairman and CEO)

Yeah, we're seeing some opportunities in waste energy. It's still strong in the European market. U.K., in particular, is still as strong for new build projects. We're starting to see more demand, I think, which is great for our Renewable Service business and platform in Europe, where older plants are requiring upgrades and new services, either to expand their size or platform or, you know, just on update to technologies and, or, you know, various parts and services that traditionally B&W hadn't been involved in.

We're seeing that as well, too, and, and we're, you know, obviously, I think we, we've tried to share that excitement in the release and on the call, but, you know, our Renewable services group in Europe is doing a great job, and we're seeing the increase in revenues, you know, on that platform as well. The, you know, we mentioned earlier, an announcement, I guess, late last year, that we're involved in the Lostock project, which I think now is the, the largest in the United Kingdom, presently, from a plant size standpoint. The, there, there will be others, and, and we're involved in discussions on, you know, some other projects as well, which would be potentially part of that backlog that we talked about, but clearly in our pipeline, too.

Rob Brown (Founding Partner and Senior Equity Research Analyst)

Okay, thank you. I'll turn it over.

Kenny Young (Chairman and CEO)

I will, I will add to that, but I No, that's good, Rob. I'll just add to it because I think it's important. You know, we're, we're starting to see early, early on, but we're starting to see a number of potential projects emerge in the U.S. as well. in the waste-to-energy segment, and, and that's exciting for, for us, and, and we're in discussions with a number of partners on those projects. We're starting to see, you know, some, some early demand around waste-to-energy here in the U.S., and I think that's an exciting development. You know, nothing, or I, I, I don't think we would see anything in, in any potential bookings until the latter part of 2024 or early 2025, somewhere in that neighborhood.

You know, those take time, obviously, to develop, but there's a number of them beginning to develop here in the U.S., and I think that's, that's exciting news for us. It's been a while. Anyway-

Rob Brown (Founding Partner and Senior Equity Research Analyst)

Okay, thank you.

Kenny Young (Chairman and CEO)

I'll pause there. Thanks.

Moderator (participant)

Thank you for your question. Our next question today comes from Brent Thielman of D.A. Davidson. Brent, please go ahead.

Brent Thielman (Managing Director and Senior Research Analyst)

Hey, great. Thanks, good, good afternoon or evening. I guess, Kenny, you, you gave us a little flavor for the financial prospects around Bright. We appreciate the added color there. Since you gave us kind of the revenue opportunity, I got to ask you, you know, how we ought to think about maybe the margin opportunity from the business, such a unique sort of technology to you in terms of what you're offering here. I presume at least the margin opportunity may be in excess of kind of the legacy B&W businesses, but, but any thoughts there?

Kenny Young (Chairman and CEO)

Yeah, no, we, we fully anticipate and expect it to be a strong margin uplift to B&W overall. you know, as, as we mentioned, the different size platforms, you know, rough order of magnitude, you know, we're fully anticipating those to be in the 20%-30% gross margin range on those new build projects that we're involved in. 'Cause, you know, the other key piece that I, that I mentioned, or tried to mention anyway, was that we also anticipate, you know, follow-on on an annual basis of about, you know, call it $200,000-$250,000, roughly, of additional revenues on per ton of hydrogen produced.

You know, if we deployed several, you know, I don't know, 400 or 500 tons of hydrogen, you could multiply that out times $200,000-$250,000 a year in additional incremental revenues from, you know, follow on parts, services, and particle. You know, we fully anticipate that to be a much higher margin than the initial projects. Hopefully that helps. That's how we're thinking about it in terms of our future cash flows, and, we wanted to reflect that in the call.

Brent Thielman (Managing Director and Senior Research Analyst)

Got it. Appreciate that. Just back on the visibility toward the backlog figures you, you talked about by, you know, potentially by year-end, $850 million-$1 billion. Maybe just what stages these, these various opportunities are? I, I guess what I'm getting at, Kenny, are these things that you've been selected for, but not just not signed yet? I just wanted to understand that a little more.

Kenny Young (Chairman and CEO)

Some, some of... Yeah, it's both. Some of those were- we've been selected for, and we're in discussions on, or negotiations in, contracts. Some, some of those are, where we're down to, you know, us versus one other, and we're highly confident that that will come our way for, you know, either technology purposes, competitive purposes. You know, we've got strength in, if we go to some of the Thermal projects and the fact that we provide union construction opportunities combined with our technologies and, you know, we're, we're involved in, a couple projects on the Thermal side that would require both the union construction and the technology component, and we're really in a strong position to provide that. And that, you know...

It's with customers that we've got, you know, also customers that we've got strong prior history in performing services and work for. Those, those all give us the, the confidence that we can reach those backlog numbers, if that makes sense.

Brent Thielman (Managing Director and Senior Research Analyst)

It does. Maybe just lastly, the, the solar arena for you, I know that's a business you've been ramping up, quite a bit. Maybe just an update on progress you're seeing there?

Kenny Young (Chairman and CEO)

Yeah, as we, as we mentioned, you know, I, the solar side, we're starting to see, you know, for us, not the market. The market demand's been there, but we're starting to, to, you know, slowly pick up our share of opportunities. As mentioned, you know, with what we have, either been awarded, just, we just announced in July, or projects that were well in, you know, part of that $850 million-$1 billion, but projects that we're well into discussions on, we, we fully, intend and plan and, and should be able to announce at least $100 million in bookings on solar for the second half of 2023, which would double from last year. There are more opportunities than that in the, in the solar market on the community and utility scale.

Clearly, we are improving or working to improve the margins on those projects, primarily, as we've expanded that business. As I mentioned on the call, you know, we're investing in some back office systems, as well as a critical part is more self-performance on those projects, around those solar services. Those are two areas that we're actively involved in and we'll continue to invest in. We, we are seeing that on the solar opportunities. You know, as we mentioned before, the, you know, key thing that we're seeing constantly as we get into these renewable energy projects, many at the state level and some of the state funding on the IRA, you know, require solar aspects as well as clean energy aspects and/or, you know, CO2 sequestration.

Some of those are opportunities long term that we're starting to see that would blend some of those services, where we're, we're pulling together solar in conjunction with, you know, possible other green energy or clean energy projects in the marketplace. We're, you know, we'll see that in full probably next year more as the IRA kicks in fully. You know, a lot of the developers that we're in discussions with are starting to acquire or we're answering, you know, RFPs and other aspects in and around some of those combined technologies. But there's, there's a ramp on solar. We've got to improve the margins. We know that, and we're, we're working behind the scenes to, to do that, you know, overall.

I, I should have mentioned on the call and didn't, but I'll take the opportunity to put it here, so it's in the script. We are, you know, based on, this is beyond solar, but based on, you know, decisions and actions that we've taken over the past couple of years to help create more optimization and efficiencies in the business, you know, we're working to take out roughly another, you know, $15 million of costs out of our platform. That would be, you know, more incremental to whatever targets we put out in, 2024. Those are, you know, just further optimizations, based on actions that we have taken previously, you know, through a number of different areas. We're excited to...

You know, we wanted to point to that because it's important that we continue to announce and discuss that we're constantly trying to optimize the business as we continue to invest in the future growth of the platform and the company. We're looking to do both.

Brent Thielman (Managing Director and Senior Research Analyst)

Okay, thank you.

Moderator (participant)

Thank you for your question, Brent. Our final question today comes from Alex Rygiel B. Riley Securities. Alex, please go ahead.

Alex Rygiel (Managing Director and Senior Research Analyst)

Thank you. Good morning, Kenny and Lou. Looks like you got a lot of exciting things going on here long term. A couple of questions for you. First, backlog, $567 million. Your projection of $850 million-$1 billion by year-end is pretty fantastic growth. Can you just kind of keep it simple and help us to bridge from $567 million-$850 million-$1 billion? Sounds like $100 million is coming out of solar, but maybe give us a few other kind of bigger chunks that can help walk us there.

Kenny Young (Chairman and CEO)

Yeah, You have a great question, Alex. By the way, thanks for joining. We, we have a number of... I won't get specific because obviously we're in negotiation discussions, but we have a number of projects out that we're involved in. Some of those are larger projects that are in the, you know, $150 million-$200 million range that we're involved in, both thermal and in our, you know, I would say thermal and renewable energy, to keep it simple, primarily. There's, there's some smaller ones in Environmental, but the larger ones that I'm referring to are in Renewable and Thermal both. And, and we're in discussions on those projects. But, you know, some of those are new build opportunities in waste-to-energy and biomass to energy.

Some of those are, you know, continued upgrades, enhancements, and conversions in the, in the Thermal sector. There are, we have several large projects that are in the $100 million+ range. I guess, a couple that could be in the $200 million+ range, that would be potentially part of that, scale up from the $560, $850 billion-$1 billion.

Alex Rygiel (Managing Director and Senior Research Analyst)

That's, that's very helpful. Then, you know, with, with that said, can you kind of talk about your comfort level and guidance of the $100 million-$120 million? Clearly, if backlog's at $850 million-$1 billion, I, I've got to suspect you're going to have incrementally greater confidence in, in strong growth over that $100 million-$120 million this year out in 2024. Maybe talk about those two points.

Kenny Young (Chairman and CEO)

Yeah. No, it's, I mean, it would, it would, the, the backlog would come in, obviously, in timing of EBITDA, Adjusted EBITDA impact this year will be greatly dependent on when that backlog hits, right? Obviously, we're, from a cost standpoint, we have to get those projects in and going. Obviously, some will, some will happen before the end of the year, and some will happen more in November, December. There's always a, a timing issue there around that. It, it would allow us to really focus on growth opportunities in 2024.

The, the offset to that would only be, as we mentioned on the call, obviously, we continue to invest in these new technologies, BrightLoop, as well as, you know, biomass with the carbon or oxycombustion or carbon capture associated with that, as well as some of the new environmental bluegrass treatment technologies we've brought to the marketplace. We, we constantly have to balance the, the expense and spend towards investing in the future growth of the platform to support those new technologies versus the, the run rate EBITDA in the business. That's, try to indicate that in the call as well, that we balance those two. Clearly, on a site, we've got, you know, growth that we see. Obviously, getting the backlog in would support, you know...

That some of that backlog will be spread over 2024, 2025, 2026. Some of that backlog will, will actually be 2025, 2026, 2027. It, from a revenue timing standpoint, they'll vary depending on the specific project on, on the revenue, impact and the timing of that revenues. I don't know. I don't know, Lou?

Louis Salamone (CFO)

Yeah, I, I think you'll see, Alex, when you look at the queue, the backlog runoff is about, about 60% of that $560 million-$570 million will run off this year, and then about 30% next year, and then, as Kenny said, the rest thereafter. That's the immediate backlog that we have literally under contract. There'll be additional backlog, and then we don't, we don't include a substantial amount in backlog for the parts business because that's kind of a book-and-build business, so we don't really consider that in the backlog. That gives us the confidence of hitting these numbers for 2023 and beyond.

Alex Rygiel (Managing Director and Senior Research Analyst)

Okay. Thank you.

Kenny Young (Chairman and CEO)

Alex, thanks. Louisa, we'll turn it back over to you.

Moderator (participant)

Thank you for your question. Thank you. That concludes the question and answer session. We have no further questions. Thank you, Kenny and Lou, for your prepared remarks. I will now pass the call back to Sharyn Brooks for any closing remarks.

Sharyn Brooks (Director of Communications)

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

Moderator (participant)

Thank you all for joining today's Babcock & Wilcox second quarter 2023 earnings conference call. Have a good rest of your day. You may now disconnect your line.