BWX Technologies, Inc. Q4 FY2025 earnings call

• 2025 was a record year with revenue, adjusted EBITDA, earnings per share, and free cash flow growth. Backlog at $7.3 billion. Completed acquisitions of AOT and Kinectrics. Held grand opening for BWST Innovation Campus and opened BWXT Digital Center. - In Government Operations, focused on naval propulsion, Technical Services contract wins, microreactor and advanced nuclear fuels delivery, Special Materials centrifuge facility. - In Commercial Operations, strong organic growth, backlog growth, BWXT Medical milestone, commercial nuclear power demand and AP1000 award.

Government Operations: Fourth quarter revenue down 1%, adjusted EBITDA down 5%. In naval propulsion, shipped steam generators for CVN 81. Technical Services assumed management and operations contract for Canadian Nuclear Laboratories and was awardee on Missile Defense Agency's contract. Microreactor and advanced nuclear fuels delivered TRISO fuel. Special Materials stood up centrifuge manufacturing development facility. Commercial Operations: Quarter organic revenue growth 31%, total revenue growth 95%. Backlog at $1.7 billion. BWXT Medical reached over $100M annual revenue. Commercial nuclear power demand strong with book-to-bill over 2. Secured owner's engineer services for Bulgaria's Kozloduy AP1000 project.

• Expect revenue of approx $3.75 billion in 2026, up high teens. Government Operations expected low to mid-teens growth, Commercial Operations approx 25% growth. - Adjusted EBITDA guidance $645M - $660M, up low to mid-teens. - Non-GAAP earnings per share guidance $4.55 - $4.70, up mid- to high teens. - Free cash flow expected $305M - $320M, inclusive of low to mid-teens operating cash flow growth.

Q: Should we expect government operations margins to trough in 2026 on these mix headwinds? Or could there be incremental mix pressure in 2027 that we should be mindful of?

A: No real incremental pressure seen for 2027, 2026 has mix pressure with rebound expected in '27.

Q: How is BWXT using AI internally today? And are there any business functions where you're particularly excited about the potential impact of AI over the medium term?

A: Phase 1: using machine learning to improve manufacturing processes. Phase 2: using large language models to improve functional efficiencies. Phase 3: factory automation for digitized quality records, automated inspection, digital twin representations.

Q: Any commentary from the shipbuilder about supply chain bottlenecks flowing through?

A: Seen encouraging news, reaction is to fix bottlenecks, Navy and government held view to fix instead of slow down, seeing progress at shipyards.

Q: How is BWXT using AI in Phase 3, any limitations from security clearances?

A: Not much, have to work around using WiFi and Bluetooth in classified manufacturing environment but will work around with customer support.

Q: Any impact of tariff situation on U.S.-Canada operations? And impact of souring U.S.-Canada relations?

A: Operating under USMCA trade agreement, no tariffs on medical products or nuclear components, renegotiation ongoing, hopeful trade relations remain normal.

Q: Timing of Canadian newbuilds, micro reactors and other long-term layers to growth map?

A: Varied time frames, SMR contracts in hand, expecting additional orders for X300 and AP1000 this year, micro reactors with Janus program, medical growing at 20% compounded clip.

Q: Sense for BWXT's revenue content per AP1000 project?

A: On AP1000, depending on components won, could be in the hundreds of millions.

Q: Structurally, as government contracts ramp over time, how do margins progress?

A: Contracts structured differently, evaluate overall margin performance, incrementally adjust margin as milestones reached and risk reduced.

Q: Impact of Pentagon spending on BWX?

A: Neutral as programs funded through different lines.

Q: Capital allocation on commercial side, thinking about business?

A: Looking for U.S. capacity, interested in Europe, investing in technologies to drive throughput within factory.

Q: Detail on NASA and military micro reactor programs and TRISO fuel market?

A: Micro reactors in Pele and Janus programs, NASA work on nuclear thermal propulsion and vision surface power, TRISO fuel demand from government programs and commercial play.

Q: AP1000 component work competitiveness by continent?

A: Geographic agnostic, hope to compete reasonably well in all markets, optimistic about future with capacity constraint leading to better competitiveness.

Q: Long-term growth in naval nuclear business beyond 2030?

A: Building guidance around shipbuilding plan, some AUKUS and South Korea opportunities, broader defense budget may bring more opportunities.

Q: Latest on Canadian Competition Bureau's investigation into Kinectrix acquisition and Tech 99 approval?

A: Quiet on Kinectrix investigation, Tech 99 not submitted to FDA yet, not contemplated in 2026 guidance with product quality issues being worked through.