BWX Technologies, Inc.

Ladies and gentlemen, welcome to BWX Technologies' third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mood. 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. Good evening and welcome to today's call. Joining me are Rex Chevedon, President and CEO, and Mike Fitzgerald, Senior Vice President and CFO. On today's call, we'll reference the third quarter 2025 earnings presentation that is available on the investor section of the BWFC 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 provisions 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. I'm excited to report another strong order for BWXT. showcasing the effectiveness of our battle plan strategy and our leading position in nuclear solutions for the global security, clean energy, and medical end markets, all of which are enjoying unprecedented demand. Third quarter financial results exceeded our expectations, driven by focused execution and revenue growth in both government and commercial operations. We delivered 12% organic revenue growth and roughly 20% adjusted EBITDA and earnings per share growth alongside robust free cash flow generation. Book-to-bill was a stout 2.6 this quarter, driven by large multi-year national security contracts for the production of defense fuels and high-purity depleted uranium in our special materials line of business. This led to a total backlog of $7.4 billion, up 23% from last quarter and up 119% year-over-year. Our year-to-date financial results, deep backlog, and unprecedented in-market demand position us to enter 2026 from a position of financial strength. Our preliminary 2026 outlook calls for another year of record financial results with a posture to exceed our medium-term financial targets. Turning segment results and market outlook. Government operations revenue was up 10% and adjusted EBITDA was up 1%, both ahead of expectations. In the naval propulsion business, our teams are intensely focused on meeting delivery commitments for submarine and aircraft carrier programs and driving operational excellence. In addition to traditional process optimization strategies, we are finding new ways to leverage artificial intelligence and advanced manufacturing to drive efficiencies around quality control and workflow in our facilities that will lead to improved productivity, throughput, and margin performance. Technical services is on a growth trajectory powered by a win streak that unfolded over the last several years. Our team began transition for the Strategic Petroleum Reserve M&O contract in early October, and a BWIC-led joint venture, which includes Conendrix, is in the preferred bitter period, which is the transition period for management and operations of the Canadian nuclear laboratories. We expect to assume full operational control before the end of the year. In micro-reactors and advanced nuclear technologies, the market is evolving positively. We are currently manufacturing the reactor core for Pele, which is on track for delivery in 2027. Related to Pele, last month, the Army announced the Janus program, which aims to deploy a nuclear reactor on a military installation no later than September 2028, building on lessons learned from Project Pele. BWXT's qualifications should be a differentiator for Janus and other important national security projects that are within our cost and capital risk tolerances. During the quarter, we announced a collaboration with Kairos Power to commercially optimize triso nuclear fuel production. We are excited to have a partner that is aligned with Google. BWXT is currently producing triso fuel for Project Pele and a variety of other customers and will continue to evaluate options to enter the commercial market on a larger scale as the demand for advanced reactors grows. Lastly, over the last several quarters, we pointed to our special materials business line having some of the most exciting growth opportunities within the company. I'm pleased to say two of these opportunities, both within the NSA, materialized during the quarter. First, we were selected for the defense fuels contract valued at $1.5 billion. to establish a domestic uranium enrichment capability for defense purposes. We booked the first task order under the contract and are building a centrifuge manufacturing development facility in Oak Ridge, Tennessee. Over the next several years, our focus will be on centrifuge manufacturing and designing and licensing a plant for defense uranium enrichment. Second, we were awarded a $1.6 billion 10-year contract to supply high-purity depleted uranium to the NMSA. This is a direct result of our foray into special materials and our deliberate strategy of expanding into the depleted uranium assay through the AOT acquisition. Under this contract, we will build a manufacturing plant adjacent to our existing facility in Jonesboro, Tennessee, capable of producing up to 300 metric tons of high purity depleted uranium per year that will be used for multiple defense purposes. These are both exciting long-term projects for BWXT, not only for the revenue growth, but also the demonstration of trust our customers put in BWXT to execute on mission-critical national security programs.