BWXT's Q3 2025 Earnings Call: Contradictions in Navy Contracts, Nuclear Growth, and AUKUS Commitments

Date of Call: November 3, 2025

Financials Results

• Revenue: $866 million, up 29% YOY; organic revenue +12% excluding acquisitions
• EPS: Adjusted EPS $1.00, up 20% YOY

Guidance:

• 2025 adjusted EBITDA expected to be approximately $570M (midpoint).
• 2025 adjusted EPS guidance raised to $3.75–$3.80 (up ~$0.075 at midpoint).
• 2025 free cash flow anticipated ~ $285M (high end of prior range).
• 2026 preliminary: low double-digit to low-teens adjusted EBITDA growth; high single-digit to low-double-digit adjusted EPS growth; flat to slightly higher free cash flow.
• 2026 Government Ops revenue expected to grow mid-teens; Government adjusted EBITDA to grow high single-digits with near-term margin pressure from customer-funded CapEx.
• 2026 CapEx expected ~5.5%–6% of sales; 2025 tax rate ~21% with 2026 slightly higher due to international mix.

Business Commentary:

* Strong Financial Performance and Growth: - BWX Technologies reported a record third quarter 2025 revenue of $866 million, up 29% driven by both Government and Commercial Operations. - This growth was driven by focused execution, revenue growth in Government and Commercial Operations, and robust free cash flow generation.

• Increased Backlog and Government Operations:
• The company's backlog increased to $7.4 billion, a 23% increase year-over-year.

• This was attributed to large multiyear national security contracts, particularly for defense fuels and high-purity depleted uranium production.

• Special Materials and Contract Wins:

• BWX won two significant contracts: a contract for defense fuels valued at $1.5 billion and a $1.6 billion contract for high-purity depleted uranium.

• These contracts are expected to have below-average margins initially due to large-scale investments in infrastructure but will have long-term revenue growth potential.

• Commercial Operations Expansion:

• Revenue in Commercial Operations grew 122% year-over-year, with organic revenue up 38%.
• This growth was driven by the Kinectrics acquisition, strong performance in commercial nuclear power, and increased demand for medical isotopes.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly cited "another strong quarter," highlighted 12% organic revenue growth, adjusted EBITDA up 19%, book-to-bill 2.6 and backlog $7.4B (up 119% YOY), and described a preliminary 2026 outlook calling for another year of record financial results.

Q&A:

• Question from Peter Skibitski (Alembic Global Advisors): Did you book any revenue on the 2 new contracts in the quarter? And the modest full-year sales guidance increase implies a fourth quarter that will be down pretty sharply sequentially—can you explain that?
  Response: New contracts contributed very modest revenue; the quarter's beat was driven by earlier-than-expected long‑lead material procurements shifting spend into Q3, creating seasonal softness anticipated in Q4.

• Question from Peter Skibitski (Alembic Global Advisors): On the Janus program (co-co arrangement), what's BWXT's likely approach given you typically don't operate reactors in the field?
  Response: BWXT intends to compete for Janus as a contractor with appropriate teammates; it would not own/operate reactors itself.

• Question from Will Gildea (CJS Securities, Inc.): After ~6 months with Kinectrics, what are the key takeaways and synergy opportunities?
  Response: Kinectrics is outperforming, driven by transmission & distribution testing, offshore-wind cable testing, Pickering life‑extension work and a growing medical/isotope capability that creates cross-business synergies.

• Question from Will Gildea (CJS Securities, Inc.): With rising focus on energy/security, where are nearest-term opportunities and how are you prioritizing investment?
  Response: BWXT sees demand across government and commercial; priority is SMRs and merchant-supplier opportunities (e.g., Rolls‑Royce, Natrium, X300) across Canada, U.S., Europe and other markets.

• Question from Peter Arment (Robert W. Baird & Co.): How does revenue cadence roll out for the uranium enrichment and depleted uranium awards, and how long will lower initial margins last?
  Response: Both contracts span ~10–15 years with somewhat front‑loaded infrastructure spend; lower margins expected for the first couple of years with margin improvement as EACs are recognized over time.

• Question from Peter Arment (Robert W. Baird & Co.): Update on Project Pele—delivery timing and status?
  Response: Pele is delayed relative to original schedule but progressing well; reactor core is being assembled and delivery to Idaho National Lab is expected in 2027.

• Question from Jeffrey Campbell (Seaport Research Partners): Will HEU production capability be accomplished within the current appropriation or require additional funding?
  Response: The initial tranche funds licensing and preparatory work (centrifuge development/licensing); it does not fund production—production funding is beyond the initial appropriation.

• Question from Jeffrey Campbell (Seaport Research Partners): Does the 500 grams of ytterbium-176 capacity now belong to BWXT Medical and are there differences between EMIS generations?
  Response: The commissioned EMIS capacity yields ~500 grams ytterbium‑176 (a ~500% capacity increase); capacity supports BWXT Medical demand and the units are functionally similar to prior generation.

• Question from Scott Deuschle (Deutsche Bank AG): Can you slice up the shipset value of the steam generator content won with Rolls‑Royce?
  Response: No contract specifics disclosed; typical SMR shipset ranges $50M–$100M and Rolls content is expected to be around the mid‑point of that range.

• Question from Scott Deuschle (Deutsche Bank AG): Does localization imply building manufacturing footprint in Europe if demand materializes?
  Response: BWXT is evaluating European localization and may establish local manufacturing if demand and economics support it.

• Question from Scott Deuschle (Deutsche Bank AG): Can you summarize the puts and takes on 2026 free cash flow and why the guide is flat to slightly up?
  Response: Working‑capital improvements (cash conversion gains) are offset by timing of milestone receipts for new contracts and slightly higher CapEx (5.5%–6%), leading to flat to modestly higher FCF in 2026.

• Question from Jeffrey Grampp (Northland Capital Markets): Main risks to the 2026 outlook and does an extended government shutdown pose material risk?
  Response: Key risks are timing delays in commercial nuclear awards and a prolonged government shutdown (primarily affects technical services); guidance assumes conservative EAC recognition and no prolonged shutdown.

• Question from Jeffrey Grampp (Northland Capital Markets): Do you expect commercial demand to accelerate into '26 versus government-driven '25?
  Response: Yes—management expects commercial orders (SMRs, large builds in Canada, AP1000 work) to accelerate in 2026 and become a larger portion of orders.

• Question from Michael Ciarmoli (Truist Securities): Update on Navy/shipbuilding cadence, AUKUS and capacity needs?
  Response: Naval nuclear demand has improved, AUKUS appears to be moving forward, shipyards are stabilizing, and BWXT has CapEx plans underway to add capacity to meet demand.

• Question from Michael Ciarmoli (Truist Securities): Are Government Ops EBITDA margins down due to lower‑margin startup work or is something changing in the core Navy business?
  Response: Margin pressure is mix‑driven—about half the growth is from DUECE/HPDU with low initial margins and lingering effects of legacy pricing; core Navy operations remain stable.

• Question from Jonathan Dorsheimer (William Blair): Were you supply constrained in radiopharma (lutetium‑177 precursor) in the quarter and how should radiopharma growth be expected?
  Response: No supply constraint—BWXT produces the precursor (ytterbium‑176/lutetium‑177) capacity is adequate and management expects continued acceleration in lutetium demand.

• Question from Jonathan Dorsheimer (William Blair): Would RFPs/wins for Rolls SMR or AP1000 drive backlog but not revenue in '26?
  Response: Yes—such commercial awards would add backlog but are not expected to materially contribute to 2026 revenue under current forecasts.

• Question from Andre Madrid (BTIG): Status of DRACO and is weaker microreactor volume attributable to that?
  Response: DRACO evolved into NASA's Sentry program with limited funding so far; task orders sustain the team but revenue is lower and the program's future funding/timing is uncertain.

• Question from Andre Madrid (BTIG): What gains could BWXT capture from the recent $80B nuclear partnership announcement?
  Response: Potential opportunity is component manufacturing (steam generators, reactor pressure vessels, etc.), but the company has not sized the opportunity or provided specifics.

• Question from Alexander Christian Preston (BofA Securities): What's your M&A appetite going forward given recent deals and leverage profile?
  Response: BWXT remains selective—interested in strategic, value‑creating acquisitions, is preparing balance‑sheet capacity and is open to opportunistic deals within leverage targets.

• Question from Peter Skibitski (Alembic Global Advisors): Does the $15M step-up in D&A in 2026 relate to the two new government contracts or tech‑99?
  Response: No—it's not related to those programs; timing differences in cost recovery and assets not yet placed in service mean no significant immediate D&A step‑up tied to tech‑99 or the new contracts.

• Question from Scott Deuschle (Deutsche Bank AG): Is rare earth handling/processing of strategic interest given hazardous materials experience?
  Response: No—BWXT's focus is special nuclear materials (aside from ytterbium‑176); rare earth processing is not part of the strategic plan.

Contradiction Point 1

Navy Contracts and Revenue Expectations

It directly impacts expectations regarding revenue from Navy contracts, which could influence financial forecasts and investor expectations.

Did you recognize revenue from the two new contracts in the quarter? Why does the modest full-year sales guidance increase imply a sharply lower sequential fourth quarter? - Peter Skibitski (Alembic Global Advisors)

2025Q3: We haven't seen any change in guidance for Navy and support contractor programs since we took the binaries last year. - Michael Fitzgerald(CFO)

Are there opportunities for BWXT to secure content on new AP1000 reactor builds in the U.S.? What types of content could the company compete for in those reactors? - Scott Deuschle (Deutsche Bank)

2025Q2: There are more opportunities in the special materials area with the Navy. The Navy's awarded us 8-year contracts. - Rex Geveden(CEO)

Contradiction Point 2

Growth Opportunities in Nuclear Energy

It involves the company's strategic focus and growth prospects in the nuclear energy sector, which are crucial for future revenue streams and market positioning.

What are BWX's largest growth opportunities in nuclear energy? - Will Gildea (CJS Securities, Inc.)

2025Q3: Demand is high in SMRs, CANDU life extensions, and the Westinghouse AP1000. The Janus program is also of interest. Commercial outlets for TRISO and nuclear medicine growth are significant. - Rex Geveden(CEO)

Are there opportunities for BWXT to secure content on U.S. new AP1000 reactors, and what types could the company compete for? - Andre Madrid (BTIG, LLC)

2025Q2: There's interest in TRISO fuel on the commercial side, and BWXT is the only company with scalable production. Additionally, there's potential for commercial outlets in the defense enrichment program. - Rex Geveden(CEO)

Contradiction Point 3

Revenue and Material Procurement Timing

It involves the timing and sequencing of material procurement and its impact on revenue recognition, which is crucial for financial forecasting and investor expectations.

Did you recognize revenue from the two new contracts in the quarter? Why does the modest full-year sales guidance increase imply a sharply lower Q4 sequentially? - Peter Skibitski(Alembic Global Advisors)

2025Q3: Very modest contribution from the new contracts, as some material procurement was shifted to the fourth quarter to lock in pricing earlier. - Michael Fitzgerald(CFO)

How will raw material issues affect commercial operations in Q2? - Pete Skibitski(Alembic Global)

2025Q1: The raw material impact reduces margins in the first two quarters, but we expect higher margins in the second half due to more favorable project timing. - Robb LeMasters(CFO)

Contradiction Point 4

Naval Nuclear Propulsion and AUKUS Commitment

It involves the progress and commitment to the AUKUS project, which is a significant contract for the company and could impact revenue and investor expectations.

Can you provide an update on Naval Nuclear Propulsion and the AUKUS commitment? - Michael Ciarmoli (Truist Securities)

2025Q3: AUKUS is going forward, and shipyards are turning the corner. More capacity is needed for AUKUS, with current CapEx projects underway. - Rex Geveden(CEO)

What is the current status of the moly process with the FDA and the expected timeline? What are the primary growth drivers over the next five years? - Bob Labick (CJS Securities)

2024Q4: AUKUS is a challenging project, and we continue to engage deep in the design phase. We're working with the government on the next funding tranche. - Rex Geveden(CEO)