Q1 2025 BWX Technologies Inc Earnings Call
Speaker Change: Ladies and gentlemen, welcome to BWX Technologies first quarter 2025 earnings conference call. At this time, all the participants are in a listen only mode.
Speaker Change: Following the company's prepared remarks, we will conduct a question and answer session and instructions will be given at that time
Speaker Change: I would now like to turn the call over to our host, Chase Jacobson, BWXT's Vice President of Investor Relations. Please go ahead.
Speaker Change: Thank you, France. Good evening, everyone, and welcome to today's call. Joining me are Rex Geveden, President and CEO and Robb LeMasters, Executive Vice President and CFO .
Speaker Change: Today's call will reference the first quarter 2025 earnings presentation that is available on the Investors section of the BWXC website.
Speaker Change: We will also discuss certain matters that constitute forward-looking statements. These statements involve risks and uncertainties, including those described in the State Margaret Provision, found in the investor materials in the company's SEC violence.
Speaker Change: We will frequently discuss non-GAF financial measures which are reconciled to GAT measures and the appendix of the earlier presentation that can be found on the investor section of the BWSC website. I would now like to turn the call over to Rex.
Rex Geveden: Thank you, Chase, and good evening to all of you. BWXC had a solid start to the year with good first quarter financial results and multiple strategic wins.
Our first core of financial performance exceeded expectations.
Rex Geveden: highlighted by double-digit year-over-year revenue, adjusted EBITDA and adjusted earnings per share growth.
Rex Geveden: We had solid execution across our businesses and benefited from an increased pace of work and timing of material procurement.
Rex Geveden: From a demand perspective, we had another quarter of robust bookings performance.
up 78% year-over-year. In government operations, our win streak continued.
Rex Geveden: with the award of the Management and Operations Contract for the Department of Energy's Strategic Petroleum Reserve in April . Additionally, the NNSA published its intent to award the Domestic Uranium Enrichment Centrifuge Experiment or Duce contract to BWXT on a sole source basis. The NNSA published its intent to award the Domestic Uranium Enrichment Centrifuge Fund for the Department of Energy.
Rex Geveden: These two contracts highlight our unique value proposition and energy security.
Rex Geveden: with our strong first quarter results as a backdrop. I'd like to spend a few moments to discuss BWXT's all-weather portfolio, the trust our customers place in BWXT and how we are positioned in the current macro
Rex Geveden: First, the secular drivers of our business, the global power competition, decarbonization, and increased demand for nuclear technologies are persistent.
Rex Geveden: They are creating near and long-term opportunities for BWXT that are mostly independent of short-term economic variability.
Rex Geveden: On the government side of our business, US shipbuilding and more specifically, the Naval Nuclear Fleet
and nuclear modernization or top priorities for the administration.
Rex Geveden: Our roles as the socialist provider of nuclear reactors, components and fuel for the U.S. Naval Nuclear Propulsion Program, and as a trust and supply of other products and services to the DOE and NSA, position us well in the current environment.
Similarly, on the commercial side of our business
Rex Geveden: Our customers are making long-term investments to meet growing electricity demand and satisfied decarbonization goals with clean nuclear power. We have the largest heavy nuclear equipment manufacturing facility in North America, in Cambridge, Ontario, where we are expanding capacity.
Rex Geveden: Further, we are augmenting our nuclear services portfolio through the pinning acquisition of Connectrix.
Rex Geveden: said differently, BWXT enables mission-critical, long-term investment to which our customers are committed.
Rex Geveden: I will remind you that our supply chains are mostly contained in the countries where we operate and the US we have a longstanding, largely domestic supply chain to meet the strict national security requirements of our customer.
Rex Geveden: In Canada, we have a growing workforce that currently stands at about 1900 across five major operating sites serving the can-do and SMR market with a mostly indigenous supply chain requiring little or no cross-border movement of input materials and finished products.
Rex Geveden: All of this is meant to remind you that while no company is impervious to macro disruptions,
Rex Geveden: BWXT is positioned to weather any storm, given our long cycle contracts, alignment with customer priorities and strong balance sheet. Now, turning to our first quarter results and market outlook which further affirm the resilient characteristics of our business.
Rex Geveden: The continued ramp of you metal and the AOT acquisition. Higher revenue and solid operating performance trope segment adjusts the Evedon margin to its highest level since the 4th quarter of 2023.
Rex Geveden: Enable Propulsion, our focus on operational excellence, drove improvements in utilization and efficiency. Our backlog supports our revenue outlook for modest growth in 2025 with steady production of Virginia class submarine reactor cores.
Increasing production of Columbia class components, and early Acha scope.
Rex Geveden: These help offset the law and forward-class aircraft carrier propulsion systems through 2025 and likely 2026, which we began discussing upon publication of the latest 30-year shipbuilding plan in early
Rex Geveden: From a longer term perspective, the administration's prioritization of the Navy and its industrial base to defend the South Pacific underscores our 10-year forecast of a 3-5% revenue keger in this line of business.
Rex Geveden: Our recent wins and ongoing operations and multiple DOE sites within technical services are also a testament to government confidence and trust in BWXT to support its most crucial missions.
Rex Geveden: In the first quarter, we completed transition and now lead the Hanford Integrated Tanks
Rex Geveden: TSG Project in our portfolio and one of the largest environmental restoration projects in the world. Just recently, BWXT is a minority JV partner with Aptum, was selected to manage and operate the Strategic Petroleum Reserve sites in Texas and Louisiana for the DOE.
Rex Geveden: While this contract brings a relatively modest earnings contribution in the near term, it highlights our value-based competitive positioning in this space.
Rex Geveden: Following this win, BWHT is providing services at 13 DOE and NSA sites in the US and is actively tracking new opportunities in the US and Canada to further grow this exciting business.
Rex Geveden: In special materials, perhaps one of our most underappreciated businesses our growth prospects are beyond exciting. We close the AOT acquisition on January 3rd, have fully integrated it financially and are working with customers on large scale opportunities.
Rex Geveden: to supply high purity, depleted uranium for national security missions that would create a strong upside to our M&A business case within the first few years of our ownership. In that same vertical, we are more than halfway through a one-year study for the build out of a national security enrichment plant.
Rex Geveden: We are receiving positive feedback from the NSA which recently published its intent.
Rex Geveden: to issue a sole source contract to BWXT for a pilot plan. For that purpose, we acquired 97 acres of land in Oak Ridge, Tennessee. We will keep you posted as this exciting part of our business
Rex Geveden: In our microreactor business line, the Defense Innovation Unit launched the Advanced Nuclear Power for Installations Program, or ANPI, to provide energy security for US military bases.
Rex Geveden: BWXT and a handful of other companies were selected to be eligible to receive awards under this program for which we are well-positioned, given our heritage of pay lay, and try so fuel in addition to our facilities and experiential qualifications.
Turning to commercial operations [inaudible]
Rex Geveden: Results in the segment met expectations with revenue and even dog growth in both commercial power and nuclear medicine.
Rex Geveden: In commercial power, we had another very strong quarter of bookings leading to a record segment backlog
Rex Geveden: of 1.3 billion up 39% from last quarter and up 78% year over year. This is mainly driven by the booking of the remainder of the Pickering Life Extension.
Rex Geveden: Steve Generator Contract, augmented by other key lands across portfolio. Importantly, even excluding the Pickering Contract, our book to bill would have been above 1.0 highlighting solid underlying demand in the market and supportive of our forecast for double-digit organic commercial power revenue growth in 2025.
Rex Geveden: Concerning future plans, our largest customers Bruce Power and Ontario Power Generation
are investing in their existing nuclear generation capacity.
Rex Geveden: as they look to undertake large-scale new builds. On top of that, energy Alberta recently submitted an initial project description for the proposed Peace River Nuclear Power Project, the calls for up to 4.8 gigawatts of can-do capacity.
Rex Geveden: This expands the large-scale new-build opportunity in Canada to nearly 20 gigawatts, more than double the country's current nuclear capacity and obviously representing a meaningful long-term opportunity for BWXC and the entire can-do supply chain.
Rex Geveden: in the SMR market, the Canadian Nuclear Safety Commission, authorized construction of the first BWRX 300 unit at OPEG's Darlikon side, a significant milestone for North America's first SMR project.
Rex Geveden: Our work on the reactor pressure vessel continues at pace and we continue to anticipate multiple follow on orders in Canada, the US and Europe .
Rex Geveden: As I previously mentioned, we are investing to meet customer demand. The expansion of our Cambridge Manufacturing Plant, which will create nearly 50% more capacity, is ahead of schedule in the acquisition of kinetics, which offers a broad set of life of plant services is on track to close by mid-year.
Rex Geveden: Also, as the U.S. nuclear power industry seeks partners for plant life extensions, new SMR deployments, and perhaps large-scale reactor buildouts.
Rex Geveden: BWXT stands ready with our scale domestic nuclear manufacturing footprint and a highly credentialed nuclear qualified workforce. There are several compelling industry groups coalescing around a whole of industry approach to propelling the commercial nuclear enterprise in America.
Speaker Change: Similar to the group formed by TVA and its application to the DOE for an $800 million SMR development grant.
Speaker Change: These groups will require strong nuclear partners and BWXT is prepared to support this exciting growth. Turning to BWXT Medical, we had a solid quarter with double-digit revenue and adjusted EBITDA growth driven by our pet diagnostic product lines.
Speaker Change: We remain on track for a full year revenue growth of over 20%.
Speaker Change: As discussed on the last call with our medical business based in Canada and a portion of our sales going to the United States, we've been working closely with our customers to assess the impact of potential tariffs.
Speaker Change: Today, our products are covered under the USMCA Free Trade Agreement, which exempts radio pharmaceutical materials from tariffs. Nonetheless, we continue to watch this closely and are working to limit future cross-border risk and product delivery disruption.
Speaker Change: On Tech 99, consistent with prior updates we are perfecting our product as we proceed toward FDA approval.
Speaker Change: Looking forward, the market for nuclear medicine remains highly enticing with increasing volumes of respect.
Speaker Change: and pet scanning procedures and pharmaceutical companies investing heavily in novel radiotherapeutic drugs. Of note, Novartis just received FDA approval for Pluvicto. It's Blockbuster, LTC177-based prostate cancer treatment to be used in pre-chimotherapy settings.
Speaker Change: which is estimated to triple the number of patients eligible for the treatment, highlighting the market's growth potential.
Rob: In conclusion, we had a very good financial performance in the first quarter, supported by our growing backlog and accelerating nuclear demand. Our customers are investing for the future, and our value proposition rings true as we prepare for growth and navigate any macroeconomic condition. And with that, I will now turn the call over to Robb.
Thanks, Rex, a good evening, everyone.
Rob: I'll start with some total company financial highlights and slide four of the earnings presentation.
Rob: First quarter revenue was $682 million, up 13% with growth in both segments.
Rob: Adjusted EBITDA was $130 million, up 13% year-over-year driven by robust double-digit growth in government operations, and modest growth in commercial operations
This was partially offset by slightly higher corporate expense.
Rob: We continue to expect corporate EBITDA expense in 2025 to be slightly lower than the $16.8 million reported in 2024.
Rob: Adjusted earnings per share were 91 cents, up 20 percent compared to it.
Rob: 76 cents last year due to the operating items previously discussed, complemented by a lower tax rate and slightly lower interest expense. That was partially offset by lower pension income in other net on the income statement.
Rob: Our adjusted effective tax rate in the quarter was 18.3 percent in line with seasonal patterns due to the timing of excess tax benefits on competition expense.
Rob: For the full year, we expect our adjusted effective tax rate to benefit from the ongoing tax planning and issues discussed last quarter.
Rob: In fact, with a better line of sight to qualify research expenditure credits and geographical mix from growth in our Canadian commercial nuclear power business.
Rob: We now expect our 2025 tax rate to be only slightly higher versus 2024, a modest improvement compared to our original expectation of a 20-to-40 basis points increase.
Rob: Free cash in the quarter was $17 million, driven by timing of advanced buildings and working capital management in what is seasonally our lowest quarter of cash generation.
Rob: Capital expenditures in the quarter were $33 million, or 4.9% of sales compared to our expectation for full-year cat-backs to be in the range of 5-6% of sales.
Rex Geveden: Lower CapEx in the quarter was mainly due to timing of spend on the Cambridge expansion, which is expected to ramp throughout the year as the project is progressing ahead of schedule as Rex mentioned.
Rex Geveden: Consistent with our prior view, we anticipate full year free cash flow of $265 million to $285 million.
Moving to the segment results on slide six [inaudible]
Rex Geveden: and government operations. First quarter revenue was up 14% driven by growth in naval propulsion, special materials, and about 1% contribution from the AOT acquisition.
Rex Geveden: Adjusted EBITDA was $117 million, leading to a Adjusted EBITDA margin of 21.1%.
Rex Geveden: As Rex mentioned, we had good operating performance, but also benefited from timing of certain long lead material procurements.
Rex Geveden: We continue to expect government operations to generate mid-single-digit revenue growth in 2025, consisting of low-single-digit organic growth, plus contribution from the acquisition of AOT, and adjusted EBITDA margins of approximately 20 percent.
Rex Geveden: Turning to commercial operations, revenue was $128 million, up 10% year-to-year, led by double-digit growth in medical.
and Solid Growth and Commercial Power.
Rex Geveden: Within commercial power, higher revenue was driven by SMRs and pickering component volumes which was partially offset by lower field services work due to the wind down of the Darlington Life Extension project and timing of outage work which can vary significantly on a year over year basis.
Thank you.
Rex Geveden: Adjusted EBITDA on the segment was $14 million, up modestly year-over-year. However, Adjusted EBITDA on margin was 10.9%, down 100 basis points as good operating performance was offset by two main factors.
Rex Geveden: First, as we discussed last year and contemplated in our guidance, we faced unfavorable mix and cost absorption due to the decline in field services related to the pacing of life extensions and outage schedules.
Rex Geveden: Second, we experience heightened inflation for specialized raw materials in our can-do fuel business line.
Rex Geveden: This temporary impact will be with us through the second quarter until we begin to contractually recover these cost increases in the second half of the year.
Rex Geveden: For the full year, we anticipate commercial operations revenue growth of approximately 50% consisting of double-digit commercial power growth, over 20% medical growth, and a contribution from the Kinectrix acquisition.
Rex Geveden: Our EBITDA Outlook calls for 14-15% EBITDA margin, although we now see the lower end as more likely due to the higher raw material cost issue in the first half of the year.
Rex Geveden: Turning now to our 2025 total company guidance on slide seven and eight of their earnings presentation.
Rex Geveden: We are reaffirming our guidance for the four key metrics we provide a last quarter for Revenue, Adjusted EBITDA on APS, and for Casual.
Rex Geveden: I will note that we refined the ranges for several items listed on the right side of Slide 8, which I referenced throughout my remarks.
Rex Geveden: Looking at the quarterly cadence of earnings, as discussed, our first quarter EPS outperformance was largely due to the timing of work in government operations as well as a slightly lower tax rate.
Rex Geveden: For perspective, compared to our expectation, a little over a dime in earnings per share came from higher operating income, mainly due to higher government operation segment income, from material procurement timing, from Q2 into Q1, and just over a penny from more favorable taxes, given the tax planning and issues that discussed earlier... [inaudible]
Rex Geveden: That will remain with us for the remainder of the year.
Rex Geveden: As the material procurement related item normalizes, we now expect a second
Rex Geveden: This should equate to a little over half of our full-year EPS coming in the second half of the year, consistent with our prior views.
Rex Geveden: To conclude, we had a good start to 2025. Our financial performance, strong bookings, and outlook highlight the quality of BWXC's broad capabilities in the nuclear industry serving global security, clean energy at nuclear medicine markets. We are intensely focused on execution and our investing in our company to support customer demand.
And with that, we look forward to taking your questions.
Thank you. Thank you.
Rex Geveden: Thank you, and we will now begin the question and answer session.
Rex Geveden: If you would like to ask a question, please press star and then one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.
Rex Geveden: Please pick up your handset and ensure that your phone is not on mute when asking a question.
Rex Geveden: And just a reminder, we ask that you please limit yourself to one question and one follow-up only. Thank you.
And your first question comes from the line off [inaudible]
Scott Duschle from Deutsche Bank. Please go ahead.
Scott Duschel: Hey, good evening, Robb. It looks like there were some negative EACs this quarter of about 11 million based on what's in the 10Q. Were those EACs all at government operations, and then can you share in more detail what the assets were that allowed the segment to deliver these?
Pretty strong margins, honestly, despite that headwind. Thank you.
Speaker Change: Yeah, no, it wasn't all in government operations. It's about half and half between the commercial and the government business.
Speaker Change: in terms of those EACs in that footnote, the half from the commercial operations. We talked a little bit about that.
Speaker Change: Zerk Cost Impact, that was actually the material zirconium that impacted us on the fuel business and so we'll start to recover that as I mentioned during the second half and ultimately into 2026.
Speaker Change: So we're in that back, but that obviously causes sort of a negative offset there. And then the geo business was really a little bit of this, a little bit of that across that segment, nothing to call out and nothing big on the positive side.
Speaker Change: Okay, as in Rex, in terms of the recent funds that have been appropriated to support the shipbuilding industry, do you see BWXT as in line to get any of that funding? I mean, the performance would suggest you don't really need it, but just curious if maybe there are opportunities for you all in terms of getting additional government support. Thank you.
Scott Duschel: Yes, thank you, Scott, to be clear you're talking about all the elements in the reconciliation bill.
Speaker Change: Yeah, as well as the continuing resolutions that included, I think, an extra five and a half billion for the industry. Oh, for the CEO . Yeah, okay. Not much there for us in the CR. The reconciliation bill is interesting. That's a question you didn't ask, but...
Scott Duschel: There are interesting things in there for defense enrichment and for acceleration of DOD nuclear reactors and some things like that, so we're a bit optimistic about what could come of that.
Thank you.
Thank you
And your next question comes from Peter Skibitski.
from Alhambic Global [inaudible]
Let's go ahead. Hey, good evening, guys. Um...
Speaker Change: Rex, could you maybe go further on the whole Record Insiliation package? I mean, I think there are some potential changes at NASA.
Speaker Change: I don't know if that means we're more inclined to go to Mars now and maybe what that can mean for you and then also just the whole shipbuilding office set up, a lot going on there. Could you maybe add some color all that?
Speaker Change: Yeah, up to the best of my ability, I will, Peter, and hey there. So, yeah, the reconciliation bill, as I mentioned, has some funding for accelerating defense enrichment. There's some funding to accelerate.
Speaker Change: DoD Reactors, there's some additional funding for the Strategic Capabilities Office
Speaker Change: There seems to be maybe some funding in there for coded fuels like triceau.
Speaker Change: and some things like that, and of course there's a pretty big chunk of money for a second Virginia.
Speaker Change: I think that goes with FY27, and so there's a lot there
Speaker Change: In terms of the office of shipbuilding, I think it's too early to tell what if any of that would influence us, Peter. I would say that's generally positive. I certainly like the White House's posture on.
Speaker Change: The emphasis on nuclear shipbuilding specifically, and also, you know, commercial shipbuilding, which I believe this nation needs more capacity for.
Speaker Change: On the space one, hard to say exactly what that you're talking about the language that came out in a skinny budget from the White House.
Speaker Change: Part of the tale exactly what that propulsion language was about.
Speaker Change: I suspect it's related to SLS. In terms of nuclear, we're getting pretty good vibes from NASA about their appetite for nuclear thermal propulsion and I kind of expect that to go forward.
Speaker Change: I wasn't quite sure at DOE if you saw any step back in terms of support of...
Speaker Change: You know, I nearly advanced nuclear stuff you do there that goes through DOE. Did that all look pretty kosher to you guys?
Speaker Change: This idea of energy dominance that's being promoted by the administration certainly includes a strong nuclear element and I would say that the energy secretary Chris Wright seems very very pro-nuclear from every encounter we have.
Speaker Change: So, yeah, if anything, it feels like full steam ahead on advanced nuclear and acceleration of nuclear projects.
Speaker Change: Got it, thank you, maybe just one quick one for Rob. Hey Rob, just on the raw material issue at commercial and calling it back in the second half. Second core is typically your highest margin core rate commercial. Does that change this year because of that impact?
Speaker Change: It does. Thanks for flagging that. Yeah, generally, as you know, that that is a higher margin quarter where we actually do some, you know, outage work that can be a little bit higher margin.
Speaker Change: That's going to be overwhelmed, if you will, by that zirconian sort of issue that we have and just kind of a couple of their mixed items.
Speaker Change: So I would say we're not going to have as greater performance as it relates to the normal margin flow and then I'll pick back up I think we have a better schedule frankly in the second half than we even had
Speaker Change: last year and just in terms of timing and project. So the way I would think about it is, you know, sort of lower margins in the first two quarters which is a little bit of an anomaly for us in the commercial business and then picking up even more than maybe one might expect in the second half.
Okay, great. Thank you.
Sure.
Speaker Change: And your next question comes from Bob Labick from CJS Securities. Please go ahead.
Good afternoon. Thanks for taking our questions.
Speaker Change: Hey, Bob, hey, so Rex you start, you said you're perfecting the process on Molly right now and
Speaker Change: So just kind of maybe the latest update and timeline on that and you know in the past we've kind of thought if you were approved by September October then you can get into the contracting season for 2026 but
Speaker Change: Now you have partners kind of waiting for approval, so I don't know if September October is still a timeframe that's necessary or how are you thinking about you know latest steps and then kind of like timeline to get into contracted sales in 2026.
Speaker Change: Yeah, I certainly had hoped for, you know, approval in 2025, Bob, as we've discussed many times before. This last mile here has been pretty long for us to get a couple of product characteristics right. So, you know, what I would say about that is there's still a window for approval in 2025. We...
Speaker Change: did not forecast any sales in 2025, I think what we said consistently was.
Speaker Change: that, you know, if anything, we might be in the spot market for 2025. So our plan doesn't depend on that at all.
Speaker Change: Certainly, I certainly hope for approval in 2025 and we still see, we have still had a window for that for sure But, you know, honestly speaking, that could bleed over into the first couple of months of 2026 or whatever ever.
Speaker Change: But we can finish line from here, for sure
Speaker Change: Great, just to clarify, the effect of this and everything is there, as you said, perfecting the product, the illusion time, the rates, things like that, or how should we think about the delays?
Speaker Change: Yeah, we've been working on things. You know, you have a number of items when you go through, when we went through our first FDA application that came back with a number of items that we needed to address technically. And so you sort of work your way through that list of which there are literally dozens.
Speaker Change: Some of them are minor things, and some of them are pretty significant things [inaudible]
Speaker Change: So it's things like that, it's just kind of pounding it flat as I've said before and you know I was certainly going to get there but it's just a lot of details here in the last in the last mile.
Speaker Change: Okay, great. And then, you know, Robbie gave us some good color on the cadence of commercial ops going a next quarter, you know, this next, et cetera. With the, you know, very big increase in backlog from pickering and pickering being the biggest driver, how do we think about that when that roll on over the next year or two, is there like a
Speaker Change: Wampiness to it is its smooth once we get there or is there any kind of general thought on a transition to that growth and...
And that's it.
Timor Growth, and how it will affect.
Speaker Change: Yeah, there's nothing to call out in terms of, you know, all of a sudden it's going to search in any one quarter or any one year. I think it's going to build pretty steadily. I would note that, of course, you have other
Speaker Change: A, we talked about a last quarter that Pickering looks very strong on top of what we're doing at the Bruce, and then of course you have Darlington at some point that we'll kind of finish up. So, I think it's going to be steady, we've talked about that growth rate being one of the higher ones within our overall portfolio, and I still see that over the next couple of years.
Speaker Change: Connectrix as well, kind of lining up and confirming that, you know, as it kind of looked inside their books, we also kind of feel like, oh, we have a different glimpse of that trajectory and experience you've got.
Okay, super. Thank you.
Sure.
Speaker Change: And your next question comes from Thomas Meric from Johnny Montgomery. Please go ahead.
Good morning, gentlemen. Thanks for taking the questions.
Speaker Change: I wanted to start on the Enrichment Contract and just kind of walk us through the next phases of the pilot program if you can over the next few years. Then secondly, within Enrichment, I just wanted to get a sense of how you look at...
Speaker Change: The LEU Market for US reactor owners, potentially being an unobligated supplier of enriched product there, and just what do you see is the returns in that market, as well as the capital and operational risks of it.
Yes, you're a good question, by the way.
Speaker Change: So where we are on that program with the NSA is we're just in a conceptual stage designing a pilot plant.
Speaker Change: This next phase would be a sole source award for that pilot plant and what we're doing is is looking at that douche technology which was developed at Oak Ridge.
Speaker Change: National Laboratory. It's a centrifuge type of enrichment technology and really what this phase is about is about design for manufacturability of those centrifuges. And what you do is of course with this pilot plant.
Speaker Change: B, manufacturing the centrifuges themselves. So you think of this in two different pieces. One is the manufacturing phase. The second phase is when you have obviously a plant and you go and actually perform enrichment on the Uranium.
Speaker Change: and all that has to be done with unobligated materials, meaning U.S. sourced.
So that's the tricky part that means you can't use. [inaudible]
Speaker Change: for that L-E-U and H-A-L-E-U material, or the NSA could build the entire capability themselves. And so we've got a whole spectrum of outcomes depending on the acquisition strategy and depending on what emerges commercially on a natural basis.
Speaker Change: So I guess what I would say about it, I'll have to fudge you a little bit, it's just too early to tell where that thing will go.
Speaker Change: But suffice it to say that the pilot plan is an opportunity that's very interesting for us in the near term It'll be a significant program and then in the end we'll be the company that's doing the enrichment
Speaker Change: for defense purposes for the high-enriched uranium part of it. And I think all the in-between stuff is the interesting question mark and we'll see where that goes.
Speaker Change: Yeah, the government has a very constructive view of using the Halo market to ultimately set up that
and test that capability, and as you know...
Speaker Change: The amount of swoo that's necessary in that market is way different than in the LEUs so said differently if you were to try to stand up a technology going from 1% to 5% that's a lot of
Speaker Change: A lot of costs, whereas you could focus on the Halo, and that's why we believe that they've let that.
that will allow us to do it at a lower...
Speaker Change: investment on behalf of the government and ultimately if that proves out then they'll have an alternative, there's one other technology that could potentially be available to the LLU market, we'll see what the government, the DOE, and say one would do.
Speaker Change: Hopeful on both. Thank you, Robb. I wanted to follow up on free cash flow seasonally through the year. I mean, I think we've covered a lot of the margin, puts in takes, but maybe just to expand on that on the cash flow statement a little bit. Is there any any reason to think free cash flow seasonality this year is? [inaudible]
Speaker Change: Markedly different than, say, last year or the year before, and that's it for me. Thank you, gentlemen.
Speaker Change: Yeah, thanks for the question. No, I see it as a typical pattern. We've gotten off to a really good start in the first quarter, which is great to see.
Speaker Change: Look as it hasn't passed in the fourth quarter to be the most significant quarter in terms of free cash flow, but happy to get off to a good start here.
Thank you.
Speaker Change: Here next question comes from Michael Charmoli, from Thruist. Please go ahead
Michael Sharmoli: Hey, good evening, guys. Thanks for taking the question. Nice results
Adam
Michael Sharmoli: Rex, hey, you mentioned, I think some girly scope on Ocus, you know, and that's probably come under some scrutiny. But if I think about Ocus, and then, you know, that potential for the second VA sub, does that, do those two items potentially change the slope of your...
Michael Sharmoli: kind of 10-year growth rate, Kager, 3 to 4 percent, are they contemplated in there or are you feeling better about sort of all to those programs?
Michael Sharmoli: Yeah, Michael. I don't think that fundamentally changes our outlook. I think what it does is the risks are outlook a little bit because what's happening here, of course, is the Australians have made kind of a $500 million down payment against their $3 billion commitment to the Department of Defense, the U.S. government.
Michael Sharmoli: and some of that, you know, some of that starting to trickle through and what we have going are capital projects related to capacity expansion.
Michael Sharmoli: in order to accommodate August . And so, it's just early capital projects, frankly, slightly lower margin than what we do in the rest of the plant, because it isn't production programs, but it's also without risk because it's cost-reinversible.
Michael Sharmoli: But yeah, it's just the risks of our future and starts the rant toward August .
Okay, okay, perfect. And then just …
Speaker Change: and switching gears, maybe to the ANPI program, any sort of updated details there. I think maybe there were probably a couple more participants than maybe we originally thought, but how are you thinking about that opportunity, maybe incremental revenues, or what's the expected occasion for that program?
Michael Sharmoli: Yeah, I would say Michael, there's a lot of uncertainty around that thing right now. We thought what would happen is they would down select to a couple of suppliers.
Michael Sharmoli: That final list is actually eight, and it includes us happily, but some other sex energy Westinghounds, Kairos, Channel Atonics, and Radiance, and a couple others.
Speaker Change: So what they've said is that they've down-selected to that group of eight from by the way a very large field of interest.
and they're going to negotiate, then we're eligible to negotiate.
Chase Jacobson, Rex Geveden
Speaker Change: And so, you know, I mean, you're to see where that goes. We just don't have a good feel for the funding. We don't have a good feel for how much potential we don't have a good feel for the probabilities yet, but we're eligible and we'll start the negotiations and hopefully get some business out of it.
Speaker Change: Okay, fair enough. I'll jump back in the queue guys. Thanks. Thanks, mine.
Speaker Change: And your next question comes from Peter Arment. From Beard, please go ahead.
Speaker Change: Good afternoon, Rex Robb, Chase, nice results. Robb, just for clarification on the Pickering Life Extension steam generator contract that was added into commercial operations backlog, was that for the full amount or was that just for the initial steam generators?
Robb LeMasters: Yeah, that finishes off the full order. I mean, there might be a little bit of cash in dogs, but that's the steam generator, the final 48 memory serves. So, that's the final dose. I think we got a little bit in the beginning and that just kind of gives us the final bit.
Okay.
Speaker Change: Thanks, helpful. And then Rex, you mentioned that with the new Secretary of Energy, you know that it seems to be, you know, all will go for, you know, nuclear. What has, has there been any discussions or any new developments on SMRs, whether it's TVA or some of the other players that are out there?
Yeah, I think the Department of Energy is, is. [inaudible]
Speaker Change: It's certainly pushing TBA to get the clinch-river side started as soon as possible, and there are other discussions that I hear about that I couldn't necessarily disclose, but it feels like the DOE is leaning in very hard to enable the commercial capability for us in the US.
Speaker Change: We're certainly grateful to see it. We need some steam on that.
Speaker Change: Yeah, I might just say we feel pretty well positioned because of course we have strong manufacturing capability in the US and with everything going on macroeconomic wise, they would be looking obviously for a local solution whereas in other instances or other other geopolitical environments, we might see different people, you know, desiring the ship material into the US. We see that all the more reason why, you know, we'll be part of the solution.
Peter Arman: Got it. Alright, I'll leave it there. Thanks guys. Appreciate it. Thanks, Peter.
Speaker Change: And your next question comes from Andre Madrid from BTIG. Please go ahead.
Hey, good afternoon everyone.
Andre Madrid: You know, you called out the Circónium cost impact a bit earlier in the call and I kind of want to just dive a little bit deeper there and get a sense of what you guys are seeing. I'm aware that you know obviously a lot of global supply is
Andre Madrid: is dominated by China so recent tariff noise probably doesn't help the issue. I mean, how isolated is that impact? How able do you think it would be to manage it moving forward? Any sense there would be helpful.
Speaker Change: Yeah, I could start just financially talking about it. As we mentioned in the commercial nuclear power business, we do import certain materials into Canada, right, from other markets into Canada. So that's the first thing to make clear.
the U.S. We generally try to buy that.
Chase Jacobson, Rex Geveden
Speaker Change: Hedge all that and kind of have that material on the ground and that business so this was a very rapid change and luckily because we have really strong relationships with our customers we actually have a path through mechanism as I said to exactly mitigate
Speaker Change: Some unforeseen risks to our business because ultimately we weren't looking to bear that risk and so we've had that for years.
Speaker Change: Got it. Got it. And then I guess aside from that, and sorry, this is kind of rehashing the previous question. It was asked on it, but August aside from the initial Virginia units that you guys are going to be contributing to, I mean, when will we get any further sense on, you know, component down selection and what your your eventual role on the later program that's, you know, built in Australia will be [inaudible]
Speaker Change: Yes, so that you're talking about the SSN Orchestra, yeah, following the 3-5 Virginia, we've said that we anticipate scope on SSN Orchestra. We haven't been specific about that yet and really can't be, but as soon as we could disclose that scope, we will.
Speaker Change: God, I got it very helpful. All right, I'll leave it there. Thanks
Thanks, Andre.
Speaker Change: Before we proceed to the next question, again, if you would like to join the queue, simply press star one. And your next question comes from Jeffrey Countville, from Seaport Research
Jeffrey Countville: Please go ahead. Good evening and congratulations on the strong quarter. I thought BWXD's entry into the SBR management list
Jeffrey Countville: Both interesting and perhaps not expected. Can you add some color on how the award came about and why you believe BWXC was chosen?
Speaker Change: Yeah, hey Jeff, I'll take a crack at that right. It was a very competitive field there. I believe there were six.
Proposals that were submitted altogether for that activity.
Speaker Change: I thought it was a bit of a long shot for us and so we were certainly happy to win it with that crowd at Field that said, you know we have experience of qualms that go all the way back to our history as McDermott, we once managed that side as Babcock and Wilcox
Speaker Change: So we know that world and we've developed experiential quarrels in that world and so I think I think the reason you see DOE taking a bet on us there is because we understand how to operate high-consequence sites
Speaker Change: whether they're nuclear or otherwise, and there's I think a tremendous amount of confidence in the BWXT brand and the people that we bring to it. And so it gave us the opportunity to look out on the horizon and expand into something new based on our performance history with DOE.
Speaker Change: Yeah, that makes a lot of sense. Thank you. And on the medical side, I just want to ask how the I can't aim 225 effort continues to progress. We continue to see some chatter about led 212 as a competitive approach, so I just thought I would check in on this.
Speaker Change: Yes, sir, so we're doing well in actinium. I think we're still the largest commercial producer of that product.
Speaker Change: We produce it at the Triumph Accelerator with a Spolation Method, it's called.
Speaker Change: We also are working on other production modalities I think we've talked about on these calls.
Speaker Change: And so we've got multiple sources for it. It's exciting. There are other, you know, other isotopes that are emerging as possible therapeutics for cancer.
Speaker Change: And what I would say about those is I don't I don't know that they're necessarily competitors, they are probably also in the race who teach him an titanium for example behave differently in the body and address different cancer conditions and different.
Speaker Change: tumors in different states of metastasis. To me it's lead is another one of those in the exotic pipeline, so it would be there with with lutecium, actenium, and perhaps others to come.
So, I'm pretty excited about the potential of all of it.
Great. Great. Thank you. Appreciate it.
Speaker Change: There are no further questions at this time. I would like now to turn the call back over to Chase Jacobson for the closing remarks.
Chase Jacobson: Thanks everybody for joining us today. We appreciate your interest in BWXT and for your questions. We look forward to seeing and speaking with many of you at upcoming investor events in the next few months. If you have any questions, you can reach me at investorsatbwxt.com. Thank you.
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