BWX Technologies, Inc.

Q4 2025 Earnings Call — February 23, 2026

Scott Duchelle (Deutsche Bank): Hi, good evening. Mike, should we expect government operations margins to trough in 2026 on these mixed headwinds, or could there be incremental mixed pressure in 2027 that we should be mindful of? Thanks, guys.

Mike (Executive): No, I don't see any real incremental pressure as we look at 2027. I think as I've mentioned in the last call and maybe over the last couple of earnings calls, we feel really good about the current pricing agreement. If you look at our core naval propulsion business, we're actually performing really well. Efficiency and utilization are up at our best sites and our largest sites. And so we see a lot of opportunity as we move through the future. I think what you're seeing in 2026, is a little bit of this mixed pressure. As we discussed, half of the growth is coming from these new programs where we're making infrastructure investments. And so you're seeing a little bit of a decline there, but we would expect a rebound in 27.

Okay. And then Rex, can you talk about how BWXT is using AI internally today? And then are there any business functions where you're particularly excited about the potential impact of AI over the medium term, whether that be from cost synergy opportunity or something else. Thank you.

Rex (Executive): Yeah, sure, Scott. I think, thanks for the question. I think there's an outside story for AI with BWXT, and there's an inside story. I think you obviously know the outside story, which is there's an expectation that nuclear power will power the data centers of the future, and I think that's a reasonable expectation, but that's all in the windshield for us. Certainly, that's not part of the current business mix. The inside story shapes up like this. I think there are I think of it in kind of three phases. The first phase was BWXT using machine learning to improve certain internal functions, particularly manufacturing processes. We, for example, put hyperspectral sensors on complex weld processes and used a machine learning algorithm to figure out when those things were going out of spec, which saved us a ton of expensive rework. And we did it, and there are other examples I can cite. So I call that phase one. Phase two is You know, with the release of large language models, we're figuring out ways to use those in our business to improve functional efficiencies and the like. And so in this phase of it, we're basically democratizing access to the tools.

And I mean tools like Databricks and ChatGBT and the like. And then the third phase is going to be factory automation. That's kind of our burning platform in the sense that we've got a lot of traditional plants that need to be automated and digitized. And so in the future, it's our expectation to have fully digitized quality records, automated inspection, digital twin representations of every component that we manufacture. So that's the phase that we're going into right now, and we're quite excited about that.

That's really interesting. For phase three, do you see any limitations from the security clearances required, things like that, that would prohibit your ability to deploy those types of systems, particularly for government operations? Or do you think you would have the ability to use things like digital twins and, you know, some of those classified areas as well?

Rex (Executive): I'd say not much, Scott. I mean, certainly we have to be concerned about using Wi-Fi and Bluetooth kind of systems in a classified manufacturing environment. So there are things that we will have to work around, but I think we will work around them with support from our customers.

Thank you.

Matt Akers (BNP Paribas): Hey, guys. Good afternoon. Thanks for taking my question. I wanted to ask, I think some of the commentary from the shipbuilder this quarter was relatively positive in terms of just some of the supply chain bottlenecks they had seen maybe starting to get a little better. Just curious if you're seeing any of that flow through to you in terms of maybe more pulling demand forward or anything like that, or if you're seeing anything along those lines?

Rex (Executive): Yeah, we've seen that encouraging news, too. I'd say our reaction to it is that from the very beginning, I think we've held the view, and I believe that the Navy and the government held the view that instead of slowing down the supply chain, what you've got to do is fix the bottleneck. And so I think we're seeing that now. I think we're seeing pretty encouraging progress at the shipyards. I think you'll know, and we announced this a couple of quarters ago at least, that Admiral McCoy, who'd been running our government operations business, was seconded into the Department of Defense to support the Navy for that specific purpose, the express purpose of improving throughput at the shipyards. And that's certainly what the nation needs to do. That's what the Navy needs to have. So I'd say we're continuing at the pace we were, you know, delivering on our delivery schedules and very, very, very pleased to see the shipyards turning the corner and bouncing off the bottom in terms of delivery rate.

Yeah, thanks. And I guess as a follow-up, I wanted to ask on capital deployment and sort of what your priorities now and how big could M&A be as a part of that after AOT and Connectrix?

Rex (Executive): Yeah. So we're, look, we're really excited about some of the things that we've done to strengthen our balance sheet. You know, we did the convertible in the fourth quarter, I think, which really gave us a lot of flexibility. And so we feel well positioned for, you know, potential M&A as we come into 2026. You know, I will say as we look at a number of different targets that are out there, you know, we're highly focused on continuing to drive something within our core and also very highly focused on driving an increase in our overall capacity as we prepare to support our customer needs in the future. So those are the things that we're going to be looking for. We have a number of assets that we always look at on a consistent basis, but I do think that we will continue to see M&A as a big part of our capital deployment strategy.

Great. Thank you.

Jeffrey Campbell (Seaport Research Partners): Congratulations on the quarter, and thanks for taking my question. I'll just stick with one. Rex, you mentioned your US commercial facility might be built at Mount Vernon. I just wondered, are there any particular challenges in siting a commercial facility adjacent to one that's dedicated to defense purposes? Thanks.

Rex (Executive): Yeah, thanks, Jeff, for the question. Good to hear you. No, I think it's the opposite, right? There's some synergies between our government business there and, you know, the would-be commercial facility there. For example, you share radiography facilities. I did mention that we have a thousand metric ton crane capacity to stevedore proponents right onto the Ohio River there. So we would certainly jointly share those assets and be able to amortize the cost over those assets together. So I think there are certain advantages. We would segregate those businesses for certain reasons financially. But, yeah, no, very good reasons and very good synergies for putting those two things on the same side.

Great. Thank you.

Robert Labick (CJS Securities): Hi, this is Willen for Bob. As a U.S. company with obviously strong operations in Canada, what is the latest impact, if any, on the tariff situation? And in general, does the seemingly souring of U.S.-Canada relations have an impact on BWX?

Rex (Executive): You know, knock on wood, it hasn't so far because we're still operating under the framework of the U.S.-MCA trade agreement, the U.S.-Mexico-Canada framework. trade agreement that was struck in the last Trump administration. And so there are no tariffs in that framework on medical products or on nuclear components, happily. And this last announcement around 10% and then 15% tariffs across the board does not apply to the USMCA agreement. So we're still operating in that framework. And that's being renegotiated right now. So we'll see how that comes out. But I'm certainly hopeful that trade relations between the U.S. and Canada and Mexico remain normal and continue to not have a negative influence on our business.

Thank you. And one more. As we look over the next several years, we have DEUCE and HBDU incremental growth this year and naval growth coming in 2027. Beyond that, can you discuss the timing of SMRs, Canadian new builds, microreactors, and other long-term layers to your growth map?

Rex (Executive): Yeah, I'd say, you know, a variety of different timeframes for all of that stuff. And then we mentioned on the script that we now have business with AP1000 in Europe with that causal duty owner's engineer contracts. We certainly have an SMR. We have SMR contracts at hand right now, but we're certainly making the reactor pressure vessel for GE and we're doing a number of other components for different small module reactor suppliers. So I think you just see that building over the years. It's my expectation that we'll have additional orders for the X300 this year. It's also my expectation that we'll have orders for the AP1000 this year. We'll see. Those aren't in hand yet, but I think we're starting to see the commercial side of our business build very nicely, and we have forecasted pretty aggressive organic growth there, but most of that is in hand. And so I think you can see small modular reactors ramping up, you know, starting now, essentially. Microreactors, of course, we've had a good program going for seven years now, but we now have the Janus program as sort of a follow-on program to Pele.

And we're in a good competitive position for that, and we're hoping for a good outcome. And so you can see that building over the next few years. And then medical has been growing at this sort of 20% compounding clip. So, you know, we're seeing generally very good demand in all of our markets, and we expect it to build, you know, at various timings over the years.

Thank you.

Jeff Grampy (Northland Securities): Good evening. Thanks for the time. Rex, to go back on the AP1000 comments that you had in your prepared remarks, can you give us a sense for BWXT's revenue content for a project you're competing on or any generalities there, just to kind of get a sense of materiality for some of these projects for the company? Thanks.

Rex (Executive): Yeah, I think we've characterized it historically for the large reactors, I think, on a can-do new bill, which was not your question, but on that one, it's $500 million to a billion, perhaps, particularly in Canadian with the Conentrix contribution, maybe pushing to the high end of that. I'd say on an AP1000, depending on the components that we win, steam generators and whatnot, you could think of in the hundreds of millions, maybe in the low hundreds. But that's a bit of guesswork, right? We don't know what content we're going to win yet, bidding on a lot of different things. And we'll just have to wait and see how that comes out.

Understood. That's helpful. Thank you. And for my follow-up on some of the recent government contracts, you guys alluded to having some lower margins at the front end. I'm just wondering structurally, as these ramp over time, should we expect just kind of a kind of linear progression in margin over time as these mature, or is it kind of more of a stair-step function as milestones are reached? Just kind of wondering to level set expectations as those contracts kind of roll through the results here.

Rex (Executive): Yeah. So, you know, I would say that the contracts are structured slightly differently. You know, we are in the first phase of negotiating under the Defense Fuels Program. And then for HBDU, that's a longer kind of upfront negotiated program. I think in both cases, what we would typically do along with our processes is kind of evaluate, you know, the overall margin performance. And usually as we meet various milestones and reduce risk under those programs, we is when we would incrementally adjust margin. So those programs, we feel like we have a great opportunity to perform well, but it's a little early days. And we talked a little bit about how we're doing some infrastructure build-out, and so we have some lower margin components associated with those initial costs. But we do expect that as we start to get into full ramp of processing of the materials and production, that ultimately we'll have an opportunity to outperform.

Got it. That's helpful. That's helpful. Okay. Thank you guys for your time.

Chad Derzheimer (William Lear): Hey, thanks for taking my question, and congrats on the quarter. Rex, I guess first question, Pentagon just released the $29.2 billion spending, added a new sub... I'm just wondering how that compares to your expectations. Was that ahead, in line, behind your expectations? Any surprises as you look through the budget allocation? Then I have a follow-up.

Rex (Executive): Yeah, sure, Jed. So that appropriation of funding really doesn't influence our business, right? our programs are funded through different lines. And so it's, it was a neutral for us. We are still on the shipbuilding schedule at two Virginias a year, one Columbia year and, and boards more or less on five-year intervals. So it was, it was, we were indifferent to that news.

Got it. Thank you. And then, um, maybe for both you and Mike, as you think about capital allocation on the commercial, uh, side of things, um, You're in the can-dos in Canada and abroad. You've just gotten into AP1000, and you're in a variety of SMRs between GE, Rolls-Royce, and also some of the new players. And so I'm just curious, with that level of visibility, are you... How are you thinking about the business? Are you seeing, is it sort of, you know, growth at a steady pace, but in different regions that you're able to support? Or do you see any particular technology that's, you know, advancing at a faster pace? How are you thinking about, you know, adding resources to supply those markets?

Rex (Executive): Yeah, I'd say when you look at our capacity in Cambridge, Jed, it's, you know, it's not, you could see a couple of years into the future where we start to look capacity constrained. And so we're looking for assets in particular in the U.S. We've got things in the, you know, interesting targets in the acquisition pipeline. And I mentioned explicitly on the call the thought of building a plant at Mount Vernon. So we think we need U.S. capacity first and soonest, and we put a high emphasis on that. I think the second interesting opportunity is around Europe. There's an appetite for small modular reactors there, and I think whether we would invest there I think depends somewhat on localization demands. But, yeah, we need capacity. We need it pretty soon because we see a lot of demand coming in the future, and we'll start in the U.S. with it.

Yeah, Jeff, the only thing I could add is I would just say that in addition to expanding footprint, you know, we are also investing in technologies to drive throughput within the factory. So it's not just a, you know, let's go get as much footprint as we can because we're trying to drive throughput through our operational excellence initiatives, which really supports the overall workforce as well. So that's an important aspect as we look to capital deployment and where we want to spend it. money on additional machinery and technology.

Great. Thank you.

Sam Strasaker (Rui Securities): Hi. Good evening, guys. I'm from Mike Ciamulli. I appreciate you taking the questions. I think just to start kind of a two-part building off of the conversation around SMRs and microreactors, I was curious if you guys could just put a little more detail on kind of where you are with the NASA and military microreactor programs, and then also with the growth that you're seeing in small modular reactors, how are you guys looking at the triso fuel market overall in terms of where it's at now and potential opportunities moving forward? Thanks.

Rex (Executive): Yeah, sure. A few questions embedded there. On microreactors, we're in the middle of Pele. We deliver that to Idaho National Laboratory next year. You know, we announced the delivery of the fuel for that reactor at the end of last year. So we're proceeding apace, and that reactor will start undergoing testing in the 27-28 timeframe. Think of that as a precursor to the Janus program, which is in procurement right now. They're soliciting offers from various technology providers, including us, We see that one as a super interesting opportunity. On the NASA side, we're still doing some work on nuclear thermal propulsion, although it's not within the context of the Draco program. We still have some level of effort with NASA. I think the bigger opportunity in the space market is around fission surface power. It looks like NASA intends to procure a fission reactor for a lunar base, and certainly we have got the right credentials to compete for that. In terms of triso fuel, I think there are two interesting things going on here.

One is demand on the government side that's related to programs like Janus, where the microreactor technologies generally are calling for triso fuel or designed around triso fuel. But I think there's also an interesting commercial play there, and we're certainly evaluating that. You know, either, you know, subgrid or below-grid capacity power output and, you know, and certainly remote applications for high-density power. So a very interesting opportunity around TRISO, and we're looking pretty hard at whether we make an investment there, a larger-scale investment.

Great. I'll leave it at that for now. Thank you.

Jen Engelbrecht (Beard): Good afternoon, Rex and Mike. Progressing a strong quarter. I think just want to return to the AP1000 and the can-do market. As we think about the AP1000, that owner's engineer contract you won, and just in terms of components, do you consider your bid on sort of the component work to be more competitive if it's a North American project that gets announced versus something in Europe? Because we know on AP1000 in Poland, they've announced sort of the steam generator supplier on that one. And I know you guys didn't bid on that, but how should we think about as a new AP1000 contract or project gets announced, do you see that you have a sort of a better probability on which continent it's on? Or just how do we think about that?

Rex (Executive): I don't think we're thinking of it that way, JF. The owner's engineer contract with Bulgaria was a unique opportunity for us to team up with a component of Ontario Power Generation. So we have their imprimatur and we have our deep engineering capability, which is augmented by kinetics. So that was a very particular opportunity there. I think we're sort of geographic agnostic when it comes to component supply. We hope to be able to compete reasonably well in all these markets. But I would also say that, you know, as the market really starts to warm up and we start to see real capacity constraint, I think we'll be more competitive and we'll have more pricing power. So I'm optimistic about all of it.

Perfect. Thanks. And then, thanks, Rick. Just a quick follow-up on the naval nuclear business. You know, A lot of shipbuilding and reconciliation funding for shipbuilding. And then you just got the news from Australia. They're going to invest, I think, close to $3 billion in their own shipyard. And in terms of second source opportunities, can you just sort of, how are you thinking about long-term, you know, all this new funding that's going on? It seems that there's really a lot of attention being placed into sort of reducing the bottlenecks. But how does that set you up, you know, beyond 2030 for long-term growth in that segment?

Rex (Executive): Yeah, maybe a little hard to say. I mean, right now we're sort of building our guidance and our internal forecast around the shipbuilding plan. We do have some business on the AUKUS side related to production capacity that's giving us a bit of growth here in 2026. And, of course, there's sort of the wild card of South Korea out there. We would hope to be involved in, say, fuel manufacturing at least, if not reactor cores. So there are interesting possibilities out there. I would say that if you think about reconciliation and just a broader defense budget, I think you'd see more opportunities around micro-reactors, fuel, and other such things that are sort of not prescriptively mapped into the shipbuilding schedule. So a bit of a TBD for us, but certainly exciting on the national security side of our business.

Perfect. Thanks, Quint. Thanks for taking my questions, Rex. Appreciate it.

Andrew Madrid (BTIG): Hey, this is Ned Morgan on for Andre. I just want to ask and get the latest on the Canadian Competition Bureau's investigation into the Connectrix acquisition. It's been pretty quiet on our front.

Rex (Executive): No news on that one.

All right. Then a follow-up. Is there any update on when we could see approval of Tech 99?

Rex (Executive): Yeah, not much new there. I've said the last couple of quarters that we are in sort of the grueling last mile of that around some issues with product quality, filtration, concentration, things that we've been working on. We do have new leadership in that medical business, and the person of Jason Van Wark is showing a lot of strong leadership in that business. And Jason has some compelling new ideas around our commercial product strategy, including Tech 99, early days on that, but we'll see how that forms up. So I find myself encouraged about that business broadly. We have not submitted to the FDA yet. And I have, frankly, imperfect clarity around that because of these product quality issues that we're having to sort through. I will say that we did not contemplate Tech 99 revenue in 2026 in our guidance that we just published. And so it's not in our numbers. It would be an upside for us if it did occur.

Okay. Thank you very much.

Management: There are no further questions

at this time.

I would like to turn the call back over to Chase Jacobson for closing remarks.

Chase Jacobson (Management): Yeah. Thanks, Desiree. Thanks, everybody, for joining us today. We look forward to speaking with many of you and seeing you at upcoming investor events or on calls. If you have any questions, please feel free to reach out to me at investors at BWSP.com. Have a great night. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.

Q3 2025 Earnings Call — November 3, 2025

Analyst Pete Skabitsky (Alembic Global): Good evening, guys. Nice quarter. I guess for anyone, I guess, you know, certainly on an absolute basis, this is one of the bigger revenue beats of consensus that you guys have ever had, I think. So just wonder if you could clarify, did you book any revenue on the two new contracts in the quarter? I know it went into backlog, but did you book any actual revenue on those two new ones? And then just kind of the modest full-year sales guidance increase implies a fourth quarter that will be down pretty sharply sequentially. So I'm wondering if you could explain that also. I don't know if there's some conservatism or something else. I'll stop there.

Executive Name (Title): Yeah, thanks, Pete. So as it relates to the new contracts, very, very modest contribution. So not a big driver here. One of the things I think that you're seeing a little bit, and we've seen this trend this year in the second and third quarter, is the seasonality around some of our large material procurements. If you remember, what we've discussed in the past is as we enter into our pricing arrangements, we ultimately will work to get some of those long-lead material procurements done as quickly as possible to lock in pricing. And so we've been working to try to do that in the second and third quarter. We had we were able to accomplish that a little bit earlier this quarter in comparison to when we had originally forecasted it in the fourth quarter. So that is why you're seeing, you know, a large heat this quarter, but ultimately a little bit of seasonality in the fourth quarter, just as some of those material procurements have shifted to the right. I would say outside of that, we're seeing really strong performance in the shops and, you know, we're continuing to see them outperform both on, our government ops and our commercial ops segment. And so we're very encouraged by that and highly focused on driving continued operational excellence initiatives within the factories.

Analyst Pete Skabitsky (Alembic Global): Just one last one for me, maybe for Rex. Hey Rex, in the new Janus program, it seems like this is supposed to be kind of a cocoa arrangement, which I know you guys typically don't like to actually operate reactors in the field. So I'm wondering kind of what the approach is going to be for BWXT here and maybe it's just a simple team agreement is all that's needed, but I was curious as to your thoughts on that.

Executive Name (Title): Yeah, hi, Pete. We certainly do intend to compete for that Janus program. It's very interesting. The government's obviously looking at putting a number of reactors at a number of different sites, and I think they'll pick at least two contractor teams for that. Yeah, we typically don't own and operate reactors. That's normally the job of the nuclear utility, so it'll be a matter of finding the right teammates to go after that opportunity, but we'll do that, and we'll go in and compete hard for it.

Analyst Will (CJS Securities): Hi, this is Will on for Bob. With six months or so under your belt now, what are the key takeaways from the Connetrix acquisition, and what are some of the new market and revenue synergy opportunities?

Executive Name (Title): Well, as I said on the call, Connetrix is outperforming so far. In fact, I might speak more broadly and just say the two acquisitions that we did this year, the Jonesboro acquisition, AOT, and the Connetrix acquisition are both outperforming. And I think, frankly, we created a lot of value there. We bought both of those businesses well within our multiples, and both of them are doing quite well for us. For Connetrix itself, the outperformance relates to the transmission and distribution business, which is growing very smartly right now because of two things going on there. One is the aging infrastructure requires a lot of testing, so we're doing that. And then we've got a nice business in offshore wind cable testing particularly focused in Europe. So we're seeing outsized growth there. The life extension programs at the Pickering plant are creating a lot of opportunities that Connetrix is well suited for. So we're attacking that one.

And then finally, you know, we're seeing some business, sizable business around licensing support to the Canadian nuclear utilities for the new built large projects, large reactor projects in that market, and I find that encouraging from multiple perspectives, obviously for Connetrix itself, but I think that demonstrates the seriousness of the nuclear utilities to proceed with their plans for large nuclear reactors. So, you know, a lot of goodness in the Connetrix business, and it's a really great match for BWXT. I might add that, by the way, that medical business of theirs is doing very nice, and there's a lot of talent in that part of the business, which has been helpful and synergistic to BWXT Medical.

Analyst Will (CJS Securities): Just one more. With the exponential increase in the focus on energy production and security, where are the biggest and nearest-term opportunities for BWX to participate in the growth in nuclear energy, and how are you prioritizing investment into so many opportunities?

Executive Name (Title): Yeah, I'd say we see demand everywhere. We see it on the commercial side of the business. We see it on the government side of the business. If you're speaking to commercial power in particular, I'd say the opportunities in order are kind of, you know, small modular reactors everywhere. And you know that we face the market as a merchant supplier. And we participate on the X300. We participate on the TerraPower Natrium reactor. We did a deal with Rolls-Royce, so we're supporting that reactor and steam generator design and ultimately manufacturing. And the geography is, you know, Canada, U.S., Europe, and Poland, and the U.K., and other places. So that one is super interesting to us. I do expect to see SMR announcements in the U.S. in the fairly near future. I'd say the large reactor opportunity is expressing pretty strongly based on what I just said about the plans in Canada. I think they'll build at least eight, you know, can-do derivative large reactors at Wesleyville and at the Bruce site.

And then obviously the Westinghouse announcement for $80 billion worth of reactors in the U.S., is, I think, quite a positive sign for the industry as it relates to capacity and the need for that. We're actively bidding on AP1000 components kind of every day. So that's in the commercial side of it. Now, Pete mentioned the Janus program, which is kind of a quasi-commercial program because it's contractor-operated facilities for U.S. military sites. So that one's interesting in itself. And, of course, we see commercial outlets for triso, growth in nuclear medicine. So it's everyone.

Analyst Peter Arment (Beard): Hey, good afternoon, Rex, Mike, Chase. Nice results. Hey, can you, Rex, on the two large contracts that you booked in the quarter, the uranium enrichment and then the depleted uranium awards, I think Mike mentioned that there's going to be some government-funded CapEx to help stand some of that up. But how does the revenue kind of cadence roll out when both of those programs kick off? And I guess related to that, Mike, you said it would probably initially come in at some lower margins. Just how long of a period is that last? Thanks.

Executive Name (Title): Yeah. So, for both of those contracts, they're kind of over an extended period of time. So, I think for HBDU, we announced 10 years, and in DEWIS, we've talked about that being a roughly 10- to 15-year program. We will see a little bit of front-loading as we build up kind of the infrastructure investments on those in the early parts of the year, but generally speaking, they're pretty distributed over the life of the period of performance. You know, maybe a little bit waiting early, but certainly not significant. So, it'll be relatively distributed over those 10 or 10 to 15 years, depending on the contract that you're talking about. Those contracts are structured as fixed-price programs. As you know, we typically will enter into kind of a base-level margin percentage and then ultimately work to outperform those over a period of time. Our special materials business has had a long history of being able to outperform, and so typically, we do not make any of those kind of large-scale adjustments from an EAC perspective until we're probably around 25% or more on the contract.

So I would expect that the kind of lower margin to last for the first couple years, and then ultimately we would be highly focused on driving improvement in that EAC and being able to recognize a higher profit. Appreciate that color, Mike. And then just, Rex, just on Project Pele, could you just give us the latest update on how that's going? Because it sounds like you said delivery in 27. I thought that was, is that later than previously planned? Just give us any more updates there. Thanks.

Executive Name (Title): Yes, Peter, that is later than the contract originally called for. You know, that said, the requirements for that program have been evolving, particularly the role of the national labs in that. And so, it's not unexpected, and the program's doing very nicely. We are assembling the reactor core down in Lynchburg, Virginia right now and do expect to deliver that reactor and that fuel to Idaho National Laboratory in 2027, and they'll fire it up and test it out there. So the program's going great.

Analyst Jeffrey Campbell (Seaport): First of all, congratulations on the strong quarter. Regarding DEUCE, the press release announcing the $1.5 billion award said that the pilot plant will demonstrate LEU production for defense missions before being repurposed to produce HEU for naval propulsion applications. To be clear, will the capabilities to produce HEU be accomplished in the current appropriation, or will it require additional funding?

Executive Name (Title): So that initial tranche of funding is about licensing, Jeff, licensing and preparation for the high-enriched uranium cascade, which ultimately will be based at your fuel services business in Irwin, Tennessee. That combined with a centrifuge manufacturing development capability that we're doing up in Oak Ridge, Tennessee. So that actually, the first tranche of funding does not relate to the production of the material itself.

Analyst Jeffrey Campbell (Seaport): Okay, yeah, thank you. And regarding the four new second-generation electromagnetic isosceles separator units that you announced being commissioned by Connectrix, does the entirety of that 500-kilogram of uterium output now belong or will it belong to BWXT Medical? And were there any noteworthy differences between the first and the second generation of the MIS units?

Executive Name (Title): Yeah, that's 500 grams of output, the uterium-176, which, of course, is the base material for lutetium-177. So it's an important precursor for that nuclear medicine product. There's no essential difference between this generation and the prior generation. It's really just an increase in capacity of about 500%, by the way. So it's an impressive capability. We haven't integrated Connetric's medical business into BWXT's medical business for some good reasons, but those businesses are supporting one another. And we're finding strategic synergies there that are pretty powerful.

Analyst Scott Dushel (Deutsche Bank): Hey, good evening. Mike, could you slice up the chipset value of the steam generator content you won with Rolls-Royce?

Executive Name (Title): So we haven't given specifics around that. I think, you know, Scott, when we talk about the SMR opportunity with roles, we've discussed kind of similar to the rest of our SMR, you know, in the $50 to $100 million range. I think we're, you know, squarely in the middle of that as it relates to the roles content. So we feel comfortable kind of being in that range from a roles perspective, but we haven't disclosed, you know, the specifics yet.

Analyst Scott Dushel (Deutsche Bank): Okay. And then the press release announcing that one discussed a localization plan for future manufacturing work. I think most of what Rolls-Royce is currently bidding on is for reactors in Europe. So is the implication here that you may elect to build out a manufacturing footprint in Europe if the demand is there?

Executive Name (Title): Yeah, I think, Scott, we were evaluating that and other opportunities for localization. That seems to be the trend in commercial nuclear power. So we certainly are considering it.

Analyst Scott Dushel (Deutsche Bank): And then last question. Sorry to be a pig, but Mike, can you walk us through the puts and takes on 2026 free cash flow that result in that guy to flat to slightly up? I heard some of the pieces in the script. I'm just curious if you could put a bow on it for us.

Executive Name (Title): Yeah, so I think, you know, we've seen a pretty significant step change over the last couple of years. As we mentioned in our investor day, our kind of medium term outlook was to see, you know, continued kind of one day and call it cash conversion cycle days, which is the internal metric that we use. That's roughly about a 10 million improvement each year. We've seen a sizable improvement going from 23 to 24 and then from 24 to 25. You know, if you remember, we started the year at low into the range of 265. Now we're guiding to 285, roughly approximately 425. So, part of this is driven by some of these investments in the newer contracts. We were able to negotiate some milestones on Deuce and HBDU that are hitting in the fourth quarter of 25, which is good, but it creates a steps function as you look into next year in just the timing of when you get to that next milestone. And so that's a little bit of what we're seeing. In addition to that, we're going to be on a little bit higher end of the range on CapEx. We went up to 6% for this year. We'll be 5.5% to 6% of revenue for next year.

So you're seeing a little bit of you know, CapEx as we continue to invest in our growth initiatives across the board. And so when you kind of take a look at that, you're seeing that basically we're going to end up flat based on even though we'll have a probably one day working capital improvement, that's going to be offset by call it 10 to 15 million of timing related to kind of milestones payments for some of these larger new contracts.

Analyst Jeff Grampy (Northland Securities): Evening, folks. Thanks for the time. I'm curious, when we look at this 26 outlook, what do you guys view as kind of the main risk to achieving that outlook? And then maybe this is more of a 25 discussion point, but does an extended government shutdown represent a risk at all to this year's or next year's outlook? Thanks.

Executive Name (Title): Yeah. I think I'll start with the second question just on the government shutdown. And just, you know, to clarify that the majority of the impact of our government shutdown is specific to our technical services, part of the business within government operations where we run based, you know, different joint ventures with external partners to do M&O and other environmental cleanup on DOE sites. I think the teams have done a great job of managing funding. The majority of our sites are fully operational still at this point, and we're kind of making sure that we're continuing with the mission. I would say we have not contemplated a long-term shutdown in our guidance, and so to the extent that we're seeing an extended shutdown, I don't see that as a major driver for 2025, but I would say that that would create some risk if it extended into 26 for an extended period of time. As far as kind of the puts and takes from next year, I would say, yeah, from an opportunity perspective, we continue to focus on operational performance and OpEx initiatives, which we've discussed a lot.

When you look at our kind of guidance for next year, we are still working through some of the old pricing agreements. I mentioned last week, last quarter, I anticipated some of that to continue in through 2026. So to the extent that we can drive continued performance in the business and we're able to see that productivity, we could have some upside as it relates to opportunities and EAC potential write-ups. We have not assumed a substantial amount of EAC write-ups in our current guidance. In addition to that, you know, based on the timing of some of the new special materials contracts we've seen, you know, earlier this year we had strong performance in those contracts. We'll continue to focus on performing well in that part of the business, and so that could result in, you know, ultimately some opportunities to the guidance that we've laid out. From a risk standpoint, I would say a lot of this relates to just kind of the overall timing of our commercial nuclear opportunities. You know, we're seeing a flurry of activity in RFP and RFIs, and we certainly have a decent visibility into when the timing of those orders are.

But if you had some delays in the timing of those orders, it could have an impact or create some risk for next year. And then we always will highlight just, you know, defense spending. You know, we haven't seen a major impact on that, but that's always a potential risk. And, you know, I mentioned the extended government shutdown. That could be also a potential risk. So those are the big puts and things.

Analyst Jeff Grampy (Northland Securities): Awesome. I appreciate that thorough answer. That's really helpful. And it kind of ties into my follow-up. So Rex, you mentioned this demand market is being unprecedented. It seems like the last couple of quarters have been more headlined, more on the government segment of the business. I'm curious how you see the commercial side playing out, the potential acceleration there. I mean, it sounds like that the pipeline is robust, and so maybe is this something that you guys think kind of materializes or accelerates from a kind of order backlog standpoint over the coming quarters, or do you have that level of conviction or insight at this point in the cycle?

Executive Name (Title): No, I do think, Jeff, that we'll see that order start to accelerate. I think, you know, obviously the Westinghouse announcement was maybe the first domino to fall. If you look at small modular reactors, OPG seems committed to building out those four. We'll see what the next announcement for SMRs is in the U.S. I think that should be Tennessee Valley Authority or another nuclear utility. There's a lot of chatter about that. I do fully expect that nuclear utilities in Canada go forth with the large builds pretty soon. Like I said, we have task orders, contracts already to study the licensing for those can-do derivatives. And so, yeah, a lot of things are falling into place, a lot of announcements, a lot of demand. And so I think next year for this business will be more about commercial orders and commercial announcements than about government orders and announcements, which characterize 25.

Analyst Michael Charmoly (Trui Securities): Hey, evening, guys. Thanks for taking the questions. Maybe, Rex, not to derail things, but maybe talk more about the, I guess, the boring portion of your business. No one's asked about Navy subs, shipbuilding, and communications. Just kind of general thoughts, you know, Mike, I heard you talk about the CapEx. I think we still have a commitment to AUKUS out there, but any kind of general update on kind of what you're seeing in terms of, you know, VA, Columbia cadence, you know, how you're thinking about, you know, whether or not AUKUS flows in at some point. Do you need more CapEx or more capacity?

Executive Name (Title): Yeah, thanks for the question, Mike. I think it's taken quite a positive turn here in the last quarter, our boring business in naval nuclear propulsion. You know, AUKUS had been in question because it's being examined by the Department of Defense, but you saw the sort of love fest between the Australian Prime Minister and the President. It looks like AUKUS is absolutely going forward now. We're also seeing at the same time, we're seeing positive things at the shipyards. at both GD and HII seem to be turning the corner on production. And I think that's quite a positive for all of us. And then, of course, there's that announcement, that surprise announcement about South Korea and the idea that the South Koreans have built a shipyard for nuclear-powered submarines in the U.S. Now, that thing was not well-formed from my perspective, but we don't know what that looks like yet. But to the extent that the U.S. is involved in the nuclear propulsion system, that could be an interesting opportunity for us. And so I see a lot of upside in the business relative to a couple of quarters ago. We do need more capacity to meet the demand for the AUKUS program, and we do have CapEx projects that are underway with our customer at Naval Reactors for that purpose. So there's a bit of that going on already. So full steam ahead.

Analyst Michael Charmoly (Trui Securities): Got it. Got it. And then just one more, Mike, I think I've got this. I mean, the implied government EBITDA margins, you know, look to be down next year. Sounds like it's just the front end loading of some of that lower margin work and, you know, maybe even some of the other pilot progression projects. But is anything changing, you know, with that core Navy business or is it really just kind of some lower margin startup contracts that's weighing on the margins?

Executive Name (Title): No, that's exactly right. If you look at 2026, most of it is mixed pressure. Half of the revenue growth is driven by Zeus and HBDU. And as we mentioned, we start off at a pretty low margin and then would anticipate higher positive EACs in the future. I would say in addition to that, we are still dealing with a little bit of just the burn off of the pricing arrangements that we had entered into shortly before COVID. As I mentioned before, that mix will start to change next year. And, you know, as we work through that and into the new pricing arrangements that we just recently entered into. So we're hopeful that we're going to focus on that. The other thing I would just say is we're highly focused on operational excellence initiatives. And we have a large focus on margin improvement that we're going to be driving into the business. And we continue to focus on that every day. So we'll continue to make investments to drive performance in the business. And hopefully we'll be able to outperform and see some positive EACs next year.

Analyst Jed Dorsheimer (William Blair): Hey, thanks for taking my question. And yeah, I'll echo the other sentiments. Congratulations on a great quarter here, guys. I guess just first one, if I just kind of unpack the commercial growth, I noticed that you separated out growth from kinetics and specifically in your radiopharma business, you know, that supply with Novartis, it looks, you know, Plovicto got off label from pre-chemo, which expands and um so my question is were you supply constrained in the quarter in terms of you know at the precursor um or for the laticium 177 uh and you know previously you had talked about i think 30 plus phase three so I'm just wondering how we should expect radiopharma growth um and whether or not that was limited by the uh by capacity.

Executive Name (Title): Yeah, I don't hate that. I don't think we were supply constrained for that product. You know, we're pretty far downstream. We do the base material, the euterbium-176, and lutetium-177. We don't produce the active pharmaceutical ingredient that goes to a customer upstream of us. But we, no, we don't feel, we're not in a position of supply constraint for that product as to how that's going to grow. I do expect Lutetium growth to continue to accelerate. I can't predict that one for our business right now, but, uh, but certainly there will, there will be higher demand in the future.

Analyst Jed Dorsheimer (William Blair): And then just sticking with commercial, but switching to the reactor side, um, it sounds, you know, if you received, um, an RFP for, you know, a rolls, uh, fmr for example just is an example here or even for you know an ap 1000 um you know that would obviously drive the backlog but wouldn't contribute anything to growth uh next year is that correct i just wanted to make sure that seems like that would be the case but just wanted to confirm it in other words 26 is a year of you know rfb's wins and you know, while most of the reactor side would be Bruce and OPG up in Canada, correct?

Executive Name (Title): Yeah, that's correct. Yeah, that's correct. Yeah, we don't have a lot of that kind of scope in the forecast, if that's what you're asking. Yeah. Right. From my perspective, the growth numbers that we put out there for 26, those kind of early targets for growth, I don't see much – I mean, I frankly don't see much risk on the revenue side because we've booked so much business in naval reactors, special materials, and even on the commercial side and on the medical side. So it's a low-risk outlook from the standpoint of revenue. We just need to drive margins. But, yeah, anything that we would get on the commercial side, say, from the AP-1000, be added to that.

Analyst Andrew Madrid (BTIG): Rex, Mike, Chase, good afternoon.

Executive Name (Title): Good afternoon.

Analyst Andrew Madrid (BTIG): Could you maybe give us a status update on Draco? I know you said last quarter it kind of lives on through NASA, but we did see you guys call out some weaker micro reactor volumes in the quarter, and I wanted to know if it was attributable to this.

Executive Name (Title): Yeah, that's exactly right. So the Draco program devolved into, you know, single agency support. It was, it was DARPA, it was a DARPA and NASA joint program. Now it's a NASA, nuclear thermal propulsion program called Sentry. And the funding hasn't really shaped up for that in a meaningful way yet. We do have some task orders under that, under that contract and we're able to keep our team together, but it's a lower level of revenue. And it's hard to predict what the outcome of that will be. Certainly NASA seems to be focused on lunar efficient surface power right now, and we've assembled a team to go attack that opportunity. But nuclear thermal propulsion is still a need on the civil space and national security side. So I do think that program goes forward in some form in the future. It's just hard to predict right now.

Analyst Andrew Madrid (BTIG): Got it. Got it. No, that makes sense. And Mike, on... I think you called it out earlier, but on the 80 bill nuclear partnership that was recently announced, I mean, what gains could be, you know, captured there, if any? I mean, how do we assess that opportunity for you guys, if it is an opportunity?

Executive Name (Title): Yeah, I don't think, I mean, we haven't given specific guidance on what the size of that opportunity is at this point. I would just add to that that the opportunity there is for component manufacturing, which is obviously right in our sweet spot. So it could be steam generators, reactor pressure vessels, those kinds of things. And so I think the opportunity set is pretty interesting, but it's not specific yet.

Analyst Ron Epstein (Bank of America): Hi, good afternoon. This is Alex Preston on for Ron today. I was just curious on M&A, right? Obviously, talked through a couple times AOT and Connetrix performing really well. I'm curious if you could just walk us through a little bit about the environment you're seeing, any appetite going forward for more investments. It seems like you'll be well within your sort of two to three times leverage range going even to like the end of the year.

Executive Name (Title): Yeah, but maybe I'll make a broad comment about that and then flip it over to Mike. We've been historically pretty picky about doing acquisitions because our philosophy there is to go and get things that amplify our strategic intentions in the nuclear space, and so I think that means you're necessarily limited on the number of targets. But that said, we did a couple of really good ones this year with Conetrix and AOT, and we've done some very good ones in the past. Nordion was a good acquisition for us, the GE Hitachi. Assets in Canada, very good acquisition for us. I would say that we are interested in acquiring right now because, as I said on the call, or as I said in one of the answers, we certainly can get assets within our multiple. So you've got an opportunity to create value there. So we're continuing to look. I think it's super interesting, and we'll acquire if it matches what we're trying to do strategically. Otherwise, we'll stay away from it. And I think we feel comfortable where we are from a leverage standpoint. One of my priorities is to continue to clean up some of the balance sheet and create some capacity and dry powder to be opportunistic about acquisitions going forward.

Analyst Pete Skabitsky (Alembic Global): Just a quick housekeeping question, I guess, for Mike. Mike, the $15 million step up in DNA in 2026, this is a small EBIT impact. But I was just wondering, does that relate to the two new contracts in government or is it from Tech 99 or something completely different?

Executive Name (Title): It's not related to either. Part of this is the timing difference between when we get recovery under cost accounting standards and financial accounting standards. But no major step changes that relates to Tech 99. That won't happen until that program has gone through full approval. And then from the initial investments that we've been doing related to the new contracts.