BWX Technologies, Inc.

Ladies and gentlemen, welcome to BWX Technologies' fourth quarter and full year 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.

Thank you, Gail. Good evening and welcome to today's call. Joining me are Rex Jebeden, President and CEO, and Rob Lemassers, Executive Vice President and CFO. On today's call, we will reference the fourth quarter 2024 earnings presentation that is available on the investor section of the BWXC 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 not-gap financial measures, which are reconciled to gap 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 better than expected fourth quarter earnings, capping off another strong year for BWXT. We generated record revenue, adjusted EBITDA, adjusted earnings per share and free cash flow, all meeting or exceeding the full-year guidance metrics we set last year. Demand in our end markets is unprecedented. Major players in national security, clean energy, and medical end markets view nuclear technologies as novel solutions for their mission needs. BWXT is well-positioned to benefit from this accelerating demand, which drove our extremely strong fourth quarter and full-year bookings. We ended 2024 with a backlog of $4.8 billion, up 21% year-over-year, from large contract awards in both of our operating segments. In addition to the focus on growth, we are obsessive about improving the business in all its aspects. Internally, we call this the BWXT battle plan. It has five elements that intertwine with one another, which are sustain and grow the core, invest strategically, expand into adjacent markets, drive performance, and deliver the mission. The battle plan is our operating system, and I use it to communicate our purpose and to drive the focus on execution every day. With that backdrop, let me take a few minutes to highlight how we are executing under this framework and how this is positioning VWXT for continued success in 2025 and beyond. First, we are investing strategically, organically and inorganically across our business lines. These investments create capacity, expand our capabilities with new products and services, and importantly, increase customer confidence in choosing BWXT to support their most critical needs. In government operations, we recently completed the expansion of the BWXT Innovation Campus, the home of our Advanced Nuclear Business Line. This facility, located adjacent to our Naval Reactor Manufacturing Plant in Lynchburg, Virginia, is home to over 300 employees and has state-of-the-art capabilities for the design and manufacturing of micro-reactors and advanced nuclear fuels for defense and commercial applications. We have spoken extensively about the major investments in our naval nuclear propulsion manufacturing plants. While the largest are behind us, we continue to make these strategic investments in our infrastructure to meet the current and future demands of our naval reactors customer. This includes maintaining a steady production rate of Virginia-class reactor cores, increasing the cadence of Columbia-class submarine production as we enter a serial ordering pattern over the next decade, and capacity expansion for AUKUS. Further, in the first week of the new year, we completed the acquisition of AOT, expanding our special materials business line into the depleted uranium assay with exciting new capabilities in R&D, prototyping, testing, and production for major customers, including the Department of Energy and Department of Defense. We are already uncovering interesting opportunities at AOT that would drive growth beyond the acquisition business case. In commercial operations, it is a similar story. The demand signals in commercial nuclear power and medical markets are strong and visible, and we are investing in plant capacity and workforce to address that demand. The ongoing expansion of the Cambridge manufacturing plant just outside of Toronto positions BWXT to pursue more projects for large, heavy nuclear equipment. Beyond this investment, we are assessing options for additional capacity in North America, as demand from utilities and non-traditional high-tech buyers for green baseload power generation precipitates. In early January, to complement and enhance our commercial nuclear power business, we announced an agreement to acquire Conetrix Incorporated, which we expect to close in mid-2025. Conetrix offers a comprehensive specialty service portfolio to commercial nuclear players globally, covering key stages of the project lifecycle that we have coveted, from reactor design and site licensing on the front end to testing, analysis, and materials management throughout the life of a plant through to decommissioning support at the end of a plant's life. We have received unequivocally positive feedback on the announcement from our customers, whom we will be able to serve more effectively with a larger portfolio of services. Connetrix also has an interesting play in nuclear medicine isotope irradiation services and stable isotope enrichment for the production of the most important oncology radiotherapeutic on the market, lutetium-177. This complements BWXT's capabilities in isotope production systems and processing and provides us exposure to the largest and most advanced pipeline of drugs in nuclear medicine. Our investments extend beyond operations. Over the last year, we have taken on a full digital transformation initiative, including cloud migration, better collaboration tools, ERP consolidation, elimination of redundant on-premise IT systems, and vastly improved financial integration tools, enabling faster and better business decisions. Overall, our investments to enhance capabilities, drive growth, and improve efficiency are paying off, yet we remain committed to an active and disciplined capital deployment strategy. How does all this translate into our results and future growth? As I noted, in 2024, we achieved record financial performance. Adjusted EBITDA grew 6%, adjusted earnings per share were up 10%, and free cash flow was nearly 20% higher, driven by strong operations and supported by many of the financial initiatives Rob and his team have implemented. In government operations, despite multiple severe weather disruptions, In a tough year-over-year comparison, we delivered revenue and adjusted EBITDA growth in line with our expectations. We continued to hire and drive productivity through lean manufacturing processes and increased use of technology, mitigating the impact of higher labor costs and a business mix shift toward less mature, therefore lower-margin programs. During the year, we delivered multiple critical components to naval reactors and drove progress in our microreactor and special materials programs, such as Pele, Draco, and U-Metal Processing. In the fourth quarter, we booked our next pricing agreement for naval propulsion reactors and components. Through the year, we also secured several long-term technical services contracts. In November, we took responsibility for management and operations at the Pantech site, and just today, we assumed full responsibility for environmental restoration at the Hanford tank site after a successful four-month transition period. Both contracts boost the bottom line and provide added earnings visibility over a multi-year period. Further, in September, we announced that BWXT was the sole awardee of a contract to study the build-out of a national security enrichment plant, a vital strategic capability that the U.S. does not presently possess. This could blossom into a new and exciting long-term opportunity for BWXT, which would enhance the security and energy independence of the United States. These wins, with our existing book of business, provide the foundation for continued growth in government operations in 2025. In commercial operations, we delivered double-digit revenue and adjusted EBITDA growth in 2024, driven by strong growth in commercial power in the commercial power and medical end markets. Commercial power revenue grew by more than 10%, driven by steam generator deliveries and services to the Bruce Power Life Extension Project, which will persist through the early 2030s. We are entering the final phases of the Darlington refurbishment, one of the highest performing nuclear projects in the world. Over the past decade, we are particularly proud of this project as it serves as a proof point against the misapprehension that all nuclear projects experience cost and schedule overruns. The positive precedent set by these projects led OPG to commit to extending the life of its Pickering B reactors, for which BWXT has been selected to provide 48 steam generators. Finally, earlier in the year, we were awarded a contract to manufacture the reactor pressure vessel for the BWRX-300 small modular reactor project at the Darlington site, and we continue to anticipate multiple follow-on orders in Canada, USA, and Europe. Having booked the RPV and a considerable portion of the Pickering contract in the fourth quarter, Commercial Operations enters 2025 with a record backlog of $930 million. up 19%, supporting our expectation for another year of double-digit commercial power revenue growth. Looking ahead, the opportunity set in commercial power is rich, to say the least. In Canada, Ontario Power Generation recently announced that it is assessing adding up to 10 gigawatts of new nuclear capacity at Port Hope. Bruce Power is evaluating technologies to add up to 5 gigawatts of new capacity And in the United States, the Tennessee Valley Authority, along with a group of industry partners, including BWXT, announced that it is seeking DOE support to build SMRs at the Clench Riverside. BWXT Medical continued its strong growth trajectory. Revenue grew 23% in 2024, and EBITDA turned more meaningfully positive. This was driven by CDMO and PET diagnostics business lines and increased sales of therapeutic isotopes. for Actunium 225 clinical trials. We signed our second Tech 99 commercial agreement with a key distributor during the fourth quarter, further affirming industry appetite for our brand and our product and keeping us on track for contracted volumes in 2026. Overall, we expect 2025 medical revenue to grow at a similar rate to 2024. In conclusion, we are executing on our strategy and delivering the forecasted growth Demand for nuclear solutions is strong, and we are driving performance through the organization to maintain our competitive edge, improve financial performance, serve our customers, and build on the momentum we have generated. With that, I will now turn the call over to Rob. Thanks, Braxton.