Q2 2025 BWX Technologies Inc Earnings Call
Ladies and gentlemen, welcome to bwx Technologies, second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode.
Following the company's prepared remarks, we will conduct a question-and-answer session, and instructions will be given at that time.
I would now like to turn the call over to our host. Chase Jacobson pwx T's vice president of investor relations. Please go ahead, sir.
Thank you. Good evening and welcome to today's call joining me, are Rex, Jean president and CEO and Mike Fitzgerald, senior vice president and CFO on today's call. We will reference the second quarter of 2025 earnings presentation. That is available on 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 in the company's SEC filings.
We will frequently discuss non-gaap Financial measures which are reconciled to gaap measures in the appendix of the earnings presentation that can be found on the investor section of the bwsd website.
I would now like to turn the call over to Rex.
Thank you, Chase and good evening to all of you.
First I would like to welcome Mike, Fitzgerald our CFO to the call Mike has been with bwxt since 2022 and previously held the roles of Chief accounting officer head of finance and CFO of government operations is deeply ingrained in our business, is a trusted resource for the entire executive team and I'm happy to have him on the call with us today.
Now turning to our results and a discussion of our markets and Outlook second quarter Financial results. Exceeded our expectations, driven by strong execution and pacing of work. In government operations. Our second quarter Financial results, featured double digit adjusted evida and earnings for share growth and robust. Free cash flow. We closed the acquisition of connectrac in May.
Panet brings a Workforce of over 1,300 employees and significantly broadens. Our life of Plant Services capabilities in the nuclear power and energy infrastructure, markets enabling us to offer an even broader range of services to the market.
Demand across the Global Security, clean energy and medical and markets is accelerating.
Backlog grew to 6 billion up, 23% quarter over quarter and 70% year-over-year with growth. In both segments, organic book. The bill was 2.2 in the quarter and the pipeline with new opportunities and government and Commercial operations is expanding.
Turning to segment results in Market Outlook,
Government operations revenue was up 9%, and adjusted EVA was up 23%, exceeding our expectations. Results were driven by strong execution, particularly within the special materials portfolio, the AOT acquisition, and the timing of material procurement.
The naval propulsion business is focused on driving operational, excellence and maintaining production Pace on our franchise submarine and aircraft carrier programs.
As we announced last month, we saw in the next pricing agreement for Naval nuclear reactor components. The agreement is valued at 2.6 billion over the next 8 years, primarily related to Virginia and Columbia class submarines and certain components for Ford class aircraft carriers. We've booked over 1 billion in orders. On this contract in the second quarter driving government operations. Backlog to 4.4 billion up 24%, sequentially and up, 55% compared to the second quarter of last year.
This contract follows a 2.1 billion dollar pricing agreement. We signed in late 2024, which combined with the administration's focus on naval ship building and the submarine industrial base supports our longer term forecast of a 3 to 5% Revenue behavior in this line of business.
Special materials remains 1 of the most exciting growth stories at our company. We had strong performance on Legacy contracts during the quarter. And our growth prospects are brightening
By strategic priorities for our customers.
we have nearly completed the 1 year engineering study for defense, uranium enrichment, using the deuce technology that satisfy Naval Fuel and National Security needs under contract to the nnsa
our current focus is responding to the sole source RFP issued in April, for the next phase of this program which includes design licensing and construction of pilot plant.
Additionally, we are working with the nnsa on long-term production of high Purity depleted uranium.
And quantities that exceed our business case. Expect expect expectations for the aot acquisition.
We are also tracking several Advanced nuclear fuel opportunities intended for defense and Commercial applications.
We will keep you posted as these prospects take shape.
And micro reactors. We began manufacturing. The reactor core for payday, the land-based transportable micro reactor.
Pallet has received strong support in recent government funding bills and is highly aligned with the President's National Security executive order titled "Deploying Advanced Nuclear Reactor Technologies," which directs the DoD to commence operations of a nuclear reactor by September 2028. As Pallet progresses and the advanced fuel supply chain grows, there are multiple emerging opportunities that BWXT is well positioned to capture.
And Technical Services results are strong inside, operational performance. And in contract wins,
Operating income from this business line was up over 20% compared to the average quarterly rate over the last year and we are on track to outpace that growth for the full year.
This is driven by the rampant pandex in Hanford both of which began in 2024 and newer projects, such as West Valley and the Strategic petroleum reserve the latter which is expected to come in the second half of the year.
From a new business perspective. Atomic energy, Canada, Limited selected nuclear Laboratory Partners of Canada. A BWC LED joint venture which also includes kinetics to manage and operate Canadian nuclear Laboratories. Our first International project in this line of business,
The annual contract value is about 1.2 billion, Canadian dollars with an initial term of 6 years and extensions for up to 20 years.
We are in the preferred bidder period and expect to transition to a contract start date late in the third quarter.
Turning to commercial operations,
reported Revenue growth was 24%.
On an organic basis, revenue was down 3% and largely in line with our expectations, as double-digit growth in medical was offset by a modest decline in commercial power. This decline was due to the timing of outages and maintenance projects, as we discussed last quarter.
Backlog in the segment grew to $1.6 billion, including about $240 million from the Connectrix acquisition.
On an organic basis. Booked the bill in the quarter was 1.3. Importantly, this was driven by a multitude of contracts for existing nuclear power, infrastructure highlighting, the strong underlying base of Revenue in our portfolio and supporting our full year. Outlook for Mid teens organic growth and over 50% growth including contribution from Kinetics
Bwxt, medical delivered, a solid quarter, with double digit Revenue, growth driven by the pet diagnostic, product lines and therapy, robust demand, signals for the diagnostic and therapeutic Isotopes support. The outlook, for over 20% growth this year.
And product development, the Canadian nuclear safety commission approved, the irradiation of vitrium 90 and lithium 177 using the target, delivery system with Laurentiis Energy Partners at the Darlington site.
On Tech 99. As we discussed last quarter, we've been perfecting the product attributes encouragingly. We have line of sight to address the final technical issues that are typical in the scale of and industrialization phase of complex projects.
Uh, I am quite encouraged by our progress given the timing. I don't expect a product launch this year, but customer appetite remains strong, and this will be an important addition to our fast-growing portfolio of medical isotopes.
Turning now, to commercial power, where demand is accelerating rapidly in the canned do Market. We have talked in depth about the opportunities in the ongoing Life Extensions and the potential for large scale, new builds.
Ontario power generation and Bruce Power are evaluating options to expand their nuclear reactor fleets to meet increasing electricity demand in the region.
Uxt and connects our trusted Partners in the Canadian nuclear market and are engaging with these utilities now.
For the AP1000, we are bidding on component engineering and manufacturing contracts across a global opportunity set.
There continues to be good, momentum in the SMR Market in July the NRC, except the tva's construction permit application to build a GE Hatachi bwrx. 300 at Clinch River in Tennessee with the review expected to be complete by the end of next year. This would be a giant step in the USS and our market and would complement the progress in Canada at the Darlington site for which bwxt is manufacturing. The reactor pressure, vessel and other important components potentially
In addition to our work with GE Hachi, we are also working with Tara Power, Rolls-Royce, and others as we anticipate multiple follow-on orders in the coming years.
Our long history of manufacturing. Large complex, nuclear components, and existential, and expanding capacity position us as a super Merchant supplier to the SMR Market.
With that, I will now turn the call over to Mike.
Thank you, Rex and good evening, everyone very happy to be here. I've had a chance to meet with a number of you recently and I look forward to meeting with more of you in the coming months.
I'll start with some total company financial highlights on slide 4 of the earnings presentation.
Second quarter revenue was $764 million, up 12%, with growth in both segments.
Excluding contributions from Acquisitions. Organic Revenue was up 4%.
Adjusted ibido was 146. Million up 16% year-over-year driven by robust double digit growth in government operations, which was partially offset by lower adjusted ibida and Commercial operations.
Corporate expense was lower compared to last year and we continue to expect corporate adjusted. Eva expense in 2025 to be slightly lower than the 16.8 million reported last year.
Adjusted earnings per share were $12 up 24% driven by strong operating performance complemented by a lower tax rate, foreign currency gains and higher pension income which were partially offset by higher interest expense due to debt associated with the kinetics and aot acquisitions.
Are adjusted effective tax rate was 20% for the quarter, which was lower than anticipated, due to various tax credits, as well as higher stock compensation expense.
Given the lower second quarter tax rate. We now expect our full year tax rate to be approximately 21%.
This yields a second half tax rate of approximately 22.5%, which is more in line with our expectation of our tax rate going forward.
3 cash flow in the quarter was a robust. 126 million driven by good working Capital Management.
Capital expenditures in the quarter were 33 million or 4.3% of sales due to timing of growth Investments. Being more back half weighted during the year.
We now expect capital expenditures to be 5.5% to 6% of sales for the year, driven by investments to meet growing market demand, including the ongoing expansion of our Cambridge commercial nuclear manufacturing facility and infrastructure investments related to defense fuels and government operations.
Moving now to segment results on slide 6.
In government operations. Second quarter Revenue was up, 9% driven by growth in Naval propulsion. Timing of material, procurements, special materials performance in just over 2% contribution from the aot acquisition.
Adjusted EBITDA was up 23% year-over-year to $133 million, yielding an adjusted EVA margin of 22.6%.
This was driven by favorable, mix strong operating performance and favorable contract performance in our special materials portfolio.
We continue to expect government operations to generate mid single-digit Revenue growth in 2025, however, with stronger margin performance in the first half, we now anticipate adjusted ibida margin to be approximately 20.5% for the year.
turning to commercial operations,
Excluding Kinetics, organic revenue was down 3%.
Specific to commercial power. While we have strong Revenue, growth and components. Work on the vwr, X300, reactor pressure, vessel, and Pickering, steam generators. This was more than offset by the expected decline in field services, due to timing of key outage and maintenance projects during the year.
Adjusted evida in the segment was 16 million compared to 23 million last year.
This resulted in an adjusted IBA margin of 9.2%.
While we had solid margin performance in commercial power components and fuel, this was offset by the decline in field services and growth investment to match the robust market demand.
To provide some additional perspective within commercial power field services 1 of our higher margin business lines was just over 10% of Revenue in the quarter down from over 35% in the same period last year.
This unfavorable mix accounted for over half of the year-over-year margin decline with the remainder due to unfavorable absorption of higher sgna given lower Revenue in the quarter.
At the segment level. We now expect commercial operations, Revenue to grow over 50% with mid-teens Organic growth complemented by the kinetric acquisition.
However, adjusted ibida margin is expected to be 13.5 to 14% compared to the low end of 14 to 15% previously, due to growth investment and modestly higher contribution from Kinetics.
Still our guidance implies significantly, improve your results in the second half of the year with higher Revenue. More favorable next and the absence of commodity price pressure that acutely impacted our first quarter results.
Turning. Now to our 2025, total company, guidance on slide 7 and 8 of the earnings presentation.
We are raising our guidance for Revenue, adjusted ibida, and earnings per share, and increasing the low end of our free cash flow guidance.
We now anticipate revenue of approximately 3.1 billion dollars with modestly. Better Revenue assumptions across the business as well as contributions from a slightly earlier close of the kinetric acquisition.
Accordingly, we're raising our adjusted, EBA guidance to 565 to 575 million up 10 million dollars at the midpoint as the stronger, operational performance in government and slightly higher revenue. And Commercial is, partially outset by mix and growth investment as I previously discussed.
These changes to our operating outlook, combined with a lower tax rate and better pension and other income, yield an increase in our adjusted EPS guidance to $3.65 to $3.75 per share. This is up about 2 to 3.9%.
lastly, we are increasing our free cash flow guidance to 20075, to 285 million up 10 million at the low end as higher income, and benefits from tax legislation are partially offset by a slightly higher capex.
Overall we had a strong second quarter and our well positioned to meet our increased guidance for the year with that. I will turn it back to Rex for closing remarks.
Thanks. Mike over the past decade is a standalone. Public company bwxt has invested both organically and inorganically to enhance our capabilities in the nuclear Market.
We have built significant industrial scale and our customers are increasingly relying on bwxt to meet their needs.
We've had a strong start to the year, both financially and strategically. Our backlog is at a record level, with demand across our end markets accelerating, and our intense focus on operational excellence.
Positions us well to continue to drive shareholder value in the years ahead.
And with that, we look forward to taking your questions.
Thank you. 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. If you would like to reach your questions, seem to press star 1. Again, if you are called upon to ask your question and are listening via speaker phone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question.
We do request for today's session that you please limit to 1 question and 1. Follow-up question again, press star 1 to join the queue.
Our first question comes from the line of Scott Toy from Noisy Bank. Your line is open.
Hey good evening, Mike the 10q flags a 29 million favorable, contract adjustment. I think on on nuclear operations, can you clarify any more what that relates to and if any of that was assumed in the original guide,
Yeah, thanks Scott. The the 29 million as, as you mentioned in the 10 Q relates to 1 of the special materials contracts. Uh, Rex mentioned we had strong operating performance and special materials. Uh, it's got, you know, we look at a number of different, you know,
Potential opportunities as it looks to those contracts. So, the portion of that I, I was included in the guide, but I would say it was a little bit more favorable than we had originally anticipated. Um, so, you know, I would say a part of it, we assumed in our original guidance.
Okay, great. And then Rex do you see any opportunity for b2x to secure some level of content on new build? Ap1000, that may be built at some point in the US and if so, what type of content, what the company be able to compete for on those reactors?
Yeah, I do Scott.
Uh, we have, in fact, we have an mou with with Westinghouse.
Um, to potentially manufacture certain components for the AP1000, you know, in the U.S. market and potentially in other markets. And what we would do there is similar to what we do and can do; we're qualified for.
For pressure components, high pressure components like steam generator CD exchangers. We could make that reactor pressure vessel in our Cambridge plant. So there's a lot there and I think, you know, as
Uh, industrial capacity starts to stretch. We might have, you know, some really interesting opportunities there.
Okay. And just to clarify, could your content on that potentially be as large as can do, or would it be still materially smaller?
Yeah, I'm not sure if I go that far; we'll have to see how that unfolds for Can Do. Of course, we typically get all the same generators, most of the heat exchangers, feeders, and other such content. I'd say it's the same kind of scope of equipment, but I don't know if we would sort of run the table like we do at Can Do.
Okay, thank you.
Thank you.
Our next question comes from the land of Jeff Campbell with Seaport. Your line is open.
Good afternoon and congratulations on the strong quarter. I thought I'd start with 1 kind of high level question that I got a specific for the second. I thought the appointment of Kevin McCoy, the chief nuclear officer was clearly important but it's not clear to me how he will influence bottlenecks that don't historically recite at bwxt. So any high level commentary? You can provide, there's certainly appreciated.
Yeah, Jeff, I didn't quite catch. The question. Would you be good enough to repeat it?
Sure. Um,
I, I was saying that I noted, Kevin McCoy's appointment to Chief nuclear officer with interest.
But I wasn't really sure how what, what his mandate.
Will be since bwxt is usually not the the point of uh of dragging when we have difficulties getting these projects through. So just any commentary that you can provide on how he's going to influence. So the the I got. Yeah. Thank you. Alright. Okay, I understand the question now, right? So you're you're quite correct in the in the way that title is normally used and let me just say that that's a bit of a
Um, sort of a holding place for Kevin. And the reason for that is that
Uh, Kevin is sec to the Department of Defense to help with deputy secretary of defense and the secretary of the Navy, with nuclear ship building. So he remains an executive employee of bwxt, but he's fully under contract for the Navy. And so, that's the title that he's holding while he's at while he's occupying, uh, those positions with the Navy, in the meantime, we promoted Joe Miller up into president of government operations through to replace. Kevin. So it's all part of that dynamic.
Okay. Yeah, that makes a lot more sense. Um, my other question was slide 7, the government operations margins of approximately 20.5%.
That seems well about prior guidance. I just wondered if you could pinpoint some drivers that this improvement and maybe their durability. Thanks.
Yeah, so Geo margin for the quarter was impacted by the EAC for the special materials contract that we just mentioned.
Some of the timing of materials that that was good from a an overall margin standpoint. I mean overall I would say you know we're comfortable and we're happy with you know some of the efficiencies and utilizations that we're seeing at the plants. We we think you know we're continue to focus on that from a margin standpoint to to create some long-term sustainability there. Um we'll see continued strong performance for the rest of the year and and we'll we'll give you more clarity around. What, what we're expecting in 26, next quarter.
Okay, great. Thank you.
Next question comes from the line of Robert leik with CJs Securities. Your line is open.
Good afternoon. Thanks for taking my questions, and congrats to Mike on his new role.
Thank you.
Um sure. Um I wanted to start Rex, you mentioned this in your prepared remarks, but yeah, yeah. The recent approval by the cnsc to radiate uh Atrium and lets them uh in your target delivery system. Can you talk about the opportunity there what are the next steps? And, you know what, it'll take for you to, you know, you know, get that through done and and, you know, produce commercial material
Uh, sure Bob. Yeah, we, uh,
We're doing that in partnership with Laurentiis Energy Partners. As I said in the script, and
The qualification of those products is really up to our partner, as they are the ones who have developed the contracts.
To produce that material for certain clients and so we we have a bit of a passive role. There we did design and deploy that Target delivery system. And so it'll be a, uh,
It'll be a royalty opportunity for us.
Okay, great. And then just uh, uh, Switching gears a little bit for my, you know, follow up. You have, you know, a tremendous amount of opportunities ahead of you talked about do csmr growth P, um, build out Etc. Talk about Capital allocation, how do you prioritize? You know, Capital into each of these? What what is are the big amounts of capital that you need to deploy over the next 5 to 10 years for any of these or other opportunities and and how you allocate?
Yeah, maybe I'll start and then flip it over to Mike. Uh, you know, we've given the broad guidance that, you know, 4%, uh, for maintenance, capex searching up to perhaps 5 or 6% episodically depending on the opportunity. We're doing the Cambridge plan. Build out right now, which is obviously not maintenance capex and that sort of 1% of our sales right now. Uh and so that that pushes it up into that 4 to 6% range.
Uh, and I think that's how we see it. We don't, we don't see in the windshield, Bob any
Capex super Cycles. Like we've been through at least at the present moment, so I think you'd see it banded in that range 4 to 6 as to how we evaluated. It's obviously, it's obviously business case and we've got so many high quality business cases right now and so much competition for Capital. It's actually pretty tough.
Uh, but you know, that goes with the abundance of opportunities that we're facing. Maybe a um, the mic or any additional comments? Yeah, Rex is right. The only other thing I'd call out is, you know, we did raise guidance and expectations for capex to 5.5% to 6%. Part of that is driven by some investments we're making around defense fuels, really to do enrichment. Uh, but as Rex mentioned, you know, we see this, and I think we've said before.
We anticipate, you know, more of tens of millions of dollars in investments in some of these opportunities. But we, we don't see the the same level of, uh, significant capex. Then we may have seen in the past.
Super. All right. Thanks very much.
Our next question comes from the line of David Strauss with Barkley's. Your line is open.
Hi, good afternoon. This is Josh corn on for David. Uh, so you've gotten to uh, Navy contracts. Now, in in quick succession, how far out are, are you contracted for? For those Navy programs,
Those contracts have a performance period of up to 8 years.
Um it's typical for the delivery of a full ship, set to take between 6 and 8 years depending on whether that's Virginia Columbia or or Ford. So 8 years from time, we signed the contract.
Okay thanks uh and then once you ask uh so with kinetric closing a little earlier than uh than you expected.
How much did that contribute to the, uh, guidance increase and then in the free cash flow guidance. What what are you assuming for working capital?
Yeah. So
It was it was a few weeks ahead of, you know, what we had planned. So part of what you're seeing in in the guidance raised uh relates to that I would say though that that that's a smaller portion. Um, if you think about kind of the kinetics at an EPS level, it is you know slightly neutralized by the additional interest expense associated with funding um, from the acquisition. And so
When you look at it from that standpoint, it's a smaller amount. I think most of the rates really relate to kind of, you know, timing and pacing of work, as well as our performance and our government operations business.
And then as as it relates to kind of working capital um you know from a from an overall working capital standpoint and I don't know if this was specific to kinetics, but we are anticipating you know, kind of uh working capital and and free cash flow generation similar to the rest of our business. So over 80% free cash flow generation specific to Kinetix
Okay, thanks.
Next question comes from the line of bitski with Olympic your line is open.
Hey, good evening guys this corner. Um hey, hey Rex, hey Rex, if I could follow up, I think it was Josh's. Question on the 2, N. Reactor contracts in the last. Call it 6 or 7 months or so, I feel like historically, the Navy is kind of on a, you know, like an annual Pace with you guys.
But now we've got kind of a quicker pace. Pretty, especially this latest one, pretty sizable award. Can you give us a sense of what's kind of motivating the Navy? Because I don't know if this is, you know, industrial base funding or wage growth or what, but I don't really think of you guys as being kind of a bottleneck on some Marine construction. Right? So I'm just wondering if you can give us a sense of kind of what the motivation is here for these sizes of awards and this kind of compressed time frame.
Yeah. Hey, Pete. Uh, that was...
So the way that worked out this last pricing agreement, that we announced a 2.6 billion dollar 1 was really kind of on time. You may remember on the last 1 that we had a number of delays and that related to the complexity of that negotiation and it was complex, because we had gone through Co had a lot of Labor and commodity price pressure, and it took a while to get through that. And so, this 1 kind of came on time. The prior 1 came pretty late. So, the pace is still the same. We're still be receiving orders to the 30-year ship building plan that the Navy has. But I would say, what significant about it is, you know, there are concerns about whether or not, um, you know, the shipyards will keep Pace with the supply.
supply chain and we, we, you know, we have offered that we believe that the names approach is going to be to try to, you know, to, uh,
To fix the problem at the shipyards and keep the supply chain running at base. And so this last pricing agreement kind of validates that thesis. You know, it has, you know, 2 Virginia's per year Columbia is now serial in serial ordering and then the 4 the next 4 when it comes. And so I think it's kind of important from that perspective to say that at least for us the supply chain statements schedule.
Okay, got it, got it. Um, so yeah. So don't expect the next one until 2026, it seems like.
This is what we should think that's. That's it depends, you know, sometime it's on 2 year intervals, sometime on 3 so so we'll see how that unfolds with our customer. Okay. Okay. Okay. And just 1, follow up on me that in your prepared remarks that your your comments about several Advanced nuclear fuel opportunities,
I feel like in the past you guys have said that you're not really interested in commercial fuel opportunities, and I just want to validate if that's still true or if these fuel opportunities are largely, uh, the government at this point.
Uh, so not exactly. I'd say there's, uh, you know, an interesting, it's smallish, but an interesting demand signal for Treecko fuel that we're responding to, and we can produce that fuel commercially. We're literally the only.
The only company that can produce Trico in any scale. So there's commercial interests and I expect we'll get a couple of contracts in that area this year. And then I think the other, the other comment was around
the other indication was around on the front of the fuel cycle for the defense enrichment program that were involved with, you know, depending on the scale of that thing and and on how it unfolds, there could be commercial outlets for for that material. So I'd say a couple of opportunities there that are interesting to us.
Okay, great. Thank you.
You're welcome.
Our next question comes from the line of Andrea Madrid, the btig, your line is open.
Good afternoon, guys. Thanks for taking my question.
Um, yeah. Andre
Looking at micro reactor. Uh, I know a lot of moving pieces. There looks like pale is progressing. Well, you know, I guess, how should we think about that and Market in the near to medium-term, given the progress on pale? The loss of Draco
Is there any contribution from Jetson? I'm still just trying to figure out what the moving pieces are.
ya say Andre the
so let me let me take those by part for pay. Um, yeah it's Progressive. We're assembling the Reactor Core now. So we
As we have discussed um I was in the Pentagon just within the last month, talking to a senior official about what the path ahead is for for government, Mike for the actors and it looks like procurement strategy is going to be a competitive offering to put micro reactors at multiple DOD sites. So this is what we had always hoped. We had hoped that paylay would become a maybe a low rate initial production program with production programs to follow and I think that could happen.
Uh, now that's in the, you know, that's certainly in the future a couple of years, but I think that's the end point for it.
Concerning brako. Um, so Draco hasn't gone away, it's just to be clear about that darker with through its participation from kind of a joint venture with NASA to develop that nuclear thermal propulsion technology. But the NASA program is is is going ahead. In fact, the um the CGS appropriation marks for Ping, sorry.
For Draco uh for nuclear thermal propulsion were 175 million on the house side and 110 million on the Senate side. So it looks like we will have a program going forward through NASA to develop that technology and I'm, and I'm actually pretty optimistic about that 1.
Uh, in terms of, uh, Jets and the other program that you talked about, it's the that's there's a sliver of a program there. It's the smallest thing. And then we have some other pieces, Vision, surface power, and other such programs. And I think, I think from what I'm hearing, NASA's ready to gear up on Vision surface power pretty quickly. So, so there's a lot there and um, and I think we'll have a significant role in in some of it.
Okay, that's, that's definitely promising. Good to hear. Um, and then I guess,
Moving in a different direction I guess. Just talking about Naval nuclear supply chain more, broadly. Uh, I think 1 of your peers talked about the prospect of taking more work off the plates of the shipyards in order to
Help clear up some of those bottlenecks. Um, is that something that you guys would ever be interested in doing? Or has it kind of been there, done that? Don't really want to do that anymore? Um, I know this is something that I think you guys have explored before, but I wasn't sure if you're maybe taking a look at it with fresh eyes.
I'd say generally it's not a high interest to us if it's not, you know, nuclear qualified components, and that work would not be, for the most part. So, um, I wouldn't put it at the top of my list.
Got it, got it. Okay, no that makes sense and and and 1 more, if I could squeeze it in, I, I guess, you know,
Looking at the supply chain again, to stick on that. Any further impact related to Zarwin? What are you guys seeing there? Does it look like it's getting better or getting worse?
Seems to have leveled out. It certainly went through a spike there and Mike talked about it in his remarks, it it impacted Us in the first quarter. It was a modest, a very minor impact in the second quarter. But but just as a reminder,
Um, that zirconia price variability is the reason why we don't accept that risk in our contract. So, that passes through to the customer. The impact was merely a timing impact related to how we do the percentage-complete contract, so that bounces back to us. So, uh,
So, I think it's the first and settled down second. It comes back to us in the end.
Got it, got it. I appreciate the clarification Rex. I'll uh I'll leave it there. Thanks so much.
Thank you.
All right. Next question comes from the line of Jed or Shimmer with William Blair. Your line is open.
Hey guys, do you have Mark Shooter on for Jed?
Give it all the nuclear enthusiasm and the government support.
Can you try to place a metric on maybe the engagement level? You're seeing now versus a quarter ago or a year ago? Yeah maybe on a number of projects, you're bidding on actively or an increase of Revenue opportunity.
In fact, I said earlier today, that we kind of can't outgrow the government business.
Commercial power. The opportunities are abundant. Um, yeah, it's, uh, the markets are just strong everywhere and, uh, we certainly haven't experienced a time like this.
I appreciate it. I thought I'd ask, um, just Switching gears a bit to the Trico fuel. I think I heard you mentioned that, you expect some contracts by the end of the year. Can you wrap that in in any kind of unit, economics, or maybe a capacity? Or can you give us any more color on what we should be expecting there? And is that going to be any significant impact to the financials this or, or maybe the next year?
Yeah, I'd say, you know I I I don't want to be specific about timing uh and say I would be a little bit cautious about the scale of those, they're smallish for certainly smaller than the pale, a contract, fuel contracts. But but I think they're interesting because they're the, you know, we're beginning to see the precipitation of modest demand for trying so fuel on the commercial side. So it's exciting strategically it's not big economically yet.
Great. Thank you guys.
Next question comes from the line of John's France, Angel Breath with Beard. Your line is open.
Good evening, Rex, Mike, and Chase. Um, the first question, I just want to start on the reconciliation bill. Just, there's a lot of, you know, big dollars across shipbuilding and just the support for the nuclear Triad. So, I just wanted to get your thoughts on how you're thinking about that and any sort of incremental orders that you expect to start to flow to BWXT, where it wouldn't have existed if there was no reconciliation bill.
Yeah, there was, um, a reconciliation bill that was good for us. There was, uh, funding in there for a second Virginia for 2026, of course.
There was if I recall it correctly 100 million for defense enrichment which obviously is right in right in our wheelhouse and what we're working on with.
National nuclear Security Administration. There was funding, that was specific to Advanced reactors. You can read that as pale there was additional funding for the Strategic capabilities office. And so when you stack all that up, I think resolve, you know, quite edifying, um, to to programs that we have in the progress.
Chris. Thanks for asking, it just a quick follow-up. On the bwrx, 300, just on that first reactor in Darlington. How should we think about the revenue recognition, sort of? When does that Peak for the first reactor? And I guess
To add to that question, is there a potential for the TVA deployment to sort of lead frog reactors to the four at Darlington? So, just ask if we think about those two sort of locations and just the revenue cadence for Reactor 1.
On the data actually design.
Yeah, we what we said,
Historically on them.
New profile for that X300. Is that
Well, first, we said the opportunity for X300s is in the range of $100 million.
And that the revenue uh, profile was kind of evenly distributed over. Let's call it in 4 year period. And the reason for that is the react compression vessel in certain other components that we could manufacture tend to be Longley in items for those reactors. In fact, the, the we received the order for the project was formally approved by the provincial government.
Um, and so, you could think about it that way. Uh, in terms of the timing for TVA, uh, you know, I don't know if it will LeapFrog 2 3 and 4 Darlington. I mean, I hope so. I hope I hope it goes fast, but, but I think both of those opportunities think about that opportunity is probably 4 or more. X300s added to the additional 3 at Darlington. And so, it remains an exciting opportunity for us.
I would think what would happen is.
You know, maybe the first reactor at TVA falls somewhere in the middle of all that.
But I'm speculating.
Okay, great. Thank you. It's very helpful. I'll jump back in the queue, Congressman, on a strong quarter. Thanks. Thank you.
And our next question comes from the line of microservices. Your line is open.
Hey, uh, good evening, guys. Nice, uh, nice result for the super Merchants supplier at Rex. Um, hey, did you spend on the...
Looks like it might be below 20% and, you know, you haven't done that in quite some time. You know, any was it all just timing is there anything going on with the mix of some of these newer programs? You know, it should be? Should we just think about you know, more Cost Plus coming in or or what's what's the best? You can help us with on that that weaker second half.
Yeah, I would say, I don't think we're seeing a major shift in overall mix across the contract for portfolios, but what I would say is, um, you know, we signed the pricing agreement, you know, that we mentioned a little bit ahead of schedule that that had a number of, you know, Advanced material procurements that that came into the quarter, uh, that we weren't expecting that typically would be in the, in the back half of the year. I would say, in addition to that, when you look at kind of the special materials contract performance, typically the fourth quarter is a very strong quarter for us. Uh, and you know, in a lot of cases we're seeing you know, strong performance at at that point in the year we we've seen and we're able to get very confident and kind of our contract performance in Q2, which is where you're seeing, you know, some outsized growth in the, in the quarter. So when we look at kind of the the rest of the year, I mean I think, you know, the way that we look at it, we feel confident and you know where we'll land, I don't think there's anything individually to call out to
Much around, you know, kind of overall revenue. But I, I would just say that, you know, we're seeing a number of things hit earlier in the year than we typically do.
Okay, maybe I'll just add a similar comment to that. Uh, to...
We're just going to add a footnote to what Mike just said. Uh, Mike, you know the operating condition of the plants— that's good. We've had a focus campaign around Opex.
for with with multiple Dimensions to it including you know Factory through throughput lead time cost of of for Quality. Price of non-conformance is the name of our program. So the plants uh in Cambridge and and across Canada, the plants in our inog complex are are due performing quite well. I think we just had a very strong over performance in the first half and it'll normalize a little bit in the second half, but we feel good about our operational performance, so there's no no degradation from that perspective.
Okay. Okay, okay. And then just kind of on that topic, maybe the inverse here, commercial it. It sounds like you've got good line of sight to that field services. I thought that was a good color, Mike, providing the uh,
Kind of percent of revenue, but presumably, you get a pickup in field services and that drives the margin strength in Commercial for the second half.
That's right. Yeah. So we, we were down, you know, seasonally compared to normally, uh, Q2 is a strong, you know, quarter for us. But obviously, we saw a significant decline, you know, down to 10% of Revenue, uh, in that mix. So, uh, we feel we feel good about where the rest of the year will shake out. And, and I think we're we're confident in what we're going to see in field services and the components margins uh for for the next few quarters.
Okay, perfect. Thank you, guys. Okay, bye. Thank you.
And our last question comes from the line of front Epstein with BAML. Your line is open.
Hello. Hey, good afternoon, guys. Um, yeah, maybe just a couple quick ones. 1, when you look at the growth in the backlog, it bumped up a lot. How much of that is because of the acquisition, and how much of that is organic?
Yeah. So from the majority of that is is going to be, uh, organic. If you look at, you know, ultimately or both the bill for this, this quarter was 2.2. Uh we had really about 240 million ish of of backlog associated with uh the Acquisitions. But majority of it was organic.
Got it. All right. Great, great. That's super bad. And then one more, we've heard some companies talk in this quarter about, you know, shortages of critical minerals. Has that been an issue for you guys? Do you see it as a potential issue? And how are you mitigating it, or is it just not an issue at all?
Yeah, maybe I'll take that. Ron, we, uh...
We're not seeing much pressure from that. We did the zucchini pricing that you saw in the first quarter was was a derivative of that problem, um, but that seems to be settled. That seems to be settling out. Now, as I said earlier,
Apart from that, we manage our commodity risk pretty well and aren't that sensitive to critical minerals.
Um,
Only thing I would say, I mean, we're not having an issue trying to get in the actual raw materials. And then from a pricing perspective, we typically, and I think we've publicly said in the past that we, you know, our Arrangements will have kind of pricing locked in for, you know, roughly 70%, uh, over overall materials purchases on our contracts and that's either due to, you know, firm vendor quotes, extended ordering periods, those types of things. And so that, that's how we're able to manage.
Got it. All right, cool. All right, thank you.
That concludes.
I would like to turn the.
Offer closing remarks.
Thank you, and thanks to everybody for joining today. We look forward to seeing many of you and speaking with you in the upcoming weeks at investor events or on the phone.
And if you have any questions, please feel free to reach out to me at investors@bwxt.com. Thank you.
Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.
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