Q1 2024 BWX Technologies Inc Earnings Call

May 6, 2024

Operator: Ladies and gentlemen, welcome to the BWX Technologies' first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. Following the company's prepared remarks, we will conduct a question and answer session. Instructions will be given at that time. I would now like to turn the call over to our host, Chase Jacobson, WXT's Vice President of Investor Relations. Please go ahead. Thank you.

Okay.

Speaker Change: Ladies and gentlemen, welcome to the VW X technologies first quarter 2024 earnings conference call.

Speaker Change: At this time all participants are in listen only mode. Following the company's prepared remark, we will conduct a question and answer session and instructions will be given at that time.

Speaker Change: I would like to turn the call over to our host Chase Jacobson of double your XD Vice President of Investor Relations. Please go ahead.

Chase Jacobson: Thank you, Kathleen. Good evening, and welcome to today's call. Joining me on today's call are Rex Geveden, President and CEO, and Robb LeMasters, Senior Vice President and CFO. During today's call, we will reference the first quarter 2024 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 Kathleen 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 first quarter of 2024 earnings presentation that is available on the investors section of the BWXT website. We will also discuss certain matters that constitute forward looking statements.

Statements involve risks and uncertainties, including those described in the safe Harbor provision found in the investor materials and the company's SEC filings.

Chase Jacobson: Frequently discuss non-GAAP financial measures, which are reconciled to GAAP measures in the appendix of the earnings presentation that can be found on the investors section of the BWXT website I would now like to turn the call over to Rex.

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 would now like to turn the call over to Rex. Thank you.

Rex D. Geveden: Thank you, Chase, and good evening to all of you. This afternoon, we reported the BWXT first quarter results. We delivered 6% organic revenue growth, 9% adjusted earnings per share growth, and remarkably good cash flow compared to historical seasonal patterns. Operating performance was in line with our expectations, and we are reaffirming our full-year guidance, calling for mid-single-digit revenue and adjusted EBITDA growth, leading to adjusted earnings per share of $3.05 to $3.20. Before I get into the segment discussion, I'd like to spend a few minutes on our recent announcement to expand the Cambridge plant, which is already North America's largest heavy nuclear equipment manufacturing facility.

Rex: Thank you Chase and good evening to all of you. This afternoon, we reported the BWXT first quarter results, we delivered 6% organic revenue growth, 9% adjusted earnings per share growth and remarkably good cash flow compared to historical seasonal patterns operating performance was in line with our expectations and we are reaffirming our.

Rex: Full year guidance, calling for mid single digit revenue and adjusted EBITDA growth, leading to adjusted earnings per share of $3 <unk> to $3 20.

Speaker Change: Before I get into the segment discussion I'd like to spend a few minutes on our recent announcement to expand the Cambridge plant, which is already north America's largest heavy nuclear equipment manufacturing facility.

Rex D. Geveden: As we discussed on recent calls, demand in the commercial nuclear markets is robust, with new and ongoing life extensions of can-do reactors in Canada and the international market, the potential for large new builds, and the incipient demand for small modular reactors. With this tangible future demand and our existing commercial nuclear backlog of over $700 million, we are moving forward with a project to increase the Cambridge facility footprint by 25% and upgrade it with advanced manufacturing equipment. Over the next two years, we will invest about $60 million, with construction starting in the third quarter of this year and planned completion in mid-2026.

Speaker Change: As we discussed on recent calls demand in the commercial nuclear market is robust with new and ongoing life extensions of candy reactors in Canada, and the international market the potential for large new builds and the incipient demand for small modular reactors.

With this tangible future demand and our existing commercial nuclear backlog of over $700 million. We are moving forward with a project to increase the Cambridge facility footprint by 25% and upgraded with advanced manufacturing equipment over the next two years, we will invest about $60 million with construction starting in the third quarter of this year and plan.

Speaker Change: <unk> in mid 2026, I would add that the expanded capacity enables more efficient execution of our existing backlog and room for new and exciting growth projects.

Rex D. Geveden: I would add that the expanded capacity enables more efficient execution of our existing backlog and room for new and exciting growth projects, while much smaller in scale. Our intention is to get ahead of demand that we know is rising in this market, just as we did with naval propulsion, micro-reactors, and the medical business in recent years. This investment also enables our customers to signal supply chain strength as they compete for and secure more clean energy projects. In that vein, just last week, GE Vernova announced that BWXT is the first qualified company in the BWRX 300 supply chain group.

Speaker Change: While much smaller in scale.

Speaker Change: Our intention is to get ahead of demand that we know is precipitating in this market just as we did with naval propulsion micro reactors and the medical business in recent years.

Speaker Change: This investment also enables our customers to signal supply chain strengths as they compete for and secure more clean energy projects in that vein just last week GE for Nova announced that BWXT as the first qualified company and the BW are X 300 supply chain group our customers.

Rex D. Geveden: Our customers require products that meet extremely high-quality standards with on-time delivery. By making meaningful investments now, we will be ready to satisfy the demand at the right time with market-leading credentials and capacity. Before making this investment, I personally engaged in discussions with our top customers and will be on the road visiting with others over the next couple of months to underscore BWXT's commitment to the industry and our need to generate appropriate returns for the value we provide.

Speaker Change: <unk> require products that meet extremely high quality standards with on time delivery by making meaningful investments now we will be ready to satisfy the demand at the right time with market, leading credentials and capacity.

Speaker Change: Before making this investment at personally engaged in discussions with our top customers and will be on the road visiting with others over the next couple of months to underscore bwxt's commitment to the industry and our need to generate appropriate returns for the value we provide as capacity inevitably Titans BWXT will occupy an enviable position.

Rex D. Geveden: As capacity inevitably tightens, BWXT will occupy an enviable position given its world-class workforce, facilities, and experiential qualifications. Now turning to a discussion of segment results in the market outlook, government operations continue to grow nicely with 6% organic revenue growth in the quarter.

Speaker Change: <unk>, given us world class workforce facilities and experiential qualifications.

Speaker Change: Now turning to a discussion of segment results and the market outlook.

Speaker Change: Government operations continue to grow nicely with 6% organic revenue growth in the quarter from a demand perspective, I would like to touch on a couple of key areas.

Rex D. Geveden: From a demand perspective, I would like to touch on a couple of key areas. First, at a high level, the long-delayed fiscal 2024 appropriations provided adequate funding across all our programs and government operations. Looking beyond this year, the President's fiscal year 25 budget supports the secular themes, namely the great power competition and global decarbonization that underpin BWXT's long-term growth story. The request prioritizes the Columbia-class submarine program and provides substantial investment in the modernization of the submarine industrial base to sustain the shipbuilding plan and prepare for auction. This was further supported with $3.3 billion of the Defense Supplemental Bill that was just signed by the President.

Speaker Change: First at a high level the long delayed fiscal 2024 appropriations provided good funding across all our programs and government operations looking beyond this year the president the President's fiscal year 'twenty five budget supports the secular themes, namely the great power competition and global de carbonization that underpinned dws.

Speaker Change: <unk> long term growth story request prioritizes, the Columbia class submarine program and provide substantial investment in modernization of the submarine industrial base to sustain the shipbuilding plan and prepare for August.

Speaker Change: This was further supported with $3 3 billion in the defense supplemental Bill that was just signed by the president.

Rex D. Geveden: The FY 25 request supports clean energy, including investments in advanced nuclear technology development, which is important for growth in the micro and small modular reactor market. More specifically, it fully funds NASA and DARPA's Draco project, the first demonstration of a nuclear thermal rocket engine in space, a program for which BWXT is manufacturing the reactor hardware and complex coated fuel. Second, there's been a lot of recent news flow around delays in Navy shipbuilding at U.S. shipyards and changes in the procurement schedules reflected in the Navy's new 30-year shipbuilding plan.

Speaker Change: The FY 'twenty five request supports clean energy, including investments in advanced nuclear technology development, which is important for growth in the micro and small modular reactor markets more specifically it fully funds NASA and DARPA Draco project. The first demonstration of a nuclear thermal rocket engine in space a program in which.

Speaker Change: <unk> has manufacturing the reactor hardware and complex coated fuel.

Speaker Change: Second there's been a lot of recent news flow around delays in Navy shipbuilding at U S shipyards and changes in the procurement schedule as reflected in the Navy's New 30 year Shipbuilding plan.

Rex D. Geveden: To address the shipbuilding delays, I will remind you that BWXT made early, significant investments to ensure we could handle the workload associated with the serial ramp and Columbia class orders concurrent with two Virginia class orders per year and carrier work going through our facilities. For the most part, we have successfully navigated some of the labor and supply chain issues as shipyards during and post-COVID. Accordingly, we are somewhat decoupled from the shipbuilding delays.

Speaker Change: To address the shipbuilding delays I will remind you that BWXT made early significant investments to ensure we can handle the workload associated with the serial ramp and Columbia class orders concurrent with two Virginia class orders per year and carrier work going through our facilities.

Speaker Change: For the most part we have successfully navigated some of the labor and supply chain issues as the shipyards during the post during and post Covid. Accordingly, we are somewhat decoupled from the shipbuilding delays that said, we remain vigilant to continue to work with our customers to ensure the stability of our execution schedules.

Rex D. Geveden: That said, we remain vigilant and continue to work with our customers to ensure the stability of our execution schedule. The updated 30-year shipbuilding plan, released since we last spoke at Investor Day just over two months ago, reflects pressures and trade-offs the Navy sees amid tighter times with varied priorities. While plans for the Virginia class are mixed, that is not particularly meaningful to BWXT given our backlog of work.

Speaker Change: The updated 30 year Shipbuilding plan released since we last spoke at Investor day, just over two months ago.

Speaker Change: Reflects pressures and tradeoffs the Navy CES amid tighter times with very priorities.

Speaker Change: While plans for the Virginia class or mix that is not particularly meaningful to BWXT, given our backlog of work, but the navy's potential adjustment to the Ford class aircraft carrier schedule would be more impactful because of the reactor scaling quantities. According to this new plan CV and 82 will be procured a 2030 rather than in 2028.

Rex D. Geveden: But the Navy's potential adjustment to the Ford-class aircraft carrier schedule would be more impactful because of the reactor scale and quantity. According to this new plan, CVN82 will be procured in 2030 rather than in 2028, with advanced procurement starting in 2027 rather than 2026. For BWXT, this could mean that the carrier lull in 2024 and 2025 could be extended another year. As we did in 2024, we will aim to offset this potentially extended lull with other programs.

Speaker Change: With advanced procurement, starting in 2027, rather than 2026 for BWXT. This could mean that the carrier low in 'twenty four 'twenty five could be extended another year as we are doing in 2024, we will aim to offset this potentially extended lull with other programs.

Rex D. Geveden: In any case, our visibility into the demand for naval propulsion reactors, components, and fuel work remains clear with the steady procurement cadence of Virginia-class submarines and serial production of Columbia-class submarines. Additionally, while still early, it is possible that the Navy could use an extended carrier lull to get ahead on AUKUS-related work.

Speaker Change: In any case, our visibility into the demand for naval propulsion reactors components and fuel fuel work remains clear with steady procurement cadence of Virginia class submarines in serial production of Columbia class submarines. Additionally, while still early it is possible Navy could use an extended carrier level to get ahead on Argus related work.

Speaker Change: <unk>.

Rex D. Geveden: BWXT has received funding for initial architectural and engineering facilitation work, and work scopes to support future increased workload demand, including potential AUKUS activity. While the cadence of orders on any specific ship set could shift from year to year, we believe the 10-year compound growth rate for our naval propulsion business of 3% to 5% that we laid out in Vestor Day remains achievable. The nation is doubtlessly committed to its long-term goals for the nuclear fleet, and changes under various administrations or other Washington dynamics have not historically supplanted the national security imperative.

Speaker Change: BWXT has received funding for initial architectural and engineering facilities Asian work.

Speaker Change: Work scopes to support future increased workload demand, including potential orcus activity, while the cadence of orders on any specific chipset could shift from year to year. We believe the 10 year compounded growth rate for our naval propulsion business of 3% to 5% that we laid out at Investor day remains achievable.

Speaker Change: The nation is doubtlessly committed to its long term goals for the nuclear fleet and changes under various administrations or other Washington dynamics.

Speaker Change: Not historically supplanted the national security imperative.

Rex D. Geveden: Our micro-reactor projects for both land and sea are progressing nicely. Project Pele, the terrestrial micro-reactor we are developing with the Strategic Capabilities Office, is in the procurement phase, and we are working alongside Idaho National Lab and the DOE to finalize the requirements for the authorization basis needed for the licensing operation of the system. It is worth noting that Pele received the full funding request in the fiscal 2024 defense bill, highlighting government support for this critical technology, one that could ultimately serve as a strategic advantage due to increasing needs for stable power at remote military bases and for applications including high-powered radars and the electrification of military tactical vehicles and weapons.

Speaker Change: Our micro reactor projects for both land and sea are progressing nicely project Pele the terrestrial micro reactor, we are developing with the strategic capabilities office.

Speaker Change: As in the procurement phase and we are working alongside Idaho National Lab, and the Dod to finalize the requirements for the authorization basis needed for licensing operation of the system. It is worth noting that <unk> received the full funding request in the fiscal 2020 for defense Bill highlighting the government support for this critical tech.

Speaker Change: <unk>, one that could ultimately serve as a strategic advantage due to increasing needs for stable power at remote military basis and for applications, including high powered radars and the electrification of military tactical vehicles and weapons. Similarly, while in its early stages Draco is ramping nicely and was a key contributor to revenue.

Rex D. Geveden: Similarly, while in its early stages, Draco was ramping nicely and was a key contributor to revenue growth in the quarter. Beyond Draco, we continue to build on our space franchise as the U.S. and its allies increasingly invest in nuclear technologies to expand their presence and capabilities in this domain. We recently entered a teaming agreement with Rolls-Royce through which we secured a U.K. space agency contract for nuclear space power missions. This agreement provides for expanding our collaboration beyond space and into other advanced nuclear applications, including micro-reactor and small modular reactor fuel and component development.

Speaker Change: Growth in the quarter beyond Draco, we continued to build on our space franchise as the U S and its allies increasingly invest in nuclear technologies to expand their presence and capabilities in this domain.

Speaker Change: We recently entered a teaming agreement with Rolls Royce through which we secured a UK space agency contract for nuclear space power missions. This teaming agreement provides for expanding our collaboration beyond space and into other advanced nuclear applications, including micro reactor and small module reactor fuel and <unk>.

Speaker Change: Ponant development.

Rex D. Geveden: While our MicroActors strategy is primarily focused on defense applications, we continue to assess opportunities in the commercial market. Our history of manufacturing nuclear reactors for the Navy, along with our dedicated manufacturing footprint and significant technical expertise position us well as commercial opportunities materialize. Special Materials

Speaker Change: While our micro <unk> strategy is primarily focused on defense applications, we continue to assess opportunities in the commercial markets. Our history of manufacturing nuclear reactors for the Navy along with our dedicated manufacturing footprint and significant technical expertise position as well as commercial opportunities materialize.

Rex D. Geveden: We've assembled a deep portfolio based on our strengths and technical capabilities in radiochemical processing, handling, and accountability. Earlier this year, we announced a two-year extension of our downblending contract, building on the success of 2023 when we captured a five-year uranium purification and conversion contract and a multi-year contract to recycle scrap material from the Y-12 National Security Complex into high-SA, low-enriched uranium In March, a BWXT-led joint venture was awarded the 10-year Hanford Integrated Tank Disposition Contract by the DOE.

Speaker Change: And special materials, we've assembled a deep portfolio based on our strengths and technical capabilities in radiochemical processing handling and accountability earlier.

Speaker Change: Earlier this year, we announced the two year extension of our down blending contract building on the success of 2023, when we captured a five year uranium purification and conversion contract and a multi year contract to recycle scrap material from the Y 12 National security complex and too high assay low enriched uranium.

Speaker Change: In March of BWXT led joint venture was awarded the 10 year Hanford integrated tank disposition contract by the Doe we.

Rex D. Geveden: We were first awarded this contract in April 2023. After multiple protests by the incumbent, the DOE decided to re-award the contract to the BWXT-led joint venture. While it is again being protested, we delivered a superior proposal, as evidenced by our being selected twice.

Speaker Change: We were first awarded this contract in April 2023.

Speaker Change: After multiple protest by the incumbent in the Doe decided to re award the contract to the BWXT led joint venture.

Speaker Change: While it is again being protested we delivered a superior proposal as evidenced by our being selected twice.

Rex D. Geveden: Assuming it settles in our favor, we expect a contract transition later this year. Meanwhile, while we are encouraged by market demand, we also remain keenly focused on improving our operations. As I discussed before, we've made significant investments in our workforce and facilities. In the first quarter, we continued to realize benefits of our operational equipment effectiveness program as we saw improved efficiency metrics across our key sites. By way of example, a team tasked with improving coop sheet drilling, a process that requires immense precision, nearly doubled the efficiency of this work track.

Speaker Change: Assuming it settled in our favor we expect the contract transition later this year.

Speaker Change: While we are encouraged by market demand. We also remain keenly focused on improving our operations.

Speaker Change: As I discussed before we've made significant investments in our workforce and facilities in the first quarter. We continue to realize benefits of our operational equipment effectiveness program as we saw improved efficiency metrics across our key sites by way of example, the team tasked with improving to cheat drilling the process requires in men's precision nearly.

Speaker Change: <unk> doubled the efficiency of this work track. This is just one example of how our focus on Opex is helping to drive profitability and offset inflationary impacts to the business.

Rex D. Geveden: This is just one example of how our focus on OPEX is helping to drive profitability and offset inflationary impacts on the business. Turning now to our commercial operations segment. Revenue in the segment grew 7% in the quarter, and adjusted EBITDA was up 55%. Continuing a recent trend, growth was driven by increasing demand for medical isotopes and improved medical EBITDA contribution. As I described earlier in the call, demand in the commercial nuclear power market is strong. At the end of January, Ontario Power Generation formally announced that it would proceed with the life extension of Units 5 through 8.

Speaker Change: Turning now to our commercial operations segment.

Speaker Change: Revenue in this segment grew 7% in the quarter and adjusted EBITDA was up 55%.

Speaker Change: Continuing a recent trend growth was driven by increasing demand for medical isotopes and improved medical EBITDA contribution as I described earlier in the call demand in the commercial nuclear power market is strong at.

Speaker Change: At the end of January, Ontario power generation, formerly announced that it will proceed with life extension of the Pickering site units five through eight this is a substantial opportunity for BWXT that will drive backlog and revenue growth and provide another 10 years or more of visibility into our backlog of life extension work that began in that region.

Rex D. Geveden: This is a substantial opportunity for BWXT that will drive backlog and revenue growth and provide another 10 years or more of visibility into our backlog of life extension work that began in that region in 2017. In the SMR market, we are working with GE Hitachi on the reactor pressure vessel for the BWRX-300 project with OPG and anticipate a full release of the manufacturing award in the coming months. And our opportunity set remains enticing as utilities in North America and Europe consider building SMRs to meet growing electricity demand.

Speaker Change: In 2017.

Speaker Change: In the SMB market, we are working with GE Hitachi on the reactor pressure vessel for the BWXT BW Rx 300 project with LPG and anticipate a full release of the manufacturing award in the coming months.

Speaker Change: Our opportunity set remains enticing as utilities in North America, and Europe consider building <unk> to meet growing electricity demand.

Rex D. Geveden: The expansion at Cambridge that I described earlier improves our position as the preeminent supplier of large nuclear equipment in North America. Turning to BWXT Medical, revenue grew rapidly, building on the momentum from last year with base diagnostics and contract drug manufacturing expansion. We continue to expect full-year medical revenue growth of about 25%. Demand for diagnostic and therapeutic isotopes is increasing, and rapid consolidation of the therapeutic space continued with AstraZeneca's announcement to acquire Fusion Pharmaceuticals, a key partner of BWXT, and a leader in actinium-based drug development, for up to $2.4 billion.

Speaker Change: The expansion at Cambridge that I described earlier improves our position as the preeminent supplier of large nuclear equipment in North America.

Speaker Change: Turning to BWXT medical revenue grew rapidly building on the momentum from last year with based diagnostics and contract drug manufacturing expansion.

Speaker Change: We continue to expect full year medical revenue growth of about 25% demand for diagnostic and therapeutic isotopes is increasing and rapid consolidation of the therapeutic space continued with Astrazeneca announcement to acquire fusion pharmaceuticals, a key partner of BWXT and a leader in actinium based drug development for up to two.

Speaker Change: $4 billion.

Rex D. Geveden: We continue to see positive data points as various actinium and lutetium-based reopharmaceuticals advance through clinical trials, driving significant growth in the addressable market. There are over 155 active clinical trials for drugs using these isotopes, some involving drugs that have already proven to be successful. For example, Novartis recently announced that it will seek approval for Plovicto, the market-leading lutetium-based prostate cancer drug with over a billion in annual sales, for use in the pre-chemotherapy setting.

Speaker Change: We continue to see positive data points as various actinium and lutetium based radiopharmaceuticals advance through clinical trials driving significant growth in the addressable market. There are over 155 active Copeland active clinical trials for drugs using these.

Speaker Change: These isotopes some involving drugs that have already proven to be successful for example, Novartis recently announced that it will seek approval for <unk> use in the pre chemotherapy.

Speaker Change: Netting for Victoza market, leading lutetium based prostate cancer drug with over $1 billion in annual sales and is currently only approved for post chemotherapy settings approval would open a significantly larger patient set highlighting the meaningful growth potential of this market.

Rex D. Geveden: Approval would open a significantly larger patient set, highlighting the meaningful growth potential of this market. We are currently the only commercial supplier of non-carrier added actinium and are supporting multiple clinical trials and plan to significantly increase commercial sales of lutetium next year as we finalize our drug master file with the FDA. So, overall, we had a good quarter and are reaffirming our 2024 guidance. BWXT is at the forefront of the nuclear industry, occupying meaningful competitive positions in multiple markets.

Speaker Change: We are currently the only commercial supplier of non carrier added actinium and are supporting multiple clinical trials and plan to ramp commercial sales of lutetium significantly next year as we finalize our drug master file with the FDA.

Speaker Change: Overall, we had a good quarter and are reaffirming our 2020 for guidance.

Speaker Change: BWXT is at the forefront of the nuclear industry occupying meaningful competitive positions in multiple markets.

Rex D. Geveden: We are experiencing secular tailwinds over the long term in a portfolio that can withstand near-term demand and funding variability. We have a highly credentialed, experienced workforce, unique infrastructure, and world-class capabilities in manufacturing, processing, and services, and are enhancing these with organic investment. We are committed to providing our customers with nuclear solutions to address critical missions in global security, clean energy, interventional oncology, and other nuclear applications, positioning us well to achieve our medium-term financial targets. With that, I will now turn the call over to Robb. Thanks, Rex, and good evening, everyone.

Speaker Change: We are experiencing secular tailwind over the long term and a portfolio that can withstand near term demand and funding variability we have a highly credentialed experienced workforce unique infrastructure and world class capabilities and manufacturing processing and services and are enhancing these with organic investments we are.

We're committed to providing our customers nuclear solutions to address critical missions and global security clean energy intervention oncology and other nuclear applications positioning us well to achieve our medium term financial targets with that I will now turn the call over to Rob.

Thanks, Brad and good evening everyone.

Robb A. LeMasters: I'll start with some total company financial highlights on slide four of the earnings presentation. First quarter revenue was $604 million, up 6% organically on a consolidated basis, with similar growth in both settings. Adjusted EBITDA was $115 million, up 4% year over year as growth in commercial operations and lower corporate costs were partially offset by slightly lower government operations EBITDA. The lower corporate costs in the first quarter were mainly due to the timing of healthcare-related costs and are expected to return to a more normalized level over the next several quarters. We continue to see full-year unallocated corporate EBITDA at flat to slightly lower than 2023. Adjusted earnings per share was $0.76, up 9% compared to $0.70 in the prior year quarter.

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

Robb A. LeMasters: First quarter revenue was $604 million up 6% organically on a consolidated basis with similar growth in both segments.

Robb A. LeMasters: Adjusted EBITDA was $115 million up 4% year over year as growth in commercial operations and lower corporate costs were partially offset by slightly lower government operations EBITDA.

Robb A. LeMasters: The lower corporate costs in the first quarter were mainly due to the timing of healthcare related costs and are expected to return to a more normalized level over the next several quarters. We continue to see full year unallocated corporate EBITDA at flat to slightly lower in 2023.

Robb A. LeMasters: Adjusted earnings per share was <unk> 76, that's up 9% compared to <unk> 70 in the prior year quarter.

Robb A. LeMasters: As you can see in the EPS bridge on slide 5, operations contributed about 2 cents to the year-over-year growth, with the remainder split between slightly higher pension and other income, lower interest expense, and a lower tax rate. For the full year, we expect the net impact of non-operating items to be relatively neutral to adjusted EPS compared to 2023, as various items around timing of certain expenses, FX gains, and interest expense that benefited the first quarter will be offsets over the next three quarters.

Robb A. LeMasters: As you can see on the EPS bridge on slide five operations contributed about two two the year over year growth with the remainder split between finally higher pension and other income lower interest expense and a lower tax rate for.

Robb A. LeMasters: For the full year, we expect the net impact of nonoperational items to be relatively neutral to adjusted EPS compared to 2023 as various items around timing of certain expenses FX gains and interest expense that benefited the first quarter will have offset over the next three quarters.

Robb A. LeMasters: Our adjusted effective tax rate was 22.5% in the quarter due to higher excess tax benefits and stock compensation expense. Nonetheless, we still expect a full-year tax rate of approximately 23.5%, meaning you could see a tax rate closer to that level over the next few quarters. Free cash flow in the quarter was $3 million compared to a use of $43 million in the first quarter of 2023. I'll be modest.

Robb A. LeMasters: Our adjusted effective tax rate was 22, 5% in the quarter due to higher excess tax benefits on stock compensation expense.

Robb A. LeMasters: Nonetheless, we still expect full year tax rate of approximately 23, 5%, meaning you could see a tax rate closer to that level over the next few quarters.

Robb A. LeMasters: Free cash flow in the quarter was $3 million compared to a use of $43 million in the first quarter of 2023, albeit modest. This was the first time, we had positive free cash flow in the first quarter since becoming a standalone company highlighting our focus on working capital management and Capex discipline.

Robb A. LeMasters: This was the first time we had positive free cash flow in the first quarter since becoming a standalone company, highlighting our focus on working capital management and CapEx. CapEx in the quarter was $30 million, and we continue to expect full-year CapEx to be flat to slightly down compared to 2023, inclusive of early spend on the Cambridge facility that Rex discussed earlier. Moving now to the Segma results on slide six.

Robb A. LeMasters: Capex in the quarter was $30 million.

Robb A. LeMasters: And we continue to expect full year capex to be flat to slightly down compared to 2023 inclusive of early spend on the Cambridge facility that Rex discussed earlier.

Robb A. LeMasters: Moving now to the segment results on slide six.

Robb A. LeMasters: Government Operations' first quarter revenue was up 6% to $487 million, driven by higher naval nuclear component production, special materials, and micro-reactor volume that was partially offset by lower long-lead material procurement. Despite higher revenue, first quarter adjusted EBITDA in the segment declined modestly to $100 million. This led to an EBITDA margin of 20.5% compared to 22.5% in the first quarter of 2023, which benefited from a particularly strong mix and timing of certain items, both of which worked against us.

Robb A. LeMasters: And government operations first quarter revenue was up 6% to $487 million driven by higher naval nuclear component production special materials and micro reactor volume that was partially offset by lower long lead material churn.

Robb A. LeMasters: Despite higher revenue first quarter adjusted EBITDA in the segment declined modestly to $100 million.

Robb A. LeMasters: This led to an EBITDA margin of 25% compared to 22, 5% in the first quarter of 2023, which benefited from a particularly strong mix and timing of certain items, both of which worked against us this quarter.

Robb A. LeMasters: For the full year of 2024, we continue to expect government operations EBITDA margins to be down only slightly from 21.1% in 2023 due to a few key dynamics. Those include grinding through onboarding inefficiencies and higher labor rates after growing our workforce by 10% last year.

Robb A. LeMasters: For the full year of 2024, we continue to expect government operations EBITDA margins to be down only slightly from 21, 1% in 2023 due to a few key dynamics.

Those include grinding through Onboarding inefficiencies and higher labor rates that for growing our workforce by 10% last year absorbing outsized revenue growth and cost plus micro reactor projects and other new programs and the absence of the missile tube expense recovery in the fourth quarter of 2023.

Robb A. LeMasters: Absorbing Outsized Revenue Growth in Cost Plus Microreactor Projects and Other New Programs and the absence of the Missile Tube Expense Recovery in the fourth quarter of 2023. Providing quarterly margin guidance can be challenging, but at this juncture, our best view is that government EBITDA margins in the second and third quarters will be similar to the 20.5% we reported in the first quarter, with a typical slight seasonal lift in the fourth

Robb A. LeMasters: Providing quarterly margin guidance can be challenging but at this juncture. Our best view is that government EBITDA margins in the second and third quarter will be similar to the 25% we reported in the first quarter with a typical slight seasonal lift in the fourth quarter again all of this leaves US right in line with government with the government.

Robb A. LeMasters: Again, all of this leads us right in line with government with the government operations margin guidance we gave last. Turning to commercial operations, revenue was up 7% driven by increases in field service activity in our commercial nuclear business as well as robust BWXP medical revenue growth, and partially offset by lower nuclear components and fuel handling volumes. Commercial operations adjusted EBITDA was up about $5 million to $14 million. The increase was driven mainly by improved performance in medical, which was partially offset by a slightly lower contribution from commercial nuclear.

Robb A. LeMasters: <unk> margin guidance, we gave last quarter.

Turning to commercial operations revenue was up 7% driven by increases in field service activity in our commercial nuclear business as well as robust BWXT medical revenue growth and partially offset by lower nuclear components and fuel handling volumes.

Robb A. LeMasters: Commercial operations adjusted EBITDA was up about $5 million to $14 million. The increase was driven mainly by improved performance in medical which was partially offset by slightly lower contribution from commercial nuclear.

Robb A. LeMasters: This led to a commercial EBITDA margin of 11.9%, up from 8.2% last year. We continue to expect commercial operations growth of high single digits to low double digits in 2024 with higher EBITDA margins compared to 2023. Growth will be led by medical, with commercial nuclear contributing as well, particularly in the second half of the year. Turning now to guidance on slide seven.

Robb A. LeMasters: This led to commercial EBITDA margin of 11, 9% up from eight 2% last year.

Robb A. LeMasters: We continue to expect commercial operations growth of high single digits to low double digits in 2024 with higher EBITDA margins compared to 2023.

Robb A. LeMasters: Both will be led by medical with commercial nuclear contributing as well, particularly in the second half of the year.

Robb A. LeMasters: Turning now to guidance on slide seven we are reaffirming our guidance for the four key metrics, we provided last quarter.

Robb A. LeMasters: We are reaffirming our guidance for the four key metrics we provided last quarter. We project total company revenue and adjusted EBITDA growth in the mid-single digits, leading to revenue of at least $2.6 billion and adjusted EBITDA of approximately five months. Included in this forecast is a year-over-year DNA step-up of approximately $10 million, driven mostly by government operations as the new equipment and capacity we have invested in for our naval propulsion business and microreactor projects are more fully utilized.

Robb A. LeMasters: We project total company revenue and adjusted EBITDA growth in the mid single digits, leading to revenue of at least $2 6 billion.

Robb A. LeMasters: And adjusted EBITDA of approximately $5 million.

Included in this forecast is a year over year D&A step up of approximately $10 million driven mostly by government operations as the new equipment and capacity, we have invested in for a naval propulsion business and micro reactor projects or more fully utilized.

Robb A. LeMasters: As such, we are reaffirming our adjusted EPS guidance of $3.05 to $3.20. As for the quarterly cadence of earnings, we expect slightly higher operating results on a sequential basis over the next two quarters and a seasonal pickup in the fourth quarter. On the sequential progression of non-operating items, we expect the next three quarters to have higher net interest expense, slightly lower other income, and higher tax. In total, this should lead to EPS in the second and third quarters being relatively consistent with the first quarter and then a seasonally stronger fourth.

Robb A. LeMasters: As such we are reaffirming our adjusted EPS guidance of $3 <unk> to.

Robb A. LeMasters: The $3 20.

Robb A. LeMasters: As for the quarterly cadence of earnings we expect slightly higher operating results on a sequential basis over the next two quarters in a seasonal pickup in the fourth quarter.

Robb A. LeMasters: On the sequential progression of nonoperating items, we expect the next three quarters to have higher net interest expense slightly lower other income and a higher tax rate in total this should lead to EPS in the second and third quarters being relatively consistent with the first quarter and then a seasonally strong.

Robb A. LeMasters: Longer fourth quarter.

Robb A. LeMasters: Lastly, we are maintaining our free cash flow guidance of $225 million to $250 million, driven by EBITDA growth and improved working capital management. Capital expenditures are expected to be flat to slightly down, inclusive of early spending on the Cambridge Plan expansion and other select growth investments across our business. As discussed at Investor Day, we are keenly focused on driving improved free cash flow through both working capital management and CapEx discipline as we work toward our medium-term target of 90% free cash flow conversion.

Robb A. LeMasters: Lastly, we are maintaining our free cash flow guidance of $225 million.

Robb A. LeMasters: To $250 million.

Robb A. LeMasters: Driven by EBITDA growth and improved working capital management.

Robb A. LeMasters: Capital expenditures are expected to be flat to slightly down inclusive of early spending on the Cambridge plant expansion and other select growth investments across our businesses.

Robb A. LeMasters: As discussed at Investor Day, we are keenly focused on driving improved free cash flow through both working capital management and Capex discipline as we work toward our medium term target of 90% free cash flow conversion to.

Robb A. LeMasters: To sum it up, we had a good first quarter on track to achieve our full year goal. Our focus remains on capturing growth opportunities in our core businesses, innovating to pursue new markets, and driving operational excellence and financial performance. And with that, we look forward to taking your questions.

Robb A. LeMasters: To sum it up we had a good first quarter and are tracking to achieve our full year guidance. Our focus remains on capturing growth opportunities in our core businesses innovating to pursue new markets and driving operational excellence and financial performance.

Speaker Change: And with that we look forward to taking your questions.

Speaker Change: Okay.

Operator: We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, please press star 1 to join the queue. Your first question comes from the line of Scott Deuschle from Deutsche Bank; please go ahead.

Speaker Change: We will now begin the question and answer session. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad eraser head and trying to Q and.

If you would like to withdraw your question simply press Star one again.

Speaker Change: I called up on asking your question and they're listening via loud speaker in your device. Please pick up your handset and then sure that your phone is not on mute when asking your question.

Speaker Change: Again, Please press star one to join the queue.

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

Scott: Hey, good evening guys.

Scott: Davidson.

Scott Deuschle: Rob, just to clarify, was the year-over-year margin pressure at government operations this quarter entirely from

Scott: Rob just to clarify was the year over year margin pressure at government operations this quarter entirely from the Onboarding and the inefficiencies in cost plus mix.

Robb A. LeMasters: Anything else in there that's dragging down the margins? Now, the year over year margin, the geo margin that you're referring to, the kind of 200 basis points, those were some of the pressures that we saw, Scott, but really, if you really look back to last year, you'll realize that that was the highest margin that we saw all year, so that's the first thing to note. That quarter really enjoyed positives in a couple of ways.

Scott: Or is there anything else in there that's dragging down the margins.

Robb A. LeMasters: No the year over year margin decline in the Geo margin that youre, referring to the kind of 200 basis points.

Those were some of.

Robb A. LeMasters: The pressures that we saw Scott, but really if you really look back to last year, you'll realize that that was the highest margin that we saw all year. So that's the first thing to note.

Robb A. LeMasters: That that quarter really enjoyed.

Robb A. LeMasters: Positive in a couple of fashions one was it.

Robb A. LeMasters: One was it had, if you go back and look, it had a kind of one-time positive uplift from TSU performance fees that normally we see over kind of the next couple quarters. We also saw a really good NOG volume, and I think that had to do with just sort of a release in general as we got through the workforce ramp-up. In that first quarter, we really saw some positives that we talked about if you go back and look at the script.

Robb A. LeMasters: It had if you go back and look at had a time.

Robb A. LeMasters: One time positive uplift from TSV performance fees that normally see over the next couple of quarters.

Robb A. LeMasters: We also saw a really good MLG volume I think that had to do with just sort of a relief to generalize we got through the workforce ramp up that first quarter. We really saw some positives that we talked about if you go back a little bit of spread that was about half honestly that that.

Robb A. LeMasters: That was about half, honestly, that high point. The second half of the step down of that kind of 100 basis points really came from less inefficiencies in the way of describing mix, Scott, but more around just what's going on with some of our new projects. So as we ramp up the U-Metal project and the initiatives within AT, our advanced technology groups, specifically Paley and Draco, all those businesses are just new for us, right?

Robb A. LeMasters: That high point, the second half of the stepped out of that 100 to 200 basis points really came from.

Robb A. LeMasters: Lessor inefficiencies in the way of describing mix.

Robb A. LeMasters: Scapa more around just what's going on with some of our new projects. So as we ramp up the new metal project.

Robb A. LeMasters: The initiatives within our.

Robb A. LeMasters: Our advanced Technology group, specifically palea Draco all of those businesses are just new for US right. So they come in at a lower margin. So again about about half of that came from that extraordinary performance that we saw last year that was just kind of a real high point and the other half came from really the ramping up what you could call mix the ramping of some of these new projects.

Robb A. LeMasters: So they come in at a lower margin. So again, about half of it came from that extraordinary performance that we saw last year that was just kind of a real high point. And the other half came from really the ramping, what you could call mix, the ramping of some of these new projects. Okay, that's helpful, Rob. Then Rex, I think this multi-year pricing and negotiation was supposed to happen.

Speaker Change: Okay. That's helpful. Rob and then Rex I think Thats multiyear pricing negotiation was supposed to have finished up last year I want to say so it seems to be taking quite a bit longer than normal. Just curious if you can shed any light on whats driving that delay and whether you've got a bridge contract to help you kind of get through until you get the actual multiyear Don.

Rex D. Geveden: Those two finished up last year, I want to say, so it seems to be taking a while.

Rex D. Geveden: last year, I want to say. So it seems to be taking quite a bit longer than normal. Just curious if you can shed any light on what's driving that delay and whether you got a bridge contract to help you kind of get through until you get the actual multi-year done earlier.

Speaker Change: Thank you.

Robb A. LeMasters: Sure Scott of course, we we completed the fuel part of that contract earlier that one.

Rex D. Geveden: That one's in the bag. But yeah, the rest of it, we've been operating under a bridge contract for a period of time while we work out the negotiating details. I would say that the uncertainty around the FY24 appropriations, that combined with a defense supplemental, created some uncertainty about what funding would be available. And so I'd say now that those are water under the bridge, we're in a position to get this across the finish line now. But your assertion is correct, right? We've been executing the work scope under that pricing agreement for a long time now through a bridge contract.

Robb A. LeMasters: That one's in the bag, but yes, the rest of it.

Rex: We've been operating under a bridge contract for a period of time, while we work out the negotiation details I would say that.

Rex: The uncertainty around the FY 'twenty four appropriations that.

Rex: That combined with the defense supplemental created some uncertainty about what funding would be available and so I would say now that those are water under the bridge. We're in a position to get this across the finish line now but.

Rex: But but your assertion is correct right. We've been we've been executing the work scope under that pricing agreement for a long time now through bridge contracts.

Speaker Change: Okay. Thanks, guys.

Speaker Change: Thanks.

Operator: Your next question comes from the line of Bob Labick of CJS Securities. Please go ahead.

Speaker Change: Your next question comes from the line of Bob <unk> of CJS Securities. Please go ahead.

Robert James Labick: Thank you. Good afternoon.

Bob: Thank you and good afternoon.

Bob: Hey, Bob.

unknown: [inaudible]

Bob: Hey.

Speaker Change: <unk> you mentioned.

Bob: Drug Master file for with Tcl I was just wondering if you could give us a little more update on the process of seeking obtaining approval for irradiation of <unk> up there in your target delivery system and everything and then the other steps that it's going to take to get all the way through the Dms for the TCM.

Rex D. Geveden: Hey, Rex, you mentioned the drug master file for lutetium. I was just wondering if you could give us a little more update on the process of seeking Canadian approval for the irradiation of ytterbium up there in your target delivery system and everything, and then the other steps that it's going to take to get all the way through the DMF for lutetium.

Bob: For lutetium, okay, well, so for lutetium and those other active pharmaceutical ingredients, that's a that's a pretty simple process.

Rex D. Geveden: For lutetium, okay, so for lutetium and those other active pharmaceutical ingredients, that's a pretty simple process, and what happens there is that the pharmaceutical companies that are planning to use that radioisotope will reference our product and their filing to the FDA. So it's a simpler and cleaner process, and the timing for that is, we'll be in business for lutetium sometime next year, and I believe the same thing Yeah, that's right. Maybe just to give it a little added color there.

Bob: What happens there is that the pharmaceutical companies that are planning to use that that radio.

Bob: That radioisotope will reference we will reference our product in their filing to the FDA. So it's simpler and cleaner process in the.

Bob: The timing for that is will be will be in business on lutetium sometime next year and I believe the same thing for Ya terbium.

Rex D. Geveden: We're through the process of making targets. As you know, you need to get through that, and then ultimately, you'll place those in a source of irradiation. There are two sites that we're going to be looking to irradiate material first at the Missouri reactor. That's sort of the first stage.

Speaker Change: Yes, that's right.

Speaker Change: Just to give a little added color there worked through the process of making targets as you know you need to get through that and then ultimately you place those.

Speaker Change: Source of a radiation theres two sites that we're going to be looking to iridium material first.

Rex D. Geveden: And then ultimately, as you mentioned, Bob, in our TDS at OPG, we built that, obviously, for tech, but that has the capability around irradiating ytterbium. So we will have to go through some work to get that credentialed with the regulators, but that's in the process. That's released to OPG, but we don't see that as an impediment to there. And then, ultimately, we're also standing up a processing line for that irradiated material, Bob, as you know, to make active pharmaceutical ingredients.

Speaker Change: Missouri reactor, that's sort of the first stage and then ultimately as you mentioned Bob.

Speaker Change: Tds.

Speaker Change: G.

Speaker Change: We built that obviously for tax but as capability around.

Speaker Change: Radiating your turbines. So we want to go through some work to get that credential.

Speaker Change: The regulators, but that's in process as it relates to LPG and we don't see that as.

Speaker Change: An impediment on there and then ultimately we're also set to standing up a processing line for that irradiated material, Bob as you know to make active pharmaceutical ingredients. So that's one more staff and so we're.

Rex D. Geveden: So that's one more step, and we're rolling out the construction there. So, kind of moving along nicely as the market matures. Frankly, we're seeing a lot of different customers for both irradiated material as well as for API.

Speaker Change: Rolling out the construction there so kind of moving along nicely as the market matures frankly, we're seeing a lot of different customers without the radiated material as well as for API.

Robert James Labick: Okay, super. And then just sticking with isotopes, obviously, you have a lot going on this quarter. I didn't hear any update on Molly-99. Any news from the FDA, or when should we expect more information?

Bob: Okay Super and then just sticking with.

Bob: Isotopes, obviously, you have a lot going on this quarter.

Speaker Change: I didn't hear any update on the moly 99, any news from the FDA or when we when should we expect next information.

Rex D. Geveden: Yeah, thanks Bob. Let me give you maybe sort of a broad perspective on that product line and its development. I think for products like this, you can think about sort of three big phases. The research and development phase, of course, which we have already exited a long time ago. The industrialization phase, which we are going through right now. And then, of course, the commercialization phase; that's what everyone's been most interested in. And so we're at the very tail end of industrializing that product line.

Speaker Change: Yes, yes, thanks, Bob let me give maybe sort of a broad perspective on.

Super: On the on that product line and its development I think of for products. Like this you can think about sort of three big phases.

Rex D. Geveden: And, by the way, this is overlapping with the commercialization of that product. And so when you think about the industrialization phase. The systems that we've described to you, and you've seen them, you've put your eyes on them for the most part, but it's really exercising the target delivery system and then exercising our radio chemistry and radio pharmacy lines. There are other things too, waste management systems and other such, but those are the big three

Speaker Change: Research and development Phase of course, which we exited a long time ago.

Speaker Change: The industrialization phase, which we are going through right now and then of course commercialization phase Thats, what everyones been most interested in and so we're at the very tail end of industrializing that product line.

Speaker Change: And by the way, it's overlapping with with commercialization of that product.

Speaker Change: So when you think about the.

Speaker Change: The industrialization phase.

Speaker Change: The new systems that we've described to you and you have seen them you put your eyes on them for the most part, but it's really exercising the target delivery system, and then exercising our radiochemistry and radio pharmacy in lines Theres other things to waste management systems and other such but those are the big three.

Rex D. Geveden: And by the way, let me pause for a second and remind you that, as Robb said in his previous answer, we pivoted from a Murrah radiation campaign and went directly to the target delivery system, which did cost us some time, but it avoids having to do a second filing to get that product approved by the FDA. So I think we're going to look in the rearview mirror and see that as a good decision.

Speaker Change: By the way, let me pause for a second and remind you that.

Speaker Change: As Rob said.

In his previous answer we pivoted from Imrie radiation campaign and went directly to the target delivery system, which did cost us some schedule.

Speaker Change: But it avoids having to do a second filing to get that product approved by the FDA. So I think we're going to look in the rearview mirror and see that as a good decision.

Rex D. Geveden: So, where we are is we have exercised our target delivery system, we've run targets through the reactor at Darlington in a high neutron flux environment and produced high activity targets. We have exercised all four of those target elevators, and we had to, frankly, had to work out some kinks in that system, which we have done, and it's working very well now.

Speaker Change: No.

Speaker Change: So where we are as we have exercised our target delivery system, we've run targets through the reactor at Darlington and a high neutron flux environment.

Speaker Change: And produced high activity targets, we have.

Speaker Change: <unk> exercised all four of those target elevators, we had to frankly had to work out the kinks in that system, which we have done so it's working very well now.

Rex D. Geveden: We have run those high activity targets through Radio Chem and Radio Farm, and I would say that we are doing the final tweaking on both of those systems to get the product exactly right. I would say that we are very well pleased with the product quality. It meets all the drug pharmacopeia. And then we're working through, you know, sort of the final items on our checklist with the FDA. In the meantime, we've been focusing on the commercialization phase.

Speaker Change: We have run those high activity targets through radio Kim and radio farm and I would say that we are doing the final tweaking on both of those both of those systems.

Speaker Change: To get the product exactly right.

Speaker Change: I would say that we are very well pleased with the product quality. It meets all the drug Pharmacopoeia and then we're working through sort of the final items of our check list with the FDA in the meantime, we're we've been focusing.

Speaker Change: Focusing on the commercialization phase there is quite a bit of enthusiasm in the market for this product. So we've been doing some product testing by way of.

Rex D. Geveden: There is... quite a bit of enthusiasm in the market for this product, so we've been doing some product testing by way of sending our generators to radiopharmacy networks and tagging our product with cold kits, and tagging cold kits with our product. We're working through, in pretty serious ways now, supply agreements with the radiopharmacy network. And we're working on logistics details now, the shipping costs, and how we distribute the product, in particular with which radio pharmacy. So I'd say I'm super well-pleased with all that progress, and we're pushing through to the finish line.

Speaker Change: Of sending our generators to radio pharmacy networks, and tagging tagging, our product with cold kit tagging cold kits with our product.

Speaker Change: We're working through.

Speaker Change: And pretty serious ways now supply agreements with the radio pharmacy networks.

And we're working on logistics details now the shipping cost and <unk>.

Speaker Change: And how we distribute that product in particular, with which with which radio pharmacy, So I would say.

Speaker Change: We're well pleased with all of that progress and Thats.

Speaker Change: We're pushing through to the finish line.

Robert James Labick: Okay, great update. Thank you. Thank you. Your next question comes from the line of David Strauss of Barclays. Please go ahead. Hi, good afternoon. Thanks for taking the question.

Speaker Change: Okay, great. Okay. Thank you.

Operator: Your next question comes from the line of David Strauss of Barclays. Please go ahead. Hi, good afternoon. Thanks for taking the time.

Your next question comes from the line of David Strauss of Barclays. Please go ahead.

David Egon Strauss: Yeah, sure, Josh. I'll start with that one. Robb may want to add something.

David Egon Strauss: Hi, good afternoon, Thanks for taking my questions actually Josh corn on for David.

Josh: I wanted to ask about the.

Josh: The expansion of the Cambridge plant.

Josh: If you could give us anything on.

Josh: When you might see some of that elevated demand start to come through and what the additional capacity might allow you.

Josh: To produce.

Speaker Change: Yeah sure Josh I'll start with that one Rob may want to add.

Rex D. Geveden: So the thing that kind of tripped us over on making a decision on that capacity expansion was the formal announcement on Pickering. That's a very big project. We'll be making the steam generators, of which there are 48 for those four reactors, 12 per reactor. 48 steam generators. We're very likely to manufacture the feeders for that, heat exchangers, and other kinds of components. It's a lot.

Robb A. LeMasters: So the thing that kind of trip this over on making a decision on that capacity expansion was the formal announcement on Pickering.

Speaker Change: That's a very big project, we'll be making the steam generators of which there are 48 for those four reactors 12 per <unk>.

Speaker Change: Per reactor 48 steam generators will likely to be.

Speaker Change: Very likely to manufacture the theaters for that heat exchangers and other kinds of components. So it's a lot and when you look at what we have in that plant right now, we're making all the steam generators replacement steam generators for the Bruce side, we're making theaters for the Bruce site, making heat exchangers for the Bruce site, we're doing theaters for the Darlington refurbishment.

Rex D. Geveden: And when you look at what we have in that plant right now, we're making all the steam generators, replacement steam generators, for the Bruce site. We're making feeders for the Bruce site, and making heat exchangers for the Bruce site. We're doing feeders for the Darlington refurbishment. And now, we've got this activity on the small modular reactor, the reactor pressure vessel, and we expect to receive firm orders for that in the next few months, as we said on the call. So when you blend all that up, basically, if you walk through that plant, it is full.

Rex D. Geveden: I mean, it is full. And so we really need the capacity now. And our expectation is that we'll see follow-on orders for the other three reactor pressure vessels. And there's other content in that reactor. There are refueling systems and various other things for which we will compete. And then after that, the fast followers would be organizations like TVA, which is preparing the Clinch River site for the same type of small modular reactor.

Speaker Change: <unk> and <unk> and now we've got.

Speaker Change: This activity on the small modular reactor the reactor pressure vessel and we expect to receive received firm orders for that in the next few months as we said on the call.

Speaker Change: When you blend all that up basically if you walk through that plant it is full.

Speaker Change: This fall and so we really need the capacity now.

Speaker Change: And our expectation is that we'll see the follow on orders for the other three.

Speaker Change: The other three reactor pressure vessels and theres other content on that reactor this refueling systems and various other things for which we will compete.

Speaker Change: And so and then and then after that.

The fast followers would be would be organizations like TVA, which is preparing the clinch river site for the same type of small module reactor, we hear about the utilities that are interested in that.

Rex D. Geveden: We hear about the utilities that are interested in that, and then potential reactors that would go into Poland and other places that you've heard us talk about. So the demand seems to be coming in kind of a wave and we've built out a capacity to be ready for that. Yeah, I might just add that we've done a lot of business case, but kind of, you know, we've been talking about this with you guys even in the past couple quarters, and we really wanted to do a business case to say, can we make the numbers work on the expansion with essentially the book of business that we have, right, and then leave the upside of being able to either serve international or U.S. demand on the SMR side, that sort of gravy to this.

Speaker Change: And then potential.

Speaker Change: Reactors that would go into Poland and other places that you've heard us talk about so the demand seems to be coming in kind of a wave and we built out.

Speaker Change: Our capacity to be ready for that.

Speaker Change: Yes, I might just add that we've done a lot of business cases.

Speaker Change: We've been talking about this with you guys. Even the last couple of quarters and really wanted to do a business case to say can we make the numbers work on the expansion.

Speaker Change: Essentially the book of business that we have and then leave the upside of being able to either serve international or U S demand on the <unk> side that sort of gravy to this so as Rex said as you have the Darlington OBG reefer.

Rex D. Geveden: So, as Rex said, as you have the Darlington OPG refurb kind of come to an end at some point that you're ramping up on the Bruce Power, and then ultimately the Pickering, all that refurb work, and then you have the GE Hitachi work of the first SMR and the likely follow-on, that really kind of makes you the business case, and then you want to have a tail of opportunity that ultimately pushes it to a really good business case, and that's when I looked at, you know, international growth, Chernobyta, either refurbs, you're talking now more about greenfields, and so all of that, you know, can't be priced in to counting on it, but really will seem to be, you know, quite clever if that all comes through. So, we're pretty excited about the economics of that build-out.

Come to an end at some point and you're ramping up on the Bruce power and then ultimately the papering all that refurb work and then you have the <unk>.

Speaker Change: Work on the first FMR and the likely follow on that really kind of makes you. The business case, and then you want to have a tail of opportunity that ultimately pushed that to a really good business case, not when I look at international growth, China, Moda, either either reefers Youre talking now more about greenfields and so all of that can be.

Speaker Change: And to comment on it but really will seem to be quite.

Speaker Change: Right.

Speaker Change: However, if that all comes through so we're pretty excited about the economics of that build out.

Speaker Change: Okay. Thank you I'll stick to one.

Operator: Your next question comes from the line of Peter Arment of Baird. Please go ahead.

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

Peter J. Arment: Yeah, good evening Rex, Robb, and Chase. Nice results. Hey, maybe just to stay on that topic of Pickering, could you talk about, you know, I think at your investor day, you highlighted that some of these refurbishment projects that you, the BWX, you know, kind of content was roughly about 10% of the total project costs. Is that, would that be similar for Pickering? And when would we actually expect the ordering of the long-lead materials to start?

Good evening <unk> Jason.

Peter J. Arment: Nice results.

Peter J. Arment: Maybe just to stay on that topic on Pickering could you talk about.

Peter J. Arment: I think at your Investor Day, you highlighted with some of these refurbishment projects.

Peter J. Arment: The BWXT com.

Peter J. Arment: Content was roughly about 10% of the total project cost.

Peter J. Arment: Would that be similar for Pickering, and when would we expect actually the ordering of the long lead materials to start.

Rex D. Geveden: So on Pickering, let me see Peter, I don't know if I could give a rule of thumb on the percentage of total project costs, but you can think of the opportunity as being similar in scale to the Bruce reactors where we built the steam generators for all those. And that was a $600, $650 million Canadian contract, I believe, at the time.

Peter J. Arment: So.

Speaker Change: On Pickering, let me see Peter I don't know if I could give a rule of thumb on percentage of total project cost, but you can think of the opportunity as being similar in scale to the I think a good comparison point would be the Bruce reactors, where we built the steam generators for all those and that was up.

Speaker Change: 600 $650 million Canadian contract I believe at the time.

Rex D. Geveden: So maybe factor in a little bit of escalation and a larger number of steam generators. Then you can add the feeders to that and heat exchangers, you know, that's sort of a billion-dollar-scale opportunity there. And I don't know the total project cost estimate from OPG, but obviously, that's a sizable opportunity.

Speaker Change: So maybe factor in a little bit of escalation and a larger number of steam generators.

Speaker Change: Then you can add the theaters to that and heat exchangers that sort of $1 billion scale opportunity there.

Speaker Change: And I don't know the total project.

Cost estimate from from OAG, but it's obviously, that's a sizable opportunity.

Robb A. LeMasters: Okay, that's helpful. And then just when does the long-lead materials kind of, you know, activity begin? Obviously, you're putting the CapEx in place in front of that.

Speaker Change: Okay. That's helpful and then just when when.

Speaker Change: When does the long lead materials.

Speaker Change: Activity begin, obviously youre, putting the capex in place in front of that.

Robb A. LeMasters: Yeah, I can take that one. So they're already talking about, you know, whether or not that long-length material could come in the near term. And they're also looking at a schedule to get after a set of those in a more sequential basis to ultimately drive down the cost. So I wouldn't be surprised if you get a more upfront order, but we're working through that with the customer to see how quickly they want to move. But I think in the near term.

Speaker Change: Yes, I can take that one yes, so they are already talking about.

Speaker Change: Whether or not that long lead material to come in the near term and they are also looking at our schedule to get after a set of those in a more sequential basis to ultimately drive down the cost. So I wouldn't be surprised if you get more upfront order, but we're working through that with the customer and see how quickly they want to move but I think in the near term.

Robb A. LeMasters: That's helpful. And then just regarding Romania, is there any update there in terms of the export financing you mentioned is in place? When would we think about the kind of border timing on that one?

Speaker Change: That's helpful. And then just regarding Romanian is there any updates there in terms of you mentioned the export findings as the financing is in place when we think about kind of more of a timing on that one.

Robb A. LeMasters: Yeah, I can take that too. It's still looking good. And we're kind of a year or two out to when it will sizably hit our books. That date's moving around, but they're moving forward. The OEM and EPC are moving forward, and so we're starting to see schedules put out and starting to get our business lined up. So I would say it's sort of, you know, call it two to three years out for it to be meaningful for us.

Speaker Change: Yes, I can take that too it's still looking at.

Speaker Change: Kind of a.

Speaker Change: A year or two out.

Speaker Change: Sizable hit our books that dates moving around but they're moving forward.

Speaker Change: The OEM and EPC are moving forward and so we're starting to see schedules put out and starting to get our business lined up so I would say it's sort of.

Speaker Change: Call It two to three years out for it to be meaningful for us.

Peter J. Arment: Thank you, Robb. Just, lastly, on the CapEx part, Robb, so, you know, it sounds like you had already kind of planned for this, you know, so CapEx doesn't seem like it's going to go up at all very much. Are we thinking about this kind of similar level next year, you know, just given this announcement, or do you think this is kind of like a little bit of growth CapEx that's

Speaker Change: Thank you Rob just lastly on the Capex part Rob.

Speaker Change: No.

Speaker Change: It sounds like you've already kind of planned for this.

Speaker Change: Capex doesn't seem like it goes up.

Speaker Change: All very much.

Speaker Change: Think about this kind of similar levels next year.

Speaker Change: Just given this announcement or do you think this is kind of like a little bit of growth capex that you're putting in place.

Robb A. LeMasters: Yeah, the way I describe it is, to go back to investor day, right, we had a little bit over $100, $110 million if you just look at 4% of sales, and then we were finishing off the micro-reactor projects from last year, so that probably put us at the lower end, if you will, of our sort of guidance, right, the free cash flow range that I have out there, you know, includes a couple of different scenarios, so maybe on the upper end of free cash flow you might say, you know, you're going to have a $125, $130 million of capex, and so for this year, that could tilt us from a capex standpoint to, as we've got out of Cambridge, to be sort of at the upper end, but we fully expect to offset that with all the goodness that we're seeing in operating cash flow, so that's what allows us to kind of remain in our range, is that even if we spend, you know, Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: Yes.

Speaker Change: Describe it is to go back to Investor day, right, we had a little bit over 100 $110 million. If you just look at 4% of sales and now we're finishing off the micro reactor projects from last year, so that probably put us at the lower end if you will of our.

Speaker Change: Sort of guidance right the free cash flow range that we have out there.

A couple of different scenarios, so maybe on the.

Speaker Change: Upper end.

Speaker Change: Free cash that you might say.

Speaker Change: Youre going to have a.

Speaker Change: $125 million to $130 million of Capex and so for this year that could tilt us from a capex standpoint.

Speaker Change: As we've got our Cambridge to be sort of at the upper end, but we fully expect to offset that with all of the goodness that we're seeing in operating cash flow. So that's what allows us to kind of remain in our range is that even if we spend.

$10 million to $20 million on this project. This year that will sort of contemplated we can absorb that with all the good initiatives have on operating cash flow I think it's a tad too early to talk when you say next year. Thanks. So much yeah no problem I just I'll comment about next year I think it's a little far out, but I don't see any major changes in this project.

<unk>.

Speaker Change: Can live within that normal budget.

Peter J. Arment: I appreciate it. Thanks, Robb.

Speaker Change: Yes.

Speaker Change: I appreciate it thanks, Rob.

Speaker Change: Sure.

Operator: Your next question comes from the line of Pete Skibitski of Alembic Global. Please go ahead.

Speaker Change: Your next question comes from the line of beats Kubicki of Alembic Global. Please go ahead.

Peter John Skibitski: Yeah, good evening guys. Just one for me, Rex, you touched on earlier in the opening comments about the 24 baseline budget and supplementals approved, and I think there was $3.3 billion in SIB funding. I guess, A, does any of that SIB money go to you guys at all, or, you know, basically, you're just doing okay, and you're already facilitated, so it goes to other suppliers? And then, anything at all, any changes at all between the 24 budgets and the new 25 budgets at NASA or DOE with anything you guys are interested in there? Thanks.

Beats Kubicki: Hey, good evening guys.

Beats Kubicki: Just one from me Rex you try.

Earlier in your opening comments about the 24 baseline budget and supplemental is approved and I think there was $3 3 billion in the same funding.

Speaker Change: I guess he does.

Beats Kubicki: Any of that money go to you guys at all or.

Beats Kubicki: Basically you're just doing okay in your R&D facilities.

Beats Kubicki: It goes to other suppliers and then anything any changes at all between the 24 budgets and a new 25 budgets at NASA.

Beats Kubicki: With anything you guys are interested in there.

Beats Kubicki: Yes.

Rex D. Geveden: Let's see here on the submarine-based industrial funding, which is for the broad submarine industrial base, which could include us, Pete. And that would, of course, come through our customer. I'd say there's more to come on that as to what, if any, of that would get to us. And would you repeat the second question again for me?

Beats Kubicki: Let's see here on the submarine base industrial funding. It is for the broad submarine industrial base, which which could include us Pete.

And that would of course come through our customer I'd say theres more to come on that.

What if any of that would get to us and would you repeat the second question again for me just in the 25 spin up the got released.

Peter John Skibitski: Yeah, just in the 25, you know, fit up that got released, um, you know, with regard to NASA and DOE, I was just wondering if there's anything, you know, kind of new or interesting, you know, nuclear wise, that you saw in those budgets, the plans are? Oh, new and interesting nuclear wise. Probably not. But I would say that, you know, we're continuing to see. Unknown Executive, Scott Deuschle, Chase Jacobson, Robert Duffy, Byron Callan, Jonathan Cirtain

Beats Kubicki: With regard to NASA and I was just wondering if theres anything kind of.

New or interesting nuclear wise that you saw on those budgets. The plans are new and interesting nuclear wise.

Speaker Change: Probably not but I would say that we're continuing to see sustained and very good support for the for the programs of record electric co and payload and and hopefully that will continue.

Speaker Change: Got it thanks guys.

Speaker Change: Thanks Pete.

Operator: Your next question comes from the line of Michael Ciarmoli from Truist. Please go ahead.

Speaker Change: Your next question comes from the line of Michael <unk> from True list. Please go ahead.

Michael Frank Ciarmoli: Hey, good evening, guys. Thanks for taking the question. Nice, nice results. Maybe Rex, just maybe.

Hey, good evening guys. Thanks for taking my question nice results.

Michael: Maybe Rex just back to the multi year pricing is.

Michael: Is that I mean, you mentioned kind of maybe delay I don't know if thats the right word but.

Michael: Just what was going on with the fiscal 'twenty four 'twenty five budget.

As folks Ford CPM sort of schedule all factor in kind of what's happening with that new multiyear contract.

Rex D. Geveden: Yeah, I think I think that when...

Speaker Change: Yes, I think.

Speaker Change: I think that when we're working through those agreements with our customer markets. It's everything right. So it's what has US what is the shipbuilding schedule. What is the budget available how many spares do they want to order of what's going on with Escalations. So that blends up to a pretty complex thing, particularly right now with labor and materials inflationary pressure.

Speaker Change: Sure. So it's sorting through that and by the way certainly not unusual for other defense contractors to be on on bridge.

Speaker Change: Bridge contracts to negotiate through these things. So it's all of that it's all the above that with the FY 'twenty five 'twenty four appropriation. It was the supplemental and its the shipbuilding schedule and the presence, but the budget request all blended up into what do we have here and we will certainly sorted out.

Michael Frank Ciarmoli: Got it, got it. And then, Rob, just on the back to the medical and the TC-99, any sort of change in your thought process? I mean, directionally, maybe it sounds like the TC-99 approval is sliding to the right a little bit, but still comfortable with the trajectory of, you know, 24 and 25 revenues there for overall medical pushing to, you know, 200 million and I guess getting that margin into the mid-30s.

Speaker Change: Got it got it and then Rob just on the back to the medical and the TC 99, any sort of change in your thought process I mean, I guess directionally, maybe it sounds like the TC 99 approval it sliding to the right a little bit, but still comfortable with the trajectory.

Speaker Change: <unk> 24, and 25 revenues there for overall medical pushing to $200 million and I guess getting that margin into the mid thirty's.

Robb A. LeMasters: Yeah, no, I don't think there is any change, really, overall. Again, we don't anticipate any tech really moving the needle this year. In 2024, we talked about that last quarter that we're not really seeing. We're going to try to get commercial, but the actual impact will be minor in the near term.

Robb A. LeMasters: No I don't think there is any change really.

Robb A. LeMasters: Overall.

Robb A. LeMasters: Again, we don't anticipate any Tac really moving the needle this year in.

Robb A. LeMasters: In 2024, we talked about that last quarter, and we're not really seeing we're going to try to get commercial but the actual impact will be minor in the near term ultimately as we laid out that target. We said that it would really come from a couple of different areas our core portfolio.

Robb A. LeMasters: Ultimately, as we laid out that target, we said that it would really come from a couple of different areas, our core portfolio, the Therapeutics portfolio, and then the last area, the Tech portfolio. And if you move through those and you really think about it, there's been some pretty good upside on Nordeon. I think Therapeutics is, at least from a market standpoint. We need to get some contracts. We talked about lutetium.

Robb A. LeMasters: The therapeutics portfolio and then the last area is the tech portfolio and if you move through those and you really think about it.

Robb A. LeMasters: Been some pretty good upside on minority on I think therapeutics is at least from a market standpoint, surprising we need to get some contracts, we talk about new TCM.

Robb A. LeMasters: We're the only commercial supplier in Actinium, so I wouldn't be surprised if it gets surprisingly upside there. And then Tech, for all the fits and starts that we've had, is actually lining up pretty nicely. The market is ready for a third player, and so I wouldn't be surprised if we nailed that one as well. So the target overall for, call it, 25, 26 years to have that level of 200 million revenue still seems readily achievable.

Robb A. LeMasters: Commercial supplier and actinium, so I wouldn't be surprised if we get surprised to the upside there and then tech tech.

Robb A. LeMasters: For all of the fits and starts that we've had is actually lining up pretty nicely. The market is ready for a third player and so I wouldn't be surprised if we nailed that one as well so the target overall for call. It 25 26.

Robb A. LeMasters: Year to have that level of $200 million revenues still seems readily achievable.

Speaker Change: Got it and then just last one for me just Rob given given your background.

Speaker Change: What were your thoughts when you saw fusion kind of pre revenue pre EBITDA getting acquired for $2 billion, knowing knowing what you guys have in terms of your medical business.

Michael Frank Ciarmoli: Yeah, I thought it was a solid acquisition for the Acquire. We're working very closely, as you know, we've released a press release that we're working closely with a couple of key companies, one of them being Fusion. And we've been constantly impressed with their products and their knowledge that understanding how to get supply of Axinium, which is what their drugs are really based on, is key. And if you read the press release from Acquire, they're really focused on the fact that they could bring that to bear on the parent company. So it's not only the product they have but the knowledge of the supply chain. And we're a partner there. So, in an indirect way,

Speaker Change: Yes.

Robb A. LeMasters: I thought it was.

Robb A. LeMasters: It was a.

Robb A. LeMasters: Solid acquisition I think for the acquirer, we're working very closely as you know.

Michael Frank Ciarmoli: Okay, cool. Good stuff. Thanks, guys.

Robb A. LeMasters: Press release that we're working closely with a couple of key companies one of them is fusion.

And we have been constantly impressed with their products and their knowledge that understanding how to get supply of the actinium, which is what their their drugs are really based on is key and if you read the press release from the acquirer Theyre really focused on the fact that they can bring that to bear to the parent company. So it is not only the products they have.

Robb A. LeMasters: But the knowledge of the supply chain and we are a partner there. So in an indirect way theyre affirming our strategy that that's really a key aspect to what makes that company solid.

I've always been.

Robb A. LeMasters: Transparent debt that we don't sell we're not in the drug business. So those valuations really are multiples of our <unk>.

Robb A. LeMasters: Revenue, if you will and were more of a fixed and shovel pleasure player.

Robb A. LeMasters: A very solid part of the ecosystem that I think really warrants evaluation, while we bring our whole business plan that to bear and I know everybody's been patient with that but if we hit these targets I think the valuation of that entity is could be quite compelling.

Robb A. LeMasters: Okay.

Speaker Change: Good stuff thanks, guys.

Speaker Change: Thanks, Michael.

Operator: Your next question comes from the line of Ron Epstein from Bank of America. Please go ahead.

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

Ronald Jay Epstein: Hey, yeah, good evening, guys. Just maybe a quick one.

Ronald Jay Epstein: Hey, Good evening guys just a quick one when you look at.

Ronald Jay Epstein: No.

Ronald Jay Epstein: When you look at the cadence for, you know, submarine production, it seems like, you know, the Virginia class has kind of been, I don't know, slowed down, given what the industry can do. And what impact does that have on y'all? I mean, are you kind of directly connected to that? Are you delivering your stuff separately? I mean, how should we think about that?

Ronald Jay Epstein: Cadence for summer in production.

Ronald Jay Epstein: It seems like Virginia class has kind of been.

Slowed down given what the industry can do.

Ronald Jay Epstein: What impact does that have on your <unk> I mean is it.

Ronald Jay Epstein: Kind of directly connected to that are you delivering.

Ronald Jay Epstein: Your stuff separately, how should we think about that.

Rex D. Geveden: Yeah, hey Ron. I just touched on that in the script a little bit. I think you can think of us as somewhat decoupled from the shipyards. I mean, first off, the shipyards, HII and GD, are not our customers. We sell that product to naval reactors, and we sell it to them on their schedule.

Speaker Change: Yeah, Hey, Ron.

Speaker Change: Okay.

Speaker Change: I touched on that in the script a little bit I think you can think of us as somewhat decoupled from the shipyards.

Speaker Change: First off the shipyards.

Ronald Jay Epstein: And <unk> are not our customers, we sell that product enable reactors and we sell it to them on their schedule and then that is government furnished to the shipyards. So we're a little bit decoupled from that.

Rex D. Geveden: And then that's government supplied to the shipyards. So we're a little bit decoupled from that. And so I think that's a way to think about it. Another aspect here, maybe three things to think about.

Ronald Jay Epstein: And.

Ronald Jay Epstein: And so I think I think that's the way to think about another another aspect here, maybe three things to think about another aspect to consider here is that look. This is this is the president's budget request and this the shipbuilding schedule, but it doesn't mean that much until the authorizers and appropriators are done enacting the budgets for 25 and beat.

Rex D. Geveden: Another aspect to consider here is that, look, this is the President's budget request and that's the shipbuilding schedule, but it doesn't mean that much until the authorizers and appropriators are done enacting the budgets for 25 and beyond. So I think, you know, it's certainly the very early innings in that game of Virginia production. We've heard our peer companies out there, HII and others, talking about how important it is to keep that production rate funding going and obviously very, very strong bilateral support for the Virginia program. So, you know, I'd say that one's not done yet.

And so I think it's certainly very early innings in that game of Virginia production. We've heard are our peer companies out there and others talking about how important it is to keep that production rate funding going and obviously very very strong bilateral support for the Virginia program. So.

Ronald Jay Epstein: I would say that one is not done yet and the third thing I would say is that is that the industrial base ultimately and BWXT ultimately have to get to a higher production rate in order to meet the needs for August. So this this virginia rate needs to go to two three for a decade or more until we got to <unk>.

Rex D. Geveden: The third thing I would say is that the industrial base ultimately, and BWXT ultimately, have to get to a higher production rate in order to meet the needs of AUKUS. And so this Virginia rate needs to go to 2.3 for a decade or more. And so we've got to build the industrial capacity and the workforce capability to do that. And so slowing down doesn't make any sense to me. And so we'll see what the appropriators do, but it doesn't worry me all that much given the depth of our backlog and given the strategic priority that Virginia represents.

Ronald Jay Epstein: The industrial capacity in the workforce capability to do the added so slowing down doesn't make any sense to me.

Ronald Jay Epstein: And so we will see we will see what the appropriators do but it doesn't worry me all that much given the depth of our backlog and given the strategic priority that the debt to Virginia represents.

Rex D. Geveden: Got it, got it, yeah, that makes sense. And then, I think you spoke to the sun, but can you speak to, you know, what's going on with labor for you all? I mean, labor has been a challenge for, it seems like everybody across the space. I mean, has it been any different for you in retaining people, hiring people, and, you know, potentially the people that you're going to need to bring on board to eventually ramp up to meet the demand for the Navy?

Ronald Jay Epstein: Got it got it yes.

Speaker Change: That makes sense.

Speaker Change: And then I think you spoke to the Sun, but can you speak to what's going on with labor for you. All I mean labor has been a challenge for it seems like everybody.

Speaker Change: Across the space I mean is it has it been any different for you or retaining people hiring people.

Speaker Change: Potentially the people that you're going to need to bring on board to <unk>.

Speaker Change: Eventually ramp up to meet the demand for the Navy.

Rex D. Geveden: Yeah, I'd say maybe there are a couple of things I would say about that, and I talked about this a lot in prior calls, and that is that we re-engineered our talent acquisition process under Bob Duffy's leadership, who runs Human Capital for us, over the last, let's call it a year and a half. And, and the, you know, the fruits of that were we hired 10% of our total workforce last year, as we said in the script.

Speaker Change: Yes, I'd say, maybe there's a couple a couple of things.

Speaker Change: Things I would say about that.

Speaker Change: You talked about this a lot in prior calls and that is that we've re engineered R. R.

Speaker Change: Our talent acquisition process under Bob <unk> leadership.

Speaker Change: Who runs human capital for us over the last let's call it year, and a half and and the fruits of that where we hired 10% of our total workforce last year as we said in the script and so.

Rex D. Geveden: And so we, you know, there were two things there, right? We were able to achieve, largely achieve our growth needs and do so in an environment where attrition post COVID is higher than historically it has been. So I'd say that, you know, we sort of won on both sides of that one.

Speaker Change: There were two things there we were able to achieve largely achieve our growth needs and do so in an environment, where attrition post COVID-19 is higher than historically it has been so I'd say that we sort of won on both sides of that one.

Ronald Jay Epstein: All that said, it's a tough environment for labor, right? I think we're reindustrializing the US, the U.S. economy, and certainly trying to ramp up submarine production, and that's not an easy thing to do, and it's hard to get your hands on those scarce resources. And so, you know, when Robb talked about the pressure that we're feeling on, the pressure that we're getting on our margins, it has to do with onboarding that many people and that amount of churn.

Speaker Change: That said.

Speaker Change: It's a tough environment for labor right I think we're re industrializing the U S.

Speaker Change: U S economy, and and certainly trying to ramp up submarine production and Thats not an easy thing to do and it's hard to get your hands on those scarce resources and so.

When Rob talked about the pressure that we're feeling on.

Yes.

The pressure that we're getting in our margins. It has to do with Onboarding that many people in that amount of churn where our efficiencies are good we're making this product.

Ronald Jay Epstein: You know, our efficiencies are good. We're making this product, you know, with the profit that we thought we would, but you've got a lot of people sitting in training classes, and you've got a lot of people, you know, churning through overhead because of that. So I want to say that we've done a really good job of dealing with what I think is a very challenging environment, and we just have to keep swinging the axe at this thing.

Speaker Change: With the profit that we thought we would but you've got a lot of people sitting in training classes and you've got a lot of people churning through overhead because of that so I want to say that.

Speaker Change: We've done a really good job of dealing with I think is a very challenging environment and we just have to keep swinging the access to stay.

Ronald Jay Epstein: Rob, you want to add anything to that? No, I think you said it well. We're absorbing. We got ahead of the industry, I think, on CapEx to build the capacity, and we tried to do the same thing last year, really swarmed the issue of the workforce, and so we got ahead of it, and others are also in our industry, but that's sort of how BWX goes about it.

Speaker Change: Got it.

Ronald Jay Epstein: We try to just address the problem quickly, and now we're turning through, as Rex said, our utilization at our top component sites is off almost 400 basis points year over year, but we're chewing through that, and we will all year, so we're sticking with our guidance, which shows that we can take all that workforce in and still keep moving, so I think we're going to be on the other side of this and be quite strong. All right. Thanks.

Speaker Change: No I think you said I think you said it well we are absorbing we got ahead of the industry I think on Capex to build the capacity and we tried to do the same thing last year really swarm the issue of workforce and so we got ahead of it.

Speaker Change: And others are also in our industry, but thats sort of how BWXT goes about of charges address the problem quickly and now we're turning through.

Speaker Change: As Rick said, our utilization at our top components site are off almost 400 basis points year over year, but we're chewing through that and we will all year. So we're sticking with our guidance, which shows that we can we can take all of that workforce in and still keep moving so I think we're going to be on the other side of this and be quite strong.

Ronald Jay Epstein: Cool. All right. Thank you, guys.

Speaker Change: Alright, Thank you guys.

Speaker Change: We welcome Ron.

Chase Jacobson: That concludes our Q&A session. I will now turn the conference back over to Chase Jacobson for closing remarks.

Speaker Change: Yeah.

Speaker Change: That concludes our Q&A session I will now turn the conference back over to Keith Jacobson for closing remarks.

Chase Jacobson: Thank you everybody for joining us today. We will be speaking with many of you in the coming days and seeing many of you over the coming months. If you have any further questions, you can feel free to reach out to investors at BWST.com. Thanks.

Keith Jacobson: Thanks, everybody for joining us today.

Keith Jacobson: We'll be speaking with many of you in the coming days and seeing many of you over the coming months do you have any further questions you can feel free to reach out at investors at BWXT Dot com.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Speaker Change: [music].

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

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