Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reported 6% organic revenue growth and 9% adjusted earnings per share growth in Q1 2024.
- Reaffirmed full-year guidance with expectations of mid-single-digit revenue and adjusted EBITDA growth.
- Announced a significant expansion of the Cambridge plant to increase manufacturing capacity by 25%, enhancing capability to meet robust demand in commercial nuclear markets.
- Secured a position in the BWRX-300 supply chain group, indicating strong customer confidence and future growth potential in small modular reactors.
- Achieved positive free cash flow in Q1 for the first time since becoming a stand-alone company, highlighting improved working capital management and CapEx discipline.
Negative Points
- Experienced margin pressure in Government Operations due to onboarding inefficiencies and a mix of lower-margin new projects.
- Anticipate an extended lull in carrier work following adjustments to the Ford class aircraft carrier schedule, potentially impacting future revenue streams.
- Facing ongoing challenges in labor market, with increased efforts required to onboard and train new employees amidst higher attrition rates post-COVID.
- Delayed finalization of multiyear pricing negotiations with the Navy, operating under bridge contracts which could affect financial stability and planning.
- Concerns about the impact of shipbuilding delays at U.S. shipyards on the overall industry, although BWXT's operations are somewhat decoupled from these issues.
Q & A Highlights
Q: Robb, was the year-over-year margin pressure at Government Operations this quarter entirely from the onboarding inefficiencies and cost plus mix? Or is there anything else in there that's dragging down the margins?
A: Robb A. LeMasters - BWX Technologies, Inc. - Senior VP & CFO: The margin pressure was partly due to onboarding inefficiencies and the mix of new projects, which are at a lower margin. Additionally, the previous year had unusually high margins due to one-time positive uplifts and good NOG volume.
Q: Rex, the multiyear pricing negotiation was supposed to have finished last year. What's driving the delay, and do you have a bridge contract in place?
A: Rex D. Geveden - BWX Technologies, Inc. - President, CEO & Director: The delay is due to uncertainties around FY '24 appropriations and defense supplemental funding. We have been operating under a bridge contract while finalizing the negotiation details.
Q: Rex, can you update us on the process for seeking Canadian approval for the irradiation of ytterbium and the steps to complete the DMF for lutetium?
A: Rex D. Geveden - BWX Technologies, Inc. - President, CEO & Director: The process for active pharmaceutical ingredients like lutetium is straightforward. Pharmaceutical companies will reference our product in their FDA filings. We expect to start commercial sales of lutetium next year.
Q: Josh Corn on for David. Can you provide details on the expected timeline and capacity for the Cambridge plant expansion for SMRs?
A: Rex D. Geveden - BWX Technologies, Inc. - President, CEO & Director: The expansion was triggered by the formal announcement of the Pickering project. The plant is currently at full capacity, and the expansion will accommodate the expected increase in demand for SMRs and other nuclear components.
Q: Peter, regarding the Pickering project, can you compare its scale to previous projects and clarify when the ordering of long-lead materials might begin?
A: Rex D. Geveden - BWX Technologies, Inc. - President, CEO & Director: The Pickering project is similar in scale to the Bruce reactors project. Ordering of long-lead materials is expected to begin in the near term as we coordinate with the customer.
Q: Ron, with the slowdown in Virginia class submarine production, how does this impact BWXT? Are you directly connected to the shipyards' schedules?
A: Rex D. Geveden - BWX Technologies, Inc. - President, CEO & Director: We are somewhat decoupled from the shipyards as our products are government furnished to the shipyards on naval reactors' schedules. The strategic priority of the Virginia program and the depth of our backlog provide stability despite potential schedule adjustments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
