BWXT Q3 2026 Earnings Call Transcript

DATE

Monday, Nov. 2, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations – Chase Jacobson
• President and Chief Executive Officer – Rex Geveden
• Senior Vice President and Chief Financial Officer – Michael Fitzgerald

TAKEAWAYS

• Revenue — $953.0 million, representing a 10% increase year over year driven by growth in both operating segments.
• Adjusted EBITDA — $179.7 million, increasing 19% due to double-digit growth in Government and Commercial Operations.
• Adjusted EPS — $1.26, a 26% increase year over year reflecting higher operating income and nonoperating benefits from lower interest expense.
• Government Operations Revenue — $639.1 million, up 4% driven by growth in Special Materials and Advanced Nuclear activity.
• Government Operations Adjusted EBITDA Margin — 22.6%, reflecting improved efficiency, operational discipline, and higher manufacturing volume.
• Commercial Operations Revenue — $314.2 million, up 25% year over year including 15% organic growth and contributions from the PCG acquisition.
• Commercial Operations Adjusted EBITDA Margin — 13.2%, as higher volume was partially offset by product mix and investments to scale the business.
• Free Cash Flow — $150.5 million, reflecting strong earnings, favorable advanced billings, and disciplined working capital management.
• 2026 Adjusted EPS Guidance — $4.72 to $4.77, a tightening of the previous range of $4.70 to $4.80.
• 2026 Free Cash Flow Guidance — $350 million to $360 million, representing an increase to the low end of the previous guidance.
• 2026 Adjusted EBITDA Guidance — Approximately $667 million, which aligns with the midpoint of the company’s prior range.
• 2027 Outlook — High single-digit to low double-digit growth in Adjusted EBITDA and Adjusted EPS, supported by core business expansion and Special Materials contributions.
• Capital Expenditures — Approximately 6% of revenue expected for 2026 and 2027, focused on manufacturing capacity and fuel capabilities.
• Backlog — $8.6 billion, including approximately $500 million in backlog acquired through the Precision Custom Components transaction.
• Naval Propulsion — $189 million for the annual fuel contract, with management currently negotiating the next multiyear pricing agreement.
• High-Purity Depleted Uranium — $1.6 billion contract value, with a new facility in Jonesborough, Tennessee, expected to drive revenue growth starting in the fourth quarter.
• Cambridge Facility Capacity — 50% increase in heavy component manufacturing capacity following the completion of an expansion project.
• TRISO Fuel Agreement — 1 metric ton initial allocation to Antares, marking the company’s first large-scale commercial customer for this fuel type.
• Medical Divestiture — On track to close later this year, leading to an expectation of low single-digit total revenue growth for Commercial Operations in 2027.
• Dividends — $24.7 million paid to shareholders during the third quarter at a rate of $0.27 per common share.

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

• Fitzgerald noted that the company expects “margin mix effects associated with scaling new programs” in the Government Operations segment during 2027.
• Geveden stated, “the distribution of risk,” between hyperscalers, utilities, and the government is a primary gating item for commercial nuclear final investment decisions.
• Fitzgerald indicated that free cash flow in 2027 will face a “$10 million headwind to pension contributions” primarily associated with the Kinectrics acquisition.

SUMMARY

BWX Technologies, Inc. (BWXT -0.18%) reported 10% revenue growth and 19% Adjusted EBITDA growth for the third quarter. Management highlighted the expansion of manufacturing capacity at the Cambridge facility and ongoing negotiations for the next multiyear pricing agreement in the Naval Propulsion business. The company confirmed its 2030 financial targets, which include revenue of $5.5 billion to $6 billion and Adjusted EBITDA of $1.1 billion to $1.2 billion. Management stated that growth in the Government Operations segment was supported by Special Materials and Advanced Nuclear programs, while Commercial Operations benefited from organic growth and the PCG acquisition. The company reported a consolidated backlog of $8.6 billion at the end of the quarter.

• CEO Geveden stated, “Commercial nuclear demand is precipitating rapidly on a global scale now, and we continue to expect to convert that demand into firm orders in 2027.”
• The technical services team is utilizing artificial intelligence to drive site performance and generate operating efficiencies across its portfolio.
• Management is finalizing design details for a new U.S. manufacturing facility for steam generators and reactor pressure vessels, with a final investment decision expected by year-end.
• Geveden noted that the BANR microreactor technology is “suitable for some large-scale applications” such as running military bases or providing industrial heat.
• The company remains on track to test a prototype centrifuge for the defense fuels enrichment program by the end of this year.
• Management indicated that the PCG acquisition assets are approximately 50% underutilized, providing immediate capacity for medium reactor components.

INDUSTRY GLOSSARY

• BANR: BWXT Advanced Nuclear Reactor, a transportable microreactor technology.
• CANDU: Canada Deuterium Uranium, a Canadian pressurized heavy-water reactor design.
• HALEU: High-assay low-enriched uranium, a type of nuclear fuel required for many advanced reactor designs.
• HPDU: High-purity depleted uranium.
• PCG: Precision Custom Components, an acquired business specializing in nuclear component manufacturing.
• Project Pele: A U.S. Department of Defense project to develop a mobile microreactor.
• SMR: Small modular reactor, a category of nuclear fission reactors smaller than conventional reactors.
• TRISO: Tri-structural isotropic, a type of robust nuclear fuel particle.

Full Conference Call Transcript

Operator: Ladies and gentlemen, welcome to BWX Technologies Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I would like to turn the call over to our host, Chase Jacobson, BWXT’s Vice President of Investor Relations. Please go ahead.

Chase Jacobson: Thank you. Good evening, and welcome to today’s call. Joining me are Rex Geveden, President and CEO; and Mike Fitzgerald, Senior Vice President and CFO. On today’s call, we will reference the third quarter 2026 earnings presentation that is available on the Investors section of the BWXT website. We will also discuss certain matters that constitute forward-looking statements. These statements involve risks and uncertainties, including those described in the safe harbor provision found in the investor materials and the company’s SEC filings. We will frequently discuss non-GAAP financial measures, which are reconciled to GAAP measures in the appendix of the earnings presentation that can be found on the Investors section of the BWXT website.

I would now like to turn the call over to Rex.

Rex Geveden: Thank you, Chase, and good evening to all of you. Just over a month ago at Investor Day, we outlined our path to $5.5 billion to $6 billion of revenue and $1.1 billion to $1.2 billion of Adjusted EBITDA by 2030, supported by our predictable core, significant incremental organic growth opportunities, focus on operational excellence and disciplined capital allocation. Our third quarter results reinforce that guidance with 10% revenue growth and 19% Adjusted EBITDA growth, including double-digit growth in both operating segments. Our businesses continue to execute well. We are converting opportunities into meaningful new awards, and we are expanding the industrial capabilities needed to support the next phase of nuclear growth. The demand environment remains exceptionally strong.

The need to address economic, national and energy security challenges globally is driving increased investment by our customers in nuclear national security and commercial power markets. Our national security customers are investing to reconstitute strategic deterrence capabilities that diminished after the Cold War and to radically improve energy resilience. Our commercial customers are investing in sustaining and growing their nuclear power generation fleets. Funding is coming from public and private sources, and there is solid bipartisan political support. What differentiates BWXT is our ability to translate that demand into executable programs and sustained financial growth.

Our technical capabilities, industrial scale and position in the nuclear value chain enable us to deliver integrated solutions for our customers and capture opportunities across these markets. Turning to our segment results and outlook. The Government Operations delivered a strong quarter with good operating performance across business lines, driving Adjusted EBITDA margin of 22.6%, reflecting the continued benefit of improved efficiency, operational discipline and higher manufacturing volume. In Naval Propulsion, we booked our annual fuel contract for $189 million and are actively negotiating the next multiyear pricing agreement. In Special Materials, our defense fuels enrichment and high-purity depleted uranium programs continue to ramp, driving the majority of Government Operations revenue growth in the quarter.

For defense fuels, we are designing an HEU enrichment facility in Erwin, Tennessee, and industrializing centrifuge technology in our Oak Ridge facility. We remain on track to test a prototype centrifuge by the end of this year. On HPDU, as part of our $1.6 billion contract to produce 300 metric tons of high-purity depleted uranium annually, we initiated construction of a new large-scale facility in Jonesborough, Tennessee, that will drive meaningful revenue growth in the fourth quarter and through 2027. Our technical services teams once again boosted earnings in the quarter with outperformance on key programs, including Hanford and Savannah River, among others.

From a business development standpoint, we were selected to provide a conceptual design for a lithium processing facility at the Y-12 National Security Complex in support of strategic deterrence. We expect the down selection for the next phase of this program in the first half of 2027. Further, our technical services team is rapidly adopting AI to drive site performance and generate operating efficiencies. This further differentiates TSG as we develop new growth opportunities in that business to augment our base of predictable core earnings. Moving to Advanced Nuclear. It was a busy quarter for operations and business development. We completed the core barrel assembly for Project Pele.

And just a few weeks ago, we hosted Energy Secretary Chris Wright at the BWXT Innovation Campus to see our progress firsthand before we deliver the reactor to Idaho National Laboratory next year. We also secured new wins for the BWXT advanced nuclear reactor called BANR. We were selected for the U.S. Army’s Janus Program that aims to install more than 20 microreactors of various sizes across 5 military bases. We are working through the first phase of the contract, including final site selection at Fort Campbell, initiating nuclear regulatory processes and TRISO fuel production. In parallel, we are working with our partners to fully define the program’s costs, execution approach and operating plan.

In addition, BANR was selected by Prodigy Clean Energy for its transportable nuclear power plant project in Belledune, New Brunswick, Canada, our first international microreactor win. This is an excellent example of cross-segment collaboration as it brought together capabilities from our advanced nuclear teams from Lynchburg and commercial power and Kinectrics teams from Ontario, which will supply chain development and licensing services to Prodigy, highlighting the benefits of our broad capabilities across the nuclear value chain. And lastly, we entered into a multiyear agreement to supply an initial allocation of 1 metric ton of TRISO fuel to Antares, our first large-scale commercial customer.

This fuel will be manufactured in Lynchburg on the same TRISO production line used for Project Pele, the Antares Mark-0 criticality demonstration reactor and others. We will also manufacture TRISO for the Janus Program on that line. These awards are tangible proof of BWXT’s leading position in the advanced nuclear market as we uniquely combine microreactor technology, TRISO fuel manufacturing and life cycle services into a differentiated integrated offering. Turning now to Commercial Operations. Organic revenue increased 15% and total revenue grew 25%, driven by double-digit growth in commercial power, Kinectrics and medical, along with contribution from the PCG acquisition. During the quarter, we completed the expansion of our Cambridge facility and began utilizing new sections of the plant.

The expansion increases our heavy component manufacturing capacity by about 50% and will improve operating efficiency and throughput as we execute on our deep backlog associated with CANDU life extensions and SMR projects and other new awards. In the United States, we are finalizing design details for a new commercial manufacturing facility for large steam generators and reactor pressure vessels. The expansion will complement our existing operations and amplify our role as a super merchant supplier of critical, highly engineered nuclear components. We intend to make a final investment decision by the end of the year. In Europe, we are also seeing high interest in nuclear power, particularly in markets where energy security is a national priority.

I recently met with government officials and business leaders in Poland, where there is a strong appetite for nuclear power to address their energy security and decarbonization goals. Specific to BWXT, there is a meaningful opportunity to deploy microreactors there and participate in the SMR supply chain. Any decision to invest in manufacturing capacity in Poland would be backed by firm orders and appropriate government partnerships. Commercial nuclear demand is precipitating rapidly on a global scale now, and we continue to expect to convert that demand into firm orders in 2027 and in the years to come as the trickle becomes a flood. With that, I will turn the call over to Mike.

Michael Fitzgerald: Thanks, Rex, and good evening, everyone. I’ll begin with total company financial highlights on Slide 4 of the earnings presentation. Third quarter revenue was $953 million, up 10% year-over-year, including 7% organic growth. Strong Commercial Operations performance was complemented by steady growth in Government Operations. Adjusted EBITDA increased 19% to $180 million, driven by double-digit growth in both operating segments, partially offset by higher corporate expense as we continue to invest for the future. Adjusted earnings per share increased 26% to $1.26, driven largely by higher operating income as nonoperating benefits from lower interest expense and a lower tax rate were partially offset by lower other income.

Third quarter free cash flow was $151 million, reflecting strong earnings, favorable advanced billings and disciplined working capital management. Given our year-to-date performance, we raised the low end of our 2026 free cash flow guidance, resulting in a revised range of $350 million to $360 million. We continue to expect capital expenditures of approximately 6% of revenue in both 2026 and 2027. These investments are focused on expanding our manufacturing capacity, scaling fuel capabilities and supporting programs where we see significant long-term demand. Our improving credit profile, including Fitch’s inaugural investment-grade rating and Moody’s positive outlook revision reinforces the strength of our financial position and provides flexibility as we execute on our disciplined capital allocation strategy.

As we discussed at Investor Day, our top capital allocation priority is investing in attractive organic growth opportunities, maintaining the capacity to pursue disciplined acquisitions and return capital to shareholders when appropriate. We continue to view balance sheet flexibility as an important competitive advantage as BWXT executes on its next phase of growth. Moving to the segment results on Slide 6. Government Operations revenue increased 4%, driven by growth in Special Materials and Advanced Nuclear, partially offset by modestly lower Naval Propulsion revenue from reduced materials procurement compared with a strong prior year quarter.

Adjusted EBITDA was $144 million, representing a margin of 22.6% and up 22% from last year, supported by strong operational performance, productivity improvements and higher technical services equity income. As we look ahead, we remain focused on sustaining productivity improvements in our established businesses while scaling special material programs, supporting our expectation for Adjusted EBITDA growth broadly in line with revenue in 2027. Turning to Commercial Operations. Revenue increased 25%, including 15% organic growth, driven by increases in commercial power, Kinectrics and medical plus the contribution from the PCG acquisition, which closed in early July.

Growth in commercial power and Kinectrics reflected the continued strength of our Canadian components manufacturing and services businesses as well as increased engineering services revenue in the United States. Adjusted EBITDA in the segment grew 17% to $41 million. Adjusted EBITDA margin in the quarter was 13.2% as higher volume and good execution more than offset mix and continued investments to scale the business for future growth. Turning to our consolidated guidance for the remainder of 2026 and our preliminary outlook for 2027. In 2026, the assumptions in our operating guidance are unchanged. We anticipate Adjusted EBITDA of approximately $667 million and adjusted earnings per share to be $4.72 to $4.77, both at the midpoint of the previous guidance ranges.

Looking ahead to 2027, our preliminary outlook reinforces the financial trajectory outlined at Investor Day. We expect high single-digit to low double-digit growth in Adjusted EBITDA and adjusted earnings per share. Importantly, we expect this growth to be driven by continued expansion in our core businesses, increased contributions from Special Materials and ongoing improvements in operational execution and productivity. 2026 has been an exceptionally strong year, and we have a solid foundation for continued earnings growth in 2027, primarily supported by our existing businesses and programs with additional opportunities as new programs and commercial awards progress. Within Government Operations, we expect high single-digit to low double-digit revenue and Adjusted EBITDA growth.

Special Materials will remain a significant growth driver, complemented by increased Naval Propulsion and Advanced Nuclear activity. We expect continued productivity improvements and operational execution to help offset the margin mix effects associated with scaling new programs. In Commercial Operations, we expect high single-digit organic revenue growth and low single-digit total revenue growth due to the planned medical divestiture, which is on track to close later this year. Organic revenue growth will be supported by our components manufacturing and services businesses. We also expect Commercial Operations Adjusted EBITDA margins to improve by 50 to 100 basis points, reflecting higher volume, continued operational improvements and better absorption of growth investments, resulting in high single-digit Adjusted EBITDA growth.

From a cash perspective, we expect another year of solid generation in 2027 with free cash flow anticipated to be flat to slightly higher compared to 2026. While earnings growth should support increased operating cash flow, we expect continued investments in working capital and capital expenditures to support the significant growth opportunities across our business. We remain focused on disciplined cash conversion and capital deployment as we execute our long-term growth strategy. Importantly, our preliminary 2027 outlook remains consistent with the longer-term financial framework presented at Investor Day and reinforces our confidence in achieving our 2030 targets. Overall, we had a solid quarter.

Our focus on operational excellence, converting our bid pipeline into firm awards and driving profitable growth, combined with our strong balance sheet and disciplined capital allocation strategy positions us well to deliver another strong year in 2027. With that, I’ll turn it back to Rex for closing remarks.

Rex Geveden: Thanks, Mike. To date, 2026 has been an excellent year for BWXT, and I’m excited about what lies ahead. As we close, I will leave you with 3 thoughts. First, our core businesses continue to deliver strong predictable performance, providing the foundation for our long-term growth. Second, the opportunities we discussed at Investor Day are blossoming. We are securing new contracts, executing on strategically important programs and investing in the industrial capacity needed to grow the business. And third, our focus remains on execution. We recognize the significant opportunities ahead of us and know that long-term value creation depends on converting those opportunities into profitable growth and strong cash generation.

BWXT is exceptionally well positioned to do that, and our performance this quarter underscores our confidence in the 2030 financial targets we established at Investor Day. With that, we look forward to your questions.

Operator: [Operator Instructions] Your first question comes from the line of Matt Akers with BNP Paribas.

Matthew Akers: I wonder if you could touch on a little bit more on the Government Operations margins. It was a really good quarter. And I know you guys — you called out the equity income, I think even excluding that was pretty good. So if you could just kind of talk through kind of the big drivers there.

Michael Fitzgerald: Yes. So thanks, Matt. Look, we’re really, really proud of kind of the execution that we’re performing within Government Operations. We’ve seen a significant increase in our overall margin from our expectations at the beginning of 2026. I think when you get down to it and really what’s happening is we’re seeing a substantial increase in the efficiency of the volume of the work that we performed specifically in our naval nuclear business. So those contracts are performing very well. We’re very focused on managing our volume so that it’s highly efficient work. And we’re seeing the results of that. So excited to see that.

I think if you look at some of the newer programs that we’ve talked about, no major changes there. I think that the growth on those programs, they’re performing well, but they’re in early stages. And as we’ve discussed before, we don’t take large margin adjustments on those until we get further along from a progress standpoint. So what you’re seeing is really excellence in the efficiencies of our core business. And certainly, it’s great to see.

Matthew Akers: Yes. And then — was there backlog acquired as part of the PCG deal? It looks like your commercial backlog is up a bit. And if so, can you talk about what that is, sort of how that runs off and how that fits in with your plan to kind of use that capacity for BWXT work?

Michael Fitzgerald: Yes, that’s right. I mean, so when we announced the PCG deal, what we had said at the time was that there was still — most of that business, I think, 75% to 80% of that business was still in the kind of naval work and ultimately, the rest is commercial. We had close to $500 million in backlog associated with that transaction. So that came on to the books associated with that. That will burn off over a period of time. I mean the thing that’s encouraging is we’re seeing growth in the PCG business.

But as we stated before, a lot of the — if you look at the capacity, we thought that the factories were about 50% unutilized and that we could, with some modest maybe CapEx investments, be able to get another 50% of that. So we still want to continue to see that government work continue to be performed, and we’ll see some growth in that, probably at a low single digit. But where we’re able to do the commercial work is going to be in tapping into that unutilized capacity that currently exists at the site.

Operator: Your next question comes from the line of Bob Labick with CJS Securities.

Bob Labick: Great. Congratulations on another strong execution and continued great outlook. I wanted to dig into your capital allocation comments between today a little bit and then some from the Analyst Day or Investor Day as well. I think to maintain the 2 to 3x leverage by 2030, you’ll be spending, I think, somewhere between $3 billion and $4 billion going forward. And you just reiterated, you want to spend this on attractive organic opportunities as kind of first thing you want to spend it on. So could you maybe tell us the top priorities, maybe 3, 4, 5 opportunities out there? And then how much of that $3 billion plus spending is necessary to reach your revenue and EBITDA numbers?

Or how much is upside? How should we think about that capital allocation?

Michael Fitzgerald: So one of the things that we laid out is that we had — if you looked at kind of the slide from our Investor Day, it actually showed that amount of kind of additional capital. So the way I would think about it is the 2030 targets are really anchored to the 5% to 6% core CapEx spending that we’ve discussed from a target standpoint. We also stated that we didn’t need any specific M&A per se to be able to hit those 2030 targets. So I would think of that as additional deployment opportunities above and beyond the core business and what we laid out there from a 2030 target standpoint.

With that said, I think we’re seeing opportunities out there. However, we’ve made it very clear that when there’s not organic opportunities or when there’s not additional M&A targets that we would return that capital to shareholders as appropriate. So I still think there’s a real possibility for that. If you look in our 2027 guidance, we’ll do some modest share repurchases, consistent with our prior practice of offsetting dilution. But we are focused on kind of the — those capital allocation priorities as stated. When you look at from a priority standpoint, we want to continue to build off the momentum that we’ve been seeing. So we’ve talked about capacity investments that we’ve made across the business.

We certainly have talked about Special Materials, and that’s been a great part of our growth story. And then I think you’ll hear more around we’re seeing a lot of some traction happening with our microreactor business with the program Janus win and BANR being selected in Canada as well. And so excited to see that market. And hopefully, there’s some additional opportunities there.

Operator: Your next question is from the line of Tomo Sano with JPMorgan.

Tomohiko Sano: Maybe just on Commercial Operations. Your full year guidance calls for roughly 45% growth in this business. Given where you are through Q3, that implies a pretty big step-up in Q4. Is there something specific a large order or revenue recognition event driving that acceleration, please?

Michael Fitzgerald: Nothing unusual to call out. We’ve always experienced some ramp in the fourth quarter as we look at just kind of the timing of that overall from an execution standpoint. You are — we are also seeing there will be contribution from PCG as well. So if you look at that on over a year-over-year basis, you’re going to see some additional growth there. But I don’t think anything unusual from a fourth quarter perspective.

Tomohiko Sano: And just a follow-up on PCG acquisition. It’s been a few months since you closed the acquisition. How is integration tracking? Are you seeing the synergies and cost benefits you expected on schedule?

Michael Fitzgerald: Yes, absolutely. Actually, the integration is going very, very well. We did not — if you remember, the thesis around this transaction was not necessarily revenue synergies. We did see some opportunities on the cost side, but we didn’t put out any specific targets related to that. However, I would say we’re finding a lot of opportunities and the team has been getting very involved in how we can really address this from a U.S. commercial market standpoint. So I’m very pleased with the progress that we’ve made, and they’ve been a great addition to the overall company.

Operator: Your next question comes from the line of Jeffrey Campbell with Seaport Research.

Jeffrey Campbell: Your recent press release concerning rumors of Poland investment was explicit in saying that such a decision would require firm orders of sufficient size to transact. Should we assume the same structure applies to beginning construction of a new U.S. commercial heavy component facility?

Rex Geveden: No, Jeff. I don’t know, that U.S. facility does not depend on firm orders. That said, there’s so many things in the pipeline that we’re certainly compelled to go ahead with that U.S. plant. The Poland situation had to do with some discussions around how much demand we think will precipitate for microreactors and small modular reactors in Poland. And there were certainly gigawatt scales of demand that we discussed. But no, we’re going ahead with the U.S. plant regardless.

Jeffrey Campbell: Okay. Great. One of the things that impressed me in the Investor Day was the potential remuneration from your exposure to CANDU. Recently, I read that AtkinsRealis, the state of Indiana and Hoosier Energy had partnered to evaluate up to 6 gigawatts of CANDU reactors for that state. So high level, what do you think about CANDU potentially finally making inroads into the U.S.? And is it reasonable to assume BWXT could potentially be a component supplier to this project if it ever materializes?

Rex Geveden: Yes. Maybe to put some things in context, Jeff, if you look back at the history of CANDU and there were about 30 CANDU units delivered globally, 20 in Canada itself. And so 10 or so that went to other places, South Korea, China, India, Romania and Argentina. So — and that’s with — that’s 30 large plants compared to a total global installed base of about 600. So let’s say it captured 5% of the international market over the course of those years. And maybe that’s a reasonable assumption going forward. I certainly would hope and certainly, the Canadians hope that they can build some — can build an international market from CANDU and have a real export capability.

And I think that’s feasible. And I certainly do hope that they can export into the U.S. And if they do, we will certainly be in that supply chain, probably supplying fuel, major components, feeders, all the things that we normally do, we would do for that. And that’s the purpose of Canada’s investment in the CANDU industrial supply base is to be able to create an industry there that’s durable and has export qualities to it.

Operator: Your next question comes from the line of Marc Bianchi with TD Cowen.

Marc Bianchi: I want to ask first on the ’27 outlook. It looks like you upgraded the EBITDA growth expectation a little bit from the Investor Day. Could you talk a little bit about that?

Michael Fitzgerald: Yes. I think, look, we’re seeing some — we’ve had really strong performance in the underlying margin for this year. We’re seeing some continued momentum as we go into 2027. So I would think of it as kind of a refinement of our expectations, nothing material, but we feel confident in ultimately getting to high single to low double digit, both on adjusted EBITDA as well as EPS.

Marc Bianchi: Okay. Is that more coming from government side of the business, just given the beat in 3Q here?

Michael Fitzgerald: I think we look at this from different scenarios. So we’ll run multiple scenarios. I think it’s fair to assume that our government business will continue to perform very well. As mentioned, we’re kind of coming off of that — some of those older pricing arrangements. And so we’re starting to see that come into the financials as we execute successfully on those programs. But I would say we’re also seeing continued momentum in commercial. So it’s positive across the board.

Marc Bianchi: Okay. And then if I could just ask one more. On the potential orders for commercial, there’s — I think everybody sort of read the news around we’ve got this DOE long lead up program for large reactors and then there’s a Department of Commerce track for 8 reactors, and there was an announcement, I guess, it’s several weeks ago about the Korean program there. Like which one of those feels like we could get a quicker hit? And maybe do you think that BWXT is equally positioned for both of those programs or maybe more weighted to one than the other? Just curious for any color you can provide.

Rex Geveden: Yes, Marc, I’ll add some color there. I think in my opinion is that the SMR opportunity is a bit ahead of large reactor opportunity. That’s just my feel for it. We’re certainly in active discussions with Westinghouse and GE on all of that. So I think you’d see — we’d see more activity in our order book. I think first from the Darlington project, units 2, 3 and 4 up there. I think closely following that would be the TVA opportunities, the 10 reactors there, 5 at Clinch River and then 5 at Bellefonte, I think. And then with the APs to follow that would be my guess.

Now all those discussions are active, and I think all of that represents opportunity for us, but that’s how I see the sequencing. And I said at the beginning of this year that I expected us to have new orders for U.S. reactor plant builds in — by the end of this year. And I still think that’s a possibility for us, but certainly no later than about the first half of the next year.

Operator: Your next question comes from the line of Scott Deuschle with Deutsche Bank.

Scott Deuschle: Mike, can you walk through what’s been driving the relatively slow organic growth at Government Operations year-to-date? And maybe just kind of what the headwinds have been? And has the revenue cadence surprised you at all? Or is it consistent with how you thought the year would play out?

Michael Fitzgerald: No, I would say it’s consistent. One of the things as we came into 2026 we were going to see a larger ramp on the — on the newer programs, but specifically on the HPDU program as we get on to the third and the fourth quarter. And so we’re continuing to see that. We did discuss, I think, a little bit last quarter how we were performing actually really well on that program. And because of that, it was lower revenue just because we had really strong margin performance, which under a percent complete model actually results in lower revenue. So no surprises.

I think those programs are performing well, and we’ll continue to see them into ’27 as well.

Scott Deuschle: Okay. And then, Rex, if the first U.S. AP1000 builds ultimately get funded by South Korea as opposed to another funding source, is that a negative as it relates to your content opportunity on those initial builds? Or is the funding source not expected to influence supplier content allocations?

Rex Geveden: I think it’s hard for me to say on that one, Scott. I would say that it’s our expectation that we will have to go and compete with Doosan and IHI and all the usual suspects when those opportunities come up. That said, I think there’s going to be plenty of opportunity for all the players there because there’s actually still not that much capacity globally for these kind of components. So we’ll compete and hopefully get our share and make a great business out of it.

Scott Deuschle: Is Westinghouse typically the one deciding who gets the content or someone else?

Rex Geveden: No. I mean it’s my expectation that Westinghouse will be making those decisions.

Operator: Your next question comes from the line of Jeff Grampp with Northland Capital Markets.

Jeffrey Grampp: Rex, sticking on the new build topic. From your guys’ perspective, what are kind of the main gating item or items keeping new build projects from reaching an FID? Is it predominantly finance and kind of structuring things related to that? Or are there other particular items that you guys see that kind of holding things up from getting a couple of projects across the finish line here?

Rex Geveden: Yes, I’m not in those discussions, but what I’m hearing about is it has to do with the allocation of risk. How much are the hyperscalers going to take, how much of the utility is going to take, if that applies, how much is the government going to take? Are there any backstops and how much will the technology provider itself take? And so I think it’s about — we’ve been hearing this concept that everyone bleeds, but no one bleeds to death as it relates to any overruns or risks in the project. So I think it’s about the distribution of risk.

I don’t think it’s so much about financing because in the case of the 10 X-300s and certainly those 10 AP1000s and then that second tranche, those are going to be funded through the sovereign investments from South Korea and Japan, as I understand it. So I think it’s less about financing. It’s more about allocation of risk.

Jeffrey Grampp: Got it. I appreciate those details. And for my follow-up, can you touch on BWXT’s capabilities to handle multiple awards of projects for larger nuclear new builds if this accelerates into the coming years, how does your ability to scale compare to the business opportunities you guys are seeing? And maybe where does that rank in terms of, I guess, the list of worries on a given day for you guys in terms of just capacity to meet the demand that’s out there?

Rex Geveden: Yes. Well, good problem to have. I would say we’ve been trying to anticipate all that. We, of course, just increased our production capacity by about 50% at Cambridge, Ontario. We literally just completed that expansion under budget, slightly under budget and about on the original schedule. So we’re prepared there. Of course, the PCG acquisition was around that thesis. That, as Mike said in an earlier question, we think that, that asset is about 50% underutilized, and we can build some capacity there for medium reactor components. And then the U.S. plant that we’ve been talking about for the past couple of quarters is intended to deal with that demand.

So I mean, we’re stacking them up we’re stacking up our capacity. We’re certainly one of the largest players in the world, and I think we’ll be prepared for it.

Operator: Your next question is from the line of Mark Shooter with William Blair.

Mark Shooter: Congrats on the quarter. And Rex, I heard you mention that you’ll have a prototype test of the DUECE centrifuge by end of the year. I was wondering if you can give us some color on the metrics you’ll be judging it by. And speaking of the NNSA program, I know we also talked about the potential of widening that scope to include unobligated LEU and HALEU enrichment. So I was wondering if you could tell us how you’re thinking about that now.

Rex Geveden: Yes. Sure thing, Mark. What we’re doing, of course, in that program is taking technology developed at Oak Ridge National Laboratory and taking it into industrializing that technology and building production capacity and ultimately, a demonstration cascade at our plant in Oak Ridge. And so I certainly can’t cite the particular success criteria for that demonstration. It is just a demo. And what we’re doing, of course, is trying to reduce the complexity, exercise the supply chain and be able to build an unobligated system. So I think sort of just spinning that thing will be the proof that we’re looking for, and we’ll be building certainly many more units in the future.

As it relates to the opportunity in between the technology transfer and the high enriched uranium scope that we have at our Erwin, Tennessee plant, we are certainly pursuing adding low-enriched uranium and high-assay, low-enriched uranium to the scope. Those discussions are ongoing. I can’t offer any details on that, but it’s certainly in our sights, and we hope to add it.

Mark Shooter: That’s great. Switching gears on to the other fuel, TRISO. Congrats on the Antares win. And so you’ll be supporting Antares, Project Pele, Project Janus and also from the Lynchburg facility. So can you remind us what capacity increases are needed today to meet those commitments? And what level of fuel contracting do you need to see to require an expansion past Lynchburg?

Rex Geveden: Yes, I’ll offer some details there, Mark. We were able to produce a couple of hundred kilograms a year on that Lynchburg line, and that’s enough capacity for fully fueling the core of the Pele reactor and some other things that we did, the Antares demo and a couple of other customers that we actually haven’t — that we haven’t disclosed. Through some technology changes and some capacity we can add and from some operational improvements, we can at least quadruple the output of that facility. That’s our Lynchburg plant that I’m talking about, not the greenfield. So that gives us quite some capacity for the near term.

I think in terms of making the larger investment decision and getting to multiple megatons of — sorry, multiple metric tons of capacity, say, at a Wyoming plant, we’re going to need to see 2 things. We need to see larger demand precipitate first with our partner, Kairos, for the Hermes reactor. That one as an anchor tenant will consume a lot of TRISO and then others, right, multiple BANR orders, for example. So we need the precipitation of concrete, significant demand in the future. And we also need to see HALEU become available commercially. And those are 2 important gates, and we’ll get those — we’ll get to that decision as that becomes clearer.

Operator: Your next question comes from the line of Laurence Alexander with Jefferies.

Laurence Alexander: Just a simple one on Commercial Operations. The margin improvement expected for ’27, how important is that? I mean, given the range of the growth opportunities you’re evaluating and the incremental investments to support that, do you need that kind of — is that sort of a flexible part of your bridge for next year?

Michael Fitzgerald: Yes. Sorry, I’m not sure I follow. So from a — we are seeing some margin improvement as we look into 2027. That’s — there’s a large mix. If you kind of remember what commercial, we have kind of a services business component that we have ultimately the components margin. So that’s just on the components manufacturing. And then we also will have the kind of the contribution of PCG that would continue. So different margin mix profiles. I think we’re seeing some substantial growth in the underlying revenue base for the components business.

That will — that is offsetting some of the headwinds that were associated with the divestiture of Medical, which was a higher growth — higher kind of margin business as well. So I think when you blend all that together, I mean, we’re not seeing anything unusual. The margin continues to perform well, and we’re seeing a slight uptick primarily as a result of just kind of overall mix and growth in different aspects of the business.

Operator: Your next question comes from the line of Andre Madrid with BTIG.

Andre Madrid: You had mentioned it before that maybe the gating factor in seeing more commercial orders convert was kind of the allocation of risk. Do you expect tomorrow’s midterm elections to potentially, I guess, complicate those conversations any further? Or is that not really a concern?

Rex Geveden: I don’t think it’s a big concern, Andre, because those deals are constructed outside the framework of congressional appropriations and authorization and they don’t come through the President’s budget request. So in some ways, it’s outside that whole system. It obviously relates to the tariff deals that were done and the sovereign investments that were made to offset the threat of tariffs. So I think those deals go forward regardless. And all that said, and I’ve said this often, I’ve been in the seat for 10 years and through multiple administrations and support for nuclear has only gotten stronger and stronger. It’s bicameral, it’s bipartisan. It makes sense for so many different reasons.

And so just about everyone lines up behind nuclear now. So I don’t expect a lot of impedance here.

Andre Madrid: Got it, Rex. That’s helpful. And staying on that point of commercial order flow, I mean, you said that you were expecting something to start — some of these to start picking up in the latter part of this year, but definitely no later than the first half of next year. I mean, given the back-end weighted nature of your 2030 targets, I mean, at what point does the pace of commercial order flow start to become a concern? If we don’t see, I guess, a specific number of awards come in, in the first half of next year, does that kind of put risk on the long-term guidance that you guys outlined?

Rex Geveden: I don’t think so, Andre. I think we’ve got multiple ways of achieving that guidance, as we said, and we’ve mapped in some modest success in commercial orders for new builds. And yes, we’ve got multiple ways to win, and we intend to do so.

Operator: Your next question comes from the line of Pete Skibitski with Alembic Global.

Peter Skibitski: Rex, I’d love to get a sense for the revenue opportunity with this New Brunswick Prodigy win, I guess, we can call it. It looks like my simplistic math, it looks like it could be maybe 2 or 3 BANR reactors. But can you give us a sense maybe for what a contract will be signed and maybe if there’s a way you could size it or put a framework around it?

Rex Geveden: Yes. Maybe I’ll be a little bit coy here, Pete, because if you look at the way — so just backing up a little bit, if you look at the way that Janus program is structured by the Army and DIU, what they’re intending to do is create a commercial opportunity for microreactors, even though in that case, you’re selling into the government market. And this one in Canada, of course, is a purely commercial endeavor. And we’ve got multiple other commercial opportunities around BANR. So we’re not being — we’re certainly not intending to disclose any pricing details because of competitive sensitivities.

But yes, I mean, if you think about selling 3 microreactors and it is a significant revenue opportunity for us and has the potential to be an exciting business for us. But it’s super early days on that one, right? We’ve been selected for technology. The financing has got a line up behind it. New Brunswick has committed to an MOU for a power purchase agreement. So there’s some government strength behind it, but there’s a long road ahead on this one. And I’d like to offer you more details, but I just can’t right now.

Peter Skibitski: Understood. So time lines, so you do Fort Campbell first and then would Tata be the first kind of commercial deployment and maybe then New Brunswick?

Rex Geveden: I mean, certainly, Fort Campbell’s first in line. But yes, opportunities in Wyoming, opportunities in Poland, Canada, those are all kind of to me sort of running in parallel for second place.

Peter Skibitski: Okay. Okay. Got it. If I can ask one last one just because it just popped up. Obviously, Army and Janus is together, but now the Navy is talking about microreactors. I was wondering if you guys are going to do the reactor for the Navy at NSWC Crane in Indiana.

Rex Geveden: No. That’s a smaller microreactor and being done by one of our competitors. And by the way, Pete, if I could just add a footnote to this whole discussion. A lot of these microreactors are out there in the sort of megawatt range, let’s call it. There is one 5-megawatt reactor. And what we have, of course, with our product, the BANR reactor on the Janus program and elsewhere is a 20-megawatt electrical output, 22-megawatt actually, 75 megawatts thermal. So — and it’s a very high temperature reactor. So it’s suitable for some large-scale applications, even though it’s a microreactor. You can run large military bases with that. You could provide industrial heat at a large chemical plant, for example.

And so we have — we’re seeing a range of opportunities that are completely unavailable to our competitors in that space because of the scale of that reactor. That said, it still fits on a train. This is a rail shippable actually modular reactor. When we talk about small modular reactors, those are not small. And frankly, they’re not modular. They’re built in the field. These things are actually literally built in the factory just as our naval reactors are. And so we’ve got the largest scale microreactor that’s capable of addressing some very big problems, and that’s one of the reasons why we’re bullish on it.

Operator: Your next question comes from the line of David Strauss with Wells Fargo.

Joshua Korn: It’s Josh Korn on for David. I wanted to ask about the free cash flow guidance. I guess, what’s weighing on cash in the fourth quarter? And then you seem to be implying a pretty big working capital headwind into next year. Just kind of anything you could provide there?

Michael Fitzgerald: Yes. I think — so fourth quarter is just the timing. We had a really strong third quarter. So you’re seeing some of that just on overall timing coming into the third quarter. But we feel good about where we’re guiding for the year. And I think we have a great opportunity to execute on that. When you look at 2027, there’s a couple of things that are going on. One, we got about a $10 million headwind to pension contributions. This is normal course, primarily associated with the Kinectrics acquisition.

We have a little bit of working capital investment for some of the growth opportunities, and there is some timing of just overall milestones, specifically on the HPDU and kind of our newer enrichment programs. But I think at the end of the day, we’re seeing — if you look at kind of the underlying true performance from an OCF perspective, we’re still seeing good conversion on our core businesses. So a little bit of headwind as we invest for growth and some other kind of unique items, but we still ultimately feel good about where we’re going to land for the year.

Operator: Your next question comes from the line of Peter Arment with Baird.

Peter Arment: A lot of questions asked. But Rex, maybe just a quick one on the budgets. If we don’t have any budgets resolved post midterms here and things linger into next year, does that have any impact on your thoughts on ’27? Or is that not really an issue regarding for you guys?

Rex Geveden: Peter, historically, we’ve been able to work through those continuing resolutions in pretty good shape because almost everything in our portfolio is program of record and those get funded at 95% of the prior year or whatever. And we typically have some uncosted carryover that’s able to sustain us. We sort of got to the end of our rope on some TSG programs last year when that one ran extra long. But broadly speaking, we’ve been a little bit immune to CRs. And so I don’t think it certainly doesn’t influence how we think about the forecast right now.

Operator: And our final question comes from the line of Michael Ciarmoli with Guggenheim Securities.

Michael Ciarmoli: Rex, we get this question a lot from investors on the AP1000, the Westinghouse. And you guys have, I guess, sized it already as a couple of hundred million dollars of content. But just given the comments you made, I mean, how much blood are you willing to lose on that content if risk is going to be spread around? And I guess I think about it from a margin standpoint, are there any terms or any potential content or undertaking that would be too risky for you guys?

Rex Geveden: I think — so Mike, component manufacturing is something that we understand very, very well, right? And the opportunities we’ll go after would be things like RPVs and steam generators and those kind of components that we understand how to make. I think that’s a very, very different category of risk than delivery risk. Project delivery risk is what it’s all about. And I’ve been saying of late that, that we need more innovation on the delivery side because these final investment decisions ultimately in the commercial sense are driven by the capital cost and the cost of capital. So we, the industry, have to deliver these reactors more quickly and more reliably.

So it’s not — yes, I don’t see that component manufacturing bears the same kind of risk as delivery. Now we’ll certainly have — we’ll certainly experience price pressure. We always do that. But we know how to make steam generators, heat exchangers, control rod drive mechanisms, reactor pressure vessels, just bring it on, right? We can accept that risk, and we do every day.

Michael Ciarmoli: Got it. And presumably, that’s all contemplated in your 2030 forecast in terms of a margin profile?

Rex Geveden: Absolutely.

Operator: And with no further questions in queue, I will now hand the call back to Chase Jacobson for closing remarks.

Chase Jacobson: Thank you to everyone for joining us today. We look forward to seeing and speaking with many of you at upcoming investor events. You can all feel free to reach out to us at [email protected], and we look forward to talking to you and seeing you soon. Thanks for the support.

Operator: Thank you again for joining us today. This does conclude today’s conference call. You may now disconnect.