Q2 2024 Earnings Summary
- BWXT is transitioning from prototyping to low-rate initial production (LRIP) of microreactors for military applications, driven by the Defense Innovation Unit's request for microreactors with outputs of 3 to 10 megawatts for deployment on army bases, potentially leading to full-rate production and significant growth opportunities in their microreactor business.
- BWXT is making strong progress toward FDA approval of its Technetium-99m (Tech-99) generator, with exceptional product quality and engaged customers, positioning the company for future growth in the medical isotope market.
- BWXT has established agreements to supply Actinium-225 for over 25 clinical trials, and expects to meaningfully participate in drug production upon approvals, indicating significant potential in the growing radiotherapeutics market.
- Ordering lull in the naval nuclear propulsion business extended into 2026, which could impact BWXT's revenue growth in the near term. The shipbuilding schedule has the Ford-class aircraft carrier's ordering lull extended into 2026, and while BWXT is seeking ways to keep plants operating at level loads, this lull poses a potential risk to meeting medium-term guidance numbers.
- Uncertainties in participation and scope in future submarine programs, such as the SSN-Aukus platform. BWXT executives mentioned they don't have much visibility into the down-selection process by the Australians and that the scope and size of BWXT's involvement in the future platform are still TBD (To Be Determined). This lack of clarity may impact future growth opportunities in this area.
- Delayed profitability from the medical isotopes business, specifically with molybdenum-99 (Mo-99) and technetium-99 (Tech-99) products. BWXT anticipates that significant economic benefits from these products won't materialize until 2026, with 2025 being a cautious ramp-up year. Therefore, the medical isotopes segment may not contribute meaningfully to earnings in the near term, potentially affecting investor expectations.
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Moly-99 Commercialization Timeline
Q: What's the time frame for moly-99 approval and commercialization?
A: Management is confident in their moly-99 product, expecting to be commercial and ready to service customers in 2024, pending FDA approval. They're discussing agreements with potential customers and plan a cautious ramp-up in 2025, with significant financial impact anticipated in 2026. -
Virginia-Class Submarine Production
Q: Could potential cuts to Virginia-class submarines affect your business?
A: Management acknowledges speculation about possible reductions but remains hopeful to continue building two Virginias per year. They believe they can manage if cuts occur and note that advanced procurement dollars could keep them steady even in a reduced scenario. Future demand may increase due to the AUKUS program. -
Government Margin Outlook
Q: Should we be cautious about government margins given the work mix?
A: Margin pressure stems from rapid growth in Advanced Technologies, with early-stage, cost-plus-fixed-fee reactor programs affecting margins. As these programs mature, margins are expected to improve, becoming a tailwind in 2–3 years. Management is confident in finding ways to grow EBITDA in 2024 and 2025. -
Microreactor Opportunities
Q: Can you elaborate on microreactor opportunities with the DIU RFP?
A: The Defense Innovation Unit's RFP includes potential procurement of up to five reactors of each type, aiming for deployment by the end of the decade. This marks a transition from prototyping to low-rate initial production, and management is bullish on this development. -
Pantex Win and Hanford Update
Q: What's the ramp-up timeline for Pantex, and any update on Hanford?
A: Pantex is in a four-month transition phase, with modest impact expected in Q4 and full run rate in 2025. The Hanford contract is under court review, with resolution anticipated in the next quarter. -
SMR Revenue Timeline
Q: How will the G Tachi SMR work impact revenue?
A: Each small modular reactor contributes roughly $100 million over 2–4 years. The first unit is underway, with future units planned at intervals of 18 months to 2 years. -
Capacity Expansion
Q: How are you managing capacity for multiple projects?
A: BWXT is expanding their Cambridge facility and aggressively recruiting to support overlapping projects at Bruce, Pickering, and Darlington, including small modular reactor work. They expect to meet labor needs and accommodate all customer requirements. -
Project Pele Timeline
Q: Any updates on Project Pele's schedule?
A: The development phase is ongoing, with reactor assembly in Lynchburg, Virginia, and testing at Idaho National Laboratory planned through the middle of the decade. Progress will unfold over the next few years. -
Tech-99 Customer Discussions
Q: What are you hearing from early Tech-99 customer conversations?
A: BWXT is engaging with the five major North American distributors, discussing terms, pricing, and logistics. Customers are receptive to having a third supplier, and BWXT expects to significantly penetrate the market with their differentiated product.