Prepared remarks
Ladies and gentlemen, welcome to BWX Technologies' Second Quarter 2026 Earnings Conference Call. 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 timeline 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 site we choose, we'll 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, defense 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. In 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's 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 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 the 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 followed 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 one 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 $155 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 a 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 in advanced nuclear and nuclear fuel. Moving to the segment results on Slide 6. Government Operations revenue increased 2% as growth in special materials and naval 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 Slides 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 few 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 to 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 of 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 toward 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 quarter and are 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.
Questions and answers
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.
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 talk about the deal a little bit more and 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, 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 liberate 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 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 is 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 which is 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 Vernova and 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 in Budapest just last week with the CEO and leadership of GE, and I'm very optimistic about what we heard 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 U.S. AP1000 order despite all this positive news and federal support? I guess, I'm just trying to understand like what does 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 are intended 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 rightly waiting 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 business 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. So 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.
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 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 starting in the McDermott days and then Babcock & Wilcox, our predecessor companies. I think that work began in the 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. It's kind of IP that's been sitting on the shelf—a partially designed, partially certified small modular reactor. It is rated to 195 megawatts, by the way. We have not done incremental work on that technology since that time. But there has been some interest in it because it was a very elegant design and 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 ourselves. 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 to 2 years now. 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'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 nearshore power and avoid some balance of plant costs and some other complexities around licensing and siting. That was pretty compelling, and we are under contract with Core Power to assess that situation right now. So one licensee under an agreement, one potential licensee and some outlets for our technology. 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 Applied Atomics effort, does that mean between your current capabilities and the stuff you've added with PCG, 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 pressure 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 (RPVs), core barrels, fuel components, control rod drive mechanisms for that design. So lots of things we could do there, lots of content we could take. We wouldn't do balance plant or anything like that, of course.
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 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?
Early days on that one, but we're certainly having discussions with Naval Reactors about that. That one, of course, is dependent upon future authorization and appropriations for that program. It's a battleship class vessel that would use a Ford-class nuclear reactor. The Ford-class aircraft carriers use two of these very large reactors. The battleship would use one of those, so it would be a drop-in. We would manufacture the fuel, steam generators, the reactor pressure vessels, the core barrels, all the things that we do. There was budget authorized to study that ship design in the '27 budget authorization. We would not be involved with that study; that's for the shipyards. Long lead procurements would begin in '28 as we understand it, and that's when the business is starting to flow into our plants. It would flow right through the existing Ford-class reactor lines and fuel lines and fit very nicely into the business and produce incremental volume for us. Putting the Ford on a 4-year cadence is actually more important to our business and has a bigger volume impact than even adding a battleship. But both of those are serious upsides to the business.
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 if that could grow into 2027?
So we started the year 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 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. If you look at the updated guide, we're actually guiding a 150 basis point increase since the start of the year. A lot of that is 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. We have started to see some very good cost performance, cost underruns on some of these newer programs, particularly on HPDU, but we're still hitting milestones. 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 reflected in the updated guidance. As we look to '27, I'm not setting '27 guidance at this point. I think we'll give better perspective on that later in the year. One thing I would 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 fuel supported Antares nuclear reaching criticality. Could you provide an update on expected TRISO demand such as government scales and monetization timing as far as you can share, please?
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 demand lays up across the broad market? I think it depends on a lot of things. It depends on the success of X-energy. It depends on the success of Kairos and some others that require TRISO fuel and use these high-temperature gas reactors with pebble-type fuel. So I think that there's still uncertainty. When you stack all that opportunity up, the opportunity could be fairly 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. So it's still a highly uncertain market, in my opinion. We're not yet ready to make a full capital commitment on it, but it is in time.
And just one follow-up on the mPower licensing and the feasibility work with Core Power. Could you quantify the company's monetization model? And what kind of the next milestone should we be expecting?
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—the license drives the design and licensing process, and our next milestones on our side are to support the license and be prepared to execute on manufacturing should the design and license progress to that point.
Your next question comes from the line of Pete Skibitski with Alembic Global.
Rex, can you talk more about the new Canada nuclear strategy, you have 10 new large-scale reactors, more penetration into CANDU internationally. It sounds like maybe you think Canada is behind where the U.S. is, but maybe you could talk about the TAM there and the timing?
Sure, Pete. The federal strategy that Canada rolled out is quite impressive. Canada has had a favorable nuclear industrial policy for a long time. It's the reason why we've been active in that market and the reason why our center of gravity is still there. The strategy has four pillars. One was enabling new builds across Canada, and there's federal support for up to 10 large reactors by 2040 with some of those under construction by 2035 and at least one deployment outside of Ontario by 2035. They also paired that with a plan to build a Canadian micro reactor, deploy one of those to a remote community by the late 2030s. That effort would be led by the Canadian Nuclear Laboratories where we are the majority equity partner in operating that laboratory. Pillar two is Canada intends to be an exporter and a global supplier of choice around sovereign CANDU technology and make full use of its supply chain in that process. Pillar three has to do with expanding uranium production and nuclear fuel; Canada likely will participate on the fuel side. Pillar four is about driving innovation through Canada, which translates to investing into fusion projects in addition to fission, medical isotopes and other nuclear applications, primarily through the Canadian Nuclear Laboratories where we're principally involved. It's forward-looking and favorable for us, and it's gratifying to see it laid out in detail.
In terms of revenue to you, are they maybe a year or two behind the U.S. at this point?
I think they're actually ahead in some respects because of what's going on with the small modular reactor work at Darlington. In terms of large reactor builds, if you have projects underway by 2035, that means long lead items like pressure vessels and steam generators have to be ordered 2 to 3 years in advance. 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?
We see our last couple of commercial nuclear deals have been very accretive to the business. We're certainly looking at ways to continue to expand not only capacity, but also areas where we can provide expanded services throughout the life cycle of nuclear. Kinectrics has unique design capabilities, experience around licensing, and strong relationships with nuclear utilities. So there could be expanded opportunities as we look at commercial nuclear. National security nuclear also remains a high priority and focus, and that's continuing to expand our capabilities to support those missions. We have a robust pipeline, and we assess it regularly to ensure strategic fit and financial metrics align with what makes a good BWXT business. 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 want 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 Marc, the ordering cadence historically had 5-year intervals, with some exceptions. The long lead items ordered through BWXT for the most recent shipset were ordered in 2024 for a 2026 hull. Previously, orders were in 2020 and 2016 for earlier shipsets. For the new 4-year cadence, the 2026 hull goes 2030 on a 4-year interval and then 2034 after that, and our long lead items are typically ordered about two years ahead. So the advanced procurement for the next hull occurs in 2027, and long lead items for that next hull would be ordered in 2028. The move to a 4-year cadence removes the troughs created by a 5-year cadence and improves stability and throughput in our plants. It smooths the production profile so we constantly have 2 shipsets moving through our plants at any one point in time, which is very positive for rates and forecasting.
So we start to see the consistency in the business in 2028 and beyond is that right, Rex?
Yes, that's right. Because of the ordering and delivery cadence and the duration of delivery, you can end up with gap years every decade when there's only one shipset moving through the plants instead of two. The 4-year ordering interval fixes that gap, so we would constantly have two shipsets moving through, which improves stability, forecasting, and production efficiency.
Okay. Great. And then the other one that I wanted to ask on 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?
At the time the Vogtle plants were being built, we were almost out of the commercial nuclear business and had very limited activity. Today, our capabilities are very favorable compared with the largest industrial players globally. We have the largest nuclear manufacturing plant in North America and, when our Cambridge expansion is complete, we will have a very large, modern nuclear clean room. Adding PCG doubled our commercial footprint in the U.S. PCG cannot produce the very largest components like RPVs for an AP1000, but it can do medium-scale components such as modules, pressure boundary components and fuel-related items. So we're right there in terms of capacity and capability, and I don't think there's anyone better on the globe in terms of combining these capabilities with our supply chain experience and naval heritage.
Next question comes from the line of Mark Shooter with William Blair.
Rex, congrats on the quarter for the divestiture and fueling the Antares' Mark-0 reactor. Just following up a little bit on the TRISO question here. 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 CapEx or the capacity or timelines?
I'd say we'd like to see a pipeline of orders that looks very solid. We're pretty far down that road. We have a partner in Kairos and a $100 million grant from the Wyoming Energy Authority. We need to see that pipeline of opportunities firm up a little bit. The CapEx associated with standing up that facility and populating it with equipment is a few hundred million dollars, up to $500 million. That would be the scale. We'll share it with a partner and have an offset with Wyoming. So probably a modest investment for us relative to large-scale capital, and we remain optimistic about it.
The only other thing I would add is one of the key milestones that we're looking for is the Janus decision. That will continue to progress through this year and we're expecting an award this year. That will be a key milestone to watch from an order solidification standpoint in order for us to make a decision.
That's helpful. Also 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 of BWXT it 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. The scope is to do the technology transfer from the federal laboratory into our Centrifuge Manufacturing Development Facility. We stood up that facility within the last 14 months, and we are expecting to demonstrate an operational centrifuge in the second half of the year. That's the front end. The back end is licensing and construction of the plant for enriching to the assays required for stockpile replenishment. The opportunity in between is building plants for enriching from depleted or natural uranium up to low-enriched uranium (commercial fuel) and then from low-enriched up to high-assay low-enriched uranium. All that equipment has to be unobligated, meaning U.S.-sourced, which results in unique supply chain considerations and higher costs. There's a question about the commercial viability of enriching into those assays, but that's the way it must be done under treaty. These would be very large-scale projects.
Next question comes from the line of Andre Madrid with BTIG.
I'm looking for an update on Project Janus. 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?
We're still in that process and remain optimistic about the outcome of that competition. This is government timing; they're making decisions on their timetable. We are certainly optimistic. Regarding the economics, we'll need to get through the negotiation stage and, hopefully, receive an award before commenting in detail on economics. That will give us a clearer view on the differences between outcomes.
Got it. And then I guess another one as it pertains to the decision upcoming about expanding commercial capacity, whether it be Mount Vernon, greenfield or M&A. What are really the gating factors to come into that decision? What more are you looking for to help you get there?
Not much. We certainly see the commercial demand and need domestic capability in the U.S. for large component manufacturing. We need a deepwater site to ship by water to global customers. We're sorting out state incentives among New Jersey, Indiana and one other option. We're proceeding with the plant design in full and will proceed with equipment procurements in short order. It's a matter of site selection at this point, and we'll get to that decision in pretty short order.
Next question comes from the line of Ron Epstein with Bank of America.
So far, we've covered a lot of ground, but maybe just a 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. I wouldn't worry about it as we surge into this demand environment over the next 2-3 years, but we're keeping a very close eye on it. We've got reliable suppliers and our supply chain team is talented. One key point: BWXT was the last man standing in commercial capability in North America in part because we had a tremendous anchor tenant on the government side with Naval Reactors. We've delivered the nuclear components and systems for naval reactors for decades, which helped maintain capability and supply chain relationships that others did not. So far, so good on supply chain.
Got you. And then the other side of that — how are things on the labor front? Do you have adequate sources of qualified labor? Can you retain labor and so on?
Generally good. It is challenging to find all the trades. It's more challenging to find qualified tradespeople than it is to find nuclear engineers right now. We're doing pretty well. Our acquisition rates are consistent with program needs for the most part. Our turnover rates net of retirement and voluntary exits are low — mid-single digit or below 4%. We have some challenges finding steel workers in Canada right now as an example, but we're addressing that. Broadly speaking, human capital management is under good control. We have a great leader in Gonzalo Cajade who is focused on this.
Got you. And then maybe just a bit of a financial detail. Could you 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.