BWX Technologies, Inc.

Ladies and gentlemen, welcome to BWX Technologies' third quarter 2021 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, Mark Kratz, BWXT's Vice President of Investor Relations. Please go ahead.

Thank you, Matt. Good evening and welcome to BWXT's third quarter 2021 earnings call. Joining me 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. These statements involve risks and uncertainties, including those described in the safe harbor provision found in today's earnings release and in the company's SEC filings. We will also discuss non-GAAP financial measures, which are reconciled to GAAP measures, and the quarterly materials that are available on the BWXT website. With that, Rex, I'll turn the call over to you.

Thank you, Mark, and good evening, everyone. Before I begin with a business update, I want to address the COVID-19 pandemic and share with you my thoughts about the future on that topic. We say at BWXT that we are people strong, and we see that value expressed every day across the business and the actions of our employees. And I want to thank them for their commendable efforts during the last 18 months through this awful pandemic. We've all adapted to new protocols to keep everyone as safe as reasonably possible and to protect our business. We deliver critical materials, components, and services for national security, clean energy, nuclear medicine, and nuclear environmental remediation. And these missions simply cannot be derailed by COVID-19. In compliance with federal executive orders, associated contract changes, and safety regulations concerning COVID-19, we are requiring all U.S. employees to be fully vaccinated. While this new hurdle may create some disruption to our business, either directly or through the supply chain, I fully expect our company, and our nation for that matter, to come together again over the next few months to stop this pandemic so that we can go about the business of fulfilling our shared and deeply important mission objectives. Now onto the business update. Earlier today, we reported third quarter earnings of 76 cents per share, our strongest quarter year to date as we executed well across all business lines. The nuclear operations group continued to reliably perform for our customers and to generate cash. The third quarter was no exception, achieving several important milestones and generating in excess of 20% operating margins. However, pandemic headwinds have remained persistent and were particularly acute during the first third quarters this year, aligning with the pre-vaccine and Delta variant surges in cases. While the business continues to perform, we've been unable to maximize shop volume hours and productivity due to lower headcount from COVID-related absences. Despite the pandemic headwinds, we are focused on delivering BWXT's high consequence systems as we continue to ramp into more Columbia-class content. At the same time, We are finishing up the last remaining work on aircraft carrier refueling, which will be absent from the business until the Navy begins preparing for Ford-class carrier refueling around the turn of the decade. We are encouraged by AUKUS, the new trilateral security pact between Australia, the United Kingdom, and the United States, announced in September. At the center of the agreement, the US and the UK will help Australia acquire nuclear-powered submarines, and the US will share nuclear propulsion technology with Australia just as it has with the United Kingdom since the 1958 US-UK Mutual Defense Agreement. While it is early in the process and not part of our strategic baseline, BWXT stands ready to support the US government's contribution, whatever that may be. We look forward to engaging and learning more over the next 18 months as the Nuclear Powered Submarine Task Force determines the responsibilities and capabilities of the nations who are parties to this agreement. And the other government-focused segment, nuclear services, secured a flagship win last week with a $21 billion environmental management contract at DOE's Savannah River site. This was a key strategic success that validates our growth thesis of achieving market share gains in this segment. It is our aim to build on this success and receive future DOE service contract awards. Nuclear services also extended its track record for good award fee performance scores as reflected in operating income growth in the third quarter. The company's commercial operations in NPG are exhibiting good growth, up over 10% year-to-date, driven by a combination of higher revenue from commercial nuclear power and BWXT Medical. On the commercial nuclear power side, business and opportunities remain solid, supported by the well-managed execution of sizable life extension projects across the Can-Do fleet. Beyond that, we see additional clean energy opportunities materializing in small modular reactors. As I mentioned on the last call, we remain well positioned in this market as one of, if not the only, nuclear manufacturer in North America which produces large nuclear qualified components. We are excited to support the market as our forward thinking Canadian customers select partners to help them harness the benefits of new, safer, and more efficient nuclear technologies which they plan to deploy by the end of the decade. At BWXT Medical, the Technetium 99 generator project progressed well across all work streams during the third quarter as the testing phase ramps up. We successfully irradiated the first MOLLE targets at the Missouri University Research Reactor, and they were delivered to our facility in Kanata at the end of August in preparation for hot chemistry testing. I mentioned on the last call that we are utilizing E-beam accelerators for terminal sterilization in the radiopharmacy production line. This quarter, all of that equipment was received and installed, and we will be commissioning that equipment soon. Lastly, we successfully completed the factory acceptance test with OPG for the reactor access equipment that will be installed on the commercial reactor at Darlington. Related to that development, the Canadian Nuclear Safety Commission has approved OPG's license amendment that permits installation and operation of that equipment on the Darlington reactor. Lastly, we have begun to ship the first components to the OPG site, and some of the early equipment has been installed. So overall, the project is tracking well, and the team is focused on a number of critical testing milestones to complete before we produce reference batches and make our submission to the FDA in the near future. Beyond the Tech 99 generator project, the medical business is taking strategic actions and laying the groundwork for building a world-leading nuclear medicine manufacturing business. We regard therapeutics as the most interesting part of the nuclear medicine business and currently manufacture one of the leading products in that market called TheraSphere. We recently increased production capacity for that product, which is BWXT Medical's largest as measured by sales volume. Meanwhile, our longer-term automation initiative announced earlier this year is progressing to plan. We are pleased to manufacture this finished product for Boston Scientific and are encouraged by recent strides they have made with the FDA, which expand medical indications addressed by the product, stoking future volume increases. And lastly, for BWXT Medical, we entered into an agreement with Bayer for the development and production of Actinium-225 and related partnership opportunities. Actinium-225 is a powerful radioisotope used in targeted alpha therapies and is one of a handful of nuclear isotopes that can potentially deliver radiation directly to cancerous tumors by combining it with tumor seeking medical targeting vectors. We are excited about the possibility of radiotherapeutic treatments and look forward to engaging with Bayer and other big pharmaceutical companies to co-develop these important products. This relationship is further evidence that our strategy of partnering with big pharma on drug development while occupying a crucial niche in the market as a global go-to isotope supplier and contract manufacturing partner is working and will enable growth in the burgeoning nuclear medicine therapeutic segment of the market. I'm well pleased with the progress we are making across the board in the execution of the core business. while simultaneously building for the future in a number of exciting initiatives, including micro reactors for space and national security applications, advanced nuclear fuels, and nuclear medicine. That said, given the ongoing pandemic headwinds, as well as unfavorable government contract award timing that I mentioned earlier, we are narrowing 2021 earnings guidance to the low end of the initial range of 305 to 320 per share. We maintain strong conviction in the long-term growth of VWXT, which is underscored by the fact that we returned more than $166 million of cash to investors through strategic share repurchases in the third quarter. We will continue to look at deploying cash towards opportunistic share repurchases going forward to meet or exceed our medium-term capital deployment commitments and other objectives. With that, let me turn it over to David to discuss third quarter results and other financial matters.