Q1 2022 BWX Technologies Inc Earnings Call
Okay.
Ladies and gentlemen, welcome to BWXT technologies first quarter 2022 earnings conference call.
At this time all participants are in a listen only mode. Following the company's prepared remarks, we will conduct a question and answer session and instructions will be given at that time.
I would now like to turn the call over to our host Mark Kratz, Bwxt's Vice President Investor Relations. Please go ahead.
Thank you, Matt Good evening, everyone and welcome to Bwxt's first quarter earnings call. Joining me are Rex <unk>, President and CEO , and Rob Lemasters Senior Vice President and CFO .
On today's call, we will reference the first quarter earnings presentation, which is available on the investors section of the BWXT website.
We will also discuss certain matters that constitute forward looking statements. These statements involve risks and uncertainties, including those described in the safe Harbor provision family Investor materials and in our SEC filings.
We will frequently discuss non-GAAP financial measures, which are reconciled to GAAP measures and a separate presentation that can also be found on the investors section of the BWXT and website.
I would now like to turn the call over to Ron.
Thank you Mark and good evening, everyone earlier today, we reported solid first quarter 2022 results revenue was up to three $531 million and adjusted EBITDA was $94 4 million demonstrating consistent operational and financial performance. Despite some headwinds from COVID-19 absences early in the quarter equally as.
BWXT continued to move forward on several strategic growth initiatives. So let me give you an update on those before I turn the call over to Rob to walk through the financial details.
As noted in the earnings date of announcement and detailed in our earnings release, we are in the final stretch and qualifying the Tech 99 generator production line. We spent the majority of the last two months conducting a comprehensive series of Hot chemistry runs to fully test and optimize the manufacturing line to support our application to the FDA. This testing we did last.
Month in achieving process qualification acceptance of our radio chemistry system over the next couple of weeks, we will be conducting end to end process qualification runs ahead of the first of three registration batches, which will generate the final data set for the FDA package.
I want to express my gratitude to the team at BWXT medical for their dedication and conviction in this endeavor. This first of a kind project has been enormously challenging. While this is somewhat typical for projects of this complexity and scale in the nuclear industry. The team has nonetheless demonstrated remarkable resilience and commitment to this new product it has been a longer road than.
We anticipated, but we are introducing a disruptive product with very attractive attributes into an exciting market.
And we see the tech 99 product line as a foundational portfolio product for BWXT medical and through all this we continue to see a very attractive business case and associated value creation.
And the government operation services business, we completed the contract transition for Savannah River, which occurred towards the end of the first quarter. We have now entered the fee bearing period and look forward to executing this important mission for the department of energy.
Yeah.
In March we delivered the final design for the payload transportable micro reactor to the department of Defense and we are standing by for a decision on contract award for the demonstration phase we applied our best efforts and remain confident that our approach to the demonstration phase underscored by Bwxt's history, and credibility and reactor and fuel Matt.
Factoring combined with some of the most advanced nuclear technology innovations will win the day.
As these advanced reactor programs mature, we have begun to consider incremental investments not only in technology and people, but also physical space for instance, and consideration for a small divestiture in 2020, we acquired a nuclear qualified facility adjacent to our main plant in Lynchburg, Virginia, we've gone to make improvements and attend to outfit that facility to <unk>.
How's the bulk of new micro reactor work should BWXT prevail in these strategic future opportunities.
Finally, as we noted in today's earnings release, we recently closed a small but strategic acquisition that expands and enhances our core mission and global security the.
The acquisition consists of two businesses dynamic controls and <unk>, which supply highly engineered proprietary valves manifolds and fittings for global shipbuilding, which complements our core naval nuclear manufacturing business.
The acquisition enables BWXT to participate more fully in the U S and UK Navy supply chains with strong incumbent OEM and aftermarket positions on several important enabled platforms, including Virginia dreadnought astute and Ford class vessels. These businesses, we believe provide a beachhead for international.
<unk> operations that expose us to growth with allies, whom we view is increasingly important in light of recent threat to global security.
Dynamics controls <unk> exhibit the business characteristics, we see in the rest of the BWXT portfolio. They have been sole source critical suppliers since the 19 eighties and share many unique differentiators, including high consequent systems design and manufacturing to exacting quality standards long term visibility and insensitive.
To global Capex and GDP cycles.
Lastly on the transaction, we continue to see global supply chain and labor shortages. We also see this as an acquisition of talented employees, who have experience relevant to our core business.
By and large BWXT has been insulated for much of this global pressure, particularly on labor shortage shortages labor shortages, our voluntary turnover remains low relative to other industries as we have a strong culture long visibility into our backlog and our future built on growth and opportunity.
This was a challenge during Covid is virtual work is really not possible for most of our workforce and our employees likely benefited by remaining connected to our culture and the critical mission day serve.
In that vein. The Navy released an updated 30 year Shipbuilding plan in April most assuring is that there are no changes to the acquisition plan.
For nuclear powered vessels over the next five years Interestingly. The Navy has produced three alternative procurement schedules that extend for the balance of the 30 year plan, while each option has some variability there is no change to the Columbia class ballistic missile submarine procurement schedule as it remains the Navy's top acquisition priority.
The alternatives presented have some suggested procurement changes related to aircraft carriers attack submarine quantities in a new class of cruise missile submarines to be procured following Columbia.
We continue to consult and work closely with naval reactors to understand the path that Navy is planning the feedback. We've received so far is that there is no change to the strategic baseline for the long range business forecast as we look to ensure BWXT is positioned to serve the needs of the U S. Navy.
The President's budget request for government fiscal year 2023 was also released in March.
Followed by the release of the future year's Defense program documentation through 2027 and.
In addition to status quo for naval reactors BWXT programs, where it's widely supported in the President's request.
And the department of energy the request has solid funding levels for uranium processing projects, including a ramp in funding for the uranium conversion and purification services and sustained funding for uranium down blending. The Dod budget also supports the funding for the new Savannah River contract on which we recently transitioned.
Advanced nuclear reactors also continued to receive support with budget request for the three major areas in which BWXT is involved for space NASA received funding request for both vision surface power and nuclear thermal propulsion and the Doe is increasing funding for space based the Dod is increasing funding for space.
<unk> nuclear systems, as well and the Doa the president requested that the advanced reactor demonstration program continue to be funded.
And lastly, the strategic capabilities office request for the transportable nuclear reactor project Pele is in line with the transition from designed to demonstration later this year.
With that update let me turn it over to Rob.
Thanks, Rex and good evening everyone.
Let's start with total company results on slide four of the earnings presentation.
First quarter revenue was solid at $531 million up about a half a percent compared with the first quarter last year driven by growth in government operations, which was partially offset by a decline in commercial operations as expected first quarter adjusted EBITDA was down year over year to $94 $4 million, which.
Driven by a reduction in recoverable Cas pension income and slightly lower operational performance first quarter earnings were <unk> 69 per share off about a penny from operations and more so by lower recoverable Cas pension income.
We also had fewer foreign exchange gains reported in other income.
These headwinds were partially offset by a lower share count.
As typical with our first quarter, we had modest operating cash use this quarter, we utilized about $5 million of cash in operations compared with $98 million provided by operations in the prior year period. The majority of that difference was due to a single $88 $7 million cash receipt that occurred in the first quarter of 2000.
'twenty one that normally would have been collected before the end of 2020.
Capex on the other hand was down significantly to $52 million in the first quarter of 2022, as we begin to wrap up major capital campaigns for the Navy business and the Tech 99 generator commercialization line. This resulted in a free cash flow use of $58 million for the first quarter of 2022.
We have detailed our first quarter EPS bridge on slide five now I'll now move to segment results on slide six.
In the first quarter government operations generated $432 million of revenue up 2% driven by long lead material production and the naval reactors business higher volume in uranium processing and higher volume in advanced technologies related to micro reactors work. These increases were partially offset by lower missile tube.
Revenue as we complete the remaining contractual obligations first quarter government operations, adjusted EBITDA was down 3% year over year to $84 $7 million driven by lower recoverable Cas pension income and fewer positive contract adjustments due in part to lower productivity and the naval reactors business.
The business was impacted early in the quarter by inefficiencies related to COVID-19 absences. During the omicron variant search excluding pension segment adjusted EBITDA would have been up year over year in line with revenue.
In commercial operations revenue was $100 million for the first quarter down 7% driven by lower commercial nuclear power field services, which were higher in the first quarter last year due to a particularly large outage project. This was partially offset by higher fuel handling and the commercial nuclear power business and higher <unk>.
<unk> medical revenue of year over year.
First quarter commercial operations adjusted EBITDA was down 5% to $10 7 million as lower revenue was partially offset by a more favorable product mix.
Turning now to guidance on slide seven.
While first quarter performance was about what we expected or perhaps slightly better we do see a modest interest expense headwind building through the remainder of the year. We have updated our interest expense expectation to a range of 35% to $39 million versus our prior range of 30% to $35 million.
We look forward to seeing how the second quarter operations progress and calibrating, the remaining risks and opportunities for the remainder of the year.
So with our performance to date and given we are only through the first quarter of the year, we are reiterating guidance and still feel that the midpoint of our EPS guidance and three concert consensus is aligned with where we will finish 2022.
As we discussed in our last earnings call, we see second quarter EPS stepping up sequentially driven by the transition of the Savannah River contract and a seasonal increase in outage services work for commercial power as.
As the year unfolds, we anticipate that EPS will continue to build ratably thereafter.
Switching gears to the acquisition as Rex mentioned, we view. This addition to BWXT is strategically important as it will enhance and expand our core naval nuclear business. It is very rare that we find businesses with attributes similar to that of our core business and in this case is right in the Bull's eye.
These two businesses provide BWXT with an expanded global installed base with LIFO platform components on every nuclear powered submarine used by the U S and U K navies.
The addition of dynamic controls and <unk> are factored into the reiteration of our outlook as the financial impacts of the acquisition fall within the initial guidance ranges.
So let me give you some of the specifics on the deal.
We purchased these businesses for $50 million and the two acquired entities have a combined annual revenue of about $20 million, so less than 1% of Bwxt's total revenue, but are expected to grow nicely over time.
The proprietary and critical nature of the products. These businesses generate about 20% EBITDA margins similar to Bwxt's core business.
When you consider depreciation and amortization, which we did not plan to non-GAAP given the size of the deal will be slightly positive at the op income level. This year.
After a year of growth, we expect the deal to be very modestly accretive to EPS in 2023 and beyond.
Lastly, I wanted to I want to close my remarks on some observations that I've made over my first six months as CFO and aspirations, we have moving forward.
As I have made my way deeper into the organization I continue to be impressed by the culture of continuous improvement.
This is clearly evidenced in the Navy business and was a core principle, we inherited from Admiral Rickover that remains today. It is part of the BWXT DNA and really when I think about honing the business I think about leveraging that culture and capability more broadly for me, particularly in the finance organization, we will continue to elevate our performance.
<unk> and financial analysis planning and communication of working capital investment decisions and forecasting just to name a few.
One of my other top priorities is to focus on driving free cash flow conversion, which we laid out as an important component of our medium term guidance are.
A major element of that target is ensuring that our working capital is managed as efficiently as possible. Both in the near term with an <unk> analysis and optimization, but also through longer term structural changes that could benefit the companys use of cash.
However, the largest near term driver of generating more free cash flow is capex as capex transitions to a move to more of a maintenance level, our first opportunity to achieve this would naturally be 2023.
We believe the next couple of years will show a return to a more normalized level of spending with only modest growth capital to turbocharge, our strategic initiatives.
While we haven't fully committed to any of these new investments we continue to see the most likely targets of any future growth capex to be in space and defense reactors or nuclear medicine manufacturing in any case, we see such investments at tens of millions each that would be spread across a couple of years, we will be transparent <unk>.
<unk>. These in explaining why we find these to be compelling ROIC projects.
Our nearest.
Term opportunity would be facilitating for the pele terrestrial micro reactor and see such an investment to be less than $30 million of incremental capital beyond the amount we're spending in our normalized capex.
My final area of focus has been to enhance our transparent communication with investors analysts and other stakeholders. Most recently BWXT was named one of the world's 100, most transparent companies by transparency global and we embrace that award and believe it is present and the foundation of the BWXT culture.
So our goal is to continue down this path, making improvements along the way to maintain the trust of our customers and shareholders with that let me hand, it back to Mark.
Thanks, Rob that concludes todays prepared remarks operator. Please go ahead and open the line for questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
If at any time your question Thats been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our own.
Our first question will come from Pete's Kubicki with Alembic Global Please go ahead.
Hey, good evening guys.
So that was that was a pretty thorough but I have a few questions.
Rex you guys touched on the Labor force, but I just wanted to make sure you guys have any any issues with hiring during the quarter and any issues with either material or labor inflation.
In ways that you can kind of quickly pass along to the customer.
Pete I'd say that the situation has generally been pretty good for us because of the factors that we noted in the call we do have.
Our business with a highly visible backlog and people that are interested in long term careers are attracted to the business that said it is a pretty tight labor market. We're starting to see some challenges around that I think we are addressing those alright, I would tell you that probably the most acute.
The challenge we had is around getting radio farm techs in the Canadian market to support our work there thats been probably one sort of local challenge, but generally speaking we've been a pretty pretty good shape.
Our voluntary turnover has been remarkably low in this environment and we're.
We are up to meeting our hiring challenge.
Okay sounds great.
And then on a couple of incremental opportunities Pele and then there's the DARPA Draco program and any sense of how big This pele. The demo award could be and then on Draco. It seems like they're kind of reopening up to full competition are you guys going to kind of play out at a higher level and that are going to attempt to.
Play at a higher level in the Recompete.
Yes, so on the first on the former peak the Pele program as I've said from the beginning on these that the technology and design phases would be contract awards in the tens of millions and that's what we that's what we've shown historically I think these the demonstration programs are in the range of a few hundred million is a good way to think.
About the scale on those opportunities.
And then in terms of the Draco opportunity itself right, Yes, certainly DARPA has reopened that competition.
We expect to play there, we expect to be competitive and I think it's an exciting opportunity for us.
Okay. That's great one last one for me just the bookings in the commercial segment were really strong this quarter.
Is that an indication of I'm just curious.
I was curious of the subunit within commercial in particular.
Yes, so it's a broad set of things it's Rob thanks for the question.
Bob a broad set of.
Really initiatives across the Canadian space for all of our customers I wouldn't call anything out specifically, it's really just generally a pretty strong environment for us and so we're we're seeing a lot of work and all of our facilities up there.
Okay pretty good visibility to revenue guidance at this point given that commercial.
Yes, that's right.
We had provided guidance specifically for that segment are tracking quite well within that range, we see some.
Some good signs that that will be with us for a couple of years good outlook there.
Thanks, so much guys.
Thanks Pete.
Okay.
Our next question will come from Jon <unk> with CJS Securities. Please go ahead.
Hi, This is Bob <unk> from CJS.
Sure Hey, Bob anyway.
Hi.
Hi.
Curious about that one anyway.
Thanks for taking my questions.
I want to talk about the tech.
99 generators very excited and continue to make progress there.
Maybe you can give us a sense what are you what are the final stages. What are you working on what are you tweaking now is it like is it purity is that the amount of curious per batch and generator is it the elution time or what are the final tweaks and then I know you've kind of talked about this for export.
Give us a timeline again and just.
What are the potential hurdles before submission and.
Walk us through the next weeks months whatever the timeline is.
Sure Bob Thanks for the question, Yes, we had hoped to submit to the FDA in the first quarter vary obviously.
We encountered a few problems in the course of the quarter. Some of those were kind of normal things. We did have some people challenges.
We had experienced COVID-19 surges at our Kanata plant and also done in our Cambridge plant.
The latter part of the quarter from March and then on into April but.
But we also sell.
This in answering <unk> question about about the workforce, we have had some challenges.
Hiring and keeping <unk>.
<unk> radiation technicians in that market and so we had hoped to be on a tempo of about three hot runs a week and we've really been able to accomplish more like two.
So that slowed us down just a bit and we have had some equipment supply chain issues kind of like what a lot of companies are talking about these days.
But whats ahead of us.
We've completely we.
We finished with the with the qualification of the radio Kim line, we're going through the radio farmland qualification right now.
And we will go through three or four runs of that and then we'll be into the reference batches for the FDA and so it's our expectation it's our expectation to have the bulk of that activity wrapped up let's say this month.
That would be followed by assembling our data and getting it into the FDA. So I think it is second quarter kind of a target at this point.
I might add Bob that we we are looking at making the filing and we've talked about in the past we are strongly considered doing an expedited.
A review with the FDA and what that entails is definitely making sure that all of our information is perfect and so maybe as an outsider looking in.
I can say the culture of BWXT is always about sort of measure twice, if not three times and cut once and so our culture on this one is to get this a perfect product so down the stretch we've really.
Improved everything to make the perfect submission and so I think theres, a little bit of on us of making sure that everything ticked and tied even better than what we thought a couple of months ago just to make sure. We are a perfect product. We're entering this space and we want it to be.
A good thing to hit the ground, so maybe theres, a little bit of that a little bit of.
Making sure it's more than perfect.
Got it okay, great and then in terms of.
I understand you have to do all of this.
This.
The regulation and everything else, but the product itself.
Where is it versus your expectations six months 12 months ago is it.
Performing as well as you want or there is still a modification do you have to make in that regard or what are the what's the performance like.
So the performance I've never had concerns about the product quality, Bob we have always thought we'd introduce a product that is.
As good or better than anything on the market and we believe that to be the case and so it's really not about.
It's not about tweaking for product quality, it's really more about tweaking for production efficiency. I guess is the way I would I would put that so you've got to go through these qualification runs and you have to have everything run perfectly Rob was kind of alluding to this.
Because once you get into qualification runs those become runs a record for the FDA and so we've been quite careful about that about making sure that the process is exactly right.
Quality and risk of FDA approval have never been a concern for me.
Okay Super and then just one other question in terms of.
I don't even know what segment falls in the government I guess, but MSG and former <unk> any update on kind of outstanding bids fair enough Savannah has now turn.
Fee bearing which is great.
There was a protest potentially at Y 12, Pantex I don't know where that stands just any updates on other former and SG operations bids.
Yes, so the big three that we talked about over the last year or so or is the Savannah River integrated mission cleanup contract, obviously, but we prevailed in that one and we were and we are in the execution phase on it.
12 Pantex was.
Was the largest of the opportunities from a revenue scale perspective that one.
Was in protest and is now in a phase with the Doe called corrective action and the Doe has not completed that phase and so we're kind of standing by to see what the outcome of it is net net result of all that is we're still competitive we're still in we're still in the hunt on that one.
And then the final one that we've talked a lot about is the hanford.
The Hanford tanks disposition contract, which is to clean up the liquid waste and the Hanford tanks.
That one has submit has been submitted we have gone through oral is on it the governments and their evaluation phase and I think we would expect an announcement on the award or around the end of the year.
There are some other smaller ones, but those are the big three that we're keeping our eyes on and we feel competitive for all of them.
Alright, thank you so much.
Thank you.
Our next question will come from Pete Australian with <unk> Securities. Please go ahead.
Hey, good evening on for much moly. This evening, thanks for taking our question.
So first just had a follow up on that Tech 99, do you have an updated estimate for the remaining start up costs associated with it.
Have there been any changes to either your growth outlook the sales expectations for the nuclear medicine business as a whole over the next few years versus what you originally discussed at last year's investors day.
Incrementally.
Incrementally increasing.
Costs related to getting the FDA application done, but not nothing thats meaningful to the business I would say our views of of of our of how much market we can get.
Our competitive position in the market have not changed materially we still feel very very strong about that product.
Great. Thanks, and then switching gears do you have any update you can share on the <unk> opportunity.
We've spoken with the customer and do you have a sense of what timeframe that could be for any potential sales related to office.
Not much to say on that one we're not in the middle of that negotiation thats happening at government level.
And so I'd say, there's not much to offer there and certainly no timeframe to go other than to say that at the beginning of this process.
Australians in the UK and the U S said, there would be an 18 month study phase and we're probably eight eight months into that timeline. So I would expect to hear something around the beginning of next year.
Okay, great. Thanks for taking my questions. Thank you.
Our next question will come from Peter Arment with Baird. Please go ahead.
Good afternoon, Rob.
Rob can I just come back to Europe . When you made some comments just a clarification how about how long do you expect the priority review or at least that part of the application and the last night I had previously thought it was under a year, but maybe could you clarify that yes. We've generally said I mean, each each application has its own timetable, but generally we've been told by.
Set of consultants that generally you should expect about six to nine months for that review.
Okay, that's great.
And then just unrelated relax just on the supply chain.
But just about every company out there is talking about it maybe and I'm sorry, if I missed this in your opening remarks, but.
What are you guys seeing or you've been pretty good so far throughout this whole challenging time, but any.
Any new updates there would be helpful.
Yes.
Not much there Peter I would say that on the naval reactors business nuclear operations its been pretty good. We're generally in long long term relationships with our supply chain there thats been very stable.
It's been stable on the commercial nuclear side in Canada, as well really no disruptions or problems. There. The one place we've seen it are the hiccups around.
The Tech 99 program, where we've had would have something like.
Just as an example, the digital or digital probe would fail and something you can normally get the next day. We ended up taking a couple of weeks to five weeks and so we've had some of that kind of effect show up in the medical business, but for the most part we've avoided any big consequences.
The supply chain disruptions.
Okay, and just if I could sneak sneak one one in the morning just on the.
On the M&A.
So.
It seems like a pretty unique and good fit from what Youre, what youre doing there maybe you could talk about is there is there are other types of pipelines out there for you to do things like this sir.
Or was this just a unique opportunity.
Yes, I think so Peter I mean, there are assets like this around this one is pretty small scale hopefully we can step it up in scale in the future, but the idea there was to and it's hard to grow our core business, obviously because of the share that we have there which is all of it for the components that we make and so the thesis was.
Let's go ahead and fund something that has characteristics similar to the core business.
Highly engineered products high average selling price sole source for the most part about 80% of this business is sole source as it happens and so.
If we can find that set of characteristics that I think we're a buyer and certainly if it's as close to the core business. As this one is this one is really really right there when youre, making check valves in seawater manifolds, which are cannot fail systems than it really is in our sweet spot. The particular nuance here is that this is non nuclear work.
It's critical naval component work, but its not nuclear work except for.
We do have some exposure to commercial nuclear power in that business with some valves they sell into that market. So very interesting fit to our business.
The <unk> the financial characteristics also fit and we'd like to see a pipeline of assets that look like this but hopefully on larger scales yes.
Yes, we think we think it's achievable just just to add a little color around it financially to this is it.
Pretty unique asset as Rex described and we bought this inside you can do the math of sort of the EBITDA. We bought this inside our own trading multiple which is pretty unique so all of the synergies and all of the.
The possibilities of using this as a platform both internationally as well to expand our Tam as well as just general synergies between the two businesses are all kind of on us. So we feel pretty excited about the purchase price. We think it could lead us to other acquisitions down the road, we are going to definitely be conservative integrate it see how it goes.
We move on to the other alternatives we think.
We're good buyer in this market, we actually believe that the price that we put on the table was inside other offers.
<unk> proprietor in our vision of how we connect the dots between our business in international and just general non nuclear work.
Acquiring precision manufacturing businesses like that sort of spoke to that that's all provider and so were pretty happy with overall financial as well as where this could take a strategically.
I appreciate the color. Thanks.
Yeah.
Thanks Peter.
Again, if you have a question. Please press Star then one our next question will come from David Strauss with Barclays. Please go ahead.
Yes.
Thanks.
Hi.
So.
I think you've mentioned potentially about having some exposure to Russia in terms of the moly that you need to ramp up can you talk about can you talk about that and what your exposure might be to Russia.
Yes sure David.
Couple of theirs.
Our general effects, obviously on the business, but the particular ones. They are kind of two things there.
One is we had looked at purchasing some enriched Molly for a very special purpose on the moly 99 program, having to do with with filling a gap in our service outage is not not material really but it's something we'll have to work around now very minor effect.
So that's that's a slight negative to the business I would say a potential potentially interesting positive to the business is that the advanced reactors.
Most of the advanced reactors.
Our designing for Halo fuels high assay low enriched uranium fuels that they had expected to get from Russia, and Thats, probably not a possibility now so.
In order to meet the near term needs for advanced reactors.
Likely solution is to down blend high enriched uranium to high assay low enriched uranium and we would be the only source for that and so I think there is a potential upside in the business around that one and we have discussions with department of energy around that topic.
I would say net positive when you think about the impact of the invasion of Ukraine.
And certainly certainly if you integrate the sort of the global security.
Fix on.
On the defense market in general.
It's certainly a positive.
Okay, Thanks, and Rob you touched on working capital and the opportunity there can you.
Essentially frame them would you when do you see as the opportunity and then also what are you thinking about leverage and where leverage post the <unk>.
The acquisition, where do you where does leverage actually stand now thanks.
Sure yes so.
I think we're in a phase right now of really understanding and analyzing what our working capital position as we took the.
The.
Opportunity to provide some view of operating cash flow for this year and we expect to continue to do that the next couple of years and overall free cash flow, but as I see it I think it's a lot of singles and doubles in terms of instituting.
And understanding around what.
What are some of the terms of our offering to different.
Our suppliers and customers and so forth and so we're kind of going methodically through that and making sure in all our business lines that we're considering not only the earnings potential from future business, but.
But also the free cash flow I think we've brought up in the past that we had a contract related to Bruce power that was half of $1 billion U S dollars and we're working our way through that we have one year of headwind left and that being the year that we're in and then it slowly turns to sort of a good guy.
So that will be helpful for us.
We put out there that we hope to ultimately get to 85% conversion I think we have a line of sight to that the second one on leverage I would say, we're actually at a pretty good place right now we did a a good bit of buyback buyback activity last year.
We're scratching at the upper limit of our kind of 2% to 3% range.
Thats kind of a leverage level that we've been comfortable were just a hair below that if you look at our debt to EBITDA on a trailing basis and so we feel pretty good about where that stands would we go a little bit touch higher for a deal or two that really was strategic we would but we wanted to preserve flexibility. So we're kind of going to be in that three ish times.
Plus or minus I think for the near term, we did buy back about $20 million of stock in the first quarter.
And we will continue to review that Opportunistically. So we're kind of in a good place I think from a leverage standpoint.
Okay, great. Thanks very much.
Sure.
This concludes our question and answer session I would like to turn the conference back over to Mark Kratz for any closing remarks.
Thank you for joining us today, everybody. If you have further questions you can reach us by phone at 90, 80365, 4300 or E mail at investors at BWXT Dot com.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.