BWX Technologies Q1 2025 Earnings Report

BWX Technologies EPS Results

• Actual EPS: $0.91
• Consensus EPS: $0.73
• Beat/Miss: Beat by +$0.18
• One Year Ago EPS: $0.76

BWX Technologies Revenue Results

• Actual Revenue: $682.26 million
• Expected Revenue: $644.15 million
• Beat/Miss: Beat by +$38.11 million
• YoY Revenue Growth: +13.00%

BWX Technologies Announcement Details

• Quarter: Q1 2025
• Date: 5/5/2025
• Time: After Market Closes
• Conference Call Date: Monday, May 5, 2025
• Conference Call Time: 5:00PM ET

BWX Technologies (NYSE:BWXT) (NYSE: BWXT) is a technology and manufacturing company that specializes in nuclear components, systems and services. The company primarily serves government and commercial customers in the nuclear energy, national security and medical markets.

BWXT is a major supplier to the U.S. government and supports the U.S. Navy’s nuclear propulsion program by designing and manufacturing nuclear reactors and related components for naval vessels. Its offerings also include nuclear fuel, reactor components, engineering and maintenance services, and technologies intended for advanced and small modular reactors.

Through its commercial and medical businesses, BWXT provides nuclear equipment and services for civilian power generation, produces medical radioisotopes and related technologies, and supports research and other specialized applications. The company operates facilities in the United States and Canada and has roots in the broader Babcock & Wilcox nuclear business. BWXT is headquartered in Lynchburg, Virginia, and is led by President and Chief Executive Officer Rex D. Geveden.

BWX Technologies Q1 2025 Earnings Call Transcript

Key Takeaways

• Solid Q1 performance: Exceeded expectations with double-digit year-over-year revenue, adjusted EBITDA, and adjusted EPS growth driven by strong execution and timing of material procurement.
• Record commercial backlog: Bookings climbed to $1.3 billion, up 78% YoY, led by the Pickering life extension steam generator contract, supporting anticipated double-digit organic commercial power revenue growth in 2025.
• Major government contract wins: Secured DOE Strategic Petroleum Reserve management & operations contract, NNSA DEUS sole-source intent, Hanford Integrated Tanks transition, and integrated AOT acquisition, underscoring BWXT’s energy security value proposition.
• Margin pressure in commercial segment: Experienced temporary inflation of zirconium raw material costs impacting Q1 margins, with recovery expected through contractual cost pass-through in the second half of the year.
• Guidance reaffirmed: Maintained full-year targets for revenue, adjusted EBITDA, adjusted EPS, and free cash flow, signaling management’s confidence in the 2025 outlook despite macroeconomic uncertainty.

Presentation

[Operator]

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. 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, BWXT Vice President of Investor Relations. Please go ahead.

[Chase Jacobson, VP of Investor Relations at BWX Technologies]

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. On today's call, we will reference the First Quarter 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 provisions found in the investor materials and the company's SEC filing. 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 BWXT website. I would now like to turn the call over to Rex.

[Rex Geveden, President and CEO at BWX Technologies]

Thank you, Chase, and good evening to all of you. BWXT had a solid start to the year with good first-quarter financial results and multiple strategic wins. Our first-quarter financial performance exceeded expectations, highlighted by double-digit year-over-year revenue, adjusted EBITDA, and adjusted earnings per share growth. We had solid execution across our businesses and benefited from an increased pace of work and timing of material procurement. From a demand perspective, we had another quarter of robust bookings performance led by commercial operations, whose backlog now stands at $1.3 billion, up 78% year-over-year. In government operations, our win streak continued 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 DUECE, contract to BWXT on a sole-source basis.

[Rex Geveden, President and CEO at BWX Technologies]

These two contracts highlight our unique value proposition in energy security. 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 environment. First, the secular drivers of our business, global power competition, decarbonization, and increased demand for nuclear technologies, are persistent. They are creating near and long-term opportunities for BWXT that are mostly independent of short-term economic variability. On the government side of our business, U.S. shipbuilding, and more specifically the Naval Nuclear Fleet and nuclear modernization, are top priorities for the administration. Our roles as the sole-source provider of nuclear reactors, components, and fuel for the U.S.

[Rex Geveden, President and CEO at BWX Technologies]

Naval Nuclear Propulsion Program, and as a trusted supplier of other products and services to the DOE and NNSA, position us well in the current environment. Similarly, on the commercial side of our business, our customers are making long-term investments to meet growing electricity demand and satisfy 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. Further, we are augmenting our nuclear services portfolio through the pending acquisition of Kinectrics. Said differently, BWXT enables mission-critical long-term investments to which our customers are committed. I will remind you that our supply chains are mostly contained in the countries where we operate. In the U.S., we have a long-standing, largely domestic supply chain to meet the strict national security requirements of our customer.

[Rex Geveden, President and CEO at BWX Technologies]

In Canada, we have a growing workforce that currently stands at about 1,900 across five major operating sites, serving the CANDU and SMR market, with a mostly indigenous supply chain requiring little or no cross-border movement of input materials and finished products. All of this is meant to remind you that while no company is impervious to macro disruptions, 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, government operations had a strong quarter with 14% revenue growth and 17% adjusted EBITDA growth, albeit off a relatively easy comp, driven by timing of material procurement under our new pricing agreement with Naval Reactors, the continued ramp of U-metal, and the AOT acquisition.

[Rex Geveden, President and CEO at BWX Technologies]

Higher revenue and solid operating performance drove segment-adjusted EBITDA margin to its highest level since the fourth quarter of 2023. In Naval 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 AUKUS scope. These help offset the lull 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 2024. 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 CAGR in this line of business.

[Rex Geveden, President and CEO at BWX Technologies]

Our recent wins and ongoing operations at multiple DOE sites within technical services are also a testament to government confidence and trust in BWXT to support its most crucial missions. In the first quarter, we completed transition and now lead the Hanford Integrated Tank Disposition Contract, which is the largest TSG project in our portfolio and one of the largest environmental restoration projects in the world. Just recently, BWXT, as a minority JV partner with APTIM, was selected to manage and operate the Strategic Petroleum Reserve sites in Texas and Louisiana for the DOE. While this contract brings a relatively modest earnings contribution in the near term, it highlights our value-based competitive positioning in this space. Following this win, BWXT's is providing services at 13 DOE and NNSA sites in the U.S. and is actively tracking new opportunities in the U.S.

[Rex Geveden, President and CEO at BWX Technologies]

and Canada to further grow this exciting business. In special materials, perhaps one of our most underappreciated businesses, our growth prospects are beyond exciting. We closed the A.O.T. acquisition on January 3rd, have fully integrated it financially, and are working with customers on large-scale opportunities 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. We are receiving positive feedback from the NNSA, which recently published its intent to issue a sole-source contract to BWXT for a pilot plant. 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 evolves.

[Rex Geveden, President and CEO at BWX Technologies]

In our microreactor business line, the Defense Innovation Unit launched the Advanced Nuclear Power for Installations Program, or ANPI, to provide energy security for U.S. military bases. 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 Paylay and TRISO fuel, in addition to our facilities and experiential qualifications. Turning to commercial operations, results in the segment met expectations with revenue and EBITDA growth in both commercial power and nuclear medicine. In commercial power, we had another very strong quarter of bookings, leading to a record segment backlog 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 steam generator contract, augmented by other key wins across the portfolio.

[Rex Geveden, President and CEO at BWX Technologies]

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. Concerning future plans, our largest customers, Bruce Power and Ontario Power Generation, are investing in their existing nuclear generation capacity 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 that calls for up to 4.8 gigawatts of CANDU capacity. 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 BWXT and the entire CANDU supply chain.

[Rex Geveden, President and CEO at BWX Technologies]

In the SMR market, the Canadian Nuclear Safety Commission authorized construction of the first BWRX-300 unit at OPG's Darlington site, a significant milestone for North America's first SMR project. Our work on the reactor pressure vessel continues at pace, and we continue to anticipate multiple follow-on orders in Canada, the U.S., and Europe. 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, and the acquisition of Kinectrics, which offers a broad set of life-of-plant services, is on track to close by mid-year. Also, as the U.S. nuclear power industry seeks partners for plant-life extensions, new SMR deployments, and perhaps large-scale reactor buildouts, BWXT stands ready with our scaled domestic nuclear manufacturing footprint and a highly credentialed nuclear-qualified workforce.

[Rex Geveden, President and CEO at BWX Technologies]

There are several compelling industry groups coalescing around a whole-of-industry approach to propelling the commercial nuclear enterprise in America, similar to the group formed by TVA in its application to the DOE for an $800 million SMR development grant. 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. We remain on track for full-year revenue growth of over 20%. 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. Today, our products are covered under the USMCA Free Trade Agreement, which exempts radiopharmaceutical materials from tariffs.

[Rex Geveden, President and CEO at BWX Technologies]

Nonetheless, we continue to watch this closely and are working to limit future cross-border risk and product delivery disruption. On Tech-99, consistent with prior updates, we are perfecting our product as we proceed toward FDA approval. Looking forward, the market for nuclear medicine remains highly enticing, with increasing volumes of SPECT and PET scanning procedures and pharmaceutical companies investing heavily in novel radiotherapeutic drugs. Of note, Novartis just received FDA approval for Pluvicto, its blockbuster lutetium-177-based prostate cancer treatment to be used in pre-chemotherapy settings, which is estimated to triple the number of patients eligible for the treatment, highlighting the market's growth potential. 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. With that, I will now turn the call over to Robb.

[Robb LeMasters, EVP and CFO at BWX Technologies]

Thanks, Rex, and good evening, everyone. I'll start with some total company financial highlights on slide four of the earnings presentation. First quarter revenue was $682 million, up 13%, with growth in both segments. 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. We continue to expect corporate EBITDA expense in 2025 to be slightly lower than the $16.8 million reported in 2024. Adjusted earnings per share were $0.91, up 20% compared to $0.76 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.

[Robb LeMasters, EVP and CFO at BWX Technologies]

Our adjusted effective tax rate in the quarter was 18.3%, in line with seasonal patterns due to the timing of excess tax benefits on compensation expense. For the full year, we expect our adjusted effective tax rate to benefit from the ongoing tax planning initiatives discussed last quarter. In fact, with a better line of sight to qualified research expenditure credits and geographical mix from growth in our Canadian commercial nuclear power business, we now expect our 2025 tax rate to be only slightly higher versus 2024, a modest improvement compared to our original expectation of a 20-40 basis points increase. Free cash flow in the quarter was $17 million, driven by timing of advanced billings and working capital management in what is seasonally our lowest quarter of cash generation.

[Robb LeMasters, EVP and CFO at BWX Technologies]

Capital expenditures in the quarter were $33 million, or 4.9% of sales, compared to our expectation for full-year CapEx to be in the range of 5-6% of sales. 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. 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. In government operations, first quarter revenue was up 14%, driven by growth in naval propulsion, special materials, and about 1% contribution from the A.O.T. acquisition. Adjusted EBITDA was $117 million, leading to an adjusted EBITDA margin of 21.1%. As Rex mentioned, we had good operating performance but also benefited from timing of certain long-lead material procurements.

[Robb LeMasters, EVP and CFO at BWX Technologies]

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%. Turning to commercial operations, revenue was $128 million, up 10% year-over-year, led by double-digit growth in medical and solid growth in commercial power. 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. Adjusted EBITDA in the segment was $14 million, up modestly year-over-year. However, adjusted EBITDA margin was 10.9%, down 100 basis points, as good operating performance was offset by two main factors.

[Robb LeMasters, EVP and CFO at BWX Technologies]

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. Second, we experienced heightened inflation for specialized raw materials in our CANDU fuel business line. 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. 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 contributions from the Kinectrics acquisition. 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.

[Robb LeMasters, EVP and CFO at BWX Technologies]

Turning now to our 2025 total company guidance on slides seven and eight of the earnings presentation. We are reaffirming our guidance for the four key metrics we provided last quarter for revenue, adjusted EBITDA and EPS, and free cash flow. I will note that we refined the ranges for several items listed on the right side of slide eight, which I referenced throughout my remarks. 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.

[Robb LeMasters, EVP and CFO at BWX Technologies]

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 operations segment income from material procurement timing from Q2 into Q1, and just over a penny from more favorable taxes, given the tax planning initiatives I discussed earlier that will remain with us for the remainder of the year. As the material procurement-related item normalizes, we now expect the second quarter to be our lowest earnings quarter of the year.

[Robb LeMasters, EVP and CFO at BWX Technologies]

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 view. To conclude, we had a good start to 2024. Our financial performance, strong bookings, and outlook highlight the quality of BWXT broad capabilities in the nuclear industry, serving global security, clean energy, and nuclear medicine markets. We are intensely focused on execution and are investing in our company to support customer demand. With that, we look forward to taking your questions.

[Operator]

Thank you. We will now begin the question and answer session. 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. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking a question. Just a reminder, we ask that you please limit yourself to one question and one follow-up only. Thank you. Your first question comes fromthe line of Scott Deuschle from Deutsche Bank. Please go ahead.

[Scott Deuschle, Director of A&D Equity Research at Deutsche Bank]

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? Can you share in more detail what the offsets were that allowed the segment to deliver these pretty strong margins, honestly, despite that headwind? Thank you.

[Robb LeMasters, EVP and CFO at BWX Technologies]

Yeah, no, it wasn't all in government operations. You said it's about half and half between the commercial and the government business in terms of those EACs in that footnote. The half from the commercial operations, we talked a little bit about that zirconium cost impact. That was actually the materials zirconium that impacted us on the fuel business. We'll start to recover that, as I mentioned, during the second half and ultimately into 2026. We'll earn that back. That obviously causes sort of a negative offset there. 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.

[Scott Deuschle, Director of A&D Equity Research at Deutsche Bank]

Okay. 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, your performance would suggest you do not really need it, but just curious if maybe there are opportunities for you all in terms of getting additional government support? Thank you.

[Rex Geveden, President and CEO at BWX Technologies]

Yeah, thank you, Scott. To be clear, you are talking about all the elements in the reconciliation bill?

[Scott Deuschle, Director of A&D Equity Research at Deutsche Bank]

Yeah, as well as the continuing resolutions that included, I think, an extra $5.5 billion for the industry.

[Rex Geveden, President and CEO at BWX Technologies]

Oh, for the CR? Yeah, okay. Not much there for us in the CR. The reconciliation bill is interesting. That's a question you didn't ask, but there are interesting things in there for defense enrichment and for acceleration of DOD nuclear reactors and some things like that. We're a bit optimistic about what could come of that.

[Scott Deuschle, Director of A&D Equity Research at Deutsche Bank]

Thank you.

[Rex Geveden, President and CEO at BWX Technologies]

Thank you.

[Operator]

Your next question comes from Pete Skibitski from Alembic Global. Please go ahead.

[Peter Skibitski, Director of Aerospace and Defense Equity Research at Alembic Global]

Hey, good evening, guys. Rex, could you maybe go further on the whole reconciliation package? I mean, I think there were some potential changes at NASA. I don't know if that means we're more inclined to go to Mars now and maybe what that could mean for you. Also, just the whole shipbuilding office setup, a lot going on there. Could you maybe add some color on all that?

[Rex Geveden, President and CEO at BWX Technologies]

Yeah, to the best of my ability, I will, Pete. Hey there. Yeah, the reconciliation bill, as I mentioned, has some funding for accelerating defense enrichment. There's some funding to accelerate DOD reactors. There's some additional funding for the strategic capabilities office. There seems to be maybe some funding in there for coated fuels like TRISO and some things like that. Of course, there's a pretty big chunk of money for a second Virginia, I think, that goes with FY2027. There's a lot there. In terms of the office of shipbuilding, I think it's too early to tell what, if any, of that would influence us, Pete. I would say that's generally positive. I certainly like the White House's posture on the emphasis on nuclear shipbuilding specifically, but then also commercial shipbuilding, which I believe this nation needs more capacity for.

[Rex Geveden, President and CEO at BWX Technologies]

On the space one, hard to say exactly what that—if you're talking about the language that came out in a skinny budget from the White House, it's hard to tell exactly what that propulsion language was about. 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.

[Peter Skibitski, Director of Aerospace and Defense Equity Research at Alembic Global]

Okay. You didn't say—I wasn't quite sure at DOE if you saw any step back in terms of support of any of the advanced nuclear stuff you do there that goes through DOE. Did that all look pretty kosher to you guys?

[Rex Geveden, President and CEO at BWX Technologies]

Yeah, I'd say almost the opposite, Pete. This idea of energy dominance that's being promoted by the administration certainly includes a strong nuclear element. I would say that the energy secretary, Chris Wright, seems very, very pro-nuclear from every encounter we have. Yeah, if anything, it feels like full steam ahead on advanced nuclear and acceleration of nuclear projects.

[Peter Skibitski, Director of Aerospace and Defense Equity Research at Alembic Global]

Got it. Thank you. Maybe just one quick one for Robb. Hey, Robb, just on the raw material issue at commercial and calling it back in the second half, second quarter is typically your highest margin quarter at commercial. Does that change this year because of that impact?

[Robb LeMasters, EVP and CFO at BWX Technologies]

Yeah, it does. Thanks for flagging that. Yeah, generally, as you know, that is a higher margin quarter where we actually do some outage work that can be a little bit higher margin. That's going to be overwhelmed, if you will, by that zirconium sort of issue that we have and just kind of a couple other mixed items.

[Robb LeMasters, EVP and CFO at BWX Technologies]

I would say we're not going to have as great a performance as it relates to the normal margin flow. That'll pick back up. I think we have a better schedule, frankly, in the second half than we even had last year in terms of timing of projects. The way I would think about it is 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.

[Peter Skibitski, Director of Aerospace and Defense Equity Research at Alembic Global]

Okay. Great. Thank you.

[Robb LeMasters, EVP and CFO at BWX Technologies]

Sure.

[Operator]

Your next question comes from Bob Labick from CJS Securities. Please go ahead.

[Bob Labick, President at CJS Securities]

Good afternoon. Thanks for taking our questions.

[Rex Geveden, President and CEO at BWX Technologies]

Hey, Bob.

[Bob Labick, President at CJS Securities]

Hey, so Rex, you said you're perfecting the process on Moly right now. Just kind of maybe the latest update and timeline on that. In the past, we've kind of thought if we were approved by September, October, then you can get into the contracting season for 2026. Now you have partners kind of waiting for approval. I don't know if September, October is still a timeframe that's necessary, or how are you thinking about latest steps and then kind of timeline to get into contracted sales in 2026?

[Rex Geveden, President and CEO at BWX Technologies]

I certainly had hoped for 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. What I would say about that is there's still a window for approval in 2025. We did not forecast any sales in 2025. I think what we said consistently was that, if anything, we might be in the spot market for 2025. Our plan does not depend on that at all. I certainly hope for approval in 2025, and we still have a window for that, for sure. Honestly speaking, that could bleed over into the first couple of months of 2026 or whatever. We can see the finish line from here, for sure.

[Bob Labick, President at CJS Securities]

Great. Just to clarify, the effectiveness and everything is there. This is, as you said, perfecting the product, the elution time, the rates, things like that? How should we think about the delays?

[Rex Geveden, President and CEO at BWX Technologies]

Yeah, we have been working on things. You have a number of items when you go through—when we went through our first FDA application, it came back with a number of items that we needed to address technically. You sort of work your way through that list, of which there are literally dozens. Some of them are minor things, and some of them are pretty significant things. I think we're well satisfied with product quality. We've been chasing down some contamination issues, which is very, very typical in radio pharma or pharma generally. It is things like that. It is just kind of pounding it flat, as I've said before. We're certainly going to get there, but it is just a lot of details here in the last mile.

[Bob Labick, President at CJS Securities]

Okay. Great. Robb, you gave us some good color on the cadence of commercial ops going next quarter, this next, etc. With the very big increase in backlog from Pickering and Pickering being the biggest driver, how do we think about that when that rolls on over the next year or two? Is there a lumpiness to it? Is it smooth once we get there? Or is there any kind of general thought on transition to that growth and SMR growth and how it'll affect commercial?

[Robb LeMasters, EVP and CFO at BWX Technologies]

Yeah, there's nothing to call out in terms of all of a sudden it's going to surge 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 refurbishment work that tails off, right, from refurbishments that we started a few years ago. You kind of have a—we talked about it last quarter—that Pickering looks very strong on top of what we're doing at the Bruce.

[Robb LeMasters, EVP and CFO at BWX Technologies]

Of course, you have Darlington at some point that will kind of finish up. 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. Kinectrics as well, kind of lining up and confirming that, as we kind of looked inside their books, we also kind of feel like we have a different glimpse of that trajectory, and it's steady as you go.

[Bob Labick, President at CJS Securities]

Okay. Super. Thank you.

[Robb LeMasters, EVP and CFO at BWX Technologies]

Sure.

[Operator]

Your next question comes from Thomas Simcik from Janney Montgomery. Please go ahead.

[Thomas Simcik, Complex Director at Janney Montgomery]

Good morning, gentlemen. Thanks for taking the questions. 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, just wanted to get a sense of how you look at the LEU market for US reactor owners, potentially being an unobligated supplier of enriched product there. Just what do you see as the returns in that market, as well as the capital and operational risks of it?

[Rex Geveden, President and CEO at BWX Technologies]

Yeah, sure. Good question, by the way. Where we are on that program with the NNSA is we're just in a conceptual stage designing a pilot plant. This next phase would be a sole source award for that pilot plant. What we're doing is looking at that DUCE technology, which was developed at Oak Ridge National Laboratory. It's a centrifuge type of enrichment technology. Really what this phase is about is about design for manufacturability of those centrifuges.

[Rex Geveden, President and CEO at BWX Technologies]

What you do is, of course, with this pilot plant, be manufacturing the centrifuges themselves. You can 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. In order to get to the stockpile needs, you obviously need high-enriched uranium. To get to that stage, you have to walk through low-enriched uranium and high-assay, low-enriched uranium, which I think is the source of your question. All that has to be done with unobligated materials, meaning US-sourced. That is the tricky part. That means you cannot use some commercial uranium that is not unobligated on your way to high-enriched uranium. I think that program could play out in multiple ways.

[Rex Geveden, President and CEO at BWX Technologies]

One way would be that some commercial source emerges for that LEU and HALEU material, or the NNSA could build the entire capability themselves. We have a whole spectrum of outcomes depending on the acquisition strategy and depending on what emerges commercially on a natural basis. I guess what I would say about it, I'll have to fudge here a little bit. It's just too early to tell where that thing will go. 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. In the end, we'll be the company that's doing the enrichment for defense purposes for the high-enriched uranium part of it. I think all the in-between stuff is the interesting question mark, and we'll see where that goes.

[Robb LeMasters, EVP and CFO at BWX Technologies]

Yeah, I would say the government has a very constructive view of using the HALEU market to ultimately set up and test that capability. As you know, the amount of SWU that's necessary in that market is way different than in the LEU. Said differently, if you were to try to stand up a technology going from 1% to 5%, that's a lot of cost, whereas you could focus on the HALEU. That is why we believe that they've let that. That will allow us to do it at a lower investment on behalf of the government. Ultimately, if that proves out, then they'll have an alternative. There's one other technology that could potentially be available to the LEU market, and we'll see what the government, the DOE, and NNSA want to do.

[Thomas Simcik, Complex Director at Janney Montgomery]

Helpful on both. Thank you. Robb, I wanted to follow up on free cash flow seasonality through the year. I mean, I think we've covered a lot of the margin puts and takes, but maybe just to expand on that on the cash flow statement a little bit, is there any reason to think free cash flow seasonality this year is markedly different than, say, last year or the year before? That is it for me. Thank you, gentlemen.

[Robb LeMasters, EVP and CFO at BWX Technologies]

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. We talked about the seasonality of CapEx building over the course of the year. Same thing with operating cash flow. I think that'll make ultimately the back half look as it has in the past in the fourth quarter to be the most significant quarter in terms of free cash flow. Happy to get off to a good start here.

[Operator]

Your next question comes from Michael Ciarmoli from Truist. Please go ahead.

[Michael Ciarmoli, Director of Aerospace and Defense Equity Research at Truist]

Hey, good evening, guys. Thanks for taking the question. Nice results. Rex, hey, you mentioned, I think, some early scope on AUKUS, and that's probably come under some scrutiny. If I think about AUKUS and then that potential for the second VA sub, do those two items potentially change the slope of your kind of 10-year growth CAGR of 3-4%? Are they contemplated in there? Are you feeling better about sort of both of those programs?

[Rex Geveden, President and CEO at BWX Technologies]

Yeah, hey, Michael, I don't think that fundamentally changes our outlook. I think what it does is it de-risks our 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. And some of that's starting to trickle through. What we have going are capital projects related to capacity expansion in order to accommodate AUKUS. It is 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-reimbursable. Yeah, it just de-risks our future and starts to ramp toward AUKUS.

[Michael Ciarmoli, Director of Aerospace and Defense Equity Research at Truist]

Okay. Okay. Perfect. And then just 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. How are you thinking about that opportunity, maybe incremental revenues, or what's the expected cadence of that program?

[Rex Geveden, President and CEO at BWX Technologies]

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. That final list is actually eight. It includes us happily, but some others: X-Energy, Westinghouse, Kairos, General Atomics, and Radiant, and a couple others. 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. They're going to negotiate, and we're eligible to negotiate what are called OTAs with them.

[Rex Geveden, President and CEO at BWX Technologies]

That stands for Other Transactional Authority. That means contracts that are outside of the federal acquisition regulations. It's an easier way for them to get into a contract framework with the suppliers. I'm eager 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. We're eligible, and we'll start the negotiations and hopefully get some business out of it.

[Michael Ciarmoli, Director of Aerospace and Defense Equity Research at Truist]

Okay. Fair enough. I'll jump back into queue, guys. Thanks.

[Rex Geveden, President and CEO at BWX Technologies]

Thanks, Mike.

[Operator]

Your next question comes from Peter Arment from Baird. Please go ahead.

[Peter Arment, Senior Research Analyst of Aerospace & Defense at Baird]

Yeah, good afternoon, Rex, Robb, Chase. Nice results. Hey, 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, EVP and CFO at BWX Technologies]

Yeah, that finishes off the full order. I mean, there might be a little bit of cats and dogs, but that's the steam generator, the final, the 48 if 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.

[Peter Arment, Senior Research Analyst of Aerospace & Defense at Baird]

Okay. Thanks. Helpful. Then, Rex, you mentioned that with the new Secretary of Energy, that it seems to be all a go for nuclear. 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?

[Rex Geveden, President and CEO at BWX Technologies]

Yeah, I think the Department of Energy is certainly pushing TVA to get the Clinch River site started as soon as possible. There are other discussions that I hear about that I could not necessarily disclose, but it feels like the DOE is leaning in very hard to enable the commercial capability for SMRs in the U.S. We are certainly grateful to see it. We need some steam on that.

[Robb LeMasters, EVP and CFO at BWX Technologies]

Yeah, I might just say we feel pretty well positioned because, of course, we have strong manufacturing capability in the U.S. With everything going on macroeconomic-wise, they would be looking, obviously, for a local solution. Whereas in other instances or other geopolitical environments, we might see different people desiring to ship material into the U.S. We see that as all the more reason why we will be part of the solution.

[Peter Arment, Senior Research Analyst of Aerospace & Defense at Baird]

Got it. All right. I will leave it there. Thanks, guys. Appreciate it.

[Robb LeMasters, EVP and CFO at BWX Technologies]

Thanks, Peter.

[Operator]

Your next question comes from Andre Madrid from BTIG. Please go ahead.

[Andre Madrid, VP of Equity Research at BTIG]

Hey, good afternoon, everyone. You called out the zirconium cost impact a bit earlier in the call. 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, obviously, a lot of global supply 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 you'll be to manage it moving forward? Any sense there would be helpful.

[Rex Geveden, President and CEO at BWX Technologies]

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. That's the first thing to make clear about the geopolitical, right? It's materials into Canada from other geographies, sometimes also the U.S. We generally try to buy that sufficiently forward.

[Rex Geveden, President and CEO at BWX Technologies]

We do not see other issues really affecting us. I mean, overall, commodity prices going up is not a favorable thing for us, but we generally work with our customers and have clarity and hedge all that and kind of have that material on the ground in that business. This was a very rapid change. Luckily, because we have really strong relationships with our customers, we actually have a pass-through mechanism, as I said, to exactly mitigate some unforeseen risk to our business because ultimately, we were not looking to bear that risk. We have had that for years.

[Andre Madrid, VP of Equity Research at BTIG]

Got it. Got it. I guess aside from that, and sorry if this is kind of rehashing the previous question I was asked on it, but AUKUS, 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 component down selection and what your eventual role on the later program that's built in Australia will be?

[Rex Geveden, President and CEO at BWX Technologies]

Yeah, so that you're talking about the SSN AUKUS scope, yeah. Following the three to five Virginias, we've said that we anticipate scope on SSN AUKUS. We haven't been specific about that yet and really can't be. As soon as we could disclose that scope, we will.

[Andre Madrid, VP of Equity Research at BTIG]

Got it. Got it. Very helpful. All right. I'll leave it there. Thanks.

[Rex Geveden, President and CEO at BWX Technologies]

Thanks, Andre.

[Operator]

Before we proceed to the next question, again, if you would like to join the queue, simply press star one. Your next question comes from Jeffrey Campbell from Seaport Research Partners. Please go ahead.

[Jeffrey Campbell, Senior Analyst of Cleantech and Sustainability at Seaport Research Partners]

Good evening and congratulations on the strong quarter. I thought BWXT's entry into the SPR management was both interesting and perhaps unexpected. Can you add some color on how the award came about and why you believe BWXT was chosen?

[Rex Geveden, President and CEO at BWX Technologies]

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. I thought it was a bit of a long shot for us, and we were certainly happy to win it with that crowded field. That said, we have experiential quals that go all the way back to our history as McDermott.

[Rex Geveden, President and CEO at BWX Technologies]

We once managed that site as Babcock and Wilcox. We know that world, and we have developed experiential quals in that world. I think the reason you see DOE taking a bet on us there is because we understand how to operate high-consequence sites, whether they are nuclear or otherwise. There is, I think, a tremendous amount of confidence in the BWXT brand and the people that we bring to it. It gave us the opportunity to look out on the horizon to expand into something new based on our performance history with DOE.

[Jeffrey Campbell, Senior Analyst of Cleantech and Sustainability at Seaport Research Partners]

That makes a lot of sense. Thank you. On the medical side, I just wanted to ask how the actinium-225 effort continues to progress. We continue to see some chatter about lead-212 as a competitive approach, so I just thought I would check in on this?

[Rex Geveden, President and CEO at BWX Technologies]

Yeah, sure. We're doing well in actinium. I think we're still the largest commercial producer of that product. We produce it at the TRIUMF accelerator with a spallation method, it's called. We also are working on other production modalities I think we've talked about on these calls. We've got multiple sources for it. It's exciting. There are other isotopes that are emerging as possible therapeutics for cancer. What I would say about those is I don't know that they're necessarily competitors. They are probably also in the race. Lutetium and actinium, for example, behave differently in the body and address different cancer conditions and different tumors and different states of metastasis. To me, lead is another one of those in the product pipeline. It would be there with lutetium, actinium, and perhaps others to come. Pretty excited about the potential of all of it.

[Jeffrey Campbell, Senior Analyst of Cleantech and Sustainability at Seaport Research Partners]

Great. Great. Thank you. Appreciate it.

[Rex Geveden, President and CEO at BWX Technologies]

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, VP of Investor Relations at BWX Technologies]

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 investors@bwxt.com. Thank you.

Participants

Executives

• Robb LeMasters, EVP and CFO
• Rex Geveden, President and CEO
• Chase Jacobson, VP of Investor Relations

Analysts

• Scott Deuschle, Director of A&D Equity Research at Deutsche Bank
• Thomas Simcik, Complex Director at Janney Montgomery
• Peter Arment, Senior Research Analyst of Aerospace & Defense at Baird
• Bob Labick, President at CJS Securities
• Jeffrey Campbell, Senior Analyst of Cleantech and Sustainability at Seaport Research Partners
• Andre Madrid, VP of Equity Research at BTIG
• Michael Ciarmoli, Director of Aerospace and Defense Equity Research at Truist
• Peter Skibitski, Director of Aerospace and Defense Equity Research at Alembic Global