BWX Technologies, Inc. Stock

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.

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.

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 predictable core significant incremental organic growth opportunities focused on operational excellence and disciplined capital allocation. Our third quarter results reinforce that guidance with 10% revenue growth and 19% and 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 are 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. 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 and 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 out performance 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. And -- 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 2 weeks ago, we hosted Energy Secretary, Chris Ride 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 micro reactors 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 Trio 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 and initial allocation of nonoptical 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 Trice 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 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 governments 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's a meaningful opportunity to deploy microreactors there and participate in the SMR supply chain. In a 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 term 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.

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 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, significant long-term demand. Our improving credit profile, including its 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 containing 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 BWP executes on its next phase of 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 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 and 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, Conectric and Medical plus the contribution from the PCG acquisition, which closed in early July. Growth in commercial power and Conectric 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%, and as higher 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 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 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 and with free cash flow anticipated to be flat to slightly higher compared to 2026. [Audio Gap] .

[indiscernible] I will leave you with 3 thoughts. First, our core businesses continue to deliver strong predictable performance, providing the nation 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 in 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 Instructions] Your first question comes from the line of Matt Akers with BNP Securities for BNP Paribas.

I wonder if you could talk -- touch 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 maybe you could just kind of talk through kind of the big drivers there.

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 expectation beginning in 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've performed specifically in our naval nuclear business. So those contracts are performing very well. We're very focused on managing our volumes 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 on from a progress standpoint. So what you're seeing is really the excellence in the efficiencies of our core business. And certainly, it's great to see.

Yes. And then was there a backlog acquired as part of the PCG deals, 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 capacity for BWXT work?

Yes, that's right. I mean 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 have 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.

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

Congratulations on another strong execution and continued to create. I want to dig into 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?

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 at our 2027 guidance, we'll do some modest share repurchase 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 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 the 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 and BANR being selected in Canada as well. And so excited to see that market. And hopefully, there's some additional opportunities there.

Okay. Super exciting. I'll jump back in queue. I know there's a lot of questions to follow.

Your next question is from the line of Tomo Sano with JP Morgan.

Good evening, everyone. Maybe just on commercial operations. Your full year guidance closed 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?

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 the all 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 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.

And just a follow-up on PCD 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?

Yes, absolutely. Actually, 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.

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

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

No, Jeff. I don't know that U.S. facility does not depend on on firm orders. That said, we -- there's so many things in the pipeline that we're certainly compelled to go ahead with that U.S. plan. the Poland situation had to do with some discussions around how much demand we think will precipitate for micro reactors 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.

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 Enlist, the State of Indiana and who's your energy have 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?

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 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 real assumption going forward. I certainly would hope and certainly the Canadian so 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 to create an industry there that's durable and has export qualities to it.

Your next question comes from the line of Marc Bianchi with TD Cohen.

I want to ask first on the 207 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?

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.

SP1 Okay. Is that more coming from government side of the business? Just given the beat in 3Q here.

I think we look at this from a different scenario, 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.

kay. And then if I could just 1 more. On the -- 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 fields like we could get a quicker hit? And maybe do you think that BWX 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.

Yes, Mark, I'll add some color there. I think -- in my opinion is that the SMR opportunity is a bit ahead of the 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've seen 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 TBA opportunities, the 10 reactors there about 5 at Clinch River and then 5 at Belfont 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 as 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.

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

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.

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 go 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 were -- 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.

Okay. And then, Rex, if the first U.S. 81,000 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 connections?

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 do so on 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 capacity globally for these kind of components. So yes, we'll compete and hopefully get our share and make a great business out of it.

Is West accounts typically the one deciding who gets the content or someone else?

No. I mean, it's my expectation that Westinghouse will be making those decisions.

Your next question comes from the line of Jeffrey Grampp with Northland Capital Markets.

Rex, sticking to the newbuild topic. From your guys' perspective, what are kind of the main gating item or items keeping newbuild 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 kind of holding things up from getting a couple of projects across the finish line here.

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 is -- are the hyperscaler is 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 at self-take. And so I think it's about -- we've been hearing this concept that everyone bleeds, but noone 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 -- I don't think it's so much about financing because 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.

Got it. I appreciate those details. And for my follow-up, can you touch on BWXT's capabilities to handle multiple awards or projects for larger nuclear new build, if this accelerates into the coming years, how does your ability to scale compared 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.

Yes. Well, a good problem to have. I would say if 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 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.

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

And Rex, I heard you mentioned that you'll have a prototype test of the dose centrifuge by end of the year. So 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 widening that scope to include unobligated LEU and halo enrichment. So I was wondering if you could tell us how you're thinking about that now.

Yes. Sure thing, Mark. What we're doing, of course, in that program is taking technology deleverage to National Laboratory and taking it into industrializing that that technology and building production capacity and ultimately, a demonstration cascade at our plant in Oakridge and so I certainly can't cite a 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 and offer any details on that, but it's certainly in our -- certainly in our sights, and we hope to add it.

That's great. Switching gears to the other fuel TRISO. Congrats me and Terry's win. And so you'll be supporting Antares, Project Pele, Project Janus, I mean also 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?

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're going need to see larger demand precipitate first with our partner, Kairos for the Hermes reactor. That 1 as an anchor tenant would 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 Halo become available commercially. And those are 2 important gates and we'll get to that decision as that becomes clearer.

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

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?

Yes. Sorry, I'm not sure I follow. So from a -- we are seeing some margin improvement as we look into 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 business that will -- that is offsetting some of the headwinds that were associated with the divestiture of medical which was a 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 is 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.

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

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?

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. And 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 remain 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 by camera, 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 impatience here.

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?

I don't think so, Andre. I think we've got multiple ways of achieving that guidance, as we've 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.

Yes, fully agree.

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

Rx, 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 a 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? .

Yes. Maybe 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.

Understood. So time line is [Audio Gap] so you do for Campbell first and then would caught up [indiscernible].

But yes, opportunities in opportunities in Wyoming, opportunities in Poland, Canada, those are all kind of to me sort of running in parallel for second place.

Okay. Okay. Got it. If I could ask one last one, just because it just popped up, obviously, Army and Jenesis, together. But now the Navy is talking about micro reactors, I was wondering if you guys are going to do the reactor for the Navy at NSW in Indiana.

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 micro reactors 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 -- with our product, the BANR reactor on the Janus program and elsewhere is a 20-megawatt electrical output, 22 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 micro reactor, you can run large military bases with that. You could provide industrial heat at a large chemical plant, for example. And so 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 microreader that's capable of addressing some very big problems, and that's one of the reasons why we're bullish on it.

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

It's Josh Korn on for 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.

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 just overall milestones, specifically on the HPU and kind of our newer enrichment 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 yet 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.

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

Yes, Mike Chase. A lot of questions asked. 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 7? Or is that not really an issue regarding for you guys?

Peter, historically, we've been able to work through those continuing resolutions in pretty good shape because almost everything in our portfolio is a program of record and those get funded at 95% of the prior year or whatever. And we typically have some uncast 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 does influence how we think about the forecast right now.

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

Sorry about that. Can you hear me guys? Rex, we get this question a lot from investors on the AP1000, the Westinghouse and you guys have, I guess, sized it already at -- that's 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 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?

Say. So Mike, component manufacturing is something that we understand very, very well, right? And the opportunities we'll go after would be things like RPBs 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 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 the industry have to deliver these reactors more quickly and more reliably. So it's not -- 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 exchange -- just bring it on, right, we can accept that risk and we do every day.

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

Absolutely.

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

Thank you for joining us today. We look forward to seeing and speaking and thanks for the support.

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

All right. Good morning, everybody. Thank you for coming. I'm Chase Jacobson, I'm the Vice President of Investor Relations and Strategic Finance here at BWXT. We're excited to have our 2026 Investor Day here at the NYSE. And thank you to those participating virtually as well. For those of you here in attendance, I think most of you have it, but you can access the presentation using the QR codes on the tables, and you can take the little phone stand home, as well, remember BWXT. It's also posted on the Investor Relations website.

A quick safety note for those in person. In the event of an emergency, please follow NYSE personnel to the exits, and there's a staircase by the elevator banks from which you arrived.

So during today's presentation, we'll discuss certain matters that constitute forward-looking statements that involve risks and uncertainties, and those are described here in the safe harbor slide. We'll also make reference to non-GAAP financial metrics, which are reconciled to GAAP measures in the appendix of the Investor Day presentation.

Okay. For the agenda, so the goal today is to give you an in-depth look at each of our businesses and insight into our many growth opportunities and how we're going to execute on that growth. We'll also be updating our medium-term financial targets. So we'll start with a presentation from Rex Geveden, our CEO. He will provide an overview of BWXT and our strategy. And then we'll move into Commercial Operations where John MacQuarrie, President of that business, will talk about our super merchant supplier role in the commercial nuclear power market and the large growth potential that we see there.

We'll then hear from Joe Miller, President of Government Operations, who will talk about our role providing nuclear solutions to some of our government's most critical missions. And then Mike Fitzgerald, our CFO, will discuss our financial strategy and our updated medium-term targets. And then Rex will come back with some closing remarks. We'll take a break at around 10:30 for about 10 minutes and then come back for a Q&A session. So please hold your questions until then. If you are participating online, you can submit a question at any time through the portal.

In addition to our presenters, we have a few other members of our executive team in attendance, and a couple of them will come up for the Q&A session with the speakers. So before we begin, we're going to play a short video highlighting BWXT's role in delivering nuclear solutions to our customers' most important missions.

[Presentation]

All right. The delivery got cut off a little bit, but that's the key point here. So with that, it's my pleasure to introduce Rex Geveden, our President and CEO.

Thank you, Chase, and welcome to everyone who joined us here at the historic New York Stock Exchange this morning and to everyone who's listening online. This is unequivocally one of the most exciting times in the history of this business as a stand-alone public company. I said the same -- probably similar words when I stood on this stage 32 months ago, and it was true then, and it's also true now. It's an increasingly exciting story.

Throughout the morning, what we will do is give you an update on the state of the business. We're going to talk about the incredibly robust demand environment that we see on both sides of the business, the commercial and the government side of the business, how we're positioned across the value chain to capture those opportunities and convert them into business and then how we intend to execute on that business from the standpoint of operations and capital allocation.

I'll start with this. We consider ourselves to be a global nuclear industrial champion. That may sound a little provocative or a little bit bold, but I think we'll make that case today when you think about it from a number of different dimensions that we'll validate that claim. If you look at it from the standpoint of revenue scale, we'll do $3.8 billion in sales this year. That's up 19% year-over-year. That's also up from $2.7 billion when I last stood on this stage at the beginning of 2024. So we've grown impressively.

I think from the standpoint of sheer industrial scale, it's inarguable what a nuclear industrial champion we are, 5 million square feet of nuclear qualified manufacturing space, and that's growing organically and inorganically. Our geographic footprint, certainly heavy in North America, now extending into Europe, and we have aspirations to do more there. Our exposure across the value chain, I think, is like no other company you will see, and we will talk to that. Also our 70-year history, which was mentioned in the video, no one can make a similar claim. And then we have these 11,400 employees as it stands today with incredible experiential qualifications, doing work that no one does across the nuclear space.

I'll also mention that we have, I think, a very compelling corporate vision, our corporate purpose, which is to deliver innovative nuclear solutions to create a better world. And that's from the perspectives of delivering clean energy, providing for the nation security, enabling the exploration and settlement of space, nuclear environmental restoration, great missions that our employees wake up to every day.

So in reference to scale and geographic exposure, we have at BWXT, 16 major manufacturing sites across North America and Europe. And that compares, by the way, to 6 manufacturing sites when I came into this job over a decade ago. I mentioned the 5 million square feet of nuclear manufacturing space, and that's increasing by the day. We're completing a major expansion at our Cambridge plant under John MacQuarrie's leadership, we'll cut the ribbon on that one in about a month from now. Major capability. It will lead to having the world's largest nuclear clean room.

We also acquired a business called Precision Components Group, closed that acquisition a couple of months ago. That added about 10% to our capacity, 500,000 square feet and also, by the way, 500 nuclear qualified employees. And we've invested since I came into this business about $1.8 billion in CapEx in these facilities. That's probably a sliver compared to what we've invested historically. So the point there is from the standpoint of scale, we have capabilities and from the standpoint of depth and unique capabilities in those facilities, it would be virtually impossible for a competitor to try to replicate what we have.

Now looking at it from the standpoint, slicing at a different angle and looking at it from the standpoint of revenue by segment and product category. As the business stands today, it's about a 70% national security government business and about a 30% commercial business. And that compares to about 80-20 5 years ago, 80% government, 20% commercial. The commercial business is the fastest growing. In fact, that business has grown from about $115 million at the time we spun this company out to about $1.1 billion today, growing very fast organically and through acquisition. But the government business tends -- is also growing very impressively with new product categories, new domains of application like in special materials, advanced reactors that we'll be talking about more today.

Now slicing it by revenue -- by product category, the revenue by product category, about half -- a little bit less than half of our business is in Naval Nuclear Propulsion, which has always been the heart of this business. The commercial power business, as I noted, is about 30% of it. Special materials is somewhere between 15% or 20%. But that one is super interesting because we've got some programs there in special materials that are becoming franchises for BWXT, things like high-purity depleted uranium, defense fuels, uranium metal, uranium oxides. We're doing things there that are uniquely -- that we're uniquely capable of doing by virtue of our licenses and credentials. And so we expect that to be a larger slice of the pie going forward.

Of course, we're exposed to advanced nuclear. That's Kate Kelly's business. Kate is in the audience here today in the front. And that's the home for projects like Pele, the BWXT Advanced Nuclear Reactor, which is under the Janus program. That's where we manufacture TRISO fuel and do other national security programs, a very exciting business that's been growing, and we expect to continue to grow.

And then there's a little sliver of business there that you see called Technical Services. That's deceivingly small. I think most people in the room know that we don't consolidate revenue in that business because it's executed under joint venture limited liability companies with our partners. But we are operating at 14 major sites across North America, including now the Canadian Nuclear Laboratories. But we do defense work, we do environmental restoration in that business, but it moves the bottom line a lot. It's an $80 million equity income business. And so a very exciting business that's grown quite dramatically over the last 10 years as well.

It's not just about scale and geographic footprint. I mentioned earlier that we have some highly differentiating credentials and experiential qualifications, and that's what this chart speaks to. I'll mention again, and we say it often, and it has the merit of being true, that we're the only commercial business that possesses a Category 1 NRC license. That means we're permitted to handle special nuclear materials. Think of that as high enriched uranium that's used in applications like Naval Nuclear Propulsion, requires a special license to do that.

And so if you're a government customer that needs to do some special materials processing, and there is a lot of need for that these days, then your choices are to go to BWXT or go to a similarly qualified government facility. Those are the only 2 choices. And that's one of the reasons we've been able to -- the special materials part of our business and others have expressed so strongly in the past few years is because of that credential and the experiential qualifications that go with that.

This chart will also show you how exposed we are to fuel. We have delivered 2 million fuel bundles to the Canadian nuclear power market. We are the sole provider for all the nuclear reactors that belong to Ontario Power Generation, and we've been delivering that fuel for decades. We have delivered 9,000 fuel elements for research and test reactors. And of course, we're the sole source provider for naval nuclear fuel, which we've been doing for 70 years. And so this is, at its heart, really kind of a fuel business. And it's -- and those credentials are the reasons why we can move into things like TRISO fuel production and advanced fuels for nuclear space. Those are the foundational credentials for that.

Now we also have some unique commercial credentials. For example, we have delivered 325 steam generators to the commercial power market under John MacQuarrie's business, and there's 60 more in backlog. These steam generators are enormous. They're highly engineered, extremely complex products. There's only about 2 or 3 places in the world where you can get these products made, and we're absolutely the world leader in that.

So how are we doing as a business? We did stand here 32 months ago in February of 2024 and laid out some targets for some medium-term targets at our last Investor Day, and we define those off the 2023 baseline, the 2023 fiscal year as the baseline, and we define that as the 3- to 5-year period following that. So as we're standing here today and based on our 2026 forecast that we are reaffirming today, here's how we're doing.

First off, we delivered -- we forecasted at that time mid-single-digit revenue CAGR. What we've delivered is a 15% revenue CAGR, of which 8.5% is organic. Obviously, the rest of that is acquired revenue and very -- from some very high-quality businesses. We expected at the time to deliver mid-single-digit adjusted EBITDA CAGR. What we instead delivered was 12%, obviously, well above target. Now we did have some implied margin expansion in these numbers, and so we won't stick a spear in the ground on that one just yet. We have gone into some new businesses that have created some margin headwinds from a mix perspective, but we've got a very clear path to improving those margins over the next medium-term guidance.

And you'll hear from Mike Fitzgerald, our CFO, about how we intend to do that and what the margins will look like in 2030, and they certainly will be substantially better than they are today. We forecasted double-digit free cash flow CAGR at the time, and we've delivered 18% instead. And so I think in just about every measure, we've blown out the last Investor Day targets that we gave you. We're going to lay down some aggressive targets here again today, and we hope to stand in front of you in 3 or 4 years and tell you how we crush those targets as well.

Now when you think about it from the standpoint of strategic successes across the enterprise, I think there's a lot to say there. I'll mention a couple of these and then leave the rest of them to your consumption. But we have been working on sharpening the portfolio, enhancing the portfolio, and we've done that through both acquisitions and divestitures. On the acquisition side in the commercial business, we bought Precision Components Group, closed that a couple of months ago, as I mentioned. Also, we brought Kinectrics into the business about 1.5 years ago, and that's been a tremendous success for us, a nice growing business, highly differentiated, outperforming the business case for the acquisition.

And then on the government side of the business, we acquired a business called A.O.T. that got us into the high purity depleted uranium business. Shortly after we acquired that business. In fact, 9 months after we acquired that business, we won a $1.63 billion contract to deliver 2,000 metric tons of high-purity depleted uranium to the U.S. government. And that gave us the full spectrum of uranium assays. So a highly strategic acquisition that one was.

And then we announced that we are divesting our medical business or at least most of it for $800 million. We are keeping 20% of that business and riding along with what we think is a very interesting growth thesis for the business. That one is frankly better off and better off in other hands. The acquirer has a really serious plan for growing that into a global enterprise, and we're going to ride along with that. We like it. The reason that, that was good for us is because that medical business, frankly, a couple of rings away from the bull's eye. And now we have a business after the disposition of that asset that's completely focused on national security and clean commercial nuclear power. So we like what we've done there.

I'll also mention that we've really grown our backlog, and I'm going to come back to this in a future chart, but the backlog growth has gone from $4 billion when I was last on this stage to $8.4 billion. And what's interesting about that is, of course, it gives you a sense of how we're converting opportunity into real business. That's one thing. But the other thing is it underscores the confidence that you should have in the targets that we're going to lay out here when Mike Fitzgerald takes the podium.

Now we have a clear view about how we create value in the business. And it's depicted here in a pretty basic way. And the first is we want to participate in attractive end markets, and we absolutely do that. The national security market, the commercial power market and the constituents that underlie those are very interesting markets right now. They're all growing. And again, it shows up in our backlog. And so we want to be in great markets. We want to be in superior competitive positioning in those markets, and we certainly have made the case for that with our credentials, with our capabilities, with our depth, with our scale, we are winning. We are winning at a very high rate, and you're seeing that in the backlog.

And then having captured business, it's all about how we execute and allocate capital. I've said since I came into this business as CEO that the job jar is pretty clear. What I'm supposed to do in this job is run the businesses well so that they generate cash and then take the capital that's created there and allocate it in such a way that you can optimize long-term shareholder value. That's basically it. Michael Ciarmoli heard me say that in the first month on the job on a roadshow to the West Coast. That's how I think about the business. And there's a bunch of other things I have to do. I have to build the organization. I have to communicate. I have to do Investor Days. But that's how I think about it.

And so operational excellence has been a focus for us from the beginning, and we're doubling down on that of late. We built a program first under Bob Duffy's leadership and now with Suzanne Maddux called Driving Performance Excellence, where we are applying the principles of continuous improvement everywhere across the business. We're not only driving performance on the shop floor, which we've always been focused on, but we're driving performance in the nonoperating elements of the business right now, and it's showing up impressively. It's showing up in terms of millions of dollars that are coming to the bottom line.

You've seen our margins creep up throughout the year. Part of it is just driving performance excellence. And so we're focused on that. We also created the position of Senior VP for Operations under Suzanne Maddux, a new position, which creates kind of a home room for operations. And then we're also putting tools, including AI tools in the hands of our people so that we can optimize the performance of the organization with the use of empowering technology.

Now we said that we like to use nuclear to address some of the world's largest challenges. I've been saying publicly in a few -- fora and in interviews that I think BWXT kind of uniquely sits at the Venn diagram intersection of economic and national and energy security. And so why is this important for nuclear? When you think about economic security, well, if you think about -- let me back up and say, when you think about what has been -- what has led to the buildup of demand and interest in nuclear, on the commercial side, it really sort of started with clean energy, right, with the goal to decarbonize the grid, climate change related. And that's been kind of a slow burn, frankly. I think we've been sort of pounding the table around decarbonization for a long time. It didn't lead to business, frankly, because the business case still needed to close for nuclear utilities. So that was thing one.

Thing two was the electrification of everything. We started to see more demand on the grid from the electrification of transportation and from industrial processes that created new demand signals, which is good for nuclear, because for clean baseload power, nuclear is increasingly seen as a solution for that in addition to solar and wind, which are obviously variable power sources.

And then I think the surprise demand signal came in November 2022 with the first release of ChatGPT. We didn't know it at the time, how important that would be for power demand, but AI is an extremely power consumptive technology. The incremental demand from AI right now is 60 gigawatts. 60 gigawatts, you think about that, that's the electrical output of 60 large nuclear power plants, and I don't see it slowing down anytime soon. So -- and particularly that last element, AI is thought to be probably a cornerstone of economic security. And so leading nations like the U.S., like China and others are trying to win at AI. And winning at AI means winning at power and winning at power probably means having a nuclear solution. And so that's the economic security angle for nuclear and for BWXT.

On the national security side, there are really 3 layers to the demand there. One is recapitalization of the nuclear [indiscernible] as a global power and the need to sort of to recreate that deterrence capability. Obviously, we're involved in the submarines and the aircraft carriers. We provide the fuel and the nuclear reactors. And so a hugely important part of our business.

The second part of that one, and we saw this a decade ago, and I think we were ahead of just about everybody else on it. We saw that the nation was going to need to rebuild its deterrence industrial base. It had literally fallen apart starting in the early '90s. We stopped doing things like high-purity depleted uranium. We started -- stopped doing things like making high enriched uranium. We shut down all that stuff and started cleaning it up, thinking we would never need it again. I don't know why we thought that, but we did.

And so what's -- the consequence of all that is this nuclear stockpile that we had of high enriched uranium and other special materials that only BWXT can manage, can process apart from the government, that stockpile is burning down. There's only so much high enriched uranium. Yes, by the way, we down blended some of it for nonproliferation. And by the way, we down blended some of it for processing other materials and in some cases, for doing things like the Pele reactor. So we're burning that stockpile down and somebody has to rebuild it, and we believe that will be us.

The third thing there in the national security stack of demand is the surprising demand, at least for me, of power and propulsion -- nuclear power and propulsion applications in other domains. So I talked about Pele and I talked about the BWXT advanced nuclear reactor. Those are small micro reactors that are used for things like powering military bases. We see the interest for space reactors for both power and propulsion. We know that cislunar space will become contested in the long run. We need nuclear solutions for the problems that are incipient in that domain. And so those are the 3 things that are stacking up to create demand in the national security space.

And then energy security, to me, this is a super interesting one here. This one started also in 19 -- sorry, in 2022, not 1922. That one also started in 2022 with the Russian invasion of Ukraine in February of that year. So we had Russian invasion of Ukraine, ChatGPT in the same year, both of them strongly influencing demand in nuclear. The Russian invasion of Ukraine alerted Europe, particularly, but the rest of the world to the need for energy security. And it shows up -- nuclear shows up in that discussion because it is a very -- those nuclear assets are durable infrastructure that go on for decades, and they provide you energy diversity and they provide you probably a hedge against fossil fuel price increases. And so all of that has conspired to create a lot of interest and support for nuclear, and we see this as the beginning of a very long cycle of demand, a decadal type cycle of demand, and we sit here on the verge of that.

Now I've said earlier that we play across the full value chain in nuclear, and that goes all the way from the front end of the fuel cycle to disposal and management of complex nuclear waste streams. And so you look across that entire spectrum, enrichment, fuel production, special materials, just about everywhere you look in the nuclear space, you will find BWXT. And you will find, by the way, very few of our competitors. They tend to be in one place or another place. I've mentioned earlier that we've won a contract with the U.S. government to provide unobligated enriched material for nuclear fuel for national security purposes. I also mentioned earlier that, that's a $1.5 billion contract, but that's just the tip of the spear. We're -- the scope of that work is to take the technology out of Oak Ridge National Laboratory and industrialize it and then to do the planning stages for the back end of high-enriched uranium.

But what that leaves out is the middle assays. The high-assay, low-enriched uranium, the low-enriched uranium still has to be unobligated. Unobligated means that everything in that -- and this is under treaty obligations through the United Nations, the nonproliferation treaty, unobligated means that it has to be U.S. sourced from tip to tail. That means U.S. mined uranium, U.S. manufactured components, U.S. wound fiber or whatever it is, it all has to be U.S. sourced. So that's not necessarily a commercial opportunity. It is a unique opportunity for the U.S. government. And so that has to be done to reconstitute defense fuels capability for high-enriched uranium.

And we are -- we have the scope for a couple of pieces of that. When you fill the middle parts in, that's where you get into tens of billions of new opportunity that we hope to address. Joe Miller has got a chart on that, and he'll talk more extensively about it. But staying in the realm of the front end of the fuel cycle, we produce all the Navy fuel. I mentioned that already, that's a special kind of unique fuel that no one else makes and no one else can make by virtue of not having the licenses or the technological know-how to do it.

We make the CANDU fuel. I talked about that one earlier through John MacQuarrie's business, where we are the sole source provider for Ontario Power Generation, which has aspirations to build a lot of new large reactors, and we hope to make all the fuel for that. And then and of course, we actually are the world's leading supplier of TRISO fuel. There's a lot of competitors out there, noisy competitors that are delivering very modest amounts of TRISO fuel. So we are the largest in that market.

If you think about nuclear systems, again, we are the sole provider for naval reactors. We have probably the largest commercial components capability on earth through our Commercial Operations business, and we're involved in multiple commercial reactors, various types, heavy water, light water reactors, reactors on all scales, grid scales from small modular reactors to large reactors. And I have mentioned also our special materials portfolio, high-purity depleted uranium defense fuels, uranium oxide and uranium metal that we're processing for the U.S. government. And then we manage all of these sites for the Department of Energy and for the Canadian and now for the Canadian government, doing management and operations of sites and environmental restoration. So we're all over the place and can't stop, won't stop is the message there.

Now back to this idea that we see ourselves as a global nuclear industrial champion. As I mentioned, if you could slice that in a number of different ways to make that case. I don't think it's a hard case to make, frankly. But here's the case from the standpoint of nuclear-related revenues generated in public companies. And this is based off the 2025 results. But you can see here, BWXT at about $3 billion last year. Our nuclear revenue for this year will be $3.7 billion of our $3.8 billion. We've got a few nonnuclear things, not much, transmission and distribution stuff that we do and things like that. But we're sort of 98% nuclear.

The next players would be in that $2 billion range, a couple of those, and then it drops off pretty quickly to $1 billion. I'm talking about nuclear-related revenues generated by the business. So in Curtiss-Wright, that would be one segment of their business as an example. And then it falls off pretty quickly from there. It's notable that there are public nuclear companies out there that are pre-revenue. So interestingly, the public capital markets have supplanted sort of private equity and venture capital in some ways for some nuclear start-ups. But that's the perspective from revenues and public companies that are nuclear related.

Now I mentioned the backlog already, but I'll just show it here graphically, again, going from $4 billion in backlog when I was last standing here to $8.4 billion today. That -- if you think about our current run rate, that's 9 quarters of backlog, which, again, I think highlights 2 important things here. One, it's our ability to take opportunities and convert those into real business. That's number one. And that's what you see there with the buildup of those revenues, particularly in the last couple of years, which have been very exciting for the business. And then the second, I think, notable point is it ought to give you confidence in the medium-term guidance that we're going to present to you today because a bunch of this is in the backlog.

Now I mentioned my 2 jobs as the CEO to run the businesses, create the cash and then to invest the capital to optimize long-term shareholder value. And this is how we think about the allocation of capital, how we invest. And some of the investments that we make are pretty visible through our Investor Relations efforts. We talked about the expansion of our Cambridge facility, for example, to create the world's largest nuclear clean room and build some very much needed capacity there. The factory is absolutely jammed full right now. So there's no question that we needed that.

We've talked about the advanced technology business, the BWXT Innovation Campus, which is the home of our advanced nuclear programs that belong to Kate Kelly. So we've made a number of those things public and visible. But we're investing in all these areas. We have really been investing in people. Gonzalo Cajade sitting up front here. He's our Chief Human Resources Officer, and we have just a talent campaign that's unbelievable, both at the top of the organization and building down through it. We're absolutely investing in processes. I talked about AI.

I talked -- I'll talk more about automation and digitalization of the business. We are investing in infrastructure across the board, trying to build this global scale of capacity. And we're investing in digital transformation to lead to the end state of scalable growth, growth that we can manage and growth that makes sense for the company with our investments. And we do that with certain investment criteria that are shown here on the right. I won't read through those other than to say this. I mentioned earlier that we've invested $1.8 billion in our facilities since I occupied the CEO seat. So I am not reluctant to invest in the business. But I will say that I think that the investments that we're making in the business are always disciplined and are almost always bearing good fruit. Our acquisitions have been fantastic. Our human capital acquisitions have led to tremendous talent in the organization and the edification of this performance culture that we have. And so I really like where we're putting our money, and I think it's showing up in our numbers and in our capabilities.

So to continue the discussion on automation and digitalization of the business, I talked about how AI impacts the business from the demand side, the power that AI is going to consume and where nuclear would play a role in that. We're, of course, also thinking about how AI impacts the business from the standpoint of our operations. And we've had really 3 streams of effort going on in the digital world for a number of years now. that are bearing fruit for the business.

And number one is digital transformation. This is where we're sort of upgrading the capabilities, the software capabilities, the core processes like finance, HR, payroll, all those sort of things, bringing those completely up to modern standards. We're going through a very aggressive campaign that we call the digital factory, where we are trying to automate literally everything, including doing things like in situ inspections, having digital quality records for everything, digital twin representations for every component that we make, and we're making great strides there. And we had to, right, because our factories are, in some cases, are not very young. And we needed to automate, update, digitize.

Now we have some greenfield opportunities. Joe Miller will talk about that when he does Government Operations, greenfield opportunities to build some major new factories for high-purity depleted uranium for manufacturing hundreds of thousands of centrifuges for the government. And we'll have a greenfield opportunity there to automate everything and to take those lessons learned and reflect them back into the legacy industrial base. So that's a huge thing for us right now.

And then digital workplace. We are putting the latest digital tools into the hands of our engineers and scientists and workers. We're democratizing access to AI. The use cases are extraordinary. We've got one case where we figured out how to optimize radiochemical processing waste stream and have saved the government potentially $5 billion in so doing. This is -- and by the way, speaking of which, we opened a BWXT Digital Center in Melbourne, Florida, in February of this year. It's under Kurt Bender's leadership. He's assembled a world-class team down there. which is the reason we built that down there. They were geographically kind of in that area. So we have opened a new facility. You see it there. It's on the water, and that's where we'll have our February Board meetings from now on as it happens.

Okay. I want to talk about our leadership team here a little bit. These are the executive team members. I feel so supported, so edified, so empowered by this set of leaders, a number of whom are in the room here today. It's an incredible leadership team. It is certainly true that there are a number of new faces on here compared to when I last was on this stage, a lot of new faces. And the reason for that -- and we're not suffering attrition at the executive level, voluntary attrition. The reason for that is we needed to build the leadership team for the future of this business, which is bigger stronger, more demanding, a higher performance culture. We have to build that. And we're trying to go and get Fortune 50 talent in places that we can get it. And I frankly think that we're doing that. So incredibly powerful leadership team that are taking this company to the next stage of growth and capability.

Now I'll stop here, and I certainly will return to the stage later to hammer this point home. But here's the investment thesis. First off, BWXT is everywhere across the nuclear value chain. But let me talk about the remarkable characteristics of this business. When I interviewed for this job to come into BWXT first as the COO very briefly and then CEO, I was interviewing with the Executive Chairman and the transitional CEO at the time. And one of the first questions they asked me was, why -- it looks like you're in a great place over there at Teledyne, Rex. Why would you be interested in a business like BWXT, which, by the way, was thought to be kind of a bond proxy sleep at night opportunity in all honesty.

And what I said was, look, what's not to like here? You have a core of incredibly powerful, sustainable, defensible businesses here with beautiful financial characteristics, cash generators, reliable businesses around Naval Nuclear Propulsion, the components business and the services business in the Canadian market under John's leadership at the time. And then we had a Technical Services business that was at a little bit of a low point at the time, but looked like it could inflect up. And my view of it was, look, you can go and get some of that cash and go and invest it and build some beautiful new businesses like advanced nuclear or special materials. We certainly made some investments in nuclear medicine, which have paid off for us.

And so that story remains true today. Now some of those businesses have migrated from new markets, new opportunities into the core. And so the core looks different than it did at the time, but it's still what it was then. It is a business that's set up with an incredibly robust set of core businesses that are utterly defensible and then large growth opportunities on top of that. We have a big growth opportunity in defense fuels, a big growth opportunity in high-purity depleted uranium. We have -- I don't know how many microreactors we're going to deploy around planet Earth, but I think it will be a lot. But the biggest thing out there in my perspective, is in commercial nuclear power.

Now it takes a long time for this to build. These are long-cycle businesses and utilities kind of ring their hands around the business case and all of that. But large nuclear is coming. And it's coming because of the conspiracy of forces that I talked about earlier. We need clean power. We need to win at AI. We need to expand baseload generation. We need to refurbish and rebuild all these old plants.

But let me give you a sense of the scale here. In a 3-decade period over the '70s, '80s and '90s, the global industrial base delivered about 600 large nuclear reactors, more or less in a 3-decade period. You think about that, that's 15 or 20 new reactors a month delivered. And those assets -- a lot of those assets are still standing, still generating clean power. The economics are interesting around nuclear because certainly, the capital cost upfront, the capital cost and the cost of capital are daunting things for nuclear, but the fuel is cheap. And I think people don't get that. You can put a gigawatt of natural gas in and the fuel costs are going to be $400 million a year.

And by the way, those gas turbines are now, what, $3.5 billion or something like that for a gigawatt. So the price is going way up. And by the way, the delivery time line is now 5 or 6 years on those things, right? So nuclear is getting to be more competitive from that perspective, but nuclear fuel costs are going to be something like $60 million a year for a gigawatt. So when you look at it, if you're a patient investor over the course of time, it becomes a cheaper asset to run. And when you think about being able to extend the life of that plant by a factor of 2 for $0.30 on the dollar or whatever that is, those assets become incredibly powerful economic assets, incredibly stable baseload power that utility customers need.

And so that's part of the growth story that we're planning for. That's the reason we're expanding Cambridge. That's the reason why we're expanding into the U.S. That's the reason why we're interested in Europe because we believe this uplift is going to come and BWXT is going to be there when it happens. Thank you.

With that, I'm going to turn it over to John MacQuarrie to update us on Commercial Operations.

Thank you, Rex. Good morning, everyone. I'm John MacQuarrie. I'm President of Commercial Operations. I've been with the company for more than 28 years and in the nuclear industry for more than 30. And I agree with Rex. This is by far the most exciting time that I have seen in my 3 decades in the industry. And it's exciting because we're going through this really large growth cycle that looks like it's got a lot of potential to continue to grow at a very high rate. And we're seeing demand for major life extension projects.

So for example, we're extending the life by 40 years, 14 reactors in Canada. That's more than 500 reactor years that we're adding to the life of those plants, which is just a lot of business in the future that we have good visible, predictable demand for. We're also building the Western world's first SMR. So it's under construction. We're making the reactor vessel for that. I'll tell you about that. It's a really fantastic project for us.

Beyond that, we're involved in designing components for next-generation advanced reactors. And that's really interesting work. And so designing components that operate at very high temperatures that don't use water as their cooling medium. They use liquid metal or molten salt. And maybe not all of those are going to make it to the market as a commercial product. But where we sit, we're involved in helping those technology providers to figure out how to do that. And that's a great business for us. And some of them, for sure, will make it, and we'll be super well positioned to support that.

The other thing that's really exciting is we're seeing this really great alignment between the electrical power industry and governments on the need for a lot more electricity and a lot more nuclear power, which is exciting. We haven't seen that for decades, of course. And all of that is translating into really rapid growth for us and a solid pipeline unlike anything I have ever seen before. It's orders of magnitude more than what I've seen in our pipeline before in terms of components and services that we bid. So that's exciting.

Okay. I want to start with some key messages about the commercial business. So first, we're -- we built ourselves into a leading supplier of nuclear equipment and services. And we're investing to further expand that leading position to add capacity, to add capabilities across the value chain. We've done this because we've got predictable demand from some of the things I just mentioned from life extension work, from SMR work from our recurring ongoing services that I'll tell you about. But we've got this growing pipeline, as I said, that is unlike anything I've seen before for new build reactors in Canada and the United States and in Europe that is really, really exciting. And the combination of that, the robust backlog that we have, the bid pipeline that we have support an outlook of strong double-digit earnings growth.

Okay. So I've told you some key aspects of our business, but I want to talk about how the business has changed, especially recently. We've been in the nuclear business for 6 decades, really since the start of commercial nuclear generation. But more recently, we've been working hard to evolve our business to meet the demand that we see coming to be more capable to be more global. And we've done this because of the demand that we're already experiencing, but also because of the pipeline that we have good visibility to.

So if you look at this chart, back in 2020, our business had revenue above $330 million. It was predominantly CANDU focused, CANDU reactor focused. And about half of that was making components. If you move forward 3 years into 2023, revenue increased nicely to $400 million. And at this point, we're starting to see emerging demand for SMR opportunities. And now you come forward to 2026 to today, the business has really transformed. It's $1.1 billion that we're expecting in revenue this year, and that doesn't include the medical business.

And we've got a significant amount of services that are in our business. We've got a much broader customer base. So we've added a lot of customers in the United States and Europe, a much larger, as I said, service business and more exposure to large-scale reactors and small modular reactors than we've ever had before. So over this time, we've gone from being primarily a CANDU-focused supplier to a global merchant supplier of equipment and services.

Okay. So with all of that change, let me give you a sense of some of the key attributes of our business here. And some of them I've just mentioned, $1.2 billion in revenue this year, that includes about $130 million of medical in that number. As of the midpoint of this year, $1.6 billion in backlog. We've got more than 4,000 employees in the commercial segment right now. As Rex said, we've made more than 325 steam generators and deliver those to commercial customers around the world. We've got 60 in backlog working through our factories right now to add to that number over the next 5 years or so. And we will be booking more to add to that number of steam generators.

And of course, we make a lot more than steam generators, all kinds of other components, but that's a real marquee product for us. It's a very complex type of product to make. We've made more than 2 million fuel assemblies for our Canadian customers, the CANDU customers, and that's just a steady ongoing very predictable demand for our business. And we do have the largest heavy nuclear component manufacturing footprint in North America. And we're just expanding what is the largest clean room for assembly of nuclear components. So when you make a big nuclear component like a steam generator, you need to do that in a very controlled environment, and we've got uniquely the largest capability in the world to do that.

The other thing I'd like you to notice about the business is that it's really changed in terms of mix, okay? We're about half services now, which is a recurring business for us that is predictable and it's got long-term visibility. And so really, the message here is we're a merchant business. We've got significant industrial scale, and we've got strong recurring services.

Now we didn't arrive at this position by accident. We've been purposely investing to build our business to meet the demand that we see coming that we have really good visibility into. So you can see on this chart, we added the fuel and fuel handling business that was GE Hitachi Nuclear Energy Canada in 2016. A little after that, we went and acquired a precision manufacturing business from Laker Energy. So this is precision reactor components for the CANDU business. Then we realized because of the backlog that we were growing, we needed more capacity in our large component manufacturing plant in Cambridge, Ontario. And so we began the expansion of that facility, and it's a significant expansion. So we're adding about 40% to the part of the factory where we make the really large complex components, and we're just about finished that.

Then we acquired Kinectrics, and that really, really transformed our engineering capabilities and our service business. It's a very large company, about 1,400 people, more than 800 engineers and many technicians in that business, and it gave us real exposure to life cycle services for fleets in Canada and around the world.

And then just recently, we acquired Precision Components Group here in the U.S., and that established our U.S. commercial manufacturing footprint. It's a large and long operating business. So 500,000 square feet of manufacturing space, more than 500 people in that business. They've been operating for many decades. They've done both commercial and government work. So they've got a lot of work right now for the Navy related to things like missile tubes and to other components like steam condensers, but they've made a bunch of commercial product. And we are looking to leverage that to meet the coming commercial demand here as well as continuing with the work that they're doing. So our strategy here has been consistent. It's to add differentiated capabilities -- it's to add capacity as we see that demand coming and it's to expand geographically to get exposure to good markets like the U.S. and like Europe.

Okay. So now I want to describe the breadth of our capabilities in this business that we've built. We've really got 3 lines of business in the commercial business, heavy components, many of which we design. We've got a wide variety of services. You can see some of that in the center of this chart, and I'll give you some additional information about that in a few minutes. And then we've got our fuel and our specialized equipment business. And we are the OEM of the on-power refueling system for the CANDU reactor.

So CANDU reactors are unique in the world, they do not shut down to be refueled. The refuel while they operate. And it's a really complex system to do that. It works very well. It allows them to have the record in the world for the longest operating cycles. They can operate for more than and do operate for more than 3 years. So we're the OEM of that system.

Okay. So when you look across this breadth of what we do, it really gives us exposure for the entire value chain and throughout the entire life of nuclear plants. And that means we've got multiple touch points, both with reactor OEMs, but with power generators, right? Those are a major part of our customer base. And it allows us to participate in different ways. So in existing operation and maintenance and things like outage services, which is a very big part of our business, life extensions and power upgrades. Power upgrades are interesting, huge demand for power. We're seeing a lot of operators in the U.S. that are looking to take their existing assets and just generate more power. And we will add -- the industry will add gigawatts. We do a lot of the engineering to support that and of course, new builds.

Okay. So that's a description of our business. Now I'd like to talk about our demand outlook worldwide. So the IAEA, the International Atomic Energy Authority is forecasting global growth in nuclear capacity to more than double by 2060. And they're not alone in that. There are many, many different organizations that are predicting that kind of growth to meet the demand for electricity. We're seeing that opportunity develop across multiple reactor technologies and in multiple geographies. So it's very, very widespread situation for us.

And so for example, Westinghouse is reporting that they've got opportunities for 90 AP1000 large reactors globally. In the case of the CANDU technology, CANDU Energy, which is a division of AtkinsRéalis, is reporting that they've got opportunities for 14 new CANDU reactors, many of which are likely to be in the Canadian market. And then there's potentially hundreds of SMRs around the globe of different types, many of which we're involved in. What's driving this is increasingly clear. It's economic security, it's the need for -- or the desire for decarbonization and the need for energy security. After more than 30 years in the industry, the magnitude of the opportunities we're seeing is unlike anything I've ever experienced before. And importantly, for BWXT, this isn't concentrated on one type of technology or in one geography. It's varied and widespread, which is great for our merchant supplier business.

Okay. So Canada is a very established market for us. And it's where demand is the most visible for us because we're so involved in and embedded in that market in very many ways. It's also a large market. right? Canada, if you think of it by nations that generate nuclear power, it's third on the list between North America and Europe if you don't count Russia and Ukraine. So a good large market that's investing a lot in nuclear. In that market, we've got more than 1.2 million square feet of manufacturing and engineering space, a lot of differentiated space. We have extraordinarily long-term customer relationships, so more than 6 decades actually with the history of our company, we were involved before nuclear. And so we've got these really long-term relations where they know what we can do, they know our people, they know they can count on us.

We've also got rare fuel manufacturing capability and fuel handling technology. We're 1 of 2 fuel manufacturers and we have the -- we're the OEM of the on-power refueling systems. And now we've got very specialized plant services and engineering and licensing capabilities, some of which came with the Kinectrics acquisition. So all of that gives us layers of demand in the market. First, we've got a solid foundation of recurring demand from the existing fleet in Canada for aftermarket components, parts, fuel services that's just continually that we're seeing all the time and that's growing as the reactors age.

Second, we've got major life extension programs. And this has been a really large, very good market. So right now, we're actively involved in supporting the life extension of the Bruce Power reactors and Ontario Power Generation's Pickering reactors. This is a $50 billion Canadian market that we've been participating in. It started in 2015, and it's going to continue all the way through 2032. Third, we've got SMR demand, active SMR projects. We're making the reactor pressure vessel for the BWRX-300 SMR that's being deployed at the Darlington site for Ontario Power Generation. It's GE Vernova Hitachi technology. Construction has started. We're deep into manufacturing the reactor vessel. That is the Western world's first SMR. OPG has committed to build 4 of those at that site. I'm highly confident they will do that.

I want to give you a sense of what we're making. So this reactor vessel is 600 tonnes. It's 100 feet long. It's at its biggest diameter, 22 feet roughly. It is the world's largest reactor vessel. You saw some of that perhaps in the video, although it was only briefly in that video. It's a remarkable vessel. And we are doing the detailed design of that and the analysis of that for our customer.

And fourth, in Canada, we've got ramping demand for new large reactors. And this is a massive opportunity that's coming towards us. My estimate is that, that market is about CAD 120 billion to CAD 150 billion for the planned new builds in Canada. So -- and that's going to happen over the next couple of decades.

I was going to go back and just spend one more minute on the Canadian market. I have to say I'm very optimistic about the Canadian market. Canada just released its national nuclear strategy. It's one of the few countries in the world that has a national nuclear strategy. You may have read about that. You can look it up online. But here's a couple of key points about that. So the objective is to deploy 10 large reactors, 2 under construction by 2035 and 5 more by 2040. Other elements that are key here are regulatory streamlining, which is critical. And they've just introduced legislation, the federal government about this, which is one project, one decision by one agency in 1 year. And that's encouraging, and I believe that will happen. They want more SMRs. They want more off-grid generation for the Arctic, for the Canadian North, for the Northwest Territory packet. They need to make sure that we secure that land as a nation.

And there's considerable government funding and incentives. So for example, we take benefit from clean manufacturing tax credits that are 30% rate. We've also got reduced corporate taxes because they are very much encouraging us to invest to be able to meet the demand that's coming. The market has, in general, structural changes driving increased electricity demand. It's got an established nuclear investment momentum. and a very strong record of delivering these large complex projects well. So the Darlington refurbishment has just been finished 4 reactors, roughly $13 billion, delivered on time and within budget. That gives investors confidence. And when you couple that with some other factors like government ownership of utilities or a regulated electricity market, where it's normal to be able to collect from the rate base the cost of building new reactors, which is going on right now with these SMR new builds, you can attract financing at reasonable rates into that market.

There's also strong interest in decarbonization in the Canadian market, not a lot of interest in building a lot of gas turbines for power generation and multiparty government support for large long-duration investments in energy infrastructure. So it's a pretty attractive market. In fact, we're already involved. We have contracts for licensing and project definition for these new large reactors. And we expect this will translate into orders for components before the end of this decade.

Okay. So beyond Canada, we're positioning ourselves for significant growth in the United States and Europe. In the U.S., Precision Components Group that we just acquired gives us an established large nuclear manufacturing footprint. It's at 2 sites in Pennsylvania and New Jersey. The New Jersey sites on the Delaware. It's a fantastic site for transportation of large components where you really need to be on a waterway that is where you can transport those components. We're pursuing additional capacity for heavy nuclear components in the U.S. because we can see the demand coming from customers like Westinghouse or GE Vernova that need very large components, and we need to be able to meet that demand. And so we're working on that diligently right now.

The Kinectrics acquisition gave us long-standing relationships with U.S. customers, particularly utilities. They've been in the market for decades, doing engineer of choice kind of awards, so heavily embedded in that U.S. fleet. That gives us some really good visibility into what those customers are doing because, of course, that engineering happens at the front end of changes. And as you know, and you can see on this chart, there's substantial government -- U.S. government support for new reactors to be deployed.

In Europe, at the bottom of the chart here, we're seeing a lot of activity. We're already participating in the European market in various ways. So we're designing the steam generators for the Rolls-Royce SMR. In fact, it's a large SMR. It's over 450 megawatts. So that's in the U.K. We've got engineering services that we acquired through Kinectrics in several countries. So we're serving the installed fleet there. We're supporting AP1000 deployment through owner's engineer work in Bulgaria. So the Bulgarian utility at what's called the Kozloduy site, where they operate a couple of reactors are looking to deploy 2 large AP1000 reactors, and they selected us to leverage our expertise and what we know about this to help them to figure out how to deploy those reactors. And of course, based on our work that we're doing in Canada, we're really well positioned to support the BWRX-300 deployment in Poland, in Central Europe, in Eastern Europe and perhaps the U.K. as we've seen recently in the news there that there's a lot of activity going on there.

And then finally, there's a life extension project going on in Romania at the CANDU reactor there at what's called the Cernavoda site on the Danube River. And we've got a pretty exciting pipeline for more components to supply 2 new reactors there, CANDU reactors at that site. There's 2 already operating. There's 2 that are partially built that they're now looking to complete, and they're already active in front-end engineering on that project.

So just to step back from all this, our strategy is not to just export from Canada, which has been our sort of a traditional strong operating place. We are building the geographic footprint to operate locally in these Western global markets in the U.S., in Europe.

Okay. I'd like to spend a little time on our service business because that's become a very large and very important part of our business, and it's an area where we see continued strong growth. So if you look at the right-hand side of this chart, you can see service revenue has grown from about $70 million in 2020 to more than $600 million this year. Now Kinectrics is a significant part of that growth. It's a large service company. But if you exclude Kinectrics and look at our traditional BWXT services business, over that same period of time, it has grown a lot. In fact, it's nearly tripled. So we're seeing tremendous growth in our service business.

What makes this service business attractive is that we can participate across the entire life cycle of a nuclear plant. So at the very beginning in licensing and onerous engineering, as I just described, we're doing that in Canada and Bulgaria in other places through operations and maintenance, doing lots of outage service work, plant modification work supporting the aging of these reactors and ultimately, end of life and decommissioning. We have a significant role in designing the deep geological repository for the spent fuel in Canada, which is a very exciting project.

And because nuclear plants operate for many decades, somewhat uniquely for power production technology. So most of the plants operating today are expected to hit at least 80 years of life and probably go beyond that to 100 years of life. That long operating cycle gives us really long-term customer relationships, recurring revenue and visibility into demand long into the future for service work. So service has become a very important line of business for us. We see strong demand. We see continued growth. And in fact, we see some opportunities for inorganic continued growth in this area, and we're pursuing those opportunities now.

Okay. So continuing on with services a bit more here. We know service is kind of a broad term. It can encompass a range of activities, obviously. And I've just told you about quite a breadth of services here. But to give you a better understanding, I wanted to describe an example of the service that we offer just to kind of give you a sense of what that looks like. So picture a large CANDU reactor and CANDU reactors are not a reactor that have a sort of a reactor vessel with all the fuel sing inside it. It's a pressure tube reactor. So it's got up to 500 pressure tubes. These are about 4 inches of diameter, about 30 feet long, and they are critical to the safe, reliable operation of that type of reactor.

And what's key for the understanding the life of the reactor because the life of the pressure tube is the life of the reactor and a CANDU reactor is understanding how they pick up hydrogen from the water around them. That is the degradation mechanism. And it's well understood, it's well characterized. What plant operators need to know is how much hydrogen is there because that equals the life of that reactor. And there was some technology that was used in the market to try to do this. But the customer that we're working with said we need new technology. We need to get much more accurate here because we could be missing out on ability to operate these reactors longer without being able to characterize that hydrogen uptake.

So Kinectrics came up with a very innovative and proprietary solution for this. Design new inspection equipment and in fact, new sampling equipment where you deploy it into the core of the reactor in a very highly radioactive work environment, take small samples out of the pressure tube. And then we do laboratory analysis. We have these radioactive hot labs where we can do this analysis, determine hydrogen content and then provided with our engineering team an assessment of the condition, the fitness for duty of those components and the remaining life. And so we didn't just provide sort of a piece of equipment, as you can see perhaps on the -- in this chart, but we provided a total solution end-to-end. So we designed all the equipment, including the delivery system to get that equipment into the reactor, then delivered all of that and then did all the engineering to support that.

This created very significant value for the initial customer and now other customers because they can reliably say to a regulator, here's -- I know what the condition of these pressure tubes are. I know how much longer I can operate and they extended life, which is tremendously valuable for them. So it's value for them, but for us, it created a differentiated service offering that is recurring as these reactors operate. And of course, it deepens our customer relationships substantially. It's just one example of the types of services that we offer regularly in our business. So I hope that's helpful and gives you a bit of a sense of that.

Okay. Let me switch gears from services here to our heavy component manufacturing, design and manufacturing business. There's 5 things that I want you to know about this business. First, we're technology agnostic. We are not aligned with any one reactor technology. Other manufacturers are, right? They manufacture for their own reactor design. We're a merchant supplier. We support all. We work across light water reactors, heavy water reactors, boiling water reactors and advanced reactors that don't even use water as they're coolant. An example of that would be TerraPower that uses a liquid metal sodium for cooling of their reactor.

Second, we have industrial scale. So as I said, the largest nuclear component manufacturing footprint in North America, largest clean room for assembly of components in the world. Third, we have rare technical expertise. So an aspect of our manufacturing business is that we are a very capable designer of components, okay? And let me explain that in a couple of ways. So we design steam generators, perhaps in a pressurized water reactor, the most complex component to design, very few organizations can do that globally. But we're also designing and doing the detailed analysis of the reactor vessel for the BWRX-300 SMR.

Increasingly, we're finding customers are coming to us as they're developing new technology, getting us involved early because of our design expertise to look at how to make components, material selection, et cetera, and then how do you design that for manufacturability to make sure you can deliver with reasonable lead time with reasonable cost. A good example of this is TerraPower. So TerraPower has a sodium fast reactor, of course, they call the Natrium reactor that they're deploying in Wyoming. And they came to us early on and said we needed to look at designing these heat exchangers that sit in the core of that reactor.

So they're surrounded by liquid sodium and actually sodium on both sides of that heat exchanger tube. It's a very high environment. No reactors on a commercial scale operate with sort of high-temperature environment like that, which is challenging from a material selection and mechanical design of that heat exchanger. And so we've been designing that now for a while, making good progress and expecting to move to manufacturing stage. And that's a big part of why we're getting involved early is our design expertise.

Fourth, we've got a decades-long track record of delivery. Our customers know exactly what our track record is. They've seen us deliver those 325 steam giants and many other components, hundreds of heat exchangers and other components. And fifth, we have strong positioning in good markets, especially in Canada and the U.S. That's why we describe ourselves as a super merchant supplier of engineered nuclear equipment.

Okay. So continuing with components here. I've talked about our large market opportunity for components in our broad portfolio. But what I want to do now is quantify for you what a new reactor means financially for BWXT. And by that, I mean, what's our addressable opportunity per reactor in revenue. And it, of course, as you're probably not surprised, varies by the type of reactor. So for a CANDU reactor, our addressable opportunity is between $350 million and $700 million per reactor of revenue. And that's the largest opportunity by reactor type that we have. We cover the full spectrum of everything. We can make everything in the core and everything around the core for our CANDU reactor.

For an AP1000, it's a little smaller. So it's low hundreds of millions of revenue per reactor. We can make all of the components, but we don't make things like the fuel handling system and some other systems, for example. So that's a little bit lesser opportunity than a CANDU reactor. And of course, now we have legacy AP1000 content in our acquisition of PCG because in the first wave of AP1000 deployment, they made a variety of components for the U.S. plants and for the Chinese plants.

Okay. Now turning to an SMR. There, our addressable opportunity is about $50 million to $100 million per reactor. And it varies, of course, based on the SMR type. So let me give you an example to illustrate that. So for the BWRX-300, the GE Vernova Hittachi reactor, it's a boiling water reactor. So it's got fewer components. The reactor vessels where a lot happens, right? That's where they boil the water, that's where they can control pressure. There aren't steam generators. So a bit smaller opportunity per reactor there, still a very exciting opportunity. But then think of a Rolls-Royce small modular reactor. That's a scaled down SMR. It's about 470 megawatts. And of course, it's got steam generators. It generates steam with separate steam generators. It's got pressurizer. It's got a variety of components. So that's a bigger opportunity for us per reactor.

Now on top of all the components work that we can supply, there's life of plant services, which are not included in the numbers that I just gave you. And those go on for 80 or 100 years after these plants are built. The other important thing here to note is timing. So these are very long lead components, and our customers come to us very early, probably amongst the earliest in terms of suppliers that they talk to. And sometimes we can get orders even before they've made a final investment decision because these are such long lead components. And once they're awarded, we recognize revenue over several years, depending on the type of reactor. I said earlier, our bid pipeline is unlike anything I've ever seen before. It's the strongest it's ever been. And we expect to start converting some of these opportunities into awards either later this year or early in 2027.

So supporting these market-leading technologies isn't an aspiration for us. We're already involved. And we're involved and have been selected by them because of our industrial scale, our technical engineering expertise and our track record for delivery. So let me give you some examples here.

So for CANDU, we're making 48 steam generators for Ontario Power Generation for the Pickering life extension project. That's 4 reactors that are being life extended. For AP1000, we're providing owner's engineering service to a Bulgarian customer that I described earlier. For the BWRX-300, obviously, we're manufacturing the first reactor vessel for that first deployment. I mentioned that for Rolls-Royce SMR, we're designing their steam generators, and we expect to make those steam generators for the U.K. market. They've been -- they've won and been selected in Sweden, and they've also gone into Czechia. So we're participating across large and small reactors in North America, in Europe, and that's the diversified position that we've been building, which is enabled by our expertise and our ability to innovate.

Of course, all this demand only matters if you can execute well, and we know this from our many years of operating. That's why operational excellence or our DPX program, as Rex described, is really critical to us. Our focus is straightforward: improve factory flow continuously and eliminate waste relentlessly and automate repetitive work increasingly. And we're doing all of that. And our objectives, of course, are to reduce lead time and cost and increase capacity and expand our margins.

I hope this example on the right side of this chart maybe makes this tangible for you. For our current steam generator program that I mentioned, we're required to deliver steam generator a month to our customer. But as soon as we got that contract, we focused on increasing that throughput significantly. So we're now operating at a pace of over 1.5 steam generators a month in our factory. And that is really helping our customer. And just to give you a sense of scale here, these are 100-ton components. They're 50 feet long, they're 8 feet in diameter. They're pretty large components with thousands of tubes inside them and complex welded assembly.

So significant effort to get to that kind of pace. By doing that, we've obviously benefited our customer, but we've increased our throughput, which gives us more capacity for the pipeline that we see. And it's an example of how operational excellence translates into growth and into margin improvement.

Okay. So let me bring all these pieces together for you and talk about how we create value. Our position is built on 3 things here, a 6-decade track record of solid execution performance, some deep and rare engineering, technical capability and unmatched industrial scale in North America. Our strategy from here is to create more value is to maintain our leading position in the CANDU market in the Canadian market and CANDU globally, expand our scope with large -- other large OEM reactor vendors and SMR vendors, expand our industrial scale to meet that demand that we see coming and to continue to grow our service offering in various ways because that's been a great business for us and use operational excellence to add capacity and improve margin as we go. So we're talking about taking what is a strong existing position and scaling it into a much larger, more global business.

And that brings us to the financial outlook for the Commercial segment. We've got a predictable core growth here, backlog of $1.6 million (sic) [ $1.6 billion ], as I said, ongoing life extension and SMR work, steady demand for aftermarket components and services. In addition, we have many new growth opportunities, very sizable. So we've got large scale and SMR new builds in North America and Europe, expansion of our service offering, driven by a growing fleet of aging reactors, geographic expansion. We now have presence in the U.S. commercially in Europe and further opportunity to grow with disciplined M&A.

With that outlook, we expect to achieve high teens revenue CAGR over the period to 2030. And with volume increasing pricing discipline and operational excellence, we expect EBITDA margins to go from about 13% now into the high teens by 2030 with adjusted EBITDA or CAGR greater than 20% over that period.

Okay. I want to leave you with 5 key messages about our commercial business. First, we've built ourselves into a leading supplier of nuclear equipment and services. Second, we're continuing to invest to expand that leading position. Third, we have predictable demand from all the sources I just described to you. And fourth, a growing pipeline, significantly growing pipeline for new nuclear opportunities in North America and Europe. And fifth, with our combination of strong backlog, good bid pipeline, it supports an outlook for strong double-digit earnings growth.

Okay. So I'll wrap up with 2 points here. One, we've built a very differentiated commercial business over the last several years, and that has positioned us exceptionally well for the growth cycle ahead. So now I'd like to turn it over to Joe Miller, who will talk about our Government Operations business. Thank you.

All right. Good morning, everybody. I'm Joe Miller, and I appreciate all the commentary we heard from Rex so far with the strategy, the outlook, how we're currently executing across BWXT. And then John emphasized a lot of important points that I'll also talk through, but I'll talk about it very specific to how Government Operations has been constructed, how we operate every day, how we think about execution, continuous improvement and how we're going to grow.

So you'll see some parallels between what Rex talked about, what John talked about, but I'll stay very focused on the government customers we have, that trusted relationship. And we do have a commercial offering that I'll talk about towards the end with mPower, with the Janus Program and how we're going to commercialize microreactors. But there's a lot of similarities. And those similarities are true because we talk very strategically within BWXT, and we have since 1867, right? We've talked about the importance of having a manufacturer's mindset in everything that we do. Even if it's a design, even if it's using AI and machine learning, it's all about manufacturing. It's all about delivering. It's all about staying very focused on what the customer needs when they need it and how we invest strategically to get there.

So I've been with the company for 15 years. I had my first exposure to BWXT on board a Los Angeles-class submarine, the USS Norfolk. And it's when I fell in love with nuclear. I didn't know much about it until I joined the Navy. I was put into the nuclear pipeline, so I went to school for a couple of years. I learned how to operate nuclear reactors, how to perform the sampling and analysis of water chemistry, how to go through the radiological controls and understand really important things like changing out the resin inside of a nuclear reactor, changing out the entire reactor itself, cutting the submarine in half and doing all those high-consequence operations. So that helped me understand how to perform in high-consequence environments. And then I decided to get my nuclear engineering degree and take my career to new levels in this role as Government Operations President.

And I took over Admiral McCoy, who is now our Chief Nuclear Officer and who's seconded to the U.S. Navy. He works out of the Pentagon, but he spends all of his days in the shipyards. And he's doing that because we need to improve the speed of shipbuilding in the United States, and he's an integral part of that. U.S. Navy is taking that very seriously. They're taking our reactor deliveries very seriously, and we're setting ourselves up for the future and how we build out our submarine fleet in the U.S. and how we work with some of our international partners that I'll talk about later in the presentation.

But more specifically, inside of Government Operations, there are 4 business segments. We have Naval Propulsion, which is by far the largest in Government Operations and the company. It's about 50% of the total revenue of BWXT and 70% of Government Operations. We also have Technical Services. It's the most broad. So 14 sites we manage and operate nuclear laboratories, environmental remediation and really revitalization of how we can use those facilities in the future and a variety of other methods that we use as a company to go off and provide those Technical Services.

Advanced Nuclear, a business that Kate Kelly and I started back in 2017 and really became a formal organization in 2018 and how that organization is bringing new technology to life, all of the nuts and bolts of manufacturing and understanding how to operate nuclear reactors, coupled with advanced design, advanced manufacturing, AI and machine learning. We've been doing all of that since 2018, and I'll talk a lot about how those products are now coming to life.

And then our next segment, our newest and fastest growing is special materials. Now we've been handling special materials for 70 years because you have to do that when you're building nuclear reactors and the nuclear industry is 70 years old. So we've been doing that ever since this company got into the nuclear industry. But as a separate segment, we saw this meaningful growth and these meaningful growth opportunities that were coming out of the U.S. government with a variety of new customers, especially in the advanced nuclear market. So we addressed that. We formed a business just focused on that. And I'll talk about how that's manifesting in a couple of big operations that we have in high-purity depleted uranium enrichment operations and how that couples back to our core businesses.

So the key tenets here of Government Operations are our foundation. Our foundation is solid because we have unmatched experience in the way in which we operate our facilities, the way which we manufacture each one of our products. We also have that foundation based on a sole source contract from the U.S. Navy. So these are billions of dollars worth of contracts that allow us to deliver on multiple platforms. And I'll talk about what those platforms are, what the shipbuilding outlook is, but it's a solid foundation for us. It allows us to make strategic investments on how we think about that business, how we invest not just in infrastructure and technology, but also how we invest in people, how we can lean into bringing people into the company, understanding once again, how to manufacture, how to do things the right way and then allow those people to move into some of our growth engines, in Technical Services, special materials and advanced nuclear.

And so we have this predictable and growing revenue base, and I'll talk about where the growth is occurring. And I'll also talk about how we're driving margin improvement out of that revenue base. So not only do we need to execute, but with this new infrastructure build-out that we've seen, and Rex talked about it, billions of dollars worth of CapEx in BWXT have been matched largely by our customers. Once we do that, once we build out those facilities, you need to optimize how you manufacture in those facilities. And as you optimize, you create efficiencies. And as you create efficiencies, as we create efficiencies all day, every day, we're creating better margins for BWXT.

So once again, the core capabilities you see here in the center, we have complex nuclear manufacturing capability with a proven safety record. That equals credibility and credibility and trust is paramount inside of the nuclear industry. So we take that very seriously, and we keep that as part of our training programs, the way in which we operate, the way in which we communicate to all of our organizations. And with that credibility comes deep government relationships, and that helps us -- that has helped us establish this base. So I talked about 70 years in nuclear, 70 years in the nuclear industry. For us, that started with Admiral Rickover. He decided to take nuclear technology, convert that into nuclear reactors that could be used on submarines to create a strategic deterrent that would maintain peace worldwide. Very, very important that we did that after World War II because of what happened in World War II. How do we create machines for the Department of Defense to maintain peace worldwide for decades to come. That's why nuclear reactors exist on submarines. We continue to build those nuclear reactors with that same consequence, and we continue to do that for the U.S. Navy and a couple of other partners that, once again, I'll talk about in later slides.

So that was in the 1950s. And then in the 1990s, the government decided to transition from government-owned, government-operated facilities to government-owned commercially operated facilities, GOCOs. So Technical Services were required. And most of the facilities, especially the ones that we address have nuclear credentials and capabilities and material handling and control, all the things that we do and have been doing for several decades inside of BWXT. And so we brought those people into Technical Services. We started to understand more about how we could rapidly innovate in those operations across the United States and use the high skilled capability and expertise throughout BWXT to bring on new contracts.

So on the left side, the established base, Nuclear Naval Propulsion 70 years ago. The Technical Services work about 40 years ago, we've been working on that. And then on the right side, how do we support our growth, Special materials and advanced nuclear. Now these are new businesses, but they have hundreds of millions and billions of dollars' worth of contracts. So special materials, like I mentioned, is born out of our Naval Propulsion business because of the handling and the requirements that go there. But as we start to see this depletion of the stockpile that Rex talked about with highly enriched uranium as we see the need to replenish a variety of other materials inside of the NNSA portion of the Department of Energy, we expanded that portfolio. And once again, we broke that business out to report separately directly to me.

And advanced nuclear did start as a start-up. And we did that because we had an mPower program. That mPower program, which I'll talk about, was shelved for very good financial reasons, but we had this core capability and people that knew how to design advanced things that knew how to test advanced things, that knew how to utilize the newest technology to bring nuclear power projects to fruition. At that same time, we started to see from the U.S. government, especially from NASA and the space portions of the U.S. government, an extreme interest in high-performance propulsion, nuclear thermal in particular, in like the 2017 time frame. So we formed a business around that. We brought a dozen people together. That's now 400. And we brought those people together because we knew that power dense systems in small packages could be of extreme value to the government market and eventually the commercial market. And I'll talk about how that growth out of advanced nuclear has come to fruition over the last couple of years.

Before that, I'll talk about just a high-level overview of Government Operations. Now Rex talked about the backlog at $8.4 billion, almost $7 billion of that is in Government Operations because of our long lead contracts. And that relates mostly to the shipbuilding industry, but it also relates back to Technical Services work that we're doing, some long leads that we're seeing across the special materials as well. So overall revenue for Government Operations, $2.6 billion.

One of my most proud parts of this slide is 425 reactors and counting, at least 2 a year, more like 3 a year is what we're producing out of our facilities in Erwin, Tennessee, in Lynchburg, Virginia, but we're also producing all the components that go along with those reactors to translate the thermal energy from nuclear reactions to power and propulsion. So we have 25 years of experience manufacturing advanced nuclear fuel, several decades beyond that for all different types of fuel, especially for the naval reactors program.

Also, Rex mentioned the Category 1 NRC license that we have. These are very unique. We are the only industry holder that has these license and has all the capability and the security and the protocols that go around each one of these licenses. And we do it with 6,000 employees inside of Government Operations. So those 6,000 employees wake up every day and they go into industrial settings, and they build the most exquisite, the most robust nuclear machines on earth. And they do it every day, and they do it with passion, and they do it with a relentless pursuit, not just for quality, but also optimizing everything that they perform inside of those industrial settings.

The revenue layout here, and Rex talked about this as well, the naval nuclear propulsion, once again, 70% of Government Operations book ended by Technical Services, which has very little revenue because we take an equity stake in joint ventures, 14 of them. We take that to the bottom line as equity income. We don't consolidate revenue at the top line. Special materials is growing fast, and I'll talk about both special materials and advanced nuclear in detail and specifically what projects are bringing that revenue and growing that revenue over the next couple of years and into the future.

So a lot of words on this slide. This is our business line overview. Once again, bookended by our most mature parts of Government Operations with nuclear propulsion, Naval Nuclear Propulsion and Technical Services. And once again, you see a lot of customer overlap here. In fact, even John and I have some customer overlap in Commercial Operations and Government Operations. But the customer overlap is one thing. We stay very focused on what our core capabilities are and how we can meet those customer demands. That's how we divide up what we're doing day in and day out. So you see key customers in NNSA, obviously, the naval reactors program, the Department of War, Department of Energy. We have some work with DARPA. We have work with DIU. I mean it's really across the entire spectrum of the government clients that are interested in nuclear.

One new customer for us is AECL in Canada. So we just won as the prime Government Operations, Technical Services group as a prime to manage and operate the Canadian Nuclear laboratory. And like John mentioned, it's a perfect time for us to have that relationship with the Canadian government because the Canadian government has taken nuclear very seriously. They have their own strategy, and they're doing a great thing in bringing that strategy to bear using this nuclear laboratory.

So we went across the nuclear value chain, and these are some of the high-level awards that we've received very recently. So over $6 billion worth of awards through our market basket contracts in naval nuclear, $3 billion in awards in just special materials alone. Those are just 2 separate awards, one at $1.5 billion and one at $1.63 billion. And then advanced nuclear, we've been able to translate all the institutional knowledge of Pele into a win on the Janus Program. And Technical Services, the awards that we've received there throughout the entire complex equate to about $4 billion in annual site funding at site funding, once again, that flows down through our P&L as equity income.

So I mentioned operational excellence. Both John and Rex talked about our DPX initiatives. These are broad initiatives that start off with a global look across BWXT, where can we improve? How do we use the strength of BWXT to improve and increase our overall efficiency. So the first thing for us is let's optimize our facilities. We can create capacity. We can do more in our existing footprint by optimizing those facilities. We can reduce waste through that optimization process, and we can use tools like automation and AI to maximize the output of each one of our operations.

So automation and AI is really important to me. I spent 6 years in the semiconductor industry. So I kind of saw the future before I joined a nuclear company again. And in that future, we see that day in and day out in Commercial Ops and Government Operations. Using automation and AI also takes an extreme expertise because you can throw automation at a lot of problems that may not need it. Sometimes you just need the ability to use AI for QA inspections, quality inspections. You can understand how to -- we understand because of our manufacturing expertise, how to utilize technology that best fits the problem, not using technology to go search for problems. So it's a nice way to integrate technology into our existing factories.

And then as we ramp up in some of these greenfield sites, especially in enrichment, we're going to fully automate that factory because we have to make dozens, if not hundreds of centrifuges a day, much different than our normal delivery cadence. So we'll be using this in a variety of ways, but it's really important, and John and I tell our staff this all the time. we're going to apply technology where it matters the most, where we'll get the most value because we have to wake up every day and deliver and produce. We can't stop production to start integrating technology. So we have these maker spaces that are available to us to go off and test the technology and have a pragmatic way in which to implement that technology on the factory floor.

So you're seeing the increases in efficiency, especially from 2024, we have a 10% increase from '23 to '26, it's a 7% increase in efficiency, and that's going to continue to grow. So we've been making a lot of improvements. We've been seeing the margin improvements come to the bottom line, but we're not stopping here.

Across BWXT, we are the sole provider of nuclear reactors for both components and fuel. What you're seeing here is a diagram of an engine room. So starting with a nuclear reactor, the control rod drive mechanisms, the pressurizers, the steam generators, the fuel, a variety of other heat exchangers that go into this power plant inside of the engine room originate in our factories. They originate in our northern sites and our southern sites really throughout the Eastern Seaboard of the United States. And so we manufacture these components for a variety of different classes of ships for the U.S. Navy.

And what you're seeing on the right side of the screen is the build time. So essentially, the size and the build time equate to how long does it take us to deliver each one of these shipsets. So the Virginia-class submarine, the SSN-AUKUS program are equivalent, about the same. In the middle, you have the battleship in the Columbia-class submarine. On the right, you have the aircraft carriers. Now the battleship as proposed by the U.S. Navy will use a Ford-class aircraft carrier. So it's the same components. It's the same reactor, but there's only one of them on a battleship or there's 2 on the aircraft carrier. So this graphic is to depict how long does it take to deliver the entire shipset.

And that's relevant to our content in BWXT. We have -- we deliver more Virginia-class submarines than we do Columbia class, more Columbia-class submarine cores than we do the Ford-class aircraft carrier reactors. This is more on what that growth looks like and the visibility that we have into the 30-year shipbuilding plan. So it's pretty steady state for Virginia-class, 2 a year for the next several decades. and we've hit that cadence. And this is where a lot of our efficiencies are coming in, inside of the factory because we've been building Virginia-class now for quite a while, and we've gotten up to an operational cadence that makes a lot of sense.

Now the Navy will likely feather in the next-generation fast attack submarine reactor here, and that's up to them, and that will show up in the shipbuilding plan as that evolves from the Navy. Same goes with Columbia-class heavy deliveries. We've delivered the Columbia core. We have many Columbia cores in production right now, and we expect that to continue pretty rapidly through the mid-2030s and then start to even out into the out years.

And then the Ford-class aircraft carrier, we're continuing to build those as well. We have the battleship just shown here right now. This isn't in our forecast because the commitments and the purchases haven't come through from the Navy yet, but we do expect that to come through or at least get better visibility to that in the coming future. So all in all, 4% to 6% CAGR growth over this time period.

And we see some upside here. And you see this blue shading at the top on the sand chart, and that shows up as Battleship, cores, the SSN-AUKUS program, which is a trilateral agreement between Australia, the United States and the U.K. And then there's other international support, meaning when our allies need support on nuclear programs, especially nuclear programs specific to the shipbuilding industry, they'll come to the U.S. government who come directly to us. So we have a lot of interface in that regard. And we expect if there is an ally arrangement to provide this type of technology, BWXT will be there, and we'll leverage that opportunity for additional growth.

So I want to move over to Technical Services in a little more detail. And now I mentioned the 14 programs where we provide services, and that's throughout the United States and now in Canada through the Canadian Nuclear laboratory. And there's a variety of sites listed here. Some of these sites are Department of Energy nuclear laboratories where there's a lot of early science and development and some testing like you see out of Idaho National Lab, especially with some of the criticality experiments that we've seen in that lab. But we also work in places like Hanford and Savannah River, where we go through the restoration of those areas based on Manhattan project operations that occurred there. We're going to restore those areas by cleaning up the tanks and preserving the environment surrounding each one of those tanks.

And then we also manage Pantex and other NNSA sites where we participate in joint ventures, making sure that the science is right and the equipment and the deliveries are right there, much like we do for the naval reactors program. So there's low financial risk here because we're a management and operating contractor. We have GOCOs. We do invest capital, but that's part of the contractual relationship, and we get paid back in due course throughout the execution of those contracts.

So how do we build on this success? And only 6 years ago, 2020, this was a $27 million EBITDA business. And now we've grown it to $80 million. And we've done that because we've been winning. We've been winning contracts in the variety of scope that's offered in GOCOs. In fact, we've won just about every contract that we bid over the last 5 to 10 years. And it started off with our initial bid in West Valley. We ramped that up across our Savannah River mission completion, which is the environmental remediation portion of the Savannah River site. And then we augmented that with Hanford Tanks, and we continue to win with Pantex, Canadian Nuclear Laboratories. And we even won a contract that we used to participate on, on the Strategic Petroleum Reserve. We used to operate a portion of those oil fields, and we're doing that as part of that joint venture.

And then more recently, and some of the opportunities that we're seeing out of the government that are atypical is bidding individual pieces of scope from each one of those sites. So meaning the Y-12 complex has to build large facilities to manufacture products for NNSA, including lithium. And so they went out to bid. Normally, that would just be consolidated under that MNO contractor, but they went out to bid because they want this rapid growth in the footprint for NNSA, and we won one of the initial awards to go off and design that building, design the facility and operations and really provide a good proposal back to NNSA for the full build-out to process lithium into the future.

So we're expanding here. We're using a variety of things. I talked about the people side of the business. We're utilizing the best in BWXT to go after these contracts. We're using a process that's tried and true, meaning teaming and teaming relationships that we know we can win with. And then we're using digital tools. We manage these enormous projects in 14 sites. The best way to do that, the best way to streamline that is to use artificial intelligence. And we've been employing that through each one of those sites. We've been integrating the way in which we're using AI with our customers, and they love it, right? They love the fact that we're moving faster than they've ever seen any contracted move before. And that's the real reason we're winning, right? You can bid jobs all day long, but it's all about the CPARS scores as part of the FAR process. If you don't have good scores, you will not win. And we've had good scores, and it's growing day in and day out or year after year. And it's because we're moving faster than anybody, and we're doing it with extreme safety.

So I'm going to move over to advanced nuclear. And like I mentioned, Kate Kelly, Erik Nygaard, several of us started this business in 2018, and it was an exciting time because we did start to see this translation of new technology into the nuclear realm. And so we started to understand what does the customer base look for. First, it was space nuclear reactors, then it was optimized nuclear fuel.

In fact, we 3-dimensionally printed HALEU fuel in 2019 as part of this business. It was one of our first projects. And we did it because we wanted to prove to DARPA that we could not only rapidly innovate, but we could create a material composition of nuclear fuel that had never been done before. We could 3-dimensionally print it. We could put it in a furnace that had hydrogen in 3,000 seat temperatures and it would perform mechanically. And we did that in about a year. It was an amazing feat for us, but what we learned was that entire cycle. It was a brand-new business that had to understand how to hire right, how to create good program management, how to interface with new customers, how to develop a supply chain and how to get things done quickly in a high-consequence environment, a nuclear laboratory.

And we did all that. And that was the springboard for all the rest of this growth. And what we've done is we've hired 400 people. We did a lot of that during COVID. We had monthly all-hands meetings to make sure those people understood exactly why the strategy existed inside of BWXT to have a start-up in a company that had been around since 1867. We built a 200,000 square foot maker space that has classified capability, and it's much more than a maker space now.

First, it was a lot about development and seeing the designs come to life and component type testing. But now we have a full-up reactor in there. We have the Pele reactor core with a core barrel installed, 7,000 components inside, flow sleeves ready, ready to be fueled, ready to be shipped and fueled at the Idaho National Lab. So the transition has not only taken place inside of the nuclear industry, it's taking place inside of BWXT. We're designing our own products. We're manufacturing those with the latest technology. We're creating a digital representation of the as-built design, and we're going to be delivering this product and operate this reactor for the U.S. government here in short order.

So out of that, we also learn how to go through the entire cycle of research and development. That's the reason why Government Operations, advanced nuclear, in particular, is the development engine for a lot of the new product lines that we have. And also, how do we optimize the TRISO manufacturing process. I'll talk more about that in a later slide.

So I talked about the early part of this and why we built advanced nuclear platform in the way that we did. Now we're getting into initial deployments. I would consider this the fun stuff, right? We've traversed this very difficult to traverse technology road map, the technology readiness levels from 0 all the way to 7. We're there. We are now prototyping. We are going to deliver that first reactor. We have several other programs in the pipeline that I'll talk about in national security.

And then we're going to scale production, and then we're going to expand the markets as we scale production. And we see that in context of what the government is looking for, how they think about microreactors, how they are thinking about distributed energy, how they are thinking about the tactical capability that goes along with a strategic product like a microreactor.

In addition to that, we've been manufacturing fuel inside of inside of Government Operations at our nuclear operations group in context -- in collaboration with our advanced nuclear group. So not only have we been manufacturing TRISO fuel for 20 years, we're the only ones delivering inspect TRISO fuel to the government, right? And we're doing that in the hundreds of kilogram quantities, and we're going to get into larger quantities as that market demands it. But we're ready for that. We've been making investments double-digit millions in just providing ourselves with more facilities with more equipment to manufacture TRISO fuel.

We've already delivered the Pele fuel that was last year. That Pele fuel will be inserted into the core that's in Lynchburg now in our facility. We delivered the fuel for Antares experiment. If you recall, earlier this year or actually last year, there was a call to action by the White House to deliver critical reactors by July 4, 2026. That first criticality was Antares. That fuel came from our facilities in BWXT. It's been a great relationship.

And so this is where we have a little bit of an intersection. They're a microreactor vendor. We're a microreactor vendor. We're providing them fuel. It's a true rising ties lift-all boat situation. We're going to make fuel for everybody, whether they're our competitors or whether it's us. And we do that because we need this TRISO market to expand. We need the volume to increase so we can reduce the cost. So microreactors can become a technology and create a new market for off-grid and behind-the-meter type applications.

So back to what we use in our capabilities and how we are using TRISO fuel to not only create Project Pele, and this is a project that's been running since 2020, but we had another project running in parallel to that through the Department of Energy Advanced Nuclear campaign. And that project for us was called the BWXT Advanced Nuclear Reactor or BANR. So just like Project Pele, we started this program in 2020. We were highly focused on how do you commercialize a Pele reactor. How do you use Pele reactors or micro reactors in a variety of different ways.

It started off with an oil and gas company, paid us $250,000 to write them a proposal on how we could deploy these reactors in an oil field. And so we've taken that thesis. We put that into a program under the Department of Energy. And we not only understand how this reactor needs to be scaled up from Pele, but we also understand the key tenets of supply chain, delivery, program management. We are the prime for Pele, meaning we have Northrop Grumman and Rolls-Royce LibertyWorks working for us as subcontractors. So we know how to create big programs with new technology, and we're going to deploy it for the Janus Program at Fort Campbell. In addition to that, we'll have a commercial offering as the same BANR reactor that will deploy [ CONUS ] at a military installation, and that commercial offering will have a lot of uptake as we predict here in the near future.

So moving on to something that I see as the next generation of the next wave of technologies borne out of our Advanced Nuclear segment. It's really 3 different categories. Strategic deterrent modernization, just like it sounds, there needs to be a modernization of what we're delivering for the strategic deterrent. High-precision manufacturing is absolutely required. high-precision manufacturing in classified environments, very, very important. That's what BWXT does. We do it for nuclear products. We can do it for mechanical systems for this customer as well.

Operational energy, it's really deploying what we see in Pele, what we see in Janus and creating an operational energy case around that microreactor product. And then space operations. I mentioned high-power dense systems and very small packages are a very unique offering that BWXT can provide.

Space operations needs that. Volume and mass are absolutely important in space operations. And if you can get a power density well beyond solar, which nuclear absolutely provides, then space operations is going to be an emerging and ramping segment for us. And we'll talk more about that as those products and as those programs continue to mature.

So moving over to mPower. This is the reason I joined BWXT. Back in 2011, I was very excited about small modular reactors. I was very excited about BWXT and what we could bring to the marketplace. So this program started in 2007, 2008, and we really ramped up about 2010, maybe 2011, and we had a couple of things that were happening simultaneous. We were designing the reactor, the components that were most mature, we were building and we were testing. And then we also had a large thermal hydraulic test facility that I managed and operated to understand the dynamics of an integral vessel once through steam generator, coupled to a nuclear reactor.

So we went through a lot of the design basis events and scenarios that are required to analyze this technology. It became very mature, but the economics weren't right. The demand signal wasn't there. The financial case no longer made sense. And in the 2014, 2015 time frame, we shelved it and we shelved it for very good reasons, but we preserved all the information that went along with mPower. And we did that because we knew that it may reemerge. We may have an investment scenario in the future where BWXT would pick it up or in this case and what we're doing, where 2 other companies would be interested in it.

So the 2 companies are Applied Atomics. We have licensed them this technology. We have an agreement with them. to commercialize mPower for the commercial market, terrestrial in particular. And then CORE POWER, they're interested in marinizing the mPower reactor. So essentially putting multiple units on an enormous barge and then allowing that to provide power to the shore. And this is interesting for us because now we can monetize all that investment that we made in mPower.

And furthermore, we stay true to what John MacQuarrie talked about. We will maintain our existence as a supplier, super merchant supplier to the small modular reactor community because we will build what they design. They're going to continue the design. They will continue the licensing. We will provide services to make that real. And then most of the scope will go into John's factories and in Commercial Operations as they continue to advance the product. So we'll retain the IP. We'll retain the exclusive rights to manufacture. These 2 companies will take this from where we left off and fully commercialize. And it's good to have 2 companies doing that because they can share their resources and they're in constant contact. They see this as a strategic benefit to have each other. It's not a competitive context, and I think that gives even more life to this program as they continue to invest.

So moving over to special materials. We do have these differentiated capabilities, and I talked about that in some level of detail, but it started off with a variety of defense fuels. It started off with our work with the National Labs about 25 years ago in scaling up TRISO manufacturing. And then it equates to how can BWXT serve the government clients. We started with -- we have this HEU stockpile. It will extend into the 2040s and maybe into the early 2050s. What supply -- where does that supply go? Some of it goes into naval reactors. Some of it gets down blended for use for things like tritium production. And so we've been performing those over time, and we kept that as part of our core business. But what we branched out was when we saw high-purity depleted uranium enrichment operations become big businesses, that's how we coalesced around what we already had strategically and how we could form and create and solidify new opportunities on that established base.

So you're seeing the variety of enrichments here on the right starts with depleted uranium. There are things called tails. It's essentially the excess from the gaseous diffusion enrichment process that was performed in Portsmouth and Paducah. And so those tails have been maintained. And now we take those tails, we create depleted uranium for a variety of uses for the government. We also see an enrichment capability that I'll talk about here on later slides through LEU, HALEU and HEU. But right now, we're contracted for HEU, taking HALEU, making it -- enriching to HEU, allowing us to not only replenish the stockpile but maintain a constant inventory for the U.S. government. And we're seeing growth here, large growth, 24% CAGR, and we're seeing continued growth into 2030.

So more about high-purity depleted uranium. This is a great story because we quickly translated inorganic growth to organic growth. We acquired a company, Aerojet Ordnance Tennessee. We acquired that in January of last year. And it was once again an extension of our capabilities in material handling. From there, we had almost immediate interest from the NNSA customer. They were excited about the fact that BWXT, a large company that could handle large programs, could now take on a very important and strategic program for them called high-purity depleted uranium. And that's really what you see here on the top line, restoring the critical national asset known as HPDU.

And so on the right, the 10-year execution of this means that we will have a steep ramp in execution because we have to construct the facilities. We've cleared all the land. We are almost complete with the initial facility. We will be complete here in the next year or 2 on the other 2 facilities to manufacture up to 300 metric tons of high-purity depleted uranium in our facility in Jonesborough, Tennessee. So that steep ramp is through the construction period. And then you see a level off a bit just during operations, and that's where the operational efficiency, our focus, our relentless focus on margins comes into play. So we'll start driving better margins in the out years post construction, commissioning and through initial and final operations or enduring operations.

Staying with special materials. I'll talk a little bit about unobligated enriched uranium on this slide, and then I'll talk about what the future looks like as projected by the U.S. government. So we completed highly enriched uranium enrichment in the 1990s, but we still enriched until about 2013. That enrichment was focused mostly on LEU. And then in 2024, the government came to us and they said, we have this excellent technology that has been born out of Oak Ridge National Lab. We've been developing it for about 8 or 9 years, and we want you to fully commercialize it or we want your proposal on how you would fully commercialize it.

So we went back to how do we take products and products from our advanced nuclear campaign from all the products that we've developed inside of our Naval Propulsion business, and we developed a program plan, and we were awarded the contract in September of last year for $1.5 billion, performing on 2 parallel tasks. One is the commercial -- or not to commercial, but scale up the operation and prepare this centrifuge. It's called the DUECE centrifuge out of Oak Ridge National Lab, prepare that for mass production and then also prepare all of the facilities and the licenses and all the requirements to take that centrifuge and enrich all the way through highly enriched uranium.

So these 2 parallel paths we started a year ago. It's going quite well for us. The relationship that we forged with that national lab with this customer has been very strong, and we can -- we expect to continue that for this program in particular. But like I mentioned, and Rex mentioned this as well, the government knows strategically that we need -- that we, as the United States, need to have some control over the entire enrichment pipeline. So right now, in the U.S., there are about 4.8 million SWU or separative work units of enrichment capacity in the U.S., but none of that is owned by the United States government or a U.S. company.

And so there's 15 million SWU, so 3x that consumed just by the commercial marketplace. So the emerging enrichment market is enormous. It's enormous on the commercial side because we have an impending ban on import of Russian uranium, which is a pretty substantial supply to the world and the United States. And we have this demand signal from this dropping supply in our stockpile of highly enriched uranium. So a lot of opportunity enrichment. What BWXT is focused on is what we consider unobligated fuel, which is enriched uranium for the government's purposes. The reason it's called unobligated is because it has no obligation to a treaty worldwide because we manufacture and we use all the components from U.S. sourced materials.

So there's 4 parts to the strategy that you can all read in the GAO report. One is use the current available inventory of unobligated LEU and HEU. There's some downblending work in there, and I talked about that on a previous slide, deploy large centrifuge technology. The problem with that is there's -- all of the material in a large centrifuge is not sourced from the U.S., so it cannot currently produce unobligated fuel, develop and deploy small centrifuge technology, which is this DUECE platform that's been invested in by the government for nearly 10 years and then develop a large-scale unobligated enrichment capability. And that's something that we're working on. And I talked about that on the previous slide and those 2 parallel paths. But this inventory needs to be replenished and the gap between HALEU and HEU must be filled. And that's what you're seeing on the right side.

So over the next couple of decades, what we expect to see is the government to understand how they want to go off and procure that entire enrichment pipeline, not just the HEU that we will be enriching but the entire pipeline. And we feel really well positioned for that because I have staff that are working all day, every day, understanding how we can mass produce these centrifuges. We can get to an economy of scale and ultimately propose to the U.S. government that this enrichment pipeline can be fulfilled by investments that they are making now and have been making for a decade.

So going over to the financial outlook. I talked about the revenue at $2.6 billion. Adjusted EBITDA for 2026 is $520 million with a margin of about 20.5%. Now at the beginning of the year, this was 19% margins. And because of what we've been focusing on, I talked about operational excellence and how we're using technology and how we're just doing the nuts and bolts factory optimization throughout the entire 3 million square feet in Government Operations, we've been able to raise that margin above 20% to about 20.5%. But once again, we're not done there. We're going to continue to grow our margins because as you start to gain operational efficiencies, other efficiencies become more clear, and we're prioritizing that.

I've aligned my OpEx teams to focus on that. I've provided stretch goals to my entire general management team, and they're excited about it because they have staff that are excited about bringing new technology or new processes or new ways of staffing or new factory. I mean there's just tons of different methodologies that have been employed here to continue to grow margins. So we have our predictable core growth. We have our $6.8 billion backlog, and we'll continue to grow there. But we have these new opportunities in special materials essentially commercializing the enrichment capability that we have, HPDU, the high-purity depleted uranium and then the advanced nuclear segment through this Janus Program, through the pathfinder known as the Pele program is going to become real, and it's going to become real very soon, including the TRISO opportunity that not only fulfills our own needs, but the entire marketplace. So in 2030, we expect to have mid- to high single-digit CAGR as compared to today, high single-digit CAGR for EBITDA and then margins are going to continue to expand, and we'll relentlessly pursue that as well.

So back to our key takeaways. Inside of Government Operations, we have this unmatched experience -- we have great customer relationships. We have the sole source contracts that are proof that these customer relationships and our deliveries are exactly what they need to be for this set of really important clients. We're continuing to invest in the advanced nuclear platforms. We're doing that in both reactors and fuel. We're doing that with a coherent strategy that we've been developing over the last decade that we're continuing to implement and refine as new opportunities come to us. We have a very predictable and growing revenue base, and we're continuing to drive margins. It's the vitality that's been injected into this business over the last several years, really starting with Admiral McCoy, starting with the resurgence of a lot of new nuclear opportunities with all the staffing that we brought on board.

I mean, it's palpable. And I walk through these facilities every quarter. and I talk to staff, and I understand what's important to them. And they are excited about producing more, doing it smartly and then also growing this business alongside with Commercial Operations.

All right. With that, I'll turn it over to Mike Fitzgerald, who will talk about financial strategy and outlook.

Thanks, Joe. It's great to see so many familiar faces today, and I just want to thank you for being here and the continued interest and support for BWXT. I do want to acknowledge we are running a few minutes behind, so I will try to focus on the key financial messages as we go through this. For those that I haven't met, I'm Mike Fitzgerald. I'm the CFO for BWXT. I've been with the company for about 4 years, and I've been in the seat for about 1.5 years.

I think you look at today, you hear about the growth and the opportunities ahead of us. My job over the next several minutes is really to translate that into what that means financially. What does that mean for growth? What does it mean for margins? What does it mean for cash generation? And what does that mean for capital allocation? And when you look at the center of this, it's really about durability. We believe that we can compound earnings and cash flow at very attractive rates while still maintaining financial discipline that has been important and that you've gotten to know from us.

As I go through the financial section, I want to leave you with 5 key messages. The first, we expect sustained profitable revenue growth. This is supported by our backlog, our durable end markets and our multiple growth drivers. Second, we see a clear path to margin expansion. This will allow adjusted EBITDA and earnings to grow faster than revenue. Third, we expect earnings growth to translate into meaningfully higher free cash flow. And fourth, we will remain disciplined in how we reinvest that cash, investing organically through disciplined M&A with a focus on strengthening our core strategic markets while continuing to return capital to shareholders. And fifth, our strengthened balance sheet provides the strategic and the financial flexibility to pursue compelling opportunities and maintain appropriate leverage and liquidity for the business. Together, these elements create a financial model that we believe can compound earnings and drive additional cash flow and shareholder value through 2030 and beyond.

Before we look forward, I think it's important to acknowledge how much of the BWXT financial profile has changed. If you look at 2020 to 2023, revenue grew at approximately 6% annually. From the 2023 to the midpoint of our 2026 guidance, that has accelerated to 15%. More than half of that is organic, and it's been complemented by additional acquisitions. If you look at adjusted EBITDA, it shows a similar acceleration. You had 3% in the earlier period, accelerating to 12% from 2023 through 2026.

But perhaps the most significant change, I think, in the BWXT story is around free cash flow. We came into the decade following a few large capital programs and with inefficient working capital, which led us to having negative free cash flow, as you can see in 2020. Since then, we've continued investing for growth. But at the same time, we focused on working capital performance. And importantly, what we've seen is a significant improvement in working capital or free cash flow performance and is expected to reach $345 million to $360 million based on our current guidance.

So the takeaway is not that BWXT is larger. It's the quality of our financial model has changed. We have a higher growth rate. We have a larger earnings base, and we have significantly stronger cash generation profile. And we're doing this even while investing at continued heightened levels for the opportunities ahead.

From a segment perspective, we're seeing it really across the business in both segments. In Government Operations, Joe described how we went from a low single-digit growth to high single-digit growth. We're expecting approximately $2.6 billion of revenue this year. Growth is being driven really across the board. You see it in naval nuclear propulsion. You see it in the evolution of advanced technologies. You see it in special materials. And if you look at our adjusted EBITDA, we're growing as well.

And I do want to acknowledge that we have experienced some modest margin compression, and that has primarily been driven by mix, but we continue to operate very strongly. You heard a lot of the initiatives that Joe talked about, and we see a very clear path to margin expansion. Importantly, government has become a high-growth business, but a very predictable foundation for what we're calling the predictable core.

If you look at Commercial Operations, I think that's even seen even more significant improvement. Revenue has grown from $500 million in 2023 to more than $1.2 billion expected this year. John talked about the CANDU life extensions, the early work that we're doing on SMRs. Don't discount our aftermarket services. We've had a medical growth. We've had strategic acquisitions, and you're seeing that compound. Adjusted EBITDA has increased from approximately $60 million to more than $160 million. So when you look at both segments, they enter into the next several years with a substantially stronger growth profile than they had before. And when you combine that with operational initiatives and what we're doing to continue to support and increase margins, we'll see an increase in exponential compounding of earnings and cash flow.

Rex talked earlier about the investment philosophy. Let me put some numbers around this. Across 2024, 2025 and 2026, we will have allocated approximately $1.6 billion of capital. A significant portion of that has gone directly back into the business. We've talked about the BWXT innovation campus, optimizing our naval nuclear propulsion facilities, the expansion of our Cambridge manufacturing plant and ongoing maintenance and regulatory investments. We've also deployed capital through disciplined M&A. We discussed today around A.O.T. and Kinectrics in 2025 and most recently, PCG. And throughout that period, we've continued to have a consistent and growing dividend and modest share repurchases. The common denominator here is discipline. Capital will go where we believe it can generate long-term returns.

One of my top priorities when I took over as CFO was to optimize and strengthen the balance sheet. My belief was that as our cash profile has changed, that our balance sheet needs to evolve with it. Last November, we issued $1.25 billion of convertible notes at a 0% coupon with a cap call taking the conversion premium up to 100%. We did this to pay off our credit facility, add cash on the balance sheet. But at the same time, we simultaneously renegotiated our credit facility terms to be more flexible and increase capacity. Following the recently announced PCG acquisition, we have $400 million of cash and $1.7 billion of total liquidity. If you look at this time last year, following the Kinectrics acquisition, liquidity was less than $300 million. That is a meaningful increase in our financial flexibility.

The next step on this path is towards investment grade. Last week, we were very proud to announce that Fitch had assigned us an investment-grade rating, and we're pursuing investment-grade ratings for other agencies as well. We're also evaluating alternatives to address our medium-term debt maturities. Our focus is on reducing the cost of capital, supporting our investment-grade objectives, maintaining our net leverage within our targeted 2 to 3x range and at the same time, making the balance sheet a strategic asset. We believe this will give us greater flexibility to invest organically, to pursue disciplined M&A and manage capital returns while maintaining the financial discipline that you've come to expect from us. Importantly, we have more strategic and financial flexibility today than we've had in the past, and that expands the range of opportunities that we can consider.

I've given you the historical perspective and a snapshot of where we are today. Now let's turn to what that means through 2030. Historically, we've provided medium-term growth rates over a 3- to 5-year range. Given the visibility we have today and based on investor feedback, we wanted to provide specific 2030 targets for revenue, adjusted EBITDA and free cash flow. On revenue, we're targeting $5.5 billion to $6 billion in 2030, which is a low double-digit annual growth rate from 2026. We're seeing growth across both government and commercial.

For adjusted EBITDA, we're targeting $1.1 billion to $1.2 billion. That's a low to mid-teens annual growth rate. And in other words, we're expecting earnings to grow faster than revenue, driven by scale, operational excellence and the margin initiatives that we've discussed. These will offset what we see from a mix headwind standpoint. And we're targeting free cash flow of $525 million to $575 million, which builds off the substantial growth that we've seen in free cash flow over the last few years.

The most important point is the combination, sustained revenue growth, expanding margins, increasing cash generation. And that framework is diversified across the company. You heard today, it's not dependent on one government program. It's not dependent on one reactor technology, and it's not dependent on a single geography.

One reason that we have confidence in the revenue target that we lay out for 2030 is the dramatic improvement that we discussed around backlog. It's the key foundation of what we're calling that predictable core. You've heard many -- a lot about kind of the individual wins today. So I'm not going to repeat all those. I think what's really important to look at is if you look at book-to-bill, we've remained over 1x over the last few years, and we're 1.7x on a trailing 12-month basis as of the second quarter.

And I just want to reiterate, this is true contracted work and customer commitments. This is -- we're not talking about a market forecast or pipeline opportunities. This is real commitment. As of the second quarter, $4.5 billion of our backlog is expected to convert to revenue by the end of next year. That provides a substantial base, not only for the rest of this year, but for all of 2027. And that amount is up 40% year-over-year. And when you look at the long-term backlog, it's also up 40%. This gives us a ton of confidence in both not only the near-term outlook, but the longer-term growth trajectory of this business.

While backlog gives us confidence in the base, what I wanted to show on this slide was how that base combines with incremental opportunities to take revenue from $3.8 billion today to $5.5 billion to $6 billion in 2030. The first layer, as we've discussed, is the predictable core. That represents a little over half of the growth forecast. So in government, we're talking about high priority programs that are supported by long-term customer relationships and contracts, includes naval nuclear propulsion, special materials, among others.

In commercial, this is about our kind of service and aftermarket portfolio, along with visible large-scale nuclear and SMR opportunities. The second layer is really about incremental organic growth. So when we think about that, that is the expansion of the naval nuclear that Joe discussed. It's the special materials upside. It's advanced nuclear that is -- we're continuing to see progress on. It's starting to use our U.S. commercial facility that we've established with the PCG acquisition. And it's additional large-scale and SMR opportunities that have not been captured in the core.

And then finally, we layer on their disciplined M&A. This is going to be a key part of our strategy. We see opportunities to strengthen our positions, but this is going to be within our core strategic markets. We want to add differentiated capabilities and capacity. We want to create additional avenues for growth, but we need the strategic and the financial case to be compelling. As you think about the path to 2030, I would not expect this to happen in a growth or a straight line. The growth and the timing of opportunities can convert. So any given year may be a little bit different from a cadence standpoint. However, I think we feel very confident in the long-term growth trajectory. And we'll talk a little bit about that more when I talk about the '27 framework.

So if I sum up this slide, I just want to reiterate, we don't need to win every opportunity discussed to achieve our objectives or our targets. We have a strong visible base -- we have multiple pathways to additional growth, and we're not dependent on a single program, single platform, single customer or any single future acquisition.

Revenue growth is only part of the financial opportunity that we see. The next part is about improving the economics of that growth. We're laying out a path from 17.5% adjusted EBITDA margin in 2026 to approximately 20% by 2030. The interesting thing that gives us a lot of confidence in this is a lot of this is within our control. When you look at the factors, operational excellence we've established, I think you've heard about how this is an organizational-wide initiative focused on simplifying processes, improving productivity, reducing inefficiencies, increasing throughput. Pricing and value is really about being disciplined in how we price our differentiated capabilities and the work that we pursue.

And when you look at volume and scale, we believe that, that will provide meaningful benefit in commercial as well as across the business as additional overhead leverage is maintained through additional scale. This represents about 300 basis points of opportunity, but we want to be balanced. And so we also explicitly are accounting for growth investment and mix offsets within that to get to the 20% target. So I think the important thing here is that 20% doesn't assume that mix is going to be more favorable. We're expecting to earn that improvement through execution, through productivity, through value capture and through scale. And combined with our revenue outlook, that supports low to mid-teens adjusted EBITDA growth.

The next part of the model is converting free cash flow from earnings. And that's important. I know it's an important focus for many of you. If you look at free cash flow, our free cash flow has compounded at approximately 18% from 2023 to the midpoint of our 2026 guidance. We're coming off a depressed base. So we're not assuming that, that's going to continue indefinitely. But I would say that from here through 2030, we're targeting low double-digit free cash flow growth.

There's 3 primary drivers. The first is the earnings growth we just discussed. The second is our disciplined capital spending. And I want to be clear that we are targeting CapEx at 5% to 6% of revenue and our continued focus on working capital management. Growth itself will consume some working capital. And so we have factored in some of those offsets, at least in our overall framework. And the result is ultimately a free cash flow target of $525 million to $575 million. I think for investors, this is probably one of the more important changes in BWXT story. We're not simply targeting higher earnings. We expect those earnings to translate into substantially greater cash generation. And the target already incorporates continued investment in the business for the opportunities that we're seeing ahead. And if I put this differently, you can look at the trajectory and see that we will yield over $2 billion of cumulative free cash flow from 2026 through 2030. And that really materially changes what BWXT can do strategically.

So that brings us back to capital allocation. Based on the framework that we've outlined and assuming net leverage remains at the targeted 2 to 3x range, we estimate $5.5 billion of available capital to deploy through 2030. We expect CapEx, as I mentioned before, to be 5% to 6% of revenue with a meaningful portion of that directed towards organic growth, and we expect to maintain a consistent and growing dividend and share repurchases will continue to remain an option. After those uses, we will have approximately $3.5 billion of additional capital deployment capacity. And that gives us really a significant amount of strategic flexibility.

If you look at it from a prioritization standpoint, our first priority will continue to be organic growth. Disciplined M&A will continue to be an important part of how we build the portfolio as well. We have more capacity and flexibility today than we've had in most recent years. And that means that we're not anchored to the same size of transactions or the types of acquisitions that we've done in the past. But I do want to be clear that what we're focused on is strategic fit. We're focused on the quality of the assets. We're focused on things that will generate attractive risk-adjusted returns. And when we don't see sufficient reinvestment opportunities, we will return incremental capital to shareholders.

Rex showed a version of this slide earlier, but I wanted to put some numbers around our approach to organic investment. We're asked about this frequently, which is -- makes a ton of sense just given the magnitude of the opportunities that we see. From 2024 through 2026, cumulative CapEx is approximately $565 million, so roughly about 6% of revenue. And more than half of that was really directed towards capacity expansion in both commercial and government. Going forward, we expect total CapEx of approximately 5% to 6% of revenue, roughly 3.5% to 4% for maintenance capital and another 1.5% to 2% for growth capital.

The areas of investment remain consistent: capacity expansion, productivity, operational excellence and digital transformation. But every project competes for capital. We evaluate investments based on their ability to support growth, improve margins, advance a strategic objective and carry an acceptable execution risk profile. And that center of that framework is financial discipline. The objective is not to spend more because the markets are attractive. It is to direct capital towards sustainable growth and attractive long-term returns.

If you look at our recent portfolio actions, you can see how we apply that discipline. The point of these acquisitions is not simply to add revenue. We are acquiring differentiated capabilities that we believe can be more valuable within BWXT by combining them with our relationships, our nuclear pedigree and our scale. A.O.T. is a great example. We acquired the business for $100 million in January of 2025, and Joe mentioned earlier how that helped us capture a $1.6 billion 10-year HPDU contract. Kinectrics expanded our commercial nuclear services offering that John discussed, and PCG is our first U.S. commercial nuclear manufacturing plant.

But portfolio discipline also works in both directions. It means that we need to be willing to exit businesses where we believe capital can create greater value elsewhere. We recently announced the sale of majority stake in BWXT Medical for up to $800 million while retaining an approximate 20% interest. Taken together, these actions illustrate how we look at portfolio management. Acquisitions and divestitures are 2 sides of the same strategy. Concentrating our capital in areas where BWXT has differentiated capabilities where we believe we can create the longest-term value. And this can mean investing organically, acquiring complementary capabilities, monetizing businesses or putting capital where we can -- we believe will be deployed effectively.

As we look forward, this disciplined M&A will remain an important part of the strategy, as I mentioned before. Our pipeline is active. The opportunity set we are evaluating has broadened as our financial capacity and strategic position have strengthened. We're focused on assets in our core strategic markets where we can add additional value through differentiated capabilities, strong market positions or revenue synergies. But disciplined M&A means strategic fit and financial returns have to work together. We expect positive NPV, including achievable synergies. We target EPS accretion in year 1, excluding onetime amortization and integration costs, and we look for attractive margins and sustainable organic growth. We have greater financial flexibility today, and we're not anchored to what we've done in the past. The gating factors here are strategic fit and our confidence in execution. We remain very active. We have a great team that's led by Rik Geiersbach, who's with us here today. And the objective isn't simply to acquire businesses. It's to add differentiated assets that can create more value as part of BWXT than they can on their own.

I'll finish the financial outlook by bringing this back to the near term. We -- first off, as Rex mentioned, we are reaffirming our 2026 guidance. We've had a really strong first half. Our backlog remains robust, and we're expecting a solid performance in the second half. So we'll provide additional detail with our third quarter results in early November.

For 2027, we wanted to provide a preliminary framework because there are several moving pieces in the portfolio, including the PCG acquisition and the planned sale of BWXT Medical. So for purposes of this framework, to be clear, we're assuming that Medical closes at the end of 2026. Our preliminary framework calls for high single-digit revenue growth, high single-digit adjusted EBITDA growth and modest margin expansion. If you look at this from a government segment perspective, we expect high single-digit to low double-digit revenue growth in total, and that's driven primarily by mid-single-digit naval nuclear propulsion growth and robust double-digit special materials growth as the defense fuels and the HPDU programs continue to ramp. We expect government margins to be flat to modestly higher with strong operational performance partially offset by mix from the continued ramp of the customer-funded infrastructure programs.

Within commercial, we expect high single-digit organic growth in 2027. And we're coming off a particularly strong year of growth in 2026. So it creates a little more challenging year-over-year comparison, but it also assumes kind of a measured contribution for new orders. So there is potential upside depending on the timing of orders and how we execute. Reported commercial revenue growth is expected to be low single digits as the full year contribution of PCG is largely offset by the assumed planned sale of Medical.

And we expect commercial margins to expand 50 to 100 basis points, really 100 basis points, excluding Medical, which reflects the continued improvement of that underlying business. The reason that we're providing this '27 framework now is that it's the first year on the path to 2030, and we wanted to make the bridge to 2030 visible. So as you can see, we have strong underlying organic growth, initial margin expansion and continued cash generation.

So to wrap it up, let me leave you with the financial thesis for BWXT. We have a greater visibility, a stronger growth profile and clear path to higher margins and substantially higher cash generation. That cash generation, combined with the strengthening of our balance sheet, gives us increasing opportunities to invest behind what we're seeing in the markets ahead. So the model is straightforward, really grow the business profitably, expand margins, convert those earnings into cash and reinvest that cash with discipline. And as we do these things consistently, we believe BWXT will compound earnings, free cash flow and shareholder value through 2030 and beyond. And with that, I'll turn it to Rex for closing remarks.

Okay. Thank you, Mike. I'll wrap it up here. I do want to thank you again for attending. Those of you who came in person and those that joined us by way of the webcast, we're honored by your participation and your interest in BWXT. I do want to thank my team for delivering, I think, a very clear and compelling message today for investing in BWXT, particularly thanks to Chase Jacobson, who leads Investor Relations and put this all together.

So I will conclude by returning to the investment thesis, a single chart here and make 5 key points for you. First, the demand is inflecting now. I think we've made that case clear. As we've said multiple times today, that's showing up in our backlog that increased from $4 billion to $8.4 billion. And the demand is underscored by these major secular themes that we talked about, that intersection of economic security, national security and energy security, all of which are begging for nuclear solutions. That's the reason why nuclear is in the spotlight these days.

I think we've established that BWXT appears in virtually every part of the value chain. No one else could make this claim, I'm quite certain. We participate in literally every uranium assay from high-purity depleted uranium all the way up to high enriched uranium. No one else and certainly no one else in the free world could say that. And we work in virtually every type and scale of reactor technology, light and heavy water reactors, high-temperature gas reactors, liquid metal, molten salt and scales that range from as low as about 1 megawatt up to gigawatt to gigawatt scales.

And we cross all these project phases. We start with licensing and safety analysis. We do design of components and manufacturing thereof. We provide fuel. We have aftermarket services. So everywhere you look in the nuclear space, you will find -- you'll just -- you're likely to find BWXT being there. We have this unmatched record of delivery. It's been said multiple times today, but it bears repeating, we've delivered 425 of these exquisitely beautiful small modular reactors to the nuclear Navy.

There's an existence proof that small modular reactors can be built and then they can run successfully and that you can maintain supply chain for them, and we've been doing that for decades. We have delivered 325 steam generators to the commercial nuclear power market, 60 more in backlog, decades of nuclear fuel delivery to the Navy and half the commercial fuel to the Canadian market through John's business to Ontario Power Generation. We allocate capital to improve capacity, capability and efficiency in our existing plants, and we acquired to amplify our strategic intentions. I think we've made that case very clear today. I'm thrilled with the acquisitions that we've done historically, and they have delivered significant value for our shareholders.

And they have -- and the acquired assets have largely outperformed the acquisition business cases. Kinectrics is on fire. A.O.T. is on fire. I expect we'll see a similar story at PCG unfold and the ones that are in the rearview mirror when we did the GE acquisition in Canada, all of those have been paying dividends for our shareholders.

And then we return capital to shareholders when that's the best use of our capital. We are spring-loaded for future growth. We have powerful, defensible long-cycle franchise programs, which are that core that we talked about. And these are high-quality, highly predictable business. And then we've got this optionality for future growth that's expressing everywhere, special materials, advanced nuclear, will expand in technical services geographically and otherwise. And the commercial power one I talked about, I compare this period to the beginning of the '70s, '80s and '90s when the globe delivered 600 large reactors.

We're going to need at least that many to satisfy the power demands of AI, electrification and to replace existing infrastructure. It wouldn't surprise me if we build 1,000 large reactors in the future, and we certainly need to do so. And the wrapping around all the foregoing is this persistent pursuit of operational excellence. Our particular flavor of it is driving performance excellence, but we are dead set on improving the quality of the business, improving operations as we go, driving down the price of nonperformance, driving up margins.

You heard Mike forecast that we could go from 17.5% adjusted EBITDA margins now to about 20% when we get to 2030. And we've got a clear path for that. I did assert in the opening that this is the most exciting time in the history of this company, and I think we've made that point resoundingly today. I do think the scale of the opportunity is astounding. And I also believe that BWXT is extraordinarily well positioned to take advantage of that demand and create an opportunity to produce tremendous shareholder value.

Okay. With that, I'll close and thank you. We'll take a brief break. I'll pull Chase back up here to the microphone for -- to announce this.

Yes. Thanks, Rex. So we're going to do an 8-minute break. We're going to come back at 11:15 for Q&A. Thanks.

[Break]

I think we're good to get started. Okay. So we're going to do a little bit of a Q&A session here for the next 45 minutes or so. So in addition to the speakers today, we have Suzy Sterner. She's our Chief Corporate Affairs Officer, spends her time in D.C. So great insight to everything going on there, easy to figure out. And we also have Rik Geiersbach, who's our Chief Strategy Officer, joining the panel today.

So I just ask that -- we have Kelsey and Beth that are bringing a microphone. So just please introduce yourself. And if your question is direct to somebody, please address them with it. And yes, let's get started. And if you're online, feel free to submit your questions via the portal, and I'll try to get to a few of those.

Start with Mike -- sorry, we had Marc Bianchi.

Thanks, Chase. It's Marc Bianchi, TD Cowen. Thanks for the presentation, guys. It's an exciting outlook for the next several years here. I was hoping you could unpack a little bit the growth opportunities from now to 2030. Talk to us about -- I think you had a pie chart of how much was sort of service fuel large components for today. Maybe talk to us a little bit about what that pie chart would look like in 2030, so we can get a sense of the drivers of the growth opportunities.

I don't think the pie chart changes that dramatically, Marc. I do think we did not specifically lay out exactly specific quantification of each of those opportunities. One of the reasons is primarily because we see growth really across all of those opportunity sets, and we don't want to be held to one path versus another. And so I think we feel very comfortable with what we're seeing.

I will tell you this, when you look at the commercial business, we're going to continue to grow our aftermarket services business. However, I do think we'll see an inflection point of the new commercial nuclear build as we get past 2027 and into the early -- later as part of this decade.

So that is an inflection point. That's one of the reasons when you look at '27 kind of initial framework that we're guiding a little bit lower than what we're seeing over our overall 2030 is because you're going to see that inflection in '28 and '29. So I think that's the biggest point there.

The other thing I would say is that we continue to see opportunity set as it relates to the infrastructure build and special materials in the government operations segment. And the important thing to think about there is that those are long-tail programs. There's significant upside to those programs. And I think we highlighted some of the opportunity set that we see. So those could grow exponentially in comparison to kind of our current framework on the government operations. So I would say those are the biggest maybe changes that you'll see over the next few years. But otherwise, we -- the great thing is we're seeing growth opportunities really across the portfolio. And so I think there's a number of ways that we can win and hit those targets.

Okay. Mike?

Mike Ciarmoli, Guggenheim Securities. Thanks for all of the big information here. Rex love that story. I remember it well. Just on the outlook, I guess, Mike or Rex, as we think about that growth trajectory, it seems that there's some sort of placeholder for M&A there. I mean you're going to have a lot of capital to deploy. Is that embedded in the outlook? And then I guess the bigger question, and we're getting a lot of this, the opportunity with Westinghouse. I think you framed that as a couple of hundred million. Is your dollar content locked in there yet? Do those orders, if we get those orders by year-end, does that change how we should think about the slope of growth? And I think, Mike, you just said it's more like a '28 inflection, but just any additional color there on Westinghouse and M&A?

I think -- so two questions, right? One, how much M&A is in there, I guess for Mike. And then probably for John to talk about the content on Westinghouse?

Yes. So to be clear on that, over 50% we see in kind of our predictable core from an organic growth standpoint. We did include M&A as part of additional growth opportunity set. However, as I mentioned in the comments, we're not beholden to M&A in order to hit our growth outlook. So I think the reason we didn't specifically break it out is because we could see multiple paths, and we wanted the optionality to be able to pursue those paths. And then from a '27 standpoint, and I'll let John talk about the specifics around Westinghouse. But we do see opportunity for upside, as I mentioned, but a lot of that will depend exactly on timing of orders as well as the execution of those builds. So we didn't want to get too far ahead. We'll have some additional details as we get into the Q3 results.

Yes, I'd add, we're building a really great relationship with Westinghouse. We've been doing a lot of work on establishing a commercial relationship between us for those components. We've got a lot of bidding that we've done there for clients anywhere they deploy. They know our capacity. They know what we're ready to do, what we're capable of. They're working through qualifying us for all of the components that they need. So we're optimistic about how that opportunity looks for us. We've got the legacy work that PCG has done. So all of that makes us feel pretty good about the outlook there.

Mark?

Mark Shooter from William Blair. Rex, you've spoken a lot about using government opportunities to establish capacity and then the potential to repurpose that also for commercial applications. The GAO outlined $37 billion in their report for domestic enrichment needs just for the NNSA or other government uses. I just wondering if you could comment a little bit on that $37 billion number and what share you guys may look to take from that? And then if that's just the government number, is there even larger commercial obligation?

Yes. Thanks, Mark. I'll comment and then ask Joe Miller to add to it. That $37 billion number was about what it would take to reconstitute the defense fuels capability in a non-obligated fashion. So that's all the way from mining through eventually high enriched uranium. So the opportunity there, as we stated in the presentation, is around low-enriched uranium, high assay, low-enriched uranium, and we're going to go and compete for that. I think we have a chance to win a good chunk of that, if not all of it, is how I see it.

Now as to commercial possibilities there, because it's an unobligated fuel capability, U.S. mined uranium or bringing depleted uranium tails up to natural and above-the-ground mine in a way, and building with U.S. sourced materials, machining in U.S. plants and all of that, there's going to be a natural competitive disadvantage to that capability relative to the commercial market, particularly especially as it relates to established capability like Urenco's plant in New Mexico. That said, if you could work with the government on an arrangement where you could make sales on a contribution margin basis on the edge of that business, I think there's maybe a commercial opportunity there. But let there be no doubt, this is an enormous opportunity even with just the government demand.

Yes, I'll agree with that. And I'll also say that scale up is really important in driving down the cost of delivery of the individual centrifuges. And Rex mentioned all of the equipment, all of the components have to come from U.S. sources. So we're really focusing on how does the design compare to how we can mass produce to how we can create the supply chain. And then we need to go back to the government and say this is what we think it's going to look like and then opportunities will come from that. And right now, I mentioned the $1.5 billion contract, that's to get us to a point where we can go off and start the enrichment process. There's more contracts that are follow-ons from that, that we expect just from the existing start that we had last year. And then layering on everything that Rex said just provides us more opportunity as we continue to scale.

Tomo?

Tomo Sano from JPMorgan. On commercial components, AP1000 and SMRs appear not to be fully captured at CANDU-like breadth. So could you talk about any reasons, opportunities? And then how you think about the -- to get those kind of opportunities in-house versus, including potential M&A, please?

Well, for the Westinghouse components and for the SMR components we're working on, we're not in need of additional M&A activity to be able to produce those parts. We can make those in the facilities that we have today. Other than, as I said, we want to add capacity for very large components on water for logistics, transportation reasons. So I think we're really well positioned for that just as we are for the CANDU reactor components. It's just that our scope on CANDU is very large because of our history there and everything we can do for them. So I wouldn't characterize them any differently when you look at those reactor types in terms of our opportunity and what we can deliver with what we have within our capabilities today.

John, there's a question here online about the chart that we showed with the CANDU opportunities, right, and the path well into the 40s. Can you just talk about the kind of like what your view on that market is and what the revenue outlook could be? Or what's your kind of view of like revenue potential of that longer term?

Yes. So what we're looking at in -- I think in the near term is at least 4 reactors at the Bruce site, what Bruce Power calls Bruce C. And whether that's CANDU or another technology will be decided soon. And then Ontario Power Generation is looking at a site near their Darlington site called the Wesleyville site. And they've said probably 8 reactors at that site. So it could become one of the world's largest nuclear generating sites.

There are already -- both organizations are really advancing into this. So Bruce Power has been working on environmental assessment kind of work for a while. They just got $300 million from the Provincial Government to continue developing that. OPG has formed a dedicated team to deploy new nuclear. So what we're looking at, as I said, is maybe $350 million to $700 million per reactor and expect those reactors would deploy with sort of a gap between each one coming online that would be something like 18 months or so. And there's probably overlap between that Bruce C work and that Wesleyville work.

Perfect. Thank you. Bob? In the middle here.

Bob Labick, CJS Securities. Thanks for a great presentation. Appreciate it. One of the things you talked about was you're the current leader in TRISO production, and there's noise out there, and that's a big opportunity going forward. In your growth CapEx numbers, which you kind of just gave us for the next few years, you have like 1 -- sort of 1.5% of revenue for growth and then the rest for maintenance. Is there TRISO expansion in that? Or when do you decide to put more capital behind TRISO expansion as that market begins to develop in the 2030s and beyond?

So the answer is yes. We do have TRISO expansion capital within those targets. And so we do feel comfortable that we could stay within those targets. I would say, right now, we're expanding our TRISO capacity. So we do see some increased demand over the next few years, and we are planning to invest capital to expand the capacity. Now those will be modest investments, and they are tied directly to demand signals that we're seeing.

Over the longer term, what we really need to see is HALEU availability in order for us to really feel confident in the longer-term outlook related to TRISO. So we have not made a decision on a new greenfield facility, and that's -- we probably won't make a decision on that for a little while. And so I think in the time being, that's what we're focused on trying to increase the capacity and move that forward based on what we can. I don't know, Joe, if you have anything else to add there, but...

Yes, I think it's well put. And we're watching the market demand signal. We're feeding the market out of our facility in Lynchburg right now. Mike mentioned it, I mentioned it. We're making some small investments there to stay ahead of the market, but we watch all the dynamics, right? Where is the HALEU going to come from? How fast can we make TRISO for our market and where are the real contracts? The desire signal is high. We're translating that in demand signal, and we're staying ahead of the curve just by keeping tabs on what's happening in the marketplace.

Andre?

Yes. Andre Madrid with U.S. Bancorp, BTIG. I wanted to talk on naval nuclear maybe for a second. You mentioned 4% to 6% CAGR. That's based on existing programs. But I guess just what does the high watermark look like if battleship and AUKUS? And then additionally, I think during earnings, you had mentioned that Ford-class procurement cadence might accelerate a little bit. But I don't see that on the slides. Is that still on the table? And if so, I mean, is that another potential upside driver?

Yes. So I think from a Ford cadence standpoint, you'll see that in the shipbuilding schedule. So that did accelerate, and we have incorporated that. I think what I mentioned on the last earnings was that we wouldn't see that really until around the 2030 time frame. So that's why you're not seeing it in at least the near-term numbers. We haven't given a direct call it, upside related to the battleship and some of the AUKUS programs. I will tell you that those aren't -- the battleship is not forecasted into the 2030 that still got -- has to go through appropriations and a number of hurdles. So that certainly is upside.

And I know we don't really talk about kind of content by reactor, but the reason that we laid it out with Ford being kind of the largest, and then you can see kind of the directional kind of capacity with Virginia and AUKUS being the smallest and kind of Columbia and the battleship being in the middle is just to give you some sense of as we get an additional, call it, battleship through the factory, what could that do from an exponential standpoint. And I'll just remind everybody that we don't sell specific price per reactor because of the large fixed costs within the plant. We actually have to establish those large fixed costs and then determine how many ship sets the government needs in order for us to determine final pricing. So while I'd love to be able to give a price per ship set, it just doesn't work like that contractually. And that's why we don't give a better idea just because that can change depending on just the overall volume.

If we're going to go to JF, I'm going to just going to take one online real quick. I guess just sticking up to just kind of in line with shipbuilding schedule and what's going on in D.C. Can you talk about the midterm elections and what impact you see that having on BWXT depending on how it shakes out?

So I'm guessing that one is for me.

That's for you, Suzy.

So first, the Government Relations team works extremely hard and has been very successful in ensuring that we have bipartisan bicameral support of all of our programs. So whether the Rs are in control or the Ds are in control, BWXT is still at the table. And we like to say, if you're not at the table, you are on the menu. We're at the table.

I would also highlight that our programs are priority programs for our government customers across the board. Columbia, Virginia, the Ford, right, but also enrichment that you just heard about. And we're seeing that throughout the cycle from whether, again, it's a Democratic administration or a Republican administration. So we are in good shape.

For the midterms, I'll put my finger up and test the wind today. I was checking the polls, and I'm sure you all have seen right now, the generic ballot is up for the Dems about 8.5 points. It fluctuates. It was up to 8.7 at the end of last week. It's come down a little. I don't know why, but it has. And if you look at the toss-up races, they're in the Senate, 7 are considered toss-up. Sometimes it gets up to 9. And of the 7, 5 of those are Republican seats. So the Senate is surprisingly in play. I don't think anybody even 6 months ago would have thought that. And then in the House, it varies between 21, 22 seats and of those 16 are Republicans. So you can see which way the wave is going. But again, for BWXT, we're in good shape.

I might add a comment to that, and Suzy's team does a great job on the Hill and in the executive branch, making sure our interests are cared for. I would say as the CEO of BWXT, I experienced 20 days of Obama, Trump 45, all the Biden administration, Trump 47. We've seen changes in polarity in the White House, changes in polarity in the Senate and in the House and the support for nuclear has endured. There is support for nuclear on the left and the right, support for shipbuilding on the left and right. And that's been consistent throughout the last 10 years. And again, I would agree with Suzy that it just doesn't move our business around very much.

Okay. Jan-Frans?

Jan Engelbrecht at Baird. I think this question would be for Rex, Joe or for Mike. That's to do with Special Materials. If you look at $550 million of revenue in '26, that could go to almost $1 billion franchise just after this decade. But I was thinking more about sort of the margin potential for this business. Joe, you talked about automation for centrifuge manufacturing. Just how are you guys thinking about margins for that business longer term? And just sort of the technical know-how, the labor that you would need to scale up that franchise?

Yes, I'll start. And I would say the margins are going to be similar to what we do for other government customers. But right now, it's just too early to predict. But your point is a good one. We're building greenfield sites. We're building a lot of footprint. So we are industrializing both of those operations. And it's interesting from a technical standpoint as well because HPDU is a chemical process. While the centrifuge manufacturing is a mechanical process where we're going to be manufacturing lots of both -- in both factories. And so that allows us to use factory automation from a clean sheet essentially in how we implement both of those projects.

It also allows us the capability through our other sites, nuclear fuel sites or chemical. The mechanical processes we have in our northern sites, in particular, can adopt the technologies pretty pragmatically as we build up the enterprise. So I would see an uplift in margins throughout government operations. That's the reason why we predicted what we predicted based on new technologies being inserted into new factories, not necessarily stopping production to increase that technology base. So it's too early to say specific to those 2 programs, but I would align them with what we normally have, and then we'll uplift the margins as we insert technology and get to a rapid cadence and a more distinct cadence of delivery.

Tom?

Thomas Meric, Encompass Capital. Capital allocation question for Rex. A lot of the inflecting businesses you have now, whether it's TRISO or enrichment, several others have been talked about today, would benefit greatly from increased capacity. I think Joe mentioned enrichment quite well. They would also benefit greatly from reduced unit cost of production for the commercial industry. So I'm curious how you hold those 2 things in tension or even just how you think longer term about lowering unit cost of production, either a time line or a ranking or just any kind of strategic commentary around getting costs lower.

Joe and John to pile in here. So historically, we've been in pretty low rate production environment, right? We're delivering 2 nuclear ship sets a year to the Navy, 2 plus, 2 or 3 steam generators, a few of them a year and that kind of thing. And so we haven't had sort of an eye on high rate production and what you might do around that. These opportunities that Joe talked about in defense fuels and also in high-purity depleted uranium, we're going to have large factories with high throughput. So we'll be highly focused on that.

That said, even in the low rate production environments, we are focused on what we can do around throughput in particular. OpEx is broader than that, but we've been focused on throughput. John talked about it in his briefing, taking those steam generator deliveries from 1 per month up to 1.5 per month. And what's behind that is that when you look at where we are right now, 5 million square feet of nuclear qualified manufacturing space, that's impressive. But the answer to every question about capacity can't be build or acquire a new plant, right? Sometimes the answer is get more production out of the plant that you have. If we do 1.5 steam generators a month -- sorry, 1.5 steam generators a month instead of 1 per month, then we've got 50% more capacity there very obviously. So that's what we -- that's how we think about it. We're really trying to push throughput and expand at the same time.

And just to answer your question very specific to TRISO, you need a big demand signal, so you can get a higher volume of throughput through the factory that you build and then you can bring the overall cost of TRISO. And there's a lot of assertions that TRISO is a very expensive fuel. Everything is really expensive when you make a little bit of it. And so one of the partnerships that we've established and it's in the press is with Kairos. Kairos has a big demand signal for TRISO in the near future. They have backing by Google, and they want to use that backing to go off and invest strategically in the development of increasing the throughput and reducing the cost of TRISO. We're doing that with them.

So they've invested in technology for pebble manufacturing and robotics and automation very specific to that fuel. We've been investing in making fuel the right way every day for 2 decades. You combine those efforts with some of the advanced nuclear or advanced technologies staff that we have that have been optimizing the manufacturing practice or processes then we can create a very cost affordable and palatable fuel cost for TRISO moving forward. So it's a partnership as well, not just our investment, but who do we tend to partner with, and we partner with those people that can not only provide volume so we can get to an economy of scale, but also the ingenuity to help us decrease the overall delivery costs.

Yes. So it's interesting when you think about the fact that we've got order for 32 steam generators from Bruce Power, 48 from Ontario Power Generation. What that's allowed us to do is really get into a rhythm of production at a higher rate, but also look at investments in automation, right, that we can really justify much easier with that kind of backlog. And so we're moving hard in that direction. That's really improving productivity and it's lowering cost. And so that's the -- I'd say that's the main way we're addressing cost in our production.

I have a specific guidance question here for Mike on CapEx. So 5% to 6% of sales on average over the medium term, you had talked about higher than that in 2027. Is that still the case? Or are you in the 5% to 6% range? And is there any fluctuation in that 5% to 6% throughout the longer-term period?

So yes, we had signaled previously that we were anticipating there a potential to go above the 6% to get into that 7% range in 2027. Right now, we're targeting 6% for 2027. So that's what you'll hear us come out with in a few weeks as we kind of set formal guidance for 2027. As far as the fluctuation, I think it's going to ultimately depend on the opportunities and the timing of where we need to make those investments. So I think it's safe to assume kind of a 5% to 6% range. I don't want to give more specific guidance on that at this point.

Pete?

Can you guys talk a little more about space? If I think about military and maybe NASA, maybe even commercial, where do you guys see it as the largest opportunity in space? And is there anything we should look for in terms of traction in the next couple of years, let's say?

Yes. I'll start off with what NASA is doing. So they have a project called SR-1 Freedom. It's a nuclear electric propulsion design that's being worked with the National Labs, is working with NASA. So that will be the first launch in civil space for nuclear products in the coming future. And so that is supposed to be the pathfinder for a Lunar power system. And that Lunar power system is what we're seeing in early RFIs and draft RFPs and things of that nature.

So I see a renewed interest in space. We had this 2017 to early 2020s interest out of NASA and some of our national security customers. That's now in this new administration converted over to the SR-1 Freedom. So I would track that one as the space opportunity. On the national security side, as I mentioned in the slides, there are other opportunities for power and propulsion, but they're pretty new. And so as those continue to develop, we'll put more out about that.

We got Josh...

Josh Korn from Wells Fargo. I wanted to ask about the size of the potential investment for the defense fuels. And who's paying for that? Might any of that be funded by the government? Or is that mostly on BWXT?

So we made an initial investment in defense fuels. It was procuring the land, building -- starting the construction process and the design process for the construction of our demonstration facility. Beyond that, it's been a government investment. This is a government-owned technology. This is a government-owned fuel source. And so we expect that to continue. I don't know if Mike has some more to add.

Jeff?

Jeff Campbell, Seaport Research Partners. First of all, congratulations on a great event. Rex, you've talked a lot about how BWXT made a pivot to become the merchant supplier to the industry. But you do have some creative work that's coming back to the floor, for example, mPower. And in that case, it looks like you decided to hand that off to a third party and secure to be the merchant provider for that if it gets anywhere. I thought John said that there might be some commercial potential with Pele down the line. And I wondered if that came to pass, would you follow the same playbook? Would there be a third-party partner that might be involved in that? Or would that be something you'd keep for yourself?

Yes. We'll bring on partnerships to commercialize microreactors, but not for the reactor. That will be us. And so the way that we think about the segments, and John can add on to this is the gigawatt scale, the SMRs, we're a merchant supplier, and we're going to stay true to that mission in perpetuity. For the microreactors, we'll do 2 things. One, we'll provide fuel for our own microreactors like we have for Pele. And for the Janus program that's using a scaled-up version of Pele. So 1.5 megawatts is the thermal output or the electrical output of the Pele reactor.

Our BANR reactor, which is part of the Janus program now is 20 megawatts. So it's a scaled-up version. That will be a BWXT design. BWXT will manufacture not just the fuel, but the entire reactor and serve as the prime for the hardware delivery. But there is also a commercial use case for this program. And so we will bring partners on utilities, people like that or organizations like that to help us fully commercialize that microreactor technology.

And then in addition to what we were providing for TRISO, we will make TRISO for the entire industry, whether it be an SMR like Kairos or other microreactor vendors like Antares, we'll continue to feed that fuel into the marketplace because volume is king here, and we need to get to volume, we need to get to economy of scale on that fuel. So it's a little bit of a mixed bag. And just -- and then when I talked about mPower, that was very specific to participating and continuing the design, testing and licensing, but the ultimate manufacturing, much like the rest of our SMR customers will come as a merchant supplier with John.

Yes, and we're well positioned for that mPower supply when it comes -- we did a lot of work to prepare for that design for manufacturability. We made mockups. So we're in good shape to be able to meet that demand just like any other SMR customer.

There's gotta be more questions. Mike?

Joe, just to stay on TRISO, can you give us a sense maybe, is it 5, 10 years full rate production? What sort of an annual market could be? Or if you want to be guarded there, maybe even just talk about where cost per kilograms are now, where revenue per kilogram is, where those could go with economies of scale?

Yes. I would say I'm not going to answer any of those questions right now just because -- and they're good questions. And believe me, we have integrated models on our Pele reactor versus our 20-megawatt BANR reactor. There's different economics for both of those. Though the one thing that we should keep in mind for microreactors, the fuel cost of the microreactor is substantial as compared to the overall delivery cost of the hardware. That's different for an AP1000. The fuel cost of an AP1000 is very small. It's almost in the noise. It's maybe 10% tops for the delivery of that reactor.

And Rex talked about what the enduring fuel costs are for a nuclear system is much less than you would have from a natural gas or other types of systems, so our combustion system. So for us, it's all about scalability. And that's the reason why we're not only supplying the existing -- the current market right now, but we are spending a decent amount of time and resource along with Kairos to do development activities. So when we hit the go button when that market does materialize and harkens back to Mike's comment, if the HALEU is there, the demand signal is there, the real contracts translate from desire to demand, we'll be able to hit the go button with a very economical case. And we track that in integrated models, not just with BWXT reactors, but also the partners that we're working with.

I'll take an online question here on M&A. So for Rik. And I guess the question is really asking is if you could just talk about the pipeline that you're seeing and if you're changing your view in terms of size of M&A targets?

Yes, sure. So the pipeline right now is quite robust. So every business area that we talked about today has got a very robust pipeline from assessment to cultivation to transaction to working through it, and we have them in various stages of being here. Relative to size, we continue to look for small tuck-ins, of course. We're looking at more medium-sized plays as well as some potentially more transformative plays. I think if you wanted to sort of think about the framework that we're looking at, it's going to track with our very intentional language, we put in there, Global Nuclear Industrial Champion, right? So you can track against all those things.

Global, we are clearly a strong player in North America and want to continue to be stronger and are looking for geographic diversity. That's Global. Sort of Nuclear, we love the markets we're playing in. We continue to believe that there's opportunity there for energy security, economic security and national security. It's going to be a Nuclear play.

Industrial, we're unapologetic about the fact that we make things, we service things, right? So you go to Cambridge, you go to Lynchburg, you go to Barberton, you go to Mount Vernon, you go to these places. We are a nuclear company. We love that. We want to continue to do that. It's going to be Industrial. And then Champion. So we want to get stuff that's high quality, that has good capabilities and has good margins. It's going to be expansive to the earnings potential, to the margin potential, free cash flow potential as well. So we want to win Global Nuclear Industrial Champion.

All right. Any final questions out there? All right. Well, thank you, everybody, for attending in person and virtually. Thank you to all the speakers and the Q&A panel. And yes, feel free to reach out if you have any questions. It was great seeing everybody. Thank you.

Ladies and gentlemen, welcome to BWX Technologies' Second Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to our host, Chase Jacobson, BWXT's Vice President of Investor Relations. Please go ahead.

Thank you, operator. 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 second 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 investment materials in 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.

Thank you, Chase, and good evening to all of you. We delivered another strong quarter, characterized by excellent execution across the company and continued momentum in commercial nuclear. Revenue increased 18%, including 9% organic growth. Adjusted EBITDA grew 7%, and adjusted earnings per share increased 5%.

Demand for nuclear solutions continues to build across the national security and global commercial power markets. We are benefiting from that demand today and believe the industry is in the early stages of a multi-decade super cycle of growth. BWXT faces the market from a position of strength with exposure across the nuclear value chain.

Our naval propulsion, technical services, special materials and commercial nuclear aftermarket businesses provide a highly predictable base of revenue and earnings. Combined with more than 75 years of nuclear experience, specialized qualifications, established infrastructure and approximately 11,000 employees, these capabilities create a competitive position that is exceptionally difficult to replicate. Still, we are taking disciplined actions to further strengthen our market position and capture the opportunities ahead.

We announced the sale of our medical business to Nordic Capital at a valuation of up to $800 million. The transaction results in the sale of just over 80% of BWXT's medical and Kinectrics stable isotope enrichment businesses. BWXT will retain a minority equity interest and continue to provide certain specialty manufacturing services following the close. Notably, the transaction does not include our Isogen joint venture with Framatome, which provides irradiation services through Bruce Power.

While we remain optimistic about the long-term nuclear medicine market, this transaction enables BWXT to sharpen its focus on our core nuclear national security and commercial nuclear power businesses while placing the medical business with an owner dedicated to accelerating its growth. We believe this creates compelling value for both organizations.

We also completed the acquisition of Precision Components Group in early July. While the majority of PCG's current revenue and backlog is tied to the U.S. naval nuclear propulsion program, it also has a history of serving the commercial nuclear power market, including components for AP1000s, thereby establishing an important commercial nuclear manufacturing platform for BWXT in the U.S.

Customer feedback on the acquired capabilities has been very positive. PCG also creates opportunities to bring outsourced work in-house to capture supply chain profits, alleviate capacity constraints and generate near-term synergies. Beyond PCG, we are evaluating the next phase of our U.S. commercial manufacturing expansion. In addition to Mount Vernon, Indiana, which we discussed before, and because our closing time line with PCG accelerated, we now have attractive potential East Coast locations that could leverage PCG's real estate and workforce and accelerate our time to market. Importantly, whichever side we choose will have the deepwater port access necessary to serve the global nuclear power market with large components such as steam generators and reactor pressure vessels, complementing PCG's capabilities for medium-sized components and enhancing our merchant supplier role.

In May, we were awarded a $21 million award from the DOE to support our domestic manufacturing capacity expansion, and we expect to reach a final investment decision in the coming months. Supporting this strategy is a growing pipeline of heavy nuclear equipment proposals with multiple SMR and large reactor OEMs across a spectrum of technologies. In the United States, we are encouraged by the administration's continued efforts to accelerate nuclear deployment, streamline licensing, support project developers and strengthen the domestic industrial base.

In recent months, the DOE's Energy Dominance Financing Office announced a $17.5 billion loan commitment supporting long lead nuclear equipment procurement for AP1000 projects, an initiative that aligns well with our capabilities. We also see momentum across multiple government-backed SMR programs.

International demand is equally compelling. Canada recently released its nuclear strategy, contemplating up to 10 new large nuclear reactors over the coming decades in addition to the SMR deployments and CANDU life extension programs already underway, which BWXT is actively supporting. Across Europe, energy security continues to drive demand for new nuclear power, creating opportunities across countries including Poland, Bulgaria, the United Kingdom, Sweden and other markets. Taken together, these developments reinforce our confidence in sustained global nuclear growth. BWXT is investing now to extend our market position and capitalize on this expanding opportunity set.

Turning now to our results and market outlook. We ended the quarter with backlog of $8.4 billion, an increase of 40% year-over-year. Although backlog was modestly lower than last quarter, the timing of large multiyear contract awards can result in normal sequential backlog fluctuations. On a trailing 12-month basis, our book-to-bill is a robust 1.7x, demonstrating the strength of customer demand.

In segments, Government Operations delivered another strong quarter with strong margins attributable to outstanding operational execution and productivity improvements. In May, the Navy released its updated 30-year shipbuilding plan. The plan calls for a sustained production of 2 Virginia-class submarines and 1 Columbia-class submarine annually. Importantly, the plan also accelerates Ford-class aircraft carriers to a 4-year procurement cadence. Over time, this should improve manufacturing volume stability and efficiency compared with the 5-year ordering cadence under which we have been operating.

The plan also introduces a nuclear powered battleship. While this program will require further design work and congressional authorization, we are actively engaged with our customer and stand ready to support the mission as requirements develop.

Our technical services business continues to earn strong performance ratings while supporting 14 major programs for the DOE and NNSA in the United States and the [ Canadian National Labs ]. Within special materials, our 2 largest growth programs, defensive fuels, enrichment and high-purity depleted uranium, are progressing well. Our enrichment program is moving quickly, and we remain closely engaged with the NNSA on this strategically important capability.

At our Centrifuge Manufacturing development facility, we are on schedule to deliver an operational prototype centrifuge this year. At Jonesborough, Tennessee, engineering design and site prep for our new HPDU plants are moving along nicely as we prepare to initiate construction. This program should contribute meaningfully to Government Operations revenue growth in the second half of the year. These new factories will incorporate advanced automation, digital manufacturing and AI-enabled capabilities that will serve as a blueprint for the continued modernization of our entire manufacturing footprint.

Advanced nuclear also had an active quarter in June. Antares' Mark-0 Reactor became the first advanced reactor to achieve criticality under the administration's Reforming Nuclear Reactor Testing executive order, utilizing TRISO fuel and HALEU supplied by BWXT. This milestone demonstrates our leadership in advanced nuclear fuels and highlights a growing customer demand for our capabilities. As advanced reactor deployments accelerate, including through the potential Janus Program, we continue to evaluate a commercial TRISO investment in Wyoming through our collaboration with Kairos.

We executed multiple agreements related to our mPower technology as well. These align with our strategy of serving as a merchant supplier of large critical components for SMRs while creating additional value from our legacy design efforts through licensing agreements.

We signed an exclusive land-based licensing agreement with Applied Atomics, wherein they will lead and fund the completion of the design and licensing process. Under the agreement, BWXT will be contracted to provide support during that process and retains exclusive manufacturing rights, royalty rights and intellectual property. We also announced a feasibility study with Core Power to evaluate the use of mPower technology for floating nuclear power platforms serving offshore energy markets where we are seeing demand from multiple parties. The study will inform potential engineering scope, regulatory engagement, commercial structure and next steps. These arrangements follow the extended discussions and a deliberate evaluation of potential partners and applications. We believe Applied Atomics and Core Power are well suited to advance mPower in their respective markets and unlock value from the technology.

Turning now to Commercial Operations, which delivered another strong quarter. Organic revenue increased 33%, total revenue grew more than 70% and adjusted EBITDA more than doubled. Performance was driven by exceptional growth in commercial nuclear power and nuclear medicine, with additional contribution from Kinectrics. As I discussed, demand for commercial nuclear equipment and services remains exceptionally strong. We continue pursuing opportunities with multiple reactor vendors around the world.

Although award timing can be difficult to predict, our customer discussions are advancing, and we believe there's a credible opportunity to secure at least 1 new build nuclear equipment order before the year-end. As demand builds, we are investing in our facilities, workforce and capabilities. These investments will moderate near-term margin expansion, but they are essential to establishing the industrial scale required to lead this market and support our customers over the long term.

With that, I will now turn the call over to Mike.

Thanks, Rex, and good evening, everyone. I'll begin with total company financial highlights on Slide 4 of the earnings presentation. Second quarter revenue was $902 million, up 18% year-over-year, including 9% organic growth. Strong Commercial Operations performance was complemented by steady growth in Government Operations. Adjusted EBITDA increased 7% to $156 million, driven by robust Commercial Operations growth, partially offset by lower Government Operations adjusted EBITDA and higher corporate expense.

Adjusted earnings per share increased 5% to $1.07, driven entirely by operating performance as nonoperating items were net neutral compared to last year. Our adjusted effective tax rate for the quarter was 21.8%, up modestly from last year due to stronger growth in international markets. Second quarter free cash flow was $115 million, supported by solid earnings, strong advanced billings and disciplined working capital management, partially offset by the timing of tax payments.

Given our strong year-to-date performance and visibility into second half milestones, we are raising full year free cash flow guidance by $30 million to a range of $345 million to $360 million. Capital expenditures in the quarter were $41 million. We continue to expect our full year capital expenditures of approximately 6% of sales, with increased investment in U.S. commercial capacity during the second half of the year. As discussed last quarter, capital expenditures could approach 7% of sales in future years as we expand commercial capacity and add capabilities and advanced nuclear and nuclear fuel.

Moving to the segment results on Slide 6. Government Operations revenue increased 2% as growth in special materials enable propulsion more than offset lower microreactor volumes. Adjusted EBITDA in the segment was $126 million, resulting in an adjusted EBITDA margin of 20.9%, driven by solid operational performance across the segment and higher technical services group equity income.

Turning to Commercial Operations. Revenue increased 72%, including 33% organic growth, reflecting increases across commercial power and medical with an additional contribution from Kinectrics as we passed the 1-year anniversary of the acquisition in mid-May. Results reflected higher Canadian field services and aftermarket activity, along with increased revenue at Kinectrics.

Adjusted EBITDA more than doubled to $36 million, an increase of 123% from last year. Adjusted EBITDA margin in the quarter was 11.9% as higher volume and strong execution more than offset continued investments to scale the business for future growth.

Turning to our updated 2026 guidance on Slide 7 and 8 of the earnings presentation. We now expect revenue of approximately $3.8 billion, representing high teens growth compared to 2025. We are raising our adjusted EBITDA guidance by $10 million at the midpoint to a range of $662 million to $672 million. The increase reflects strong year-to-date execution and our expectation of continued improvement over the next 2 quarters.

Looking at the segments. In Government Operations, we now expect revenue growth in the high single digits compared with our previous expectation of low teens growth. This revision reflects stronger cost performance, particularly on HPDU, as well as broader operational efficiency gains. Improved cost performance under our accounting rules results in lower reported revenue, but an overall favorable economic outcome. As a result, based on our strong year-to-date performance and outlook for the remainder of the year, we are raising adjusted EBITDA margin guidance approximately 20.5% from greater than 19%, yielding higher expected adjusted EBITDA dollars.

In Commercial Operations, we're increasing our revenue growth outlook to approximately 45% from approximately 30% previously. Slightly more than half of the increase reflects the PCG acquisition, with the balance driven by stronger organic growth in commercial power and modestly improved Kinectrics performance. We now expect Commercial Operations adjusted EBITDA margin of approximately 13% compared with approximately 14% previously. The revision reflects incremental investments in U.S. capacity expansion, including PCG, as well as continued investment in Canada. These investments position the segment to capture a growing pipeline of long-term opportunities.

For modeling purposes, as you look towards 2027, on an annualized basis, we expect the medical businesses included in the sale to Nordic Capital to represent approximately $130 million of 2026 revenue at a margin that is modestly accretive to the Commercial segment average. Following the transaction, we will account for our retained minority interest through equity income with no associated revenue.

These assumptions result in updated 2026 non-GAAP earnings per share guidance of $4.70 to $4.80. The increase from our prior guidance is driven entirely by stronger operating earnings. On a quarterly basis, given normal seasonality in Commercial Operations and the timing of new program ramps in Government Operations, we expect approximately 55% of second half earnings to be generated in the fourth quarter.

Overall, we delivered another strong order at raising our financial outlook for the year. Our robust backlog, expanding opportunity pipeline, strong cash generation and continued focus on execution give us increasing confidence in our 2026 performance and long-term growth trajectory.

With that, I will turn it back to Rex for closing remarks.

Thanks, Mike. As I discussed in my prepared remarks, BWXT faces the nuclear market from a position of strength. Our capabilities span across the nuclear value chain. We have a remarkably robust business foundation, and demand for our solutions continues to grow.

With the announced sale of our medical business, we are sharpening the focus on our core nuclear national security and commercial nuclear power markets, and we'll have even greater financial capacity to invest in the future of BWXT and capitalize on the powerful secular trends driving the nuclear market. I believe this is just the beginning, and I am increasingly confident in our long-term growth prospects and our ability to drive shareholder value, which we look forward to discussing more at our upcoming Investor Day in September.

And with that, we look forward to your questions.

[Operator Instructions] Your first question comes from the line of Bob Labick with CJS Securities.

Congratulations on the quarter and on the medical sale as well.

Thank you, Bob.

Sure. It's got to be a little bittersweet. It's obviously been performing very well, but it certainly lets you hone your focus. And you gave us the P&L impact, so thank you for that. So I guess first question is just, can you just talk about the deal a little bit more, what the considerations are to reach "up to $800 million?" Like what's the downside? What's the range of the sale outcomes? And what are the drivers of that range?

Yes, I'll start with maybe a little bit of strategic context, but Bob, and then flip it over to Mike here. So a few points. First, that asset wasn't for sale. We certainly weren't going through strategic considerations there. We were approached by the buyer, and they came forward with a very compelling offer financially. But I think an even more compelling strategic growth story for that asset.

And it became clear to us pretty early in that process that those assets would be better off in the hands of a strategic player that has a focus on the medical market. Nordic has a lot of history in the medical market, and they understand that and are committed to it. As I said in the prepared remarks, we still like that market, and we will maintain a 20% equity stake in those assets going forward.

And it does -- and I said this twice in the prepared remarks, certainly liberates us to focus more on the national nuclear security and commercial nuclear markets where we've got abundant opportunities to grow both. So there's some room to invest in both and concentrate resources on both of those areas. Medical was 3% of our total sales and required certainly an outsized management attention relative to its place in our portfolio. And in the end, we can't shoot at everything that moves. We've got to manage our resources appropriately.

So it was the right time to sell it for those reasons. Maybe I'll flip it over to Mike here to talk about the financial considerations.

Yes. So from an outcome perspective, the deal includes $750 million of consideration, and then there's some shared economics that allow you to get up to $800 million. As we said in the prepared remarks, this includes both the legacy BWXT medical business, but it also includes part of the stable isotope business for Kinectrics. That is not the entire portfolio of nuclear medicine related to medical isotopes for Kinectrics, but it does include kind of the stable isotope production.

We still will complete work around design support, chemical analysis, hot cells, things of that nature. If you look at total revenue of approximately $130 million for 2026, we've discussed before that that's going to be at a modestly accretive margin compared to the segment. And so you can do the math on kind of the implied multiple valuation, but we felt very comfortable with the offer. And we fully believe that we can get up to the $800 million consideration, but it's an enticing deal even at $750 million.

Okay. Super. And then congratulations. And then just, I guess, for my follow-up, but just shifting a little bit. With PCG closed, can you talk a little bit about the timing? I know there's incremental capacity there. The timing and what's necessary for you to be able to update that incremental capacity to get it in so that you can use that for your U.S. nuclear work and growth there?

Yes, Bob, I would say that will be something that will unfold over the next few quarters. We've got to assess our portfolio and see what we're going to tuck in over there at PCG and also see what the capital needs are. But it's certainly something that we're working on in earnest right now, but will unfold over the next, let's call it, year.

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

Rex, you made a comment in your prepared remarks that you expect at least 1 new nuclear equipment order by year-end. Can you specify if that was a gigawatt class order you expect? Or is that more connected with SMRs?

I think it's certainly among those opportunities, Scott. We've got -- I mean, we certainly expect to get a second half order among the opportunities for the 3 SMRs, additional SMRs, at the Darlington site, the AP1000 opportunities and then the X300 opportunities that are in the U.S. There's a lot of momentum around those. We are in constant contact with GE, Renova and with Westinghouse, and they certainly are biased to action here. So we're quoting actively and there's a lot of feedback on our quotes.

And it just feels like things are moving, at least with regard to technology providers. I was at Budapest just last week with the CEO and leadership of GE. And I'm very optimistic about what we learned over there. So yes, that set of opportunities. The 10 X300 reactors in the U.S. government deal, the 10 AP1000s in the U.S. government deal, the 10 reactors that are in the commerce -- Department of Energy, long lead item deal. There's just a lot happening there, and it feels like real movement. And so we're very optimistic about it.

Okay. And just from an industry perspective, do you have a sense as to why Westinghouse still hasn't received a firm US AP1000 order despite all this positive news and federal support? I guess I'm just trying to understand, like what is that first customer need that they haven't gotten yet in order to pull the trigger to buy a reactor and get the cycle going?

Yes, Scott, what I believe is happening is that when you look at the way those deals are structured with the sovereign money, and that would be -- that would apply to the first 10 X300s in the U.S. and the first 10 that were announced out of commerce a while back. Those deals are being structured as I understand it as special purpose vehicles where the participants in the SPV, including the U.S. government, would actually own those reactors and procure all the long lead items and the reactor plants. In that case, I think the utilities are intended to be the operators, the nuclear utilities tend to be the operators of those reactors, which are likely to be on government sites.

And so what I think is happening is that the utilities are sort of [ right leading ] to see how those deals come out before they step into it. So I think that's the dynamic here is wait and see how these government deals, the sovereign deals unfold, and then jump in.

Next question comes from the line of Jeffrey Campbell with Seaport Research Partners.

First of all, congratulations on a very strong quarter, dynamic quarter. Just a quick follow-up on the BWXT medical questions. Have you determined a use for the sale receipts at this point?

So not exactly. I would say, part of our focus on capital allocation priorities, this was a big part of it because what the sale of the medical does is it really allows us to focus on national nuclear security and commercial nuclear opportunities within the portfolio. As we've discussed before, we're highly focused on growth investments.

And so first and foremost, we'll be looking at internal investments that we're making through kind of the 6% to 7% we've discussed around CapEx funding. Outside of that, we have a very robust M&A pipeline, but we also have a fine filter and we're looking for opportunities similar to what you've seen over the past couple of years where it fit strategically and also fit nicely from a financial perspective. So we'll continue to look at those.

We do also have a couple of bonds due over the next couple of years. So to the extent that we want to continue to show balance sheet strength, we'll look at those opportunities. And we don't have any planned at the moment, and we've guided for '26 that we don't have any planned repurchases. That's always something that we'll continue to look at as well. So I think we're looking across the opportunity set, and we'll certainly give more perspective as we make those decisions.

No, that was helpful. I wondered if you could talk a little bit about the mPower licensing to Applied Atomics a little bit more. I was wondering, was there some recent work done on the design? [ World Nuclear ] or news called it a 195-megawatt reactor. I thought it was 180 megawatts when the project was shelved in 2017. That's a little wonky, but just kind of curious.

Yes, Jeff, I'll take that question. Yes, we announced 2 activities with mPower. Maybe by way of a little bit of background, mPower was a small modular reactor technology developed originally by -- starting in the McDermott days, and then Babcock & Wilcox, our predecessor companies, I think that work began in 2008-2009 time frame. We eventually stopped that activity around 2014 after having spent something like $400 million on it. We estimated at that time that there was maybe $600 million to go in licensing that technology through the NRC.

And so we stopped that project at the time because the market around small modular reactors had not precipitated. And so it's kind of -- it's IP that's been kind of sitting there on the shelf. You might call it a partially designed, partially certified small modular reactor. It just rated to 195 million of megawatts by the way. We have not done an incremental work on that technology since that time. But there has been some interest in it because it was a very elegant design. It probably would be attractive in the modern market.

Now when we stopped progress on mPower, we made the decision strategically to face the market as a merchant supplier. And you see how that manifests in today's business. We are supporting the BWRX-300. We're supporting TerraPower. We're working with Rolls-Royce on steam generators for their projects in the U.K. And that's been a very successful strategy for us. So it's not our intention to bring mPower into the marketplace.

That said, there are some parties that are out there that are interested in that IP and have approached us about licensing that technology. And so we've been in that process for probably 1.5 years or 2 years now. And we ended up with an agreement with Applied Atomics, who has exclusivity for terrestrial applications.

What they would do is complete that design and get it through NRC approval. We're -- we'll be under contract with them to support that. And what that deal entails is they get exclusivity for the terrestrial application. We get right of first refusal for manufacturing all the components, and we retain the IP. So it's a very attractive looking deal from our perspective.

The other case was Core Power. And Core Power has been interested in using mPower On a barge-like system so that you could generate near shore power and obviously avoid some balance of plant costs and some other complexities around licensing and siding. That one's pretty compelling, and we are under contract with Core Power to assess that situation right now.

So 1 licensee under an agreement, 1 potential licensee and some outlets for our technology. So fundamentally, what we're doing here is monetizing our IP, and we hope that both of them succeed with it.

And if I could just ask you real quickly. When you talk about being the exclusive supplier to the AA efforts, does that mean between your current capabilities and the stuff you've added with PCG, that you essentially provide x percentage of components for the entire reactor? Or is it going to mainly concentrate on the stuff you've historically done like reactor vessels and steam generators and heat exchangers?

Yes, it would be our typical component capabilities. We would manufacture presumably things like steam generators, reactor pressure vessels. We certainly can do control raw and drive mechanisms for that design. So lots of things we could do there, lots of content we could take. We wouldn't do balance point or anything like that for us.

Next question comes from the line of Matt Akers with BNP Paribas.

Rex, you mentioned the battleship in the opening remarks. I was wondering if you could you say anything about sort of how far along are you on discussions there? When do you expect that to ramp up? And just how you think of -- does that fit into existing capacity? Or would there be some expansion needed to support that?

Yes, early days on that one, but we're certainly having discussions with naval reactors about that. And that one, of course, is maybe certainly dependent upon some future authorization and appropriations for that program. But it's a battleship class vessel that would use a Ford class nuclear reactor. Now the Ford class aircraft carriers use 2 of these very large reactors, small modular reactors that we make. The battleship would use 1 of those, and so it would be a drop in kind of thing.

So we would manufacture the fuel steam generators, the RPPs, the [ core bar ], all the things that we do. There was some -- in the -- there was budget authorized to study that ship design. We would not be involved with that. It's obviously for the shipyards. That was in the '27 budget authorization.

We would -- should go forward, long-lead procurements would begin in '28 as we understand it, and that's when the business would start to flow into our plants. But it certainly would flow right through the existing Ford-class reactor lines and fuel lines, existential capacity that we have and would fit very nicely into the business and produce quite some incremental volume for us.

Now I would say, let me just add to that, that putting the forward on 4-year centers is actually more important to our business. That one has a bigger volume impact than even that in a battleship to it, but both of those are serious upsides to the business.

Great. That's helpful. And could you touch on margins and how you're thinking about that longer term on the Government business? I know there are a couple of dilutive programs ramping up, but just how you think about that and FX could grow into 2027?

Yes. So we started the year at guiding around 19% from a margin perspective, and a lot of that was driven by the newer programs with HPDU and DUECE that we're ramping up that had kind of a lower margin to start, similar to our past special materials and other contracts where you start off at a lower margin and you increase that margin over time. We've also kind of previously discussed that we're still working off backlog associated with older pricing arrangements with the customer, and we fully expect that to be done by the end of '26.

So if you look at the updated guide, we're actually guiding 150 basis points, an increase since the start of the year. And a lot of that is really driven by very strong operational performance. We're hitting significant increases in our efficiencies and throughput within the factories of pretty much all of our Government Operations plants. And we have started to see some very good cost performance, cost [ unruns ] on some of these newer programs, particularly on HPDU. But we're still hitting milestones.

And so when you look at that from a margin perspective, we've started to see some of the margin enhancements that we've been talking about, and you can see that in the reflected results in the updated guidance. As we look to '27 -- I'm not setting '27 guidance at this point. I think we'll give a better perspective on that later in the year.

I mean, the one thing I would just say is we will have to continue to maintain this performance and some of the performance that we've discussed that we were expecting to see in '27 is starting to show up in '26. So we'll continue to push and drive efficiency and operational performance within the business. And hopefully, we can see that expand over time.

On the Commercial Operations side, we did lower the guidance for the year from approximately 14% to approximately 13%. That is mainly driven by some of the additional investments that we're making to stand up the U.S. commercial nuclear capacity and also to prepare ourselves for some of the high growth that we're expecting. We're adding high-caliber executive talent to the business to support what we think is going to be very high growth going forward, and we're working to do that. So there's some modest investment there.

When you look at that year-over-year, we'll have a pretty consistent margin at 13% year-over-year. And I do expect that as we go into '27, we'll see more of a meaningful increase in that margin in that business.

Next question comes from the line of Tomo Sano with JPMorgan.

You noted TRISO [ fill ] supported Antares' nuclear reaching criticalities. Could you provide an update on expected TRISO demand such as government skills and monetization timing as far as you can share, please?

Yes, let me see. Let me place it in terms of the kind of capacity that we exhibit at BWXT, Tomo. We're able to produce a few hundred kilograms a year in our plant down in Lynchburg, Virginia. It took basically the full capacity of that plant to load the Pele core running for, let's call it, 1.5 years. And then we've had some incremental demand from some customers, including Antares, as you cited, that's well within our existing capacity.

As to how the as to how the demand lays up across the broad market, I think it depends on a lot of things. It depends on success of X-Energy. It depends on the success of Kairos and some others that are requiring TRISO fuel and use these high-temperature gas reactors with the pebble type fuel. So I think there's a bit of a TBD. When you stack all that opportunity up, the opportunity could be fairly striking, strikingly large. And I think that's the reason why you see multiple players getting involved here, including ourselves, TRISO, X, and Standard Nuclear and some others. And so it's still a highly uncertain market, in my opinion. And so we're not yet ready to make a full capital commitment on it, but it is enticing.

And just one follow-up on the mPower licensing and the feasibility work with the Core Power. Could you qualify BWXT's monetization model? And the next milestones, please.

Sorry, I didn't catch the latter part of that question, Tomo.

Sorry. So like, could you quantify the company's monetization model? And what kind of the next milestone that we should be expecting?

Yes, monetization model is we certainly have some royalty rights and manufacturing rights, as I've said. But their monetization model, I'm not clear on what that is, but that's -- yes, license the design, presumably.

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

Rex, can you talk more about the new Canada nuclear strategy, 10 new large scale reactors, more penetration into CANDU do internationally? It sounds like maybe you think Canada is behind where the U.S. is, but -- maybe you can talk about the TAM there and the timing?

Yes, sure, Pete. The federal strategy that Canada rolled out, I think, is quite impressive. In fact, Canada's nuclear industrial policy has been very favorable for a long time. It's the reason why we've been buying assets in that market and the reason why our center of gravity is still there. That -- the strategy that the federal government rolled out had 4 pillars to it. One was enabling new builds across Canada. And this federal support for up to 10 large reactors by 2040, with some of those under construction by 2035. And 1 deployment outside, at least 1 deployment outside of Ontario by 2035.

They also paired that with a plan to build a Canadian micro reactor, and I think that means Canadian licensing rights or IP, deploying 1 of those to a remote community by the late 2030s. Now that would be -- that effort would be led through the Canadian Nuclear Labs, where we are in the majority equity partner and operating that laboratory. So that's Pillar 1.

Pillar 2 is Canada and tends to be an exporter and a global supplier of choice around that sovereign technology coming to CANDU technology. And they want to make full use of their supply chain in that process. And of course, there's a track record above that. There are CANDU in Romania, South Korea, Argentina. And so there's some history there.

The third pillar has to do with expanding uranium production and nuclear fuel. Now we would presumably participate on the fuel side of that. We're not involved in mining and milling, but Canada has powerful uranium assets. I think they have something like 20% of the world's reserves there.

And then the last one has to do with driving innovation through Canada, which is -- which translates to investing in fission -- sorry, fusion projects in addition to fission, medical isotopes and other nuclear applications. Again, I think, primarily through the Canadian Nuclear Laboratories, where we're principally involved there. So all good for us, very forward-looking strategy. Canada is leaning forward on nuclear as they have been. And so it's unsurprising, but it's gratifying to see that laid out in detail.

In terms of revenue to you, are they maybe a year or 2 behind the U.S. at this point?

Well, I think they're actually ahead, right, because of what's going on with the small modular reactors at Darlington. In terms of large reactor builds, yes, I think what you see there is if you've got projects underway by 2035, then that means the long lead items like pressure vessels, the steam generators have to be ordered 2 or 3 years in advance of that. So I would expect it to start to influence our business in a very positive way in the early 2030s.

Next question comes from the line of David Strauss with Wells Fargo.

This is Josh Korn on for David. I was hoping you could maybe speak a little bit about the M&A pipeline now with the sale of medical, if you might be more interested in kind of staying in that, doubling down on the commercial nuclear power side or maybe getting into other adjacencies? So any context you could provide?

Yes, I think that's right. I mean, so we see our last couple of commercial nuclear deals, I think, have been very accretive to the business. And we're certainly looking at ways that we can continue to expand not only capacity, but also looking for areas where we can continue to provide expanded services throughout the life cycle of nuclear.

Kinectrics has some really unique design capabilities. They perform work around transmission and distribution, lot of unique experience around licensing. So they have a strong relationship with the nuclear utilities. And so there could be expanded opportunities as we look at commercial nuclear from a pipeline perspective.

I think national security nuclear also is a high priority and focus, and that's continuing to expand our capabilities to support the national security missions. As well as any other small tuck-ins, similar to what you've seen us do in the past. So we have a robust pipeline. We go through that regularly to assess that and strategically to make sure that it aligns not only with what we're trying to accomplish from a strategic standpoint, but it also has the financial and other qualitative metrics that make it a good BWXT business. So I think you'll continue to see more M&A from us in the future.

Next question comes from the line of Marc Bianchi with TD Cowen.

I first wanted to ask on this updated shipbuilding plan and the forward cadence. Can you talk about -- just remind us where you are in that forward cadence? And then when we could start to see this update affecting your financial results?

So yes, Marc, the -- see the ordering cadence. The -- so the last 4 that was ordered, long lead items quarter through BWXT was 2026, if I'm recalling correctly. 2024. The shipset was ordered in 2026, before that, was ordered in 2020. And before that 2016 for the shipyards, that's when the holes were ordered. As you know, our long lead items ordered a couple of years in advance of that.

What happened was in 2020, that was accelerated from 2021. So that 2020 order for us, the long lead items started to be ordered in 2018. The 2026 long lead items started to be ordered in 2024 from us. And then the next board set, the advanced procurement occurs in 2027.

So what's happened -- what happens on the 4-year intervals that 2026 call and goes 2030 on a 4-year interval in mid-2034 after that? And again, put us 2 years ahead of that. Sorry, a lot of dates there to sort through, but 2030 would be the next whole order to the shipyards, 2028 for long lead items on that one.

Okay. So we start to see the consistency in the business in 2028 and beyond is sort of -- it sounds like is that right, Rex?

Yes, that's right. I would make a key point here, Marc. Because of the ordering and the delivery cadence, and we've talked a lot about this in the past, the ordering cadence has been on the 5-year intervals except for that 1 exception where there was an acceleration in 2020. And delivery for that chipset takes about 8 years altogether.

And so what that means is that you end up with a couple of gap years every decade because of that so that you've got 1 chip set moving through the plants instead of 2 chip sets. What this does is this 4-year ordering interval fixes that gap so that we would have -- constantly have 2 to 4 for chip sets moving through our plants at any 1 point in time. So it takes that swell out of there, that revenue bathtub that we've been going through for the past couple of seasons. And that's obviously very positive for our rates, for our stability, for our ability to forecast business and keep a steady production going through the plants.

Yes. Okay. Great. And then the other one that I wanted to ask was just on these AP1000 opportunities. And we've talked to this in the past, but just want to get maybe some updated thoughts on this. Like if we go back to [ Vogtle ], I don't think you guys were involved in any of the large reactor components that you're sort of going for right now, but there are other participants that were and they're still in the market. How do you think your value proposition compares to them? Or what do you think you're going to win on when it comes to going up against those other suppliers?

Yes, at the time those [ Vogtle ] plants are being built, we were almost out of the commercial nuclear business. Very, very limited activities in our Canadian plant at Cambridge at that time, Marc I would say our capabilities are very favorable with the largest industrial players, the [ Dusants ] and the [ NSAs ] of the world. There's some captive capabilities for the technology providers.

But in terms of let's call it, supply chain providers, we sit right at the top. We certainly have the largest component nuclear manufacturing plant in North America, really the only surviving one. And when we're done with our capacity expansion in Cambridge, we will have the world's largest nuclear clean room.

And then you add to that the capacity expansion that we took with PCG, where we kind of doubled our commercial footprint. Now that one does -- is not capable of producing the very largest components. PCG is not capable of producing the largest components like reactor pressure vessels for, say, an AP1000 or a steam generator, but it can do medium-scale components like fuel assemblies and modules and other such things to pressure boundary components. So yes, we're right there. In terms of capacity and capability, I don't think there's anyone better on the globe.

Next question comes from the line of Mark Shooter with William Blair.

Congrats on the quarter with the divestiture and fueling the entire Mark-0 reactor. Just following up a little bit on the TRISO question here that somebody -- another analyst asked. You did mention that you're not ready to make a full capital commitment on it. But what would you like to see from the reactor customers or other demand signals to give you that green light? And assuming that light turns green, any shape on the -- or any color to the CapEx or the capacity or time lines?

Yes, I'd say we'd like to see a pipeline of orders that looks very, very solid. Now we're pretty far down that road. We've got a partner within Kairos, we have $100 million grant from the Wyoming Energy Authority. And so we just need to see that pipeline of opportunities firm up a little bit.

I think we've talked about in the past that it's been the commitment, the CapEx associated with standing up that facility and populating with equipment is a few hundred million dollars up to $500 million. And so that's the scale of it. Again, we'd be sharing it with partner, and we've got an offset with the Wyoming Energy Authority. And so probably a pretty modest investment for us in terms of large-scale capital, and we remain optimistic about it.

The only other thing I would add is we continue -- one of the probably key milestones that we're looking for is the Janus decision. That will is expected to continue to progress through this year, we're expecting an award this year. And so that will be a key milestone to watch from an order solidification in order for us to make a decision.

That's helpful. Also in one of the last times we spoke, we were thinking or walking through the potential expansion of the NNSA enrichment award and what that opportunity could bring. And on the preamble here, BWX is obvious that you're executing on schedule on this program. So has there been any deeper conversations or updates around the potential to expand that program?

Sure. I'll make a few comments about that. As you know -- as you may know, the scope of that program to the technology transfer from the Federal Laboratory into our Centrifuge Manufacturing development facility. We discussed in the script, the progress that we're making there. We stood up that facility within the last year or so, just 14 months ago. And we are expecting to demonstrate centrifuge capability, operational centrifuge in the second half of the year. So great progress there. That's the front end of it.

The back end of it, it's licensing and construction of the plant for doing the high enriched uranium part of the -- a part of the process that's required for stockpile replenishment. The space in between is where the real opportunity is, and that's building plans for -- we're enriching from either depleted uranium or natural uranium up to low enriched uranium, which is essentially commercial fuel. And then from low-enriched up to high assay, low uranium, thinking about going through -- building through all of those assays, which you have to do to get to high-enriched uranium.

I think there's a subtle point here that all of that equipment has to be unobligated, meaning U.S. sourced. And so there's a uniqueness to how you build supply chain, and there's some uniquely higher costs that are associated to that. So there's a question about the commercial viability of enriching into those assays. But that's the way it has to be done under treaty. And so that's the opportunity to go and build out low enriched uranium and high assay low enriched uranium plants and to see whether or not you can build a commercial capability on the, say, on a contribution margin basis, for those plants. And those would be very, very large-scale projects.

Next question comes from the line of Andre Madrid with BTIG.

I'm looking for an update on Project Janus. I mean, does the timing still hold here? And how might the economics differ based on the outcome, whether you win as an OE or as a supplier?

Yes, that the -- we're still in that process. We still are optimistic about the outcome of that competition. So I think this is just government timing. They're making their decisions, and they will announce their decisions on their timetable, but we're certainly optimistic over here. And what was the second part of the question, pardon me?

Just how the economics might differ based on the outcome? I know you kind of have several shots on goal here.

Yes, we do. Do you mean how we might think about investments in things like TRISO and micro reactors if we don't succeed in that one?

Well, that and as well as what the contribution might look like, either way things go.

Yes, I'd just say -- maybe I'll hold comments on that one. We need to get through this negotiation stage and hopefully receive an award, and then I think we can have more say about it.

Got it. Got it. That's helpful. And then I guess another one as it pertains to the decision upcoming about expanding commercial capacity, whether it be [ outman, Vernon ], greenfield or M&A. I mean, what are really the gating factors to kind of come into that decision? What more are you looking for to, I guess, help you get there to that decision?

Not much, right? We certainly see the commercial demand. And I don't think we're ahead of the market by any means whatsoever. There needs to be domestic capability in the U.S. for large component manufacturing, and we need to be in a deepwater situation so that we could ship by water to any point on the globe. Because our intention to be a global supplier in addition to a domestic source for AP1000s, X300s, TerraPower, whatever comes.

So all we're going through right now is sorting out state incentives amongst New Jersey, Indiana and one other option that we're considering. By the way, we're proceeding with the plant design full out, and we'll proceed with equipment procurements in short order. So there's nothing that stalling this out. It's just a matter of site selection at this point, and we'll get to that decision in a pretty short order.

Next question comes from the line of Ron Epstein with Bank of America.

Yes. Rex and team, so far, we've covered a lot of ground, but maybe just couple of basic ones. How is supply chain holding out for you, Rex? Given the growth you're seeing across the business, in particular on the commercial side. Are you having any challenges there, getting the raw materials you need or otherwise?

Not so far, Ron. Things have been going pretty well. Zirconium tubes, large forgings, whatever we need, we've been able to get those materials now. I wouldn't worry about it as we surge into this demand environment over the next 2 or 3 years, but we're keeping a very close eye on it. And so far, so good. We've got reliable suppliers, and our supply chain team is really quite talented in managing this.

Now I will make 1 key point which I've made a lot in relation to the history of this company. The reason that BWXT was kind of the last man standing in commercial capability in North America is because we had a tremendous anchor-tenant on the government side with naval reactors. And so just to remind you, we've delivered 420 essentially small modular reactors, exquisitely beautiful, high-performing small modular reactors to the market over the last 50 years or so. And that's been a great way for us to maintain our capability and exercise a supply chain. Not exactly the same one as the commercial one, but we've had our muscles around that capability. So we have some natural advantages that our competitors did not. And so far, so good supply chain.

Got you. Got you. And then sort of the other side of that. How are they going on the labor front, right? Because all this work takes labor as well. Have you have a adequate source to qualified labor? And can you retain labor, so on and so forth?

Yes, generally good. It is challenging to find all the trades. As I've said many times before, more challenging to find qualified trades people than it is to find nuclear engineers right now, if you can believe that. And we're doing pretty well with it. Our acquisition rates are consistent with our program needs for the most part. Our turnover rates net of retirement, net of voluntary exits are really low. It's mid-single digit or below 4%, something like that.

I would say we've got some challenges finding steel workers in Canada right now as an example of a little bit of a shortage, but we're attacking that problem. But broadly speaking, human capital management is really under good control. Then we've got a great leader in that area in [ Gonzalo Gahate ], and he's working with the operating businesses and is on it every second of his life.

Got you. Got you. And then maybe just a bit of a financial detail. Could you guys quantify what the organic change was in your EBITDA guide? How much can be attributed to organic versus inorganic?

It's mostly organic.

There are no further questions at this time. I will now turn the call back over to Chase Jacobson for closing remarks.

Thank you, everybody, for your questions and your interest in BWXT. We look forward to speaking with you and seeing many of you at investor events in the coming months and at Investor Day in late September. If you have any questions, please reach out. Thank you.

This concludes today's call. Thank you all for joining, and you may now disconnect.

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

Thank you. Good evening, and welcome to today's call. Joining me are Rex Geveden, President and CEO; and Mike Fitzgerald, Senior Vice President and CFO. On today's call, we will reference the first 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.

Thank you, Chase, and good evening to all of you. We had a great start to 2026 with very strong first quarter results. Revenue grew 26%, 11% of which was all organic. Adjusted EBITDA grew 14% and earnings per share grew 22%, all ahead of expectations. Outperformance in the quarter was driven by improved throughput, favorable pacing of work and exceptional operational execution across our business lines.

We ended the quarter with a backlog of $8.7 billion, up 77% year-over-year and 19% sequentially. Supported by robust bookings in government and consistent backlog in commercial, providing clear visibility to future growth. Demand for commercial nuclear power components and services continues to accelerate across the U.S., Canada and Europe.

As projects launched, we believe that localized manufacturing capacity will increasingly differentiate BWXT, making the establishment of U.S. commercial manufacturing footprint to complement our Canadian operations a strategic priority. To that end, in April, we announced the acquisition of Precision Components Group, PCG, a U.S.-based manufacturer of complex heat transfer components for the U.S. naval and commercial nuclear markets with 2 facilities in more than 400 highly skilled employees, PCG represents our first step toward building domestic U.S. commercial nuclear manufacturing capacity.

While most of PCG's current revenue and backlog is related to cable programs, its facilities have immediately available capacity that we intend to utilize for the commercial market. With products such as reactor internals, pressurizers, heat exchangers and reactor head assemblies.

Beyond the PCG acquisition, we intend to expand our U.S. commercial manufacturing footprint likely with a greenfield plant at our Mount Vernon, Indiana site on the Ohio River. This facility will be capable of producing larger heavy nuclear equipment, including steam generators and reactor pressure vessels.

Ultimately, our goal is to build scalable U.S. commercial nuclear manufacturing operations that can serve U.S. and global SMR and large reactor projects. By adding domestic capacity, we are positioning BWXT to meet rising commercial demand while creating meaningful synergies with our existing U.S. operations.

Beyond commercial power, we are making disciplined growth investments across the portfolio, supporting existing businesses, adding new technologies and capabilities and pursuing opportunities in advanced nuclear and other national security applications.

Turning to segment results and market outlook. Government operations revenue was up 4% and adjusted EBITDA was up 1% in the quarter, slightly ahead of our expectations. We had strong bookings, including $1.4 billion from the second portion of the pricing agreement for Naval reactors awards last year and long lead material procurement contracts for out-year production.

This led to segment backlog of nearly $7 billion up 25% sequentially and 93% year-over-year. In naval propulsion, we are driving operational efficiencies in our plants, which contributed to our good margin performance in the quarter. We anticipate continued revenue growth with a steady pace of Virginia-class production, growth in the Columbia class and early work on the next Ford-class ship set.

The President's FY '27 budget request supports these programs and ship building generally, further reinforcing our confidence in longer-term growth rates in special materials, our legacy programs delivered solid results and our defense fuels enrichment and HPDU programs are progressing in line with early program schedules.

Specific to defense fuels enrichment, we completed construction of the Centrifuge manufacturing development facility earlier in the year and have begun prototyping the first units. In April, we engaged with the NRC regarding our plans to build an HEU enrichment facility in Irwin, Tennessee. This engagement is an important milestone as it creates alignment with regulators in the NRC approval process.

For our new large HPDU contract, we are organizing the supply chain and preparing for construction of the new facility in [ Jones Earl, ] Tennessee. That program will ramp through 2026 and continue over the next several years before transitioning to commissioning and production. The growth potential in special materials is exciting, and we continue to pursue new scopes with existing customers and evaluate entry points to new markets.

Technical Services has delivered strong equity income growth over the past few years with multiple strategic wins. We are pursuing new opportunities in the DOE market and in other new markets with the next wave of contract awards expected over the next 12 to 18 months.

Moving to microreactors and advanced nuclear fuels, the market is evolving rapidly in land-based defense, commercial and space markets. We continue to see strong demand across the board, including cortisol fuel for demonstration reactors and future commercial projects with multiple reactor developers.

Of note, Kyros with whom we have a collaboration agreement on [indiscernible] recently began construction of its Ernest II reactor for Google in Oak Ridge, Tennessee. Finally, we are continuing our close engagement with the Army on the [ Janus ] program. Turning now to commercial operations. Results in the quarter were well ahead of our expectations.

Organic revenue grew 39% and total revenue rose 121% with robust double-digit growth in commercial nuclear and medical and contribution from metric -- while the outperformance was partially due to timing of outage work and progress on large component manufacturing, we also improved operational performance with accelerated throughput and reduced lead times.

Following an 85% increase in backlog in 2025, backlog was flat sequentially in the first quarter, but still up 33% year-over-year, supporting our expectation for low teens organic growth in commercial power this year. The outlook for new build nuclear projects remains very positive. Notably, the U.S. and Japan announced plans to invest up to $40 billion to build up to 3 gigawatts of GE Hitachi, SMRs in the Southeastern United States.

Our role is the reactor vessel supplier on the first GE Hitachi BWRX-300 SMR in Canada, puts us in a good competitive position for these future projects. Given BWXT's industrial scale and engineering and design capabilities, customers are increasingly coming to BWXT to supply critical nuclear components for their current and future SMR and large-scale nuclear projects, which should lead to further backlog growth over the next 12 months.

Conectric continues to exceed the acquisition business case having delivered another very strong quarter. A key highlight in the quarter was Kinetics being selected as the design and fabrication partner for a U.K. Tritium loop facility, which will be the world's largest and most advanced Tritium fuel cycle facility.

This presents an entry point for engineering services and specialty equipment manufacturing and the exciting nuclear fusion market. With that, I will now turn the call over to Mike.

Thanks, Rex, and good evening, everyone. I'll begin with total company financial highlights on Slide 4 of the earnings presentation. First quarter revenue was $860 million, up 26% year-over-year with 11% organic growth. Strong performance in commercial operations was complemented by steady growth in government operations.

Adjusted EBITDA was $148 million, up 14% year-over-year driven by robust growth in commercial operations and modestly higher government operations, partially offset by higher corporate expense relative to an unusually low level in last year's first quarter. Adjusted earnings per share were $1.12, up 22%, reflecting strong operating performance and approximately $0.08 of higher nonoperating contributions.

Our adjusted effective tax rate for the quarter was 15.8%, benefiting from timing of stock compensation. Our updated full year tax rate guidance of less than 21.5% and is modestly higher than last year's rate, reflecting strong growth in international earnings, mainly from Canada. First quarter free cash flow was $50 million a strong result for what is typically our seasonally weakest quarter, reflecting solid earnings and effective working capital management.

Capital expenditures in the quarter were $43 million. We continue to expect our full year capital expenditures to be around 6% of sales. However, it is possible that CapEx may exceed that level in future periods as we advance targeted growth investments including expansion of U.S. commercial nuclear manufacturing capacity and advanced nuclear and fuel capabilities given the significant business we expect to capture.

We are carefully balancing these strategic investments with our financial return metrics as we evaluate the numerous growth initiatives across the business. Moving to the segment results on Slide 6. In government operations, first quarter revenue was up 4% with growth in special materials and naval propulsion offsetting lower microreactor volumes.

Adjusted EBITDA in the segment was $118 million up 1%, resulting in an adjusted EBITDA margin of 20.4%, has better revenue, solid operating performance and timing of technical services income benefited margin. Given first quarter performance, we now expect government operations margins to exceed 19% for the year.

Turning to commercial operations. Revenue was up a robust 121% and including 39% organic growth, reflecting increases in both commercial power and medical and contribution from [ Conectric ] Growth exceeded expectations due to increased throughput on large commercial nuclear component projects, mainly associated with the picker and life extension and better-than-expected performance from metrics.

Adjusted EBITDA in the segment was $36 million, up 162% from last year. Adjusted EBITDA margin in the quarter was 12.9%, and with higher sales and strong execution, offsetting the impact of growth investments as we continue to scale the business. Turning to our 2026 guidance on Slides 7 and 8 of the earnings presentation which I will note does not include contribution from the recently announced PCG acquisition.

We expect revenue of at least $3.75 billion, up high teens compared to 2025. In government operations, we expect low teens growth with over half coming from the defense fuels and H PDU contracts. In commercial operations, we increased our revenue growth expectation to approximately 30%, driven by low teens growth in commercial power, high teens medical growth and a full year of contribution from Conectric which as mentioned, has outperformed our expectations to date.

For adjusted EBITDA, we are increasing the guidance range by $5 million on each end, resulting in revised adjusted EBITDA guidance of $650 million to $665 million. Regarding the cadence of operating earnings, we continue to expect our full year results will be slightly more back half weighted than usual with about 55% of full year EBITDA anticipated in the second half, and we expect second quarter EBITDA to be roughly in line with to slightly below first quarter levels.

These assumptions lead to non-GAAP earnings per share guidance of $4.60 to $4.75, with the increase driven by higher operating earnings. We expect free cash flow of $315 million to $330 million, inclusive of mid- to high teens operating cash flow growth supporting continued reinvestment and long-term shareholder value creation.

Regarding the recently announced acquisition of PCG, the business generated approximately $125 million of revenue with low double-digit EBITDA margins in 2025, and we anticipate mid-single digits revenue growth in 2026. The acquisition, which will be included in our Commercial Operations segment, is expected to close in the second half of the year.

As such, our annual financial guidance does not include contributions from PCG at this time. Overall, we're off to a strong start in 2026. Our robust backlog provides us great visibility for the remainder of the year, allowing us to focus on margin expansion cash generation and capturing new high-value contracts across the defense and commercial nuclear markets. With that, I will turn it back to Rex for closing remarks.

Thank you, Mike. It is an exciting time at BWXT. We are delivering on our commitments to customers and shareholders in driving value through process optimization, technology adoption and disciplined growth investments.

Our 2026 guidance supports meeting or exceeding the medium-term financial targets, we introduced at our Investor Day in February 2024. We look forward to providing an update at our next Investor Day this fall. As I wrote in a recent Washington Times offer, BWXT is not betting on a horse. We are betting on the race. We participate across the nuclear value chain in defense and commercial markets and as a merchant supplier and a technology provider, enabling us to win across a broad range of competitive outcomes.

We have record backlog, unprecedented demand and the financial strength to continue investing for growth. We intend to build on our market-leading position in nuclear solutions for defense and commercial nuclear markets, thereby driving long-term shareholder value. And with that, we look forward to your questions.

[Operator Instructions] Our first question comes from Matt Akers from BNP Paribas.

I may have missed this, but did you say how much you're planning to pay for PCG. And then I guess another just a question on the sort of footprint. Build that because you mentioned this is sort of the first step towards building out the footprint. And sort of how should we think about what's left? Is it more kind of capacity driven? Is it technology? Is it head count? And just kind of what -- how to think about that?

Yes. Thanks, Matt. So from a purchase price standpoint, we didn't put it in the public release, but it was roughly around $200 million. So in line with the multiples that we've seen in some of our more recent acquisitions.

And so ultimately, depending on the time line, we'll see when that will close out this year, but fully expect that to move along pretty rapidly. I would say when you look at this from a kind of first step, there's a couple of different ways to think about this.

One, we like the capabilities. We like the workforce. We certainly need the square footage from a capacity standpoint However, this is going to be primarily focused on manufacturing of certain aspects. It's not going to be able to handle some of the large, very large scale components that we need to manufacture.

So we're looking at kind of a multiple approach step, which we announced in our last earnings call, the potential for a new facility may be adjacent to our Mount Vernon location which could handle some of the heavier large components. And so we're looking at this both from a capacity and workforce standpoint.

Great. I was wondering if you could touch a little bit on kind of the space end market and the opportunities that you're seeing there with how you just added Dan, to the Board recently, you remember from [ Maxar, ] but just curious what you kind of think of it as kind of the opportunities coming up in the pipeline there.

Yes. So I kind of -- this is Rex. I kind of divided into 2 areas. There is a civil space opportunities and NASA seems interested in really 2 things: nuclear electric propulsion and then also efficient surface power for a lunar based. And then there's a long-term commitment to nuclear thermal propulsion according to the NASA Administrator, [indiscernible] And so we have opportunities to play in all of that. .

Certainly on the fuel side and on delivering a reactor for any of that. So interesting -- it's an interesting opportunity. It's an interesting market for us. It's kind of a one-off market in that in the sense that into one of those systems typically. I think probably the more fertile ground for us is national security space. I believe we'll see more applications for power and propulsion there, and we're locked in on that opportunity.

Our next question comes from Jeffrey Campbell from Seaport Research Partners.

Congratulations on the strong quarter. My first one is, with your new commercial facility, the one that you have not yet reached FID. Would it have any limitations regarding components that it could build for customers such as a [indiscernible] Westinghouse or Rolls-Royce.

No limitations at all. I mean I think when we look at our demand signals, we're certainly seeing some capacity constraints even in our Cambridge facility as we look out multiple years. The other thing that I think we're finding is that being kind of localized in the U.S. creates a competitive advantage, and we're excited to add some of those capabilities to make sure that we have a U.S. presence and we think that, that's a differentiator when we look at it from a market standpoint.

So ultimately, the idea is to set up potentially centers of excellence, where you would have certain facilities that are focused on things like reactor internals and tanks and pressurizers and you would have other facilities that would be focused on kind of the large steam generators, reactor pressure vessels, those types of things. And so we would think of it there, but we would ultimately make that across multiple customers and multiple platforms.

Okay. Great. I appreciate that color. My other question is you've made the case for PCG's acquisition for the budding U.S. commercial activity. I just wondered if the acquisition has any positive effects for your naval business as well.

Yes, I think it could, Jeff. It's a nice business in the sense that it has an existential qualified nuclear workforce, it has plenty of capacity, as we alluded to in the script, and we'll make immediate use of that capacity. But I think the more important thing is nuclear manufacturing credentials are rare and hard to get -- so you have to go through certifications to get stamps for to get things like end stamps and NPT stamps and Sam.

These are ASME certified factories that also have nuclear quality systems. And so that's hard to get, and it's an immediate capability for us. And so certainly beneficial to our Navy customer, which has been using that has been using that capability for a long time, but more importantly, I think, is the commercial case because as we expand into the U.S., we need that kind of manufacturing capacity capability, and we'll get going with it right away.

Our next question comes from Bob Labick with CGS Securities.

Congratulations on the results and the exciting outlook as well. I just wanted to expand on the questions on kind of U.S. capacity build-out. Have you decided yet? Or do you know how much capacity do you want to add? And could you give us a sense of the capital needed for a U.S. greenfield and how long that might take to build out?

Yes, Bob. We're going -- we're presently going through a 60,000 square foot capacity expansion at our Cambridge plant. And the capacity we're looking for in Mt Vernon would be 50%, 60% more than rough it out at 100,000 square feet and then to outfit that factory. So now the expansion that we're doing in Cambridge is brownfield this would be quasi greenfield. And so it will be more expensive than our Cambridge build-out.

But that -- the reason we're attracted to the Mount Vernon side is because we've got rail spur there, we've got crane capacity 1,000 metric ton crane pass, radiography facilities. So there's some natural cost synergies that would go with our native business that's there, not to mention workforce that's nuclear qualified in a plant next door so that's kind of the thesis behind it. In terms of budget, it would be -- think of it as kind of twice what we're doing at Cambridge and rough terms.

Okay. Great. And then there's obviously so much demand out there, and it just seems to keep growing and growing. Is there any thought about, I guess, exploring customer funding for commercial capacity growth? Or how do you derisk building out incremental capacity on the commercial side versus on the government side?

Yes, I'd say we have got the balance sheet to do what we need to do in terms of capacity.

Our next question comes from Peter Skibitski from Alembic Global. Please go ahead.

Guys, you talked, I think, in both segments about improved throughput. I was wondering if you could put some color to that, if there's certain initiatives you have in place to help with throughput or if it's just net hiring or something?

Yes. Yes, Pete. We did have formal initiatives in-house of called Driving Performance excellence is what we call a DP, that's our -- that's sort of our name for operational expense. And we've had that kind of process going on in the plants for a long time.

We've now expanded across the entire enterprise. So we're using things like supply chain and human capital and other areas. But yes, we do have some dedicated throughput projects, including, for example, the Pickering steam generators, [ SteriSphere, ] we had an important throughput project in our Lynchburg plant last year, having to do with an area called that we call higher tier.

So yes, we're highly focused on that because of this basic fact, we need more capacity than we have, and we can get capacity in 1 of 2 ways. We can get capacity from increasing our throughput, which is the cheapest and best way to do it or we can get it by adding square feet.

Doing acquisitions or doing brownfield and greenfield plants. We're doing all of the above because we need so much capacity. But that's how we're thinking about it, and that's the reason we focused on throughput.

Okay. Okay. Great. And last one for me. I guess Air Force DIU had this recent API awards, Radian Westinghouse and Antares. Just were you guys disappointed you didn't get an award here? Are there going to be further A&P opportunities? Or is the focus really more so on Janus and on your banner reactor. Just wonder if you could kind of -- these initiatives seem to have some relationship to each other. So I was just wondering if you could kind of start it out for us.

Yes, sure, Pete. So no disappointment because we didn't pursue those opportunities. Those were more about some smaller scale reactors for lower power output. And none of those reactors is transportable like our palate reactors. So we have our transportable pale reactor that fits certain use cases, and it's very interesting, but not for those particular -- not for those particular opportunities.

And then we have commercial derivative of [indiscernible], you might say that's called banner, which is a 20-megawatt let-out a much larger microreactor than you see out there in most and that 1 fits a completely different use case. So that was -- those competitions were really for us. We are focused on Palay follow-on work. We're focused on Janus, and we see plenty of opportunities for microreactors and for microreactor fuel for [ TRISO ] fuel.

Our next question comes from Mark Bianchi from DB Balan.

Maybe Rex, following up to the last point there on Trio. There's been some more focus on it now with some other companies that are involved in manufacturing coming public. Can you talk a bit about your our process there and how you think your competitive positioning would stack up over time? I know currently, you're doing it.

So that's a good sign. But maybe just as you think about the next few years and taping out your competitive position?

Yes, I'll use some color on that one. Yes, we are the only producer of Tricon scale at this point. We're producing hundreds of kilograms a year we made all the fuel for our payload reactor. We're making fuel for Antares and some other clients we haven't disclosed yet.

So we're in commercial business on Trio. I would say that -- that is sort of the limit of our capacity now, a few hundred kilograms a year. So there's only so much you can do with that. In order to scale that, we are considering ground field and greenfield opportunities. And we've talked publicly about doing something on a larger scale and Wyoming.

And that's what the market needs. We need a very large-scale plant so that we can drive down the cost on Trio to help make these reactors commercially viable. I will just maybe add to that point that I think this is a really interesting place to be in the market to be able to be the tool side of micro reactors and small modular reactors is a pretty nice place to be.

I said it in the script, but we're betting on the race, not on the horse and that posture enables us to win in a variety of competitive outcomes. And for TriCo, we're positioned exactly where we want to be, which is we produce it for our own purposes, but we also produce it for the market, and we intend to do that in the future.

Okay. And then the other one I had was just on the Japan announcement, the $40 billion for GE Hitachi when would it be realistic for awards to be made to the market for that equipment? Like just I know you still need to win it, but just in terms of thinking of a time line for when that could potentially be added to backlog.

I think it's -- I mean I think of this one and the AP1000 1 is fairly near term as far as nuclear projects go, I'm in touch with the top leadership of GE, and we're in touch with the top leadership of Westinghouse.

And these deals are being negotiated at a -- with urgency is the way I would put it with the Department of Commerce -- and so I think -- I said it on prior call, it wouldn't surprise me if we started to receive orders this year related to those large.

To those sort of bulk reactor buys -- but there's a lot of things that -- a lot of hurdles that need to be cleared between now and then.

Our next question comes from Jeff Grampp from Northland Capital Markets.

Rex, it seems like conviction and proceeding with the commercial expansion at Mt Vernon I'm curious how long might something like that take to get operational from when you ultimately decide to move forward there? And how important do you guys sense is having something like that operational to winning U.S.-based business?

Yes. You said a couple of key things there, Jeff. So on the time line, that's something that will take us 2 or 3 years to complete. And that should be in the right time frame for being able to take some of these large orders and get going.

But you made a key point there on the end, which is around how important it is to have U.S. industrial capacity. I do believe that localization of supply chain is kind of going to be the way it is in nuclear. It's certainly a strong emphasis in Canada where we place strongly and we have local capabilities in there. I think you'll see the same thing play out in Europe.

I think they're going to favor local supply because of the economic development impacts. And so I do believe that localization in the U.S. will matter. And I think it will particularly matter on some of these government projects like the 10 81,000 and up to 10 next 300s.

And that's one of the reasons we're doing it. We don't have orders yet, obviously, but we're trying to skate to where we think the puck is going. Because these are such long cycle projects and you have to have the capacity, the existential capacity when the order comes -- so that's how we're thinking.

We're very bullish on it. And by the way, I don't think in the long run, about 10 reactors or 4 reactors at Darlington. If you think about what the global industrial base in nuclear industrial base did in the 70s, 80s and 90s built 600 large reactors. And I think if we're going to decarbonize the grid to meet the energy needs of AI, meet the energy needs of electrification, we're talking about hundreds and hundreds of reactors globally, large reactors, translate that into thousands of small amounts of reactors.

And so that's the kind of opportunity set we think about. And so we're very bullish on that outcome, and we're building capacity in advance of the orders. .

Super helpful detail. I appreciate that. My follow-up is on the enrichment side. Can you just give us maybe a high-level flavor for kind of, I guess, general timing or progression points on the Center fuse manufacturing facility, NRC licensing engagement, things like that? Just anything we should kind of keep our eyes field for to gauge kind of moving that project forward.

Yes, I think I've said publicly that, that will progress over the next few years. We've obviously completed our Centrifuge manufacturing development facility in Oak Ridge, Tennessee. We are outfitting it and working on prototypes right now, that will progress. So the technology transfer from Oakridge National Laboratory to BWXT occurs over the next few years.

The licensing for the HEU part of it should progress normally over the next few years. I think the more interesting part of it is when we get into centrifuge production, which we need to do for the high enriched uranium cascade.

And I think in the long term, what will be interesting for us is how do you fill the gap for low enriched uranium and high-assay low-enriched uranium. The gap is very evident and fundamentally very interesting from a business development perspective.

Our next question comes from David Straus with Wells Fargo. Please go ahead.

This is Josh Korn on for David. I wanted to ask about Medical. I think you had said strong double-digit growth in the quarter. I just wanted to ask about any specific products or markets to call out kind of the outlook there. And then any update on the tech 99?

Yes, we didn't give much detail on the script on medical, but that's still a good news story for us. We've got good growth all across the board. And following 3 years of 20% compounded growth, we're forecasting high teens growth this year and we see strength in strontium. We see it in germanium, we see it in [ TheraSphere. ] Actinium 225 is growing at an outsized pace, but that's off a pretty small revenue base. and we're ramping up production of stabilized stopes with the [indiscernible] 176.

That production is going quite well. And we've got some new therapeutic products in the pipeline like LED 212 and other products that are interesting. Tech 99 is progressing. There's fundamentally no different news on that. We mentioned on the last call that we're evaluating some approaches to the market based on the particularities of our product. And we don't have -- we don't have anything in the 2026 forecast for tech, but we're continuing to push that towards the finish line.

Okay. And then wanted to ask on defense. You had been a recipient on the Shield contract for golden dome. So with all of that money in the 27 budget, kind of what -- if you could provide any color on what that -- what your work may involve and then kind of what the addressable market is for you?

Yes. We are building 1 contract or word. That's not uncommon. They certainly awarded to several hundred companies, as I recall it, ours was for some broad infrastructure scope, which I think is pretty interesting for us because of the nuclear capabilities that we have.

So to the extent that Golden dome would need micro reactors to drive missile defense sites or radars or whatever it is, distributed power even up to small module reactors we could play there as a fuel supplier I think there's a lot there for us potentially in the future, but it's pretty undefined at this point for us.

But we've got sort of a -- we've sort of got a license to go hunting and we'll turn it into some things.

Our next question comes from Scott Deuschle from Deutsche Bank.

I think Connectrix brought with it some revenue connected to the broader power and grid infrastructure space, including in areas like high-voltage testing and cable commissioning. Would you be able to give us a sense as to how big of a business that is for them and what the growth outlook is there?

Yes, David, it's about 10% of the total Connectrix business right now and growing faster than a lot of the parts of that portfolio. That yes, that's a very interesting business, super high voltage capability, testing components for the grid for component supplier to the grid kind of an underwriters' laboratory type of thing.

But I think the real shots of the real green shoots of growth are around cable testing for wind power in Europe. We have supportable test sets, and we've invested in some more portable test sets, and we've got a nice share of that market, and it's growing smartly. So pretty interesting business obviously exposing us to a different market than we had before, and we like where that's going.

Do they have any direct exposure to the data center build-out given these high-voltage data centers that are now coming up?

Yes. I don't know the details on that. I suspect that we do. .

Okay.. And then Mike, when you talk about CapEx potentially exceeding 6% of sales in the future, is there a maximum threshold you could share with us as to what that excess might be? Like would it still be less than 8% of sales? Or could it exceed that as well.

No, I think that's about right. I mean we feel pretty comfortable with the 6% for what we're seeing for 2 the comment is really just if we make the decision to have a greenfield facility for another kind of large-scale manufacturing component facility in the U.S. we may exceed that 6%.

But I would see it somewhere around the 7%-ish range. What we don't want to do is go back to closer to the kind of 9%, 10% that we saw over the last decade and we were going on a large kind of CapEx spend. So we're going to keep it pretty reasonable, but I could just see it going up in the maybe 7% range.

Our next question comes from Jed Dorsheimer with William Blair.

Good job for announcing that name. So Rex, I guess, if I read between the lines here, it sounds like Mount Vernon is a bit more of a signal on -- I mean I know the administration's meeting with supply chain companies, including yourself, and it sounds like you're a bit more balanced, not that you're ever imbalance, but a bit more balanced in terms of AP1000 versus SMR. So I guess my question is, how are you thinking about the E&C part of the equation, where you build out or spend the CapEx to build out the capacity.

And in terms of the labor to get these things stood up, which I know Scott over GE has talked about one of his concerns. So a broad question, how are you thinking about this whole supply chain and kind of the pieces of the puzzle and am I thinking about this correctly in terms of the body language on around Mount Burnet and AP1000.

Yes. So if you're talking, Jed, broadly about delivery risk for nuclear projects, I do think that is an existential an important risk. And I think it's probably the biggest risk in the market just to be able to deliver those projects and we've got some poor examples of project delivery, [indiscernible] and others. That said, the counterpoint to that is the refurbishment projects in Canada, both at the Bruce side and at the Darlington side so far have delivered ahead of schedule and under budget. .

So there are some examples we can point to where the industry stood up and delivered the project according to the plan, and I'm hoping that the industry can get to that point.

If you're talking about the sort of the construction delivery risk of a project like Mt Vernon, we've demonstrated the ability we can do that. We are doing very well with our Cambridge project that will come in under budget. It will come in on time. We delivered the centrifuge manufacturing development facility, which, by the way, a Kelvin impressive facility from the first shovel in the ground until the completion of it, and that was in 7 months.

And so I think we've got a -- we really got sort of a high skill set for being able to deliver projects that are internal to the need of BWXT. Now that's apart from the complexity of the nuclear power plant, but we can build our facilities with a good risk posture.

Yes. That's fair on my question was for the former, not the latter in terms of more industry not worried about you standing up Mount burning getting that burning and getting that on time. And so I guess just to the broader -- so far, we've seen the LPO.

We've seen the administration kind of through EOs. What would you think would help solve the one of the key components in terms of -- it sounds like you're going to get the supply chain getting stored up. Is it just a sequencing or -- or do you see something else in terms of how the government could step into trying to stage risk here?

You talked -- again, you're talking about delivery risk for the balance of plan and the nuclear jet. To the other question, specific to BWX have already been asked. So I'm just curious, using my second just to think from a more macro broader perspective, given that you are in late-stage discussions with or I'm assuming that.

Yes. So maybe I'll break it into 2 pieces. I think the supply chain risk is manageable. I think we're demonstrating BWXT as a company that we can deliver the components on schedules that our customers need reactor pressure vessels, steam generators, whatever it is.

We're organizing around that. And I think the industry can stand up and do that. And of course, I'll remind you that we've delivered 420 roughly small module reactors to the nuclear Navy. So we know how that's done. I do think -- I agree with you that the bigger risk is on the engineering procurement and construction side, and that's a problem that the backhand the first of the world we're going to have to solve.

They're just going to have to do it. And I think it's going to require the injection of high loss of talent maybe AI can help on the planning side of it, maybe even on robotic construction in the long run, but it's something the industry has to address -- it's not a thing I don't think BWXT can address, but I do recognize it as a gating item for the success of the nuclear resurgence.

Our next question comes from Peter Arment with Baird.

Rex Mike, Chase. Nice results. Rex, could you give us maybe the latest update or your thoughts on overall schedules? I know OPG just recently had an update on Darlington at the end of March. And there was also an update regarding the foundation or the basement module getting installed. So how does that line up with your first reactor press oral delivery schedule and everything tracking according to plan there.

You're talking, Peter, about the small modular reactor at Darlington.

Correct. Correct. Correct.

Yes. I don't have detailed insight to how that project delivery is going, but I hear that it's reasonably on track, and I have the expectation that the following units will we'll order for those will be coming relatively shortly.

Okay. And when -- and just as a reminder, when the delivery is for your first pressure valve's there.

Let's see next year, as I recall it,

Okay. And then just, Rex, at a high level, kind of apartment of War and Department of Energy budgets out in detail. Anything that stood out to you, whether it's on microreactors or enrichment or anything to call out that you're encouraged by?

Yes. I'm encouraged by all of it, Peter. Good support for Palay, good support for defense fuels, -- there's some long lead procurement in there for a couple of extra Columbia class submarines. So I think we're starting to hear about dot adding Columbia units to the submarine force.

And I think that's pretty encouraging. So when you add [indiscernible] in additional Columbias, I think our naval nuclear propulsion program looks more robust and more interesting than it did even a couple of years ago. So yes, I'm very excited about what I'm seeing.

Our next question comes from Ron Epstein with Bank of America.

Yes, maybe speak to maybe have a couple of times. Have you seen any changes on the front with doing work for the Koreans some sort of Korean nuclear summary?

No, we haven't seen anything on that. No. you're talking about --

Yes. Right. At some point there was some talk about the Korean terms and something nuclear and gas would be you guys have helped them, maybe not. I don't survey.

Yes. Again, yes, yes, certainly, there's a discussion between the White House and the Koreans about having nuclear-powered submarines, the Korean ambitions are real. I think they will have nuclear-powered submarines, There's, let me call it, sovereign intent there. I think the question is, where do they source their fuel I think that probably comes from the U.S.

And if it does, I think maybe there's something interesting there for us but super early days, and we'll have to get that demand signal from our customer and enable reactors should that ever come -- so I like the possibility of that, but I would say it's very immature at this point.

Got you. Got you. And then on the M&A front, it seems like you still -- you guys still have a dry powder? Is there any areas that you're particularly interested in today? Or if you could give us a sense of what you might be thinking about?

I'm sorry, Ron, the was a little weak. What was the front end of the question?

Yes, M&A .

Yes, lots of pipeline there. Mike, do you want to take that one?

Yes. I would say -- I mean we -- we started the year off really focused on the expansion of capacity and that continues to be a priority. But we also are looking at a number of other adjacent opportunities really to expand our capabilities.

I think when we look at this, we want to focus on driving opportunity set within the full life cycle of nuclear and how we support our customers from end to end. And so anything that would continue to enhance our capabilities there. We're very interested in.

Our next question comes from Andre Madrid with BTIG.

Yes, Rex, Mike, Chase, I wanted to refocus on PCG for a second. I know initially, it seems like the customer sets, mainly government and AV focused, but the capacity is highly fungible. I mean just can you provided some context to how quickly you can pivot that mix to more commercial?

And maybe what the margin utilization uplift like could look like as a result?

Yes, Andrew, I'll start with that and maybe Mike will add to it. First off, it's about 70-30 maybe in commercial nuclear at this point. and scattered across 2 sites, New York, Pennsylvania and Florence, New Jersey. Both of them are good sites. There's a lot of manufacturing capacity and women in the script that there are 400 employees there. there's more capacity, there's plenty of available capacity.

So one of the things that we can do right away is we can move some work that we've been outsourcing from our commercial business right into those plants. And so doing, we can capture the profits that are otherwise going to the supply chain. And so that's an immediate opportunity for us. And let me also say, we're absolutely going to satisfy the needs of our existing customers with the Navy and other government -- the government customers were under contract to deliver we will absolutely deliver another question about that.

But over the course of time, we'll probably change the complexion of the portfolio in that business more toward commercial because that's where we need the capacity. Mike, do you have?

Yes. Andrew, just the way I would think about it, we have roughly -- we believe about 50% capacity that can be utilized. Now the reality is it's going to take some time to ramp up and hire the workforce. You've got 400 people. Let's assume that we can hire a few folks per week. I mean it's still going to take a few years to get to kind of a full ramp.

So I think there's some -- as Rex mentioned, there's some immediate opportunities for us to move some things in-house, and I think that will be accretive from a margin standpoint. But when we looked at the business case, we looked at kind of a longer ramp and just making sure that, that still made sense financially and it certainly did.

I think on margin side, we disclosed it's low double-digit EBITDA margins today. We certainly think as we have opportunities to increase that slightly as we increase scale and we focus on kind of in-sourcing certain aspects of -- from a supply chain perspective where we can capture that margin as well. So there's certain opportunity to expand over time.

Got it. Got it. That's really helpful. I think you also mentioned August. It's been a while since we've heard a more flush out update there. Any color you can provide us on the conversation that you're maybe having and how you're gearing up to support the effort. I know you kind of have a lot of shots on goal there.

I don't think there's anything really new to disclose. I would say we continue to our build from an infrastructure standpoint to support from Manaus. We've seen good funding support for that. And so we continue those capacity build-outs and we're anxious for future awards. But A lot of good support for it's continuing, but I don't think anything else to really disclose at this point.

There are no further questions at this time. I will now turn the call back over to Chase Jacobson for closing remarks.

Yes. Thank you, and thank you, everyone, for joining us today. We look forward to speaking with many of you and seeing you at upcoming investor events will be on the road and at a few conferences over the next month or so. If you have any questions, feel free to reach out at [email protected].

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, welcome to BWX Technologies Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to our host, Chase Jacobson, BWXT's Vice President of Investor Relations. Please go ahead.

Thank you, operator. 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 fourth quarter and full year 2025 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.

Thank you, Chase, and good evening to all of you. We closed out a record 2025 with another strong quarter of results that were ahead of our expectations. For the full year, revenue grew 18%, adjusted EBITDA grew 15%. Earnings per share grew 20% and free cash flow grew 16%, all exceeding the initial guidance we provided at the start of the year. These results reflect our ability to scale successfully in a context of robust demand in all of our nuclear end markets.

We ended the year with backlog of $7.3 billion, up 50% year-over-year with meaningful growth in both segments and Government, we secured new pricing agreements for naval propulsion equipment and fuel and booked initial scopes on major awards to build out a U.S. defense uranium enrichment capability and to expand production of high-purity depleted uranium and commercial backlog was boosted by CANDU life extensions, multiple SMR projects and our first engineering contract on an AP1000.

Beyond financial performance, 2025 was a year of exceptional strategic success. We completed the acquisitions of A.O.T. and Kinectrics enabling key wins such as the $1.6 billion high-purity depleted uranium contract and the owner's engineer role for Bulgaria's Kozloduy AP1000 project.

Building on the significant capital we invested in our business earlier in the decade, we continue to invest in our facilities to support our customers and build capacity for future demand in 2025. We held the grand opening for the BWXT Innovation Campus, the home of our advanced nuclear and microreactor businesses and continue the expansion project at our large nuclear component plant in Cambridge.

We recently completed construction of the Centrifuge manufacturing development facility and are designing a new high-purity depleted uranium manufacturing facility, both to support the NNSA. And earlier this month, we opened the BWXT Digital Center in Melbourne, Florida, which is our hub for digital transformation and AI initiatives across the organization.

Turning to segment results and market outlook. Government operations revenue was down 1% and adjusted EBITDA was down 5% in the quarter, slightly ahead of our expectations. In naval propulsion with 2 new pricing agreements in place. Our teams are focused on long lead materials, operational excellence and delivery. During the quarter, we shipped 2 large team generators for CVN-81, a Ford-class aircraft carrier, from our Mount Vernon, Indiana facility, highlighting our rhythm delivery for naval reactors.

The Mount Vernon facility sits on the Ohio River and has a 1,000 metric ton crane capacity suitable for lifting the largest nuclear reactor components onto barges directly from the site. Accordingly, we are considering expansion there to supply the U.S. commercial nuclear market and technical services, a team led by BWXT, including Connectrix assumed the management and operations contract for the Canadian vacula laboratories, our first international TSG project.

We are tracking several other contract opportunities within the DOE complex as well as an [indiscernible] domain. In fact, BWXT was an award on the Missile Defense Agency's $151 billion Chile contract or Golden Dome, which positions us to compete for infrastructure support and engineering and manufacturing technology development on this strategically important national security program.

In microreactor and advanced nuclear fuels, we delivered the first core of TRISO fuel for Project PELE to Idaho National Lab in November. We are also manufacturing TRISO for Antares which aims to achieve reactor criticality by July 4 of this year, in line with the administration's nuclear executive orders, while others are planning for deduced manufacture advancement for our fuel, we are delivering today. Further, in space domain, we continue to develop the technology required for nuclear thermal propulsion with NASA and are seeing specific opportunities around [indiscernible].

Lastly, as special materials, our team stood up the Centrifuge manufacturing development facility in just 7 months for the defense fuels program with NNSA, reestablishing a domestic uranium enrichment capability for national security purposes. We are also preparing for the construction of a new facility in Jonesborough, Tennessee for high-purity depleted uranium production. These programs support a robust revenue growth outlook in 2026 and are highly strategic for the future of our special materials portfolio.

Turning now to commercial operations. We reported impressive organic revenue growth of 31% in the quarter and total revenue growth of 95%, strong growth in commercial nuclear power and medical and sales from Conectrix. Backlog ended 2025 at $1.7 billion, up 85% compared to last year and up 15% sequentially, driven by equipment per candy refurbishments in Canada and other international markets and design awards for SMR components to various reactor OEMs. This backlog growth, coupled with robust market demand reports our expectations for low double-digit organic revenue growth in the segment in 2026.

BWXT Medical reached a milestone slightly more than $100 million of annual revenue up about 20% from last year with double-digit growth in diagnostic isotopes a meaningful increase in Actinium sales and steady growth in Terrier. We expect similar growth in 2026 as these factors continue to drive the business. We continue to make measured investments in our medical portfolio as we work through the industrialization of our tech 99 product, explore new modalities for producing actinium-225 and around other therapeutic isotopes such as LAN 212.

Turning now to commercial nuclear power. Demand is strong, and our opportunity [indiscernible] is expanding. Commercial nuclear power book-to-bill was over 2% in the quarter, [indiscernible] CANDU aftermarket services and components in Canada, Europe and Asia, a new long-term CANDU fuel contract and design and proponent manufacturer contracts with several SMR technology providers, underscoring our role as a super merchant supplier for critical nuclear technologies.

Additionally, in December, a consortium of BWXT, Leventis Energy Partners and its subsidiary, Canadian Nuclear Partners, was selected to provide owner's engineer services or 2 proposed AP1000 nuclear reactors at the Caslavuisite in Bulgaria. This is BWXT's first meaningful AP1000 award, leveraging our large nuclear project experience and Kinectrics death and licensing, regulatory support and engineering. We are actively bidding component practices for multiple [ 8000 ]projects and expect additional awards this year.

With that, I will now turn the call over to Mike.

Thanks, Rex, and good evening, everyone. I'll begin with total company financial highlights on Slide 4 of the earnings presentation. Fourth quarter revenue was $886 million up 19% year-over-year as strong growth in commercial operations was partially offset by a modest and expected decline in government operations. Organic revenue was up 4%.

pAdjusted EBITDA was $148 million, up 13% year-over-year, attributable to robust double-digit growth in commercial operations and lower corporate expense which were partially offset by lower government operations. Adjusted earnings per share were $1.08, up 17% due to strong operating performance and a higher contribution from nonoperating items of approximately $0.05.

Our adjusted effective tax rate in the quarter was 19.5%, and which was below our full year tax rate of 20.4% due to timing of R&D tax credits. In 2026, we expect our tax rate to be slightly higher at approximately 22% and as growth in our commercial power and Kinectrics businesses will result in a greater percentage of international earnings.

Fourth quarter free cash flow was $57 million and full year free cash flow was $295 million, up 16% compared to last year, inclusive of 17% operating cash flow growth. Capital expenditures in 2025 were $185 million, 5.8% of sales. In 2026, we expect CapEx to be about 6% of sales as we continue to invest in the business to meet our commitments with our government customers and to support the growing demand in our commercial markets.

During the quarter, we also completed a $1.25 billion convertible debt offering with a 0% coupon. In connection with the offering, we entered into a cap call transaction, which essentially increased the conversion price to over $396. Funds from the transaction were used to repay balances on our credit facility and term loan which we, in turn, renegotiated with more favorable terms and increased capacity. This was a highly opportunistic transaction for BWXT. We reduced our cost of debt, lowered our interest expense enhance our financial flexibility and increase our liquidity, which stood at $1.7 billion at the end of the year.

Moving to the segment results on Slide 6. In government operations, fourth quarter revenue was down 1% as expected with growth in special materials and contribution from A.O.T. being offset by lower microreactor volumes and long lead material procurement for enable propulsion equipment, the latter of which was the benefit to our results in the first 3 quarters of the year. Adjusted EBITDA in the segment was $111 million, resulting in an adjusted EBITDA margin of 18.8%. Our quarterly adjusted EBITDA margin was slightly lower than the full year result of 20.4% due to mix as newer projects in this segment began to ramp.

Turning to commercial operations. Revenue was up a robust 95%, driven by 31% organic growth, with strong growth in both commercial power and medical and contribution from Kinectrics. This reflects both accelerating organic momentum and the strategic expansion of our commercial capabilities. Adjusted EBITDA in the segment was $44 million, up 87% from last year. Adjusted EBITDA margin was 14.9%, a notable improvement from last quarter.

In 2026, we expect the Commercial Operations segment adjusted EBITDA margin to increase by roughly 100 basis points as higher revenue and more normalized mix is partially offset by continued growth investment as we scale the business for the future. Beyond 2026, we expect growth investment to be less of a margin headwind of continued investments are offset by additional revenue growth. Turning to our 2026 guidance on Slide 10 and 11 of the earnings presentation. From an operational standpoint, our guidance is largely in line with the preliminary outlook we provided in November. We expect revenue of approximately $3.75 billion, up high teens compared to 2025.

In Government operations, we expect approximately low to mid-teens growth with over half coming from the defense fuels and H PDU contracts. In commercial operations, we expect approximately 25% growth, driven by low double-digit growth in commercial power high-teens medical growth and a full year of contribution from Kinectrics. For adjusted EBITDA, we are guiding $645 million to $660 million up low to mid-teens compared to 2025.

In Government operations, we expect margin to be slightly lower given the significant revenue contribution from new programs which begins at a lower initial profit recognition and expands over time as execution milestones are met and contract risk is reduced. In commercial operations, we expect margin to trend back towards historical levels as I previously discussed.

Regarding the cadence of operating earnings, we anticipate our results will be slightly more back half weighted than usual, with about 55% of full year EBITDA anticipated in the second half. This will largely be reflected in the first quarter results with a return to more normal seasonality in second quarter. In the first quarter, while we expect solid year-over-year organic revenue growth, EBITDA is likely to be flat to slightly higher in both segments due to seasonality and short-term impacts of mix and ramping of new programs.

In government operations, this will likely translate the first quarter EBITDA being roughly flat year-over-year, yielding a margin that is slightly below the full year guidance rate. And in commercial operations, margins are expected to start the year well below our full year guidance before improving sequentially each quarter throughout the remainder of the year, reflecting program timing and mix. These assumptions lead to non-GAAP earnings per share guidance of $4.55 to $4.70, up mid- to high teens, driven largely by growth in both segments with a modest contribution from nonoperational items as lower interest expense is partially offset by a slightly higher tax rate and share count and lower pension and other income.

From a quarterly perspective, while we anticipate earnings per share to follow with similar pattern to our operating earnings with first quarter EPS relatively flat compared to last year, we are highly confident in delivering our full year earnings growth outlook. Finally, we expect free cash flow of $305 million to $320 million inclusive of low to mid-teens operating cash flow growth, in line with our adjusted EBITDA growth outlook. Importantly, this level of cash generation supports both continued reinvestment and long-term shareholder value creation.

Overall, we see 2026 as another year of meaningful operational growth for BWXT. We've strengthened our balance sheet, expanded our commercial platform and positioned the company for continued margin improvement and cash generation. Our focus remains on disciplined execution prudent investment and long-term shareholder value creation.

With that, I will turn it back to Rex for closing remarks.

Thanks, Mike. 2025 was a monumental year for BWXT. We said at the intersection of the national security and commercial liquidity power markets in a market-leading position with unmatched scale, experiential qualifications and regulatory credentials. It's an exciting place to be, and the outlook is bright. This position demands that we execute to drive quality earnings growth and shareholder value. Our priorities are executing against our robust sample process optimization, new technology adoption throughout the organization and on disciplined growth investments, both organic and inorganic.

And with that, we look forward to taking your questions.

[Operator Instructions] Our first question comes from the line of Scott Deuschle with Deutsche Bank.

Mike, should we expect government operations margins to trough in 2026 on these mix headwinds? Or could there be incremental mix pressure in 2027 that we should be mindful of?

Thanks, Scott. 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 4 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 mix 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?

Yes. Sure, Scott. 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 -- I think over a kind of 3 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 well processes and use the 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 side. So I'd call that Phase 1.

Phase 2 is with the release of large language models, we're figuring out ways to use those in our business to improve functional efficiencies and like. And so in this phase now that we're basically democratizing access to the tools. And I mean tools like Databricks and ChatGPT and the like.

And then the third phase is going to be a factory automation. That's kind of our learning 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 III, 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'd have the ability to use things like digital twins and some of those classified areas as well?

I'd say not much, Scott. I mean, certainly, we have to be concerned about using WiFi 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.

Our next question comes from the line of Matt Akers with BNP Paribas.

I wanted to ask, I think some of the commentary from the shipbuilders this quarter was relatively positive in terms of to some of the supply chain bottlenecks that 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.

Yes, 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's a Navy and the government help a view that instead of slowing down the supply chain, what you 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's 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 that's what -- 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 delivering on our delivery schedules and very, very pleased to see the shipyards turning the corner and bouncing off the bottom in terms of delivery rate.

Yes. And I guess as a follow-up, just I wanted to ask on capital deployment and sort of what your priorities now? And how big -- how big could M&A be as a part of that after A.O.T. and Kinectrics?

Yes. So we're -- look, we're really excited about some of the things that we've done to strengthen our balance sheet. We did the convertible in the fourth quarter, I think, which really give us a lot of flexibility. And so we feel well positioned for potential M&A as we come into 2026. I will say, as we look at a number of different targets that are out there, we're highly focused on continuing to drive something within our core and also 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 that 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.

Next question comes from the line of Jeffrey Campbell with Seaport Research Partners.

Congratulations on the quarter. I'll just stick with one. Rex, you mentioned your U.S. commercial facility might be built at McDermott. I just wonder, are there any particular challenges in citing a commercial facility of to one that's dedicated to defense purposes.

Yes. 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 there would be a commercial facility there. For example, you can share radiography facilities. I did mention that we have a 1,000 metric ton crane capacity to Stevedore components right on to the Ohio River there. So we would certainly jointly share those assets and be able to amortize the costs over those assets together.

So I think there are certain advantages. We would segregate those businesses for certain reasons financially. But yes, no, very good reasons and very good synergies for putting those 2 things on the same side.

Next question comes from the line of Robert Labick with CJS Securities.

This is [indiscernible] on 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?

Knock on wood, it hasn't so far because we're still operating under the framework at the U.S. MCA trade agreement, the U.S., Mexico, Canada trade agreement that was struck in the last Trump administration. And so it hasn't -- there are no tariffs in that framework on medical products or on nuclear components happily.

And this last announcement around 10% and 15% tariffs across the board does not apply to the U.S. MCA 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.

And one more. As we look over the next several years, we have DUECE and HVDU incremental growth this year in naval growth coming in 2027. Beyond that, can you discuss the timing of Canadian newbuilds, micro reactors and other long-term layers to your growth map?

Yes, I'd say a variety of different time frames for all of that stuff. But now we mentioned on the script that we now have business with AP1000 in Europe with that Kozloduy owners engineer contracts, we certainly have an SMR. We have SMR contracts at hand right now, we're certainly making the reactive pressure vessel for GE, and we're doing a number of other components for different small module reactors suppliers. So I think you just see that building over the years.

It's my expectation that we'll have additional orders for the X 300 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, starting now essentially micro reactors, of course, we've had a good program going for 7 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% compound in clip. So we're seeing generally very good demand in all of our markets, and we expect it to build at various timings over the years.

Next question comes from the line of Jeff Grampp with Northland Securities.

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 per 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.

Yes. I think we've characterized it historically for the large reactors, I think, on a CANDU new build, which was not your question, but on that one, it's $500 million to $1 billion perhaps particularly in Canadian with our -- with the Kinectrics 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 100s, 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. 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, did we expect just 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.

Yes. So I would say that the contracts are structured slightly differently. We are in the first phase of negotiating under the Defense fuels program. And then for HVDU that's a longer kind of upfront negotiated program. I think in both cases, what we would typically do along with our processes, it's kind of evaluate the overall margin performance. And usually, as we meet various milestones and reduce risk into those programs 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 will have an opportunity to outperform.

Next question comes from the line of Jed Dorsheimer with William Blair.

Congrats on the quarter. Rex, I guess, first question, Pentagon just released $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.

Yes, sure, Jeff. So that appropriation of funding really doesn't influence our business, right? our programs are funded through different lines. And so it was neutral for us. We are still on the shipbuilding schedule at 2 Virginias a year, 1 Columbia year and 4 is more or less on 5-year intervals. So it was -- we were indifferent to that news.

Got it. And then maybe for both you and Mike, as you think about capital allocation on the commercial side of things. You're in the CANDUs in Canada and abroad. Your -- 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 how -- with that level of visibility, are you -- how are you thinking about the business? Are you seeing -- is it sort of growth at a steady pace, but in different regions that you're able to support? Or do you see any particular technology that's advancing at a faster pace? How are you thinking about adding resources to supply those markets.

Yes, I'd say when you look at our capacity in Cambridge, Jed, 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 interesting targets in the acquisition pipeline, and I mentioned explicitly on the call the thought of building a plant at Mt 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 opportunities around Europe that there's an appetite for small modular reactors there. And I think whether we would invest there, I think it depends somewhat on localization demands. But yes, 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.

Jeff, the only thing to add is -- I would say that in addition to expanding footprint, we are also investing in technologies to drive throughput within the factory. So it's not just a -- 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 money on additional machinery and technology.

Next question comes from the line of Sam Straker with Truist Securities.

On for Mike [indiscernible]. I think just to start kind of a 2-part building off of the conversation around SMRs and micro reactors. 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 trisofuel market overall in terms of where it's at now and potential opportunities moving forward?

Yes, sure. A few questions embedded there. On micro reactors, we're in the [indiscernible], we deliver that to Idaho National Laboratory next year. We announced the delivery of the fuel for that reactor at the end of last year. So we're proceeding a pace, and that reactor will start undergoing testing in '27, '28 time frame. Think of that as a precursor to the Genus program, which is in procurement right now. their 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 Draka program, we still have some level of effort with NASA. I think the bigger opportunity in the space market is around fish and surface power. It looks like Nassentends to procure an efficient reactor for a lunar base. And certainly, we have got the right credentials to compete for that. In terms of Trico fuel, I think there are 2 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 trial fuel or designed around trio fuel.

But I think there's also an interesting commercial play there, and we're certainly evaluating that either sub-grid or below-grid capacity power output and certainly remote applications for high-density powder. So a very interesting opportunity around Tri-Soand we're looking pretty hard at whether we make an investment there, a large-scale investment.

[Operator Instructions] Our next question comes from the line of Jan Engelbrecht with Baird.

Congrats on a strong quarter. I think just wanted to return to the AP1000 and the CANDU market. As we think about the AP1000 that owner's engineer contract you won and just in terms of components, is it -- do you consider your bid on sort of the component were to be more competitive if it's a North American project that gets announced versus something in Europe? Because 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 the new AP1000 contract or a project gets announced do you see that you have a sort of a better probability on which continent it's on? Or just as we think about that.

I don't think we're thinking of it that way, Jay. 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 there in promoter, and we have our deep engineering capability, which is augmented by Konetrics. 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 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. And then just a quick follow-up on the Naval Nuclear business. A lot of shipbuilding 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 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 beyond 2030 for long-term growth in that segment?

Yes, maybe a little hard to say. I mean right now, we're sort of building on our guidance and our internal forecast around the shipbuilding plan. We do have some business on the August side related to production capacity that's giving us a bit of growth here at 2026. And of course, there's the sort of the wildcard of South Korea out there, and 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 can see more opportunities around micro reactors, fuel and other such things that were 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.

Next question comes from the line of Andre Madrid with BTIG.

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 Kinectrics acquisition.

It's been pretty quiet on our front. No news on that one.

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

Yes. Not much new there. I've said the last couple of quarters that we are in the sort of the growing 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 in the person of Jason Bad Ward is showing a lot of strong leadership in that business and has 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.

There are no further questions at this time. I would like to turn the call back over to Chase Jacobson for closing remarks.

Yes. Thanks, Bedore. Thanks, everybody, for joining us today. We look forward to speaking with many of you and seeing you at upcoming investor events are on calls. If you have any questions, please feel free to reach out to me at investors at bwxt.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.

Ladies and gentlemen, welcome to BWX Technologies Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to our host, Chase Jacobson, BWXT's Vice President of Investor Relations. Please go ahead.

Thank you. Good evening, and welcome to today's call. Joining me are Rex Geveden, President and CEO; and Mike Fitzgerald, Senior Vice President and CFO.

On today's call, we will reference the third quarter 2025 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 in the company's SEC filings.

We'll 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.

Thank you, Chase, and good evening to all of you. I'm excited to report another strong quarter for BWXT showcasing the effectiveness of our battle plan strategy and our leading position in nuclear solutions for the global security, clean energy and medical end markets, all of which are enjoying unprecedented demand.

Third quarter financial results exceeded our expectations driven by focused execution and revenue growth in both Government and Commercial Operations. We delivered 12% organic revenue growth and roughly 20% adjusted EBITDA and earnings per share growth alongside a robust free cash flow generation.

Book-to-bill was a stout 2.6% this quarter driven by large multiyear national security contracts for the production of defense fuels and high-purity depleted uranium in our Special Materials line of business. This led to a total backlog of $7.4 billion, up 23% from last quarter and up 119% year-over-year.

Our year-to-date financial results, deep backlog and unprecedented end market demand position us to enter 2026 from a position of financial strength. Our preliminary 2026 outlook calls for another year of record financial results with a posture to exceed our medium-term financial targets.

Turning to segment results and market outlook. Government Operations revenue was up 10% and adjusted EBITDA was up 1%, both ahead of expectations. In the Naval Propulsion business, our teams are intensely focused on meeting delivery commitments for submarine and aircraft carrier programs and driving operational excellence. In addition to traditional process optimization strategies, we are finding new ways to leverage artificial intelligence and advanced manufacturing to drive efficiencies around quality control and workflow in our facilities that will lead to improved productivity, throughput and margin performance.

Technical Services is on a growth trajectory, powered by a win streak that unfolded over the last several years. Our team began transition for the strategic petroleum reserve M&O contract in early October and the BWXT-led joint venture, which includes Kinectrics, is in the preferred bidder period, which is the transition period for management and operations of the Canadian Nuclear Laboratories. We expect to assume full operational control before the end of the year.

In microreactors and advanced nuclear technologies, the market is evolving positively. We are currently manufacturing the reactor core for Pele, which is on track for delivery in 2027. Related to Pele, last month, the Army announced the Janus program, which aims to deploy a nuclear reactor on a military installation no later than September 2028, building on lessons learned from Project Pele. BWXT's qualification should be a differentiator for Janus and other important national security projects that are within our cost and capital risk tolerances.

During the quarter, we announced a collaboration with Kairos Power to commercially optimize TRISO nuclear fuel production. We are excited to have a partner that is aligned with Google. BWXT is currently producing TRISO fuel for Project Pele and a variety of other customers and we'll continue to evaluate options to enter the commercial market on a larger scale as the demand for advanced reactors grows.

Lastly, over the last several quarters, we pointed to our Special Materials business line, having some of the most exciting growth opportunities within the company. I'm pleased to say 2 of these opportunities, both within the NNSA materialized during the quarter. First, we were selected for the defense fuels contract valued at $1.5 billion to establish a domestic uranium enrichment capability for defense purposes. We booked the first task order under the contract and are building a centrifuge manufacturing development facility in Oak Ridge, Tennessee. Over the next several years, our focus will be on centrifuge manufacturing and designing and licensing a plant for defense uranium enrichment.

Second, we were awarded a $1.6 billion 10-year contract to supply high-purity depleted uranium to the NNSA. This is a direct result of our foray into special materials and our deliberate strategy of expanding into the depleted uranium assay through the AOT acquisition. Under this contract, we will build a manufacturing plant adjacent to our existing facility in Jonesborough, Tennessee, capable of producing up to 300 metric tons of high-purity depleted uranium per year that will be used for multiple defense purposes. These are both exciting long-term projects for BWXT, not only for the revenue growth, but also the demonstration of trust our customers put in BWXT to execute on mission-critical national security programs.

Turning now to Commercial Operations. Reported revenue grew 122% and organic revenue grew 38% year-over-year, driven by the Kinectrics acquisition, strong growth in commercial nuclear power and medical isotopes. BWXT Medical revenue grew double digits, driven by PET and other diagnostic product lines for which the outlook remains favorable. We expect this trend, along with the increasing therapeutic isotope sales for clinical trials to support continued revenue growth in 2026.

Consistent with our commentary last quarter, the tech-99 development is progressing nicely and is on track for an FDA submittal in the near future. In the therapeutics market, Kinectrics commissioned 4 new electromagnetic isotope separator units that increased production capacity of ytterbium-176, the precursor material for lutetium-177 to over 500 grams annually. This expansion reinforces our role as a global supplier of highly enriched stable isotopes needed for cancer radiotherapy.

Turning now to Commercial Power, where demand is very strong and our opportunity set is expanding across various geographies and with many of the leading reactor technology OEM providers. In the CANDU market, we have a deep backlog of heavy nuclear components supporting life extensions in Canada, including the 48 steam generators for the Pickering life extension, which are driving significant revenue growth this year. Beyond that, BWXT and Kinectrics are tracking opportunities for international CANDU life extensions, the Canadian new builds we have discussed in the past, other large-scale opportunities, including the Westinghouse AP1000 and multiple SMR projects.

In the SMR sector, we are a key partner with the majority of leading technology providers in this rapidly expanding market. To this point, we recently signed a contract with Rolls-Royce to design steam generators for its SMR along with an MOU for the manufacturing phase, highlighting the power of our merchant supplier position in the market.

With that, I will now turn the call over to Mike.

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 $866 million, up 29%, driven by both segments. Excluding contributions from acquisitions, organic revenue was up 12%. Adjusted EBITDA was $151 million, up 19% year-over-year, driven by robust double-digit growth in Commercial Operations, a modest increase in government operations and lower corporate expense.

Adjusted earnings per share were $1, up 20%, driven by strong operating performance. Nonoperating items were neutral on a net basis. Our adjusted effective tax rate in the quarter was 23.6%, and we continue to expect a tax rate of approximately 21% for the year. In 2026, given a greater percentage of international earnings following the Kinectrics acquisition, we expect our tax rate to be slightly higher year-over-year.

Third quarter free cash flow was $95 million, driven by solid earnings performance and timing of cash receipts from major awards. We anticipate free cash flow in 2025 to be approximately $285 million, the high end of our previous outlook range. Capital expenditures were $48 million in the quarter and $114 million year-to-date. We anticipate full year CapEx to be approximately 6% of sales, indicating an increase in the fourth quarter due to timing of spend on growth initiatives, including capacity expansion for commercial nuclear and a number of smaller projects in our government business. In 2026, we expect CapEx to remain at 5.5% to 6% of sales, supportive of our longer-term growth outlook.

Moving now to the segment results on Slide 6. In Government Operations, third quarter revenue was up 10%, driven by Naval Propulsion, Long Lead Material Procurement, Special Materials and a roughly 3% contribution from the AOT acquisition, partially offset by a decline in microreactor volume. Adjusted EBITDA of $118 million was up modestly compared to last year, resulting in adjusted EBITDA margin of 19.2%. We expect Government Operations revenue to be up mid-single digits organically in 2025, plus just over 2% contribution from the AOT acquisition, slightly ahead of our previous outlook, and we continue to expect adjusted EBITDA margin of approximately 20.5%.

Turning to Commercial Operations. Revenue was up a robust 122%, driven by contribution from the Kinectrics acquisition. Organic revenue growth was 38%, driven by strong year-over-year growth in our Commercial Power business and double-digit growth in Medical. Adjusted EBITDA in the segment was $36 million, up 163%. This results in adjusted EBITDA margin of 14.2%, a nice improvement compared to our first half results and up from the 11.9% in the same quarter last year.

Margin expansion was driven by solid operational performance and more favorable mix compared to recent periods. We now anticipate 2025 commercial revenue to be up approximately 60% compared to last year, driven by high teens organic growth and contribution from Kinectrics, which is performing slightly ahead of our expectations since the closing of the acquisition in May. We expect segment adjusted EBITDA margin to be approximately 13.5%, the low end of our previous range due to the timing of the recovery of higher material procurement costs, which acutely impacted our results in the first half of the year.

Turning to our consolidated guidance for the remainder of 2025 and our preliminary outlook for 2026. In 2025, we anticipate adjusted EBITDA to be approximately $570 million, the midpoint of our previous range. However, we now expect adjusted earnings per share to be $3.75 to $3.80, up $0.075 at the midpoint given the benefit from nonoperating items, including foreign currency gains and slightly lower interest expense.

Looking to 2026, we anticipate another year of strong financial performance with low double-digit to low teens adjusted EBITDA growth, yielding high single-digit to low double-digit adjusted earnings per share growth given modest nonoperating headwinds. This should lead to another year of solid cash generation, although near-term working capital investments related to the significant growth in our business will likely lead to flat to slightly higher free cash flow.

In our segments, Government Operations revenue is expected to grow in the mid-teens, led by growth in Special Materials and supported by higher revenue in Naval Propulsion and microreactors. Of note, the defense fuels program in HPDU will account for over half of the segment's growth in 2026. This growth includes a significant amount of what is essentially customer-funded CapEx to build the unique infrastructure required for these programs, meaning they are expected to have below average margin in the first phases compared to the rest of our Special Materials portfolio. As such, we anticipate Government Operations adjusted EBITDA to grow in the high single-digit percentage range compared to 2025, ahead of our medium-term outlook for mid-single-digit growth in this segment.

In Commercial Operations, we anticipate another year of robust revenue performance with low double-digit organic revenue growth plus contribution from Kinectrics. We anticipate adjusted EBITDA growth to outperform revenue growth driven by better margins due to the favorable mix and solid execution.

Overall, we had a strong quarter, and we are well positioned for another year of record financial results. Our backlog is robust. We have good visibility into the future, and we remain focused on driving improved margin performance and cash generation in our business.

With that, I will turn it back to Rex for closing remarks.

Thanks, Mike. It is an exciting time for BWXT. The secular trends of decarbonization, electrification and data center power demand, combined with an increasing appetite for nuclear solutions in the national security space are meaningful tailwinds to BWXT. We are proud of our strong market position and the customer trust we have earned, built upon the expertise of our workforce, our differentiated infrastructure and credentials and our strategic organic and inorganic investments. We are winning in our core businesses and expanding into new and exciting areas.

During this period of exceptional growth, we are doubling down on operational excellence focus and expanding its application across the entire BWXT enterprise. We are driving further process improvements and increasing the use of industrial automation and artificial intelligence to optimize cost structure, product quality and cash generation to maintain our winning position and drive shareholder value.

And with that, we look forward to taking your questions.

[Operator Instructions]

First question comes from the line of Pete Skibitski with Alembic Global.

Nice quarter. I guess for anyone, I guess, certainly on an absolute basis, this is one of the bigger revenue beats of consensus that you guys have ever had, I think. So I just wonder if you could clarify, did you book any revenue on the 2 new contracts in the quarter? I know it went into backlog, but did you book any actual revenue on those 2 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 wonder if you could explain that also. I don't know if there's some conservatism or something else. I'll stop there.

Yes. 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 a large beat 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 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.

Okay. Just one last one for me, maybe for Rex. Rex, on the new Janus program, it seems like this is supposed to be kind of a co-co 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. Maybe it's just a simple teaming agreement is all that's needed, but I was curious as to your thoughts on that?

Yes. Pete, we certainly do intend to compete for that Janus program, very interesting. The government is obviously looking at putting a number of reactors at a number of different sites. And I think they'll pick at least 2 contract teams for that. Yes, we typically don't own and operate reactors. That's normally the job of the nuclear utility. So it will 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.

Our next question comes from the line of Robert Labick with CJS Securities.

This is Will, on for Bob. With 6 months or so under your belt now, what are the key takeaways from the Kinectrics acquisition? And what are some of the new market and revenue synergy opportunities?

Well, as I said on the call, Kinectrics is outperforming so far. In fact, I might speak more broadly and just say the 2 acquisitions that we did this year, the Jonesborough acquisition, AOT and the Kinectrics 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 Kinectrics itself, the outperformance relates to the transmission and distribution business, which is growing very smartly right now because of -- there's 2 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 Kinectrics is well suited for. So we're attacking that one.

And then finally, we're seeing some business -- sizable business around licensing support to the Canadian nuclear utilities for the new build large projects -- large reactor projects in that market. And I find that encouraging from multiple perspectives, obviously, for Kinectrics itself. But I think that demonstrates the seriousness of the nuclear utilities to proceed with their plans for large nuclear reactors. So a lot of goodness in the Kinectrics 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.

And 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?

Yes. I'd say we have -- 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 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 that's -- and the geography is 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 8 CANDU 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 a kind of a quasi-commercial program because it's contractor-owned, contractor-operated facilities for U.S. military sites. So that one is interesting in itself. And of course, we see commercial outlets for TRISO and growth in nuclear medicine. So it's everywhere.

Next question comes from the line of Peter Arment with Baird.

Nice results. Could you -- Rex, on the 2 large contracts that you booked in the quarter, the uranium enrichment and then the depleted uranium awards, I think Mike mentioned that there's just 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 that -- 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 does that last?

Yes. 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 DUECE, 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.

So maybe a little bit waiting early, but certainly not significant. So it will 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 the kind of lower margin to last for the first couple of 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 could you give us any more updates there?

Yes, Peter, that is later than the contract originally called for. 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 is 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 program is going great.

Next question comes from the line of Jeffrey Campbell with Seaport.

First of all, congratulations on the strong quarter. Regarding DUECE, 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?

So that initial tranche of funding is about licensing, Jeff. Licensing in preparation for the high enriched uranium cascade, which ultimately will be based at our fuel services business in Erwin, 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.

Okay. And regarding the 4 new second-generation electromagnetic isotope separator units that you announced being commissioned by Kinectrics, does the entirety of that 500 kilogram of ytterbium output now belong or will it belong to BWXT Medical? And were there any noteworthy differences between the first and the second-generation EMIS units?

Yes, that's 500 grams of output, the ytterbium-176, which, of course, is the base material for lutetium-177. So it's an important precursor for that nuclear medicine product. It is -- 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 Kinectrics Medical business into BWXT's Medical business for some good reasons. But those businesses are supporting one another, and we're finding strategic and -- we're finding strategic synergies there that are pretty powerful.

Next question comes from the line of Scott Deuschle with Deutsche Bank.

Mike, could you slice up the shipset value of the steam generator content you won with Rolls-Royce?

So we haven't given specifics around that, I think, Scott. When we talk about the SMR opportunity with Rolls, we've discussed kind of similar to the rest of our SMR in the $50 million to $100 million range. I think we're squarely in the middle of that as it relates to the Rolls content. So we feel comfortable kind of being in that range from a rolls perspective, but we haven't disclosed the specifics.

Okay. And then the press release announcing that win discussed the 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?

Yes. I think, Scott, we are evaluating that and other opportunities for localization. That seems to be the trend in commercial nuclear power. So we certainly are considering it.

Okay. 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 resulted in that guide of flat to slightly up? I heard some of the pieces in the script. I was just curious if you could put a bow on it for us?

Yes. So I think 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 continued kind of one day in, 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. If you remember, we started the year at low end of the range of $265 million. Now we're guiding to $285 million, approximately $425 million. So part of this is driven by some of these investments in the newer contracts. We are able to negotiate some milestones on DUECE and HBDU that are hitting in the fourth quarter of '25, which is good, but it creates a step 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 do have -- 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 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 1 day working capital improvement that's going to be offset by, call it, $10 million to $15 million of timing related to kind of milestones payments for some of these larger new contracts.

Next question comes from the line of Jeff Grampp with Northland Securities.

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?

Yes. So I think I'll start with the second question just on the government shutdown. And just 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 different joint ventures with external partners to do MNO and other environmental cleanup on DOE sites.

I think the teams have done a great job of managing funding. Those 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 the -- 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 quarter that I anticipated some of that to continue 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 in EAC potential write-ups. We have not assumed a substantial amount of EAC write-ups in our prudent guidance.

In addition to that, based on the timing of some of the new special materials contracts, we've seen 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 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. 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 defense spending. We haven't seen a major impact on that, but that's always a potential risk. And I mentioned the extended government shutdown that could be also a potential risk. So those are the big puts and takes.

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 as 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?

No, I do think, Jeff, that we'll see that order start to accelerate. I think, 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 4. We'll see who the next -- 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 the nuclear utilities in Canada to go forth with the large builds pretty soon. Like I said, we have task orders, contracts already to study the licensing for those CANDU derivatives. And so yes, 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.

Next question comes from the line of Michael Ciarmoli with Truist Securities.

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 just kind of general thoughts. 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 VA, Columbia cadence? How you're thinking about whether or not AUKUS flows in at some point, you need more CapEx or more capacity?

Yes. 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. AUKUS had been in question because it's being examined by the Department of Defense, but you saw the sort of lovefest 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 an announcement -- a 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 -- is 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 and naval reactors for that purpose. So there's a bit of that going on already. So full steam ahead.

Got it. Got it. And then just one more, Mike, I think I've got this. I mean the implied government EBITDA margins look to be down next year. It sounds like it's just the front-end loading of some of that lower-margin work and maybe even some of the other pilot progression projects. But is anything changing with that core Navy business? Or is it really just kind of some lower-margin start-up contracts that's weighing on the margins?

No, that's exactly right. If you look at 2026, most of it is mix pressure, half of the revenue growth is driven by DUECE and HPDU. And as we mentioned, we start off 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 before we saw significant labor costs and those types of things.

And so -- as I mentioned before, that mix will start to change next year. And 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.

Next question comes from the line of Jed Dorsheimer with William Blair.

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 had separated out growth from Kinectrics. And specifically in your radiopharma business, that supply with Novartis, it looks -- Pluvicto got off-label from -- to pre chemo, which expands. And so my question is, were you supply constrained in the quarter in terms of at the precursor or for the lutetium-177. And previously, you had talked about, I think, 30-plus Phase III. So I'm just wondering how we should expect radiopharma growth and whether or not that was limited by the capacity?

Yes. I don't -- Jed, I don't think we were supply constrained for that product. We're pretty far downstream. We do the base material, the ytterbium-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 certainly, there will be higher demand in the future.

Got it. And then just sticking with commercial, but switching to the reactor side. It sounds -- if you received an RFP for a Rolls SMR, for example, just as an example here or even for an AP1000, that would obviously drive the backlog, but wouldn't contribute anything to growth next year. Is that correct? I just want to make sure that it seems like that would be the case, but just wanted to confirm it? In other words, '26 is a year of RFPs, wins and while most of the reactor side would be Bruce and OPG up in Canada, correct?

Yes, that's correct.

Yes, that's correct.

Yes. We don't have a lot of that kind of scope in the forecast, if that's what you're asking.

That was what I was asking.

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 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 yes, anything that we would get on the commercial side, say, from the AP1000 be additive to that.

Next question comes from the line of Andre Madrid with 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?

Yes, that's exactly right. So the DRACO program evolved into single agency support. 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 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 the 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.

Got it. Got it. No, that makes sense. And Mike, on -- I think you called it out earlier, but on the $80 billion nuclear partnership that was recently announced, I mean, what gains could be captured there, if any? I mean, how do we assess that opportunity for you guys if it is an opportunity?

Yes. 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, 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.

Next question comes from the line of Ron Epstein with Bank of America.

This is Alex Preston, on for Ron today. I was just curious on M&A, right? Obviously, talked through a couple of times AOT and Kinectrics performing really well. 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 2 to 3x leverage range going even to the end of the year?

Yes, 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.

That said, we did a couple of really good ones this year with Kinectrics 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, a 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.

Yes. 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.

Next question comes from the line of Pete Skibitski with Alembic Global.

Just a quick housekeeping question, I guess, for Mike. Mike, the $15 million step-up in D&A in 2026, this is a small EBIT impact. But I was just wondering, does that relate to the 2 new contracts in government or from tech-99 or something completely different?

It's -- not related to either. I mean part of this is the timing difference between when we get recovery under cost accounting standards and financial accounting standards. But no major step change as it relates to tech-99. That won't happen until that, that program has gone through full approval. And then from the initial investments that we've been doing related to the new contracts, we're starting to spend that, but those aren't placed in service. So you're not going to see a significant step-up of that in '26 that will kind of bleed in over a period of time.

And our last question comes from the line of Scott Deuschle with Deutsche Bank.

All right. I saved this question from the end of the call because it's probably where it belongs. But Rex, is rare earth handling or processing at all an area of strategic interest to the company given your existing experience in the handling and processing of hazardous materials?

So I don't think so, Scott. Our capabilities are around special nuclear materials and the materials handling and accountability systems that go with that. We just aren't involved with rare earths typically, I mean, apart from ytterbium-176, but just not in our playbook. And so I would say the answer to that is broadly no.

That concludes the question-and-answer session. I would like to turn the call back over to Chase Jacobson for closing remarks.

Thank you, Desiree. Thank you, everybody, for joining us today. We appreciate your questions. We appreciate your interest in BWXT. We look forward to seeing many of you and speaking with you in the coming days and weeks and seeing you at investor events. If you have any questions, please reach out to me at [email protected]. Thank you.

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