BWX Technologies, Inc.

Ladies and gentlemen, welcome to BWX Technologies' first quarter 2022 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, everyone, and welcome to BWXT's first quarter earnings call. Joining me are Rex Chevedin, President and CEO, and Rob Lemasters, Senior Vice President and CFO. On today's call, we will reference the first quarter earnings presentation, which is available on the Investors 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 provision found in the investor materials and in our SEC filings. We will frequently discuss non-GAAP financial measures, which are reconciled to GAAP measures, in a separate presentation that can also be found on the investor section of the BWXT website. I would now like to turn the call over to Russ.

Thank you, Mark, and good evening, everyone. Earlier today we reported solid first quarter 2022 results. Revenue was up to $531 million and adjusted EBITDA was $94.4 million, demonstrating consistent operational and financial performance despite some headwinds from COVID-19 absences early in the quarter. Equally as important, BWXT continued to move forward on several strategic growth initiatives. So let me give you an update on those before I turn the call over to Rob to walk through the financial details. As noted in the earnings date announcement and detailed in our earnings release, we are in the final stretch in qualifying the Tech 99 generator production line. We spent the majority of the last two months conducting a comprehensive series of hot chemistry runs to fully test and optimize the manufacturing line to support our application to the FDA. This testing last month in achieving process qualification acceptance of our radiochemistry system. Over the next couple of weeks, we will be conducting end-to-end process qualification runs ahead of the first of three registration batches, which will generate the final data set for the FDA package. I want to express my gratitude to the team at BWXT Medical for their dedication and conviction in this endeavor. This first of a kind project has been enormously challenging. While this is somewhat typical for projects of this complexity and scale in the nuclear industry, the team has nonetheless demonstrated remarkable resilience and commitment to this new product. It has been a longer road than we anticipated, but we are introducing a disruptive product with very attractive attributes into an exciting market. And we see the Tech 99 product line as a foundational portfolio product for VWXT Medical. And through all this, we continue to see a very attractive business case and associated value creation. In the government operations services business, we completed the contract transition for Savannah River, which occurred toward the end of the first quarter. We have now entered the fee-bearing period and look forward to executing this important mission for the Department of Energy. In March, we delivered the final design for the Pele transportable microreactor to the Department of Defense and we are standing by for a decision on contract award for the demonstration phase. We applied our best efforts and remain confident that our approach to the demonstration phase, underscored by BWXT's history and credibility in reactor and fuel manufacturing, combined with some of the most advanced nuclear technology innovations, will win the day. As these advanced reactor programs mature, we have begun to consider incremental investments, not only in technology and people, but also physical space, for instance. In consideration for a small divestiture in 2020, we acquired a nuclear-qualified facility adjacent to our main plant in Lynchburg, Virginia. We've begun to make improvements and intend to outfit that facility to house the bulk of new micro-reactor work should BWXT prevail in these strategic future opportunities. Finally, as we noted in today's earnings release, we recently closed a small but strategic acquisition that expands and enhances our core mission in global security. The acquisition consists of two businesses, Dynamic Controls and CUNICO, which supply highly engineered proprietary valves, manifolds, and fittings for global shipbuilding, which complements our core naval nuclear manufacturing business. The acquisition enables BWXT to participate more fully in the U.S. and U.K. Navy supply chains with strong incumbent OEM and aftermarket positions on several important naval platforms, including Virginia, Dreadnought, Astute, and Ford-class vessels. These businesses, we believe, provide a beachhead for international operations that expose us to growth with allies whom we view as increasingly important in light of recent threats to global security. Dynamics Controls and CUNICO exhibit the business characteristics we see in the rest of the BWXT portfolio. They have been sole source critical suppliers since the 1980s and share many unique differentiators, including high consequence systems design and manufacturing to exacting quality standards, long-term visibility, and insensitivity to global capex and GDP cycles. Lastly, on the transaction, we continue to see global supply chain and labor shortages We also see this as an acquisition of talented employees who have experience relevant to our core business. By and large, BWXT has been insulated from much of this global pressure, particularly on labor shortages. Our voluntary turnover remains low relative to other industries as we have a strong culture, long visibility into our backlog, and a future built on growth and opportunity. This was a challenge during COVID. as virtual work is really not possible for most of our workforce, and our employees likely benefited by remaining connected to our culture and the critical mission they serve. In that vein, the Navy released an updated 30-year shipbuilding plan in April. Most assuring is that there are no changes to the acquisition plan for nuclear-powered vessels over the next five years. Interestingly, the Navy has produced three alternative procurement schedules that extend for the balance of the 30-year plan. While each option has some variability, there is no change to the Columbia-class ballistic missile submarine procurement schedule as it remains the Navy's top acquisition priority. The alternatives presented have some suggested procurement changes related to aircraft carriers, attack submarine quantities, and a new class of cruise missile submarines to be procured following Columbia. We continue to consult and work closely with naval reactors to understand the path the Navy is planning. The feedback we've received so far is that there is no change to the strategic baseline for the long range business forecast as we look to ensure BWXT is positioned to serve the needs of the US Navy. The President's budget request for government fiscal year 2023 was also released in March, followed by the release of the Future Years Defense Program documentation through 2027. In addition to status quo for naval reactors, BWXT programs were widely supported in the President's request. In the Department of Energy, the request has solid funding levels for uranium processing projects, including a ramp in funding for the uranium conversion and purification services and sustained funding for uranium down blending. The DOE budget also supports the funding for the new Savannah River contract on which we recently transitioned. Advanced nuclear reactors also continue to receive support with budget requests for the three major areas in which BWXT is involved. For space, NASA received a funding request for both fission surface power and nuclear thermal propulsion, and the DOD is increasing funding for space-based nuclear systems as well. In the DOE, the President requested that the Advanced Reactor Demonstration Program continue to be funded. And lastly, the Strategic Capabilities Office request for the transportable nuclear reactor project, PELAE, is in line with the transition from design to demonstration later this year. With that update, let me turn it over to Rob.