BWX Technologies, Inc. (BWXT) Earnings

Management highlights

### Strategic Focus & Portfolio Adjustments - Completed the sale of the majority of its nuclear medicine business to Nordic Capital, retaining a 20% minority equity stake in the sold assets. This transaction allows BWXT to sharpen focus on its core national security and commercial nuclear power markets, freeing up management attention and capital that was disproportionately allocated to the 3% of revenue medical segment. - Completed the acquisition of Precision Components Group (PCG) in early July 2026, post-quarter end. Most of PCG's current revenue and backlog is tied to the U.S. naval nuclear propulsion program, and it also adds a U.S. commercial nuclear manufacturing platform, including experience producing components for AP-1000 reactors. PCG allows BWXT to bring outsourced work in-house, capture additional supply chain profits, alleviate existing capacity constraints, and generate near-term synergies. ### Government Operations Highlights - The U.S. Navy's updated 30-year shipbuilding plan calls for sustained annual production of two Virginia-class submarines and one Columbia-class submarine, and accelerates Ford-class aircraft carrier procurement to a 4-year cadence from the prior 5-year cadence. This will improve manufacturing volume, stability, and efficiency over time, and eliminates the multi-year revenue gaps that resulted from the slower ordering cadence. The plan also introduces a new nuclear-powered battleship program, which would use existing Ford-class reactor designs and fit within existing manufacturing capacity if approved. - Growth programs in special materials, including Defense Fuels Enrichment and High-Purity Depleted Uranium (HPDU), are progressing on schedule. BWXT remains on track to deliver an operational enrichment centrifuge prototype by the end of 2026, and site preparation and engineering design for the new HPDU plant are progressing well, with the program expected to meaningfully contribute to revenue in the second half of 2026. ### Commercial & Advanced Nuclear Highlights - BWXT supported the Mark Zero advanced reactor in Ontario, which became the first advanced reactor to achieve criticality under the U.S. administration's regulatory reform order, using BWXT-supplied triso fuel and HALU, demonstrating the company's leadership in advanced nuclear fuels. - The company executed two new agreements related to its Empower (mPower) small modular reactor (SMR) intellectual property: 1) an exclusive land-based licensing agreement with Applied Atomics, where Applied Atomics will lead and fund completion of design and NRC licensing, with BWXT retaining exclusive manufacturing rights, royalty rights, and all intellectual property; 2) a feasibility study with Core Power to evaluate use of Empower technology for floating nuclear power platforms for offshore energy markets. These arrangements unlock value from legacy intellectual property while aligning with BWXT's strategy as a merchant supplier of critical nuclear components. - A $21 million DOE award was received to support domestic manufacturing capacity expansion, with a final investment decision for the new large component manufacturing facility expected in the coming months. Potential East Coast locations leveraging PCG's existing real estate and workforce are now being evaluated, with any selected site requiring deepwater port access to serve the global market with large components like steam generators and reactor pressure vessels. ### Overall Operational Results - Total Q2 2026 revenue was $902 million, up 18% year-over-year (9% organic growth). Adjusted EBITDA increased 7% to $156 million, adjusted earnings per share increased 5% to $1.07, and free cash flow was $115 million. End-of-quarter total backlog was $8.4 billion, up 40% year-over-year, with a robust 1.7 trailing twelve month book-to-bill ratio.

Guidance

- Full-year 2026 total revenue guidance is now approximately $3.8 billion, representing high single-digit year-over-year growth from 2025. - Full-year adjusted EBITDA guidance was raised by $10 million at the midpoint, to a range of $662 million to $672 million, reflecting strong year-to-date execution. - Full-year free cash flow guidance was raised by $30 million, to a range of $345 million to $360 million. - Full-year 2026 non-GAAP adjusted earnings per share guidance is now $4.70 to $4.80, with the increase driven entirely by stronger operating performance. - For Government Operations: Revenue growth guidance was revised to high single-digit from the prior expectation of low teens growth, due to stronger cost performance on the HPDU program and broader operational efficiency gains (improved cost performance reduces reported revenue under accounting rules but improves overall profitability). Adjusted EBITDA margin guidance was raised to approximately 20.5% from the prior guidance of greater than 19%, leading to higher overall expected adjusted EBITDA for the segment. - For Commercial Operations: Revenue growth guidance was increased to approximately 45% from the prior 30%, with just over half of the increase coming from the PCG acquisition and the remainder from stronger organic growth in commercial power and improved Conetrix performance. Adjusted EBITDA margin guidance was lowered to approximately 13% from the prior 14% to reflect incremental investments in U.S. capacity expansion (including at PCG) and continued investments in Canadian operations, which position the segment for long-term growth. - Capital expenditures for full-year 2026 are expected to remain approximately 6% of total sales, with higher investment in U.S. commercial capacity expected in the second half of the year. Capital expenditures could approach 7% of sales in future years as capacity expansion continues. - Approximately 55% of second-half 2026 earnings are expected to be generated in the fourth quarter, due to normal seasonality and the timing of new program ramps.

Segment performance

BWXT has two core operating segments: 1. **Government Operations**: Revenue increased 2% year-over-year. Adjusted EBITDA for the segment was $126 million, with an adjusted EBITDA margin of 20.9%. The 2% revenue growth came from growth in special materials and propulsion, which offset lower microreactor volumes. The margin improvement was driven by strong operational execution across the segment and higher equity income from the technical services group. This segment contributes approximately 66.8% of total company quarterly revenue. 2. **Commercial Operations**: Revenue increased 72% year-over-year (including 33% organic growth), reaching $303 million, or 33.5% of total company quarterly revenue. Adjusted EBITDA more than doubled (increased 123% year-over-year) to $36 million, resulting in an adjusted EBITDA margin of 11.9%. The strong growth was driven by higher Canadian field services, aftermarket activity, and the full contribution from the Conetrix acquisition. Higher volume and strong execution offset continued scaling investments for future growth.

Risks & headwinds

- Award timing for large new commercial nuclear build projects is difficult to predict, even as customer discussions advance. - The new nuclear-powered battleship program from the U.S. Navy requires further design work, Congressional authorization, and appropriations before it can move forward, so there is uncertainty around program execution and timing. - Triso fuel demand growth for advanced reactors is dependent on the commercial success of multiple advanced reactor developers, leading to high market uncertainty that has delayed a full capital commitment to expanded triso production capacity. - Expanding domestic manufacturing capacity for large commercial nuclear components requires significant upfront capital investment that will be realized before large orders are confirmed, creating near-term margin pressure. - There are ongoing challenges in sourcing qualified trade labor for new capacity, particularly in Canadian markets, which could impact expansion timelines. - Demand growth for new nuclear capacity relies on continued government policy support, loan guarantees, and regulatory progress, which can experience delays.

Analyst Q&A

• Q: The medical business sale can reach up to $800 million in total consideration. What are the strategic reasons for the sale, what drives the range of outcomes, and what is the structure of the deal?

  A: BWXT was approached by Nordic Capital with an unsolicited compelling offer. Nordic, a strategic buyer focused on the medical market, is better positioned to accelerate growth of the medical assets than BWXT, which needed to free capital and management attention for its large core national security and commercial nuclear growth opportunities. BWXT retains a 20% minority stake in the business. The deal includes $750 million in base consideration, with additional shared economic upside that can bring total consideration to $800 million, including the majority of BWXT's legacy medical business and part of Kinetrix's stable isotope portfolio. Management expects to hit the full $800 million outcome.

• Q: Management mentioned expecting at least one new large nuclear equipment order by the end of 2026. What types of orders are these, and why have U.S. AP1000 orders not yet closed despite strong government support?

  A: The potential year-end orders span multiple opportunities, including additional SMRs at Canada's Darlington site, U.S. AP1000 projects, and X-300 reactor opportunities, with active ongoing quoting and customer feedback showing strong momentum. The delay in the first U.S. AP1000 order comes from the structure of these government-backed projects, which are being organized as special purpose vehicles with government ownership of reactors on government sites, and utilities stepping in as operators. Utilities are waiting to see how these initial government-sponsored deals are finalized before committing to move forward.

• Q: What are the gating factors for BWXT's final investment decision on new U.S. large commercial component manufacturing capacity? What is the current status of site selection?

  A: BWXT already sees sufficient commercial demand to move forward, and is not stalled, only sorting out site selection between competing locations that offer different state incentives. Plant design is already proceeding full speed, and equipment procurement will start soon after the site decision, which is expected in the near term. The new facility requires deepwater port access to ship large components globally, aligning with BWXT's goal to be both a domestic U.S. supplier and a global supplier of large nuclear components.

• Q: What needs to happen for BWXT to approve a large capital investment in expanded triso fuel production capacity? What is the scale of the potential investment?

  A: Management wants to see a solidified pipeline of firm customer orders before committing to the full investment. BWXT already has a partnership with Kairos and a $100 million grant from the Wyoming Energy Authority to support the project. A key near-term milestone is the expected outcome of the Janus program award from the U.S. government, expected later this year. The total capital investment for a new facility is estimated at up to $500 million, with the offsetting grant and partner sharing reducing BWXT's net required investment.