BWXT - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, welcome to BWX Technologies First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following the Company's prepared remarks, we will conduct a question-and-answer session and instructions will be given at that time.

I would now like to turn the call over to our host, Mr. Mark Kratz, BWXT's director of investor relations. ahead. go Please

Mark Kratz

morning, XXXX Good you joining for Thanks, call. and first-quarter earnings BWXT's Grant. thank

Joining SEC Rex and harbor the today certain risks David earnings On me and are yesterday's call, provision matters Black, filings. officer; chief today's and those statements release senior found and that executive uncertainties, constitute in vice and will including safe president we chief forward-looking officer. Geveden, financial BWXT discuss president involve and in described

financial measures, in our non-GAAP on are reconciled Copies We these will measures provide will section with website. available which to GAAP that, Rex. I presentation turn the of of also with the Investors are materials. the quarterly And to today's call documents, along earnings over

Rex Geveden

morning. first-quarter setting share, Consolidated crisis. segments all and reported business growing. we were challenging generally And Mark, with results per records a were resulting you, from both COVID-XX exceptional environment earnings three new BWXT. up quarterly XX%, Thank good for the despite revenues health Yesterday, $X.XX

was lead in by this savings combined the ramp Operations Class Nuclear performance Columbia originally led production accelerated the Group, quarter line through solid as long recognition well achieved of product as operating and the contract second material anticipated with outperformance year. First-quarter

are the quarter, the focused team COVID-XX response priority we as In navigate pandemic results, on pleased we address safety. crisis. quarter well is created acutely While first top our threat. with the planning protecting remain to and we first the That employee health we through and coronavirus

and to is work, and adapting where with employees face require also screenings shift remarkably significant It we social health guidance, do our continue we distancing changes noting business. to CDC resilient how required of that at possible. crisis. temperature Based employees in to possible. been include very provided in where We where respond have teleworking worth updated on to coverings at staggering to the practices points, policies, factory to entry aspects procedures Examples and we all

protocol We be established thorough, have responding cases other these coronavirus The the to effective that we number business. to BWXT sites. far the quite minimizing and in limited experienced to for impact appears are a employees of and so at some cases

continues to situation our a of modify effectiveness high evolve, evaluate, all and the update we practices As will maintain to across BWXT locations. frequently level

you As U.S. the may know,

said the of federal major government XX coronavirus-related are or sites of at Having BWXT business designated operating have and we roles at essential, medical All wanted offer to have time. more segment impacts, national Canadian experienced given and as running and various appropriate security, our the this energy that, I governments provincial details less in normally production level. our businesses business manufacturing. some

the stated start Operations Nuclear a earlier, As the Group off I to strong year. to is

with business this limited been have disruptions date. to to segment in the impacts COVID-XX notable no

We ramp work incremental year. continue production Columbia-Class we and the carrier hire we last are for forward to calendar enter of up on and the as growth late year first secured gearing that full

the president's seeing FY On in we 'XX Armed and the support request their submarine slated and to for Virginia budget second are provide Senate budget the committees the budget are to House markups in bipartisan the a months, coming discussions. Class Services front, incremental

Class on We 'XX. both for the we pricing FY and government information systems continue with Navy one the work customer propulsion are and pricing to Virginia providing next agreement, in multiyear two

the enable We still systems that Class ordered is four This content second where key may ordered scenario nuclear encompass attack COVID-XX power the impact Class the production we FY for take would the experienced not government a and are to for ballistic shop these submarine submarines still and the balanced years, The Virginia see advantage next and 'XX for submarine is of missile group but nuclear pandemic. contain to nuclear pricing for and planning next BWXT from hours equipment Virginia the the fast Class a for anticipate agreement the Columbia However, 'XX optimized multiyear haul efficiencies two keep propulsion largest volume cost advanced segment has funding. through government provides second to with and Navy's procurement fleet. submarine.

utility conditions exposure refurbishment activities differently opted work improve. customers some Canadian personnel outage have delay upcoming are limit until service managing to on-site and and to

hospitals COVID-XX as we demand patients. current Additionally, radioisotope weaker are for medical seeing for prioritize products resources

While to still procedures fewer potential critical, considered to are are isotope procedures physicians scheduling most exposure COVID-XX. limit patient

have revenue oil and the the Canadian global is the income operating of prices Lastly, economic and NPG, dollar, for which fallout currency conversion. result the for that through weakened lower lower to segment

lead conditions limit for do of not site and margin the potential lower exposure, DOE the NSG foregoing yet laboratory our personnel to from safe and a year, to a performance guidance Most COVID segment we some both to us standpoint, production experienced impact three fees. The award immense From perspective. NPG operational know has in condition sites the are revenue impacts. and

We awards. in seeing delays are incremental new also

anticipate a occur tank fall the timeframe. in global will transition late occur The BWXT contract been resilient through now the contract health the crisis. in example, has chain to For the we Company supply sometime Hanford summer across with

of and health The remains fundamentals been continue So of relatively closely business far, we the to long-term have the BWXT's COVID-XX strong. supplier impacts base. monitor minor,

particularly are we impacts business the witnessing group. are power near-term generally characterized as The from nuclear time related,

updated trends with the the has the to relate the beyond the us the for quarantine employee First that cases Based to the generally guidance. guidance our the XXXX earnings updated they through some across conditions to underlying return positive that. current XXXX reiterate conditions assumes quarter outlook as combined of Company, COVID-XX guidance current business reflect and of count, within while conditions lead modifying the components business normal on generally concerning current year, continue pandemic. of to and guidance active performance, been quarter The second

could beyond that extend into conditions the worsening second further contemplate and not does guidance quarter Our XXXX.

provide across we'll significant as activity and to closely will And any updates continue turn over monitor investors that, call will We appropriate. the David. with with I to the Company, business

David Black

of company with on total the Rex, Slide X good morning. results presentation. Starting Thanks, earnings and

revenues high new million, growing. at watermark segments XX% basis, consolidated First-quarter all with $XXX a a up on set

non-GAAP EPS a at also quarter was First record $X.XX.

EPS offset found A was Slide the XX.X%. of XXXX, came of from income with quarter volume bridge first and compared of presentation. the X the $X.XX which XX% up rate improvements. can partially operational tax majority favorable Other contract higher expenses be and on were of by quarter-over-quarter a of

X. segment to Slide Moving on results

to Nuclear delivered group quarter million. operations $XXX with revenue up XX% a record

purchases first quarter. volume $XX a efficiencies. production the volume resulting NOG of Class higher up margin. see Columbia accelerated adjustments income in of the was and we and as result was operating favorable to and continue versus We from first material as recognize XXXX XX.X% million, quarter significantly higher contract operating also a savings some into This

revenue due unfavorable $X.X group the Energy quarter, project. X% first when product absence quarter power lower an X.X%. a nuclear service Operating with were of non-GAAP quarter a China by offset partially steam X%. NPG non-GAAP compared income $XX field and down acquisition component first acquisition, was shift XXXX operating year, increase compared manufacturing, income mix, of and the activity. in last margin in produced the about the The line to of were revenues first million, generator down in the including NPG margin resulting quarter to higher Laker by operating driven million when primarily organic Without first the

services result as operating And prior a nuclear million technology $X.X delivered $X.X programs. and year volume first period the lastly, advanced in the the group million services nuclear increased from expenses of commercial and versus income of up U.S. quarter, lower

Turning now Slide guidance to on X.

mentioned consolidated for we As during reiterating XXXX. are his guidance Rex opening remarks, our

per of with up approximately Revenue $X.XX to is share. still about expected be X% earnings

second an the QX quarter, and service the we being low quarter half with accelerating lead XX-XX still production earnings expectation first for exceptional some into COVID-XX to a year slightly NPG. had half we back-half first split. Although, in Resulting material the outage the due our approximately long reiterate impacting second are point weighted, year delays for versus

taking our to optimize XXXX the guidance the We have COVID-XX, impact reflect some are and components as as updated related risks we to of underlying to actions well some cost. of

about be Canadian help outage manage activity customers or the now utility shift to right to of impact group the as revenue refurbishment to slightly power is the Nuclear expected and services down X% COVID-XX.

our also versus expect operating XX% prior XX%. We of margins assumption of now NPG

In factors contributing lower work, to volume utility that cause shift income expectations. major addition NPG to two from there other lower us are

First the and and volatility is Canadian U.S. rate foreign exchange fluctuations between

are for weight down. equal an segment demand of suppressed since All is pushing components these second medical isotopes prioritizing COVID-XX income operating three the hospitals And patients. of have dollar.

be expectation costs, versus expectation about we side, we for On the and $XX which for now unallocated anticipate million we approximately to optimize the corporate the continue million. the have our to cost positive $XX prior of year structure, updated

the to Additionally, we and depreciation year. expect for be now $XX amortization approximately million

position. asset placement a X of guidance our components timing close to the my liquidity will the procurements our their other on outlook, has shifted. debt have XXXX of Slide remain reflect changes. with bridge and initial about with consistent As we our and guidance aforementioned All I remarks into few and updated service comments

appreciated an credibility Company, outlook March in more increased the late which facility and compared the in the also terms cash $XXX for speaks generation. of the the the agreement, extended expense favorable the a important when XXXX with in and credit lower revolver secure our amendment we to total This interest $XXX maturity improved working Having prior debt market date our revolver The with March, environment. and long-term lower-than-expected providing that a to with rates and amended us million. business tailwind through to some of borrowings. step rate the volatile environment our ability a we the was for by amendment debt is banks of pricing the In pricing million expected better with

facility. by level increased $XXX flexibility end first investments Company's capital with future to current around at This debt strategy action remaining not two and allocation a amended opportunities, the fund under our And of leverage the COVID-XX. Company look balance times. has of debt the the $XXX environment. us gives to of and underscored as quarter environment the million capital comfortable in million the at also gross at BWXT's growth light is related remained availability we changed credit totaled current sheet

allocation priorities. with certain over capital to time balanced continue year-to-year demonstrate on emphasis a We

For XXXX, in peak future capital growth. focus $XXX be still investing at we year million expenditures as at on we organic expect a to

downward expenditures are a capital and near trajectory, anticipated the year than this levels in we $XXX will XXXX, be to for with anticipate start Following return expected to maintenance XXXX to XXXX. lower million somewhat

shareholders, in payments and dilution. in to dividend $XX.X in to and return million We also the offset capital $XX million repurchases continued to allocated quarter, first share

changed, in cash not the Cash from has a Our and we beyond dividend $XX period. year. overall years million dilution. than we first and activities perspective share cash the in repurchase capital during at commitments as Based for and the quarter these million short-term elevated of net annual capex repurchases standpoint, was on future. restricted the end investments, for anticipate From any the XXXX, quarter remain a cash do we strategy the cash, of remain million not $XX.X less Company operating and remainder $X.X the year the utilized of XXXX, the opportunistic positioned about expenditure prior first net offsetting well incremental for

I'll that, Rex with over back And call remarks. some with closing to turn the

Rex Geveden

Thank David. you,

are efforts my a and prepared remarks XX with moly finish micro gaining on brief reactors. our we with me Let some traction update commercial

As last rebase within program. line, dealing the were the I radioisotope issues us we program on of leading moly on business a schedule line the the to with said call,

have European sub-suppliers those and suppliers to and addition challenges, COVID-XX. Canadian In due since from suffered component delays we to some

readiness and have manifest, now Despite the could comprehensive product very the XXXX. project enthusiastic competitive the about challenges, position the rebaseline in factors we that business the in foregoing now of reach we market. a to commercial line, new and remain and other delays completed case the risks We midyear considering program our

TRISO a challenge at awarded past couple In transformational National Oak of related reactor reactors we contract Laboratory. fuel. the and to for micro received TRISO the support fuel March, awards we several Ridge to DOE over were months Finally,

capabilities In TRISO technologies accident addition increasing a to office. and strategic and propulsion some also others remain positioned compact pending DOD tolerant awarded underscore million reactors the to from in micro-reactor interest was These with line of in and well operator design $XX government TRISO, that, to to power fuel problems, security, the solve awards BWXT market and for open and contract challenging new And the the most questions. the ask lead we these national programs. I'll

Operator

with Arment Please first from come go Baird. instructions]Our question ahead. will Peter [Operator

Peter Arment

give Yes resolution of that your second on given for comments sir. long on Thanks there Class. do, could nature just David thoughts Thanks sir. Good maybe fall, are your you the kind of you morning if in Virginia But details the there? the is continuing Rex. and the your around the would a lead what contracts? us

Rex Geveden

normally, similar. are continuing funding the is year-over-year and Well, in solutions scenario, a content funding

I be favorable So us, a that think would for situation actually Peter.

Peter Arment

expect slip. then just So And that the... terms you of wouldn't any in on

Rex Geveden

the just tempo a stay would on two speculate, we'd Virginia I CR. in

Peter Arment

And impact That's seeing the maybe supply from Could more COVID? there, we a then see you XX. you're latest helpful. on us color from why just a chain and moly push just give such the impact out exactly little from what

Rex Geveden

Right.

let's we impact, outlined do equipment start call for moly key from of So Peter, the our most date is it push in has Europe. the to one-fourth that effects, programmatic COVID related it about out suppliers sale for the the of challenges and earlier. hot most to with program of are that in

suppliers. have We two Italian

We have German supplier. a

some or shut date. more the slowed And pandemic delays factored factories into or are of those launch down we those less product now. of back the normal But They the to down during crisis. peak

Operator

Skibitski Our Alembic next Global. with from come question Pete will

Pete Skibitski

morning Nice guys. quarter. Good

guys Just officer, name was of questions. a think you top-level couple chief title. can Rex, the a I strategy

have talk just then one thoughts And I that, follow-up. about you Can there? your quick

Rex Geveden

Sure.

had who, spin active So to prior. at Blue an our Harbor LeMasters, on been spin we a five BWXT & you Harbor. hired in went board know, a public in Wilcox Robb that during came and time investor years as and position has came in heavy of period history company. Babcock of from the But had over the he and our the with ago, Blue about into for BWXT board Robb as would there that been time

useful career the was transition Blue company. doing sold going He's with been keep was happy of and always He very so He down board stayed the that board on Harbor on public to a after a him, team. something board. was sort was a star bright executive a in and its position, interested the through and

offer an chief make officer. So Robb strategy as we opportunity took to to an

the the strategy, will have corporate mergers but same, he investor positions. oversight piece, have Robb his and have team So stay will of portfolio development will also oversight will of and the have those relations and The acquisitions members that.

very investors I bring how business. react will to So a understands, he the interesting perspective. He think,

down and end of the understands works all business, members the team. he and aspects with He well of our executive

it it for add. And of think a He's in brings great our business So talented. he was expand good depth. to also be executive our I and will terms very what

Pete Skibitski

you industry. is, I Thanks House, impact think, And last I thoughts to that Great. looking Does that on your the question color. for curious. me the just White domestic uranium for guy revitalize was anyway? just

Rex Geveden

much, so Not Yes. Pete.

uranium in that enriched need XX% low We above highly enriched in any starts haven't assay, enrichment into time that or mean, uranium. nation the the category if in past. or been haven't enrichment to been high mining to I X%

supported role we play days Centrifuge on a the could we back USEC There's American in program. the because

that. priming effort So could part that speaking, roles the in not there of generally play are including But we value too an chain there, active now. right we're that like

Operator

Labick next question from go ahead. Bob with Our come Please CJS will Securities.

Bob Labick

the long-term I start with guidance. wanted to

maintain shifted built has isotope you're in out, XXXX that. us start to term give how expecting You you some contribution the perhaps and isotope and guidance. guidance? Can of starting longer And contribution revenues to the puts a since the obviously, reiterated the into contribution much sense of guidance, your just And long-term is now takes mid-XXXX.

cushions If any other guidance? in that there's

Rex Geveden

Bob, Sure. question. the for Thanks,

isotope award we and guidance, concerns takes. are of with timing obviously, about delays but feel DOE such and long-term over Some pressure still that. on Those confident that some the

major the of business. that become see the gathering the about, component a that micro terms have in and asked how that reactors can we us puts you will quickly of and In we fuel, momentum takes where do and

hours One can backlog mandatory overtime requiring significant sort our by operations our working that have burning kit, the business such we pull we of of backlog backlog. the nuclear in is on things by additional and in that tool

the So pressure admitted have to that we in there's remain but committed is long-term it. levers There guidance, business. some we that certainly on

Bob Labick

Got bit again, five-year seemingly the the things mean, I it. little outlook Great. drivers as right? out as about, pressure a well. of opposed are kind about and is, growth then Maybe if As of XXXX, existing thinking And we start maybe, a businesses. timing, end pushed to just just talk

We've the about talked in past space.

in You you about five aspirations potential help years any just opportunities? think or growth the about given business, up brought Can and steady and maybe and us microreactors M&A? disruptions market think again next your

Rex Geveden

Sure, Bob. Sure.

are So certainly, growth. very defense reactors the component of a and space interesting future

franchise the so we tempo business, Our core have, good slight platform and in the and all Ford, submarines like business, assuming prospects the very we Class coming maintain that. Columbia the the does Virginia that for obviously, of acceleration there's

We a business certainly done the isotope imaging, right light moly of is pulmonary in is bright business. a in sort that and picture bit of a XX spot exploding with is of like COVID-XX. growing That's isotope the which now

whole through around will even And I the out will And by cardiology COVID-XX, damage there been imaging, and in from that. procedures so may that's lung have there's so that think of need interesting driven permanent you class see, there's periodic people assessment growth a we past. prospects

have can also through capacity, through And balance earnings drive we but repurchases, then and acquisitions. certainly we sheet share

in our for and And pipeline sheet balance capacity so we interesting some have opportunities those.

And right? of growth window it quite the business for so the long-term I artificial around Despite XXXX, to prospects 'XX strong. sort put you perfectly, are think this

David Black

investor the ramp. the If five we've of the we XX have Colombians the briefing, power Page four got look on look you going if on shop, out we business we and through Columbia, that the that's production years where today NOG Bob, one. reiterate, show unit I'll where And

that, between gives and of that growth we then. indication, won't an gives So you now that an indication but quantify the you

Operator

next go Our will question ahead. come instructions] [Operator SunTrust. Ciarmoli Please from with Michael

Michael Ciarmoli

Hey the maybe remainder cadence of good quarter. David, morning Thanks the the looks the on guys. for NOG, fairly Rex or for question. Nice of revenues year taking flat.

some some You, Does have give about But time. Virginia you the back made before obviously, start decision just that boat pulled budget? you added be see we the headwind, us or as maybe lead sense feel isn't there work the the to Class? into on the a to think of can long would guys in if

Rex Geveden

morning. Hey is in that on business said altogether. potentially impact And call effects obviously, a story start business. Michael, over our we prior the Well, year. would of life incremental which continue on about six years to know good of And project, that we you it the of this the on duration the QX the

single On maturity you There there time, going from about just for are ship factories the based on of on sets sets And stages schedule various the any take, are, through point one give in XX Class or starting acquisition verge delivery. of have of then the Virginia those. at that, our ship top through. tempo going two Ford delivery the speaking, to Columbia and four generally at

So give XX, time. our through one point moving shipsets systems or XX take, at in any XX, factories

rod core And pressurizers, drive fuel mean, whole by at of shipset, vessels, I steam barrels, mechanisms, cores, thing factories. that generators, various course, the control reactor

starting of in QX the it effect that on XXXX. So business would incremental have kind

carry happen in normal, the year. a think I we doing two probably ship what with on earlier, Peter scenario, scenario, Virginia sets questioned just a as would CR As CR

a So fiscal done we of beginning have the appropriation will I by government year certainly 'XX. doubt full

be that some hanging that, think out I will decision there time. So for

Michael Ciarmoli

current finally that this a decision out, of you I be would firm if it to to what if see in headwind? funding mean, I year? impact other as you we out or become funding September, isn't environment support, need your on I now? if Would kind guess stay at make made. mean, a there October that point? the without November at Virginia words, to drags that it be where Class? we purgatory any this can see late I'm a trying Or In impact But does they decision made bipartisan made decision think do in but figure as point

Rex Geveden

Yes.

normal I think in operational we are right tempo now.

So would think would it we government if appropriation the say that I be just it's the year. how of QX, by impacting fiscal we not occurred, got would done plan. the the or how in impact really beginning if

And the the modest lesser the a begin with. obviously, impact. to It's impact later

thing So I'm 'XX, I concerned for fiscal don't think a about now our particularly it's year right Michael.

Michael Ciarmoli

NPG, the to delays Got this how baseline any the new sort received the related of refurbs. COVID you've Or nor impacts of depending social it. And Have updated fluid then just schedules? the distancing. or on still of you seen Canada, guys kind on outages, is some

you Just of or trying is in of get a line flux? still refreshed sense do to have sort time a it there

Rex Geveden

in flux. still It's

into So from the things we quarter. But were when happen. do wait and quarter see. a clients indications of our outages fourth it's a Those about second have that in the pushed bit will think some little got I

challenge of The they're the through the on for as want crawling when XXX certainly course, face cases to they maintain timely as around are, the rely same They try their much component at major replacement. business because possible time, completion. going utilities, they will reactor tempo because of people a don't is

quickly possible, of to those and there's keep a of as a pressure it's from I our see as perspective. bit certainly but projects going So a lot think wait think I

Operator

question next Sullivan from go will ahead. Our come Group. with Please Maxim Tate

Tate Sullivan

Thank you. Rex follow-up, XX. A Hi. moly earlier on

kits or access please. equipment? reactor supply component can core you You that for delays. If said specify, Was some

Rex Geveden

Hey Tate. Good morning.

major in As before, target are system. the is delivery called there I One components said system. three the

initial that's there material. fully it does robotic on do to system, all packages there's subsequently a which can and it in That's reactor in And factory then the into it is it that a down radiochemical system. the the In radiopharmaceutical to which the to processing the get have to on our moly then factory hot, sterilizes in the goes put process irradiated is the Kanata. automated and radiated Kanata, that we reactor so to equipment that system, it

internal to for in that I like. supplying and are equipment the cells like suppliers autoclaves the various delay cells hot was hot and that referring So

what So And complex plant that's destined coming for components part could a little add from to our listeners to accounted point I ultimately different for and a has of on the have out call color rebaseline. Kanata. schedule, schedule our to all in driven the that If that want in of take, maybe have number we would this more had Continental Europe. some challenges. I this, we

is challenge program. have the schedule This second identified on this we significant

has of And so number to in the rebaseline conservatism a mid-XXXX of, let me it. call components it,

unencumbered have, in We for example, months there. some reserve schedule of

extended have months. about We timeline months about six regulatory the to approval nine from

completely we envelope as So can perceive uncertainty timeline. what that we any in

risk have relates and technical schedule perspective, costed and from factories. dollar design and for a into into integration the conversion our manufacturing any of ultimately, We also to and accounted that

so board ourselves, investors for And here, for as so the to right because for laid for I pretty have timeline our think out, program we've we and rebaselined conservative appropriately team. our and a and we one this need our certainly

we positive quite about that schedule. are So with feel I where

Tate Sullivan

And then in the as releases nuclear years. year five multiple to fuel schedule. should the I similar I manufacturing. It had units feel as seems bit the fuel But look terms on in more manufacturing, the consistent of previous at economics it a manufacturing behind production if state you've

in economics on schedules, please? what Can fuel unit the versus the you manufacturing drives anything share

Rex Geveden

mean and nuclear the business, operations manufacturing You fuel the Tate?

Tate Sullivan

Yes, please. Yes, specifically.

Rex Geveden

Yes.

fuel Class agreements what the manufacture the the the generally, Columbia to similar course, and classes the Ford all a we agreements. somewhat the is carriers. And three We, of of that's of in major timing So vessels, those nuclear Virginia, for pricing all steady do business. component very

They the the are of the follows separate rest of tempo scale contracts, the but business. generally, and it

terms of timing. of sort there there's and no so important in And distinction volume

Tate Sullivan

you. Thank

Operator

I question-and-answer session. for any Kratz turn concludes would like to call remarks. Mark to back This our the closing

Mark Kratz

That Thank joining us quarter call. XXXX you our for conference concludes this first morning.

questions, If at XXX-XXXX. please further call you Thank you. me (XXX) have

Operator

The attending presentation. conference concluded. Thank today's now is you for

now may disconnect. You

BWX (BWXT) 6 May 202020 Q1 Earnings call transcript