Q2 2026 Earnings Call — August 3, 2026
Analyst Bob Labick (CJS Securities):
Our first question comes from the line of Bob Labick with CJS Securities. Good afternoon. Thanks for taking our questions and congratulations on the quarter and on the medical sale as well.
Executive Name: Thank you, Bob.
Analyst Bob Labick (CJS Securities): Sure. It's got to be a little bittersweet. It's obviously been performing very well, but it certainly lets you hone your focus. And you gave us the P&L impact, so thank you for that. So I guess first question is just, can you just talk about the deal a little bit more? What the considerations are to reach up to $800 million? What's the downside? What's the range of the sale outcomes? And what are the drivers of that range?
Executive Name: Yeah, I'll start with maybe a little bit of strategic context, Bob, and then flip it over to Mike here. So a few points. First, that asset wasn't for sale. We certainly weren't going through strategic considerations there. We were approached by the buyer first, and they came forward with a very compelling offer financially, but I think an even more compelling strategic growth story for that asset. And it became clear to us pretty early in that process that those assets would be better off in the hands of a strategic player that has a focus on the medical market. Nordic has a lot of history in the medical market and they understand that and are committed to it. As I said in the prepared remarks, we still like that market and we will maintain a 20% equity stake in those assets going forward. It does, and I said this twice in the prepared remarks, certainly liberates us to focus more on the national nuclear security and commercial nuclear markets where we've got abundant opportunities to grow both. Medical was 3% of our total sales and required certainly an outsized management attention relative to its place in our portfolio. And in the end, we can't shoot at everything that moves. We've got to manage our resources appropriately. So it was the right time to sell it for those reasons. Maybe flip it over to Mike here to talk about the financial considerations.
Executive Name: Yeah, so from an outcome perspective, the deal includes $750 million of consideration, and then there's some shared economics that allow you to get up to $800 million. As we said in the prepared remarks, this includes both the legacy B2HT medical business, but it also includes part of the stable isotope business for Kinetrix. That is not the entire portfolio of nuclear medicine related to medical isotopes for Kinetrix, but it does include kind of the stable isotope production. We still will complete work around design support, chemical analysis, hot cells, things of that nature. If you look at total revenue of approximately $130 million for 2026, we've discussed before that that's going to be at a modestly accretive margin compared to the segment. We felt very comfortable with the offer, and we fully believe that we can get up to the $800 million consideration, but it's an enticing deal, even at $750 million.
Analyst Bob Labick (CJS Securities): Okay, super, and congratulations. And then just, I guess for my follow-up, but just shifting a little bit, with PCG closed, can you talk a little bit about the timing? I know there's incremental capacity there. The timing and what's necessary for you to be able to, you know, update that incremental capacity to get it in so that you can use that for your U.S. nuclear work and growth there.
Executive Name: Yeah, Bob, I would say that'll be something that'll unfold over the next few quarters. We've got to assess our portfolio and see what we're going to tuck in over there at PCG and also see what the capital needs are. But certainly, something that we're working on in earnest right now, but we'll unfold over the next, let's call it, year.
Analyst Scott Duschel (Dolce Bank):
Your next question comes from the line of Scott Duschel with Dolce Bank. Hi, good evening. Rex, you made a comment in your prepared remarks that you expect at least one new nuclear equipment order by year end. Can you specify if that was a gigawatt class order you expect, or is that more connected with SMRs?
Executive Name: I think it's certainly among those opportunities, Scott. We've got, I mean, we certainly expect to get a second half order among the opportunities for the three SMRs, additional SMRs at the Darlington site, you know, the AP1000 opportunities, and then the X300 opportunities that are in the U.S. There's a lot of momentum around those. We are in constant contact with GE, GE Vernova, and with Westinghouse, and they certainly are biased to action here, so we're quoting actively, and there's a lot of feedback on our quotes, and it just feels like things are moving, at least with regard to technology providers. I was at Budapest just last week with the CEO and leadership of GE, and I'm very optimistic about what we heard over there. So yeah, that set of opportunities, the 10 X300 reactors in the U.S. government deal, the 10 AP1000s in the U.S. government deal, the 10 reactors that are in the Commerce Department of Energy long lead item deal, there's just a lot happening there and it feels like real movement. And so we're very optimistic about it.
Analyst Scott Duschel (Dolce Bank): Okay, and just from an industry perspective, do you have a sense as to why Westinghouse still hasn't received a firm USAP-1000 order despite all this positive news and federal support? I guess I'm just trying to understand, like, what does that first customer need that they haven't gotten yet in order to pull the trigger to buy a reactor and get the cycle going?
Executive Name: Yeah, Scott, what I believe is happening is that when you look at the way those deals are structured with the sovereign money, and that would apply to the first 10 customers, X300s in the U.S. and the first 10 that were announced out of commerce a while back. Those deals are being structured, as I understand it, as special purpose vehicles where the participants in the SPV, including the U.S. government, would actually own those reactors and procure all the long lead items and the reactor plants. In that case, I think the utilities are intended to be the operators. The nuclear utilities are intended to be the operators of those reactors which are likely to be on government sites. And so what I think is happening is that the utilities are sort of right-leaning to see how those deals come out before they step into it. So I think that's the dynamic here is wait and see how these government deals, the sovereign deals unfold and then jump in.
Analyst Jeffrey Campbell (Seaport Research Partners): Next question comes from the line of Jeffrey Campbell with Seaport Research Partners. Your line is open. First of all, congratulations on a very strong quarter, dynamic quarter. Just a quick follow-up on the BWXT medical questions. Have you determined use for the sale receipts at this point?
Executive Name: So, not exactly. I would say, you know, part of our Thank you for having me. Outside of that, we have a very robust M&A pipeline, but we also have a fine filter and we're looking for opportunities similar to what you've seen over the past couple of years where it's fit strategically and also fit nicely from a financial perspective. So we'll continue to look at those. We do also have, you know, a couple bonds due over the next couple of years. So to the extent that, you know, we want to continue to show balance sheet strength, we'll look at those opportunities. And, you know, we don't have any planned at the moment and we've guided for 26 that we don't have any planned repurchases. That's always something that we'll continue to look at as well. So I think we're looking across the opportunity set, and we'll certainly give more perspective as we make those decisions.
Analyst Jeffrey Campbell (Seaport Research Partners): Now, that was helpful. Thank you. I wondered if you could talk a little bit about the Empower licensing to Applied Atomics a little bit more. I was wondering, was there some recent work done on the design? World Nuclear News called it a 195-megawatt reactor. I thought it was 180 megawatts when the project was shelved in 2017. That was a little wonky, but just kind of curious.
Executive Name: Yeah, Jeff, I'll take that question. Yeah, we announced two activities within power. Maybe by way of a little bit of background, Empower was a small modular reactor technology developed originally by, starting in the McDermott days, and then Babcock and Wilcox, our predecessor companies, I think that work began in 2008, 2009 timeframe. We eventually stopped that activity around 2014 after having spent something like $400 million on it. We estimated at that time that there was maybe $600 million to go in licensing technology through the NRC. And so we stopped that project at the time because the market around small modular reactors had not precipitated. And so it's IP that's been sitting there on the shelf. You might call it a partially designed, partially certified project. Small Modular Reactor. It is rated to 195 megawatts, by the way. We have not done incremental work on that technology since that time, but there has been some interest in it because it was a very elegant design and probably would be attractive in the modern market. Now, when we stopped progress on mPower, we made the decision strategically to face the market as a merchant supplier.
And you see how that manifests in today's business. We are supporting the BWRX 300. We're supporting TerraPower. We're working with Rolls-Royce on steam generators for their projects in the UK. And that's been a very successful strategy for us. So it's not our intention to bring Empower into the marketplace. That said, there are some parties that are out there that are interested in that IP and have approached us about licensing that technology. And so we've been in that process for probably a year and a half or two years now. And we ended up with an agreement with Applied Atomics, who has exclusivity for terrestrial applications. What they would do is complete that design and get it through NRC approval. We'll be under contract with them to support that. And what that deal entails is they get exclusivity for the terrestrial application, we get right of first refusal for manufacturing all the components, and we retain the IP. So it's a very attractive looking deal from our perspective.
The other case was CorePower, and CorePower has been interested in using mPower on a barge-like system so that you could generate near-shore power and obviously avoid some balance of plant costs and some other complexities around licensing and siting. That was pretty compelling, and we are under contract with CorePower to assess that situation right now. So one licensee under an agreement, one potential licensee, and some outlets for our technology. So fundamentally what we're doing here is monetizing our IP and we hope that both of them succeed with it.
Analyst Jeffrey Campbell (Seaport Research Partners): And if I could just ask you real quickly, when you talk about being the exclusive supplier to the AA effort, does that mean between your current capabilities and the stuff you've added with BCG that you essentially provide X percentage of components for the entire reactor or is it going to mainly concentrate on the stuff you've historically done like reactor vessels and steam generators and heat exchangers?
Executive Name: Yeah, it would be our typical component capabilities. We would manufacture presumably things like steam generators, reactor pressure vessels. We certainly could do control rod drive mechanisms for that design. So lots of things we could do there, lots of content we could take. We wouldn't do balance plant or anything like that, of course.
Analyst Matt Akers (BNP Paribas): Great. That was really, really helpful. Thanks a lot, Rex.
Executive Name: Sure, Jed. My pleasure.
Analyst Matt Akers (BNP Paribas): Next question comes from the line of Matt Akers with BNP Paribas. Your line is open. Hey, guys. Good afternoon. Thanks for the question. Rex, you mentioned the battleship in the opening remarks. I was wondering if you could say anything about how far along are you on discussions there? Would you expect that to ramp up? And just how you think of, you know, does that fit into existing capacity or would there be some expansion needed to support that?
Executive Name: Yeah, early days on that one, but we're certainly having discussions with naval reactors about that. And that one, of course, is maybe certainly dependent upon some future authorization and appropriations for that program. But it's a battleship class vessel that would use a Ford-class nuclear reactor. Now, the Ford-class aircraft carriers use two of these very large reactors, small amounts of reactors that we make. The battleship would use one of those, and so it would be a drop-in kind of thing. So we would manufacture the fuel, steam generators, the RPVs, the core barrels, all the things that we do. There was budget authorized to study that ship design. We would not be involved with that. That's obviously for the shipyards. That was in the 27 budget authorization. We would, should it go forward, long-lead procurements would begin in 28 as we understand it, and that's when the business was starting to flow into our plants. But it certainly would flow right through the existing Ford-class reactor lines and fuel lines existential capacity that we have and would fit very nicely into the business and produce quite some incremental volume for us. Now, I would say, let me just add to that, that putting the Ford on four-year centers is actually more important to our business. That one has a bigger volume impact than even adding a battleship to it. But both of those are serious upsides to the business.
Analyst Matt Akers (BNP Paribas): Great, great. Thank you. That's helpful. And could you touch on margins and how you're thinking of that longer term on the government business? I know there are a couple of dilutive programs ramping up, but just how you think about that and that's actually grow into 2027.
Executive Name: Yeah, so, you know, we started the year at guiding around 19% from a margin perspective, and a lot of that was driven by the newer programs with HVDU Induce that we're ramping up that had kind of a lower margin to start, similar to our past special materials and other contracts where you start off at a lower margin and you increase that margin over time. We've also kind of previously discussed that we're still working off backlog associated with older pricing arrangements with the customer, and we fully expect that to be done by the end of 26th. So if you look at the updated guide, we're actually guiding 150 basis points and increase since the start of the year. A lot of that is really driven by very strong operational performance. We're hitting significant increases in our efficiencies and throughput within the factories of pretty much all of our government operations plants. And we have started to see some very good cost savings. Cost performance, you know, cost underruns on some of these newer programs, particularly on HBDU, but we're still hitting milestones.
And so when you look at that from a margin perspective, we've started to see, you know, some of the margin enhancements that we've been talking about, and you can see that in the reflected results in the updated guidance. As we look to 27, I'm not setting 27 guidance at this point. I think we'll give better perspective on that later in the year. I mean, the one thing I would just say is, you know, we will have to continue to maintain, you know, this performance and some of the performance that we've discussed that we were expecting to see in 27 is starting to show up in 26. So we'll continue to push and drive, you know, efficiency and operational performance within the business. And hopefully we can see that expand over time. On the commercial operations side, we did lower the guidance for the year from approximately 14% to approximately 13%. That is mainly driven by some of the additional investments that we're making to stand up the U.S. commercial nuclear capacity and also to prepare ourselves for some of the high growth that we're expecting. We're adding high caliber executive talent to the business to support what we think is going to be very high growth going forward.
And we're working to do that. So there's some modest investment there. When you look at that year over year, we'll have a pretty consistent margin at 13% year over year. And I do expect that as we go into 27, we'll see more of a meaningful increase in that margin in that business.
Analyst Tomo Sano (J.P. Morgan): Great. That's very helpful. Thank you. Next question comes from the line of Tomo Sano with J.P. Morgan. Your line is open. Hi. Hello, everyone. Thanks for taking my questions. You noted Triso Fuel supported Ontario's nuclear reaching criticalities. Could you provide an update on expected Triso demand, such as government skills and monetization timing, as far as you can share, please. Thank you.
Executive Name: Yeah, let me see. Let me place it in terms of the kind of capacity that we exhibit at BWXT, Tomo. We're able to produce a few hundred kilograms a year in our plant down in Lynchburg, Virginia. It took basically the full capacity of that plant to load the Pele core running for let's call it a year and a half. And then we've had some incremental demand from some customers, including Antares, as you cited. That's well within our existing capacity. As to how the demand lays up across the broad market, I think it depends on a lot of things. It depends on success of X Energy. It depends on the success of Kairos and some others that are requiring Triso fuel and use these high-temperature gas reactors with the pebble-type fuel. So I think there's a bit of a TBD. When you stack all that opportunity up, the opportunity could be fairly strikingly large. And I think that's the reason why you see multiple players getting involved here, including ourselves, TrisoX and Standard Nuclear and some others. And so it's still a highly uncertain market, in my opinion, and so we're not yet ready to make a full capital commitment on it. but it is enticing.
Analyst Tomo Sano (J.P. Morgan): Thank you very much. And just one follow up on the Empower licensing and the feasibility to work with the core power. Could you clarify BWXT's monetization model and the next milestones, please? Thank you.
Executive Name: Sorry, I didn't catch the latter part of that question, Tomo. Sorry, so could you qualify the company's monetization model and what kind of the next milestone we should be expecting? Thank you.
Executive Name: Yeah, monetization model is we certainly have some royalty rights and manufacturing rights, as I said, but their monetization model, I'm not clear on what that is, but that's, yeah, license to design, presumably. Thank you. That's all I have.
Analyst Pete Skabitsky (Alembic Global): Next question comes from the line of Pete Skabitsky with Alembic Global. Your line is open. Good evening, guys. Hey, Rex, can you talk more about the new Canada nuclear strategy? You know, 10 new large-scale reactors, more penetration into CANDU internationally. It sounds like maybe you think Canada is behind where the U.S. is, but maybe you could talk about the TAM there and the timing.
Executive Name: Yeah, sure, Pete. The federal strategy that Canada rolled out, I think, is quite impressive. In fact, Canada's nuclear industrial policy has been very favorable for a long time. It's the reason why we've been buying assets in that market and the reason why our center of gravity is still there. The strategy that the federal government rolled out had four pillars to it. One was enabling new builds across Canada and there's federal support for up to 10 large reactors by 2040 with some of those under construction by 2035 and one deployment outside, at least one deployment outside of Ontario by 2035. They also paired that with a plan to build a Canadian microreactor and I think that means Canadian licensing rights or IP, deploy one of those to a remote community by the late 2030s. Now that would be that effort would be led through the Canadian Nuclear Labs where we are the majority equity partner in operating that laboratory. So that's pillar one. Pillar two is Canada intends to be an exporter and a global supplier of choice around that sovereign technology, CANDU technology. And they want to make full use of their supply chain in that process.
And of course there's a track record of that. There are CANDU reactors in Romania, South Korea, Argentina, so there's some history there. The third pillar has to do with expanding uranium production and nuclear fuel. Now, we would presumably participate on the fuel side of that. We're not involved in mining or milling, but Canada has powerful uranium assets. I think they have something like 20% of the world's reserves there. And then the last one has to do with driving innovation through Canada, which translates to investing in fusion projects in addition to fission, medical isotopes, and other nuclear applications. Again, I think primarily through the Canadian nuclear laboratories where we're principally involved there. So, you know, all good for us, very forward-looking strategy. Canada's leaning forward on nuclear as they have been, and so it's unsurprising, it's gratifying to see that laid out in detail.
Analyst Pete Skabitsky (Alembic Global): In terms of revenue to you, are they maybe a year or two behind the U.S. at this point?
Executive Name: Well, I think they're actually ahead, right, because of what's going on with the small modular reactors up at Darlington. In terms of large reactor builds, yeah, I think what you see there is if you've got projects underway by 2035, then that means the long lead items like pressure vessels and steam generators have to be ordered two or three years in advance of that, so I would expect it's a start to influence our business in a very positive way in the early 2030s.
Analyst David Strauss (Wells Fargo): Next question comes from the line of David Strauss with Wells Fargo. Your line is open. Hi, good afternoon. This is Josh Korn on for David. I was hoping you could maybe speak a little bit about the M&A pipeline now with the sale of medical equipment, and, you know, if you might be more interested in kind of staying in that, you know, doubling down on the commercial nuclear power side or maybe getting into other adjacencies. So any context you could provide. Thanks.
Executive Name: Yeah, I think that's right. I mean, so we see, you know, our last couple commercial nuclear deals, I think, have been very accretive to the business. And we're certainly looking at ways that we can continue to expand not only capacity but also looking for areas where we can continue to provide expanded services throughout the lifecycle of nuclear. You know, Netflix has had some really unique design capabilities. They perform work around transmission and distribution, a lot of unique experience around licensing, and so they have a strong relationship with the nuclear utilities. and so there could be expanded opportunities as we look at commercial nuclear from a pipeline perspective. I think national security nuclear also is a high priority and focus and that's continuing to expand our capabilities to support the national security missions as well as any other small tuck-ins similar to what you've seen us do in the past. So we have a robust pipeline. We go through that regularly to assess that and strategically to make sure that it aligns not only with what we're trying to accomplish from a strategic standpoint, but it also has the financial and other qualitative metrics that make it a good BWXT business. So I think you'll continue to see more M&A from us in the future.
Analyst Mark Bianchi (TD Cowen): Great. Thanks. Just one for me.
Analyst Mark Bianchi (TD Cowen): Next question comes from the line of Mark Bianchi with TD Cowen. Your line is open. Hey, thank you. I first want to ask on this updated shipbuilding plan and the forward cadence, can you talk about, you know, just remind us where you are in that forward cadence and then when we could start to see this update affecting your financial results?
Executive Name: Mark, the ordering cadence, the last board that was ordered, long lead items ordered through BWXT was 2026, if I'm recalling correctly, 2024. The ship set was ordered in 2026. Before that, it was ordered in 2020. And before that, 2016 for the shipyards. That's when the hulls were ordered. As you know, our long lead items were ordered a couple of years in advance of that. What happened was in 2020, that one was accelerated from 2021. So that 2020 order for us, the long lead items started to be ordered in 2018. The 2026 one, long lead items started to be ordered in 2024 from us. And then the next forward set, the advanced procurement occurs in 2027. So what happens on the four-year interval is that 2026 that 2026 haul goes to 2030 on a four-year interval, and then 2034 after that. And again, put us two years ahead of that. Sorry, there's a lot of dates there to sort through. But 2030 would be the next haul order to the shipyards. 2028, four long-lead items on that one.
Analyst Mark Bianchi (TD Cowen): Okay, so we start to see the consistency in the business in 2028 and beyond this.
Executive Name: Yeah, that's right. I would make a key point here, Mark. Because of the ordering and the delivery cadence, and we've talked a lot about this in the past, the ordering cadence has been on five-year intervals, except for that one exception where there was acceleration in 2020. And delivery for that ship set takes about eight years altogether. And so, what that means is that you end up with a couple of gap years every decade because of that, so that you've got one ship set moving through the plants instead of two ship sets. What this does, this four-year ordering interval, fixes that gap so that we would constantly have two Ford ship sets moving through our plants at any one point in time. So it takes that swale out of there, that revenue bathtub that we've been going through for the past couple of seasons. And that's obviously very positive for our rates, for our stability, for our ability to forecast business and keep steady production going through the plants.
Analyst Mark Bianchi (TD Cowen): Yep. Yep. Okay, great. Thanks for that. And then the other one that I want to ask on was just on these AP1000 opportunities. And we've talked to this in the past, but just want to get maybe some updated thoughts on this. Like, if we go back to Vogel, I don't think you guys were involved in any of the large reactor components that you're sort of going for right now, but there are other participants that were and they're still in the market. How do you think your value proposition compares to them, or what do you think you're going to win on when it comes to going up against those other suppliers?
Executive Name: Yeah, at the time those Vogel plants were being built, we were almost out of the commercial nuclear business. Very, very limited activities in our Canadian plant at Cambridge at that time, Mark. I would say our capabilities are very favorable with the largest industrial players, the Ducsons and the Inces of the world. There's some captive capabilities for the technology providers, but in terms of, let's call it supply chain providers, we sit right at the top. We certainly have the largest component nuclear manufacturing plant in North America, really the only surviving one. and when we're done with our capacity expansion in Cambridge, we will have the world's largest nuclear clean room. And then you add to that the capacity expansion that we took with PCG where we kind of doubled our commercial footprint. Now that one is not capable of producing the very largest components. PCG is not capable of producing the largest components like reactor pressure vessels for say an AP1000 or a steam generator, but it can do medium scale components like fuel assemblies and modules and other such things, pressure boundary components. So, yeah, we're right there in terms of capacity and capability. I don't think there's anyone better on the globe.
Analyst Mark Shooter (William Blair): Okay. Thanks, Rex. I'll turn it back.
Analyst Mark Shooter (William Blair): Next question comes from the line of Mark Shooter with William Blair. Your line is open. Thank you. Hey, Rex. Congrats on the quarter of the divestiture and fueling the Antares Mark Zero reactor. Just following up a little bit on the Triso question here that another analyst asked. You did mention that you're not ready to make a full capital commitment on it. So what would you like to see from the reactor customers or other demand signals to give you that green light? And assuming that light turns green, any shape on the or any color on the shape of the CapEx or the capacity or timelines?
Executive Name: Yeah, I'd say we'd like to see a pipeline of orders that looks very, very solid. Now, we're pretty far down that road. We've got a partner in Kairos. We have a $100 million grant from the Wyoming Energy Authority. And so we just need to see that pipeline of opportunities firm up a little bit. I think we've talked about in the past that it's been, you know, the commitment, the capex associated with standing up that facility and populating with equipment is a few hundred million dollars, up to $500 million. And so that's the scale of it. Again, we'd be sharing it with a partner and we've got an offset with the Wyoming Energy Authority. And so, you know, probably a pretty modest investment for us in terms of large scale capital. And, you know, we remain optimistic about it. The only other thing I would add is, you know, we continue one of the probably key milestones that we're looking for is a Janus decision that will is expected to continue to progress through this year. We're expecting an award this year, and so that'll be a key milestone to watch from an order solidification in order for us to make a decision.
Analyst Mark Shooter (William Blair): That's helpful. Thank you both. Also, one of the last times we spoke, we were thinking or walking through the potential expansion of the NNSA Enrichment Award. and what that opportunity could bring. And, you know, on the preamble here, PWX is obvious that you're executing on schedule on this program. So, has there been any deeper conversations or updates around the potential to expand that program?