BWX Technologies, Inc.

Ladies and gentlemen, welcome to the BWX Technologies' fourth quarter 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. Instructions will be given at that time. I'd now like to turn the conference call over to our host, Mark Kratz, BWXT's Director of Investor Relations. Please go ahead.

Thank you, Jamie. Thank you, Jamie. Good morning and welcome to BWXT's fourth quarter 2020 earnings call. Joining me today are Rex Jevedin, President and CEO, and David Black, Senior Vice President and CFO. On today's call, we will discuss certain matters that constitute forward-looking statements and involve risks and uncertainties, including those described in the Safe Harbor provision found in yesterday's earnings release and the company's SEC filings. We will also provide non-GAAP financial measures, which are reconciled to GAAP measures in the quarterly materials that are available on the BWXT website. With that, Rex, I will turn the call over to you.

Thank you, Mark, and good morning, everyone. Yesterday, we reported fourth quarter results, and we will get into that during this call, but I first wanted to thank our 6,700 employees for their hard work, grit, and dedication to the BWXT mission through 2020. Despite battling a public health crisis and other business challenges, we met our commitments to customers and shareholders, made tangible progress toward future growth initiatives, and produced financial results that were well above expectations. In challenging times like these, our corporate purpose, which is to employ nuclear technology to solve some of the world's most important problems, is a clarion call that reminds us of our commitment to the highest safety, security, ethical, and environmental stewardship standards. We continue to demonstrate strong financial and operational results by staying focused on our mission while holding to our core values. In 2020, we exceeded revenue and earnings per share guidance, resulting in top line growth of 12% and earnings per share growth of 16%, setting new top and bottom line records for the company. Owing to our 2020 earnings performance, we achieved a long-term guidance established over three years ago and are therefore retiring it today. The company's 2021 guidance reflects more modest growth but remains aligned with the multi-year strategy against which we continue to execute. Our future growth opportunities are driven by the company's mission and strategy, and we have the building blocks for continued growth over the medium and long term. Let me give you a quick business update and some insight into our focus for 2021 before turning the call over to David. The nuclear operations group finished out a strong year, but it was not without challenges, particularly in the fourth quarter. We saw a dramatic increase in active COVID case counts, leading to a meaningful number of absences toward the end of the year, which ultimately had some limited impact on shop volume. Almost all the active cases have been determined to be non-workplace transmission, so our protocols continue to effectively mitigate the probability of contracting the virus at work. On a positive note, we are seeing active case counts come down significantly relative to January and early February, similar to what we are seeing across the country. Despite the adversity, our business remains strong, and we do not anticipate a material impact from absenteeism in 2021. Our backlog remains robust, and the team remains dedicated to the customers' and companies' mission success. To that end, we completed the negotiation of the next multi-year pricing agreement that is on track for a formal contract award toward the end of the first quarter or early second quarter pending final government approval. To remind everyone, this multi-year pricing agreement is very similar to the one we announced in February of 2019, a two-year agreement primarily supporting Virginia class and Columbia class fuel and component production. In the fourth quarter, we also shipped the second of three Virginia payload module missile tubes. The team has completed all weld repair efforts, and we expect to complete the remaining backlog for missile tube production as that program rolls off in the coming year or so. And the Nuclear Power Group, our principal customers, Ontario Power Generation and Bruce Power, are effectively managing COVID protocols, as we saw a pickup in the second half of 2020 with service outage activity. In the medical business, signs of recovery persist as fourth quarter revenues were only down mid-single digits, and we finished 2020 down about 7%, driven largely by some deferral of demand, particularly for elective procedures. Last summer, we hired Martin Coombs, a seasoned executive in the pharmaceutical and medical technology sectors, to lead the BWXT nuclear medicine business. Since then, Martin has been busy positioning the organization for future transformation recruiting top industry talent, optimizing production, and navigating near-term market disruptions. BWXT Medical is well positioned in 2021 to capture latent demand from a rebound in electric procedures and increased volume in other products. We expect the medical business to grow about 30% over the course of the next year, confirming the strong platform we acquired in 2018 as part of the Nordion acquisition. In addition to a positive outlook in the base medical business, I continue to be pleased with progress Martin and the medical team are making towards Technetium 99 generator commercialization. While there are no new significant milestones to report from the fourth quarter of 2020, we are rapidly completing major facility modifications in Kanata and we have begun in-cell equipment installation in the radiochemistry line. We expect to complete significant milestones in the coming quarters and we will continue to provide updates. Lastly, in the Nuclear Services Group, the 2021 Opportunity Pipeline remains robust. BWXT-led teams submitted proposals for the Management and Operating Services Contract at Y-12 and Pantex and the Savannah River Integrated Mission Cleanup Contract, both of which are expected to be awarded and to transition late this year. Beyond the aforementioned contracts, BWXT remains postured to help the DOE with its evolving mission at Hanford. As that procurement process has been significantly expanded to include additional scope combining a previously planned separate contract direct feed low activity waste into the new opportunity. As we progress into 2021 we are acutely focused on completing the energy capital campaign as we edified the company's premier position and naval nuclear reactors through outstanding execution. We also expect to provide incremental validation of our progress against significant medium and long-term opportunities, including achieving critical milestones in our disruptive Technetium 99 generator product, continuing to rebuild the DOE site management and environmental remediation portfolio and standing up a strong presence in the emerging nuclear micro-reactor market. Capital allocation priorities for 2021 remain largely unchanged. We continue to see long-term shareholder value creation and preservation through the capital investments in the Navy business and the Tech 99 generator production line. The Board of Directors increased the quarterly dividend 11% last week, resulting in a 250% increase since spin just five and a half years ago. This action reflects the confidence in BWXT's ability to generate future cash. As the two key capital campaigns roll off over the next 24 months, we anticipate a strong return to free cash flow generation. In order to maximize long-term shareholder value, we will maintain a flexible and strategic view about how much of that cash we return to shareholders and how much we reinvest in the business. And with that, I will turn the call over to David to discuss financial results and the 2021 guidance details.