Q4 2023 BWX Technologies Inc Earnings Call

Okay.

Operator: Ladies and gentlemen, welcome to BWX Technologies' fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker Change: Ladies and gentlemen, welcome to BWXT technologies fourth quarter and full year 2023 earnings conference call.

Speaker Change: 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 Chase Jacobson.

Operator: 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, Chase Jacobson, BWX's Vice President of Investor Relations. Please go ahead.

Chase Jacobson: You ask these vice President of Investor Relations. Please go ahead.

Chase Jacobson: Thank you, John. Good evening, and welcome to today's call. Joining me on today's call are Rex Geveden, President and CEO, and Rob LeMasters, Senior Vice President and CFO. During today's call, we will reference the fourth quarter and full year 2023 earnings presentation that is available in the investor 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 found in the investor materials and the company's SEC filing.

Chase Jacobson: Thank you John Good evening and welcome to today's call. Joining me are Rex <unk>, President and CEO, and Rob Lemasters Senior Vice President and CFO.

Chase Jacobson: On today's call, we will reference the fourth quarter and full year of 2023 earnings presentation that is available on the investors section of the BWXT website.

Chase Jacobson: We will also discuss certain matters that constitute forward looking statements.

Chase Jacobson: These statements involve risks and uncertainties, including those described in the safe Harbor provision.

Chase Jacobson: Found in the Investor materials, and the company's SEC filings, we will frequently discuss non-GAAP financial measures, which are reconciled to GAAP measures in the appendix of the earnings presentation.

Chase Jacobson: We will frequently discuss non-GAAP financial measures, which are reconciled to GAAP measures in the appendix of the earnings presentation that can be found in the investor section of the BWXT website. I'd also note that we'll be hosting an Investor Day tomorrow in New York City. The event will be streamed live beginning at 8.30 a.m. Eastern, and you can register on the Investor Relations website at investors.bwxt.com. Because of Investor Day, we will be focusing our comments on today's call on our fourth quarter and full year results and our 2024 guidance. I would now like to turn the call over to Rex.

Chase Jacobson: Can be found on the investors section of the BWXT website.

Chase Jacobson: I'd also note that we will be hosting an investor day Tomorrow in New York City. You example, but there'll be streamlined beginning at 830, a M. Eastern and you can register on the Investor Relations website at investors that BWXT Dot com.

Chase Jacobson: Cause of the Investor day, we will be focusing our comments on today's call to our fourth quarter and full year results and our 2024 guidance.

Chase Jacobson: I would now like to turn the call over to Rex.

Rex D. Geveden: Thank you, Chase. Good evening to everyone, and I'm looking forward to seeing many of you in person tomorrow at our Investor Day. This afternoon, we reported good fourth-quarter results. It was a strong finish to a record year for BWXT, with all guidance metrics at or above the targets we originally set. We reported a very strong 16% organic revenue growth in the fourth quarter, with double-digit growth in both segments. This brought our 2023 revenue to $2.5 billion, up 12% compared to last year, with growth across all major business lines. Adjusted EBITDA was up 13% in the quarter and up 7% for the year. This includes double-digit EBITDA growth in our government operations segment and a turn to positive EBITDA at BWXC Medical.

Rex: You Chase good evening to everyone.

Rex: I am looking forward to seeing many of you in person tomorrow at our Investor Day. This afternoon, we reported good fourth quarter results. It was a strong finish to a record year for BWXT with all guidance metrics at or above the targets. We originally said we reported a very strong 16% organic revenue growth in the fourth quarter with double.

Rex: <unk> growth in both segments.

Rex: This brought our 2023 revenue to $2 5 billion up 12% compared to last year with growth across all major business lines. Adjusted EBITDA was up 13% in the quarter and up 7% for the year. This includes double digit EBITDA growth and our government operations segment, and a turn to positive EBITDA.

Rex: At BWXT medical this led to fourth quarter adjusted earnings per share of $1, one set up 8% compared to last year and full year adjusted earnings per share of $3 <unk> down slightly from last year as operating earnings growth was more than offset by non operating items such as lower pension.

Rex D. Geveden: This led to fourth-quarter adjusted earnings per share of $1.01, up 8% compared to last year, and full-year adjusted earnings per share of $3.02. Down slightly from last year as operating earnings growth was more than offset by non-operating items such as lower pension income reported in other income and higher interest expense, as we expected. Free cash flow for the year was a robust $212 million.

Rex: Income reported in other income.

Rex: And higher interest expense as we expected free cash flow for the year was a robust $212 million.

Rex D. Geveden: The fact that we are proud of is that we have increased focus and improved processes around working capital management. Our efforts here may take time to fully pay off, but we are making good progress. And we'll continue to drive this priority through the business. Underpinning our good financial performance, and not always as visible, we are pleased to have achieved some important operational goals in the quarter and throughout the year. First, I want to highlight workforce growth.

Rex: The fact of which we are proud as we have increased focus and improved processes around working capital management. Our efforts here may take time to fully pay off but we are making good progress and we will continue to drive this priority through the business underpinning our good financial performance and not always as visible. We are pleased to have achieved some important.

Rex: And operational goals in the quarter throughout the year first I want to highlight workforce growth over the past year, we re engineered and invested in our talent acquisition process.

Rex D. Geveden: Over the past year, we re-engineered and invested in our talent acquisition process, leading to a remarkable 10% growth in total headcount... In line with the aggressive goal we established at the beginning of the year and roughly matching the strong revenue numbers we reported. Considering the growth opportunities we see ahead for BWXT, we view talent acquisition and management as foundational components of our operating strategy, looking at our business units and our special materials franchise within government operations. We recently announced a $122 million, two-year extension of our downblending contract with the Tennessee Valley Authority to support the National Nuclear Security Administration's defense program objectives. This has been an enduring program for BWXT, and it will now run through mid-2027.

Rex: Leading to a remarkable 10% growth in total head count in line with the aggressive goal we established at the beginning of the year and roughly matching the strong revenue numbers, we reported <unk>.

Rex: Considering the growth opportunities. We see ahead for BWXT, we view talent acquisition and management is foundational components of our operating strategy.

Rex: Looking at our business units and our special materials franchise within government operations, We recently announced a 122 million two year extension of our down blending contract with the Tennessee Valley Authority to support the National Nuclear Security Administration Defense program objectives.

This has been an enduring program for BWXT and it will now run through mid 2027.

Rex D. Geveden: In the fourth quarter, we were also awarded a $300 million contract for the manufacturing of naval nuclear fuel through mid-2025. This is the first step in finalizing the other elements of our next multi-year pricing agreement for naval propulsion reactors and components, which we expect to complete once all assumptions on the exact product mix and rates are confirmed by BWXT and our naval reactors. We continue to expand our special materials portfolio outside of naval fuel and downblending as well, about which you will hear more at our investor day tomorrow. This includes strategic programs such as a five-year contract for uranium conversion and purification for the NNSA and a contract to recycle scrap material from the Y-12 National Security Complex into high-assay, low-enriched uranium, or HALU, which may serve as feedstock material for the DOE's Advanced Reactor Development Program.

Rex: In the fourth quarter. We were also awarded a $300 million contract for the manufacturing of naval nuclear fuel through mid 2025.

Rex: This is the first step in finalizing the other elements of our next multiyear pricing agreement for naval propulsion reactors and components.

Rex: Which we expect to complete once all assumptions on the exact product mix and rates are confirmed by BWXT in our naval reactors customer.

Rex: We continued to expand our special materials portfolio outside of naval fuel and down blending as well about which you will hear more at our Investor Day Tomorrow.

Rex: This includes strategic programs, such as a five year contract for uranium conversion and purification for the NSA and a contract to recycle scrap material from the Y 12 National security complex into high assay low enriched uranium or Halo, which may serve as feedstock material for the Doe advanced reactor developed.

Rex: Program.

Rex D. Geveden: These are highly technical programs where BWXT has a unique competitive advantage given its licensing and experiential qualification, further strengthening our position in the nuclear industry and driving our future. Despite onboarding efficiencies and higher labor costs that we experience throughout the year, our government operations... have performed quite well. Notably, we completed the missile tubes program on a strong footing.

Rex: These are highly technical programs, where BWXT has a unique competitive advantage given its licensing and experiential qualifications further strengthening our position in the nuclear industry in driving future growth.

Rex: Despite onboarding efficiencies and higher labor costs that we experienced throughout the year our government operations team.

Rex: Formed quite well, notably we completed the missile tubes program on a strong footing. Despite some challenges along the way in the fourth quarter, we finished better than expected delivering a positive final EAC related to that closeout and in addition to a final settlement with our customer to account for the previous cost growth that was driven by.

Rex D. Geveden: Despite some challenges along the way, in the fourth quarter, we finished better than expected, delivering a positive final EAC related to that closeout in addition to a final settlement with our customer to account for the previous cost growth that was driven by out-of-scope changes and absorbed by BWXT over the past couple of years. Finally, we continue to see the benefits from our intense focus on operational excellence initiatives throughout the organization, including remarkable gains in operational equipment effectiveness and the use of digital tools and supply chain management to drive solid underlying margin performance. Turning to our commercial operations segment, growth prospects remain strong. In our commercial nuclear power group, we continue to see robust demand for our market-leading manufacturing, engineering, and design, and field services capabilities. Utilities around the world are increasingly turning to nuclear power for their electricity generation.

Rex: Out of scope changes and absorbed by BWXT over the past couple of years.

Rex: Finally, we continue to see the benefits from our intense focus on operational excellence initiatives throughout the organization, including remarkable gains in operational equipment effectiveness and the use of digital tools and supply chain management to drive solid underlying margin performance.

Rex: Turning to our commercial operations segment.

Rex: Growth prospects remain strong.

Rex: In our commercial nuclear power group, we continued to see robust demand for our market, leading manufacturing engineering and design and field services capabilities, Utah.

Rex: Utilities around the world are increasingly turning to nuclear for their electricity generation needs. As many of you have seen nuclear was put on the global stage at the Cop 28 conference at the end of December with more than 20 countries signing a declaration to triple nuclear energy by 2050 at the same time BWXT.

Rex D. Geveden: As many of you have seen, nuclear energy was put on the global stage at the COP28 conference at the end of December with more than 20 countries signing a declaration to triple nuclear energy by 2050. At the same time, BWXT signed the Net Zero Nuclear Industry Pledge along with many other industry participants calling for the same goal. We expect that this increased focus on nuclear energy and support from the global industrial base will translate into longer-term demand for BWXT as countries around the world look to add new grid-scale nuclear capacity, with small modular reactors and large reactors. In the larger grid-scale nuclear reactor market in which we play, at the end of January, Ontario Power Generation announced that it will proceed with a long-term life extension of its Pickering site units 5 through 8. As the province remains committed to meeting growing electricity demand with clean energy and has put significant investment into its can-do nuclear fleet.

Rex: <unk> side, the net zero nuclear industry pledge.

Rex: Along with many other industry participants calling for the same goal.

Rex: We expect that this increased focus on nuclear energy and support from the global industrial base will translate into longer term demand for BWXT as countries around the world look to add new grid scale nuclear capacity with.

Rex: With small modular reactors and large reactors.

Rex: And the larger grid scale nuclear reactor market in which we play at the end of January on Tower, Ontario power generation announced that it will proceed with a long term life extension of its Pickering site units five through eight as.

Rex: As the province remains committed to meeting growing electricity demand with clean energy.

Rex: And put significant investment into its can do nuclear fleet.

Rex D. Geveden: This is a significant opportunity for BWXT that will likely provide another 10 years or more of visibility into our existing backlog of life extension work in the region that started almost a decade ago. We also continue to see growing demand in the SMR market, where we are well positioned as a merchant supplier, which we will talk more about at Investor Day tomorrow at BWXT Medical. Growth in our Base Diagnostic and Contract Drug Manufacturing Business was strong in the fourth quarter and throughout last year. Full year revenue And that business was just over $70 million, which is a strong 25% growth compared to 2022. And that is even before sales kick in from our new Tech 99 product line. As we have discussed previously, we continue to see healthy demand for our diagnostic isotopes and expect similar growth in 2024 that will be complemented by increasing sales of therapeutic isotopes, such as Actinium and Lutetium, as our customers work to bring novel cancer-treating therapeutic drugs to the market. We continue to work with the FDA through the approval process for our TEC-99 generator product and continue to expect commercialization.

This is a significant opportunity for BWXT that will likely provide another 10 years or more of visibility into our existing backlog of life extension work in the region that started almost a decade ago.

Rex: We also continued to see growing demand in the <unk> market, where we are well positioned as a merchant supplier, which we will talk more about at Investor Day Tomorrow.

Rex: At BWXT medical growth in our base diagnostic and contract drug manufacturing business remained strong in the fourth quarter and throughout last year full year revenue and that in that business was just over $70 million, which is a strong 25% growth compared to 2022 and that is even before say.

Rex: Those kick in from our New Tech 99 product line as we have discussed previously we continue to see healthy demand for our diagnostic isotopes and expect similar growth in 2024 that will be complemented by increasing sales of therapeutic isotopes, such as actinium and lutetium as our customers work to bring novel.

Rex: <unk> cancer treating therapeutic drugs to the market.

Rex: We continue to work with the FDA through the approval process for our tech 99 generator product.

Rex: And continue to expect commercialization in 2024. So overall, we had a great 2023 with strong financial performance, we achieved key operational and business development objectives, and our end markets continued to gain momentum.

Rex D. Geveden: So overall, we had a great 2023 with strong financial performance. We achieved key operational and business development objectives, and our end markets continued to gain momentum. This positions us well for 2024. Our guidance calls for mid-single-digit revenue and EBITDA growth and improving free cash flow performance. Our focus remains on innovation and operational excellence as we work to provide our customers with nuclear technologies to solve their most important challenges in global security, Space, Clean Energy, and Medical Markets.

Rex: This positions us well for 2024.

Rex: Our guidance calls for mid single digit revenue and EBITDA growth and improving free cash flow performance, our focus remains on innovation and operational excellence.

Rex: As we work to provide our customers with nuclear technologies to solve their most important challenges in the global security space clean energy and medical markets I look forward to articulating our strategy and outlook at Investor Day Tomorrow, and with that I will turn it over to Rob to provide more detail on our fourth quarter and full year.

Bob Labick: I look forward to articulating our strategy and outlook at Investor Day tomorrow. And with that, I will turn it over to Rob to provide more detail on our fourth quarter and full year results and walk through the details of our 2024 guide. Thanks, Rex, and good evening, everyone.

Rob Lemasters: Our results and walk through the details of our 2020 for guidance.

Rob Lemasters: Thanks, <unk> and good evening everyone.

Bob Labick: I'll start with some total company financial highlights on slide four of the earnings presentation. Fourth quarter revenue was a robust $725 million, up 16% organically on a consolidated basis and up about 16% in each segment as well. Adjusted EBITDA was up 13% to $148 million, in line with our expectations, given solid performance from both business segments. As we had discussed throughout the year, our fourth quarter EBITDA benefited from the closeout and final recovery on our past missile tube contract. At the segment level, our adjusted EBITDA expanded modestly compared to last year, largely driven by improved performance in medical, which, as Rex mentioned, is now in a positive EBITDA position. However, our consolidated adjusted EBITDA margin in the quarter was slightly lower compared to last year.

Rob Lemasters: I'll start with some total company financial highlights on slide four of the earnings presentation.

Rob Lemasters: Fourth quarter revenue was a robust $725 million up 16% organically on a consolidated basis and up about 16% in each segment as well.

Speaker Change: Adjusted EBITDA was up 13% to $148 million in line with our expectations given solid performance from both business segments.

Speaker Change: As we have discussed throughout the year, our fourth quarter EBITDA benefited from the closeout and final recovery on our past missile tube contract.

Speaker Change: At the segment level, our adjusted EBITDA expanded modestly compared to last year, largely driven by improved performance in medical which as Rex mentioned is now in a positive EBITDA position. However, our consolidated adjusted EBITDA margin in the quarter was slightly lower compared to last year. This.

Bob Labick: This was mainly due to higher year-over-year corporate costs. I will remind you that corporate cost in 2022 was unusually low because of retirements, health care underruns, and captive insurance releases. 2023 also had a step up in corporate costs related to digital systems and human capital investments in HR and finance to posture for the exciting growth ahead. Adjusted earnings per share was $1.01, up 8% from $0.93 last year.

Speaker Change: Was mainly due to higher year over year corporate costs.

Speaker Change: I will remind you that corporate costs in 2022 was unusually low because of retirements healthcare underrun and captive insurance releases.

2023 also had a step up in corporate costs related to digital systems, and human capital investments in HR and finance to posture for the exciting growth ahead.

Speaker Change: Adjusted earnings per share was $1 <unk> up 8% from 93 last year.

Bob Labick: As you can see in the EPS bridge on slide 5 of our presentation, the majority of our EPS growth came from operations but was also helped by a lower effective tax rate and a modest FX currency benefit in the quarter, which was partially offset by higher interest expense and lower pension income, as was the case throughout the year. Compared to our implied fourth-quarter guidance, one-time tax and FX currency benefits contributed three cents to our final EPS results. Our fourth-quarter effective tax rate was 22.5% due to the timing of discrete items around state taxes, including prior year true-ups.

Speaker Change: As you can see on the EPS bridge on slide five of our presentation. The majority of our EPS growth came from operations, but was also helped by a lower effective tax rate and a modest FX currency benefit in the quarter, which was partially offset by higher interest expense and lower pension income as was the case throughout the year.

Speaker Change: Compared to our implied fourth quarter guidance, one time tax and FX currency benefits contributed <unk> <unk> to our final EPS result.

Speaker Change: Our fourth quarter effective tax rate was 22, 5% due to the timing of discrete items around state taxes, including prior year true ups with.

Bob Labick: Without those true-ups, our tax rate would have been about 23% in the quarter. Our full-year effective tax rate was 23.2%, and we expect a tax rate of approximately 23.5% in 2020. Full year 2023 adjusted EPS was $3.02, down from $3.13 in 2022. The EPS bridge on slide 6 of our earnings presentation shows a similar trend to that of our fourth quarter results. Operationally, 2023 adjusted EBITDA was up 7% year-over-year, although this was offset by the lower pension income and higher interest expense that I previously mentioned. Free cash flow is certainly a bright spot for us in the quarter, and we believe that we have now turned the corner and we'll see an upward climb in free cash flow.

Speaker Change: Without those true ups, our tax rate would have been about 23% in the quarter.

Speaker Change: Our full year effective tax rate was 23, 2% and we expect a tax rate of approximately 23, 5% in 2024.

Speaker Change: Full year 2023, adjusted EPS was $3 <unk> down from $3 13 in 2022.

Speaker Change: The EPS bridge on slide six of our earnings presentation shows a similar trend to that of our fourth quarter results.

Speaker Change: Operationally 2023, adjusted EBITDA was up 7% year over year. Although this was offset by the lower pension income and higher interest expense that I previously mentioned.

Speaker Change: Free cash flow was certainly a bright spot for us in the quarter and we believe that we have now turned the corner and we will see an upward climb and free cash flow.

Bob Labick: Pre-cash flow was $171 million in the quarter and $212 million for the year, up significantly from 2022. This was driven by strong working capital management and some modest positive collections late in the quarter that ultimately led to a solid beat versus our initial target of about $200 million that we provided in early 2023, which was the first time we had guided free cash flow in our history. Our capital expenditures were $150 million for the full year.

Speaker Change: Free cash flow was $171 million in the quarter and $212 million for the year up significantly from 2022.

Speaker Change: This was driven by strong working capital management and some modest positive collections late in the quarter that ultimately led to a solid beat versus our initial target of about $200 million.

Speaker Change: That we provided in early 2023, which was the first time, we had guided free cash flow in our history.

Speaker Change: Our capital expenditures were $150 million for the full year.

Bob Labick: This was consistent with maintenance CapEx requirements and select investments to support growth in our microreactor program. We will provide a deeper dive into our longer-term expected free cash flow growth prospects at Investor Day tomorrow. Moving now to the Segma results on slide 7. In government operations, fourth-quarter revenue was up 16% to $602 million, driven by growth in nearly all of our business lines. Adjusted EBITDA on this segment was $131 million, up 13% from last year. The government operations EBITDA margin was 21.8%, down slightly from 22.4% in the fourth quarter of 2022.

Speaker Change: This was consistent with maintenance capex requirements and select investments to support growth in our micro reactor programs.

Speaker Change: We will provide a deeper dive into our longer term expected free cash flow growth prospects at Investor Day Tomorrow.

Speaker Change: Moving now to the segment results on slide seven.

Speaker Change: And government operations fourth quarter revenue was up 16% to $602 million.

Speaker Change: Driven by growth in nearly all of our business lines.

Speaker Change: Adjusted EBITDA in the segment was $131 million up 13% from last year.

Speaker Change: Government operations EBITDA margin was 21, 8% down slightly from 22, 4% in the fourth quarter of 2022.

Bob Labick: First, I will note that while we recognized the missile troop recovery in the fourth quarter of 2023, last year's fourth quarter also benefited from strong EAC performance. The elements that contributed to the modest year-over-year margin decline were, one, outsized growth in our cost-reimbursable microreactor projects and in our new special materials programs. Two, we continue to experience labor inefficiencies related to the rapid growth of our workforce. And three, on a relative basis, we had a modestly lower contribution from technical services.

Speaker Change: First I will note that while we recognize the missile tube recovery in the fourth quarter of 2023 last year's fourth quarter also benefited from strong EAC performance.

Speaker Change: The elements that contributed to the modest year over year margin decline were one outsized growth in our cost Reimbursable micro reactor projects and in our new special materials programs.

Speaker Change: Two we continue to experience labor inefficiencies related to the rapid growth of our workforce and three on a relative basis, we had a modestly lower contribution from technical services income.

Bob Labick: In commercial operations, revenue was up 16 percent, driven by increases in commercial nuclear field services and nearly 40 percent medical growth. That was partially offset by lower commercial nuclear component volume, mainly because of time. Fourth quarter commercial operations adjusted EBITDA was $21.3 million, compared to $13.6 million last year.

Speaker Change: And commercial operations revenue was up 16% driven by increases in commercial nuclear field services and nearly 40% medical growth.

Speaker Change: That was partially offset by lower commercial nuclear component volume, mainly because of timing.

Speaker Change: Fourth quarter commercial operations, adjusted EBITDA was $21 3 million compared to $13 $6 million last year.

Bob Labick: The increase was largely driven by improved profitability in medical. Commercial operations EBITDA margin was 12.9% in 2023, which we anticipate will trend toward the mid-teens throughout 2024, as commercial nuclear field services mix is less of a headwind, and the benefits of higher-margin medical sales contribute more to the segment's overall margin profile. Turning now to our 2024 guidance on slides 8 and 9, which is generally in line with the preliminary outlook we provided last quarter. On the top line, we expect mid-single-digit revenue growth of over $2.6 billion, with growth in commercial operations outpacing that of government operations. Government operations growth is expected to be in the low to mid-single digits as increasing production of Columbia-class submarines, growth in microreactors, and higher special materials revenue is offset by the lull in aircraft carrier work due to the cadence of the Navy's ship ordering schedule.

Speaker Change: The increase was largely driven by improved profitability in medical.

Speaker Change: Commercial operations EBITDA margin was 12, 9% in 2023, which we anticipate will trend toward the mid teens throughout 2024 as commercial nuclear field services mix is less of a headwind and the benefits of higher margin medical sales contribute more to this to the segments overall.

Speaker Change: Margin profile.

Speaker Change: Turning now to our 2024 guidance on slide eight and nine which is generally in line with the preliminary outlook, we provided last quarter.

Speaker Change: On the topline we expect mid single digit revenue growth to over $2 6 billion.

Speaker Change: With growth in commercial operations outpacing that of government operations.

Speaker Change: Government operations growth is expected to be in the low to mid single digits as increasing production of Columbia class submarines.

Speaker Change: Growth in micro reactors and higher special materials revenue is offset by the lull in aircraft carrier work due to the cadence of the Navy's ship ordering schedule.

Bob Labick: Commercial operations revenue is expected to grow in the high single to low double digits with solid growth in commercial nuclear complemented by accelerating growth in metacritic. We also expect adjusted EBITDA to grow mid-single digits to approximately $500 million and an EBITDA margin of about 19% in line with the 2023 level. The impacts of program mix and the absence of any recoveries we experienced in 2023 in the non-naval components business will lead to a slightly compressed government operations margin on a year-over-year basis, although this will be offset by higher commercial operations. We project this will lead to adjusted earnings per share of $3.05 to $3.26.

Speaker Change: Commercial operations revenue is expected to grow in the low and the high single to low double digits with solid growth in commercial nuclear complemented by accelerating growth in medical.

Speaker Change: We also expect adjusted EBITDA to grow mid single digits to approximately $500 million and an EBITDA margin of about 19% in line with the 2023 level.

Speaker Change: The impacts of program mix and the absence of any recoveries, we experienced in 2023 and the non naval components business will lead to slightly compressed government operations margin on a year over year basis.

Speaker Change: This will be offset by higher commercial operations margins.

Speaker Change: We project this will lead to adjusted earnings per share of $3 five.

Speaker Change: To $3 20.

Bob Labick: Included in this forecast is a DNA step-up of approximately $10 million, slightly lower other income, and a tax rate of approximately 23.5%. At this juncture, we expect earnings per share to be slightly weighted toward the back half of the year. On a quarterly basis, we would expect relatively consistent EPS performance in the first and second quarters and building thereafter. Lastly, we expect free cash flow growth to be in the range of $225 million to $250 million, reflecting about 80% free cash flow conversion at the midpoint. This will be driven by further working capital improvement and disciplined capital expenditure investment.

Speaker Change: Included in this forecast is a DNA step up of approximately $10 million slightly lower other income and a tax rate of approximately 23, 5%.

Speaker Change: At this juncture, we expect earnings per share to be slightly weighted towards the back half of the year.

On a quarterly basis, we would expect relatively consistent EPS performance in the first and second quarters and building thereafter.

Lastly, we expect free cash flow growth to be in the range of $225 million to $250 million, reflecting about 80% free cash flow conversion at the midpoint.

Speaker Change: This will be driven by further working capital improvement and disciplined capital expenditure investment.

Chase Jacobson: We expect CapEx to be about flat, slightly lower compared to 2023 as we manage our maintenance CapEx at around 4% of sales with select near-term and visible growth investments, pushing that to near the level we saw in 2023. As I mentioned, we believe we have turned the corner and are now at a point where we will see steady increases in free cash flow growth ahead. To sum up, we had another solid quarter to end a strong year, and we expect continued growth in 2020. Demand trends across our global security, clean energy, and medical end markets remain strong, and our unique capabilities and infrastructure position us well to benefit from these trends. We are committed to driving more predictable earnings and pre-cash flow conversion with a balanced capital allocation approach that we believe will continue to drive meaningful shareholder value. I look forward to seeing many of you and providing a more in-depth perspective on our strategy, growth prospects, and financial targets at our Investor Day tomorrow. Thanks, Rob. Before I turn it over to John to open the line for Q&A,

Speaker Change: We expect capex to be about flat to slightly lower compared to 2023, as we manage our maintenance capex at around 4% of sales with select near term and visible growth investments pushing that to near the level. We saw in 2023.

Speaker Change: As I mentioned, we believe we have turned the corner and are now at a point, where we will see steady increases in free cash flow growth ahead.

Speaker Change: To sum it up we had another solid quarter to end a strong year and expect continued growth in 2020 for.

Speaker Change: Demand trends across our global security clean energy and medical end markets remained strong and our unique capabilities and infrastructure position us well to benefit from these trends we are committed to driving more predictable earnings and free cash flow conversion with a balanced capital allocation approach that we believe will continue.

Speaker Change: To drive meaningful shareholder value.

I look forward to seeing many of you and providing a more in depth perspective on our strategy growth prospects and financial targets at our Investor Day Tomorrow.

Speaker Change: Thanks, Rob before I turn it over to John to open the line for Q&A.

Operator: I would kindly ask that you please leave your questions about our fourth quarter and full year results and our 2024 guidance, as we'll be providing more in-depth commentary on our outlook and strategy. We're ready to open it up for Q&A, John. Thanks, Chase. If you would like to ask a question at this time, please press the star followed by the number one on your telephone keypad.

John: We ask that you. Please limit your questions to our fourth quarter and full year results and our 2020 for guidance.

Speaker Change: <unk> will be providing more in depth commentary on our outlook and strategy.

Speaker Change: Tomorrow, we're ready to open it up for Q&A John.

John: Thanks Chase if you would like to ask a question at this time. Please press star followed by the number one on your telephone keypad. Thank you lost just for a moment to compile the Q&A roster.

Operator: Thank you. We'll pause just for a moment to compile the Q&A roster. Your first question comes from the line of Bob Labick from CJA Securities. Please go ahead. Good afternoon.

John: Your first question comes from the line of Bob <unk> from CJS Securities. Please go ahead.

Bob: Good afternoon. Thank you for taking our questions. We're looking forward to seeing you tomorrow as well.

Bob Labick: Thank you for taking our questions. We're looking forward to seeing you tomorrow as well. Great. Thank you, Bob. Of course. Sure, yeah. So to stick with your rules, I'll just ask about next year. You obviously had very strong growth in BWX Medical this year in getting to EBITDA break even or better, and I think you were forecasting equally strong or very strong growth in medical next year as well. Can you kind of dig down a little and talk about which isotopes are driving that, or which related drugs are driving that, and how much, if any, moly do you have baked into your medical growth?

Speaker Change: Great. Thank you Bob for Zen.

Bob: Sure, Yes, so to stick with your rules I will just ask about next year can you.

Speaker Change: You had very strong growth in gws medical this year and getting to EBITDA breakeven or better.

And I think we're forecasting as equally strong or very strong growth in medical next year as well can you kind of dig down a little and talk about which isotopes are driving matter, which like related drugs are driving that and how much if any Molly do you have baked into your medical growth for next year.

Rex D. Geveden: Yeah, I'll take that one, Bob. We... So really, all the product lines are growing within medical. The diagnostic side of the portfolio, where we have germanium and strontium, is growing very strongly. Of course, we're in the actinium market. I think it's correct to say we're the only commercial supplier of actinium in the market today, and so that's been a good product for us, and TheraSphere, which is a contract-manufactured product for Boston Scientific, continues to kind of gallop along and compound at a 10% rate.

Speaker Change: Yes, I'll take that one Bob.

Speaker Change: We.

Speaker Change: So all the really all the product lines are growing within medical are.

Speaker Change: The.

Bob: Diagnostics side of the portfolio, where we have germanium strontium is growing very strongly of course, we are in the actinium market I think it's correct to say, we're the only commercial supplier of actinium in the market today and so that's been a good product for us.

Bob: And there is fear, which as a contract manufacturer product for Boston scientific continues kind of Gallup along in compound compounded a 10% rate so really all the products across the portfolio are growing quite nicely.

Bob Labick: So really, all the products across the portfolio are growing quite nicely. We don't, and I think we've said this before, we didn't forecast any Tech 99 in the 2024 year. Maybe flip it over to Rob.

Bob: We don't and I think we've said this before we didn't forecast in a tech 99 in 2024 year, maybe flip it over to Rob for any additional comments I think that's right will.

Bob Labick: No, I think that's right. We don't require, you know, any meaningful contribution from tech to hit the forecast that we laid out for you earlier. Okay, super. Great. And then, I guess just last one for me, I'll jump back in queue. How are you treating the Hanford Tank Project in guidance? And what are the other kind of big wildcards that could impact us here?

Rob Lemasters: We don't require any meaningful contribution protect to hit the forecast that we laid out for you earlier today.

Rob Lemasters: Okay Super and then.

Rob Lemasters: I guess just last one for me I'll jump back in queue.

Speaker Change: How are you treating the Hanford tank project in guidance and what are the other kind of big Wildcards that could impact the year given almost everything else is pretty much locked in and strong with your strong visibility.

Bob Labick: Almost everything else is pretty much locked in and strong. Yeah, I think that's right. We do have the year ahead of us, if you note, we gave a range of 15 cents this year, whereas, you know, in prior years, we've given as much as 20 cents. I think we have, you know, increased fidelity just on our overall forecasting process. So I know that.

Speaker Change: Yes, I think that's right we do have actually the year. If you'll note. We gave a range of 15 this year, whereas in prior years, we've given as much as 20 I think we have increased fidelity just on our overall forecasting process. So I know that I would also say you are right. There are not a lot of wildcards, though.

Bob Labick: I would also say you're right, there are not a lot of wildcards that we have this year; we have a pretty predictable set of businesses. We do the same thing, Bob, in our guidance, where we essentially predict a set of, you know, items that we probability and time adjust. One of those would be Hanford.

Speaker Change: We have this this year, we have a pretty predictable set of businesses. We're doing the same thing Bob in our guidance, where we essentially predict a set of.

Speaker Change: Items that we probability and time time adjust one of those would be hanford.

Bob Labick: We have included something in there, and probability adjusted, but it's really not meaningful. And if, just like last year, right, certain items fell out, certain items came in, and so that's not something, again, like tech, that we're sort of biting our nails about. If that comes in, I'm sure something else will fall out.

Speaker Change: We have included something in there and probability adjusted but it's really not meaningful and just like last year right certain items fell out certain items came in and so thats not something again like tag that we're sort of biting our nails about if that comes in I'm sure something else will fall out. So we're kind of have a lot of.

Bob Labick: So we kind of have a lot of sticks in the fire, and we have multiple ways to get it. So thanks so much. Yeah, see you tomorrow.

Speaker Change: Sticks in the fire and we have multiple ways to get there.

Super Thanks, So much look looking forward to see you tomorrow.

Speaker Change: Jesse Tomorrow.

Speaker Change: Your next question comes from the line of Peter Arment from Baird.

Rex D. Geveden: Yeah, good afternoon, Rex, Rob, and Chase. Hey, Rex, thanks for your color on the Pickering commentary. Is this when they do units five through eight, is that something where we actually start to see backlog this year associated with that? Thanks. So we expect to make, for example, steam generators for those Pickering reactors, and there are 48 in total for those four.

Peter J. Arment: Yes, good afternoon, Rob Chase.

Peter J. Arment: Hey, Rex Thanks for your color on the Pickering commentary is that.

Peter J. Arment: When they do the units five through eight is that something where we actually start to see backlog this year associated with that.

Peter J. Arment: Yes, it's a modest amount of backlog for that this year as you know from our from our business characteristics. Peter we tend to be involved in both on the Navy side and the commercial side, we tend to be involved in some of the advanced procurement of long lead items. So we expect to make for example steam generators for those Pickering reactors in their 48 in total for those.

Rex D. Geveden: That's great! That's great! And then just, Rob, just quickly, just so I understand, on the medical, it's great to see that it's turned profitable. So I assumed that because there's no Tech 99 kind of baked in this year, we wouldn't see any of that depreciation cost kind of kicking in that you had originally talked about way back. That's right. What we talked about, even on the last call or the call before, was the fact that depreciation comes on, first of all, in a couple phases. It's not all one block.

Peter J. Arment: Four.

Peter J. Arment: And so.

Peter J. Arment: Yes, I think we'd start to see a little bit of a ramp on that this year.

Peter J. Arment: That's great that's great and then just Rob just quickly just so I understand on the on the medical it's great to see that turn profitable so I.

Rob: I assume that that because theres no tech 99 kind of baked in this year that we wouldn't see any of that depreciation cost kind of kicking in that you had originally talked about way back.

Rob: That's right well, we talked about even on the last call or the call before was the fact that the depreciation comes on first of all in a couple of phases as not all one block so kind of phases in.

Bob Labick: So it kind of phases in, in terms of different assets getting deployed. And then the assets getting deployed are really mostly based on commercial activity. So again, if we're just, you know, running, you know, samples for ourselves or getting into the market, and we're not commercial yet, we don't turn on that depreciation.

Rob: In terms of different assets getting deployed and then assets getting deployed is really mostly based on commercial activity. So again, if we're just running running samples for ourselves are getting into the market and we're not commercial yet we don't turn on that depreciation.

Bob Labick: So to the extent that we were successful and got in the market, say, in late 2024, yeah, that would come with a little depreciation and frankly offset that sale. So that's why it's not meaningful for ultimately hitting, say, our EPS target because either you get the sales, or you get the DNA at the same time. So it's sort of, you know, ramping up slowly from a profit standpoint. Your next question comes from the line of Scott Duschel from Deutsche Bank. Please go ahead.

Rob: So to the extent that we're successful in getting the market say in late 2024, yes that would come with a little depreciation of frankly offset that sale. So that's why it's not meaningful for ultimately hitting say, our EPS target because I didn't get the sales or you get the DNA at the same time, so it's sort of.

Rob: We'll ramp up slowly from a profit standpoint.

Speaker Change: I appreciate all the color I look forward to tomorrow. Thanks, guys.

Speaker Change: Yeah. Thanks Pierre.

Speaker Change: Okay.

Speaker Change: Your next question comes from the line of Scott <unk> from Deutsche Bank. Please go ahead.

Operator: Thank you all. Thank you. Thank you. Yeah, that's not it.

Scott: Hey, good evening.

Scott: Hey, Scott.

Scott: Hey, Rob was.

Scott: How large was the missile tube recovery received in the quarter I think the 10-K it talks about the $28 million benefit from non nuclear components on check if that was the right number.

Operator: So first, in the EAC disclosure, you'll see a couple different elements we break out in there. One of them is the non-naval components, and then there's a, you know, just a total company number in there. You're right that we attributed that to the non-naval component business, and we don't really want to break that down just given the sensitivity around customers, the Navy, and so forth. But let me help you with that a little bit.

Speaker Change: Yes, thats not so so first the EAC disclosure youll see a couple of different elements, we break out in there one of them is the non naval components and then there's.

Speaker Change: Just a total company number in there you are right that we attributed that to the non non naval component business and we don't really want to break that down just given the sensitivity around customer Navy and so forth, but let me help you with that a little bit.

Bob Labick: You know, ultimately, that number that you quoted right there includes a couple different elements that we talked about in the transcript. We did successfully recover the amount, and then some, from 2022. I think I continually pointed people to that $11 million number in the second quarter of 2022.

Speaker Change: Ultimately that number that you quoted right. There includes a couple of different elements that we talked about it in the transcript.

Speaker Change: We did a success.

Speaker Change: Successfully recover the amount and then some.

Speaker Change: 2022, I think I continually pointed people to that $11 million number in 2022 in the second quarter. We were successful, let's say at recovering that and then a little more and then we did have successful performance overall on that contracts as you close those out as you know you really scrub where youre EAC.

Bob Labick: We were successful, let's say, at recovering that and then a little more. And then we did have successful performance overall on that contract. So as you close those out, as you know, you really scrub where your EAC lands.

Speaker Change: <unk> lands and so that was also.

Bob Labick: And so that was also a meaningful component to that ultimate EAC item that you talk about. And I'd like to just leave it there, given the sensitivity around the customer and the negotiation and other competitors in this market. Okay, yeah, it's really helpful. Then, Rex, I was wondering if you could quantify at all how large the actinium line would be in 2023, either in terms of revenue or doses, then curious if that might be the fastest-growing product line at BWXT Medical in $24 terms, and whether or not you might be able to shed some light on that. Thanks.

Speaker Change: A meaningful component to that ultimate.

Speaker Change: EAC item that you talked about and I'd like to just leave it there just given the sensitivity around the customer and the negotiation and other competitors in this market.

Speaker Change: Okay. Yeah, that's really helpful. And then Rex I was wondering if you could quantify at all how large the actinium line was in 2023 either and.

Speaker Change: In terms of revenue or doses and then curious if that might be the fastest growing product line of <unk> medical and <unk> 24 in dollar terms, whether or not you might be able to shed some light on that thanks.

Rex D. Geveden: I think we might decline to break out the product lines on a sales basis, but I would say that Actinium is certainly a fast-growing product, and we expect revenue Contribution and 24 from. Okay, and then if some of these phase three trials are successful with actinium and you're the only commercial supplier, could the market opportunity here be potentially larger than technetium with better margins, or am I being too wishful thinking in that? Thanks.

Rex: Yes, I think.

Speaker Change: We might declined to breakout the products.

Speaker Change: Product lines on a sales basis, but I would say that <unk>, certainly a fast growing product and we expect some meaningful revenue contribution in 'twenty four from that.

Speaker Change: Okay, and then if I mean, if some of these phase III trials are successful with actinium and Youre. The only commercial supplier I mean could the market opportunity here be potentially larger than technetium was with better margins or am I being too too wishful thinking in that thanks.

Rex D. Geveden: Yeah, I think any one product in therapeutics, we still have a lot of hope for TEC-99. So, you know, I think we've laid out where our targets are. I think Actinium and Lutetium, as well as, just to be clear, the PET diagnostic portfolio, which really follows what happens in the therapeutics, right, the theranostic category, we're going to talk about that a lot tomorrow, that's been a huge growth driver for us. That's Germanium specifically within our portfolio, as well as just pull-through of other items. But tomorrow, what we're going to walk you through is exactly what you said, which as you move from call it phase one to phase two, phase three, you're still only having, you know, patient samples of call it, you know, 500 patients maybe. As those turn in 26 and 27, you get multiples, right, thousands of commercial patients. And so the scale goes up meaningfully. So to address your specific question about the size of the actinium or lutetium line, it's small, but it can explode meaningfully when you actually convert from a sort of phase three to a commercial trial.

Speaker Change: Yes, I think any one product when therapeutics, we still have a lot of hope for the tech 99. So.

Speaker Change: I think we've laid out where our targets are there I think actinium and Lou Anne Lou TCM as well as just to be clear the pet diagnostic portfolio, which really follows what happens in the therapeutics right that they are not the category, we're going to talk about that a lot tomorrow. That's been a huge growth driver for us that's germanium, specifically within our portfolio as well as just <unk>.

Speaker Change: All three of other other items, but tomorrow, we're going to walk you through is exactly what you said, which as you move from call. It phase one to phase II phase III, you're still only having patient samples of call. It 500 patients maybe as those turn in 2006 and 2007, you get multiples right thousands of of commercial patients.

Speaker Change: And so the scale goes up meaningfully so to address your specific question about the size of the actinium, our lutetium line its small but it can explode meaningfully when you actually convert from a sort of a phase III to a commercial trial and we see that you can do you can read around a lot of those are predicted in kind of the 'twenty six 'twenty seven.

Bob Labick: And we see that, you know, you can do the, you can read around. A lot of those are predicted in kind of the 26, 27 timeframe, and so that's when we'll get more isotopes and, hopefully, even some contract drug manufacturing alongside. Okay, great. And the last question, just Rex, maybe you can shed some light on what's currently adding to the approval timeline for Tech 99 and whether or not you might be able to commercialize that before the fall, when I think a lot of the forward year sales go on contract. Thank you. Yeah, there's no change in that.

Speaker Change: <unk> timeframe and so thats, when we will get more isotopes and hopefully even some contract drug manufacturing alongside that.

Speaker Change: Okay, Great and last question just Rex maybe you can shed some light on whats currently adding to the approval timeline on tech 99, and whether or not you might be able to commercialize that before the fall and I think a lot of the forward year sales go on contract. Thank you.

Rex: Yes, there is no change in that I think we've been saying consistently that we expect approval here in 'twenty four and we're still on that track.

Rex D. Geveden: We, I think we've been saying consistently that we expect approval here in 24 hours, and we're still on that track. All right. Thanks, guys. Thanks guys, see you tomorrow. Your next question comes from the line of Chardon Leonet from Bank of America. Please go ahead. Hey, good evening.

Speaker Change: Alright, thanks, guys.

Speaker Change: Thanks, Scott cinema.

Speaker Change: Your next question comes from the line of Chardan DNA from Bank of America. Please go ahead.

Chardan DNA: Hey, good evening, thanks for taking the call.

Operator: Thanks for taking the call. Just a question on the defense business. We're hearing from other naval suppliers that the Navy is starting to have discussions about CapEx reimbursement. HII did report that.

Chardan DNA: Just a question on the defense business, we're hearing from other naval suppliers. The Navy is starting to have discussions about.

Chardan DNA: Capex reimbursement Hai did report it.

Operator: Other suppliers are saying they're in talks. Is that something you guys are hearing too, or would you expect a benefit from it? Maybe I'll, Jordan, I'll take that one and maybe give a little broader perspective here and change altitude from your question.

Chardan DNA: Other suppliers are saying they are in talks is that something you guys are hearing too or would you expect to benefit from it.

Chardan DNA: So maybe ill.

Speaker Change: Jordan I'll take that one and maybe give a little broader perspective here to change altitude.

Jordan: From your question I'd say first off remember that for BWXT, where our reactors and fuel our long lead items for those submarines and aircraft carriers.

Bob Labick: I'd say first off, you know, remember that for BWXT, our reactors and fuel are long lead items for those submarines and aircraft carriers. And so we frankly had to get out in front of those capital needs before the shipyards did. And so you look at our buildup to the two Virginias, with the Columbia on top of that, and then we went through that two carrier buy and actually had to put considerable capital in for that. But we got ahead of that, and that was one of our major capital campaigns. And so that's kind of done for us.

Chardan DNA: And so we frankly had to get out in front of those capital needs before the shipyards did and so when you look at our buildup to the two Virginia's with the Columbia on top of that and then we went through that two carrier buy.

Chardan DNA: And actually had to put considerable capital in for that so we got ahead of that and that was one of our major.

Chardan DNA: Capital campaigns.

Chardan DNA: And so that's kind of done for us and we were frankly ahead of that submarine industrial base funding activity.

Operator: And we were, frankly, ahead of that submarine industrial-based funding activity. And so that's where we have been, and we're sort of well-equipped to deal with the volume that we see out there. You know, that said, if some new scope comes in, for example, the AUKUS program is an example, or Accelerated Columbia, then we would certainly have discussions with our customer and do have discussions with our customer about, you know, where's the most appropriate place to bear the capital load. So those discussions do go on, but I would say that, you know, we certainly got ahead of the capital issue. Relative to the shipyard. Got it. Thank you so much. Your next question comes from the line of Michael Ciarmoli from Truist Securities. Please go ahead.

Chardan DNA: And so that's where we've been and we're sort of well equipped to deal with the volume that we see out there ahead that said if some as some new scope comes in for example, the August program as an example, or accelerated Colombia, then we would certainly have.

Chardan DNA: Discussions with our customer and do have discussions with our customer about about where is the most appropriate place to bear the capital load. So those those discussions do won't do go on but I would say that we certainly got ahead of the capital issue.

Chardan DNA: Relative to the shipyards.

Speaker Change: Got it thank you so much.

Speaker Change: Youre welcome.

Chardan DNA: Your next question comes from the line of Michael Cerasoli from truly Securities. Please go ahead.

Michael Ciarmoli: Hey, good evening, guys. Thanks for taking the questions. Rex, just back to Tech 99 and the FDA process: what's the sort of back and forth right now? What's the dialogue like?

Michael Ciarmoli: Hey, good evening guys. Thanks for taking the questions.

Michael Ciarmoli: Rex just back to tech 99, and the FDA.

Michael Ciarmoli: Process whats sort of the back and forth right now whats the dialogue like any any surprises with what they are requesting or with what youre doing or.

Rex D. Geveden: Are there any surprises with what they're requesting or with what you're doing or, you know, anything new there? I know you're talking about approval later this year, but any color you can give us. Yes, there's really nothing new here, Michael. We had some findings from the FDA and some issues to work out, including some equipment modifications to run some reference batches and all that sort of thing. And we're just sort of grinding right through that. So, it's absolutely on track relative to everything we've said for the last several quarters. No change in posture at all.

Michael Ciarmoli: Any anything new there I know you're talking about the the approval later this year, but any color you can give us.

Michael Ciarmoli: Yes, there is really nothing new there Michael you know we had some findings from the FDA in some some issues to work down including some equipment modifications to run some reference batches and all that sort of thing and we're just sort of brining right through that so let's say, it's absolutely on track relative to everything we've said for the last several quarters no change in posture at all.

Michael Ciarmoli: Okay, perfect. And then, Rob, just as we think about 24, and specifically the revenue growth in government, I think, you know, the initial view may have been a little bit more conservative. Can you give us any sense as to what's really kind of picking up some momentum in that portfolio? Is it more the microreactors, some of the new start programs, or just kind of give us a sense of what's kind of really offsetting some of those headwinds from the carrier? Yeah, yeah, I can do that.

Speaker Change: Okay perfect.

Michael Ciarmoli: And then I guess, Rob just as we think about 'twenty four and specifically the.

Michael Ciarmoli: Revenue growth in government and I think the.

Michael Ciarmoli: The initial view may have been a little bit more conservative can you give us any any sense as to what's.

Michael Ciarmoli: Really kind of picking up some momentum in that portfolio is it is it more the micro reactors some of the new start programs or just kind of give us a sense what is kind of really offsetting some of those headwinds.

Bob Labick: Thanks for the question. Yeah, on the top line within the government business in general, we're seeing a couple drivers that contributed to the outsized performance in Q4 will roll through in 2024. You know, to name a couple of those, they're outside of the core naval business, frankly. On the non-naval side, we're really ramping Draco nicely.

Speaker Change: From the carrier.

Speaker Change: Yes, Ken Thanks for the question, yes on the top line within the government business in general and we're seeing a couple of drivers that contributed to the outsized performance in Q4 will roll through in 2024.

Speaker Change: And to name a couple of those they are outside of the core naval business frankly.

Michael Ciarmoli: On the non naval side, we're really ramping draco nicely. So that's our space micro reactor program as you know we learned a lot from Pele in terms of standing up the supply chain and getting after that and that allowed us to spend capital.

Bob Labick: So that's our space microreactor program, as you know. We learned a lot from Pele in terms of setting up the supply chain and getting after that, and that allowed us to spend capital and hire people efficiently and get the materials we need to get working. So you saw some pretty good growth in that in the fourth quarter, and I think that's going to roll through. Now, those are cost-reimbursable programs, so that's one of the sort of drags on the market, but to me, that's a good news story to be ramping those quickly and serving our customers well. Then on the special materials business that we've been talking about, and we're going to spend a lot of time on that tomorrow in terms of our key capabilities around processing and handling. I think a lot of people think about that as a fuel business and a downblending business, but now we've landed this terrific program around Umetal. We're recovering some HALU scraps and turning those over to ARDP winners.

Michael Ciarmoli: And hire people efficiently and get the materials, we need to get work and so you saw some pretty good growth in that in the fourth quarter and I think thats going to roll through that now those are cost Reimbursable program. So that's that's one of the sort of drags on margin, but that's to me. That's a good news story to be ramping those quickly and serving our customer well.

Michael Ciarmoli: Then on the special.

Michael Ciarmoli: Materials business that we've been talking where I spent a lot of China that tomorrow in terms of our key capabilities around processing and handling I think a lot of people think about that is as a fuel business in a down blending business, but now we've landed this terrific program around new metal, we're recovering some halo scraps and turning those over to <unk>.

Michael Ciarmoli: RDP winters, we have other prospects to expand that franchise so within that.

Bob Labick: We have other prospects to expand that franchise. So within that special materials portfolio, we do have mature programs, and so that's a good margin, but again, as you're bringing on Umetal or you bring on HALU, that comes with good revenue as you're standing that up. So that has implications also, which we talked about from a top-line and a margin perspective. Those are notable.

Michael Ciarmoli: Special materials portfolio, we do have mature programs and so that's good margin, but again as you as you bring on new metal are you bring on Halo that comes with good good revenue as youre standing that up but our new approach right. So.

Michael Ciarmoli: That has implications also which we talk about from a from a top line and a margin perspective.

Michael Ciarmoli: Those are notable and then just the core NRG legacy <unk> business is doing well, it's coming with.

Bob Labick: And then just the core NOG, legacy NOG business, is doing well. It's coming in with revenue. We've got the workforce now, as we talked about hiring, you know, 10% of the net workforce overall as a company, really is going to allow us to grow the top line nicely in 2024, in all of our business lines in GEO, but particularly in the ones I've named as well as just the core shipbuilding, you know, naval propulsion. Got it. Got it.

Michael Ciarmoli: Revenue.

Michael Ciarmoli: We've got the workforce now as we talked about hiring 10, 10% net workforce overall as a company really is going to allow us to grow the topline nicely in 2024, and all of our business lines and GL, but particularly in the ones I've named as well as just the core shipbuilding.

Michael Ciarmoli: Naval propulsion business.

Speaker Change: Got it got it helpful. And then just last one I know you guys aren't wildly impacted by the budget environment, continuing resolution, but any any risks that we should be aware of even looking at 25, I know, they're kind of thrown out there may be one Virginia class, although that seems to be a function of just.

Michael Ciarmoli: And then just last one, I know you guys are wildly affected by the budget environment, continuing resolution, but any risk that we should be aware of, even looking at 25, I know they're kind of thrown out there, maybe one Virginia class, although that seems to be a function of just kind of what the supply chain can handle, any thoughts there? Yeah, maybe just the broad thoughts here, Michael, maybe to frame it a little bit. Of course, some of our business is naturally completely insulated from that noise. Our commercial business in Canada; we've got a little footprint in the UK, but to the extent that our government programs are affected by continuing resolutions or stalling out actions on appropriations. And just every program in our portfolio is a program of record. I mean, that's meaningful, everything from Pele to our Navy programs and certainly our national security programs with the NNSA.

Michael Ciarmoli: Kind of what the supply chain can handle but any thoughts there.

Michael Ciarmoli: Yes, maybe just a broad thoughts here, Michael maybe to frame it a little bit of course, some of our businesses naturally completely insulated from that noise, our commercial business in Canada, We've got a little footprint in the UK, but to the extent that our government programs are affected by continuing resolutions or.

Michael Ciarmoli: We're stalling out actions on appropriations and it just every program in our portfolio as a program of record that's meaningful everything from Pele too to our Navy programs and certainly our national security programs with the NSA.

Rex D. Geveden: So that doesn't, those CRs don't influence our business very much because those are crucial programs on a multi-year basis. I would say the one place that it might affect us, and you can talk to Susie Stirner about this tomorrow. The one place it can affect is DOE site clean-up type work where you might have a funding break and go into sort of a stand-down mode, so those kind of... Okay, got it.

Michael Ciarmoli: So that doesn't those those.

Michael Ciarmoli: <unk> don't influence our business very much because those are crucial programs on multi year money I would say the one place it might affect us and you can talk to Susie's Turner about this tomorrow.

Michael Ciarmoli: The one place that can affect us as the Doe site cleanup type work.

Michael Ciarmoli: Where you might have a funding break and go into sort of a stand down mode. So those kind of things can and have happened in the past, but overall, our business is really pretty well insulated from that kind of action.

Michael Ciarmoli: Thanks, guys. I'll see you tomorrow. Yeah, that's too mixed, Mike.

Speaker Change: Okay got it.

Speaker Change: Thanks, Scott I'll see you tomorrow.

Speaker Change: Yes savings Mike.

Chase Jacobson: That concludes our Q&A session. I would now like to turn the call over back to Chase Jacobson for his brief closing remarks. Yeah, thanks everybody, for joining us today. We look forward to seeing and speaking with many of you tomorrow and at upcoming investor events. If you have any questions, you can reach me by phone at 980-365-4300 or by email at investors at bwxt.com. Thank you. This concludes the BWX Technologies fourth quarter and full year 2023 earnings conference call. Thank you for participating. You may now disconnect.

Speaker Change: That concludes our Q&A session I would now like to turn the call over back to Chase Jacobson for brief closing remarks.

Chase Jacobson: Yes, thanks, everybody for joining us today, we look forward to seeing and speaking with many of you tomorrow and at upcoming Investor events. If you have any questions. You can reach me by phone at 90 803654300 or by E Mail at Investor is at BWXT Dot com. Thank you.

Speaker Change: You.

Speaker Change: This concludes the BWI ex technologies fourth quarter and full year 2020, <unk> earnings Conference call. Thank you for your participation you may now disconnect.

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