BWX Technologies, Inc.

Ladies and gentlemen, welcome to the BWX Technologies second quarter 2024 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, Chase Jacobson, BWXT's Vice President of Investor Relations. Please go ahead, sir.

Thank you, Kathleen. Good evening, and welcome to today's call. Joining me are Rex Jevedin, President and CEO, and Rob Lemasters, Senior Vice President and CFO. On today's call, we'll reference the second quarter 2024 earnings presentation that is available on the investor 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 in the company's SEC filings. We will frequently discuss non-GAAP financial measures, which are reconciled to GAAP measures in the appendix of the earnings presentation that can be found on the investor section of the BWXT website. I would now like to turn the call over to Rex.

Thank you, Chase, and good evening to all of you. This afternoon, we reported strong second quarter results that were ahead of our expectations. We had robust 11% organic revenue growth 18% adjusted EBITDA growth, and adjusted earnings per share growth of 26%. We benefited from good execution across our business lines and favorable timing for a number of items in the first half, which drove the outperformance. Year-to-date performance gives us the confidence to increase the lower end of our adjusted earnings per share guidance, resulting in a range of 310 to 320, and to reaffirm our full-year operational guidance for mid-single-digit revenue and adjusted EBITDA growth. Over the last several months, we continue to experience positive demand momentum in our global security, clean energy, and medical markets. We are seeing federal and state governments prioritize regulatory clarity and funding to boost investments in nuclear power as a reliable clean energy alternative, complemented by demand from private industry. This ranges from utilities and major power consumers looking to add nuclear capacity to the grid to pharmaceutical companies investing in radiotherapeutics as the first line of attack for complex cancers. BWXT's nuclear technical depth, unique licenses, and differentiated infrastructure across various industry segments position us well to help our customers realize their goals across project life cycles. At our core, we are a supplier and partner to our customers, capable of everything from concept development and engineering in early design stages through manufacturing of critical components and ultimately providing services to maximize the utilization and lifespan of their assets. This provides a substantial visibility into the long-term potential of the markets we serve and opens decadal lifecycle opportunities for BWXT. Now turning to a discussion of segment results and market outlook. Government operations had a solid quarter with 10% revenue growth and 13% adjusted EBITDA growth, both ahead of our expectations and driven by the continued ramp on newer special materials and micro-reactor projects, as well as solid volumes in our naval propulsion business. From an operational standpoint, our naval nuclear propulsion business performed well in the quarter. As we discussed in detail last quarter, the lower tempo of work associated with the ordering lull for the Ford-class aircraft carrier will be with us through at least 2025 and potentially 2026, but we are seeking and finding ways to keep our plants operating at level loads. We remain intensely focused on operational equipment effectiveness initiatives and driving process improvements throughout the organization to mitigate these headwinds, and we expect to finalize our next pricing agreement in the coming months. At the same time, we continue to invest in our businesses to ensure sufficient capacity for execution of program schedules and to improve our competitive positioning. For example, In the second quarter, we engaged in a significant and successful facility and process line modernization in our nuclear fuel services plant to support growing demand. Such investments can create modest near-term margin headwinds, but we make these investments to improve product quality and production capacity. Also within government operations, we are very excited about the contract award and quick transition onto the Pantex plant in Amarillo, Texas. As of July 13th, BWXT is leading a joint venture that will supervise this important site under a 20-year contract, further solidifying our leadership in the NNSA space. In the microreactors business line, our defense-related projects, Pele on land, the Draco in space, are progressing well. And in the commercial sector, we continue to work with the Wyoming Energy Authority to assess the viability of deploying microreactors in that state, leveraging our Banner work, largely funded under the Department of Energy's Advanced Reactor Development Program. In a related matter, in early June, the Army and Defense Innovation Unit posted an RFP for procurement of a microreactor capable of generating 3 to 10 megawatts of power for U.S. Army bases. We believe the strong team of partners we have selected, our experience of TELE, and our existential component and fuel manufacturing facilities put us in a leading position for this remarkable opportunity. Overall, the long-term demand trends in our government operations segment are favorable. We remain confident in this segment's medium-term outlook for mid-single-digit revenue and adjusted EBITDA growth, as modest growth in our naval nuclear propulsion business is enhanced by real growth in micro-reactors, special materials, and technical services. Turning to commercial operations, revenue in the segment grew 17% organically and adjusted EBITDA grew 42%. Demand for commercial nuclear power is blossoming with interest from industry, utilities, and government buyers. During the quarter, we received full notice to proceed with the manufacture of the reactor pressure vessel for GE Hitachi's BWRX-300 small modular reactor project at Ontario Power Generation's Darlington site. as the first SMR project in the Western Hemisphere. This is a strategically meaningful project for BWXT and is also an important reference point for power plant developers assessing the build-out of SMRs. Additionally, in June, the Department of Energy announced that it will provide up to $900 million of funding to spur SMR development. This was followed by Dominion Energy issuing an RFP to find a technology partner to build at the North Anna Power Station in Virginia. Dominion joins a growing list of domestic and international utilities expressing interest in building small modular reactors. We face the SMR market with deep nuclear design capabilities and as a merchant manufacturer with the largest nuclear equipment assembly facility in North America. In the can-do market, we had a solid quarter driven by ongoing life extension projects, and strong field services growth weighted toward outage projects that generally bring slightly higher margins. We are starting early work on the life extension of Ontario Power Generation's Pickering Units 5 through 8, which will be a key part of this segment's bookings and earnings over the next 10-year life cycle of that project. Turning to BWHT Medical, revenue in the first half of 2024 is tracking in line with our full-year expectation of approximately 25% growth. I continue to be pleased with the progress we are making and growing and executing on our existing diagnostics portfolio and expanding our product lines in key cancer therapeutics. Specifically, over the last couple of months, BWXT has extended its leading commercial position in high-quality Actinium-225, a therapeutic isotope that is being used in over 25 clinical trials for the treatment of multiple forms of cancer. In June, we submitted a drug master file with the FDA for our Actinium-225 active pharmaceutical ingredient. We are now the only commercial company with an active drug master file for this vitally important medical isotope. This enables pharmaceutical companies to reference our product as they advance drugs through clinical trials and prepare to file new drug applications. Additionally, in July, we announced a partnership with Northstar, whereby BWXT will provide processing and purification services to develop Radium-226 targets that will be utilized in North Star's electron accelerator to produce Actinium-225. This partnership highlights our picks and shovel strategy through which we serve the ecosystem with a full suite of services including sourcing starter material, target design, irradiation, processing the irradiated material, and waste stream management. In this instance with North Star, we are initially focused on constructing the difficult to manufacture radium-226 targets, but over time, it could evolve into a second source of irradiation and production in addition to our current actinium operations in Vancouver. In diagnostics, we continue to advance our Tech 99 development and commercialization strategy. We have successfully produced test generators and continue to work with the FDA at the pace we previously outlined and seek clear customer support for our product. As the pending FDA approval date becomes more visible, we have been actively marketing and testing samples of our product with customers to enable supply agreements and commitments to significant spot volumes when they become available. We have planned a methodical entrance into the market to ensure a smooth product launch with gradual volume increases throughout 2025 and a full annual run rate of contracted volumes in 2026 and beyond. Finally, as BWXT Medical shifts the balance from development to a more operational and commercial phase, we are adding executive talent to the business. I'm pleased to announce that Vittorio Pupo will join BWXT this month. He brings deep operational and commercial expertise, having spent most of his 30-plus year career in the nuclear medicine industry at Amersham, Bracco, and Medtronic, among others. I appointed Dr. Jonathan Certain to run this business in 2022 with a charge to lead development and regulatory approval of the Technetium 99M generator product, and to establish the foundations of a therapeutic growth strategy. He has made remarkable strides in developing the product portfolio, nearly doubling sales and driving it to positive EBITDA. He will now return to my direct staff and resume his role as Chief Development Officer, maintaining a focus on BWXT Medical alongside Vittorio. and growing the larger BWXT product portfolio including micro-reactors, advanced fuels, special materials, and other exciting new product lines. Overall, we had a strong quarter and we continue to position BWXT to capture an overweight share of business in these exciting and growing nuclear market segments. Our year-to-date performance leads us to narrow our 2024 adjusted earnings per share guidance range There are firm demand signals from our government and private customers alike, and their desire to use nuclear solutions to address their challenges is steadily increasing. BWXT has world-class manufacturing, processing, and services capabilities, backed by our highly credentialed and experienced workforce and unique infrastructure that enables us to benefit from the many compelling nuclear opportunities we see ahead. With that, I will now turn the call over to Rob.