Ladies and gentlemen, welcome to BWX Technologies Inc. Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Following the company's prepared remarks, we will conduct a question-and-answer session and instructions will be given at that time. Please note this event is being recorded. I would now like to turn the call over to our host, Mark Kratz, BWXT’s Vice President of Investor Relations. Please go ahead.

Thank you, Andrea. Good evening and welcome to BWXT’s fourth quarter and full year 2021 earnings call. Joining me are Rex Geveden, President and CEO and Robb LeMasters, Senior Vice President and CFO. On today’s call, we will reference the fourth quarter earnings presentation that is available on the Investor sector of 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 Investor materials and our SEC filings. We will frequently discussed non-GAAP financial measures which are reconciled to GAAP measures in those materials. With that Rex, I will turn the call over to you.

Thank you, Mark and good evening everyone. Before we get into the results, I want to welcome Robb LeMasters to his first earnings call as BWXT's Chief Financial Officer. Robb was new to his role at our Investor Day a few months ago, when many of you met him for the first time. Since assuming his new role, Robb has impressed me and all of us with his appetite for detail, his drive for continuous improvement, and his disciplined stewardship of the company's financial resources. As the company rolls off a multi-year capital campaign and positions itself for future accelerating growth, I've asked Robb to focus on driving our financial results from several angles including managing the glide path downward on CapEx and maintenance levels in 2023, improving the efficiency of managed working capital, and expanding margins through cost efficiencies and synergies within the company. We will also assess how we can make small future investments to increase operational effectiveness and modernize operational support functions. With the completion of two large capital campaigns in our near-term focus on streamlined execution, BWXT is firmly positioned to layer in new revenue and margin expansion from our growth vectors. Our first step on that path is consolidating from three operating segments into two. The new segments will be called Government Operations and Commercial Operations. This new organizational structure lines up nicely with how we intend to leverage capabilities within each segment to more effectively meet customers' needs. We also expect this action to result in meaningful future strategic and cost synergies both for our customers and our shareholders. Turning now to earnings results, earlier today, we reported strong fourth quarter earnings of $0.95 per share on $592 million of revenue, wrapping up 2021 on a solid note in an otherwise challenging year. We…

Thanks Rex for thanks of support and good evening everyone. I agree there as much honing we can do as we prepare for these interesting growth markets to bear fruit after years of investments and strategic positioning under Rex's leadership. I look forward to taking on that challenge with an excellent team around me. Let's start with total company results on slide four their earnings presentation. Fourth quarter revenue was strong at $592 million, up 6% compared with the fourth quarter last year, driven by growth in both nuclear operations and nuclear power segments. This resulted in about $2.1 billion for the full year, at slightly lower nuclear operations revenue was offset by higher nuclear power segment revenue. Fourth quarter adjusted EBITDA was also robust at $123 million, up 18% with EBITDA margins 200 basis points higher than the fourth quarter of 2020, driven by stronger operating margins in the nuclear power segment, and increasing depreciation in both NOG and NPG. For the full year, EBITDA was down 2% to $418 million. This result also included $15.6 million of net FAS/CAS pension headwind or 4% of adjusted EBITDA. So, underlying EBITDA would have been up in 2021 despite the multiple businesses -- business challenges we faced last year. Fourth quarter earnings were $0.95 per share, a high watermark for the company and up 28% when compared with $0.74 per share in the fourth quarter of 2020. I would note that fourth quarter earnings benefited from a lower tax rate that was driven by a state tax reimbursement that had a corresponding negative impact to NOG operating income. State taxes are considered part of our cost base in government contracts and this change required a reversal. Full year 2021 earnings were $3.06 per share, a modest 1% increase compared with the…

Thanks Rob. That concludes today's prepared remarks. Operator, please go ahead and open the line for questions.

We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Michael Ciarmoli of Truist. Please go ahead.

Hey, good afternoon, guys. Thanks for taking the questions here. Maybe, I guess either Rex or Robb, can you -- the NOG bookings in the quarter for 1. -- basically $1.2 billion, can you just remind us what's included in there? And then as part of that booking, what was sort of contemplated for inflation and sort of hedging against whether it was a range of raw material costs, other sort of input costs you expect to get the same margins that you historically had on future work here?

Yes, Michael, let me -- and good afternoon, by the way. Let me start with that one, maybe flip it over, Robb for a little bit on the materials inflation aspects. That was an that was an order that related to the prior pricing agreement, which, as you know had four Virginia's and Columbia. And so we have some growth coming out of nuclear operations this year with Columbia feathering in and of course, continuing on the Virginia program, so it’s a really just a funding -- that was a funding booking is what that was.

Okay.

In terms of how we structure those pricing agreements, I think, you know, that we build escalation in for materials and labor and protect, to some extent protect against, sort of hedge against inflation by use of firm quotes from our suppliers. And to some extent, what we plan in the pricing agreement with our government customer. Maybe Robb, you could add some flavor.

Yes, sure. On the supply side, we're monitoring all what's going on as you are in terms of raw material pricing. As know, we sign up these pricing agreements, we generally have very good visibility on how that schedule is going to play out over multiple years. We have almost three quarters of the materials sort of known when we're sizing up these pricing agreements. So, then we're sort of exposed to some extent, on that remaining quarter. So, we were constantly monitoring that. We have escalation in our agreements and we try to get as much of that in the door as we can, and then monitor that over time. And of course, as we sign subsequent pricing agreements, if we actually see some sort of escalation that gets out of line, we'll try to bake that into the next pricing agreement to make sure we're protected adequately.

Got it. Got it. That makes sense. And then just shifting gears on the FDA submission to the Tc-99, I know you guys laid out more of a detailed roadmap at the Investor Day, but I guess seemingly, the submission is probably slipped here. I think he said, by end of first quarter, I mean, seemingly slipped a good chunk. But should we kind of assume that that everything you laid out in terms of the commercialization and ramp still on track? Or will this kind of call it a 90 day delay have any sort of -- or create any sort of headwinds on that kind of plan you threw out there last year?

No, I feel really good about where we are Michael. A few quarters ago, I said that we would expect to submit it by around the end of the year, I was deliberately hedging a little bit in my language, because we were experiencing COVID things and supplier issues and in particular, we were having trouble getting tax in from Italy at that time, because of COVID issue. Where it stands right now, radio chem is completely done and we've been doing hot runs as I said, in the script here, radio farm is completely done. And we're doing some integration testing and software testing over there and then the facility modifications are all completely done. So, we have this gleaming factory ready to go that we're running product through hot product and tagging it to cold kits. And so I'm very well pleased with the progress and see very little schedule risk between now and the FDA submission and, and even more. So more importantly, really, as I see no risk about the product quality. We've always suggested that this there's no technological risk here. It's really just about the industrialization of the technology and I maintain that position. It's going to be a great product for the market and we're very close to the finish line.

Got it. Thanks a lot guys. I'll jump back in the queue.

Thanks Mike.

Our next question comes from Bob Labick of CJS Securities. Please go ahead.

Good afternoon. Thanks for taking my questions.

Hey Bob.

I want to -- thanks. I wanted to pick up on just on the last comments on the FDA submission timeline. We're really excited to hear about the hot chemistry running and that kind of stuff. So, you mentioned you're seeking priority review from the FDA, could you remind us what that means? And then kind of the timeline for incremental questions for NIM and how it plays out? And what gives you confidence what the FDA is seeking in this submission given that these things don't happen all the time, right? It's a rare event. It's a big opportunity, but what kind of insights you have as to what they're seeking and obviously, what you're submitting?

Yes, sure. So, I'd say there's a couple of answers to that, Bob. The one is we've had a series of meetings with the FDA to update them on our progress and on our approach. So, they have visibility all along as we go through this development, including this type B meeting that I referred to in the script. And so they know what we're doing, and we know what their expectations are. So, that's one aspect of it. The other -- sort of second aspect to it and there's a couple of dimensions to this. One is that we have some consultants who have been involved in the FDA approval of radiopharmaceutical medical devices for decades that know exactly what the FDA are looking for, and of course, we have our own experience team. Maybe the final point on all this is that there's a published pharmacopoeia out there, that has the parameters that the drug must satisfy from a quality control perspective, for it to meet the FDA standards. And so we have the pharmacopoeia, we have experts on the outside, experts on the inside. And we have this running dialogue with the FDA itself. And so I don't think anybody's going to be surprised about what we submit. And we're certainly not going to be surprised about what expectations they have on the FDA side of the equation. All that said, priority review would typically get you an approval timeline in the range of six, seven months, something like that, unless we get a complete response letter and then require additional information, which would extend the timeline. But certainly we're hoping to avoid that by delivering a very comprehensive and complete package on the front end.

Okay, that's very exciting. And then I think you may have touched on this at the Analyst Day, but I figured I was just asking in this context, as well. Obviously, a lot of time has passed since you originally thought you would be submitting or getting very close to the submission finish line, which is exciting. Can you talk about how the underlying markets develop during this time period? So, from your opportunity set, and also from a -- you mentioned something about The Netherlands reactor. So, from a competitive supply standpoint, how the market is developed? And how you are situated to fit in?

Yes, sure, Bob I'll try to try do that. So, we -- there are other competitors that are developing Moly for commercialization; Shine is a name that you hear a lot. Shine is in a different place in the value chain than we are, they're delivering the Moly itself. We moved up the value chain and are delivering the generator product. It's kind of a generic offering in the sense that that whatever customer could use our own cold kits with our offering. So, we're in a little different place in the value chain. I think we're ahead of others that are that our competitors into the market. Obviously, they're already established players like Lantheus and Curium. And, of course, they maintain their competitive position, but their product -- as I've said from the beginning is based around uranium targets; in some cases weapons-grade uranium and no -- and at the very least, high SA low enriched uranium. Ours uses industrial Moly metal. So, we have a non-proliferation advantage. Since ours is produced on a commercial power reactor, ultimately, we have continuity supply advantage. And then because it is industrial Moly metal, very limited nuclear waste stream. So, we have waste advantages, cost advantages, continuity of supply advantages, and proliferation risk advantages, and all of that makes for a very compelling offering. And we believe that the market uptake for the product will be quite strong.

I might also add just to touch on some of the other aspects of the broader BWXT medical, as you know, on Investor Day, we laid out exactly as Rex said that that part of our portfolio, the core product there in the diagnostics area, the market has gotten better, in general, and we feel good about that. Overall, the business as you know, has a couple other exciting opportunities for it. We still have that exciting core Nordion portfolio, which includes a couple key products there, as well as [indiscernible] and that really is doing quite well for us. That's a second sort of growth opportunity that really has panned out well within that portfolio. And then thirdly, I think we shares the therapeutics opportunity that we see and the related contract, drug manufacturing opportunity as it relates to therapeutics and when so when you summarize those three markets, the diagnostics opportunity that Rex said, the Nordion portfolio, and then the therapeutics, we really stand to really have a pretty good outlook for that industry. It's really gotten better. And as you know, it culminates in kind of those statistics that we put out there of getting almost $200 million of revenue, a couple years out and $75 million EBITDA across those three sort of business lines, if you will.

Okay, that's super. Thank you so much.

You're welcome Bob.

[Operator Instructions] I'm showing no further questions at this time. So, I will turn the conference back over to Mark Kratz for any closing remarks.

Thank you, Andrea. Thank you for joining us today. That concludes this conference call. If you have further questions, you can reach me by phone at 980-365-4300 or email at investors@bwxt.com.

The conference has no concluded. Thank you for attending today's presentation and you may now disconnect.